The Shamrao Vithal Co-operative Bank (SVCB), one of the country’s oldest players in the co-operative bank space (it has been around for almost a century), recently selected Synlog for SWIFT (Society for Worldwide Interbank Financial Telecommunications) connectivity using the TurboSWIFT suite from BankServ, USA. SWIFT connectivity will enable the bank to process international financial transactions independently. To date, the bank's forex transactions were routed through Karnataka Bank. The SVC Bank now has its own Bank Identifier Code or BIC (SVCBINBB), which will serve as its international identification code. SVCB received its foreign exchange AD-I licence from the RBI during FY 2007-08 itself; however, full-fledged operations on this front are expected to start in the current financial year i.e. FY 2008-09.

"The RBI, before granting a forex license to any bank, considers the capacity of the bank to manage the extended business volume, its financial soundness, its capacity to set up new infrastructure and finally its ability to hire forex experts", says Ravikiran Mankikar, GM – IT, SVCB. The bank has to report regularly to the RBI after getting a forex licence.

SWIFT's Connectivity Model

SWIFT is a messaging system that facilitates global inter-bank payments. The flow of messages also supports the accounting system. Initially, the new bank has to register with SWIFT to get connectivity from the dedicated terminal (to the bank) that is attached to the mainframe based in Geneva, Switzerland, which is in turn connected to all member banks. As a result, any message from the sender bank will hit the recipient bank through the SWIFT interface and vice versa. This whole system is Web-enabled with adequate security and encryption to ensure the messages reach the authorised recipients.

The SWIFT interface at SVCB will go live by mid-July. The bank is building an International Business division at its Cuff Parade branch to host this interface. "On the technology side, we are ready with the required servers and other equipment. Once the premises are ready, the equipment will be installed," says Mankikar.

TurboSWIFT – the Indian Enabler for SWIFT

TurboSWIFT, SWIFT's affiliate body in India, enabled SVCB to complete the set-up needed to go live with SWIFT. It provided the necessary interface, servers, terminal connectivity, lease line and technical assistance. "The prerequisites for SWIFT connectivity are certain types of servers that can be compatible with the software, the availability of a lease line and employee training. Once all this is in place, a bank can go live with SWIFT," says Sanjay Patil, senior manager – IT, SVCB.

TurboSWIFT also recommended that SVCB have 64 Kbps bandwidth speed configured for the SWIFT server and 128-bit encryption for its independent terminal.

Integration with Back-End Systems

On the technology side, SWIFT is integrated with the back-end system – the foreign exchange accounting module and the domestic accounting module through STP (Straight Through Processing), thus, avoiding duplication and making the workflow seamless as an entry made in one module automatically gets updated at the other two levels. The Synlog software will act as a mediator between the CBS Genius I and the SWIFT server to convert the bank’s message into the desired format and decode any message received from another bank.

Procedure for Receiving and Sending Payments

Foreign currency transactions can be segregated into two main types. The need for foreign currency arises either if a person is travelling abroad and needs the currency of specific countries or if he/she wishes to transact with a party abroad and needs currency for effecting the business. For travel needs, the individual is required to provide relevant documents and declaration as proof. Meanwhile, for business needs, one has to open a Letter of Credit (LC) and provide a bank guarantee to receive payment in foreign currency.

For any forex transaction, the customer has to fill in an application form to mention the source of funds followed by provision of a declaration about the fund usage in tune with the guidelines of the Foreign Exchange Management Act (FEMA). The customer should also have an equivalent amount of money in Indian rupees to enable the exchange. Following this, he has to select a payment medium – TT (Transfer), Cheque or Bank Guarantee. The application form has to then be checked and approved by the relevant authorities. Post this, a payment message is sent via the SWIFT interface to the concerned bank.

Considering the current trend of Internet banking, can the customer leverage the Web for filing the above application? Mankikar explains, "The bank should have an Internet banking module to make that possible with digital signatures provided to all its customers. SVCB is also planning to come up with the digital signature facility to be on par with other banks".

"International standards and formats have to be followed for compiling SWIFT messages. We sent some test messages to SWIFT, which came back to us with corrections," says Patil.

One-stop Facility For Customer and Global Exposure For Bank

"The customer will benefit from getting a one-stop facility from the bank. Till now, he had to apply through us to the Karnataka Bank or any other correspondent bank resulting in increased turnaround time for the disposal of his application," says Mankikar.

"SWIFT connectivity has put SVCB on the world map," says Mahesh Kalyanpur, senior manager – IT, SVCB. "Until now, all the transactions were routed through Karnataka Bank; therefore, the sender bank never knew SVCB directly. However, post SWIFT connectivity the message will be directly addressed to SVCB."