Project Report On

Need & Effectiveness of Core Banking Solution

Submitted in the partial fulfillment of Master of Business Administration (2004-2006)

Submitted To: Project Guide Mr. Santosh Tagore Faculty, IMS Indore

Submitted By Saurabh Bakliwal MBA 2004-2006 IMS, DAVV Indore

Institute of Management Studies Devi Ahilya Vishwa Vidyalaya, Indore

CERTIFICATE

I certify that Mr. Saurabh Bakliwal, a student of MBA (2004-2006)FT of Institute of Management Studies, DAVV Indore, has carried out a research project entitled Need & Effectiveness of Core banking solution with special reference to State Bank of Indore, in pursuance to the requirement of the MBA (2nd Sem) curriculum. I am satisfied with the work done by him. I wish him luck for all his future endeavors.

Project Guide: Mr. Santosh Tagore Faculty, IMS DAVV, Indore

DECLARATION
I have tried my level best in making this research project useful, pragmatic & successful. I have tried to provide the accurate information to the best of my knowledge. The data collected is primary, authentic & analyzed by me. I have got the questionnaires filled by branch managers of different branches in Indore and their respective employees & clients. All other information has also been gathered from reliable sources. I hereby declare that project entitled Need & Effectiveness of Core Banking solution is authentic I have put in my efforts meticulously to make this project to come up to the expectations and pragmatically viable.

(Saurabh Bakliwal)

ACKNOWLEDGEMENT
This project is not one persons solitary effort. Its successful completion is the result of many different people to whom I owe a debt beyond repayment. Unfortunately, I can not acknowledge my indebtedness to all these people, so I must necessarily limit my thanks to those who have helped me directly in making my project work an incredibly pleasant task and giving to final shape. It is my duty as well as privilege to express my deep sense of gratitude to all those who have been associated with me in this research project. First of all, I express my deep gratitude towards Mr. Santosh Tagore, my project guide who initiated this study and also helped me by giving his valuable comments at every stage of my work. I m also deeply indebted to Dr. (Mrs.) Sangeeta Jain, Coordinator MBA (Full Time) at IMS, Director Dr. Rajeev Gupta at IMS for the providing the required facilities for my project. I offer my sincere thanks to all the branch managers of various branches of State bank of Indore situated in Indore & their respective employees & clients for their co-operation & providing valuable information by filling questionnaires. Last but not least, I m also thankful to my father Mr. Dilip Jain, my uncle Mr. Narendra Jain and rest of the family for providing me crucial feedback that influenced the development of this project. I m also thankful to my friends and all my classmates for their constructive criticism and constant encouragement and friendly co-operation.

(Saurabh Bakliwal)

PREFACE
Banking scenario has changed rapidly since 1990s. The decade of 90s has witnessed a sea change in the way banking is done in India. Technology has made tremendous impact in banking. Anywhere banking and Anytime banking have become a reality. The financial sector now operates in a more competitive environment than before and intermediates relatively large volume of international financial flows. In the wake of greater financial deregulation and global financial integration, the biggest challenge before the regulators is of avoiding instability in the financial system. Technology has thrown new challenges in the banking sector and new issues have started cropping up which is going to pose certain problems in the near future. The new entrants in the banking are with computer background. However, over a period of time they would acquire banking experience. Whereas the middle and senior level people have rich banking experience but their computer literacy is at a low level. Therefore, they feel the handicap in this regard since technology has become an indispensable tool in banking. Foreign banks and the new private sector banks have embraced technology right from the inception of their operations and therefore, they have adapted themselves to the changes in the technology easily. Whereas the Public Sector Banks (PSBs) and the old private sector banks (barring a very few of them) have not been able to keep pace with these developments. In this regard, one can cite historical, political and other factors like work culture and working relations (which are mainly governed by bipartite settlements between the managements and the staff members) as the main constraints. Added to these woes, the PSBs were also saddled with some non-viable and loss making branches, thanks to the social banking concept thrust upon them by the regulatory authorities in 1960s.But, now PSBs are also trying to compete with private sector bank in terms of technology and Core banking solution is one of the example of it. My project is concerned with the motive of probing into the effectiveness level of core banking solution with respect to its users i.e. branch managers/ systems managers, employees & clients. This study is mainly concerned with measuring the need & effectiveness of Core banking solution confined to State Bank of Indore, Indore division. In the proceedings, I had formed an experience survey form that I got filled by various branch managers, employees & clients of State Bank of Indore along with their personal interviews. The research traces need & effectiveness of Core banking solution from the perspective of branch managers/ system managers, employees & clients. Along with these, I have thrown light upon future aspect of banking scenario in India with respect to technology.

CONTENTS

Chapter-1 1.1. Executive Summary Chapter -2 Impact of technology on Banking-Literature review 2.1 The banking industry, history & technological changes 2.2 Impact of IT Act 2000 on banking sector Chapter-3 Core banking solution 3.1 Core banking solution Chapter-4 Objective 4.1 Rationale of Study 4.2 Objective of Study 4.3 Type of Research Chapter-5 Project Methodology 5.1 Sample Design & Sample Size 5.2 Methods of Data collection 5.3 Analysis 5.4 Findings 5.5 Managerial Implications & Recommendation 5.6 Conclusion Chapter-6 6.1 Bibliography Chapter-7 Annexure 7.1 Questionnaires 7.2 Raw score data sheet

CHAPTER -1

1.1

Executive Summary

EXECUTIVE SUMMARY
Banking was never been such a pleasure, but today information technology & its impact have made banking a pleasure activity. In the present kaleidoscopic economic scenario l banking has seen sea change especially in Global as well as Indian context. It may be true that concept of universal banking rushed through not because of inherent strength of the model but perhaps may be of the sheer pressure of globalization & competition. But the fact remains is that Indians are getting world-class services & products. Core banking solution is one of the medium through which all these world-class facilities are being provided. Its the core banking solution, which has made possible the concept of Anywhere banking and Anytime banking with the help of ATMs, having centralized database. Now, a customer is no more a customer of a particular branch, in fact he/she has become customer of that banking organization and can do transaction from any branch of the bank all over the India. Core banking solution is the need of the hour. In this global village, where geographical distances are ever shrinking with the advent of newer technologies and communication, Core banking is essential. Core banking provides the ease of performing transactions, where we go. In order to compete in this cutthroat competition, its essential for any banking organization to integrate all its products and services and make a formidable combination for its customers. Currently, most of the banking organizations are facing lot of problems in implementing Core banking solution due to resistance to change, sophisticated technology etc. but they all are like toothache problem and should be over in some time. Afterwards, we can expect a smooth journey towards the new era of banking through Core banking solution.

CHAPTER -2 Impact of Technology on Banking

2.1 2.2

Banking industry, history & technological changes Impact of IT Act 2000 on Indian Banking

