Indian bank clearing System from manual to CTS Cheque Truncation Grid System

National Clearing Data Center

2009

[10/26/2009] [Confidential] Page 1

Functional Requirement specifications OF

National Clearing Data Center FOR

National Payment Corporation of India 6

th Floor, Stadium House

Veer Nariman Road, Mumbai 400021

BY

IIT Solutions Private Limited 120, Kothari Industrial Estate, L. B. S. Marg, Bhandup (East)

Mumbai 400078 www.iits.in, [email protected]

http://www.iits.in/

mailto:[email protected]


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Index Page

Sr. No. CONTENT PAGE No.

1 Introduction 3

2 NCPI Website functions 5

3 Proposed Hardware Architecture Diagram 6

4 Proposed Software Application Architecture 7

5 List of Applications/ Module, Locations, Users and Functional Specifications

8

6 Big Picture Diagram 10


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1. Introduction:

This proposed system document has been prepared based on the study carried out (Available as a separate document) on the current clearing operations and processes at various levels like Manual, MMBCS based, MICR and CTS Clearing Houses being run by RBI and other nationalized banks across India at more than 1000 locations.

NPCI has versioned a centralized tracking of all clearing transactions that will achieve:

a. Daily settlement of each banks position due to clearing on daily basis with efficient systems and operations.

b. Empower the Clearing houses with the state of the art secured systems and processes software solutions.

c. Provides systems and processes to ensure that the clearing differences are kept close to zero with help from member

banks.

d. With the best of technology this also should be a more economical operation if possible.

e. The exact time of operations of clearing houses and the debits & credits to bank accounts to be tracked.

f. Track the movement, transactions on value, volume basis with trends to take improvements and changes timely.

g. Make a suggestion for architecture, hardware, software and technology and seek improvements on this through RFP.

h. Set standard files formats that need to be exchanged amongst banks and also between Clearing House and NCDC.

i. Make this user friendly and incorporate a module to process requests and complaints from all users.

j. Track all bank holiday for all states and enable clearing house within specified time. In case there is need to extend hours

submit reason why extended time was required.

k. The system will also have all rules, regulations, operations procedures and manuals available online to all users based on

their roles and requirements.

l. This will have a very strong secure user and role management to create and define new roles and functions to ensure that

the users seen only what is to be seen by them i.e. there is no need to view data and report that is irrelevant to them.

m. Database structure and reports will be so designed to be able to drill down from day to week to month to year(s) for a

given range of date.

n. EOD will be allowed at all operational levels only after the data is completely uploaded to central NCDC servers.

o. Suggest possible methodology that can be adapted to provide MICR code to each and every bank branch.


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2. External Boundaries for NCDC:

National Clearing Data Center (NCDC)

Website Non-MICR /

Manual Clearing

Houses

CTS / MICR

Clearing Houses

Manual / MMBCS

Clearing Houses

Centralised at

Banks

Interface to

Users at RBI,

NPCI & Banks

RBI Existing

Data Center at

Nagpur

Utilities MIS,

Holidays,

Queries etc


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3. Major Functions Covered Under NCDC:

Master Circular

Management with

History for All

Users

Complaint And

Request

Processing

National Holiday

management (just

recording)

CTS / MICR

Clearing Center

Interface

Executive User

Interface NPCI /

RBI

Weekly reports

and same to date

N-MICR MMBCS

Clearing Center

Interface

N-MICR non-

MMBCS

Clearing Center

Interface

Bank Executive

user Interface

Government

Revenue

Executive Query

Interface

Daily Reports

Printing Operations

Monthly reports

and same to date

Yearly Reports and

same to Month /

Date

Processing specific

reports on request

NPCI Website

Administrator, Supervisor

users & Operators

CTS Clearing

Centers


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4. The complete over all System of Multiple servers: The following server cluster diagram indicates that the servers replicate data amongst themselves to ensure high availability of the system to all users and their queries operations can be executed from any server depending on the data replication time across the server. Excluding the absolute live operation all applications can be run from any server.

a. The usrs loggedin information and his current page operations status are available in all servers to ensure that the query

requested by the user is answered by the server that is free. b. We can mark one of the server as DR back up site equivalent to live operation and that takes over the live operation when

one of the server fails or is overloaded with queue of requests. c. This will ensure high availability and faster user program query execution. d. Each of the server location has Reporting Server, Image storage server and database server to the capaity it serves.


