Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices.
Core Banking system or CBS is one of the recent developments in the field of banking, and has proved to be very useful. It is a facility provided by banks in which a person, having an account in one branch, can operate his account, in another branch. This has become possible, because each account holder is given a specialised, computerised and unique account number. In simple terms, CBS is a type of banking, in which a person, who opens a bank account in a particular branch of a bank, will be a customer of the bank, rather than being a customer of a particular branch. Therefore, he can transact anywhere, at any time.
Previously a bank’s core operations such as keeping a ledger of various transactions, maintaining customer information, interest calculation of loans and deposits, adjustments to accounts on withdrawal and deposits of funds etc. were done manually. With the advent of ICT (Information & Communications Technology),under core banking), efforts were done to automate various banking processes using software applications so as to make them simple, efficient, effortless and cost effective. Thus, the core banking system, where ICT is used to perform the core operations of a bank, makes the bank to function in an effective and efficient manner.
Software applications record transactions, maintain customer information, calculate interest on loans and deposits etc. The data, instead of huge ledgers, are stored in backend databases in digital form. Now, the same software can be installed in various branches of a bank and can be interconnected through the internet or telephone lines to form a core banking network of the bank. The advantage, a customer can operate on his account from any branch of the bank and if the bank owns Internet Banking or ATM facilities, then the customer can operate on his account from virtually anywhere.
Thus, Core Banking System has radically changed the way in which banks function. The greatest advantage of having a Core Bank System is that new features and functionalities can be easily added to the system that customers will have a whole lot of services that they can use. Electronic funds transfer between banks, online trading in the stock markets etc. are examples of this, which were unheard of in banks pre Core Banking System era.
A central bank
The entity responsible for overseeing the monetary system for a nation (or group of nations). Central banks have a wide range of responsibilities, from overseeing monetary policy to implementing specific goals such as currency stability, low inflation and full employment. Central banks also generally issue currency, function as the bank of the government, regulate the credit system, oversee commercial banks, manage exchange reserves and act as a lender of last resort. RBI is the central banking institution of India.
The institution was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934. It plays an important part in the development strategy of the government and is a member bank of the Asian Clearing Union.
Functions of a central bank:-
• Implementing monetary policy
Central banks implement a country's chosen monetary policy. Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment.
• Determining Interest rates
Fundamentally, a central bank controls the interest rate since it is the growth rate of liabilities denominated in its own unit of account. NOK, USD,...