Core Banking Systems Overview
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Questions and Answers

Which feature of Core Banking Systems indicates that all transactions are recorded at once across all locations?

  • Daily closing
  • On-line real-time processing
  • Centralized Operations (correct)
  • Remote interaction with customers

    • What is a key benefit of online real-time processing in Core Banking Systems?

  • Immediate transaction postings (correct)
  • Lesser operational costs
  • Duplication of entries reduced
  • Increased manpower requirements

    • Which technology component of Core Banking Systems refers to the secure storage of data?

  • Data warehouse
  • Application environment
  • ATM Switch
  • Database environment (correct)

    • What is a distinguishing feature of transactions in Core Banking Systems?

    <p>Authorization within the application</p> Signup and view all the answers

    Which module is essential for handling customer transactions remotely in Core Banking Systems?

    <p>Mobile banking</p> Signup and view all the answers

    Which of the following is NOT a feature of Core Banking Systems?

    <p>Static interest applications</p> Signup and view all the answers

    In terms of operational efficiency, what is an effect of using Core Banking Systems?

    <p>Significant reduction in error rates</p> Signup and view all the answers

    What does the application environment in a Core Banking System primarily consist of?

    <p>Application servers hosting core systems</p> Signup and view all the answers

    Which of the following components is NOT part of the CBS IT Environment?

    <p>Data Backup Server</p> Signup and view all the answers

    Which core business process is related to managing financial services for individuals and businesses?

    <p>Current and Savings Account</p> Signup and view all the answers

    Which subprocess of Information Security focuses on defining user access and privileges?

    <p>User Security Administration</p> Signup and view all the answers

    What is necessary for the successful implementation of CBS?

    <p>Strict adherence to predefined project milestones</p> Signup and view all the answers

    Which of these is a responsibility of the Maintenance phase of CBS?

    <p>Fixing program bugs and implementing version changes</p> Signup and view all the answers

    Which of the following best describes Application Security?

    <p>Implementing security during application configuration and transaction processes</p> Signup and view all the answers

    Which component is specifically responsible for handling online transactions in CBS?

    <p>Internet Banking Application Server</p> Signup and view all the answers

    What is the purpose of an audit in the context of CBS?

    <p>To verify that controls are functioning as intended</p> Signup and view all the answers

    What is one of the primary purposes of Core Banking Systems (CBS)?

    <p>To enhance service delivery models</p> Signup and view all the answers

    What is a key factor contributing to the growth of banking services in India?

    <p>Increased financial inclusion efforts</p> Signup and view all the answers

    Which of the following is NOT a type of deposit that commercial banks typically accept?

    <p>Real estate investments</p> Signup and view all the answers

    What are advances in the context of commercial banks?

    <p>A major source of lending</p> Signup and view all the answers

    Which of the following best describes the role of banks in addressing fraud risks?

    <p>They implement multi-point authentication checks</p> Signup and view all the answers

    How does the geographical dispersion of branches affect banking services?

    <p>It enhances the reach of banking services</p> Signup and view all the answers

    What is one of the primary responsibilities of banks regarding monetary items?

    <p>To ensure physical security of large volumes of cash</p> Signup and view all the answers

    What is a common type of remittance operation provided by commercial banks?

    <p>Transferring funds between branches</p> Signup and view all the answers

    Which remittance method involves the physical issuance of an instrument from one bank branch to another?

    <p>Demand Drafts</p> Signup and view all the answers

    What is the minimum amount for a transaction using Real Time Gross Settlement (RTGS) in India?

    <p>₹2 lakh</p> Signup and view all the answers

    Which of the following is an electronic form of inter-bank transfer available 24x7?

    <p>Immediate Payment Service</p> Signup and view all the answers

    What distinguishes Mail Transfer (MT) from other forms of remittance?

    <p>It is responsible for the transmission of the instrument.</p> Signup and view all the answers

    Which method allows for bulk transfers for payments such as salary or pensions?

