"Study of Bank Challenges and Priorities: " Submitted by Kompelli Mukund Ravindra T.Y.B.B.I. (Semester V)
"Study of Bank Challenges and Priorities: " Submitted by Kompelli Mukund Ravindra T.Y.B.B.I. (Semester V)
"Study of Bank Challenges and Priorities: " Submitted by Kompelli Mukund Ravindra T.Y.B.B.I. (Semester V)
ON
B.N.N. COLLEGE
DHAMANKAR NAKA, BHIWANDI, 421302
SUBMITTED TO
UNIVERSITY OF MUMBAI
B.N.N. COLLEGE
DHAMANKAR NAKA, BHIWANDI, 421302
SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
2016-2017
B.N.N.College, Bhiwandi.
CERTIFICATE
Examiner: - 1._______________________
2._________________________
DECLARATION
________________________
PLACE: BHIWANDI
DATE:
ACKNOWLEDGMENTS
I am deeply indebted to my project guide, my family and friends who have supported me all
through my project by encouraging and inspiring me. They have also contributed to the quality
of the material presented in the project. I would like to acknowledge all those whom I owe a debt
of gratitude. It is my foremost duty to express my sincere gratitude towards my mentor, guru and
guide, Miss Charmi Gondaliya ,Assistant Professor, B.N.N. College, Bhiwandi, Dist.Thane,
Maharashtra for her constant encouragement, support and generous attitude which helped me
with new insights not only in understanding different aspects of my project but also the
intricacies of life. It was truly an enriching experience working under her guidance.
Dr. Ashok D. Wagh, Principal, B. N. N. College for constantly encouraging me for my project.I
also thank to Dr. S.T. Rawal, Head Department of Banking and Insurance and all Vice-Principal
of B.N.N. College for their support and cooperation from time to time and also to my other
work. Discussions with them have helped me develop great clarity of thought and understanding
in my project.I am also thankful to the staff of library of B.N.N. College. I express my deep
sense of gratitude to all my teachers, friends and all well wishers who were always concerned
about my project and contributed directly or indirectly for the successful completion of my
project work.
HISTORY OF
In 1997, the
World Bank issued a statement of its global strategy for
rural development entitled Rural
Development: From Vision to Action. Subsequently,
important improvements in the performance of the rural
portfolio have been achieved. These include increases in
quality-at-entry of rural projects, reductions in the
proportion of projects at risk and an improved impact
from supervision. However, the Strategy does not appear
to have achieved its key objective of reversing the
declining trend in rural investment volumes within the
Bank. In financial year (FY) 2000, a historical low of only
38 rural development projects were approved world-wide
by the Bank, with a total value of US$1.5 billion in
comparison with US$4 billion in FY97. This is equivalent
to only 10 percent of new loan commitments by value3.
Of further concern is the assessment by the Operations
Evaluation Division of the Bank during FY99 that only 37
percent of agricultural projects and 42 percent of all rural
projects were sustainable. Finally, important changes in
world-wide economic, institutional and political conditions
have occurred since the preparation of Vision to Action
and these now need to be taken into account in looking at
future operations. With poverty reduction still the central
goal of the World Bank and considering that majority of
the worlds poor are dependent on agriculture, the Rural
Development Strategy remains an important document,
but needs to be updated. The revised Strategy will be
more action-oriented and will have a stronger regional
focus than previously. Each regional division of the Bank
has been given primary responsibility for developing its
own regional strategy, and a number of supporting
studies have been commissioned largely from thematic
groups within the Bank to provide technical inputs to the
strategy formulation. In this context, FAO was invited to
collaborate in preparing a supporting study with the
following objective.
Introduction
At a time of unprecedented structural change in the
financial services industry, banks and credit unions are
contending with increasing challenges, including post-
crisis regulations, a more demanding consumer and new
competition from inside and outside the industry.
And while only 24% of corporate banks cited this as their biggest
concern, the private wealth sector noted the increasing challenge of
customer loyalty, with 32% of respondents indicating that this is their
biggest challenge. This may be attributable to the influx of younger
investors who have different needs and behaviors than their parents and
grandparents.
The State Bank of India (SBI), the largest and oldest bank in
India, had computerized its branches in the 1990s, but it was
losing market share to private-sector banks that had implemented
more modern centralized core processing systems.
The State Bank of India has achieved its goal of offering its full
range of products and services to all its branches and customers,
spreading economic growth to rural areas and providing financial
inclusion for all of India's citizens.
Exhibit 1.
Profile of the State Bank of India and Associate Banks (May 2008)
Source: State Bank of India Group Unlike private-sector banks,
SBI has a dual role of earning a profit and expanding banking
services to the population throughout India. Therefore, the bank
built an extensive branch network in India that included many
branches in low-income rural areas that were unprofitable to the
bank. Nonetheless, the branches in these rural areas bought
banking services to tens of millions of Indians who otherwise
would have lacked access to financial services. This tradition of
"banking inclusion" recently led India's Finance Minister P.
Chidambaram to comment, "The State Bank of India is owned by
the people of India." A lack of reliable communications and power
(particularly in rural areas) hindered the implementation of
computerization at Indian banks throughout the 1970s and 1980s.
During this period, account information was typically maintained
at the local branches with either semi automated or manual ledger
card processing. During the 1990s, the Indian economy began a
period of rapid growth as the country's low labor costs, intellectual
capital, and improving telecommunications technology allowed
India to offer its commercial services on a global basis.
Customer service
Provision of a single customer view of all accounts
The ability to merge the affiliate banks into SBI
Support for all SBI existing products
Reduced customer wait times in branches
Reversal of the customer attrition trend
6
Given the success of the initial project and SBI's desire to offer new products to
all of its customers,
a new IT plan was created that would encompass all branches. TCS and the
bank would have to
demonstrate the capability to process 100 million accounts in a single processing
environment.
