BANKING RECONCILIATION
Reports of various comities on computerization of banks & related issues.
Introduction.
Indian banking industry has undergone it dramatic change in the size and complexity of business during the post-nationalization period. The wide network of branches as well as extensive diversification of banking functions in India brought a number of stress on its operations, due to the absence of any regulatory mechanism, back of awareness of technology & prohibitive costs of computerization, the banking industry was very slow in making use of technology for its operations.
This had been continued till the initiative taken by RBI in 1983. It is a remarkable area in the history of banking industry for mechanization and computerization of banks. Many comities have been formed to fulfill the above criteria; the second Rangarajan committee established in the year 1988 has lead the way and the successive committees paved the way for mechanization and computerization in the Indian banking industry.
In India , computerization programs of banks are regulated and monitored by RBI, technology played a crucial role in increasing competitive efficiency between banks in India , the approach for computerization of banks is done in phases. So that the changes are introduced in a manner in which they can absorb easily or followed easily.
Rangarajan Committee on Computerization (1985-1989):-
RBI setup a committee in the year 1983 under the chairmanship of Dr. Rangarajan, Deputy Governor RBI to look into the modalities of drawing up a phased plan of mechanization of banking industry covering the period 1985-89. Committee submitted its report in the year 1984 and recommended introduction of Computerisation at regional / head office, with emphasis varying from one level to another.
Committee observed that some degree of mechanization was essential for bringing about positive change in the basic functions of bank such as customer service, inter bank transactions etc. For this committee recommended two modules as under:-
Module 1:
In this module committee recommends the use of micro processor based stand alone ALPM’s (Advanced Ledger Posting Machine’s) with limited memory capacity for certain functions like maintenance of primary ledgers etc. However, for different counters dedicated functional machines need to be deployed.
Module 2:
In this module, committee recommends single micro-processor based system of large capacity to enter general ledgers, day book and generate statistical returns etc.
The committee also recommended installation of main frame and mini computer systems at controlling offices of the banks for processing of statutory and statistical returns etc. Mechanization of foreign exchange operations, deal room operations, service branches were some of the other areas recommended for computerization.
Initially due to restrictions put on utilization of technology and the attitude of work man’s union, the progress were very slow, but the committee recommendations certainly, put the banking industry on the firm path of using modern tools for its operations. The implementation of recommendations of the committee helped the banks improve considerably house keeping to branch level and provide better services to the customer. Mechanization also proved useful to the employees in their work environment evoking the response.
Rangarajan Committee on Computerization (1990-1994):-
The following are the silent features of the report submitted by committee
1) The main purpose of computerization of banks should be improvement of customer service, decision making and productivity.
2) About 2000-2500 larger branches are to be fully computerized.
3) The following 3 different approaches are recommended.
a) Super-micro or mini or super mini computer systems along with the required number of on-line terminals can be installed at the countries and back offices of the identified branches.
b) Each branch will have PC’s at various counters connected through LAN, branches will also be connected through bank net with each other
c) This alternative is heavily reliable in telecom lines within the city and between 30 cities.
4. A small network of ATM’s can be tried out the use of ancillary equipment such as copping machines, facsimiles should be encouraged.
Unfortunately, even after submission of second report by Dr.Rangarajan, not any notable progress is achieved with regard to computerization of banking in India . There are a few ALPM installed in some branches, these are also network with regard to computerization of Zonal offices is also only little progress.
As compare to computerization of banks at international level, computerization of banks is very slow and backward. A single bank spent US$400 million every year on computers whereas money spent by all banks till today on computerization has only behalf of that.
CASH DISPENSERIES
Cash withdrawal is the basic service rendered by the bank branches. The cash payment is made by the cashier or teller of the branch and it takes a lot of time in counting the cash. Cash dispenser is an alternate to time saving. The operations by their machine are cheaper than manual operations and this machine is cheaper and faster than that of ATM. The customer is provided coated. After completing the formalities, the machine allows the transactions for required amount.
