What exactly is Core Banking?

From the last 3-4 years, we are reading news like ‘XYZ bank deploys Core Banking Solutions ’,’ Bank ABC is implementing Core Banking System ’ etc.  But what exactly core banking is?

Core Banking Solution (CBS) is the networking of bank branches, which allows customers to manage their accounts, and use various banking facilities from any part of the world.

In simple terms, there is no need to visit your own branch to do banking transactions. You can do it from any location, any time. You can enjoy banking services from any branch of the bank which is on the CBS network regardless of the branch you have opened your account.

For the bank which implements CBS, the customer becomes the bank’s customer instead of the customer of a particular branch.

Execution of Core banking system across all branches helps to speed up most of the common transactions of bank and customer. In Core banking, all branches access banking applications from a centralized server which is hosted in a secured datacenter.

Banking software/application performs basic operations like maintaining transactions, the balance of withdrawal & payment, interest calculations on deposits & loans, etc. This banking application is deployed on a centralized server & can be accessed using the internet from any location.

Why we need Core Banking Technology ?

Nowadays, the use of Information Technology (IT) is a must for the survival & growth of any organization and the same applies to the banking industry also. By using IT in any industry, banks can minimize the operation cost; also banks can offer products & services to customers at competitive rates.

CBS is required

  • To meet the dynamically changing market & customer needs.
  • To improve & simplify banking processes so that bank staff can focus on sales & marketing stuff.
  • Convenience to customers as well as banks.
  • To  Speed up the banking transactions.
  • To expand presence in rural & remote areas.

Basic elements of CBS that helps customers are

  • Internet Banking
  • Mobile Banking
  • ATM
  • POS & kiosk systems
  • Fund Transfers – NEFT, RTGS

Benefits of Core banking

Core banking solutions are beneficial to both banks as well as customers.

A] Benefits For Customers

  • Quicker services at the bank counters for routine transactions like cash deposits, withdrawal, passbooks, statements of accounts, demand drafts, etc.
  • Anywhere banking by eliminating branch banking.
  • Provision of banking services 24 X 7.
  • Fast payment processing through Internet banking, mobile banking.
  • Anytime anywhere banking through ATMs.
  • All branches access applications from central servers/datacenter, so deposits made in any branch reflect immediately and the customer can withdraw money from any other branch throughout the world.
  • CBS is very helpful to people living in rural areas. The farmers can receive e-payments towards subsidy etc. in their account directly. Transfer of funds from the cities to the villages and vice versa will be done easily.

B] Benefits For Banks

  • Process standardization within bank & branches.
  • Retention of customers through better customer service.
  • Accuracy in transactions & minimization of errors.
  • Improved management of documentation & records – having centralized databases results in quick gathering of data & MIS reports.
  • Ease in the submission of various reports to the Government & Regulatory boards like RBI.
  • Convenience in opening accounts, processing cash, servicing loans, calculating interest, implementing changes in policies like changing interest rates, etc.

In India, most of the private sector banks have implemented the Core banking solutions but most of the cooperative banks, Regional Rural Banks are missing the benefits of CBS.

With the help of core banking & the latest technology, private sector banks are giving tough competition to urban co-operative banks(UCBs) & other government-managed banks.

To cope up with the growing needs of customers; co-operative banks need to implement core banking solutions. To face the challenges of a dynamic market, UCBs need to take the help of IT in their operations. Considering the importance of the matter, the Reserve Bank of India (RBI)   mandated a deadline for Urban Co-operative Banks (UCBs) and advised to implement the core banking solutions (CBS) by December 31, 2013.
In India, many IT organizations like ESDS Software are helping in the implementation of cost-effective core banking solutions & Turn-Key Datacenter solutions.


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