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ROLE OF IT

IN

FINANCE & BANKING

SECTOR

PRESENTED BY: NISHANT


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Financial sectorrefer to services provided by the finance

industry. The finance industry encompasses a broad range

of organizations that deal with the management of money.

Among these organizations are

WHAT IS FINANCE SECTOR ?


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Banks

Credit card companies

Insurance companies

Consumer finance companies

Stock brokerages

Investment funds

Some government sponsored enterprises.

Organisations & Services of finance sector


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In general terms, the

business activity of

accepting and safeguarding

money owned by other

individuals and entities,

and then lending out this

money in order to earn

profit

What is banking ?


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The banking regulationact,1949,Section(b)

defines banking as

accepting for the

purpose of lending andinvesting of deposits of

money from public ,

repayable, on demand

or otherwise

withdrawable by

cheque , draft

order or otherwise.


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Functions Of Banks

The functions of a commercial banks are

divided into two categories:

i) Primary functions

ii) Secondary functions including agencyfunctions.


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i) Primary functions:

The primary functions of a commercial bank include:

a) accepting deposits; and

b) granting loans and advances;

ii) Secondary functions

a) Issuing letters of credit, travellers cheques, circular

notes etc.

b) Undertaking safe custody of valuables, important

documents,securities by providing safe deposit vaults or

lockers;


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c) Providing customers with facilities of foreign exchange.

d) Transferring money from one place to another; and from one

branch to another branch of the bank

.

e) Standing guarantee on behalf of its customers, for making

payments for purchase of goods, machinery, vehicles etc.

f) Collecting and supplying business information;

g) Issuing demand drafts and pay orders; and,

h) Providing reports on the credit worthiness of customers.

Continued


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Public SectorBanks

State Bank of India and its associate banks called the State BankGroup

20 nationalized banks

Regional rural banks mainly sponsored by public sector banks

PrivateSector Banks

Old generation private banks

New generation private banks

Foreign banks operating in India

Scheduled co-operative banks Non-scheduled banks

Co-operativeSector

State co-operative Banks

Central co-operative banks

Primary Agriculture Credit Societies


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BANKING BEFORE COMPUTERISATION

Large no of queues in banks

Large no of files to record the data manually

Waste of time


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Banking after computerisation

12

ATMs

Head Office

BranchBanking

Branch 1

Branch 2Branch 3

Branch 4

Branch 5

Branch 6

Branch n


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Electronic Banking

SBIs Mobile ATM in Kerala


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Stock market

A stock marketor equitymarketis a public market

(a loose network of

economic transactions,

not a physical facility or

discrete entity) for the

trading of company stock

shares andderivatives atan agreed price;


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The role of stock exchanges

Raising capital for businessesMobilizing savings for investment

Facilitating company growthProfit sharing


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There has been a migration from

a Screen based trading system

for Government Securities to an

Order Matching System so as to

result in better price discovery

and more transparency in the

market related transactions in

Government securities

Negotiated Dealing System

(NDS).

Clearing Corporation of India

Ltd., (CCIL) as a fully IT enabled

entity

IMPACT OF TECHNOLOGY IN STOCK MARKET


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More accessible in the global market. Being more

accessible Opportunity to pick up a bigger market share

Give them a greater market value

Ability to compete with the larger corporations

Information technology enhances investor growth.

The Internet has created global availability ofinformation.

BENEFITS OF IT IN STOCK MARKET


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Use of the Multi-Lateral Net

Settlement Batch

Use of credittransfer based RTGS

transactions by

brokers,

CONTINUED..


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ONLINE BANKING


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HISTORY In 1980s the modern home online banking services

were the distance banking services over electronic

media.

The term online became popular in the late 80s .

In 1981s Online services started in New York

In 1983s The UK's first home online banking

services was set up by Bank of Scotland for

customers of the Nottingham Building Society

(NBS).


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ONLINEBANKING

Definition :- Online banking (or Internet banking)

allows customers to conduct financial transactions

on a secure website operated by their retail or

virtual bank, credit union or building society.

Features :- The common features fall broadly into

several categories.

Transactional (e.g., performing a financial

transaction such as an account to account transfer,

paying a bill ect)


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ONLINEBANKING(CONT..)

Non-transactional (e.g.,

online statements, check

links, cobrowsing, chat) .

Bank statements.

Financial InstitutionAdministration.

Support of multiple users

having varying levels of

authority. Transaction approval

process.

Wire transfer.


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ATTACKS/THREATSTOONLINEBANKING

Based on deceiving the

user to steal login data

and valid TANs.

In this correct

transactions are shownon the screen and faked

transactions are signed in

the background.

The most recent kind of

attack is the so-called

Man in the Browser

attack.


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MOBILEBANKING:AMAJORCOMPETITIONTO

ONLINEBANKING


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CREDITCARD

History :-in 1887 the concept of using a card for

purchases was described.

in 1950 the concept of customers paying different

merchants using the same card was implemented.

In 1938 several companies started to accept each

other's cards.

in 1921 . Western Union had begun issuing charge

cards to its frequent customers.


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CREDITCARD

A credit cardis a

small plastic card

issued to users as a

system of payment.

For merchants, a credit

card transaction is

often more secure than

other forms of

payment.


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ATM CARDS

An ATM card (also known as

a bank card, client card, key

card or cash card) is a card

issued by a bank.

Some ATM cards can also

be used:-

at a branch, as identification

for in-person transactions.

at merchants, for EFTPOS(point of sale) purchases.


