punjab national bank institute of information technology

e-trackbusiness of future

vol. IV no.3 quarterly journal july-september-2008

M-Banking in India

e-track

Editor

Pratima Trivedi

Editorial Team

Pramod Dikshit

M K Bose

Swapnil Srivastava

Sanjay Srivastava

Printed by

Swastik Printing Press

27, Mai Gi Ki Bagiya,

Kapoorthala Crossing,

Mahanagar, Lucknow

Mobile : 9415419300

punjab national bank institute of

information technology

Vibhuti Khand, Gomti Nagar,

Lucknow--226 010 (U.P.)

T : +91 522 2721442, 2721174

F : +91 522 2721201, 2721441

E-mail : bankingtech@pnbiit.co.in

URL : www.pnbiit.com

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ContentsFrom Director's Desk Ajay Misra 3

M-Banking in India Moloy Bose 5

When the Bubble Burst Shyam Pattabi 10

Blue Oceans Strategy for Banks in Developing Countries Dr. S. N. Ghosal 14

Knowledge Management System Pramod Bhatnagar 21

FAQ's on Finacle Kamal Kant 28

Financial and Technical News 30

“Your attitude, not your aptitude, determines your altitude.”

- Zig Ziglar

Thought for the quarter

2

From the editor

Dear Readers,

Over the last few years, the mobile and wireless

market has been one of the fastest growing markets in

the world and it is still growing at a rapid pace.Mobile

banking, which is catching up fast in the cities and

hinterland, is not only helping the government to take a

step forward towards fulfilling its aim of having one

bank account for every household, but also saving

crores of rupees by way of reduced transaction

costs.The mobile acts as a branch of the bank by storing

a database of customers. It also has a smartcard, which biometrically stores the

identity of the customer such as name, address, photograph, fingerprint

templates and relevant details of the savings or loan accounts held by the

issuing bank. Keeping this in mind, article on “M- banking in India” is kept in

this issue to elaborate various intricacies including RBI guidelines on the topic.

For those of us who had only a nodding acquaintance with Wall Street,

news this week has been bafflingly littered with the big Wall Street names.

Lehman Brothers filed for bankruptcy, the venerable Merrill Lynch was taken

over by Bank of America and AIG, bailed out by the US Fed. So, how has the

housing crisis in the US impacted Wall Street? What were the repercussions on

the Indian markets? To elaborate this article on “When the Bubble Burst” has

been included in this issue. Also to highlight the grip of sub mortgage crisis over

the banks article on “Blue Ocean strategy for banks in developing countries”

has been incorporated in the issue.

In this age of information, knowledge is the most important factor in the

long-term success of both an individual and an organization. The only source of

competitive advantage in the future will be the knowledge that an organization

contains and an organization's ability to learn faster than the competition

Effective knowledge management system creates competitive advantage by

bringing appropriate knowledge to the point of action during the moment of

need. The article on “Knowledge Management System” in the issue highlights

various complexities of the topic.

I hope that you enjoy the contents of this issue. I look forward to hearing

from you for suggestions / Improvements of the issue.

Happy Reading ………….

Pratima Trivedie-mail : pratima@pnbiit.co.in

July-September-2008

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April-June-2008 July-September-2008

“The power of the future is the power of the mind.” - Winston Churchill

If mass production characterised the industrial revolution, individual

creativity and brilliance marks the information revolution of current century.

Development is no longer symbolised by imposing plants and machinery but

knowledge is now universally recognised as the true strength of a nation. Using

information technology, we now have the ability to tap information sources in our

environment and manipulate it for the growth and development of mankind.

Technology has played a prominent role in improving the efficiency of the banking and financial

system in recent years. It helps banks in attaining the efficiency in their internal processes and give them

competitive advantage vis-à-vis their competitors in the market.

Information technology has also enabled sophisticated product development, better market

infrastructure, implementation of reliable techniques for control of risks and reaching geographically distant

and diversified markets.

Through IT centralisation banks and financial institutions benefit in terms of Customer Relationship

Management (CRM), Customer Profiling and Differentiation and for improved customer service. Adequate

Disaster Recovery Systems and the regular periodical testing and auditing of critical systems would be

needed to ensure fail safe Business Continuity Plans.

The role of technology service providers and intermediaries have now gained greater significance

due to increased outsourcing; for the banks and financial institutions, the complexities in handling vendor

management as part of outsourcing need to be carefully dealt with so as to ensure that risks arising out of

outsourcing are minimized.

Implementation of core banking systems has almost reached its final stage and most banks have

successfully implemented CBS in their branches.

Now there is a need for integration. Another crucial activity which needs to be completed in a time

bound manner relates to the IT related aspects pertaining to conformity to the BASEL II requirements by

banks.

In lieu of this, a continuous supply of IT trained manpower is the need of the hour, for all the banks.

Sensing this, PNBIIT has incorporated programme like “Advanced programme of IT for Non-IT officials”

in its training plan, in addition to various other programmes, wherein a vide coverage on IT related areas is

incorporated. The details of the programmes can be viewed at institute's website http://www.pnbiit.com.

Ajay MisraDirector-PNBIIT

E-mail: director@pnbiit.co.in

3

From Director's Desk

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July-September-2008 4

Reader's Comments

We find “e track” publication very informative and have articles of interest to a banker; this is a good initiative from by the PNB Institute of Information Technology.

-AM Pedgaonkar,Chief General Manager –in-charge, Reserve Bank of India

I have gone through the Journal and found it very informative and educative.-Albert Tauro,

Executive Director, Central Bank of India

I have gone through the Journal “e track”. Indeed the journal is very informative and got useful information. I personally found it very interesting. Please convey our congratulations to your editorial committee team.

-Raghurama, AGM, MIS IT, Karnatka Bank

We found the “e track” very informative and interesting.-Samir Sawe,

Research Team, Symbiosis Institute of Business Management, Pune

I have received the journal in our library. We find it very useful. The officers of Reserve Bank of India who are user of our library find it informative and journal is widely read by all.

-Sujata Shrikantiah, Asst Librarian, Reserve Bank Staff College, Chennai

My faculty members and I found the Journal very useful. Difficult concepts have been explained lucidly in the various articles on e banking, mobile banking, RTGS etc. I congratulate you and your team for the excellent efforts

-CBL Narsimha RaoChief Manager Training, Syndicate Bank, Banglore

I had the opportunity to go through e-track april- june 2008 issue. The getup & presentation are superb. The best part is "frequently asked questions in payment & settlement system"where the latest benefits of technology for customer convenience have been explained in a very simple manner. I hope many more such articles will be there in future issues. KEEP IT UP.

Yash Pal Kumar Manager , Punjab National Bank, B.O. Safdarganj, Distt Barabanki

As a part of our derive to make the contents of Journal more pertinent and germane to the readers we welcome articles on latest topics of Banking / Information Technology / Management. Articles may be of about 10000 words. Publishes articles are suitably remunerated.

Appeal

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April-June-2008

M- Banking in India

5

People love to use technology in save their time and reduce the number of rounds to

every field they can. Every sector is banks for collecting updates of the account. They are

using this new trend to lure more finding it more techs friendly and so are more excited

users. In this tech era, banks are also in for this latest technology put forward by Banks.

the same race of enticing more People generally perform functions like monitoring

customers to use their services. After the transactions, checking balances and making

introduction of electronic banking and sensing the payments. The ratio of usage of each service by each

nerves of today's customers, banks are pushing customer group differs.

ahead the concept of Mobile banking to their The banks are putting this agenda forward as customers. Mobile banking, the latest in customer they find it more cost saving. They are hoping that convenience in banking, lets customers access and this technology will reduce the number of calls made operate their bank account from anywhere, from to the customer service representative for basic their cell phone. This is available on advance information. They find this technology to be more technology phones. Customer can access their bank alert and can let the banks easily notify the fraud account through SMS or scripting languages like transactions. As the latest trend is the adoption of XML, HTML, SOAP and WAP. Web Services, so to attract more customers, this

But to most of the customers still mobile option seems viable. They are making use of

banking is an unknown concept. To start with Mobile technology advances to keep track of their customers

Banking, it is a concept of checking accounts, and to add new customers to their current database.

making payments, and performing monetary Banks can deliver mobile banking in three transactions via your mobile phones. This concept is basic ways:widely accepted and the customers are looking for

· Through a phone's Web browser. Nearly all the banks that provide such facilities in their

cell phones sold these days come with a accounts. As per survey on mobile banking

browser, and the browser's WAP 2.0 security is conducted by Asia Pacific “One of every three

pretty good. But unless you have a phone with Indians with a bank account is ready to switch to

a keyboard, mobile banking is a bit another bank on being offered free mobile banking”.

cumbersome. Also, data charges on a cell It also found out that consumers in India (71 per cent)

phone can add up fast. are more aware when compared to their counter parts

· Through a bank-specific application. This is in the other regions on the offerings their bank

something that's either already part of the provides on mobile phones. Almost a half of the

phone you buy (preloaded) or that you get Indian respondents checked their bank balance on

from your bank's Web site (downloadable). their mobile phone and 54 per cent via the Internet.

