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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 1
CORE BANKINGPresentation by
P. R. KULKARNIManaging Director
Fluent Consultants Pvt. Ltd., Pune
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 2
In simple way it is doing
all banking operations of Branches
and Head Office
by connecting to a
central computer kept atDATA CENTRE
WHAT IS CORE BANKING
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 3
Working in TBA mode
In mere computerized functions each branch
has its own computer and branch functionsare thus automated on that computer. This is
called as Total Branch Automation (TBA).
Back up of each branch is kept at Head
Office on tapes, CD etc.
Consolidation of data from different branchesis done at Head Office at a decided
periodicity.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 4
Core Banking - Basic concept
With technology advancement particularly in
Tele Communication and WirelessCommunication it became possible to send
data from one computer to another computer.
Taking advantage of this it was thought fit to
connect branch computers to a single
computer at data centre and have alltransactions of all branches recorded live at
one place. This concept is CORE BANKING
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 5
Core Banking - Business Change
As the single computer at data centre get live data
from branches position of the bank as a whole isavailable at one place at each moment.
This system of operations then brought total change
in traditional banking operations. Many repetitivefunctions at branches were taken at central place.
This is called business re-engineering in terms of
shifting to core banking. This change brought manyadvantages to bank and its customers and also
changed customer service dimensions.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 6
Advantages of Core Banking
Centralized Accounting All the transactions of the bank directly
impact the General Ledger and Profit andLoss Account. This provides a real time total
picture about the financial position and
situation of the bank
This helps for timely effective decision
making for financial management, a verycritical and dynamic function in todays
banking.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 7
Advantages of Core Banking
Centralized Product Control & Monitoring Centralization helps in better product
analysis, monitoring and rollout. Aspects like interest rate modifications,
product modification and interest application
can be done centrally from one place for all
the branches.
Bank can quickly respond to market scenarioand customer needs. This gives competitive
edge to the bank.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 8
Advantages of Core Banking
Introduction of Technology Based Services
Service channels such as ATM, either on-site or off-
site, can be started.
Cheque Deposit Machines (CDM) can be installed.Such machine in WAN connectivity can allow any
customer to deposit the cheque for collection at any
branch.
Cheque book printing machine can be installed at
central location to give personalized cheque books.
Such machine in WAN connectivity can receive
command from any branch.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 9
Advantages of Core Banking
Centralized Customer Account Management
Any customer becomes the customer of the bank
rather than of a branch. With unique ID / Account Number the accounts of
the customers can be viewed centrally by the bank.
As such, customer profile, details of products andservices availed by him and customer behavior
about business of the bank can be well understood.
Such customer view gives the bank opportunity todecide directions for business development and
marketing strategies.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 10
Advantages of Core Banking
Centralized Reporting Presence of centralized data constantly live
up-dated at any time ensures comprehensivereport / statement generation.
This tremendously helps in decision making
as well as submission to various authorities.
Operational efficiency of the bank gets
increased due to quick report generation forbank as a whole.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 11
Advantages of Core Banking
Centralized System Administration Centralized system / I. T. administration
enhances system security and usermanagement.
In TBA mode man-power for I. T.
administration is required at each branch. Butin core banking it is required only at oneplace. Thus reduction in man-power need
and cost. Due to single point resource available I. T.
manpower is utilized properly.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 12
Advantages of Core Banking
Advantages to Head Office Consolidation of MIS / statements / reporting
at one place reducing duplication of tasks atbranches and it is of real time.
Supervision of branches on risk perceptions
possible as on going process.
Frequent audits and timely control measures
can be initiated. Quick informal decisions on real time MIS.
Contd. ..
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 13
Advantages of Core Banking
Advantages to Head Office Faster and practically real time reconciliation
of accounts. Centralized marking and movement
monitoring of NPA accounts.
Centralized follow-up and co-ordination of
overdue and NPA accounts.
For statutory reporting and compliance noneed to wait for branch compliance
Contd. ..