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GLOBAL RANKINGS

RANK1 RANK2


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MANAGEMENT ASPECTS

WHY PEOPLE REVOLTED AGAINST

COMPUTERIZATION

WHAT ARE THE ADVANTAGES OF

COMPUTERIZATION

HOW COMPUTER CUTS COSTS

RELEVANT DATA AND STATISTICS


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TECHNOLOGYDIFFERENTIATIONFAILS

GRADUALLY


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MIGRATION OF BANK CUSTOMERS

CHANNEL YEAR

1990

BRANCH 100

ATM 0

INTERNET 0

YEAR

2000

94

4

2

YEAR

2010

28

51

21


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COST CUTTING


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INDIAN IT SECTOR COMPARED WITH

OTHER ECONOMIES OF THE WORLD


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A CASE STUDYPNBs IT-ENABLED JOURNEY


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PNB had adopted two-pronged s trategy to IT-enable itself

Scenario As on March 2000

IT systems were deployed only at 500-odd branches 35 percent of the bank's business was computerized

small software packages ran on standalone PCs.

The bank used seven different software, which ran on 13 different flavors of

Unix, on standalone PCs.

The overall expertise in IT among users was low.

HOW IT WAS DONE..?

CVC issued directive to the bank to computerize at least 70 percent

of its business by December 2000.

PNB needed strategy to tackle the daunting task in the short period

of time.

Scenario In 2003

101 branches on WAN

deployed a core banking infrastructure

runs 175 networked ATMs

deployed a reliable security infrastructure
http://f/MBA%20work/IT/WAN.docxhttp://f/MBA%20work/IT/CORE%20BANKING.docxhttp://f/MBA%20work/IT/CORE%20BANKING.docxhttp://f/MBA%20work/IT/WAN.docx


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SWOT analysis was performed.

produced the following results:

Strengths:The bank personnel would be able to readily embrace the use of IT.

An existing pool of qualified knowledge-based personnel.

Strong financial position of the bank- no constraint of funds tofacilitate IT initiatives.

The bank wasn't bound to too much legacy systems and equipment.

ANALYSIS


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Different Unix OS flavors in different branches.

Different standalone financial applications on PCs at different

branches.

Lack of interoperability due to disparity in systems.

Limited expertise on the software packages currently deployed-

increased dependence on vendors.

Systems audits were pending.

Most branches did not have a proper LAN in place.There was almost no WAN connectivity.

The bank realized that there was a lot of opportunity to create a

stable IT infrastructure which would fuel future growth.

But there was also the need to honor the CVC deadline tocomputerize at least 70 percent of its business within December

2000.

RESULT: The bank now has around 4,000 branches.

WEAKNESSES IDENTIFIED


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PNBs two-pronged plan of action comprised:

1. A short term goal - To meet the CVC deadline.

2. A long term goal - To create a dependable core banking

infrastructure.

Bank deployed simple IT infrastructure to computerize 70 percent ofits business.

Application made to run on standalone PCs across its nationwide

branches.

PNB chose a product from company -Nelito. It was a DOS-based,'Partial Branch Automation' application.

The interface was simple in design, and thus easy for the bank

personnel to use.

Act ion


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HARDWARE AND TRAININGNelito's package was deployed at 1 branch at a time , replicated after each

successful implementation.

Internal training sessions for the bank personnel were conducted.

The IT team was specially trained to re-architect the source code, and

make any modifications, improvements , value additions, and

enhancements.

By March 2001, 70.60 percent of the bank's business was computerized.


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CORE BANKING ARCHITECTURE It took help of Infosys.

Infosys trained 200-odd personnel from a core team over six months. The core team modified and customized the package according to its specific needs.

Hardware modified according to new software-PNB purchased servers, securityinfrastructure, and storage equipment and decided to house it in its own central datacenter in New Delhi.

April 2002 - Finnacle in 7 branches as a pilot venture.

This was done because the bank had seven different application packages, and itwanted to ensure smooth migration of the data into Finnacle.

By mid May 2002, all data from other software was successfully migrated intoFinnacle.


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CULTURAL AND TECHNOLOGICAL

ISSUES Mostly cultural-most staffers were used to working in a manual

environment, and some had worked in standalone environments. In the new networked environment, personnel at the node/counter didn't

actually 'see' the transactions updating in the various account books.

Gave rise to a number of queries and suggestions from personnel

Around six months later, the personnel felt that the environment

'change' had done them good, and was used to working on the systems.

Few integration issues when migrating to Finnacle-in-houseIT team was able to resolve them all.


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PNBSINTERNETBANKING

PNB got license from RBI to offer Internet banking services.

Bank recruited technically trained staff to provide the necessaryknowledge pool.

With the Internet banking launch, the bank strengthened itssecurity policy.


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WAN AND CONNECTIVITY

101 branches of the bank are on a WAN.

Plans to put 500-odd branches on the WAN this year

In three years the WAN will have 2000-odd branches.

PNB Tried a number of connectivity options.

The bank then explored the option of leased lines and

used connectivity from MTNL and BSNL. now uses

Reliance Infocom's fiber optic.


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Human error reduced to zero.ATMs will have the facility to receive cash.

Black money transaction stoppage(KYC norms)

Unbilled transactions are easily identified.

E-purse technology

OTHER ADVANCEMENTS


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With e-purses the transaction can involve a transfer of

value from payer to payee without information on that

transfer immediately going to the financial institutioninvolved.


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IT can bring an end to the use of national currency only

when government prescribes that all transactions must

go through an electronic device.

Safa T1000 MP3 player with e-wallet


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REFERENCES

Economictimes.com

Pnbindia.com

NETWORK MAGAZINE


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