Again, you'll need a data plan. The download People are making use of this technology to

process can be difficult for a novice to

July-September-2008

-Moloy Bose

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6

navigate, although once enabled, accessing enables you to shop

your bank is easier and faster than with a

browser-based version.Banks want you to sign up for a number of

· Even old phones without reasons: browsers can send and receive texts, so this

· To reduce costs. Banks hope to reduce calls to widens the potential banking audience

customer-service representatives for basic considerably. But text messages typically

account information, like checking balances. aren't encrypted, and the functions you can

The savings can be dramatic: While a chat perform are limited. Instead of one session,

with a phone rep costs the bank about Rs.1.20 you might have a lot of back-and-forth texting

per minute, where a one-way text costs just to get the information you need.

40p.

· To improve fraud prevention. Mobile

banking can allow banks to quickly notify Wouldn't life be easier if you could access your customers of potentially fraudulent

bank account while traveling, pay bills from home transactions and get a customer's OK before and transfer money from office? Well, you can do all proceeding. Contacting customers via text or this and more, thanks to mobile banking. e-mail is cheaper than using call centers, and

response times may be faster than when banks

call a customer's land line.· Use banking facilities anywhere, even far

away from a bank · To trap you more firmly in their web of

services. With the onset of electronic banking · Easy operation – access accounts from a cell services, banks realized something phoneinteresting: The more technological services a

· Lower operational costs (for banks) than customer adopts, the more likely he or she is to

setting up ATM machines stay with the bank. If you use direct deposit,

automatic debit and/or online bill payment, · Pay bills you understand this intuitively: It would be a

· Transfer funds major hassle to change banks. Adding mobile

banking improves such "stickiness."· Take mini-statements, conduct balance

enquiries · To boost fee income down the line. Banks

typically don't charge for mobile-banking · Set alerts for movement in accounts – change

access, but they hope to get a slice of the next in balance, payments of bills set on auto

step in mobile banking - using your cell to payment mode etc.

make purchases.· Purchase items – e.g. ABNAmro's Mpower

Via text messaging.

Why banks love mobile phone banking?

Why Customer would prefer mobile phone

banking?

Benefits

Uses

July-September-2008

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April-June-2008 7

Banks are going cellular, fast: authenticating your mobile number.

After years of talking about the possibilities of Only 3% of total customers are using mobile using cell phones for banking, it's finally taking off.

banking but the expectations are there that this ratio Six of the 10 largest U.S. banks have

will top 30% by 2010. Now that RBI has granted introduced some kind of mobile-banking

permission to transfer funds across various mobile-technology, according to information technology phone service providers, 3 public sector banks are research firm Celent. By summer 2008, all the big

banks are expected to have a mobile-banking option. rolling out their mobile banking solutions in the next

few days.

·Use the phone lock function on your mobile

device when it is not in use.

·Choose passwords which have eight

characters or more and use a combination of

letters, numerals and symbols.

·Never disclose via text message any

personal information.

·Make sure your phone is configured

securely.

·Protect the phone with security software,

including a software firewall and antivirus If asked from banks or tech pundits the protection.answer is a unanimous YES. All agree to the point

that the mobile banking is safe as it gives access to ·Download file from a trusted source.

the same amount of information to the non-·Also make sure the Bluetooth is switched off

concerned as your ATM receipt. Also the access to while not in use to avoid viruses.

the functions that you can perform on your account

with mobile phone is limited. The other factor that is

relieving for the customers is that hackers are least In India, the Mobile Banking is being

interested in hacking your mobile phones as they are regulated by the Central Bank after considering

in hacking Web or your PC. The banks also ensure various security norms and to safe guard the interest

that if you are using mobile banking then your of the customer. The RBI has issued guidelines vide

account number is not exposed in any of the their Notification dated 19.9.2008. The salient

transactions. They make it possible by features are as under:

Few safeguards for secure usages of mobile for

financial transactions:

Is mobile phone banking safe?

RBI Mobile Phone Banking Guidelines

July-September-2008

Mobile banking is still in its toddler stage

Mobile-banking options

Mobile technology

Mobile browser

Downloadable application

Text messaging

Preloaded application

Mobile browser

Preloaded application

Mobile browser

Text messaging

Launch date

March 2007

April 2007

Sept. 2007

June 2005

Winter 2007

July 2007

In pilot phase

Winter 2007

Bank of America

Bank

Citibank

Chase

SunTrust

Wachovia

Wells Fargo

Source: Celent

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8

·The services shall be restricted only to details of the proposal.

customers of banks and holders of debit/credit The biggest concern among the Indian user cards. while accessing details through mobile phones is

·Use of mobile banking services for cross security. In line with this, they accounted for the

border transfers is strictly prohibited. largest percentage of survey respondents expressing

an interest in the ability to report potentially ·Banks may also use the services of Business fraudulent transactions and to freeze cards via their Correspondent.mobile phones (67 per cent for both). Indian

·The guidelines issued by Reserve Bank on respondents were also the most willing to pay for “Know Your Customer (KYC)”, “Anti Money these services.Laundering (AML)” and Combating the

RBI has given Technology and Security Standards Financing of Terrorism (CFT) from time to for the Banks providing Mobile Banking facilities to time should be adhered to. their customer. Banks providing mobile banking

·Only banks who have implemented core services shall comply with the following security banking solutions would be permitted to principles:provide Mobile Banking.

a) All mobile banking shall be permitted only by ·Banks shall file Suspected Transaction Report validation through a two factor authentication.

(STR) to Financial Intelligence Unit –India b) One of the factors of authentication shall be (FID-IND) for mobile banking transactions

mPIN or any higher standard.·Banks shall put in place a system of document

c) Where mPIN is used, end to end encryption of based registration with mandatory physical the mPIN shall be ensured, i.e mPIN shall not presence of their customers, before be in clear text anywhere in the network. commencing mobile banking service.

d) The mPIN shall be stored in a secure ·Settlement infrastructure operating on a 24x7 environment.basis would be necessary.

Proper level of encryption and security shall ·Transactions limit of Rs. 2500/- shall be be implemented at all stages of the transaction imposed on all Mobile Banking transactions processing. The following guidelines with Subject to an overall cap of Rs. 5000/- per day, respect to network and system security shall per customer.be adhered to:

·Banks may also put in place monthly a) Implement application level encryption over transaction limit.

network and transport layer encryption ·Banks wishing to provide mobile banking wherever possible.

services shall seek prior one time approval of b) Establish proper firewalls, intruder detection the Reserve Bank of India, by furnishing full

July-September-2008

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April-June-2008 9

systems (IDS), data file and system integrity adequate risk control measures to manage such

checking, surveillance and incident response risks.

procedures and containment procedures. So there's currently not much risk, because:

c) Conduct periodic risk management analysis, ·What you can do on your phone is pretty

security vulnerability assessment of the limited.application and network etc at least once in a

·Your account number typically isn't year.exposed; during the sign-up process, the

d) Maintain proper and full documentation of bank "authenticates" your phone so you can security practices, guidelines, methods and use it to access your account without typing procedures used in mobile banking and in the number.payment systems and keep them up to date

·Hackers, virus writers and other bad guys are based on the periodic risk management, more interested in attacking your computer analysis and vulnerability assessment carried than your phone.out.

The popularity of mobile banking can be Thus, Mobile banking will facilitate the gauged from the fact that one in three Indian Customers such anywhere, anytime access and can consumers would consider the option of switching to cut down on the possibility of a bounced-transaction a bank, which offers free mobile banking services fee by giving customers the options of forgoing according to the report. Some other findings are:purchases or quickly transferring money into their

checking accounts. With the all guidelines of ·50% of the respondents use mobiles for

Reserve Bank of India in respect of regulatory, checking their bank balance

registration, technology and security to be adopted ·29% think mobile banking is safe

by the Bank it sounds pretty cool, but banks will still ·41% are ready to pay for services that allow need to reassure customers that such transactions are

them to freeze a card safe.

·35% are ready to pay for reporting a Banks are required to maintain secrecy potentially fraudulent transaction and confidentiality of customers' accounts. In the

: mobile banking scenario, the risk of banks not

1. http//www.rbi.org.inmeeting the above obligation is high. Banks may be 2. Wildbluesky-trends and strategies in digital mediaexposed to enhanced risk of liability to customers on 3. Business Standard 23.08.07

account of breach of secrecy, denial of service etc., 4. msn money, Article- LB pallium Weston

on account of hacking/ other technological 5. IT voir article, pluggd.in authour Ashishfailures. The banks should therefore, institute

References

The author is Chief faculty at PNBIIT Lucknow

July-September-2008

e-track

While some blame the greed of Wall Street world.

investment bankers and the dangers of a totally Rohit: Yes dude, the job here is amazing, I get to unregulated system for the current financial crisis, interact with people around the world, investment what can't be denied is that lives, and lifestyles, have

been suddenly changed across the social spectrum

and careers built up over a lifetime have vanished in

an instant. Apart from the revised $700 billion

bailout plan, can the U.S. government do enough to

restore confidence and assuage the trauma?