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 14
Advantages of Core Banking
Advantages to Head Office Better ALM, especially for short term assets
and liabilities possible. Product-wise, customer-wise, customer
profile based analysis and decision making
possible.
Analysis of data on any aspect of banking
business and control issues gives scope forkeeping the bank professionally healthy.
Contd. .
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 15
Advantages of Core Banking
Advantages to Head Office Clearing function is centralized reducing man
power requirement at each branch for thepurpose.
Audit on operational aspects of the accounts
can be done at a single location as entiredata is available at one place.
User access to the computer system in the
bank can be restricted to his/her needs andauthority only that achieves safety.
Contd. .
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 16
Advantages of Core Banking
Advantages to Head Office Printing of several matters such as follow-up
notices, statement of accounts etc. can bedone centrally on line printer that reduces
the printing time, printer and man-power need
at each branch. Such printer can be activatedby any branch on WAN command.
Account opening and scanning of signaturescan be done at central location.Contd. ..
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 17
Advantages of Core Banking
Advantages to Head Office By installing mailing solution on the intra net
of the bank, written communication in theform of letters, between H. O. and branchesand vice versa, can be eliminated.
Mailing solution can set parameters fordecision timing and if not decided in time themail can be escalated to next higher
authority. This enhances the decision makingprocedure and delay at any level gets knownto higher authority.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 18
Advantages of Core Banking
Advantages to Credit Department Reduced credit processing time for existing
loan accounts as the Credit Department getsinformation handy.
For processing of new loan accounts the
information on product is available thatfacilitates proper decision.
Real time credit tracking by setting alerts
about delays, deviations, penalties etc. Corrective measures in credit portfolio can be
quickly taken due to credit portfolio analysis.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 19
Advantages of Core Banking
Advantages to Accounts Department Centralized real time General Ledger and Profit and
Loss Account almost eliminates accounting work.
Greatly reduces paper work, inward communication
needs and work of tallying.
Deadlines of statutory compliance and submissionsare met in time.
Balance sheet of the bank available at any day, any
hour, any moment. Accounts Department can concentrate on policy,
compliance and reporting issues.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 20
Advantages of Core Banking
Advantages to I. T. Department I. T. Department becomes the focused entity
and back-bone of the operations of the bank. Central data management and application
reduces logistical problems and reaction time
for system changes and/or troubleshooting. Parameter settings, interest application and
such other works being done at one place
avoid chances of otherwise repetitivemistakes at different branches and then loadon I. T. Dept. for rectification work.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 21
Advantages of Core Banking
Advantages to Customers Customer can operate his account from any of the
branch of the bank.
More service channels can be made available to the
customer.
Customer gets immediate credit if the transaction isbetween the branches of the bank.
Even extension counters can provide all services to
the customerContd. .
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 22
Advantages of Core Banking
Advantages to Customers Customer gets full attention and service
satisfaction at the branches as the branchesare freed from all back office functions,
clearing functions and almost all accounting
functions. Customer can get SMS alerts on his mobile
or e-mail alerts through net for transactiontaking place in his account. This gives him
comfort and security.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 23
Advantages of Core Banking
Advantages to Branch functionality With reduced work at the branches they can
focus on development of business, customerservice and attendance and meaningfulliaison with customer for getting new
business. Since customer needs are known with proper
analysis they can be well attended even
before their demands that boosts the imageof bank as customer savvy.
This increases business and thereby profit.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 24
Components of Core Banking
Non-human Infrastructure Software
Hardware Data Centre / Disaster Recovery Centre
Connectivity devices Connectivity service providers
Security equipments
Uninterrupted power supply arrangements
Anti-virus / Fire-walls
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 25
Banking Software Selection
Check Points Since when the vendor is in the field.
Who are the promoters. Whether the software is really ABB (Any
Branch Banking i.e. Core Banking) or TBA
(Total Branch Automation). Present installations in ABB as well as TBA.
What are optional modules ready. Database (Oracle / DB2/any other)
Contd. ..
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 26
Banking Software Selection
Check Points Operating system (WINDOWS / LINUX).
Antivirus integrated or bank choice. Cost if it includes conversion cost also.
