Audit in CBS Environment

CA. Kuntal P. Shah

Background
Over the years, the banking operations have been automized to a large extent and wide range of banking
softwares have been developed for accounting of transactions and core banking operations.
Bank software is becoming more sophisticated all the time. As new accounting methods develop and more
people bank online, private banking software is being developed to streamline the processes

Banking Industry & Banking Software:

Current Scenario
The face of Banking Industry is changing continuously. What Banking is today is quite different from what it
was in the years gone by. Some of the present trends in banking industry include
 Focus on Customer Relationship (Service Oriented Architecture[SOA])
 Introduction of Value Added Services
 Connectivity of branches
 Multiplicity of Delivery Channels (ATM, Cash Deposit Machines, Cheque Deposit Machine, Point of
Sale Units, Credit Card, Mobile Banking, Internet Banking)
 Focus on MIS & Risk Management
 Focus on Reduction of Transaction Cost

Future Scenario
One can visualize future scenario in the industry on current trends. Going by the current happenings one can
expect the future of Banking Industry.
 Increase in the expectations of Customers
 Increase in Healthy Competition due to issue of New Banking Licenses
 A greater variety of Products and Delivery Channels in the market
 Centralised Customer Management (Service Centric Approach)
 Information Technology to act as an integrator and enabler between demands on the industry and
services rendered

Challenges
The biggest challenge before the Banking Industry today is posed by its customers’ expectations. The customer
today is more informed and aware than before. Customers demand more and more services and delivery channels.
Customers’ Expectations
 Anywhere, Anytime banking
 Diverse products and facilities

There are challenges posed by Market Forces due to stiff competition wherein the differentiator or selection of
bank by the customers is based on quality of Services. However, the Service up-gradation comes with a cost for
the Bank. Hence, a Tradeoff between cost of Transaction and Quality Service to Customer is the key. Moreover,
due to diversified products and services, upto date information for Customer and Banker is very important.

On the other front the Regulatory requirements are rapidly increasing. Apart from handling Transactions, Customer
and competition it is very important to pay equal attention to adherence to regulatory guidelines.

A composite system / software which handles Transactions, Customer Relations, Regulatory compliances, MIS /
Reports request is the need of an Hour. Core Banking Systems provide the solution for the same. There are various
Core Banking Softwares available in the market. More prominent and used in India are,

Software Package Provider

Finacle Infosys

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 FLEXCUBE Oracle Financial Services Software, (By iflex)
TCS BaNCS Tata Consultancy Services (TCS)

Audit of Banks & Banking Softwares

Ever since the human being started documenting transactions, audit methodology and techniques have evolved
over the period of time keeping pace with the style of business. With the growth in business volume and
technological advances there has been paradigm shift in various aspects of business. Conducting audit of financial
transactions can not be an exception to the same. Traditional audit techniques and methodology were outcome of
the volume and complexities of the business of its time. A classic example of the same is audit techniques applied
for conducting audit of a bank operating under Core Banking System (CBS).

As we have witnessed, during the last decade there has been large scale growth in banking services, covering
more and more geographical area and large number of population. This has necessitated applying modern
technology, particularly in the field of data capturing, recording and processing. CBS is outcome of the same.

For obvious reasons audit methodology can not remain static, it has also to change. Therefore, with the spread of
CBS in large number of cases, changing audit methodology also became inevitable. If the auditee’s dependence
on technology hinges heavily, there is no reason why auditor should not apply the same technology.

Core Banking Solution (CBS)

What is CBS?
The core banking system is the set of basic software components that manage the services provided by a bank to
its customers through its branches (branch network). The bank's customers can make their transactions from any
branch, ATM, Service Outlets, Internet, Phone at their disposal.

The CBS is based on Service Oriented Architecture (SOA). It helps banks to reduce risk that can result from manual
data entry and out-of date information. It also helps banks to improve Service Delivery quality and time to its
customer.

The software is accessed from different branches of bank via communication lines like telephones, satellite,
internet etc.

Core Banking System [CBS] works on a concept of Centralized Database and Processing. Transactions take place
at various geographical locations which get recorded and processed at a Centralized Server. Updation of Database
is on Real Time Basis. Due to the Centralization of Transaction Processing, issue of Out of Date Information is
eliminated. All the users connected to CBS will be able to get upto date information. CBS also enhances quality of
Reporting and strengthens Access Control.

Centralized Banking Solution / Core Banking Solution

Under CBS data is stored in centralized servers at Data Centre. This effectively means that all operations at the
connected branches, back offices are carried out through servers at Data Centre including transactions through
other delivery channels like ATMs, Internet Banking, Phone Banking.

Under CBS, the branches, back offices are defined as SOL (i.e. Service Outlets) where each SOL functions as a
service window. The CBS is capable of processing any transaction from any branch location connected to CBS. It
can be equated with single window operations at airline counters or railway reservation counters wherein all the
services can be obtained at one place. Hence, under CBS customer is now a customer of the bank and not merely
a customer of a branch of the Bank. This has facilitated Any-where, Anytime Banking convenience for the customer.

From Bank’s perspective, control over the application and processes has been entrusted at Data Center Level. In
addition to it CBS also makes available effective MIS on real-time basis. It enables generation of all periodical
returns centrally.

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As mentioned above there are various CBS developed by various software companies are available in the marked
however, out of the all, highly acclaimed and widely used Core Banking Softwares are a) FINACLE by Infosys, b)
BaNCS by Tata Consulting Services and c) FlexCube by Oracle Financial Services

Part - A

Overview of Various CBS and Basic Concepts

Introduction to FINACLE
A Financial Package, for Banking Solution developed by Infosys on a platform of Oracle, is thus named as FINACLE.
Presently, many Indian Public Sector Banks, Private Sector Banks and Foreign Banks operating in India are using this software
as banking solution due to high flexibility and scalability. Finacle is an integrated, on-line, enterprise banking system designed
to provide the "e-platform”.

Prior to 1995 it was known as BANC 2000, a Total Branch Automation package with a distributed network. After 1995 Infosys
developed the same as FINACLE, a Core Banking Solution.

Functionalities
 Finacle facilitates anywhere banking
 It is menu driven software with easy navigation.
 It is functionality rich and addresses the retail and corporate banking requirements.
 Customization and parameterization are two special features of Finacle.
 Finacle provides multi-lingual support
 Finacle provides multi-level security i.e. operation, database and application level security
 It supports workflow based Transaction Processing.
 It has High level of security control and audit capabilities
 It has a common transaction interface for all type of transactions.
 It provides a browser based GUI interface to Finacle
 SQL & PL SQL is used for generation of MIS, Reports, Queries at Centralized Level.
 Designed for optimum Usage Of Network Bandwidth
 There are two Functional Modules -
a. Retail and Corporate Module - Encompassing Saving Accounts, Current Accounts, Term Deposits, Cash Credit
Accounts, Overdraft Accounts, Term Loans, Demand Loans.
b. Trade Finance Module - Encompassing Inland & Foreign Bills, Forward Contracts, Inland & Foreign Documentary
Credits, Inland & Foreign Bank Guarantees, Inland & Foreign Remittances and Preshipment Credits.

Finacle Overview
Finacle User Menu
Menu Block Favorites !
Main Menu
-> Sub Menu
-> Menu Description [Menu
Code] User Defined Favorites

MESSAGE AREA (A)

Menu Btn.1 Btn.2 Btn.3 Btn.4 Btn.5 Btn.6 Btn.7
(B)
Option Action Bar
A = Progress Indicator
B = Field to Specify Menu Option
• Menu Block: The block houses all the menu and sub-menu options available in Finacle.
• Menu Option Block: Menu Code to be entered to gain access to the respective menu.

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• Action Bar: User can execute the process of Finacle Operations by clicking on various options on this bar. The Hot-Keys
are also assigned for all options, which appear on the bar.
• Action Buttons: Every action button has a specific purpose. E.g. On clicking WhoAmI button, system will display user_id
of the user who is currently logged in & other information viz. date, name of SOL in a message box.
• Message Bar: The message bar displays warnings, exceptions, errors or Lists under a specific field code.
• Favorites: Menu items which are required and used on Regular basis can be put in favorites by copying from Menu
Block. As a one time process Specific Menu Item which is required to be copied to Favorites should be located in Menu
Block and with the use of Drag and Drop the function can be stored under Favorites menu.
• Progress Indicator: It shows the progress of the action initiated through the use of Colours (i.e. Green indicates that the
System is “Ready” for processing, Red indicates that the “System is busy in Processing Activity and Yellow indicates
that browser is performing internal processing like assembling / painting screen as per requirement. User should not
operate the system)
General Key Map
Default Physical Keys in Finacle are as follows. However, default key map differs in individual bank.
Physical Key What does it do?
F1 Field level help. Like in several word processors and spreadsheet packages, F1 displays
context sensitive help messages and field level help messages.
F2 List. This key lists the codes that may be used in a particular field.
F3 / ESC Quit/ Back. Quits and takes the user back to where he started when in action. It can be used
when the input is incorrect and the user wants to abandon what he has been doing. It can also
be used to go back to the previous menu.
F4 Accept. After the user has completed the input, this key can be used to accept the data.
F5 Background Menu
F6 Next Block
F8 Copy Record
F9 Display Signature
F10 Commit/ Save. This is very important key and this concludes the transactions. This is the
commit and transactions get into the General Ledger (database) when this key is used.
F11 Next field
F12 Previous Block
TAB Go to next valid field
ENTER Go to the next field
DOWN Arrow ↓ Next Record (In a list or result of a query)
(NextRec button)
UP Arrow ↑ Previous Record (In a list or result of a query)
(PrecRec button)
CTRL+F1 Help maintenance
CTRL+F3 Show key map
CTRL+F4 Display error
CTRL+F8 Terminal lock
CTRL+F9 Memo pad look up
CTRL+F11 Context level help
CTRL+D Page down on a list
CTRL+E Explode. This key is particularly useful for the further inquiry.
CTRL+F Clear field. This key combination can be used when the user wants to clear the field.
CTRL+T Display LGI. The user ID, Terminal ID, SOL, BOD Date and language details are displayed.
CTRL+U Page up on a list
CTRL+X Put BOD date. This key combination populates the default BOD date in the field.
SHIFT+F4 Select the current item from the list. This key combination can be used to select a value from
the list of valid values listed for a particular field.
SHIFT+F11 Transmit
SHIFT+TAB Go to the previous field

