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ANALYTICAL STUDY ON CORE BANKING WITH REFERENCE TO STATE BANK OF INDIA

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ANALYTICAL STUDY ON CORE BANKING WITH REFERENCE TO STATE BANK OF INDIAPROJECT REPORT SUBMITTED TO THE BIRLA INSTITUTE OF TECHNOLOGY, MESRA (DEEMED UNIVERSITY) FOR THE PARTIAL FULFILLMENT OF DEGREE OF MASTER OF BUSINESS ADMINISTRATION

RAJIN SHERNISH MBA/8018/09

Under the Supervision of Mr. Sunil Kumar CT

BIRLA INSTITUTE OF TECHNOLOGY INTERNATIONAL CENTER RAK, UAE. June, 2011

DECLARATION

This is to certify that the present report Analytical study on core banking is based on my original work and data collected and indebtedness to other works/publications has been duly acknowledged at the relevant places. It has not been submitted in part or full for any other diploma or degree of any other university.

(Signature)

RAJIN SHERNISH

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ACKNOWLEDGEMENT

First of all immensely and wholeheartedly I thank God and also my parents for giving me this opportunity for successful completion of my project work. Also I thank the management for giving us a chance for doing this course. I extend my thanks to our respected Director Mr. DJ Biswas for permitting me to take up this project work. I wish to express my sincere thanks to all my teachers, for the continuous and creative ideas, given during my studies and also for this project. I am deeply indebted to my mentor, my guide and my respected teacher Mr. Sunil Kumar CT, for his patience, valuable inputs, motivations to perform more better and his instincts support without which the project work would not have completed.

I am extremely indebted to the internet technology for the valuable help rendered to me by providing the necessary materials and support needed for the preparation of this project work.

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CERTIFICATE

This is to certify that the project entitled project work carried out by

Analytical study on core banking is the of MASTER OF BUSINESS

RajinShernish ,MBA/8018/09

ADMINISTRATION, Department of Management, Birla Institute of Technology, International Center, Ras Al Khaimah, during the academic period (2009 2011), in

partial fulfillment of the requirements, as per subject code MBA/4004 for the award of the degree of Master of Business Administration.

Signature of the Guide

Signature of the Head of the Department

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CONTENTS

Chapter/Serial Number CHAPTER1 : INTRODUCTION 1.1 Introduction Banking in India Banking with IT Banking around the world 1.2 Meaning of Core Banking Core Banking Solution

Contents

Page No.

2 3 4 9 10 11 14 16 17 19

History of Core banking system 1.3 Bank profile History of the Bank Need for the study CHAPTER 2: RESEARCH METHODOLOGY 2.1 2.2 2.3 2.4 2.5 2.6 Statement of Problem Scope of the Study Objectives of the study Methodology Sources of Data Limitation CHAPTER 3: ANALYSIS AND INTERPRETATION 3.1 3.2 3.3 3.4 Feasibility Report Uses of Core banking in India Results for SBI Businesses Scalability Test of TCS BaNCS System

21 21 21 22 22 22

46 48 49 52

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CHAPTER 4: FINDINGS AND SUGGESTIONS 4.1 4.2 Findings Suggestions CHAPTER 5: CONCLUSION 5.1 Conclusion Bibliography 61 62 55 57

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List of Tables

Name Table 1: Uses of Core banking in India Table 2: Results for SBI Businesses

Page No. 48 49

List of Figures

Name Figure 1: Time Line of State Bank of India Figure 2: Network Architecture Figure 3: Physical Architecture Figure 4: Core Banking System components Figure 5: ATM Figure 6: Data Transfer Interface Figure 7: Security Architecture Figure 8: Hierarchy of Functions

Page No. 18 28 30 31 33 35 36 38

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CHAPTER 1 INTRODUCTION

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1.1 INTRODUCTION

Since the 80s, there has been turbulence in the banking and finance industry worldwide. Changes are being driven, above all by competition, technology and customer demand. The Internet both an opportunity and threat for banks - will intensify these effects.

The globalization process and the opening up of the Indian economy have given reason for the banking sector to rethink its existing strategies. The penetration of computers and growth in Internet usage is making the customers crave for more more services, more convenience. People want to put their PC to as many uses as possible. E-Banking is one such use and a very important one at that.

These reasons and more have given rise to the need for such a project. Although many researches and projects have been conducted on this topic before, this project is not redundant because core banking is a very dynamic subject in todays scenario and hence it needs to be constantly updated and studied.

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PRE E-BANKING SCENARIO IN INDIA Traditional Banking Traditionally the relationship between the bank and its customers has been on a one-to-one level via the branch network. This was put into operation with clearing and decision-making responsibilities concentrated at the individual branch level. The head office had responsibility for the overall clearing network, the size of the branch network and the training of staff in the branch network. The bank monitored the organizations performance and set the decision-making parameters, but the information available to both branch staff and their customers was limited to one geographical location.

Traditional Banking Structure

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On IT Adoption The Indian banking sector woke up to the world of technology in early 1990s. The banking sector in India has been dominated by the public sector banks, which hold between them more than 80% of the total asset base. New private sector banks and foreign banks have tended to concentrate their efforts more on the top 23 centers, which house the cream of the country's urban customers. These banks have taken the lead in technology adoption and have succeeded in building up a substantial base of technology savvy, high-end customers.

Making an observation about the adoption of technology by the banks, P.C. Narayan, vice-president (IT and retail banking) of Global Trust Bank Ltd, says, "The rate of adoption of IT by foreign and private sector banks in the country has been significant over the last five years. This can be attributed largely to intense competition as well as the Internet phenomenon worldwide. A number of banks in the public sector have also accelerated the pace of IT deployment, largely because of the competitive pressure brought upon them by private sector banks and foreign banks."

Though in the beginning the employees resisted computerization (especially in nationalized banks), the management finally succeeded in convincing its employees about the benefits and need for adoption of technology. Says P. Seshadri Rao, a financial consultant based in Hyderabad, "The basic reason for getting the nod for computerization was the competition from private banks. Once the gates were opened to the private sector to operate banks, they started with a bang, thereby forcing nationalized banks to reconsider their way of doing business."

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A SBI official in Delhi echoes the same sentiments: "Needless to say, competition from foreign banks was one of the motivating factors for us to switch to computers. But housekeeping scored over everything else. Maintaining books and regular tasks like computing interest at the end of the calendar year was tedious. The quantum of database was so huge that computerization was the only way out. Banks would have certainly started downing their shutters had banking software not taken over the reins."

