Previous Year Question
The term ‘Core Banking Solution’ is sometimes seen in the news. Which of the following statements best describes/describes this term?
It is a networking of a bank’s branches which enables customers to operate their accounts from any branch of the bank on its network regardless of where they open their accounts.
It is an effort to increase the RBI’s control over commercial banks through computerisation.
It is a detailed procedure by which a bank with huge Non-Performing Assets is taken over by another bank.
Select the correct answer using the code given below:
1 only
2 and 3 only
1 and 3 only
1, 2 and 3
Correct Answer: A
Detailed Solution
A Core Banking Solution, or CBS, is a centralised information-technology arrangement under which different branches of a bank are connected to a common central data centre and banking application.
“Core” is also associated with Centralised Online Real-time Exchange. Transactions are recorded in the central system almost immediately, eliminating the customer’s dependence on the original home branch.
Statement 1 is correct.
CBS enables a customer to operate an account through any CBS-enabled branch of the bank and the available digital channels. This is commonly described as Anywhere Banking.
CBS facilitates centralised processing of:
deposits and withdrawals;
transfers between accounts;
operation of loan accounts;
calculation of interest;
customer-identification and account records;
integration with ATMs, internet banking and mobile banking; and
connection with clearing and payment systems.
If a customer opens an account in one city, CBS enables access to banking services, subject to the bank’s rules, through another branch or a digital channel in a different city.
Statement 2 is incorrect.
The primary purpose of CBS is not to increase the RBI’s control over commercial banks. It is a technological arrangement intended to improve a bank’s internal operational efficiency, centralise records, improve customer service and provide anywhere-banking facilities.
The RBI regulates banks through statutory and regulatory powers. Its authority does not originate from CBS, although digital records can facilitate better regulatory reporting and supervision.
Statement 3 is incorrect.
The takeover or merger of a bank having large NPAs is a process of bank restructuring and resolution. It is unrelated to the concept of a Core Banking Solution.
CBS connects the banking operations of different branches through a central technological platform; it does not prescribe a bank-acquisition procedure.