Video 1- CBS

Core Banking System (CBS) & IT in

Banking – Comprehensive Study Notes

📌 What is Core Banking System (CBS)?

A Core Banking System (CBS) is a centralized software solution that connects all branches
of a bank, enabling customers to perform transactions from any branch rather than being
limited to their home branch.

✔ Key Features of CBS:

Real-time processing – Transactions are instantly updated across all branches.
Anywhere banking – Customers can access their accounts from any branch.
Multi-channel integration – Supports ATMs, mobile banking, internet banking, UPI, and
PoS (Point of Sale) transactions.
Automated banking operations – Reduces human errors and fraud risks.

✔ Popular CBS Software Used in Banks

Finacle (Infosys) – Used by major banks like ICICI, and Union Bank.
BaNCS (TCS) – Implemented in banks such as Bank of India and IDBI Bank.
 FLEXCUBE (Oracle) – Used by HDFC Bank and Yes Bank.
Bankmate – Commonly used in cooperative and rural banks.

📌 How CBS Works – Real-time Example in SBI

Scenario: A Customer Deposits Money in Kanpur

🔹 Step-by-Step CBS Transaction Process:

1. Customer deposits ₹10,000 in an SBI branch in Kanpur.
2. Transaction request is sent to the CBS central server.
3. CBS updates the central database in real-time.
4. Updated balance is immediately accessible from any SBI branch, ATM, or digital
platform.
5. Customer can withdraw money from an ATM in Delhi or transfer funds via UPI
instantly.

🔹 CBS ensures real-time synchronization across:

✅ Branches (Physical banking)
✅ Internet Banking & Mobile Banking (Digital banking)
✅ ATM, PoS, and UPI Payments (Third-party integrations)
📌 Real-world Impact: SBI processes millions of real-time transactions daily through CBS,
ensuring seamless banking nationwide.

📌 IT Infrastructure of CBS (Technical

Architecture)
CBS relies on a robust IT setup to manage vast amounts of financial transactions securely.

✔ Key Components of CBS IT Infrastructure

1️⃣ Frontend (User Interface Layer)
Bank Branch Terminals: Used by bank employees for transactions.
Customer Channels: Mobile banking apps, internet banking, ATMs, PoS terminals.

2️⃣ Backend (Database & Processing Layer)

 Centralized Databases: Store customer information, transaction history, and banking
records.
Common Database Systems Used:
Oracle Database – Used by SBI, HDFC.
MySQL – Used in some cooperative banks.
IBM DB2 – Used for high-performance banking transactions.

3️⃣ Middleware (Integration & Connectivity Layer)

APIs (Application Programming Interfaces): Connect CBS with UPI, IMPS, RTGS,
and NEFT transactions.
Enterprise Service Bus (ESB): Ensures smooth communication between different
banking modules.

4️⃣ Security Layer (Cybersecurity & Compliance)

Firewalls & Intrusion Detection Systems (IDS): Prevent unauthorized access.
Encryption Standards: SSL/TLS encrypts transactions to protect customer data.
Multi-Factor Authentication (MFA): Ensures secure login for customers and
employees.

📌 Advantages of CBS in Banking

✔ For Banks:
✅ Faster transactions – Reduces processing time for payments, loans, and deposits.
✅ Centralized control – Simplifies banking operations and regulatory compliance.
✅ Cost savings – Reduces overhead costs for maintaining separate systems in branches.
✅ Fraud prevention – Advanced security measures help detect and prevent fraud.
✔ For Customers:
✅ Convenience – Access accounts from any branch, ATM, or digital platform.
✅ 24/7 banking – Enables online, mobile, and UPI transactions anytime.
✅ Faster loan processing – Loan applications and approvals are automated.

📌 Interview Q&A on Core Banking

System (CBS) & IT in Banking
Here are some additional interview questions along with detailed answers to help you
prepare for banking and IT-related discussions.
🟢 Basic CBS Questions
Q1. What is CBS? Why is it important in banking?
Answer:
CBS (Core Banking System) is a centralized software that integrates all banking
operations, allowing real-time transactions across all branches, ATMs, and digital banking
channels. It is important because it:
✅ Enables anywhere banking (customers can access their accounts from any branch).
✅ Ensures real-time processing of deposits, withdrawals, and transfers.
✅ Supports multi-channel banking (internet banking, mobile banking, ATMs, PoS, etc.).
✅ Reduces operational costs and improves customer service.

Q2. How does CBS differ from traditional banking

systems?

Feature Traditional Banking CBS-Based Banking

Transaction Manual, paper-based Automated, real-time

Processing

Branch Transactions possible only at Accessible from any branch

Dependency home branch

Customer Limited 24/7 banking via ATMs,

Convenience mobile, internet

Fraud Detection Manual, delayed AI-driven real-time

monitoring

Q3. What are the main CBS software solutions used by

banks?
Answer:

1. Finacle (Infosys) – Used by SBI, ICICI, Axis Bank.

2. BaNCS (TCS) – Used by Bank of India, IDBI Bank.
3. FLEXCUBE (Oracle) – Used by HDFC Bank, Yes Bank.
4. Bankmate – Used by cooperative and regional banks.
Q4. What are the core modules of CBS?
Answer:
CBS consists of multiple modules that handle different banking operations:
✅ Customer Information System (CIS): Stores customer details, KYC data.
✅ Deposit Management System: Manages savings, current, and fixed deposit accounts.
✅ Loan Management System: Automates loan approvals, EMI payments, and risk
assessment.
✅ Payment Processing Module: Handles NEFT, RTGS, IMPS, UPI transactions.
✅ Risk & Compliance Module: Ensures banks follow regulatory requirements.