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Introduction to TCS BaNCS
A Financial Package, for Banking Solution offered by Tata Consulting Services. The Core Banking solution TCS BaNCS is an
integrated solution that automates all aspects of core banking operations across entities, languages and currencies. BaNCS
is built on open architecture, component-based product suite to leverage service-oriented and event-driven architectures.

Functionalities
 Entire range of banking products including savings, checking, overdraft and deposit accounts
 Entire range of lending products
 Complement of transactional services including remittance, foreign exchange, cards and trade finance
 Accessibility through multiple channels, including mobile banking and web
 Full integration of front-, middle-, and back-office processes
 Accurate, timely and actionable information about customer relations
 Single view between bank and customer
 “Anytime anywhere” banking

Introduction to Oracle FlexCube

FlexCube provides a comprehensive, integrated, interoperable, and modular solution that enables banks to manage evolving
customer expectations.

Functionalities
 24/7 processing of large transaction volumes, with high availability
 Multiple delivery channel support
 Security management covering application and role-based access
 Service-oriented architecture supports agile business process management
 Componentized architecture helps build scalable and reusable solutions

Quick access screens through Hot Keys in Flexcube

Hot Keys Screen Name Description
Alt + B Balance Inquiry This screen displays the account details of the savings and checking account
balances such as the available balance, nucleated balance, current book
balance, passbook balance, net balance, etc.
Alt + C Customer Name And This screen displays the details such as the name, address, city, country,
Address Inquiry SSN/TIN number, etc of the selected customer
Alt + A Account Details This screen displays the account details of the customer such as account
number, account branch, account currency, customer name, etc.
Alt + S Amount based This screen displays the images on the basis of the details maintained in the
Account Image Amount Based Operating Instruction Maintenance ( Fast Path: 7116) option
Display
Alt + P This will enable the user to print the receipt of the transaction.
F8 This will enable the user to return to the same screen.

General Concepts of CBS and of Finacle:

 SOL ID & Set ID (Init. Br. ID)
SOL ID: Under Core Banking System, each Branch, Back Office, Administrative / Controlling Office are assigned a code
i.e. Service Outlet ID [SOL ID]. It helps in identifying the Branch / Office under which the Account is maintained. Hence,
if a branch at Delhi is assigned a SOL ID of “0089”, the accounts opened under Delhi Branch will display “0089” as SOL
ID in CBS.
As discussed above under CBS any branch can initiate transaction for any of the account maintained with the bank.
Hence, a distinction is required between the branch which maintains the account and the branch who initiate the
transaction.
Set ID (Init. Br. ID): Set ID or Initiating Branch ID is a SOL ID of the Branch who initiated the transaction.

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 E.g.: Transaction of a Cash withdrawal by a customer of Mumbai Branch (SOL ID “0044”) from Delhi Branch (SOL ID
“0089”). In the instant case “0089” is Init. Br. ID and “0044” is Account SOL ID.
In order to search transactions based on the branch who initiated transactions in Finacle, SET ID (Init. Br. ID) parameter
is required to be used under Menu Code “FTI”.

 Tran ID, Journal No. & Date

Each transaction in Finacle will be assigned a unique Transaction ID. The Transaction ID remains unique only for the
day, since, on the next day the Transaction IDs are reset.
Combination of Transaction ID and transaction date make it unique across the system. In Finacle, once the transaction
is “Entered”, a Tran ID is generated. To locate any transaction from the database the user need to use Tran ID and Date
at TI/TM Menu command.
Under BaNCS the transaction number is known as Journal Number.

 Transaction Type & Subtype

Transactions in Finacle are entered with the Transaction Type and Transaction Subtype. It easier to trace set of
transactions with Transaction Type & Sub Type.
Codes for Transaction Type and Sub Types are prescribed differently by each bank.
E.g.: Transaction Type codes for Cash and Transfer may be of following types.
 Tran Type: Cash: “C”, Transfer: “T”
 Sub Tran Type: CR – Cash Receipt, CP: Cash Payment
The auditor must acquaint himself with the Transaction Types used by each bank. It helps auditors to design query
(search parameters) for inquiry of financial transactions.

 Customer Master Level Configurations

Under CBS, the customer is identified by a number generally called CUST ID / CIF No. Following are the advantages of
separate configuration for Customer and Accounts of Customer.
 Identification of unique customers.
 Data redundancy can be reduced by eliminating the process of updating repetitive details about customer at each
time of opening of Account.
 It is easier to comply with Customer centric Regulations. E.g. TDS provisions under Income Tax Act (where payment
to customer is important than payment for an account), IRAC Guidelines (where classification of account is Borrower-
wise and not Account-wise)
 Multiple accounts of the customer can be mapped to a customer for better identification.
Under the Customer Master Level configuration basic details about the customer are updated. Details include Name, Date of
Birth, PA Number etc.
Once the CUST ID / CIF is opened, various accounts can be opened under the said CUST ID / CIF. Relationship between
CUST ID/CIF No. and Account is that of Parent and Child wherein the Account Master inherits the information and parameter
values from Customer Master.
In Finacle menu command CUMM / CUMI is used for inquiry on CUST ID / CIF No. Under BaNCS the customer master details
can be reviewed through “Customer Master Details” module.

Important Points for Auditors:

1. Issues with multiple CUST-ID:
In terms of guidelines issued by RBI on UCIC, each customer in bank is required to be assigned a unique ID.
However, it has been observed in many banks that multiple CUST IDs have been opened for a customer. It has
also been observed that at the time of migration had migrated old customer information to one CUST ID and have
opened new CUST IDs for opening of new accounts post migration.
Due to multiple CUST ID the vary purpose of having configuration of CUST ID is defeated. The auditors should
verify such discrepancies at the time of account opening verification. Moreover, the auditors should also seek help
of bank’s IT Dept. for generation of report based on combination of information viz. Name, PAN, date of birth,
employee code etc. to identify existing cases of multiple CUST ID in the system.

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 2. Difference in customer’s name at CUST ID and at Account Level:
At the time of opening of Account, Finacle automatically displays the name of Account Holder based on CUST ID
details. However, Finacle also allows user to amend the name. Generally the said change is configured as an
exception which requires sufficient powers / work class in the system to override.
The Auditor at the time of Account Opening verification should verify the details as per CUST ID and in Account.
Difference in names at both the places increases unwarranted confusion. Moreover, auditor should seek help of
bank’s IT Dept. for generation of report based on difference in name as per CUST ID and as per Accounts opened
(if any).

 Account Level Configurations

Configurations / parameters for are setup at the time of Account Opening. Modification afterwards is also permitted.
Account Level master contains the parameters and details specifically with respect to account. For instance, Interest
Rate, Interest payment periodicity, Freeze, Lien etc.
It is important to note here that under CBS majority of functions and transactions are master driven and hence, any minor
error at Master Level (whether Customer Master or Account Master) can have magnanimous effect on transaction
processing. E.g. if Interest Collection Flag is selected as “N” at Account Master Level, the system will not collect any
interest. Hence, accuracy of master is a vital audit area.

 Pointing Type Accounts / Self Reconciling Accounts

Apart from maintaining Customer Accounts, the bank’s general ledger also contains various Suspense / Sundry Accounts.
Such accounts can be with Debit or Credit balance.
The said accounts are used for limited purpose and for parking of entries for limited time frame. Transactions wherein
either Debit / Credit leg is not confirmed / identifiable at the time of Transactions are parked in such accounts. E.g. An
amount of Rs. 1,000 is given to an employee in advance for purchase of Stationery item for branch. The said transaction
will be kept under such Suspense / Sundry account till the date the employee submits the bill / returns the advance.
The transactions processed in such accounts are not routine hence it calls for continuous monitoring and earliest reversal.
Moreover, numerous transactions in an office account make it difficult for reconciliation. In earlier times, the activity of
reconciling the office account was manual.
However, under CBS such accounts are opened under Pointing Type Office Account / Self Reconciling Accounts Scheme
Code which facilitates automatic reconciliation and real-time information on outstanding / non-reversed transactions.
Transactions in such type of accounts are in two parts. i) Originating Transaction ii) Reversal Transaction. For each
reversal entry, the system will prompt the user to point it to an originating transaction. There can be multiple reversals
against single originating transaction. Such type of Account will also ensure that in case of a Debit Type Office Account,
Credit entry as Originating entry will not be permitted.
On the users side, at the time of reversal of Transaction the system will ask the user to “Point” the Originating Transaction
against which the transaction is being reversed. On selection, the system will reduce the balance under the said
Originating Transaction. Under this type of Pointing Type Account, at any given point of time aggregate of outstanding
transaction-wise balance will be equal to the Office Account Ledger Balance.
Under Finacle, verification of outstanding / non-reversed entries can be verified from menu command IOT (Inquire on
Transaction). Moreover, a report on outstanding office account transaction can be generated through Menu MSGOIRP.
Various customized reports for the said purpose are also available under each banks “Report” menu in Finacle.
Under BaNCS, the outstanding entries are available through offline reports viz. “Audit BGL accounts age wise break up“
and “GL-Outstanding-Accnts” report.

