Vol. 16 No. 2 June 2017 `75 Pages 56
Iranian banking Addressing NPAs AfDB annual meeting Utkarsh Small Finance Bank www.bankingfrontiers.com
Energizing digital lending for MSMEs CA Abhay Bhutada Managing Director, TAB Capital Editor’s Blog Manoj Agrawal Mobile : 98673 66111 Email : [email protected]
June 2017 - Vol. 16 No. 2
Group Publisher : Babu Nair Group Editor : Manoj Agrawal Banks, Robbers & Thieves Editor : N. Mohan wo news items caught my attention today (June 13). In Mumbai, a gang of thieves drilled a hole into the wall of a jewelry store and stole jewelry and cash valued Editorial Tat about `31 lakh. The gang had hired the adjacent shop and were doing a Mehul Dani, Ravi Lalwani, business of selling mangoes. V. Raghuraman, Surekha Galagoda The news report said that they were keeping a close watch on Research Editors the jewelry store and discovered Prof Venugopal Iyengar, V. Babu, that the surveillance camera had Ratnakar Deole, W.A. Wijewardena, stopped functioning. That is when Sanchit Gogia, K.C. Shashidhar, they made their strike. The KYC L.S. Subramanian, Ajay Kumar papers they had submitted to rent Advisor-Alliances the shop were apparently fake. Ateeq Siddique The other news item in today’s newspaper is that thieves broke Marketing into the strong room of PNB branch in Modi Nagar in UP. Here too the modus operandi Zahid Siddique, Arun D’Souza was to make a hole in the wall. The thieves broke up 30 safe lockers. Obviously, the Events & Operations customers who had rented those lockers were very angry. Gautam Magare, Shirish Joshi, Is breaking walls the new tactic of thieves? Typical of any place of value is that Stalin Saldhana, Pramod Jadhav, 5 out of 6 sides are walls/floor/ceiling. This gives the impression that only the open Amit Gupta, Bharat Solanki, side needs to be guarded and that is why we have security guards outside branches Shweta Kadam, Durgesh Nadkarni, and ATMs. Ashish Verma Bank looters have 2 methodologies - by force and by stealth. In the former Design methodology, the miscreants, termed as robbers, come in with guns during daytime, Somnath Roy Choudhury take hostages and forcibly take cash and valuables. In the latter methodology, the miscreants, termed as thieves, come in stealthily, typically at night avoiding the main Published By entrance to steal valuables. Glocal Strategies & Services Thanks to news and movies, there is a greater consciousness about forcible attacks. D-312, Twin Arcade, Military Road, Marol, There is a new movie coming named ‘Bank Chor’, which will further reinforce this Andheri (E), Mumbai 400059, India. thinking. However, the trend is that criminals are increasingly preferring to operate by Tel: +91-22-29250166 / 29255569 stealth rather than by brute force. Fax: +91-22-29207563 Most bank security chiefs come from the army background and I assume that their primary training is oriented towards action. If we look at our borders, there is increasing Printed & Published by Babu Nair on behalf of Glocal Strategies & Services and activity in stealth mode than in action mode. This is not just for India, but across the Printed at Indigo Presss (India) Pvt Ltd., world. I see stealth attacks as the dominant threat vector all across the world. I do look Plot No. 1C/716, Off Dadoji Konddeo Cross forward to bank security chiefs upgrading their strategy to effectively handle both Road, Between Sussex and Retiwala Indl. kinds of threats. Estate, Byculla (E), Mumbai 400027. I also hope that start-ups look at this opportunity and bring in innovative ideas, particularly suited to the Indian scenario. One small suggestion I have is that government Editor: N. Mohan (Responsible for selection should make it mandatory that whenever a tenant is being registered, his bank details of news under PRB Act) should be captured and verified. This itself could be an additional deterrent.
Banking Frontiers June 2017 3 N E W S Regulators RBI advertises for deputy governor Brazil to regulate fintechs The Reserve Bank of India has released an advertisement The Central Bank of Brazil may enact new calling for applications for the regulations to oversee and assist fintech position of a deputy governor. firms across the country. Director the bank This is for the first time that an Otavio Damaso said increased innovation advertisement has been issued and a growing number of fintechs are all in newspapers for the position. very positive for the efficiency of Brazil’s The advertisement said the financial system. At present, fintechs firms central bank needs candidates have only a small share of Brazilian banking, with over 15 years of experience but they have been making good headway in banking and financial market with credit cards and consumer lending. operations. Besides, they should Damaso said the proposed regulations also be whole-time directors or board members. The selected candidate will be would pave the way for development of the replacing S.S. Mundra whose term will be ending in July 2017. The advertisement does fintechs within a secure judicial framework. not specify whether the candidate should be from the public sector or private sector The new rules would cover fintechs teaming banks. The advertisement also specifies that the applicant should have an appreciation, up with banks to offer loans, those providing as a practitioner, of the role of banks in large corporate lending, in an environment with securitised credit from institutional strong bond markets is desirable, besides seeking an understanding of bankruptcy/ investors, and peer to peer lenders. restructuring/turn-around/credit models, and/or overseen the risk management function in a large financial institution. The appointment is for a period of three years initially and the selected person is eligible for re-appointment. The central bank has Sweden invalidates already announced it is intending to have a chief financial officer. 3 old coins China mulls regulating fintech sector The People’s Bank of China (PBoC) has set up a new fintech committee to augment future regulations and policies surrounding this sector. PBoC is expected to undertake an in-depth study on the impact of financial and technological development on monetary policy, financial market, financial stability and payment and settlement and do well the strategic planning and policy guidance for China’s financial and technological development. The central bank believes that the introduction of an innovative fintech apparatus will strengthen exchanges and facilitate further cooperation at home and aboard. The regulator is willing to join hands with those in the ecosystem and work together in order to promote a functional and healthy fintech industry.
Palestine to have digital currency The Sveriges Riksbank, Sweden’s monetary Palestine Monetary Authority is mulling creating of its own digital currency. Azzam regulator, has invalidated use of three Shawwa, head of the authority said the regulator is weighing a bitcoin-style solution to denomonations of coins in the country. its lack of a central currency. Palestine uses a mix of US dollars, euros and other regional It said older 1-, 2- and 5-krona coins will currencies. Apparently the regulator does not have the infrastructure and conveniences no longer be accepted in circulation after to issue its own currency, due to the agreement that led to its establishment. Shawwa said 1 June. They will remain legal tender until the new currency will be called the Palestinian pound. He suggested it might be backed 31 August, but may only be deposited into by some kind of commodity, mentioning ‘reserves, gold, oil’ as possible assets to underlie bank accounts. In 2016, new coins of the the currency. The authority is keen to have the new currency in the next five years. three denominations debuted with new designs and different alloys. The designs Hong Kong may use facial recognition technology are based on the theme Sun, Wind and The Hong Kong Monetary Authority is examining whether facial recognition or Water. The bank is now withdrawing older fingerprint technology can be used in cash machines to beef up financial security. It versions of these coins. The old 1-krona wants to make sure this technology is reliable and useful. HKMA chairman Norman coins were in use from 1976 to 2012, with Chan Tak-lam said Macau has adopted this new technology and Hong Kong will study several circulating commemorative designs to see if this can enhance security. Official figures showed that the number of suspicious in use. Two different types were in use transaction reports received by the police tose from 23,282 in 2012 to 76,590 in 2016. during this period, with the most recent Macau announced the move to use facial recognition to scan bank card users at ATMs definitive design used from 2001 to 2012. to tackle money laundering and capital flight. The high-tech screening system will first The 2-krona coin had not been issued for be installed at ATMs in and around casinos before being extended to cover all 1300 circulation since 1971. The classic 5-krona cash machines. coin has been issued since 1976.
