CORE BANKING SOLUTION

Levels of computerization vary significantly in the Indian Banking Industry. On the one hand centrally computerized and fully networked new private banks and foreign banks and on the other with little computerization in old private banks and PSBs are in two ends of the spectrum. This situation will very soon change and the entire banking system in the country will be technology driven. This is evident from the fact that almost all the banks have implemented / are implementing the core banking solution and are also offering Internet banking services. With the payment system in the country getting upgraded technologically, the intermediaries namely the Banking system will have to absorb technology in a big way. Further, competition in the industry, cutting edge technology based customer services and products, growing customer needs, RBI guidelines, guidelines issued by CVC and also the VRS offered by Banks are some of the factors that are driving all the players to computerize the operations quickly and effectively to reduce the transaction cost and maximize profits. Major efforts towards computerization in the banking industry started almost two decades ago.

The stages of computerization in the banking industry may be classified as below:

ALPM branches Partially computerized branches Fully computerized branches Centrally Computerized and Fully Networked Banks Banks offering Internet Banking, ATM /banking Off-shore data processing

Various Committees appointed by the Reserve Bank of India proactively encouraged introducing technology to enhance customer service in the banking industry. Simultaneously the Central Vigilance Commission also urged the banks to improve transparency in their operations by computerizing all their operations / business. These driving forces coupled with the need to bring down transaction

costs and increase profitability forced banks to embrace technology in a big way. In the early 80s banks introduced Automated Ledger Posting Machines which was the genesis for introducing automation in banks. During the mid 1980s, banks computerized their operations on stand-alone computers for catering to the needs of the customers and at the same time improve the efficiency in the functioning of the branch. Through introduction of such a system, banks could render a particular service only at specified counters in the branch. For example, transactions relating to savings bank account or term deposits can be put through only at specific computers. Even though this marked the beginning of automation, it did not meet the expectations of the demands of the customers. However the branch functioning improved noticeably and the employees were exposed to the use of computers. In order to improve the customer service further, banks adopted the concept of single window, which meant that the branches move over to a client-server environment. This led to networking with in the branch and the branches were classified as Totally Automated branch (TBA) or Partially Automated Branch depending upon the extent of computerization of the various business areas of a branch functioning. A major thrust to networked computing came about with the entry of new private sector banks in the later part of 1990s, which were mandated by the RBI to be totally computerized and networked banks right from day one of their existence. These banks were able to offer anywhere / anytime banking and also offered multiple delivery channels in the form of ATM, Internet banking, Mobile banking etc thereby weaning away the clientele from the PSBs. Today, if banks want to survive in their business they need to cater to the demands of the customers who dictate to a great extent the service that banks are required to offer. Core Banking offers an ideal platform to meet the challenges in the financial industry. It is heartening to note that all banks, especially the PSBs, with their constraints and compulsions have been able to adapt to core banking technology smoothly. Core banking solution refers to a common IT solution wherein a central shared database support the entire banking application. Business processes in all the branches of a bank update a common database in a central server located at Data centre, which gives a consolidated view of the banks operations. Branches function as delivery channels providing services to the customers of the bank. Core Banking Solution is an integrated application that supports real time, multibanking and multi-channel strategies. The single biggest

achievement of implementing the Core Banking Solution is that each customer is truly the customer of the Bank and not just the customer of the Branch, where his/her account is maintained. He/she can go to a branch anywhere in the country and perform a transaction. This is possible as the entire Customer Database is centrally located at the Central Data Centre (CDC) and can be accessed throughout the network of branches.

Key Features of the System:

24X7 Banking As a result of implementing Core Banking, most of the facilities being offered by banks, are available to Customers 24 hours a day, 7 days a week. The transactions are performed using multiple channels such as ATMs, Internet Banking, Phone Banking and Mobile Banking. Further, the transactions using these delivery channels are updated in the CDC in real time. Anywhere Banking Customers can avail of banking services across the branch and Channel network irrespective of location where their account is maintained. Integration with strategic sectors Core Banking integrates all strategic sectors of Banking such as Trade Finance, Treasury, Asset-Liability Management and Corporate Balance Sheet. As a result, the information related to these areas is centrally available for use or reference. Strengthening MIS, DSS and EIS Core Banking Solution is more than just a transaction processing system. It provides updated data for generating various reports for Management

Information System (MIS), and will facilitate Decision Support System (DSS) and Executive Information System (EIS). As data is located on CDC, branches and administrative offices can concurrently avail updated data when required.