In sharp contrast, most of private banks like HDFC and ICICI started their operations with the use of technology. And with these new banks wooing the customers by offering what was till then an unknown phenomenon-customer servicethe nationalized banks were forced to take remedial steps. "The compulsion for private banks to adopt a very high level of IT was driven by their desire to contain their operating cost at the lowest levels and at the same time be able to offer a wide variety of products and services in the quickest possible time," observes Narayan.

Commenting on the reasons for public sector banks being laggards in the adoption of technology, State Bank of Mysore managing director Sitarama Murty says: "The private banks started with a clean slate. They hired technology savvy people. On the other hand, public sector banks didn't have those advantages. We need to follow the public sector bank's rules and regulation while hiring people. We can't appoint computer professional in the top management directly."

Computerization of all branches, especially in semi-urban and rural areas, is still a far cry for public sector banks. "This calls for huge investments and retraining of staff. I think these factors are inhibiting most of the banks to take technology to rural areas. But since IT is becoming an integral and inevitable part of the banking12

system, rural banks' computerization should also happen very soon," comments a senior official with Andhra Bank. Explains P.K. Seshadrinathan, CTO of SSI Technologies: "The key obstacles to introduction of IT are non-integration or nonnetworking of branches, and a lack of corporate network. Computerization has been introduced but each branch acts as an island. And, of course, cultural/social issues continue to pose problems. Overcoming these obstacles, therefore, would be the biggest challenge by itself."

However, the nationalized banks have taken to computerization in the right earnest. Today most of them have their own in-house IT department which not only takes care of deployment and implementation issues but is also into developing specific and customized applications for the bank. From SBI to Canara Bank, everyone is expanding its IT division and making huge investments to develop the division as a profit center by itself. According to an SBI official, "It makes more sense to have our own division which understands our needs and comes out with a solution. It is not just cost-effective but also useful for a bank to have a separate division that takes care of IT in totality."

Faced with deregulation, privatization and globalization, the Indian banks are slowly looking at various options to stay ahead in the steady race. This has resulted in the following recent trends: Banks and financial services organizations have recognized the advantages of deploying technology to improve the value, speed and flexibility of their product offering to customers. Particularly in todays highly competitive banking industry, core banking technology is a vital element that helps a bank differentiates itself. This is especially true on the retail front, and allows banks to offer many new technology driven channels to customers such as ATMs and Internet banking, thus pioneering the concept of Anywhere Banking, and eliminating the concept of branch banking. With13

features like real-time transaction processing coming into effect, customers can experience the benefits of real-time banking and no longer need to wait days or weeks for their transactions to be completed. Another key advantage of technology is the significant decrease of product development and testing lead time, leading to faster launch of new products for the bank enhancing the organizations innovativeness and agility.

The Business Challenge While most banking organizations in India clearly recognized the advantages of deploying technology, they continued to hesitate before embarking on the process due to a number of pain areas related to the adoption and roll-out of technological platforms:

Long implementation periods Standard banking technology software solutions were largely inapplicable to individual organizations. As a result, the tailoring of the solution and its roll-out for the organization was a long and often drawn-out period.

Return on investment (ROI) Making the very significant capital investment required for a technological package was a challenge in the environment of keen competition and slim margins. Senior management and shareholders demanded a clear quantification of the ROI involved, which was difficult to accurately evaluate and compute.

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Technology absorption rate at Indias rural branches Particularly in branches located in Indias rural areas, absorbing technology was a challenge on its own. Ease of training and ease of use was a critical component that determined the success or failure of any solution.

Connectivity Given the sheer size of the Indian market in geographic terms, it was inevitable that connectivity at broadband levels could not be expected at every branch. The solution needed to be able to work even in areas with poor or intermittent Internet access.

High costs High upfront investment was in many cases an inhibiting factor for investment. Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the Corporate Banking division of the institution. Core banking basically is depositing and lending of money. Nowadays, most banks use core banking applications to support their operations where CORE stands for "Centralized Online Real-time Exchange". This basically means that the entire bank's branches access applications from centralized datacenters. This means that the deposits made are reflected immediately on the bank's servers and the customer can withdraw the deposited money from any of the bank's branches throughout the world. These applications now also have the capability to address the needs of corporate customers, providing a comprehensive banking solution.

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Around the world In countries such as India and Hong Kong that were a part of the erstwhile British empire, it is only recently that core banking has caught on. This is mainly due to the restrictions by the UK government on free movement of money throughout the region. Also, the IT infrastructure necessary for such services did not exist in these countries until recently. After liberation from the UK, the economies of these countries went through a drastic change - thus the demand for such services increased and the need to meet such demand were met with today's technologies. Most of the nationalized banks in India for example: State Bank of India, Punjab National Bank, Allahabad Bank, HDFC and ICICI Bank today supports core banking. As of 2007, many Cooperative banks in India such as Jain Urban Cooperative Bank, Kangra Central Cooperative Bank, Udaipur Urban Cooperative Bank, Kollam District Cooperative Bank, Kerala State Cooperative Bank and Panchsheel Mercantile Cooperative Bank have started to use and offer centralized core banking too. The three standard software used are Flexcube from iFlex Solutions, Finacle from Infosys and [email protected] from TATA Consultancy Services.

In countries such as Japan, core banking is still in its early stages. Although having autonomous reign over their currency for over half a century, the consumers themselves do not see much use for such services - low demand, thus less services. It is only within the last decade that banks started placing ATMs outside the bank premises. Many of the bank services must be done in person at the account holder's registered branch. Japanese banks rely heavily on paperwork and physical evidence, such as the personal chop or Inkan - thus rendering core banking impractical.

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1.2 MEANING

Core means Basic, hence the basic services provided by the internetworked branches of bank is called Core Banking. Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the Corporate Banking division of the institution. Core banking basically is depositing and lending of money.

Nowadays, most banks use core banking applications to support their operations where CORE stands for Centralized Online Real-time Exchange. This basically means that all the banks branches are throughout the world. These applications now also have the capability to address the needs of corporate customers, providing a comprehensive banking solution. A few decades ago 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 datacenter only at the end of the day.

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

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CORE BANKING SOLUTION 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 Banks Customer. Thus CBS is a step towards enhancing customer convenience through Anywhere and Anytime Banking.

Core Banking System or Core Banking Solution is a term that we hear very often these days. For IT and Banking folks, this doesnt need any explanation but for those who want to know a bit, heres a brief overview of what it means.

