Description
The PPT describes about E-Banking, Committees on Computerisation , Bank Branches , Virtual Banking, Internet Banking, ATMs, Electronic Data Interchange , Customer Relationship Management (CRM)
Technology in Indian Banking
Glossary in E-Banking
• ALPM – Advanced Ledger Posting Machine – Micro processor based electronic device used for maintenance of primary ledgers, working out products and interests at periodical intervals, preparation of account statements and listing of standing instructions to be executed in the accounts.
Commercial Banking Technology in Indian Banking 2007 2
Glossary-2
• BANKNET – A communication software to provide message and file transfer between branches of banks and across banks • CRM –Customer Relationship Management is an information technology industry term for methodologies, strategies, software, and other web-based capabilities that help an enterprise organise and manage customer relationships.
Commercial Banking Technology in Indian Banking 2007 3
Glossary-3
• DBMS – Database Management System – A set of computer programs that controls the creation, maintenance, and utilisation of the databases of an organisation • E-Commerce is conducting business communications and transactions viz computers over networks. It is the buying and selling of goods and services through digital communication
Commercial Banking Technology in Indian Banking 2007 4
Glossary-4
• SWADHAN – India?s first Shared Payment Network Service (SPNS) offering countrywide access to banking operations at more than 1,000 ATMs in and around 64 cities. It has 55 member banks in the network – which includes public, private and foreign banks. • Touch Screen – recognises human touch. Users can point to the select something on the screen
Commercial Banking Technology in Indian Banking 2007 5
E-BANKING DEVELOPMENTS
• ALPMs and Back Office Computerisation • NEED TO IMPROVE CUSTOMER SERVICE • RECONCILIATION / UNION PROBLEMS • ADVENT OF PC IN 1980s • COMPETITION AND REFORMS • INTRODUCTION OF COMPUTERISATION
– CLEARING HOUSES, ATMs, ELECTRONIC FUND TRANSFERS, BANKNET, SWIFT, ELECTRONIC MAIL, CREDIT CARDS, ONLINE BANKING, TELE-BANKING, ETC
Commercial Banking Technology in Indian Banking 2007 6
Committees on Computerisation in Banks in India 1982-1995
1. Working Group to consider feasibility of introducing MICR / OCR Technology for Cheque processing (1982) • Convenor : Dr Y B Damle, Advisor, Management Services Department, RBI
Commercial Banking Technology in Indian Banking 2007 7
Committees on Computerisation
2. Committee on Mechanisation in the Banking Industry (1984) Chairman : Dr C Rangarajan, Deputy Governor, Reserve Bank of India
Commercial Banking Technology in Indian Banking 2007 8
Committees on Computerisation
3. Committees on Communication Network for Banks and SWIFT implementation (1987) Chairman : Shri TNA Iyer, Executive Director, RBI
Commercial Banking
Technology in Indian Banking 2007
9
Committees on Computerisation
5. Committee on Technology Issues relating to Payments System, Cheque Clearing and Securities System in the Banking Industry, (1994) Chairman: Shri W S Saraf, Executive Director, Reserve Bank of India
Commercial Banking Technology in Indian Banking 2007 10
Committees on Computerisation
6. Committee on proposing Electronics Funds Transfer and Electronics Payments (1995) Chairperson: Smt K S Shere, Principal Legal Adviser, Reserve Bank of India
Commercial Banking
Technology in Indian Banking 2007
11
Bank Branches – 2006 (x- RRBs)
Banks 19 Nat?d 8 SBGr Rural 12,990 5,229 S’Urban 7,103 4,043 Urban 6,990 2,449 Metro 6,929 2,110 Total 34,012 13,831
1 IDBI
19 OPBs 8 NPBs 29 FBs TOTAL
2
936 97 0 19,254
17
1,447 322 1 12,933
66
1,236 674 37
88
947 857 221
173
4,566 1,950 259
11,452 11,152 54,791
Commercial Banking
Technology in Indian Banking 2007
12
Indian Banking @ Cross Roads?
• • • • • • • • Computerisation - Modernisation ? Extended Hours (24x7)- Competition? NPAs, Provisions & Strain on Profitability? Prudential Norms - ALM - Risk Mgt ? Mergers & Acquisitions - Universal Bkg? Voluntary Retirement Scheme Effects ? Downsizing - Outsourcing ? Alliances - Bancassurance ?
• Automate or Else ......... Perish ??????
Commercial Banking Technology in Indian Banking 2007 13
Indian Banking-Now...
• • • • • • • • • • • Transparency in Banking; Compliances Narrow Banking Relationship Banking Retail / Personal / Private Banking Hi-tech Banking E Age-Banking Mobile Banking / Phone Banking Network Banking Virtual Banking Universal Banking Online Banking / Internet Banking
Commercial Banking Technology in Indian Banking 2007 14
WHY TECHNOLOGY IN BANKS ?
