IMT NAGPUR

MANAGEMENT
INFORMATION SYSTEM
BANKING INDUSTRY

Submitted to: Prof. H Halve

16 February 2011

Submitted By:-
Section C
Niraj Thakur 2010136
Nisarg Ostwal 2010137
Nishit Agarwal 2010139
Nitin Maurya 2010140
Palak Narang 2010141
 Evolution of MIS

Indian banking industry, today is in the midst of an IT revolution. Combinations of regulatory

and competitive reasons have led to increasing importance of total banking automation in the
Indian Banking Industry.

The Indian Banking system has been operating successfully over the last two centuries. It was in
50s that the Government of India evolved the policy of using the Banking system as an
instrument of economic development and social change and, as a first step, nationalized the
then Imperial Bank of India and re-christened it as State Bank of India.(SBI). The SBI was given
the mandate of a massive branch expansion programme and was asked to open branches in far
flung unbanked areas and assist in their development. This resulted in an explosion of sorts in
volumes of transactions and posed a severe strain on all resources. More particularly, the inter-
branch reconciliation became one area that defied manual handling. It was in this background
that the first steps towards mechanization were taken.
Due to the quick pace of branch expansion, whole system of reporting and reconciliation of
transactions was revamped and modernized.
Interestingly, at that time, no immediate need was felt for automation of Branch and customer
related activities or for that matter head office/corporate office operations. MIS was still in its
infancy. RBI & SBI made some efforts to develop MIS in the area of Deposits and Advances
through use of Uniform Balance Books etc.

Another significant development that had a bearing on the bank computerization was the
advent of Personal Computers (PCs) in the 80s and their easy availability.
As time passed, volumes increased further and manual handling of these volumes led to
dwindling customer service and increasing complaints. With increased trade unionism and
rather restrained handling of available human resources, a realization grew that unless
computerization of customer accounts and other banking services like remittances etc. at
branch level was resorted to, things will go out of hand. However, mechanization of any kind
was opposed by the Unions and resulted in slowing down of computerization drive in Indian
Banks.
The present level of computerization in Public Sector Banks is a result of these initiatives. RBI
has also went ahead in creating of nationwide and localized networks for integration of the
entire financial system
 Management Information System (MIS)

The term is not new to the banking sector. Since the early 1980s, banks have been using this
terminology to refer to the process of generating various reports and analyses at the
Corporate/Head offices for their decision making for own use as well as for conveyance to
authorities in charge of regulation.MIS in the present context of high availability of voluminous
data on electronic media at diverse locations and on diverse platforms, has become more
pertinent to banks’ decision-making process, thanks to the availability of new tools of
technology such as data warehousing, data mining. Management Information System would
thus be the end product of both the processes - data warehousing and data mining.

Relevance of Data Warehousing and Data Mining for banks in India

Banking being an information intensive industry, building a Management Information System

within a bank or an industry is a gigantic task. It is more so for the public sector banks which
have a wide network of bank branches spread all over the country. At present, banks generate
MIS reports largely from periodic paper reports/ statements submitted by the branches and
regional/zonal offices.
Except for a few banks which have been using technology in a big way, MIS reports are available
with a substantial time lag. Reports so generated have also a high margin of error due to data
entry being done at various levels and the likelihood of varying interpretations at different
levels. Though computerization of bank branches has been going on at a good pace, MIS
requirements have not been fully addressed to. It is on account of the fact that most of the
Total Branch Computerization (TBC) software packages are transaction processing oriented.
They have been designed primarily for day-to-day operations at the branch level and day-end
balancing of books

Need for building MIS

The need for building MIS at the corporate level has increased considerably during the last few
years because of the following reasons:
• To generate reports on a regular basis in electronic format.
• Need for timely submission of Balance Sheets and Profit & Loss Accounts.
• Focus on transaction costing and a need for relating the service charges levied on the
customers to be based on cost of servicing.
• Need for Inter-Branch Reconciliation of Accounts within a definite time frame.
 • Need to undertake risk management strategies and for this purpose build up
appropriate sets of data and market intelligence reports.

Application of data warehousing and data mining techniques

Implication of adopting such technology in a bank would be as under

• All transactions captured at the branch level would get consolidated at a central
location. Such a central location could be called the Data Warehouse of the concerned
bank.
• For banks with large number of branches, it may not be desirable to consolidate the
transaction details at one place only. It can be decentralized by locating the services on
regional basis.
• By way of data mining techniques, data available at various computer systems can be
accessed and by a combination of techniques like classification, clustering,
segmentation, association rules, sequencing, decision tree, various reports such as
Statement of Structural Liquidity, Statement of Interest Rate Sensitivity etc. or
accounting reports like Balance Sheet and Profit & Loss Account can be generated
instantaneously for any desired period/date.