A cash dispenser is a financial electronic machine that is specially designed for distribution of cash in banks and institution. In a bank, it distributes the required amount of cash to the customer against a plastic card on which specific information like the account number, name etc. are magnetically coded when a customer inserts the card into this machine, if whether the card is valid or not. If the card is found to be valid, the customer is then paid the required money by this machine into which the staff must have inserted the same at the end of transactions the machine also signals a receipt or statement of transactions are installed inside the bank premises to reduce the pressure on the manual teller counter.
Features of cash dispensers: The significant features of cash dispensaries are mentioned.
1. It provides notes of various denominators.
2. Operations are very faster and cheaper than manual teller operations.
3. It ensures accuracy in transactions.
4. It ensures improved cash security science. It is not appriable to the bandits or dacoits and theft from outside.
5. It can be placed in the open plain environment.
6. A payment takes nearly a few seconds.
7. It is installed in a secure steel cabinet of 6-25 mm thickness.
8. It is easy to use and easy to provider services.
9. Replenishment of cash is quite simple and can be carried out during working hours.
10. It improves the productivity of the staff for business development.
11. It improves banker customer relations.
There are two types of such machines. They are
1. Under the desk cash dispensers.
2. Self service cash dispensers.
It may be noted that the 1st cash dispenser in the world was incorporated on June 27 1967
at a bank branch of Barklays Bank of England . It was invented by a company called De-Larue Systems. It was designed to simply release the pre-packed sachets of money based on the token inserted by the customer. It was not able to count the money the notes had to be counted and put into the machine by the staff. The customers were given a token by the staff in advance, so that he could withdraw money from the cash dispenser, even at an odd hour.
AUTOMATIC TELLER MACHINES ( ATM )
ATM is an electronic machine which is operated by the customer himself to make deposits, withdrawals and other financial transactions. ATM is an improvement in customer service. The machine is located in the bank premises or at any other centre when floating of customers is heavy.
Soon after opening a saving account ATM card will be issued. ATM is a plastic card which bears customers name. This Card is magnetically coded and can be read by ATM machine. A customer who wishes to utilize ATM card will have access to it only. Each card holder is provided with Secret Personal Identification Number (PIN) when the customer wants to use the card, he has to insert his card in the slot of the machine, enter his pin which allows the customer to transact as per his wish.
There are two types of ATM’s i.e. exterior and interior. Exterior ATM’s are located in various places like shopping centers; railway stations etc with or without drive in facility. When an ATM is located within bank premises is called interior ATM’s. ATM’s which are directly interactive with the banks computers are known as online ATM’s and others are known as offline ATM’s.
Structure of ATM’s:
1. Processor. It is the main brain behind the ATM. All necessary interfaces with various ATM’s modules are handled by the processor. It receives commands through the CIP and decised on future action.
2. Consumer Interface Panel (CIP). It consists of set of devices provided to consumer to carry on his transactions and allows the consumer to allow the data.
3. Card Reader. Motorized card reader is provided on the ATM’s. The magnetic track on the ATM’s is read by the card reader, as soon as card inserted by the consumer. It facilitates the consumer to carry on the transactions with ATM’s.
4. Printers. There are two types printers provided in an ATM’s one printer for consumers and other one if for journal printer. Both are not visible to the consumer. The transactions data is available in electronic media.
5. Dispensers. The country notes are stored in the cassettes in dispenser. It picks the currency and delivers the same to the consumer to the slot panel of consumer. The currency dispenser use both frictions pick and vacuum pick technology depending upon the technology available to ATM.