Business Process Re-engineering (BPR) enabler Core Banking would enable implementation of BPR initiatives of a Bank and facilitate centralized handling of various processes. Branches would do less and less back office work and would be able to focus on marketing, customer relationship management and cross selling.

Components of CBS:
Major components of a core banking solution are: Data centre Network connectivity CBS application software Hardware at branch and data centre Delivery channels Disaster recovery site A strong business continuity plan

CBS Architecture:
In the CBS set-up, all the servers are hosted at a central place called the data centre. Data centre can also be outsourced. The data centre should have high end infrastructure in the form of robust access control, 100% fire-proof, Non-stop power supply, AC, reliable connectivity and high speed internet facility etc. The generic architecture is a three tiered architecture as shown below:

CBS runs on the WAN. The central server is located at the Data centre. Generally there is no application running at the aggregation points. However, the aggregation points will be having the network components. Branches have a branch server which acts as a gateway to the branch. To this branch server various nodes of the branch are connected.

Transactions after being recorded at the data centre are simultaneously passed on to the backup / DR site. Remote trouble shooting capability is also available in the data centre besides the network monitoring software at the datacenter to monitor connectivity. System software, RDBMS, Anti-Virus as well as data centre make up the core of the CBS. Data centre will generally have a backup site with full replication of hardware, software, Network components and personnel. Let us look at the benefits to the branch, to the customer and to the bank as a whole. Benefits to the branch As the back office work is done at a centralized location, more time is available to the branch officials for activities like product promotion, marketing, business expansion and cross selling of products.

Single window service for the varied needs of the customers is made available at the branches. This enhances customer service at the branch There is a uniform approach to the branch rules / operations Branches can concentrate on developing business. Standardization of IT infrastructure at the branches.

No End of Day (EOD) / Beginning of Day (BOD) process at the branch No local server and hence no local backup and other administrative Chores.

Benefits to customers Anywhere / anytime branch banking is available to the customers

 As multiple delivery channels are facilitated, Internet banking, online access to all ATM network, tele-banking facility, bill payment facility etc are made available to the customers. Customer becomes customer of the bank Improved customer service at the branches No need to visit the branch as the multiple delivery channels enable the customer to transact basic banking even from the comfort of her home / office

Benefits to bank Instant availability of consistent and accurate data. MIS at a central location enhancing the decision support for the top management. There will be effective control and monitoring by the top management.

Data base and processing are centralized leading to better monitoring of the business and reduction in data cost and transaction cost. Faster introduction of customer centric products from the central location ensuring uniformity in implementation. Roll out of new products / Business changes can be implemented immediately New delivery channels can be integrated easily The need for reconciliation among the branches is eliminated thereby improving better house keeping and better operational risk management Ease of system administration and thereby reduction in support costs.

 Information system security is ensured as the Information processing facility is centralized. Since the transactional as well as master data of all the branches is available at a centralized location, it is easy to set up Data-warehousing which will provide a decision support system. Critical nation wide payment system products introduced by the regulator such as RTGS, NDS, CFMS, and SFMS etc can be implemented and integrated with the core banking at the data centre.

There are also certain risks involved in the implementation of CBS. These are:
All eggs are in a single basket and hence the effect of centralized failure will be colossal resulting in reputation risk for the bank. The dependence on vendors and service providers increases. Data Integrity and data security have to be ensured all the time as the centralized location will be the target of all evil eyes. To be able to provide a reasonable level of comfort in this aspect, the security program of the banks will have to be dynamic and alive to the imponderables. Acceptance by the staff and changing their mind set to accept technology and a role shift will be a very big challenge for managements As the benefits outweigh the risks and as other major private sector banks started off from this platform coupled with competitive pressures and heightened customer expectations are forcing all banks today to adopt technology in a big way.