• TO TRANSFORM FINANCIAL SERVICES INDUSTRY IN THE NET-WORKED WORLD
– BANKS TO BE CUSTOMER CENTRIC – PROVIDE SERVICES / PRODUCTS ACROSS A RANGE OF CHANNELS – TO BE FUTURISTIC AND HAVE “TIME” VALUE IN ALL ITS DEALINGS WITH CUSTOMERS
Commercial Banking Technology in Indian Banking 2007 15
Many Benefits of Technology
• Increased operational efficiency, profitability & productivity • Superior Customer Service • Multi-channel, real-time transaction processing • Better Cross-Selling ability • Improved management / accountability • Efficient NPA and Risk Management • Minimal transaction costs • Improved financial analyses capabilities
Commercial Banking Technology in Indian Banking 2007 16
Pre-requisites for Technology
Human Resource Empowerment Business Process Re-engineering
Planning for
Disasters
Commercial Banking Technology in Indian Banking 2007 17
Focus aspects of Commercial Banking
BANK’S BUSINESS
LOANS & MISC. SERVICES
RAISING DEPOSITS
Core Banking (CBS) Electronic Banking Any Branch Banking CRM
MIS & Intranet
ATMs
POS Terminals and Cash dispenser
Corporate Network
Card Management Document Management
Risk Management
Technology in Indian Banking 2007
Resource Management
BANK’S BUSINESS
Commercial Banking
18
Benefits of Virtual Banking
• To Banks
– Large satisfied customers and higher retention – Scope to attract new customers – Improve quality and differential services – Greater opportunity to cross sell – Sharing network and Cost Saving – Increased volumes and profits – Reduce overall risk with proper MIS
Commercial Banking
Technology in Indian Banking 2007
19
Benefits to Customer
• More convenience & flexi timings • Better awareness of products & services
• Up-to-date information on accounts
• Low cost of accessing the accounts
Commercial Banking
Technology in Indian Banking 2007
20
BANKS? IT STRATEGY
• INVESTMENT IN HARDWARE • ACQUIRING / DEVELOPING SOFTWARE • TRAINING OF STAFF AT DIFFERENT LEVELS • NETWORKING OF OFFICES – R-S-U-M? • SECURITY FOR TRANSACTIONS & INFO • GLOBAL REACH • ONLINE BANKING, OUTSOURCING
Commercial Banking Technology in Indian Banking 2007 21
Internet Banking
• Issues of Confidentiality ? • Hacking and Fraud prone ?? • Scope for failure of Technology ??? • Resultant denial of Services ????
Commercial Banking
Technology in Indian Banking 2007
22
INST. FOR DEV & RESEARCH IN BANKING TECHNOLOGY
• TO PROVIDE TECH? & OPERATING SUPPORT TO Bks / Financial Institutions • SET UP BY RBI AT HYDERABAD - 1996 • FUNDED BY RESERVE BANK OF INDIA • AN AUTONOMOUS CENTRE FOR DEV AND RESEARCH IN BANKING TECHNOLOGY • “THINK-TANK” FOR PROMOTION OF TECH • RESEARCH & CONSULTANCY • www.idrbt.ac.in
Commercial Banking Technology in Indian Banking 2007 23
IDRBT, HYDERABAD
• V-SAT BASED FIN? NETWORK FOR BKs • DATA WARE-HOUSING & DATA MINING • PUBLISHING A JOURNAL ON IT IN BKG • WEB BASED TRAINING TO EXECUTIVES • INDIAN FINANCIAL NETWORK(INFINET)
– INTER BANK APPLICATIONS LIKE RTGS – DELIVERY Vs PAYMENT, GOVERNMENT TRANSACTIONS – AUTOMATIC CLEARING HOUSE, ETC
Commercial Banking Technology in Indian Banking 2007 24
DEVELOPMENTS
• • • • • • • • • • • • ALPMs CLEARING HOUSE CAR,CRR,SLR,PS,NPAs CREDIT/DEBIT CARDS NICNET,I-NET, RABMN INFINET, RBINET BANKNET, NDS, SFMS MICR, ATMs, SWIFT DEMAT, IT ACT-2000 INTERNET BANKING ECS, EFT, SEFT, RTGS CROSS SELLING
Commercial Banking
• • • • • •
ALM & RM, MIS CRM, KYC, AML Core Banking Solutions KISAN /SME CARD CREDIT INFO BUREAU DISASTER MANAGEMENT • Cheque Truncation • CYBER CRIMES – HACKING, PHISHING, PHARMING, TROJAN, SKIMMING, ETC • SMART CARDS
25
Technology in Indian Banking 2007
Communication Networks
• MICR (Magnetic Ink Character Recognition) Clearing • BANKNET • INFINET • SWIFT • Electronic Data Interchange (EDI) • Electronic Funds Transfer (EFT) System • Electronic Clearing Services (ECS) • ATM network - SWADHAN (Shared Payment Network System -SPNS)
Commercial Banking
Technology in Indian Banking 2007
26
MICR CLEARING
• • • • Magnetic Ink Character Recognition Introduced in 1987 in the four metros 1,047 Clearing Houses; 42 with MICR SB/CA Cheque leaves standardised size (8 X 3 2/3”) are pre-printed with the bank-branch code and account type in MICR strip, while the amount is read manually and fed into the system using the encoders for funds settlements • Speeds up clearing work • BC/DW/TC/DD/PO/GC/IW/RW/SI...
