TyroCity: Banking Notes

High Power Money

Banking Notes — Sun, 08 Apr 2012 05:41:42 +0000

The total amount of currency held by the public, as well as cash in the vaults of financial institutions, and bank deposits at the Federal Reserve. The Federal Reserve Bank maintains close Control over the amount of high powered money that can influence its monetary policy decisions. also called the monetary base.

In simple terms High Powered Money (HPM) is the net or total liability of the monetary authority of any nation……in Nepal it is the liability of NRB.

It is simply the sum of all currency in circulation with the people of the country, cash kept in the commercial bank vaults along with the deposits of govt. of the country and commercial banks. The term liability basically means that when people/govt/commercial banks produce the currency/claims….the NRB has to pay value equal to currency/claim.

The NRB uses this H.P.M. for regulation of money supply in the economy. By controlling the money supply NRB regulates (i.e tries to regulate) the inflation in eco.

NRB uses the H.P.M for the process of money creation. Money creation will increase the supply of money in eco.

When NRB needs to pump extra money in eco. it injects a certain amount of high powered money (Say H) into the economy (by the purchase of govt bonds/assets etc).

NRB may purchase government bond worth 500 million. Then, total money supply will not only increase by 500 million but it goes on multiplying.

This money injected into the economy through purchase of government bonds and so on will increase the total money supply. But the actual amount increase will not be determined

This money injected into the economy through purchase of government bonds and so on will increase the total money supply.
But the actual amount increase will not be determined

NRB may purchase government bond worth 500 million. Then, total money supply will not only increase by 500 million but it goes on multiplying

This increased addition of money supply (over the injected value of H) is due to the factor called Money Multiplier!

Mathematical relationship between the monetary base and money supply of an economy. It explains the increase in the amount of cash in circulation generated by the banks’ ability to lend money out of their depositors’ funds. When a bank makes a loan, it ‘creates’ money because the loan becomes a new deposit from which the borrower can withdraw cash to spend. This money-creating power is based on the fractional reserve system under which banks are required to keep at hand only a portion (between 10 to 15 percent, typically 12 percent) of the depositors’ funds. The rest may be converted into loans, thereby increasing the available cash by a factor that is a multiple of the initial deposit.

Monetary multiplier means the influence a central bank has over the money supply by altering the required banking reserve rate.

Compiled and collected by
Krishna Prasad Aryal
Assistant Branch Manager
Rastriya Banijya Bank
Branch Office Parasi

Internet

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Introduction
The Internet is the largest computer network in the world, connecting millions of computers. A network is a group of two or more computer systems linked together. Connection of millions of Domain (org, net, gov , mil, edu , com) and Public Network.The Internet is the largest computer network ,The Internet is the largest computer network in the world, connecting millions of in the world, connecting millions of computers. A network is a group of two or computers. A network is a group of two or more computer systems linked together. more computer systems linked together. Internet is defined as international network Internet is defined as international network that integrates the computer to form a that integrates the computer to form a global network structure. So it is also called global network structure. So it is also called the network of various networks. Now a the network of various networks. Now a day, it is very essential for all types of day, it is very essential for all types of business, academic institution, hospitals, business, academic institution, hospitals, banks etc. banks etc.

Business Use of Internet

Information
e-Mail
Communication
Entertainment
Education
Research
Marketing
Training

Intranet
The private network structure is intranet. It may exist as LAN or WAN or other form. But it is secured isolated private network structure.

Benefits of an Intranet

Publishing
Document Management
Training
Workflow
Front-end to corporate systems
Email
Better internal communications
Sharing of resources and best practice
Improved customer service
Reduction in paperwork

What is Extra-net?
An extranet is similar to an intranet but it is made accessible to selected external partners such as business partners, suppliers, key customers, etc , for exchanging data and applications and sharing information. As with an intranet, an extranet can also provide remote access to corporate systems for staff who spend lots of time out of the office, for instance those in sales or customer support or home workers.

e-Mail

“electronic mail,” is the process of sending and receiving messages over the Internet
e-Mail Address contains: Name and Domain Name
For eg. ram@ntc.net.np here, ram is name and ntc.net.np is domain.

Business Application of Computer Networks

Some Questions

What is Internet? What are the different types of services provided by the Internet?
Differentiate between Internet and Intranet?
What is e Mail ? What is the use of e mail in modern days?
What is social media? Why it is important in these days?

ICT in Bank Sectors

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Introduction to Computer Technology
Computer is an electronic machine operating under the control of instructions stored in its memory unit that can:

accept data (inputs)
process data arithmetically and logically
produce results (outputs)

IT and ICT in Banking

Usage of IT and ICT in Bank

Types of Computer
Computers are classified on the basis of work, on the basis of size, on the basis of model and on the basis of brand.

Applications of Computer

Banking and Financial Institutions (BFI)
Education
Industries
Research
Hospital
Data Processing
Science and Engineering
Offices
Advertisement
Communications
Library
Simulation
Weather Forecasting
Hotel Management
Airline Corporation

Computers in Banking

Introduction to ICT

Bank

Banking and Finance

Some Questions

What is Computer? What are the different types of Computer?
What is the use of computer or ICT in Banking industry ?
Define the term Computer. What types of Computer are used in modern banking system?

Database

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Database
A database is a collection of information that is organized so that it can easily be accessed managed, and updated. In one view, databases can be classified according to types of content: bibliographic, full-text, numeric and images.

Data Storage Hierarchy

Level 0	Bit A	Single binary digit (0 or 1)
Level 1	Character	Multiple related bits are combined to form a character (byte)
Level 2	Field	Multiple related characters are combined to form a field
Level 3	Record	Multiple related fields are combined to form a record
Level 4	Table	Multiple records are combined to form a table
Level 5	Database	Multiple related tables are integrated to form a database

Components of Database System
Users- People who interact with the database:

Application Programmers
End Users
Data Administrators

Software- Lies between the stored data and the users:

DBMS
Application Software
User Interface

Quality of Information

Accuracy
Times
Relevancy
Completeness

Database Application

MS – Access
My-SQL
SQL
Oracle

Why to use DBMS?