Some of the core banking solution products that are popular and adopted by banks are:

NAME OF THE PRODUCT

NAME OF THE COMPANY I FLEX SOLUTIONS LTD INFOSIS TECHNOLOGIES LTD TCS CMC LTD LASER SOFT INFOSYSTEMS ICICI INFOTECH SERVICES LTD

FLEX CUBE FINACLE FNS-BANCS TC / 4 LASER PANACEA NEWTON

Today, 21 public sector banks have embarked on the use of such systems and the number of CBS-enabled branches exceeds 14,000 as against 14 banks with about 5000 CBS-branches a year ago.

ORAGANIZATIONS PROFILE
Name of organization : Head Office : Punjab National Bank Bhikaji Cama Place, New Delhi

VISION
"To be a Leading Global Bank with Pan India footprints and become a household brand in the Indo-Gangetic Plains providing entire range of financial products and services under one roof"

MISSION
"Banking for the unbanked"

INTRODUCTION:

Punjab National Bank (PNB), the second largest public-sector bank with more than 4,600 branch offices in India, has set a benchmark with the implementation of Core Banking Solution (CBS). The bank has completed the task ahead of the timeframe that was initially set at March 31, 2009. PNB has become 100 percent core banking system. If a customer puts Rs.100 in any of the branches, it will be posted on the servers in Delhi. It would not have been possible to implement such a robust solution without our technology partners, said RIS Sidhu, chief general manager-IT, PNB. PNB has implemented Finacle Core Banking Solution from Infosys across all its banking operations, and a scalable database platform from Oracle together with Sun SPARC enterprise servers from Sun Microsystems. The bank has more than 22,000 concurrent users on Finacle technology platform. The solution facilitated the bank to become one of the leading banks in the world as its daily transactions vary from 3 million to 5 million. We are the first public-sector bank to adopt core banking throughout all the branches in urban and rural India. The branches will be controlled through the servers in Delhi and data would be transmitted through routers and switches. We have set a network of local and zonal centers so that data can travel efficiently, said Sidhu. With the integration of delivery channels, including ATMs and internet banking, PNB is now able to offer 247 transaction service to its customers at a reduced cost. Sun Microsystems has established business continuity platform with disaster recover site and alternative datacenter. We chose Finacle from Infosys, and our entire technology is based on Sun hardware. Our customers are no longer related to a specific branch. They can do banking 247 anywhere, anytime, he said.According to Sidhu, Oracle is supporting PNB for nearly 20 years and the bank is comfortable with it. Its database is facilitating our transactions, and we get scalable and reliable platform. Finacle application handles all our business segments, and soon well come up with mobile alerts, he said. With the implementation of Finacle Core Banking Solution, PNB is said to reduce operational cost and improve productivity of branches. In addition, Sun SPARC enterprise M series Chip Multi-Treading (CMT) systems on Solaris Operating System deliver scalability to the banks architecture and caters to the needs of all its branches.

INTERNET BANKING OR CBS:

Consumers using the internet to access their bank account and to undertake banking transactions. Involves provision of facilities such as accessing accounts, funds transfer, and buying financial product or services online. Also called transactional online banking.

TRADITIONAL BANKING V/S E-BANKING:

TRADITIONAL- In traditional banking, the customer has to visit the branch of the bank in person to perform the basic banking operations viz., account enquiry, funds transfer, cash withdrawing etc.

E-BANKING- E-banking enables the customers to perform the basic banking transactions by sitting at their homes or at offices through a desktop or laptop round the clock globally through electronic media. This is called any time, any where banking.

MODELS OF E-BANKING:

To implement effectively E-banking and augment the level of technology the following models have been suggested: Complete centralized solution (CCS) Cluster approach. High tech bank within bank.

CCS OR CBS:
Ideal branch network model on which E-banking activities can be implemented uniformly and efficiently. Under this model, the bank has to provide web-server and the requisite software which is connected to the main server. The customers can access the web server for their basic banking operations using any standard browser at any location.

CBS BENEFITS TO CUSTOMERS:

Instant fund transfers. Cheques collection/deposit across cities. Cheque can be deposited at the centre where it is drawn.

 Interconnected ATMs Access of accounts through any CBS connected branch SWIFT remittance facility Instant generation of statement of accounts.