Commercial Banking Technology in Indian Banking 2007 27
Automated Teller Machines
• ATMs or 24 hour Tellers – Electronic Terminals - allow to bank at any time... • On-site (near branch) and Off-site ATM • ATMs facilitate withdrawal/deposit.... • Customer provided with a PIN / Card • Introduced in India by Foreign Banks • SWADHAN / SPNS wef Feb 1, 1997 • Introduced in Mumbai by IBA initiative www.iba.org.in
Commercial Banking Technology in Indian Banking 2007 28
Bank ATMs – 2007 (x-RRBs)
Banks 19 Nat?d 8 SB Group 1 IDBI Bk 18 Old PBs 8 New PBs 29 FBs TOTAL-83
Commercial Banking
On-Site 6,377 3,655 257 1,104 3,154 249 14,796
Off-Site 2,991 2,786 263 503 5,038 711 12,292
Total 9,888 6,441 520 1,607 8,192 960 27,088
29
Technology in Indian Banking 2007
ATMs
• On-site and Off-site Automated Teller Machines -MOBILE, BIOMETRIC ATMs • Total installed ATM base – >21,000 • Average withdrawal per ATM transaction - Rs 1,500 to Rs 3,000 • Total cash movement through ATMs in India is Rs 35,000 - 40,000 crores every year • Medium for non-cash transactions such as printing of statements, credit card enquiry, cross selling, etc
Commercial Banking Technology in Indian Banking 2007 30
Cross Selling
The strategy of pushing new products to current customers based on their past purchases. Cross-selling is designed to widen the customer's reliance on the bank and decrease the likelihood of the customer switching to a competitor.
Commercial Banking
Technology in Indian Banking 2007
31
Cross Selling ADVANTAGES
• Customer servicing, marketing, communication costs - lessen • Credit appraisal made easy • Increased loyalty – married to the bank! • All-in-one financial super market – consumer • Business/employee - increases
Commercial Banking Technology in Indian Banking 2007 32
BANKNET
• Set up in 1991 by RBI • Meant to facilitate transfer of interbank/ inter-branch messages within India by Public Sector banks who are members of this network • Wide connectivity - Major Centres like Mumbai, Delhi, Calcutta, Madras, Nagpur, Bangalore, Hyderabad, Pune, Ahmedabad, Kanpur, Lucknow, Chandigarh, Kochi, Jaipur, Bhopal, Patna, Bhubaneshwar, Thiruvananthapuram, Guwahati, Panaji, Jammu, etc
Commercial Banking Technology in Indian Banking 2007 33
• Indian Financial Network • Set up by RBI in June 1999 • Satellite based WAN using VSAT (Very Small Aperture Terminal) technology • The hub and Network Management System of INFINET are located in the Institute for Development and Research in Banking Technology, Hyd • Major applications: E-mail, Electronic Clearing Service - Credit and Debit, Electronic Funds Transfer
• http://www.idrbt.ac.in/index_fromsm.html ?infinet1.html?infinet
Commercial Banking Technology in Indian Banking 2007 34
INFINET
SWIFT www.swift.com
• Society for Worldwide Inter-bank Financial Telecommunication • HQ La Hulpe, Brussels, Belgium • Provides reliable, fast tele-communication facilities for exchange of financial messages all over the world between Banks and FIs • As non-profit making co-operative society in 1973 by 239 banks in 15 countries • Hubs in Brussels, New York and Netherlands • Rules in 1975; first message in 1977 • >7,000 members in 200 countries now • Handles over 7 million messages every day • India – a member since 1991 • 88 Indian banks are members as on date
Commercial Banking Technology in Indian Banking 2007 35
SWIFT contd...
• Any Bank / FI can become a member • Allots an address called Bank Identification Code (BIC) of 8 characters • Enables members to send secure and reliable messages – authenticated... • Correspondent bank arrangements... • Advantages: 24 hours service, system based – fraud-free – faster – accurate – confidential – funds/LCs/Guarantees
Commercial Banking Technology in Indian Banking 2007 36
Electronic Data Interchange
• Facilitates transfer of banking transactions using agreed protocol and standard data structure b/w computers • Norms developed in respect of specific messages for transmission of business transactions which are electronic equivalents of commercial invoices, purchase orders, transport bookings, payment instructions etc • Appropriate message formats and standards for financial applications in EDI developed by Message Development Group-Finance (constituted by IBA)
Commercial Banking Technology in Indian Banking 2007 37
Electronic Funds Transfer (EFT)
• Hosted and operated by the RBI • Permits fund transfer up to Rs 5 lacs from any account at any branch of any member bank in any city to any other account at any branch of any member bank in any other city • RBI acts as the service provider as well as regulator
Commercial Banking Technology in Indian Banking 2007 38
ECS
• Electronic Clearing Scheme (ECS) operated by the RBI since 1996-97 • Utilises BANKNET and INFINET • Facilitates payment from a single account at a bank branch to any number of accounts maintained with the branches of the same or other banks – Eg., Payment of dividends • RBI has also launched ECS – Debit for payment to utility companies like Telephones, Electricity etc
Commercial Banking Technology in Indian Banking 2007 39
SWADHAN
• Launched in 1997 • India's FIRST Shared Payment Network Service covers > 1000 ATMs in 64 cities • 55 member banks in the network, which include nationalized, private and foreign banks • Enables member banks to share their ATMs with other participating banks
• Objective - reduce the huge investment being made by the banks to deploy ATMs in different locations
Commercial Banking Technology in Indian Banking 2007 40
SERVICES
• Bill Payment through Electronic Banking • Electronic Shopping Mall • Effecting Personal Investments through Electronic Banking – Trading in shares – Investing in Mutual Funds – Trade In Derivatives – IPOs Online
Commercial Banking
Technology in Indian Banking 2007
41
Real Time Gross Settlement
• Introduced in India in 2004 by RBI • Internationally accepted system to minimise the settlement risks • Settlements occur simultaneously • >10,000 bank branches networked • Balances held with RBI by banks • 4 types of members – A, B, C & D • http://www.iba.org.in/FAQs-RTGSNEFT-ECS.doc
Commercial Banking Technology in Indian Banking 2007 42
Cheque Truncation System
• IN USE IN MANY COUNTRIES ... • NI Act was amended appropriately • Settlement based on e-images/MICR • RBI Wg Gr submitted report in 2003 • Images to be preserved for 8 years • Pilot project in New Delhi in 2006 • Reduces delays in collections... • Fraught with risks, legal issues...