IMPACT OF TECHNOLOGY ON BANKING

The banking industry, history and technological changes Historical overview Indian banking got its start in 1870, with the Bank of Hindustan. Modern banking began with the establishment of three presidency banks under The Presidency Banks Act, 1876 - the Bank of Calcutta, the Bank of Bombay and the Bank of Madras, which were subsequently amalgamated to form the Imperial Bank of India. Bank of Calcutta, the Bank of Bombay and the Bank of Madras, which were subsequently amalgamated to form the Imperial Bank of India. The Imperial Bank carried out some of the functions of a central bank before the formation The Reserve of the Reserve Bank of India under Bank of India (RBI) Act of 1934. The RBI was constituted as India's apex bank without major government ownership. The Banking Relations Act of 1949 brought the RBI under government control, vesting it with wideranging powers of supervision and control of Indian banks. In 1955, the RBI acquired control of the Imperial Bank of India. It was renamed the State Bank of India (SBI); The SBI then converted eight private banks floated in the erstwhile princely states into 100% subsidiaries. Subsequently, the RBI forced weak banks to merge with the strong ones reducing the numbers from 566 in 1951 to 85 in 1969; In 1980, the government acquired six more banks with deposits of more than Rs. 2 billion. The avowed purpose was to turn these banks into catalysts for economic growth. Rural markets for industrial goods could not be developed so long as moneylenders, charging usurious rates of interest, were the main source of rural credit. Moreover, the 'green revolution' depended on farmers finding substantial sources of credit to pay for fertilizers and hybrid seeds. Since the mid-1970s, there has been a spectacular growth in the spatial distribution of bank branches and in the size of their deposits and advances. According to experts in banking this transformation has no parallel anywhere in the world (Anantharam Iyer, 1991). After nationalization, there was also a change in recruitment policy. For the first time, the doors of the banks were opened to everyone, irrespective of family status, caste, community, religion or gender. Recruitment was placed on a more systematic basis, with merit assessed by aptitude tests conducted by an external agency in a relatively impartial manner (Deekshit, 1991). As the size of the banking sector increased, the industry became difficult to manage. Computer technology offered a possible solution. In India, a small number of industrial houses and a few educational, research and development institutions started using computers in the early 1960s. During the late 1960s and 1970s, service-oriented industries such as airlines, railways and insurance companies introduced computers to 'improve their functioning' and 'to provide better customer service' (Anantharam Iyer, 1991). Banks in India did not, however, introduce computers on a large scale because of the fear that these would result in retrenchment and unemployment (Goodman, 1991). For a long time Indian banks
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faced very little competition and operated in a protected economy. Thus no long-term policy or perspective for the banking sector was formulated: it was simply treated as part of the public sector. This is now changing. Well-computerized foreign banks are beginning to compete seriously with the nationalized banks. They aim at a profitable and wealthy part of the market and, in contrast to the nationalized banks, do not recognize any social responsibilities to small account holders or to a rural and semi-urban clientele. Technological changes, legislation and bargaining In India, the main agents affecting the introduction of new technology have been the unions, management and the workforce. The government has played a very indirect role in the process. In the early days of the massive introduction of computer technology into industry and services, union policies on new technology were basically defensive. They focused almost entirely on the immediate consequences of technological change on the workforce, especially the aspect of possible job losses. However, these attitudes and the strategies of unions vis--vis computerization have begun to change, especially since the 1980s. Management in many places has been able to convince workers and unions that competition is becoming increasingly harsh, and computerization is not only inevitable for the health and survival of the unit but also beneficial to employees, because it may improve the competitiveness of the enterprise, enhance job security and improve employment conditions. Many unions that have consistently opposed computerization have had to face their members who are keen on technological changes. As one EDP employee who is also a unionist put it, 'As a unionist I would oppose computerization, as an employee I would welcome it. That is my dilemma.' Consequently, unions today are increasingly seeking to influence the process of technological changes so that new technology can be introduced in such a way as to benefit workers and minimize its adverse consequences. The last decade has seen several 'technology agreements' or 'computerization agreements', along with routine collective bargaining agreements, which contain clauses related to technology. Despite these agreements, most managers in India, including those in the public sector, have consistently regarded all aspects of technological changes as matters falling within the area of managerial prerogative. When consultation with unions has occurred, these have been far from fair since unions have lacked the requisite know-how and information. The Reserve Bank of India (RBI) installed its first computer in 1968, and a larger one in 1979. But the United Commercial (UCO) Bank, the Standard Chartered Bank, Lloyds' Bank, Grind lays, and others had installed accounting and other machines before 1966. Operations such as payrolls had been computerized fairly early on. Some head offices began to use computers by the beginning of the 1980s. In September 1983. Two of the major banking unions - the All India Bank Employees Association (AIBEA) and the National Confederation of Banking Employees (NCBE) signed an agreement with the Indian Banks Association (IBA), representing 58 bank managements. The unions wished to maintain surveillance of the process and to protect job prospects in the banking sector, but the final settlement was selfcontradictory. On the one hand there were restrictions on computerization, with numerical limits on the numbers of mainframe computers, and even on the number of accounting machines that might be used in rural branches, but there was also a loop-hole which allowed
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the banks to use 'such number of mini-computers as are warranted by their needs and exigencies'. The 1983 agreement provided an opening for individual banks to make their own computerization agreements, and many foreign banks immediately took advantage of this 'openness' to negotiate agreements giving them a free hand to introduce new technology, despite the careful restrictive approach of the AIBEA and NCBE. In March 1987 the AIBEA and NCBE signed a new settlement with the IBA. The settlement was similar in its approach and concerns to the 1983 agreement. Although it allowed for an extension of new technology in both the operations computerized and the equipment used, the concern was largely still with ways of restricting and controlling the use of computers to protect existing staff and preserve the prospects for future staff. The agreements also provided some additional allowances and protection for pregnant women. Taking advantage of the 'openness' clause in the 1983 and 1987 agreements, some of the AIBEA's own affiliates agreed to the installation of automatic teller machines and fax machines, which were beyond the purview of the industry level accord.2 There are signs that the AIBEA has been forced to reverse its earlier relatively liberal stance on computerization because of the campaign spearheaded in recent years by its arch rival, the Bank Employees' Federation of India (BEFI), which has been seeking recognition from the IBA. However it would be misleading to look at the unions alone in explaining the slow rate of technological innovation. A highly placed bank executive commented that the management of the banks lack perspective, because of the protection they had enjoyed, and were not really serious about computerization (Goodman, 1991). There is also uncertainty among bank managers about the implications of computerization in terms of the hierarchy and their own positions. Employees of many Indian banks, including the State Bank of India and Bank of Baroda, said that management 'just dumped these machines here. They are hardly used, and some don't work.' A comprehensive policy seems completely absent. In contrast, the multinational banks have computerized almost totally, with the unions unable to have any say. Impact of computerization on the workforce Some of the general issues that have concerned unions and employees, especially women, in the wake of the introduction of new technology in the banking and finance sectors have been: Prospects of job losses and declining employment levels. Increase in workloads. Pressure for flexibility. Changes in job contents. Increased insecurity in the workplace, and loss of union power. Increase in the proportion of 'non-bargainable' staff (i.e. those without an automatic right to unionize) as compared to the 'bargainable' staff. Changes in grading and pay. Changes in information and control.
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 Changes in the autonomy of employees. Job losses There have not been visible losses of employment in either the banking or insurance industries, due to the massive expansion and diversification in the two industries and to the high proportion of nationalized enterprises, in which workers are generally protected against job losses. Some of the foreign banks have undergone massive expansion in terms of the number of their branches and their areas of operation. In fact, in January 1992, 12 foreign banks sought permission to open 44 more branches in various major cities of India (Economic Times, 1992). There has however been a reduction in the rate of recruitment in the nationalized banks. According to a recent study covering three banks and two insurance companies, the growth of new jobs has dwindled. As the use of new technology expands, labour savings are likely to increase further in some operations (Chopra, 1991). The three developments that are likely to displace workers, and women in particular are voice recognition, optical character recognition and artificial intelligence (Rajan, 1990). An employee at the Hong Kong bank observed that the entire category of typists had already been abolished. It is possible to discern a tendency to reduce the proportion of 'bargainable' staff in both nationalized and foreign banks. The Banque Nationale de Paris reduced its bargainable staff from 200 employees in 1979 to just 135 in 1992, by not recruiting staff at the lowest levels and by asking about 35 employees to accept the so-called Voluntary Retirement Scheme (VRS) because computerization was expected to reduce the need for their labour. Increase in workloads New technology could lessen the repetitive and heavy nature of certain operations. However, most employees in the insurance and banking industry, especially in the foreign banks, have experienced serious strain and heavy workloads. According to an employee working in the cash department of the Citibank, Before computerization we used to do 30-40 cash entries per day; now we have to do more than 100. There is a greater pressure of work more work and more responsibility. The speed has increased enormously According to experienced unionists in ANZ Grind lays Bank, computerization, coupled with non-recruitment and non-replacement of retired staff, has led to a tremendous increase in workloads, 'after 20 years of employment, people are bound to be completely fagged out. Then the management will term them "unsuitable", "old" or "unfit"'. The personnel officer of Grind lays, who disagrees with the union on everything else, admitted, 'since the emphasis is entirely on productivity and efficiency, there has been intensification of work. Employees' efficiency levels have gone up ten-fold'. Personnel officers at the Life Insurance Corporation (LIC) confirmed this picture. Pressure for flexibility Over the last decade and a half, management has consistently sought to have flexible manning levels. They have argued that they need operational flexibility in order to respond quickly to changes in the market, to introduce technological innovations, and to deal with fluctuations in the flow of work. This, they say, can be achieved by employing a core of secure, permanent,
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multiskilled, full-time employees and a 'periphery' of marginal, generally single-skilled workers who may be employed part-time or temporarily, and directly or indirectly, in a variety of 'new' ways (Huws et al., 1989) Computer technology demands functionally flexible multi skilled workers rather than specialists. The strategy of increasing flexibility in the employment system frequently targets women workers, who occupy the lower rungs of the job hierarchy. They are often forced to change workstations or leave the firm. Professionals and specialists, a majority of whom are men, benefit from the strategy. Changes in job content Changes in work methods caused by the introduction of computerization affect the content of work as well as the skills needed by employees. The direction of changes is, however, not uniform. Two divergent tendencies can be observed. In routine transactions, certain skills of a mechanical nature, which nevertheless require a measure of mental effort and concentration, are no longer required or are needed less. The skills replacing them are equally mechanical but call for less mental effort. The level of skills required for the performance of routine transactions therefore actually falls, although the degree of attention and concentration required will be just as high or even higher. In contrast, in the area of customer services, computerization offers potential for an increase in both the necessary range and level of skills, for example, searching for, extracting and assimilating relevant information in response to a request. The realization of the potential is, however, contingent on the relevant organizational decisions being taken by management (Ozaki et al., 1992) The impact of new technology on work content and the skills required of workers also depends on how rigidly jobs are defined and demarcated and on the skill levels of the existing workforce. Various studies seem to show that, in places where the tasks of workers have already been defined broadly and flexibly, with much overlapping, the reorganization of work after the introduction of new technology has been comparatively smooth and workers' resistance relatively minor. In places where the skill level of workers is high, technological change tends to strengthen the tendency towards the integration of planning and production tasks. Where skill levels are low there seems to be a trend towards polarization of skills. Computerization is also creating skills that are largely transferable from one enterprise to another, such as the skills of computer programmers (Ozaki et al., 1992). Product innovations have generally led to an increase in the importance of formal skills. The informal skills, learned on the job, which characterized women's work, are not seen as important. The professional and technical jobs increase in number and importance, and formal theoretical knowledge is becoming more important for employees in the banking sector (Tremblay, 1991). In India as elsewhere, categories such as junior clerks and tellers are becoming less important in the overall workforce as Automated Teller Machines (ATMs) multiply (Rajan, 1990). An employee working at the bill discounting department in Citibank, Bombay, says: Earlier, when a bill was brought to us, we made manual entries. The customer would present the bill. We had to scrutinize it, and then send it to the liability department for their approval. In the liability department, each client had one
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big card that showed her status. After approval, it was sent back to us for processing. That is: Calculate the interest using a interest machine Make debit/credit cards ticket. Balance the amount Finally, send the tickets to journal keeper, who would balance all the amounts

