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P2P lending here to stay

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India Money Martwww.bankingfrontiers.com

Vol. 15 No. 1 May 2016 `75

Pages 60

Make in India helps credit growth

Aditya Birla Finance

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Banking Frontiers May 2016 3

Editor’s BlogManoj AgrawalMobile : 98673 66111Email : [email protected]

May 2016 - Vol. 15 No. 1

Group Publisher : Babu Nair

Group Editor : Manoj Agrawal

Editor : N. Mohan

Editorial

Mehul Dani, V. Raghuraman, Ravi Lalwani,

Surekha Galagoda, Mohammed Irshad

Research Editors

Prof Venugopal Iyengar, V. Babu,

Ratnakar Deole, W.A. Wijewardena,

Sanchit Gogia, K.C. Shashidhar

Marketing

Zahid Siddique, Aaswad Deshpande,

Gautam Ratan, Shweta Kadam,

Sunny Rajendra H., Ashwani Seli (Delhi)

Events & Operations

Durgesh Nadkarni, Ashish Verma,

Saaniya Naik, Bharat Solanki,

Gautam Magare, Shirish Joshi,

Stalin Saldhana, Wilhelm Singh,

Pramod Jadhav, Amit Gupta

Design

Somnath Roy Choudhury

Published By

Glocal Strategies & Services

D-312, Twin Arcade, Military Road, Marol,

Andheri (E), Mumbai 400059, India.

Tel: +91-22-29250166 / 29255569

Fax: +91-22-29207563

Printed & Published by Babu Nair on

behalf of Glocal Strategies & Services and

Printed at Indigo Presss (India) Pvt Ltd.,

Plot No. 1C/716, Off Dadoji Konddeo Cross

Road, Between Sussex and Retiwala Indl.

Estate, Byculla (E), Mumbai 400027.

Editor: N. Mohan (Responsible for selection

of news under PRB Act)

Banks vs Fintechs

The driving force behind digital banking is not just the availability of

technology but also the rising level of competition. Already 21 provisional

banking licenses have been given, which is such a steep rise compared

to the past that it boggles the mind. RBI governor Raghuram Rajan has now

expressed that banking licenses will become available on tap for qualified

applicants. So, the number of banks will surely jump up.

Most of these new banks will definitely chase the most accessible customer…the

typical middle and upper class mid-age person who is tech savvy and looking

for good deals. Numerous wallet companies have already targeted this segment

and made inroads.

And then there are customer facing fintechs. While many fintechs target banks

as their customers, there are many others who are directly targeting the end

customer. While banks are banks at heart and adopt technology, these fintechs

are IT companies at heart and they are adopting financial services. One major

difference between them and banks is that fintechs are specialized entities –

they focus on a single or few aspects of financial service and aim to excel at

that. Typically, their objective is market domination for their chosen service. With

that mission, they are well poised to make deep inroads into selected aspects

of the banking space.

One advantage for fintechs is that they face far fewer regulatory and compliance

issues. That gives them greater freedom and the ability to be very very agile. They

are funded by venture capital and private equity rather than public deposits. So,

the future of financial services is a battle between safety seeking pubic deposits

and risk taking private funds. The regulator will surely have to resolve a lot of

dilemmas to find the right way to bridge these two super-powers.

10 Banking Frontiers May 2016

Interaction

N. Mohan: Tell us briefly about the Aditya

Birla Financial Services Group and where

does Aditya Birla Finance fit in?

Rakesh Singh: The Aditya Birla Financial Services Group (ABFSG) is an umbrella brand for all the financial services businesses of the $41 billion Aditya Birla group. We are a significant player in the non-banking financial services space and rank among the top 5 fund managers in India (excluding LIC). Our presence extends across many sectors, including life insurance, asset management, private equity, general insurance broking, wealth management, broking, online personal finance, housing finance, pension fund management and NBFC. We are also setting up a health insurance business with MMI Holdings of South Africa and a payment bank along with group telecom company Idea. Across our 12 lines of business, we enjoy the trust of over 7.8 million customers, manage assets worth over `185,515 crore and possess a talent pool of over 12,000 committed employees. ABFSG’s wings are spread across more than 500 cities in India through 1350 points of presence and over 112,000 agents / channel partners. With approximately `6270 crore in consolidated revenues and profits of about `743 crore, we are today a significant non-bank player.

As the lending arm of ABFSG, Aditya Birla Finance (ABFL) is one of India’s leading non-banking financial companies, providing financing solutions to customers, which completes the ABFSG bouquet of financial services. ABFL offers customized solutions in areas of capital markets, corporate finance, commercial real estate and mortgages, retail business and personal loans and infrastructure

project and structured finance.

What have been the key factors that

ensured sustained growth for Aditya Birla

Finance in spite of the sector as a whole

showing just moderate growth?

We have managed a consolidated portfolio worth `25,755 crore for the year ended 31March 2016 and has registered a healthy yoy growth of 46%. The gross NPAs as on 31 March 2016 have been ~ 0.63% as compared to 0.90% in the previous year and our net NPA is 0.22%. Our earnings before tax have been `626 crore registering yoy growth of 52%.

We attribute this performance to

strategic design in chosen product categories, expansion of geographies, increased manpower productivity and prudent customer selection. We have also invested heavily in technology platforms to bring in high levels of efficiency and service.

What are your focus areas and what are

the products to suit these customers? We have traditionally been laying a

whole lot of emphasis on the SME and MSME sector. I can say this is our core focus area. As much as 30-35% of our business is with the SME sector. We have products specifically structured for this sector. This business actually comes under the broad product called corporate finance, which also offers products such as treasury risk solutions, structured finance, working capital, demand loans, term loans and supply chain financing solutions, including invoice discounting.

I must mention that one of these products - structured treasury risk solutions - is a popular product for us. What we do is we offer assisted guidance to safeguard one’s business against the volatility in the currency markets. We provide long term advice as well as timely insights to guide the corporate in its dealings with the forex market. We can offer solutions structured to the requirements of the corporate concerned. This I believe is our USP.

One of our key business drivers is the mortgages business. Through this, we help SMEs and individuals to realize their financial goals like buying new premises or investing in machinery and processes. We offer loan against property, lease rental discounting, construction finance and

Aditya Birla Finance offers a range of financing solutions to make its customers achieve ambitious growth. Rakesh Singh, CEO, provides an insight into the company’s strengths and priorities:

Aditya Birla Finance on a growth momentum

Rakesh Singh explains how solution-oriented approach and structuring the deals based on customer requirement have helped the company


commercial property purchase loan. This business vertical now runs in 30 cities and we intend to double this in about a year.

Quite a good number of SMEs and MSMEs avail of our financing solutions such as SME loan, working capital demand loan and term loans.

We have recently entered unsecured lending. We have started offering personal loans and business loans. The focus will be on SMEs and it is part of our retail business but a separate vertical.

What are the advantages or constraints

that an NBFC like ABFL has over a bank?

Our biggest strengths are a faster turnaround and a hassle-free process for customers. We have some of the best approval turn-around-time (TAT) in industry. We have a dedicated business credit team to evaluate all the proposals in terms of borrower financials, credentials, security analysis and it provides suggestions to make the same workable. Generally, in the BFSI industry, the evaluation is done only by the risk team. At ABFL, the credit process works as an additional check point and helps faster approvals.

We take a solution-oriented approach and structure the deals based on the requirement of our customers. Customized solutions, hassle-free financing, standardized processes and risk management are the strongest pillars of our business.

What role has technology played in

ABFL’s success?

We primarily operate within the B2B sphere where relationship-based acquisition and servicing plays a major role in revenue generation. We have invested heavily in developing IT systems to pave the way for seamless on-boarding and servicing. Examples include an end-to-end lifecycle transaction processing system for mortgages, which boasts of state-of-the- art customizations for the end customer, credit underwriting tools and scorecards, monitoring systems and servicing workflows and platforms among others. Given the changing technological landscape, the company is simultaneously developing

digitized modes of acquiring and servicing customers. This industry will continue to rely heavily on the existing model of business acquisition, but technology trends suggest that efforts need to be directed towards using the digital platform to not only acquire customers but to use initiatives such as search engine optimisation (SEO) and search-engine-marketing (SEM) to bring in customers directly.

How do you intend to address the

challenges and opportunities?

I strongly believe that challenges and opportunities go hand in hand. The competition is increasing every year with the entry of new players in the market. We are often faced with the challenge of competing with banks on pricing in price-sensitive segments, such as SME term loan and working capital requirements without access to a full product suite that a bank has. Keeping pace with the ever-changing and evolving technology is also a challenge. This calls for heavy investment in technology which is sometimes hard to justify as we do not have the advantage of economies of scale that the banks and FIs that cater to retail customers have.

Ever shifting and evolving regulatory environment brings in a great deal of challenges. We are also impacted by the global and domestic macro-economic conditions, as they directly or indirectly impact our business. A slowdown in certain important sectors, such as real estate, which are struggling due to limited number of transactions, impacts the financial services industry. Another issue of concern is the rising incidence of frauds. Finally, managing customer attrition in an environment of zero pre-closure charges and high competition continues to pose challenges.

On the positive side, there are also several opportunities in the business environment.

For instance, on account of various policy changes and initiatives by the government to make the environment conducive for growth of small and medium businesses, SME finance presents huge opportunities.

There is scope to grow further by penetrating deeper in the existing locations. We have an opportunity to add new asset classes to increase our scale, and thereby not just grow out revenue, but also reduce our cost. We also have a significant opportunity to diversify in the retail space.

What does the future look like for

the company?

The performance of the economy in FY 16 suggests that the way ahead is going to be trickier than anticipated, at least in the short term. Nevertheless, the green shoots are clearly visible. I believe that while the pace of recovery has been negatively surprising, once the building blocks are in place, we will be surprised again - but positively. The key challenges remain in engendering business confidence, reviving sentiment and ensuring business predictability. Our medium to long term story is still intact. In 5 years, we will have the youngest population amongst large economies. The challenge is how we can ensure that we maximize our potential.

From a future outlook perspective, the digital transformation underway will bring about a sea change in the way of doing business. NBFCs are and will be critical to the financial sector. Due to the nature of the financial system, there will be customers and segments of the economy that banks cannot adequately cater to and where NBFCs can add significant value for the financial system as a whole. We expect the growth momentum NBFCs have shown in the past decade to continue for the next. And Aditya Birla Finance will be at the forefront of this growth path.

[email protected]


Cover Story

India Money Mart

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P2P lending is in the news. The Reserve Bank of India has recently issued a consultation paper to the

stakeholders of this form of alternative finance seeking to prohibit cross border transactions and limit money transfer only between a lender and the borrower’s bank account. This, the regulator says, is aimed at eliminating money laundering. Besides, RBI is also proposing that P2P lending platforms must have a minimum

capital - `2 crore - besides measures to contain indiscriminate leverage and limits on funding by a lender to a borrower in view of the fact that most of the borrowers using P2P platforms today are not conversant with the financial nuances. In addition, the consultation paper feels that no entity other than a company can undertake P2P lending activity. RBI ultimately wants to bring this sector under its regulations.