Commercial Banking Technology in Indian Banking 2007 43
Customer Relationship Management (CRM)
• • • • • • • • • Not a product / service, but a strategy Increasing competition among banks Customer expectations and demands Product development / Service Quality Know Your Customer (KYC) guidelines Knowledge Management in Banks Call Centres, DSAs, Franchisees in Banks Two Banking Ombudsman Schemes Core Banking Solutions & CRM Packages for Best Customer Service
Technology in Indian Banking 2007 44
Commercial Banking
Customer Relationship Management
• Customer Analytics
– Statistical Credit Score Card
• Demographic details • Transaction details • Historical loan default data
• Targeted Marketing Campaign
– Carpet bombing avoided – Hit rate increases
Commercial Banking Technology in Indian Banking 2007 45
Core Banking Solutions (CBS)
• POOLING DATA AT CENTRAL SERVER • TRANSACTIONS OF DELIVERY CHANNELS FROM DELIVERY POINTS (BRANCH/ATM) FEED ONLINE TO HOST – NO BACK OFFICE • HOST DATABASE IS UP TO THE MINUTE • END OF DAY (EOD) AND START OF DAY (SOD) TASKS PERFORMED AT BRANCHES WILL BE DONE BY „HOST? SERVER • ELIMINATES BR RECONCILIATION WORK • STAFF PRODUCTIVITY – BANK CUSTOMER!
Commercial Banking Technology in Indian Banking 2007 46
Smart Cards – The Future
• Multi-application Smart Card • Channel of the future • Pilot project started • Pilot Project funded by Govt. of India • Project is in progress in partnership with IDRBT, IIT Mumbai and Banks • Visit www.scafi.in The Smart Card Forum of India is a non-profit, multiindustry organization promoting the wide spread acceptance of multiple application smart card technology.
Commercial Banking Technology in Indian Banking 2007 47
Beware of
• Hacking • Phishing • Pharming • Skimming • Trojan
Commercial Banking
Technology in Indian Banking 2007
48
Hacking
• Hacker: May mean simply a person with mastery of computers.
• •
• • • • • • •
TIMELINE Early 1960s Hackers begin breaking into mainframe computers. 1983 The FBI busts six teen-age hackers from Milwaukee; one of the first arrests of hackers. 1984 First issue of 2600: The Hacker Quarterly in New York: prime source for hacking information 1985 “Phrack”, an electronic magazine about computer hacking, begins. 1987 AT&T computers hacked into by Herbert Zinn............................................... ...................................................................................................................... ...................................................................................................................... February 2000
In only three days some hackers brought down some of the biggest Web sites in the world that included Yahoo!, Amazon.com, Buy.com, eBay and CNN.com. They used"Denial of Service" attacks to overloaded the sites' servers by sending them an excessive number of data requests. Commercial Banking Technology in Indian Banking 2007 49
Phishing
A method of identity theft carried out through the creation of a website that seems to represent a legitimate company. The visitors to the site, thinking they are buying something from a real business, submit their personal information to the site. The criminals then use the personal information for their own purposes, or sell the information to other criminal parties.
Commercial Banking Technology in Indian Banking 2007 50
www.antiphishing.com
Commercial Banking
Technology in Indian Banking 2007
51
Pharming
Commercial Banking
Technology in Indian Banking 2007
52
Skimming
An electronic method of capturing a victim's personal information used by identity thieves. The skimmer is a small device that scans a credit card and stores the information contained in the magnetic strip. Skimming can take place during a legitimate transaction at a business.
Skimming can occur easily in a restaurant because your card is taken away when the bill is being settled. If your server is a skimming identity thief, he or she will, before giving the card back to you, scan the credit card with a hand-held electronic device, which takes only seconds. The electronically captured information is then used to by the thief or sold to other criminals
Commercial Banking Technology in Indian Banking 2007 53
Trojan
• Trojan horse is a program that installs malicious software while under the guise of doing something else. Though not limited in their payload, Trojan horses are more notorious for installing backdoor programs which allow unauthorized non permissible remote access to the victim's machine by unwanted parties normally with malicious intentions. • Unlike a computer virus, a Trojan horse does not propagate by inserting its code into other computer files. The term is derived from the classical myth of the Trojan Horse. Like the mythical Trojan Horse, the malicious code is hidden in a computer program or other computer file which may appear to be useful, interesting, or at the very least harmless to an unsuspecting user. • When this computer program or file is executed by the unsuspecting user, the malicious code is also executed resulting in the set up or installation of the malicious Trojan horse program. (See Social engineering.) • Often the term is shortened to simply Trojan.