Previously a banks core operations such as keeping a ledger of various transactions, maintaining customer information, interest calculation of loans and deposits, adjustments to accounts on withdrawal and deposits of funds etc. were done manually. With the advent of ICT (Information Communication Technology), efforts were done to automate various banking processes using software applications so as to make them simple, efficient, effortless and cost effective. Thus, the platform where ICT is used to perform the core operations of a bank, like those mentioned above, is known as Core Banking System.

Thus, Core Banking System has radically changed the way in which banks function. The greatest advantage of having a Core Banking System is that new features and functionalities can be easily added to the system that customers will have a whole lot of services that they can use. Electronic funds transfer between banks, online trading in the stock markets etc. are examples of this, which were unheard of in banks pre Core Banking System era.

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Core Banking and Run the Bank are synonymous for most part. Core Banking is the meeting point of the largest banking services augment namely Retail and Commercial Banking, cutting edge Information Technology and the advancing Communication Technology. It is the heart of a modern financial service organization and is all about providing the banking customers with the right products at the right time through the right channels 24 hours a day, 7 days a week through a multi-location, multi branch network. Core Banking Solution are banking applications on a platform enabling a phased, strategic approach the lets people improve operations, reduce costs, and prepare for growth. Implementing a modular, component-based enterprise solution ensures strong integration with your existing technologies. An overall serviceoriented-architecture (SOA) helps banks reduce the risk that can result from multiple data entries and out-of-date information, increase management approval, and avoid the potential disruption to business caused by replacing entire systems. Core Banking Solutions is new jargon 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, 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 account from any branch if it has installed core banking solutions. This new platform has changed the way banks are working. Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these19

services available across multiple channels like ATMs, Internet banking, and branches.

Previously a banks core operations such as keeping a ledger of various transactions, maintaining customer information, interest calculation of loans and deposits, adjustments to accounts on withdrawal and deposits of funds etc. were done to automate various banking processes using software applications so as to make them simple, efficient, effortless and cost effective. Thus, the platform where ICT is used to perform the core operations of a bank, like those mentioned above, is known as Core Banking System.

In Core Banking System, software applications record transactions, maintain customer information, calculate interest on loans and deposits etc. The data, instead of huge ledgers, are stored in backend databases in digital from. Now, the same software can be installed in various branches of a bank and can interconnect through the internet or telephone lines to form a core banking network of the bank. The advantage, a customer can operate on his account from any branch of the bank and if the bank owns Internet Banking or ATM facilities, then the customer can operate on his account from virtually anywhere.

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HISTORY OF CORE BANKING SYSTEM IN THE WORLD

The first core banking solutions appeared in the 1970s in the United States. Most of them ran on mainframe computers and were designed by the banks themselves or by third parties in conjunction with the large US banks. Limitations to exporting these systems outside the US were customized by top tier banks, but these efforts consistently failed. In the 1980s, we saw package solutions coming from other parts of the world, primarily Europe, Asia and Australia. Vendors with a different butcomparable background also entered the arena, for example the private banking solutions developed in countries such as Switzerland and Luxembourg. Because due to the nature of their business - these were more customerfocused than the transaction- oriented, transaction-crunching engines available before, they had a natural fit with the customer centricity that was coming increasingly into focus. Limitations of these systems mainly had to do with the ability to handle large volumes. The 1990s saw new players emerging in India, benefiting from the opening up of the Indian economy, the availability of English language skills, and the huge pool of highly skilled engineers. i-flex solutions (and its legal predecessor CITIL) can be considered as the first successful software product company from India that managed to sell outside the Indian subcontinent few years later by Oracle (through the acquisition of i-flex solutions and Siebel and aligning these to their technology and application strategies).

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1.2 HISTORY OF CORE BANKING IN INDIA The major objectives of bank automation are better customer service, flawless book keeping and prompt decision-making that leads to improved productivity and profitability. The concept of bank automation started in the year 1981, but it was during the period 1984-1987 banks in India started the branch level automation, making use of the then available MSDOS based stand-alone computers. Another committee was in 1988 under the chairmanship of Dr. C. Rangrajan, the then Deputy Governor of RBI to slate down a perspective plan on automation of banks for a five year period. This paved way to the implementation of multi-user Total Branch Automation packages running on a LAN (Local Area Network) either on a Network or a UNIX operating system. With the implementation of TBA, banks started to offer the facilities of exclusive Customer Terminal, Single window transaction, on-line and off-site ATMs, Tele-Banking etc.

But with the advent of new generation private sector banks in India during 1994-1996, the real era of bank marketing started and these banks started to offer anywhere and anytime banking facilities to its customers. This was possible for them mainly owing to the fact that they opted for the implementation of a WAN (Wide Area Network) based centralized banking solution rather than a LAN based branch solution to network their limited number of branch banking solution to network their limited number of branch outlets.

Improved telecommunication facilities and reduction in hardware as well as networking cost changed the mindset of the banks in India to try the CBS option. This also equipped them with the required technology products and services, as those offered by their new generation competitors.

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1.3 Bank Profile State Bank of India (SBI) is the largest Indian banking and financial services company (by turnover and total assets) with its headquarters in Mumbai, India. It is state-owned. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks, Bank of Calcutta and Bank of Bombay to form Imperial Bank of India, which in turn became State Bank of India. The India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India. SBI provides a range of banking products through its vast network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). The State Bank Group, with over 16,000 branches, has the largest banking branch network in India. It also has around 130 branches overseas. With an asset base of $352 billion and $285 billion in deposits, it is a regional banking behemoth and is one of the largest financial institutions in the world. It has a market share among Indian commercial banks of about 20% in deposits and loans. The State Bank of India is the 29th most reputed company in the world according to Forbes. Also SBI is the only bank featured in the coveted "top 10 brands of India" list in an annual survey conducted by Brand Finance and The Economic Times in 2010. The State Bank of India is the largest of the Big Four banks of India, along with ICICI Bank, Punjab National Bank and HDFC Bankits main competitors.

