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Commercial Banking
Technology in Indian Banking PGP I (2007-09) (2007April, 2008
ATMs Electronic Banking Branch Banking

Branch 3 Branch 2 Branch 1 Head Office Branch 4
Branch n Branch 6
Branch 5
Commercial Banking
Technology in Indian Banking 2007
Glossary in E-Banking E ALPM Advanced Ledger Posting Machine Micro processor based electronic device used for maintenance of primary ledgers, working out products and interests at periodical intervals, preparation of account statements and listing of standing instructions to be executed in the accounts.
Commercial Banking Technology in Indian Banking 2007 3
GlossaryGlossary-2
BANKNET A communication software to provide message and file transfer between branches of banks and across banks CRM Customer Relationship Management is an information technology industry term for methodologies, strategies, software, and other web-based capabilities that help an enterprise organise and manage customer relationships.
GlossaryGlossary-3
DBMS Database Management System A set of computer programs that controls the creation, maintenance, and utilisation of the databases of an organisation E-Commerce is conducting business communications and transactions viz computers over networks. It is the buying and selling of goods and services through digital communication
GlossaryGlossary-4
SWADHAN Indias first Shared Payment Network Service (SPNS) offering countrywide access to banking operations at more than 1,000 ATMs in and around 64 cities. It has 55 member banks in the network which includes public, private and foreign banks. Touch Screen recognises human touch. Users can point to the select something on the screen
E-BANKING DEVELOPMENTS
ALPMs and Back Office Computerisation NEED TO IMPROVE CUSTOMER SERVICE RECONCILIATION / UNION PROBLEMS ADVENT OF PC IN 1980s COMPETITION AND REFORMS INTRODUCTION OF COMPUTERISATION
CLEARING HOUSES, ATMs, ELECTRONIC FUND TRANSFERS, BANKNET, SWIFT, ELECTRONIC MAIL, CREDIT CARDS, ONLINE BANKING, TELE-BANKING, ETC
Committees on Computerisation in Banks in India 1982-1995 19821. Working Group to consider feasibility of introducing MICR / OCR Technology for Cheque processing (1982) Convenor : Dr Y B Damle, Advisor, Management Services Department, RBI
Committees on Computerisation
2. Committee on Mechanisation in the Banking Industry (1984) Chairman : Dr C Rangarajan, Deputy Governor, Reserve Bank of India
3. Committees on Communication Network for Banks and SWIFT implementation (1987) Chairman : Shri TNA Iyer, Executive Director, RBI
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4. Committee on Computerisation in Banks (1988) Chairman : Dr C Rangarajan, Deputy Governor, RBI
5. Committee on Technology Issues relating to Payments System, Cheque Clearing and Securities System in the Banking Industry, (1994) Chairman: Shri W S Saraf, Executive Director, Reserve Bank of India
6. Committee on proposing Electronics Funds Transfer and Electronics Payments (1995) Chairperson: Smt K S Shere, Principal Legal Adviser, Reserve Bank of India
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Bank Branches 2006 (x- RRBs) (xBanks 19 Natd 8 SBGr 1 IDBI 19 OPBs 8 NPBs 29 FBs TOTAL Rural 12,990 5,229 2 936 97 0 19,254 SUrban 7,103 4,043 17 1,447 322 1 12,933 Urban 6,990 2,449 66 1,236 674 37 Metro 6,929 2,110 88 947 857 221 Total 34,012 13,831 173 4,566 1,950 259
11,452 11,152 54,791
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Indian Banking @ Cross Roads?

Computerisation - Modernisation ? Extended Hours (24x7)- Competition? NPAs, Provisions & Strain on Profitability? Prudential Norms - ALM - Risk Mgt ? Mergers & Acquisitions - Universal Bkg? Voluntary Retirement Scheme Effects ? Downsizing - Outsourcing ? Alliances - Bancassurance ?
Automate or Else ......... Perish ??????

Indian Banking-Now... Banking Transparency in Banking; Compliances Narrow Banking Relationship Banking Retail / Personal / Private Banking Hi-tech Banking E Age-Banking Mobile Banking / Phone Banking Network Banking Virtual Banking Universal Banking Online Banking / Internet Banking
WHY TECHNOLOGY IN BANKS ?

