* Essentials of Bank

Computerisation
Hemchand J

* The winds of liberalisation sweeping through

India affected all sectors of the economy.

Operations in Banks needed immediate
automation to provide services comparable to
best International standards and to match
technological changes taking place in other
countries.

*Introduction

*Indian Banks undertook very little efforts for

modernisation in the areas of introduction of

computers and communications till early 1980s.
*In 1983, agreements with unions on computerisation
was signed and the new agreement reversed the
trend and banks started the process of
computerising operations at various levels.
*The first report of Rangarajan Committee sped up
the pace of computerisation and communications in
Indian Banks.

*Modernisation

* Bank computerisation gathered momentum after

setting up of a committee in 1983 under the

chairmanship of the then Deputy Governor of RBI,
Dr. C. Rangarajan.
* The committee was set up to study the
possibilities and stages involved in bank
computerisation and to prepare guidelines for the
same . The report submitted by the committee is
1984 was known as the First Rangarajan
Committee Report on bank mechanisation.

*Rangarajan

Committee

* Four major objectives of computerisation are

to improve:
* A Customer Service
* B House keeping
* C Decision making
* D Productivity and Profitability

*Need for

computerisation

* A question often asked is whether computers are

necessary at all.
* Speed and accuracy are the hallmarks of
computers.
* They have a vital role to play where there are
large volumes of data and works needs to be
completed within a specified period.
* There is a price on customer time and customers
are looking for fast settlement of their
transactions.

*Necessity of

Computers

*At branch level, the main objective is improvement

of customer service, quality of house keeping and
generation of data for better management and
control.
*At the regional and head office level, which are
administrative offices of the bank, the purpose of
computerisation is to store, analyse and retrieve
data received from branches, generation
information with speed and thereby strengthening
internal control over branches for policy
formulation.

*Computerisation at

Branch Level

* They are introduced at the initial stage of branch

computerisation . The single user computer system

was a dedicated machine, user by a single person
and was named Advanced Ledger Posting Machine in
the branches.
* These computers were useful for decision making at
branch level and were used to process and analyse
data. For executive use, the system was provided
with software for generating EXCEPTION REPORT for
perusal by the Highest official at branch level.

*Stand alone

computer system

* The stand alone systems are cheap and easy to

install, support simple software and do not share

information with other machines.
* However, they had low processing speed and low
data storage capacity and were put to use for front
office operations at branches with low workload.
* It was also an initial demand of Unions that the
computers should not be interconnected or
networked and should be used only in single user
mode.

*Stand Alone systems

* Multi user systems permitted more than one

person to work at the same time. Initially, they

were installed in administrative offices in
connection with computerisation of
administrative office functions.
* Most of the administrative offices, installed
mini computers which were UNIX based and
typically had six to eight terminals attached to
the main server.

*Multi User systems

* The system is based on centralised processing

concept. All information is kept and processed at

the main central machine and various terminals
are attached to the main computer.
* The main computer could store huge amount of
data and possesses high processing speeds .
* Each user had a unique identification code .
* The system worked on a time sharing basis and
were used for development of online
applications.

*Multi user computer

networking

*The second stage of automation at branch level was carried

out with the help of mini computers and was named TBA.
UNIX operating system was the most popular and supported
most of the relational database management systems
(RDBMS).
*Banking systems were developed using centralised computing
concept in which terminals had limited powers and normally
did not process data locally. However, simple validation
programs could be stored on these terminals for use at data
entry level. Under TBA, banks could offer single window
system of service to customers. Typically one of the terminals
in the front office was designated as May I Help You terminal.

*Total Branch

Automation

* Total Branch Automation offered a totally

computerised environment for the customers and

officials of the bank in their day to day banking
transactions. Transactions carried out at the
terminals were immediately recorded in the Central
Server. This data is verified and authenticated
instantaneously and crucial information like account
balance is updated online. Some of the entries
pertaining to internal accounts are processed in
batches to reduce the load on the main server.

*TBA

* Various security controls are enforced to ensue

data integrity and security. Terminal operators

are given limited powers so that customers get
faster service (encashment of small amount
cheques). These transactions are subsequently
verified and authenticated by senior officials.
Passbooks, account extracts and vouchers could
be generated online and even customer
photographs could be captured and stored.

*TBA

* Officials working at branches are graded into

as many as fourteen levels with Branch

Manager at the highest level with powers to
sanction and authenticate highest value
transactions. Typically, one of the officials in
the branch is designated as Administrator and
is entrusted with DAYEND and DAYBEGIN jobs
which include taking backups of data in the
prescribed form and generation of day end
reports, Balance sheet and Exception Reports.

