Page 134 - DMGT303_BANKING_AND_INSURANCE

Unit 6: New Age Clearing and New Age Payment

back automatically into original words at the receiving time. This ensures that even while Notes
the message is flowing through Swift system, its privacy is ensured and even the staff of
Swift is not aware of the contents. Even the information stored by Swift for future use/
reference is stored in encrypted form.

Each message is also assigned an Authentic on being given ISN to guarantee the identity
of sender and receiver.
This authentication is based on a complex mathematical formula (algorithm) provided by
(a) Swift and (b) on bilateral codes exchanged between any two correspondent banks.
These "authenticator codes" for each different bank are automatically provided by CBT on
being commanded to do so by the CBT user and then exchanged between two banks
through postal/courier channels on confidential basis.

Advantages

Swift is the latest mode of inter-bank exchange of messages on a global basis. It is cost
effective reliable and secure communication system, which, inter alia, indemnifies the
bank in case of any misuse of the system. It provides immediate transfer of funds, LCs,
balance reports, statement of accounts etc. resulting in improved customer service, lower
costs and better funds management.
Swift handles approximately 220.1 million messages per month, average daily traffic
9081423 messages on global basis. This high volume ensures a very low per message cost.
Swift message is treated as an operative instrument and does not need any telex/mail/
courier confirmation.

In most foreign centres, where banks are fully computerized (specially in Europe and
USA) the Swift message is received and automatically processed by the receiving bank's
internal computer'. This results in a much lower processing/handling changes of foreign
banks apart from ensuring priority processing of the message.

All messages are authentic and also verified at the receiving end.
A message can be delivered within 20 seconds if the sender and receiver are both operational
on Swift at that time.

6.7 Swift in India

The initiative to introduce SWIFT was taken in 1982 by Indian Banks Association and RBI. The
dream was transformed into reality when SWIFT was formally inaugurated on 2nd December,
1991 as a result of persistent efforts by IBA. Richard Frohlich, the then Chairman of Board of
Directors, SWIFT made himself available to the banking industry in India. The message
transmission traffic is improving in India now. There are 64 financial institutions/banks enacted
on SWIFT in India. At present all the major banks are connected through SWIFT as it is impossible
for them to answer the current demands of retail as well as corporate customers who need
services at speed of thought.

Notes The initiative to introduce SWIFT was taken in 1982 by Indian Banks Association
and RBI.

LOVELY PROFESSIONAL UNIVERSITY 129