So, why has P2P lending suddenly gained attention? Perhaps RBI feels that the sector is becoming popular and there could be scope for frauds, money laundering and other indiscriminate financial activities.

P2P lending in short can be described as an activity where lenders and borrowers, who are otherwise not eligible for availing the traditional mode of funding, can meet and facilitate transactions. These are

RBI has recently announced that the hitherto unregulated P2P lending in India would come under regulation soon and for this purpose it has issued a consulation paper. What is P2P lending? Is it another version of money lending? A discussion:

Cover Story

here to stay


often online platforms that match lenders with borrowers in order to provide unsecured loans. The borrower can be an individual who is requiring a loan and the lender may be someone who has funds and wants to beneficially invest the funds. The two meet on the P2P platform where the rate of interest can be set by mutual agreement between them. The platform gets a fee both from the borrower and the lender.

INTERMEDIARYRBI wants that the platforms can be registered only as an intermediary limited to bringing the borrower and lender together without the lending and borrowing getting reflected on their balance sheets. The platforms will be prohibited from giving any assured return either directly or indirectly. Besides, these platforms will have to have effective risk management systems, business continuity plans and data backup. Similarly, the platforms would be required to take the responsibility for transparent operations, data confidentiality and minimum disclosures to borrowers and lenders.

The paper also mentions that it has been noticed that some of the platforms virually function as recovery agents for the lenders and it has suggested that recovery regulations applicable to NBFCs should be the norm for these platforms as well.

SOCIAL LENDINGP2P lending, also called ‘social lending’, is a matured channel in several developed countries although 10 years ago there was no such channel existing. It is described as the practice of lending money to unrelated individuals, or ‘peers’, without going through a traditional financial intermediary such as a bank or other traditional financial institutions. It is a channel that can facilitate loans to borrowers with a good profile however with either low credit scores or a requirement that is not fulfilled through traditional financial institutions. The lenders here have the advantage that

they get higher interest rates than traditional instruments. There is also the process of reverse auction possible, which determines the interest rates to be provided to the borrower.

The noteworthy P2P platforms across the world are Lending Club, Prosper, Kiva, Zopa, Fairplace, CreditEase, PPdai.com, Society One, i-Lend, Faircent, Indialends and India Money Mart.

In the US, there are two prominent P2P platforms - Lending Club and Prosper. They claim to help thousands of borrowers and lenders to connect to each other. What has contributed to their success is the fact that they make sure every borrower has creditworthiness and at the same time the lenders have an established record. While they help the lenders who are essentially investors to find ideal borrowers, they also help borrowrs to pay the loans back.

P2P funding has its own disadvantages. One is about the security of the funds given to a borrower. There is no guarantee that the borrower would repay the loan. This often leads to remedial measures such as high interest rates.

VIS A VIS BANKThere has been a comparison drawn between Wells Fargo and Prosper. Wells

Fargo, has 270,000 employees and 9,000 branches nationwide. Prosper has just 240 employees spread across a few locations. Its operations are fully automated, and hence cost-effective compared to the operations of a bank.

P2P lending companies have shown remarkable growth in the last five years. It is said that to begin with Lending Club took over five years to issue $1 billion in loans. But today, it is managing to lend this amount every two months.

And these companies pass on part of their savings on account of lower operational expenses to their customers - better return for the lenders and comparatively affordable rate of interest for borrowers.

SIMPLICITYWhat attracts a person to a P2P lending platform is the fact that the process here is simple and quick. A borrower has just to fill in the information and submit documents to establish identity and once the loan is approved, it is instantaneously handed over. There are no other hassles. The one important factor that attracts an investor to this channel is the higher return. (In the US, this is calculated based on an algorithm that is designed with inputs on the default possibility,

At Lending Club headquarters in San Francisco


Cover Story

timely repayment and similar other factors and many investors consider the investment less risky than investments in stock market. The SEC has classified P2P lending as a security, which means these investments can be bought and sold on a secondary market. This enables an investor to back out of this investment by simply selling the loans on the secondary market and close the account. In fact it is a new asset class for an average person to invest. By diversifying the investment across 200 different borrowers, one can even mirror the overall default rate, gaining stability and consistency within the account.)

Normally, in P2P lending every lender and borrower can deal with multiple members. Some P2P lending platforms do not allow an individual to fund more than a certain percentage of a single borrower’s requirement to limit exposure risk.

PROCEDURESSo what is the procedure like? As soon as a borrower and a lender have agreed on the terms of the offer, they create a loan contract. In countries where P2P lending has markedly developed, the money from each lender goes into an escrow account held by the platform. The loan is disbursed after a minimum amount has been collected and post-dated cheques towards EMI payments are received by the investor. If the EMIs are delayed or not paid, the borrower is charged a penal interest. In case of default, the P2P platform assists in loan recovery.

Many Indian financial experts are of the view that P2P lending could pave the way for a better banking scenario. They believe that since lenders and borrowers interact with one another directly, there is virtual saving on intermediation costs. Similarly, it can help banks as the small ticket borrowers can be easily moved to this platform and banks can concentrate on large loans.

Is it akin to money lending? Not exactly, say these experts. It can be easily developed into a marketplace where individuals, small scale organizations and small businesses can easily avail finance without the rigmarole of collaterals, security pledges and hypothecations. It also has the advantage of an audit trail. And once RBI brings in the required regulations for the sector, it can easily be another pillar in the BFSI spectrum. However, several of them feel there

could be a cap on the interest rates offered by these players and the amount offered as loan to a single entity.

One concern that the experts have is the fact that this segment does not at this point of time afford to have

the luxury of accepting deposits unlike NBFCs and other financial services entities. It is in this context that the RBI stipulation that P2P lending platforms should have a capital of `2 crore.

GROWTH IN INDIAIndia has been seeing a steady growth in the number of P2P platforms. In 2016 alone some 20 new firms have come into being, according to information gathered by a well known data analytics company. In total, there are 30 companies in the country. However, India is making a very slow start as the number of such companies in developed markets are quite high - in China their number is said to have crossed 3000.

These 30-odd companies are broadly offering consumer loans, loans to SMEs and MSMEs, commercial loans and personal loans. To some extent, they are also offering educational loans. Some of the important players are Faircent, Loanmeet, i-lend, LenDen Club and i2i Funding. A borrower can get loans from `25,000 to `30 lakh - personal loans of up to `5 lakh or a business loan of up to `30 lakh. The loan tenure could be six months to 5 years while the interest rates could be from 12% to 36% depending on the credit profile of the borrower. The lending platforms evaluate the borrower in terms of credit reports from credit bureaus, bank statements and salary statements. The companies levy a fee for Staff members of Indian company i2i Funding

Founders of Society One of Australia


processing the loan and it can be anything from `500 to `2000. Some companies charge a percentage of the loan amount as a one-time fee. Mostly there is no pre-payment charges in case a borrower opts to prepay the loan. Delayed payments as well as non-repayments of EMIs attact additional charges, which can be really high.

A customer has to register himself with the concerned platform before he avails a loan. The required amount can be specified and each borrower has a page of his own where the details such as the loan amount required, purpose for which it is required, financial status, employer details etc are also to be filled in. Once this process is through, a verification is carried out. The details are then exposed to the lenders, who would approach the borrower online through the portal. Often a single loan can be provided by multiple lenders.

GLOBAL SCENARIOAgainst this, the global scenario is something like this:

P2P lending is an important source of cheaper fund-raising for people or businesses, especially those who may not be able to borrow from banks. According to an industry association, global P2P lending has grown to approximately $20 billion in 2015and it is projected to reach $150 billion+ by 2025. While almost all countries in the world allow this model, Japan and Israel are among those which have banned it.

Many industry watchers believe P2P lending may develop in India in a different manner. This may be because of the regulatory enviroment in the country. It could develop itself into a comprehensive online loan platform system where apart from individual investors, even recognized and registered lenders may also be present to distribute non-collateralized, small loans affordably. One challenge, according to them, could be the collation of data for credit information companies. These platforms must then be made to perforce file

this data as otherwise there could be major shortcomings.

Venture Catalysts, an angel investment firm which has funded LenDen Club, is of the view that P2P lending space in India is expected to become a $4-5 billion market within the next three to five years and it is considered to be high risk-return investment.

GLOBAL PICTURENo doubt, the P2P lending industry is posed for significant growth, especially in developed countries. The US has one of the largest P2P lending markets in the world by loan volume, but the UK’s is 72% larger on a per capita basis. Europe is the next big market - while the alternative finance market in Europe reached nearly $3.9 billion in 2014, a 144% jump, and small-business P2P loan volume in France grew almost 4,000% last year, to reach $10.6 million.

There are reports that Germany’s Commerzbank plans to launch its own P2P lending marketplace called ‘Main Funders’ soon. It is expected to connect SMEs and small bsuiness ventures seeking funding with investors. The name ‘Main Funders’ is a wordplay as ‘Main’ is the name of the river passing through Frankfurt, where the bank has its headquarters. The service is developed together with Main Incubator, the fintech incubator of Commerzbank. Under

German regulations only banks can fund loans. To comply with this all existing P2P lending companies in Germany partner with a transaction bank which originates the loan and then sells the proceeds to the investors. So far a handful of small specialized banks were involved in these transactions.

Similarly, Singapore’s DBS Bank said it has signed cross-referral agreements with two local P2P lending platforms, Funding Societies and MoolahSense, in a first-of-its-kind collaboration between established financial institutions and emerging fintechs. The partnership enables DBS to refer to these lending platforms some of the smaller businesses that the bank is unable to lend to. In return, these lending platforms will refer borrowers who have completed two successful rounds of fund-raising to DBS for larger commercial loans and other financial solutions such as cash management.

Meanwhile, banking experts in India have welcomed RBI’s discussion paper saying bringing this nascent industry under regulation would help it flourish and at the same time create an environment for proper credit flow in the country, especially to the unbanked and underbanked sectors. RBI has made it clear that it will not regulate them directly but they will be governed by the Companies Act.

[email protected]

Everything in P2P lending depends of technology


Interaction

Mehul Dani: How will the ‘Make in India’

program benefit India’s financial sector?

Kishor Kharat: Under the ‘Make in India’ program, focused approach has been adopted on creating jobs and skill enhancement in 25 sectors. It contains various proposals designed to urge companies - local and foreign - to invest in India. Coupled with various other initiatives taken by the government to improve the ease of doing business in the country, the program has led the next wave of investment and growth. Consequently, investment in new projects in manufacturing sector posting robust growth as is evidenced by increase in investment from `58,149 crore as on September 2014, rose to `104,347 (estimated) as on March 2016, marking a growth of 79.45% during the period in consideration. Even on an annualized basis, investment in new projects in manufacturing sector grew by 17.25% in March 2016 over March 2015.

