PSU banks race against time to implement core banking

MUMBAI: Government-owned banks are racing against time to put in place by June 2010 a centralised banking software that will enable customers to access their accounts anywhere through a variety of channels. Adding to their haste is the need to be networked in order to facilitate the government’s unique identification project where banks are to act as sub-registrar.

The centralised banking software, which the industry describes as a core banking solution, transfers accountholder information from computers in bank branches to a central server.

In a recent meeting between the CEO of large commercial banks and RBI deputy governor Usha Thorat on financial inclusion, banks informally agreed that they would strive to achieve 100% CBS by June 2010, a CEO of a large commercial bank told ET. The financial inclusion project aims to ensure that every family has access to banking services. A key component in RBI’s plan to achieve full financial inclusion is the unique ID project. This project will enable banks to identify Indians excluded from banking services and provide them with an identification to acquire a bank account.

Nandan Nilekani, chairman of Unique Identification Authority of India (UIDAI), which has undertaken the UID project, has made it clear that banks need to inter-connect their branches to act as sub-registrar. Individuals can approach a sub-registrar to get the UID number. UIDAI will provide software to banks for registering individuals, and in this context, banks under CBS will be better equipped to act as sub registrar.

Bankers say if an individual registers through them for the UID, especially in rural India, it will support their endeavour towards financial inclusion, which is providing banking services at affordable costs to the weaker sections of society. Customers, particularly those located in slums and rural India, sometimes find it difficult to open bank accounts since KYC norms require identity proof like proof of address and electricity bills. But if he has a UID number, it will enable him to quickly open a bank account.

As of now RBI has not placed any deadline for banks to achieve 100% CBS. However, a deadline has been fixed for the regional rural banks (RRBs), which is September 2011. So far, large commercial banks such as State Bank of India and all its associate banks have achieved 100% CBS. Others include Punjab National Bank, Bank of India, Bank of Baroda, Union Bank of India, Corporation Bank, Andhra Bank, Oriental Bank of Commerce and Indian Bank. Banks such as Canara Bank and Central Bank of India are among the big banks yet to achieve 100% CBS. Officials from both the banks told ET that they are likely to achieve 100% before June. Besides anytime-anywhere banking, it will facilitate instantaneous transfer of funds across accounts and allow PSU banks to extend their customers the same facilities that are provided by new generation private banks.
Meanwhile, banks are also looking to rope in telecom companies for financial inclusion project. Almost 10 telecom company and CEOs of large commercial banks are slated to meet Mr Nilekani in New Delhi on January 6 to discuss the role each of them could play for India to fully comply to financial inclusion.