Banking Project File

Name- Garima Singh

Class-XII G
Roll No.-
Bank
Computerization
Computer Is a device that accepts data, processes data
as desired, retrieves the stored data as and when required and
prints the result in a desired format.
Characteristics of a
computer:-
• Speed: All the computer operations are caused by electrical pulses
and travels at the speed of light. It can perform 100 million
calculations per second.
• Storage: Computers have huge capacity to store data in a very small
physical space. Today’s computers are also capable of storing
pictures and sound in digital format.
• Accuracy: The accuracy of computer is very high and every
calculation is performed with the same accuracy.
• Diligence: A computer is free from tiredness and lack of
concentration. Even if it has to do 10 Million calculations, it will do
even the last one with the same accuracy and speed as the first.
Components of a computer:-
• Input unit: Input unit comprises of various input devices which are
used for entering data into the computer. It is responsible for taking
input and converting it into binary. Some input devices are keyboard,
mouse, scanner, light pen etc.
• Central Processing Unit: CPU is the brain of the computer which
stores program, photos, graphics and data. It is divided into 3 sub
units:-

1. Control unit: Coordinates the activities of all the components of the

computer.

2. Memory unit: Stores data before actually being processed.

3. Arithmetic and logic unit: Responsible for performing all the

arithmetic and logical calculations such as addition, substraction,
division and multiplication and comparisons among variables and
data items.
• Output unit: It ensures the convertibility of output into human
readable form. Some output devices include monitor(visual display
unit),printer etc.
Books of accounts
maintained:
• The most popular system of recording of accounting transactions is
manual which requires maintaining books of accounts. The
accountant is required to prepare a summary of transactions and
financial statements manually.
• With substantial increase in the number of transactions, a machine
was developed to store and process accounting data.
• The computerized accounting uses the concept of databases. It is a
basic software which allows access to the data contained in the
database. Some of the commonly used accounting softwares are Tally,
Cash Manager, Best Books etc.
• Such an advancement leads to number of growing successful
organizations. Now maintaining accounting records have become
more convenient with the computerized accounting.
Components of Computerized
Accounting Software:-
• Preparation of accounting documents: Computer helps in preparing
accounting documents like cash memo, bills and invoices etc. and
preparing accounting vouchers.
• Recording of transactions: Every day business transactions are
recorded with the help of computer software, every account and
transaction is assigned a unique code. The grouping of accounts is
done from the first stage, this process simplifies the work of
recording transactions.
• Preparation of Trial Balance and Financial Statements: After recording
transactions, data is transferred into ledger account. Trial Balance is
prepared by the computer to check the accuracy of the records. With
the help of trial balance the computer can be programmed to prepare
Trading, Profit and loss account and balance sheet.
Transaction Processing
System (TPS):-
It is the first stage of computerized accounting system. The
purpose of any TPS is to record, process, validate and store
transactions that occur in various functional areas of business for
subsequent retrieval and usage.
Manual System- only human resources
Computerized System- only computer resources
Computer-based System- both computer and human resources
 Steps in processing transactions:-
1. Data Entry: The actions taken by the customer constitute data which is processed
after validations by the computerized banking system.

2. Data Validation: It ensures the accuracy and reliability of input data. This validation is
made by the “Error Detection” and “Error Correction” procedures.

3. Processing and Revalidation: The processing of data occurs almost instantaneously in

case of Online Transaction Processing (OLTP) provided a valid data has been fed to
the system. This is called check input validity. Revalidation occurs to ensure that the
transaction in terms of delivery of money by the ATM has been duly completed. This is
called check output validity.

4. Storage: Processed actions as described above, result into financial transaction data
i.e. withdrawal of money by a particular customer are stored in transaction database
of computerized personal banking system. This makes it absolutely clear that only
valid transactions are stored in the database.

5. Information: The stored data is processed making use of the query facility to produce
desired information.

6. Reporting: Reports can be prepared on the basis of the required information content
according to the decision usefulness of the report.
Advantages of Computerized
Accounting:-
• Numerous Transactions: The computerized accounting system is
capable of handling large number of transactions with speed and
accuracy.
• Instant reporting: It is capable of offering quick and quality reporting.
• Reduction in paperwork : A manual accounting system requires a
large physical storage space to keep accounting records/books and
voucher/documents.
• Flexible Reporting: The reports of a manual accounting system
reveals balances of accounts on periodic basis while computerized
accounting system is capable of generating reports when required.
• Security: Only the authorized users are permitted to have access to
the accounting data.
Basic requirements of the
Computerized Accounting System:-
• Accounting Framework: It is the application environment of the
computerized accounting system. A healthy accounting framework in
terms of accounting principles, coding and grouping structure is a pre-
condition for any computerized accounting system.
• Operating Procedure: A well-conceived and designed operating
procedure blended with suitable operating environment of the
enterprise is necessary to work with the computerized accounting
system.
Core Banking Solution (CBS)
• Computerization in Indian banking sector and the use of modern innovation has
increased many folds after the economic liberalization as the country’s banking sector
has been exposed to the world’s market.
• In 1984 a committee was formed by RBI in mechanization in the banking industry
whose chairman was Dr. C. Rangrajan, Deputy governor of RBI
• CORE ( Centralized On-line Real Time Environment ) means all bank’s branches,
service outlets ( automated or manual ) back office accesses applications from
centralized data centers.
• CBS is a set of basic software a component that manages the services provided by the
bank to its customers through its branches.
• CBS is based on Service Oriented Architecture ( SOA ).
• CBS is step towards enhancing customer convenience through “anywhere and anytime
banking”.
• Normal core banking functions – Deposit account, loans, mortgages, and payments.
 Dr. Chakravarthi
Rangrajan -19 th

governor of RBI(22
December 1992 to 21
December 1997)

