History of Core Banking System in India

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History of Core Banking System in India :

History of Core Banking System in India

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The major objectives of bank automation are better customer service, flawless book keeping and prompt decision-making that leads to improved productivity and profitability. The concept of bank automation started in the year 1981, but it was during the period 1984-1987 banks in India started the branch level automation, making use of the then available  MSDOS  based stand alone computers. This initiative was taken by the banks on the basis of “ First Rangarajan Committee report ” on bank computerisation submitted in the year 1984. ALPMs ( Advanced Ledger Posting Machines ) were the fashion in those days. However , the pace of bank automation was very slow in the banks primarily owing to the lack of trade union consensus on bank automation.

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Another committee was constituted in 1988 under the chairmanship of Dr. C Rangarajan , the then Deputy Governor of RBI to slate down a perspective plan on automation of banks for a five year period . This paved way to the implementation of multi-user  Total Branch Automation  packages running on a LAN (Local Area Network), either on a Netware or a UNIX operating system . With the implementation of TBA, banks started to offer the facilities of exclusive Customer Terminal, Single window transaction, on-line and off-site ATMs, Tele-Banking etc.

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But with the advent of new generation private sector banks in India during 1994-1996, the real era of bank marketing started and these banks started to offer any where and any time banking facilities to its customers. This was possible for them mainly owing to the fact that they opted for the implementation of a WAN (Wide Area Network) based centralised banking solution rather than a LAN based branch banking solution to network their limited number of branch outlets.

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The old generation banks in India hesitated to follow this banking fashion on account of its large network of branches on one hand and the then prevailing exorbitant IT cost on the other hand . But with the globalisation and liberalisation of Indian market and with the enactment of  TRAI  (with a mission to create and nurture conditions for growth of telecommunications in the country in a manner and at a pace which will enable India to play a leading role in emerging global information society) during the late nineties, there happened a drastic reduction in IT cost.

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Improved telecommunication facilities and reduction in hardware as well as networking cost changed the mind set of the banks in India to try the CBS option. This also equipped them with the required technology leverage to compete in the Indian market by offering the similar technology products and services, as those offered by their new generation competitors.

Changing the face of Indian banking :

Changing the face of Indian banking It is a revolution that that has changed the face of banking in India. The core banking solution (CBS) enabled the concept of ‘anytime, anywhere’ banking. The concept is all set to evolve from just being the IT infrastructure automating banking operations to the only way of doing banking in the future

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the large Indian banks undergoing a core banking transformation, branches were the only viable banking channel for both businesses and consumers. “ Worse yet, these resource-constrained channels were localized with respect to the information that they possessed . For example, if a consumer opened an account at a branch near their home, that person would not be recognized at other bank branches. This decentralized model restricted the value of banking. Since most large banks and many other banks have transformed their back office, anywhere and anytime banking is driving higher levels of access and value to the end customers,” stated Don Free, Research Director, Banking/Investments, Gartner.

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No other sector has benefited from IT as much as the financial sector, in particular banking. The process of bank automation started in the 1990s, and since then there has been constant evolution. The implementation of CBS has been marked by key milestones at every step. Indian banks have of course had the last mover advantage while their counterparts in Western countries have been struggling with the challenges of replacing legacy systems.

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Free added “The key milestone for Indian banking was the ability to leapfrog technologies—bypassing the client- server technology era and entering the true multi-channel, Web-based and mobile banking age.”

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