Mere cost should not be selection aspect.
Data conversion responsibility and guaranteeof correctness.
Data cleaning cost, if any. Implementation period.
Contd. .
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 27
Banking Software Selection
Check Points Warranty period.
Annual Maintain ace Contract commencement and charges.
Support.
Organization Certification CMM level. If software audited? If yes, by whom and
when. ISO certification. If yes, exactly on which
area.
B ki S f S l i
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 28
Banking Software Selection
Check Points for optional modules ATM switch
Internet Tele Banking
Mobile banking Anti Money Laundering (ALM)
Income Tax issues and Returns
Salary
Cheque Deposit Machine
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 29
Selection of Hardware
Whether branded or unbranded.
Warranty one year or three year. Scope of warranty.
Whether of exact need or spare capacity. Ifspare capacity considered is really required.
Cost.
Support.
AMC.
D C d Di R C
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 30
Data Centre and Disaster Recovery Centre
Selection of site.
Basic civil construction. Consideration about water leakage, seepage,
oozing etc.
Consideration about sun heat, exposed walls,cooling load factors.
Technical design including security devices.
Accessibility for different electrical wiringsand connectivity connections / devices.
C i i D i
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 31
Connectivity Devices
Switch connecting the computer to router.
Router connecting switch to connectivitychannel.
Lease lines connectivity lines given by
BSNL / MTNL.
ISDN lines fall back lines taken from BSNL
/ MTNL. Wireless communication systems.
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 32
C i i S i P id
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 33
Connectivity Service Providers
MTNL
BSNL Private service providers on wireless method
S i E i
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 34
Security Equipments
Restricted entry to I. T. Dept., Data Centre
and Disaster Recovery Centre Temperature control with hooters
Fire alarms
Fire extinguishers
Rodent control
Water leakage / seepage detection
U i t t d P S l
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 35
Uninterrupted Power Supply
For core banking continuous power supply at
Data Centre (DC) and Disaster RecoveryCentre (DR) is essential.
Generator set, UPS and batteries of high
capacity are required with redundant capacityneeded.
Failure of any system should be thought overas alternate.
A i Vi d Fi W ll
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 36
Anti Virus and Fire Walls
Strong and constantly up-dated antivirus is
required to protect virus threats comingthrough external devices use on computers
such as pen-drive, CD etc.
The servers need to be protected by fire wallto prevent virus entry
If bank is allowing net-banking the fire wallneeded is very strong
Core Banking
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 37
Core Banking
Human Issues Change in mind-set for change in the way of
business and operation done now and aftercore banking.
Readiness by management, staff and
customers for any eventual temporarydiscontinuation of business activity due to
technical failure beyond control. Lack of skilled persons in I. T. Department.
Preparation for CBS
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 38
Preparation for CBS
Data mapping
Data cleaning
Data standardization
Conversion to CBS software
Checking Filling additional fields
Staff mentality preparation, adoption-acceptance of
CBS Business continuity plan
Threats and Risks of Core Banking
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 39
Threats and Risks of Core Banking
Total dependency on technology
Any failure on technical ground can halt the working
with uncertainty about restoring normalcy
Stoppage of work has adverse effect on banks
image and reputation Technical person/s leaving the bank poses serious
problem
If not mitigated by generating profit out of benefits ofcore banking the recurring costs are heavy
Security Policies Required
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 40
Security Policies Required
Database Security
Data Centre and Disaster Centre Security Back up Initiation and Security
Business Continuity
Data Retention
Network Security and Risk
Internet Security and Risk Audit Trails
Operating System Security and Risk
Costing for Core Banking
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 41
Costing for Core Banking
Initial Costs Software
Hardware servers, nodes, back-up devices,
cabling
Networking switches, routers, line procurement
Antivirus Security instruments fire prevention, entry
Air conditioning
Civil alterations for data centre and DR
Power supply generator, UPS
Costing for Core Banking
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 42
Costing for Core Banking
Recurring Costs Rentals / AMCs1. Hardware AMC / updating
2. Operating System AMC / updating
3. Software AMC / updating
4. Database AMC / updating
5.
