Banking before CBS: An Overview of the Past
Today when we go to a bank, we see clerks and officers working on their computers and anybody having account anywhere can do banking irrespective of his or her location. The facility, also known as Core Banking Solution or CBS, is a relatively new concept in the banking arena.
Today when we go to a bank, we see clerks and officers working on their computers and anybody having account anywhere can do banking irrespective of his or her location. The facility, also known as Core Banking Solution or CBS, is a relatively new concept in the banking arena. The computerization of banking transactions started only after the economic liberalization in India in 1991 but banks have been there in India from 18th century onwards. So, how was banking before human efforts were replaced with computer programmes?
Banking in the old era: A Peek into the Past
There used to be different procedures for different kinds of transactions in banks before the advent of technology:
- Cash Deposit: Every account holder in a bank used to have his or her account number in the general ledger of a branch and it used to be indicated by a folio number where all the transactions in that account used to be recorded. So, when one used to go to the bank in order to deposit cash, the cashier would take the money and pass the voucher to the clerk sitting with ledgers. The clerk would find the name and folio number and enter the transaction record in the account.
- Cash Withdrawal: Cash withdrawal used to be a tedious process at that time. The account holder used to give the passbook along with the withdrawal slip or cheque to the clerk and then the clerk would issue a token after checking whether there is balance in his account or not. Then, that voucher would be passed to the officer, who would verify the signature with the card maintained at the branch for each and every customer containing his or her photo, signature and other details. If the signature is okay, it would go to the cashier and cash would be given to the account holder on receipt of the same token issued to him earlier by the ledger clerk.
- Interest Calculation: It used to be one of the most difficult tasks in the banking sector because interest had to be calculated manually and that is why, closing day used to be a holiday for bank customers. Clerks would calculate the interest manually and enter in the ledger maintained at the branch.
- Loan Processing: It used to be a procedure more difficult than the general banking operations. For loan accounts also, there used to be ledgers where account numbers used to be maintained as folio numbers. Now, every time there is disbursement or repayment of loan, interest had to be calculated manually on the outstanding amount of loan. This used to take a lot of time and chances of human error were very much there.
- No chance of non-home transactions: This was the worst of all when banking was all about paper. If you had an account with a particular branch of a bank, you could do transactions in that branch only, nowhere else and with no ATM, if somebody had to go away on business or any other purpose, the only option was carrying enough money with him or her.
- Investment in Bank Deposits: Everything was almost the same except the fact that interest calculation used to be manual and if somebody was maintain a monthly income plan account, a clerk had to maintain the interest amount every month and credit it to his savings account at the end of month during the tenure of the deposit.
Banking is based on purely taking deposit from public and then giving that money to the needy sectors of the economy. Before computerization as well banks used to do the same, but it used to take more time only because of the fact that human interventions were more and therefore, human errors were more. With computers at the helm, banking has become more convenient and faster as well but the underlying principle of banking remains the same and will always be that way.