Cooperative Banking in Place (COIN)*

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1 Cooperative Banking in Place (COIN) 1 Cooperative Banking in Place (COIN)* Saurabh Gupta, Sr Technical Director & Project Leader National Informatics Centre, Patna, Bihar sio-bih@nic.in P C Sahoo, Principal Systems Analyst & Project Coordinator Sanjay Kumar Sinha, Sr. Systems Analyst & Project Member O P Gupta, Programmer & Project Member, op.gupta@nic.in S N Behera, Technical Director, behera@nic.in Sanjay Kumar Sinha, Sr. Systems Analyst & Project Member National Informatics Centre, Bihar State Centre, Technology Bhawan, Patna ABSTRACT COIN (Co-operative Banking In-Place) The first ICT based solution by the government for Total Branch Automation (TBA) making effective economic reforms in Co-operative Bank and its branches thereby enhancing the reach of the bank to the Rural Masses for the prosperity of the State. COIN has set a new standard of citizen-centric services by supporting Commercial banking along with Agricultural loans, automated credit and disbursement of pension to freedom fighters. The business reengineering model of Group accounting for the state government with MICR interface of cheque clearing with RBI paved the way for COIN to achieve Microsoft Award in A mark jump of 10,000 customers in single year has shown the trust on the new system and the stake holder bank created a history by touching the height of 117 crores Net Profit against the previous net profit of only one crore. This solution was replicated in all branches of Bihar State Cooperative bank Ltd. (BSCB) across the state. 1. Introduction/Background Project conceptualization Core infrastructure like the buildings of the bank along with the working environment was in extremely poor condition prior to implementation of COIN. There was no mechanism to provide quick service to valued customers purely because of delays in tracking of ledgers, locating specimen signatures for authentication and posting of transactions. Updating of pass-book and preparation of monthly statement of any account was so cumbersome that it

2 Cooperative Banking in Place (COIN) 2 was taking days instead of few minutes. In-expeditious service had started to coerce the customers to shift their banking activities elsewhere. By , the overall situation had degraded to a point where cash-book, which is supposed to be prepared on daily basis, was pending by a fortnight and trial balance, which is a weekly report, was completed almost one and half months later. All these resulted in delayed submission of Statutory Reports to NABARD and RBI. BSCB was facing difficulty in monitoring and consolidation of Agricultural loan accounts in its 38 District Central Co-operative Banks (DCCBs). The limited manpower available to it had already sagged under the burden of day to day looking after of more than 2,000 Primary Agricultural Co-operative Societies (PACS). Interest calculation and posting of interest in all the accounts was not accurate and these processes were taking more than three months. Same problem was prevailing with freedom fighters pension account. Pensioners were not able to withdraw their pension in time due to delay in posting of amount in their account. NPA (Non Performing Asset), which is the health index of any financial institution, was also alarming and due to which RBI had put Bihar State Co-operative Bank in section-11, which was the threat of closure of bank in near future. Recovery in case of Loan Account was very poor while the gap in Personal Ledger and General Ledger was broadening day by day and getting out of control of the management. A project management group comprising of Managing Director, DGM (Admin), State Informatics Officer (SIO of NIC) was formed for devising the strategy for implementation of project. A development team comprising of professionals of NIC was formed for system study and development. Progress of work was reviewed

3 Cooperative Banking in Place (COIN) 3 in monthly meetings. Series of operational trainings were imparted for smooth implementation of software. Software tools for project monitoring, requirement gathering, Designing and testing were used for smooth and fast development of software. Risk during the lifecycle of software was minimized by proactive risk management. Change request was also managed with software tools. 2. Vision To evolve BSCB into a sound and nationally competitive financial service provider and strong market player with integrated services to customers from all segments, leveraging on ICT technology, adopting the best accounting and ethical practices and fulfilling corporate and social responsibilities towards all the stakeholders. Extensive deployment of ICT tools combining innovation, quality, personal touch and flexibility in delivery at par with any corporate. 3. Stakeholders Chairman, MD & Board of Members of Bihar State Cooperative bank Cooperative Department, Government of Bihar Reserve Bank of India NABARD District Central Cooperative Banks (DCCB) Primary Agriculture Cooperative Society (PACS) Employee of the bank National Informatics Centre (NIC), Bihar State Centre NIC Services Incorporated (NICSI) Customers 4. Objectives A consensus has been achieved in all stake holders of the system i.e. (i) BSCB (ii) Customer of BSCB, (iii) DCCB and (iv) PACS