Data Independence
Efficient Data Access
Data Integrity
Data Administration
Concurrent Access and Crash Recovery
Reduced Application Development Time

Database Management System

A database management system (DBMS ) is a collection of software programs that allow a user to define the data types, structures, and constraints for the data; construct permanent storage for the data; and manipulate data by query and update operations. In the specific case of relational databases, the database management software is known as a relational database management system RDBMS.

Database Model
A database model is a type of data model that determines the logical structure of a database and fundamentally determines in which manner data can be stored, organized and manipulated. The most popular example of a database model is the relational model, which uses a table based format.

Hierarchical Model
In a hierarchical model, data is organized into a tree like structure , implying a single parent for each record. A sort field keeps sibling records in a particular order. Hierarchical structures were widely used in the early mainframe database management systems.

Network Model
The network model expands upon the hierarchical structure, allowing many to many relationships in a tree like structure that allows multiple parents. It was most popular before being replaced by the relational model.

Relational Model
A relational database contains multiple tables, each similar to the one in the “flat” database model. One of the strengths of the relational model is that, in principle, any value occurring in two different records (belonging to the same table or to different tables), implies a relationship among those two records. A key that can be used to uniquely identify a row in a table is called a primary key. Keys are commonly used to join or combine data from two or more tables.

Object Oriented Model
The object oriented programming paradigm was applied to database technology, creating a new database model known as object databases for storing objects in a database.

Advantages of DBMS

Make an easy to add new data.
Make easy to modify (change) the database.
Make easy to delete existing data.
Organized the data in proper sequence.
It reduces the data redundancy to a large extent.
It can control data inconsistency to a large extent.
Make easy to access the data for the user.
Allow multiple users to be active at one time; data in the database may be shared among several users.
Protecting data against unauthorized access (security).
Allow for growth in the database system.

Disadvantages of DBMS

Complex to understand and implement
Costly
Too many rules
Fast changing technology
Chance of losing the data
Chance of data leakage and hacking
Unavailability of trained manpower.

Data Security

Encryption
Strong User Authentication
Backup Solutions
Firewall

Some Questions

What is Database? What is the use of Database in Bank?
What is Database Management System? What are the different types of Database model?
What types of database model is used on modern banking system? Justify your answer.

Software

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Definition
Computer software, or just software, is a collection of computer programs, procedures and documentation that performs different tasks on a computer system. In contrast to hardware, software “cannot be touched”.

Classification
Based on Working Principle: Two Classes

System Software
Application Software

Based on Commercial perspective

Commercial Software
Freeware/Open Source
Shareware

Application Software

An operating system OS ) is system software that manages computer hardware and software resources and provides common services for computer programs. All computer programs, excluding firmware, require an operating system to function. Firmware is a software program or set of instructions programmed on a hardware device.

Tasks of Operating System

Difference Between Client Operating System and Network Operating System

Introduction to Windows OS
Windows is Microsoft’s flagship operating system, the de facto standard for home and business computers. The GUI based OS was introduced in1985 and has been released in many versions since then, as described below. Microsoft got its start with the partnership of Bill Gates and Paul Allen in 1975. Gates and Allen co developed Xenix (a version of Unix ) and also collaborated on a BASIC interpreter for the Altair 8800. The company was incorporated in 1981. Microsoft became famous with the release of MS DOS, a text based command line driven operating system.

Introduction to UNIX OS
UNIX is an operating system which was first developed in the 1960s, and has been under constant development ever since. By operating system, we mean the suite of programs which make the computer work. It is a stable, multi-user, multi tasking system for servers, desktops and laptops. UNIX systems also have a graphical user interface (GUI) similar to Microsoft Windows which provides an easy-to-use environment. However, knowledge of UNIX is required for operations which aren’t covered by a graphical program, or for when there are no windows interface available, for example, in a telnet session.

Introduction to Linux OS
Linux is an operating system or a kernel. It is distributed under an open source license. Its functionality list is quite like UNIX. Linux is an operating system or a kernel which germinated as an idea in the mind of young and bright Linus Torvalds when he was a computer science student. He used to work on the UNIX OS (proprietary software) and thought that it needed improvements.

Types of Operating System

Batch operating system
Time-sharing operating systems
Distributed operating System
Network operating System
Real Time operating System

Batch operating system
The users of a batch operating system do not interact with the computer directly. Each user prepares his job on an off line device like punch cards and submits it to the computer operator.

Time-Sharing Operating System
Time-sharing is a technique which enables many people, located at various terminals, to use a particular computer system at the same time. Time-sharing or multitasking is a logical extension of multi-programming. Processor’s time which is shared among multiple users simultaneously is termed as time-sharing.

Distributed Operating System
Distributed systems use multiple central processors to serve multiple real time applications and multiple users. Data processing jobs are distributed among the processors accordingly.

Network Operating System
A Network Operating System runs on a server and provides the server the capability to manage data, users, groups, security, applications, and other networking functions. The primary purpose of the network operating system is to allow shared file and printer access among multiple computers in a network, typically a local area network (LAN), a private network or to other networks.

The advantages of network operating systems are as follows

Centralized servers are highly stable.
Security is server managed.
Upgrades to new technologies and hardware can be easily integrated into the system.
Remote access to servers is possible from different locations and types of systems.

Real Time Operating System
A real time system is defined as a data processing system in which the time interval required to process and respond to inputs is so small that it controls the environment. The time taken by the system to respond to an input and display of required updated information is termed as the response time. So in this method, the response time is very less as compared to online processing.