Each department had a journal keeper. Now, we still have to scrutinize a bill. Then we key it into the programme - the bill programme. The computer shows the credit limit automatically. The ticket is then given to the officer, who takes it to the Credit Approval Committee. According to the personnel manager of the LIC, work had not been enriched or tasks enlarged, because jobs were set and functions well defined. 'Computerization has made the jobs easier rather than interesting.' The personnel officer at the ANZ Grind lays Bank, in contrast, was adamant that employees' skills had increased ten-fold, but he was actually referring to their productivity or efficiency. He agreed however that many jobs have been 'realigned'. For example, in bill discounting, work that was previously done by a team is now done individually by workers with their own machines. An employee at Grindlays comments, 'Earlier, there was greater interaction between employees. Teamwork was good work. We learnt more about the work. Now there is no time to look around, help or seek help from colleagues. You just sit there and bang at the keyboard'. The management of Grindlays argues that employees used to spend most of their time with books (e.g. tabulations) and now spend more time with customers. The unionists at Grindlays dismissed this claim, 'There have been no changes. Work has become more monotonous. The brain is getting more dull.' Many employees expressed mixed feelings about computerization. While it relieved some work pressures and strains of particular types, it has made work dull. It increased efficiency, but decreased the feeling of teamwork and sharing. Work might be less arduous, but it also becomes less varied. Computerization is supposed to increase customer interaction, but many employees experienced a reduction, and all complained of an increased work tempo. Increased insecurity and loss of union power Deskilling contributes to a feeling of powerlessness vis--vis the employer. This feeling was expressed more definitely by employees working in foreign banks than by those employed either in the nationalized banks or the nationalized LIC, Four women employees in the Banque Nationale de Paris said that the closure of some branches and their awareness that they had not been given computer training at a time when nearly all the banking operations had been computerized had made them 'very scared.' All four were later made redundant. At ANZ Grindlays, insecurity was said to have increased, with early retirements and no recruitment for the last four to five years, 'that itself creates insecurity. If there is a reduction, then it creates panic.' Citibank employees reported feeling, on the one hand, that their workload was generally too heavy, and, on the other hand, that any temporary reductions made them fear that work had been contracted out. They said that contract workers had been employed for specific tasks,
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without informing the employees or the union. This has become possible because of computerization. The feeling of insecurity has also increased because unions have been considerably weakened. The women who were forced to take the VRS (Voluntary Retirement Scheme) by the Banque Nationale de Paris say: Here is virtually no union in the BNP. The union officials were bending backwards to sell the VRS to us. We didn't want to resign. We wanted to fight it out. But how can you do that without the firm backing of the union? Even when a union is strong, women may not be protected against discrimination. Increase in the proportion of 'non-bargainable' staff Control over the workforce provides the basis for controlling production processes, output levels, and scheduling. Over the years, this control has been loosened as unions have come to play a role in areas such as work intensity, output levels, health and safety, which were and still are considered to be 'management prerogatives'. One of the strategies available to wrest control back is to weaken unions, both numerically and in terms of the functions, which the unionized workforce performs. This is one reason behind the dramatic and continuous increase in the non-bargainable category of workers, as compared to unionized workers. This actualization process has occurred in the banking and insurance industry as well as in manufacturing. The number of workers in the bargainable categories is being reduced, for instance by using contract couriers in place of employing messengers. In 1973, 18.7 per cent of all workers in the banking industry were officers. By 1987 this had grown to 26.7 per cent. Over the same period, the percentage of clerical workers fell slightly, from 55.9 per cent to 52.4 per cent, and the percentage of workers in more subordinate positions fell quite significantly from 25.4 per cent to 20.9 per cent (Borkar, 1991). In almost every industry in India, computer programmers are in the non-bargainable category. Computer programmers are usually in a position to anticipate changes and may use their knowledge to keep other workers and unions informed. Most new recruitment is done in the 'officer' category, though often these new employees do the same work as the bargainable employees. In industries where the union has refused to cooperate with computerization, the management recruits 'officers' to do the work of data entry operators etc. The unionists are increasingly feeling that they have to bargain with the management about the content of work in the bargainable and non-bargainable categories, and be vigilant about any infringement. Changes in grading and pay There seems to have been no attempt to redefine a new grade structure in the banking and insurance industry after computerization was introduced. In the Banque Nationale de Paris a 'promotion agreement' was signed in 1987, under which all the clerical staff were promoted within three years to the status of Special Assistants, a supervisory category with an extra wage allowance. Everybody, including the lower grade staff, received the allowance, and there was a substantial increase in basic pay too. But there was no attempt at evolving a new grade structure, nor any training to equip employees to deal with the new type of work. All
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employees, including the women, have gained financially but there has not been any change in their job definition or real status. All the banks have some allowance for EDP staff or computer operators. In the LIC the allowance was Rs 100. In the Hong Kong Bank only the most senior employees in the department got the allowance, although almost all the employees have to work on the terminals. The Union Bank of India employees who work on the computers get an allowance of Rs 350 per month. The Hong Kong Bank employees get an allowance of Rs 400. In the words of one computer operator in the Bank of Baroda, 'EDP staffs are definitely graded highly in the Bank'. Changes in information and control Traditional craft workers often knew far more about their jobs than managers or supervisors, which gave them a lot of freedom as to how the work was done. But computers have enormously increased management's ability to collect and analyze information - about product performance, market trends, customers, sales, finance, and of course about employees. The tendency has been for management to learn more about how work is done, and to specify more tightly how jobs should be done - both in terms of method and speed. Every minute of your time is being recorded. How many words did you key in? How much time was required for posting debits and credits, for bill discounting? However, we cannot access information that is not in our jurisdiction. If one tries it, it is invalid; but the fact that you tried will be recorded in the computer. If one looks at it dispassionately, one would have an eerie feeling. Employees felt that they were being watched and intimidated, increasing the sense of insecurity. Unions have not claimed a right to have access to information relevant for negotiating. Employees in ANZ Grindlays bank found such a demand difficult to even imagine. 'Management has total control over all information. Profits, costs etc. are under secret code. They have all the information about us though.' Changes in health and safety conditions The introduction of new technology has also created a range of new hazards for the workers. The development of new materials, processes and substances, without adequate information being made available about their impact, may be creating problems, which will not be perceived for many years. Increases in the scale and pace of production have contributed towards stress, especially where there is also inadequate support or training or an unfair distribution of workloads. Some specific health and safety problems have been shown to arise from the introduction of computer-based equipment. Visual Display Units (VDUs) have been known to cause a number of health problems, especially if operated continuously for a long time. 'Video blues', eye problems, musculoskeletal problems, painful conditions such as tenosynovitis, varicose veins, ulcers, nausea, headaches, and skin diseases as well as reproductive problems such as miscarriages, stillbirths, birth defects, infertility, menstrual problems and low sperm counts have been very extensively documented (Labour Research Department, 1985). However, none of the bank employees had been given any health training. Most employees complained of
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eyestrain, headaches, or a heavy feeling in the head, but they worked at the terminal from 9.30 a.m. to 4.30 p.m. with only breaks for lunch and tea i0n between. Three women in Citibank had had miscarriages, though none of them had any personal or familial history of miscarriages. Of the forty women interviewed only one had heard that working on the computers continuously could cause health problems. None of the training sessions had mentioned this problem. Though information on the health and safety aspects of working with computers is widely available, employees were ignorant of health hazards. This indicates their lack of access to information relevant to women, the unwillingness of management to share it, and the indifference of the union to issues of health and safety. This is a serious issue, especially because the number of women working on computers is increasing rapidly.

