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- 1. EMPOWERING COOPERATIVE BANKS THROUGH EFFECTIVE APPLICATION OF IT Tapojyotee Bandyopadhyay IIM Rohtak 2010-12
- 2. Exploring the CBS for level CBS in Light of current Implemen- Sector Study Cooperative Sector Study Cooperative of IT maturity Envisioning tation Banks in cooperative Banks banks 2
- 3. CBS for Co Sector -operative Study Banks Structure of CCS in India Implemen Questions tation ? Cooperative Credit Institutions Rural Cooperative Credit UCBs Institutions Short Term Long Term 31 StCBs StCBs SCARDBs 373 DCCBs DCCBs PCARDBs 1 for every 6 villages PACs 3
- 4. CBS for Co Sector -operative Study Banks Overview of the setup Implemen Questions tation ? Function Sources of Funds Supervision Management 4
- 5. Exploring the CBS for level CBS in Light of current Implementatio Sector Study Cooperative Sector Study Cooperative of IT maturity Envisioning n Banks in cooperative Banks banks 5
- 6. CBS for Co Sector -operative Study Banks Current State of Affairs Implemen Questions tation ? ATM POS Teller/kiosk Net/M - Banking Bank Channel Interfaces Support Services Front Office A/C setup Transaction Process Mgmt and CRM and Credit Initiation Management Control Assessment Back Office Risk and Bank Compliance Core Fee Based Partner Common Products Products Products Services 6
- 7. CBS for Co Sector -operative Study Banks CBS, Wrap Around and Delivery Channels Implemen Questions tation ? GL/ Trial Balance / PL account etc Remittances Loan KYC, AML and Services Origination Teller System HR Credit Card Securities management Clearing Application house module and Call Operations Centre POS device Processing Housekeepin /IVR system g tools Savings/ Customer Information CBS– around Wrap Delivery Current Account applications Customer Interaction Channels Automated Securities Banking Module/Data Teller Processing Kiosks Regulatory Tools Mining Machine reporting/ ALM Wrap Delivery CBS Audit trails Channels DocumentAroundTruncation Cheque Tax modules (TDS , Direct Internet Borrowing Management Mobile and Indirect Banking Loans and System Banking system taxes) Advances 7
- 8. CBS for Co Sector -operative Study Banks CBS – other requirements Implemen tation Questions ? Setting up of Data Centre and Disaster Recovery Centre Setting Up of network connectivity to respective branches and control office Provision for network security Deployment of servers and storage racks Data Migration – facilitate Customization of CBS Training and Hand holding 8
- 9. Exploring the CBS in CBS of Light customized levelImplementatio current Sector Study Sector Study for Cooperative Cooperative of IT maturity Envisioning Banks Banks cooperative in n banks 9
- 10. CBS for Co Sector -operative Study Banks Implementation Implemen tation Questions ? Requirement Implementation Installation Support Planning • Project Plan • Establish & maintain DC & • Post • SRS framing , GAP DRC implementation analysis • Connectivity & Bandwidth support • Acceptance of the • Implement & Operationalize • Training Core team same CBS • System Testing & UAT • Data Capture and Data migration • CBS Roll Out 10
- 11. CBS for Co Sector -operative Study Banks Implementation - UCBs Implemen tation Questions ? DC Cloud DRC Firewall Bank N/W 1 Bank N/W 2 Bank N/W 3 11
- 12. CBS for Co Sector -operative Study Banks Potential Problem Areas Implemen tation Questions ? Connectivity issues in remote areas and intra – branch networks. Scarcity of Technical Manpower Re – aligning the businesses processes to suit the CBS. Integration with legacy systems Data Migration Roll Out 12
- 13. CBS for Co Sector -operative Study Banks Likely issues - UCBs Implemen tation Questions ? Connectivity and ability to withstand network outage Skepticism regarding Data Security Scalability Cost vs. flexibility Long Term commitment. 13
- 14. CBS for Co Sector -operative Study Banks Implemen Questions tation ? Thank You! 14
- 15. CBS for Co - Sector operative Study Banks Questions? Implementati Questions? on 15
Editor's Notes
- 1. Let us start by getting an overview of the unique breed of financial institutions called cooperative banks.