Utility Software
Utility Software is a collection of those programs that helps the programmer in performing some specific tasks to reduce the overall programming effort of the programmer. It also provides a useful service to the user of the computer by providing facilities for performing common tasks such as data transfer, search and merge of files, data and file recovery, diskette management, disk cleaner, disk derangement, system restore, anti virus, etc. It is also known as House Keeping Utilities or Service Programs.

Some Questions

What is Operating System? What are the different types of OS? List and explain.
What types of OS are used in banking system?
What are the functions of OS?

Application Software
Application Software utilizes the capacities of a computer directly to a dedicated task. Application Software is able to manipulate text, numbers and graphics.

Application Software can be categorized into
a) Tailored Software and
b) Packaged Software.
Tailored Software is that software that are specially designed and developed to solve specific job or task. For examples, school billing system, result processing system, printing of certificate, etc. Packaged Software is that software that is generalized set of programs designed and developed for the general purpose. For examples, producing bill or payment, accounting package, office package, etc. The most popular package software is Microsoft Office, Adobe Package, Tally, Fact, etc.

Microsoft Office

Microsoft Office is an office suite of desktop applications, servers and services for the Microsoft Windows and Mac OS X operating systems, introduced by Microsoft on August 1, 1989. First version of Office contained Microsoft Word, Microsoft Excel and Microsoft PowerPoint.

Most Common Microsoft Office Applications

Word – Words processing and mailings.
Publisher- Brochures, signs, cards, images etc.
PowerPoint- Presentations and Slideshows.
Excel- Spreadsheets, tables and mailings.
Access- Database Creation and management.
Outlook- Professional email and personal information manager.

MS – Word
Word Processor is a Software package that enables you to create, edit, print and save documents for future retrieval and reference. Creating a document involves typing by using a keyboard and saving it. Editing a document involves correcting the spelling mistakes, if any, deleting or moving words sentences or paragraphs.

Features of MS – Word

Formatting Text
Formatting Paragraph
Inserting Table, Word Art, Foot Note, Header, Footer, Page Number, Citation etc.
Defining Heading
Break • Generating Table of Content, Bibliography etc.
Mail Merge,
Page Setup and Printing

MS – Excel
MS Excel is used to store and analyze statistical and financial data.
Main Features

Auto Function
Usage of Formula
Usage of Functions
Producing Charts
Coping and Moving data/charts to other application (MS Word/MS PowerPoint)

MS PowerPoint
MS PowerPoint is used to prepare PPT Slides of any content. By using MS PowerPoint we can add following effects:

Slide Transition
Slide Animation
Hyperlink
Audio/Video
Designing
Copying Data from other applications
Header/Footer/Date/Time etc.

MS Access
Microsoft Access is a Database Management System (DBMS) from Microsoft that combines the relational Microsoft Jet Database Engine with a graphical user interface and software development tools. It is a member of the Microsoft Office suite of applications.

Features of MS – Access

Tables
Queries
Forms
Reports

MS Outlook
Microsoft Outlook is a personal information manager from Microsoft, available as a part of the Microsoft Office suite. Often used mainly as an e Mail, application, it also includes a calendar, task manager, contact manager, notebook, journal, and web browsing.

Some Questions

Define the term software. What are the different types of software? Explain in details.
What is Application Software? Why the bank use customized software?
Differentiate between System Software and Application Software.
Explain in details about MS Office.
Differentiate between hardware and software.

Factor affecting money supply

Banking Notes — Sun, 08 Apr 2012 05:41:42 +0000

The supply of money in a modern economy and financial system is determined by three key factors:

“Open market operations” – this is effectively the same as Quantitative Easing. The Central Bank buys government bonds, effectively creating money
The “reserve requirement” imposed on banks – this is the % of deposits made by customers at the bank that the bank must keep hold of rather than lending it out
The policy interest rate set by the central bank – the rate of interest will influence how many households and businesses are willing and able to borrow. Most money in a modern economy is created by commercial bank lending so the rate of interest ultimately does have a bearing on the supply of money

Key factors affecting the demand for money:

The rate of interest on loans
The number / value of monetary transactions that we expect to carry out
The extent to which we also want to hold other financial assets, such as bonds, property, saving (this is also influenced by the rate of interest) – this is known as the speculative motive for holding money
Changes in GDP
The extent to which it is possible to use debit cards / credit cards i.e. the pace of financial innovation
The extent to which we might have to pay out large unexpected payments, for example, for i.e. the precautionary motive
The rate of anticipated inflation
Inter-bank lending
Money at call
Refinanceable export credits
Commercial bills
Central Government debt: internal considerations
Local authority short-term borrowing

Compiled and collected by
Krishna Prasad Aryal
Assistant Branch Manager
Rastriya Banijya Bank
Branch Office Parasi

Core Banking System

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Introduction
A core banking system is the software used to support a bank’s most common transactions. Elements of core banking include: Making and servicing loans. Opening new accounts. Processing cash deposits and withdrawals.

Core Banking Software
Banking and financial sectors all around the world have embraced ICT to facilitate their customers with efficient services and innovative products through multichannel. The central engine that runs the core operations of the banking and financial institution is the Core Banking Software (CBS).

Overview

The CBS evolved in the 1970s and has gone through different significant changes over time; the recent CBS has the capacity of real time processing and multi channel integration (Kreća & Barać, 2015). The fundamental function of CBS is to perform deposit and lending in a bank (Chairlone, 2009). Abbate (1999) defined a core banking system as “a back end system that processes daily banking transactions, and posts updates to accounts and other financial records.”

