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Hubei Rural Credit Union new TCSFS’s core banking system improves IT and business functions

Author: The Asian Banker Research



Hubei Rural Credit Union implements TCSFS’s TCS BaNCS core banking system to increase transaction times and to become more customer centric in order to achieve growth targets.


Hubei Rural Credit Union (HRCU) is the largest credit union in Hubei province. The credit union has more than 30 million customers, it has lent to 3 million farmers, and it provides clearing and settlement services to around 70% of the rural areas in the province. HRCU has more than 27,000 employees, 70 million accounts, and 2,103 outlets throughout Hubei.

HRCU in 2011 realized that their legacy core banking system, which was installed in 2005 by a company from Qingdao China, could not smoothly handle the amount of transactions the bank was processing since it has been growing rapidly in recent years. The daily transaction volume at the beginning of 2011 quadruples that of 2006. The rate of processing in the previous system was slow which angered customers, and the rate of development was often stalled. The mainframe was frequently overloaded, especially during peak-periods such as the end of the year or during Chinese Spring Festival (Feb 9-15).

Despite the fact HRCU has taken multiple measures to optimize its legacy system to divert installing a new core banking system, such as replacing the core server, the system was still continually overloaded. There were even times when the leadership in HRCU would pause certain businesses in order to prevent a system crash, which inconvenienced clients and damaged the reputation of the credit union.

In early 2011, the bank decided to replace its core banking system, thus conducting a bidding to find a cost effective, experienced company to implement the new system. The bidding came down to two international companies: IBM and Tata Consultancy Services Financial Solutions (TCSFS), a strategic business unit of Tata Consultancy Services (TCS). HRCU selected TCSFS to install their TCS BaNCS core banking system because of their experience in successfully installing core banking in banks of the same size in mainland China, such as Guangdong Rural Credit Union.

The Challenge

TCSFS’s main challenge was to successfully replace HRCU’s legacy system with its TCS BaNCS core banking system and to provide training to the credit union’s employees on how to operate it properly.

In particular, the bank had to ensure that the system could operate smoothly during peak volume (peak volume reaches 27 million transactions a day, the legacy system could only amount to 4 million), increase its transactions by second, increase its application response time, increase its transaction success rate, increase the batch time processing speeds, and to increase the CPU average utilization rate. The system would also have to be able to contain the general ledger system, the DOS, migrate the data and applications smoothly, including the reporting systems.

HRCU was becoming very diverse in its products, which ranged from traditional deposits and loans, to credit cards, securities and insurances. One of HRCU’s main concerns would be to ensure that the TCS BaNCS core banking system was “market driven and customer centric.” The challenge for TCSFS was to ensure that that the new system would increase the speed to market of new products, and that new products could be designed by parameter configuration and to be able to avoid changing code.

The Solution

HRCU upgraded its existing core banking system to a solution that remains the heart around which the bank’s other systems operate. Known as TCS BaNCS, which is designed and implemented by TCSFS, the package includes a teller front-end solution called TCS BaNCSLink, which supports configurable business processes.

The TCS BaNCS system also provides a standard API, which covers deposits, loans, payments and channel management. The new system is also SOA-engaged which allows it to easily connect with an ESB, the peripheral system, management system based on specified function or performance, and it integrates its DOS system, general ledger system, and the reporting system.

The Implementation Process

TCSFS had 13 months to fully implement their TCS BaNCS system in HRCU with only 400 employees. TCSFS divided the process down to a few steps to ensure they stayed on schedule and that the implementation went smoothly.

The first step was the preparation stage. Between June 30, 2011 to July 8, 2011, HRCU and TCSFS discussed how they would safely implement the TCS BaNCS core banking system. The two parties discussed the amount of resources they had at their disposal, they also planned each stage in a specific timeframe, and they found an office place as the hub for their discussions and meetings.

The second step was the design and the establishment of the standards, which was from May 17 2011 to August 3 2011. Both parties agreed on two designs of the system and the standards they would use. One of the designs was the system integration design and the integration standards, while the other was the data integration bus and its standard. The third step was surveying the peripheral system reform and the arrangements of their personnel; this lasted from July 27 2011 to August 1 2011. TCSFS coordinated the survey and planned how they would reform the peripheral system, and they organized and confirmed how they would allocate their resources. This was necessary to ensure that the project was completed on schedule.

The fourth step was studying the system and the workflow variance, which lasted from July 1st 2011 to August 18th 2011. During this phase the two parties constructed the new core system training area and organized employees and technicians to study the new systems technology. They found more than 470 gap points; they matched the analysis of the peripheral system application connection, and they finished the analysis of their business reports.