While some of the investments have been led by increasing FDI inflows in the country as was the intent under the program, there has been distinct, albeit modest, growth in bank credit as well. This is underscored by the rise in outstanding bank credit to `7,277,650 crore as on 18 March 2016 vis-a-vis ̀ 6,830,240 crore as on 2 October 2015, marking a growth of 6.55% during the period. As on 18 March 2016, the growth in bank credit on an annualized basis, i.e. over corresponding period of previous year, was 11.34%, which is significantly higher when compared to an annualized growth of 9.05% in bank credit as witnessed in end-March 2015.

For the year 2015-16, the overall credit growth is likely to be around 12%.

Credit growth has remained below the historical averages as meaningful growth in corporate credit is expected to come around with a lag due to various reasons including excess capacity which is yet unutilized or underutilized. Additionally, there is a lag between revival in credit demand and the actual pick-up in credit growth. This is because there is a time gap between conceptualization of a project and actual drawdown of the credit from the banks. For an infrastructure project loan, the gap may be of 3 years or even more.

However, the credit growth is expected to improve further in 2016-17 and thereafter, as the demand for credit picks up on the back of improving investor sentiments.

Which sectors are likely to generate direct

and indirect loan demand?

IDBI Bank has a long legacy of industrial and infrastructure financing, including roads, highways, aviation, ports, shipping, construction, automobile, renewable energy, thermal power and chemicals. Additional exposure would be

taken up within the sector-specific caps mandated by IDBI’s board. The bank is striving to create a more diversified asset portfolio. We will consider newer sectors such as tourism and hospitality, wellness, defence, media and entertainment, etc. The bank is also proactively working towards extending assistance to start-ups whose growth is expected to get further traction following the announcement of ‘Startup India’.

How has the ‘Make in India’ program

contributed to the increase in loans?

Yes, IDBI Bank’s advances in Q3 FY16 stood at `2.09 lakh crore. Among others, sectors such as infrastructure, mining and quarrying, chemicals and chemical products, construction, food processing, automobiles and textiles are among the top 20 industries to which the bank has exposure. Most of these industries have exhibited positive growth in Q3 FY16 vis-a-vis Q2 FY16, reflecting growing demand for credit in these segments.

How will IDBI Bank mitigate losses arising

out of lending to such manufacturers?

As regard risk mitigation, we employ best international practices in the area of credit risk management through employing robust risk assessment model for large, medium and small industry proposals. We will remain selective in extending assistance to sectors where the exposure and concentration are high. For projects that are stressed on back of various macroeconomic as well as sector-specific factors, the bank undertakes to restructure those exposures provided techno-economic viability is established.

[email protected]

Kishor Kharat, MD & CEO, IDBI Bank, is convinced about the credit growth boost arising from the Make in India program, and has geared up his bank organizationally:

Make in India to facilitatecredit growth in 2016-17

Kishor Kharat


Synergy

An increasing number of banks are

interested in taking advantage of the

synergies available with the latest

generation of ATMs and mobile banking apps.

ATM manufacturers and fintech providers have

been testing new methods to withdraw cash

that do not require inserting a magnetic-stripe-

equipped debit card into an ATM machine.

At a recently held event in Mumbai, FIS,

the world’s largest provider of banking and

payments technologies unveiled its Cardless

Cash solution- the first mobile ATM solution in

India that avoids the plastic debit card. This

technology is a revolutionary capability that

allows consumers with a mobile banking app

to withdraw money from the ATM- without the

need of a debit card.

Initial deployments of these methods-

known alternatively as ATM prestaging, cardless

cash access, or mobile cash withdrawal-have

shown great interest by consumers. The feature

is deployed to ATMs through a simple software

installation, enabling rapid deployment for

financial institutions of any size without the

overhead of costly hardware investments.

The solution is also specifically designed

to be embedded in any bank’s mobile banking

application. This natural extension of mobile

banking capabilities provides a seamless

experience for users within the purview of

the bank’s brand experience. Customers can

“order” cash from their smartphones and

proceed to the nearest ATM enabled with the

cardless cash option. The app uses the location

services of the smartphone and can guide the

user to this ATM. Customers also receive an

electronic receipt of the transaction on their

phone, eliminating the hassle of paper receipts

and cutting down the overall transaction time.

With this technology all operations take place

on the mobile screen and only the last mile

“delivery” of cash happens at the ATM.

Once the person is ready to complete the

transaction, he selects the mobile option on

the ATM screen. The ATM displays a tokenised

QR code that needs to be scanned by the user

on his mobile banking app. A QR code is a two

dimensional bar code that contains an encoded

URL. The app will rapidly recognise the code,

communicate with the cloud and dispense the

cash. Cash, as ordered on the app and the

transaction completed at the ATM.

Using other Technologies

Other systems that can be used to authenticate

the user and his mobile phone could be a NFC

(Near Field Communication) reader or a one-time

password (OTP) as well. However not all smart

phones have NFC capability and NFC technology

has not been as popular as they were expected

to be. OTP is a great Indian invention for safe

authentication and this technology is useful

on feature phones as well. However in India’s

growing smart phone user base of greater than

250 million, the target market for cardless cash

will be the mobile banking app users with all

smart phones having a camera and an internet

facility will be sufficient for a QR code scanning

and authentication.

Fraud Reduction

Theft of debit card data is a top of mind

concern for consumers and ATM skimming

has been on the rise. Skimming works by

hiding a camouflaged card reader over an

ATM card reader. This card reader will copy the

information on the card and allows creating a

clone of the card. If the identity thief has the

card information and the PIN numbers, it is easy

for him to withdraw cash or make a purchase

in the name of the account holder. There have

been many cases where ATM withdrawals have

happened, even though customers have been

in possession of their card. However with a

banking app, it acts as the remote control for

the ATM from the privacy of the customer’s own

smartphone. Account information is always

current and more secure than a plastic card.

Lesser Maintenance from the Bank’s side

With a cardless cash option, the bank will

require lesser overheads to manage issues such

as hotlisting of cards, lost cards replacement

and sending PIN mailers. The customers will

not have any dependency on unable to make

any withdrawals, if the new card is in transit.

Summary

For banks looking for ways to expand their

mobile banking footprints and offer a better

integrated service with their ATM investments,

there are now exciting new options. The

convergence of mobility and ATMs is a step

toward interconnected channels and superior

banking experience. Besides providing extra

security & ease and speed of accessing cash,

this outcome is clearly a win-win for financial

institutions and banking customers, and the

foundation for mobile banking and payments to

evolve and flourish.

- Radha Rama Dorai

Business Head - ATM & Allied Services, FIS India

The convergence of ATM and Mobile Banking

Banking in the Gulf


Bahrain Business Incubation Center (BBIC), an initiative of Bahrain Development Bank, started in 2003,

has been able to provide start-ups in the country a stress free and relaxed environment for a minimum period of 3 years. Today, the Center offers business incubation, access to finance, advisory, equity, special grant schemes, affordable rent, training, marketing support and monitoring services to the start-ups and these services are tools which were carefully tailored to meet the requirements of start-up businesses in the country’s economy.

“Our aim is to be able to not only incubate but also successfully graduate businesses into the market, says Areije Al Shakar, vice president and deputy head, Development Services at Bahrain Development Bank, and in charge of the BBIC. “In 2015, BBIC has successfully reached out to many Bahraini SMEs. The total occupation of incubators as at end of 2015 was at 95%. The total graduates in 2015 were 27 businesses,” she adds.

BBIC continues to provide coaching services for its clientele with a team of certified coaches and mentors. Besides, the center has hosted many events focusing on entrepreneurship and related activities along with many training sessions and workshops.

GENESISAl Shakar outlines the genesis of BBIC: “Bahrain Development Bank started its first business incubator in 2003 where it focused on supporting businesses within the light manufacturing industry. The incubator hosts 124 units that include both service-oriented and manufacturing businesses. We have also launched two more incubators - Riyadat, which is a women focused incubator with the aim to encourage women entrepreneurship in Bahrain, and Rukn.me, which is the first ICT incubator focused on encouraging the ICT sector in Bahrain and nourishing innovative technology startups.”

She says the bank will soon be launching a Farmers Market which is managed like an incubator to encourage agricultural and food sustainability, in line with the National

Initiative for Agricultural Development (NIAD) in Bahrain. It will provide space for the agro-entrepreneurs to be able to showcase their produce in an environment which is accessible all year round. Another upcoming support platform is the Art Cluster focused on uncovering the art industry in Bahrain which will also allow for entrepreneurs within this industry to avail of space along with support services.

MAIN PILLARS“We believe that entrepreneurs require coaching, training, incubation, mentoring and partners to be able to start up and succeed at any stage of the business cycle and the strategy behind initiating incubators was to be able to fill the gap in the market and provide entrepreneurs an environment where they are able to flourish and are nourished by the support services that are offered through the bank’s comprehensive program Rowad.

Over the years, incubation has sparked interest in the private sector by affluent entrepreneurs and investors and has allowed us to create the first public-private partnership in incubation with our ICT Incubator, Rukn.me,” says Al Shakar.

As regards fintech, she says the bank does not have a singular focus on this segment but on ICT as a whole. “We do not have any interesting direct fintech innovations to speak of, but rather startups that support fintech security and other technology support elements such as telecom. We do, however, offer a pre-seed grant of up to BHD 5,000 that is a joint scheme alongside Tamkeen to help innovators develop their prototypes,” she adds. In addition, there is a seed funding program, called Seed Fuel, which grants innovative entrepreneurs at the seed stage of the business cycle up to BHD 25,000 toward their project / business.

HELP FROM BANKShe explains how entrepreneurs in the country are helped by the bank: “Bahrain Development Bank offers financial and development assistance to entrepreneurs. The financial support is through SME loans to help start up, grow and expand the business as well as equity participation of up to a

Bahrain Development Bank has an initiative to help budding entrepreneurs - Bahrain Business Incubation Center. Areije Al Shakar, vice president and deputy head, Development Services at the bank and in-charge of BBIC, speaks about the initiative and the gains made:

BDB supports innovators through BBIC


maximum of 19.9% of the start-up capital. On the development side we provide all the services offered under the Rowad Program Pillars which also includes the seed fuel and pre-seed programs. We work closely with our network mentors, affluent entrepreneurs and investors to showcase various opportunities with our entrepreneurs that they may be interested in investing.”

Al Shakar mentions that unfortunately Bahrain does not have a bankruptcy law, which would have supported an entrepreneurial society. She says the government regulators and support organizations are actively looking at developing further support policy to improve the environment and allow further growth and success of entrepreneurs in the country.