Level of Core Banking Software

CORE BANKING

Sum total of all information technology components that enable a bank to manage its core business activities in a centralized model
Round the clock processing of all the products, services and information of a bank.
24/’7/365 Model

Basic Components

Banking Application Software
Hardware Components
Network Infrastructure
Centralized Data Processing

Application Areas

Balance of payments and withdrawal are done.
Mobile banking
Internet banking
ATM’s
Recording of transactions
Passbook maintenance
Interest calculations on loans and deposits
Customer records

Need of CBS

To meet the regulations.
To meet the changing market dynamics
To meet the demands of customers
To enhance efficiency and effectiveness
To provide better and fast service
To increase the value of bank on the market
To increase customer satisfaction
To increase profit

Challenges and Barrier
1.Cost

Software
Technology
Training
Implementation

2.Change Accept

Challenges of CBS Implementation

Functionality (Capability of software to meet requirements and expectations)
Reaching unanimity within the organization on what is needed
Cost and Financial Terms
Ability of the business to adjust to the new system
Availability of skilled personnel
Vendor capabilities and credentials
System Flexibility
Data migration
User-friendliness of User Interface

Managerial Implications
The managers need to consider all three sources of challenges while choosing, implementing, and upgrading CBS. In the case of software, the most challenging part is CBS’ user interface and user-friendliness. If the user interface is complex and non-user friendly, it may result in poor performance of the users and virtually of the CBS. The second essential factor is the CBS’ functionality; whether it is meeting all the needs of the bank it promised to meet. The most important vendor related challenge is vendor capability and credential. As most of the Banks use the foreign CBS, which is very complex. Vendor support is essential to fix bugs, training, and maintenance. In the case of management related challenges, the managers always need to look for skilled personnel, who knows and can run the CBS.

List of CBS Applications

Infosys Finacle
Oracle Financial Services Software by Oracle Corporation
Fiserv Banking Solutions
Canopus EpaySuite by Canopus Innovative Technologies
Fidelity National Information Services (FIS)

Some Questions

What is Core Banking System (CBS)? What are the components of CBS?
What is the use of CBS in bank?
What do you mean by CBS? What are the components of CBS? What are the challenges to implement CBS in the context of Nepalese banking sector?

Monetary Policy

Banking Notes — Sun, 08 Apr 2012 05:41:42 +0000

Definition: Monetary policy is how central banks manage the money supply to guide healthy economic growth. The money supply is credit, cash, checks, and money market mutual funds. The most important of these is credit, which includes loans, bonds, mortgages, and other agreements to repay. Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.

In Nepal, monetary policy of the Central Bank of Nepal is aimed at managing the quantity of money in order to meet the requirements of different sectors of the economy and to increase the pace of economic growth.

The NRB implements the monetary policy through open market operations, bank rate policy, reserve system, credit control policy, and moral persuasion and through many other instruments. Using any of these instruments will lead to changes in the interest rate, or the money supply in the economy. Monetary policy can be expansionary and contractionary in nature. Increasing money supply and reducing interest rates indicate an expansionary policy. The reverse of this is a contractionary monetary policy.

For instance, liquidity is important for an economy to spur growth. To maintain liquidity, the NRB is dependent on the monetary policy. By purchasing bonds through open market operations, the RBI introduces money in the system and reduces the interest rate.

Central banks have three main tools of monetary policy: open market operations, the discount rate, and a bank’s reserve requirement. However, most banks have many more at their disposal. Here’s what they are, and how they all work together to sustain healthy economic growth.

1. Open Market Operations

Open market operations are when central banks buy or sell securities from the country’s banks. When the central bank buys securities, adds cash to the banks’ reserves. This gives them more money to lend more. When the central bank sells the securities, it simply places them on the banks’ balance sheets and reduces its cash holdings. The bank now has less to lend. A central bank buys securities when it wants expansionary monetary policy, and sells them when it executes contractionary monetary policy.

2. Reserve Requirement
The reserve requirement refers to the deposit a bank must keep on hand overnight, either in its vaults or at the central bank. A low reserve requirement allows the banks to lend more of their deposits. That is expansionary because it creates more credit. A high reserve requirement is contractionary since it gives banks less money to lend. It’s especially hard on small banks since they don’t have as much to lend in the first place. Central banks rarely change the reserve requirement because it’s expensive and disruptive for member banks to change their procedures.

3.
Instead, central banks are more likely to adjust their targeted lending rate because it achieves the same result. The Fed funds rate is perhaps the most well-known of these tools. Here’s how it works. If a bank can’t meet the reserve requirement, it borrows from another bank that has excess cash. The interest rate it pays is the Fed funds rate. The amount it borrows is called the Fed funds. The Federal Open Market Committee (FOMC) sets a target for the Fed funds rate at its meetings.
Central banks have several tools to make sure the Fed funds rate meets that target. The Federal Reserve, the Bank of England, and the European Central Bank pay interest on the required reserves and any excess reserves. Bank won’t lend Fed funds for less than the rate they’re receiving from the Fed for these reserves. Banks also use open market operations.

4. Discount Rate
The discount rate is the third tool. It’s the rate that central banks charge its members to borrow at its discount window. Since the rate is higher, banks only use this if they can’t borrow funds from other banks.

How It Works
Central bank tools work by increasing or decreasing total liquidity. This includes both the total amount of capital available to invest or lend, as well as money to spend. In other words, it’s more than the money supply, which consists of M1, (currency and check deposits) and M2 (money market funds, CDs and savings accounts plus M1). Therefore, when people say that central bank tools affect only the money supply, they are understating the impact.

Compiled and collected by
Basudev Sharma Poudel(PHD)

Hardware

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Hardware
It is Physical Component of a System.

Main Computer Components

Hardware Components

We can categorize hardware components into three broad categories:
Input devices
CPU, the Central Processing Unit and
Output devices
Storage devices or Secondary Memory [For Backup]

Types of Storage devices
i) Primary Storage

Read-only Memory (ROM)
Random Access Memory (RAM)

ii) Secondary Storage

Punching Device
Magnetic Tape
Floppy Disk
Optical Disk
Hard Drive
Flash Disk

RAM and ROM

Main Memory
The Main memory of a computer is used to store programs and data. The processor cannot store the whole program and needs its main memory to store the parts of the program.

Types of Main Memory

Random Access Memory
The program is stored Temporarily while the computer is on. The contents of RAM is lost when the computer is switched off.