- They form a part of a class of institutions called the Cooperative credit institutions.They are present as UCBs in the Urban sector and as part of the Short Term Lending structure in the Rural sector.The later is further divided into three hierarchical layers – the State Cooperative Banks, also called apex banks at the state level, followed by a host of DCCBsat the District level and Primary Agricultural Cooperative Society at the village level.[click 1] The numbers in the callout boxes indicate pan India figures.There is also a long term structure , much in the same lines as the Short term structure, but since they are not allowed to engage in regular banking operations , [click 2] we will leave them out of further discussion
- [click 1] These institutions came up just after independence to free the poor farmers/ producers from the clutches of the landlords and money lenders. Over the years they have proved to be effective channels for bringing financial services and products to the poor and supposedly unbankable.[click 2] For funds they are primarily dependent on deposits from members However,StCBs can borrow from commercial banks and other financial institutions .DCCBs primarily borrow from StCBswhich they may lend to a borrower or a member PACS.[click 3] . Like any cooperative management is the responsibility of the members. This lack of professionalism in management has deprived these institutions of much needed direction and leadership.[click 4] Also, Regulatory responsibiltyis vested in parts upon RBI and RCS .This led to duality of control and rendered the whole supervisory process ineffective..
- In the light of these developments , various committees constituted by GoI gave recommendations to revive these institutions. Despite other differences, they agreed on one aspect – to expand the role of IT in these institutions.In the following slides I will try to analyze the exact problems and tailor a solution to their needs.
- Here is the architecture of a bank.[click 1] For cooperative banks , most of these channels are absent. In fact many of them donot have multi – branch banking facility.[click 2] Most front office functions take too long and are inefficient, while CRM and support services are often absent.[click 3] Though Back office functions are present they are often grossly mismanaged, with frequent loss of information and time.Not to mention almost all of it is done manually.
- This calls for a solution design, not just limited to Core banking, but which also takes care of front office and delivery channel requirements.[click 1] At the core, we have a CBS taking care of the bank’s various core , fee based and partner products, while simultaneously taking care of Risk ,compliance and other regulatory requirements.[click 2][click3]Wrapped around the core, are the front office functions like CRM , DMS and Application processing services.[click 2][click3]These are then integrated with the delivery channel through an interface bringing services like ATM and net banking facilities to the customer and ,teller and call centre terminals to the bank’s various branches, ensuring seamless connectivity
- H/W support will includesetting up of DC /DRC including essential h/w like servers and routers.In addition to setting up of n/w connectivity to respective branches and control offices.with robust network security provisions.However, after implementation facilitating data migration, and Training and hand – holding will be the major supplementary requirements.
- 1. This brings us to the process of implementation.
- The implementation process itself is divided into three stages – a criteria that can also be used to segment the market for CBS in these banks .The first stage- requirement planning - generally involves project planning and approvals.Once this is done - we come to the installation stage where the CBS and allied systems are operationalized, verified and finally deployed with live data. The final stage involves support services like troubleshooting and providing training and handholding. Individual stagesmay or maynot be contracted out to the same vendor.
- UCBs pose an unique problemThey perform more or less the same function yet owing to their small size have limited capacity to mobilize necessary resources.However, these banks have very limited requirements So, pooling a few them together to jointly share one installation might solve the problem. We can achieve this by borrowing from the concept of cloud computing.All the data centers along with applications are hosted at a central location.. The banks can access these data by remotely calling these applications through a secured network. Responsibility of maintainancerests with the vendor.Astonishingly banks can avail this for a one time fee of Rs 50,000 and monthly rental of around Rs 20,000
- As with most such implementations there are some issues that one is likely to encounter.N/W Conncetivity, and availability of technical manpower, can prove to be a major impediments, as most of these banks are located in remote areas.Besides, most processes in these banks require extensive re – engineering. This may not be well received in many quarters of the organization.For banks operating on some stand alone , non – standardized legacy systems , integration may also be an issue.But – as documentation and storage of data in most of these banks are often not standardized - data migration is likely to pose the single biggest challenge before Roll out.
- In addition to the above, the issues can be a little more typical for UCBs. Since, the system for UCBs follow distributed computing architecture, we need to ensure that the system is robust enough to withstand significant n/w downtime.And because applications are centrally hosted, scalability for individuals banksmay be an issue.The system is designed to eliminate the need for individuals banks to devote resources for ITSo, maintenance and data management are the prerogative of the vendor ,which calls for long term commitment from their partAnd as if these were not enough ,since the DC/DRC are shared by multiple banks , many of them may not be willing to enter such an arrangement on grounds of Data Security.