BENEFIT OF MIS

 Significant cost benefits, time savings, productivity gains and process re- engineering
opportunities are associated with the use of data warehouse for information processing.
 Data can easily be accessed and analyzed without time consuming manipulation and
processing.
 Decisions can be made more quickly and with confidence that the data are both time-
relevant and accurate.
 Integrated information can be also kept in categories that are meaningful to profitable
operation.
 EXAMPLE

We can see below the credit application process in a bank. As the flow chart shows that each
and every application is being analysed by the data base and then the decision of accepting or
rejecting the application is taken. This shows how important MIS is in the context to Banking
Industry.
 Focus Aspects of Commercial banking now are:

Bank Business

MIS &
Internet
Core
Banking ATMs
(CBS)

Post
Electronic Terminal
Banking & Cash
dispenser

Corporate
Any
Network Card
Branch Managem
Banking -ent

Documen
t
CRM
Managem
-ent

Risk Resource
Managem Managem
-ent -ent
 ORGANISATION COMPUTING RESOURCES

 The implementation will provide the bank with an automated system that reduces
manual effort to streamline its operations.
 The benefit envisaged by the bank is that everybody being on the same system, it can be
accessed by anyone on the different locations of the bank.
 The users at the bank would include traders, dealers and risk managers.
 The solution will result in smoother deal processing, with verifying and online risk
monitoring mechanism.
 It will streamline all operations and the risk mechanism can be monitored centrally.

ORGANISATION TRANSACTION PROCESSING SYSTEM

Web Commerce or Ecommerce has witnessed a significant increase in revenue year on year.
This option can be integrated to the website in the various Secured Payment Gateway Options
the banks offer.

How It Works
Step 1: Customer select and adds item in the shopping cart And places the order on your
(merchant) website.
Step2: Customer selects to pay via credit card.
Step 3: Customer is redirected through EBS Payment Gateway to Transaction Processing Bank.
Step 4: Customer enters credit card details on Secured Payment page.
Step 5: Credit card information is transmitted securely to the corresponding bank for approval.
Step 6: Corresponding bank sends appropriate information to the transaction Processing bank.
Step 7: The result is forwarded to EBS (via the Transaction Processing Bank).
Step 8: Customer receives a confirmation and is redirected to your (merchant) website.

Centralized Service Desk – Use in Axis Bank

A dedicated service desk has been started at the Centralized Collection and Payment HUB
(CCPH) to ensure that all the queries are resolved quickly and efficiently. The Customers can
contact CCPH regarding any query about the MIS or the process flow.
 Web CMS
Web CMS provides with all the information at a click. Detailed MIS like location wise
collection and return, product-wise pooling, pooling in pipeline (due credit report) etc.
can be viewed and downloaded from web interface through internet.

 Comprehensive MIS

The bank provides comprehensive MIS reports like daily report, transaction report
future credits reports and cheque returned unpaid report. On the payments side they
provide daily paid - unpaid status for the demand drafts, cheques or warrants issued by
the organization.

 Mobile Alert Service

The CMS clients availing the bank’s collection products have the facility to subscribe to
Mobile Alert Service for receiving alerts on registered mobile phone numbers instantly
after the funds are pooled.
 CASE STUDY- STANDARD CHARTERED BANK
Standard Chartered Bank was looking for a tool that would help it analyze the huge volumes of
data captured by its OLTP systems. The objective was to analyze new business opportunities,
provide better customer service, and boost profitability.

Standard Chartered Bank has over 2.2 million retail customers and over 1.3 million credit card
customers nationwide. The bank needed to manage and analyze the huge volumes of data
captured by its OLTP systems.SCB decided to go for SAS Customizable CRM Solutions to address
its business needs.

Standard Chartered Bank (SCB) previously used OnLine Transaction Processing (OLTP) system,
which facilitated and managed transaction-oriented applications. "The system was reliable but
provided little scope for in-depth customer analysis, which is the key to survive in the fiercely
competitive financial marketplace. It answered the financial queries and generated reports at a
broad portfolio level, which included total earnings, debt situation, interest income, cost, fee
income, and profits," said Sedjwick John Joseph, Head-Business Intelligence Unit, SCB.

The bank realized that it needed to go a step further and deploy a solution which it can use to
analyze the huge volumes of data captured by its OLTP systems. The idea was to search for
crucial nuggets of information from the vast amounts of transactional data at its disposal to get
the right information, to the right executive and at the right time. This information can help a
bank take critical business decisions in the dog-eat-dog financial world.

The bank's IT team looked at the business requirement in detail and deduced that the
organization needed a data warehousing and analytical solution that would help analyze
customer data to enable fact-based decision making in areas ranging from acquisition and risk
management to cross-selling and portfolio management. After evaluating a number of vendor
offerings, SCB decided to use a suite of products from SAS. It went for the SAS Customizable
CRM Solutions.

Varied services

A better way to understand the bank's need would be to understand its customer base and the
varied services it provides.