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Impact of IT Act 2000 on Indian Banking

Indian Banking: Withstanding the Challenges After a decade of reforms, the Indian banking sector is slowly getting stronger. Regulations are forcing the banks to adopt better operational strategies and upgrade their skills. The system has witness the integration of the financial markets. Externally, the happenings in the international markets have their implications on the markets and the players. All these are making the operational environment more volatile and hence challenging for the Indian banks. Thus the need of a strong IT acts for Indian banks was required, so that the new way of banking can be safe, secure and adaptive. Indian banks have nevertheless, withstood all these challenges and are becoming more adaptive to the changing environment with new banking reforms like IT Act 2000, Bankers book evidence act and Reserve Bank of India Act etc. With the onset of 2001, the Indian financial sector has entered its 10th year of reforms. During this decade, the reforms have touched upon almost every segment of the financial sector. Nevertheless, it is the banking sector, which experienced major reforms. A retrospect of the events clearly indicates that the Indian banking sector has come far away from the days of nationalization. Increase in the number of banks due to the entry of new private and foreign banks, increase in the transparency of the banks balance sheets through the introduction of prudential norms and increase in the role of the market forces due to the deregulated interest rates have all significantly affected the operational environment of the Indian banking sector. Also with the introduction of electronic method of operations Indian banks got a new threat. It was required to have a proper method of working with clear guidelines for it. IT Act 2000, Bankers book Act provided the necessary guidelines for such situation and is helping the banking sector to grow stronger and stronger. The Narasimham Committee had laid the foundation for the reformation of the Indian banking sector. Constituted in 1991, the Committee submitted two reports, in 1992 and 1998, which laid significant thrust on enhancing the efficiency and viability of the banking sector but it was the IT Act of 2000 which boosted the concept of E-banking, E-commerce with the support to the secure banking system thru electronic media. As the international standards became prevalent, banks had to unlearn their traditional operational methods and adopt new way of banking. Different level of Computerization: Public and Private Banks The Indian banking sector faces significant challenges. Public banks are struggling to computerize, while private banks are eager to adopt security mechanisms. The private banks that have a clear-cut agenda in place to tackle the emerging challenges in this sector drive the online banking business in India. Meanwhile, public sector banks view the basic computerization of operations as an daunting task. The security risk involved is directly related to the size of the network.
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In India, the computerization of banking operations and the maintenance of manual methods each has their pros and cons. While computerization can lead to efficiency through automated transactions across branches, reduced cost of operations and workload management, it also has its pitfalls in the form of security risks, network downtime, scarcity of trained personnel, expensive system upgrades and recurring costs. The advantages to manual banking include no network security risks, the high availability of personnel, and confirmed transactions through physical verification and re-confirmation. But it also carries a legacy of drawbacks, including operating inefficiencies, a massive paper trail and the slow update of transactions. In spite of their different positions on the computerization spectrum, both public and private banks understand the concept of the Public Key Infrastructure. It is only the size of the initiative in both these categories that will vary. While private banks look at security as a value added, risk reduction utility for their online and real-time transactions; The public sector banks look at computerization as their first agenda, a massive exercise in itself considering their huge branch networks, and security as something that will happen as they get computerized. Automation in Banking sector Public sector banks realize that computerized banking is the way to go and are moving frantically pace in this direction, but it will take time. An interesting factor here is that 100 banking centers in India, with high levels of Internet connectivity, control 70% of the assets and liabilities of the entire financial system. This region thus becomes a priority zone for the public banks to computerize as well as work security measures into their operations. Private banks came into existence knowing that they would have to use technology, as a cutting edge tool to deliver services in those areas that public sector banks couldn't. Such areas include customer service and real-time banking and related products. Adding value to the banking experience by using technology is a thing easier said than done. There are very few online trading sites that are successful. There are only prototype payment gateways and digital signatures don't exist in the banking system. The inclination towards developing a state of the art network in the financial system in general and the banking system in particular is evident in recent legislation. The Information Technology Bill 2000 has been passed in parliament and has come into effect. The Office of the Controller of Certifying Authorities (CCA) has been constituted and Mr. K.N. Gupta has been appointed as the first Controller. The CCA will be issuing the license needed to operate as a Certification Authority, and the first set of licenses will be issued sometime in January after a stringent evaluation of the applicants' technical, infrastructural and financial strengths. In spite of their different positions on the computerization spectrum, both public and private banks understand the concept of the Public Key Infrastructure. The IT Bill is aimed at bringing in structure, legal validity and authenticity for transacting online". Its passage can be perceived as an indication of the government's inclination towards promoting e-commerce and e-governance while ensuring accountability.
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Credit Information Bureau Unlike other developed or developing countries, data on individuals or corporates is not available in the Indian market. With over a billion Indians, this data structuring exercise is indeed a massive task. It is noteworthy that efforts are afoot in this area too. The Credit Information Bureau (CIB) is being established under the mandate of the Reserve Bank of India. The State Bank of India and HDFC BANK are supervising it with technical support from Dun & Bradstreet India and TransUnion. While Dun & Bradstreet will provide assistance for retail accounts, TransUnion will provide technical support for maintaining databases of corporate accounts. The bureau will have access to the largest database of borrower accounts with the SBI group having close to 30% of the banking sector advances and HDFC having the largest database of long term retail borrowers. The CIB will collect commercial credit related data and create, package, market, sell and distribute credit reports to banks, financial institutions and businesses, which agree to contribute the relevant data on a regular and continuous basis. Acceptance of emerging technologies in India like PKI is driven by two main factors, one being the brand value of the solution provider. How strong is the reference value of the solution and is it a globally accepted product? Second, is the pricing correct," he asks? "In this case the cost of the solution will most probably have to be discounted by the service provider who is keen on identifying his customer and building a relationship. As the usage increases the end user will realize the value of the product and be willing to pay a higher price for it". The need for a globally accepted product places the Identrus framework in a prime position to succeed in the Indian embryonic banking security market. The Indian market place also has a unique vendor factor in play. The local partner of the technology provider is a key factor in the decision making process of the buyer. Delivery capabilities, corporate relationships, business networks and the option of getting a one-stop shop for end-to-end solutions are also factors that influence the buying procedure. As awareness grows and user comfort increases, it would not be surprising to find uptake of PKI growing exponentially. India with its skilled computer professionals is perfectly positioned to set the global benchmark in terms of innovation and product benchmarks in the PKI world. Pushing through reform The Narasimhan Committee Report of 1992 initiated reforms for the banking sector to align them with internationally accepted banking practices. The amendment of Banking Regulation Act in 1993 saw the entry of new private sector banks through a licensing system. The state funded financial development institution called the Industrial Credit and Investment Corporation of India (ICICI), the Housing Development Finance Corporation, the database of long-term retail borrowers. Hinduja group and some prominent non-banking financial institutions were among the successful licensees.