6. Depositors. It accepts envelopes with cash or other documents and provide security for the deposited material.
Advantages of ATM’s:
1. They provide service customers for 24*7*365 hours a day.
2. There is a ease and privacy of operations trough self service and no need to involve banks staff in transactions.
3. ATM’s are involved at convenient places which reduces the customers visit for bank transactions.
4. Machine is free from human errors; it shows no sign of tiredness.
5. Cost of maintenance is lesser and better customer service is possible.
6. Less pressure on teller during peak period of transactions.
7. It reduces the pressure on the bank staff.
8. Automatic and instantaneous accounting and operating.
Disadvantages:
1. ATM’s has to be imported from foreign countries which increase the financial pressure on banks.
2. It demands a higher degree sophistication and literacy in part of users.
3. ATM’s are not net worth and operate as a stand alone machine; customers will have to go to the concerned bank only.
4. Cash dispensation is currently limited to few denominations.
5. Minimum balance has to be maintained and daily withdrawals are limited.
Safety measures in utilizing ATM’s:
1. Selection of site should be done carefully to avoid discomfort for the customers.
2. Customers must be educated about privacy to be maintained in an ATM.
3. Customers PIN should be kept secret and not be disclosed to anyone under any circumstances.
Note Counting Machines
These machines are being used on Cash counters of the bank. These machines came into the picture due to counting and arranging in sections of 100’s s becoming quite tedious and error prone task. To reduce the burden on the teller, note machines are very useful. These machines are very fast in counting the currency notes. Notes or packets of notes inserted in the slot of machine which indicates the notes counted, every time the number reaches hundred machine stops and allows the bundle to be packed.
Advantages:
ü It saves time in counting operations of notes.
ü It saves time to cashier and customers as well.
ü As soon as the number reaches hundred, its stops and allows for the packet to be taken out.
Disadvantages:
ü The notes to be counted by the machine should be in fairly good condition to be counted properly.
ü Notes in the packets should be in the same denominations (it should be checked by the cahier) otherwise it will not make any difference between a 100/- note and 50/- note.
ELECTRONIC COMMERCE (E-COMMERCE)
Electronic commerce is an emerging concept that describes the process of buying and selling exchanging of products, services and information via computer networks including the internet. In other words e-commerce is the process of doing business online. Through this net buyer can access to any product available in the world market. The availability of product is referred to as cyber catalogue. In this catalogue, the functioning of goods, articles or machine is shown. In the cyber can set the order for the desired product through using e-commerce, through website of the vendor. Payment of the product call be made electronically using cyber cash a/c’s i.e. payment can be made in foreign currency mere at click of button. For transfer of funds Electronic Data Exchange (EDE) is used.
Definition: KALAKOTA AND WHINSTONE defines e-commerce in the following perspectives.
1. Communication Perspective. E-Commerce is delivery of information, products or services or payment over telephone lines, computer networks or any other electronic means.
2. Business process perspective. E-Commerce is the application of technology towards the automation of business transactions and work low.
3. Service Perspective. E-Commerce is the tool that addresses the desire of the customer, firms and management to cut service costs while improving the quality of goods and increase speed of service delivery.
4. Online perspective. E-commerce provides the capability of buying and selling products and information on the internet other online services.
The term commerce is viewed by some as transactions conducted between business partners. Therefore the term e-commerce sums to be firmly narrow to sum people. But it is a much broader term which does not deal with buying and selling but also with customer services and collaborate with business partners and conducts electronic transactions within a organization.
Electronic Markets
A market is network of interactions and relationships with information, products, services and payments are exchanged. When the transactions or business takes place in a network based relations rather than in a physical building that is called as electronic market.
Benefits of e-commerce
The global nature of technology, low cost, opportunity to reach hundreds or millions of people, interactive nature, and variety of possibilities and rapid growth of supporting infrastructures resulted in many potential benefits to the organization, individuals and society.
Benefits to organization:
1. Electronic commerce expands the market place to national and international markets.
2. E-Commerce decreases the cost of creating, processing, distributing, storing and retrieving paper base information.
3. It also reduces inventories and overheads by facilitating “Pull” pull type supply chain management.
4. Other benefits include improved image, customer service, new firm business partners, and simplified process reducing transportation costs and increasing benefits.
