“ANALYTICAL STUDY ON CORE BANKING

WITH REFERENCE TO STATE BANK OF INDIA”

PROJECT REPORT SUBMITTED

TO
UNIVERSITY OF MUMBAI
FOR THE PARTIAL FULFILLMENT OF DEGREE OF
BACHELOR IN COMMERCE (BANKING AND INSURANCE)

UNDER THE FACULTY OF COMMERCE

BY

VEDANT DANDEKAR

Under the Guidance of

ASST.PROF.MRS TRUPTI KAUTIKWAR

KG JOSHI BEDEKAR COLLEGE OF COMMERCE

And
NG BEDEKER COLLEGE OF COMMERCE

MARCH 2023
 DECLARATION

This is to certify that the present report “Analytical study on core banking” is based on
my originaI work and data coIIected and indebtedness to other works/pubIications has
been duIy acknowIedged at the reIevant pIaces. It has not been submitted in part or fuII
for any other dipIoma or degree of any other university.

(Signature)

VEDANT DANDEKAR

2
 ACKNOWLEDGEMENT

First of aII immenseIy and whoIe heartedIy I thank God and aIso my parents
for giving me this opportunity for successfuI compIetion of my project
work. AIso I thank the management for giving us a chance for doing this
course.

I extend my thanks to our respected Principal Dr. Suchitra Naik for

permitting me to take up this project work.

I wish to express my sincere thanks to aII my teachers, for the continuous

and creative ideas, given during my studies and aIso for this project.

I take this opportunity to thank our coordinator Dr. Mrunmayee Thatte,

for her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

Asst. Prof Mrs. Trupti Kautikwar whose guidance and care made the
project successful.

I am extremeIy indebted to the internet technoIogy for the vaIuabIe heIp

rendered to me by providing the necessary materiaIs and support needed
for the preparation of this project work.

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 CONTENTS

Chapter/Serial Contents Page No.

Number
CHAPTER1 : INTRODUCTION
1.1 Introduction 2
Banking in India 3
Banking with IT 4
Banking around the worId 9
1.2 Meaning of Core Banking 10
Core Banking SoIution 11
History of Core banking system 14
1.3 Bank profiIe 16
History of the Bank 17
Need for the study 19
CHAPTER 2: RESEARCH METHODOLOGY
2.1 Statement of ProbIem 27
2.2 Scope of the Study 27
2.3 Objectives of the study 27
2.4 MethodoIogy 28
2.5 Sources of Data 28
2.6 Limitation 28
CHAPTER 3: REVIEW OF LITERATURE
3.1 FeasibiIity Report 46
3.2 Uses of Core banking in India 48
3.3 ResuIts for SBI Businesses 49
3.4 ScaIabiIity Test of TCS BaNCS System 52

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 CHAPTER 4: DATA ANALYSIS AND INTERPRETATION
4.1 Secondary Data 61
CHAPTER 5: CONCLUSION AND SUGGESTIONS
5.1 Findings 64
5.2 Suggestions 66
5.3 ConcIusion 69
5.4 BibIiography 70

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 List of Tables

Name Page No.

TabIe 1: Uses of Core banking in India 48
TabIe 2: ResuIts for SBI Businesses 49
Table 3: Consolidated Balance Sheet of five years 61

List of Figures

Name Page No.

Figure 1: Time Line of State Bank of India 18
Figure 2: Network Architecture 28
Figure 3: PhysicaI Architecture 30
Figure 4: Core Banking System components 31
Figure 5: ATM 33
Figure 6: Data Transfer Interface 35
Figure 7: Security Architecture 36
Figure 8: Hierarchy of Functions 38

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 CHAPTER 1

INTRODUCTION

7
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 today's
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
organization's 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."

10
 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 service-
the 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 banking

11
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 non-
networking 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 today's 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. With

12
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 organization's
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.

13
Technology absorption rate at India’s rural branches
Particularly in branches located in India's 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 B@ncs 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.

