A core banking system is the software that holds every account and every loan of a bank, and records every deposit and withdrawal. It is also called the core, or CBS. Every bank in India runs on one.
Take, for example, one month in your savings account. On the first of the month, your salary of ₹60,000 is credited. The core banking system records ₹60,000 against your account. That afternoon, you pay ₹20,000 rent from the bank's app. The core records ₹20,000 debited. In the evening, you withdraw ₹1,500 at an ATM, and the core records that too. Recording each deposit or withdrawal against the right account is called posting.
Every night, the core runs the bank's daily calculations. This is called the end-of-day batch. It adds interest to savings accounts and deducts EMIs from loan accounts. It updates the balance in every account. At the end of the month, it produces your statement.
Almost every other system in the bank is connected to the core. The digital banking platform asks the core for your balance and shows it in the app. The payment hub sends every payment that comes in or goes out to the core, so that the core can post it. Staff at a branch use branch banking software, which also reads and writes the core's records. Every day, the core also sends figures to regulatory reporting software, which prepares the reports that the RBI requires.
Most banks do not write their own core. They buy it from a small number of software companies. Many of the world's core banking companies build their software in India, and some of the largest of them are Indian.
Many cores are decades old, and some still run on mainframes, large central computers that banks have used since the 1970s. A bank cannot stop working while it replaces its core. So many banks now launch new products on a cloud ledger beside the old core, and move accounts across a few at a time. This work is called core banking modernisation.