ROWADShe elaborates on Rowad, which have seen a lot of initiatives: “The Rowad model was built over the years through research and observation on the basic tools and necessities required by an entrepreneur to start up, grow, expand, and turnaround a business or an idea. The model is an enhancement to the Bahrain Arab Model for Entrepreneurship that has been recognized by UNIDO as the best model for entrepreneurship, which includes training, advisory and incubation. It has grown from the Bahrain Model to incorporate elements that are necessary for entrepreneurs to flourish and resides on the pillars of coaching, training, incubation, funding, mentoring and partners.”

She mentions that the Rowad program and model are different because most of the entrepreneur support services are broken down into separate entities or organizations. “The Rowad program and model is very well linked so that the entrepreneur does not have to deal with too many separate institutions, but by joining the program he has access to all the pillars that are offered and is guided by a coach throughout the journey. We cannot offer everything, but in any area that we do

not directly provide the service we have a strong network community that we work closely with to provide the entrepreneur with the knowledge and expertise. The program is extended to any entrepreneur at any stage of the business cycle that is being set up in Bahrain.”

Do social media find a place in the scheme of things?

Al Shakar says Bahrain has a wide audience for social media and BDB also provides the same amount of attention ensuring that it is present on most of the popular social media platforms such as Twitter, Instagram and Facebook. “Our newly launched website platform was initiated in order to meet with global technological advancements and to ensure that entrepreneurs have access to the Rowad program at all times,” she adds.

GOVERNMENT’S ROLEHow is to government playing its role?

Says Al Shakar: “The Bahrain Economic Vision 2030 led by the Economic Development Board actively promotes the private sector by encouraging entrepreneurship through the various support schemes offered by Tamkeen and Bahrain Development Bank. The government also offers further support in the form of award recognition for innovation and entrepreneurship through various award programs such as the Bahrain Award for Entrepreneurship.”

She says the bank has done a tremendous job in 2015, reaching out to over 700 people in coaching alone even before the official launch of the program. It has extended its services to over 3,000 beneficiaries in 2015 and it expects to cross this number in 2016. The bottlenecks, according to her, are lack of a regulatory framework that helps entrepreneurs who may fail. “Without bankruptcy laws we still are not effectively attracting the true amount of passionate entrepreneurs due to the higher risk that they may undertake without such policies in place. Nevertheless, as a support organization we work closely with distressed businesses to ensure that they are able to shut down with

the least amount of damage,” she adds.Al Shakar says Bahrain Development

Bank has a joint finance scheme with Tamkeen, called BDB Tamkeen Finance, which provides subsidized interest rates to startups and growing enterprises up to BHD 250,000. This scheme also is guaranteed by Tamkeen of up to 50% of the capital as collateral to help support extending this finance to entrepreneurs in case of default.

She emphasizes that BBIC, an entrepreneurial division, moves dynamically to adapt to the needs of entrepreneurs. “Within the next year, we aim to fully launch our online platform www.rowad.co, with all of its support services along with both the official launch for Rukn.me, the Farmers Market and the Arts Cluster. We are also launching our online mentoring platform which is now in soft launch and hope to be able to match over 300 entrepreneurs over the next three years. Through funding, we hope to invest in and support innovative projects through Seed Fuel and our pre-seed programs schemes and look forward to being able to allow them to reach further by obtaining Series A and B rounds of funding. We also look to expand our network of support through our partners program and through the Rowad network.”

BBIC, she says, hopes to be the number one model and platform both locally and in the future regionally to help support entrepreneurs at any stage of the business cycle.

[email protected]


N E W S Banking in the Gulf

QFB gets Global Finance awardQatar First Bank (QFB), Qatar’s leading shari’ah compliant bank, has been named exclusively 2016’s ‘Best Up-and-Coming Islamic Financial Institution’ in Global Finance magazine’s ninth annual awards for the World’s Best Islamic Financial Institutions. QFB won the award after Global Finance had extensive consultations with bankers, corporate finance executives and analysts throughout the world. In selecting the world’s

top Islamic Financial Institutions, Global Finance considered a wide range of quantitative factors including growth in assets, profitability, geographic reach, strategic relationships, new business development and product innovations, as well as informed subjective criteria such as reputation, customer satisfaction, and the opinions of analysts and industry experts. CEO of QFB Ziad Makkawi said the prized global award is a translation of QFB’s winning strategy and innovative approach to Islamic finance.

Emirates NDB cuts 300 jobsEmirates NBD said two of its group entities together cut down 300 jobs as part of internal restructuring. A spokesperson of the bank said the bank is cutting 100 jobs in Emirates Money and an additional 200 jobs from Emirates Islamic, the Islamic banking unit of the group. The job losses in Emirates Money are attributed to redundancy caused by a move to merge the small business finance provider with Emirates NBD’s operations. Emirates Islamic shed 200 jobs as part of internal restructuring in response to the changed economic environment. A number of banks in the UAE including foreign banks operating in the country have announced job cuts this year anticipating a contraction in economic growth adversely impacting banking business.

OAB launches new corporate cardOman Arab Bank has launched its first corporate credit card in collaboration with MasterCard. The card is expected to provide its corporate clients with enhanced efficiency, flexibility and convenience in managing employee business expenses. The OAB MasterCard Corporate Credit Card offers customers the ability to seamlessly track and manage business related expenditure online as well as access Smart Data,

MasterCard’s suite of reporting and expense management tools. The new service also offers card holder level, department level and company level statements for tracking and accountability. In addition, the card will provide corporate customers with a number of unique privileges and services including access to airport lounges in several major cities.

Abu Dhabi, China regulators in tie-up Financial Services Regulatory Authority of Abu Dhabi Global Market and the China Banking Regulatory Commission (CBRC) entered into a MoU to facilitate cooperation and exchange of information that supports the exchange of regulatory information as well as the development of financial institutions in both jurisdictions. The MoU was signed by Shang Fulin, chairman of the China Banking Regulatory Commission and Richard Teng, CCEO, Financial Services Regulatory Authority in Beijing. This MoU is FSRA’s first with an Asian regulator and represents the importance placed by ADGM on maintaining a strong relationship with China. The agreement provides a framework for FSRA and CBRC to render mutual assistance, exchange of relevant regulatory information, cooperate in the supervision and oversight of the compliance of financial institutions with applicable banking laws and regulations.

New expat account from Doha BankDoha Bank has launched an all-new expat account package that offers customers enhanced rewards and benefits. These include a QR1500 voucher to be redeemed when availing tinting services at Ziebart, dining vouchers with every new Doha Bank credit card, remittance services that allow customers to send money to their home country at the most competitive exchange rates and transaction charges in the market, and a gift card from Jumbo Electronics worth QR200 for the first 500 salary transfer accounts. Customers also get 0% interest payment plans when purchasing furniture, electronics and other items using their credit cards. In addition, the Expat Account Package allows customers to gain access to a host products and services from the bank. Besides, there is a heavily discounted car loan offer with an annual interest rate of only 1.99% per annum. Loans get approved ‘in as little as one hour’.


N E W S Banking in the Gulf

New app from Emirates NDBEmirates NBD has introduced a tablet banking app that aims to reduce the waiting and transaction time of customers at branches. The app will enable branch service personnel to fast-track customers from the queue and service specific requests instantly on the tablets using the customer’s digital signature for verification to process transactions. Customers will also be assisted in processing requests themselves via

their online or mobile banking accounts. The app has been currently launched at the bank’s branches in Al Barsha, Jumeirah Lakes Towers, Al Quoz, Al Qusais and Sharjah City Centre, with plans to roll out to a majority of the branch network. Suvo Sarkar, senior executive vice-president and group head - retail banking and wealth management of the bank said the first of its kind app is completely secure and reduces waiting time for customers on certain transactions while providing branch personnel the opportunity to educate customers on using and optimizing their digital banking accounts.

DIB lists sukuk on Nasdaq DubaiDubai Islamic Bank has listed its latest sukuk worth $500 million on Nasdaq Dubai, bringing the bank’s total sukuk listings on the region’s international exchange to $3.25 billion. Following a total of seven sukuk listings this year by regional and international issuers, the total value of sukuk currently listed in Dubai has reached $42.61 billion, the largest amount of any listing centre in the world, underlining the rapid expansion of Dubai as a global capital of the Islamic economy. Dr Adnan Chilwan, group CEO, DIB, said given the challenging market conditions, it was critical to have a strong credit come in and successfully close a deal. DIB previously listed a sukuk in 2013 and two in 2015.

Emirates Islamic to offer Twitter bankingEmirates Islamic has launched Social Banking, offering banking services via

Twitter. The bank will be the first Islamic bank in the UAE to offer banking services on a social media platform. Customers will be able to perform select transactions such as balance enquiry, view their last few transactions, and make enquiries about their accounts or credit cards with a tweet. To maintain privacy and confidentiality, the bank will only respond to customer

queries via a direct message. Emirates Islamic said the Twitter banking platform complements its existing digital channels which include ATMs, 24 hour telephone banking, online and mobile banking, adding that it was also the first Islamic bank in the UAE to launch a mobile banking app. Faisal Aqil, deputy CEO, Consumer Wealth Management of the bank, said banking via Twitter is especially relevant given the UAE’s advanced social media and mobile phone penetration. With this new service, the bank is able to offer yet another quick and convenient method to access their banking requirements.

Gulf banks fare well: KPMG reportA report by KPMG said banks in the Gulf region fared well in 2015 and the outlook remains relatively positive given the expectation of continued government support for the sector and committed infrastructure investment. In spite of the impact of margin compression caused by an increase in the cost of funds and greater competition for assets, both profitability and assets rose across the region by 6.8% and 6.3% respectively on simple average, said the report. The report analyzed the published financial statements of 56 leading listed commercial banks across Oman, Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. Paul Kallaghan, head of Financial Services in KPMG Oman, said the banking sector in the region has moved a long way from the days of excess capital and liquidity. The report reveals that the sector is no longer growing at double-digit growth rates.

Mashreq introduces biometric systemMashreq Bank Qatar has launched a biometric security system for mobile banking in the country. Bank customers can now use their fingertips as password. The upgraded Mashreq’s mobile banking App Snapp also offers the unique and innovative cardless cash withdrawal service, which allows the customers to send a transfer code to any mobile number in Qatar, 24/7. The recipient need not have a bank account and can withdraw cash from any Mashreq ATM in the country using the transfer code. Mashreq customers will now be able to access their accounts without user name and passwords, overview their relationship with the Bank, and undertake a range of online transactions such as mobile-to-mobile domestic money transfer, international funds transfer, mobile top-ups for prepaid service globally, and instant utility bill payments, as well as receive Forex rate alerts, by having their identity verified on the go.

Banking in the Gulf


A good decision is based on knowledge and not on numbers - Plato

The ongoing damage control exercise by the Basel Committee of Banking Supervision can be seen as an augmentation project that

seeks to put in place improved rules and controls to attain greater resilience of the financial sector. The central focus of such regulatory enterprise is to avoid the next collapse.