    <p>ECS</p> Signup and view all the answers

    What is a characteristic feature of Electronic Funds Transfer (EFT)?

    <p>It allows for instantaneous transfer of funds.</p> Signup and view all the answers

    ECS Credit operates by debiting a single account to credit how many beneficiary accounts?

    <p>A large number</p> Signup and view all the answers

    Which of the following statements is true regarding National Electronic Funds Transfer (NEFT)?

    <p>It is a nationwide payment system for individual fund transfers.</p> Signup and view all the answers

    What is Compliance Risk associated with?

    <p>Potential legal and financial penalties</p> Signup and view all the answers

    Which of the following is a common source of People Risk?

    <p>Unauthorized access to sensitive areas</p> Signup and view all the answers

    What defines Credit Risk?

    <p>The risk associated with a client's default on a loan</p> Signup and view all the answers

    What is the primary concern of Market Risk?

    <p>Losses from trading activities due to market changes</p> Signup and view all the answers

    Which aspect describes Strategic Risk?

    <p>Risk due to mergers, competition, and changing demands</p> Signup and view all the answers

    Which of the following is NOT a common IT Risk in CBS?

    <p>Software compatibility issues</p> Signup and view all the answers

    What is an essential control for unauthorized Credit Line setup in banks?

    <p>Limited access rights for credit limit authorization</p> Signup and view all the answers

    What could be a potential impact of People Risk on an organization?

    <p>Degraded security of sensitive operations or processes</p> Signup and view all the answers

    Which function is not associated with the Reserve Bank of India (RBI)?

    <p>Providing loans to individual clients</p> Signup and view all the answers

    What is the objective of money laundering?

    <p>To conceal illegal income and make it appear legitimate</p> Signup and view all the answers

    Which stage of money laundering involves moving proceeds from the crime scene?

    <p>Placement</p> Signup and view all the answers

    What is involved in the layering stage of money laundering?

    <p>Separating proceeds through complex transactions</p> Signup and view all the answers

    What does the integration stage of money laundering aim to achieve?

    <p>Convert illegal proceeds into legitimate income</p> Signup and view all the answers

    Which of the following is a reporting requirement under Section 12 of PMLA?

    <p>Report suspicious activity regardless of transaction size</p> Signup and view all the answers

    Which statement is true regarding the calculation of interest and charges in the loan disbursal system?

    <p>Interest and charges are automatically calculated based on defined parameters</p> Signup and view all the answers

    Which of the following is NOT a stage of money laundering?

    <p>Falsification</p> Signup and view all the answers

    Study Notes

    Core Banking Systems

    • Banks provide various services, even in remote locations in India.
    • Key factors aiding service delivery include IT, government reforms, financial inclusion for Indians, and internet penetration growth.
    • Core Banking Systems (CBS) fulfill customer needs, meet global challenges, and enhance service delivery, scaling operations and improving customer satisfaction and overall efficiency.

    Key Features of Banking Services

    • Core functions involve deposit acceptance and lending.
    • Managing large volumes of monetary items (cash, negotiable instruments) with secure physical handling is important.
    • Wide branch networks and departments (geographically dispersed) are crucial.
    • Protecting from fraud requires multi-point authentication and high information security.

    Major Products and Services of Commercial Banks

    • Deposits: Various schemes (term, savings, current, recurring) and innovative products.
    • Advances: Lending in various forms, including cash credit, overdrafts, bill discounting, term loans, and loans like housing, education, or car loans.
    • Remittances: Transferring funds from one location to another, utilizing various methods.

    Other Banking Services

    • Back operations: General ledger, management information systems, and reporting.
    • Retail banking: Front-office operations (debit cards, personal loans, mortgages).
    • High Net-worth Individuals (HNIs): Specialized services catering to high-value customers.
    • Risk management: Strategic, operational, and technological risk management based on policy.

