Bank Computerization – JAIIB Module – C

Essentials of Bank Computerization

The process of computerization in Indian banks started in early 80s when the first committee on computerization. Rangarajan Committee gave its recommendations in the year 1984. The 2ND report of Rangarajan Committee in the year 1989 gave the much needed pace to expedite the computerization. The major objective of computerization, can be improved customer service, better housekeeping, quicker decisionmaking and increased profits and productivity.

COMPUTER : A computer can be defined as an electronic machine which converts raw data into meaningful information. The data so fed into a computer can be store, retrieved and converted into output.

In banking, the computers can be used in almost all aspects of banking such as:

  • Cash management
  • Investment management
  • Foreign exchange management
  • Human resources management
  • Management information system
  • Decision and policy making

COMPONENTS OF COMPUTER

The computers comprise two basic components:

Hardware (physical parts, that could be touched or seen) and

Software (operational instructions).

HARDWARE

The hardware comprises:

  • Mother board: It contains CPU chip, memory chip, ROM, RAM, input-output controller, expansion slots and a number of logic circuits.
  • Input devices: key board, pointing devices such as mouse, touch pad, joysticks, touch sensitive screen, pen based system, optical scanner, voice recognition system
  • Output devices: printers, monitors
  • Storage device.: RAM, ROM, Magnetic disk, floppy, cd, dvd, pen drive

SOFTWARE

Software is a set of instructions that tells a computer what to do or how to perform a task. Software is a generic term that included application software and operating system.

Application software are programs that do a specific thing, such as a game or a word processor or a music player.

Operating systems like Windows XP, Win 7, Win 8, Win 10, linux, Unix,Dos, Ubuntu, Mac OS is a software that helps the applications run, and controls the display and the keyword. It acts as an interface between the hardware and the user.

DATA BASE MANAGEMENT

A database is an organised collection of data, stored and accessed electronically. A database managaement system (DBMS) is computer software application that interacts with end users, other applications, and the database itself to capture and analyze data. DBM helps in reading the data, removing the errors, updation of records, sorting and extraction of data fromdifferent files, sharing and storage etc.

Data Warehouse:

In computing, a data warehouse is a system used for reporting and data analysis, and is considered as a core component of business intelligence. The data stored in warehouse is uploaded from operational systems (like clerical entries) and is modified, remodeled as per the requirements of the top management for business analytics.

Data mining is a technique to reveal the strategic information hidden in data warehouse. It is the process of automatically finding patterns and relations in large database.

Data warehouse and data mining can be used by banks for various purpose such as loan risk analysis, portfolio risk analysis, demographic information about customer to focus on different segments, overall risk analysis etc.

DATA COMMUNICATION

Data Communication is the process of using computing and communication technologies to transfer data from one place to another. A common example of data communications is a computer connected to the internet via a WIFI connection which uses wireless medium to send and receive data.

Data-Communication

The basic components of data communications are as follows:

  1. Message – data to transmit
  2. Sender
  3. Medium(Wired or Wireless)
  4. Encoder and decoder

COMPUTER NETWORKING

Networking in computer terminology means connecting computers and peripheral devices in such a way that the networked computers are able to work together. These networked computers may be located at different places or in the same premises. These include Local Area Network (LAN), Metropolitan Area Network (MAN) or Wide Area Network(WAN).

Local Area Network (LAN): Computers and computer devices are connected within the same building.

Metropolitan Area Network (MAN): Computers are connected between 2 buildings.

Wide Area Network (WAN): Computers are connected to internet which can access data from all over the world.

NETWORKING TOPOLOGY

The way in which the devices are interconnected is known as topology. These are two basic forms of local area network design used in information transmission; centralised control and distributed control.

network-topology.png

The networking may be done under following kinds of topology:

  • Star network – the central node is the master and other nodes are joined to the master by separate link
  • Ring topology – devices are connection in a closed loop and information is passed from one node to another in series
  • Bus topology – all devices are connected to a single continuously cable
  • Hybrid topology – combining 2 or more of the above topologies

CORE BANKING SOLUTIONS :

Core Banking Solutions (CBS) or Centralised Banking Solutions is the process under which the information relating to the customer’s account (i.e. financial dealings, profession, income, family members etc.) is stored in the Central Server of the bank (that is available to all the networked branches) instead of the branch server.

Essential requirement of CBS:

Creation of Primary Data centre : It houses the central server for online transaction. Central data base is used for all customer centric delivery channel services integrated with CBS. It is manned round the clock to offer 24X7 service to the customer.

Disaster recovery site (DRS): It is done to avoid disruption in the business activities of CBS branches due to central system or network failure, to ensure non-stop functioning of branches and on line delivery channels integrated with CBS, to act as a back up for providing a reliable and continuous processing environment.

Business process re-engineering: To help the bank in realigning existing business processes in tune with the benefits provided by the new technology platform, to help the bank in taking advantage of the best business practices available in the technology platform to provide more efficient services.

Software : It is to comprise the branch functional modules, delivery channel requirements like ATMs, telebanking, Internet banking, interface to integrate with NDS, RTGS etc.

Networking: Leased lines of WAN to be used as primary communication channel and ISDN link as back up.

Core-banking-solution
Core Banking Solution

Advantages of CBS

  1. The CBS process is advantageous both to the customers and the banks in the following manner: Enables the establishment of a reliable centralised data repository for the bank
  2. Facilitates data warehousing and data mining technologies for business intelligence
  3. Easy implementation of integrated customer centric services like online ATMs, tele-banking, internet banking, any branch banking, kiosk banking, cash management services, etc.
  4. Enables centralised management information, decision support and executive information systems
  5. Efficient and effective MIS, ALM, risk management, etc., using the central data pool
  6. Enables centralised management and control with centralised data
  7. Standardisation of the branch automation software using a single version. Quick adoption of software changes as changes are done only at the central site
  8. Facilitates business process re-engineering (BPR) to streamline the existing processes
  9. Relieves branches of jobs like data backup, MIS generation, etc.
  10. Requires infrastructure at the central location, backup location and at branches
  11. Servers are not mandatory at branch locations
  12. Attracts higher investment in the beginning
  13. Cost of implementation for further branches and delivery channels relatively cheaper
  14. Core infrastructure can be used for future expansions
  15. No extra cost for implementation of SFMS, RTGS, CFMS, etc.

Memory Units

  • 1 Byte = 8 Bits
  • 1 Kilo byte = 1024 bytes
  • 1 Mega byte = 1024 Kb
  • 1 Giga byte = 1024 Mb
  • 1 Tera byte = 1024 Gb
  • 1 Peta byte = 1024 Tb
  • 1 Exa byte = 1024 Pb
  • 1 Zeta byte = 1024 Eb
  • 1 Yota byte = 1024 Zb

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