SCB has over 2.2 million retail customers and over 1.3 million credit card customers nationwide.
It claims to be the first to launch initiatives like a Global Credit Card and a Photo card in India.
Its products and services include cash management, custody, lending, foreign exchange,
interest rate management, and debt capital markets for corporate. And credit cards, personal
loans, mortgages, deposit taking activity, wealth management services to individuals and
medium-sized businesses, and mutual funds to retail customers.

SCB’s customer base has increased three fold in last three years, such a fervent pace needed to
be supported by efficient management of the huge volumes of data generated and captured at
each touch-point.

Defining benefits

SCB’s vision was to champion fact-based strategic business decisions using best-in-class
analytics. The objective was to enhance the organization's competitive advantage and boost
profits. The bank was looking forward to the following broad benefits:

 The ability to exploit changing and widening markets.

 The ability to implement a customer-centric approach focused on optimizing the

lifetime value of the customer.

 The ability to concentrate on financial budgeting, cost control, and risk management.

 To look for new ways to minimize costs, while increasing profitability and shareholder
value by effectively managing consumer relationships

Solution needs

It was clear that in order to achieve the desired benefits, the bank had to implement a data
warehouse and analytical solution. SCB wanted a solution that can perform analytics on the
valuable customer data to answer queries across divisions. The answers would then enable
them to proactively service customers and thereby ensure customer loyalty and retention. This
exercise is a must for survival in a fiercely competitive environment.

Any bank today cannot ignore the risk:reward equation. It is a complex and challenging task
that all bankers have to accomplish. It's the process of applying a variety of scoring techniques
across product lines to arrive at the probable risk associated with each product sale and the
possible rewards. Examples of products are credit cards, auto loans, and personal loans. SCB
wanted the solution to leverage information on customer profiles and segments and enable
them to spread the risks based on empirical data analysis.

They also wanted the solution to be scalable. This was crucial as the solutions would be very
critical to their business, and the volumes of data kept increasing exponentially.
 Evaluation
SCB created a team of 25 people in Bangalore and called it a Business Intelligence Unit. This unit
was responsible for deriving and implementing strategies to analyze and exploit customer data.

The company evaluated a number of solutions from Brio, Cognos, Business Objects, and SAS.
SAS was chosen as the preferred solution partner and SCB today relies on SAS solutions across
Asia for its customer analytics.

The SAS solutions reside on an IBM RS/6000 server running the AIX operating system. The SAS
software accesses and integrates data from multiple sources and disparate systems across the
enterprise. This data is then used for a variety of analyses by the Business Intelligence Unit and
is disseminated to all information consumers across the bank. The information consumers
include sales managers, finance resources, credit resources, product heads and managers, and
the head of consumer banking via the SCB Intranet. As a result, analytics provide a key
competitive edge and are used seamlessly for empowering business manager in their goals.

Analytics' benefit

The solution has helped the bank effectively manage and optimize profitability of all the
products that constitute its retail portfolio.

SAS's solutions forms a central part of the bank's CRM strategy. It is easier for them to run
targeted campaigns and elicit substantially higher returns since they perform profit modeling
for each account. This also enables micro-segmentation. Using analytics, and a test and learn
culture we know the likelihood of customers to take a new product. We now know which card
member is more likely to take an auto loan. This has resulted in more focused marketing
campaigns and reduced costs with improved customer satisfaction.

The organization's marketing team is now empowered with information to increase cross
holding, and can target its most valuable customers (not accounts within a product line) and
also help in the next best product strategy for a customer.

With the help of the Business Intelligence (BI) solutions, SCB was able to successfully launch
DIVA. DIVA is a specially designed women's international credit card targeted at the Indian
woman and bundled with several features. It includes discounts and zero interest rates on
categories like jewellery, cosmetics, apparel, consumer durables, leather products, and mobile
phones.

This was possible due to an in-depth analysis of our customer data provided by the BI solutions.
SCB realized that a significant proportion of their business came from the upwardly mobile
Indian woman and was likely to grow substantially from this section in the coming months. This
gave them an impetus to launch a product which catered to the needs of this segment and
consolidate their position in the mind of the customer

They are successfully able to calculate our risk-reward equation. SCB uses SAS for scoring
virtually all its products in the asset portfolio ranging from its 1.3 million credit card holders to
its loan portfolio in excess of $ 860 million. Information on customer profiles and segments
forms the backbone of product strategy for them. It allows them to tailor their products across
a diversified consumer base, enabling them to spread the risk across a much wider spectrum.

SAS solutions are also used to carry out simulations that help the bank assess its overall
profitability and balance its exposures across portfolios. The bank can carry out stress tests on
its portfolios and learn about the best case and worst case scenarios. The working of the SAS
library of advanced statistical techniques helps in achieving the results and arriving at an
optimized risk-adjusted capital.