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History The roots of the State Bank of India rest in the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal was one of three Presidency banks, the other two being the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint stock companies and were the result of the royal charters. These three banks received the exclusive right to issue paper currency in 1861 with the Paper Currency Act, a right they retained until the formation of the Reserve Bank of India. The Presidency banks amalgamated on 27 January 1921, and the reorganized banking entity took as its name: Imperial. The Imperial Bank of India remained a joint stock company Pursuant to the provisions of the State Bank of India Act (1955), the Reserve Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 30 April 1955, the Imperial Bank of India became the State Bank of India. The government of India recently acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority. In 1959, the government passed the State Bank of India (Subsidiary Banks) Act, enabling the State Bank of India to take over eight former state-associated banks as its subsidiaries. On 13 September 2008, the State Bank of Saurashtra, one of its associate banks, merged with the State Bank of India. SBI has acquired local banks in rescues. For instance, in 1985, it acquired the Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State Bank of Travancore, already had an extensive network in Kerala.

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THE NEEDS OF CORE BANKING STUDY

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 beingy To study the intense competition and changing market dynamics in an over banked environment. y To understand the demands of customers who are better informed, more demanding and less loyal than ever. y y y y y y 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 todays banker are as intense as they are varied and about technology, the bankers 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, multilingual and processoriented. Not doing so in the near term could prove to be a costly gamble.

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CHAPTER 2 RESEARCH METHODOLOGY

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2.1 STATEMENT OF THE PROBLEM :The core banking system in India is vital in very present scenario to do transactions. The users of the system are ignorant about the usage of the system without any experience.

2.2 SCOPE OF STUDY: The study is mainly based on State Bank of India as a whole. The time period for this study is financial year 2010-11.The project is widely applicable with private banks. It can evenbe used in industries for their personal transactions.

2.3 OBJECTIVES OF THE STUDY:-

To practically study the concept.

To analyze the scope of core banking solutions.

To gain practical knowledge relating to core banking solutions.

To understand complete operation of core banking solutions

To draw a conclusion based on the analysis & experiences.

To know about future prospects of core banking solutions28

2.4 RESEARCH METHODOLOGY DESCRIPTIVE RESEARCH - Descriptive research includes surveys and fact-finding enquiries of different kinds. The main feature of this type of research is that the researcher has no control over the variables. He can only report what has happened or what is happening. 2.5 DATA COLLECTION METHOD: Data Collection Tool Secondary data: Various websites, articles from magazines and newspapers, books were used for collecting secondary data.

ANALYSIS OF DATA: The collected data in the study has been presented and analyzed using the various tables & representations.

2.6 LIMITATION OF STUDY: y The study was restricted to a bank, so the competitive scenario could not be studied. y Inadequate time was the major constraint during the whole project. y Due to security concerns only read-only access to the data was encouraged.

y Confidential datas were not allowed to access. y Information may be incomplete, obsolete, inconclusive, or inaccurate

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State Bank of India Core Systems Modernization Drivers for a New Core System SBI had undertaken a massive computerization effort in the 1990s to automate all of its branches, implementing a highly customized version of Kindle Banking Systems' Bank master core banking system (now owned by Misys). However, because of the bank's historic use of local processing and the lack of reliable telecommunications in some areas, it deployed a distributed system with operations located at each branch. Although the computerization improved the efficiency and accuracy of the branches, the local implementation restricted customers' use to their local branches and inhibited the introduction of new banking products and centralization of operations functions. The local implementation prevented the bank from easily gaining a single view of corporate accounts, and management lacked readilyavailable information needed for decision making and strategic planning. The advantages in products and efficiency of the private-sector banks became increasing evident in the late 1990s as SBI (and India's other public-sector banks) lost existing customers and could not attract the rapidly growing middle market in India. In fact, this technology-savvy market segment viewed the public-sector banks as technology laggards that could not meet their banking needs. As a result, the Indian government sought to have the public-sector banks modernize their core banking systems. In response to the competitive threats and entreaties from the government, SBI engaged KPMG Peat Marwick (KPMG) in 2000 to develop a technology strategy and a modernization road map for the bank. In 2002, bank management approved the KPMG-recommended strategy for a new IT environment that included the implementation of a new centralized core banking system. This effort would encompass the largest 3,300 branches of the bank that were located in city and suburban areas.

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The State Bank of India's objectives for its project to modernize core systems include: The delivery of new product capabilities to all customers, including those in rural areas Provision of a single customer view of all accounts The ability to merge the affiliate banks into SBI Support for all SBI existing products Reduced customer wait times in branches Reversal of the customer attrition trend

Challenges for the Bank The bank faced several extraordinary challenges in implementing a centralized core processing system. These challenges included finding a new core system that could process approximately 75 million accounts daily a number greater than any bank in the world was processing on a centralized basis. Moreover, the bank lacked experience in implementing centralized systems, and its large employee base took great pride in executing complex transactions on local in-branch systems. This practice led some people to doubt that the employees would effectively use the new system. Another challenge was meeting SBI's unique product requirements that would require the bank to make extensive modifications to a new core banking system. The products include gold deposits (by weight), savings accounts with overdraft privileges, and an extraordinary number of passbook savings accounts.

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Vendor Consortium Selection Recognizing the need for large-scale centralized systems expertise, SBI sought proposals from a number of vendor consortiums that were headed by the leading systems integrators. From these proposals, thebank narrowed down the potential solutions to vendor consortiums led by IBM and TCS. The TCS group included Hewlett T Packard-based Financial Network Services (FNS) and China Systems (for trade finance). Although SBI favored the real-time processing architecture of FNS's BaNCs system over that of the IBM consortium's memo post/batch update architecture, the bank had several concerns about the TCS consortium proposal. They included the small size and relatively weak financial strength of FNS (TCS would eventually purchase FNS in 2005) and the ability of the UNIX-based system to meet the scalability requirements of the bank. Therefore, it was agreed that TCS would be responsible for the required systems modifications and ongoing software maintenance for SBI. Additionally, scalability tests were performed at HP's lab in Germany to verify that the system was capable of meeting the bank's scalability requirements. These tests demonstrated the capability of TCS BaNCs to support the processing requirements of 75 million accounts and 19 million daily transactions.