The bursting of the speculative bubble in the

U.S. housing market has destroyed billions of

dollars in investor wealth across the world, crippled

the banking system, expunged close to a million managers – who want to invest millions of dollars

jobs…and India has not been spared either. With Me: great…so tell me something interesting. What's

banks failing by the day…definitely, these are your job all about?

uncertain times for the financial services industry. Rohit: You know there is a great demand for While many people, who have lost their jobs, are American home loans, which we buy from the U.S. faced with permanent shrinkage of their lifestyle, banks. We then convert these into what is called as others in the industry are going through the trauma of CDO's (Collateralized Debt Obligations). In plain not knowing if and when their turn would come. English – this refers to buying home loans that banks Who is to blame?had already issued to customers, cutting them into

smaller pieces, packaging the pieces based on return Rohit (name changed to protect identity), a

(interest rate), value, tenure (duration of the loans) – good friend of mine and someone who was officially

and selling them to investors across the world after considered to be a genius with an IQ of 150+,

giving it a fancy name, such as 'High Grade graduated from one of the leading IIM's. Rohit

Structured Credit Enhanced Leverage Fund'.managed to make it into the New York Headquarters

Me: Wow! I would've never guessed that boring of the most sought after firm that had arrived on

home loans could transform into something that campus for the first time – Lehman Brothers – a top

sounds so cool!U.S. Investment Bank (then). On joining, he was

Rohit: hahaha…actually we create multiple funds assigned to Lehman's mortgage securities desk that categorized based on the nature of the CDO dealt with Collateralized Debt obligations (or packages they contain and investors can buy shares CDO's).in any of these funds (almost like mutual funds…but

Following is an extracted transcript of a chat called Structured Investment Vehicles or SIV's)

session I had with Rohit back in 2004:Me: Dude, you make your job sound like a meat

Me: So man, you must feel like you are on top of the shop…chopping and packaging. So, in effect when

Flashback to year 2003:

When The Bubble Burst -Shyam Pattabi

10July-September-2008

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April-June-2008

an investor purchases the CDO's (or the fund Me: What are you saying, man? What if the people

containing the CDO's), he is expected to receive a who have taken these underlying home loans

share of the monthly EMI paid by the actual guys default? Then the investors would stop getting the

who have taken the underlying home loans? EMI's, and their returns would take a hit. Wouldn't

Rohit: Exactly, the banks from whom we purchased it?

these home loans send us a monthly cheque, which Rohit: Boss, may be some will default, but not we in turn distribute to the investors in our funds definitely more than 2-3% of them. Moreover, we Me: Why do the banks sell these home loans to you have convinced AIG (a leading insurance company) guys? to insure our CDO's. This means that even if there

Rohit: Because we allow them to keep a significant were big defaults – the insurance company would

portion of the interest rate charged on the home loans compensate the investors.

and we pay them upfront cash, which they can use to Me: that's amazing. What are these insurances issue more home loans. Otherwise home loans go on called?for 20-30 years and it would take a long time for the Rohit: Credit Default Swapsbank to recover its money. Me: Definitely you guys are the most creative when Me: and, why does Lehman buy these loans? it comes to naming.Rohit: Because we get a fat commission when we Rohit: Thanksconvert the loans into CDO's and sell it to investors

Me: and why has this AIG guy insured millions of Me: Who are these investors?

home loans?Rohit: They include everyone from pension funds in

Rohit: see man, the logic is simple. Home prices in Japan to Life Insurance companies in Finland

the U.S always go up. In fact over the last 3 yrs alone Me: But tell me, why are these funds so interested in

they have doubled. So even if someone defaults purchasing American home loans?

paying the EMI, the home can be seized and sold for Rohit: Well, these guys are typically interested in a much higher price. So there is no risk. Insurance U.S. Govt bonds (considered to be the safest in the companies are actually competing to insure this, world). But unfortunately, Mr. Alan Greenspan because they can earn risk-free premiums.(head of Federal Reserve Bank – similar to RBI in Me: no wonder investment managers from all over India) has reduced the interest rate to nearly 1% to the world want to put money in your CDO's. *end of perk up the economy after the dot-com crash & Sep conversation extract*11 attacks. This has left many funds looking for

alternative investments that can give them higher A global financial cobweb started getting built

returns. Home loans are ideal because they offer 4-around the American dream of purchasing a home

6% interest rate.and it rest on the assumption that “home prices will

Me: Wait, aren't home loans more risky than U.S keep rising”. As demand for the CDO's started

Bonds?growing across the global investment community,

Rohit: We have made home loans less risky now. In the investment bankers (like Lehman) who were fact they have become as safe as U.S Govt bonds. meant to sell these instruments also started investing

NINA and the Housing Bubble

11 July-September-2008

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a significant portion of their own capital in these. I that although he was earning close to $20,000 a

guess after selling the story to the whole world, they month (that is what CEO's in India make) he was not

themselves got sold on the seemingly foolproof able to save anything because his lifestyle expenses

concept. Gradually the markets for CDO's and where growing faster than his salary.

Credit Default Swaps started expanding with traders

and investors buying and selling these as if they were In late 2006, Mortgage lenders noticed shares of a company, happily forgetting the something that they'd almost never seen before. underlying people behind these products who took People would choose a house, sign all the mortgage the home loans in the first place and on whose papers, and then default on their very first payment. capacity to repay the loans, the safety of these Although no one could really hear it, that was products depended. probably the moment when one of the biggest

As Wall Street firms like Lehman were speculative bubbles in American history popped. churning more and more home loans into CDO's and Another factor that lead to the burst of the housing selling them or investing their own money, there was bubble was the rise in interest rates from 2004-2006. a pressure on the banks to issue more loans so that Many people had taken variable rate home loans that they can be sold to the Wall Street firms in return for started getting reset to higher rates, which in turn a commission. Slowly banks started lowering the meant higher EMI's that borrowers had not planned credit quality (qualification criteria) for availing a for.home loan and aggressively used agents to source The problem was that once property values new loans. This slippery slope went to such an extent starting going down, it set off a reverse chain that in 2005, almost anyone in the U.S could buy a reaction, the opposite of what had been happening in home worth $100,000 (45 lk INR) or more – without the bubble. As more people defaulted, more houses income proof, without other assets, without credit came on the market. With no buyers, prices went history, sometimes even without a proper job. These even further down.loans were called NINA – 'no income no assets'. In early 2007, as prices began their plunge,

The U.S. housing market went into a classic alarm bells started going off across mortgage backed speculative bubble. Home loans were easy to get, so securities desks all over Wall Street. The people on more and more people were buying houses. The Wall Street, like Rohit, started getting calls from increased demand for houses caused the price to investors about not getting their interest payments increase. The rising prices created even more that were due. Wall street firms stopped buying demand, as people started to look at homes as home loans from the local banks. This had a investments -- investments that never went down in devastating effect on particularly the small banks value. and finance companies, which had borrowed money

When I touched base with my friend Rohit in from larger banks to issue more home loans thinking late 2005, he was on cloud nine. During the previous they could sell these loans to Wall Street firms like one year, he managed to buy a home in Long Island Lehman and make money.(a posh area near New York City) worth almost a Everyone got into a mad scramble to seize and millions dollars, and got himself a Mercedes. All this sell the homes in order to get back at least some of the was interesting to hear, but what shocked me was

The popping of the Housing Bubble

12July-September-2008

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April-June-2008

money. But there were just not enough buyers. The the reality seems to point towards the stupidity of

guys who had insured these loans thinking they had people who lent all this money, financial institutions

near zero risk (e.g. AIG) could not fulfill the that built fancy derivative packages and in effect

unexpectedly huge number of claims. The best part facilitated billions in trading and investments in

was that since these insurance policies (credit these fragile low quality loans.

default swaps) could themselves be traded, multiple The U.S. Govt is planning to grant 700 billion people had bought and sold them, and it became so dollars to the Wall Street firms to compensate the tough to even trace who was supposed to financial speculators for the money that they have compensate for the loss. lost. Isn't this like rewarding greed and stupidity?

The head of a leading Investment Bank has stated,

“This is necessary to sustain financial ingenuity. We The global financial cobweb built around don't want to spend this money on ourselves. We just mortgages is on the brink of collapse. Firms, large want this money to go into the market so that we can and small, some young some as old as a 100 years carry on trading complex securities, borrowing and have crumbled as a result of suing each other over lending money.” (Yeah…right, so that one can act as the dwindling asset values. Lehman's India if nothing had happened without analyzing too much operations- that employed over a thousand staff is up into it). The real question is: who is going to for sale and many of the employees have been asked compensate the common investors across the world to leave. The Indian stock market has crashed almost who have lost their wealth in the resultant market 50% from its high (and so have markets around the meltdown? (either directly or through pension world) as the Wall Street giants sold their funds).investments in the country in an effort to salvage

whatever is good in order to make up for the After being unreachable for a month now,

mortgage related loss. Hedge funds, pension funds, finally I heard back from my pal, Rohit, saying he is

insurance companies all over the world have lost back in India to take a break from the roller coaster

billions in investor's money. Many Indian Bschool ride that he had lived through. After Lehman's

graduates with PPO's (pre-placement offers) in the collapse he has lost his job and probably the house

financial sector (India and abroad) have either that he had bought by taking a hefty loan. I really

received an annulment or indefinite postponement don't know whether to feel happy for him, for getting

of joining dates. IT firms that built and maintained an opportunity to learn a lesson or two from the

software for the U.S. mortgage industry or the experience or to feel sad for him for losing his job.

related Investment Banks, have shut down their May be I'll get a better sense of things once I meet

business units, laid-off people or transferred them to him next week.

other verticals.