Banking Frontiers June 2017 5 Project Pipeline IDBI Bank to implement turnaround plan BoB to have mobile IDBI Bank is going to engage a consultant device solution to advise it on Bank of Baroda is intending to set up a mobile sustainable growth device management system in the bank and profitability. The primarily to enhance mobile security. The bank is exploring key objectives in implementing the system avenues to identify include providing a secure mechanism for areas and strategies the bank’s corporate (in-house developed) for cost containment commercial applications used on a variety and revenue of mobile devices and platforms, providing maximization leading context segregation between corporate and to sustainable growth end-user personal contexts, implementing and profitability BYOD feature, implementing full kiosk and it intends to mode for selected set of corporate formulate a strategic owned devices and integrating with program to focus on directory services. The bank is looking four areas, namely, revenue enhancement, cost control & reduction, asset productivity for a solution that can provide complete and overall program management coordinating across multitude of initiatives. The device and application management bank believes this will enable it to identify and address the existing lacunae, capitalize consisting of policy enforcement and on core strengths and improve existing products and processes. The consultant would compliance, security based on requirement, be required to draw up a turnaround plan containing both short term and medium- application management, data sharing and term milestones within the first four weeks of his engagement. The consultant would management and scalability. have a time span of 9 months. BoB to have analytics center of excellence BoI to implement Bank of Baroda is setting up an analytics center of excellence. It wants a service provider to set up the center on BOT mode. The bank is selective in identifying the mobile banking service provider as it has specified that the selected service provider should have proven experience in fields of big data, enterprise data ware house, advanced analytics, implementation of Realtime analytics in BFSI and in running the center using program management and change management capabilities. The bank, in its effort to create an analytics engine, is depending on 3 key building blocks - Core Capability Elements (Technology and Resources, including big data technology, data organization and management and governance and security; Analytics Platform comprising core analytics delivery capability; and peripheral activities such as data cleansing, data enrichment, Training, Program Management and Change Management. The service provider will have to create an enterprise wide Big Data Lake (BDL), including set-up of data environment including data ingestion across internal and external sources, design and implement a to-be analytics technology infrastructure capable Bank of India is proposing to have a mobile of supporting real time analytics, set up integrated analytics platform offering banking solution. It is intending to identify predictive analytics, machine learning and deep learning capabilities and set up self- a service provider, who can develop, install, service analytics and visualization platform offering various dashboards, reports and integrate, operationalize, maintain and scorecards using both structured and unstructured data. support a system for the bank. The bank wants this to be an end-to-end project to be Indian Bank to take up IS audit implemented at the bank’s data center and Indian Bank is on the lookout for an information systems audit firm to undertake DR site. The bank wants to have a state- a comprehensive information systems audit of the bank’s critical IT infrastructure of-the-art user interface capable of 100% and IT governance. The main idea is to determine the effectiveness of planning and frontend customization. It does not want oversight of IT activities, to ward of risks in the IT domain, to evaluate adequacy of to have a solution whose look and feel to be operating processes and internal control and determine adequacy of enterprise wide similar to that of other players. The bank compliance efforts relating to policies and control processes and identifying areas with also wants the service provider to be able deficient control mechanisms. The audit would cover all its IT systems including CBS, to achieve a perfect balance of technology and its modules, other modules in the central system and switches. The audit would and creative designs, especially use of be covering the bank’s data center, DR site, Near DR site, digital banking division, IT color, texture, input controls, navigational division, international division, treasury and other setups. components, information components, etc.
6 Banking Frontiers June 2017 Punjab & Sind Bank to have new HRMS Indian Bank to have Punjab and Sind Bank is proposing to implement an end-to-end HRMS IT system audit and it has sought proposals from Indian Bank wants to undertake an service providers to undertake information systems audit in the bank and supply, customization, deployment, has invited IT systems audit firms to make maintenance and support of the proposals to carry out a comprehensive system. The bank intends to implement audit of the critical IT infrastructure and the project as a turnkey project. IT governance in the bank. The bank wants The project will be implemented to have a clear idea of the existing levels of and operated through the bank’s IT security systems in the bank and have data center. The HRMS would be a report, determine the effectiveness of a centralized web-based solution panning and oversight of IT activities, accessible from all the branches and evaluate adequacy of operating processes controlling offices of the bank. At and internal controls, determine adequacy present, the bank is using a standalone of enterprise wide compliance efforts in-house developed solution based on FOXPRO. Besides all its employees, the system relating to IT policies and internal control would also cover some 9000 pensioners of the bank. The bank intends to introduce procedures and identify areas with deficient the best-practiced processes and techniques in HR in managing its workforce. internal controls and take up corrective measures. Sidbi to take up BPR Sidbi is seeking to appoint a consultant for undertaking process documentation and Vijaya Bank to have business process re-engineering. The bank had engaged PWC to formulate its IT strategy and roadmap. To implement the recommendations of PWC, the bank is insurance for cyber risk proposing appoint a consultant for process documentation and BPR of its business, control and support functions. The selected consultant shall work to achieve the intended objectives as guided by the bank /PWC. The bank wants the consultant to assist it in ensuring that the exercise is undertaken in totality, especially the ongoing and new IT initiatives. The bank has already appointed consultant for implementation of Indian Accounting Standard (IND-AS) and Goods and Services Tax. The impact of IND-AS and GST is to be considered and incorporated during process documentation and BPR in consultation with IND-AS and GST consultants. UBI for audit management solution Union Bank of India is implementing a web-based audit management solution for Vijaya Bank is looking to have a cyber risk conducting risk-based internal audit as per the guidelines of the union ministry insurance policy to cover first party and of finance and the Reserve Bank of India. This is part RBI’s directive to banks to third-party liability coverage when the bank prepare themselves to move towards risk-based supervision for internal audit faces a cyber risk and cyber security controls exercise. The bank wants to put in place a risk assessment methodology that should in the organization fails. The insurance cover enable development of independent risk assessments, capture the applications and would broadly be for property, theft and effectiveness of risk management procedures and assist critical evaluation or internal liability. Property and theft would mean control systems for formulation of a risk-based audit plan. The bank has sought destruction of software system and network, proposals for implementation of a web-based application for risk-based internal audit unrecoverable loss of information from the and other audits with online and offline facility. The bank wants a service provider stored data, recovery from malware attacks who can take up an end-to-end implementation project. The proposed solution should and business interruption etc, while liability cover RBIA, concurrent audit, management audit, information system audit, offsite would cover network security, breach transaction monitoring, service branch audit, currency chest inspection, Saral audit, of confidentiality, reputational damage, expenditure audit of regional audits and special audit. business continuity and supply chain disruptions, defamatory content posted on United Bank of India to have mobile banking the mobile app of the bank etc. The aggregate United Bank of India is proposing to implement mobile banking and UPI solution for limit of liability per policy period for all the bank. It is looking for a service provider, who can provide a complete solution on losses under all insurance covered with be a hosted model. Besides, the selected service provider should be responsible for direct `25 crore in option 1 and `50 crore in option secured connectivity, creation and maintenance of a helpdesk and system software 2. The coverage will be for the whole world. including database and operating system. The bank is also insisting that the service The bank has sought offers from insurance provider should have DC and DR facilities for mobile banking in full redundancy mode. companies in this regard.
Banking Frontiers June 2017 7 Banking in Iran Aiming to integrate with global banking system The Iranian banking system is waking up and evolving to be part of the global banking system post the lifting of the sanctions
recent World Bank report describes including Bank Melli Iran, which is the Iran as the second largest economy largest, with more branches than those of Ain the Middle East and North Africa all the private banks combined, control the (MENA) region after Saudi Arabia. It has an majority of banking assets. Government estimated GDP of US$412.2 billion in 2016. appointees feature prominently even in It also has the second largest population of private banks. All the banks are Sharia- the region after Egypt, with an estimated compliant and they together account for 78.8 million people in 2015. Iran’s economy US$316 billion in assets. This is the largest depends on hydrocarbon, agriculture and Islamic banking sector in the world. What services sectors, and a noticeable state is more, as of 2015, six of the top 10 fastest- presence in manufacturing and financial growing Sharia-compliant banks in the services. The report points out that the world were Iranian. country has adopted a comprehensive strategy encompassing market-based REGULATOR reforms as reflected in the government’s The Central Bank of Iran (CBI) is the 20-year vision document and the sixth regulator, mandated by the 1972 Monetary five-year development plan for the 2016- and Banking Law of Iran to control the 2021 period. The report also suggests that banking system in the country. While by law implementing a domestic reform agenda is it is autonomous, like in the case of many likely to bring the highest growth dividend central banks the world over, it is bound in the medium to long term. to promote and implement the policies of Central Bank of Iran and governor Valiollah Seif (inset) In this background, the banking sector the government. The decision-making is institutions after obtaining a working in the country is poised for reform and left to the Money and Credit Council and license from the CBI. It explains all banking growth. Despite various international it has representatives of both the central operations and services, sets regulations economic sanctions the country had faced, bank and the finance ministry, as well for the establishment of branches analysts feel the local banking system as legislators. pertaining to foreign banks and sets limits remains intact and displays potential The country’s parliament has seen to their investments. It also obliges credit for growth. the introduction of the Central Bank and institutions to provide viable information, Usury-Free Banking Reform Bill recently. puts in place a professional set of criteria govt banks dominant The bill is described as the first major step for choosing new top executives and board Iran has 30 banks, 20 of them are in the to implement necessary reforms in the members and makes provision for setting private sector. There are 5 specialized Iranian banking sector. The governor of up internal risk and auditing committees. government banks, 3 commercial Central Bank of Iran Valiollah Seif has said Among other things, the new law also government-owned banks and 2 Islamic the bill will be sent to the Majlis sometime envisages defining banking contracts non-profit granting funds. Besides, there in June as it is undergoing verifications by and the legal status of the newly-formed are 5 financial/credit institutions. the cabinet. The country’s banking system Association of Banks, launching credit The top Iranian banks are Bank Melli, was hitherto governed by the Usury-Free rating institutions and detailing lending Post Bank Iran, Bank Saderat Iran, Bank Banking Law and the new bill is expected and capital adequacy rules are among other Sepah, Bank Pasargad, Bank of Industry to bring in new regulations. The earlier law articles of the bill. and Mine, Export Development Bank of was not able to handle many problems of Iran, Bank Tejarat, Bank Mellat, Eghtesad the country’s banking system. integrating with GLOBAL SYSTEM Novin Bank and Karafarin Bank. Meanwhile, Iranian banks are making But, what is significant is that the REFORM BILL efforts to integrate with the global banking government continues to dominate the Broadly, the Banking Reform Bill outlines system. The central bank representatives, banking sector. State-owned banks, the duties of banks and non-bank credit along with officials of leading banks,