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These new private sector banks that entered the field in 1994 started with a clean balance sheet. They used technology as the means of improving efficiency and reach. In the last few years the private sector banks have come a long way though they have not achieved the potential in terms of deposit growth. The top private sector banks (PSBs) -- ICICI Bank, HDFC Bank, Global Trust Bank, UTI Bank, and Centurion Bank -- are present in almost every major city and metro in the country. IT and private sector banks The private banks were in a position to leverage IT applications in their daily operations adopting new technology for the delivery of various financial products. While HDFC is keen on setting up its own virtual marketplace, ICICI is concentrating on venture capital investments and keeping financial intermediation under its direct domain. IT and public sector banks The top management in state-owned banks has hit a wall in their own pursuit of the same goals. The lack of trained manpower, hostile trade unions and the general enormity of the task are all major obstacles. For example, in 1998 the State Bank of India with more than 5,000 branches started work on a plan to build an IT network -- including the integration of an electronic payment gateway managed by a private service provider -- connecting all its branches. Unfortunately, progress has not been up to the expectation. Net Banking Net banking will make an impact in India even though the overall level of Internet access is very low. The top 100 centers out of around 36000, which account for about 70% of assets and 60% of liabilities, have high penetration levels. Recent research indicates that Internet connections and users are growing exponentially with 11 million connections and around 23 million users by 2003. The market for PKI applications will hopefully experience a similar growth curve. The need for a globally accepted product places Identrus' framework in a prime position to succeed in the Indian embryonic banking security market. IT Act Contributions: Banking sector E-commerce The three best contributions of the IT Bill to the E-commerce movement in India are as follows: 1. The legal recognition of electronic records. The IT Bill has laid down for the first time in the legislative history of India that where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is - rendered or made available in an electronic form; and accessible so as to be usable for a subsequent reference. This is likely to give a huge boost to e-commerce in India because it solves the practical problems, which were arising prior to the existence of the IT Bill on the law book. 2. The IT Bill further states that unless otherwise agreed, an acceptance of contract may be expressed by electronic means of communication and the same shall have legal validity and enforceability. The said Bill purports to facilitate electronic intercourse in trade and commerce, eliminate barriers and obstacles coming in the way of electronic
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commerce resulting from the uncertainties relating to writing and signature requirements over the Internet. The Bill also aims to fulfill its objectives of promoting the developing of the legal and business infrastructure necessary to implement electronic commerce. 3. Thirdly, the said law grants legal recognition to digital signatures. This is further likely to give an impetus to the rapid development of e-commerce.

Banking a part of Service Sector Services the 'tertiary sector' of the economy covers a wide gamut of activities like trading, banking & finance, infotainment, real estate, transportation, security, management & technical consultancy among several others. The contribution from services sector today stands over 40 per cent of the total GDP in India. The sector currently employs close to 20 million people in India. For all the aforesaid areas IT plays the prime role in information processing, storage & access with a view to providing improved services to the consumers. Financial Services Financial services have been the major users of IT and communication technologies. IT expenditure by US banks has recorded a compounded annual growth rate of 8.4 per cent. The Management Information System (MIS), distributed computing devices, open systems, highspeed data networks (LAN, NIAN, WAN, ISDN etc.), RDBMS have been important development milestones in IT with major impact on financial services. Use of multimedia for storage of text, graphics, video, sound etc. has immensely benefited the information storage system. All these technologies are used extensively by the banking and financial services sector. Automated Teller Machines (ATM) ATMs though operational in the country for quite some time, are expected to make a big headway in India. It has been estimated that there are around 400,000 ATMs worldwide. The latest generation networked ATMs allow the user to perform upto 150 kinds of transactions ranging from simple cast withdrawals & deposits, to fund transfer to trading in stocks to buying mutual funds to something mundane like payment of electricity bills, booking airtickets and making hotel reservations, although many of above services are not yet available in India. In 1999-2000 as many as 40 percent of ATM cardholders used it for cash withdrawal, while in 2000-01 the figure rose to 80 percent, which shows the kind of confidence and awareness increasing in India. ATMs are synonymous with credit cards - 578 million credit cards issued worldwide and India is poised to become one of the world's largest credit card users by 2010. 'Virtual' Bank Multimedia technology would be quite effective in bringing the banking services to the doorstep of its customers. The Customer Activated Terminal (CAT) or Kiosk is an interactive
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multimedia display unit, housed in a small enclosure, typically consisting of a computer workstation, monitor, videodisk player and a card reader. It allows the customers to browse through information and use the available banking services at their own speed. Some banks are thinking of establishing 'virtual' branches where a customer can walk through the door, explore services by touching parts of the screen and at any time call up a member of the bank staff by video conferencing. While the banks do not need to invest heavily in real estate for setting up such a branch, the customer gets the benefit of 'one-stop banking' at a convenient location. Phone banking Many of Indian banks (ICICI etc) have started giving this facility of doing the banking from any phone. Your transaction is safe and secure, as you need to tell a specified code that is known only to the authentication server. Home Banking Apart from phone banking, Smart phones with screen built-in modems and programmable microprocessors let the customer access a variety of financial services from home. Another is Net Banking in which Subscriber can access various financial /Banking services thru the Internet. Electronic Funds Transfer at Point of Sale (EFTPOS) While travelers cheques meant 'pay-now-buy-later and credit cards had 'buy-now-pay-later advantages, EFTPOS or debit cards signify 'buy-now-pay-now' but without cash transaction. The user presents his ATM card when he buys goods and the EFTPOS system immediately debits his bank account. Smart Cards The 'processor' type Smart Cards with in-built integrated circuits (ICs) or microchips offer a wide range of transactional opportunities even from remote areas. The Smart Cards are extensively being used for employee 'clocking in', withdrawing cash from ATM, using pay phones, payment of various bills etc. Electronic Data Interchange (EDI) EDI typically denotes paperless financial transactions across the locations. EDI is fast becoming the norm for inter-company transactions and also for procurement of bought-out items from the suppliers. The companies can now operate their bank accounts through corporate banking terminals in their own offices, which are linked to the bank computers. Companies can thus carry out transactions like transferring funds, managing its cash flow, opening Letters of Credit etc. without any paper work. India thru VSNL has already established Trade- Net (EDI) to facilitate electronic submission of trade documents by traders to various Govt. agencies and the response of these agencies to the sender. It has reduced document-processing time from one day to 15-30 minutes. BHEL is using the same for getting orders, filling tenders etc thru this EDI facility. Image Processing
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As financial services including capital markets and banking are highly document intensive, image-processing technology can have a far-reaching impact for such applications for its 'less paper' handling characteristics. In banks, image technology could be used for automatic identification or character recognition to read text and diagram wherein the cheques or documents can be scanned. Expert Systems The financial services sector is increasingly using decision support systems (DSS) or expert systems for functions such as credit risk appraisal, forecasting loan delinquencies, investment decisions etc. One of the most promising developments in this field is the use of 'neural network' approach to build an expert system, which lets the software literally learn from example and experience. Several banks today are using neural network programs to detect credit card fraud. Some leading international investment banks to track stock price patterns and predict their movements are also using it. Although such credit rating are not very common in India but for individual customers sooner it will also come up. Information Technology & Financial Services: Key Issues While the technological possibilities of IT may be unlimited, their applications and adoption in India need a conscious approach towards Business Process Reengineering of existing practices and procedures to take the fullest advantage of IT. Continuous training & skill up gradation of human resources assume critical importance towards absorption of new technologies. The elimination of manual records, the introduction of electronic fund transfer, ATMs etc. raise the important issue of security and integrity of data. This includes issues relating to confidentiality of information, preventing data corruption and prevention of fraud. Appropriate technologies for encryption of data for secured transaction, regular & multiple backups, extensive use of passwords and other forms of authorization are been adopted. As in case of EFT, a cheque is not required to be presented physically for making payment as per the current practice. Also the legal liabilities of banks and customers in case of loss of ATM cards, ATM frauds etc. are not quite understood in the present system. The adoption of new technologies would warrant a thorough review of the system towards changed legal stipulations. For paperless and electronic financial transactions in India, a host of legal aspects need to be looked into. These legal aspects are taken care in the new IT Act 2000. The services sector covers a vast range of occupations involving comparatively little capital investment leading to gainful employment and has a very good potential for export revenues. The sector calls for continued induction and infusion of knowledge-based technologies with cutting edge applications of information technology. With the highly skilled manpower and excellent entrepreneurship qualities, India can truly emerge as a 'global player' in the services sector, once a proper frame work start working in fashioned way, and IT Act 2000 will show the way for growth of all service sectors including the banking. The table below provides a glimpse of the technologies of future related to banking sector and their likely time- frame of introduction in India.
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IT Applications in Financial/Banking Sector: FUTURE SCENARIO