CBS IN PUNJAB NATIONAL BANK:

A need for centralized banking system prompted PNB to go computerized and what followed was the establishment of CBS in Punjab national bank branches in all the leading cities like Delhi, Pune, Chennai, Mumbai, Ahmedabad, Chandigarh, Gurgaon, Hyderabad, Jalandhar, Kolkata, Ludhiana, Noida and Bangalore. Internet banking services are provided to all customers in the CBS branches. A branch and ATM locator is also available on the official website of Punjab national bank. Bank has been focusing on expanding its operations outside India and has identified some of the emerging economies which offer large business potential. All the branches of the bank have been computerized. The bank has also launched aggressively the concept of any time, any where banking through the introduction of centralized banking solution (CBS) and over 5399

service outlets at the 2881 cities/centres have already been brought under its ambit. PNB also offers internet banking services in the country for corporate as well as individuals. Internet banking services are available through all branches of the bank networked under CBS. Providing 24 hrs, 365 days banking right from the PC of the user, internet banking offers world class banking facilities like anytime, anywhere access to account, complete details of transactions, and statement of account, online information of deposits, loans overdraft account etc. PNB has introduced online payment facility for railway reservation. Banking account holders to pay their telephone, mobile, electricity, insurance and other bills anytime from anywhere from their desktop.

Best Automation Project : Punjab National Bank : CBS@RRB

Implementation of Core Banking Solution in Punjab National Bank's sponsored 6 Regional Rural Banks with 1400 branches.

RRBs play a key role in rural institutional financing and were formed with the objective of rural credit delivery & upliftment of rural economy. RRBs faced many challenges due to non-availability of skilled resources, lack of infrastructure, etc. The business domain scope of RRBs is completely different than commercial banks & mainly covers the priority sector advances. So taking all these

considerations into account under the guidelines of RBI, Punjab National Bank had implemented CBS in its 5000+ branches in 2008. Now the same implementation methodology was also adopted to bring RRBs under the CBS fold. To implement this, a lot of business and technical challenges were faced. First, as mentioned above, the business scope of RRB is different and RRBs have specific needs of subsidy, subvention and soft loan scheme. Second, the target customer are mainly the local mass comprising of agriculturists, small businessmen having their own needs and expectations. Third, adopting new technologies was a great challenge for the RRB employees.

Best Automation Project Company Scenario Before Deployment

Lack of infrastructure, non-availability of skilled resources, etc Customization, parameterization, etc was a big challenge Customization, parameterization, innovative system redesign is handled. Seamless banking experience to the rural masses. Exisitng H/W, Data Centre setup, skilled and experience manpower and other It resources was extended to RRBs. A total of 12 officials, 2 each from 6 RRBs were selected and trained extensively by PNB officials and Infosys Ltd, utilizing the training infrastructure.

After Deployment

what was Deployed

Punjab National Bank finally implemented CBS successfully in 6 RRBs in just 12 months before the schedule deadline. Improved customer service, better housekeeping,desired growth, centralized generation of MIS reports, etc is now achieved through the implementation of CBS in RRBs. Branches now have more time so as to explore new business opportunities due to the automation of frontoffice businesses. Anywhere Anytime Banking, Automated Teller Machines, Internet banking solutions, etc are also provided to the banking customers. Post CBS implementation, total gross profit has reached to Rs 228.97 Crore from Rs 175.04 Crore. The entire project was implemented using the internal resources of Punjab National Bank including hardware, software, network and information security infrastructure. Ajay Misra, General Manager (CTO) What has been the overall impact of this project? RRBs have started reaping the benefits in terms of improved customer services, improved housekeeping, centralized generation of MIS reports, etc, all with the implementation of Core Banking Solution in RRBs. New business opportunities are being explored at the branch level due to the automation of front-office business. Not only that, due to the automation, the shortage of staff strength is also complemented. Revenue leakage was curtailed and service charge also got increased due to centralized execution of different charges. The RRBs are now at par with any other commercial bank and are now marching with prominence. Inter- SOL transactions have now become a reality. The customer is now a customer of the bank rather than the customer of the branch. One of the live examples is that, with the implementation of Earnest Money Deposit Scheme of Haryana Urban Development Authority of the Haryana Gramin Bank, they have fetched a deposit business of Rs1600 crores during the month of December 2009- January 2010.