4 Cooperative Banking in Place (COIN) 4 and Govt. of Bihar to implement ICT based Solution COIN with the following objectives. efficient and effective Citizen-centric service delivery to Rural Masses Single window based banking activities Control on Non Performing Assets(NPA) Re-engineering and simplification of process Provide complete banking solution Faster error-free transactions and reconciliation Reduction in transaction cost Better reporting tools and book keeping To enhance profitability using better management tools Better manpower management System should be capable enough to track the errors made, delay tracking mechanism, trend in opening of A/c, work performance analysis of individual staff To strengthen the knowledge base by identifying valuable customers. 5. Services Front end All sort of banking services required by customer with respect to cash deposit, withdrawal, passbook updation, Demand Draft, loan, Cheque clearance, opening/closing/transferring accounts, various deposit schemes etc. Back end MICS clearing system, Preparation of Profit & Loss Account, Balance sheet, Interest calculations, Loan Advances and NPA monitoring, CC account monitoring, preparations of various statutory reports etc. COIN has been implemented as an in-house model with funding from the Bank for creation of required ICT infrastructure i.e. procurement of hardware and networking components and data porting to the new system. The required software i.e. COIN has been developed by National Informatics Centre, Bihar freely of

5 Cooperative Banking in Place (COIN) 5 cost for the bank. The implementation, rollout and maintenance of COIN have been carried out under the technical guidance/ supervision of NIC COIN Project team. Prior to taking up the project a formal MOU was signed between NIC and the Bank. The COIN software has gone through the quality documentation and audit requirements of NIC s ISO requirement. 6. Necessity/Needs The need of COIN development and its deployment can be attributed to the following factors inherent to the manual systems of operations o Delay in service delivery - There was no mechanism to provide quick services to valued customers, purely because of delays in tracking the ledgers, locating specimen signatures for authentication and posting of transactions. Updating pass-books and preparation of monthly account statement was cumbersome and used to take days instead of few minutes. There were observations that due to inexpeditious and below quality services customers had started shifting their activities elsewhere. o Delay in report return and compliance to RBI, NABARD, Government The situation was so critical that e cash-book which is supposed to be prepared on daily basis, was pending by a fortnight. Trial balance which is a weekly report was delayed by one and half months. All these resulted in delayed submission of Statutory Reports to NABARD and RBI o Monitoring DCCBs BSCB was finding it difficult in monitoring and consolidating Agricultural loan accounts of all 38 District Central Co-operative Banks (DCCBs). The limited manpower available to it had already sagged under the burden of day-to-day monitoring of more than 2,000 Primary Agricultural Co-operative Societies (PACS).

6 Cooperative Banking in Place (COIN) 6 Manual method of monitoring DCCB was quite difficult due to limited availability of manpower. o Accuracy in Accounting Human errors in the financial transactions like interest calculations and posting, ledger entry was a difficult process to validate in the manual process. In addition to errors there was also delay of more than 3 months in reflecting the entries with respect to individual accounts. These all resulted in delay in P&L account preparation and preparation of balance sheet. The most affected accounts were Pensioners and freedom fighters. Pensioners were not able to withdraw their pension in time due to delay in posting of amount. o NPA (Non Performing Asset) Management - NPA of BSCB, the health index of any financial institution, was above the threshold limit prompting RBI putting Bihar State Co-operative Bank in section-11, which is the threat of closure of bank in near future. Recovery in case of Loan Accounts was very poor while the gap in Personal Ledger and General Ledger was broadening day by day and getting out of control of the management. 7. Project plan Requirements of process re-engineering and legal framework Technology Architecture 8. COIN Architecture COIN is developed using COM (Component Object Model), which is general architecture that lays the foundation of the project. It uses technology of building inter operable component through an object orientation. An arbitrary number of OLE Custom Controls

7 Cooperative Banking in Place (COIN) 7 (OCXs) are developed and used as fabricated components to aid in building the project. A Dynamic Link Library (DLL) file is developed which groups many functions and class modules that are compiled, linked and stored separately from project facilitating faster response and easier maintenance. COIN supports 3-tier architecture - (a) Presentation Layer -Is responsible for the presentation of data, receiving user events and controlling the user interface. COIN Software s executable file resides in presentation layer which contains Presentation logic having User Interface, displaying data to the user, accepting input from the user facility. (b) Business Layer - Business-objects that implement the business rules live here, and are available to the clienttier. This tier protects the data from direct access by the clients. Custom Dynamic Link Library (DLL) contains business logic of Bank, is middle-tier component. It contains Business logic, which means Data Validation, ensuring the data is correct before being added to the database. (c) Data Layer - It contains Data Access Logic which means Database Communication, accessing tables and indices, packing and unpacking data. Logical view of COIN Software

8 Cooperative Banking in Place (COIN) 8 Security Aspects of COIN Coin software is very secure software system, which provides five levels of Application Security Management is available» Operating System Level» RDBMS Level» Application Level» Transaction Level &» Audit Log Level Milestones Phase Date of Brief Description Number release Pilot release Reporting module are added and improvement of user interface Addition reporting module in incorporated for NPA and Loan monitoring, Daily deposit schemes Addition module Daily and Vendor management incorporated New NPA reporting Logic in incorporated as per the guideline of RBI 9. Project Management Structure Administrative and logistic supports were provided by Bank to NIC Project team of COIN for trouble shooting and maintenance of COIN at implemented branches. Policy decisions with respect to changes in the application were jointly decided by the NIC-BSCB coordination committee, which also meets regularly to take stock of project progress. 10. Implementation Strategy for Pilot to roll out

