Structured Financial Messaging System

Structured Financial Messaging System (SFMS) is a secure messaging standard developed to serve as a platform for intra-bank and inter-bank applications. It is an Indian standard similar to SWIFT (Society for World-wide Interbank Financial Telecommunications) which is the international messaging system used for financial messaging globally.

Payment and settlement systems play a vital role in the efficient functioning of the financial system. IDRBT Hyderabad developed and launched the Structured Financial Messaging System on December 14, 2001.  It is messaging system that can be used for speedy funds transfer and for all purposes for secure communication within the bank (inter-bank) and between banks (intra-bank). SFMS is an Indian standard similar to SWIFT (Society for World-wide Interbank Financial Telecommunications) an international messaging system used globally for financial messaging. SFMS is an EDI (Electronic Data Intervention) for banks and it uses INFINET as the communication medium. This system is connected to banks gateways with HUB located at IDRBT, Hyderabad. Banks secure intra-bank transactions messages by means of standard encryption and authentication services conforming to ISO standards. SFMS messages from a bank branch to another bank branch are delivered via Bank Gateways and the Hub. The Hub and the bank gateway are connected via VSAT communication links or dedicated leased lines or dial up lines depending on proximity and the volume of traffic with Bank Servers. The bank servers are connected to the branches in the offline mode.

The inter-bank messaging is useful for applications like Electronic Funds Transfer (EFT), Real Time Gross settlement System (RTGS), Delivery Versus Payments (DVP), Centralized Funds Management System (CFMS) etc.

Security aspect of SFMS

Authentication, Confidentiality, Non-Repudiation, Integrity are the main security aspect of SFMS. Security is taken care by using Public Key Infrastructure (PKI).  Under Public Key Infrastructure each entity has a public key and a private key. Messages sent through SFMS are digitally signed.

Advantages of SFMS

SFMS reduces transaction time, cost and make trade finance operations more efficient.  The electronic handling of communications reduces considerable reduce risk of fraudulent transactions. SFMS facilitates inter-bank and intra-bank transactions in cash and securities, in treasury operations, forex transactions, Letters of Credits and in negotiation of bills drawn against the Letters of Credit. With SFMS banks would be able to avoid paper based transactions.

SFMS can be used for secure communication within the bank and between banks. The SFMS was launched on December 14, 2001 at IDRBT. It allows the definition of message structures, message formats, and authorization of the same for usage by the financial community.[citation needed] SFMS has a number of features and it is a modularized and web enabled software, with a flexible architecture facilitating centralized or distributed deployment. The access control is through Smart Card based user access and messages are secured by means of standard encryption and authentication services conforming to ISO standards.

The intra-bank part of SFMS is used by banks to take full advantage of the secure messaging facility it provides. The inter-bank messaging part is used by applications like electronic funds transfer (EFT), real time gross settlement systems (RTGS), delivery versus payments (DVP), centralized funds management systems (CFMS) and others. The SFMS provides application program interfaces (APIs), which can be used to integrate existing and future applications with the SFMS. Several banks have integrated it with their core or centralized banking software.

Centralised Funds Management System:

 The centralised funds management system (CFMS) was set up by the Reserve Bank of India. It is operated and maintained by RBI. There are two components;

• The Centralised Funds Enquiry System (CFES)
• Centralised Funds Transfer System (CFTS)

Centralised funds management system provides a centralised view of balance positions of the accounts maintained by banks with RBI at various locations. It enables banks to operate and transfer funds from one account to another account maintained with different Deposit Accounts Department (DADs).

Only those banks who maintain current account with the Deposit Accounts Department (DAD) of RBI and are the members of INFINET can become the member of this system. Each member is required to install on its own cost and maintain in good order computer/s, servers, telecommunication equipment and other electronic equipment as required / prescribed for the purpose. All funds transfer messages received by the Central system for debiting of any current account are digitally signed. Each message is identified by a unique identifier for tracking at a future point of time.

On the successful completion of a transaction, the originator of the message is informed by the Bank Level Funds Management System (BLFMS) / Local Banks Funds Management System (LBFMS). The CFMS normally operates on all days on which at least two Deposit Accounts Departments of Reserve Bank of India function.

The Centralised Funds Transfer System (CFTS) provides services through:

• Apex Level Server (ALS) built in the main frame computer maintained at Mumbai.
• Local Funds Management System (LFMS): The facility is provided by those Regional Offices of RBI which have the Deposit Accounts Department (DAD).
• Bank Level Funds Management System (BLFMS): RBI provides the software to CFMS members for the use of Treasury Department / Central Accounts Department.
• Local Banks Funds Management System (LBFMS): RBI provides this facility to the CFMS members for accessing local DAD.