Corebanking a case study for the banking system

Answers to Selected Questions and ProblemsChapter 1 Database Systems Answers to Selected Review Questions2. Data redundancy exists when unnecessarily duplicated data are found in the database. For example, a customers telephone number may be found in the customer file, in the sales agent file, and in the invoice file. Data redundancy is symptomatic of a (computer) file system, given its inability to represent and manage data relationships. Data redundancy may also be the result of poorlydesigned databases that allow the same data to be kept in different locations. (Heres another opportunity to emphasize the need for good database design)(See Section 1.6.2, Data Redundancy.)4. A DBMS is a collection of programs that manages the database structure and controls access to the data stored in the database. (See Section 1.3.) The DBMS’s main functions are data dictionary management, data storage management, data transformation and presentation, security management, multiuser access control, backup and recovery management, data integrity management, database access languages and application programming interfaces, and database communication interfaces. (See Section 1.7.2, DBMS Functions.)6. Data are raw facts—more precisely, realworld facts that have been formatted and stored. Data are the raw material from which information is derived. Information is the result of processing raw data to reveal its meaning. (See Section 1.2, Data vs. Information.)8. Databases can be classified according to the number of uses supported: singleuser, desktop, multiuser, workgroup, and enterprise databases. According to data distribution, a database can be classified as centralized and distributed. According to its intended use, databases can be classified as operational (transactional) or data warehouse databases. (See Section 1.3.2, Types of Databases.) 10. Metadata is data about data. The metadata provide a description of the data characteristics and the set of relationships that link the data found in the database. (See Section 1.3, Introducing the Database.)12. The potential costs are increased hardware, software, and personnel costs; complexity of management; currency; and vendor dependence. (See Section 1.7.3, Managing the Database: a Shift in Focus.)Answers to Selected Problems1. The file contains seven records (215Z through 317P) and each of the records is composed of five fields (PROJECT_CODE through PROJECT_BID_PRICE.)3. The PROJ_MANAGER and MANAGER_ADDRESS fields should be broken up and moved into the following fields: First_Name, Initial, Last_Name, Area_Code, City, State, and Zip.5. The project name, employee name, job code, job charge per hour, and employee phone fields are unnecessarily duplicated. That duplication will lead to data anomalies.7. The file structure in Figure P1.5 can be subdivided into simpler files, each representing a single subject; for example, project data, employee data, job data, and proj_emp data. (The proj_emp data file would store the hours that an employee worked on a project.)9.The file structure in Figure P1.9 contains redundant data (teacher last name, first name, and initial). That data duplication could lead to data anomalies. It would be preferable to use a teacher ID or a teacher number column to relate the schedule data to a Teacher data file. Question 1: What do you think about banks investing heavily in core banking and ebanking? In your opinion, how can core banking and ebanking systems help banks in satisfying customers?Importance of ebankingWe will look at the importance of electronic banking for banks, individual customers, and businesses separately.BanksLesser transaction costs– electronictransactions arethe cheapest modes of transactionA reduced margin for human error – since the information is relayed electronically, there is no room for human errorLesser paperwork – digital records reduce paperwork and make the process easier to handle. Also, it is environmentfriendly.Reduced fixed costs – A lesser need for branches which translates into a lower fixed cost.More loyal customers – since ebanking services are customerfriendly, banks experience higher loyalty from its customers.CustomersConvenience – a customer can access his account and transact from anywhere 24x7x365.Lower cost per transaction – since the customer does not have to visit the branch for every transaction, it saves him both time and money.No geographical barriers – In traditional banking systems, geographical distances could hamper certain banking transactions. However, with ebanking, geographical barriers are reduced.Shopping – Withanebankingservice, acustomer can purchase goods or services online and also pay for them usinghisaccount. Shoppingathisfingertips.Advantages of Ebanking or Internet banking:Convenience: Banks that offer internet banking are open for business transactions anywhere a client might beaslongasthereisinternetconnection. Apartfrom periods of website maintenance, services are available 24 hours a day and 365 days round the year. In a scenario where internet connection is unavailable, customer services are provided round the clock via telephone.Low cost banking service: Ebankinghelpsinreducing theoperational costsofbankingservices. Better quality services can be ensured at low cost.Higher interest rate: Lower operating cost results in higher interest rates on savings and lower rates on mortgages and loans offers from the banks. Some banks offer high yield certificate of deposits and don’t penalize withdrawals on certificate of deposits, opening of accounts without minimum deposits and no minimum balance.Transfer services: Online banking allows automatic fundingof accountsfromlongestablished bankaccounts via electronic funds transfers.Ease of monitoring: A client can monitor hisher spending via a virtual wallet through certain banks and applications and enable payments.Ease of transaction: The speed of transaction is faster relative to useof ATM’sorcustomary banking.Discounts: The credit cards and debit cards enables the Customers to obtain discounts from retail outlets.Quality service: EBanking helps the bank to provide efficient, economic and quality service to thecustomers. It helps the bank to create new customer and retaining the old ones successfully. Any time cash facility: The customer can obtain funds at any time from ATM machines.Advantages to the customersEbankingdelivers 24x7 services to customer.Easy access to account information in quick time.Payment can be made online for the purchase of goods and services.With ebanking, customers can check account balance, can get statement of their account, apply for loans,check the progress of their investments and collect other relevant information.