🟢 Technical CBS Questions

Q5. Explain the IT infrastructure behind CBS.
Answer:
CBS relies on multiple IT layers for seamless banking operations:

1️⃣ Frontend Layer: Bank branch terminals, mobile apps, ATMs.

2️⃣ Backend Layer: Central database (Oracle, MySQL, DB2) that stores transaction data.
3️⃣ Middleware Layer: APIs that connect CBS with third-party services (UPI, IMPS).
4️⃣ Security Layer: Firewalls, encryption, authentication to prevent cyber threats.

Q6. What database systems are commonly used in

CBS?
Answer:
🔹 Oracle Database – Used by SBI, ICICI due to high scalability.
🔹 IBM DB2 – Used in high-performance banking systems.
🔹 MySQL – Used in smaller banks and financial institutions.

Q7. What security measures are implemented in CBS?

Answer:
CBS must be highly secure to prevent cyber threats. Some key measures include:
✅ Data Encryption: Protects sensitive data using SSL/TLS encryption.
✅ Multi-Factor Authentication (MFA): Requires OTPs or biometric authentication.
✅ Firewalls & IDS (Intrusion Detection Systems): Prevents unauthorized access.
✅ AI-based Fraud Detection: Identifies suspicious transactions in real-time.

Q8. How does CBS handle online transactions like UPI

and IMPS?
Answer:
CBS integrates with payment networks through APIs:
1️⃣ Customer initiates a UPI/IMPS transaction via mobile banking.
2️⃣ CBS communicates with the NPCI (National Payments Corporation of India).
3️⃣ Funds are transferred in real-time, and CBS updates the central database instantly.
4️⃣ Transaction confirmation is sent to the customer via SMS/email.

🟢 Advanced CBS & Banking IT Questions

Q9. What are the key challenges in implementing CBS?
Answer:
✔ High Initial Cost: Requires expensive infrastructure and skilled IT teams.
✔ Integration with Legacy Systems: Old banking software may not be compatible.
✔ Cybersecurity Risks: Banks must constantly update security protocols.
✔ Downtime & Technical Issues: Any system failure can disrupt banking services.

Q10. How does CBS help in fraud prevention?

Answer:
🔹 Uses AI-driven monitoring to detect suspicious transactions.
🔹 Implements real-time alerts for unusual account activity.
🔹 Geotagging & Biometric Authentication prevent unauthorized logins.

Q11. What role does cloud computing play in CBS?

Answer:
Cloud computing enhances CBS by:
✅ Providing scalability – Banks can handle a large number of transactions.
✅ Reducing costs – No need for expensive on-premises servers.
✅ Enabling real-time data backup – Reduces data loss risk.
✅ Improving disaster recovery – Ensures continuity in case of failures.

Q12. What is the impact of CBS on financial inclusion?

Answer:

CBS has helped expand banking services to rural and unbanked areas by:
✔ Supporting mobile banking & UPI, reducing the need for physical branches.
✔ Enabling microfinance & digital lending, making credit accessible to small businesses.
✔ Facilitating government subsidy transfers (DBT – Direct Benefit Transfer).

🟢 Scenario-Based Questions
Q13. A customer reports that an ATM withdrawal was
unsuccessful, but the amount was debited. How does
CBS handle this issue?
Answer:
1️⃣ The CBS logs all ATM transactions in real-time.
2️⃣ The bank verifies whether the cash was dispensed.
3️⃣ If the cash was not withdrawn, CBS automatically reverses the transaction in a few
hours.
4️⃣ The customer receives a refund, and an SMS notification is sent.

Q14. What happens if a CBS server fails? How does

disaster recovery work?
Answer:
✔ CBS uses backup servers & cloud-based storage to prevent data loss.
✔ A Disaster Recovery Plan (DRP) ensures banking operations switch to backup servers
instantly.
✔ Real-time replication of data ensures no customer transactions are lost.

Q15. How does CBS handle international banking

transactions?
Answer:
CBS integrates with SWIFT (Society for Worldwide Interbank Financial
Telecommunication) for secure global payments. The process includes:
1️⃣ Customer initiates an international fund transfer.
2️⃣ CBS connects with SWIFT to verify and process the payment.
3️⃣ Currency conversion occurs (if required).
4️⃣ Funds are transferred to the recipient’s foreign bank account.

Q16. What are some future trends in CBS & Banking IT?
Answer:
🔹 AI-Powered Banking – Chatbots, robo-advisors, AI-driven fraud detection.
🔹 Blockchain Integration – Secure, transparent financial transactions.
🔹 Digital-Only Banks (Neobanks) – No physical branches, completely online services.
🔹 Biometric Payments – Fingerprint and facial recognition for transactions.
🔹 Quantum Computing in Banking – Faster processing of large-scale transactions.