Advantages of CBS:-
• Helps banks to improve service delivery quality and time to its customers.
• Helps banks to reduce risks that results from manual data entry and out of date
information.
 Need of CBS:-
• Improve operational efficiency: Reduce cost of operations as they provide alternative
delivery service channels, which reduce cost and time taken for the transactions.
• Improve customer service: Core banking will improve customer service by providing
services through alternate channels on 24x7 basis- ATM, Internet/Mobile banking.
• Comply with Anti-Money Laundering (AML) / Know Your Customer (KYC) requirements:
It is easy to comply with AML norms through CBS. The AML norms require the banks
to detect when a customer has opened multiple accounts.
• Integrate with electronic payment systems: It will allow banks to participate in an
inter-operable electronic payment network run by the National Payments Corporation
of India. It will help in quick and safe transfer of funds through NEFT and RTGS.
Key CBS System Controls:-
It is a combination of manual and automated controls which
makes a safe system. Various types of controls embedded at
various types of controls embedded at various levels in CBS
are:-
• Application controls
• IT administrative controls and security
• System developmental controls
Application level controls:-
• Authorization of a transaction as per delegation authority.
• Data Input ( validation ) controls.
• Accessibility in software areas as per employee position and area of
operations.
• Product level controls: 1.Prefixed Financial parameters

2. Fixed tenure

3. Controlled error handling through

warnings,

exceptions and errors.

IT Admin control and
security:-
• Controls are associated with processing activity.
• It allows users to use the software as per access rights table
• Confirmation/ Pre authorization for any outside software
installations.
• To ensure encryption of data.
• To ensure no changes are affected in IT hardware.
• Security policies for all IT assets.
Logical access controls
available are:-
• Access to system/menu as per the category and type of branch.
• Single sign on for all applications.
• Maker and checker controls.
• Security policies for all IT assets.
• CBS controls- System development controls.
• Testing and programs acceptance controls.
• Amendments to controls and maintenance of Standard Operating Procedure ( SOP )
for source code.
• Generation of Audit Trail.
• Maintaining editing history.
• Transaction tracking system.
System Development
controls:-
• Testing and programs acceptance controls.
• Amendments to controls and maintenance of SOPs for source code.
• Generation of Audit Trail.
• Maintaining editing history.
• Transaction tracking system.
Benefits of CBS project:-
• Anytime and anywhere banking.
• Standardized, simple and automated process.
• Increase in quality of the service provided to the customers.
• Timely and accurate information for management decision making.
• Strong audit and internal controls.
• Bring down the cost of transaction and thereby improving operational efficiency
• Paving way for new value added services thereby generating additional revenue for
the bank.
• Many people across the world are relying on the internet to conduct a number of
banking transactions.
• This method of banking Is quicker, easier, faster and more convenient than physically
visiting the bank branch.
Non-transactional tasks:-
• Viewing account balances.
• Viewing recent transactions.
• Downloading bank statements, example- In PDF format.
• Viewing images of paid cheques.
• Ordering cheque books.
• Download periodic accounts statements.
• Downloading applications for Mobile banking, E-banking etc.
Banking tasks :-
• Funds transfers between the customer’s linked accounts.
• Paying third parties.
• Investment purchase or sale.
• Loan applications and transactions.
• Register Utility bills.
Advantages of Online
Banking :-
• Easy to apply.
• Free to air.
• Safe and fast.
• Convenient.
• Accessible for 24 hours of the day.
• Worldwide access.
• No special software required.
• Wide range of services available.
• Better interest rates.
Online access process:-
• Register with the institution for the service.
• Set password for customer verification.
• Go to the financial institution’s secured website.
• Enter the online banking facility using the customer number and
password previously setup.
Online Banking
Risks :-
Declining the user to steal login data and valid TAN’s viz.
phishing and pharming. Use of cross site scripting and Key
Logger/Trojan Horse to steal login information. A Trojan Horse
permits a remote attacker to modify the destination account
number and the amount.
Phishing:-
The way of sending emails at arbitrary, indication to come from a
candid company which is operating on the internet. When the
customers make an attempt its request disclosing information at a
bogus website will be operated by them. Information entered on the
bogus website is captured by the criminals and they use it for their own
purpose.
Skimming :-
Fraudsters use skimmers to make fake ATM cards, a swipe card device
which reads consumer’s ATM card’s information, scanners swipe
information from credulous customers by inserting the card they are
able to encode all the information when they swipe from an ATM
skimmer catches PIN.
Spoofing:-
The invader creates a misleading context which false you in making an
unsuitable security-appropriate decision. Example: False ATM machines
have been set-up. If they will be having PIN number they will be having
enough information to steal from the account.
Online Banking Security
features:-
• Security token device.
• Secure website.
• Single password authentication.
• PIN( Personal Identification Number )/ TAN ( Transaction Authentication Number ).
• OTP ( One Time PASSWORD ).
• Signature based online banking.
• Digital certificates against phishing and pharming.
• Use of class-3 card readers.
• Use of virus scanners.
Mobile Banking
It is a system that allows customers of a financial institution to
conduct a number of financial transactions through a mobile
device.
Importance of mobile banking
:-
• Reduced branch/ call center costs.
• Increased proportion of transactions.
• Authorized transactions in many more places than ever before.
• Access to new business opportunities and new alliances across
business sectors.
• High market penetration.
Advantages of mobile
banking :-
• Advantages to customers: Time efficient, No more consideration of
bank hours, Balance can be checked anytime and anywhere.
• Advantages to bank: control costs, can cater to increased online
channel customers, Personalize customer interactions, cross selling,
unparalleled convenience, proactive customer service.
Mobile Banking Services :-
• Fast data services.
• Low data transfer costs.
• More functionality possible.
• Higher security mechanisms.
• Applications capitalize on the on the mobile aspects.
Mobile Banking security
issues:-
• Devices are easy to lose/steal and get misused.
• Location-aware applications could invade privacy.
• Clear text can be read or interrupted.
• Lack of standardizations in payment solutions.