For all the hoopla over the sharp and

sophisticated people on Wall Street, the current

financial crisis has exposed the fragility of the

system. Wall Street is blaming the entire episode on

people who could not repay their home loans. But

Back to 2008: The carnage

Reprint of article, already printed in 'The Hindu Newspaper' magazine dated 5, October 2008, with the permission of author. Author is a career finance professional, writes a fortnightly column 'FISCALLY FIT' for The Hindu- Sunday Magazine (pg 4). Can be reached at: shyamscolumn@gmail.com http://www.shyamscolumn.com/

13 July-September-2008

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14

Banks are under the grip of models may trap them to develop and market high-

sub prime mortgage crisis all risk services and products and consequently that

over the world. In developed would ultimately end up in heavy losses for entering

countries the impact is severe into incomprehensible deals. These losses will not

and direct whereas in only affect their own balance sheets but also of their

developing countries the clients. In fact this is what has happened globally in

impact is not so severe and almost all banks only with the difference of degree

direct but certainly need serious attention of both and its intensity depending on the extent of

management and policy makers including regulators application of such generally unintelligible and not

to curtail the crisis. It is true that crisis has occurred full proof mathematical models to estimate involved

more because of present trend of leaning heavily on risk in their products and services.

recently developed mathematical models of risk

management by banks as these have been considered

as a proven tool to develop products and services It has therefore become imperative for banks that are not only to full proof to counter risk or help particularly in developing countries to evolve a them to operate almost on zero risk or pre-estimated strategy that may help them to grow without risk. It is surprising that such an assumption could be competing in the conventional market that has taken despite the fact that these models are mostly become highly crowded and competitive and for that based on asymmetrical data or inadequate data and reason the operation there has not only becoming illogical assumptions. However for quite some time more and more risky but also steadily reducing the banks adopting such a strategy could earn fabulous margin in all deals This obviously lead bank to profits by creating a make believe situation for their heavily lean on mathematical models to hedge the customers and also for themselves that they have increasing risks arising from new products and been able to develop a strategy, which is all weather services that they have to develop to increase proof and everlasting as well as sustainable under all advocacy of demanding customers in crowded types of market conditions and business markets with risks that are mostly unpredictable environment. under conventional assessment processes. Banks

therefore due to almost compelling need have to

develop and operate highly innovative products and

However soon they realized that howsoever services to counter increasing intensity of

sophisticated methods and models they conceive competition due to globalization and liberalization

and adopt, they could not make their products and and thereby have to heavily lean on mathematical

services totally risk free. In fact a closer look soon models to take care of unintelligible risks in such

revealed that such sophisticated mathematical products and services.

Need to Avoid Crowded Markets

Fallacy of Mathematical Models

Blue Ocean Strategy for Banks in Developing Countries

- Dr S N Ghosal

July-September-2008

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April-June-2008 15

Interim Strategy to Enhance Liquidity and

Capital

The Path for Blue Ocean

Emerging New Markets

more sophisticated knowledge that could enable

them to become more enterprising and well groomed

to take advantage of emerging markets and be ready Banks in general all over the world particularly

to enter the mainstream of enlightened sector of the those who have tasted the heat of fire arising from

society. It is now well-researched fact that if they get sub-prime mortgage lending crisis are either busy in

appropriate opportunities and their hands are held raising their capital and liquidity even through

for sometime to embolden them to take risk with subvention from the state or seeking loan from

knowledge and confidence, the market so far sovereign funds created by oil rich countries. This

inadequately explored gets enlarged and risk of obviously could not help them much and therefore it

getting the market overcrowded is avoided. In fact has become necessary for all these banks to look for

this way new market space gets evolved and hence uncontested market where the competition becomes

prospects of earning better margin and growth is irrelevant. In fact the conventional approach of

created. It helps restraining products becoming acquiring better competitive edge to counter the

commodity and the space getting crowded. This way competitive skill and knowledge of competitors to

banks can avoid cutthroat competitions with each build or create captive markets of their own is fast

other and the market remains cool like a blue ocean becoming irrelevant. It is high time for banks

instead of turning into a bloody red ocean. particularly in developing countries to realize that

the only way to beat their competitors is to open up

new areas and stop trying to beat their competitors in

their already developed and crowded markets. The strategy of blue ocean is therefore to

define the untested market space available for banks

where opportunities of demand creation and growth

exist and or could be evolved through well planned The present trend to outperform competitors to and organized extension services friendly to

grab higher share of the existing market is perhaps prospective customers both institutional and

needed to be reviewed particularly when new and individual, in fact this virtually makes competition

unexploited horizons of market is not only visible totally irrelevant if not totally non-existent.

but also fast growing. This newly evolving markets However this un-chartered blue ocean obviously need early attention as otherwise it may soon create have some inherent and some inbuilt risk but social crisis for being neglected despite their fortunately much of these risks have been explored preparedness to grow and merge into developed and experienced for centuries and therefore good

society. This is more and more visible in developing number of remedial measures either already have

been taken or waiting to be taken when proper countries as these countries are having not only large funding and institutionalization for implementing part of their territory highly neglected but also large the same could be made available and become section of their population have no access to modern feasible. One very well known example is technology. In fact they are still not having modern dependence on monsoon for success in farming in

facilities to learn modern technology and to acquire

July-September-2008

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16

India. However there already exist several both financial and manufacturing as well as service

technologies to tap underground waters to irrigate sectors. These studies have poignantly brought out

fields and reduce the dependence on monsoon. This that it is the strategic move that build or bury the

could be further enhanced if banks come forward industry both financial and manufacturing. The blue

with increased liquidity, expertise and sincere ocean strategy therefore stresses on:

intention to hold hands of farmers and artisans. vCreation of uncontestable market;

vMaking the competition irrelevant;

vCreating and Capturing new demand;

vBreaking the present theory of value cost trade It would be interesting to note that some of the off;

recent researches have revealed though operation in vAligning and Focusing on differentiation and blue ocean markets by industries is hardly 14 % but low cost.it has generated 38% of their total revenue and 61%

of their total profit as observed by Chan King and

Renee Menborgue of Harvard Business School. It

has therefore increasingly becoming imperative to

create blue haven market space not only for banks In this strategy one has to comprehend that it but also for other industries. It is obvious that in a

provides both opportunity and risk and therefore one crowded space there would be more and more should not be swayed by the thought that new stumbling blocks and eventually lead to falling pastures are always green as there could be red spot down and cracking bones. The history is full of such here and there or may even turn into red over a period examples. One could remind oneself about a one of time. It is therefore necessary for banks to be time famous book 'In Search Of Excellence' where, proactive to make changes both in products and excellence of many companies were vividly services to better their capacity and capability for described for each identified companies and also risk management. Since they have chosen to operate highlighted. How excellence was achieved by some in not so well known pastures it would be necessary top companies on those days But within two years of to equip and train themselves appropriately and its publication some of those top companies begun to adequately not only to save themselves from the crack and could not withstand growing intensity of possible risk but also their customers as they are also competition despite their developing highly presently ill-equipped to counter the emerging risks sophisticated competitive edge at one point of time. that may arise in their operation where some Thus one time bible for growth took no time to innovation need to be introduced to make their become questionable if not trash.enterprise viable as well as sustainable.