15
1.2 MEANING

Core means “Basic”, hence the basic services provided by the inter-
networked 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 bank's 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 Bank's 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 doesn't need any explanation but
for those who want to know a bit, here's a brief overview of what it means.

Previously a bank's 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 service-
oriented-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 these

18
services available across multiple channels like ATMs, Internet banking, and
branches.

Previously a bank's 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 behemo th 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 Bank—its main competitors.

22
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.

23
24
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 being-
• To study the intense competition and changing market dynamics in an over
banked environment.
• To understand the demands of customers who are better informed, more
demanding and less loyal than ever.
• 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 bank's competitiveness in the market
• Improved process efficiency

Shrinking margins. Slow growth …. The challenges that confront today's

banker are as intense as they are varied and about technology, the banker's 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 process-
oriented. Not doing so in the near term could prove to be a costly gamble.

25
 CHAPTER 2

RESEARCH METHODOLOGY

26
 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 solutions

27
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:

• The study was restricted to a bank, so the competitive scenario could not be
studied.
• Inadequate time was the major constraint during the whole project.

• Due to security concerns only read-only access to the data was encouraged.
• Confidential datas were not allowed to access.
• Information may be incomplete, obsolete, inconclusive, or inaccurate

28
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.

29
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.

30
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.

31
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 allow

32
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.

33
34
 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.

35
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.

36
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

37
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.

38
 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:

• Speaker - The speaker provides the cardholder with auditory feedback

when a key is pressed.
• Display screen - The display screen prompts the cardholder through each
step of the transaction process. Leased-line machines commonly use a

39
 monochrome or color CRT (cathode ray tube) display. Dial-up machines
commonly use a monochrome or color LCD.
• Receipt printer - The receipt printer provides the cardholder with a paper
receipt of the transaction.
• 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 the

40
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

41
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.

42
Organizing Structure of IT

Enabler

Information Security Department

• Assess risks
• Define Policies, and develop Standards and Procedures
• Provide training & awareness
• Deploy & manage security products
• Define security architecture for network, databases & applications: Secure
Configuration Docs
Enforcer

Application Owners /Business Owners/System administrators / IT Personnel

• Implement technical and procedural controls

• Manage Network, servers & applications securely adhering to policies,
standards & procedures
• Report Incidents
• Act on Security Logs
Auditor

Inspection & Management Audit Dept.

• Auditing compliance against policies across applications and locations

• Vulnerability testing
• Penetration testing
• Application security testing
• Feedback to ISD on effectiveness of policies

43
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.)
• Electronic bill presentment and payment - EBPP
• Funds transfer between a customer's own checking and savings accounts, or
to another customer's account
• Investment purchase or sale
• 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

44
Features commonly unique to Internet banking include

• 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.
• 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

• 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.
• 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.
• 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 $16-
million 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.

45
Countermeasures

• 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.

• 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.
• 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 a

46
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 8-
processor 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

47
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.

48
Reduced transaction time Enterprise significantly reduces a bank's mean
transaction time. The solution's single transaction engine (capable of providing n-
level 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 customer's 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.

49
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 Hyper-
Threading 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.

50
 CHAPTER 3

REVIEW Of LITERATURE

51
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
user's 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 doesn't 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.

52
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 user's 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.

53
 3.2 USE OF CORE-BANKING IN INDIA FROM LAST FEW
YEARS

Year 2003 2004 2005 2006 2007 2008 2009 2010

Incr.% 9 12 15 20 25 32 40 50

70

60

50

40

30 Increase in %

20

10

0
2003 2004 2005 2006 2007 2008 2009 2010

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

54
3.3 Selected Business Results for State Bank of India Group (2006–10)

CATEGORY 2006 2007 2008 2009 2010 Change

2006-2010
Total Deposits Rs72.0 Rs 82.5 Rs 99.6 Rs115.7 Rs 121.9 Rs 146.4

Total 34.1 40.2 50.9 65.6 83.9 112.1

loans/advances
Total operating 2.00 2.25 2.87 3.30 3.95 4.60
expenses
Staff expenses 1.29 1.56 1.82 1.97 2.41 2.44

Total operating 1.81 2.38 3.33 3.47 3.44 3.31

profits

55
 $700.00
$600.00

$500.00

$400.00
Change (2006−2010)
$300.00
2010
$200.00
2009
$100.00 2008
$0.00 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.