8 Banking Frontiers June 2017 have been visiting various countries, especially in Europe and south-east Asia, to re-establish relationships and explore how best banks from these countries can open offices in Iran. The effort has met with some success. But, many experts say Iran’s banking system still lacks efficiency. Even when foreign direct investment flows into the country, the banking system may not be able to absorb this flow, they aver, as the reform process is yet to happen and the sector has to find a strong backbone. Maybe, the new bill will bring in this much- wanted stability. The bill has provisions for the whole restructuring of the sector and enabling the central bank to supervise the entire process of implementing Basel III regulations. The new laws are also aimed Bank Saderat Iran at bringing in transparency in the sector. body in charge of Iran’s payment network, MISTRUST The Iranian government too has Iranians made 1.06 billion successful One hurdle that Iran faces today in taken steps to facilitate integration of digital payment transactions worth 1.19 getting into the global banking system is the country’s banking sector with global quadrillion rials ($30.8 billion) during the mistrust it draws from FATF, which institutions. The parliament has already the one year ending December 2016. The is skeptical about the country’s readiness passed a separate anti-money laundering report indicated there has been a 31.17% to tackle money laundering and terrorism and counter-terrorist financing (AML/ growth in the number of successful digital funding. The central bank representatives CFT) law to make the banking sector more transactions and 46.7% growth in the value have met FATF and convinced that the compliant with the Financial Action Task of electronic operations compared with the country is ready to implement necessary Force (FATF) standards. same period of last year. Shaparak also said processes in this regard. It is likely that The government is also taking necessary 253,358 online gateways were active in the FATF will have the necessary conviction steps to ensure that the banks are able to country. Besides, the debit card penetration to approve the integration of the Iranian provide enough loans, especially to small in the country has been at 92% and there and global banking systems soon. FATF and medium enterprises that can create are more than 4 million PoS terminals. All is more concerned about the lack of jobs and reduce unemployment. these statistics indicate Iran is well poised processes and system in the country’s to take the digital plunge and usher in a banking system rather than a fear that Not lagging in TECHNOLOGY cashless system. Iranian banks and financial services Banking experts point out that despite the institutions are participating in money sanctions, the Iranian government has FINTECHS are active laundering or related activities. Governor been able to bridge the technological gap Aiding such a possible transition are the Valiollah Seif has in fact said Iran would between the Iranian and global banking active fintech operators in the country. Iran, meet the conditions necessary to become systems by focusing on innovative products according to published data, has several a full-time member of the FATF within in the field. Even though Iran was cut off fintechs, the notable among them being two months. from the global financial system for over a Fanap, Tosan, Zarinpal and Payping. Some Nevertheless, the country’s regulator decade because of the sanctions, compared of these were created by state-run Iranian faces other challenges in making the to the banks of many of its neighboring banks to augment their digital offerings, banking system compete with global countries, the banks in the country are at while others are private sector players players. The main one is capital shortages the same level and they are not lacking hoping to cash in on the growing demand for the nationalized banks. Then like any in any area except for the ability of using for mobile-based payment solutions. Most other developing country, there are high cards issued by the banks internationally. enjoy good local penetration, given the levels of stressed assets. Maybe when the The banks have efficient ATM networks, absence of competition from abroad, and new banking law gets enacted, the country almost all the banks have issued cards a sizeable customer base. When foreign can expect to recapitalize the state-owned and the banking system works on a strong banks and financial services institutions banks and initiate processes to integrate IT infrastructure. reach Iran, they will have a population very with the global financial system. According to Shaparak, an industry much ready to adopt fintech products. [email protected]
Banking Frontiers June 2017 9 Cover Story
Energizing digital lending for MSMEs
MSME lending has always been a challenge for banks. TAB Capital, a new NBFC, is converting that challenge into an opportunity:
igital India is experiencing a the preferred choice for MSMEs seeking lengthy loan processes into a completely revolution in lending practices finance, irrespective of their locations, time digital solution which is paperless (and Dand processes. Digital lending is and the industries that they operate in. Our hence fast) and customer-centric (and invading the space of traditional lending. prime goal is to become the most trusted hence beneficial to the borrower.) It has begun to show signs of prominence digital lending NBFC platform where and is becoming a leading method of MSMEs can apply online for loan from Profitability funding, particularly for the Micro, Small anywhere, anytime and get quick funding TAB Capital started its operations in and Medium sector. in 2 days. We made the whole digital March 2016. Due to the unique model, Globally, online lending has started to lending process a more pleasant and hassle- branchless banking and lower operational transform the traditional lending business free experience.” The company boasts of cost, it is one of the first NBFCs, which has through the use of high technology in order sanctioning loans within 2 working days generated operational profit from the first to reduce operational costs, underwrite after the customer has provided all relevant year of operation itself. “We at TAB Capital with surrogate data points and remarkably loan related details online. have made the lending process online with speed up lending processes. For MSMEs, the traditional lending efficient work ethics and the company TAB Capital Ltd, a Non-Banking process is a stringent and a demanding task. has maintained record of zero NPA from Finance Company (NBFC) registered with Taking cognizance of this, TAB Capital has the day of incorporation,” declares Bhutada RBI, is aiming to position itself as the best created a simplified digital lending process with pride. digital lending NBFC for SME finance in where a customer can easily apply for a The company is unique among NBFCs India, based on its speed and convenience. loan and also track his/her loan application to have made a profit in the first year itself, CA Abhay Bhutada, Managing Director process online. Being automated and while the timeline for typical NBFCs is at TAB Capital, elaborates: “We want to be streamlined, this process remodels the 3-4 years. Some start-up NBFCs have
10 Banking Frontiers June 2017 through Facebook, Linkedin and SEO. It Get Funds has over 1 lakh followers on Facebook. In Upload in 2 service sectors, the company has clients Documents in hospitality, healthcare and contract Working Days Verification centers. In the manufacturing sector, its Apply & clients include engineering, automobile, Online Assessment and machine tool firms. The company also has professionals like doctors, CAs and architects as customers. It avoids funding jewellery, real estate and similar TAB Capital’s Digital Lending is an optimized solution for MSMEs financial problems risky sectors. sunk huge amounts of venture funds in have become today’s large corporates. So, TAB Capital does not give loans to aggressive growth with no sign of profits why not provide an effortless, seamless first time borrowers. Bhutada explains: on the horizon. Bhutada chooses to be lending platform for them?” “We look at about one year’s track record conservative and profit focused. For MSMEs, TAB Capital provides a of borrowing. We not only check financial TAB Capital’s business model evolved wide range of financial solutions based statements, but also VAT returns, electricity after years of research by the promoters on their diversified business needs. It bills, salary payments, etc.” of the company. Bhutada is sure that the currently provides loan products like The company has appointed portfolio business model is unique and cannot Equipment/Machinery Loan, Merchant managers, who take care of existing be imitated by any competitor financial Cash Advance against POS Machine customers for renewal and every quarter institution. Copying would take a few years Transactions, Working Capital Finance they visit these customers. Though the lead at least. and General-Purpose Business Loans, generation is online, there is always physical According to Bhutada, digital lending to serve various capital requirements in personal discussions. Visit to business will make each channel function in sync the MSME segment. The company is and residential premises is compulsory. with others. Customers expect that each always on a hunt to design new products Also, either a guarantor or a co-applicant lending arm works seamlessly with others, in order to cater to diversified needs. required before granting the loans. so that they do not have to fill in the same It also provides the facility to give top– Data from mobile phone records, data repeatedly. The major focus for lenders up on the loans every 6 months or prepaid top-ups, mobile bill payments should be to improve in this domain. He provide an extended line of credit for and mobile browsing, and app download adds: “Yesterday’s MSME organizations their customers. history can be used to assess consumer Says Bhutada: “Unlike traditional risk and determine the creditworthiness of banks and lenders, who rely on collateral underserved customers. Lenders can use Customer focused Products security and financial ratios, we analyze the output of their credit scoring to offer AB Capital gives loans to about 10 the credit worthiness of a business by unsecured, small ticket, short-term credit Tcustomers every day. The minimum understanding the profile of the customer, at a much lower cost than traditional loans. tenure is 6 months and maximum is 3 cash flow, business model, social behavior years. The average tenure is 2 years. and personal discussions with the promoter. Focused Marketing One of the most important feature of Our loan size ranges from `2 lakh to `1 In India, there were 220 million (18% of the the TAB’s professional Loan is that it crore, with the average loan size being population) smartphone users in 2016. This offers Moratorium period of 6 months. around `10 lakh.” is estimated to rise to 340 million (28%) in For example, a doctor or a CA, who has 2017. There are about 150 million feature obtained loans, pays only interest on Smarter Risk Management phone users, who are eligible for an upgrade the loans The company is generating online leads to smartphones. Social media friendly for the first 6 months before he or she starts the EMI. Almost 20% of the loans offered are collateral free, while LOAN PRODUCTS 80% are secured. Bhutada speaks on the unsecured loans: “Our unsecured loan is primarily for short term. We also have compulsory credit insurance cover. Lending is cashflow based, most unsecured loans are given to professionals.” Loan to Business Working Marchant Machinery / Professionals Loan for MSME Capital Demand Loan Cash Advance Equipment Loan
Banking Frontiers June 2017 11 Cover Story
Marketing Map to `2 lakh. We usually spend near about `1.5 lakh for online marketing, and about PAN India Presence Search `0.50 lakh for offline activities. Recently, TAB Capital Branches Engine we have been doing online marketing • Pune • Chennai Optimization activities aggressively on Facebook, Google • Mumbai • Bengaluru Media Paid and other similar channels. The main motto • Delhi • Hyderabad Marketing Campaign of organic and paid marketing activities is Online to promote loan products, to increase traffic Channels on our website and ensure lead generation.” The Way Ahead He adds on the use of the print media: The various factors which the company Aliate Social “For brand awareness, we are focussing is working upon are creation of extensive Marketing Media on print media. Recently, we have given product line, strong geographical and digital
Content product ads on prime business papers like presence and a strong capital base. The Marketing Times of India and Economic Times, and company is looking to raise equity of `100- this has resulted in several loan applications 150 crore over the next 2 years. The equity on our website.” infusion will be used for strengthening its smartphones bring the browsing power of data science capabilities and enhancing its the net to your fingers for as low as `5000. Dedicated Team technology platform. To stay relevant in such an environment, TAB Capital has a team of dedicated, skilled Bhutada delves further into the TAB Capital is promoting loan products and experienced professionals who are expansion plans: “We will open 10 new through all digital marketing activities to committed to serve the SMEs, professionals branches in semi-metro cities and will reach their target audience. and entrepreneurs with regard to taking increase the employee strength from 50 at The company mainly uses digital care of their financial needs irrespective present to 100, in the coming months. We marketing activities to target its customers, of their size of business. After thoroughly have no plans to apply for a deposit license. as it is a digital lending company. It uses understanding client requirements, the The current operating cost is low, as most of SEO on-page and off-page activities, products are tailored and personalized the sourcing is done online, and hence the social media marketing and search engine on the basis of the specifications provided customer acquisition cost is negligible.” marketing - Google ads, email marketing, by clients, which makes them exclusive to TAB Capital also intends to launch a mobile content marketing, etc - to reach out to the particular client and their business. app for customers by September 2017, using prospective customers. Bhutada reveals “Giving our clients what they want is which, a customer will be able to download further details about the online activities: our specialty when it comes to lending,” account statements, NOC, etc, documents.” “We keep monthly marketing budget of up affirms Bhutada. [email protected]
BOARD OF DIRECTORS
From Left to Right: Bhama Krishnamurthy, Prabhakar Dalal, Abhay Bhutada, Amar Deshpande & Sujit Thite.