Answers to Selected Questions and Problems Chapter 1 Database Systems Answers

to Selected ReviewQuestions

2 Data redundancy exists when unnecessarily duplicated data are found in the database For example, a

customer's telephone number may be found in the customer file, in the sales agent file, and in the invoice file Data redundancy is symptomatic of a (computer) file system, given its inability to represent and manage data relationships Data redundancy may also be the result of poorly-designed databases that allow the same data tobekeptindifferentlocations.(Here'sanotheropportunitytoemphasizetheneedforgooddatabasedesign!)

(See Section 1.6.2, Data Redundancy.)

4 A DBMS is a collection of programs that manages the database structure and controls access to the data

stored in the database (See Section 1.3.) The DBMS’s main functions are data dictionary management, data storage management, data transformation and presentation, security management, multiuser access control, backup and recovery management, data integrity management, database access languages and application programming interfaces, and database communication interfaces (See Section 1.7.2, DBMS Functions.)

6 Data are raw facts—more precisely, real-world facts that have been formatted and stored Data are the raw

material from which information is derived Information is the result of processing raw data to reveal its meaning (See Section 1.2, Data vs Information.)

8 Databases can be classified according to the numberofuses supported: single-user, desktop, multiuser,

workgroup,andenterprisedatabases.Accordingtodatadistribution,adatabasecanbeclassifiedascentralized

anddistributed.Accordingtoitsintendeduse,databasescanbeclassifiedasoperational(transactional)ordata warehouse databases (See Section 1.3.2, Types ofDatabases.)

10 Metadata is data about data The metadata provide a description of the data characteristics and the set of

relationships that link the data found in the database (See Section 1.3, Introducing the Database.)

12 The potential costs are increased hardware, software, and personnel costs; complexity of management;

currency; and vendor dependence (See Section 1.7.3, Managing the Database: a Shift in Focus.)

Answers to Selected Problems

1 The file contains seven records (21-5Z through 31-7P) and each of the records is composed of five fields

(PROJECT_CODE through PROJECT_BID_PRICE.)

3 The PROJ_MANAGER and MANAGER_ADDRESS fields should be broken up and moved into the

following fields: First_Name, Initial, Last_Name, Area_Code, City, State, and Zip.

5 The project name, employee name, job code, job charge per hour, and employee phone fields are

unnecessarily duplicated That duplication will lead to data anomalies.

7.ThefilestructureinFigureP1.5canbesubdividedintosimplerfiles,eachrepresentingasinglesubject;for example,

project data, employee data, job data, and proj_emp data (The proj_emp data file would store the hours that an employee worked on aproject.)

9 The file structure in Figure P1.9 contains redundant data (teacher last name, first name, and initial) That

data duplication could lead to data anomalies It would be preferable to use a teacher ID or a teacher

number column to relate the schedule data to a Teacher datafile.

Question1:Whatdoyouthinkaboutbanksinvestingheavilyincorebankingande-banking?Inyour opinion, how can

core banking and e-banking systems help banks in satisfyingcustomers?

Importance of e-banking

Wewilllookattheimportanceofelectronicbankingforbanks,individualcustomers,andbusinessesseparately

Banks

 Lessertransactioncosts–electronictransactionsarethecheapestmodesoftransaction

 Areducedmarginforhumanerror–sincetheinformationisrelayedelectronically,thereisnoroom for

humanerror

 Lesserpaperwork–digitalrecordsreducepaperworkandmaketheprocesseasiertohandle Also, it isenvironment-friendly

 Reducedfixedcosts–Alesserneedforbrancheswhichtranslatesintoalowerfixedcost

 More loyal customers – since e-banking services are customer-friendly, banks experience

higherloyalty from itscustomers

Customers

 Convenience–acustomercanaccesshisaccountandtransactfromanywhere24x7x365

 Lowercostpertransaction–sincethecustomerdoesnothavetovisitthebranchforevery

transaction,itsaveshimbothtimeandmoney

 Nogeographicalbarriers–Intraditionalbankingsystems,geographicaldistancescouldhamper

certainbankingtransactions.However,withe-banking,geographicalbarriersarereduced



Shopping–Withane-bankingservice,acustomercanpurchasegoodsorservicesonlineandalsopayforthemusinghisaccount Shoppingathisfingertips