Benefits to consumers:
1. EC enables customers to shop or to do other transactions 24hrs, all the year from about any location.
2. EC provides customers with more choices, they can select from any vendor and from lore products.
3. In some cases, especially digitized products, EC allows quick delivery.
4. EC makes it possible to participate in virtual options.
Benefits to society:
EC enables more individuals work at house and to do less traveling for shopping, resulting less traffic on roads in lower air pollutions.
Limitations:
1. Lack of system security, reliability, standards and some communication protocols.
2. There is no sufficient telecommunication band width
3. Vendors we need special web services and other infrastructures, in addition to the network servers, which increases the expenditure economy.
4. The cost of developing EC in house can be very high, and mistakes due to lack of experience may result in delays.
Consumer oriented application in electronic commerce.
The most commonly discussed type of EC is business to consumers (B2C), EC in which online business attempt to reach individuals consumer B2C. EC is an online business which seeks to reach individual consumers. The following table illustrates the major business models utilized in B2C area.
Portal. It offers users powerful web search tools as well as integrated packages of contents and services such as E-Mail, Calendars, shopping and more all in one place.
E-Teller. Online retails stores often called E-Tellers. Customer can log onto internet ad check their inventory of the vendor to place an order.
Content provider. Sites that processed transactions for consumers normally by phone or mail are transaction brokers. Ex: Financial services, travel services, job placement services etc.
Business model | Variations | Examples | Descriptions | Revenue model |
PORTAL | General or horizontal Vertical or special | Yahoo.com msn.com aol.com rediff.com boats.com | Offers an integrated package of services and contents such as search, news videos, chat e-mail etc. seeks to be a users home base Offers services and products of a specialized market place | Advertising, subscription fee, transaction fee. Advertising, subscription fee, transaction fee. |
E-TAILER | Virtual merchant Clicks and mortar Catalogue merchant Online mail Manufacture direct | Amazon.com Walmart.com Landsn.com 99acres.com Fashionmail. Com Dell.com | Online version of retail store, where customers can shop at any home of day or night without office or home Online distribution channel for company that also has physical stores. Online version of direct mail catalogue Online version of mail Online sales made directly by the manufacturer. | |
Content provider | Sportsline.com Cnn.com Espnstar.com | Information and entertainment providers such as newspapers, sports sites etc offer the customer to update there knowledge. | Advertising, subscription fee, affiliate referral fee. | |
Transaction brokers | Etrade.com Monster.com | Processors of online sales transactions, such as stock brokers to increase customer’s productivity by helping them get things done faster and more cheaply. | Transaction fee | |
Market creator | Priceline.com | A web page business that uses internet technology to create markets that brings buyers and sellers together. | Transaction fee | |
Service provider | Exdrive.com | Companies that make money by selling users a service rather than a product. | Sales of services. | |
Community provider | Blackplanet. Com Above.com Ivillage.com | Sites where individuals with particular interest, hobbies and common experience can come together and compare notes. | Advertising, subscription fees, referial fees. |
Types of E-Commerce. E-commerce is broadly divided into three categories namely
1. Business to consumer (B2C)
2. Business to business (B2B)
3. Consumer to consumer (C2C)
Business to consumer (B2C): This is the most visible segment of EC. As the name implies in this segment the business directly sell to end consumers. Typically, the per customer volume of transactions may be low but the number of customers serviced at large. This is also referred to us E-Tailing or “Virtual store fronts” on the web sites.
As this media offers scope for 24 hours direct retail shopping and global reach, it provides the facility to interact and provides customers information and ordering. By early ’99 EC has started to gain reputation and many businesses are planning to enter into EC.
This segment of E-Business however requires huge investment and not only in terms of advertisement but also in the terms of hardware and software requirements for supporting for many millions of bits of data that they deal with, not only this it even requires extensive back office setup for running these operations for the proper delivery to the customer.
Business to Business (B2B): As the name suggest this includes this medium buying and selling of products and services between business organizations through the net.
Consumer to Consumer (C2C): As the name suggests this segment of the E-Business includes business where the consumers deal with other consumers for buying and selling goods and products. This may include rare, special category or 2nd hand goods. The most important of search site are auction sites.
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