Core Banking

Core banking is a banking service provided by a group of networked bank branches where customers may access their bank account and perform basic transactions from any of the member branch offices.

Core Banking Solution (CBS) is networking of branches, which enables

Customers to operate their accounts, and avail banking services from any branch of the Bank on CBS network, regardless of where he maintains his account. The customer is no more the customer of a Branch. He becomes the Bank’s Customer.

Another interesting fact regarding CBS is that all CBS branches are inter-connected with each other. Therefore, Customers of CBS branches can avail various banking facilities from any other CBS branch located anywhere in the world.

Now a days, most banks use core banking applications to support their operations where ‘CORE’ stands for “Centralized Online Real-time Environment”. This basically means that all the bank’s branches access applications from centralized data centres. It means that the deposits made are reflected immediately on the servers of bank and the customer can withdraw the deposited money from any of the branches of bank throughout the world. These applications now also have the capability to address the needs of corporate customers providing a comprehensive banking solution. Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATMs, internet banking and branches.

Core banking is often associated with retail banking and many banks treat the retail customers as their core banking customers. Businesses are usually managed via the corporate banking division of the institution. Core banking covers basic depositing and lending of money.

Core banking functions will include transaction accounts, loans, mortgages and payments. Banks make these services available across multiple channels like automated teller machines, Internet banking, mobile banking and branches.

Banking software and network technology allows a bank to centralise its record keeping and allow access from any location.

Software

Advancements in Internet and information technology reduced manual work in banks and increasing efficiency. Computer software is developed to perform core operations of banking like recording of transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawal. This software is installed at different branches of bank and then interconnected by means of computer networks based on telephones, satellite and the Internet.

Gartner defines a core banking system as a back-end system which processes daily banking transactions, and posts updates to accounts and other financial records. Core banking systems typically include deposit, loan and credit-processing capabilities, with interfaces to general ledger systems and reporting tools. Core banking applications are often one of the largest single expense for banks and legacy software are a major issue in terms of allocating resources. Spending on these systems is based on a combination of service-oriented architecture and supporting technologies.

Many banks implement custom applications for core banking. Others implement or customize commercial independent software vendor packages. Systems integrators implement these core banking packages at banks.

Open-source Technology in core banking solution or software can help banks to maintain their productivity and profitability at the same time.

Features

• To make enquiries about the balance or debit or credit entries in the account.
• To obtain cash payment out of his account by tendering a cheque.
• To deposit a cheque for credit into his account.
• To deposit cash into the account.
• To deposit cheques/cash into account of some other person who has account in a CBS branch.
• To get the statement of account.
• To transfer funds from his account to some other account his own or of third party, provided both accounts are in CBS branches.
• To obtain Demand Drafts or Banker’s Cheques from any branch on CBS – amount shall be online debited to his account.

Advantages of Core Banking

• Limited Professional Manpower to be utilized more effectively.
• Customer can have anywhere, more convenient and easier banking.
• ATM, Interest Banking, Mobile Banking, Payment Gateways etc. are available.
• More strong and economical way of management information system.
• Reduction in branch manpower.
• Additional manpower can be available for marketing, recovery and personalized banking.
• Instant information available for decision support.
• Quick and accurate implementation of policies.
• Improved Recovery Process causing reduction on recovery costs, NPA provisions.
• Innovative, redefined or improved processes i.e. Inter Branch Reconciliation causing reduction in manpower at Head Office.
• Reduction in software maintenance at branch and Head office.
• Centralized printing and backup resulting in reduction in capital and revenue expenditure on printing and backup devices and media at branches.
• Electronic Transactions with other Financial Institutions.
• Increased speed in working resulting in more business opportunities and reduction in penalties and legal expenses.