It has therefore become more and more

It would be therefore necessary to focus on obvious that it is strategic change and innovation

that provides stability and sustainability to industry minimizing the risk and maximizing revenue and

Some Researched Facts to Prove Efficacy of The

Strategy

The Strategy Opens up New Market with

Limited Risk and Higher Rate of Margin and

Growth

It is High Time Now to Change The Strategy and Focus Minimiation of Risk and Maximization of not Imitate Successful Business Enterprise

Margin on Return

July-September-2008

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April-June-2008 17

margin and to give stress on opaque and transparent strategize their operation to give greater focus to

strategy with an emphasis to provide maximum common people who may require not only their

benefits to customers even at the cost of margin in financial support but also risk sharing support along

returns to banks as that would help banks to still with technology and management and marketing

enjoy better margin and maximize revenue with support as most of them are not very much familiar

increasing advocacy of customers. It has been the with modern and fast growing technology as well as

practiced in almost all banks and perhaps in all growing complexity of markets arising due to

industries to exploit customers by taking advantage intervention of politicians who build their vote

of ignorance and indifference to finer prints of what banks and accumulate personal wealth by exploiting

has been offered to them by banks and perhaps by farmers and artisans in the guise of offering them

most other industries. The time has come to totally lollipops in the form of subsidies and doles as well as

efface such policies and offer products and services waiver of loans from the revenues collected from

to customers with transparent and easily common tax payers. It is surprising that this has been

comprehensible terms and conditions as customers happening not only in developing countries but also

are becoming more and more enlightened and in developed countries. It is surprising to find

knowledgeable. powerful lobbies of politicians have developed

policies and laws to distort farm markets for decade's

may even centuries in Europe and USA to continue

subsidies and pocket a major portion of the same The blue ocean strategy also aims at risk with the support of affluent farmers and artisans.minimization and not risk maximization and

therefore stresses on avoiding complex products and

services that are easily understood and successfully

put into practice with predictable risk and return. It It is therefore necessary to change the mind-set

therefore targets common people who are either of politicians of the country radically to transform

having limited access to banks or almost no access the economy of farms and small firms. It is true

so far for one reason or the other. As their numbers change in mind-set particularly when the same is

are high particularly in developing countries, banks practiced for centuries or even for decades are

have large untapped space to operate with less difficult if not impossible unless some alternative

complex products and services to serve these left out ways of funding political parties could be

customers. In fact this would lead to real mass developed. One way could be to develop direct

banking along with class banking that banks have funding to political parties by the state and

been doing by serving corporate sectors along with institutions that are owned by the state depending

affluent traders and people. upon their elected members of parliament and

legislatures. This way the present backdoor

financing could be avoided and also to a large extent

the existing rampant open corruption they have been However this would need some change in practicing and also polluting bureaucrats along with mind-set of bank executives as they have to

Avoid Complex Products

Need to Change The Mind-set of Politicians

Need for Change in Mind-set of Executives

July-September-2008

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18

them. In fact ultimately it is the public fund that they neglected or have been supported inadequately as

have been misappropriating so long, it would be well as inappropriately so far despite their

nothing immoral if direct allocations are made with contribution to the economy as well as vote banks of

necessary vigilance on any indirect and immoral politicians. This is strange but a truth.

flow of funds to them. It is strange that we talk of

money laundering and create so many laws to totally

ban such entries, but we blink or close our eyes when It is therefore necessary for banks to not only openly we accept that major portion of subsidies and think of funding farmers and artisans to expand their grants do not reach the people for whom these are space in non competitive area but also to hold their sanctioned but are grabbed by intermediaries who hands so long they are not acquiring expertise both

are mostly bureaucrats and politicians. Time has in technology and management and become

come to change this practice and mind-set not only confident to assume risk on their own without any

for the good of common people but also of the hesitation and diffidence. This is possible when

banks become one of their partners in farming and country.

small business and not only help them with funds but

also in management and upgrading their technology

and skill both in production and marketing. The need Similarly, there is need for radical change of

is direct participation by banks by manning and mind-set of bank executive's particularly top

equipping themselves with appropriate technology executives who set the strategy and guide the

and expertise. All efforts so far made by banks and operation of banks. It is ridiculous if not stupidity to

governments to assist them through intermediaries announce in high pitch recruitment of clerks in

of various types and hues have failed in the field. It banks and that too in highly technologically

has therefore become imperative for banks to upgraded banks. It may be just playing to the gallery directly share the risk and participate in operations as no sensible person could think of recruiting clerks wherever farmers and artisans have either failed to in banks where technology has already taken up their perform or lacked in necessary expertise or work both in back and front office and there is more knowledge to perform as an efficient unit. In fact for and more felt need for empowerment of executives quite sometime we have followed Alfred Marshall's to cater to the increasingly diverse demands of theory of 'Invisible hand' to take care of market customers of all types. Obviously banks clerks and woes. It would be appropriate to say now that

subordinate staffs cannot handle this with efficiency Keynesian 'intervention' policy is also not adequate

and knowledge both in technology and finance. In to make their business viable and sustainable. In fact

fact one may like it or not these categories of staff are if we are really serious and sincere to uplift farmers

and artisans from the present chaos and fate, we have totally redundant. In today's banking the need is to

to build institutions on the model of public private induct technical experts who can transform

partnership. Banks have to shed their present models agriculture and small business who contribute major of developing intermediaries like self help groups portion of GDP of a country and who have been

New Space for Banks

Need to Change The Mind-set of Bank Executives

July-September-2008

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April-June-2008 19

and or micro financing institutions as these neither technical persons no longer remained technical as

have risk bearing capacity nor technical know to they were merged in general management stream. It

hold the hands of farmers and artisans. Their funding happened largely because banks were not in search

capacity also heavily depends upon banks of space but agreed to fund willy-nilly farmers and

patronage. This has obviously increased the cost of artisans under political compulsions.

fund raised by them and that has given them ample

excuse to charge high rate of interest from farmers

and artisans. In this regard they are no better than

moneylenders. In fact in recent years policy makers However today the situation is that banks have

even thought of reviving moneylenders for rural to look for space as their conventional areas of

lending. But ultimately it has not been done not for operations have not only become overcrowded but

one good reason but perhaps for several compelling the intensity of competition is so high that some of

good and bad reasons.them almost got burnt in the growing fire of

competition despite acquiring high technology to

reduce cost and minimize risks. It is therefore most

opportune time to increase the space by entering in

much more simple but having potentiality to become

In any case after lot of experimentations both viable and sustainable even rewarding to bankers as

in the past and in recent years it has been rightly it has been well researched fact that farmers and

realized that time has become ripe to strategize artisans can pay or rather are accustomed to pay high

banks to acquire adequate and appropriate expertise interest for their loans if they get the same

and technology to participate in farming and small adequately and on time. Banks therefore need not

business and share their risk not merely as funding lose time to create subsidiaries at district level with

agency but as also one of the participating shareholding of farmers and artisans according to

institution. This idea is under incubation since land holding of farmers and business turnover of

socialization of Indian banks. It was the visionary artisans. Initially major portion of capital will be of

leaders like T.A.Pai of Syndicate Bank and B.K.Dutt banks but gradually it may be passed on farmers and

of United Bank who first agreed to recruit in their artisans as and when farmers and artisans become

banks technical persons having expertise in familiar with the risk taking strategy and with the

agriculture and small business to identify farmers new technology of farming and running small

and artisans who may be funded by banks and businesses. These subsidiaries should identify

guided by technical staff specially recruited for this clusters compact land and groups of artisans and

purpose to help farmers and artisans to develop map out appropriate projects for identified clusters

viable and sustainable farms and firms. However as of land and groups of farmers and artisans and

it happens with almost all visionary ideas it was implement the same along with them by providing

totally diluted due to pressure from unions and the fund technology and management support.

gradual succumbing to such pressures by top These projects should be run on modern business

management due to the vested interests. Those models and subsidiaries so created should also

Change in Environment and Increasing Search

for Space

Need to Train and Recruit Executives with

Expertise and Experience in Farming and small

Business

July-September-2008

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20

develop suitable infrastructure like roads, It is perhaps now imperative for banks to invest

warehouses and markets with necessary support of funds of affluent people of the society in the equity

market intelligence with commodity exchange of subsidiaries to be floated by them as has been

arbitrage as well as procurements. In fact state suggested here. This would take care of Stiglitz

should shed the policy of procurement and market 'Irrational Exuberance' and state should provide tax

intervention as well as subsidy and various exemption to make such investments attractive The

employment projects that are now routed through Funding of Subsidiaries and its Management

political institutions and bureaucrats as that has Structures are presented in Exhibit 1 and Exhibit 2.

unnecessarily encouraged corruptions and

exhibition of power by politicians and bureaucrats.

Exhibit 1

FUNDING OF SUBSIDIARIES OF BANK:

(Rs. 50 crores to 100 crores)

Exhibit 2MANAGEMENT STRUCTURE:

The author is Adjunct Faculty, ICFAI Kolkatta

July-September-2008

LIFELife is a struggle,

Don't let it go away in a giggle.Many troubles you will face,

But always try to win the race.Make the bells of happiness jingle,Even when the sorrows twinkle.

No matter what is your pace,Always occupy in every heart a high place.