Mobile Banking
Applications:-
• SMS
• WhatsApp
• Downloadable apps
 Mobile Banking Facilities :-
• Account information.
• Access to loan statements.
• Access to card statements.
• Mutual funds/ equity statements.
• Insurance policy management.
• Investments: Portfolio management services, Real-time stock quotes, Personalized
alerts and notifications on security prices.
• Support: Status of requests for credit, Check book and card requests, ATM location,
Exchange of data messages.
• Content Services: General information, Loyalty related offers, Location-based services.
Security measures implemented
for Mobile Banking :-
• Use of Crypto-Java SIM cards and Public Key Infrastructure ( PKI ) for
establishing hierarchy of trust.
• Debit/Credit cards linked to phone numbers.
• Implementation of secure PIN/one time password for transactions.
Internet Banking
Use of electronic means to transfer funds directly from one
account to another rathe than by cheque or cash.
Uses of Internet Banking:-
• NEFT ( National Electronic Funds Transfer ) funds transfer.
• Taxes.
• Railway/Bus/Hotel bookings.
• Filling up loan applications.
• Credit cards.
• Insurance.
• Customer services.
• Recharging your prepaid phones.
• Shopping.
• Bill payment.
Steps to use Internet
Banking:-
1. Obtain your user ID and passwords.

2. Create your own unique user ID.

3. Link the account numbers to your user ID.

Advantages of Internet
Banking:-
• Less cost.
• Transaction speed.
• Efficiency.
• Speed banking.
• Vast coverage.
• Available 24/7.
Security risks in Internet
Banking:-
• Increasing number of fraudulent websites.
• Fake emails purporting to be sent from banks.
• Use of Trojan Horse programs to capture user IDs and passwords.
Precautions to be taken for
Internet Banking:-
• Keep your passwords and PIN number a secret.
• Install Anti-Virus software in your computer.
• Install software to remove spyware.
• Check bank statements regularly.
• Use secure banking sessions.
• Log off completely after completing the banking session.
ATMs
ATMs are primarily machines to securely store and dispense
bank notes.
ATM Services:-
• Payment of utility bills.
• Topping up of mobile phones.
• Reloding prepaid cards.
• Payment of government benefits, entitlements or micro-loans.
• Open 24/7
• Customers do not have to visit their branch for withdrawing cash.
• ATMs reduce cost of branch operation.
Purpose of ATM:
• Dispensing cash without visiting their bank branch.
• Carrying out all the financial and non-financial transaction.
Uses of ATM:-
• 24-hour access to cash.
• Deposit cash or cheques.
• Change your PIN.
• Transfer funds between accounts.
• Payment of utility bills.
• Order a cheque book/account statements.
Steps to use ATMs for cash
withdrawal:-
1. Customer is given an ATM card with a PIN by the bank where customer has an account.

2. Customer needs to change the password before using the card.

3. Customer inserts the card in the slots of the ATM.

4. Customer selects the language he wants the instructions.

5. Customer inputs the PIN using the keyboard.

6. ATM verifies the PIN and initiates the process.

7. Customer selects cash withdrawal option from various options.

8. Customer inputs the amount he wants to withdraw and confirms it.

9. ATM will dispense the cash which the customer will take.

10. Customer presses exit option

11. Card is dispensed by the ATM which the client takes with him.

12. Customer can request for a paper transaction slip to be provided by the ATM.

13. If customer has registered for SMS alert he will get an SMS alert on his phone about the
transactions.