 Interest Table Maintenance

Interest collection as well as payment in CBS can be through Interest Tables or can be by way of absolute rate. In case
a loan account wherein Interest Rate is based on a reference rate (say Base Rate), the Interest Rate field is updated with
the Reference Rate Table to ensure automatic updation of Interest on subsequent change.
In case of Interest Table master, the primary rate is sourced from a Master Table. For instance, in case of Loan sanctioned
as Base Rate + 3 % whereas Base Rate at the time of Sanction was 10%, the Interest Rate field will be updated either
with BR+3 Table code or with BR Table with 3% updated in Account Preferential Debit Interest with +3%. Method of
updation of interest may differ from bank to bank.
In case of few specialized products (e.g. subsidy linked accounts) limit level interest rate is required to be applied. In such
case the parameters are setup at Interest Table Master Level and the said table code is updated under Interest Table
field at Account Master Level.

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 In case of a fixed rate loan, the interest rate is updated as absolute figure in Interest Rate field instead of Table. However,
few banks follow the practice of updating “ZERO Interest Rate Table” with necessary interest rate at Account Preferential
Debit Interest.

 Interest Flags
Values at Interest Flags determine the payment & collection of Interest. Applicable flags (i.e. Interest payment, Interest
collection) are required to be updated at Account Master Level. Hence, if the Interest Collection Flag is updated as “N”,
there will not be charging of interest by system, although proper Interest Table Master is selected.

 Withholding Tax Flags

Interest payment to the customer is aggregated at Customer Master Level (i.e. for all the accounts opened under a CUST
ID / CIF No.). The threshold limit for TDS is computed based on the amount aggregated at CUST ID Level. Once the
payment of Interest exceeds minimum threshold level prescribed under Income Tax provisions, the system initiates
deduction of taxes from Interest. However, for cases wherein customer has submitted Form 15H/ 15G / tax exemption
certificate, necessary flags are required to be updated to prevent deduction of taxes upto the enhanced limit (as
applicable).
Withholding Tax flags are available at both CUST ID and Account Master Level. With the recent change in the Income
Tax guidelines w.r.t. online submission of details of Form 15G/15H, the exemption is required to be flagged at CUST ID
level for the amount of Interest Income declared by the customer.
In Finacle, withholding (TDS) flags are driven by Tax Slab. For each type of customer different tax slabs have been
defined at Master Level e.g. TDS for individuals, TDS for corporate, TDS for exempt entities. It is important for auditor to
verify correctness of Tax Slab vis a vis constitution of customer.

 Freeze Flags (Debit, Credit and Total)

In case of court order, dispute between the joint account holders, recovery notice from revenue authority the transactions
in accounts are required to be suspended. Depending upon the requirement the transactions are suspended (viz. Debit,
Credit or all) through Freeze Flags.
The freeze can be applied at CUST ID Level (i.e. all the accounts of the customer) or specific account of the customer.
The source documents are required to be verified for marking of freeze and unfreeze event. The inquiry of accounts with
Freeze Flag can be made in Finacle through ACS Menu Command with Freeze Flag as “T”=Total Freeze, “D”=Debit
Freeze, “C”=Credit Freeze.

 Schemes & Scheme Codes

Different types of account products are offered to customer with different characteristics. For instance, various types of
Savings Accounts are offered. The aggregation of account balance for such cases will take place at Sub GL & GL Level.
However, for account operations and account master setup different schemes are setup in CBS. Scheme Code acts as
a placeholder. Inquiry for different types of accounts can be made in Finacle through ACS Menu Command with “Scheme
Code”.

 Exception Types
The transaction errors are handled in CBS through following modes.
 Warning – Warns user for possible errors based on prefixed criteria
 Exception – Allows user (with sufficient power) to override. However, the transaction will be recorded in Exception
Report for the day
 Error – Does not allow user to proceed further, unless the correct values are filled in.

 Maker & Checker Matrix for valid transaction

Under CBS the transactions are processed by atleast two officials of the bank under Maker and Checker mode. The
same is tracked through the transaction events (viz. entry, posting and verification). Posting is the event which updates
the GL Balance. Posting activity depends on the rights assigned to each user ID.

 Inventory Locations
The inventory concept under CBS refers to handling of security stationeries viz. Non-personalized cheque books,
Demand Drafts, Term Deposit Receipts. Each bank, as per the requirement, creates different inventory location and
inventory sub location codes in CBS.
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 Predominantly, locations are created for Joint Custody (Dual Custody), Employee Custody, External Locations. Barring,
external location, balancing of security stationery is available for all the locations.
In Finacle the report on outstanding inventory items can be generated through Menu command ISRA. Whereas under
BaNCS the same set of reports can be generated through VPIS (Valuable Paper Inventory System) module.

 Zones in Clearing Modules

For easy identification of Type of cheque and proper reconciliation various zones are opened on daily basis (as per
clearing cycle) in CBS.
Various zones are opened for Non CTS Cheques, Interbank Cheque, KYC Cheques, MICR Cheques, Non-MICR
Cheques, Warrants, CMSCheques etc.
Opening of Zone is the primary event before lodging any Inward Clearing instrument or Outward Clearing Instrument.

 Limit and Limit Node

Under Finacle the Limit Management is done through Limit Node Maintenance. Wherein, the limits are specified at each
node level with capping.
 Credit Limits can be set at Account Level as well as at Node Level for deriving the Drawing Power for a customer.
Setting up of Limit at Node level has following advantages.
i. Managing two or more accounts with drawing power deriving from the same security.
ii. Interchangeability of limits among different accounts.
iii. Monitoring the overall exposure to a single client / group of clients.
iv. Exposure to a select commodity / security. Limit Node Maintenance helps to build these requirements in the
limit management
 Limit Node:
i. Limit nodes are used to group accounts under one node to enable easy monitoring and organization.
ii. A limit node can be linked to a security for deriving drawing power.
iii. Distribution of overall group (group may be a group of clients or a group of accounts) limits to individual
members (members may be accounts or clients) is possible through creation of Parent Node and Child
Nodes.
iv. Every child node can further be distributed to group of accounts or clients.
v. This is diagrammatically explained through below example.
Facility Type Particulars Limit Remarks
(Rs. Lacs)
Funded Term Loan 225 Funded Limit Cap is 500 Lacs
WCDL 75 Upper Limits fixed in each type of Facility
CC 200
BP / FBP / BD 50
Total Funded Facilities 500
Non-Funded LC 300 Non Funded capping is at Rs. 500 Lacs
BG 300
Total Non-Funded Facilities 500
Total Company Exposure 1000 Total Exposure to Company should not
exceed 1,000 Lacs

 Temporary Overdraft (TOD) Setup:

Granting of TOD to a customer is a credit decision from Bank’s perspective. Auditor has to review the source documents
and delegated powers to ascertain whether the sanction was inline with the guidelines prescribed by the bank.
Setup of TOD is done in Finacle as follows. TOD is granted to an account under various circumstances. For instance,
Type Event Mode
TODIC Interest Calculation Single
TODDL Drop in Limit Single
TODMN / TODUG Manual / User Generated Single / Running / Adhoc
Explanation of various TOD modes is as follows.

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 Mode Narrative
Single (S) It refers to TOD for specific Purpose / transaction. It can be used only for the specific
transaction during which the same was granted.
Running (R) It refers to setting up of a parallel limit at account level for a defined period over and above
credit limits (if any).
Adhoc (A) Adhoc allows customer with OD / CC Accounts to operate within TOD Limits for defined
period.
From above narrative it appears that running and adhoc TODs serve the same purpose. However, from CBS perspective,
both the events are different. In case of single and running TOD, CBS computes the number of TOD sanctioned in the
account. In case the cumulative number exceeds the prescribed limit for an account, an exception gets triggered for all
subsequent transactions. Whereas in case of Adhoc TOD the said TOD is not counted under number of TODs thereby
circumventing the exception controls embedded in the system.
It is important for auditors to verify cases wherein Adhoc Limits have not been delinked on expiry in system.