One recent example of Basel Committee’s stretching of the remit of its global regulatory guidance is the Guidelines on ‘Prudential treatment of problem assets - definition of non performing exposures and forbearance’ issued on 14 April 2016. Those connected to the financial sector can instantly identify the relevance of such a stride, emanating essentially from the lack of standardized practices globally and inadequate regulatory framework to effectively capture asset quality deterioration and consequently, the health of the financial sector.

For the time being, let us confine ourselves to the aspect of forbearance in the loan portfolio of banks. When it comes to forbearance, the diversity of practices globally are indeed bewildering as they differ widely on scope, concessions and prudential treatment. There is also a palpable lack of consistency in nomenclature. The activity is also known also as ‘restructuring’ or ‘rescheduling’ across the globe with no uniformity in associated terminologies either. Broadly however, forbearance can refer to a a variety of concessions granted to a borrower for reasons of financial difficulty, depending on the assessment of credit risk. Such concessions can take the form of extending the loan term; rescheduling the dates of payment of principal or interest; granting new or additional periods of no payments (grace period); reducing the interest rate, capitalising arrears; forgiving, deferring or postponing principal, interest or relevant fees; changing an amortising loan to an interest payment only; releasing collateral or accepting lower levels of collateralisation; allowing the conversion of debt to equity of the counterparty; and deferring recovery /collection actions for extended periods of time.

Given such diversity of practices and the diversity of credit assessments to justify the credit decisions, the Basel Committee’s initiative comes as a breath of fresh air. The standardization measures proposed

in the Consultative document include: lUniformity in definition l Uniformity of Purpose lUniformity in assessing financial distress of the borrower, based on a combination of judgement and numbers. lTypes of concessions granted l Exit criteria with bearing on incomerecognition and asset classification and l Defining the interaction of forborne expenditure with other forms of credit classification.

The report has some key proposals with bearing on industry practices. For instance, it proposes that collateralisation should have no influence on the categorization of the exposure as a non performing asset. This is justified as collaterals are imperfect hedges and do not influence the exposures past due status and overdue balances. It also suggests a uniform one year exit period for such restructured loans from non performing category to performing one.

Such harmonization initiative cannot but be useful once regulators emphasize the need to adopt additional Basel 3 Guidelines and banks tweak their policies and procedures to the new reality. This will benefit supervisory monitoring of asset quality, pillar 3 disclosures on asset quality, data dissemination among regulators and within banking sector and enhanced risk recognition through alignment of credit categorization and migration practices.

Surprisingly, though the document mentions “bad forbearance” as a risk of embedding forbearance as an accepted practice, it stops short of proposing a robust enterprise wide framework to prevent the risk of ever-greening. Ideally, apart from the in-built mitigants in credit classification, banks should strengthen the approval and monitoring of restructuring decisions by introducing effective risk management oversight. Independent assessment of restructured transaction by the Internal Audit function can also enhance institutional knowledge of such practices and underscore the need for caution. The board of directors must also pay special attention to forbearance and the remit of concessions. Enhancing the controls around credit decisions may have a risk mitigating effect along with standardizing the practices.

Philosopher Edmund Burke once observed: ‘There is a limit where forbearance ceases to be a virtue.’ In retrospect, the Basel initiative is a welcome step towards a framework that limits bad forbearance by banks by ensuring that their risk appetite is firmly anchored within reasonable tolerance thresholds.

Dr Sunando Roy,Advisor, Central Bank of Bahrain

(The views expressed are the

author’s own and not of the

insitution he is associated with.)

Forbearance and credit quality


N E W S SWIFT

New eLearning platform SWIFT is proposing to launch SWIFTSmart, an eLearning platform that administers, documents, tracks, reports and delivers a full catalogue of digital courses and social learning. SWIFTSmart is an interactive, cloud-based service that will provide a digital catalogue of courses available in short content modules with animations, exercises, quizzes to help all users

understand and use SWIFT more effectively. The new service will offer all swift.com account holders the ease of access via single sign on and will be available from any secure internet connection, working across multiple portable devices and operating systems. It can also be configured to adapt to different user profiles, behaviours and requirements.

SWIFT launching CRFSWIFT said it is launching Change Request Forum (CRF), designed to provide a nexus for communal feedback and communication. On an annual basis, SWIFT extends a maintenance process within its comprehensive community to request formal changes to the MT messages. Such change requests are subject to a variety of measures from the community as a whole, including feedback mechanisms, dissemination, and consultation – eventually, this process culminates in the adoption or rejection of new measures in for messaging. CRF acts as a free service and feature of SWIFT’s existing MyStandards utility. It will aim to help kindle information sharing and more unified collaborative feedback for its messaging community. It will also enable the publication and streamlined dissemination of CRs throughout SWIFT’s global community.

Warning on fraudstersSWIFT has warned its customers that there could be number of recent incidents in which criminals had sent fraudulent messages through its system. These could also include the February attack on Bangladesh Bank, in which fraudsters got away with $81 million. SWIFT said it is aware of malware that ‘aims to reduce financial institutions’ abilities’ to find evidence of fraudulent transactions on their local systems. However, the malware has no impact on SWIFT’s network or core messaging services, it added. It also said there are other instances in which customers’ internal vulnerabilities have been exploited and that it is calling on customers to take steps to secure their systems and has issued a mandatory software update.

SWIFT’s new serviceSWIFT has created a service to help financial institutions comply with requirements governing payments messaging. Called Payments Data Quality, the service will cover Financial Action Task Force’s Recommendation 16 for wire transfers. The rule, which created new requirements for originator and beneficiary information in payments messages, has or will become law in many countries including the European Union member states and Singapore. SWIFT plans to release the service in the third quarter of 2016. The service will provide financial institutions with an overview of the quality of originator and beneficiary information and analytics to identify the risk presented by specific countries, counterparties and branches.

SWIFT advocacy on block chain

SWIFT and Accenture are collaborating to offer banks a block chain blueprint. The two entities will investigate existing Distributed Ledger Technologies (DLTs), highlighting the opportunities as well as the challenges for industry wide adoption. The two have brought out a paper, which highlights SWIFT’s research and plans to build technical, operational and business capabilities with a view to evolve its platform such that DLT-based services could be offered, when the technology matures and business use cases emerge across multiple verticals.

21 banks participate in SWIFT programSome 21 banks have started the pilot for SWIFT’s global payments innovation initiative, intended to improve the customer experience in correspondent banking by increasing the speed, transparency and predictability of cross-border payments. The pilot is planned to run through to December, the first results of which will be shared at Sibos 2016 in Geneva this September. The banks participating in the pilot include ANZ, Bank of America Merrill Lynch, Bank of China, Bank of New York Mellon, Bank of Tokyo-Mitsubishi UFJ, Barclays, BNP Paribas, Citi, Danske Bank, DBS, ICBC, ING Bank, and JPMorgan Chase.


Conference

Banking Frontiers organized the second edition of Inspiring Work Places (IWP) awards and conference In Mumbai. Around 250 HR professionals from the banking and financial services industry and technology companies attended the event. Here are the highlights of the event:

Babu Nair, group publisher, Banking Frontiers, outlined the concept of IWP awards and conference and said the

banking sector today has specialist HR needs and public sector banks face several challenges including retirements of top functionaries thereby creating a vacuum. Creating leadership pipeline has always been an issue for most banks and while private banks have been able to handle this problem to some extent, there has always been a dearth of quality skill sets in banks, he added.

Pooja Bajpai, director, Deloitte Consulting India, shared the highlights from Deloitte’s Human Capital Trends report. About 3300 HR professionals from 106 countries had responded to the survey. Bajpai said: “Leadership, learning and development, culture and engagement,

workforce on demand, per formance management, reinventing HR, people analytics, data and people, simplification of work and machines being considered as a collaborative talent pool were the top 10 trends in the report’s findings.”

She added: “Ismail Merchant in his book Exponential Organizations talks about business competency. In the year 1984, business competency was 30 years, but in 2014 it has drastically been reduced to 5 years. This means that what you learn today would not be relevant in the coming 5 years. 89% of the fortune 500 companies in 1985 are not even present in the Fortune 500 list for 2014. A few years down the line, 10% of S&P companies will disappear from the list. There is a major change. Even in FSI sector, the change is quite imminent.”

Dr Anil Khandelwal addressing a session

BANKING FRONTIERS’

INSPIRING WORK PLACES AWARDS AND CONFERENCE 2015


Highlights of panel discussion on ‘Exploring

Social Media and Digital Paradigms for

Empowering HR Landscape:

PANELISTS:

Pooja Bajpai, Director, Deloitte Consulting

India (Moderator)

Vinay Deshpande, Chief People Officer,

Mahindra & Mahindra Financial Services

Hamsaz Vasunia, Head HR & Training,

DCB Bank

Chaitanya Nayak, Head HR, SBI Funds

Management

Sunil Somarajan, Chief Human Resource

Officer, Reliance Capital

Harjeet Khanduja, VP, HR, Reliance Jio

Anil D’Souza, Head HR, Star Union Dai-

Ichi Life Insurance

Harjeet Khanduja: As a digital organization, a digital mindset is crucial to our business. Digital has enabled our recruiters to hire extensively across 1000 locations. Within 6 months, we have hired 30,000 employees. Recruiters were empowered to send an offer letter on mobile. When it comes to mass hiring, there is also the risk of frauds. We therefore built systems and processes that could help engage with candidates to ensure a fraud-free environment. Digital has also been used in cultivating an engaging culture and using relevant apps for work purposes. While people used Whatsapp for chatting we used it for work. For four years, we used the app to get work done on field.

Sunil Somarajan: Three years ago, when we spoke about customer service focus, we realized that there are certain elements in the group that needed an immediate review. At our organization, though resources were available the challenge was retention. We had a huge talent pool, but we questioned ourselves on how do we retain this talent pool? The answer was to implement a performance management process using digital mediums. We finalized that our objective was to build a tier2 talent. Digital tools such as mobile apps can empower the top 100s to speak directly with the CEO or even a mentor directly on a video call.

Vinay Deshpande: Earlier in the

physical world, there used to be water cooler conversations. Such conversations occur on digital mediums. With digital, communication has become instant, and the layers in the organizations have diminished. We have programs that automatically take shape and help youngsters connect with the top management. Social media is a good way of acquiring talent and nurturing internal as well as external customers.

Anil D’Souza: A large part of culture is about managing work place to have different kinds of mindsets as they enjoy working together and make place for each other. Culture has an area of significant dominance. Evolutions in culture have been occurring through social media. George Owell in a book titled ‘The brave new World’ explains the big brother concept. The big brother governs decisions observes everything through a tele-screen.

