Tag Archives: Core banking

The next Big War in Indian Banking


Dr. Raghuram G. Rajan, RBI Governor, in the Second Quarter Review of Monetary Policy 2013-14, unveiled a very bank customer friendly initiative.

Commercial Banks have been given the option to pay interest on savings deposits and term deposits at intervals shorter than quarterly intervals.

Till today, banks were required to pay interest on savings deposits and term deposits at quarterly or longer intervals.

The chief guiding for such a customer friendly initiative is the fact that all commercial banks are on CBS (Core Banking Solution), which makes interest calculation an automated activity.

The Banks CBS should be able to carry out the modified interest calculation activity without much tweaking.

The challenge would be for Banks to decide the periodicity of payment of interest, and to convey to customers, that their option is the best in the market.

Look out for innovative banking products in the near future.

Personally, I prefer to receive interest at longer intervals, rather than shorter intervals. What is your opinion?


Post Bank of India to commence business with 50 Bank Branches

India Post has over 1.54lacs post offices across India, and in the first year it plans to launch 50 Bank Branches. As India Post has its Post Offices in prime locations across cities, its first 50 branches will be housed in the same premises as its Post Offices.

The government is likely to earmark Rs. 1,300 crore for the India Post to enable it to make foray into the banking space. “The expenditure finance commission will meet this month and finalise the fund to be provided to India Post for the proposed Post Bank of India,” a finance ministry official told PTI.

The Department of Post, which has applied to the Reserve Bank for a new bank licence, had last month approached the finance ministry for sanctions of Rs. 1,300 crore for its banking foray and to meet the capital requirements.

The India Post, which has over 1.54 lakh post offices across the country, would be using its existing network to provide banking services and bring in financial inclusion.

Of the 1.54 lakh, over 1.39 lakh branches are in rural areas and 15,736 are in urban regions.

There are around 90,000 bank branches in the country and provision of real-time banking services through postal network is estimated to triple the current banking network.

The Post Bank of India is proposed to be owned by DoP, but with a completely independent board, governance structure and operations. It will have representation from Finance Ministry, Ministry of Communication & IT, besides independent directors on its board.

The plan is to use post offices – which have a network of around 150,000 branches across the country, much more than all banks taken together – to expand rolling out of the DBT scheme.

An official said that once the proposal gets Cabinet nod, the banking correspondent model envisaged in the DBT scheme will be performed by postmen. Along with regular salary, postmen will get an additional commission of 0.07% for every new deposit.

The government also plans to link all post offices with core banking solutions ( CBS), which would further enable them to function as full-fledged banks. The plan is to allow post offices, which are allowed to take savings only, to disburse loans also.

The Centre was worried as many district magistrates and deputy commissioners cited poor last mile connectivity for the delay in rolling out the DBT scheme. Chief ministers, during their meeting with the Planning Commission to finalize state plans, also flagged the issue.

Infosys has two agreements with India Post to facilitate India Post’s Rural Systems Integration (RSI) program and  Financial Services System Integration program, to receive AEPS credits.

Banks are not too enthusiastic of opening new accounts and seeding them with ‘Aadhaar’ numbers as under DBT, ‘no-frills’ accounts have to be opened, while they usually ask for a minimum deposit of Rs 1,000 for opening any new account.

RBI – Discontinuation of CFMS. Launch of eKuber.


Member Banks of RBI CFMS are aware that the funds transfer through Centralized Funds Management System (CFMS) has been discontinued with effect from January 1, 2013. Hence, the need for continuation of CFMS is not required any more.

This has led to RBI informing CFMS member banks with effect from April 1,2013, the facility of CFMS Helpdesk services and access to CFMS information/data will not be available.

Readers might be interested to know that the Centralized Funds Management System (CFMS), was  a system set up, operated and maintained by the Reserve Bank of India  to enable operations on current accounts maintained at various offices of the Bank, through standard message formats in a secure manner.

The following types of facilities were available through CFMS:

a) Enquiries relating to the operation of its current account/s maintained with any of the DADs

b) Funds Transfers between accounts of the same account holder at different DADs.


The chief reason for discontinuation of CFMS is the launch by RBI of its Core Banking Solution i.e  (E-Kuber) system. With CBS in place, it is very easy for RBI DAD account holders to operate their banking accounts with RBI. A CBS solution is also necessary for Cheque Truncation System (CTS) to succeed.

Implementation of Core Banking Solutions by UCBs


A  number of UCBs in India are  not in favour of CBS as they viewed CBS as a heavy expense. However, the regulator Reserve Bank of India, vide Notification No RBI/2012-13/437 UBD.BPD.(PCB). Cir.No. 42/09.18.300/2012-13 dt.March 13, 2013, has advised all The Chief Executive Officers of All Primary (Urban) Co-operative Banks, to take steps for Implementation of Core Banking Solutions (CBS) in their respective banks.

One of the primary reasons of CBS is to enable the regulators to effectively supervise compliance regulations in UCBs’.

CBS also aids the top management in generating analytical reports and as well as in submission of various reports to regulators and Government.

Moreover, with ePayments slowly becoming the norm, standalone UCB’s do not integrate well with the Indian Banking System.  CBS is a must to run a Bank in India today.

Hence, RBI has advised UCBs’ in their own interest, as also in the interest of their customers, to adopt CBS as soon as possible. A large number of software are available today, including cloud based solutions, and UCBs may adopt the model that meets their bank’s requirement.

The deadline for UCBs to adopt CBS in December 31, 2013. RBI has also indicated that failure to implement CBS within the timeframe could result in denial of various facilities (expansion of branches or area of operation etc.) to UCBs.

A large number of CBS applications are available in the market, and UCB’s are free to choose the best suitable CBS Application for them.