TO TRANSFORM FINANCIAL SERVICES INDUSTRY IN THE NET-WORKED WORLD
BANKS TO BE CUSTOMER CENTRIC PROVIDE SERVICES / PRODUCTS ACROSS A RANGE OF CHANNELS TO BE FUTURISTIC AND HAVE TIME VALUE IN ALL ITS DEALINGS WITH CUSTOMERS
Many Benefits of Technology

Increased operational efficiency, profitability & productivity Superior Customer Service Multi-channel, real-time transaction processing Better Cross-Selling ability Improved management / accountability Efficient NPA and Risk Management Minimal transaction costs Improved financial analyses capabilities
Pre-requisites for Technology

Human Resource Empowerment Business Process ReRe-engineering
Planning for Disasters

Focus aspects of Commercial Banking

BANKS BUSINESS LOANS & MISC. SERVICES RAISING DEPOSITS
Core Banking (CBS) Electronic Banking Any Branch Banking CRM MIS & Intranet ATMs
POS Terminals and Cash dispenser
Corporate Network
Card Management Document Management
Risk Management
Resource Management
BANKS BUSINESS
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Benefits of Virtual Banking

To Banks
Large satisfied customers and higher retention Scope to attract new customers Improve quality and differential services Greater opportunity to cross sell Sharing network and Cost Saving Increased volumes and profits Reduce overall risk with proper MIS
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Benefits to Customer
More convenience & flexi timings Better awareness of products & services Up-to-date information on accounts Low cost of accessing the accounts
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BANKS IT STRATEGY
INVESTMENT IN HARDWARE ACQUIRING / DEVELOPING SOFTWARE TRAINING OF STAFF AT DIFFERENT LEVELS NETWORKING OF OFFICES R-S-U-M? SECURITY FOR TRANSACTIONS & INFO GLOBAL REACH ONLINE BANKING, OUTSOURCING
Internet Banking
Issues of Confidentiality ? Hacking and Fraud prone ?? Scope for failure of Technology ??? Resultant denial of Services ????
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INST. FOR DEV & RESEARCH IN BANKING TECHNOLOGY

TO PROVIDE TECH & OPERATING SUPPORT TO Bks / Financial Institutions SET UP BY RBI AT HYDERABAD - 1996 FUNDED BY RESERVE BANK OF INDIA AN AUTONOMOUS CENTRE FOR DEV AND RESEARCH IN BANKING TECHNOLOGY THINK-TANK FOR PROMOTION OF TECH RESEARCH & CONSULTANCY www.idrbt.ac.in
IDRBT, HYDERABAD
V-SAT BASED FIN NETWORK FOR BKs DATA WARE-HOUSING & DATA MINING PUBLISHING A JOURNAL ON IT IN BKG WEB BASED TRAINING TO EXECUTIVES INDIAN FINANCIAL NETWORK(INFINET)
INTER BANK APPLICATIONS LIKE RTGS DELIVERY Vs PAYMENT, GOVERNMENT TRANSACTIONS AUTOMATIC CLEARING HOUSE, ETC
DEVELOPMENTS
ALPMs CLEARING HOUSE CAR,CRR,SLR,PS,NPAs CREDIT/DEBIT CARDS NICNET,I-NET, RABMN INFINET, RBINET BANKNET, NDS, SFMS MICR, ATMs, SWIFT DEMAT, IT ACT-2000 INTERNET BANKING ECS, EFT, SEFT, RTGS CROSS SELLING
Commercial Banking
ALM & RM, MIS CRM, KYC, AML Core Banking Solutions KISAN /SME CARD CREDIT INFO BUREAU DISASTER MANAGEMENT Cheque Truncation CYBER CRIMES HACKING, PHISHING, PHARMING, TROJAN, SKIMMING, ETC SMART CARDS
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Communication Networks
MICR (Magnetic Ink Character Recognition) Clearing BANKNET INFINET SWIFT Electronic Data Interchange (EDI) Electronic Funds Transfer (EFT) System Electronic Clearing Services (ECS) ATM network - SWADHAN (Shared Payment Network System -SPNS)
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MICR CLEARING
Magnetic Ink Character Recognition Introduced in 1987 in the four metros 1,047 Clearing Houses; 42 with MICR SB/CA Cheque leaves standardised size (8 X 3 2/3) are pre-printed with the bank-branch code and account type in MICR strip, while the amount is read manually and fed into the system using the encoders for funds settlements Speeds up clearing work BC/DW/TC/DD/PO/GC/IW/RW/SI...
Automated Teller Machines