Read Only Memory

The data and programs are stored Permanently.

Secondary Memory/External Memory
Floppy Disk, Hard disk, CD ROM, DVD, Zip Disk, Jaz Drive, WORM, magnetic tapes etc are secondary memories used to store data. These memories are also called backup memory because these memories are used to store data for future application. Nowadays, operating system, and other software, business data and information are stored in CD ROM.

Some Questions

What do you mean by hardware? What types of devices are used in bank to keep the record of customer?
Differentiate between primary memory and secondary memory.
What is the use of secondary memory in bank?

History of Computer

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Abacus

The abacus was an early aid for mathematical computations. Its only value is that it aids the memory of the human performing the calculation. A skilled abacus operator can work on addition and subtraction problems at the speed of a person equipped with a hand calculator (multiplication and division are slower).

The abacus is often wrongly attributed to China. In fact, the oldest surviving abacus was used in 300 B.C. by the Babylonians. The abacus is still in use today, principally in the far east.

Napier’s Bone

John Napier In 1617 an eccentric (some say mad) Scotsman named John Napier invented logarithms , which are a technology that allows multiplication to be performed via addition. Ex: log 2 x = 5.

The magic ingredient is the logarithm of each operand, which was originally obtained from a printed table. But Napier also invented an alternative to tables, where the logarithm values were carved on ivory sticks which are now called Napier’s Bones.

Slide Rule

Napier’s invention led directly to the slide rule , first built in England in 1632 and still in use in the 1960’s by the NASA engineers of the Mercury, Gemini, and Apollo programs which landed men on the moon.

Calculating Clock

The first gear driven calculating machine to actually be built was probably the calculating clock , so named by its inventor, the German professor Wilhelm Schickard in 1623. This device got little publicity because Schickard died soon afterward in the bubonic plague.

Blaise Pascal

Fig: 8 Digit Pascaline

Fig: 6 Digit Pascaline (Cheaper)

Fig: Inside Pascaline

In 1642 Blaise Pascal, at age 19, invented the Pascaline as an aid for his father who was a tax collector. Pascal built 50 of this gear-driven one-function calculator (it could only add) but couldn’t sell many because of their exorbitant cost and because they really weren’t that accurate (at that time it was not possible to fabricate gears with the required precision). Up until the present age when car dashboards went digital, the odometer portion of a car’s speedometer used the very same.

Charle’s Babbage

By 1822 the English mathematician Charles Babbage was proposing a steam driven calculating machine the size of a room, which he called the Difference Engine .

Difference Engine
This machine would be able to compute tables of numbers, such as logarithm tables. He obtained government funding for this project due to the importance of numeric tables in ocean navigation. Construction of Babbage’s Difference Engine proved exceedingly difficult and the project soon became the most expensive government funded project up to that point in English history. Ten years later the device was still nowhere near complete, acrimony Babbage.

Analytical Engine
Babbage was not deterred, and by then was on to his next brainstorm, which he called the Analytic Engine . This device, large as a house and powered by 6 steam engines, It was programmable, thanks to the punched card technology of Jacquard. Babbage saw that the pattern of holes in a punch card could be used to represent an abstract idea such as a problem statement or the raw data required for that Hollerith Desk.

Hollerith Desk

Hollerith’s technique was successful and the 1890 census was completed in only 3 years at a savings of 5 million dollars.

IBM

Hollerith built a company, the Tabulating Machine Company which, after a few buyouts, eventually became International Business Machines, known today as IBM.

Hollerith’s Innovation

By using punch cards, Hollerith created a way to store and retrieve information. This was the first type of read and write technology.
Examples of Punch Cards:

Mark I

One early success was the Harvard Mark I computer which was built as a partnership between Harvard and IBM in 1944. This was the first programmable digital computer made in the U.S. But it was not a purely electronic computer. Instead the Mark I was constructed out of switches, relays, rotating shafts, and clutches.

Atanasoff – Berry Computer

One of the earliest attempts to build an all electronic (that is, no gears, cams, belts, shafts, etc.) digital computer occurred in 1937 by J. V. Atanasoff , This machine was the first to store data as a charge on a capacitor, which is how today’s computers store information in their main memory ( DRAM or dynamic RAM ). As far as its inventors were aware, it was also the first to employ binary arithmetic.

Colussus

The Colossus , built during World War II by Britain for the purpose of breaking the cryptographic codes used by Germany. Britain led the world in designing and building electronic machines dedicated to code breaking, and was routinely able to read coded Germany radio transmissions. Not a general purpose, re-programmable machine.

ENIAC

The title of forefather of today’s all electronic digital computers is usually awarded to ENIAC , which stood for Electronic Numerical Integrator and Calculator. ENIAC was built at the University of Pennsylvania between 1943 and 1945 by two professors, John Mauchly and the 24 year old J. Presper Eckert , who got funding from the war department after promising they could build a machine that would replace all the “computers”. ENIAC filled a 20 by 40 foot ENIAC.

EDVAC

It took days to change ENIAC’s program. Eckert and Mauchly’s next teamed up with the mathematician John von Neumann to design EDVAC , which pioneered the stored program . After ENIAC and EDVAC came other computers with humorous names such as ILLIAC, JOHNNIAC , and, of course, MANIAC.

UNIVAC

The UNIVAC computer was the first commercial (mass produced) computer. In the 50’s, UNIVAC (a contraction of “Universal Automatic Computer”) was the household word for “computer” just as “Kleenex” is for “tissue”. UNIVAC was also the first computer to employ magnetic tape.

FIVE GENERATIONS OF COMPUTER

First Generation Computer (1940-1956)

The first computers used vacuum tubes for circuitry and magnetic drums for memory. They were often enormous and taking up entire room. First generation computers relied on machine language. They were very expensive to operate and in addition to using a great deal of electricity, generated a lot of heat. The first electronic computer was designed at Iowa State between 1939 1942 . The Atanasoff Berry Computer used the binary system(1’s and 0’s). Contained vacuum tubes and stored numbers for calculations by burning holes in paper.