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Transaction Replication:

The data is replicated from each server to the other server through the transaction log and this is a contineous process where we set the replication time for the data transfer from online to every x time depending on the application requirements.


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Database Mirroring:

The database mirroring is done for the Distributor database.


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5. National Clearing data Center Connectivity:

Bank / Public

Network

NPCI

Network

Member Bank 1

City A

Member Bank 2

City A

Member Bank 3

City A

Member Bank n

City A

Bank / Public

Network

NPCI

Network

NPCI

Network

Distributed

Replicated

Server Locations

Private Network

Page 1

National Clearing Data Centers Connectivity Over NPCI / Bank / Public Network

One

connection

per Bank

NCDC

City 1

NCDC

City 2

NCDC

City 3

MMBCS Clearing

House City C

MICR Clearing

House

City B

Manual Clearing

House

Member

Bank 1

Member

Bank 2 Cheque Scanner

Branch 1

Cheque Scanner

Branch 2

Cheque Scanner

Branch n

Member Bank 3Member Bank n

Cheque Scanner

Branch 1

Cheque Scanner

Branch 2

Cheque Scanner

Branch n

CTS Clearing

HouseMICR Clearing

House City A

Member Bank n

MMBCS City C

Member Bank 2

MMBCS City C

Member Bank 1

MMBCS City C

Manual clearing Members

without Computer

Manual clearing Members

without Computer

`

Members of MMBCS

Clearing House

Physically Exchange

Cheques (City C)

Members of MICR

Clearing House Present

Outward Cheques (un-

encoded) with XML data

file through NPCI Network

Can Easily adapt to CTS

with scanners at Bank

branches


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Page 1

NPCI National Clearing data Server Grid Detailed Overview

File ServerWeb ApplicationStreaming

MediaReal Time

CommunicationData Base Print Rerver

This is Back up server Located at Nagpur

and daily back up is taken from all the Four

Servers at EOD. All Executive MIS is

available from here to RBI and NPCI

Executive

Server South

ChennaiServer East

KolkataServer North

Delhi

Server West

Mumbai

These Servers are at State capitals to support routine Clearing house Operations.

Please note that the operation of these servers can be achieved by

scaling up the configuration of the four regional Servers.

Zonal Servers Grid


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Page 1

Transaction Data Flow from Service Branch to NCDC Data Center

Checker

Validate data &

return to maker

in case of error

Validate

Outward Data

and delivery

Cheques

All Data Entry

Completed?

UPLOAD the Outward Files to

State Clearing House server and confirm

end of upload / Download Inward Files

From Server Confirmation of end of

process is necessary

Maker

Outward entry

& Marking

returns for all

Branches

NO

YES

Iteration until all

the data is

validated

Revalidate data &

Cheques from Server

reports

Operations at Bank Branches

Wait till All

files are

uploaded

Download Inward

Reports for banks

& Clearing House

register

Members collect reports

validate Exchange

Cheques and Confirm

Figures at MMBCS centers

For MICR & CTS batch

presentations are made

Record discrepancies

and These are to be

adjusted in

return clearing

Is Process

Complete

at Server

ON

YES

Confirm and close

Day’s operation for

This clearing data is available

at state server

Operations at Clearing House

Operations at State Server

Receive Files for

Clearing Member

banks of All

Clearing Houses

`

Process & on

member Bank

Confirmation Update

each Clearing House

Generate Inward

list bank wise

and Clearing

House register

Wait For Clearing

House to confirm

End of Clearing

Zone

Upload Data for

all Clearing house

on their confirmation.