12 Banking Frontiers June 2017 Award Winning NBFC
TAB Capital is best at what it does, and this is proved by the Hon’ble Minister of Railways. The company has also recently awards they got at MSME Banking Excellence Awards instituted received an award for the ‘Fastest Growing Digital Lending NBFC by CIMSME for the ‘Emerging Tech Savvy NBFC’ and the ‘Best of India’ at Digital India Summit 2017, Ravi Shankar Prasad, Start-up profit making NBFC at the hands of Suresh Prabhu, minister for information technology had presented the award.
“Emerging Tech Savvy NBFC" & "Best Start-up Profit Making NBFC" at the “Fastest growing Digital Lending NBFC of India” award at Digital MSME Banking Excellence Awards – 2016 at the hands of Suresh Prabhu, India Summit 2017 at the hands of Ravi Shankar Prasad, Minister Minister of Railways. of Information Technology.
The TAB Capital Team - a mix of experience and young talent
Banking Frontiers June 2017 13 The Bank’s Scorecard Indian Banks outperform consumer expectations with digital payments post demonetisation
ndian Banks performed extremely well u The importance of the primary bank in meeting customer expectations in providing digital payment options has risen Iareas of digital payments, omnichannel year on year across all age segments. More experience, staying connected and in person than 30% of common payments are done service. However, the areas that performed with mobile apps compared to cash, cheque below expectations were Fairness or credit/debit cards. (transparency in how fees and services are priced), Reliability and competence in What Gen Y in India said servicing customer aspirations. u Consumers want to better connect with In an annual survey commissioned by their banks at their convenience, at any FIS in December 2016, during the turmoil time and from anywhere. of India’s bank note demonetisation, this u The biggest pain point, according to traction quickly among Gen Y members, year’s Performance Against Customer banked Gen Y Consumer is getting time raising the likelihood that mobile payment Expectations (PACE) report provides a to physically visit a branch. adoption will follow a similar path to mobile snapshot of a unique time when the banking u Gen Y are far less satisfied with their banking. Senior Gen Y have the most industry was under intense stress. The current banking providers and are number of monthly interactions with their response points to a dramatic and possibly vulnerable to attrition. banking providers due to higher online and forced, shift away from cash as payment. The mobile banking activity. scores were computed for every respondent India Results 3. Rapid shift to virtual payments: based on how they ranked the importance of The PACE report offers invaluable insights Compared with the global norm, India 18 key performance indicators (KPIs). into the view of consumers of financial is more quickly making the shift from Financial institutions in India gained services.To help financial institutions make plastic to virtual cards. Already, mobile one point on last year’s PACE score, sense of the consumers attributes, these payments rival credit cards in popularity achieving a score of 75, but seven points are categorised into three groups: RUN, and virtual cards are expected to overtake below the global PACE average. CONNECT and GROW. plastic possibly in just a matter of years. “Rapid shifting of payment modes paper Run Connect Grow 4. Banks must transition from and plastic to mobile and cashless helped Operate the bank Connect Investing in capability Transactions to Aspirations: reliably, fairly and consumers with that enables banks establish a stronger multiple service efficiently their finances consumers to grow Opportunities abound for financial relationship with their customers. The PACE Fairness Omnichannel Advice institutions to help consumers plan findings also present a clear picture on where Safety Digital Payments Aspirations and save for life events and realise their Leading edge India’s banks need to focus to remain first in the Simplicity Customised financial aspirations. Across the board, minds of their customers” said Ramaswamy products when asked where they would turn for Transparency Connected Control Venkatachalam, Regional Managing Director, financial assistance for a key life event, Security Immediate In person service India and South Asia, FIS. “Insights from India’s consumers overwhelmingly cited Reliability Recognition Anticipates the PACE report highlight that the increase their primary banking provider as their in digital access and transactions, including Insights from the report: first choice. However, all too often, digital payments, is assisting in attracting and The report provides five insights into the the competition steps in and captures retaining customers. Opportunities exist for banking trends in India: significant account share. banks to capture more business and to help 1. Digital is not optional: The importance 5. Addressing Customer’s pain points: consumers become more financially healthy”. of the primary banking providing digital Banking providers have numerous payment options has risen year over year opportunities to assist consumers – Key Findings about Indian Consumers across all age segments. Right now, more especially those with important life event. u More than 60% of the respondents than 30% payments are done with mobile Significant percentages of Gen Y members have used mobile devices to check their apps (versus cash, cheque or credit/ debit report having problems when trying to balances, view recent transactions, pay cards). Mobile payments have gained the engage with their primary bank. Commonly, one or more bills, transfer funds between most traction among young Gen Y, with they have difficulty finding time to visit a accounts or receive bank notifications. senior Gen Y catching up. bank branch and have trouble accessing u Nearly 18% of the respondents use their 2. Gen Y members are driving digital investment advice or assessing whether an primary bank’s credit cards exclusively. connectivity: Mobile payments are gaining investment makes sense for them. A complete copy of the PACE report for India can be downloaded from http://closethegaps.fisglobal.com and http://closethegaps.fisglobal.com/country-insights/
Banking Frontiers June 2017 15 N E W S PB & SFB Paytm Payments Bank launched Au Small Finance Bank Paytm Payments Bank has finally come into plans IPO existence. The bank said it is offering its Au Small Finance Bank is planning to service by invitation launch its `2,000 crore IPO shortly. only. The bank will offer According to sources, the bank plans to 4% per annum interest launch the IPO towards the end of June for saving accounts, 2017. It is now holding investor roadshows. which is in line with Among small finance banks, it will be the large commercial third to be listed. Equitas Small Finance banks. It will provide Bank got listed in April 2016 and in May, RuPay debit cards at Ujjivan Small Finance Bank got listed too. an annual subscription Au’s IPO is a pure offer for sale. Existing Vijay Shekhar Sharma, GS Sundarajan, PV Bhaskar and Renu Satti and offer online fund investors partially selling their shares transfer services such as IMPS, UPI and (NEFT) without any charge. Meanwhile, Paytm include International Finance Corporation, said former RBI ED P.V. Bhaskar, Saama Capital managing partner and co-founder Warburg Pincus, ChrysCapital and Kedaara Ash Lilani and former Shriram Group director G.S. Sundarajan have joined the five- Capital. A spokesperson for the bank said member board of the bank as independent directors. Paytm founder and CEO Vijay the exact timing of the IPO launch will be Shekhar Sharma will be the non-Executive chairman and Renu Satti, CEO, Paytm decided in due course. Payments Bank, will be a director on the board. Aditya Birla Payments Bank launch in September The Aditya Birla Group plans to launch its payments bank after the merger of Aditya Birla Nuvo and Grasim Industries happen by the end of September quarter and the CDC Group reduces proposed Aditya Birla Financial Services is set up. News reports quoted Sushil Agarwal, stake in Ujjivan director and CFO of Grasim Industries as saying that the payments bank license was issued to Aditya Birla Nuvo and Idea Cellular combine before the merger between Grasim and AB Nuvo was proposed and formation of full-fledged financial services company. Now with the merger receiving almost all approvals, the payments bank license would be transferred to the newly formed entity Aditya Birla Financial Services that will hold all the financial business interest of the group. As part of the merger scheme, AB Nuvo will be first merged with Grasim and the financial services will be spun off and listed separately at a later stage. India Post Payments Bank opens office in Bengaluru India Post Payments Bank will open south India’s first branch in Bengaluru. The bank UK’s CDC Group has part-exited its will have some 650 branches across the country. The first two branches were opened in investment in Ujjivan Financial Services. Ranchi in Jharkhand and Raipur in Chhattisgarh. The bank plans to have a branch in CDC sold 27.5 million shares or 2.3% stake every district and make postmen come alive in payment bank function. The bank will in the microfinance company at `360 confine its activities to acceptance of demand deposits, remittance services, Internet per share, earning `99 crore. Cinnamon banking and other specified services, primarily to cater to banking requirements of Capital bought the stake from CDC. Ujjivan individuals and small businesses. Meanwhile, the ministry of external affairs has currently has 457 branches in 24 states decided to increase the number of post offices to function as passport seva kendras. and is planning to open 66 new ones in financial year 2017-18. It has already started Airtel Payments Bank, Ola to integrate apps operating as a small finance bank. CDC had Airtel Payments Bank is proposing to have a strategic partnership with cab aggregator invested in the company in 2015 as a part Ola aimed at offering a range of digital services to the latter’s users. The two entities will of Ujjivan’s `600 crore round in which integrate their respective platforms. The bank’s platform will integrate Ola’s app to offer other investors like CX Partners, NewQuest convenient digital payments solutions to customers for their rides. It is also proposed Asia Investments, Bajaj Holdings, IFC that Ola Money will be integrated into a digital payment solution within MyAirtel App and Elevar Equity also participated. Post and the Airtel website to enable recharge of Airtel prepaid mobile/DTH and payment divestment, it holds 6.86% stake in the small of Airtel mobile/broadband bills through Ola Money. According to Bhavish Aggarwal, finance bank. The bank has 11 branches in CEO and co-founder at Ola, Airtel Payments Bank will integrate its offerings across Karnataka and has some 54,300 customer payments, content, PoS networks, and more with Ola’s offerings for its large customer accounts across branches in Bengaluru and and partner base. Ramanagara district.