Register Type& Subtype (Trade Transactions)

The concept of Register Type and Sub Type is same as Transaction Type and sub types as discussed above. The types
are used to aggregate transactions of same nature in system. It helps in identifying and tracking of transaction in a better
manner. In Finacle, Register Type and Sub Types have been used in Inland Trade Transaction and Foreign Trade
Transactions modules.
List of few Register Types and Subtypes for an Import Transactions is as follows.
Reg. Type Sub Type
Import Bill on Collection Sight
Import Bill on Collection Usance
Import Bill under LC Sight
Import Bill under LC Usance
Direct Import Bill TT (Telegraphic Transfer) / DD (Foreign Demand Draft)
Advance Remittance against Import TT (Telegraphic Transfer) / DD (Foreign Demand Draft)

Part - B
List of Important Menu Commands of CBS
Following is the list of various important menu commands for Auditors based on area of operations in the bank.
i. Accounts, Customer Master and Inquiry
CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 CUMM / CUMI Customer Master Maintenance / Inquiry Inquiry
Finacle 7 ACM / ACI Account Master Maintenance / Inquiry Inquiry
Finacle 7 ACLI Account Ledger Inquiry Inquiry
Finacle 7 ACCBAL Component of Account Balance Inquiry Inquiry
Finacle 7 ACS Account Criterion Search Inquiry (Search /
Criterion based)
Finacle 7 CUS Customer Selection / Inquiry Inquiry (Search /
Criterion based)
Finacle 7 ACINT Interest Run for Accounts Inquiry / Report
Finacle 7 INTTM Interest Table Master Maintenance Inquiry
Finacle 7 AFI Audit File Inquiry Inquiry
Finacle 10 CRM Module Customer Master maintenance Inquiry &
Modifications
Finacle 10 HACLI, HACLINQ Account Ledger Inquiry Inquiry
Finacle 10 HACM, HACMTD Account Master, Account Master Term Inquiry
Deposits
Finacle 10 HINTTM Interest Table Master Maintenance Inquiry
Finacle 10 HAFI Audit File Inquiry Inquiry
BaNCS Customer Management -> To verify all accounts of one Customer Inquiry
Enquiries -> Search by CIF
Number
Page 10 of 28
 CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
BaNCS Customer Management -> Search using available information (ID Inquiry
Enquiries -> Search by ID Number)
Number
BaNCS Customer Management -> Search using available information (Name) Inquiry
Enquiries -> Search by
Name
BaNCS Customer Management -> Inquiry on Linked Accounts, Owned Inquiry
Relationship / Ownership -> Accounts etc.
Associated Accounts
FlexCube CH021 Account Master Maintenance Inquiry
FlexCube CH701 Customer account balances-Other than Inquiry
loans-For standard accounts but including
CC limit accounts
FlexCube CH703 RD account balances- Customer wise Inquiry
FlexCube 2000 CTI Customer Search Inquiry
FlexCube 7004 Customer Name and Address Inquiry Inquiry
FlexCube 7100 All Balance Inquiry Inquiry
FlexCube 7105 Display Customer Image Inquiry
FlexCube BA095 Account Level Attributes Inquiry Inquiry
FlexCube 7002 Balance Inquiry Inquiry
FlexCube CH031 Statement Inquiry Inquiry
FlexCube BAM24 Account Status Audit Trail Inquiry Inquiry
FlexCube 1337 Term Deposit Interest Payout Inquiry Inquiry
FlexCube 7020 TERM DEPOSIT Balance Inquiry Inquiry
FlexCube TD023 TERM DEPOSIT Rates History Inquiry Inquiry
FlexCube TD031 TERM DEPOSIT Audit Trail Inquiry Inquiry
FlexCube TD037 TERM DEPOSIT Account Ledger Inquiry Inquiry
FlexCube TD050 TERM DEPOSIT Interest Inquiry Inquiry
FlexCube TD11 TDS Inquiry Inquiry

ii. Transactions
CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 TM / TI Transaction Maintenance / Inquiry Inquiry
Finacle 7 FTI Financial Transaction Inquiry Inquiry (Search /
Criterion based)
Finacle 7 FTR Financial Transaction Inquiry Report Report
Finacle 10 HTI Transaction Maintenance / Inquiry Inquiry
Finacle 10 HFTI Financial Transaction Inquiry Inquiry (Search /
Criterion based)
BaNCS Deposit / CC / OD Accounts Transaction Enquiry Inquiry
& Services -> Enquiries -> (Additional options available: Transaction
Transaction Types: 99 – All Financial, 98 – Cash
Transaction, 25 – Repayment Details, 33 –
Message Details
BaNCS -> Branch Accounting (BGL) BGL Transaction Enquiry Inquiry
-> Enquire -> Transaction
FlexCube TD044 TD Transactions Inquiry Inquiry
FlexCube LN058 Loan Interest Adjustment Transaction Inquiry
FlexCube PM025 Payment Transaction Inquiry Inquiry
FlexCube GLM04 GL Transactions and Movements Inquiry Inquiry
FlexCube AT002 Audit Trail Financial Transactions Inquiry Inquiry
FlexCube BA777 Audit Trail Inquiry for Non-Financial Txns Inquiry

iii. Clearing Transactions

Page 11 of 28
 CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 MCLZOH Maintain Clearing Zone Inquiry
Finacle 7 OCTM Outward Clearing Transaction Inquiry
Maintenance
Finacle 7 ICTM Inward Clearing Transaction Maintenance Inquiry
Finacle 10 HOCTM Maintain Clearing Zone Inquiry
Finacle 10 HICTM Outward Clearing Transaction Inquiry
Maintenance
Finacle 10 HMCLZOH Inward Clearing Transaction Maintenance Inquiry
BaNCS Collection and Cheque Inquiry for Cheque Purchase / on Inquiry
Purchase -> Enquiries -> Collection
Enquiries
FlexCube ST023 Outward Clearing Inquiry
FlexCube ST033 Inward Clearing Inquiry
FlexCube BA990 Clearing Inquiry Inquiry
FlexCube ST002 Value Date Clearing Inquiry Inquiry

iv. Office Accounts Maintenance

CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 ACLPOA Account Ledger Print Office Account Report
Finacle 7 IOT Inquire on Transaction Inquiry & Report
Finacle 7 MSGOIRP Outstanding Items Report Report
Finacle 10 HIOT Inquire on Transaction Inquiry & Report
Finacle 10 HACLPOA Account Ledger Print Office Account Report
BaNCS -> Branch Accounting (BGL) Enquiry on BGL Account Inquiry
-> Enquire -> Account
BaNCS -> Branch Accounting (BGL) Search an Account Number by BGL Name Inquiry
-> Enquire -> Account
Number Search
BaNCS -> Branch Accounting (BGL) BGL Transaction Enquiry Inquiry
-> Enquire -> Transaction
Flexcube GLM01 GL Voucher Entry Inquiry
Flexcube GLM02 Chart of Accounts Inquiry
Flexcube GLM04 GL Transactions and Movement Inquiry Inquiry
Flexcube 1005 Miscellaneous GL Transfer (Dr/Cr) Inquiry

v. Loans & Advances

CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 SRM Security Register Maintenance Inquiry
Finacle 7 HCLM / CLL Collateral Maintenance Inquiry
Finacle 7 ACHLM Account History Limit Maintenance Inquiry
Finacle 7 ALM Account Lien Maintenance Inquiry
Finacle 7 ACTODM Account TOD Maintenance Inquiry
Finacle 7 TODRP TOD Register Printing Inquiry
Finacle 7 PSP Pass Sheet Print Report
Finacle 7 ACLPCA Account Ledger Printing Report
Finacle 7 LAGI Loan General Inquiry Inquiry (Criterion
based search)
Finacle 7 LAOPI Loan Overdue Position Inquiry Inquiry (Criterion
based search)
Finacle 7 LTL Limit Tree Lookup Inquiry
Finacle 7 LNDI Limit Node Inquiry Inquiry
Finacle 7 AINTRPT Interest Report for Accounts Report
Finacle 10 HSCLM Security Register Maintenance Inquiry
Finacle 10 HALM Account Lien Maintenance Inquiry
Page 12 of 28
 CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 10 HACTODM Account TOD Maintenance Inquiry
Finacle 10 HPSP Pass Sheet Print Report
Finacle 10 HACLHM Account Limit History Maintenance Inquiry
Finacle 10 HAINTRPT Interest Report for Accounts Report
Finacle 10 HINTPRF Interest Proof Report Report
BaNCS Deposit / CC / OD Accounts To verify the Account Master Details Inquiry
& Services -> Enquiries ->
Deposit / CC / OD Account
BaNCS Deposit / CC / OD Accounts Printing Statement of Account for a Deposit Report
& Services -> Enquiries -> or CC / OD
Statement Print
BaNCS Deposit / CC / OD Accounts Basic details on Enquiry on Screen on Inquiry
& Services -> Enquiries -> Deposit Accounts
Short
BaNCS Deposit / CC / OD Accounts Additional Details on Enquiry Screen for Inquiry
& Services -> Enquiries -> Deposit Accounts
Long
BaNCS Deposit / CC / OD Accounts Details of changes in Interest Rate for an Inquiry
& Services ->Interest Rate account
History
BaNCS -> DL/TL Accounts & Loan account operations Inquiry
Services -> Loan Tracking ->
Operations
BaNCS -> DL/TL Accounts & To print Repayment schedule for a DL / TL Report
Services -> Loan Processing Account
-> Generate Repayment
Schedules ->Action – “E”
BaNCS -> DL/TL Accounts & To view amount of Arrears & Breakup of Inquiry
Services -> Enquiries -> Principal, Interest Realized, Charges &
Short -> Option “Balance Arrear of Interest
Breakup Enquiry”
BaNCS -> DL/TL Accounts & Enquire on linked collateral Inquiry
Services -> Security
(Primary / Collateral) ->
Customer -> Enquiry ->
Enquire Security Summary
FlexCube CH066 Limit Collateral Inquiry Inquiry
FlexCube CHM06 OD Collateral Maintenance Inquiry
FlexCube CHM07 OD Limit Master Maintenance Inquiry
FlexCube ST070 Cheque Purchase Inquiry
FlexCube CH033 Average Quarterly / Monthly Balance Inquiry
Inquiry
FlexCube TDM24 Lien Master Inquiry
FlexCube 1413 Loan Disbursement Inquiry Inquiry
FlexCube LN522 Account Schedule Inquiry Inquiry
FlexCube LNM10 Account Transactions Inquiry Inquiry
FlexCube BA433 Collateral To Accounts Inquiry Inquiry
FlexCube BA434 Account To Collateral Inquiry Inquiry