Advantages of E-banking or Internet banking:

 Convenience:Banksthatofferinternetbankingareopenforbusinesstransactionsanywhereaclient

mightbeaslongasthereisinternetconnection.Apartfromperiods of website maintenance,servicesareavailable24hoursadayand365daysroundtheyear.Inascenariowhereinternetconnec tionisunavailable,customerservicesareprovidedroundtheclockviatelephone

service:E-bankinghelpsinreducingtheoperationalcostsofbankingservices.Betterqualityservicescanbeensured atlowcost

 Higherinterestrate:Loweroperatingcostresultsinhigherinterestratesonsavingsandlowerratesonmort

gagesandloansoffersfromthebanks.Somebanksofferhighyieldcertificateofdepositsanddon’tpenalizewithdrawalsoncertifica teofdeposits,openingofaccountswithoutminimumdepositsandnominimumbalance

 Transferservices:Onlinebankingallowsautomaticfundingofaccountsfromlongestablishedbankaccoun

tsviaelectronicfundstransfers

 Easeofmonitoring:Aclientcanmonitorhis/

herspendingviaavirtualwalletthroughcertainbanksandapplicationsandenablepayments

 Easeoftransaction:ThespeedoftransactionisfasterrelativetouseofATM’sorcustomarybanking.

 Discounts:ThecreditcardsanddebitcardsenablestheCustomerstoobtaindiscountsfromretailoutlets.

 Qualityservice:E-Bankinghelpsthebanktoprovideefficient,economicandqualityserviceto

thecustomers.Ithelpsthebanktocreatenewcustomerandretainingtheoldonessuccessfully

 Anytimecashfacility:ThecustomercanobtainfundsatanytimefromATMmachines.

Advantages to the customers

 E-bankingdelivers24x7servicestocustomer

 Easyaccesstoaccountinformationinquicktime

 Paymentcanbemadeonlineforthepurchaseofgoodsandservices



Withe-banking,customerscancheckaccountbalance,cangetstatementoftheiraccount,applyforloans,checktheprogressofthe irinvestmentsandcollectotherrelevantinformation

Question 2:Case study“State bank of India (SBI) - World's largest centralized core

processingimplementation”

a What are the reasons for SBI to deploy core bankingsystem?

SBI had undertaken a massive computerization effort in the 1990s to automate all of its branches, implementing a highly customized version of Kindle Banking Systems' Bankmaster core banking system (now owned by Misys) However, because of the bank's historic use of local processing and the lack of reliable telecommunications in some areas, it deployed a distributed system with operations located at each branch Although the computerization improved the efficiency and accuracy of the branches, the local implementation restricted customers' use to their local branches and inhibited the introduction of new banking products and centralization of operations functions Thelocalimplementationpreventedthebankfromeasilygainingasingleviewofcorporateaccounts, and management lacked readily available information needed for decision making and strategic planning

The advantages in products and efficiency of the private-sector banks became increasing evident in the late 1990s as SBI (and India's other public-sector banks) lost existing customers and could not attract the rapidly growing middle market in India In fact, this technology-savvy market segment viewed the public-sector banks as technology laggards that could not meet their banking needs As a result, the Indian government sought to have the public-sector banks modernize their core banking systems In response to the competitive threats and entreaties from the government, SBI engaged KPMG Peat Marwick (KPMG) in 2000 to develop a technology strategy and a modernization road map for the bank

b How has SBI implemented the core bankingsystem?

TheconversioneffortbeganinAugust2003,whenSBIconvertedthreepilotbranchestotheBaNCS

system.Thesuccessfulconversionandoperationofthepilotbrancheswasfollowedbytheconversion of 350 retail branches with high-net-worth customers between August 2003 and September 2004.At this point, the bank intentionally halted the conversions to analyze and resolve reported problems They analyzed, categorized, and prioritized these problems by type of resolution (e.g., software, procedural, training) and severity TCS managed software revisions for the critical software changes while the branch personnel managed the needed training and proceduralchanges

After the software and procedural changes were implemented, SBI converted an additional 800 branches between December 2004 and March 2005 Unlike in the previous conversions, this group

of branches included predominantly commercially oriented offices The conversion effort then refocused on retail branches until November 2005, when the bank paused again to resolve problems that came up during this second group of conversions

After the second round of changes, the system and processes were functioning smoothly, and management believed the branch conversion could be accelerated An assembly line approach was then employed in April 2006 to speed the branch conversion process:

• Branchpersonnelwereresponsiblefordatascrubbingandcleaningoftheircustomerinformation on the

existingsystem

• Branches were notified three months prior to their conversion date to begin "mock," or test, conversions using a specially created test version of the BaNCSsystem

• Branches performed several test conversions to ensure the actual conversion wentsmoothly

c SWOT analysis of SBI, and give your personalopinion?