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Tata Consultancy Services and TCS BaNCs Tata Consultancy Services, headquartered in Mumbai, India, is one of the world's largest technology companies with particular expertise in systems integration and business process outsourcing. The company has more than 130,000 employees located in 42 countries and achieved revenues of $5.7 billion in fiscal 2008. Although TCS has long been a leader in core systems integration services for banks, after it purchased FNS in 2005, the company also became a leading global provider of core banking software for large banks. The BaNCs system is based on service-oriented architecture (SOA) and is platform and database independent. In addition to SBI, TCS BaNCs clients include the Bank of China (installation in process), China Trust, Bank Negara Indonesia, India's Bank Maharashtra , National Commercial Bank (Saudi Arabia), and Koram Bank (Korea). TCS has also expanded its US footprint with the opening of its largest resource delivery center North America (near Cincinnati, Ohio) that can house 20,000 personnel. The company is seeking license and implement the BaNCs system in North America and recently completed a major plan effort to ensure that the BaNCs system meets US regulatory and compliance requirements. Initial SBI Core Systems Modernization Project The contract for the initial project was completed in May 2002; 3,300 branches were to be converted by mid-2007. TCS immediately began a six-month gap analysis effort to determine the required software changes to the BaNCs system. The changes included installing required interfaces with more than 50 other systems as well as making enhancements to support the bank's product requirements. These product requirements were separated by customer segment to allow the vendor and bank to begin conversions before all the needed modifications were implemented. They placed a priority on the needed changes that would allow33

branches with high-net-worth individuals and then corporate accounts to be converted as soon as possible.

Before the first conversion in August 2003, TCS and HP created the data processing environment for SBI. The primary data center was established on the outskirts of Mumbai and a backup center. After the second round of changes, the system and processes were functioning smoothly, and management believed the branch conversion could be accelerated. An assembly line approach was then employed in April 2006 to speed the branch conversion process: Branch personnel were responsible for data scrubbing and cleaning of their customer information on the existing system. Branches were notified three months prior to their conversion date to begin "mock," or test, conversions using a specially created test version of the BaNCs system.

Network Architecture Like any corporate network architecture the SBI network is also based on the principles of stability, security, scalability, performance and simplicity. As the following illustration makes clear, the Networked Banking pool is linked to the Stakeholders, Customers and prospects. This network Pool interfaces with the Shared Operation Centers which in turn interact with Operating Units. The Operating units in turn interact with the associate Banks, RBI and Treasury and Risk Management. All the common input after validation is then handled by the Corporate Office.

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A sample deployment configuration is shown in this diagram. The solution is configured with an internal layer consisting of the application, database, mail and Intranet servers running on OMNIEnterprise features standard host connectors and all its servers are based on modular, scalable Intel processors to which additional host connectors can be added quite easily. Message pre/post M processors make sure that each message received by the system is processed and adequate modifications are made before it is forwarded to the right consumer. OMNI Enterprise uses a full featured message queue for store and forward (SFA) processing, whereby messages are received at intermediate routing points, recorded (stored), and then Intel Xeon processors for superior performance and availability, protected by a firewall. The second layer of the solution consists of a demilitarized zone that consists of servers that enable access to different delivery channels, such as the web server, FTP server, Telnet server and VPN server.

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Physical Architecture Distributed Systems Components In general the Distributed Systems Components suffice for usual needs. But for The State Bank of India such a structure will have limited scalability. Usually the general structure is as shown in the following illustration.

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To overcome the shortcomings of the model mentioned above a new model based on the general one was designed which was later implemented. Thus came CBS or Core Banking System.

Core Banking System Components

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Today the technology driven banks are finding various means to reduce costs and reach out to as many customers as possible spread over a diverse area. This has led to using multiple channels of delivery of their products. 1. Mobile banking Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Banks can now help a customer conduct certain transactions through the Mobile Phone with the help of technologies like WAP, SMS, etc,. This helps a bank to combine the Internet and telephone and leverage it to cut costs and at the same time provide its customer the convenience.Thus it can be seen that tech savvy banks are tapping all the above alternative channels to cut costs improve customer satisfaction.

2. Net Banking: Net banking means carrying out banking transactions via the Internet. Thus the need for a branch is completely eliminated by technology. Also this helps in serving the customer better and tailoring products better suited for the customer A customer can view his account details, transaction history, order drafts, electronically make payments, transfer funds, check his account position and electronically communicate with the bank through the Internet for which he may have wanted to visit the bank branch.

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2. ATM (Automated Teller Machine) How ATMs Work You're short on cash, so you walk over to the automated teller machine (ATM), insert your card into the card reader, respond to the prompts on the screen, and within a minute you walk away with your money and a receipt.

An ATM is simply a data terminal with two input and four output devices. Like any other data terminal, the ATM has to connect to, and communicate through, a host processor. The host processor is analogous to an Internet service provider (ISP) in that it is the gateway through which all the various ATM networks become available to the cardholder (the person wanting the cash).

ATM has four output devices: y Speaker - The speaker provides the cardholder with auditory feedback when a key is pressed. y Display screen - The display screen prompts the cardholder through each step of the transaction process. Leased-line machines commonly use a40

monochrome or color CRT (cathode ray tube) display. Dial-up machines commonly use a monochrome or color LCD. y Receipt printer - The receipt printer provides the cardholder with a paper receipt of the transaction. y Cash dispenser - The heart of an ATM is the safe and cash-dispensing mechanism. The entire bottom portion of most small ATMs is a safe that contains the cash.

The cash-dispensing mechanism has an electric eye that counts each bill as it exits the dispenser. The bill count and all of the information pertaining to a particular transaction is recorded in a journal. The journal information is printed out periodically and a hard copy is maintained by the machine owner for two years. Whenever a cardholder has a dispute about a transaction, he or she can ask for a journal printout showing the transaction, and then contact the host processor. If no one is available to provide the journal printout, the cardholder needs to notify the bank or institution that issued the card and fill out a form that will be faxed to the host processor. It is the host processor's responsibility to resolve the dispute.

One significant aspect to the core banking architecture is that only the necessary permissions are granted to individual officers. This is done to prevent mishaps or though unlikely, deliberate hijack attempts from within the network. The isolation of the intranet from the Internet is also a similar step to increase the security of the network. Each of the branches are connected by the WAN which in this case is not through the Internet but an entirely new infrastructure altogether. This private secure network is used to relay between the nodes at the different branches. The data flowing out of the branches is not immediately stored into the41

main servers but remain in a data pool. This data is then reviewed automatically by auditing software and if passed the data is stored in the main servers. Even then this data can be modified by the network administrators but it would require the security credentials of the Chief Officer, Information Security, State Bank of India. As a result the data security of such a network can be assured.

Illustration: Data Transfer Interface between secure server and the Internet

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Security Architecture Security is perhaps the most important aspect to the network architecture. In banking system secure transfer of data is not only desirable but indispensable. What would Core Banking be without proper security? It would have just become another failed and hacked network like millions of others, leading to the loss of billions of rupees and possibly the destruction of the Indian economy. To better protect the security a policy of crafted principle are used, which taken together are named as Information Systems Security. It is a pillared architecture as shown in the illustration below.