vi. DD / PO, Cheque Book maintenance, Stop Payments and Security Stationery maintenance
CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 DDSM DD Status Maintenance Inquiry
Finacle 7 DDIP Inquiry on Specific DD Paid Inquiry
Finacle 7 ISRA Inventory Status Report Report
Finacle 7 IMI Inventory Movement Inquiry Inquiry
Page 13 of 28
 CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 ICHB Issue Cheque Book Inquiry
Finacle 7 CHBM Cheque Book Maintenance Inquiry
Finacle 7 SPP Stop Payment of Cheque Inquiry
Finacle 7 SPRG Stop Payment Register Report
Finacle 10 HDDSM DD Status Maintenance Inquiry
Finacle 10 HDDIP Inquiry on Specific DD Paid Inquiry
Finacle 10 HISRA Inventory Status Report Report
Finacle 10 HIMI Inventory Movement Inquiry Inquiry
Finacle 10 HICHB Issue Cheque Book Inquiry
Finacle 10 HCHBM Cheque Book Maintenance Inquiry
Finacle 10 HSPP Stop Payment of Cheque Inquiry
Finacle 10 HSPRG Stop Payment Register Inquiry
BaNCS -> Valuable Paper Inventory To check inventory status Inquiry
System [VPIS] -> Enquiry of
VPIS -> General Enquiry
BaNCS -> VPIS -> Lost / Damaged / Location for Lost / Damaged / Cancelled Inquiry
Cancelled Inventories Inventories
BaNCS -> VPIS -> Enquiry of VPIS - Details of Inventory available at Teller level Inquiry
>Teller Level Inquiry
FlexCube CH078 Cheque Status Maintenance Inquiry
FlexCube CHM35 Stop Cheque Instructions Inquiry
FlexCube CHM37 Cheque Book Issue Maintenance Inquiry
FlexCube IV011 Stock Inquiry Inquiry
FlexCube IV004 Inventory Lost report Register maintenance Inquiry
FlexCube MCA80 Inquiry of sold/issued inventory Inquiry

vii. Compliances
CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 TDSIP TDS Inquiry / Print Inquiry and Report
Finacle 7 AFSM Account Freeze Maintenance Inquiry
Finacle 10 HTDSIP TDS Inquiry / Print Inquiry and Report
Finacle 10 HAFSM Account Freeze Maintenance Inquiry
FlexCube TDS06 Tax Parameters Maintenance Inquiry
FlexCube TDS04 Tax waiver criteria Maintenance Inquiry
FlexCube TDS05 Customer special Tax code maintenance Inquiry
FlexCube TDS11 Tax Inquiry Inquiry

viii. Trade Finance and Foreign Exchange Transactions

CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 INBOEM Bill of Entry Maintenance Inquiry
Finacle 7 BI Bills Inquiry (Inland) Inquiry (Criterion
based search)
Finacle 7 BP Bills Inquiry (Inland) – Printing Report
Finacle 7 BM Bill Maintenance (Inland) Inquiry
Finacle 7 FBI Foreign Bill Inquiry Inquiry (Criterion
based search)
Finacle 7 FBM Foreign Bill Maintenance Inquiry
Finacle 7 FBP Foreign Bill Inquiry – Printing Report
Finacle 7 BRBPR Balancing Report for Bills Purchased Report
(Inland)

Page 14 of 28
 CBS Package Menu Code / Access path Menu Name Menu Type (Inquiry
/ Report)
Finacle 7 BRCR Balancing Report for Bills on Collection Report
(Inland)
Finacle 7 FBBR Balancing Report for Foreign Bills Report
Finacle 7 DCQRY Documentary Credit Query Inquiry (Criterion
based search)
Finacle 7 GI Guarantee Inquiry Inquiry
Finacle 7 IRM Inward Remittance Maintenance Inquiry
Finacle 7 ORM Outward Remittance Maintenance Inquiry
Finacle 10 HINBOEM Bill of Entry Maintenance Inquiry
Finacle 10 MIIB Maintain Import & Inward Bills Inquiry
Finacle 10 MEOB Maintain Export & Outward Bills Inquiry
Finacle 10 IBL Bill Inquiry Inquiry (Criterion
based search)
Finacle 10 HBRBPR Balancing Report for Bills Purchased Inquiry
(Inland)
Finacle 10 HBRCR Balancing Report for Bills on Collection Inquiry
(Inland)
Finacle 10 HFBBR Balancing Report for Foreign Bills Inquiry
Finacle 10 HGI Guarantee Inquiry Inquiry
Finacle 10 HIRM Inward Remittance Maintenance Inquiry
Finacle 10 HORM Outward Remittance Maintenance Inquiry
FlexCube SY001 Guarantee Inquiry Inquiry
FlexCube BIM04 Bill Parameters Maintenance Inquiry
FlexCube BIM05 Bills Processing Maintenance Inquiry
FlexCube BI001 Bills Data Entry Inquiry

Note:
The discussion of Menu codes / commands in this chapter is only for guidance of members. The purpose of inclusion of the
same here is to understand functioning of banking software. Moreover, with the continuous changes and customization
requests by banks, all the menu codes may not be available / accessible in all the banks.
The Finacle menu codes discussed in this chapter is for version 7 (except expressly mentioned). Finacle has introduced new
version namely Finacle 10.X. Few banks have already migrated to newer version and few more are in process of migration.
Under Finacle 10.X there are changes in Menu Codes apart from other navigational changes.
Disclaimer:
Images, Logo, Screen Shots, Menu Codes, Software Name etc are the property of respective Software developer / Trademark
owners.

Part - C

Illustrative Checklist on Audit activity through CBS

1. Parameters affecting automatic identification of NPAs and re-designing of audit processes

In terms of directives issued by Ministry of Finance and Reserve Bank of India, it is mandatory for banks to identify the
bad loans through CBS / Systems instead of conventional methods. CBS like other software work on GIGO principle.
Master Data play an important role in correct identification of Bad Loans.
Following are few scenarios wherein incorrect updation in Master Data, manipulation through transactions etc. may
impact correct identification of bad loans through CBS.

Parameters Auditors’ Primary Checks Suggested System Support

Discrepancies in  Whether EMI / installment is Finacle:
setting up the EMI / correctly setup. – ACI -> Option “E” Repayment details
Installments BaNCS:

Page 15 of 28
 Parameters Auditors’ Primary Checks Suggested System Support
 Whether EMI / installment amount – DL/TL Accounts & Services -> Enquiries ->
is matching with the Sanctioned Account
Terms. – Deposit / CC / OD Accounts & Services ->
 Whether periodicity of Installment is Enquiries -> Deposit / CC / OD Account
correctly classified as per (Short & Long Inquiry options are available
Sanctioned Terms? under both menu.)
Multiple sets of EMI /  For case of Multiple sets of EMI e.g. Finacle:
Installments For 1-5 years EMI of Rs. 7,000 and – ACI -> Option “E” Repayment details
after 5 years Rs. 7,500 BaNCS:
 Whether sets of EMI are properly – DL/TL Accounts & Services -> Enquiries -
entered? > Account
 Is there any substantial difference – Deposit / CC / OD Accounts & Services ->
between 1st set of EMI and 2nd or Enquiries -> Deposit / CC / OD Account
other sets (e.g. 1st set Rs. 5,000 and (Short & Long Inquiry options are available
2ndRs. 1,00,000) which cast doubt under both menu.)
on debt serviceability?
System determined  CBS contain two sets of Finacle:
Asset Classification vis parameters. At first instance CBS  ACM / ACI Option – ‘Y’ Asset Classification
a vis User defined identify the account based on set Inquiry
Asset Classification parameters under Asset  A report containing accounts wherein there
Classification types. is difference between Asset Classification
 In few CBS it has been observed by System and by user should be
that user is generally given the requested for. Accounts listed in the said
option to differ and select / amend report should be thoroughly verified.
the classification. In such cases
detailed scrutiny of NPA system is
required to be carried out.
 Due to errors in certain Master
Data, there can be erroneous
identification of account as NPA.
However, such accounts require
detailed scrutiny.
Manipulation in SL / DP  Changes in SL / DP should be Finacle:
cross checked with Sanctioned  ACLHM – Account Limit History
Letter. Maintenance
 Whether any change in Limit is BaNCS:
supported by necessary  Tailormade report on Changes in Account
documentation? Limits
Incorrect moratorium  Based on moratorium period CBS Finacle:
period will identify the Loan Installment  ACI – Option “E” – Repayment Details
and will track repayment. BaNCS:
 In case the moratorium period /  Account Master details (Long Inquiry)
installment start date is erroneously
updated system will not show
correct result.
Re-phasement without  Loan Account Installments are Finacle:
reporting it as rephased / recalibrated without  ACI – Option “E” – Repayment Details
reschedule reporting the same as Re-schedule. BaNCS:
 Verify whether any change in  Account Master details (Long Inquiry)
Repayment instruction is made  Report containing details of all the cases
through System. Compare the said wherein EMI / Installment is changed
accounts with list of Restructured should be sought
Accounts.
Installment Start Date is  Check whether Installment Start Finacle:
Future Date Date entered as per sanctioned  ACI – Option “E” – Repayment Details
term? BaNCS:
 In case of future date system will  Account Master details (Long Inquiry)
not identify installment and any