Strengths

 SBI is India’s biggest bank in terms of market share, sales, andreserves.

 SBI has been ranked in the Fortune Global 500list.

 According to recent reports, the bank has more than 22141 branches and 58555ATM’s.

 The bank is active in 36 countries involved in currency traders around theworld.

 SBI has the first-mover edge of commercial bankingfacilities.

 SBI recently updated its vision and mission statements indicating an indication of inclination towards new-age bankingservices.

 State Bank of India has a huge employee base of 257252employees.

 SBI has revenue of 143306 Crore rupees (20 billion USDollars).

 The owner of the State Bank of India is the Government ofIndia.

Weaknesses

 The lack of adequate technology-driven infrastructure relative to privatebanks

 Employees are hesitant to fix issues efficiently due to better job stability, and the turnaround period for clients is lengthy relative to privatebanks.

 The banks pay a large sum on their leasedhouses.

 SBI has the largest number of employees in the banking sector, which is why the bank spendsa considerable amount of its income on employees ‘ salaries.

 Despite the modernization, the bank still conveys the perception of the traditional bank to new-ageclients.

 SBI does not draw corporate payroll accounts, and any government employee’s payroll accounts are now transferred to private banks for ease of service, unlikebefore.

Opportunities

 The merger of SBI with five other banks, namely the State Bank of Hyderabad, the State Bank of Patiala, the State Bank of Bikaner and Jaipur, the State Bank of Travancore and the State Bank

of Mysore, is at the approvalstage.

 Mergers would result in a rise in market share to protect its number onespot.

 SBI aims to expand and invest in foreign activities due to a strong inflow of capital from the Asianeconomy.

 As some of the banking activities are yet to be modernized, there is a greater opportunity for leveraging new technology and applications to enhance customerties.

 Young and talented graduate and B school pools are on the rise to open new horizons for theso-called “old government bank”.

Threats

 Net profit of the year decreased from 9166.05 in the year 2010 to 7.370.35 in the year2011.

 This indicates that the market share of its close rival ICICI isthat.

 Other private banks, such as HDFC, AXIS bank,etc.

 FDIs permitted in the banking sector was increased to 49%, which is a major challenge to SBI as citizens continue to turn to international banks for better banking services facilities and

technology.

 Other government banks, such as GNP, Andhra, Allahabad Bank, and Indian Bank, are coming up.

 Customers prefer to switch to private banks and financial service providers for loans and mortgages,asSBIinvolvesstrictverificationproceduresandtakesalongtimetoprocess.

Question 3:Case studey“E-banking: The emerging trend”:

a Summary of scientificarticles

Inanotherview,thestoryofpresentgloryofbankstakesustothe12thand13thcenturies.Somerich extended their financial help to some other needy people without any security of guarantee but on honesty The lenders did not charge any interest as they had no intention of earning income from borrowers In some of the European countries where the religion was predominant, the priests advanced to some needy people Subsequently they enlarged their lending activities consequently they introduced to accept deposits from the public People trusted priests to protect their money and so held their deposits with such priests, the representatives of god Later on they started to accept securities and ornaments while advancing loans whichwere

With the time, the concept of internet banking has got attention in the Indian context Most of the banks have already implemented the e-banking facilities, as these facilities are beneficial to both i.e banks as well as consumers The banks are facing many challenges and many opportunities are available with the banks Many financial innovations like ATMs, credit cards, RTGS, debit cards, mobile banking etc have completely change the face of Indian banking Thus, there is a paradigm shift from the seller's market to buyer's market in the industry and finally it affected at the bankers level to change their approach from "conventional banking to convenience banking" and "mass banking to class banking" The shift has also increased the degree of accessibility of a common man

to bank for his variety of needs and requirements In years to come, e- banking will not only be acceptable mode of banking but will be preferred mode of banking

b Present the new trends of e-banking according to the content of the

article? ATM:

AutomatedTellerMachine(ATM)isamachinewherecashwithdrawalcanbemadeoverthemachine

withoutgoingintothebankinghall.Italsosellsrechargecardsandtransferfunds;itcanbeaccessed 24 hours/7 days with account balance enquiry.7