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April-June-2008 21 July-September-2008

Abstract:

1. Introduction:

External knowledge:

action, performance and adaption. Knowledge

provides the ability to respond to novel situations. I n t h i s a g e o f

information, knowledge is Knowledge is the basis for, and the driver of,

the most important factor in our post-industrial economy. Knowledge is the

the long-term success of result of learning which provides the only

both an individual and an sustainable competitive advantage. Knowledge is

organization. The only action, focused innovation, pooled expertise, special

source of competitive relationships and alliances. Knowledge is value-

advantage in the future will added behavior and activities. For knowledge to be

be the knowledge that an organization contains and of value it must be focused, current, tested and

an organization’s ability to learn faster than the shared.

competition. With knowledge taking on increased Knowledge management is the name given to importance, it makes sense that there is an the set of systematic and disciplined actions that an opportunity to create competitive advantage by organization can take to obtain the greatest value effectively managing its storage and use. Effective from the knowledge available to it. “Knowledge” in knowledge management system creates competitive this context includes both the experience and advantage by bringing appropriate knowledge to the understanding of the people in the organization and point of action during the moment of need. The the information artifacts, such as documents and development of innovative processes and reports, available within the organization and in the supporting products directly impacts the ability of world outside. Effective knowledge management business and society to use information and typically requires an appropriate combination of knowledge for improvement. The objective of this organizational, social, and managerial initiatives paper is to provide an outline of the general and along with, in many cases, deployment of specific technology issues relating to knowledge appropriate technology. If the knowledge an management system. Focused on the design of employee needs exists, it should be available. This software systems, it provides a coherent overview of requirement can be split into two viewpoints: technical aspects and considerations. knowledge that exists external to the organization

and knowledge that exists internal to the

organization: Knowledge is the full utilization of

information and data, coupled with the potential of This is an area that falls under the purview of traditional library services. people’s skills, competencies, ideas, intuitions, Successful knowledge management system must commitments and motivations. leverage these services and their lessons learned. In today’s economy, knowledge is people, Outside knowledge resources must be evaluated and money, leverage, learning, flexibility, power, and tapped. Regardless of how external sources are competitive advantage. Knowledge is more relevant tapped, the vision is to have an easy-to-use search to sustained business than capital, labor or land. engine that queries all free and strategic fee external

Nevertheless, it remains the most neglected asset. It knowledge sources. The engine search then brings

is more than justified true belief and is essential for back knowledge from each in an effective,

Knowledge Management System

-Pramod Bhatnagar

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22July-September-2008

integrated fashion. Technology can help meet this ·Would it possible to find a champion within vision by converting legacy information into a the organization? digital, searchable form and providing an integrated, Feasibility study involves effective search engine. addressing the following questions:

Making the knowledge ·Is it possible to complete the project within the internal to an organization available is a more expected time frame? difficult task because the knowledge available is not

·Is the project affordable? already in the form of a finished product. Advanced

·Is the project appropriate? technology can make a large, positive impact in this area. The challenge of making knowledge that exists ·How frequently the system would be in the heads of individual knowledge workers consulted and what will be associated cost? available to an organization is tackled by creating a The traditional approach used to conduct a pervasive sharing infrastructure and culture. feasibility study can be used for building a KM

system. This involves the following tasks:

·Forming a knowledge management team. Knowledge Management systems are ·Preparing a master plan.

developed in order to satisfy the need for improving ·Performing cost/benefit analysis of the

productivity and potential of employees and the proposed system.

company as a whole. The existing knowledge ·Quantifying system criteria and costs. infrastructure is evaluated so that it can give the

perception that the present ways of doing things are not just abandoned in preference for a new system. ·Is the proposed user aware of the fact that the

It involves answers to new KM system is being developed? How it is the following questions: perceived?

·Is existing knowledge going to be lost through ·How much involvement can be expected from retirement, transfer, or departure to other the user while the building process continues? organizations? ·What type of users training will be needed

·Is the proposed KM system needed in multiple when the proposed system is up and running? locations? ·What kind of operational support should be

·Are experts available and willing to support provided? the building of the proposed KM system?

·Does the concerned problem need years of As a consequence of evaluating the existing proper experience and cognitive reasoning to infrastructure, the concerned organization should solve? develop a strategic plan which should aim at

·While undergoing knowledge capture, would advancing the objectives of the organization with the it be possible for the expert to articulate how proposed KM system in mind. Areas to be the problem will be solved? considered are:

·How critical is the knowledge that is to be nVision captured? nResources

·Are the involved tasks non algorithmic in nCulture nature?

2.2 Feasibility:

Internal knowledge:

2. Knowledge Management System Life Cycle:

2.3 User Support:

2.1 System Justification:

2.4 Role of Strategic Planning:

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April-June-2008 23 July-September-2008

methods used to capture knowledge.

·Data mining is also useful in terms of using intelligent agents that may analyze the data warehouse and come up with new findings.

·In KM systems development, the knowledge developer acquires the necessary heuristic knowledge from the experts for building the appropriate knowledge base.

·Knowledge capture and knowledge transfer Figure 2.1: Matching business strategies with KM are often carried out through teams (refer to strategies Figure 2.2).

·Knowledge capture includes determining feasibility, choosing the appropriate expert,

Forming a KM team usually means to identify tapping the expert's knowledge, retapping the key units, branches, and divisions etc. as the key knowledge to plug the gaps in the system, and stakeholders in the prospective KM system, verify/validate the knowledge base. strategically, technically, and organizationally balance the team size and competency. Factors impacting team success are:

·Quality and capability of team members (in terms of personality, experience, and communication skill).

·Size of the team. Figure 2.2: Matching business strategies with KM ·Complexity of the project. strategies

·Team motivation and leadership

·Promising only what that can be actually The spontaneous and iterative process of delivered. building a knowledge base is referred to as rapid

prototyping. In most of the cases, knowledge developers use iterative approach for capturing

·Capturing Knowledge involves extracting, knowledge. For example, the knowledge developer

analyzing and interpreting the concerned may start with a prototype (based on the somehow

knowledge that a human expert uses to solve a limited knowledge captured from the expert during

specific problem. the first few sessions).The following can turn the

·Explicit knowledge is usually captured in approach into rapid prototyping: repositories from appropriate documentation,

·Knowledge developer explains the files etc.

preliminary/ fundamental procedure based on ·Tacit knowledge is usually captured from rudimentary knowledge extracted from the

experts, and from organization's stored expert during the few past sessions. database(s).

·The expert reacts by saying certain remarks.·Interviewing is one of the most popular

·While the expert watches, the knowledge

2.5 Forming a KM team:

2.7 The Role of Rapid Prototyping:

2.6 Capturing Knowledge:

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24July-September-2008

developer enters the additional knowledge into the computer-based system (that represents the prototype).

·The knowledge developer again runs the modified prototype and continues adding additional knowledge as suggested by the expert till the expert is satisfied.

T h e e x p e r t m u s t h a v e e x c e l l e n t communication skill to be able to communicate information understandably and in sufficient detail. Some common questions that may arise in case of expert selection: Figure 2.3: Knowledge Developer's Role·How to know that the so-called expert is in fact

an expert? This phase indicates the beginning of

·Will he/she stay with the project till its designing the IT infrastructure/ Knowledge completion? Management infrastructure. The KM Blueprint (KM

·What backup would be available in case the system design) addresses a number of issues. expert loses interest or quits? Finalizing the scope of the proposed KM

·How is the knowledge developer going to system. know what does and what does not lie within ·Deciding about the necessary system the expert's area of expertise? components.

·Developing the key layers of the KM The knowledge developer can be considered architecture to meet organizat ion 's

as the architect of the system. He/she identifies the requirements. These layers are: problem domain, captures knowledge, and ·User interface writes/tests the heuristics that represent knowledge

·Authentication/security layer and co-ordinates the entire project. Some necessary ·Collaborative agents and filtering attributes of knowledge developer are:

·Application layer ·Communication skills.

·Transport internet layer·Knowledge of knowledge captures tools/ technology. ·Physical layer

·Ability to work in a team with professional/ ·Repositories experts.

·Tolerance for ambiguity. This phase involves the following two steps: ·To be able to think conceptually. Ensures that the ·Ability to frequently interact with the system is right, i.e., the programs do the task

champion and knowledge workers in the that they are designed to do. organization. Ensures that the

2.8 Expert Selection:

2.10 Designing the KM Blueprint:

2.9 The Role of the Knowledge Developer:

2.11 Testing the KM System :

·Verification Procedure:

·Validation Procedure:

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April-June-2008 25 July-September-2008

system is the right system - it meets the user's ·Training should be geared to the specific user

expectations, and will be usable on demand. based on capabilities, experience and system

complexity.

·Training can be supported by user manuals, ·After capturing the appropriate knowledge, explanatory facilities, and job aids. encoding in the knowledge base, verifying and

validating; the next task of the knowledge

developer is to implement the proposed Implementation means change, and system on a server. organizational members usually resist change. The

·Implementation means converting the new resistors may include Experts, Regular employees

KM system into actual operation. (users), Troublemakers; Narrow minded people.

Resistance can be seen in the form of Projection, ·Conversion is a major step in case of Avoidance, and Aggression as personal reactions.implementation.

·Some other steps are post implementation

review and system maintenance. The following are the questions to be asked in

the post implementation stage:

·How the new system improved the It indicates the development of controls to accuracy/timeliness of concerned decision ensure a quality KM system. The types of errors to making tasks? look for:

·Has the new system caused organizational ·Reasoning errors changes? If so, how constructive are the ·Ambiguity changes? ·Incompleteness

·Has the new system affected the attitudes of ·False representation the end users? If so, in what way?

·How the new system changed the cost of ·The level/duration of training depends on the

business operation? How significant has it user's knowledge level and the system's

been? attributes.