Banking Frontiers June 2017 21 N E W S Blockchain Bitcoin fund closes first round of funding Blockchain-based tool Dubai’s Bitcoin Growth Fund (BGF), a blockchain-based to share information startup fund, closed its first fund An Indian blockchain consortium raising with $14.5 million as part has revealed a new system of sharing of its initial coin offering (ICO). information about customers. The Founded in January 2017, consortium, BankChain, initiated by the BGF focuses on Asian markets, State Bank of India, ICICI Bank and primarily India and China. The others, has developed what is described as firm claims it is a blockchain- ClearChain, which can facilitate exchange based venture capital fund where of customer information, including data regular or small investors can on transactions as well as investigative invest by buying a token named ‘MCAPS’ via ICO. BGF said the minimum investment reports like Suspicious Activity Reports. amount required is $5 and there are close to 6 lakh investors from India who have The consortium is working with a Mumbai- subscribed to MCAP via ICO. Arvind Sehmay, a director at BGF, said 60% of the fund based startup, Primechain Technologies as has been subscribed by retail investors from India and most of the retail investors are well as IBM and Microsoft in developing the from the tech and finance background who usually understand this kind of new asset solution. The consortium is also developing class investment. There are subscribers from China and South Korea too. other solutions used in fraud detection and prevention. Canada not to implement blockchain tools Bank of Canada believes it is still not time to commit huge funds to develop and implement blockchain based technology. The regulator said recently it has decided not to incorporate the blockchain based solution into the country’s interbank system. The decision was taken after conducting an in-depth inquiry into its feasibility and other implications. Carolyn Wilkins, senior deputy governor, wrote an article in a publication, laying out the regulator’s policy. Bank of Canada and Payments Canada had carried JPMorgan partners with out research into blockchain under a project called Jasper. The study found that it is digital currency firm indeed possible to upgrade the wholesale payments process using distributed leger, but the central bank believes that it is too soon to shift from conventional systems to distributed ledger based solutions due to the presence of various hurdles. R3 gets $107 mn funding Global blockchain consortium R3 CEV secured $107 million funding to speed up development of its Corda distributed ledger platform. The group said this is the largest investment in blockchain technology so far. The investment comes from 43 financial institutions, including Bank of America, Merrill Lynch, Bank of New York Mellon, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank and HSBC, besides Singapore’s Temasek and Intel Capital. R3 is developing a blockchain technology JPMorgan Chase has announced a aiming to automate the complex networks of trust and verification, potentially cutting partnership with Zerocoil Electric Coin tens of billions of dollars of costs from the financial sector. The capital raising took Company (ZECC), which has introduced place in three stages, with the first two open to members of the R3 consortium only, Zcash, which is described as a privacy coin, plus a dispensation for Intel to participate. A final tranche, also open to non-members, on the lines of bitcoin. The partnership will begin soon. The fund raising comes as rival operators prepare to test their own will provide for the US bank to use blockchains on the critical record keeping in the foreign exchange, equity and credit Zcash’s privacy technology in Quorum, an derivatives markets. enterprise blockchain platform that the bank has built on Ethereum, a network Spanish banks form blockchain consortium similar to bitcoin’s but focused on smart A group of Spanish banks has set up the country’s first blockchain consortium. Wholesale contracts. Quorum, which already features bank Cecabank is taking the initiative, partnering with professional services firm private smart contracts, will now be able to Grant Thornton. The other banks involved in the consortium include Abanca, Bankia, ensure private settlement of digitized assets CaixaBank, Kutxabank, Ibercaja, Liberbank and Unicaja. At least two Spanish banks - on a distributed ledger. JPMorgan said Banco Santander and BBVA - are already working on blockchain technology. Cecabank adding Zcash’s zero-knowledge security said the group is trying to get a top-down understanding of the technology and how banks layer into Quorum would help it to explore can actually go about using it. A spokesperson for Grant Thornton said the intention is to how state of the art cryptographic privacy help Cecabank to implement the technologies necessary for its companies to be the first technology will enhance the next generation to make good use of the advantages that blockchain is expected to produce. of financial services applications.
Banking Frontiers June 2017 29 Staying Ahead Wallet companies spruce up marketing strategies Wallet companies are energizing their campaigns to secure their market shares
ndia had been a country where over 90% these cities. It has also found lot of of the transactions were cash-based. Only interest generating from tier 2 & 3 I5% of personal consumption expenditure cities, in line with the vision of digital took place digitally. The demonetization India. The company expects a large initiative has set a new phenomenon in the contribution from them towards country’s financial history and led to cashless its next phase of growth along with transactions. There has been sharp rise in the consistent increase from tier 1 digital transactions using debit/credit cards, geographies. mobile banking, Aadhaar Enabled Payment Mathur also has plans for System and Unified Payment Interface. international expansion: “South East Asia and Middle East will be Harshil Mathur Karan Sarin WALLET MARKET our next markets because our technology is guides to guide the rural customers on how Adoption of mobile wallets as a medium of directly scalable to these markets. We have to use our micro ATMs. We believe in face financial transaction resulted by compulsion chosen these regions as the problems there to face interaction with the people. We of circumstances. The size of the wallet are very like India’s. In some of the overseas offer cataract surgery to aged people, so industry is more than $20 billion in India. geographies, we will go independently while they became influencer for our products After demonetization, conditions have in others we will look at entry through and services. Word of mouth provides most improved, but most of the customers in India strategic partnerships. But, we are not shifting of the customer for us. We show Bhojpuri prefer cash on delivery option for making our focus away from India, as demonetization movies to the rural customers by using payments for online shopping. has opened a huge opportunity. India will be projectors, and distribute chai and samosa Harshil Mathur, CEO & cofounder, a key and primary market for us.” to maintain the relationships with them.” Razorpay, says: “We aim to democratize Sunil Kulkarni, Joint MD, Oxigen payments across India. So, businesses from Services, says Oxigen wallets receive a MERCHANT, B2B PAYMENTS anywhere in India can collect payments and major chunk of business from states like UP, B2B payments are the key focus for the truly have a global reach. For online retailers, Orrisa, Rajasthan and Bihar. The company is payments companies. The companies are we provide a powerful platform for collection planning to introduce 50,000 micro ATM’S coming up with a complete suite of B2B and control over their payments infrastructure. across India. These micro ATM will be one- oriented products which would help solve With offline companies, there are various smart stop solution for all payments transactions. issues like invoice collection, multiple vendor offline to online solutions we offer like eCOD disbursements, payment tracking, etc. The and ePOS to help them to go cashless.” RURAL MARKET payments companies have also received good Apart from start-ups and e-commerce, There has been potential rise in the digital customer feedback for existing solutions like Razorpay is seeing a lot of thrust coming from payments in the rural areas. The wallet eCOD, an online payment collection system at the OTA (travel agents) and aviation segment. companies have special strategies to target the time of delivery, which is used by logistics This year, it is also exploring partnering with the rural market. This market has been key and e-commerce businesses to replace cash new verticals such as education, government for Oxigen. The company organizes health tedious and costly cash collection systems. and logistics. “We expect a 10x growth this camps, women employment, promote year in terms of volume with the number of hygiene factors like use of sanitary pads by IMPACTFUL CAMPAIGNS merchants also doubling. We will expand women. It has appointed Sachin Tendulkar as Paytm has unveiled a new digital campaign. into newer verticals like government and its brand ambassador to create trust among It is using a film to promote its online travel education. The company will run lean setup the customers. business. It is intended to create overall with a lot of focus on automation of internal Meher Sarid, group president, awareness about wide range of travel (ticket processes which will help us towards our goal Corporate Affairs - HR, Brand & Marketing booking) related offerings from Paytm. The of sustainability,” says Mathur. of the company, shares the strategies to convenience of finding the complete bouquet target rural customers: “We use several of air, rail and road travel booking options FOCUS MARKETS offline and point of sale technique to under one roof combined with the ease of Razorpay focuses on metros and other tier promote the sale of our products through payment has enabled the company to be a one- 1 cities. It has found large scale adoption in leaflets, posters, and banners. We use user stop destination for everyone’s travel needs.