TCS and HP then conducted another scalability test in September 2006 to
determine if the system
could process SBI's entire base of 100 million accounts (excluding the affiliate
banks, which use a
separate processing environment) with sustained peak online throughput of
1,500 transactions per
second. They conducted the test at HP Labs in Cupertino, California, using two
32-CPU HP 9000
Superdome application servers and two 32-processor Itanium Core HP Integrity
servers for the
database. The test achieved a sustained peak real-time transaction rate of more
than 1,575
transactions per second, meeting the projected processing demands of SBI.
Additionally, batch
tests were run for both deposits and loan account processing. The month-end
batch process for
loans required 1 hour and 5 minutes, and deposit processing was completed in 2
hours and 27
minutes. These benchmarks were audited by Ernst & Young, and the test results
are highlighted in
Exhibit 3.
Exhibit 3
State Bank of India Scalability Test of TCS BaNCS System for Full Branch Conversion
Source: Tata Consultancy Services (TCS)
Based on the successful scalability test, SBI decided to convert the
approximately 6,700 remaining
SBI branches to the BaNCS system. The conversion of the remaining branches
began in June
2006, with the stated goal of completing the conversion by year-end 2008.
Utilizing the assembly
line conversion approach established in the initial phase, the bank converted
1,400 of these
branches by March 2007.
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Because the conversion methodology and BaNCS system were thoroughly
proven and stable, the
assembly line conversion approach allowed the bank to complete the conversion
ahead of
schedule. Between April 2007 and March 2008 (the bank's fiscal year end), SBI
converted 4,600
branches to the new system. The remaining branches were converted between
April and July 2008.
Critical Success Factors
Large-scale core systems implementations are typically the most costly and risky
IT projects
undertaken by banks. Failures of core systems projects are not uncommon at
large banks and
result in both financial impact and lost business opportunities. Further, failed
projects lead other
banks to delay needed core systems replacements because they measure the
risk of failure against
the potential benefits of a new system.
TowerGroup believes that several critical factors contributed to the success of the
SBI core
implementation effort:
Senior management commitment.
The project was driven by the chairman of SBI, who met every
month with the information technology (IT) and the business sector heads. The chairman
monitored the overall status and ensured that sufficient resources were allocated to the
project. TCS senior managers were thoroughly committed to the project as well and
periodically
met with the SBI chairman to review the project status.
Staffing and empowerment of project team.
The core banking team consisted of the bank's
managing director of IT acting as team head and 75 business and IT people selected by the
bank.
TCS also staffed the project with approximately 300 IT professionals trained on the BaNCS
system. Importantly, the SBI business people were viewed not just as contributors to a key
project but as future bank leaders. This team reported to the SBI chairman and was
empowered
with all decision-making authority.
Ownership by business heads.
The regional business line heads were responsible for the
success of conversion of their respective branches and reported the status to the chairman.
Thus, the business heads' objectives were aligned with those of the project team.
Focus on training.
SBI used its network of 58 training centers across India to train
employees on the new system. TCS personnel first educated approximately 100 SBI
professional
trainers, who then trained 100,000 SBI employees at the centers; the remaining employees
trained at their respective job sites.
Benefits of New Core Systems Implementation
The new core system has resulted in benefits throughout the bank for both the
customers and the
employees of SBI. For example, the new core banking system has allowed the
bank to redesign
processes. It established 400 regional processing centers for all metro and urban
branches that
have assumed functions previously performed in the individual branches. The
bank recently
reported that business per employee increased by 250% over the last five years.
The bank has achieved its goal of offering its full range of products and services
to its rural
branches. It delivers economic growth to the rural areas and offers financial
inclusion for all of
India's citizens.
Implementation of the TCS BaNCS system has provided the bank with the ability
to consolidate the
affiliate banks into SBI. In fact, the bank recently completed the consolidation of
State Bank of
Saurashtra into SBI.
The bank has reversed the trend of customer attrition and is now gaining new
market share.
Completion of the core conversion project has also allowed the bank to
undertake several new
initiatives to further improve service and support future growth. These initiatives
include the
deployment of more than 3,000 rural sales staff, redesign of over 2,200 branches
in the last fiscal
year, opening of more than 1,000 new branches, establishment of a call center,
and an active plan
2002 - 2009 The Tower Group, Inc. May not be reproduced by any means without express permission. All rights reserved.
8
to migrate customers to electronic delivery channels. The improvement in
productivity and growth
of business for the SBI Group is reflected in Exhibit 4.
Exhibit 4
Selected Business Results for State Bank of India Group (200207)
Source: State Bank of India Group
Summary
The implementation of the Tata Consultancy Services (TCS) BaNCS system at
the State Bank of
India (SBI) represents the largest core systems project ever undertaken. The
success of this project
should encourage other large banks to begin projects to modernize their core
systems.
The use of a UNIX-based platform to process more than 100 million accounts
daily demonstrates
that tier 1 banks can use a mainframe alternative for their core processing.
Although TowerGroup
expects that the majority of these banks will continue to rely on the IBM
mainframe for core
processing, they can fully consider the benefits of utilizing a UNIX-based
platform.
SBI's achievement demonstrates that attention to critical factors is crucial in
implementing new core
systems. The bank's senior management commitment, business line
involvement, project team
staffing and empowerment, and extensive employee training were all key
contributors to the
success of the project. Management also recognized the need for a proven
systems integrator that
possessed in-depth expertise in both business and technology.
Core systems modernization has allowed the State Bank of India to centralize
computer processing
and operations functions, offer new banking products to all the citizens of India,
reverse a trend of
customer attrition, and consolidate its affiliate banks. Additionally, the bank can
now further expand
its product offerings and improve customer service.
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