CORE BANKING

Siddhant NagleAkash ShahBinoy MehtaKaran ShahKushal Todi

Mehervaan Kohli

HDFC BANK BANKING BANKING IN INDIA CORE BANKING HISTORY OF BANKING BRANCH NETWORK RISK OF CORE BANKING BRANCH NETWORK PRODUCTS SERVICE ADVANTAGES OF CORE BANKING CAPITAL STRUCTURE CORE BANKING SOLUTIONS ACHIEVEMENTS CUSTOMER RELATIONSHIP MANAGEMENT SERVICES PROVIDED BY HDFC BANK DIFFERENCE BETWEEN RETAIL BANKING & CORE BANKING SWOT ANALYSIS

HDFC Bank

HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation Limited (HDFC)

It was among the first companies to receive an 'in principle' approval from the Reserve Bank of India to set up a bank in the private sector.

It started operations as a scheduled commercial bank in January 1995 under the RBI's liberalization policies.

Times Bank Limited was merged with HDFC Bank Ltd., in 2000.

In 2008 HDFC Bank acquired Centurion bank of Punjab taking its total branches to more than 1,000.

The amalgamated bank emerged with a base of about Rs. 1,22,000 crore and net advances of about Rs.89,000 crore. The balance sheet size of the combined entity is more than Rs. 1,63,000 crore

BANKING

A bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money.

Banks are important players in financial markets and offer financial services such as investment funds.

In some countries such as GERMANY, banks are the primary owners of industrial corporations .

While in other countries such as the UNITED STATES banks are prohibited from owning non-financial companies.

BANKING IN INDIA

Banking in India originated in the last decades of the 18th century.

The first banks were THE GENERAL BANK OF INDIA, which started in 1786, and BANK OF HINDUSTAN, both of which are now defunct.

The oldest bank in existence in India is the STATE BANK OF INDIA, which originated in the BANK OF CALCUTTA in June 1806.

The first fully Indian owned bank was the ALLAHABAD BANK, established in 1865.

WHAT IS Core Banking??

Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the Corporate Banking division of the institution. Core banking basically is depositing and lending of money.Nowadays, most banks use core banking applications to support their operations where CORE stands for "Centralized Online Real-time Exchange". This basically means that all the bank's branches access applications from centralized datacenters. This means that the deposits made are reflected immediately on the bank's servers and the customer can withdraw the deposited money from any of the bank's branches throughout the world. These applications now also have the capability to address the needs of corporate customers, providing a comprehensive banking solution. A few decades ago it used to take at least a day for a transaction to reflect in the account because each branch had their local servers, and the data from the server in each branch was sent in a batch to the servers in the datacenter only at the end of the day .Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATM’s, Internet banking, and branches.

HISTORY OF BANKING

The first banks were probably the religious temples of the ancient world.

It was probably established sometime during the third millennium B.C. Banks probably predated the invention of money.

There are extant records of loans from the 18th century BC in Babylon that were made by temple priests or monks to merchants.

NETWORK 1725 branches 4724 ATM’s .

More than 780 cities All branches are OLRT connected .

500 locations for telephone banking

Risk involved in Core Banking

Core banking replacement has for quite some time been considered fraught with high risks. The costs are potentially bordering on the prohibitive and many still believe that their present in-house systems are satisfactorily serving the purpose. But the wind is changing direction and fast. There is a rising acknowledgement of the fact that banks, irrespective of size and geography, face the dual challenge of cutting costs and increasing their internal efficiencies. This is done with the ultimate aim of improving margins which are clearly under strain. Though it is easy to select a vendor for implementing a solution, the challenging part is carrying the project through to a successful implementation. Current requirement is for an experienced vendor with impeccable implementation credentials who has in the past managed all such challenges well. Banks thus need to take a holistic view while considering the replacement of their core banking platform.

It is important that banks take a holistic view while considering the replacement of their core banking platform. While the benefits of implementing packaged solutions built on modern technology are all too obvious, one cannot deny that such an exercise is fraught with risks. The risks can be mitigated and managed - a good starting point would be for the bank to recognise the different risks and consider strategies to mitigate them.

Risks need to be mitigated and managed and following this line of thought, this paper delves into the risks that banks should take cognizance of before embarking on what is clearly going to be the single biggest technology initiative within the bank.

Product & services

Travelers Cheques

credit card

home loan

personal loan

Foreign Currency Cash

Foreign Currency Demand Drafts

Cheque Deposits

Remittances

Trade Services

Mutual funds & Insurance

SERVICES

TrHDFC Bank have people with high level of expertise and experience in trade services to provide services to suit specific requirements and structure solutions for business needs.

HDFC Bank have 500 branches for trade services.

Mutual funds : Mutual funds are funds that pool the money of several investors to invest in equity or debt markets.

Insurance :HDFC Bank offers a world of choice in insurance. Like children future plans, retirements plans, standard life, etc.

ADVATAGES OF CORE BANKING

Limited Professional Manpower to be utilized more effectively Customer can have anywhere, more convenient and easier banking ATM, Internet Banking, Mobile Banking, Payment Gateways, Referral Business More Strong and economical way for MIS Reduction in Branch Manpower by 15-20% Additional Manpower available for Marketing, Recovery and Personalized banking Instant Information availability for decision support Quick and Accurate Implementation of Policies Improved Recovery Process causing reduction on recovery costs, NPA Provisions Innovative, redefined or improved processes (e.g. Inter Branch Reconciliation)

causing reduction in Manpower at Head Office Reduction in Software maintenance at Branch and Head Office

Centralized Printing and Backup resulting in reduction in capital and revenue expenditure on printing and backup devices and media at branches

Electronic Transactions with Other Financial Institutions Increased Speed in working resulting in more business opportunities and reduction in

penalties, legal expenses etc

CAPITAL STRUCTURE

Authorized share capital of the Bank is Rs. 550 crore.