What according you sets this project apart from any other in its class? What's the USP of this project? While most of the peer banks are yet to bring their branches under the CBS umbrella, Punjab National Bank has achieved it by bringing all the odd 1400 branches of its 6 sponsored RRBs which is unique in itself. The total time required to complete the project was 24 months to cover 1400+ branches. However PNB achieved 100% CBS implementation in all 6 RRBs in just 12 months and that too before the RBI schedule date which was September 2011. Punjab National Bank implemented the entire project using the internal resources extending its own H/W, S/W, information security infrastructure, etc. Not only that, the Data Centre of RRBs is hosted by the existing datacentre of PNB and is managed by the existing team. The project CBS@ RRB meant for all the 6 Regional Rural Banks, is operating in 6 different states of North India and caters to the needs of rural masses. The Branches of these RRBs are manned by the end users who are also the employees of RRBs. On the contrary, Head Quarter is also using the Core Banking solution for business monitoring & control and for generation of centralized MIS.

Coming to technical part of it, IT resources viz Network setup, Information security setup and existing Data Centre setup was extended to RRBs. Apart from this, skilled and experience manpower was also extended to RRBs. Only a few new servers were procured while existing hardware resources were consolidated and re utilized for RRBs which in overall helped in minimizing the project cost. 6 instances of database, 3-Tier setup having Web Server, Application Server and Database server were also put in place.

In case of any kind of gaps, a detailed GAP analysis was performed in the existing system and procedures being followed at RRBs. Utilizing the PNB training infrastructure, a team of 12 officials, 2 each from 6 RRBs were selected and were given extensive training by PNB officials and Infosys Ltd. Business Process Definition exercise was undertaken with the RRB team followed by a strong Business Process Re-engineering activity. This was implemented for standardization of various processes and products across all the 6 RRBs. Specialized business modules like Subsidy linked accounts, Subvention module etc were also specially customized for RRBs. In future, PNB plans to further customize it as per the banking practices. Not only this, MIS is also flexible enough to incorporate any new customized reports without any issues. They also plan to connect alternate delivery channels like ATMs, Kiosks, etc. A Service Desk tool called Service Desk Service Plus (SPSD), which is basically a call escalation tool will also be implemented. Through this, any issues faced by branches can be simply escalated to higher level of CBS desk. Moreover, an anti virus solution with auto updates is also in the pipeline.

BIBLIOGRAPHY

 WWW.PNBINDIA.IN/NEW WWW.GOOGLE.COM WWW.SCRIBD.COM BOOKS RELATED WITH PNB

QUERIES AND FAQs:

What is Internet Banking? The Bank customers with computer and Internet facility access their Bank accounts

through Internet for viewing their accounts and transfer funds to other accounts (within Bank , other Bank), book tickets (railway/airlines), make donations, tax payments etc.

What is special about Internet Banking? It is available 24 hours a day, 365 days a year and you can operate your account anytime / anywhere at your convenience.

What I need to use the services? You require the following to use the services - A personal Computer (at least Pentium with Windows 95 or above) - An Internet Connection - Internet Explorer (5.0 or above.) - Registering with the Bank (through branch) for availing the services.

Can I use Laptop for accessing Internet Banking? Yes, provided it meets the specifications required to access Internet Banking Services.

Am I eligible for the Internet Banking? The customers maintaining SF,CA, CA(Overdraft) in case of retail customers and CC/CA in case of Corporate customers may avail the services, provided the accounts are fully KYC compliant (with regard to KYC Compliance, please take up with your branch).

What is the URL for Internet Banking? Type www.pnbindia.com or www.pnbindia.in or www.netpnb.com in the address bar.

How do I get register to Internet Banking Services? The eligible customers may get registered for the Internet Banking Services with the branch by filling request form or by recording their request at banks call centre.

But I do not have an account with PNB? The Internet Banking Service is available to PNB customers only. We shall be glad to accept you as PNB customer and have your account with us. Walk in to any of our branches for opening of account with us and availing Internet Banking Services.