Hamsaz Vasunia: Our 80 year old bank has started using social and digital media in the past 6-7 years. We use social media to create employee branding. Social channels are used to influence our audiences. We created an induction app with superhero elements that gives out the bank’s info in a fun way with new recruits and even prospective employees. The top management is present and our CEO has

one such superhero avatar on this app.Chaitanya Nayak: As a Gen X

professional I started my career in 1980s, and got salaries on the last day of the month in the form of notes. But, right now we get it in the form of either cheques or automated deposits- that is a big change. One challenge for HR professionals like me is unlearning what was learnt in the past 30 years. With our business, we have digitization to help us grow direct marketing by 10-15% without any additional costs. From an HR perspective, we have advanced from traditional portals to embracing social tools such as LinkedIn.

Highlights of panel discusion ‘Diversity

and Inclusion- The Emerging Outlook’:

PANELISTS:

Asha Naik , Special ist , Strategic

Management & Leadership (Moderator)

Shriram Darbha, Head HR, BSE

Madhura Dasgupta Sinha , Head

Employee Experience, IDFC Bank

Alok Sheopurkar, EVP & Head HR, HDFC

Asset Management

Sudakshina Bhattacharya, Head HR, IL&FS

Financial Services

Seema Shendye, EVP, Organization

Learning, Kotak Mahindra Bank

Sudakshina Bhattachar ya: A

Panel discussion on Exploring social media and digital paradigms for empowering HR landscape


Conference

diversity program can be a boardroom plan or a larger cultural strategy. The implementation of such a plan depends on people like us - the HR folks. It is time that we recognize the different kinds of diversity, and as working professionals created an inclusive atmosphere in the organization.

Shriram Darbha: The diversity that we are talking about is induced intolerance in a developing economy like India. For an HR perspective, the pertinent question is, are we including diversity, or are we diversifying the inclusion. For example, many organizations proclaim that HR is a strategic partner, but how many CEOs from different organizations truly consider the HR functions as a truly strategic partner in the business operations? Does the business consider HR to play an inclusive role or a diverse role?

Madhura Dasgupta Sinha: Diversity means one opens up his or her thought process and observes clearly. I had an amazing experience at a differently abled conference. It was inspiring and remarkable to observe the disabled dealt with customers from different designations and geographies. They brought great conversations to the table. It would be probably good sense to build a contact center with differently abled people and empower them to take charge of that business space.

Alok Sheopurkar: Organizations are realizing the rationale to have diversity as an agenda beyond the board room. A 2001 study highlights that 750 of the top 1000 fortune companies ran a diversity program. Today, I can vouch that almost all 1000 companies would be running some diversity agenda. Diversity is no longer an only-board or an only-HR issue. Sustainability is a larger issue today, and organizations want to remain relevant for 100-200 years or even more.

Seema Shendye: We studied the aspirational levels across genders and age groups at our organization. Though there was a healthy pipeline of professionals at the entry stage for both genders, the pipeline fell by 15% within the first 5 years,

and 30-35% over the next 10-15 years. The reasons for attrition among women were marriage, pregnancy and child rearing. Age groups 35 and beyond, we found that the stickiness of men and women remains more or less the same. We realized from the study that we needed to fix not just opening the pipelines at the entry level, but also ensure that women do not go out as much.

Asha Naik: Diversity is here to stay. Though the typical gender, disability based diversity programs would cease to exist, we will face different types of diversity. If you want a embrace a far more bigger diversity issue, then find the stakeholders, get their buy-in and we only then will we move away from making this look either like a fad or a gimmick and thereby bring value to the organization.

Tanvi Bhat, Personal Branding Expert, felt HR professionals must fill the lacunae of leadership in the industry. Thought leaders are a rare and a distinguished breed and they are the crazy ones, she said, making a presentation on a presentation on ‘Thought Leadership in Corporate Brands’.”It doesn’t matter who they are, but it does what they have done. True thought leaders envision the day after tomorrow today, and leap forward towards it. Building a distinguished

thought leadership is essential as one moves towards building leadership goals for a corporate brand,” she added.

Highlights of panel discussion on

‘Nurturing Internal Talent and Future

Proofing Leadership’:

PANELISTS:

Allen Pereira, former CMD, Bank of

Maharashtra (Moderator)

Paul V L, GM-HR, South Indian Bank

Thampi Kurien, National Head-HR,

Federal Bank

Chandrashekhar Mukherjee , Chief

People Officer, National Stock Exchange

Vaibhav Goel, Head-Group HR Governance

& Integration, Reliance Industries

Subhash Menon, Chief Human Resource

Officer, Angel Broking

Sunil Kutty, Head HR, Ujjivan Financial

Services

K.P. Nair, Executive Director, IDBI Bank

Pramesh Khanna, President-Human

Capital, YES Bank

Anish Srikrishna, President, Times Centre

for Learning

Thampi Kurien: The HR function has to chart an employee’s growth, facilitate success through opportunities, and create empowerment within the organization. There are some innovative HR practices

Panel discussion on Diversity and Inclusion - the emerging outlook


at Google. Google takes care of employee’s diet plan and their family outing too. The hallmark of a successful HR practice is when an employee believes that the organization has not only compensated for the work, but also holistically developed the organization.

Subhash Menon: We have four age groups of people working within our organization- Gen-X, Gen-Y, Millennial, and Gen-Z. The expectations of each group are quite different. The Gen-Z and the Millennial intern on a Friday and on Monday they aspire to be the CEO. It is indeed a big challenge for us to engage with such groups. The Gen-X & Y groups have already been in the system for a good time. How one nurtures them and gives them a clear career vision is the second challenge.

Vaibhav Goel: There is a paradigm shift in democratization and digitizing our HR process. There is no single answer to the HR issues and challenges. We have been trying to create agility in our processes and systems. There are concerns in the areas of digital and connecting seamlessly with employees who have worked for 30-40 years and also the ones who might have joined new. Hence, we are using a blend of digital as well as traditional methods to engage with our internal customers.

Paul V.L.: Banking faces several challenges such as retirements, severe attrition and poaching. With large scale recruitments, the average age profile has come down to 33 years. We have 40% women and 60% men. We implemented few employee-centric strategies such as fast track and seniority wise promotions, better leave policy including a 1 year sabbatical for women, and also offered performance based incentives. Top performers were taken to Tokyo and Russia. To motivate DGMs and GMs we created new posts like Addl DGM, and Addl GM.

Anish Srikrishna: A strong work culture creates a strong organizational identity and creates a work place that people look up to. Great companies train at the entry level, constantly assess the mid management and senior level, look for individual loopholes and provide specific inputs.

Sunil Kutty: We have different practices at the ground level. We look at available talent for a particular location and don’t look for a ceremony but just ensure that we quickly move the hierarchy. When our team members or managers move into a managerial role, we have programs to give clear insight on dispensing roles and responsibilities over a single session. The upward communication is an important feature as it enables loan officers to visit the regional office every quarter and share their feedback.

K.P. Nair: We have 1800 branches and the average age of the employee is 32 years. The big challenge is coping with youngsters and their aspirational levels. There are also other tasks such as retention and nurturing. Youngsters look at leadership, responsibilities and role besides remuneration. Engaging with the young, involves changing ourselves too. We need to have a future-proofing strategy that has a succession planning tool, and one that also helps identify the right people.

Pramesh Khanna: The demands from employees are different - personal dress codes, family-time off, want things to be done on Fun & Joy, fast track careers. Fortunately we have had constant senior level sponsorships. We have innovated the practice of HR. The HR or the HCM plays the role of a strategic business partner,

while line managers/business managers don the role of HR. The HR plays the line management and looks at developing the business. Speed and agility is the focus right from the first day.

CONCLuDING REMARKSDr Anil Khandelwal, former CMD,

Bank of Baroda in his concluding address, spoke about promotions in banks: “At the age of 44, I was a DGM, who got promoted to operations. When I resisted, my senior exclaimed that if I could do a PhD then I could very well handle banking. I replied asking I don’t know credit, but you are asking me to take risk? However, I was still moved into operations and eventually became the chairman and MD of Bank of Baroda.”

Whatever less is spoken of HR, the lesser gets practiced, he said. “Interestingly and paradoxically, HR is considered as the biggest problem. In the private sector even a small organization has a trained HR person. However, even the largest PSU in India that has over 250,000 employees, the HR department is forced to conduct transfers and promotion exercises. HR is looked as the department sending people to excursions, as sermonizers, and unfortunately as the holiday and recreational department.”

Sairaj Iyer

Panel discussion on Nurturing internal talent and future prooofing leadership

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Cooperative

Mehul Dani: How many branches and

ATMs of the bank operate in Uttar

Pradesh at present? We have 21 branches and 12 BC offices

across Uttar Pradesh and Madhya Pradesh. We have 25 ATMs cum CDMs. We have applied to the RBI for branches in Hapur, Shamli, Noida and Lucknow in U.P. and Ujjain and Dewas in M.P. In addition, we have also sought permission to expand to Delhi, Haryana, HP, Rajasthan, Uttrakhand and Chandigarh.

What is the strength of your bank in HR?

What skills are you hiring?

Our HR polices and processes are on par with those of commercial banks. For example, we offer quarterly performance pay linked to business targets. We have already implemented HRMS and a Learning Management System (LMS), perhaps among the first such implementations among banks of our size. We have moved to online employee appraisal in FY15-16 and will move to quarterly appraisal instead of annual appraisals from FY16-17. We hire skills in areas such as branch operations, credit appraisal, IT, internal audit and microfinance.

What are the key differentiators of

your bank?

We give significant focus on our mission, values, principles and technology. We do not observe lunch breaks at any branch and work continues uninterrupted. Our business hours are 10 am to 4 pm every working day. Our mission is to serve

the lowest strata of society with the best products at the best prices through the best technology-driven services. At the same we intend to be a model employer for the national industry and emerge as a global role model in the small banking sector. Our values and principles include ethical banking, strong professionalism, sound finances, good corporate governance, effective use of technology, excellent customer service and green banking.

One of the key achievements of the bank during FY 15-16 was BBB- rating from CARE Ratings. We are the first cooperative bank in the country to receive

such a rating from CARE for the excellence in the category of urban cooperative bank. The rating depended on several critical parameters like our long track record of operation, professional management team, comfortable capitalization levels marked by consistently high tier 1 CAR and moderate earning and liquidity profile. The recent rating is awarded for our strong management and promising banking operations over a long period of time. We have been creating several landmarks through easy banking procedures. The rating also took into account the limitations and risks associated with cooperative banking industry in general such as dual control, limited scale of operations along with geographical concentration. Moving forward, our ability to grow business, diversify operations, improve asset quality and maintain profitability will remain key rating sensitivities.

What is the total customer base of the

bank as of Q4, 2015-16?

Our total customer base was more than 1.5 lakh for FY 15-16. We are committed to use technology to offer products and services to customers across all segments. We have invested heavily in IT infrastructure. We have a cloud based CBS managed by FIS. In addition, the bank has implemented audit management software and asset management software. In addition, we are in the process of rolling out Loan Origination System which will take care of the entire loan cycle. We also aim to digitize and reduce paper work and manual intervention wherever possible.