Second Generation Computer (1956- 1963)

Transistors replaced vacuum tubes and ushered in the second generation of computers. Second generation computers moved from cryptic binary machine language to symbolic. High level programming languages were also being developed at this time, such as early versions of COBOL Second generation.

Third Generation Computer ( 1964-1971)

The development of the integrated circuit was the hallmark of the third generation of computers. Transistors were miniaturized and placed on siliconchips , called semiconductors. Instead of punched cards and printouts, users interacted with third generation computers through keyboards and monitors and interfaced First Generation Computers. Transistors were replaced by integrated circuits(IC). One IC could replace hundreds of transistors. This made computers even smaller and faster.

Fourth Generation Computer ( 1971- Present)

The microprocessor brought the fourth generation of computers, as thousands of integrated circuits were built onto a single silicon chip. The Intel 4004 chip, developed in 1971, located all the components of the computer. From the central processing unit and memory to input/output controls on a single chip. Fourth generation computers also saw the development of GUIs , the mouse and handheld devices.

Fifth Generation Computers (Present and Beyond)

Fifth generation computing devices, based on artificial intelligence. Are still in development, though there are some applications, such as voice recognition. The use of parallel processing and superconductors is helping to make artificial intelligence a reality. The goal of fifth generation computing is to develop devices that respond to natural language input and are capable of learning and self organization.

Apple 1 Computer – 1976

The IBM PC

Commodore 64

Apple Macintosh

The Amiga

Windows 3

Macintosh System 7

Apple Newton

Standard UNIX

Power PC

IBM OS/2

Windows 95

NRB: Computer

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

Introduction

Hardware and Software

Windows

Windows

Database Management System

Database

Computer Networking

Information System

Information System

Core Banking System

Core Banking System

Information Security

Basic Computer Terminologies

IT and ICT in Banking

IT and ICT in Banking

IT and ICT in Banking

NRB Computer Notes — Sun, 08 Apr 2012 05:41:42 +0000

IT and ICT in Banking

ICT has become an indispensable factor in the modern life of every individual. The elements of information and communication technology related sources are perceived as essential parameters in day today operation of banking both in private and public nature while deal with customers and stakeholders. The applications of ICT are augmenting in every sphere of our action includes both consumption and services. In this aspect the banking service is an intangible element which requires an effective quality delivery process from the ends of both provider and taker. In order to enhance the quality of banking services both in private and public categories, the application of ICT becomes an imperative element. But today banking organization from both private and public background aims to offers better and enhanced services to the customer in the given sphere of competition. Due to the level of service extended by bank differs based on the customer and type of services with respect to availability of infrastructure. Even though the banks from private and public base aims to elevate sophisticated services towards the perception of customers and employees in order to identify the role of ICT towards effective services of banking sectors. The present survey has been conducted from 3 private and 4 public banks situated in Kanchipuram Town. The results have been evaluated using SPSS 18.0 and suggestions provided to improve the better applications of ICT resources.

Role of Information Technology (IT) in the Banking Sector

Banking environment has become highly competitive today. To be able to survive and grow in the changing market environment banks are going for the latest technologies, which is being perceived as an ‘enabling resource’ that can help in developing learner and more flexible structure that can respond quickly to the dynamics of a fast changing market scenario. It is also viewed as an instrument of cost reduction and effective communication with people and institutions associated with the banking business.

The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the Banks started computerising the branches in a limited manner. The early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high powered PC’s and Services and banks went in for what was called Total Branch Automation (TBA) packages. The middle and late 90s witnessed the tornado of financial reforms, deregulation globalisation etc. coupled with rapid revolution in communication technologies and evolution of novel concept of convergence of communication technologies, like internet, mobile/cell phones etc. Technology has continuously played on important role in the working of banking institutions and the services provided by them. Safekeeping of public money, transfer of money, issuing drafts, exploring investment opportunities and lending drafts, exploring investment being provided.

Information Technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important medium for delivery of banking products and services.

The customers can view the accounts; get account statements, transfer funds and purchase drafts by just punching on few keys. The smart card’s i.e., cards with micro processor chip have added new dimension to the scenario. An introduction of ‘Cyber Cash’ the exchange of cash takes place entirely through ‘Cyber-books’. Collection of Electricity bills and telephone bills has become easy. The upgradeability and flexibility of internet technology after unprecedented opportunities for the banks to reach out to its customers. No doubt banking services have undergone drastic changes and so also the expectation of customers from the banks has increased greater.

IT is increasingly moving from a back office function to a prime assistant in increasing the value of a bank over time. IT does so by maximizing banks of pro-active measures such as strengthening and standardising banks infrastructure in respect of security, communication and networking, achieving inter branch connectivity, moving towards Real Time gross settlement (RTGS) environment the forecasting of liquidity by building real time databases, use of Magnetic Ink Character Recognition and Imaging technology for cheque clearing to name a few. Indian banks are going for the retail banking in a big way

The key driver to charge has largely been the increasing sophistication in technology and the growing popularity of the Internet. The shift from traditional banking to e-banking is changing customer’s expectations.

E-Banking:

E-banking made its debut in UK and USA 1920s. It becomes prominently popular during 1960, through electronic funds transfer and credit cards. The concept of web-based baking came into existence in Eutope and USA in the beginning of 1980.

In India e-banking is of recent origin. The traditional model for growth has been through branch banking. Only in the early 1990s has there been a start in the non-branch banking services. The new pribate sector banks and the foreign banks are handicapped by the lack of a strong branch network in comparison with the public sector banks. In the absence of such networks, the market place has been the emergence of a lot of innovative services by these players through direct distribution strategies of non-branch delivery. All these banks are using home banking as a key “pull’ factor to remove customers away from the well entered public sector banks.

