ROLE OF IT

IN
FINANCE & BANKING
SECTOR
PRESENTED BY: NISHANT

Financial sector refer 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 ?

Banks

Credit card companies

Insurance companies

Consumer finance companies

Stock brokerages

Investment funds

Some government sponsored enterprises.


Organisations & Services of finance sector
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 ?
The banking regulation
act,1949,Section(b)
defines banking as
accepting for the
purpose of lending and
investing of deposits of
money from public ,
repayable, on demand
or otherwise
withdrawable by
cheque , draft
order or otherwise.
Functions Of Banks

The functions of a commercial banks are
divided into two categories:

i) Primary functions

ii) Secondary functions including agency
functions.
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;
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
Public Sector
Banks
State Bank of India and its associate banks called the State Bank
Group
20 nationalized banks
Regional rural banks mainly sponsored by public sector banks
Private
Sector Banks
Old generation private banks
New generation private banks
Foreign banks operating in India
Scheduled co-operative banks
Non-scheduled banks
Co-operative
Sector
State co-operative Banks
Central co-operative banks
Primary Agriculture Credit Societies
BANKING BEFORE COMPUTERISATION
Large no of queues in banks

Large no of files to record the data manually

Waste of time
Banking after computerisation
12
ATMs
Head Office
Branch
Banking
Branch 1
Branch 2
Branch 3
Branch 4
Branch 5
Branch 6
Branch n
Electronic Banking
SBIs Mobile ATM in Kerala
Stock market
A stock market or equity
market is a public market
(a loose network of
economic transactions,
not a physical facility or
discrete entity) for the
trading of company stock
shares andderivatives at
an agreed price;
The role of stock exchanges
Raising capital for businesses
Mobilizing savings for investment
Facilitating company growth
Profit sharing
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
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 of
information.
BENEFITS OF IT IN STOCK MARKET

Use of the Multi-
Lateral Net
Settlement Batch

Use of credit
transfer based RTGS
transactions by
brokers,
CONTINUED..
ONLINE BANKING

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).


ONLINE BANKING
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)



ONLINE BANKING(CONT..)
Non-transactional (e.g.,
online statements, check
links, cobrowsing, chat) .
Bank statements.
Financial Institution
Administration.
Support of multiple users
having varying levels of
authority.
Transaction approval
process.
Wire transfer.



ATTACKS/THREATS TO ONLINE BANKING
Based on deceiving the
user to steal login data
and valid TANs.
In this correct
transactions are shown
on 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.

MOBILE BANKING: A MAJOR COMPETITION TO
ONLINE BANKING
CREDIT CARD
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.
CREDIT CARD
A credit card is 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.

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.
GLOBAL RANKINGS
RANK1 RANK2
MANAGEMENT ASPECTS
WHY PEOPLE REVOLTED AGAINST
COMPUTERIZATION
WHAT ARE THE ADVANTAGES OF
COMPUTERIZATION
HOW COMPUTER CUTS COSTS
RELEVANT DATA AND STATISTICS
TECHNOLOGY DIFFERENTIATION FAILS
GRADUALLY

MIGRATION OF BANK CUSTOMERS
CHANNEL YEAR
1990
BRANCH 100
ATM 0
INTERNET 0
YEAR
2000
94
4
2
YEAR
2010
28
51
21
COST CUTTING

INDIAN IT SECTOR COMPARED WITH
OTHER ECONOMIES OF THE WORLD

A CASE STUDY
PNBs IT-ENABLED JOURNEY
PNB had adopted two-pronged strategy 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



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 to
facilitate IT initiatives.
The bank wasn't bound to too much legacy systems and equipment.
ANALYSIS

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 to
computerize at least 70 percent of its business within December
2000.

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

WEAKNESSES IDENTIFIED

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 of
its 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.
Action
HARDWARE AND TRAINING
Nelito'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.
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, security
infrastructure, and storage equipment and decided to house it in its own central data
center 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 it
wanted to ensure smooth migration of the data into Finnacle.
By mid May 2002, all data from other software was successfully migrated into
Finnacle.

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-house
IT team was able to resolve them all.
PNBS INTERNET BANKING

PNB got license from RBI to offer Internet banking services.
Bank recruited technically trained staff to provide the necessary
knowledge pool.
With the Internet banking launch, the bank strengthened its
security policy.
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.
FUTURE OF IT IN BANKING SECTOR
Management integrated systems (MIS)
Better control-so better policies.
e.g.
a) large account of engineering industries.
b) ICICI-large accounts of salaried people.
c) Large no. of villagers dominate the accounts.

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
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 institution
involved.

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
ADVANTAGES
High level of security
Fake currency issue will no longer exist.
No need to carry heavy amount in purse.
Spoiled notes wont come into picture.
REFERENCES
Economictimes.com
Pnbindia.com
NETWORK MAGAZINE