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Organizing Structure of IT Enabler Information Security Department y Assess risks y Define Policies, and develop Standards and Procedures y Provide training & awareness y Deploy & manage security products y Define security architecture for network, databases & applications: Secure Configuration Docs Enforcer Application Owners /Business Owners/System administrators / IT Personnel y Implement technical and procedural controls y Manage Network, servers & applications securely adhering to policies, standards & procedures y Report Incidents y Act on Security Logs Auditor Inspection & Management Audit Dept. y Auditing compliance against policies across applications and locations y Vulnerability testing y Penetration testing y Application security testing y Feedback to ISD on effectiveness of policies

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Features Online banking solutions have many features and capabilities in common, but traditionally also have some that are application specific. The common features fall broadly into several categories 1. Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer and applications apply for a loan, new account, etc.) y Electronic bill presentment and payment - EBPP y Funds transfer between a customer's own checking and savings accounts, or to another customer's account y Investment purchase or sale y Loan applications and transactions, such as repayments of enrollments 2. Non-transactional (e.g., online statements, check links, co browsing, chat) 3. Financial Institution Administration 4. Transaction approval process 5. Wire transfer

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Features commonly unique to Internet banking include y Personal financial management support, such as importing data into personal accounting software. Some online banking platforms support account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions. y Signature based online banking where all transactions are signed and encrypted digitally. The Keys for the signature generation and encryption can be stored on smartcards or any memory medium, depending on the concrete implementation. Attacks y Most of the attacks on online banking used today are based on deceiving the user to steal login data and valid TANs. Two well-known examples for those attacks are phishing and harming. Cross-site scripting and key logger/Trojan horses can also be used to steal login information. y A method to attack signature based online banking methods is to manipulate the used software in a way, that correct transactions are shown on the screen and faked transactions are signed in the background. y A recent FDIC Technology Incident Report, compiled from suspicious activity reports banks file quarterly, lists 536 cases of computer intrusion, with an average loss per incident of $30,000. That adds up to a nearly $16million loss in the second quarter of 2007. Computer intrusions increased by 150 percent between the first quarter of 2007 and the second. In 80 percent of the cases, the source of the intrusion is unknown but it occurred during online banking, the report states.

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Countermeasures y There exist several countermeasures which try to avoid attacks. Digital certificates are used against phishing and harming, the use of class-3 card readers is a measure to avoid manipulation of transactions by the software in signature based online banking variants. To protect their systems against Trojan horses, users should use virus scanners and be careful with downloaded software or e-mail attachments.

y The easiest method is still prevention of any infection. The clients are only disk less nodes without any CD/DVD or Flash drive. Only the server is equipped with a hard disk. So a chance infection spreading from the client to the server is not possible. y The Intranet is completely separated from the Internet by the DMZ or Demilitarized Zone, hence keeping the network safe from any outside interference.

Financial Network Services (FNS) FNS provides end-to-end, integrated solutions for the banking and finance industry around the world. Headquartered in Sydney, Australia, the company addresses business opportunities across Europe, Asia Pacific, Africa, Latin America and the Middle East through established regional offices in London, Seoul, Manila, Jakarta, Kuala Lumpur, Hong Kong, Dubai, Santiago and Johannesburg. From 27 January to 21 February 2003, a multi-disciplinary team worked to demonstrate the scalability and performance of the FNS solution, BANCS, within a Windows server environment. Traditionally, COBOL- based critical banking software such as BANCS, runs on a mainframe or in a UNIX environment, rather than a47

Windows environment, and a benchmark study of this type had not been attempted previously. We already have eight live banking sites operating smoothly using a Windows back-end, so we knew first- hand that BANCS running on Windows was saleable and robust, said Dean Matheson, product development manager, Delivery Channels and Windows at FNS. However we wanted to quantify and validate that performance using rigorous and controlled conditions where the application and architecture could be pushed to their limits. The BANCS solution automates core banking functions such as deposit processing, loans processing, loan workflow management, contingent account processing, cash accounting, electronic file transfer (EFT) witch management, department collection and other automated banking transactions integrated across ultimo- delivery channels. For the benchmark, only the deposit and loan processing modules were used. The target was to reach workloads of 500tps (transactions per second) under Online Transaction processing conditions and 10 million accounts per hour under Batch Processing conditions using a Microsoft SQL database populated with 12 million test user accounts.

Built and Deployed Using Micro Focus Technology A 16-processor IBM series 440 was used for the FNS BANCS solution, while an 8processor IBM series 440 was used for the Microsoft SQL Server 2000 database. Micro Focus Application Server was used to deploy the COBOL-based FNS BANCS solution within the Windows environment. BANCS is a multi-process application that was built using the Net Express COBOL development environment and component business object techniques. Written in COBOL with millions of lines of code, FNS solution is easily portable

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across platforms such as mainframe, UNIX and Windows and is interoperable with Java and .NET. Benefits Solution benefits the new core system has resulted in benefits throughout the bank for both the customers and the employees of SBI. For example, the new core banking system has allowed the bank to redesign processes. It established 400 regional processing centers for all metro and urban branches that have assumed functions previously performed in the individual branches. The bank recently reported that business per employee increased by 250% over the last five years. The bank has achieved its goal of offering its full range of products and services to its rural branches. It delivers economic growth to the rural areas and offers financial inclusion for all of India's citizens. Implementation of the TCS BaNCs system has provided the bank with the ability to consolidate the affiliate banks into SBI. In fact, the bank recently completed the consolidation of State Bank of Saurashtra into SBI. The bank has reversed the trend of customer attrition and is now gaining new market share. Completion of the core conversion project has also allowed the bank to undertake several new initiatives to further improve service and support future growth. These initiatives include the deployment of more than 3,000 rural sales staff, redesign of over 2,200 branches in the last fiscal year, opening of more than 1,000 new branches, establishment of a call center, and an active plan to migrate customers to electronic delivery channels. The improvement in productivity and growth of business for the SBI Group is reflected in the picture.