Commercial Banking Technology in Indian Banking 2007 54
References:
• Information Technology & Electronic Banking – Indian Institute of Bankers, Mumbai, May 1998 • Information Technology & E-Banking – ICFAI, Hyderabad, October 2004 • Retail Banking, Everything you need to know to work in a Bank - Raghu Palat, IBD, Mumbai 2006 • Banking on Technology, Indian Management – AIMA Publication, August 2004 • Building CRM – Customer Relationship Management & KYC experience through Technology – BanCon, IBA Conference, 2004; Indian Banker Feb 2006 • Trend and Progress of Banking in India, RBI 2006 • www.rbi.org.in; www.idrbt.ac.in; www.google.co.in; www.swift.com; www.iba.org.in; www.antiphishing.com;
Commercial Banking Technology in Indian Banking 2007 55
doc_312476628.ppt
The PPT describes about E-Banking, Committees on Computerisation , Bank Branches , Virtual Banking, Internet Banking, ATMs, Electronic Data Interchange , Customer Relationship Management (CRM)
Technology in Indian Banking
Glossary in E-Banking
• ALPM – Advanced Ledger Posting Machine – Micro processor based electronic device used for maintenance of primary ledgers, working out products and interests at periodical intervals, preparation of account statements and listing of standing instructions to be executed in the accounts.
Commercial Banking Technology in Indian Banking 2007 2
Glossary-2
• BANKNET – A communication software to provide message and file transfer between branches of banks and across banks • CRM –Customer Relationship Management is an information technology industry term for methodologies, strategies, software, and other web-based capabilities that help an enterprise organise and manage customer relationships.
Commercial Banking Technology in Indian Banking 2007 3
Glossary-3
• DBMS – Database Management System – A set of computer programs that controls the creation, maintenance, and utilisation of the databases of an organisation • E-Commerce is conducting business communications and transactions viz computers over networks. It is the buying and selling of goods and services through digital communication
Commercial Banking Technology in Indian Banking 2007 4
Glossary-4
• SWADHAN – India?s first Shared Payment Network Service (SPNS) offering countrywide access to banking operations at more than 1,000 ATMs in and around 64 cities. It has 55 member banks in the network – which includes public, private and foreign banks. • Touch Screen – recognises human touch. Users can point to the select something on the screen
Commercial Banking Technology in Indian Banking 2007 5
E-BANKING DEVELOPMENTS
• ALPMs and Back Office Computerisation • NEED TO IMPROVE CUSTOMER SERVICE • RECONCILIATION / UNION PROBLEMS • ADVENT OF PC IN 1980s • COMPETITION AND REFORMS • INTRODUCTION OF COMPUTERISATION
– CLEARING HOUSES, ATMs, ELECTRONIC FUND TRANSFERS, BANKNET, SWIFT, ELECTRONIC MAIL, CREDIT CARDS, ONLINE BANKING, TELE-BANKING, ETC
Commercial Banking Technology in Indian Banking 2007 6
Committees on Computerisation in Banks in India 1982-1995
1. Working Group to consider feasibility of introducing MICR / OCR Technology for Cheque processing (1982) • Convenor : Dr Y B Damle, Advisor, Management Services Department, RBI
Commercial Banking Technology in Indian Banking 2007 7
Committees on Computerisation
2. Committee on Mechanisation in the Banking Industry (1984) Chairman : Dr C Rangarajan, Deputy Governor, Reserve Bank of India
Commercial Banking Technology in Indian Banking 2007 8
Committees on Computerisation
3. Committees on Communication Network for Banks and SWIFT implementation (1987) Chairman : Shri TNA Iyer, Executive Director, RBI
Commercial Banking
Technology in Indian Banking 2007
9
Committees on Computerisation
5. Committee on Technology Issues relating to Payments System, Cheque Clearing and Securities System in the Banking Industry, (1994) Chairman: Shri W S Saraf, Executive Director, Reserve Bank of India
Commercial Banking Technology in Indian Banking 2007 10
Committees on Computerisation
6. Committee on proposing Electronics Funds Transfer and Electronics Payments (1995) Chairperson: Smt K S Shere, Principal Legal Adviser, Reserve Bank of India
Commercial Banking
Technology in Indian Banking 2007
11
Bank Branches – 2006 (x- RRBs)
Banks 19 Nat?d 8 SBGr Rural 12,990 5,229 S’Urban 7,103 4,043 Urban 6,990 2,449 Metro 6,929 2,110 Total 34,012 13,831
1 IDBI
19 OPBs 8 NPBs 29 FBs TOTAL
2
936 97 0 19,254
17
1,447 322 1 12,933
66
1,236 674 37
88
947 857 221
173
4,566 1,950 259
11,452 11,152 54,791
Commercial Banking
Technology in Indian Banking 2007
12
Indian Banking @ Cross Roads?
• • • • • • • • Computerisation - Modernisation ? Extended Hours (24x7)- Competition? NPAs, Provisions & Strain on Profitability? Prudential Norms - ALM - Risk Mgt ? Mergers & Acquisitions - Universal Bkg? Voluntary Retirement Scheme Effects ? Downsizing - Outsourcing ? Alliances - Bancassurance ?
• Automate or Else ......... Perish ??????
Commercial Banking Technology in Indian Banking 2007 13
Indian Banking-Now...