9 Cooperative Banking in Place (COIN) 9 COIN was developed and implemented in the main branch of BSCB at Ashok Rajpath during the pilot period. Branch where the operational complexity was high, was selected by management group for replication in the first phase. After six months of rigorous testing in pilot branch with the manual system running in parallel, COIN was declared stable and then replicated at other branches. 11. Capacity building Operational trainings were provided to all the Officials and staff of a braches prior to implementation of COIN. Data porting from the manual system to the new systems takes place under the technical supervision of NIC project team. Once the data porting is completed, these get verified and certified by the concerned branch prior to the live run of the show. Changes at the branch level are not permitted and all the changes are carried out centrally as per the direction of NIC-BSCB coordination committee. 12. Evaluation and Measurement BSCB booked a profit of Rs.114 Crore in very first year of implementation of COIN in comparison to previous year of Rs.1 Crore. MIS reports helped to identify major debtors, Demand Collection Trend, Non-Performing Asset movement on weekly basis which contributed to the remarkable profit. Then after, the trend of profit is stable to around 80 crores. NPA has reduced to comfortable level and RBI freed BSCB from Section-11. After computerization management of BSCB has withdrawn more then 50% manpower from branches. In Main branch of BSCB working strength reduce to 23 from 46 in first year of computerization and currently only 16 staff are managing the bank. Complete automation of banking business and integration of MIC interface saved the duplicity of work and reduction of day-to-day running cost.

10 Cooperative Banking in Place (COIN) 10 Daily deposit schemes is started which deals with on average tractions every days. This not only enhances business of the bank but also social cause for down trodden people of Bihar. All the stakeholders of computerization of BSCB have experienced its benefits. Customers started getting the prompt and timely delivery of services like faster processing of loan applications and sanction of loans etc. Prompt response of query and observance of grievance, timely updation of pass-book and customary dispatch of Bank Statement of Daily Deposit Scheme has enhanced the faith of customers in BSCB. It is COIN software that has allowed BSCB to be recognized as True Bank of Citizens of Bihar. Satisfaction level can be very well judged by the figures shown below which indicate positive growth both in terms of Bank-Accounts as well as the Bank Deposits. The bank booked a profit of Rs.117 Crore in very first year of implementation of COIN in comparison to previous year profit of Rs.1 Crore. MIS reports prepared by COIN helped to identify major debtors for recovery, Demand Collection Trend, Non- Performing Asset movement on weekly basis which contributed to the remarkable profit. Then after, trend of profit is Rs. In Crore Before COIN Net Profit 1st Year 2nd Year 3rd year the stable

11 Cooperative Banking in Place (COIN) 11 to around 80 crores. NPA has reduced to comfortable level and RBI freed BSCB from Section Issues and their solutions Lessons learnt - critical success factors, failure factors To be truly successful, any software solution must accommodate all of the user requirements. If necessary, work-flow may be redefined to meet this objective. The approach should be modular and the technology being put on the desk of the end-user must be simple and easy to interact. In-built validation at each level is absolutely necessary for quick identification of problems, if any. Also, version control is helpful in keeping track of the overall evolution Critical success factors Majority of the success of this project owes to the efforts of Sri K.K.Pathak, the dynamic bureaucrat and Managing Director BSCB. Better Co-ordination and team work between NIC project team and accounts & Personal section of BSCB in understanding, developing and testing the application. Round the clock implementation support by NIC officials to branches during first year closing accounting, and continuous supports to all the branches BSCB Use of tested framework for project planning Effective monitoring and good communication Component wise development of software Effective user training and documentation Regular visit to branches at the initial stage for the trouble shooting. Replication in other states COIN is easy to replicate and deploy. Currently is being implemented in all the branches of BSEB covering Bihar and Jharkhand.

12 Cooperative Banking in Place (COIN) 12 Requests from several State Co-operative Banks of other States have been received by NIC, Bihar for demonstration of COIN software. Subsequently, the software has been demonstrated and much appreciated by the following States: Orissa Tripura Assam Chhattisgarh Road ahead: COIN is in the process of customization to accommodate» Postal banking for Department of Post» Common Accounting System (CAS) for PACS as per NABARD requirement» Core Banking for BSCB» Linking of DCCBs through Network 14. Status and results COIN is being implemented in all the 14 braches of Bihar State Cooperative banks spread in two states. It is being implemented in 9 different branches in Bihar and 5 different branches in Jharkhand. Followings are details of COIN enabled branches. Bihar : 1) Bakipur Main Branch 2) MauryaLok Branch 3) New Market Branch 4) Nala Road Branch 5) Kankarbagh Branch 6) MusallayPur Branch 7) Secretariat Branch all with in Patna urban area 8) Motihari District Branch, Motihari 9) Bihat Branch Barauni District. In Jharkhand: 1) Jamshedpur Main, Golmuri 2) Telco in Jamshedpur 3) Bokaro Branch Bokaro 4) Ranchi Branch Ranchi Specific achievements during the year All 5 branches of BSCB in Jharkhand were COIN enabled Future plans for readers seeking more information on project - Not specific ***