56
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.

57
ScaIabiIity 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.

58
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

59
 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

60
BALANCE SHEET MAR 22 MAR 21 MAR 20 MAR 19 MAR 18
OF SHARPLINE
BROADCAST (in
Rs. Cr.) 12MTHS 12MTHS 12MTHS 12MTHS 12MTHS
EQUITIES AND
LIABILITIES

SHAREHOLDER'S
FUNDS
Equity Share
Capital 11.50 11.50 11.50 11.50 10.00

TOTAL SHARE
CAPITAL 11.50 11.50 11.50 11.50 10.00

Reserves and
Surplus 0.93 -0.97 -1.28 -0.83 -1.64

TOTAL
RESERVES AND 0.93 -0.97 -1.28 -0.83 -1.64
SURPLUS
TOTAL
SHAREHOLDERS 12.43 10.53 10.22 10.67 8.36
FUNDS
NON-CURRENT
LIABILITIES

Long Term
Borrowings 0.00 0.00 0.00 0.00 0.00

Deferred Tax
Liabilities [Net] 0.00 0.00 0.00 0.00 0.00

Other Long Term

Liabilities 0.00 0.00 0.00 0.00 0.00

Long Term
Provisions 0.00 0.00 0.00 0.00 0.00

TOTAL NON-
CURRENT 0.00 0.00 0.00 0.00 0.00
LIABILITIES

61
CURRENT LIABILITIES

Short Term Borrowings 6.03 0.00 0.00 0.20 0.49

Trade Payables 1.69 2.22 0.89 0.00 2.09

Other Current Liabilities 1.26 0.33 0.19 0.33 0.15

Short Term Provisions 0.39 0.00 0.00 0.00 0.00

TOTAL CURRENT 9.37 2.56 1.09 0.53 2.73

LIABILITIES
TOTAL CAPITAL AND 21.80 13.08 11.31 11.20 11.10
LIABILITIES
ASSETS

NON-CURRENT
ASSETS
Tangible Assets 0.03 0.01 0.00 0.00 0.00

Intangible Assets 0.00 0.00 0.00 0.00 0.00

Capital Work-In- 0.00 0.00 0.00 0.00 0.00

Progress
Other Assets 0.00 0.00 0.00 0.00 0.00

FIXED ASSETS 0.03 0.01 0.00 0.00 0.00

Non-Current 3.50 2.28 2.03 2.64 2.40

Investments
Deferred Tax Assets 0.00 0.00 0.00 0.00 0.00
[Net]
Long Term Loans And 0.00 0.00 0.00 0.00 0.06
Advances
Other Non-Current 0.11 0.11 0.11 0.11 0.00
Assets
TOTAL NON- 3.64 2.40 2.14 2.75 2.46
CURRENT ASSETS
CURRENT ASSETS

Current Investments 0.00 0.00 0.00 0.00 0.00

Inventories 0.04 0.04 0.00 2.16 5.13

Trade Receivables 4.95 1.70 0.94 0.67 1.12

Cash And Cash 0.18 0.84 0.23 0.09 0.05

Equivalents
Short Term Loans And 8.89 8.01 7.98 5.52 0.00
Advances
OtherCurrentAssets 4.10 0.10 0.01 0.02 2.33

TOTAL CURRENT 18.16 10.69 9.17 8.45 8.64

ASSETS
TOTAL ASSETS 21.80 13.08 11.31 11.20 11.10

62
 CHAPTER 5

CONCLUSION AND SUGGESTIONS

63
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.

64
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 small-
scale 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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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.com

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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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