Many banks have modernized their services with the facilities of computer and electronic equipments. The electronics revolution has made it possible to provide ease and flexibility in banking operations to the benefit of the customer. The e-banking has made the customer say good-bye to huge account registers and large paper bank accounts. The e-banks, which may call as easy bank offers the following services to its customers:

Credit Cards/Debit Cards
ATM
E-Cheques
EFT (Electronic Funds Transfer)
DeMAT Accounts
Mobile Banking
Telephone Banking
Internet Banking
EDI (Electronic Data Interchange)

Benefits of E-banking:

To the Customer:

Anywhere Banking no matter wherever the customer is in the world. Balance enquiry, request for services, issuing instructions etc., from anywhere in the world is possible.
Anytime Banking – Managing funds in real time and most importantly, 24 hours a day, 7 days a week.
Convenience acts as a tremendous psychological benefit all the time.
Brings down “Cost of Banking” to the customer over a period a period of time.
Cash withdrawal from any branch / ATM
On-line purchase of goods and services including online payment for the same.

To the Bank:

Innovative, scheme, addresses competition and present the bank as technology driven in the banking sector market
Reduces customer visits to the branch and thereby human intervention
Inter-branch reconciliation is immediate thereby reducing chances of fraud and misappropriation
On-line banking is an effective medium of promotion of various schemes of the bank, a marketing tool indeed.
Integrated customer data paves way for individualized and customized services.

Impact of IT on the Service Quality:

The most visible impact of technology is reflected in the way the banks respond strategically for making its effective use for efficient service delivery. This impact on service quality can be summed up as below:

With automation, service no longer remains a marketing edge with the large banks only. Small and relatively new banks with limited network of branches become better placed to compete with the established banks, by integrating IT in their operations.
The technology has commoditising some of the financial services. Therefore the banks cannot take a lifetime relationship with the customers as granted and they have to work continuously to foster this relationship and retain customer loyalty.
The technology on one hand serves as a powerful tool for customer servicing, on the other hand, it itself results in depersonalising of the banking services. This has an adverse effect on relationship banking. A decade of computerization can probably never substitute a simple or a warm handshake.
In order to reduce service delivery cost, banks need to automate routine customer inquiries through self-service channels. To do this they need to invest in call centers, kiosks, ATM’s and Internet Banking today require IT infrastructure integrated with their business strategy to be customer centric.

Impact of IT on Banking System:

The banking system is slowly shifting from the Traditional Banking towards relationship banking. Traditionally the relationship between the bank and its customers has been on a one-to-one level via the branch network. This was put into operation with clearing and decision making responsibilities concentrated at the individual branch level. The head office had responsibility for the overall clearing network, the size of the branch network and the training of staff in the branch network. The bank monitored the organisation’s performance and set the decision making parameters, but the information available to both branch staff and their customers was limited to one geographical location.

Traditional Banking Sector

The modern bank cannot rely on its branch network alone. Customers are now demanding new, more convenient, delivery systems, and services such as Internet banking have a dual role to the customer. They provide traditional banking services, but additionally offer much greater access to information on their account status and on the bank’s many other services. To do this banks have to create account information layers, which can be accessed both by the bank staff as well as by th customers themselves.

The use of interactive electronic links via the Internet could go a ling way in providing the customers with greater level of information about both their own financial situation and about the services offered by the bank.

The New Relationship Oriented Bank

Impact of IT on Privacy and Confidentiality of Data:

Data being stored in the computers, is now being displayed when required on through internet banking mobile banking, ATM’s etc. all this has given rise to the issues of privacy and confidentially of data are:

The data processing capabilities of the computer, particularly the rapid throughput, integration, and retrieval capabilities, give rise to doubts in the minds of individuals as to whether the privacy of the individuals is being eroded.
So long as the individual data items are available only to those directly concerned, everything seems to be in proper place, but the incidence of data being cross referenced to create detailed individual dossiers gives rise to privacy problems.
Customers feel threatened about the inadequacy of privacy being maintained by the banks with regard to their transactions and link at computerized systems with suspicion.

Aside from any constitutional aspect, many nations deem privacy to be a subject of human right and consider it to be the responsibility of those who concerned with computer data processing for ensuring that the computer use does not revolve to the stage where different data about people can be collected, integrated and retrieved quickly. Another important responsibility is to ensure the data is used only for the purpose intended.

THE IMPACT OF INFORMATION AND COMMUNICATIONS TECHNOLOGY IN BANKING SECTOR INTRODUCTION There are so many definitions of a bank given by various authorities.But,summarizing all the definitions,a bank is simply a financial institution that accepts deposits from surplus economic units of the society and advances it to deficit units through the process of financial intermediation.Banks are the institutions that assist in managing financial system of a country.The financial systems are the totality of financial arrangement,agents,institutions etc that interact with each other and the rest of the world to develop,foster and enhance economic growth and development of a country.A robust financial sytem is very vital to the health of any economy.(Ekezie,1997).So the role banking institutions play cannot be over emphasized.And that is why any thing that affects the institution has both local and international consequences.The effective regulation of this institution helps the government to manage the monetary,political,and fiscal policies of the nation. There are divergents views on the impact of Information,Communication and Technology (ICT)in the banking sector as we have seen in our earlier discussions.Some of my colleaques agreed with me that ICT have impacted greatly the banking sector,while others disagree on the grounds that ICT have created some distortions by replacing human capital with machine capital so to say(example in comments made by Anthony). Some believe that the advantages far out weigh the disadvantages(example in comments made by Segun).Much as it has put a lot of people out of job,at the same time it has contributed significantly to creation of jobs.One can easily see examples among the likes,of VODACOM,MTN,AIRTEL,ETISALAT,IBM,FACEBOOK,MICROSOFT,HP,APPLE,SAMSU