Paid up capital of the bank is Rs. 459.6 crore.

The HDFC Group holds 23.63% of bank s equity.

Around 27 % of equity is with Foreign Institutional Investors (FII’s).

Roughly 17% of equity is held by ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue)

Core Banking Solutions

Core banking solutions are banking applications on a platform enabling a phased, strategic approach that is intended to allow banks to improve operations, reduce costs, and be prepared for growth. Implementing a modular, component-based enterprise solution facilitates integration with a bank's existing technologies. An overall service-oriented-architecture (SOA) helps banks reduce the risk that can result from manual data entry and out-of-date information, increases management information and review, and avoids the potential disruption to business caused by replacing entire systems.

Core Banking Solutions is new jargon frequently used in banking circles. The advancement in technology, especially internet and information technology has led to new ways of doing business in banking. These technologies have cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions. Here, computer software is developed to perform core operations of banking like recording of transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawal. This software is installed at different branches of bank and then interconnected by means of communication lines like telephones, satellite, internet etc. It allows the user (customers) to operate accounts from any branch if it has installed core banking solutions. This new platform has changed the way banks are working.

Gartner defines a core banking system as a back-end system that processes daily banking transactions, and posts updates to accounts and other financial records. Core banking systems typically include deposit, loan and credit-processing capabilities, with interfaces to general ledger systems and reporting tools. Strategic spending on these systems is based on a combination of service-oriented architecture and supporting technologies that create extensible, agile architectures

Achievements

HDFC Bank merged with TIMES BANK in2000.

HDFC Bank wins the Asian Banker Best Retail Bank in

India Award2008 for outstanding performance.

HDFC Bank chosen as one of Asia Pacific s best 50 companies by Forbes magazine.

Best Bank in the Private Sector2008.'

HDFC Bank ties up with Qatar National Bank.

HDFC Bank merged with CENTURION BANK OF PUNJAB in2007.

CRM at HDFC

In HDFC, the CRM is integrated with core banking solutions and offers end to end functionality to effectively address the needs of the complete cycle of marketing, sales and service of banking products.

Key Modules:

-Enterprise customer information file

-Sales

-Loan origination

-Service

-Call centre

-Marketing

CORE BANKING SERVICES PROVIDED BY HDFC BANK..

HDFC BANK are inter-connected with each other. Therefore, Customers of these branches can avail various core banking facilities from any branch located any where in the country. These services* are:

To make enquires about the balance; debit or credit entries in the account.

To obtain cash payment out of his account by tendering a cheque.

To deposit a cheque for credit into his account.

To deposit cash into account.

To deposit cheques / cash into account of some other person who has account in a CBS branch.

To get statement of account.

To transfer funds from his account to some other account – his own or of third party, provided both accounts are in CBS branches.

To obtain Demand Drafts or Banker’s Cheques from any branch– amount shall be online debited to his account.

Customers can continue to use ATMs and other Delivery Channels, which are also interfaced with CB platform. Similarly, facilities like Bill Payment, I-Bob, M-Bob etc. shall also continue to be available.

The IBM solution.

As opposed to HDFC’s previous service providers, IBM offered the bank a new value proposition in the form of POWER5, an eServer. The bank runs its Corporate Core Banking Platform and Cash Management Platform on this server. Its corporate banking business runs on Flexcube and the retail banking business on Finware. Both Flexcube and Finware are core banking solutions from i-Flex Solutions Ltd.

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Details

CORE BANKING SOFTWARE AT HDFC BANK

 Application Flexcube Finware (core banking)

 O.S AIX

 Platform pSeries p5 570

 

Difference between core banking and retail banking?

Often retail banking is referred to as "non commercial banking" this would be your common checking accounts and consumer loans. Where as "core banking" is often the very solid business accounts and commercial loans. It is referred to, as 'core' because it is a core or central to the banks business. Few banks survive from just retail banking services, they need those core business accounts that are perhaps more stable than retail business. The exact term usage may also be based on the part of the country you live in as is often the case with our language. A core banking is a centralized system and every data has been kept at the server side. So, 1- a costumer can open an account and use it in every branch, 2-whenever the connection between a branch and the core is dismissed, that branch is out of work till the connection be repaired. In a retail banking, every branch has its own portion of accounts and the changes will be synchronized with the center at a certain time (e.g. at the end of that day). So, 1-a costumer can work on his/her account just as the origin branch that he/she registered, 2-in case of disconnecting, that branch still can provide services to its own accounts.

SWOT analysis

Strengths

Support of various promoters

Knowledge of Indian Market

Right strategy for right product

High degree of customer satisfaction

Dedicated work force aiming at making long-term career in field Weaknesses

customer service staff needs training

sectoral growth is constrained by low employment levels and competition for staff Some gaps in range for certain sectors

Opportunities

Growing Indian banking sector.

People are becoming more service oriented

In the global market.

profit margins will be good

Threats

From various competitors

-Foreign banks

-govt. banks

Future market trends.

Lack of infrastructure in rural areas could constrain investment

DONE BY….AKASH SHAH BINOY MEHTASIDDHANT NAGLEKHUSHAL TODIKARAN SHAHMEHERVAAN KOHLI