ATMs or 24 hour Tellers Electronic Terminals - allow to bank at any time... On-site (near branch) and Off-site ATM ATMs facilitate withdrawal/deposit.... Customer provided with a PIN / Card Introduced in India by Foreign Banks SWADHAN / SPNS wef Feb 1, 1997 Introduced in Mumbai by IBA initiative www.iba.org.in
SBIs Mobile ATM in Kerala
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Bank ATMs 2007 (x-RRBs) (xBanks 19 Natd 8 SB Group 1 IDBI Bk 18 Old PBs 8 New PBs 29 FBs TOTAL-83
Commercial Banking
On-Site 6,377 3,655 257 1,104 3,154 249 14,796
Off-Site 2,991 2,786 263 503 5,038 711 12,292
Total 9,888 6,441 520 1,607 8,192 960 27,088

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ATMs
On-site and Off-site Automated Teller Machines -MOBILE, BIOMETRIC ATMs Total installed ATM base >21,000 Average withdrawal per ATM transaction - Rs 1,500 to Rs 3,000 Total cash movement through ATMs in India is Rs 35,000 - 40,000 crores every year Medium for non-cash transactions such as printing of statements, credit card enquiry, cross selling, etc
Cross Selling
The strategy of pushing new products to current customers based on their past purchases. Cross-selling is designed to widen the customer's reliance on the bank and decrease the likelihood of the customer switching to a competitor.
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Cross Selling ADVANTAGES

Customer servicing, marketing, communication costs - lessen Credit appraisal made easy Increased loyalty married to the bank! All-in-one financial super market consumer Business/employee - increases
BANKNET
Set up in 1991 by RBI Meant to facilitate transfer of interbank/ inter-branch messages within India by Public Sector banks who are members of this network Wide connectivity - Major Centres like Mumbai, Delhi, Calcutta, Madras, Nagpur, Bangalore, Hyderabad, Pune, Ahmedabad, Kanpur, Lucknow, Chandigarh, Kochi, Jaipur, Bhopal, Patna, Bhubaneshwar, Thiruvananthapuram, Guwahati, Panaji, Jammu, etc
INFINET
Indian Financial Network Set up by RBI in June 1999 Satellite based WAN using VSAT (Very Small Aperture Terminal) technology The hub and Network Management System of INFINET are located in the Institute for Development and Research in Banking Technology, Hyd Major applications: E-mail, Electronic Clearing Service - Credit and Debit, Electronic Funds Transfer
http://www.idrbt.ac.in/index_fromsm.html ?infinet1.html?infinet
SWIFT www.swift.com
Society for Worldwide Inter-bank Financial Telecommunication HQ La Hulpe, Brussels, Belgium Provides reliable, fast tele-communication facilities for exchange of financial messages all over the world between Banks and FIs As non-profit making co-operative society in 1973 by 239 banks in 15 countries Hubs in Brussels, New York and Netherlands Rules in 1975; first message in 1977 >7,000 members in 200 countries now Handles over 7 million messages every day India a member since 1991 88 Indian banks are members as on date
SWIFT contd...
Any Bank / FI can become a member Allots an address called Bank Identification Code (BIC) of 8 characters Enables members to send secure and reliable messages authenticated... Correspondent bank arrangements... Advantages: 24 hours service, system based fraud-free faster accurate confidential funds/LCs/Guarantees
Electronic Data Interchange

Facilitates transfer of banking transactions using agreed protocol and standard data structure b/w computers Norms developed in respect of specific messages for transmission of business transactions which are electronic equivalents of commercial invoices, purchase orders, transport bookings, payment instructions etc Appropriate message formats and standards for financial applications in EDI developed by Message Development Group-Finance (constituted by IBA)
Electronic Funds Transfer (EFT)