Track all clearing house

operations are done

Operations at Zonal Server

Operations of Major Cities

CTS Clearings

Similar to delhi

`

The servers at

these locations are

also capable of

running the CTS

Clearing Houses

Operations at Back Up Server at Nagpur Server

Has back up to previous

day data & can be live for any server if others

can not support

`

Upload Data for

all Clearing house



operations are done

Upload Data for

all Clearing house



operations are done

These servers are identical to configuration being used at NCR Delhi with scalable volume.

The total clearing house operations for all clearings types and all zones are operated here.

EOD reports are available live for one week & older from the backup servers

Live data access by all users is from this servers

All utility services are executed from these servers & also from state level servers also.

Web based

application on all

Servers is identical


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6. Proposed Hardware Architecture Diagram (Single set of Server / Users)

D a ta b a se S e rve r

D a ta

W e b S e rve r

IIS

P re se n ta tio n L a ye r

B u s in e ss L a ye r

D a ta L a ye r

N P C I N e tw o rk

N A T IO N A L C L E A R IN G D A T A C E N T E R( R ep lica ted a t 3 – 4 lo ca tio n s p ara lle l L ive s ites )

U sers a t S ite

B ran ch L o ca tio n C lea rin g

M em b er U sers

L A P T O P / E xecu tives a te R B I , N P C I an d B an ks to v iew

R ep o rt V iew ,

C o m p la in t & R eq u es t an d C ircu la rs

O p era tio n s L im ited to th e ir sp ec ific n eed s

P ro jec t : N C D C

D iag ram : S ys tem A rch itu re D iag ram

A u tho r : V inay K ab ra (IIT S )

V e rs ion : 1 .0

R e l. D a te : 24 O c tobe r 2009

C lea ring H ouses o f

V a rious T ypes (C T S ,

M IC R , M M B C S , M anua l)

R e p o rt A rch iva l a n d S e rve r

Im a g e S to ra g e a n d A rch iva l S e rve r


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7. MMBCS Clearing House Operations:

Bank Representative

Bank Representative

Bank Representative

Bank Representative

Reports Generated

Clearing Incharge Reports Sorted &

Organised

MMBCS Clearing House operations / Without computers It is Manual CH:

All members of clearing house Hand over floppy to Clearing Head and

move to table & exchange cheques.

2. Clearing head merges floppy, generates reports, sorts and hand over

to Clearing members

3. They match reports Non-conformity is informed, updated till all

reports match.

4. Leave with final settlement reports.


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8. Proposed Software Application Architecture:


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9. List of Applications/ Module, Locations, Users and Functional Specifications:

SN Application/Module Name

Location Users Brief Functional Description

1 Data Entry (Web Browser Based) MMBCS type of centers

Bank Branch / Service Branch

DEO and Executive

Individual detailed cheque entry for beneficiary name, Account Number, cheque number, drawee bank, Account Type, MICR Code, Presentation date and amount. Upload, Download clearing Files, reports detailed and summary for Inward, Outward, Inward Returns, Outwards Returns and settlement register from NCDC website. This will also have facility to mark return from Inward cheques, and will also have provision to enter the receivable and payable differences to server directly.

2 Data Entry (Client Server) MMBCS type of centers

Bank Branch / Service Branch

DEO and Executive

Individual detailed cheque entry for beneficiary name, Account Number, cheque number, drawee bank, Account Type, MICR Code, Presentation date and amount. Upload, Download clearing Files, reports detailed and summary for Outward clearing cheques. This will also have facility to mark return from Inward cheques, Create and upload the return file. Similarly this will also have provision to enter the receivable and payable differences, create and upload difference file.

3 Clearing House: (Web Browser Based) MMBCS type of centers

MMBCS Clearing House

Executive and Manager

Admin to view if any bank is missing for their presentation. Generate Inward, Outward returns and inward returns list for banks generate settlement register for all banks to view and confirm net position from all. MIS reports generation for internal use and reporting to higher management.