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Reduced transaction time Enterprise significantly reduces a banks mean transaction time. The solutions single transaction engine (capable of providing nlevel parallel processing) and multiple integrated banking modules, banks can provide faster approval of loans, credit cards, balance limits, etc. It is certified and tested to support more than 150 banking transactions per second. When operating on servers running on powerful Intel XeonTM processors, the Enterprise solution maintains a significantly higher mean number of transactions per second. Increased delivery channels Deploying the multi-channel EEnterprise solution means that the bank can offer a number of its services through different, non-traditional delivery channels to the customer aside from its branches. These include Internet banking, ATMs and mobile banking, to name just a few. In-depth customer understanding with its holistic view of customer interface history with the bank, the Enterprise solution gives banks a better view of the customers banking needs, and allows them to offer personalized, user-friendly and intuitive service packages to its customers. Standardized business processes across the system The Enterprise solution is built around the modular Enterprise: step architecture with different modules in the solution following the same activity flow and a uniform method of transactions processing. As a result, business processes are standardized across the system, allowing for easy maintenance and upgrades. In-house technical personnel find the learning curve much shorter than with other solutions since it runs on the universally accepted Microsoft* server operating system. In addition, the solution is based on industry-recognized Intel architecture which is constructed for modular deployment. Hence, adding new modules and services is also far more intuitive and can be done quickly.

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Open technology platform The Enterprise solution is built on an open technology platform that supports both Linux and Windows architectures. As a result, it is easily integrated with most legacy equipment and systems. Its industry-recognized Intel architecture and universal compatibility allows banks to effectively reuse their existing assets whether software, hardware or systems.

Lowest price performance ratio Intel Xeon servers featuring Intel Net Burst micro architecture and HyperThreading Technology, server platforms based on Intel Xeon processors provide excellent price performance ratio with faster response times, increased compute power and enhanced scalability. Built on industry standards and compliances The Enterprise solution is built on industry-recognized technologies such as Intel and Microsoft that are built with future applications and technological evolutions in mind. As a result, the solution ensures that the bank has a world-class system that can easily be upgraded or merged with future technologies.

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CHAPTER 3 ANALYSIS & INTERPRETATIONS

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3.1 FEASIBILITY REPORT Understanding Feasibility Feasibility study means the analysis of problem to determine if it can be solved effectively. In other words it is the study of the possibilities of the proposed system it studies the work ability, impact on the organization ability to meet users need and efficient use of resources. Three aspects in which the system has to be feasible are:1. ECONOMICAL FEASIBILITY:The economical analysis checks for the high investment incurred on the system. It evaluates development & implementing charges for the proposed Banking Project. The S/W used for the development is easily available at minimal cost & the database applied is freely available hence it results in low cost implementation. 2. TECHNICAL FEASIBILITY:This aspect concentrates on the concept of using Computer meaning, Mechanization of human works. Thus the automated solution leads to the need for a technical feasibility study. The focus on the platform used database management & users for that S/W. The proposed system doesnt require an in depth technical knowledge as the system development is simple and easy to understand. The S/W used makes the system user friendly. The result obtain should be true in the real time conditions.

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3. BEHAVIOURAL FEASIBILITY:Behavioral feasibility deals with the runtime performance of the S/W the proposed system must score higher than the present in the behavioral study. The S/W should have end user in mind when the system is designed while designing s/w the programmer should be aware of the conditions users knowledge input, output, calculations etc. The s/w contains only a minimum no. of bugs. Care should be also taken to avoid non-working means The developed system is an innovation in the area of private banking. In the existing system the no. of staff required for completing the work is more, while the new system requires lesser staffs generally. The data entry process requires the data on the paper, which is then feed into the application by the operator while doing so; the data entry operator has to look into the paper again & again and thus the chances of inaccuracies in the typed contents increases. Also the process includes higher transportation cost, increased handling cost, more time delays, low accuracy, more usage of resources like registers, books, papers, etc. & buttons.

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3.2 USE OF CORE-BANKING IN INDIA FROM LAST FEW YEARS Year 2003 2004 12 2005 15 2006 20 2007 25 2008 32 2009 40 2010 50

Incr.% 9

70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 Increase in %

In 2003-2010 the user of the core banking is increase in more in every year.

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3.3 Selected Business Results for State Bank of India Group (200610)

CATEGORY

2006

2007

2008

2009

2010

Change 2006-2010

Total Deposits Total loans/advances

Rs72.0 34.1

Rs 82.5 40.2

Rs 99.6 50.9

Rs115.7 65.6

Rs 121.9 83.9

Rs 146.4 112.1

Total operating 2.00 expenses Staff expenses1.29

2.25

2.87

3.30

3.95

4.60

1.56 2.38

1.82 3.33

1.97 3.47

2.41 3.44

2.44 3.31

Total operating 1.81 profits

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$700.00 $600.00 $500.00 $400.00 Change (2006-2010) $300.00 $200.00 $100.00 $0.00 2010 2009 2008 2007 2006

Selected Business Results for State Bank of India Group (2006 10)

State Bank of India Full Branch Conversion The success of the initial 3,300-branch conversion for SBI demonstrated that: TCS had the technical capabilities to support the bank's IT initiative and scale of operations. Bank personnel had the skills to adopt new processes and support the conversions. The Indian customer base would react to new technology by adopting new electronic services and demanding new, more sophisticated banking products. An assembly line approach could be used effectively to support large-scale branch conversions.

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TCS and HP then conducted another scalability test in September 2006 to determine if the system could process SBI's entire base of 100 million accounts (excluding the affiliate banks, which use a separate processing environment) with sustained peak online throughput of 1,500 transactions per second. They conducted the test at HP Labs in Cupertino, California, using two 32-CPU HP 9000 Superdome application servers and two 32-processor Itanium Core HP Integrity servers for the database. The test achieved a sustained peak real-time transaction rate of more than 1,575 transactions per second, meeting the projected processing demands of SBI. Additionally, batch tests were run for both deposits and loan account processing. The month-end batch process for loans required 1 hour and 5 minutes, and deposit processing was completed in 2 hours and 27 minutes. These benchmarks were audited by Ernst & Young, and the test results are highlighted in the picture.

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Scalability Test of TCS BaNCS System

Critical Success Factors Large-scale core systems implementations are typically the most costly and risky IT projects undertaken by banks. Failures of core systems projects are not uncommon at large banks and result in both financial impact and lost business opportunities. Further, failed projects lead other banks to delay needed core systems replacements because they measure the risk of failure against the potential benefits of a new system.