Page 16 of 28
 Parameters Auditors’ Primary Checks Suggested System Support
repayment received will be shown
as “Overflow”.
Interest Demand date  Check whether Interest Start Date Finacle:
(Future Date) entered is as per Sanctioned Term?  ACI – Option “E” – Repayment Details
 In case of future date as Interest BaNCS:
Demand Date system will not  Account Master details (Long Inquiry)
accrue interest and any repayment
received will be shown as
“Overflow”.
Fictitious credit  Are there any quarter / year end Finacle:
through Office Account credits cited in the account?  ACLI – (Use CTRL + E to Explore the Tran)
/ Inter-branch Account  Check the source of Credit Entries.  Review of Office Account Ledgers
 Review transactions in Office BaNCS:
Accounts / Inter Branch Accounts.  Deposit / CC / OD Accounts & Services ->
Enquiries -> Transaction
 DL/TL Accounts & Services -> Enquiries -
> Transaction
Round tripping from  Close scrutiny of transaction and Finacle:
internal accounts review of chain / series of  ACLI – (Use CTRL + E to Explore the Tran)
transaction for accounts with  Using only Account Turnover Information
deficiency is required. generated through “ATOR” / “CUTI” /
 Such transactions will inflate the “ACTI” menu may lead to incorrect
Credit Turnover in the account. inference, since the credits are not solitary
credits in account.
BaNCS:
 Deposit / CC / OD Accounts & Services ->
Enquiries -> Transaction
 DL/TL Accounts & Services -> Enquiries ->
Transaction
Temporary Overdrafts  Check whether the TOD is Finacle:
sanctioned in order to bring the  ACLI – Option “O”
overdrawn limit to base level  TODRP – TOD Register Printing
additional facility through TOD is BaNCS:
sanctioned. TOD Report
Devolved bills parked  Devolved Bills under LCs are Finacle:
in Office Accounts and required to be debited to the Limit  BI & FBI – with Bill Status as “K” using
not in limit account Accounts only. Assessment of status date filter
Asset Classification will be based BaNCS:
on composite overdrawn portion Report on Devolved bills under Import LC
Limit + LC Devolved amount (if any
on devolvement)
 Check whether the amount of
devolvement of LC backed bills are
parked in Office Accounts or any
separate account?
Multiple CUST ID to  Check whether multiple CUST IDs Finacle:
prevent the other have been opened for the borrower  ACS – Account Selection (Search based
account from becoming with different accounts? on Name)
NPA  NPA Report and search all the case  LAGI – Loan Account General Inquiry
by few characters of Name. (Inquiry based on other parameters)
BaNCS:
 Customer Management -> Enquiries ->
Search by Name

2. Parameters affecting collection of Interest / Revenue

Primary revenue for banks is Interest on Loans and Advances. Charging of Interest is completely automated barring few
products. However, the processing is based on certain important parameters. System parameters / fields which affect
the Interest Computation should be thoroughly verified.

Page 17 of 28
 Important Interest Parameters
 Interest Table
 Debit Interest Rate & Credit Interest Rate
– Interest Version
– Currency
– Limit Level Interest
 Penal Interest
 Interest Rate (Static / Absolute & Based on Ref. Rate)
 Interest Preferential Customer Level: Interest Rate preference will be applied to all the accounts of the customer
based on type of Interest.
 Debit Interest Preferential
– Positive preference value
– Negative preference value
 Credit Interest Preferential
– Positive preference value
– Negative preference value
 Interest Preferential Account Level: Interest Rate preference will be applied to the specific account wherein the
preference is updated.
 Debit Interest Preferential
– Positive preference value
– Negative preference value
 Credit Interest Preferential
– Positive preference value
– Negative preference value
 System Support / Important Menu Codes:
 Finacle: INTCI, AINTRPT, INTPRF, INTTM
 TCS Bancs: i) OD/CC Accounts -> Interest Rate History ii) DL / TL -> Interest Rate History
Following are few events / scenarios wherein there is a possibility of non application / incorrect application of Interest.
Sr. Event / Scenario
No.
1 Interest pegging in Advance Accounts set as “Y”. (If “Y” is selected, system will charge interest at the rate
prevailing at the time of Account Opening. For the cases of Fixed Rate Loans Pegging Flag will be “Y”)
2 Future Date is updated in Interest Demand Date
3 Interest on Principal / Payment of Interest Flag is set as “N”
4 Effective Rate of Interest is updated as “0”
5 Account Open and Installment Start Dates are identical.
6 Account Open and Interest Demand Dates are identical.
7 Interest Table Code “Zero” is selected
8 Interest Demand Date is Past Date
9 Interest Demand Frequency is Blank.

3. Audit of Foreign Exchange Transactions with the use of CBS

The liberalization of economy is paving way for opening of new areas for Inbound and outbound investment. Moreover,
with the increase in the global trade the foreign exchange and cross border transactions are increasing at a rapid speed.
However, it also poses challenge of preventing misuse of regulations and money laundering activities.
Following are few activities that the auditor must carry out for audit of Foreign Exchange Transactions.
Audit Activity Important Menu Codes of Finacle
Review of Letter of Credits issued, Expired, Search For Inquiry – DCQRY
on Outstanding LCs For Report – DCREG, DCRPTS, DCSTMT
Review of Bank Guarantee issued, invoked, closed, For Inquiry – GI
outstanding, Search on expired BGs For Report – GILR, GPI
Audit of Inland Bills (under collection, under LC, For search: BI
discounted) Search result printing: BP
For specific bill: BM
Audit of outstanding Inland Bills Report – BRCR (Collection Bills), BRBPR (Purchased Bills)
Audit of Foreign Bills (under collection, under LC, For search: FBI
discounted) Search result printing: FBP

Page 18 of 28
 Audit Activity Important Menu Codes of Finacle
For specific bill: FBM
Audit of outstanding Foreign Bills Report – FBBR
Audit of Inward and Outward Remittances (Other For Inward Remittance: IRM
than Import and Export Transactions) For Outward Remittance: ORM
Tracking of Packing Credit granted and tracking of Account wise Packing Credit: ACLI
order in case of Running Packing Credit Running Packing Credit: RPCTM

4. Audit of Office Account Transactions through CBS

Office accounts are opened for the purpose of parking entries till the time the final effect is not determined. However, at
various occasions it has been observed that the entries remain in the said parking accounts for a long period. Moreover,
in case of weak monitoring of the said accounts, the Office Accounts are susceptible to fraud and misappropriation.
There are various types of office accounts.
1. Based on Functionality
a. Pointing Type / Self Reconciling Accounts
b. Non Pointing Type Accounts
2. Based on Type of Entry
a. Sundry Accounts, Suspense Accounts
b. EOD/BOD Check Accounts
c. Inter branch Account
d. Mirror Accounts
e. Pool Accounts
Following are few audit actionables for auditor carrying out audit of Office Account Transactions.
Events Audit actionable Suggested system support
Cash Payment from Office Authorization of Transaction as per Finacle:
Accounts Delegated Authority  ACLI – For Transaction
 FTI – For Search
BaNCS:
 BGL -> Enquire -> Transaction
TOD through Office Accounts Through ineligible credit originating from Finacle:
a office account, customer can be  ACLI – For Transaction in
accommodated. Office Account
It also circumvent the number of TODs BaNCS:
granted to Customer.  BGL -> Enquire -> Transaction
Moreover, interest will not be applied in
the said case.
Parking of Cash Difference in Office Difference in Reconciliation, Cash Finacle:
Accounts, Clearing / Remittance Shortage debited to Office Account and  ACLI – For Transaction in
differences through Office not reversed. Office Account
Accounts Review ledger account in detailed.  IOT – For inquiry on
outstanding transaction
 MSGOIRP – For Printing of
outstanding office account
transaction report
BaNCS:
 BGL -> Enquire -> Transaction
 “Outstanding BGL
Transaction” Report
Rotation of entries in Office To prevent entry being reported as long Finacle:
Accounts outstanding entry, a new transaction  ACLI – For Transaction in
with debit and credit leg in the same Office Account
account is posted. Thus, the system BaNCS:
considers the new transaction date for  BGL -> Enquire -> Transaction
reporting as outstanding entries.