The fifth step was making specific functions for the core banking system, which occurred from August 19 2011 to September 29 2011. It mainly covered several aspects: Accomplishing the analysis of more than 220 new function points, creating the function specification of the core banking system, general preposition, general front-end system, and the reporting system data migration system.

The next few steps consisted of the customization of the unit testing units, which the project team constructed the testing environment for the core system, the proposition system, counter system, general ledger system and the peripheral system.

One of the major steps that TCSFS took was migrating HRCU’s data from the old to the new system. The project team collected 13 rounds across Hubei province to ensure it had all the data, and then it cleaned more than 24 million additional files, and accomplished 28 versions of migrating the data. The data migrating time took only 10 hours.

The new core banking system had to meet the IT strategies of speeding up the business process modification and the system integration. The core banking system had unique characteristics of a rural bank. The system adopts structured, modularized solutions. If any part of the system is altered, it will not influence the rest of the business. Clear separation of the application functions allows the business applications to be independent from the technology platform.

The new system offers new structural application components, such as service transfer access, service API, multi-languages, and multi currency support. Furthermore, the core banking system links up the deposit system, the loan system, payment system, and the bankcard system together so all the accounts can be seen when a client comes into a branch. The system is run on IBM’s servers and middleware, and China Telecom is its network provider. HRCF core banking system has not had any disasters since it went live. TCSFS still keeps a team of 20 employees at HRCU.

Risks and Solutions

Before TCSFS began the project, the company evaluated a wide range of potential risks and problems, and then designed a contingency plan to counter them. Three risks stood out the most during the evaluation.

One of the largest risks was that the TCS BaNCS core banking would not be able to sufficiently cover all the business requirements of HRCU. The problem was that there were large gap points between the TCS BaNCS core banking system and HRCU’s legacy system. In particular, TCSFS needed to ensure that the new core banking system could support the applications that the legacy system used, and to find a way to settle the logistics and ensure that the businesses applications were converted properly. To ensure this risk did not become a problem, TCSFS sent the gap points to every branch requesting for suggestions to ensure that the implementation ran smoothly. Based on the suggestions they received, TCSFS improved and supplemented the matchup report and finally agreed on what measures should be taken.

Another IT risks that TCSFS spotted was to ensure that the migration of data was done in an efficient, proper and secure manner. Doing this incorrectly could cause a loss of crucial data, such as debt and credit accounts. Under the guidance of TCSFS, HRCU established a migrating data group whose job was to map, clean, and reconcile data. To ensure that the data migration was done with the lowest risks, TCSFS divided the overall data-migration work into seven phases: Migration preparation, data mapping, customizing integration testing, user acceptance, going live practice run and then finally going live. Breaking the process down step-by-step allowed TCSFS and HRCU to zoom in on their progress and the potential risks.

Finally, one of the most significant risks was not being able to train all of HRCU’s 20,000 tellers in time of going live. After the practice run of going live, TCSFS only had three months to ensure that all the tellers could master the system, including the operational methods, the new businesses, and the new services. It would have been virtually impossible for TCSFS to completely prepare all of HRCU’s tellers in three months, so it sent a team of trainers to teach the group heads of the bank to ensure that they could teach and couch the rest of HRCU’s team. The project team organized and coordinated the training for the tellers, the general ledger system, the credit system, the customer server and other important areas. Using a team to teach the heads of different parts of the core banking system allowed them to pass knowledge from the top to all the different people on the ground working. 

The Benefits

The bank is deriving the following direct benefits as a result of the successful rollout of the new core banking and teller systems:

Stronger transactional processing ability

  • The transaction concurrency volume will increase to 2,500 per second, which is 10 times of the previous core banking system could handle.

  • Transaction per minute under the new system is 2443; the old system was 260.

  • The new application average time is 54ms; the old system was 153.

  • The transaction success rate is now at 99.92%, slightly higher than the older system.

  • The CPU average utilization rate is 77.7% while the previous one was 25%.

Improvement in business functions

  • Separated business functions from the accounting

  • Satisfied the new Accounting Principle’s application

  • Dual-level clearing system

  • Improved the business functions in 228 parts, 36 in the deposit modules, 54 in the loan modules, 41 in the bankcard modules, 52 in the public module, and 45 in the payment module.

  • The system was installed in 13 months, one of the fastest in history, which allowed the credit union to quickly go back to normal.

Although these benefits represent significant IT improvements mainly, it is the future benefits that will be derived from improved time to market for new products which represent the real return for the investment made to implement the new core banking and teller systems.

The Future

HRCU has mentioned that it is planning on continuing to work with TCSFS in the future has it successfully implemented its new core banking system in short period of time. HRCU currently has a technology environment that will support its business growth objectives.

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