Suveer Kumar Gupta, MD & CEO, Shivalik Mercantile Cooperative Bank, Saharanpur in UP, elaborates how the bank had grown in short span of time and explains its targets for 2016-17:

Shivalik success: work without lunch breaks

Suveer Kumar Gupta reveals that the bank intends to be a model employer and emerge as a global role model


What is the total amount of deposits

collected and loans extended?

As on 31 March 2016, the bank’s total deposits are to the tune of `809 crore while advances stood at `602 crore. We aim to expand the business size to `1700 crore. (deposits of ̀ 1000 crore + advances of `700 crore) in FY 16-17. Depending on the size and nature of a loan proposal, the appraisal process is conducted by different committees formed at branch and head office level. Each proposal is carefully examined and due diligence done before arriving at a decision.

Which were the top 3 sectors receiving

loans from your bank?

Retail loans, micro finance and gold loans constitute the top 3 sectors receiving assistance from the bank. The total outstanding in these 3 sectors are approximately ̀ 100 crore. We expect these sectors to grow by 50%. Our microfinance portfolio comprises 9000 groups covering approximately 1 lakh poor families across the districts of Saharanpur, Meerut and Noida in UP and Dhar and Indore in MP.

What new IT developments have been

taken place in the last 12 months? We are the first cooperative bank in the

country to implement cloud based Direct RTGS/NEFT. We have micro ATMs to support instant account opening and financial, non-financial transactions at the customers’ doorstep. RuPay based debit card is accepted on all 3 channels – ATM, POS and Bill Desk. Besides HRMS, we have implemented e-registers to replace physical registers and GIS. We have green PIN generation, audit management system and solar energy to power ATMs / CDMs in rural areas during power cuts. We have implemented AML package, SMS banking for fixed deposits and Aadhar number registration via SMS.

Our technological targets for FY 16-17 include Loan Origination System, online verification of PAN and voters’ cards, corporate net banking, e-KYC, full mobile banking with mobile app, IMPS service to send and receive money via

mobile phone, RuPay card integration to allow all eCommerce, EMV cards and implementation of IPV6.

Which is the CBS that is being used?

We have ‘Profile’ from FIS. Earlier, we were using ‘Suvikas’, powered by V Soft Technologies.

What brands of ATMs are being used in

your channel?

We use WINCOR and NCR. We have engaged Dz Cards and Morpho for ATM cards printing. We use CCTV cameras and employ security guards to man ATMs. Because of our focus on technology, we have been very quick to implement Aadhar based payments. The bank is geared to receive benefits under the DBT scheme. In addition, it has added facility to update Aadhar number vis SMS. Updation of Aadhar via net banking is also expected to be rolled out shortly.

What is the NIM of your bank during the

last 3 financial years?

The NIM during 2012-13 was 3.20%, in 2013-14 it was 4.28% and in 2014-15, it stood at 4.22%.

What are the third party products offered

by the bank?

Currently, we are offering general,

health and life insurance products and forex. We now intend to add mutual funds and demat services to enhance income from third party products. We are also aligned with the Oriental Insurance Company (for general insurance), Star Health & Allied Insurance Company (for medical insurance) and HDFC Standard Life Insurance Company (for life insurance).

What is the NPA situation of the bank?

Our net NPA was 0.6% for FY 2015-16. Our senior management has initiated a daily review of overdue / stressed accounts / NPA accounts. In addition, our recovery section has initiated a process of daily or weekly recovery measures in stressed accounts depending on customer profile as well as loan type. We have also employed recovery agencies in certain areas in order to help and improve the process of recovery.

What according to you is the future of

cooperative banking in India?

I am of the view that cooperative banks would need to adopt technology rapidly in order to compete with the existing and upcoming banks. In addition, cooperative banks would need to focus on HR and training extensively.

[email protected]

Shivalik Mercantile Coop Bank officials talking to the local teachers


Cooperative

Abhinandan Urban Cooperative Bank, a leading bank based in Amravati, Maharashtra, has been

serving the people of the region for about 2 decades now It has 8 branches now but does not have any ATMs as of now. Its chairman Advocate Vijay S. Bothra, says there are plans to add 3 more branches in 2017-18 and ATMs will be introduced in two months’ time in association with State Bank of India.

The bank has won several awards at the regional, state and national level from industry associations as well as other institutions. It has been achieving audit class ‘A’ grade from the beginning of operations. Similarly, it has been consistently paying dividend at 10% since inception.

Bothra says the bank has a customerbase of 31,644 in 2015-16 and the next financial year, it has set a target f 20% growth. “We intend to add 5000 new customers. Nearly 20% of the accounts at present are seeded with Aadhar numbers,” says Bothra.

BUSINESSThe bank has deposits worth `126 crore in 2015-16, while it had extended loans of `80 crore. The yoy growth in deposits is 23% and in loans it is 26%. Automobiles, IT and textiles are the three top sectors, which have received credit from the bank during the year. Bothra says the bank has given vehicle loans to the tune of `10 crore, term loans of `4 crore for IT Infrastructure and funding up to `4 crore for the readymade industry. “For 2016-17, our lending target for these 3 segments is kept at `20 crore,” he adds.

The loan policy of the bank stipulates that the loan proposals are accepted at

branch level and these are discussed and sanctioned by the board of directors of the bank. In the last three years, as much as 90% of the proposals are accepted, says Bothra.

The NIM of the bank during the last 3 financial years are 4.24% in 2013-14, 3.60% in 2014-15 and 3.68% in 2015-16.

INFORMATION TECHNOLOGYThe bank has recently updated its web-based banking software with Oracle database for its CBS. It is now providing cheque truncation service and has installed latest hardware, including system for scanning of cheques. It has aligned with State Bank of India for ATMs and POS and is a sub- member of IMPS. It has set

up its own data center. To enhance safety and security, there is a CCTV surveillance system at all the branches. Besides, it is also providing franking facility, MSEDCL bill collection service, e-chalan facility, PAN card service and SMS facility for its customers. The CBS system has been provided by Jalgaon Janta Infotech, Pune, while earlier it had used TBA system from the same company. Five members of the staff man the IT department, which manages both the infrastructure and applications.

NPAThe bank’s gross NPA for 2015-16 is 1.15%, while net NPA has been 0% for the last 7 years. Bothra maintaints that gross NPA in 2016-17 will be below 1%.

3RD PARTY PRODUCTS The bank has has tie-ups with insurance companies and mutual funds to distribute their products. Bothra says the income earned by selling these products is `4.79 lakh in 2013-14, ̀ 1.70 lakh in 2014-15 and `4.46 lakh in 2015-16. The bank has tie-ups with New India Insurance, SBI, LIC Nomura and UTI.

TARGETThe bank had set a business target of over `200 crore for 2015-16, while the targets for 2016-17 include deposits to be `160 crore and loans to be `110 crore. “We aim to have profits after tax to the tune of `3.5 crore. We will strive to adopt all latest technologies and IT infrastructure that are required for the operations and as per RBI guidelines and we hope this will help us provide better and quicker customer service,” adds Bothra.

[email protected]

Advocate Vijay S. Bothra, is chairman of Abhinandan Urban Cooperative Bank, Amravati in Maharashtra. He speaks about the growth plans of the bank:

Abhinandan UCB to soon start ATM services

Vijay Bothra estimates that nearly 20% of the accounts of the bank at present are seeded with Aadhaar numbers


N E W S FCBA

Banking Frontiers to celebrate 10th anniversary of FCBA FCBA (Front iers o f Cooperative Banking Awards) was launched in 2007, with the objective of encouraging cooperative banks to adopt the path of modernization. The cooperat ive banking sector as a whole was falling behind the other c o m m e r c i a l b a n k s in terms of customer acquisition, customer retention, technology

modernization, product innovation, channel upgradation, risk management and many other areas. However, there were many cooperative banks that were doing well. However, their performance was not being recognized as the overall cooperative banking sector did not enjoy a high reputation. The main idea behind FCBA was to bring into limelight the high performing cooperative banks and thereby encourage the other cooperative banks to learn from them and adopt best business practices and technologies. FCBA always received a warm reception from the cooperative banks and Banking Frontiers is striving to make the 10th anniversary of FCBA a grand event with more speakers than ever before and a much wider range of topics. As always, we are keen to facilitate the cooperative banking sector accelerate their march towards success.

FCBA 2016: Over 40 sessions and Over 50 speakersAnother manner in which FCBA 2016 will be different from the past conferences is that there will be 3 parallel sessions on Day 1 and half of Day 2. This will ensure that every delegate has a choice of sessions that he/she wishes to attend. This way, the number of topics being covered also increases. Some of the topics planned for FCBA 2016 include ATMs, Payments, IS Policy, Risk Management, HR Applications, Cloud, CBS Refresh, Mobil ity, RFP Creation, Vendor Management, Customer Acquisition, Customer Retention, Analytics, Mobility, Innovation, Leadership, etc. The conference will comprise presentations, panel discussions, case studies, etc.FCBA 2015: Award Ceremony at Goa

FCBA 2014: Conference attendees at Hyderabad

FCBA to be held at New Delhi this year

On the glorious occasion of the 10th anniversary of FCBA, Banking Frontiers has decided to host the event in the National Capital. Pride Plaza Hotel at Aerocity at New Delhi airport is the selected venue. This is a newly constructed 5 star hotel and boasts of over 300 rooms and world class conference facilities. The main advantage of New Delhi is that the central government is located there. We are working to invite senior leaders join us and address FCBA this time. Another advantage of the National Capital is that it is easily accessible by rail, road and air. That way delegates will not face any major issue in logistics. Another great advantage of Pride Plaza Hotel is that it is just a few minutes away from the airport and only 17 km from New Delhi railway station.


Cooperative

The Nashik Road Deolali Vyapari Sahakari Bank has been serving various sectors of the population

in Nasik for more than 4 decades. Established by a group of visionary people with deep faith, vision, optimism and entrepreneurial skills, in 1961, the bank has made steady progress with expanding geographical presence in the district. The bank today has 19 branches and 7 ATMs.

Says chairman of the bank Datta Namdeo Gaikwad: “We have got sanction for opening 8 new branches, while we have added 3 ATMs in 2015-16. Today, we have a staff strength of 212.”

Total customer base of the bank as of by Q3, 2015-16 is 179,488 - 156,051 depositors and 23,437 loan takers. It has 65,000 shareholders. Gaikwad says the bank is targeting to add 1000 more customers.

BUSINESSThe bank’s total deposits stand at `373.73 crore as on 31 December 2015 while loans account for `227.36 crore. “Our seposits have registered yoy increase of 6.73% and loans 12.8%,” says Gaikwad adding the top 3 categories of loans are loan against property, hire purchase and housing. As of 31 December 2015, the bank’s secured loans against property have increased by 76.15%, loans for hire purchases by 17.77% and home loans by 62.79%. Personal loans are given to individuals of reputed companies. It has also introduced new categories of loans.