Page 19 of 28
 Events Audit actionable Suggested system support
Review transactions with same Debit
and Credit amount through Ledger
Scrutiny.
Correctness in mapping of reversal If the transactions have not been Finacle:
transaction to originating reversed against the related originating  ACLI – For Reversal
transaction entries the report generated by CBS will Transaction in Office Account
show incorrect outstanding items. BaNCS:
 BGL -> Enquire -> Transaction
Value Dated (Back Dated) Transaction credited in the Advance Finacle:
Transactions type accounts, Operative accounts with  ACLI – For Transaction in
a value date (Back date) wherein the Office Account
clear funds were not available in the  FTI – For Value Dated
office accounts. Transaction
Review the transactions from Revenue BaNCS:
Leakage perspective.  BGL -> Enquire -> Transaction
Round Tripping Rotation of entry from office account to Finacle:
operative account(s) without any  ACLI – For Transaction in
justification / source document. Office Account
Review the transactions from the BaNCS:
perspective of inflating credit turnover of  BGL -> Enquire -> Transaction
account.
Advance paid for Fixed Assets not Entries for payment of advance against Finacle:
capitalized procurement of Fixed Assets not  ACLI – For Transaction in
reversed. Office Account
 IOT – For inquiry on
outstanding transaction
 MSGOIRP – For Printing of
outstanding office account
transaction report
BaNCS:
 BGL -> Enquire -> Transaction
 “Outstanding BGL
Transaction” Report
Income realized not credited to Loan Installment received from Finacle:
Revenue Account Customer, not adjusted.  ACLI – For Transaction in
Processing Fees received, not credited Office Account
to Income Account  IOT – For inquiry on
Charges collected, not credit to Income outstanding transaction
Account  MSGOIRP – For Printing of
outstanding office account
transaction report
BaNCS:
 BGL -> Enquire -> Transaction
 “Outstanding BGL
Transaction” Report

5. Manual updation in CBS and its verification aspects

Under any CBS the transactions are processed as per predefined process. Majority of the processes in CBS are
automated and based on masters. A manual intervention in automated process leads to error in transaction processing.
Following are few manual changes / modification in system which affects the transaction processing. The auditor must
review the manual updation in CBS.
Manual Entry Probable impact
Advances
Interest Rate change Revenue Leakage, Excess collection of Interest
Change in EMI Revenue Leakage, NPA Identification
Processing of transactions against uncleared outward Recovery of amount from customer in case of cheque
clearing effect return

Page 20 of 28
 Manual Entry Probable impact
Backdated Renewal Date updation (Updating Date of NPA Identification
Renewal on running date with past date)
Change in Limit – From Non Fund Base to Fund Base NPA Identification
Account & Customer Master
Tax exemption updation Non compliance with TDS provisions
Dormant to Active Susceptible to fraud
Interest Table Code as “0” Revenue Leakage
Interest Collection Flag “N” Revenue Leakage
Reclassification of Agriculture Advance as per Sectorial Classification
revised RBI norms dt. April 23, 2015
Foreign Exchange Transactions
Erroneous Foreign Exchange Rate Revenue Leakage, Accommodation to customer
Full BOE received flag marked as “Y” wherein BOE Reporting to RBI under BEF Return
for entire transaction is not received
FIRC Issuance (without updating flag printed “Y”) Duplicate issuance of FIRC without “Duplicate FIRC”
inscription.
Merchant Trade Transaction (Manual mapping) Reporting to RBI
Transaction Processing & Housekeeping
Changes / Modification in Auto Calculated charge Revenue Leakage
amount at the time of posting of transaction
Ineligible Credits to NRE and FCRA Accounts Non compliance of FEMA Guidelines
ATM Replenishment entries Susceptible to Fraud
Payment for FD Closure proceeds in Cash through Non compliance with Income Tax Guidelines
Office Accounts in excess of Rs. 20,000
Revalidation of Old DDs Susceptible to Fraud
Value Dating (Credit Transactions in CC / OD Revenue Leakage
Account with Value Date without Value Dating at
Debit Leg)
Debit to Income Account (though Transaction Revenue Leakage
Maintenance Menu)
Manual Credit to Income Account (though Revenue Leakage (Computation of Income credited to be
Transaction Maintenance Menu) verified)
RTGS / NEFT in cash through office accounts > Non compliance with AML guidelines
49,999
Delay in posting of clearing cheque return Accommodation to customer
Manual Transfer of Security Stationery from Susceptible to Fraud (Avoid reporting of missing inventory)
Inventory location to External Location

6. Generation & verification of specific reports based on various criteria:

CBS allows generation of various reports through Frontend as well as through Backend. Few important reports for review
by auditors are as follows.
(a) Exception Report
Reports for the month end and two days prior and after month end should be verified. Exceptions of following
natures should be closely verified.
(i) Balance exceeded Account Limit
(ii) Manual debits to Income Account
(iii) Value Dated Transactions
(iv) Manual entry for SI Failure cases
(v) Instrument passed against Clearing
(vi) Backdated entries (normally restricted)
(b) Irregularity Report
Reports for the month end and two days prior and after month end should be verified. Report contains details of
Accounts where Balance in Accounts are greater than the Limits Sanctioned. Check whether the same is due to,
(i) Application of Interest
(ii) Granting of Intra Day TOD
(iii) Passing of Instruments against Clearing Effects
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 (c) Accounts where Interest Code is ‘0’
Interest will not be charged from Accounts where Interest Code is selected as ‘0’. Hence, a detailed checking is
required. Possible reasons can be if it is a NPA account or an account with a moratorium.
(d) Interest Collection Flag as “No”
If Interest Collection Flag is selected as “No”, Software will not consider the account for calculation and entry for
Debit Interest.
(e) Debit Interest SI Failed Report
Failure of Standing Instruction for Debit Interest should be closely verified. If the SI is failed the Account will not be
debited for Interest. SI Failure can be for any reason like
(i) Non availability of Balance in Account (In case of TOD in Operative Account)
(ii) Non availability of Limit in Account
(iii) Technical Snag in execution
Whether Branch has manually passed the entry for all such cases should be verified.
(f) Loan Installment SI Failed Report
Same as above
(g) Report containing all Advance Accounts with Limits
Generally, CBS Softwares generate a Report wherein details of all Advance Accounts are listed. Excel can be used
to verify cases of DP > SL, Margin Requirement, etc.
(h) TOD Report
Documents and sanction orders should be verified for all the cases of Manually granted TODs. In Finacle the report can
be generated through Menu Code “TODRP”.
(i) Account Turnover Report
To review the quantum of transactions in the borrower accounts turnover reports should be used. In Finacle, inquiry for
Account Turnover can be carried out through “ACTI, CUTI” Menu codes and report can be generated through “ATOR”
Menu.
(j) Loan Inquiry
In Finacle, criterion based search for Loan Accounts is available through Menu option “LAGI”. The said menu can be
used to verify,
 New sanction, Accounts closed
 Loans under various schemes
 Loans based on Account Classifications
 Accounts search based on Limit (Credit & Stock Audit)
(k) Loan Overdue Inquiry
In Finacle, criterion based search for Overdue & Overflow Loan Accounts is available through Menu option “LAOPI”. In
case of BaNCS the said details are available through offline daily report. The said menu can be used to verify,
 Principle & Interest Overdue & Overflow
 Overdue in “%” as well as Overdue in “No. of Days”
(l) Financial Transaction Inquiry
In Finacle, report based on different criteria for financial transactions can be generated through Menu Option “FTR”. The
said menu can be used to verify,
 Loan disbursement in Cash (SubGL code & Tran Type)
 Value Dated Transactions verification (Only value dated flag)
 Transactions in Loan / OD-CC Accounts (SubGL, Tran Type, Part Tran Type)
 Credits to NRE Accounts in a period (SubGL, Part Tran Type)
 Credits to FCRA Accounts in a period (SubGL, Part Tran Type)
 Cash Deposit Transactions above Rs. 50,000 to verify compliance with Income Tax Guidelines on PAN (Tran Type,
Tran Sub Type)
 Cash Transactions above Rs. 10 Lacs to verify compliance with AML Guidelines (Tran Type)
 Debits to ESCROW Accounts to verify compliance with ESCROW Agreement (SubGL, Part Tran Type)

7. Guide on Audit Activity through CBS for LFAR and Tax Audit Requirements
Following are few checkpoints for auditors for reporting under Long Form Audit Report alongwith suggested system
support.

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Audit Activity / Process Auditors’ Primary Checks Suggested System Support
/ Audit Area
Cash  Physical verification of Cash Finacle-7:
Balance  “ACLI” - Account Ledger Inquiry (Vault A/c
 Cash Balance as on the date of and Teller Accounts)
Audit Period Finacle-10:
 HACLI, HACLINQ

BaNCS:
 -> Reports -> Cash Related -> View Cash
Summary (Click on Fetch)
 -> Branch Reports -> Cash Officer’s Jotting
Book Report
 -> Reports -> Printing Reports -> Cashier /
Teller Cash Report

Flexcube:
 GLM02 - Chart of Accounts
 GLM04 - GL Transactions and Movement
Inquiry
Balances with RBI / SBI /  Balance as on Date Finacle-7:
Other Banks  Transactions in Mirror Accounts  “ACLI” - Account Ledger Inquiry (Vault A/c
 Reconciliation Statement and Teller Accounts)
(Generally outside of CBS)
Finacle-10:
 HACLI, HACLINQ

BaNCS:
 -> Branch Accounting (BGL) -> Enquire ->
Transaction

Flexcube:
 GLM02 - Chart of Accounts
 GLM04 - GL Transactions and Movement
Inquiry
Advances  Sanction Limit / Drawing Power Finacle-7:
setup  “ACLHM” – Account Limit History
Maintenance
 “ACM / ACI” – Account Master (Go to Limit
details)
 “LTL” – Limit Tree Lookup (Tree view of all
Limits)

Finacle-10:
 HACLHM - Account Limit History
Maintenance
 HACM / HACI, HACMTD (For TD)
 HLMTREEI Customer Limit Tree Details

BaNCS:
 DL/TL Accounts & Services -> Enquiries ->
Account
 Deposit / CC / OD Accounts & Services ->
Enquiries -> Deposit / CC / OD Account

Flexcube:
 CHM07 (OD Limit Master Maintenance)
 CH409 (OD Limit History Report)
Advances  Account & Customer Master Finacle-7:
parameters setup viz.