30 Banking Frontiers June 2017 Oxigen had adopted ‘Playing Host’ MARKETING TECHNOLOGY theme in its marketing campaign. In 2015, Earlier, marketing depended on ‘spray the company had sponsored South African and pray’ push models. But, now a cricket team’s dress for its tour of India. In data-driven approach empowers to 2016, it sponsored New Zealand T-shirts understand our customers and deliver during the India tour. “We are also the an extremely personalized experience. T-shirt sponsors of the Gujarat Lions in the Meher Sarid of Oxigen says the IPL 2017. We also use print media to inform company is the only one in India that our customers about the important notices, provide cash to digital transactions. etc. Apart from that, we also used social He adds that the company is now media channels to reach our customers,” says focusing on the north-east market Sunil Kulkarni Meher Sarid Meher Sarid. for growth. It uses AI for chatbot, Karan Sarin, chief marketing officer, user influence and predictive analysis for the company’s growth has been organic and Razorpay, says the company had launched defining population.” word of mouth has been the most effective a series of events called RevUp, which is Sarin shares the example about the channel. “We brought a fast, affordable targeted at early stage start-ups. The events use of marketing technology to target and secure way for merchants, schools, are part of the company’s attempt to help customers: “We gather lots of data about e-commerce and other companies to accept the future generation of entrepreneurs our users during the onboarding process. payments online. Our initial users loved our by creating a platform that helps them Then, we put all this information together product because it solved a real problem collaborate with industry experts and learn and crystallize our messages into a campaign and in return, they spread the word. We just from their experiences along with ours. around various buyer personas. The emotion ensured that marketing is tied to the product The campaign intends to build a complete of the campaign’s messages and graphics are and it represents what the product delivers. support ecosystem. The company has also derived from the insights we gained from Our marketing efforts continue to be as introduced Razorpay Zero Plan, that helps the data we collected. I absolutely believe innovative as the product they serve,” he adds. entrepreneurs put behind the hassles of that data and more importantly, the insight finding right business solutions needed to derived from data fuels creativity and inspires EVENTS kickstart their business. This plan offers better initiatives and campaigns.” The payment and wallets companies have zero-charge services from Razorpay and its diverse audiences and the goal is to engage partners such as Exotel, LendingKart, and BRAND SPENT with them in the most relevant way. For Zoho among others, help them get started. Paytm has allotted an advertising budget of large companies, they organize events that `50-60 crore for the next few months. In are more contextual to their domain and CONTENT MARKETING June, the company had already shared its functions. For targeting small companies, Content marketing is effective when content plans of spending `600 crore on branding, product awareness events are organized. To is precisely mapped with the various stages of marketing in 2016-17. give different messages to different audiences, the buyer’s journey. Most of the time, before MobiKwik on the other hand, has and to address their unique needs the events becoming a customer, a prospect will first earmarked `30 crore to be spent in mass are often tailor-made. go through what’s called the sales funnel. media campaigns by January next year. The sales funnel consists of different stages Upasana Taku, co-founder, MobiKwik, says: FUTURE ROADMAP a customer goes through leading up to their “In the wake of the immense opportunity There will be potential growth for Indian purchase - from awareness (top of the funnel), that demonetization has presented to the e-payments companies in the coming to consideration (middle of the funnel), to digital payment companies, we have begun a years. The recent changes in the regulatory conversion (bottom of the funnel). `30 crore campaign across channels, which framework are driven by the need to facilitate Says Sarin: “Our content strategy is to will continue till January next year. Cash payment systems that combine the much- provide most relevant content at each stage crunch has impacted masses at large and valued attributes of safety, security and of the customer journey. From more top- being a major player in the industry, it is our universal reach with technological solutions level awareness generating content like blog responsibility to educate masses about wallet that enable faster processing and enhanced posts, articles, and social content at the top payments to make their lives easier and help convenience and inter-operability, without of the funnel, we offer more educational them overcome the challenges being faced compromising on robust regulation for content like case studies or webinars due to the shortage of physical currency.” systemically important players. It will be during the consideration stage, and finally Oxigen is spending around `100 crore interesting to see the how the framework more detailed content like case studies, in marketing. It is planning to increase its evolves and keeps pace in this space over testimonials, and product demos that aids digital marketing budget. the coming years and match steps with selection and purchase at the bottom of Sarin of Razorpay says the company has technological innovations. the funnel.” spent conservatively on marketing. Most of [email protected]
Banking Frontiers June 2017 31 Small Finance Bank Utkarsh plans to offer full banking services
The Commonwealth Development Corporation supported Utkarsh Micro Finance has just transitioned itself to a small finance bank. Govind Singh, MD and CEO of the bank, outlines the proposed activities of the bank
N. Mohan: Can you briefly outline the housing and MSME loans (ticket size as genesis of Utkarsh Micro Finance and how well as activities). In the coming years, we it managed the transformation as a small will also focus on other business and other finance bank? retail loans (like agri and vehicle loans). Govind Singh: As you know, Utkarsh Micro Finance is a Non-Banking Financial What is the level of technology induction in Company - Micro Finance Institution the bank? Will the bank be a fully digitized registered with the Reserve Bank of India. entity with paperless transactions? As most Headquartered at Varanasi, it started of your transactions involve the rural India, operations way back in September 2009 to what are the challenges that you face in provide financial and non-financial services creating a digital platform and how do you in its area of operations to the unbanked propose to overcome these challenges? and underserved population who have the In the year 2013, we introduced mobile skill but are in need of capital. Initially, based technology at field levels for real time it started with credit facility under joint data flow on disbursements and collections. liability group (JLG) model. Today, the A year ago, we upgraded the mobile company also has Micro, Small and Medium technology with tab-based operations. Enterprise Loans and Housing Loans In banking context, we have now products in its bouquet. Currently, it has 344 Govind Singh emphasizes that upgraded our system to a user-friendly core microfinance, 18 assets, 7 micro banking and the bank’s focus would be to banking solution (even for our microfinance 15 general banking branches in 110 districts operations). spanning 10 states of Uttar Pradesh, Bihar, take care of the unbanked and We faced some challenges in Jharkhand, Maharashtra, Madhya Pradesh, underbanked sections of the connectivity, since most of our branches are Chhattisgarh, Delhi-NCR, Uttarakhand, population in unbanked and under banked districts. Haryana and Himachal Pradesh. But, even for this technological challenge, From the very first year, we were we evolved a solution by carrying out focused on putting strong support and and bringing in transformation at the bottom operations in both offline and online modes. control structure in place. Even the very of the pyramid level. Will this focus remain There ought to be some tethering 1st loan was audited internally. We believe when you operate as a bank? Can you concerns initially given the geography in imbibing three pillars of a sustainable explain the target audience of the bank? and infrastructure we operate with, institution - Culture, Process and Growth. Which other sectors are you going to focus? but we are happy in addressing these We had KPMG as our statutory auditor Yes, our focus would continue to be concerns confidently. and had set up Responsible Finance (risk providing delightful banking experience to management) department in the first year all the segments of the society, especially Can you give details of the digital platform of operations. to the unbanked and under banked. Even you intend to create? Will there be ATMs, Our focused approach on quality after 5 years down the line, over 50% POS terminals, tablet banking, debit cards, rather than just quantity has helped us our portfolio would continue to be the eKYC in your scheme of things? earn regular industry recognitions like the microfinance loans. Use of technology is an integral part Mix S.T.A.R Award (Socially Transparent As a bank, our priority would be to of all our initiatives and we speak digital. and Responsible) and Client Protection provide all types of banking facilities to our The Utkarsh approach towards banking Certificate from Smart Campaign. existing clients along with new segments is technology driven to bring efficiency of society at large. Considering our current (including all the platforms of ATMs, POS As a MFI, Utkarsh has been financing JLGs clientele we have widened the scope of our terminals, tablet banking, debit cards, eKYC,
