Essential of Bank Computerization

Local Area Network

Topology: The way in which the devices are interconnected is known as topology. The method of operation for the transfer of data over networks is called packets switching. The data user wishes to send, commonly referred to as a message is broken down into smaller units called packets. Each packet consists of some data bits and a header containing its destination address. The packets are passed from one packet by switching exchange to another until they reach their destination.

Star Topology			Ring Topology				Bus Topology
Central node is often the		Devices are connected in				·	All	devices	are
master		a	closed	loop	and		connected to a single
Each of the other nodes		information is passed					continuous cable
are   joined	to   the	from  one		node	to	Transmission  from			any
master  by	separate	another in series.					station	travels	the
links.		Data is transmitted in one					length of the bus, in
It one station fails, it will		direction only.					both	directions	and
not affect the rest of		The	breakdown  of		any		can be received by all
the network		station on the ring can					other stations.
		disable the entire LAN				·	It one	station fails, it
							will not affect the rest
							of the network
Protocols

.

  Data Communication Network and EFT Systems

Data communication consists of various data communication components. It has three basic components.

1.  Transmission Devices and Interface Equipment

Modem conversion between the digital and analog forms is carried out by an interface device called Modem

2.     Transmission Medium Terrestrial Cables

Twisted-wire Pair		A twisted pair consists of two insulated copper wires
Coaxial Cable		The  Coaxial  cable  consist  of  an  inner  copper
		conductor held in position by circular spacers.
Optical Fibre		Optical fibre has been a technological breakthrough in
		communications.  It  supports  data  rate  of  2  giga
		bits/sec. Fibre Optics provide high quality transmission
		of  signals  at  very  high  speeds.  Not  affected  by
		electromagnetic interference. The transfer of data is
		through very thin glass or plastic fibres with a beam of
		light. The light source is the laser beam driven by a
		high speed high current driver.

3.    Microwave System microwave signals may be passed on to the satellite.

4.    Transmission Processors

Message Switcher is used to store and forward data to large number of terminals over a single communication channel.

Multiplexer send more than one signal simultaneously over a single communication channel.

Front End Processors used to intercept and handle communication activities for the host computer. A device located at the site of the CPU or the host computer. It relives the computer of the communication tasks leaving it free for processing application programs.

Modes Of Transmission 

·         Simplex – transmitting data in only one direction (commercial radio)

·         Half-Duplex – transmission is both directions, but in only one direction at a time.WALKY TALKY

·         Full Duplex – Simultaneous two-way transmission.MOBILE

Major Networks

INET

.

NICNET

INDONET

Emerging Trends in Communication Networks For Banking RBI’s VSAT Network

Internet – The connection to the host computer of the ISP is established through the interface protocol software, using following two protocols

Serial Line Protocol (SLIP)

Point to Point Protocol (PPP)

Automated Clearing Systems

CHIPS    - Clearing House Inter-bank Payment System

CHAPS – Clearing House Automated Payment System

CHATS – Clearing House Automated Transfer System.

Two-Level Funds Transfer System

Fed Wire

Bank Wire

Point of Sale Systems

Real-Time Gross Settlement (RTGS) System PI – Participant Interface

The message is passed on by PI to IFTP (Inter – Bank Fund Transfer Processor) which acts as a broker.

.

Role of Technology Up gradation and Its Impact on Banks

Data Warehouse: Data from heterogeneous sources is stored to generate critical information for decision support systems. The main characteristics of the data stored in a Data Warehouse are:

It is Subject-Oriented

It is integrated, and there are no inconsistencies

The data in a Data Warehouse is non-volatile

It is time variant

Data Warehouse can be established even across multiple computer platforms as long as the transaction details are made available to the data warehouse in standardized formats.

Data Mining is a technique to reveal the strategic information hidden in Data Warehouse(s). It helps in exposing the patterns that are critical to business and provide an advantage through insight and knowledge of:

1.    Sound predictions of customer behavior

2.    Highly targeted market focus

3.    Maximized operational effectiveness

4.    Optimal return on Investment.

·         Establishment of Data Warehouse : Vasudevan Committee

·         Data Mining techniques can be applied in

Predicting future trends based on information available Credit Risk Analysis

Analyzing demographic information about customers

a.     Dissemination of information

b.     Financial Advice

c.      To highlight non-banking activities

d.     A node for commerce

e.     Selling financial products

f.       Gateway to the internet

g.     Account Services

.

 Security Considerations

A typical computerised environment constitutes three independent but separate components Software, Hardware and Data

The Risks broadly lead to

Incorrect decision-making leading to setback to business

Interruption in activities due to loss of data, hardware, software, Peopleware. Violation of Privacy

Direct Financial loss due to computer frauds.

The objective of Computer Auditing is:

Assets safeguarding

Preserving data integrity

Achieving system efficiency

Risk prone components in computerised systems

Errors and omissions in data and software

Unauthorised disclosure of confidential information

Computer abuse and mis-utilisation of banks assets

Effective Control Mechanism in computerised environment

Preventive

Detective

Corrective

Scope of System Audit is

Review of operations to establish compliance Review of the adequacy of procedures and controls

Integrity review focused at fraud detection/prevention of IT system

Audit Trail is a chronological record of all events occurring in a system.

Legal Framework for Electronic Transactions

Consequent upon the recognition given to the electronic records, electronic

documents and electronic signatures, incidential amendments have also been

made in the following acts:

The Indian Penal Code, 1860

The Indian Evidence Act, 1872

The Bankers’ Books Evidence Act, 1891

The Reserve Bank Of India Act 1934