    Core Banking System (CBS) Characteristics

    • Centralised database (data centre), branches for delivery channels (consolidated view).
    • CBS is centralised banking application.
    • Incorporates advanced technology and high standards of functionality.
    • Modularity for bank-specific implementation in stages.
    • Integrates third-party applications for simple and complex business processes.

    Key Features of Core Banking Systems

    • Online real-time processing (transactions posted immediately, all databases updated simultaneously).
    • Centralised operations (All transactions in one database/server).
    • Real-time merging of back office and self-service operations, reducing errors from data duplication.
    • Separate hierarchy for business and operations, productized service divisions, customer remote interaction, transaction balancing.
    • Highly dependent system-based controls, authorization within the application, staff access based on authorization.
    • Daily/half-yearly/annual closing.
    • Less operational cost due to less manpower utilization, automatic processing of standing instructions for centralized interest applications across account types.
    • Anywhere access for customers and vendors through multiple channels like mobile, web, etc.

    Key Modules of CBS

    • Central server, back office, branch, data warehouse, ATM switch, mobile, internet, phone banking, and credit card systems are all interconnected.

    Key Technology Components of CBS

    • Database servers storing central data.
    • Application servers for core banking systems.
    • Enterprise security architecture (proxy servers, firewalls, intrusion detection systems).
    • Corporate network and internet connectivity (high bandwidth).
    • Data centers/disaster recovery centres (redundancy, backup, disaster recovery plans).
    • Online transaction monitoring for fraud management (risk profile evaluation, monitoring).

    Steps in Implementing CBS

    • Planning: Aligned with strategic and business objectives.
    • Approval: Board of directors' approval.
    • Selection: Choosing the appropriate CBS solution.
    • Design and development/procurement: Proper controls.
    • Testing: Comprehensive testing stages.
    • Implementation: Meeting pre-defined milestones.
    • Maintenance: Program bugs, versions implemented, etc.
    • Support: Ensuring CBS functionality.
    • Updation: Keeping CBS modules updated.
    • Audit: Internal and external audits for control verification.

    Components of CBS IT Environment

    • Application server
    • Database server
    • ATM channel server
    • Internet banking channel server
    • Internet banking application server
    • Web server
    • Proxy server
    • Anti-virus software server

    Core Business Processes in CBS

    • Current and savings accounts
    • Credit cards
    • Loans and trade finance
    • Mortgage and property loans
    • Internet banking
    • Treasury

    Information Security Subprocesses

    • Information Security Policies, Procedures and Practices
    • User Security Administration

    Risks and Controls in CASA Processes

    • Credit Line setup (unauthorized, not aligned with policy)
    • Credit line setups (unauthorised and not in line with bank's policy)
    • Customer Master definition in CBS
    • Accuracy of interest calculations in CBS
    • Unauthorized personnel approving transactions in CBS
    • Inaccurate reconciliations in CBS

    Risks and Controls Associated with Loans and Advances

    • Unauthorized Credit Lines
    • Incorrect Loan Setup and Authorization
    • Inappropriate Customer Master Data Input
    • Inaccurate Interest/Charge Calculation
    • Unauthorized Disbursement Operations
    • Customer Rate/Commission Discrepancies in CBS
    • Non-compliance with Disbursement Certificate Issues
    • Inappropriate Loan Facilities/Granting Processes

    Risks and Controls in Treasury Processes

    • Unauthorized securities setup in systems
    • Inaccurate trade processing
    • Unauthorized confirmations
    • Insufficient securities
    • Incomplete/inaccurate data flows between systems
    • Insufficient funds for settlements
    • Incorrect Nostro payments

    Risks and Controls with Respect to Mortgages

    • Incorrect customer and loan details
    • Incorrect loan amounts disbursed
    • Inaccurate interest calculation
    • Unauthorized changes to loan/customer data

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    Core Banking Systems PDF

    Description

    This quiz covers the fundamental concepts of Core Banking Systems, their role in providing banking services across remote locations in India, and the technology and reforms driving financial inclusion. It also highlights the key features and security measures essential for modern banking operations.

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