Antivirus AMC / updating6. Mailing Solution AMC / updating
7. Printers / Cheque Deposit Machines/ATMs AMC
8. Generator, UPS, Batteries AMC9. Lease Lines AMC / Rentals
10. Back up and Security Devices AMC / updating
Return on Investment
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 43
Return on Investment
Bank should take a stock of the situation about the
cost of benefits bank is gaining and income
generation due to core banking and then evaluatethe expenditure incurred for core banking
Such exercise will give idea about return on
investment and in how many years the investment
will be recovered
Normally within three years the investment shouldbe recovered. Lesser period is advantage.
RBI views on computerization in
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 44
RBI views on computerization in
Co-operative Banks RBI had appointed a study group, for study of
computerization in co-operative banks, in
December, 2007 under the Chairmanship of Shri.R. Gandhi, Regional Director, RBI, New Delhi.The points for reference were,
1. Quality, level and use of computerization
2. General structure / model for banks / group ofbanks.
3. Guiding principles for creation of infrastructural
needs for computerization4. What help RBI can extend
5. How much help and in what way RBI extend help
RBI views on computerization in
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 45
RBI views on computerization in
Co-operative BanksThe study group has expected, in report
submitted in August, 2008, following asminimum level of computerization in banks,
1. Computerized front-end i. e. customer
interface2. Automatic back-end accounting through
software
3. Computerized MIS, reporting and4. Automated regulatory reporting
Branch-wise classification of Co-operative
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 46
p
Banks in India and Pune District
No. of
banks in
India
%
To total
No. of
banks in
Pune Dist.
%
To total
Unit Banks 894 52 19 32
2 to 10Branches 656 38 28 46
11 to 25
Branches
135 8 10 17
26 or more
Branches
29 2 3 5
Total 1714 100 60 100
Deposit-wise classification of
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 47
p
Co-operative Banks in IndiaDeposits
Rs. In Crore
No. of Banks
in India
Unit Banks % to total bank
in category
5 to 10 581 133 57
10 to 100 909 515 57
100 to 500 190 16 8
above 500 34 0 0
Total 1714 664 50
Deposit-wise classification of
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 48
p
Co-operative Banks in Pune DistrictDeposits
Rs. In Crore
No. of Banks
in Pune Dist.
Unit Banks % unit bank tototal bank in
category
5 to 10 2 2 100
10 to 100 33 17 52
100 to 500 19 0 0
above 500 6 0 0
Total 60 19 32
Hard Facts to face
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 49
d
Unit banks will not require core banking.
Small banks take software from local vendors who
either disappears or he is not able to make
subsequent changes / updating.
Small banks do not have I. T. trained staff. In present supervisory environment the authorities
expect highest level of computerization and its use
in banks. Expectations of customers and of controlling
authorities are to adopt core banking by the banks.
Pune District - target banks for core
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 50
g
banking Number of branches criteria - 28 banks are
between 2 to 10 branches. 10 banks havingbranches 11 to 25. Thus these 38 banks canthink of core banking. Some out of this mightbe already on core.
Deposit criteria 16 banks have depositbetween 10 to 100 crore. 19 banks have
deposit between 100 to 500 crore. Thusthese 35 banks can think of core banking.Some out of this might be already on core.
Cost sharing / minimizing
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 51
g / g
Two or more banks can come together to negotiatefor cost of software, hardware and all such cost
items. Bargaining power makes the effect. Data Centre sharing by two or more banks can be
considered.
Data Centre can be taken on rental basis from bankthat has already installed the same.
Only Disaster Recovery Centre can be shared ortaken on rental.
Association can act in several ways as centralagency for banks and may consider of having a datacentre and DR Centre for giving on hire to banks
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P. R. Kulkarni, Managing Director,
Fluent Consultants Pvt. Ltd., Pune 52
THANKSPresentation by
P. R. Kulkarni
Managing DirectorFluent Consultants Pvt. Ltd., Pune