• • • • • • • • • • • Transparency in Banking; Compliances Narrow Banking Relationship Banking Retail / Personal / Private Banking Hi-tech Banking E Age-Banking Mobile Banking / Phone Banking Network Banking Virtual Banking Universal Banking Online Banking / Internet Banking
Commercial Banking Technology in Indian Banking 2007 14
WHY TECHNOLOGY IN BANKS ?
• TO TRANSFORM FINANCIAL SERVICES INDUSTRY IN THE NET-WORKED WORLD
– BANKS TO BE CUSTOMER CENTRIC – PROVIDE SERVICES / PRODUCTS ACROSS A RANGE OF CHANNELS – TO BE FUTURISTIC AND HAVE “TIME” VALUE IN ALL ITS DEALINGS WITH CUSTOMERS
Commercial Banking Technology in Indian Banking 2007 15
Many Benefits of Technology
• Increased operational efficiency, profitability & productivity • Superior Customer Service • Multi-channel, real-time transaction processing • Better Cross-Selling ability • Improved management / accountability • Efficient NPA and Risk Management • Minimal transaction costs • Improved financial analyses capabilities
Commercial Banking Technology in Indian Banking 2007 16
Pre-requisites for Technology
Human Resource Empowerment Business Process Re-engineering
Planning for
Disasters
Commercial Banking Technology in Indian Banking 2007 17
Focus aspects of Commercial Banking
BANK’S BUSINESS
LOANS & MISC. SERVICES
RAISING DEPOSITS
Core Banking (CBS) Electronic Banking Any Branch Banking CRM
MIS & Intranet
ATMs
POS Terminals and Cash dispenser
Corporate Network
Card Management Document Management
Risk Management
Technology in Indian Banking 2007
Resource Management
BANK’S BUSINESS
Commercial Banking
18
Benefits of Virtual Banking
• To Banks
– Large satisfied customers and higher retention – Scope to attract new customers – Improve quality and differential services – Greater opportunity to cross sell – Sharing network and Cost Saving – Increased volumes and profits – Reduce overall risk with proper MIS
Commercial Banking
Technology in Indian Banking 2007
19
Benefits to Customer
• More convenience & flexi timings • Better awareness of products & services
• Up-to-date information on accounts
• Low cost of accessing the accounts
Commercial Banking
Technology in Indian Banking 2007
20
BANKS? IT STRATEGY
• INVESTMENT IN HARDWARE • ACQUIRING / DEVELOPING SOFTWARE • TRAINING OF STAFF AT DIFFERENT LEVELS • NETWORKING OF OFFICES – R-S-U-M? • SECURITY FOR TRANSACTIONS & INFO • GLOBAL REACH • ONLINE BANKING, OUTSOURCING
Commercial Banking Technology in Indian Banking 2007 21
Internet Banking
• Issues of Confidentiality ? • Hacking and Fraud prone ?? • Scope for failure of Technology ??? • Resultant denial of Services ????
Commercial Banking
Technology in Indian Banking 2007
22
INST. FOR DEV & RESEARCH IN BANKING TECHNOLOGY
• TO PROVIDE TECH? & OPERATING SUPPORT TO Bks / Financial Institutions • SET UP BY RBI AT HYDERABAD - 1996 • FUNDED BY RESERVE BANK OF INDIA • AN AUTONOMOUS CENTRE FOR DEV AND RESEARCH IN BANKING TECHNOLOGY • “THINK-TANK” FOR PROMOTION OF TECH • RESEARCH & CONSULTANCY • www.idrbt.ac.in
Commercial Banking Technology in Indian Banking 2007 23
IDRBT, HYDERABAD
• V-SAT BASED FIN? NETWORK FOR BKs • DATA WARE-HOUSING & DATA MINING • PUBLISHING A JOURNAL ON IT IN BKG • WEB BASED TRAINING TO EXECUTIVES • INDIAN FINANCIAL NETWORK(INFINET)
– INTER BANK APPLICATIONS LIKE RTGS – DELIVERY Vs PAYMENT, GOVERNMENT TRANSACTIONS – AUTOMATIC CLEARING HOUSE, ETC
Commercial Banking Technology in Indian Banking 2007 24
DEVELOPMENTS
• • • • • • • • • • • • ALPMs CLEARING HOUSE CAR,CRR,SLR,PS,NPAs CREDIT/DEBIT CARDS NICNET,I-NET, RABMN INFINET, RBINET BANKNET, NDS, SFMS MICR, ATMs, SWIFT DEMAT, IT ACT-2000 INTERNET BANKING ECS, EFT, SEFT, RTGS CROSS SELLING
Commercial Banking
• • • • • •
ALM & RM, MIS CRM, KYC, AML Core Banking Solutions KISAN /SME CARD CREDIT INFO BUREAU DISASTER MANAGEMENT • Cheque Truncation • CYBER CRIMES – HACKING, PHISHING, PHARMING, TROJAN, SKIMMING, ETC • SMART CARDS
25
Technology in Indian Banking 2007
Communication Networks
• MICR (Magnetic Ink Character Recognition) Clearing • BANKNET • INFINET • SWIFT • Electronic Data Interchange (EDI) • Electronic Funds Transfer (EFT) System • Electronic Clearing Services (ECS) • ATM network - SWADHAN (Shared Payment Network System -SPNS)
Commercial Banking
Technology in Indian Banking 2007
26
MICR CLEARING
• • • • Magnetic Ink Character Recognition Introduced in 1987 in the four metros 1,047 Clearing Houses; 42 with MICR SB/CA Cheque leaves standardised size (8 X 3 2/3”) are pre-printed with the bank-branch code and account type in MICR strip, while the amount is read manually and fed into the system using the encoders for funds settlements • Speeds up clearing work • BC/DW/TC/DD/PO/GC/IW/RW/SI...