4 Clearing House: (Client Server MMBCS Executive In case of any problem due to internet link the user will


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Based) MMBCS type of centers Clearing House and Manager

have option to use this program to upload CD / Floppy / Pen drive from all member banks and complete the operations and generate Clearing House Settlement Register.

5 MICR Clearing without Encoders Bank Branches &

Service Branch

DEO, Executives and Manager

The changes at banks will be sending the batches without encoding through the encoder and only the endorsement will be done by cheque reader / encoder or scanner. The data capture program will be possible to be entered or uploaded using the MMBCS program. Physical cheques are to be sent to clearing house in batches with preprinted batch ticket having presenting branch code, serial number and amount (optional). This is identical to current presentation system except that there is no amount encoding on the cheque. This proposed system will be efficient and economical since there will be no errors due to wrong amount. There will also be a provision to send the data file in CD to clearing house if there are issues with internet connectivity.

6 MICR Clearing without Encoders MICR Clearing House


The clearing house will accept batches and blocks of cheques and process these for reading, correction, sorting and generating reports & delivery of inward cheques to bank along with the settlement register. The system needs to work without amount capture from MICR cheques and will correctly extrapolate the MICR data record for each presented cheque with the right amount based on the data file received from them. These clearing houses operations including the activity times are uploaded t the central NCDC site on completion of work.


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through the changes that are changes at banks will be sending the batches without encoding through the encoder and only the endorsement will be done by cheque reader / encoder or scanner. The captured data program will be possible to be entered or uploaded using the MMBCS program. Physical cheques are to be sent to clearing house in batches with preprinted batch ticket having branch code, serial number and amount. Sorting and settlement will happen as per the present system and this proposed system will not have errors due to wrong amount reading / correction. There will also be a provision to send the data file in CD to clearing house if there are issues with internet connectivity.

7 CTS Clearing at MICR centers (near future step)

Bank Branches &

Service Branch


This step is a simple extension from the above proposed process by adding the images by adding cheque scanners for data capture. The upload, download of image and data files will be quite similar to present CTS Operations at NCR Delhi with scope to improve security and lower cost.

8 CTS Clearing at MICR centers (near future step)

MICR Clearing House


This will be a web based solution similar to the one deployed at NCR Delhi with scope to improve security and lower cost. This study will be detailed out within a week while the draft proposal will be reviewed by the NPCI executives.

9 Utilities

9.1 Daily Settlement Position local clearing house to National level

At all servers Executives at Bank / NOCI

Depending on the availability of the data at the server the local Summary of the clearing houses and settlement reports will be available. The central server will have the national position, regional will provide the regional information and state will provide for the state level information. Users will see only their relevant information.


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9.2 Master Holiday Management system

At all Servers System Executives NPCI

This is to ensure that the clearing houses are operational only when they are required to operate. This should also help in removing the national clearing cheque presentations to other regions when they have holidays. Should this be controlled with CBS solutions in bank?

9.4 Requests, complaints and query processing module

The users can request for amendments by indicating their practical operational difficulties, for new formats of reports. Similarly there will be scope to put in their complaints and queries about the system, operations specific situations not yet addressed by the system. These will be directly answered by the NPCI executives and staff directly or with referring to the right level in case of complex queries, update in application software / reports.

9.5 Queries to address Government Revenue department and Ministry queries about specific transactions

Here the doubtful transactions can be queried and these will be reviewed by senior executives and then forwarded judiciously to the system executives for further processing.

9.6 Data Mining Functionalities Indicate the scope what all could be done by their software with these tools to locate circular, fraud transactions processed by certain accounts across India.