·In what ways the new system affected the ·Users can range from novices (casual users

relationships between end users in the with very limited knowledge) to experts (users

organization? with prior IT experience and knowledge of

·Do the benefits obtained from the new system latest technology). justify the cost of investment?

·Users can also be classified as tutors (who

acquire a working knowledge in order to keep The managerial factors to be considered are: the system current), pupils (unskilled worker

·The organization must make a commitment to who tries to gain some understanding of the user training/education prior to building the captured knowledge), or customers (who is system. interested to know how to use the KM system).

2.12 Implementing the KM System:

2.15 Managing Change:

2.16 Post system Evaluation:

2.13 Quality Assurance:

2.14 Training Users:

2.17 Implications for KM:

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26July-September-2008

·Top Management should be informed with

cost/benefit analysis of the proposed system.

·The knowledge developers and the people

with potential to do knowledge engineering

should be properly trained.

·Domain experts must be recognized and

rewarded.

·The organization needs to do long-range

strategic planning.

Displaying an approach similar to the one of A variety of architectural approaches are MCC, IBM has designed a broad architecture

evident when studying today's software (Figure 2) for developing agents but is focused technologies that support knowledge management primarily on those connections needed to integrate System. The following section describes some of legacy systems to new architectures. They have those approaches. therefore spent considerable effort on developing

libraries for format translation as well as adapter

technology to provide connections between those This type of approach is generally more

libraries and various object technologies.prevalent in academic research environments and

has spawned international standards such as the

Knowledge Information Format (KIF), Knowledge

Query and Manipulation Language (KQML), and

the Interlingua Working Group (IWG). With a basis

in artificial intelligence, this method of approach is

centered upon understanding and duplicating some

elements of human cognition.

The example shown in below (Figure 1) is

from the Microelectronic Computer Corporation

(MCC), a national research center created in the late

1980s. The architecture includes modern

technology, in the form of JAVA applets, integrated A more recent approach, one following by with the older programmatic interface of KQML. It

several companies, is the development of also includes multiple, rather than a single type, of

architectures similar to that shown by autonomy's intelligent agent and, like most products, provides agentware shown in Figure 3. These are generally linkages to databases. more focused on capturing information from the

Figure 1

3.2. IBM Agent Builder:3. Knowledge Management architecture:

3.1. MCC InfoSleuth:

Figure 2

3.3. Autonomy AgentWare:

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April-June-2008 27 July-September-2008

Internet based on user preference but lack may be http://www.lantimes.com/98/98apr/804b036

less devoted to libraries or ontologies. In the case of a.html.

Autonomy, there is much greater focus on 5. Uren, Victoria, et al. 2003. Scholarly attempting to capture tacit knowledge and convert it Publishing and Argument in Hyperspace. In to explicit form. This is one area that many newer The Twelfth International World Wide Web knowledge management architectures are trying to Conference, pp. 244-250, Budapest, Hungary: include. A C M P r e s s . [ O n l i n e ] . Av a i l a b l e :

http://www2003.org/cdrom/papers/refereed/

p137/p137-uren.html

6. Van de Sompel, Herbert and Beit-Arie, Oren.

2001. Open linking in the scholarly

information environment using the OpenURL

framework. D-Lib Magazine 7(3). [Online].

Available: http://www.dlib.org /dlib/

march01/vandesompel/ 03vandesompel.html

7. Bray, D. (2006). Exploration, Exploitation,

and Knowledge Management Strategies in

Multi-Tier Hierarchical Organizations After discussing emerging technologies and Experiencing Environmental Turbulence, their application to knowledge management it North American Assoc. for Computational becomes evident that while their usefulness is Social and Organizat ional Science growing but there is need of improvement. Some of (NAACSOS) Conference, June 2006. Article the issues like availability of knowledge and proper available on SSRN utilization of that knowledge are important. It is also

considerably noted that the application of 8. Callaghan, J. (2002), Inside Intranets & technology, and frameworks to support their Extranets: Knowledge Management and the adoption within the enterprise, have the potential for Struggle for Power, Palgrave Macmillan, dramatically improving the business value chain. ISBN 0-333-98743-8.

9. Choo, C. & Bontis, N. (2002), The Strategic

Management of Intellectual Capital and 1. Chomsky, N. 1968, Mind and Language, Organizational Knowledge , Oxford Hartcourt, Brace & World, New York.University Press, ISBN 0-19-513866-X. 2. Conarty, T. 1997, The Services Convergence:

10. Clare, M. and Detore A. (2000), Knowledge Outsourcing, Off-Sourcing, and Knowledge Assets Professional's Guide to Valuation and Management, Information Week 500 White Financial Management, Apsen Publishers, Paper, http://www.informationweek.com ISBN 0-15-607000-6. /97/iw500/conart.html.

11. Collison, C. & Parcell, G (2004), Learning to 3. Crevier, Daniel. 1993, AI: The Tumultuous Fly - Practical Knowledge Management From History of the Search for Artificial Leading and Learning Organizations, Intelligence, Harper Collins, New York.Capstone Publishing, ISBN 1-84112-509-14. Snell, M. 1998, Data Management:

Knowledge-management Systems May Make

Business Smarter, LAN Times online,

Figure 3

4. Conclusion:

5. References:

The author is Reader, at LBSIMDS, Lucknow

e-track

28July-September-2008

1) Who is a captive user?

6) One of the users in the branch is going on

long leave. I want to disable the user for the

period of leave. How can I do it?

2) Who is a free user?

7) How a user can work on holiday?

8) One of the users is not able to post

transactions involving other SOL, What

could be the problem?

3) My user id is locked. What can I do?9) How a user can change the Application

Password (Finacle password used during

login process)?

4) I was transferred from another branch 10) In case there is some problem in printing of

where I had a Finacle user id and password. reports, where to check?

Do I have to take fresh user id in the new

branch?

5) I do not want certain users to access certain

accounts. Can I restrict them?

accounts through the menu AACM.

A "captive" user can do transactions affecting

the data of his SOL (branch) only. He can also

inquire into the database pertaining to other

SOL provided the menu he is invoking is The DBA of the branch can modify the User "free". Profile of DBA by making necessary changes

through menu option UPM.

A "free" user is one who can put through

transactions affecting the data of his SOL as Any user can log into the Finacle application well as other SOL, provided the menu he is only if another user authorizes the login on any invoking is also "free". It should be noted that day marked as holiday in the SOL calendar, the "free" user could put through transactions provided the Data Center is working.affecting only the customer accounts of other

SOL and not office accounts. It should be

remembered that even though the user is

"free", he couldn't access the database of other Make the user as free user by modifying the

SOL if the menu is "captive".user profile of user through menu option UPM.

In case the menu is locked and the user is not

allowed to log into the system again, then by

going through the menu SAC we have to Through menu option PWMNT a user can

delete (unlock) the user. This activity can be change his/her password. This can be done any

performed by DBA of the branch.number of times during a day.

This may be due to Ilinkweb. First, check

whether the IlinkWeb is active or not. If There is no need to generate fresh user id. If

IlinkWeb is not active, click on Ilinkweb.exe the employee is transferred to another SOL,

to activate the ilink.the SOL of the user in the system can be

If it is not resolved then check the printer changed to the current SOL by branch DBA by status.using CSE menu option.

Users can be restricted from accessing certain

FAQs on Finacle

FAQs in Finacle, are contributed by Mr Kamal Kant,Chief Faculty , PNBIIT , Lucknow

e-track

April-June-2008 29 July-September-2008

Being Indian' is an exceptionally extended blood and color, but essay with profound understanding and which is English in taste, opinions, presented in a fairly lucid language. The book has morals and intellect". been divided into four major chapters on the Indian's English is an instrument of approach to 'Power', 'Wealth', 'Technology' followed social exclusion in India, by the analysis of 'Pan-Indianness' with an but paradoxically for the introduction on 'Image versus Reality. The Epilogue IT industry, "a bane has is narrated as a 'Critical Equilibrium for Take off'. b e c o m e a b o o n " .