S Future Services No. 1 2

4 5 6 7 8 9 10 11 12

Networked ATMs for banking & other transactions Smart phones for home banking operations Virtual branches of bank operating from Customer 2 to 10 Activated Terminal (CAT) or a Kiosk Debit Cards for EFTPOS 5 to 10 Smart Cards with built-in microchips for paperless cash, 0 to 5 pay phones etc. Electronic Data interchange (EDI) for paperless banking 0 to 5 transactions Image processing technologies for optical scanning and 0 to 10 storage of digitized images/papers Expert Systems and Neural Networks for credit risk appraisal, monitoring/prediction of stock price 5 to 10 movement, detection of credit card fraud Business Process Reengineering, training & skills 5 to 15 development for absorption of new technologies Information Security for confidentiality, prevention of 0 to 10 data corruption and fraudulent practices Legal aspects for paperless & electronic financial 0 to 5 transactions Bar coding to emerge as an important device for payment processing, accounting & inventory 0 to 5 management

Likely Time frame Introduction / completion in India (in Years) 0 to 5 2 to 10

of

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Is IT Act sufficient for Growth of banking sector? Everybody familiar with the cyber world talks about e-commerce and the recently enacted Information and Technology (IT) Act recognized one of the revolutionary features of cyber world - the digital signature. Thinking IT Act, digital signatures etc as full proof and safe. Even some say it to be instrumental in bringing major reforms in Banking sector like it has done for IT sector. But most of the experts feels IT Act to be insufficient in many ways. Experts feel the act has not have enough teeth to safeguard e banking from frauds and complexities. With most of the sites been hacked and content changed, IT Act should have given more powers to deal with complexities of virtual world. Although IT Act was only needed to give legal validity to e-commerce and inclusion of every sensitive aspect into the single framework would unnecessarily make the act complex, it has excluded negotiable instrument as defined under the Negotiable Instrument Act from the applicability of the Act. This is a classic example what changes banking sector is seeing and adapting. With still the scope of improvement in IT act this sector can grow even stronger.

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CHAPTER -3 Core banking Solution

3.1

Core banking solution

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CORE BANKING SOLUTION

What is Core Banking? Core Banking is a generic term, which denotes inter-branch transaction capability through a central database. Inter-branch transaction facility is available through out Internet Banking Solution. With the introduction of Core Banking, the facility of inter-branch transactions will cover a wide range of business (as decided by the Bank from time to time), through any of the Core Banking branches. Need for introducing Core Banking The new wave in retail banking is an enterprise-wide, customer-centric approach where branch banking; call centers and e banking converge to provide a "best of breed" approach to customers. The objective is to deliver banking services on demand across any channel without impacting a customer's experience of the process. This new wave is attributable primarily to advances in new technology such as J2EE and customer analytics. As a bank, implementing a core banking solution is not just about replacing the old core system with a new one, but also about affecting business transformation in building and selling products and services that are customer-centric. Ultimately, the philosophy behind any technology initiative is to drive easier consumer access and greater convenience, while enhancing customer service levels

Through the power of technology available through Core Banking, the new generation banks and foreign banks are able to target niche markets and provide value added services with speed and efficiency. It has, therefore, become imperative that Nationalized Bank also inducts this technology, to effectively leverage it for business and maintain out supremacy in the market place. The Business Process Re-engineering (BPR) initiatives of the Bank, which are being implemented, need Core Banking as pre-requisite. Customers of the Bank, who are currently associated with a particular Branch, will become customers of the entire Bank Group and derive benefits. Similarly, the organization, powered by information available through the central database, will be positioned to conduct its business in a far more efficient manner.

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Central aspects of the Core Banking Project? All data would be at central host. Having a centralized database would be the biggest advantage offered by Core Banking. There would be minimal data for front-end validations at Branch. Data flow from/to the CDC would be through connecting model. All system-related activities would be done at host level EOD would be done at the Host place only. It offers Offline functionalities too.

What does Core banking allows us to do?

Centralized Processing: State Bank group has computerized all the branches with Bank Master under the Universal Computerization Project. However, this is branch level computerization. Core banking on the contrary, has a centralized database, and all processing of transactions are carried out in this database, residing at the Central Data Center (CDC). Certain features (such as screens, signatures of customers, transactions for the current day, end of day balances of previous day) are also made available at the Branch, for smooth and speedy conduct of operations 24*7 Banking/Anywhere banking: Core banking will make available 24 *7 banking and Anywhere banking to the customers, and all other channels like ATM, Internet Banking etc. will be fully integrated with branches Integration with delivery channels ATMs, Internet, Mobile Banking. Strengthening MIS/DSS/EIS: As all data will be in a centralized database and branches as well as administrative offices can be connected through Core banking, better management Information System (MIS)/Decision Support System (DSS)/ Executive Information System (EIS) will be possible. This connectivity will also facilitate timely and informed decision-making. Many of the back office functions currently performed by branches can be conveniently handled at a central location (or locations) after introduction of Core banking, enabling branches to focus on efficient product delivery, marketing and cross selling. Integration with strategic areas like Trade Finance, Treasure, ALM, Corporate Balance Sheet. Change in Business processes value addition to the organization and customers.

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What is the need for integration of various IT Products for a Bank? To exploit the Group synergy To meet the rising customer expectations To overcome the pressure of competition To meet the regulatory requirements which are growing stringent day by day To improve efficiency in operations To reduce transactions costs. For efficient and timely settlement and management of funds For providing timely and accurate MIS to Top management thereby facilitating improved decision making Risk management

What are the process changes that would take place due to the implementation of Core banking solution? Core banking is not just Computerization; it aims at changing the way we do business. There would be changes in workflow at branches. Core banking frees branches from Back office work. The entity of Branches would undergo a big change Branches would emerge as delivery points- marketing outfits. The implementation of Core banking enables BPR (Business Process Restructuring) initiatives of Bank. Loans- Sanction, Tracking and Debt Collection would become more efficient. NPA - online tracking, write-off, probability of default Maintenance of many registers in system- nomination, stop payment/loan related. Changes in reporting: Core banking would enable control related exception reporting, unlike wholesale reporting as in vogue now. Accounting/ reporting related changes SCs, Inward clearing, and FD. There would be reduced Reconciliation overhead. Rationalization of service charges. Core banking aims at a paperless/register-less office
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Shared operations Center (SOC) are being proposed to take care of Back office functions Maker-Checker integrated with powers. Branch Calendar Fees & Charges Reports Generation & Distribution Voucher verification Reports Clearing Centralized Handling Cash/Currency chest computerization Computerized maintenance of Security Forms (VPIS Valuable Paper Inventory System) Self service facilities.

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CHAPTER -3 OBJECTIVE

3.1 3.2 3.3

Rationale of study Objective of study Type of Research

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OBJECTIVE Rationale of the Study

To study the effectiveness of Core banking solution and its impact on its users i.e. branch managers, system managers, employees and most important clients.

Research objectives
Primary objective Effectiveness of Core banking solution Impact of Core banking solution on its users

Secondary objectives Impact of technology on Indian banking To check the awareness level of Core banking solution among clients, employees To study the effect of ever changing technology on humans.

Research Type
Exploratory research It is also known as formulative research. The main purpose of such studies is that of formulating a problem for more precise investigation or of developing the working hypothesis from an operational point of view. The major emphasis on such type of studies is on the discovery of ideas and insight with the help of various methods viz, the survey of concerning literature, experience survey, analysis of insight stimulating.

Limitation of the Project

Study to be conducted at branches situated in Indore district only. Time duration of project is 2 months.