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Audit Activity / Process Auditors’ Primary Checks Suggested System Support
/ Audit Area
 Interest Parameters  “ACLHM” – Account Limit History
(Regular & Penal Interest) Maintenance for DP & SL – Account
 Repayment Instructions Specific
 Standing Instructions (SI)  “ACM / ACI” – Account Master
Parameters  “CUMM / CUMI ” – Customer Master
 Linking of Interest Rates
with Benchmark Rates Finacle-10:
 HACLHM - Account Limit History
Maintenance
 HACM / HACI, HACMTD (For TD)
 CRM Module

BaNCS:
 DL/TL Accounts & Services -> Enquiries ->
Account
 Deposit / CC / OD Accounts & Services ->
Enquiries -> Deposit / CC / OD Account
(Short & Long Inquiry options are available
under both menu.)

Flexcube:
 BAM12 (Interest Index Maint.)
 BAM13 (Interest Index Rates)
 LN060 (Loan Product Rates Plan)
 LNM41 (Interest Rules)
 LNM42 (Product Interest Attributes
Maintenance)
 LNM81 (Rate Change)
Advances  Transactions in Borrower’s Finacle:
Account  “ACLI” - Account Ledger Inquiry

Finacle-10:
 HACLI, HACLINQ

BaNCS:
 Deposit / CC / OD Accounts & Services ->
Enquiries -> Transaction
 DL/TL Accounts & Services -> Enquiries ->
Transaction

Flexcube:
 CH031 (Statement Inquiry)
Advances  Interest Rate History Finacle-7:
 “INTTM” – Interest Table Master
Maintenance (Under Inquire Mode –
Account Specific)

Finacle-10:
 HINTTM

BaNCS:
 Deposit / CC / OD Accounts & Services ->
Interest Rate History
 DL/TL Accounts & Services -> Interest Rate
History
Flexcube:
 LN022 (Interest Calculation Inquiry)
 LN608 (Interest Charges Report)

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Audit Activity / Process Auditors’ Primary Checks Suggested System Support
/ Audit Area
 LN801 (Loan Interest Report)
Advances  Conduct of Account and Credit Finacle:
Turnover  “ATOR” – Account Turnover Report
 Turnover of CC Account based  “ACTI” – Account Turnover Inquiry
on Borrower’s Business profile  “CUTI” – Customer Level Turnover Inquiry
 In case of Loan accounts
ACTUAL recovery of BaNCS:
Installments and Interest  DL / TL Accounts & Services ->Enquiries -
>Long
 Deposit/CC/OD Accounts & Services -
>Enquiries ->Long

Advances  Temporary Overdraft Finacle – 7 :

 ACTODM / ACTODI - Account TOD
Maintenance
 ACLHM - Account Limit History
Maintenance
 TODRP - TOD Register Printing

Finacle – 10:
 HACTODI - Account TOD Inquiry
 HTODRP - TOD Register Printing

BaNCS:
 Deposit / CC / OD Accounts & Services ->
Enquiries -> Interest Rate History -> Select
‘Limit history’ from drop down menu

Flexcube:
 CHM07 (OD Limit Master Maintenance)
 CH226 (Adhoc List of Overdue CASA
Accounts)
Advances  Non Performing Asset Finacle-7:
 Search an Account based  “ACS” – Account Selection (2nd Screen –
on Criteria IRAC Code – Main Asset Classification)

Finacle-10:
 HACSP

BaNCS:
 DL / TL Accounts & Services ->Enquiries -
>Short -> Select Option “1” – TL / DL
[Long Inquiry for NPA Date]
 Deposit/CC/OD Accounts & Services -
>Enquiries ->Short -> Select Option “2” –
CC / OD [Long Inquiry for NPA Date]
 Common Processing ->Overdue / NPA -
>NPA Enquiry (Risk Grade Inquiry / NPA
Status Inquiry)

Flexcube:
 AC02 - CRR (Credit Risk Rating) Inquiry
 LN156 - Non Performing Loan Details
Report
 LN191 - Accounts in NPA Status
Advances  Interest Report Finacle-7:
 “AINTRPT” – Interest Report for Account

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Audit Activity / Process Auditors’ Primary Checks Suggested System Support
/ Audit Area
Finacle-10:
 HAINTRPT Interest Report for Accounts
 HINTPRF Interest Proof Report

BaNCS:
 Product Sheets – To be requested from
Data Center (if not available through user
login)

Flexcube:
 LN022 (Interest Calculation Inquiry)
 LN608 (Interest Charges Report)
 LN801 (Loan Interest Report)
Advances  Primary & Collateral Security Finacle-7:
Maintenance  “SRM” – Security Register Maintenance
 CLL Collateral Maintenance
 HCLM Collateral Maintenance

Finacle-10:
 HSCLM Collateral Maintenance

BaNCS:
 DL/ TL Accounts & Services -> Security
(Primary/ Collateral) ->Customer -> Amend /
Enquiry ->Amend / Enquire Security

Flexcube:
 CH066 Limit Collateral Inquiry
 CHM06 OD Collateral Maintenance
Advances  Lien Marking Finacle-7:
 “ALM” – Account Lien Maintenance

Finacle-10:
 HALM – Account Lien Maintenance

BaNCS:
 DL/ TL Accounts & Services -> Security
(Primary/ Collateral) ->Customer -> Amend
/ Enquiry ->Amend / Enquire Security
(Under BaNCS – Collateral ID is required
to be created before setting up limits)

Flexcube:
 TDM24 Lien Master
Advances  Account Ledger Printing Finacle-7:
 “PSP” – Pass Sheet Print
 “ACLPCA” – Customer Ledger Account
Print

Finacle-10:
 “HPSP” – Pass Sheet Print

BaNCS:
 Print Menu available under DL / TL
Accounts & Services and Deposit / CC /
OD Accounts & Services

Flexcube:

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Audit Activity / Process Auditors’ Primary Checks Suggested System Support
/ Audit Area
 CH031 Statement Inquiry
 7010 Passbook update
 LNM10 Account Transactions Inquiry
 LN421 Statement of Account NPA
Advances  Non Fund based Facility (LC, Finacle-7:
BG)  “GI” – Guarantee Inquiry
 “DCQRY” – Documentary Credit Query

Finacle-10:
 HGI – Guarantee Inquiry

BaNCS:
 Report generated from Trade module
Stationery  Physical Verification of Stationery Finacle-7:
and confirmation of Balance as  “ISRA” – Inventory Status Report
per CBS (Locationwise viz., Dual Lock, Individual,
Cancelled etc.)

Finacle-10:
 HISRA Inventory Status Report
 HIIA Inventory Inquiry All

BaNCS:
 Through Valuable Paper Inventory System
[VPIS] module

Flexcube:
 IV011 – Stock Inquiries
 IV001 – Stock Transactions
 IV002 – Stock Adjustment
Office Accounts  Outstanding entries for reporting Finacle-7:
(Suspense, Sundry etc.)  Entries outstanding – Whether  “IOT” – Inquire on Transaction (As on date
any provisioning is required? Inquiry)
 “MSGOIRP” – Outstanding Items Report
 MSOIRP Minor Subsidiaries Outstanding
Items Report

Finacle-10:
 “HIOT” – Inquire on Transaction (As on date
Inquiry)

BaNCS:
 Through offline reports viz. “Audit BGL
accounts age wise break up“ and “GL-
Outstanding-Accnts” report.

Flexcube:
 GLM02 - Chart of Accounts
 GLM04 - GL Transactions and Movement
Inquiry
Office Accounts  Printing of Office Accounts Finacle-7:
(Suspense, Sundry etc.)  “ACLPOA” – Account Ledger printing Office
Account

Finacle-10:
 “HACLPOA” – Account Ledger printing
Office Account

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Audit Activity / Process Auditors’ Primary Checks Suggested System Support
/ Audit Area
BaNCS:
 BGL Accounting Menu
Inter Branch Account  Un-reconciled transactions Finacle:
 Through Outstanding IBR Report.

BaNCS:
 Through offline “Outstanding IBR Report“/
“IBR Summary report”
TDS Related  TDS Information and Reports Finacle-7:
 “TDSIP” – TDS Inquiry & Reports
 Month-end report on accountwise /
transactionwise Tax deduction.
 Bank specific customized Menu / report

Finacle-10:
 “HTDSIP” – TDS Inquiry & Reports

BaNCS:
 Through offline monthly report on
accountwise / transactionwise Tax
deduction.

Flexcube:
 TDS11 TDS Inquiry
 TDS15 Inquiry on Projected Tax

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