UPSC Prelims 2016 Q29: Indian Economy – Digital Payments & Financial Inclusion
The term 'Core Banking Solutions' is sometimes seen in the news. Which of the following
statements best describes/describe this term?
1. 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.
2. It is an effort to increase RBI's control over commercial banks through computerization.
3. 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.
- (a) 1 only
- (b) 2 and 3 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Answer: (a) 1 only
Explanation
Core Banking Solutions (CBS)
CORE stands for Centralized Online Real-time Exchange.
All branches of a bank are linked to one central server.
| Statement | Verdict | Fact |
|---|---|---|
| 1. 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 | Correct | You become a customer of the bank, not of one branch |
| 2. It is an effort to increase RBI's control over commercial banks through computerization | Incorrect | It is the bank's own technology platform |
| 3. It is a detailed procedure by which a bank with huge non-performing assets is taken over by another bank | Incorrect | That would be a merger or resolution process |
What CBS makes possible:
| Service | Example |
|---|---|
| Anywhere banking | Deposit or withdraw at any branch |
| Electronic transfers | NEFT, RTGS, IMPS |
| Channels | ATM, internet banking, mobile banking |
Answer: (a) 1 only.
Why each option is right or wrong
- (a) CORRECT. Core Banking Solutions is the networking of a bank's branches for anywhere banking.
- (b) Incorrect. It is neither a tool of RBI's control nor a take-over procedure.
- (c) Incorrect. Statement 3 is false; it has nothing to do with non-performing assets.
- (d) Incorrect. Only statement 1 describes Core Banking Solutions.
Key point
Core Banking Solutions = Centralized Online Real-time Exchange: all branches on one server, enabling anywhere banking, NEFT, RTGS and ATMs.
Remember
Core Banking = all branches on one network.
Common mistakes
- Reading 'core' as the main business of banking and guessing regulation.
- Linking it to RBI supervision; it is each bank's own system.
- Confusing CBS with schemes for resolving bad loans.
Exam tip
CBS turned 'branch customers' into 'bank customers'.
Sources
- Reserve Bank of India — Report on Trend and Progress of Banking in India (technology in banks)
- Institute for Development and Research in Banking Technology — Core Banking Solutions