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Tower Group believes that several critical factors contributed to the success of the SBI core implementation effort: Senior management commitment. The project was driven by the chairman of SBI, who met every month with the information technology (IT) and the business sector heads. The chairman monitored the overall status and ensured that sufficient resources were allocated to the project. TCS senior managers were thoroughly committed to the project as well and periodically met with the SBI chairman to review the project status. Staffing and empowerment of project team. The core banking team consisted of the bank's managing director of IT acting as team head and 75 business and IT people selected by the bank. TCS also staffed the project with approximately 300 IT professionals trained on the BaNCs system. Importantly, the SBI business people were viewed not just as contributors to a key project but as future bank leaders. This team reported to the SBI chairman and was empowered with all decision-making authority. Ownership by business heads. The regional business line heads were responsible for the success of conversion of their respective branches and reported the status to the chairman. Thus, the business heads' objectives were aligned with those of the project team. Focus on training. SBI used its network of 58 training centers across India to train employees on the new system. TCS personnel first educated approximately 100 SBI professional trainers, who then trained 100,000 SBI employees at the centers; the remaining employees trained at their respective job sites

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CHAPTER 4 FINDINGS & SUGGESTIONS

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FINDINGS The following are the findings from the project:

1) There was a tremendous change in the use of core banking by State Bank of India.Due to the evolution of technology and to withstand competition from private banks they started to implement the need for technology development. A rise in percentage of usage was denoted as 60% in 2010.

2) Total deposits had a tremendous change from Rs 72 to Rs121.9 in the year 2010.

3) Employees worked less compared to the normal traditional working hours.

4) The batch processing of loans at the end of the month took 1 hour & 5minutes 5) The working of core banking system is complicated to understand without proper guidance.

6) Lack of knowledge may lead to the ignorance of the implementation of the core banking system in the bank.

7) 30% of all office time is spent finding documents.

8) Lack of co-ordination and co-operation among the bank may lead to disrupt in the flow of the working of the system.

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9) Transfer of funds is favored efficiently with easy steps to help the users of the system.

10) Loan syndication is initiated quickly without any hassle by the form of paperless transactions.

11) It was losing market share to private-sector banks that had implemented more modern centralized core processing systems.

12) Most bankers agree on the target future core system architecture but few of them have a roadmap to get there.

13) Vendors and bankers have a different definition on Core Banking Systems.

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SUGGESTIONS:

1. The bank has a lot of scope to enhance its core banking. The keys to its core strategy can be by developing new products and services, networking its branch locations, developing its distribution channels including ATMs and internet banking.

2. The bank should expand its presence in international markets.

3. The bank should also enhance its technological capabilities and continue to implement its Core Banking Solutions plan. This connectivity will help it understand its customers better, manage its customer relationships and allow it to offer a large number of value added products and to sell its products more effectively.

4. Having such a strong technological base, the bank must use these capabilities to differentiate its products and services from those of its competitors.

5. Though the bank has a nationwide presence in the agriculture and smallscale industry sectors but it still has a lot of scope for strengthening its priority sector banking business. One aspect of its strategy could be to further strengthen its ties with the agricultural community by providing training and social support programs for the rural populace.

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6. Non-performing assets are affected by number of factors e.g., increased competition, a recession in the economy , decrease in agricultural production, decline in commodity and food grain prices, adverse fluctuations in interest and exchange rates, changes in Government policies, laws or regulations, business expansion. Since the bank has huge NPA, it should take measures to mitigate the effect from these factors.

7. The bank needs to recruit more people to fill up the manpower requirements arising because of its expansion process. Moreover, the bank needs to recruit young blood too.

8. The Bank should market its products more aggressively to attract more customers and combat competition posed by the private sector players.

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Further Improvement Like any network security is a key issue. The Information Security Officers need to guard the network from future threats. Besides the technical aspects, there are physical problems which are being overcome. Most of India is still not connected to Internet, not many use mobile banking either. Efforts are being made to help reach the facilities of advanced banking to the remotest areas of India through satellite connectivity or SMS Banking. Mobile Banking has only recently started and is sure to usher in a new age of Banking Infrastructure. Since BaNCs is the largest implementation of Core Banking, the maintenance and upkeep of the network requires a lot of effort. Billions of transactions are handled every month and every day. The validation of the End of Day messages, backing up thousands of Terabytes of data and keeping them secure is a monumental task. As a result further automation without compromising the security is stability of the network is on the cards. Due to existing tender notice regulations of the Bank further details have been omitted. The future will see more Banking options to the customers through SMS and Mobile Banking as well as TV cable Banking. Some of the features are already being implemented but will take time to grow and develop.

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CHAPTER 5 CONCLUSIONS

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Conclusion The implementation of the Tata Consultancy Services (TCS) BaNCs system at the State Bank of India (SBI) represents the largest core systems project ever undertaken. The success of this project should encourage other large banks to begin projects to modernize their core systems. The use of a UNIX-based platform to process more than 100 million accounts daily demonstrates that tier 1 banks can use a mainframe alternative for their core processing. Although TowerGroup expects that the majority of these banks will continue to rely on the IBM mainframe for core processing, they can fully consider the benefits of utilizing a UNIX-based platform. SBI's achievement demonstrates that attention to critical factors is crucial in implementing new core systems. The bank's senior management commitment, business line involvement, project team staffing and empowerment, and extensive employee training were all key contributors to the success of the project. Management also recognized the need for a proven systems integrator that possessed in-depth expertise in both business and technology. Core systems modernization has allowed the State Bank of India to centralize computer processing and operations functions, offer new banking products to all the citizens of India, reverse a trend of customer attrition, and consolidate its affiliate banks. Additionally, the bank can now further expand its product offerings and improve customer service.

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BIBLIOGRAPHY

Case Study: State Bank of India, World's Largest Centralized Core Processing Implementation Robert Hunt, Senior Research Director, Retail Banking, Tower Group Next-generation Universal Banking: State Bank of India

Cisco Enterprise Solutions End-to-End Core Banking Solution for Competitive Advantage

Solutions White Paper, Infrasoft Technologies Customer Satisfaction Vs. Service Quality

A. Krishna Kumar, Deputy Managing Director (IT) State Bank of India 6th Banking Technology 2010 Conference & Banking Technology Awards 2009 January 28, 2010 EXPERIENCE IN IMPLEMENTING SECURITY MEASURES AT SBI A CASE STUDY

Websites: Core Banking http://wikipedia.org/wiki/Core_Banking

State Bank of India http://statebankofindia.com69

www.google.com

Online Banking and Security http://en.wikipedia.org/wiki/Online_banking_Security

Secure Banking Solution http://en.wikipedia.org/wiki/Secure_Banking_Solutions

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