NG,etc. Again many agreed that other employment opportunities abound in other sectors like agriculture,manufact uring,construction,etc,can be exploited by those affected(example in comments made by Loretta).The botton line being that one should equip himself or herself with others skills and knowledge as adaptive measures. Some believe that ICT is a welcome development in the banking industry or sector and there is no going back.That was why Paul O’Neil Chairman and CEO of Alcoa once said that “I don’t see information technology as a stand alone system.I see it a great facilitator.”(Bill,1999) LITERATURE REVIEW The arguments or controversies whether the ICT have made impact in the banking sector or not is still on going.While some agree,some others disagree each school of thoughts have their own points to back up their claims.Bill Gates in his book ‘Businees @ the speed of thought ‘likened the way businesses are carried out in this generation like digital nervous system.At the click of a botton,the response rate is unimaginable.(Bill,1999).In the banking sector,the speed of revolution in bank processes via ICT is such that people are wondering whether robots will not take over the banking operations soonest. A lot of research is still going on and the kind of competition taking place in telecommunications sector is amazing.A new invention quickly become obsolete in just a matter of two(2) to three(3) years as a result of fast development.Many banks are constantly upgrading their software.A case in point is First Bank Plc which recently upgraded their software from finnacle 7 to finnacle 10.This development disrupted the normal banking operation for 3 days.About four(4)years ago finnacle 7 was taken to be a robust software capable of supporting any large data base.Other banks are equally upgrading their various softwares every now and then.Nigeria like many countries have been making effort through many policies and strategies to accelerate the pace of economic and infrastructural development.To achieve this,a number of factors are involved including entrepreneurship,good corporate governance,competent management systems, modern techniques and application of information and communications technology(ICT).(Ekezie,1997). DISCUSSION The banking industry or sector provides financial services to individuals,organizations,institutions etc and have been totally revolutionized by the impact of Information and Communications Technology(ICT) in virtually all areas of its operations.Many years ago a lot of tasks were carried out manually.These include,preparation of cashbooks,journals,general ledgers,final accounts and reports.These however accounted to greater extent the long delays in providing financial services to customers,long queues experienced in banking halls,long turnaround time in meeting customers requests like cheque books requisition, raising drafts, processing of loan requests,withdrawal/deposit of cash,trade payments etc But today,the story have changed significantly due to the impact of Information and Communication Technology.Unlike before where you have many paying and receiving tellers in the banking hall, you have fewer tellers nowadays and many Automated Teller Machines(ATM) in many strategic locations both within and outside bank premises.These days many banks even have e-branches and ATM galleries with highly reduced human activities.Loan processing have equally improved.Approvals can be obtained from various approving authorities via computer system. The clearing system of bank instruments like,cheques,managers cheque,bank drafts, etc have been reduced from four(4) working day to two(2) with chances of further improvement.In security area, electronic revolving doors have practically replaced the manually operated types.Surveillance cameras of various types are in vogue.Computerized system of monitoring custom duties,excise duties,import duty,movement and payment of goods,taxes is now the order of the day.Today in Nigeria financial inclusion strategy appears to be gaining ground.These involves using electronic means including handsets to facilitate payment of goods and services especially in areas that were not exposed to bank services.This strategy assists in mobilizing money that was not in the banking system.Thus improving the workability of monetary policy of the government.The various banking software being used in the banking system have further improved the processes of generating reports ,accounting,internal controls,human resource management,corporate governance and other processes in the system.The notable softwares include finnacle,globus,phoenix,bankmaster,etc.Internet banking services have greatly contributed in revolutionizing the banking sector.The internet creates a new universal space for information sharing,collaboration,and commerce.(Bill,1999).Today through the platform(internet) you can easily pay your utility bills,recharge your cards,transfer funds to various accounts,make payments with your electronic cards in commercial websites and you can even open accounts without necessarily going to the banking hall (GTB).Also,you can request for cheque books and stop your cheques through the internet and using your internet enabled handsets a good number of banking applications can be done.The list is endless so to say and more innovations are still on their way. However,the impact of information and communications technology have not been without its challenges.So many people have lost their jobs because of the replacement of some tasks and services by machines and computer systems.The unemployment situation have worsened such that,the percentage of unemployed youths have risen to worrisome level.Some banks have reduced the number of their branches as a result of improvement in technology.Banks like GTbank Plc and Zenithbank Plc have some branches with greater part of their operations carried out by machines and computer system.The cost of deploying the technology have impacted negatively to the profitability figures of many banks.As at today some banks are still behind others in competition because of associated cost of deploying some of the machines,computer systems and other electronic channels.The structure of banking halls are now different from what we used to know before.The computer systems,machines and other tools used are now more effectively, efficiently and strategically deployed to enhance banking operations. Many changes are still very much on their way and the impact will continue. SUMMARY Summarising the discussion above,one can see that ICT have totally revolutionized the banking industry or sector and thereby changing the manner business is conducted nowadays.There is virtually no unit that does not have ICT innovations.And the situation will continue many years to come.The effect or impact have the positive side of it as well as the negative side as we can deduced from the discussion.Whichever school of thought you belong,it is obvious that there is a cause and effect situation.No doubt,the arguments,discussions,debates etc will still continue because researches,experiments etc are still on and the results will in one way or the order affect the sector positively or negatively.The solution to its negative impact still remain in my own mind in development of oneself in other skill of human endeavour by way of seminars, training, workshops,formal and non formal education,specialized training programs,conferences etc such that you can easily adapt to changes when the need arise. CONCLUSION In conclusion, the impact of Information and Communications Technology in banking sector is enormous and has global impact.It has equally affected leading organizations all over the world.The effect is not only in the banking sector because virtually all sectors of human endeavour have experienced the revolution.Again,the speed of change is fast and in many years to come the impact will continue to cut across all areas of human endeavour going by the Research and Development(R&D) taking place all over the world presently.Change is a constant phenomenon and banking sector is not exempted.As such one needs to prepare himself or herself to such changes whenever the situation calls for it.