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10. Software Specifications for MMBCS Clearing Operations

Note:

1. This software works with client server and web based with NCDC servers.

2. The entire functions are covered with a single application.

3. The functional requirement of the software is divided as per the location of use.

4. All file structures for upload and download are provided in a separate document.

AT Clearing Member Bank Branches:

1. Set Bank Branch Details (Bank Name, Branch Name, City, MICR Code, Clearing House, Weekly Holiday, Operation

Time)

2. Set Clearing Types (Inward, Outward, Returns for various types of Clearing) with standard batch size for each clearing.

3. Software Installation Version(To be part of each file being uploaded)

4. Set Image repository path

5. Set Signature image repository Path.

6. Master list of Banks in the clearing house where

Outward Clearing Operations:.

1. Any branch can do data entry for other branch also

2. Select Clearing Type

3. Select Mandatory Fields for this Clearing

4. Select Cheques only or Slips and cheques only. The software provides multiple cheques with single slip or single cheque

with multiple slips with balancing facility.


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5. Complete data entry to cover some or all of Cheque number, Beneficiary Account Number, Beneficiary Name, Payee

Account Number, Transaction Code, payee bank code, Amount, Cheque date for each cheque.

6. Close batches on reaching batch count set for the clearing house.

7. Create file for outward Clearing and send cheques with file to Service branch.

8. Service branch also has the outward clearing program and can enter cheques for all their branches.

9. Service Branches of banks will have internet connectivity and those banks who do not have this will be provided this by

their clearing House.

7. The service branch uploads creates outward file and is uploaded to NCDC server through the terminal that has secured

login and the software.

8. Service branch even after upload can enter any new received cheque directly to the NCDC server through the terminal

that has secured login.

9. The outward presentation cheque report bank wise amount wise sorted report can be generated from local software or

from the NCDC server for verification and validation.

10. The bank Representative goes to Clearing house with the sorted cheques with the list for each drawee bank of clearing

house.

Clearing House Operations:

1. Bank Representatives come to clearing house and exchange cheques with the list. The software has provision to print the

Inward list of each bank at clearing house with continuous stationary and there is no printing required at service branches

of bank.

2. Clearing houses publishes the Clearing House balance register and get confirmation from the bank representatives.

3. Updates in case there is any difference in the inward cheques in NCDC data center.

4. The NCDC on confirmation from Clearing house associates a unique transaction number

5. The Final settlement register can be downloaded by any service branch of bank that has NCDC software terminal.

6. Bank representatives then return back with their inward clearing cheques with the list and their net position figure.


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Inward Clearing and Inward Returns Operations: 1. Select Clearing type in the system and date. (some times it becomes necessary to allow late returns by mutual consent

within the presenting and drawee bank and a previous date can be selected. Though this is not right practice but system

has provision for the same.

2. Download the inward clearing file from NCDC website by selecting the clearing code.

3. Debiting the account will be an internal process to banks and they will have only the cheques that are to be returned are

available for Mark the return cheques with their reason code.

4. Create upload file for return clearing.

5. The service branch of banks can directly mark the returns with the reason code and hence there will not be any need to

create and upload file.

6. The return reason code master is maintained at NCDC server and the will be synchronised to local system.

7. The beneficiary account number is also required to be updated on NCDC server for all inward cheques. This can be

optional for some time but can be mandatory in future.

Outward Return Clearing at Clearing House: 1. Select the outward presentation cheques

2. Identical to outward presentation the return cheque list is made available to clearing member banks.

3. The cheques are the ones which were presented by them in their previous outward clearing. At times these could be from

other previous outward clearing of some other date.

4. These are matched and confirmed to clearing house that does discrepancy updates on the NCDC website prior to

generating the reports.

5. Clearing house members return with their outward clearing return cheques.


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Outward Return Operations at bank branches: 1. Download the outward return file and reports.

Query execution facility for banks:

1. The reports for any day can be viewed, printed, downloaded by banks for specific number of days for which the data is

kept live.

2. Query on older reports will be available through the complaint and request module at this website.

3. To get any specific transaction details user needs to give the known parameters of transaction and run the query and the

returned list will be all those transaction having the entered parameter for given range of dates.