38 Banking Frontiers June 2017 etc). For a delightful customer experience, our current initiatives include tab banking solutions for customer onboarding, digital branch banking solutions for staff and seamless customer experience. We also offer mobile banking – an app for all the banking needs in customers pocket - Banking on the Move, which is our internet banking solution, a portal to meet all the banking needs and offering customer convenience and ATM’s at branches and offsite (at key strategic locations). Going forward, we will focus on certain key initiatives, which include integration of merchant acquiring business. For instance, we propose to have Bharat QR code integration in our mobile banking application for seamless payments and collections for our customers, integration with UPI for instant payment settlements and exploring other possible integrations A joint liability group financed by Utkarsh Micro Finance for generating value for customers. We also intend to have our own payment gateway, Utkarsh has always been transparent bottom line, the Utkarsh philosophy is bill payments system and BHIM app. and adopts fair practices for the benefit derived from the intent of how it is achieved. These facilities are part of our digital of all its stakeholders (be it customers, banking strategy and will be launched in a employees or partners) As I mentioned Have all the customers of Utkarsh Micro calibrated manner. earlier, we have won prestigious awards Finance become customers of the bank? for this initiative. We will be responsible Yes, as part of our business Which are the states that you intend and responsive in all our services. We come transformation plan, all the customers to focus initially? How many branches together with integrated social values and of Utkarsh Micro Finance have become are there currently and how many are always strive for excellence. This is how our customers of the bank. envisaged in 2017-18? core values are defined and being practiced While we will be opening branches in all since the beginning. It reflects more from As a small finance bank, you have a higher our existing 10 states, our major focus would the Utkarsh approach, attitude and thought target for priority sector lending. How initially be in Uttar Pradesh and Bihar. In FY process. Our new logo depicts our ideology, would you be achieving this? 2017-18, we propose to open around 40 to our legacy and our aspirations. Currently, our entire portfolio qualifies 50 general banking branches. We will also We strive to be a technology driven under priority sector lending. All our loans be simultaneously converting our existing entity. In the year 2013, we introduced disbursed under microfinance are for 350 microfinance branches into banking mobile based technology at the field for real income generating purpose. Going ahead outlets. In terms of asset products, we would time data flow and a year ago, we upgraded also, priority sector lending would be our be adding agri, vehicle, personal and other the mobile based technology with tab based strong point rather than a concern. retail loans in the coming 2-5 years. solutions. In the banking context, we have now further upgraded to user friendly CBS Can you give details of the capital As a MFI, what has been the total value even for our micro finance operations. structure of the bank? What are the plans of assets under management? And as a We always aim to provide best accessible to strengthen this structure? How do you bank, what would be the business you will technology services at grassroots level even propose to bring in capital? be targeting in the first 5 years? in the hinterlands to provide a delightful Utkarsh Micro Finance is the holding As a MFI, the total value of assets under banking experience to all our customers. company, and it holds 99.99% of the total management is more than `1,700 crore. As Our major focus would be on simple, equity of Utkarsh Small Finance Bank. a bank, we target to have a balance sheet of affordable and accessible banking more than `10,000 crore in the first 5 years. offerings covering the entire gamut of When are you planning your IPO? financial services, including credit, savings, We are adequately capitalized. We may What is the USP for the bank? What are investments, insurance and mutual fund explore the prospects of an IPO 3 to 4 years the innovative products that are planned? products to the society at large. down the line. How do you propose to make a difference? More than focusing on top line and [email protected]
Banking Frontiers June 2017 39 Growth Channel Monthly retail spend on SBI Card rises to `5000 cr Co-branded card portfolio is expected to double in the next two years by growing the existing partnerships and launching new programs in untapped categories:
BI Card, in order to cater to the products. At present, the share of co-branded needs of diverse customer segments, category in our business is 15-17% and we Shas partnered with brands across are seeing double digit growth in number categories offering the most relevant and of cards as well as spends yoy. We are rewarding solutions for the cardholders. always exploring opportunities for further Its present cardholder base is 4.68 million collaborations to offer more and more customers. It has also been on a continuous choices to our customers,” explains Jasuja. growth trajectory over the past few years, SBI Card expects to double the with customer base rising at 30% plus, and co-branded portfolio in the next 2 years today it is the second largest card issuer in by growing the existing partnerships the country. and launching new programs in other Says Vijay Jasuja, CEO: “SBI Card’s untapped categories. spends too have been growing steadily. We now have the second largest spends share in RISING USE the industry, with monthly retail spends on A significant share of SBI Card’s customer our cards being upwards of `5000 crore.” base is from the top metro cities - Delhi- NCR, Mumbai and Bengaluru. However, DIVERSIFIED PORTFOLIO the card company is seeing rapid growth The culture of constant innovation in in smaller cities such as Jaipur, Nasik, an endeavour to ‘Make Life Simple’ for Vijay Jasuja claims all credit Surat, Lucknow, etc. Jasuja puts the rate of customers is instrumental in driving SBI cards from SBI Card carry a growth from tier 2&3 cities higher than that Card’s growth. This is reflected in its wide strong value proposition and of the overall portfolio and the company is range of industry first products. Jasuja cites offer attractive reward points seeing a growing trend in queries /card examples: “SimplyCLICK is a one of its kind on spends applications from such centers. The SBI card designed for today’s online generation, Card Unnati, available through 20,000 SBI Card Unnati is a unique card tailored were among the first to introduce unique plus SBI branches, offers unmatched for new users including Jan Dhan account combo credit cards, in partnership with accessibility and will enable us to enhance holders and those without credit history, Mumbai Metro and Chennai Metro, to our penetration in tier 2&3 cities. and SBI Card ELITE for SMEs is a premium offer commuters the convenience of a Overall, in the current climate, with card for SME customers and many others.” metro smart card and a credit card in one. the government’s emphasis on digital In fact, SBI Card has the largest number We have also tied up with various banks to payments, consumers everywhere are of co-branded cards across the widest offer our cards to their customers.” becoming more open to card usage. They category spread, in the industry. In the SBI Card and Tata Capital have become comfortable with e-payments travel and lifestyle space it has a strong recently launched a unique credit card and more people adopt credit cards as foothold through tie-ups with market in collaboration with Star Bazaar. The a preferred payment instrument. Jasuja leading businesses and institutions such as Tata Star Card offers 3.5% value back expects to see significant growth from small Tatas, Future Group, Air India and IRCTC. at all Star Bazaar outlets. The card is markets across the country. In the retail segment, FBB SBI Styleup designed for customers who frequently Card is the fastest growing and largest make departmental and grocery category E-COM TRANSACTIONS co-branded card in the country. purchases from organized retail stores. Over the last 3-4 years, e-commerce has SBI Card has had a successful decade- “We have observed that co-branded emerged as a key driver for growth in long relationship with Indian Railways cardholders tend to use their cards actively consumer spends through cards. Three as its exclusive partner and this business and frequently, with spend and ticket sizes years ago, less than 25% of SBI Card spends is also growing steadily. Says Jasuja: “We on the same being higher than on other were from e-commerce. Jasuja explains:
46 Banking Frontiers June 2017 “Presently, online spends constitute about 45-50% of the total spends on our credit cards. Various discounts, cashback offers and reward earnings coupled with ease of shopping online has contributed to the increase in credit card usage for e-commerce. A unique product, SimplyCLICK SBI Card, through collaborations with 8 strategic partners - Amazon, BookMyShow, Cleartrip, Foodpanda, FabFurnish, Lenskart, OLA and Zoomcar - offers a Govind Sankaranarayanan, Tata Capital (L), Vijay Jasuja, SBI Card and Jamshed Daboo of Trent highly rewarding shopping experience in all Hypermarket, launching the Tata Star Card. major online spend categories. Cardholders receive accelerated reward points to the For agile players who can adapt to the various channels - SMS, email, IVR and tune of 10X on purchases made on partner ever-changing payments landscape and also social media platforms. sites and 5X on all online spends on non- provide meaningful solutions to consumers, partner sites. “The SimplyCLICK SBI Card there is tremendous growth opportunity. DECLINING DELINQUENCIES is a significant contributor to our portfolio. Based on deep market insight and a pulse Most customers today are aware of the E-commerce is also providing avenues on evolving consumer needs, Jasuja hopes negative impact of defaulting on credit for people to buy premium international the company will continue to innovate and card payments on their credit ratings and brands in tier 2&3 cities, where people offer relevant solutions and this will drive are therefore careful about meeting the have money and aspirations but lack access our growth in the sector. payment due dates to maintain / improve to big city malls. We expect E-commerce their credit worthiness. SBI Card is seeing spends growth to remain strong over the MINIMIZING FRAUDS decline in delinquencies, in line with the next 3- 5 years,” says Jasuja. SBI Card is dedicated to safeguarding industry. “Of late, we are seeing a trend its customers’ interests and providing that people independently check for their inactive card activated them a safe and secure experience, using CIBIL score to keep track of their history. Jasuja points out that with progressive industry leading safety features to prevent As we move ahead, delinquency is expected regulatory policy, government support frauds. Jasuja claims: “We are one of the to decline further because of awareness to to cashless transactions and increasing first few companies to have migrated keep credit history clean,” adds Jasuja. internet and smartphone penetration, the bulk of our portfolio to the superior digital payments industry is growing rapidly. Europay, MasterCard and Visa (EMV) LOYALTY POINTS’ SUCCESS Consumer acceptance of digital payments platform. These chip-and-PIN cards All credit cards at SBI Card carry a strong is on the rise. “Post-demonetisation in offer secured usage by way of mandating value proposition and offer attractive particular, we have seen a new normal personal