“Morality is a theoretical In writing about Indian attitudes towards construct abjured as power, money, technology or culture, the author of impractical in real life. this book Pavan Varma hits the nail on the head on Indians also sanction what makes the Indian civilization so different than violence when convinced any other and so complex in many ways. He writes of numerical strength and surety of victory”. In excellently all through and makes insightful Being Indian, the author demolishes these myths comments on every single page. and generalizations as he turns his sharply observant He observes that the stereotypes in which gaze on his fellow countrymen to examine what foreigners see Indians and the self-image that really makes Indians tick and what they have to offer Indians project about themselves are both erroneous. the world in the 21st century. Indians are considered democratic, spiritual,

This book also examines India's future tolerant, peaceful etc. But the author's value-neutral prospects as an economic, military and reappraisal throws up surprising conclusions that technological power, providing valuable pointers to can be embarrassing. Indians are congenitally the likely destiny of a nation of one billion people. sensitive to the power calculus. From the Maharajas Drawing on sources as diverse as ancient Sanskrit and the British to modern politicians, the powerful treatises and Bollywood lyrics, and illuminating his are not expected to be reticent or modest in the Indian examples with a wealth of telling anecdotes, the Social Political tradition. Power is a legitimate author creates a vivid and compelling portrait of pursuit and the winners are expected to get it Indians. “India is a difficult country to characterize, flaunted. Caste rigidities may be blurring today but and Indians not easy to define, especially today the preoccupation with everyone's place in a when they are in transition, emerging from shadows hierarchy persists. Indians are obsessed with status. of history into a glare of globalizing world”. This Indian culture forever looks down on manual labor book, will stimulate reflection, discussion and as degrading and higher studies as the ladder to controversy, and is an attempt to try to understand climb the hierarchical totem pole. They discount the who really we are, in the context of the past and the morality and means of securing status as long as one framework of the future. This book is must read for becomes mighty. Wanton greed for money has both foreigners who wish to understand Indians and motivated Indian IT entrepreneurs, who head the list Indians who wish to understand themselves. The of the country's billionaires. The salary of an IT author's quest is to dig into the core of this Indian-professional is much higher than the amount spent to ness using history as the teacher.acquire his or her skills. Working knowledge of

English, a major asset of Indians in the IT market, is a product of the Indian eagerness for Lord Macaulay's project of creating "a class of persons, Indian in

Being IndianAuthor : Pavan K Varma, New Delhi, Penguin Books, 2005, 239 PP. Rs.250

ISBN : 9781741752083

Reviewed by Sanjay Srivastava Librarian, PNBIIT, Lucknow

e-track

30July-September-2008

PNB opens Hockey Academy

Soon TV channels on mobile

Regulators allow computers to phone calls now

India will launch global satellite for students to

carry on experiments and learn

Pnb Introduces Master Card Money Send

Programme

PNB gets approval from RBI

The Punjab National Bank has opened a Source : Economic Times

hockey academy in the campus of the Bright

Scholars' School in Sonepat. This is the first Very soon, you will be able to watch a slew of

academy opened by the bank in view of the TV channels on your GPRS-enabled mobile phone.

Commonwealth Games to be hosted by the country. Time Broadband Services (TBSL) announced

Here 30 senior players are being given training, in Saturday it would launch its services in India to

addition to 25 others. provide 15 digital entertainment and news channels

Source : Hindustan Time on cellular phones.

Source : www.siliconindia.com

Source : www.siliconindia.com

Source : www.siliconindia.com

Punjab National Bank (PNB) received

approval from the Reserve Bank of India (RBI) for

opening representative office in Norway.

Source : www.myiris.com

5 million MasterCard Debit cards in India

Soon, for the first time in the country, one

would be able to make calls from computers to fixed

line as well as mobile phones. The Telecom India will be one of the pioneer countries that

Regulatory Authority of India (TRAI) has permitted bring space closer to students for experimenting and

Internet service providers (ISPs) to offer this learning. The Indian Space Research Organization

service. The measure will bring the country's (ISRO) is planning to launch a dedicated satellite for

telecom sector in tune with global trends and will scientific experiments pursued by the undergraduate

curtail the grey market tendencies, TRAI and post-graduate students from various universities

said.Currently, a voice call can only be made from in India. Announcing this project in Bangalore on

one computer to another, but not from a computer to Thursday, ISRO chairman G Madhavan Nair said

a mobile or a fixed line phone. that the launch of this satellite is expected sometimes

next year on-board a polar satellite launch vehicle

(PSLV) sometimes next year.

The launch vehicle will carry the auxiliary

Punjab National Bank in association with satellite with scientific experiments developed by

MasterCard Worldwide has introduced MasterCard the undergraduate and post-graduate students from

Money Send programme. This is a card-to-card various universities in India, Russia and other

money transfer program that enables Bank ATM countries. Apart from the payload (auxiliary

customers' to transfer money quickly, easily and satellite), the launch vehicle will also carry a mini

securely to family members or friends. MasterCard remote sensing satellite.

MoneySend enables funds transfer from Debit cards

issued by PNB to any MasterCard or Maestro card

account at participating banks across India. The

service provides real time online authorization and

transfer confirmation that the funds transfer has been

successful. Punjab National Bank also announced

the impressive key milestone achievement of issuing

Financial / Technical News

e-track

April-June-2008

Security features of bank notes of the Identification Mark: A special feature in intaglio

Mahatma Gandhi Note Series are set out below: introduced on the left of the watermark window on

Watermark: The Mahatma Gandhi Series of bank all notes except the Rs.10/- note assigns different

notes contain the Mahatma Gandhi watermark with shapes for various denominations (Rs. 20-Vertical

a light and shade effect and multi-directional lines in R e c t a n g l e , R s . 5 0 - S q u a r e ,

the watermark window.Security Thread: Rs. 1000 notes contain a

readable, windowed security thread alternately

visible on the obverse with the inscriptions 'Bharat'

(in Hindi), '1000' and 'RBI', totally embedded on the

reverse. The Rs. 500 and Rs.100 notes have a

security thread with similar visible features and

inscription 'Bharat' (in Hindi), and 'RBI'. When held

against the light, the security thread on Rs.1000,

Rs.500 and Rs.100 notes can be seen as one Rs.100-Triangle,

continuous line. The Rs.5, Rs.10, Rs.20 and Rs.50 Rs.500-Circle and Rs.1000-

notes contain a readable, fully embedded windowed Diamond) to help the visually impaired to identify

security thread with the inscription 'Bharat' (in the denomination. Fluorescence: Number panels of

Hindi) and 'RBI'. The security thread appears to the the notes are printed in fluorescent ink. The notes

left of Mahatma Gandhi's portrait. also have optical fibres. Both can be seen when the Latent Image: On the obverse side of Rs.1000, Rs.500, notes are exposed to ultra-violet lamp. Optically Rs.100, Rs.50 and Rs.20 notes, a vertical band on the Variable Ink: A new security feature was right side of Mahatma Gandhi's portrait contains a latent incorporated in the Rs.1000 and Rs.500 notes with image showing the respective denominational value in revised colour scheme introduced in November numeral. The latent image is visible only when the note 2000. The numerals 1000 and 500 on the obverse of is held horizontally at eye level. Rs.1000 and Rs.500 notes, respectively, are printed Micro lettering: This feature appears between the in optically variable ink, viz., a colour-shifting ink. vertical band and Mahatma Gandhi's portrait. It The colour of the numeral 1000/500 appears green contains the word 'RBI' in notes of Rs.5 and Rs.10. when the note is held flat but would change to blue Notes of Rs.20 and above also contain the when the note is tilted.denominational value in micro letters. This feature See Through Register: The small floral design can be seen better under a magnifying glass. Intaglio printed both on the front (hollow) and back (filled Printing: The portrait of Mahatma Gandhi, the up) of the note in the middle of the vertical band next Reserve Bank's seal, the guarantee and promise to the watermark has an accurate back to back clause, the Ashoka Pillar Emblem on the left and the registration. The design will appear as one floral Governor's signature are printed in intaglio, i.e., in design when seen against the light.raised prints,which can be felt by touch in Rs.20,

Rs.50, Rs.100, Rs.500 and Rs.1000 notes.

31

Source: http://www.rbi.org.in

July-September-2008

Security Features of Mahatma Gandhi Note Series

e-track

Computer is ubiquitous in banking sector. Information technology has pervaded all the spheres of

commercial banks. However, at various places IT support is being provided by non IT officials. Due to

paucity of IT knowledge, these officials are facing plethora of problems. To bridge this gap and cater to the

needs of non IT officials PNBIIT has launched a pioneer programme in the name of “Advanced Pogramme of

IT for non-IT officials”

1. Software Technology : Operating System like DOS, Windows, LINUX and UNIX, Data base Systems :

RDBMS like Oracle, SQL, Front end tools : D2K, SQL * PLUS and PL/SQL

2. Data Communication and Communication products Computer networks : Lease Line, ISDN, VSAT

and Remote Access Server, Network Components, Various Network Topologies, Network Trouble

shooting, TCP/IP addressing & Management of Network centers.

3. Site preparation, Data and Power cabling, Procurement of Hardware and UPS, Maintenance of HW,

UPS and batteries and Overview of Computer viruses, anti virus policy and Firewall management

4. Information System Audit, Digital certificate - Private and public key management, Data warehousing

and Data Mining Business Process Re-engineering, Disaster Recovery & Business Continuity Plan,

Technology led products and Delivery Channels : e-commerce, ATM, Internet Banking etc

5. Payment system : RTGS/NEFT/SFMS/ECS

6. All aspects from identification of branch to migration of data, pre & post migration activities.

More such programmes are scheduled in the Quarter October08 to December08. For details visit

http://wwwpnbiit.com. Nominations can be made by all banks.

Coverage of the programme

Advanced programme of IT for Non-IT officials”

32July-September-2008

The Art of LivingIn the pathway of life, You must strive.Dream To rise high, And touch the sky.

At the same time, keep your feet on land,And leave foot prints in the sand.