Hosted and operated by the RBI Permits fund transfer up to Rs 5 lacs from any account at any branch of any member bank in any city to any other account at any branch of any member bank in any other city RBI acts as the service provider as well as regulator
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ECS
Electronic Clearing Scheme (ECS) operated by the RBI since 1996-97 Utilises BANKNET and INFINET Facilitates payment from a single account at a bank branch to any number of accounts maintained with the branches of the same or other banks Eg., Payment of dividends RBI has also launched ECS Debit for payment to utility companies like Telephones, Electricity etc
SWADHAN
Launched in 1997 India's FIRST Shared Payment Network Service covers > 1000 ATMs in 64 cities 55 member banks in the network, which include nationalized, private and foreign banks Enables member banks to share their ATMs with other participating banks Objective - reduce the huge investment being made by the banks to deploy ATMs in different locations
SERVICES
Bill Payment through Electronic Banking Electronic Shopping Mall Effecting Personal Investments through Electronic Banking Trading in shares Investing in Mutual Funds Trade In Derivatives IPOs Online
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Real Time Gross Settlement

Introduced in India in 2004 by RBI Internationally accepted system to minimise the settlement risks Settlements occur simultaneously >10,000 bank branches networked Balances held with RBI by banks 4 types of members A, B, C & D http://www.iba.org.in/FAQs-RTGSNEFT-ECS.doc
Cheque Truncation System

IN USE IN MANY COUNTRIES ... NI Act was amended appropriately Settlement based on e-images/MICR RBI Wg Gr submitted report in 2003 Images to be preserved for 8 years Pilot project in New Delhi in 2006 Reduces delays in collections... Fraught with risks, legal issues...
Customer Relationship Management (CRM)

Not a product / service, but a strategy Increasing competition among banks Customer expectations and demands Product development / Service Quality Know Your Customer (KYC) guidelines Knowledge Management in Banks Call Centres, DSAs, Franchisees in Banks Two Banking Ombudsman Schemes Core Banking Solutions & CRM Packages for Best Customer Service
Technology in Indian Banking 2007 49
Commercial Banking
Customer Relationship Management

Customer Analytics
Statistical Credit Score Card
Demographic details Transaction details Historical loan default data
Targeted Marketing Campaign

Carpet bombing avoided Hit rate increases
Core Banking Solutions (CBS)

POOLING DATA AT CENTRAL SERVER TRANSACTIONS OF DELIVERY CHANNELS FROM DELIVERY POINTS (BRANCH/ATM) FEED ONLINE TO HOST NO BACK OFFICE HOST DATABASE IS UP TO THE MINUTE END OF DAY (EOD) AND START OF DAY (SOD) TASKS PERFORMED AT BRANCHES WILL BE DONE BY HOST SERVER ELIMINATES BR RECONCILIATION WORK STAFF PRODUCTIVITY BANK CUSTOMER!
Smart Cards The Future