Request Module:

1. This will be used by the clearing member / clearing house to set up local internal circulars in relation to clearing

operations.

2. These requests will be like as given below with reason for the same:

i. Not participating for clearing on specific day due to some reasons.

ii. Clearing house closed on specific day.

iii. Any other internal circulars.

Holiday maintenance for all state across India: 1. The NCDC website will have all India holiday maintenance for all states.

2. This will ensure the operations of clearing houses only on the non holidays.

MIS Reports: 1. This will be to monitor the time of start and end of clearing house operations.

2. Other list of reports will be added to this.


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11. Software Specifications for MICR Clearing Houses:

The proposal for existing centers is to move these to CTS based clearing operations in two steps. 1. Convert these to MICR centers without encoding with huge operational and processing cost saving. 2. Gradually move these to CTS clearing house operations.

Banks Outward presentation of cheques without encoding:

SN Current Operations Proposed Operation Advantage / Disadvantage 1 Banks enter data Once in

their system and create batches and send for Amount and batch ticket encoding.

Step to encoding amount on cheque will be removed & just endorsement will be done on batches. Each presentation document is having unique presentation number from each bank and batch tickets are also inserted within the cheque records with data.

Errors arising due to encoding will not exist. Original amount of cheque will be available with each cheque that is entered with balancing the slip amount.

2 At present the capturing of the Drawee bank MICR code and TN are not mandatory.

Capturing of these will be mandatory and without this the the electronic data of the presenting bank will not be accepted at the clearing house.

Some banks will have to start this and some are already capturing this for their internal use.

3 Encoded cheques with batch tickets are sent to Clearing house and no data is sent separately.

Pre-encoded batch ticket (Serial Number, Presenting Bank Branch code, TC) will be sent to clearing house in front of each batch and the record will have the details from the batch tickets. Electronic data will be sent on CD or through the secured network.

Clearing house is provided by the data completely that helps in reduction of payable and receivable differences.

4 Endorsement is done by the cheque encoders.

This can be done using cheque scanners and image is also available at banks end and captures the MICR band.

Very cost effective as the scanners give better cost per instruments & preprinted fields are also captured saving in data entry time and errors.

5 Not really CTS ready Can quickly shift to CTS with training only. CTS Readiness


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Operational changes at clearing House:

SN Current Operations Proposed Operation Advantage / Disadvantage 1 Amount reading errors exists There will not be any error on amount capture

as this will be taken from banks presentation file. Saving time, reducing clearing differences, better accuracy

2 Rejection re-entry has possibility of entering wrong values.

The preprinted fields entry is validated against the data available from the banks outward file and hence a better check for validation

Saving time, reducing clearing differences and better accuracy of processing.

3 Reports related to amount encoding errors are required

There will not be any report related to amount encoding errors.

Mismatch due to amount in file and physical cheque remains.

4 Uses correction terminals for about 1% amount encoding errors in reading

The number of terminals will be reduced. Staff reduced, saving cost and time, reducing clearing differences.

Note: This requires an update on the software running at existing MICR Clearing houses and is the only bottleneck.

Inward clearing does not change and the received cheques do not have any amount encoded on them.


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12. Software Specifications for CTS Clearing Centers:

We can adapt the existing CTS operation as being done at Delhi. Yes there could be some change in the file structure to

accommodate the plan to track the clearing solutions from end to end.

13. Other Administrative utilities: The utilities in this system will be as given below:

Administrator Role at NPCI:

1. Set up Administrator roles for organizations using the specific part of the software. The administrator will have the rights to create roles within the organization.

2. The updates in the client server programs will be updated by the organization based on notification and process to download and install. System administrator is informed about this through mail notification with the version number in upload file header.

The proposed system will have many roles for different types of users at various organizations. These


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14. Proposed Clearing File Structures:

Technology

Indian bank clearing System from manual to CTS Cheque Truncation Grid System