Commercial Banking Technology in Indian Banking 2007 27
Automated Teller Machines
• ATMs or 24 hour Tellers – Electronic Terminals - allow to bank at any time... • On-site (near branch) and Off-site ATM • ATMs facilitate withdrawal/deposit.... • Customer provided with a PIN / Card • Introduced in India by Foreign Banks • SWADHAN / SPNS wef Feb 1, 1997 • Introduced in Mumbai by IBA initiative www.iba.org.in
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Bank ATMs – 2007 (x-RRBs)
Banks 19 Nat?d 8 SB Group 1 IDBI Bk 18 Old PBs 8 New PBs 29 FBs TOTAL-83
Commercial Banking
On-Site 6,377 3,655 257 1,104 3,154 249 14,796
Off-Site 2,991 2,786 263 503 5,038 711 12,292
Total 9,888 6,441 520 1,607 8,192 960 27,088
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ATMs
• On-site and Off-site Automated Teller Machines -MOBILE, BIOMETRIC ATMs • Total installed ATM base – >21,000 • Average withdrawal per ATM transaction - Rs 1,500 to Rs 3,000 • Total cash movement through ATMs in India is Rs 35,000 - 40,000 crores every year • Medium for non-cash transactions such as printing of statements, credit card enquiry, cross selling, etc
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Cross Selling
The strategy of pushing new products to current customers based on their past purchases. Cross-selling is designed to widen the customer's reliance on the bank and decrease the likelihood of the customer switching to a competitor.
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Cross Selling ADVANTAGES
• Customer servicing, marketing, communication costs - lessen • Credit appraisal made easy • Increased loyalty – married to the bank! • All-in-one financial super market – consumer • Business/employee - increases
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BANKNET
• Set up in 1991 by RBI • Meant to facilitate transfer of interbank/ inter-branch messages within India by Public Sector banks who are members of this network • Wide connectivity - Major Centres like Mumbai, Delhi, Calcutta, Madras, Nagpur, Bangalore, Hyderabad, Pune, Ahmedabad, Kanpur, Lucknow, Chandigarh, Kochi, Jaipur, Bhopal, Patna, Bhubaneshwar, Thiruvananthapuram, Guwahati, Panaji, Jammu, etc
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• Indian Financial Network • Set up by RBI in June 1999 • Satellite based WAN using VSAT (Very Small Aperture Terminal) technology • The hub and Network Management System of INFINET are located in the Institute for Development and Research in Banking Technology, Hyd • Major applications: E-mail, Electronic Clearing Service - Credit and Debit, Electronic Funds Transfer
• http://www.idrbt.ac.in/index_fromsm.html ?infinet1.html?infinet
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INFINET
SWIFT www.swift.com
• Society for Worldwide Inter-bank Financial Telecommunication • HQ La Hulpe, Brussels, Belgium • Provides reliable, fast tele-communication facilities for exchange of financial messages all over the world between Banks and FIs • As non-profit making co-operative society in 1973 by 239 banks in 15 countries • Hubs in Brussels, New York and Netherlands • Rules in 1975; first message in 1977 • >7,000 members in 200 countries now • Handles over 7 million messages every day • India – a member since 1991 • 88 Indian banks are members as on date
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SWIFT contd...
• Any Bank / FI can become a member • Allots an address called Bank Identification Code (BIC) of 8 characters • Enables members to send secure and reliable messages – authenticated... • Correspondent bank arrangements... • Advantages: 24 hours service, system based – fraud-free – faster – accurate – confidential – funds/LCs/Guarantees
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Electronic Data Interchange
• Facilitates transfer of banking transactions using agreed protocol and standard data structure b/w computers • Norms developed in respect of specific messages for transmission of business transactions which are electronic equivalents of commercial invoices, purchase orders, transport bookings, payment instructions etc • Appropriate message formats and standards for financial applications in EDI developed by Message Development Group-Finance (constituted by IBA)
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Electronic Funds Transfer (EFT)
• Hosted and operated by the RBI • Permits fund transfer up to Rs 5 lacs from any account at any branch of any member bank in any city to any other account at any branch of any member bank in any other city • RBI acts as the service provider as well as regulator
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ECS
• Electronic Clearing Scheme (ECS) operated by the RBI since 1996-97 • Utilises BANKNET and INFINET • Facilitates payment from a single account at a bank branch to any number of accounts maintained with the branches of the same or other banks – Eg., Payment of dividends • RBI has also launched ECS – Debit for payment to utility companies like Telephones, Electricity etc
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SWADHAN
• Launched in 1997 • India's FIRST Shared Payment Network Service covers > 1000 ATMs in 64 cities • 55 member banks in the network, which include nationalized, private and foreign banks • Enables member banks to share their ATMs with other participating banks
• Objective - reduce the huge investment being made by the banks to deploy ATMs in different locations
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SERVICES
• Bill Payment through Electronic Banking • Electronic Shopping Mall • Effecting Personal Investments through Electronic Banking – Trading in shares – Investing in Mutual Funds – Trade In Derivatives – IPOs Online
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Real Time Gross Settlement
• Introduced in India in 2004 by RBI • Internationally accepted system to minimise the settlement risks • Settlements occur simultaneously • >10,000 bank branches networked • Balances held with RBI by banks • 4 types of members – A, B, C & D • http://www.iba.org.in/FAQs-RTGSNEFT-ECS.doc
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Cheque Truncation System
• IN USE IN MANY COUNTRIES ... • NI Act was amended appropriately • Settlement based on e-images/MICR • RBI Wg Gr submitted report in 2003 • Images to be preserved for 8 years • Pilot project in New Delhi in 2006 • Reduces delays in collections... • Fraught with risks, legal issues...