Multi-application Smart Card Channel of the future Pilot project started Pilot Project funded by Govt. of India Project is in progress in partnership with IDRBT, IIT Mumbai and Banks Visit www.scafi.in The Smart Card Forum of India is a non-profit, multiindustry organization promoting the wide spread acceptance of multiple application smart card technology.
Beware of
Hacking Phishing Pharming Skimming Trojan
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Hacking
Hacker: May mean simply a person with mastery of computers.
TIMELINE Early 1960s Hackers begin breaking into mainframe computers. 1983 The FBI busts six teen-age hackers from Milwaukee; one of the first arrests of hackers. 1984 First issue of 2600: The Hacker Quarterly in New York: prime source for hacking information 1985 Phrack, an electronic magazine about computer hacking, begins. 1987 AT&T computers hacked into by Herbert Zinn............................................... ...................................................................................................................... ...................................................................................................................... February 2000 In only three days some hackers brought down some of the biggest Web sites in the world that included Yahoo!, Amazon.com, Buy.com, eBay and CNN.com. They used"Denial of Service" attacks to overloaded the sites' servers by sending them an excessive number of data requests. Commercial Banking Technology in Indian Banking 2007 54
Phishing
A method of identity theft carried out through the creation of a website that seems to represent a legitimate company. The visitors to the site, thinking they are buying something from a real business, submit their personal information to the site. The criminals then use the personal information for their own purposes, or sell the information to other criminal parties.
www.antiphishing.com
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Pharming
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Skimming
An electronic method of capturing a victim's personal information used by identity thieves. The skimmer is a small device that scans a credit card and stores the information contained in the magnetic strip. Skimming can take place during a legitimate transaction at a business. Skimming can occur easily in a restaurant because your card is taken away when the bill is being settled. If your server is a skimming identity thief, he or she will, before giving the card back to you, scan the credit card with a hand-held electronic device, which takes only seconds. The electronically captured information is then used to by the thief or sold to other criminals
Trojan
Trojan horse is a program that installs malicious software while under the guise of doing something else. Though not limited in their payload, Trojan horses are more notorious for installing backdoor programs which allow unauthorized non permissible remote access to the victim's machine by unwanted parties normally with malicious intentions. Unlike a computer virus, a Trojan horse does not propagate by inserting its code into other computer files. The term is derived from the classical myth of the Trojan Horse. Like the mythical Trojan Horse, the malicious code is hidden in a computer program or other computer file which may appear to be useful, interesting, or at the very least harmless to an unsuspecting user. When this computer program or file is executed by the unsuspecting user, the malicious code is also executed resulting in the set up or installation of the malicious Trojan horse program. (See Social engineering.) Often the term is shortened to simply Trojan.
References:
Information Technology & Electronic Banking Indian Institute of Bankers, Mumbai, May 1998 Information Technology & E-Banking ICFAI, Hyderabad, October 2004 Retail Banking, Everything you need to know to work in a Bank - Raghu Palat, IBD, Mumbai 2006 Banking on Technology, Indian Management AIMA Publication, August 2004 Building CRM Customer Relationship Management & KYC experience through Technology BanCon, IBA Conference, 2004; Indian Banker Feb 2006 Trend and Progress of Banking in India, RBI 2006 www.rbi.org.in; www.idrbt.ac.in; www.google.co.in; www.swift.com; www.iba.org.in; www.antiphishing.com;
And now... ...WIMAX

World-wide Interoperability Microwave Accessibility...
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Commercial Banking

Technology in Indian Banking PGP I (2007-09) (2007April, 2008

ATMs Electronic Banking Branch Banking

Technology in Indian Banking 2007

Technology in Indian Banking 2007

Technology in Indian Banking 2007

11,452 11,152 54,791

Technology in Indian Banking 2007

Indian Banking @ Cross Roads?

Automate or Else ......... Perish ??????

WHY TECHNOLOGY IN BANKS ?

Many Benefits of Technology

Pre-requisites for Technology

Planning for Disasters

Focus aspects of Commercial Banking

Card Management Document Management

Benefits of Virtual Banking

Technology in Indian Banking 2007

Technology in Indian Banking 2007

Technology in Indian Banking 2007

INST. FOR DEV & RESEARCH IN BANKING TECHNOLOGY

Technology in Indian Banking 2007

Technology in Indian Banking 2007

Technology in Indian Banking 2007

Technology in Indian Banking 2007

Automated Teller Machines

SBIs Mobile ATM in Kerala

Technology in Indian Banking 2007

On-Site 6,377 3,655 257 1,104 3,154 249 14,796

Off-Site 2,991 2,786 263 503 5,038 711 12,292

Total 9,888 6,441 520 1,607 8,192 960 27,088

Technology in Indian Banking 2007

Technology in Indian Banking 2007

Cross Selling ADVANTAGES

Electronic Data Interchange

Electronic Funds Transfer (EFT)

Technology in Indian Banking 2007

Technology in Indian Banking 2007

Real Time Gross Settlement

Cheque Truncation System

Customer Relationship Management (CRM)

Customer Relationship Management

Targeted Marketing Campaign

Core Banking Solutions (CBS)

Smart Cards The Future

Technology in Indian Banking 2007

Technology in Indian Banking 2007

Technology in Indian Banking 2007

And now... ...WIMAX

Technology in Indian Banking 2007

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