Internet Banking:

Internet banking allows customers of a financial institution to conduct financial transactions on a securewebsiteoperatedbytheinstitution,whichcanbearetailorvirtualbank,creditunionorsociety

It may include of any transactions related to online usage Banks increasingly operate websites through which customers are able not only to inquire about account balances, interest and exchange rates but also to conduct a range of transactions Unfortunately, data on Internet banking are scarce, and differences in definitions make cross-country comparisons difficult.8

POS:

Pointofsale(POS)alsosometimesreferredtoaspointofpurchase(POP)orcheckoutisthelocation where a transaction occurs A ‘checkout’ refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register A POS terminal manages the selling process by a salesperson accessible interface The same system allows the creation and printing

of the receipt Because of the expense involved with a POS system, the eBay guide recommends that if annual revenue exceeds the threshold of $700,000, investment in a POS systemwillbeadvantageous.POSsystemsrecordsalesforbusinessandtaxpurposes.Illegalsoftware dubbed ‘zappers’ is increasingly used on them to falsify these records with a view to evading the payment oftaxes.9

Mobile Banking:

Mobile banking (also known as M-banking) is a term used for performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA) The earliest mobile banking services were offered over SMS, a service known as SMS banking Mobile banking is used in many parts of the world with little or no infrastructure, especially remote and rural areas This aspect of mobile commerce is also popular in countries where most of their population is un-banked In most of these places, banks can only be found in big cities, and customers have to travel hundreds of miles to the nearest bank The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information.10

Home Banking

Home banking is a service that enables a bank client to handle his accounts from a computer from a place selected in advance, at home or in the office The main features of home banking systems are the high level of security, comfort, simplicity of use, openness of the system, wide communication possibilities, networking, definition of users and their rights, automated data transmission and the option to define a combined signature specimen.11 A home banking system usually consists of two parts: a bank computer program and a program in the client‘s computer The bank program works as acommunicationserver.Itreceivescallsfromclients,verifiestheiridentity,receivesdatafromthem, authenticates digital signatures, and generates digital receipts and send data toclients

Chapter 2 Data Models

Answers to Selected Review Questions

2.A business rule is a brief, precise, and unambiguous description of a policy, procedure, or principle within

a specific organization’s environment Properly written business rules are used to define entities, attributes, relationships, and constraints.

5 Therelationaldatamodelillustratesend-userdataasbeingstoredintables.Eachtableisamatrixconsisting of a series of row/

column intersections Tables, also called relations, are related to each other by the sharing of a common entity characteristic (value in a column) The relational database is perceived by the user to be a collectionoftablesinwhichdataarestored.Therelationaldatamodel allowsthedesignertofocusonhowthe data components interact, rather than on the physical details of how the data are stored This makes is much easier to model the complex real-world dataenvironment.

6 An entity relationship model, also known as an ERM, helps identify the database's main entities and their

relationships.BecausetheERMcomponentsaregraphicallyrepresented,theirroleismoreeasilyunderstood Using the

ER diagram, it’s easy to map the ERM to the relational database model’s tables and attributes The mapping process uses a series of well-defined steps to generate all of the required databasestructures.

9.An object is an instance of a specific class The object is a run-time concept, while the class is a

more static description Objects that share similar characteristics are grouped in classes A class is a collection of similar objects with shared structure (attributes) and behavior (methods.) Therefore, a class resembles an entity set However, a class also includes a set of procedures known as methods

13.Arelationshipisanassociationamongtwoormoreentities.Threetypesofrelationshipsexist:to-one (1:1), one-to-many (1:M), and many-one-to-many (M:N orM:M).

Answers to Selected Problems

1.An AGENT can have many CUSTOMERs Each CUSTOMER has only one AGENT.

4.

Each store is located in one region.

Each employee works in only one store.

Each employee holds only one job.

6.

ENTITY Relationship Type ENTITY Business Rules

Each class is a section of only one course.

(Thismeansthataclasscanappearmanytimesinthe ENROLL table—that's because a class can have manystudents.)

(This means that a student can appear many times in the ENROLL table—that's because a student can take more than one class.)

10 a.You would create three tables:

GALLERY GAL_NUM, GAL_NAME, GAL_ADDRESS

b.The PAINTING table will be related to both the GALLERY and PAINTER tables ThePAINTING table

will contain the attribute PTR_NUMBER, which will relate it to the PAINTER table The PAINTING table will also contain the GAL_NUM attribute, which will relate it to the GALLERY where the painting is beingshown.

13.The business rules are summarized in the following table:

Each student is advised by only one professor.

Each class is taught by only one professor.