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Customer Relationship Management (CRM)
• • • • • • • • • Not a product / service, but a strategy Increasing competition among banks Customer expectations and demands Product development / Service Quality Know Your Customer (KYC) guidelines Knowledge Management in Banks Call Centres, DSAs, Franchisees in Banks Two Banking Ombudsman Schemes Core Banking Solutions & CRM Packages for Best Customer Service
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Commercial Banking
Customer Relationship Management
• Customer Analytics
– Statistical Credit Score Card
• Demographic details • Transaction details • Historical loan default data
• Targeted Marketing Campaign
– Carpet bombing avoided – Hit rate increases
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Core Banking Solutions (CBS)
• POOLING DATA AT CENTRAL SERVER • TRANSACTIONS OF DELIVERY CHANNELS FROM DELIVERY POINTS (BRANCH/ATM) FEED ONLINE TO HOST – NO BACK OFFICE • HOST DATABASE IS UP TO THE MINUTE • END OF DAY (EOD) AND START OF DAY (SOD) TASKS PERFORMED AT BRANCHES WILL BE DONE BY „HOST? SERVER • ELIMINATES BR RECONCILIATION WORK • STAFF PRODUCTIVITY – BANK CUSTOMER!
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Smart Cards – The Future
• Multi-application Smart Card • Channel of the future • Pilot project started • Pilot Project funded by Govt. of India • Project is in progress in partnership with IDRBT, IIT Mumbai and Banks • Visit www.scafi.in The Smart Card Forum of India is a non-profit, multiindustry organization promoting the wide spread acceptance of multiple application smart card technology.
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Beware of
• Hacking • Phishing • Pharming • Skimming • Trojan
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Hacking
• Hacker: May mean simply a person with mastery of computers.
• •
• • • • • • •
TIMELINE Early 1960s Hackers begin breaking into mainframe computers. 1983 The FBI busts six teen-age hackers from Milwaukee; one of the first arrests of hackers. 1984 First issue of 2600: The Hacker Quarterly in New York: prime source for hacking information 1985 “Phrack”, an electronic magazine about computer hacking, begins. 1987 AT&T computers hacked into by Herbert Zinn............................................... ...................................................................................................................... ...................................................................................................................... February 2000
In only three days some hackers brought down some of the biggest Web sites in the world that included Yahoo!, Amazon.com, Buy.com, eBay and CNN.com. They used"Denial of Service" attacks to overloaded the sites' servers by sending them an excessive number of data requests. Commercial Banking Technology in Indian Banking 2007 49
Phishing
A method of identity theft carried out through the creation of a website that seems to represent a legitimate company. The visitors to the site, thinking they are buying something from a real business, submit their personal information to the site. The criminals then use the personal information for their own purposes, or sell the information to other criminal parties.
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www.antiphishing.com
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Pharming
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Skimming
An electronic method of capturing a victim's personal information used by identity thieves. The skimmer is a small device that scans a credit card and stores the information contained in the magnetic strip. Skimming can take place during a legitimate transaction at a business.
Skimming can occur easily in a restaurant because your card is taken away when the bill is being settled. If your server is a skimming identity thief, he or she will, before giving the card back to you, scan the credit card with a hand-held electronic device, which takes only seconds. The electronically captured information is then used to by the thief or sold to other criminals
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Trojan
• Trojan horse is a program that installs malicious software while under the guise of doing something else. Though not limited in their payload, Trojan horses are more notorious for installing backdoor programs which allow unauthorized non permissible remote access to the victim's machine by unwanted parties normally with malicious intentions. • Unlike a computer virus, a Trojan horse does not propagate by inserting its code into other computer files. The term is derived from the classical myth of the Trojan Horse. Like the mythical Trojan Horse, the malicious code is hidden in a computer program or other computer file which may appear to be useful, interesting, or at the very least harmless to an unsuspecting user. • When this computer program or file is executed by the unsuspecting user, the malicious code is also executed resulting in the set up or installation of the malicious Trojan horse program. (See Social engineering.) • Often the term is shortened to simply Trojan.
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References:
• Information Technology & Electronic Banking – Indian Institute of Bankers, Mumbai, May 1998 • Information Technology & E-Banking – ICFAI, Hyderabad, October 2004 • Retail Banking, Everything you need to know to work in a Bank - Raghu Palat, IBD, Mumbai 2006 • Banking on Technology, Indian Management – AIMA Publication, August 2004 • Building CRM – Customer Relationship Management & KYC experience through Technology – BanCon, IBA Conference, 2004; Indian Banker Feb 2006 • Trend and Progress of Banking in India, RBI 2006 • www.rbi.org.in; www.idrbt.ac.in; www.google.co.in; www.swift.com; www.iba.org.in; www.antiphishing.com;
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doc_312476628.ppt