SWIFT stands for SOCIETY FOR WORLDWIDE INTERBANK FINANCIAL TELECOMMUNICATIONS. It is a cooperative society under Belgian law and is owned and controlled by its member-shareholders. SWIFT is based in Brussels (Belgium). It is a reliable, safe, instantaneous and economical means of communication amongst member banks.

What is the mission of SWIFT?

SWIFT is a worldwide community of financial institutions whose purpose is to be the leader in communications solutions with lowest risk and highest resilience. It provides low-cost competitive financial processing and communications services of the highest security and reliability. It contributes significantly to the commercial success of its members through greater automation based on its leading expertise in message processing and financial standards setting.

When did the inception of SWIFT take place?

SWIFT was formed in 1973. At the time of inception, there were 239 members from Europe and America. Presently Swift has almost 7600 members and participants in 200 countries. Daily messages regularly exceed 9 million and the average transit time is less than 20 seconds.

What was the rationale behind formation of SWIFT?

SWIFT was formed in response to the communications problems faced by the international banking community. The system provides a standard technique for fund transfer among the member banks.

How does the system work?

The financial institutions can do business with one another using computerised systems over an international data network. The member banks are provided with a Swift Interface Device (SDI) which enables them to format messages according to SWIFT rules or to accept messages in SWIFT format from another computer system. Thus it handles the communication between the computer and the network. Each member bank is given a Bank Identification Code (BIC). Normally there are 8 to 11 characters. The first 4 digits represent Bank, followed by 2 digits
Country and 2 digits Region. The last 3 digits represent branch.

How are the messages transmitted and received?

Messages are sent in test key which can be decoded. Message is sent in encrypted form which is decrypted at the receiving end. Charges are levied not based on distance but based on the block of characters.In India the SWIFT Regional Processor (RGP) is located at World Trade Centre, Mumbai.

What is meant by encryption & decryption?

Encryption means translation of data into a secret code. It is the most effective way to achieve data security. To read an encrypted file,you must have access to a secret key or password that enables you to decrypt it. Unencrypted data is called “plain text” and encrypted data is referred to as “cipher text”.

Some corporates prefer to offer ESPS (Employees Stock Purchase Scheme) which provides immediate gratification to employees vis-à-vis ESOP which has longer vesting period. ESOP schemes have an inbuilt uncertainty due to fluctuating stock market prices. The option may turn out to be worthless incase of downtrend in stock markets. T

he opponents of ESOP scheme thus feel that outright allotment of shares (under ESPS) is a superior tool vis-àvis ESOP. The success of any share benefit scheme (ESOP or ESPS) depends

upon management objective, leveraging employee expectation and, above all, stock market dynamics, which are unpredictable

Most of the ESOPs are Call Option granted by a Company to its employees. The employee will not exercise his option so long as exercise price exceeds the market price and hence the option may ultimately lapse or be forfeited. These types of options whose exercise price are higher than market price are also referred as underwater option. During the dot com bubble, stock options issued by some leading blue chip companies were rendered underwater due to adverse market conditions. SEBI guidelines authorise companies to vary the terms and conditions, including re-pricing of options, if they become underwater.

With the mergers and acquisitions going to be the fashion of the years to come, CBS application software is getting ready to take care of real time banking transactions which are of multi-bank, multi-currency, multicountry and multi-lingual characteristics.

Instead of the present user /card based password authentication, biometric authentication is going to be in vogue. Thus the day is not far away, when one of you just stand in front of an ATM here in India, the biometric camera attached to the ATM recognises your retina, the ATM screen salutes you with the menu options, you select the option “funds transfer”, then enter the 22 digit (let us add 3 digits each for the country code and bank code!) bank account number of your younger sister studying in US and then followed by the transaction amount.

The ATM now asks for your confirmation, commits the transaction and generates a receipt for you, where the transaction will show the time stamp as “Sunday, 09.30 Hrs, 10th July 2010”, where as, the credit to your sister’s account will bear a time stamp as “Saturday, 22.30 Hrs, 9th July 2010”.

And this is what we call Core, Online, Realtime, Electronic banking system.

It is an Act called “ FOREIGN EXCHANGE MANAGEMENT ACT-1999.” The Act came into force from 1st day of June, 2000. It extends to the whole of India. The objective of the Act is to facilitate foreign trade and promote orderly development and maintenance of FOREX MARKET. This enactment replaced the then prevailed (FERA) “Foreign Exchange Regulation Act - 1973”.

Capital account transactions refer to transactions which alters assets and liabilities. Thus transactions meant for investment in immovable properties, investment in securities, external commercial borrowings, etc. are of capital in nature.

Current account transactions mean the transactions other than capital account transactions. Payments on account of personal expenses, business expenses, gifts, donations, interest, commission, foreign travel, educational and medical expenses, etc. come under current account transactions.