*Total Branch

Automation

* Computerisation of cashiers activities also is

carried out in TBA. Cash transferred to the

cashier till denomination wise is available at
the Day begin and at any moment it is possible
to verify how much cash each cashier is having.
While improving customer service by using
cashiers as tellers, the system also enforces a
check on unethical activities resorted to by
some cashiers.

*Cash Module

* Regional office and Zonal office of the bank

bridges the gap between branches and Head

office. These offices exercise control over the
functioning of branches and also collect data
and transfer it to Head office for consolidation.
* RO/Zo also perform tasks like a) Maintaining
Branch Profile b) Inter branch reconciliation c)
Credit Monitoring and d) Personnel data
management.

Computerisation of
Administrative offices

* Head office is responsible for bank level planning,

control and policy decisions. Head office activities

are divided into four broad categories.
* 1. Operations 2. Planning
* 3. Personnel 3. International Business.
* Computerisation at HO level will cover Personnel
Management and Administrative support, Funds
Management and Treasury, Investment and
Portfolio Management and Branch Profile
Maintenance.

*Computerisation at

Head Office

* Core banking has a centralised branch

computerisation model, where the branches

are connected to a central host which
incorporates branch automation modules and
online multiple delivery channels like ATM, Any
Branch Banking, Debit card, Tele-banking,
mobile banking and Internet banking under one
roof.

*Core Banking

* In core banking, there is a central database for

the bank and transactions are done centrally,

online. It offers integrated products and
services to customers round the clock.
* There is scope for induction of modern banking
services in a single software package operating
on banks Wide Area Network.

*Core Banking Model

* Retail customer banking modules.

* Deposits, Loans, Bills, Remittances, locker and Clearing.
* Trade Finance/Forex modules.
* Government business modules.
* Corporate Finance module.
* Service Branch Module.
* MIS modules.
* Integrated ATM, Internet,Mobile banking, debit card
* Other branch banking, call centre and internet modules

*Business components

* Establishment of centralised data depository.

* Facilitates data warehousing and data mining.
* Easy implementation of customer centric services.
* Centralised MIS.
* Enhanced Risk management using central data pool.
* Facilitates BPR to streamline existing processes.
* Relieves branches of data back up and MIS report

generation.
* Inter branch reconciliation and monitoring enhanced.

*Benefits

* CREATION OF PRIMARY DATA CENTRE

* For housing the central server for online

transactions.
* Central database to be used for all customer centric
delivery channel services integrated with the CBS
and for banks various corporate level requirements
* 24/7 maintenance with customer support
* Skilled activities like database maintenance,
backups, network monitoring, on call support,
trouble shooting, support of delivery channels.

*Essential

Requirements

* DRS to be used for following purposes:

* To avoid disruption in the business activities of CBS
branches due to central system or network
failures.
* To ensure non stop functioning of branches and
online delivery channels integrated with CBS
* To act as a backup for providing reliable and
continuous processing environment.
* Many multinational IT companies have presence in
these technologically advanced centres.

*Disaster Recovery

Site (DRS)

* It helps in the following tasks:

* Helps bank realign the existing business

processes in tune with benefits provided by the

new technology platform.
* Helps the bank in taking advantage of the best
business practices available in the technology
platform to provide more efficient services.
* To deliver enhanced value to customers and
gain from changed processes.

*Business Process Re-

engineering

* Leased lines of WAN to be used as a primary

communication channel for CBS.
* Adequate redundancies will be built in to
address any network failure.
* ISDN link will be used as a backup

*Network

*CBS being a critical project with complexities of

multi delivery systems involving higher

investments as well as manpower requirements,
a specialised consultancy service is suggested for
centralised banking.
*Consultant should assist the bank in
crystallisation of design and formulation of
implementation strategies.
*To proceed further after getting expert
recommendations and suggestions.

*Specialised
consultancy

* Objective of computerisation in India is not to

replace men with machines. Rather, the

objective is to make the work life more
meaningful. As Banking is an industry which is
the largest processor of data, reliance on
technology is inevitable.
* Absorption and effective utilisation of new
technology will involve a change in structure,
organisation and systems as well as attitudes of
those working in the industry.

*Summing up

* Principles and Practices of Banking -Macmillan

Indian Institute of Banking and Finance
*
2nd Edition.

*Bibliography