How do I get User-Id and password for the Internet Banking Services? On registering for Internet Banking Services, User - id and password are sent to the branch and to ensure the highest security and safety, you have to collect your userid & password from your base branch. While collecting user-id & password from the base branch, please submit the acknowledgement letter duly signed in the branch.

I am a NRI customer, can I use Internet Banking? Yes, NRI customers can use Internet Banking. I am not in India, how do I apply for Internet Banking Services? If you want to register for Internet Banking, when you are outside India. 1. Download the request form from Internet Banking website and fill the same. 2. Submit your request form with a copy of your passport to the branch where you

have account(s). .

What is my user-id for IBS? If you are Retail IBS User, the Customer Id in PNB will be your user Id for Internet Banking after enabling your account for this facility. The Customer Id is also mentioned in the 2nd page of your account pass book. You can also ask your branch for the Customer Id / IBS user id.

Within how many days will I get my password? You can expect the password to reach the branch within 6 working days after giving request at the branch. An SMS is also sent to this effect, if you have provided the mobile number.

Can I change the User-id and Password? Your user Id cannot be changed. It is mandatory for you to change passwords with your own convenient passwords at first login. Later on at any time you can change your passwords but not the user-id.

How to change passwords? Passwords can be changed any time and any number of times through change password option under your IBS login. In fact bank recommends frequent change of passwords for securing access through internet. How to choose passwords? While choosing password, please ensure that: - Your Password should be easy for you to remember and difficult to guess by others. - Simple password(s) are not selected.

- The passwords which can easily be guessed e.g date of birth, car number wife/mother's name etc should not be used. - The passwords should be combination of alpha, numeric digits and special characters. - Use at least one special character (like @, #, $ etc) in your password otherwise system will not accept your passwords.

How many attempts do I get to enter my passwords? Five (5) attempts are available for login password, whereas for transaction password there are 4 attempts. After the unsuccessful attempts the passwords get disabled and you have to make request at any branch for resetting of the passwords. New passwords would be sent to the same branch after resetting.

I am unable to login with the Password and allotted User-id, communicated to me by the Bank. Passwords are case sensitive. Kindly be a little more careful while typing the system-generated passwords for the first time. - The format of the mailer password sent to you by the bank is as under: First Character Capital Alphabet Second character Special character Last 4 characters Digits Keeping the above format in mind please try to login again - It is also possible that your Internet Banking account has not been activated. Please attempt logging in after 24 hours of receiving the password. If the problem persists please get in touch with the branch.

Does my passwords expire? Login password has no expiry period, however transaction password expires after 90 days. Please change the password before expiry of the same.

What happens if I forget my password? Nothing to worry, just click on "forgot password" at the login page and submit your request online by entering IBS key Number (Only for retail IBS users). In case, you don't have IBS Key, then please submit request at the Branch for resetting of the passwords. The passwords will be sent to the branch and same may be collected by submitting acknowledgment.

What is IBS Key? IBS Key is a 6 digit number introduced for identification and reference. Under this mechanism, Internet Banking Customer would have an option of creating IBS Key Number of his own choice on the Internet Banking , which he can use later to apply for duplicate password.

What happens if I forget my IBS Key? If you forget the IBS Key, you need to contact your branch and apply for the duplicate IBS password. Once you start using the service, you can again create a new IBS Key.

What happens if I forget my User-id for Internet Banking? If you forget the username/user-id for Internet Banking Services, kindly contact your base branch.

Is Internet Banking secured? Yes, provided all precautions and safeguards are followed while accessing Internet Banking.

What are the facilities/services available through Internet Banking? - Access to accounts ( statement of account, quick view, account details) - Transfer of Funds ( with in Bank and in other Banks accounts) - Cheque Status, Online Stop payment of Cheques - Requests (cheque book issuance, statement of account, FD etc) - Mails (between customer and PNB only) - Customize- change passwords etc. - Payments towards services availed over Internet

What are the other services available through Internet Banking? The Internet Banking facility, besides providing access to accounts allows you to make payment towards the following: - Railway/Airline Tickets - Hotel/travel booking - Govt. Taxes/duties - Subscriptions/donations/premium payments - Utility bill payments like mobile, telephone, electricity, water etc.

SUGGESTIONS TO MAKE CBS MORE EFFECTIVE: