Vol. 15 No. 2 June 2016 `75 - Banking Frontiersbankingfrontiers.com/wp-content/uploads/2016/06/BF-June-2016-Main.pdf · MD and CEO, Vijaya Bank Vol. 15 No. 2 June 2016 `75 Pages 64

Dual approach for technology implementation

Kishore Kumar SansiMD and CEO, Vijaya Bank

www.bankingfrontiers.com

Vol. 15 No. 2 June 2016 `75

Pages 64

From cash to cashless

YES Bank’s DIGICAL strategy

Federal Bank retail loans

Banking in the Gulf

Banking Frontiers June 2016 3

June 2016 - Vol. 15 No. 2

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Editor : N. Mohan

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The New Bankruptcy Code

The Insolvency and Bankruptcy Bill, which became a law in May 2016, is

considered a transformational legislation that is expected to specifically

help in resolving issues relating to winding up of insolvent companies

and lowering NPAs of the banks. Our insolvency law had remained outdated and

unreformed as a result of which rehabilitation or winding up of companies had

become a time-consuming and laborious process. Until now, it took more than

4 years to resolve a case of bankruptcy. With the new law, it becomes possible

to have time-bound settlement of insolvency, faster turnaround of businesses

and creation of structured information about serial defaulters.

The new law is expected to help India move up in the World Bank’s ease of

doing business index from the current 136 among 189 countries.

How does it help banks? The law will compel corporate borrowers to avoid

defaults so that they can continue to be in control of their business. Borrowers

will lose control of the corporate entity they own as soon as the process of

insolvency is initiated under the new regime. This is bound to force them not

to default in the first place. Banks will also be able to have a strong say in

issues relating to recovery. Credit rating agency Moody’s Investors Service

has pointed out to this fact but maintained that the existing infrastructure may

hamper the proceedings to some extent. Moody’s has said the new law can

reduce threshold for creditors to invoke the insolvency resolution process and

introduce third-party insolvency professionals as intermediaries to oversee the

process, replacing the debtor’s existing management and operate the company

as a going concern upon initiation of the process. One important aspect is the

limit on the duration of process to maximum of 270 days, after which a company

will be automatically liquidated.

However, will this really help cut down the current NPAs? May not. But the

law is indeed a preventive mechanism to contain future NPAs. Besides, it may

also lead to creation of a framework to transform the ‘failed entrepreneurs’ into

an asset as like in the developed countries, the government can itself initiate

measures to identify the causes of the failure and lead them back into success.

That way there would be little or no recurrences of bad loans and the term

‘wilful defaulter’ that evokes public ire at the sheer helplessness of the entire

banking system to act may cease to exist over a period of time.

Editor’s BlogN. MohanMobile : 9322895820Email : [email protected]

8 Banking Frontiers June 2016

Fraud Prevention

Today more than 50% of the retail banking applications in India are screened by ‘National Hunter’,

a premium fraud detecting system developed by Experian. On a rough estimate, the system has been able to bring in a savings of as much as Rs4002 crore in FY16 by preventing frauds at the credit application level itself. Experian India has been offering fraud solutions to banks and insurance companies and the response has been tremendous, says Mohan Jayaraman, Managing Director, Experian Credit Bureau India. He adds: “We have recently launched ‘Hunter Fraud Score’, a new scoring mechanism which in simple words measures the probability of fraud in a credit application across the banking and insurance industry. We have the Experian Fraud Bureau, which is a closed user group of industry members, who share fraud data and in return access advanced fraud detection services from us. Some 47 banks and 17 life insurance companies are currently part of this CUG.”

In simple terms, banks will now be able to identify applications that should be screened for potential fraud and prioritise those that have a high probability of being fraudulent. What the system does is matching credit application data against multiple data sources including shared fraud data. It has several rules that work towards identifying inconsistency in credit applications. These applications are then moved into the investigation tool for further analysis and action, says Mohan Jayaraman, and adds: “Applications that are assigned a high score are less likely to be fraudulent. By using the Hunter Fraud Score a bank can identify ~45% of the potentially fraudulent credit applications by working on ~5% of the population, in the low score bands. By assigning scores to applications, the Hunter

Fraud Score also allows for a quicker and convenient customer experience for low risk customers.”

CROSSCOREExperian has also recently launched another unique product - CrossCore, which is the first open platform designed to catch frauds faster, improve compliance and enhance the customer experience. Explains Mohan Jayaraman: “CrossCore actually gives companies an easier way to connect any new or existing tools and systems in a single place, whether it is from Experian, an internal or third-party partner solution. This platform offers a ‘plug-and-play’ capability which allows companies to rapidly adapt to changing conditions and risks. The platform includes powerful workflow and strategy design capabilities

that allow fraud and compliance teams to create and adapt strategies based on evolving threats and business needs.”

DIFFERENTIATIONThere are currently four credit information bureaus in India. How can one differentiate one’s product offerings and the impact these products make?

Says Mohan Jayaraman: “The actual strength of credit information companies lies in data analytics. So, to that extent, the competency in creating products using data analytics is the differentiator. Our core strength is data analytics. Globally, we are known as a data and analytics company. As a credit information company we differ from others in three ways: One is that all our work as I said earlier is analytics driven and hence our products are very distinct and future proof. Secondly we have some 500 or so products globally, which are all value-add products. And the third is our geographical distribution. The third aspect is important to note because each country has its own specific requirements as far as credit information is concerned and we have products and services that are customized to take care of the developing market requirements while many of our competitors still have a developed market bias”

He says since data parity has happened in India (meaning all the credit information bureaus will have the same data to work on), what will add value to the products on offer will be the analytics part. “And we have a strong expertise in this space.”

RELEVANCE OF LEIIn these times of the economy becoming global and entrepreneurs operating in multiple countries, can there be a genuine credit score?

It’s possible now to predict with near accuracy a possible fraud at the level of application for credit. Mohan Jayaraman, MD, Experian Credit Bureau India, explains salient aspects of the company’s premium fraud detection technology - HUNTER:

Hunting fraudsters with a tool

Mohan Jayaraman believes Legal Entity Identifier, or LEI, will become credit scores that will have global validity


An entity may have a negative credit report in one country but this may not necessarily impact its score in another country where it may be seeking funds.

Mohan Jayaraman says this is a matter of concern at the moment. “The information may not be shared among countries because of various sovereign concerns. However, there is work going on in creating what is described as Legal Entity Identifier, or LEI.”

Some 70 public authorities from 40 or so countries have set up the Regulatory Oversight Committee to coordinate and oversee a worldwide framework of legal entity identification, the Global LEI System. LEI is a 20-character, alpha-numeric code, to uniquely identify legally distinct entities that engage in financial transactions. India is part of this set-up and Clearing Corporation of India is the Local Operating Unit for issuing LEIs in India. Once LEI becomes fully operational, there could possibly be credit scores that will have global validity.

While there is data parity and each of the four credit information bureaus in India has developed systems that can predict a possible default by a customer, banks continue to have high levels of NPA. What could be the reason?

“Admittedly, says Mohan Jayaraman, “a major portion of the NPAs of banks today is accounted for by default payments of corporate customers. While credit information bureaus can provide actionable information on retail customers, that is not the case with corporate customers. Their creditworthiness is determined not only by credit information bureaus but by credit rating agencies. Besides, banks have enforced stricter control on retail lending. The current level of NPAs should also be looked at from another angle. This is not today’s problem but has happened over a period of time during which banks have been adopting different strategies to handle the issue. Now that the RBI has come out with specific suggestions of making provisions, the legacy has come out. I believe this is a correctional phase and banks will come out of this.”

BUSINESS PRODUCTS Apart from bureau products, Experian has also been offering business services that promise to help enterprises manage customer life cycles. These products actually provide insights that help a corporate target new markets, improve response rates, maximize revenue and minimize risk. The tools comprise those for customer targeting and engagement as well as customer acquisition, credit risk management, fraud prevention, identity management, decision management and debt collection.

“As we have access to data from various sources,” elaborates Mohan Jayaraman, “we are in a position to analyze this integrated data and provide a 360-degree view of potential customers and their behaviour. A corporate can then easily take informed decisions to target them. This can include strategic issues such as product pricing, selection of customer segments as well as collection efforts. In short, a corporate can manage the entire application-to-customer life cycle. All the while, it can prevent application frauds as well.”

DATA REPOSITORYExperian India has recently been appointed by the Life Insurance Council to create a data repository and fraud monitoring framework for the life insurance industry in India. This repository will help insurance companies in reducing premium rates as insurers need not buffer for such losses, improving operational

efficiency and bottom-line of insurers and in keeping probable defaulters and fraudsters out of the system.

“This repository would certainly help to control fraud risk that may emerge due to changes in section 45 of the Insurance Laws (Amendment) Act under which a life insurance company cannot repudiate a death claim on the ground of mis-statement of facts after three years from when it was effected,” says Mohan Jayaraman, adding that Experian will use the Hunter algorithm to create patterns for the insurance industry and by mapping the available data, it will come out with a set of rules to prevent frauds.

“One aspect of the solution that is being developed is that there will be tools available for the insurers to retain customers. Insurance industry is one industry marked by persistency issues. The analytics based system can throw instances of possible attrition and help the company to take corrective action before that happens,” he says.

Mohan Jayaraman says rural India has a great potential for insurance companies. These companies have not been able to penetrate this market for various obvious reasons. “There has to be products specifically designed for this market. Secondly, the yardstick of fraud risk has to be different and enumerated. Thirdly processes need to be automated, including underwriting,” he concludes..

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Interaction

N. Mohan: While debit cards in circulation

in India has virtually doubled during the

last five years, transactions per card

per month is reported to have actually

declined. How would you analyze

this anomaly?

Mahadevan Balakrishnan: This is not true. The transaction per debit card at POS has increased from 0.11 transactions per card per month in April 2011 when we had 230 million cards to 0.15 transactions per card per month in December 2015 (representing about 33% increase based on RBI monthly statistics) despite massive increase in debit cards to 643+ million. So, it is an increasing trend, yet < 2 transactions per card per year based on December 2015 data is too low. India has a long way to go. Secondly, per capita GDP and availability of acceptance infrastructure are low in India. These factors determine the number of transactions.

In contrast, it has been found that credit

card transactions have shown significant

increase in the last five years - in terms

of number of transactions and the value

of transactions. Does this indicate any

specific trend?

My guess is that bulk of the credit cards are in few big cities that have a decent acceptance infrastructure. Also credit cards get used in preference to debit cards for a variety of reasons such as: a. official expenses (all corporate cards

fall into this category and so many other cards – but we do not have break up)

b. most e-com sites because of better fraud protection offered

c. credit facilityd. deferred payment optionse. limiting the exposure

While some of the fraud related protection is now available to debit cards

as well, the risk of losing the entire money in the account if debit card is exposed is real.

The Indian economy is still cash-bound.

Just 5% of the personal consumption

is accounted for by cards. In contrast,

as much as 30% to 50% of spending in

developed countries happen through

cards? Will India reach this stage at any

point of time?

The analysis of the payment statistics of Committee on Payments and Market Infrastructure (CPMI) (2014 data) indicates that higher the per capita GDP, higher is the number of per capita electronic payment transactions. That data also indicates that countries having higher levels of electronic transactions have indeed higher levels of acceptance infrastructure as well measured in terms of number of ATM and POS terminals per million inhabitants. Another analysis also reveals that high income countries have a better average per capita cashless transactions in comparison with medium income and low income countries as classified by WB based on GDP. India’s per capita GDP is not very high and therefore, it is not amusing that we have very little electronic transactions.

The availability of acceptance infrastructure measured in terms of number of ATMs and POS terminals per million inhabitants is an important factor. India’s number is much below

The Indian payments space needs improvements in order to help the country move away from a cash system to an electronic system. Mahadevan Balakrishnan, who is now with the World Bank Payment System Development Group, but has seen the evolution of the Indian payments infrastructure, underscores some of the possible options for improvements of the system in the first of the two-part interaction:

From cash to cashless – a long way for India

Mahadevan Balakrishnan maintains that government of India is a large user of cash and it should take steps to move transactions to electronic


that of even other BRICS nations in this aspect. For POS terminals for example, among BRICS countries, India has 889/million inhabitants and is the lowest among BRICS whereas Brazil has 24,589, Russia 8,889, China 11,650 and South Africa 6,854. This also contributes to less electronic transactions.

Merchants have a role to play too in increasing the acceptance. If the Merchant Discount Rate is not balanced, they will have no incentive to promote card payments. That could also be a reason for low adoption of electronic payments. Just look at the ATM transactions in India. They are rapidly growing – and I think one of the reason for that is there are no charges (mostly) for customers.

Will India reach that stage? It’s difficult to guess. But, if India

can take a few steps as mentioned below, maybe we will have a chance:a. Create an acceptance infrastructure -

in terms of ATMs and POS - that are comparable with these nations not in terms of just the actual numbers, but the numbers per million inhabitants.

b. Price the POS transaction in such a way that there is incentive for merchants to promote this. Without merchant support, it will never happen.

c. Price the POS transactions cheaper than ATM transactions. Today, a

`10,000 ATM transaction costs just `20 for customer if it gets charged. However, it costs the merchants `100 if the customer swipes the card at his terminals. No wonder we see merchants in India suggesting that customers withdraw the money and pay rather than use the card. So, unless we take steps to resolve this anomaly, I don’t see the debit card transactions at POS increasing dramatically.

d. If I may add, a third of India’s cash withdrawals are interbank transactions and the issuing banks pay the acquiring banks more than Rs38 billion. However, their revenue through interchange on POS transactions even assuming they are 0.5% of the transaction value is not much and is about 1/5th of ATM interchange that issuing banks pay. If the issuing banks give this up, and this is passed on to merchants in the form of reduced interchange, there would be more debit card usage at POS and in fact banks would not be losers. They would have less ATM transactions and that saving more than compensates the loss of interchange revenue on POS. Such an approach will ensure that there is

no revenue loss for acquiring banks and card schemes and they can continue to promote the acceptance infrastructure. Once desired levels of per capita debit card POS transactions are reached, this could be relooked.

e. Funding for creating an acceptance can be done in several ways. One simplest and smartest way to do this is to impose a `1 cess on ATM and branch cash withdrawals in cities. Easily `1000 crore can be collected every year and in 5 years, we could build widely available acceptance infrastructure using latest approaches which are far cheaper than earlier. This cess approach ensures that there some dis-incentive for cash withdrawal. I have suggested this as a response to the recent paper by RBI on card acceptance seeking comments. Hope this will be looked at seriously. We have already seen that the current government is open to introduce cess – it has done for Swatch Bharat and Krishi Kalyan recently.

Cash continues to rule in India. What

according to you are the measures

needed to cut down cash transactions?

In fact, the government of India is a large user of cash. It should take steps

A POS counter


Interaction

to move transactions to electronic. DBT is a good beginning. While that is on the payment side, the government can do better. All the government agencies should accept card payments and they should pay the MDR like all merchants do. That is not the case now. If you buy tickets in IRCTC, there is a levy of surcharge now. This is one way that the government can increase its share of electronic payments.

This, along with measures mentioned in point 3 above, could perhaps take India to the next level. But note that other countries are also taking steps to move up the share of electronic transactions. So, while the number of per capita transactions would certainly increase with these measures, whether that would help to catch up with BRICS, I am not sure at this point in time.

One of the reasons for the increase in

the number of debit cards in use is the

government’s programs for financial

inclusion. Does this increase translate

into transactions?

Yes, eventually. Data showed that there is increase in per capita debit card at POS despite the large number of cards being added. Additional steps like what was mentioned earlier would accelerate this process.

Do you think charges levied on ATM

transactions in India is a demotivating

factor in the higher levels of use of

ATMs? Can there be a differentiated

charging? Alternatively, would you

propose a percentage of the transaction

value as the charge with a minimum and

maximum cap?

We need to accept the fact that the ATM transactions ballooned in India after RBI put a cap on the maximum charges and allowed 10 free transactions a month. That hugely helped. Secondly, do ATM charges need a relook? I think it needs a relook and we need differentiated charging for smaller value transactions. According to a study, a good number of transactions in ATMs are for values <

`1000 and average for them is around `500 for those transactions. So the customer fee of `20 translate to 4% for small value transactions. However, for values > `5000, the average transaction value is `8000 and at `20, the charge is only 0.25%. So, the transactions, mostly used by poor cost 16 times more. This may need reconsideration. Also note that for low value transactions, the banks are also out of funds only for such low values. Therefore, if we could have a percentage like 0.25 for all ATM transactions or a differentiated interchange for low value transactions, I think it would hugely help.

How would you react to the proposal to

facilitate cash withdrawals at merchant

locations?

I would not personally suggest this because I want to promote electronic payments. There are other issues also to be sorted out on this. Particularly issues relating to counterfeit currencies and the like.

Mobile wallet is today becoming a highly

popular channel in urban India. Do you

see banks leveraging on wallet operators

and their penetration?

Wallets, while offering convenience, may be expensive for customers as customers lose the 4% to 6% interest earning options on savings account with

linked cards. So if a payment bank can offer a savings account with interest, debit card and link the card to mobile channel, wouldn’t that be better? Since deposits up to `100,000 at banks are protected by deposit insurance, customers don’t lose anything at all.

With the huge success of PMJDY, I think India has addressed the challenges of providing bank accounts and cards to those who need them. In the absence of PMJDY, prepaid would have been the approach to provide access to financial services.

Mobile wallet may still be popular because one could limit the amount in the wallet and use it as a risk mitigation measure and a convenience measure. So, if that is the way they are being positioned, it may help increase the usage across India.

Before taking up the current assignment Mahadevan Balakrishnan was involved in creating many of the retail payment infrastructure in India in the form of expanded NFS, CTS, ACH, IMPS, ABP, AEPS and RuPay as the COO of NPCI in its initial formative years. The views expressed here are his personal views and do not represent the views of the organizations he is currently working or worked for.

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Queue at an SBI ATM


Cover Story

N. Mohan: What are the major factors

that distinguish Vijaya Bank from other

banks? What are the strength areas of

the bank that helped it to reach its level

of efficiency?

Kishore Kumar Sansi: Vijaya Bank has some inherent strengths, which make it different and more vibrant from other public sector banks. The branch network of the bank is well spread geographically and is pan-India. While in the five

southern states, the bank has about 45% of its branches, the remaining 55% branches are spread across Northern, North-Eastern, Western and Central parts of the country, covering all 29 states and union territories. We have opened 246 new branches during the last fiscal, probably the largest among peer group. The asset base of the bank is well spread with priority sector and retail credit contributing 41% and 26% of total credit

respectively, which is again among the highest in the banking industry. The bank is well capitalized with a total CRAR of 12.58% and the Tier-I capital exceeding 9.45% as on 31 March 2016. We have one of the strongest IT platforms, both for customer-centric applications and for the work-flow based back end operations.

We have one of the youngest work forces among the PSBs, with the average age of employees being about 38 years.

Vijaya Bank is readying for a technological transition. The bank’s MD and CEO Kishore Kumar Sansi believes this will place the bank in an enviable position, especially catering to the needs of the GenNext customers:

Cover Story

Dual approach for technology implementation

Cover Story


The young, skilled and highly motivated work force is our main strength. With the average age of employee on the bank’s side, the adaptation of technology is fast. Most of the decisions taken by executives at various levels are dash-board based, which is made available on real-time data. The highly committed team of top level executives, supported with meticulous planning and equally good execution, makes the bank perform efficiently under most of the parameters. The bank is fundamentally strong and is poised for a steady and continuous growth on all parameters.

Has the bank at any point felt that

its human talent had lagged behind?

What are the measures that the bank is

initiating in order to make its personnel

perform in a competitive environment? We have a good balance of experienced

and young work force. More importantly, there is a close bonding between the young and the experienced and the level of interactions between the two is extremely high. We have a highly committed top management comprising 14 general managers, supported by adequate number of second line executives in all functional areas. The continuous skill upgradation of executives and the employees at all levels ensures that each employee excels in his/her area of operations.

We have put in place a mechanism of competency mapping, making sure that the right employee is put on the right job. Further, the continuous upgradation of skills through on-work and class room training, both at premier institutions of the country and overseas, ensures that motivated and trained manpower is available in each area of operation. Special focus is given to nurture talent in specialized areas of operations such as Risk, Treasury, Technology, etc. For each specialized area, a pool of trained employees has been identified with a separate career and growth path. We are also making extensive use of technology to upspeed the knowledge and upgrade the level of employee skills through e-portals,

apps, e-learning, etc which results in optimum utilization of our workforce. Hence, the bank has not really felt that its human talent has lagged behind in any area.

What are the bank’s focus areas? What

customer segments will fuel most of

the growth?

Keeping in view the prevailing overall macro and micro economic scenario within the country, we expect that during the current financial year the demand from the corporate sector would remain muted. Major sectors such as iron and steel, textiles, power, etc have yet to pick up. Accordingly, we will put in focused efforts to further increase the share of business from retail, priority and mid-corporate segments. Having seen more than 30% growth, both in housing and vehicle finance during the last fiscal, we are confident to further improve the performance in the retail sector during the coming years. Concrete initiatives are

also being taken to substantially improve savings deposits which has seen a growth of more than 18% during the last financial year.

We plan to extensively use data analytics for cross-selling of the products to the existing customers, besides capturing new customers into our fold. With the extensive use of technology, especially mobile banking, which has seen manifold increase during the last financial year, we plan to put in more focus on the high income group customer segment in the age band of 25-40 years.

Can you speak in detail about the

technology transformation that the bank

is undertaking and which is inevitable for

any bank in India to be relevant in the

years to come?

Vijaya Bank has adopted a dual approach for technology transformation. While we appreciate the need to deliver more and more IT based products and services to the customers on an ongoing basis, we feel it is equally important that technology should be adopted at the back office and the administrative offices of the bank so as to derive the best benefits from IT at all levels.

We have exponentially expanded the use of mobile banking among customers which has grown from a modest 50,000 active users to more than 5 lakh users during the last financial year. With this steep increase, we have attained the No.1 position in the use of NPCI’s NUUP based mobile banking in the industry. The transactions through mobile have increased to an all-time high of 90,000 per day, amounting to `25 crore. Similarly, the net banking penetration has also increased significantly during the last financial year, both for personal and corporate users. We would continue to expand usage of mobile and net banking across the customers while ensuring availability of more app based products for the customers on this platform on an ongoing basis.

The bank also plans to expand use of the work-flow based applications at

Kishore Kumar Sansi emphasizes that the bank will move ahead with the ‘Mobile First’ strategy, to help a large population to do banking through handsets


Cover Story

the back-end to improve the decision making process. The extensive data of more than 15 million customers for the past 10 years would be made use of for providing differentiated sets of services, besides cross-selling of products to the customers. We also have plans to make use of Intelligent Fraud Management Systems for minimizing the risks arising out of technology and banking operations.

Having launched the first Digital Village recently in Mandya district in Karnataka, we are all set to replicate this model of digitization of FI villages to other areas thereby supporting initiatives of the government of India on financial inclusion and Digital India. Vijaya Bank was among the first to computerize the top 30 processes of the bank, as per the deliberations held at Gyan Sangam-I, resulting in marked improvement in customer services. We are also taking initiatives to empower customers to do their banking transactions on their own as per their convenience through various platforms such as e-lobbies, ATMs, self-service kiosks, Tab Banking, etc, for increased customer delight.

While ensuring extensive use of technology at all levels, we are also seized of the emerging cyber threats for which we have set up a Cyber Radar, which

throws alerts of any wrongful access to our sensitive IT systems. Having built a comprehensive cyber threat matrix, we are providing a secured, efficient and state-of-the-art services to the customers by using contemporary IT platforms.

What is the current level of technology

induction in the bank and what it would

be say in five years from now? Will this

usher in a paperless bank ultimately?

Adoption of technology for us is one of the prime focus areas. We believe in continuous upgradation of technology, which ensures not only availability of the best products to the customers at the shortest possible timeframes, but also ensures that the bank is taking advantage of latest technological platforms. Innovation is a key driver for the deployment of technology. While ensuring adequate security, we are planning to move more towards app based IT platforms, which facilitate quicker launch of products to meet the needs of different segments of customers.

We are making extensive use of digitization of documents for their security and quicker retrieval. We are moving towards straight-through processes by integration of different payment systems and electronic delivery

channels. We expect more than 80% transactions shall be conducted outside the brick and mortar structure of the bank in the times to come. Data analytics would be a key driver for cross selling, product evaluation, increased profit and for intelligent decision making. All these innovations will lead to the less-paper operations within the organization.

What are the core areas that you focus

in this technology transformation -

digital as a whole, mobility, self-service,

customer delight?

Digitization per se encompasses areas such as mobility, self-service and computerization of umpteen number of front and back office processes to increase customer delight. We expect to move ahead with the ‘Mobile First’ strategy as we feel that a large population of the country would be empowered with the smart phone sooner than later, which would enable them to perform banking operations through handsets.

With the recent launch of Unified Payment Interface by NPCI and Vijaya Bank being one of the forerunners in its adoption, mobile banking is going to transform the face of banking. With this, we would offer not only latest mobile based applications to the existing customers, but customers of other banks will also be prompted to adopt our mobile based applications and services. Besides, with dashboard based decision making already available with us, more and more artificial intelligence based technologies would be adopted, both for intelligent data analytics, MIS and e-surveillance of branches and ATMs.

Do you think it is relevant to initiate

technology projects keeping in mind the

fact that ultimately it is the mobile that

is going to be the preferred medium for

transactions?

Besides providing efficient customer service, we are making active use of technology for various back office and administrative applications. For this, continuous innovation and initiation of

Centralized surveillance facility for ATMs of the bank


new IT projects is inevitable. It would be prudent for a bank like ours to innovate and adopt latest technological tools and IT platform for which mobile could be one of the prominent delivery channels. Hence, we at Vijaya Bank, firmly believe that adoption of newer and newer IT platforms would be necessary to remain frontrunners in the industry.

Do you think being a public sector bank

has hampered your efforts in digitization?

During the last one decade, Vijaya Bank has been in the forefront as far as adoption of technology is concerned. The apt directions and continuous support from the board of the bank ensures that the bank always remains updated on the various technological initiatives, as it improves the customer base, besides optimizing the operational costs. With a clear focus on technological upgradation, budget has never been a constraint and IT is being expanded to all the required areas on an ongoing basis.

Can you speak about the products that

the bank intends to come out with in

consonance with technology induction?

We will continue to invest in remittance and payment systems. We feel that there is immense market to replace cash through remittance based applications such as mobile wallet, digital wallet, etc. The ease of use and convenience to the customers would be the prime drivers for launching newer remittance and payment based solutions for the customers. This would also result in improved float and increased non-interest income. Big data is going to be of immense interest to us as this would provide meaningful information about customers, besides prompting us to come out with more and more new products and services for each differentiated set of customers.

We also plan to deploy more intelligent ATMs and kiosks, so that besides doing the mundane cash dispensation and acceptance activities, these should provide more valued based services to

the customers. The emphasis would also be on the web-based applications so that the customer can do banking transactions as per his convenience, in a secured environment. We have plans to venture into social banking infrastructure thereby targeting young tech-savvy prospective customers and bring them into the fold of Vijaya Bank.

What are your plans for mobile money?

Do you intend to launch a mobile wallet?

As I mentioned earlier, we are firming up on the ‘Mobile First’ strategy as we expect that mobile would be the most acceptable platform for conducting secured transactions in times to come. Mobile banking per se includes mobile to mobile transfers through the mobile wallet, which would go a long way in minimizing the cash transactions. The mobile wallet is also available as an accepted fund transfer facility for our customers and more and more variants would be launched in the years to come, to meet the requirements of the customers.

What has been the volume in terms

of number and funds of your internet

banking transactions? Do you think

with the mobile revolution happening,

internet banking will lose its current

status as the most preferred channel

among the GenNext customers?

During Jan–Mar 2016 quarter, there were about nine lakh financial transactions amounting to about `6500 crore through net banking. Our upgraded net banking is mobile responsive and can be seamlessly accessed across any hand held device. We have seen a surge in growth in our net banking customers and the increase in mobile customers has been phenomenal. Having made our net banking responsive has also increased its usage through mobile devices. Internet banking having more stringent security features and having a host of checks and controls is emerging as the preferred mode for corporates and those making large payments, while mobile app would be preferred by customers for small volume transactions. Both the modes can co-exist and can be interchangeably used by our customers.

Can you speak about the products and

services that you offer to your corporate

clients making use of technology? Is the

bank planning to have a mobile banking

facility for the corporate?

We foresee convergence of mobile and internet banking as most of the internet banking operations will be transacted through handsets. While most corporate businesses would be internet based,

Inauguration of the first digital village by a PSU bank at Chandagalu village in Karnataka


Cover Story

most private business transactions, in the personal banking space, will be through mobiles. We, therefore, see more convergence towards mobile banking.

What are the new security systems that

you intend to implement as you proceed

with your digital initiatives?

We are one of the first public sector banks to have a dedicated Security Operations Center (SOC) manned by top notch IT security professionals. We have implemented Defence Depth Architecture with secure infrastructure across various levels and Incident Management Solution (SIEM) with vulnerability scanners. We have recently won the IDRBT Best Bank Award for Cyber Security and Risk Management among mid-sized banks and DCSI excellence award for security.

In the past few months we implemented various technology solutions to secure our infrastructure from internal and external threats. We have evaluated the threats in terms of attacks emanating from external factors such as hackers and fraudsters with malicious intent and also risk emanating from internal employees / outsourced personnel having access to critical devices/ applications/ data.

During last financial year, we have invested significantly in upgrading the security infrastructure to counter various

cyber threats and also implemented solutions to improve internal controls for access. We will soon have a fraud risk management system to provide greater security to our customers.

What are the plans for self-service banking?

To provide banking experience with all essential banking facilities under one roof beyond the normal banking hours, a number of e-lobbies have been opened which are equipped with:• ATMs• Internet banking kiosk• Passbook printing kiosk• Cash deposit kiosk• Coin vending machine• Cheque deposit kiosk etc

We also offer online banking, tab banking and e-KYC for quick account opening.

Is the bank considering virtualization

technologies? If yes, which are the

priority areas?

In order to optimize the power consumption and space utilization, we feel that adoption of virtualization is inevitable. As a first step, we have already initiated action in virtualization of data center, thereby resulting in huge savings in power and space. Similar concept is also being extended to the branches where we are going for virtual desktop interface,

thereby eliminating the need for desktops. We are confident this initiative will go a long way to support green initiatives and reducing carbon footprints besides optimizing space requirements.

Do you have plans to upgrade your CBS?

If so what would be the salient features

of the system that you propose to adopt?

Do you have data warehousing facilities?

Adoption of newer technology is an ongoing activity for us. We feel that we should take proactive steps for upgrading to the latest platforms instead of the same being driven by fear of obsolescence. Accordingly, we have prepared a roadmap for upgradation of various applications, including CBS, 3rd party products, trade finance and other related areas.

We possess 10 years of historical data of more than 15 million customers and the latest analytical tools are being used to convert this data into intelligent information. This intelligent information is helping us to come out with newer products and services besides differentiation of the customers and their requirements for customized products based on the profile. This data warehousing would be made more comprehensive so as to derive more diversified information in times to come.

Finally, can you narrate the technology

vision of the bank in the context of

offering more and more digital services?

Technology is going to greatly dominate the landscape of banking in times to come. Right from customer acquisition to data analytics, AI based dashboards and up to cyber security and e-surveillance, IT is going to play a dominant role. Accordingly, the bank has been positioned to adopt and innovate to derive best advantages from contemporary technology. We feel that sooner than later there is going to be larger convergence of banking and technology so that we become a fintech organization to offer best of banking services through contemporary IT tools.

[email protected]

Eugene Kartak, regional director, RBI, inaugurating an e-lobby of the Vijaya Bank


Interaction

N. Mohan: How do you rate Indian banks

in terms of their reach, business acumen

and risk management prowess?

Sunny Chhabria: In the 20 years that Bloomberg has operated in India, we have witnessed the exciting evolution and growth of India’s financial and banking sector. In the 1990s, India was one of the first countries in the Asia Pacific region to open its market to international banks and financial institutions, which led us to establish an office in Mumbai to serve our clients and provide them with the technology and financial data they needed. Over the years, we have seen how Indian banks have expanded their regional and global reach, upgraded their operations, and more recently, been increasingly seeking to understand global best practices in managing risks. Private banks tend to have a greater risk appetite and interest in risk management. In a recent Bloomberg FX16 Mumbai poll we conducted in May 2016, the two greatest FX challenges facing Indian banks and corporations were ‘managing currency exposures’ (34%) and ‘hedging against market volatility’ (29%). This goes to show how interconnected Indian banks and the financial sector are to the movements of global financial markets.

What are the reforms that the sector

needs, especially to stem the malady of

non-performing assets?

According to Bloomberg Intelligence analyst Diksha Gera, who covers Indian banks, we have found that Indian banks have been more forthcoming in recognizing and providing for bad loans following recent regulatory changes and a detailed asset-quality review by the regulator. This has resulted in a gradual pickup in impaired loans reported by private banks, and a surge in public lenders’ bad loans.

Banks including Axis Bank and ICICI Bank have made detailed disclosures and recognized stressed assets in their balance sheets as part of the 4Q earnings. Continued reform of the banking sector and better disclosure in our view may raise investor confidence in Indian banks.

Do you think Indian banks

are adequately investing in technology so

that they can become banks of the future?

What are your suggestions?

We think more can be done. The right technology investments we believe will be the key differentiator for Indian banks to succeed in today’s increasingly interconnec ted g lobal f inancia l marketplace, where volatility and liquidity are real challenges. As Indian banks and financial institutions continue to expand and upgrade their business operations, we are providing an increasing number of banks with robust and integrated technology platforms and solutions around foreign exchange, fixed income, derivatives, equities, economies and enterprise risk.

YES Bank is a leading example of a bank in India adopting innovative technology to enhance its presence and business growth. It is India’s fifth largest private sector bank and known for being progressive in adopting international best practices, in its pursuit to build the finest quality bank of the world in India by 2020.

Do you think there are enough competent

banking professionals in the country? It

is feared that there is going to be a big

vacuum in public sector banks.

India has a vibrant hotbed of well-educated and experienced banking

professionals, both in public and private sectors. There are also many top Indian financial p r o f e s s i o n a l s r u n n i n g regional banks and in senior roles in Asia today. What we have found in recent years is a growing interest from Indian banking professionals in global best practices as it pertains to risk management, hedging, data management

and workflow - and this goes to show the standards Indian banking professionals are aspiring towards. At Bloomberg, we regularly host educational seminars and workshops for our banking clients, who are increasingly becoming more sophisticated in how they use the Bloomberg Professional service in helping them make informed investment decisions.

Banking operations largely depend on

timely delivery of actionable information,

especially in the treasury operations. How

is Bloomberg helping Indian banks in this

regard?

Indian banks are increasingly seeking advanced technology platforms and solutions to enhance their treasury operations, as managing currency exposures and hedging against market volatility become key challenges. Bloomberg is helping banks transform their treasury with an easy-to-use workflow and automated platform that integrates real-time monitoring of news, idea generation, risk management, trade execution, lifecycle management, hedging and portfolio management - which offers treasury operations with immediate access to financial exposures and associated hedging, keeping treasury informed of risks and ready to take action.

[email protected]

Sunny Chhabria, head of South Asia Sales, Bloomberg, speaks about the strengths of the banking system in India:

Sustainability factor of Indian banks

Sunny Chhabria


Digitization

Mohammed Irshad: Can you list the efforts

being made to integrate the channels in

the digitization effort of YES Bank?

Ritesh Pai: To bring about a paradigm shift in Indian direct banking experience, we at YES Bank has embarked on a strategy of ‘innovative use of technology’, with an aim to rapidly achieve intense pan-India coverage by introducing high quality customer touch points. This tactical strategy emanates from our strategic objective, strategic goals and the business strategy. We have moved technology function to a ‘service-oriented architecture’, where solutions are procured as a service from multiple vendors. The approach is to build strategic partnerships with the best known IT majors globally, to develop innovative system features and create sector-specific banking solutions. The strategic outsourcing approach pays off in many ways. For one, it allows to shift management focus away from routine tasks to business transformation projects. It helps to make fewer investments in diverse technology infrastructure as much of that responsibility gets shifted to the vendors. It can also operate with smaller IT teams, give flexibility and agility. Furthermore, all the channels are seamlessly integrated with transactions on one channel available for view or closure on other channels in most cases. For example, bills can be registered using retail net banking and paid using mobile banking, FD can be created using ATM and be permeated on online banking.

We are known for many industry-

first initiatives such as first Mobile Money Service in partnership with Nokia-Obopay, voice-based IVR in partnership with Nuance, first bank to implement dynamic second factor (OTP) with Portwise, personal finance management tool with Yodlee, online account opening portal with ‘choose your account number’ option, customer gratification through discount coupons on ATM/interne t t ransac t ions , organized/assisted remittance service

through BC outlets, ESB and mobility platforms in collaboration with IBM and CRM implementation in partnership with Microsoft.

To what extent paper-based transactions

have come down with digitization efforts?

Payments entail a broad spectrum of requirements, with constantly varying payment formats and systems. While paper-based payments currently constitute a majority of payment modes in the country, electronic payments are fast gaining importance. At YES Bank not only retail payments but bulk disbursement solution with dedicated systems are in a position to execute bulk payments requirement like dividend distribution in a smooth and seamless manner.

We manage these constantly evolving and varied requirements, while seeking to effect payments in a timely and accurate manner and ensuring that your internal guidelines and controls are in place. For example, we offer end to end collection services for IPOs and NFOs including banking of applications, processing of returns and delivery of MIS as per the registrar’s requirement. We understand the time criticality of such collections and have a centralized team which monitors collections across the country for our clients. Similarly, we offer a one stop shop approach for your dividend disbursement requirements. These are covered through warrants (drawn on YES Bank and partner bank locations), drafts and ECS. In addition, we also

YES Bank has several digital initiatives and some of these are really pioneering ones. Ritesh Pai, senior president and country head, Digital Banking of the bank, outlines some of these efforts:

YES Bank emphasizes on DIGICAL strategy

Ritesh Pai explains the salient aspects of SIM Sleeve, which enables carrying out banking and payments on feature phones


provide periodic reconciliation services and regular servicing of the dividend account as per regulatory requirements. Again, salary disbursements can be facilitated to a firm’s employees holding accounts with YES Bank and any other bank. With this, we have created a digital infrastructure that not only can allow free flow of information digitally along with authorization but also facilitate payments followed by customized reports to ease out reconciliation efforts.

Do you expect mobile to be predominant

banking channel in say five years?

Our mobile banking strategy is tightly integrated with other channels like net banking, contact center and ATMs. Following innovations have been initiated to ensure seamless cross-channel experience for our customers: • Unified and intuitive UI/UX• Personalized themes, geo location/

segment specific offers, opinion polls and surveys within logged in session, personalized x-sell, product recommendations and lead generation

• Third party system integrations enabled through single sign-on

• Augmented reality based branch and ATM locators etc

• Payments to Facebook, Twitter, phone contacts etc

• Use of native feature of mobile devices such as camera, mic, map, GPS, calendar, storage, accelerometer etc

• Customer service management on social media through CRM such as notifications

• Centralized MIS and analytical reporting for better product lifecycle managementThe key here is to ensure that

customers have the full range of payment and collection options available for self-service and be rewarded for frequent use to enhance loyalty and retention. Considering the growth in digital savvy mass, there is scope to build additional level of functionalities as a way of saving time for customers and engage with them real-time.

Many banking technologists are focused

on APIs to deliver services to customers.

Is it relevant in retail banking?

We have received a great response for the API banking to facilitate corporate payments and salary disbursements. When coming to retail offering, API banking helps a long way for offering instant credit on points of purchase. We are redesigning our risk and service delivery aspects to take a plunge into this area. We are also integrating our APIs into various enterprise accounting and billing applications so that all users of the licensed versions can have access to our payment options by default.

Can you elaborate on how banking apps

or social chat platforms can become

medium for small payments?

At chat platforms, direct messages and bots have replaced our browser and app based interactions such as email, SMS and MMS. Soon, these systems will also replace the way we access bank services. Their ability to provide text, image etc based conversation and asynchronous behaviour will certainly help the bank and the customers to interact with each other on real-time basis. It would also facilitate several banking transactions, including service requests such as cheque book, account statement and payments like bill payments and small value payments to peers/vendors etc. We have recently introduced YES TAG, which operates on various chat platforms such as WeChat,

Twitter, Facebook Messenger etc and allow various interactions with the bank.

What is the future of mobile wallets?

If we look at the value proposition of mobile wallets, it is offering user convenience, security and freebies (cash backs and deals). While freebies may come down over the next few months, the user convenience and security aspects will still remain till an alternative payment mode like UPI gets popularized and withstand the test of time. Any mobile wallet willing to stay for long will have to attempt to become an integral part of the customer life which can only be done by partnering with literally everyone in the ecosystem or offering credit services in partnership with a financial institution and this is definitely going to be a daunting task.

RBI is promoting tie-ups between banks

and e-commerce entities. Are banks

responsive to this suggestion?

We follow the alliances, relationships and technologies – ART - approach to increase our reach and range. So, we obviously look at this as an opportunity and RBI promotion further encourages us to move in that direction. Currently, we are working with various partners to complement their services and offer banking and payment services to customers and sellers on e-commerce platforms. Currently, we are offering APIs to process refunds, closed loop wallets and virtual cards and very soon we will be working with many of them on UPI based


Digitization

payments. Further, we are also working on offering credit to their sellers and in future we will find more opportunities to partner and offer banking and payment services.

Do you think there is corresponding

innovation in security systems to handle

newer digitized products?

Digital payments and technology based banking obviously is an emerging area and hence it is important that we understand the potential threats and incorporate sufficient checks and controls. Some of the scenarios which were remotely possible during the web regime are easy to exploit with mobile based solutions, hence even the application security teams are gearing up to understand the threats associated with latest technologies like mobility platforms, accessing native handset features, SDK integrations, custom notifications, encryptions to be

followed in the case of NFC and sound based payments etc. Obviously when the teams are tackling issues pertaining to these emerging areas, they are forced to innovate on daily basis so that the process of understanding the risks, security and keep revised the coding and testing frameworks / policies.

Further, as a thumb rule, any payment service involving new technology tools are launched post conducting an intensive pilot with fewer users and limited exposure where we could monitor the robustness and understand the weak links. Post this all necessary operational controls are incorporated and security nets are added. Only then the solutions are offered to masses

What is YES Tag? When will it be launched?

YES Tag is first of its kind smart social banking application that allows you do banking transactions seamlessly on Twitter, Facebook Messenger, WeChat, Telegram and Skype. Now, customers can check their balance, get mini statements, FD details, cheque status and much more through messaging apps. Customers can also send money to registered beneficiaries from either of these messaging apps.

YES Bank is said to be working on a

mobile app that works without data

connection and on feature phones. Can

you elaborate on this?

While there are about 200 million smartphones in India, there is huge population in the country - about 700 million - which uses feature phones. Payments through SIM Sleeve is an attempt to provide interactive interface for carrying out banking and payments on these feature phones. This entirely works on encrypted SMS and hence there is no need for the users to subscribe for data as well. The innovative SIM Sleeve wafer allows the phones to get access to a mobile banking app and perform banking transactions in a seamless, secure manner.

Your tie-up with T-Hub is expected to

help startup fintech companies. Will

there be a focus on digitization?

As part of our engagements with T Hub, we are working with various startups for payment digitization using latest technologies like NFC to facilitate payments, collections, merchant solutions and prepaid based solutions. By the way, as a first step we have already digitized the payments and collections between the startups and incubators. Further, we are also keen to partner with players who can help us with service digitization using robotics, chatbots backed by analytics. However, these are early days and hence we are yet to find players with such technology offerings.

Digitization, especially in retail banking,

can be a major facilitator for targeting

unbanked or under banked segments

of the society. Is YES Bank considering

this aspect?

We understand the potential of taking technology to the under banked segments. YES Bank DIGICAL (Digital+Physical) strategy is primarily aimed at taking technology in the form of assisted services and digitize the payments of even under banked segment. Our YES Money has been a successful service offering for migrants across the country. We have learnt that such an offering not only helps us to service a huge volume of transactions but also make some money out of it.

[email protected]

MobileFirst Platform to create apps

YES Bank has chosen IBM's MobileFirst Platform to offer secure

apps to enable seamless migration from high-cost touchpoints like transactions at branches to a personalized digital banking service. This has been part of the bank's DIGICAL strategy. One of its aims is to increase the number of its mobile banking users to five million in five years.

IBM MobileFirst Platform provides technology support to secure, personalize and integrate data from multiple sources for a better user experience. The bank has now been able to reduce time-to-market for its apps by 60%, which is especially important as it plans to scale the number of banking apps being offered across its retail and commercial banking segments.

The bank will go beyond the mobile banking domain to retail and HNI customers. The platform will also help the bank in launching a digital wallet besides apps to support SMEs and businesses with a focus on user experience and strong security features.


Research Report

Indian banks have scored high in areas such

as safety, omni channel options and digital

payments, but low in terms of the banks

anticipating their life stage needs, fairness in

the system and recognizing a customer for his

long standing business.

In a global online survey, commissioned

by FIS, a global leader in financial technology,

Indian banks ranked 9th against 10 countries

surveyed. The response was collected from

more than 10,000 banked consumers in

countries including India, Australia, Brazil,

Canada, Germany, Philippines, Poland,

Switzerland, United Kingdom and United

States. The company conducted about 1000

surveys in each country.

Financial institutions in India gained 6

points on last year’s PACE Index score, achieving

a score of 74 (last year 68), but still fell below

the global average of 79 (last year 74). “What

this year’s PACE Index shows is that financial

institutions in India must stay a step ahead of

consumer expectations - earning their spot

as the first financial institution in customers’

minds,” said Ramaswamy Venkatachalam,

Managing Director, India and South Asia at FIS.

“That means transitioning their customers from

banking to living by making products easier

to use, offering innovative technology and

services, and providing guidance that helps

customers achieve their financial goals. The

PACE findings present a clear picture on where

India’s banks need to focus to remain first in the

minds of their customers,” he added.

KEY FINDINGSAs much as 90% of the respondents in India

foresee a life event in the next 36 months that

will significantly impact their finances. And

54% of them will turn to their primary bank

for financing this event, but 29% will turn to

another financial institution.

Why? Consumers were frustrated with

slow loan process and the search for a

sufficiently knowledgeable person to answer

their questions. They face big obstacles for

information on better loan deals. They also

encounter substantial pain in sourcing and

quickly confirming a loan to take advantage

of an opportunity. Almost 66% of the banked

customers in India neither received financial

advice nor have access to a financial advisor.

Also, there is little evidence that banks reward

their customers for their long standing business.

YOUNGER GENERATIONThe millennials are more concerned about being

digitally connected to the bank rather than reliability

and transparency. They are four times more likely to

use a personal financial management app from their

primary financial institution as from another source.

App usage in India is higher than the global average.

Two thirds of the millennial app users use them

diligently for greater financial control, using features

such as spending tracker, bill payment system,

savings maximization, budget planning and low

funds alert.

Nearly 28% of the millennials are receptive

to online wealth management tools and another

22% are open to online financial coaching. The

younger generation made nearly twice as many

mobile transactions

PACE ANALYSISTo help financial institutions make sense of the

consumers’ attributes, these are categorised

into 3 groups: RUN, CONNECT and GROW.

RUN continues as the foundation of a

successful relationship, with safety as the

most important attribute, followed by security

and fairness. Consumers rated the remaining

three RUN attributes – simplicity, reliability and

transparency – as less important than other

attributes that rose in importance this year,

reflecting the young Indian population’s demands

for mobile access and banking relationships that

actively support pursuit of their goals.

In 2016, consumers want to be better

connected to their money – connected, omni

channel, digital payments, and recognition –

connect customers to their accounts, connect

their accounts across the institution, connect

their accounts to their relationship with the

institution and connect them quickly and with

the latest technology.

The next set of attributes deals with growing

customer wealth and achieving their financial

goals – and ultimately growing the relationship

between the customer and the institution.

Consumers ranked aspirations, control, advice,

in-person service and anticipates ranked last

place in terms of importance.

A complete copy of the PACE report for

India, as well as the global and other country-

specific reports, can be downloaded from

http://closethegaps.fisglobal.com and http://

closethegaps.fisglobal.com/country-insights/

- V. Babu, BFSI Consultant

Banks’ Scorecard: Excellent in safety, low on customer recognition

RunOperate the bank reliably, fairly

and efficiently

ConnectConnect consumers with

their finances

GrowInvesting in capability that enables consumers to grow

Fairness Omni-channel Advice

Safety Digital Payments Aspirations

Simplicity Leading edge products Customised

Transparency Connected Control

Security Immediate In-person service

Reliability Recognition Anticipates

Banking in the Gulf


Once upon a time there was a boy called Finto, who was very talented with artistic capabilities and possessed a

benevolent mind. His poor parents ran a tea shop in the town. Finto spent most of his time scribbling and painting on whatever surfaces he found.

One day he came across a big colorful balloon and he started painting on it, the elegance of which soon attracted public attention. He decided to inflate the balloon and fly it from the roof of his parents’ tea shop to make the art more conspicuous, thus attracting more customers to the shop. As the balloon started expanding, so did the charm of the art which drew in public accolades. The tea shop soon became crowded with people who came to witness the magnificence of the art.

Finto’s caring mother was watching all his hard work in making the balloon more beautiful in order to attract customers. But she also noticed that while the balloon was gorgeous and attractive, her son was getting tired as he had to keep blowing air into the balloon to keep it afloat as tiny holes caused by the pointed brush drained the air off the balloon.

On the other hand she also noticed her beloved husband struggling to serve the customers as the crowd grew beyond his expectations.

The situation worsened to a stage that it affected the credibility of the shop as they could not cope with the growing number of customers and serve them satisfactorily.

Finto’s objective to help his father serve the

Dr Joseph GeorgeHead of Information Systems & Technology, National Bank of Fujairah PJSC. (The views expressed are the

author’s own and not of the

insitution he is associated with.)

Retail banking digital transformation – Mother Care and Missing Links

ACE - Mother Care Model Adopting the Mother Care Model during a Retail Banking Digital Transformation journey

ACEMother Care

ModelAdoption in

Retail Banking

• Do you have an attachment creation & sustainable model for your customer.

• Do you keep giving add-on’s to your customers based on his need?

Security & Risk Mitigation Model

Continuous Engagement Model

Transparent Communication Model

Attachments & Add-on’s Model


customers after attracting them to the shop through his innovative approach did not work out as he had to labor hard to keep the balloon intact. But despite all his hard work, minor holes on the balloon started to take a toll on the beauty of his art as air oozed out through them, thus shrinking the balloon.

SHRINKING BALLOONThe shrinking balloon along with the tea shop’s inability to serve the customers’ requirements, started turning people away.

The above narration is not different from what is being done in retail banking digital transformation journey. Before we get into the same in an aggressive manner, we need to understand the common ‘missing links’ and ‘crack and creeps’ that happen in our transformation journey. These days, customer expectation is convenience and customized products and services. We need to see if our solutions are aligned with the customer expectations and are consistent. As the adage says, ‘a stitch in time saves nine’, ability to identify and cater to customized needs of the customers and service them accordingl will lead to long term relationship and retention. Only a mother understands the need of her child in depth.

Like wise , the provis ion of c o n v e n i e n c e a n d c u s t o m i z e d solutions can be achieved through the ‘ACE Mother-Care model ’ while embarking on the retail digital transformation journey.

WHAT IS THE MODEL?ACE Mother Care Model is based on the principle of Bronfenbrenner’s Ecological Model of Child Development.

As a child is growing, he is attached to his family, classroom, friends’ group, religious settings, community, influence of media, healthcare environment, school system, community, cultural values, national customs, economic patterns, political philosophy’s and so on. For a child to grow in a balanced

manner, the attaching chord for him is his mother. The mother has to hit a balance of all influence factors in order to shape her child into a better citizen as well as affectionate to his parents and the community.

The above model is adopted to define ACE Mother Care Model to further define various attaching framework that is necessary for the retail banking digital transformation journey.

While defining our retail digital transformation, we need to understand our retail customer environment like family, work environment, peer group, religious settings, community, influence of media, healthcare environment, school system, community, cultural values, national customs, economic patterns, political philosophy’s and so on as well. By knowing these factors, we have to define an Attachment Model framework based on our customer segments.

In retail banking, customers are expecting convenience and customized products and services. Retail banking core is all about CASA, loans and cards, but the important factor is that

while creating the ‘Attachment Model’ connected to a clear ‘Engagement Model’, we should necessarily ensure that the ‘addons’ to retail banking core stand out, providing an excellent customer experience while meeting their expectations.

SECURITY MODELAs we ensure the Attachment Model sustains long-term relationship with a well-connected Engagement Model through addons, we also need to ensure that the ‘Communication Model’ is well chorded to the ‘Security Model’. The first three models (Attachment, Engagement and Communication) are the core of retail and this has to be defined by retail experts in an analytical manner. while the Security Model has to be defined by IT in consideration of customer experience on digital transformation journey.

By defining the above model, the core retail banking group can act like a mother to take care of the customers’ need by knowing them in depth, resulting in a better customer experience and retention.

ACE - Digital Security Model Dataset Thwarting Security Risks & being competitive

Human Behavior“Only amateurs attack machines,professionals target people”-Bruce SchneierAmerican cryptographer,

New Technology“People who think they are crazy enough to change the world are the ones that do.”-Steve JobsChairman & CEO, Apple Inc.

Reputation“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” -Warren Buffett,American business magnate

Business Resilience“Resilience is all about being able to overcome theunexpected. Sustainability is about survival. !egoal of resilience is to thrive- Jamais Cascio, Writer and futurist

Incident Response& Forensic Readiness“There cannot be a crisis next week. My schedule is already full.” -Henry A .KissingerAmerican Diplomat

IT Infrastructure“There is a huge need and a huge opportunity to … help transform society for the future. The scale of the technology and infrastructure that must be built is unprecedented.” -Mark ZuckerbergCEO, Facebook

Regulatory Requirements“If you have ten thousand regulationsyou destroy all respect for the law” -Winston Churchill, -Ex UK Prime

Supply Chain“Change the name.” …"The name has been poisoned.” - Don Draper

Digital Security Model


Retail Banking

Mehul Dani: Can you provide details of

retail loans of the bank and the growth

this segment has seen?

Ashutosh Khajuria: We have sanctioned nearly 8000 home loans amounting to around `2000 crore, more than 5500 car loans of `400 crore and over 3200 educational loans of `125 crore during 20015-16. There has been 10% growth in retail loans in these 3 segments. Around 20% of retail loans fall under priority sector.

Have you made changes in interest rates

for retail loans?

During the FY2016, we reduced the base rate by 57 basis points in 2 tranches - from 10.20% to 9.95% in June 2015 and then to 9.63% in December 2015. This was in addition to 35 basis points reduction effected in second half of FY15. One of the major challenges in the retail finance segment since September 2014 has been the growth of gold loan portfolio due to fluctuations in the gold prices. This could partly be the result of regulatory guidelines to bring down the Loan To Value (LTV) to 75% during the entire currency of the loan. Hence we had to focus on maintaining the stipulated LTV - at times by closing out the gold loans through auction process.

Can you give details of your online loan

products?

We have introduced our first online digital product 2016. The product, Fed-e Credit, provides customers an option to take loans against deposits sitting in the comfort of their homes and offices. We also worked on a digital model of offering car loans to customers which was launched during the beginning of this financial year. During the first year of launch, around 3% of our ‘loans against deposits’ were through the digital channel. In-principle approvals for home loans are also granted on line.

Is NPA in the retail loan segment a cause

for concern? What are the improvements

in risk management for the retail loans

made in 2016-17?

The NPA in the retail loan portfolio has increased from 1.13% in 2014-15 to 1.65% in 2015-16. This is partly due to fall in oil prices impacting Gulf economies where a big chunk of our customers or their family members work. Due to the stress observed in GCC markets, some households dependent on remittances and a few NRI borrowers who have availed mortgage loans have not been able to meet their obligations in time. Though these loans are well collateralized, the failure to make timely payments has led to some of these accounts getting classified as NPA.

We have implemented various

measures to improve our quality of underwriting, vigorous follow up and recovery measures to bring down the risk in this portfolio. Some of these steps include centralization of retail underwriting hubs resulting in standardization of underwriting, introduction of advanced rating models and improved collection mechanism with more feet on street.

What has been the growth in advances and

what is the target for this financial year? Our retail advances grew by 7%

yoy despite a steep fall in the gold loan portfolio. However, core retail advances excluding gold loans, grew by 18% yoy. The bank has targeted 20% growth in retail advances during this financial year. In addition to strengthening the sales force, we are launching various digital products whereby customers will be able to avail car loans, personal loans, etc, online. We have an active Facebook page and a Twitter handle to promote our loan products in the digital space.

What about your tie-ups with builders?

Do you have tie-ups with any educational

institutions? Are you financing any

projects of colleges?

We have tied up with more than 500 builders across the country. In 2015-16, the overall demand from the builders to directly finance their projects was comparatively low. Similarly, we have banking relationship with nearly 1000 educational institutions and we offer educational loans to students in these institutions. We are also actively involved in financing projects related to some of these institutions.

Which are the top vehicle brands that the

bank has considered for offering vehicle

finance in 2015-16?

Ashutosh Khajuria, ED & CFO, Federal Bank, says core retail advances excluding gold loans of Federal Bank grew by 18% yoy in 2015-16. The bank has higher targets for the current financial year

Federal Bank aims 20% growth in retail loans

Ashutosh Khajuria is delighted that the bank has launched various digital initiatives, particularly those related to loans


Maruti Suzuki, Hyundai and Honda were the three major brands that got maximum finance from the bank in 2015-16. As many as 2029 vehicles of Maruti brand received finance amounting to `94 crore, 719 Hyuandi vehicles received `46 crore finance and 465 Honda vehicles received `32 crore finance.

Can you give details of educational loans

offered by the bank in 2015-16?

We have sanctioned 3235 educational loans in the last financial year. Of this, engineering courses account for 30%, nursing 16%, management courses 9% and medicine 8%. In the last three years, the maximum number of loans has gone to the engineering stream. Loans for studies abroad were around 9% of the total educational loans.

What is the effect of the central

government’s announcement of interest

rebate for those students whose annual

family income is under Rs4.5 lakh?

There has been an increase in the number of applicants because of the rebate subsidy scheme. Around 70% (2300) of the student loans will fall under the subsidy scheme.

How do you keep a track of the employers

where the loan taking students get

employed?

We continuously engage with the student fraternity which has taken loans from the bank and ensure that we update the contact details, educational status and employer details. We also reach out to the employers in case the loan account shows some tendency for stress.

Reducing the stress in the educational loans requires that bank appraises the loan proposal based on various factors including the course for which the loan is required, the future employability of the course, the back ground of the borrower, etc. Add to it, continuous engagement with the student during the course and after completion of the same does, to some extent, ensure that the student pays as per the schedule given to him.

What is short to medium term outlook as

a lender for the retail loans in 2016-17?

Higher growth in GDP, improvement in real estate segment, higher consumption demand - all of these factors are expected to result in robust growth in banks’ retail loans portfolio. The overall outlook is positive.

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Exports

Jewelry retailers: stability in credit profile in FY17

India Ratings and Research has maintained a stable outlook for jewelry retailers, while revising the outlook

for exporters to negative for FY17 from stable in FY16. According to a report by Harsha Sodhani, senior analyst, Ind-Ra, the credit profiles of jewelry retailers are likely to stabilize in FY17. Based on Ind-Ra’s sample set, retailers’ credit profiles are expected to improve with net leverage strengthening to 1.25x-1.5x in FY16 (FY15: 1.75x) and EBITDA/interest coverage expanding to 2.75-3.0x (2.3x).

Ind-Ra expects limited de-leveraging from the FY16 levels as players look to expand aggressively leading to higher inventory days and proportionately higher investment in working capital. Inventory days will remain a function of model used for expansion (own stores v/s franchise) and product mix (diamond v/s gold). The agency expects retailers’ credit metrics to improve in FY16 as resumption of gold metal loans will lead to a reduction of overall borrowings and interest costs and also protect EBITDA margins against fluctuations in gold prices.

Credit metrics for FY17 are likely to remain at FY16 levels as any improvement in EBITDA will be offset by higher debt requirements for funding store additions. Ind-Ra expects retailers to fare well underpinned by a sustainable domestic demand, shifting preference towards branded jewelry, and fading regulatory headwinds. Credit profile deteriorated in FY15 with interest coverage declining to 1.9x (FY14:2.2x) and net leverage increasing to 7.4x (6.8x). Debt levels increased with further elongation of working capital cycle by five days to 168 days in FY15. Part of the increase was due to a slower turnaround of certification of polished diamonds by grading agencies.

MUTED REVENUECredit profile of jewelry exporters are likely to remain stretched in FY17. Based on Ind-Ra’s sample set, revenue growth

for exporters may remain muted at 3-5% in FY16 and FY17, given slowing Chinese demand. Profitability for midstream players is expected to be stagnant and not deteriorate further as rough producers keep rough prices lower. Jewelry exporters are better placed to manage short-term volatility in prices as this segment has healthy margins compared to cut and polished diamond (CPD) players, providing sufficient cushion against short-term fluctuations.

Credit metrics are likely to remain

stretched in FY16 with interest coverage declining further to around 1.5x (FY15: 1.9x) and net leverage increasing to 7.5-8.0x (7.4x), and remaining near those levels in FY17 as debt levels rise to fund a longer operating cycle in the absence of a rebound in demand. Most CPD players have near full utilization of their working capital limits and any stretch on the operating cycle or non-payments by their customers can put pressure on the liquidity.

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IIGJ to tie-up with Welingkar Institute

Indian Institute of Gems & Jewellery (IIGJ) Mumbai , a project of the Gem & Jewellery Export Promotion Council of India (GJEPC), has come-up with a one of its kind

3 Year Graduate Program in Jewellery Design & Manufacturing Techniques with an introduction to Management studies in collaboration with Welingkar Institute of Management. With this cours in the offering, IIGJ will be the first institute in the country to offer a complete graduate course on Gems and Jewellery including Operations Management for the emerging Jewellery Professional & Entrepreneurs.

The academic year 2016-17 will be the first year of this course and the admission process is already in progress.

Speaking at a press conference Vasant Mehta, chairman, IIGJ Mumbai, hoped this program would definitely be accepted by the aspiring youth who are keen to make their career in the jewelry Industry. He further mentioned that it is appropriate that this institute is organizing this program considering that it is also the first of its kind to introduce intensive academic course for professional in Jewelry industry artisans more than 12 years ago.

Prof V.H. Iyer - Dean, Welingkar Institute of Management, said, the institute is happy to partner with IIGJ to offer India’s first graduate program in gems and jewelry. He said the institute always believed in building a pool of talent who can be industry leaders of tomorrow. With this course, he said the institute will be able to contribute in the nation’s “Make In India” initiative, as skilled and trained work force will always be required in the gems and jewelry industry.


Helping Hand

Exim Bank of India has offered credit lines amounting to `3000 crore through the Export Development

Fund (EDF) to 7 banks in Iran for importing steel rails from India and for the development of Chabahar port. Exim Bank has planned to raise the fund from the domestic market to finance purchase of goods and services from India by Iran.

LOAN PORTFOLIOExim Bank’s loan portfolio has crossed a milestone of ̀ 1 lakh crore for the first time in its history. Although Exim Bank posted a growth 18% to `102,537 crore in loan disbursals, it reported a 56.5% plunge in net profit to `316 crore for 2015-16.

Yaduvendra Mathur, CMD, who is set to retire this FY, said Exim Bank’s net worth increased by 16%, non-funded portfolio by 6.5% and the total business by 17% in 2015-16.

The bank’s lines of credit as at FY2016 end stood at 203, covering 63 countries with credit commitments of over $14.26 billion. Mathur revealed that the bank had inked 9 LoCs amounting to $2.61 billion with Bangladesh, Cote d’Ivoire, Congo, Guyana, Guinea, Tanzania , Zimbabwe and Myanmar in 2015-16.

It provides funding to 95 project export contracts in 39 countries by 50 exporters, totaling to `22,551 crore. The bank sanctioned $2.19 billion for 22 projects under the buyer’s credit (National Export Insurance Account NEIA). In-principle commitment has been extended to support several projects by the bank and the present active pipeline includes 36 proposals totaling to $5.11 billion.

RESOURCESDuring the year, the Exim Bank raised borrowings of varying maturities comprising rupee resources of `23,183

crore and foreign currency resources of `13,781 crore equivalent. Exim Bank has successfully launched a 5 year Reg S Green Bond issue of $500 million.

The bank raised $162.26 million equivalent by way of Uridashi Bonds in 2 different currencies - Australian dollar and US dollar - thereby achieving diversification of investor base. The USD swapped price of the bonds was inside the fair value of the bank’s outstanding public USD bonds for similar tenor. The bank has now tapped the Uridashi Bond market on four occasions and continues to be the only Indian entity in this market.

CONSULTANCYExim Bank with the support of the central government has extended commitment to finance the strategic Maitree Power Project in Bangladesh valued $1.8 billion. BHEL has emerged as the lowest bidder in a global bid process.

The bank has been partnering with

the ministry of new and renewable energy in its plan towards establishing the International Solar Alliance drawn as a part of the COP21 initiative in Paris, to boost solar energy in developing countries. Exim Bank has also conducted a study entitled ‘International Solar Alliance: Nurturing Possibilities’.

Exim Bank, IL&FS, AfDB and State Bank of India have floated the Kukuza Project Development Company (PDC) for Africa, based out of Nairobi. A few projects in Africa are currently under consideration by the PDC.

[email protected]

Exim Bank’s `30 bn credit line to 7 banks in Iran

Yaduvendra Mathur reveals that a few projects in Africa are currently under consideration by the PDC

Early sign of revival in exports

The fall in exports has been contained to some extent, says S.C. Ralhan, president,

FIEO. In terms of trade data for April 2016, he says while the faill remained under control in March and April 2016, exports will move into positive territory from June onwards. As many as 14 out of 30 products, for which data has been released, are showing positive growth. Gems & jewelry, organic & inorganic chemicals, plastic goods and electronic goods have shown promising results, which augur well for the

future, he maintains.

Ralhan said some of the recent initiatives like extension of MEIS benefit to all countries and thereby dispensing with landing certificate will add to the competitiveness while simultaneously reducing transaction costs. The revised threshold limit for status holders will enable many more companies to claim such status so as to get various non-fiscal benefits including expeditious clearance of import-

export cargo.

Ralhan urged the government to address the problem of simultaneous availment of EPCG and SHIS which has landed many exporters into problem for no fault of their own besides releasing of target plus benefits and incremental exports incentivization benefit for 2013-14.


Conference

Amit Tyagi, Mphasis: Financial exclusion often leads to social exclusion.

Ravi Prakash, State Bank of India: About 170 million bank accounts have so far been opened. The challenge is to make banking available to everyone. The question is whether it should be physical or digital. He felt that the country needs all – ATMs, microATMs, mobile, etc. We are one country, but we are a subcontinent. Possibly, we are reaching a point where the future of ATMs in the context of financial inclusion is viewed in the context of the future rather than the past. The success mantra is to make it available and affordable. The onus is now on the ATM industry to be paranoid about innovation pertaining to customers, cost, etc. As far as rural areas in the country are concerned, not much cash withdrawal happens, but there is cash payment for prepaid mobile charges, etc.

Ram Sunderasan, NPCI: ATMs are often used for balance enquiry and there has been a spurt in Aadhar-based transcations after banks undertook Aadhar number seeding. The proportion of cash versus non-cash has come down. Banks offer lots of value added services for their customers and NPCI wants to make this more interoperable by using its platform.

Puneet Kapoor, Kotak Mahindra Bank: 93% of the transactions are cash, despite all kinds of value added services. One thing that is missing is awareness among consumers. An ATM is nothing but a mini bank. Another dilemma is how long you want to keep the customer on the device for multiple types of transactions. It is also a dilemma for banks whether they want to turn away other customers by

having a customer using the ATM for a longer duration.

Jayant D’mello, Hitachi Payments: There is a large opportunity for corporate cash deposits at ATMs. We should be able to move the machine from the branch to offsite. We have to look at retail business rather than banking business.

Rupinder Sandhu Anand, OKI India: Recyclers are used primarily to reduce costs. One is that banks can reduce the amount of cash in circulation. The other element of cost is the cost of a branch. The risks involved should also be looked into and one should be cautious about loading the cash at the ATMs and the timing as well.

Aspy Engineer, YES Bank: WLAs will continue to complement the brown labels. When the old brown labels get replaced they would be recyclers and inter-operable cash deposit machines. They will definitely be complementary.

Anoop Neogi: CMS Infosystems: Getting right denominations to the right place is the key. Banks don’t always have the right denominations. So the cost of operations goes up. Servicing machines in tier 6 towns is very difficult. Labor reforms, such as increase in minimum wages from `7000 to `10,000 will increase costs. The home ministry is looking at shortening the window of operations of Cash In Transit (CIT) operators to 3 pm in Naxalite-affected areas, to 5 pm in rural areas and to 8 pm in urban areas. So, banks need to treat CIT as an extended arm.

K. Srinivas, BTI Payments: As much as 45% of our transactions use RuPay. The number of transaction in a tier 6 town is

no lesser than in a tier 1 town - same for the ticket size, which is a huge surprise. Another 2-3 WLA players will be good for the industry. We got a customer who approached us and said that for any customer who withdraws more than `X, pop up an ad at the end of the transaction. We do not know the details of the person, but we know the transaction pattern. Banks are spending money to transport cash from branch to currency chests. We are helping them save by taking out the cash from the branches. When RBI made 2nd and 4th Saturday a holiday, the cost of cash management went up. We shut ATMs for 2 reasons – not enough transactions and not enough supply of cash. There aren’t enough cash vaults in remote places. I recommend bank independent cash vaults.

Sanjeev Patel, Tata Telecommunications: We do ads of Tata Motors on our ATMs. Those who say yes, we ask them to give their phone number and pass them to Tata Motors. Indicash has tie-ups with 8 banks. Banks may charge on the basis of value or volume of cash withdrawals. On many locations, I shut down ATM at 8 pm and open at 8 am.

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Confederation of ATM Industry (CATMi) held its annual conference on the theme ‘Modernizing ATMs: The Way Forward’. Here are highlights of the points made by speakers and panelists:

Further cash optimization possible

Panelists at a discussion

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Documents

Vol. 15 No. 2 June 2016 `75 - Banking Frontiersbankingfrontiers.com/wp-content/uploads/2016/06/BF-June-2016-Main.pdf · MD and CEO, Vijaya Bank Vol. 15 No. 2 June 2016 `75 Pages 64