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CHAPTER -5 Research Methodology

5.1 5.2 5.3 5.4 5.5 5.6

Sample Design & Sample Size Methods of data collection Analysis Findings Managerial Implications & Recommendations Conclusion

35

RESEARCH METHODOLOGY
Sample Design & Sample Size The sample design being chosen for this project is Judgment Sampling. Judgment Sampling is that sampling is that sampling in which elements from the population are purposively selected. Thats why; Judgment sampling is also called Purposive Sampling My project was focusing on the persons who are the users of Core banking solution. Therefore, the sample designs I have chosen consist of Branch Managers, employees and client of State Bank of Indore only. The sample size of research project for various experiential survey forms are as follows: Branch Managers: Employees: Clients: Total: 20 50 50 120

Methods of Data Collection All the data collected for my research project is Primary Data. Primary data is collected by the way of getting questionnaires or survey forms filled & through personal interviews from the selected sample size. Analytical Techniques Percentage Analysis

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DATA ANALYSIS

Core banking solution on Manager Friendliness parameter

Very friendly 0% Friendly 25% Very unfriendly 10% Not friendly 20% Very unfriendly Not friendly Neutral Friendly Very friendly Neutral 45%

Results:

Every 2nd Manager finds Core banking solution similar to previous software on User friendliness parameter. Every 4th Manager finds Core banking solution comparatively friendly Every 5th Manager finds Core banking solution comparatively In-Friendly Every 10th Manager finds Core banking solution comparatively Very In-Friendly No Manager finds Core banking solution Very Friendly

Conclusion: Most of the manager rated Core banking solution Neutral on User-Friendliness parameter.

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Core banking on User Friendliness parameter By Employees

Very unfriendly 9% Friendly 39% Not friendly 22% Very unfriendly Not friendly Neutral Friendly Neutral 30%

Results:

Every 2nd Employee finds Core banking solution User friendly. Every 3rd Employee finds Core banking solution comparatively similar on UserFriendliness parameter. Every 5th Employee finds Core banking solution comparatively In-Friendly Every 10th Manager finds Core banking solution comparatively Very Unfriendly

Conclusion: Most of the employees rated Core banking solution Friendly on User-Friendliness parameter.

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Core banking on Efficiency parameter By Managers

Very efficient Very Less 5% 10% Efficient 25% Very Less Less 25% Less Neutral Efficient Very efficient Neutral 35%

Results:

Every 3rd manager finds Core banking solution similar to previous software on efficiency parameter. Every 4th manager finds Core banking solution comparatively efficient Every 4th manager finds Core banking solution comparatively In-efficient Every 20th manager finds Core banking solution comparatively Very efficient Every 10th manager finds Core banking solution comparatively Very In-efficient.

Conclusion: Most of the manager rated Core banking solution Neutral on Efficiency parameter

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Core banking solution on Routine banking operations

Very Efficient 15%

Very In-efficient 5% In-efficient 20% Very In-efficient In-efficient Neutral Neutral 15% Efficient Very Efficient

Efficient 45%

Results:

Every 2nd manager finds Core banking solution efficient on routine banking operations Every 5th manager finds Core banking solution comparatively in-efficient on routine banking operations Every 6th manager finds Core banking solution comparatively Very efficient on routines banking operations. Every 7th manager finds Core banking solution comparatively similar on routine banking operations Every 20th manager finds Core banking solution comparatively Very In-efficient on routine banking operations.

Conclusion: Most of the manager rated Core banking solution Efficient on performing routine banking operations.

Core banking efficiency on reducing workload on branches

40

Very Efficient Very In-efficient 5% 5% Efficient 20% In-efficient 40% Very In-efficient In-efficient Neutral Efficient Very Efficient Neutral 30%

Results:

Every 2nd manager thinks that Core banking solution is In efficient in reducing workload on branches. Every 3rd manager thinks that Core banking solution is comparatively similar in terms of reducing workload on branches. Every 5th manager thinks that Core banking solution is efficient in reducing workload on branches Every 20th manager thinks that Core banking solution is very efficient in reducing workload on branches Every 20th manager finds Core banking solution is Very In-efficient in reducing workload on branches

Conclusion: Most of the manager rated Core banking solution In-efficient in terms of reducing workload on branches.

Core banking solution on reducing workload parameter By employees

41

Very efficient 2% Efficient 18%

Very Inefficient 20% Very Inefficient Inefficient Neutral Inefficient 24% Efficient Very efficient

Neutral 36%

Results:

Every 3rd employee thinks that Core banking solution is similar to previous system on reducing workload. Every 4th employee thinks that Core banking solution is Inefficient in reducing his or her workload. Every 5th employee thinks that Core banking solution is Very Inefficient in reducing his or her workload. Every 6th employee thinks that Core banking solution is Efficient in reducing his or her workload. Every 50th employee thinks that Core banking solution is Very efficient in reducing his or her workload.

Conclusion: Most of the employee rates Core banking solution similar to previous system on comparing its ability to reduce their workload

Core banking solution on Increased efficiency of Employee- By Managers

42

Very Efficient 0% Efficient 10% Very In-efficient 15%

Very In-efficient In-efficient Neutral

Neutral 40%

In-efficient 35%

Efficient Very Efficient

Results:

Every 2nd manager finds that Core banking solution is comparatively similar on employee efficiency. Every 3rd manager finds that Core banking solution is In efficient, when it comes to increasing efficiency of employees. Every 6th manager finds that Core banking solution is Very Inefficient, when it comes to increasing efficiency of employees. Every 10th manager finds that Core banking solution is Efficient, when it comes to increasing efficiency of employees. No manager finds Core banking solution Very efficient for increasing efficiency of employees.

Conclusion: Most of the manager rated Core banking solution similar to previous software, when it comes to increasing the efficiency of employees.

Core banking solutions ability in Increasing Employee work efficiency

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Very Helpful 12%

Not at all 8% Not helpful 20% Not at all Not helpful Neutral Helpful

Helpful 44%

Neutral 16%

Very Helpful

Results:

Every 2nd employee finds Core banking solution helpful in increasing his or her work efficiency. Every 5th employee finds Core banking solution not helpful in increasing his or her work efficiency. Every 6th employee finds Core banking solution neutral in increasing his or her work efficiency Every 8th employee finds Core banking solution Very helpful in increasing his or her work efficiency Every 12th employee finds Core banking solution Very Unhelpful in increasing his or her work efficiency

Conclusion: Most of the employee finds Core banking solution Helpful in increasing their work efficiency.

Core banking solution on Fraud Management parameter

44

Very Efficient 15%

Very In-efficient 5% In-efficient 10% Very In-efficient In-efficient Neutral 25% Neutral Efficient Very Efficient

Efficient 45%

Results:

Every 2nd manager rates Core banking solution Efficient in Fraud Management. Every 4th manager rates Core banking solution similar to previous system in Fraud Management. Every 6th manager rates Core banking solution Very Efficient in Fraud Management Every 10th manager rates Core banking solution Inefficient in Fraud Management. Every 20th manager rates Core banking solution Very Inefficient in Fraud Management

Conclusion: Most of the managers rated Core banking solution Efficient in Fraud Management.

Core banking solution on Auditing procedure simplification

45

No 35% Yes No Yes 65%

Results: 65% Managers thinks that Auditing of branches would be easier with Core banking solution, where rest 35% managers thinks that there would be no changes in auditing procedure with core banking solution.

Brand Image Enhancement due to Core banking solution

46

No Enhancement 30% Enhancement No Enhancement Enhancement 70%

Results: 70% Managers thinks that introduction of Core banking solution should results into enhancement of brand image, which should eventually result into enticing customers. On the other side, 30% managers think that there would no enhancement in brand image of the organization due to introduction of Core banking solution.

Core banking solution on Customer service

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Very Efficiently 0% Efficiently 8% Very Inefficiently 22% Very Inefficiently Inefficiently Neutral Efficiently Inefficiently 28% Very Efficiently

Neutral 42%

Results: 42% employees find Core banking solution is comparatively similar to previous system in terms of customer service. 28% employees find Core banking solution comparatively Inefficient in Customer service 22% employees find Core banking solution comparatively Very Inefficient in Customer service. 8% employees find Core banking solution is Efficient in Customer service. No employee finds Core banking solution Very efficient in Customer service.

Conclusion: Most of the managers rated Core banking solution Efficient in Fraud Management.

