Rise of Core Banking in India
The introduction of technology into the banking system has caused a massive
transformation in the way banks function. The traditional banking methods have made
way for the latest technological innovations with highly sophisticated systems. Among
these, one of the significant moments was the adoption of Core Banking in India.
What is meant by the system of Core Banking in India?
The Core banking solutions are essential for the proper functioning of banks. It is a
vital part of the banking system, which helps in serving their clients and customers
with excellent service. Core banking is account management back end and front end
processes.
It is a centralized system or a network made by a bank and its branches. It allows the
customers to access their bank accounts to manage and perform basic transactions
from any branch of the bank where they hold an account.
Some of the underlying core banking solutions include deposit, loans, payments
etc. These services are made accessible to customers with the help of Core banking
software. Core banking system uses information communication technology to simplify
the banking procedures and processes for its various applications.
Adoption of Core banking in India
The requirement for computerized banks in India was felt in the early 1980s. The
Indian banks applied the process at the branch level. Various national committees were
formed by the government to modernize the banking system in India.
In the late 1980s, the then deputy governor of Reserve Bank of India (RBI) Dr C
Rangrajan implemented the concept of core banking in India. It formed a platform for
facilities like telebanking, off-site ATM’s and customer terminal.
In the 1990s, core banking was transformed when private sector banks and foreign
banks started having access to the Indian banking industry. The progress continued
due to globalization, liberalization and the introduction of TRAI[1] (Telecom Regulatory
Authority of India).
Implementation of the core banking system in India was a landmark moment for the
Indian Banking industry. It has transformed the way business of money is handled and
the functioning of banks. Core banking could be just a beginning, paperless and
branchless banking system could be the future of Indian Banking industry.
What are the objectives of Core Banking System?
The primary objective of the core banking system is to improve the customer
experience. It aims to provide convenient banking to its customers where the
customers are able to access banks anytime and from anywhere.
Another objective of the core banking system is to make informed decisions with facts
and figures. The different process of core banking allows the storage of data in a proper
format. All such data can be accessed by an authentication system and helps the
customers to make informed decisions. Moreover, it allows generation and providing
statutory and regulatory reports to the regulators of the government.
What is the need of Core banking?
Use of Information Technology is vital for the growth, and long term survival of any
industry, and the same applies to the banking industry as well. Banks can benefit by
using such technologies in terms of reduction in operation costs etc. The need for core
banking is significant because it can satisfy the needs of the market and customers.
Core banking is needed as it can improve and simplify the process of banking and
provide convenience to customers and banks.
The rural areas are unexposed to such technologies, and they are unable to access
banking facilities due to various reasons. Core banking can help in expanding the
banking facilities to the remote and rural areas of this country.
What are the features of Core Banking in India?
Core banking system is an operating software or system employed by banks to provide
core banking solutions to their clients. It helps the banks in carrying out the basic
functions of the banks.
Few of the basic features are as follows:
Processing and recording deposits of money and withdrawal of cash;
Calculates loan interest;
Processes loans;
Helps in opening new accounts in the bank;
Cheque and Payment clearance;
Manages customer information;
Helps in creating new banking products;
Banking analytics; and
Availability of mobile banking, internet banking etc.
What are the benefits of Core banking?
Banking and financial institutions have benefited immensely after the introduction of
core banking in India. It offers excellent support to the bank and is an integral part of
their daily businesses. It has significantly reduced the burden of manual tasks which
consumes time and money. It has made assessing, managing, and upgrading of data
simple and has increased efficiency and productivity of the employee.
Apart from there are various benefits of core banking for customers as well as for
banks. These are as follows:
Quicker services at banks for transactions;
Banking can be accessed from anywhere thus eliminating branch banking;
Provision of 24*7 banking services;
Quicker processing of payments through internet banking and mobile banking;
All branches access applications from central servers; therefore, deposits made
in any branch is shown immediately, and the customer can withdraw money from
any branch throughout the country.
Banks can retain customers through better service;
Accuracy in transactions and minimization of errors for banks;
Improved management and documentation of records;
Easier to submit various reports to the government and to the Reserve Bank of
India; and
It provides convenience in opening accounts, processing cash, calculating
interest and in implementing changes in policies of banks.
When compared with traditional banking methods, core banking is more convenient
and simplified.
Conclusion
Core banking in India has tremendously evolved in the past few years, and it is still
evolving. Therefore one can expect better and improved features in the future. Almost
all private sector banks and public sector banks in India have adopted the core banking
system. Still, some are left to adopt, but RBI is hopeful of 100% implementation of this
system all over India.