identification number (PIN) reward points on spends on the card. Its emerge where card usage is concerned. for every transaction. All cards issued by award-winning rewards program, Shop Volume and frequency of transactions SBI Card have added layers of safety, and Smile, offers consumers over 200 on credit cards has increased, indicating which considerably reduces risk of redemption options including products, rising acceptance and usage of credit cards fraudulent activities.” gift vouchers, e-vouchers and air miles from by consumers. Usage of credit cards for It is observed that one of the most leading brands across diverse categories. In everyday spends such as departmental common ways in which fraud is perpetrated order to deliver greater value to consumers, store and grocery has risen significantly. We is by extracting the card details such as SBI Card consistently keeps adding the have also observed that a large percentage CVV number, expiry date or OTP from best brands and most relevant products of inactive cardholders have started using unsuspecting customers. In response, SBI to its catalogue. Consumers get further their cards. All this indicates a shift in Card has chosen to go an extra mile to value through periodic flash deals, theme consumer behavior which will eventually engage and educate customers on fraud, via based offers etc. Jasuja says: “The program be the driver for the growth of digital its educational campaign ‘Prachar’, which resonates strongly with our customers as payments sector,” says he. sensitizes consumers on safety aspects of is evident in the best in class redemption Government initiatives like Bharat QR, credit card usage, schemes and techniques rate. The program has been awarded as the which will allow card payments at small employed by fraudsters and ways to Best Loyalty Program in NBFC sector at merchants who do not have physical PoS protect oneself against such activities. various fora and has been very successful terminals, are also expected to boost card Under the campaign, SBI Card regularly in building saliency.” usage significantly. communicates with customers through [email protected]
Banking Frontiers June 2017 47 Regional Rural Bank Himachal RRB to focus on agri, MSME for growth
The bank’s chairman has set an ambitious goal of `10,000 crores business by 31 March 2019 for the bank:
imachal Pradesh Gramin Bank, straight to the account of beneficiaries. It sponsored by Punjab National will also issue RuPay debit cards and RuPay HBank, came into existence with the Kisan cards to all eligible account holders amalgamation of two RRBs, viz Himachal so as to minimize the number of customer Gramin Bank, Mandi (sponsored by PNB) visits to bank branches, thereby increasing and Parvatiya Gramin Bank, Chamba the efficiency of the staff. (sponsored by State Bank of India) in 2013 The bank has introduced a scheme with its head office at Mandi. The area of to promote the government’s initiative of operation of the bank is spread over to 12 pushing cashless transactions. As part of districts of Himachal Pradesh. this scheme, 350 customers of the bank have won cash prizes under the ‘Lucky BRANCHES, MICRO-ATMS Grahak Yojna’. An amount of `4.06 lakh Himachal Pradesh Gramin Bank has 263 has been credited to their accounts. branches across the state as on 31 March The difficult terrain of Himachal 2017. To reach more unbanked areas, the Pradesh makes it impossible to cover all bank is following Bank Mitra and Bank the unbanked areas through brick and Sakhi models. Till date it does not have mortar branches. The bank has provided any ATM. Satish Kumar Chawla, chairman micro ATMs to its BCAs to provide better of the bank, says the bank has opened 26 and effective services in such areas. Says new branches in FY 2016-17, most of which Chawla: “Banking Frontiers recognized this are in unbanked rural areas of the state. It Satish Kumar Chawla effort and awarded Finnoviti 2017 Award to has 253 branches in rural areas. “We plan believes timely promotions our bank for distributing 85 micro-ATMs to open 25 more branches in FY 2017-18. and elevation to new scales to BCAs.” We have issued RuPay debit cards for all PMJDY account holders and to 69% of will encourage the staff to put DEPOSITS & ADVANCES Rise eligible SF accounts. To reach the unbanked something extra The bank has total deposits of `4057 crore geographically difficult areas of Himachal and gross advances of `1386 crore. It Pradesh, we have also provided 92 micro- achieved 22.25% and 13.71% yoy growth ATMs to 108 BCAs,” adds Chawla. performers has been the buzz word for us in these areas. It has given substantial The bank’s staff strength is 743, and timely promotions and elevation to weightage to retail loans, MSME loans and including 2 GMs. Eight officials from PNB new scale will surely encourage the staff to personal loans in its credit portfolio. Nearly are also with the bank. Meanwhile it is now put something extra.” 90% of advances are disbursed to priority engaged 288 new candidates, comprising sector and 45.9% to agriculture sector. 2 senior managers, 10 managers for WINNING CUSTOMERS Similarly, it registered annual growth of agriculture, 2 chartered accountants, 19 As on 31 March 2017, the bank has about 12 37.25% in CASA deposits. Says Chawla: managers for general banking, 85 assistant lakh customers all over the state. It serves “CASA deposits were increased by `315 managers and 170 multipurpose office farmers and low and middle class of the crore after demonetization. Growth in assistants. Says Chawla: “Soon there will state. Chawla says the bank proposes to advances was recorded less than expected be no shortage of staff in the bank. We will increase customer base by opening new as recovery was affected in loan accounts. have a unique blend of experienced staff branches in unbanked areas of the state, During the current financial year, we will and youngsters to help achieve a steady using IT and other technologies to effectively have focus on agriculture and MSME and consistent growth, and to successfully provide banking services to every customer. sectors. We will put stress on investment undertake the migration from traditional to It also intends to provide Adhaar seeding credit in agriculture, development of high digital banking. Transparency in operations for all the customer accounts, so that direct density apple orchards in apple belts of HP with accountability and recognition of benefit transfers by the government reach and financing MSMEs.”
52 Banking Frontiers June 2017 market SHARE too rises The share of the bank’s total business in the state has increased from 3.69% as on 31 March 2014 to 3.88% as on 31 March 2017. Performance shares under PMJDY, PMSBY and PMJJBY were 17.30%, 13.35% and 8.72% respectively. During the period of demonetization, there had been spurt in deposits and recovery thereby reducing the CD ratio of the bank to 34.18% against the national goal of 60%. Chawla says 23 branches exceeded the total business figure of `30 crore and 14 branches exceeded the total business figure of `10 crore. A total of 37 branches have been proposed for up-gradation of category and this will provide promotion opportunities to staff members and more Staff members at HO of Himachal Pradesh Gramin Bank jobs for people of Himachal Pradesh.” crore which is 6.32% of gross advances. and posting was being done in May-June. TECHNOLOGY SETUP Due to increase in NPA provisions, net NPA Chawla says the bank has now preponed this All the branches of the bank are CBS of the bank has come down to 3.83% of net exercise to be in line with the sponsor bank. compliant. It is offering NEFT & RTGS advances. The whole promotion process for 2016-17 payment channels. From beginning of During the year, `18.54 crore has been was completed on 03 September 2016. financial year 2016-17, the bank has recovered, whereas fresh additions to During last 2½ years, a number of performed well in the area of financial gross NPA amounted to `32.24 crore. The benefits have been provided to the staff, inclusion Chawla says the BCs have carried bank’s NPA provision of `27.12 crore, as which includes free health check-up for out transactions amounting to `3.34 crore on 31 March 2016, has increased to `39.47 staff and their spouse above 40 years, in the month of March 2017. Acquiring of crore as on 31 March 2017. Due to increase amount of memento on retirement equal 2000 PoS machines and starting of mobile in Risk Weighted Assets, there has been to that of PNB, silver jubilee award equal banking service are on cards and the bank alarming fall in CRAR of the bank from to PNB, housing loan limit increased equal is also planning to provide UPI facility 9.5% as on March 2016 to 9.03% as on to PNB, leased accommodation for scale IV and internet banking (view only) to its September 2016. officers, partial adjustment of housing loan customers. For this purpose, bank has also Chawla explains: “By way of taking in case of untimely death of an employee, given its consent to the sponsor bank for the various measures like issuance of IBPC of tie-up with 3 hospitals (including Medanta upgradation of Finacle (CBS) to version 10. `170 crore, shifting of investment portfolio Medicity, Gurgaon) for health check-up Finance required for the said upgradation, from bank FDR to government securities within entitlement. as per commercials shared with us by the etc, we are happy that CRAR of the bank as sponsor bank, is approximately Rs1.5 crore.” on 31.03.2017 has improved.” ambitious TARGETS The main IT vendors are HCL Comnet The bank has in September 2016 created for networking, Best Power Solution for THIRD PARTY SALES a document spelling out ways to achieve supply of UPS, HP India for supply of Performance of the bank with regard to an ambitious goal of `10,000 crore computer hardware and Infosys for Finacle settlement of claims is the best in Himachal business by 31 March 2019. Chawla is CBS. Kiosk banking is from TCS and eKYC Pradesh. Chawla underlines: “Success of confident that this will gather momentum from CSC India. Chawla adds: “The data these schemes is the result of pro-active in FY 2017-18 and the bank will scale new center is being managed by our sponsor attitude of our team. Our nominations in heights by achieving the target set in the bank i.e. PNB. All the servers are hosted micro insurance and claim settlement have document. He adds: “Many of us seem to by PNB Data Centre Delhi with DRS at been conferred a number of awards during have understood that our goal of reaching Belapur, near Mumbai.” the 46th Skoch Summit in December 2016.” every village and every door of Himachal Pradesh is enormous, but achievable, if NPA PROVISION UP benefits to staff done in a planned manner as well as with During the financial year ended 31 March Till now, the bank has been announcing full conviction and perseverance.” 2017, gross NPAs of the bank stood at `87.36 annual promotions in March every year [email protected]
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