Core banking requirement

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Core banking requirement

No, it was'nt required 52%

Yes, it was essential 48%

Yes, it was necessary No, it was'nt required

Most of the employees felt that Core banking solution was need of an hour.

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Core banking awarness - Customers

No 28% Yes No Yes 72%

Most of the customers were aware of the Core Banking solution concept.

Customer enticement towards Core banking solution

No enticement 18% Yes, it entices No enticement Yes, it entices 82%

Most of the customers were enticed/attracted towards Core Banking solution

Findings
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Benefits The concept of Anywhere Banking has been appreciated by all categories of core banking users viz branch managers, employees and clients. Clients found the concept of Internet banking i.e. online balance checking, online chequebook order system very enticing. Client is no more a customer of particular branch and can do transaction more any branch in India, which is very lucrative. 8 Hour banking Quick service Clearing system may totally be removed now Centralized banking ATM facility all over India Auditing of branches would be comparatively easy. Less burden on branches. Enhancement brand image of the bank, which would eventually help the entire bank to keep up with stiff competition from private sector banks

Problems
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Users of Core banking solution found it very slow in processing. According to them, it takes comparatively lot of time in processing transaction as compare to previous system Transaction completion/ updating process is very lengthy, involves lots of steps to complete a transaction, which eventually makes time consuming. Link fails very frequently and takes lot of time to re-connect. In the meantime, it haults the complete banking operations. Single side entry is allowed in Core banking solution, which employees and branch managers thinks that it can be very dangerous for branches and prone to fraud. Reduced customer satisfaction level Transaction completion request is denied quite frequently without any reason whatsoever. All the required reports are not available. Rejection of transaction/entry can be done only by supervisory staff, which creates lots of hassles and takes lot of time It doesnt show account no with name of the party and its balance, which doesnt brings confidence to employees to perform transaction for them. So employees have ensure every time before making transaction for that particular client/party. Payment order/Demand draft making process is too lengthy and erroneous. It doesnt suite psyche of Indians Employees as well as Branch Managers/System Managers thinks that Core banking has been enforced from Top Level Management but it wasnt the demand from the client side. Core banking solution has resulted in extra expenditure, as new charges has levied now such as statement charges etc.

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Future impact of Core banking? Changes in workflow Vouchers in Branches would reduce. There would be fewer reports to check Daybooks would be generated Checker-wise- movement of vouchers in branch would reduce. There would be reduced dependency on branch for data Controllers would have Online/Real-time information on branches. Better Monitoring & Control control returns/ irregularity statements ABC Analysis of customers segmentation possible. MIS for branches generated at Host Weekly, P report. Core banking enables Faster & Accurate MIS. Due to its centralized database structure, Core banking enables Data Mining and Data Warehousing. System Administration at branches would be Minimal. There would be better layout of Branches benefit to staff/customers. As branches would become Delivery channels the outfit would become more manageable. Back office work would be reduced, generating time for marketing. Many changes would be ushered which would impact the customer positively MOD, SMS Alerts, Activation of In-operative accounts by channels etc. Core banking enables a Single view of Customer, across branches. Funds settlement would improve. Compliance with Regulations is slated to improve. Core banking enables better Risk Management. Core banking enables Differential pricing based on accurate customer segmentation Core banking facilitates introduction of New products, reduced time to market Core banking offers scope for Cross-selling.

Managerial Implications & Recommendations

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Change of any kind is always opposed in every organization; Core banking solution is facing the same problem of resistance in change by its user including branch managers, employees and clients. Therefore, core-banking solution is currently going through a kind of teeth ache problem but it should be over soon and its for the betterment of the State bank of Indore as an organization and its respective employees. Exhaustive training should be provided to employees and branch managers in order to increase their confidence level and to acclimatize them with Core banking solution Hindi version of Core banking solution can be more effective, as it would in native language and should suit the psyche of Indian people Lot of scope of improvement in Infrastructure and infrastructure bottlenecks needs to be considered. Core banking solution awareness programmes should be conducted for clients, to make them aware of the benefits that they can receive from core banking solution.

More technical support is required to reduce the technical problems Core banking solution requirement needs to be justified Banks can consider to recruit young blood that has more exposure and comfortable working on newer technologies, for aged employees Banks can seek path of VRS.

Conclusion
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As retail banking industry in India gears up for battle royale, retaining & growing a loyal customer base will be only the competitive advantage by your side. A dissatisfied customer would turn away ten new customers. Thus, not having techno savvy products & services will be precarious & would be very difficult to withhold clients. Core banking solution is unarguably the requirement of any banking industry. It provides banking organization the cutting edge to gain over other banks combined with that, it makes the overall banking operations very systematic. Core banking has some problems, which is due to infrastructure bottlenecks. Overall, Core banking solution has a positive impact. In future, Core banking solution shall lead to a new dimension and should revolutionize the way banking is been done so for.

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CHAPTER -6 Bibliography

6.1

Bibliography

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BIBLIOGRAPHY

Magazines/Journals IT Act 2000 DITL course material (ASCL) Financial Express (India). Economic Times (The Times of India) Information Technology in Services Sector- A Vision for India- S. Biswas Promotion of E-Commerce: National Initiative (MIT, IT&T group) Step-by-Step Guide to Interactive Learning on Core banking.

URLs www.rbi.gov.in www.vsnl.com www.indiainfo.com www.ecnomictimes.com www.cmie.com

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CHAPTER -7 ANNEXURE

7.1 7.2

Questionnaire Raw score sheet

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Questionnaire- Employees
(This questionnaire is part of a research project Need & Effectiveness of Core banking solution with special reference to State Bank of Indore, as part of MBA curriculum. Please, kindly provide the required favor) 1) Do you find Core banking solution user friendly? a) Very Friendly b) Friendly c) Neutral d) Unfriendly e) Very Unfriendly

2) Has helpful core banking has been in order to improve your work efficiency? a) Very Helpful b) Helpful c) Neutral d) Not helpful e) Not at all

3) Has efficient core banking has been in terms of reducing your workload? a) Very Efficient b) Efficient c) Neutral d) Inefficient e) Very Inefficient

4) Are you able to satisfy customers demand more efficiently & effectively now? a) Very Efficient b) Efficient c) Neutral d) Inefficient e) Very Inefficient

5) Do you think that core banking was the necessity or old system was performing its task efficiently? If no, then why?

6) What benefits you foresee from core banking solution?

7) What problems are you facing while working on Core banking solution?

(Thank You)

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Questionnaire- Branch Managers

(This questionnaire is part of a research project Need & Effectiveness of Core banking solution with special reference to State Bank of Indore, as part of MBA curriculum. Please, kindly provide the required favor)

1) Do you find Core banking solution manager friendly? a) Very Friendly b) Friendly c) Neutral d) Unfriendly e) Very Unfriendly

2) How do you rate core-banking solution on efficiency parameter? a) Very Efficient b) Efficient c) Neutral d) Inefficient e) Very Inefficient

3) Has core banking been able to make management of routine banking operations more efficient? a) Very Efficient b) Efficient c) Neutral d) Inefficient e) Very Inefficient

4) How efficient core banking has been for reducing workload on branches? a) Very Efficient b) Efficient c) Neutral d) Inefficient e) Very Inefficient

5) How efficient core banking been to increase the work efficiency of employees? a) Very Efficient b) Efficient c) Neutral d) Inefficient e) Very Inefficient

6) Do you find that Core banking solution efficient in fraud management? a) Very Efficient b) Efficient c) Neutral d) Inefficient e) Very Inefficient

7) Do you think that auditing of each branch now would be comparatively easy? Reasons

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8)

Do you think that core banking will help in enhancing the brand image of your esteemed organization and your organization would now be recognized as techno savvy bank? Yes No

9) As a manager, what benefits you foresee from Core banking solution?

10) As a manager, what problems you are facing with Core banking solution?

(Thank You)

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Questionnaire - Clients
(This questionnaire is part of a research project Need & Effectiveness of Core banking solution with special reference to State Bank of Indore, as part of MBA curriculum. Please, kindly provide the required favor)

1) Are you aware of Core banking solution? Yes No

2) Does the concept of Centralized banking excites you? Yes No

3) Do you foresee any benefits from Core banking solution

4) What problems are you are facing after implementation of Core banking solution?

(Thank You)

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