DIFFERENTIATORSThe bank differs from other cooperative banks in many ways. According to Gaikwad, it scores high in total business, has its own data center and has been profit-

making throughout. The bank has also issued RuPay debit cards and is involved in social and charitable activities. It has alwo won prizes from various institutions under various categories for its varied performances.

“We have our own tier 2 data center with near DR site to prevent any interruptions in service to our customers. The datacenter was established in May 2013 and since then we have been able to maintain 99.99% uptime. The same uptime is maintained for ATMs as well. We are providing 24x7 customer care service for ATMs, hot listing of cards, dispute management and guidance to customers,” says Gaikwad.

IT IMPROVEMENTSUsing its IT infrastructure, the bank has introduced services to its customers like mobile recharge, DTH recharge, account statement, mobile number change request, cheque book request, debit/credit ECS, PoS service and loan installments SMS. It

is now planning to add Quick EMV chip card and e-commerce service in coming 12 months.

Improvements in IT infrastructure during the last 12 month include setting up of the near DR site, POS service setup and Tivoli Backup Solution with IBM Tape Drive. The IT infra team and IT applications team consist of 8 members.

Gaikwad shares the bank’s futures plans: “We intend to improve our DR site infrastructure in order to attain 30 minute RPO and 2 hour RTO. We will also provide host to host connectivity, e-commerce services and new ATMs.” The bank is using ACE Bank from Netwin System and Software as its CBS, which had replaced Smart Bank TBA.

ATMSThe bank providers 24-hour security at its ATMs, which also includes CCTV and regular monitoring. Security personnel are present at the ATMs 24x7. The bank sees 100 transactions per ATM per day.

NPAThe bank’s gross NPA for 2014-2015 stood at 3.18% and net NPA 0%. Gaikwad says the gross and net NPA for 2015-2016 would be 2.75% and 0% respectively. The bank hopes to have deposits of `405 crore and loans to be `245 crore in 2015-16, while for 2016-17, these would be `500 crore and `300 crore respectively.

Gaikwad is of the view that cooperative banks are unique in terms of their structure, clientele and credit delivery. “These banks have successfully weathered several challenges. They are showing keen interest in diversifying its business and broadbasing their clientele,” says he.

[email protected]

Datta Namdeo Gaikwad, chairman, the Nasik Road Deolali Vyapari Sahakari Bank, presents the progress card of the leading bank of the district:

Deolali Bank targets `800 cr business

Datta Namdeo Gaikwad


Cooperative

Saraspur Nagarik Cooperative Bank, established in 1968 in the Saraspur area of Ahmedabad, is popularly

known as ‘Saras Bank’, meaning a good bank, a nice bank. The head office and 8 branches of the bank are housed in its own premises and all are connected through CBS. The bank, however, does not have an ATM. Vadibhai Patel, chairman of the bank, says the bank has plans to open 2 new branches in the current FY. The staff mainly consists of graduates, post graduates and masters degree holders, he adds.

The bank has a large customer base. The number of account holders increased from 36,780 in Q3 to 37,196 in Q4, 2015-16. Patel says he targets to have 45,000 account holders in 2016-17. ”Our special treatment and way of service separates us from other cooperative banks of Ahmedabad,” says he. The bank has done a lot of charity and promotional activities in 2015-16. It has been helping charitable organizations working in the field of health care and it has been doing so right from the first year of its establishment.

DEPOSITS AND LOANSThe total amount of deposits stood at `190.39 crore and advances AT `115.81 crore in Q4, which were `176.78 crore and `106.87 crore respectively in Q3 of the last FY. The bank has registered a growth of 22.40% in deposits and 12.08% in advances. Says Patel: “For 2016-17, wehave set the target for deposits at `230 crore, whereas loans and advances should be reaching `175 crore. Normally, we meet the fund requirements of housing / infrastructure sector, engineering sector and textile sector. As much as 95% of loan proposals have been approved by the bank during the last 3 years.”

The bank has facilitated hypothecation of stocks in trade and book debts (`3023.85 lakh), housing / infra loans (`2505.54 lakh), vehicle loans `2170.42 lakh), business expansion loans (`1791.35 lakh), loans against FDs & amp; NSCs/KVPs (`885.84 lakh), personal loans (`524.66 lakh) and machinery loans (`374.02 lakh). The bank has also provided loans to professionals and individuals (`170.35 lakh), education loans (`7.24 lakh), Mahila Swarojgar (`3.74 lakh) and consumer products (`1.18 lakh). The NIM of the bank during the last 3 financial years are: 2.28% in 2013-14, 2.17% in 2014-15 and 2.13% in 2015-16.

The bank strongly believes in social ethics and helps the weaker sections of the society. It has started providing advances and loan facilities for women who work from home engaged in activities like stitching clothes and embroidery works. Patel this loan was named as Mahila Swarojagar Loan and the bank has received tremendous response. He also

says the bank has helped the lower classes of the society by giving them loans to develop their small scale business.

INFOrmATION TEchNOLOgyThe bank has started internet banking and SMS banking. Its CBS and other technology solutions were provided by T.M. System. The bank will soon have its own ATMs.

NPAWhile the gorss NPAs for the financial year 2015-16 got reduced to1.72%, from 1.99% in 2014-15 and from 2.29% in 2013-14, the net NPAs have been 0% since the beginning of the bank. Patel is of the view that cooperative banking is growing with great speed, especially in the western part of India. States like Gujarat, Maharashtra and Karnataka have the most number of cooperative banks. “The good services and the nice treatment given by these banks bond closely with the customers,” he adds.

[email protected]

Vadibhai Patel, chairman, Saraspur Nagarik Cooperative Bank, Ahmedabad, speaks about sector-wise advances of the bank in 2015-16:

Saraspur Bank to add 2 branches, ATm service



Cooperative

Nandura Urban Cooperative Bank, headquartered in Buldhana district of Maharashtra state, has completed 52 years of operations. It is the first bank to construct its

own head office building in Vidharbha region way back in 1977. The bank today has 13 branches. It added one branch in 2015-16. Avinashdada Naphade, chairman of the bank says the bank will have ATM made operational soon and 5 more during the current financial year. It is also proposing to open new branches in Amaravati, Jalna, Jalgaon, Akot and Nandura.

Nandura Bank started operations in 1964 with 81 members and ̀ 32,000 as share capital. Today, it has ̀ 5 crore as share capital and 18,000 shareholder members. Its customer base is 55,000 as of Q4 2015-2016. “We levy minimum of charges and processing fees. Any Branch Banking (ABB) and SMS services are available to the customers. Other services also are appreciated by them and 60% of the accounts have been seeded with Aadhar numbers. We have targeted to add 15% more customers in 2016-17,” says Naphade.

BUSINESSThe bank had started with deposits of `56,000 and loans of `45,000, which have now grown to `200 crore and `121 crore respectively as of Q4 2015-2016. Its NIM during FY2013 was 3.27, against 3.34 in FY2014 and 3.3 in FY2015. Naphade says the bank’s USP is easy and quick loans. The bank provides gold loans rural customers and farmers, hypothecation loans and cash credit to contractors and commission agents. Naphade says in the last three years as much as 99% of loan proposals that were received were approved by the bank. He is confident that the above three categories of loans will rise notably in 2016-17. The bank’s gross NPA was 8.23% and net NPA 5.26% as of Q3 in 2015-16. The bank has set up a special recovery team and NPAs have shown downward trend.

TECHNOLOGYIn the last one year, the bank has added ATMs and SMS banking. It had implemented TBA system from Jalgaon Janta Infotech. Now it is using Datavision Software Solutions’ CBS system. Naphade says NACH, APBS and CTS applications will be added during the next 12 months. Nandura Bank will be using NCR brand of ATM. The bank has made arrangement to provide 24 hour security at the ATM centers.

3RD PARTY PRODUCTSThe bank has a tie-up with Life Insurance Corporation of India

and ICIC Lombard for marketing their respective products.

TARGETSThe bank’s targets for 2016-17, according to Naphade, include 20% increase in deposits along with 30% increase in loans and advances. The bank is also aiming to improve its CASA substantially. “We are also aiming for increasing the share capital and reserve funds and general expansion of the business, he adds.

[email protected]

Avinashdada Naphade, chairman, Nandura Urban Cooperative Bank, provides details of the banks proposed activities:

Nandura UCB expansion plan: 6 branches, 5 ATMs Avinashdada Naphade receiving ‘Best UCB 2nd prize 2014-2015’

Avinashdada Naphade receiving 3rd prize for Annual Report Contest by Sahakar Sugandh Pune 2013

People Track

PB Banking Frontiers May 2016 Banking Frontiers May 2016 57

Ramkumar takes voluntary retirement from ICICI Bank

S. Mahalingam is chairman City Union BankS. Mahalingam, former CFO and ED of Tata Consultancy Services (TCS), is tipped to become the chairman of City Union Bank. He is now an independent director of the bank. The bank’s board has already received the approval of the Reserve Bank of India for his appointment. He will hold the position for a period of three years. The current chairman S. Balasubramanian has vacted the position recently. The board has also co opted M. Narayanan as additional director of the bank. Mahalingam is a graduate in commerce and CA. He is a director in Nani Palkhivala Arbitration Centre, Tata Reality and Infrastructure, CMC, CSI Publications, National Skill Development Corporation, Kasturi Sons and Sundaram Finance.

K. Ramkumar, ED and member of the board of ICICI Bank, has taken voluntary retirement. He was with the bank for 15 years, starting as head of human resources and subsequently taking charge of operations of the bank and leading ICICI Foundation. The bank said in a statement he has sought early retirement as he wanted to pursue his personal interests in the area of leadership consulting, research and training. Vijay Chandok, who has recently been appointed ED, will take Ramkumar’s place on the board of the bank. Chandok is currently, in charge of SME and international banking at ICICI. The other EDs on the board are Rajeev Sabharwal (in charge of retail banking), Vishakha Mulye

(in charge of wholesale banking) and N.S. Kannan (in charge of finance and treasury).

Citibank veteran may join HDFC Bank

K. Balasubramanian, a senior

banker with Citibank, is

reported to be joining HDFC

Bank and heading its corporate

banking business. The bank,

however, has not made any formal

announcement in this regard.

Balasubramanian is currently

managing director for corporate

banking at Citibank. At HDFC

Bank he is expected to report to

Kaizad Bharucha, ED in charge

of wholesale banking. The bank

is said to be focusing more on

corporate banking. Wholesale

banking in the bank includes

lending to medium and large

companies, small enterprises,

investment banking and banking

linked to the go vernment.

ICBC chairman Jiang may step downIndustrial and Commercial Bank of China, the country’s largest commercial bank by assets and one among the top banks in the world, is expected to replace its chairman, Jiang Jianquing. Jiang is 63. According to news reports, Yi Huiman, who is president of the bank since 2013, is tipped to take over from

Jiang. The bank has told its senior managers to nominate a new chairman and a president. It is also expected that the position held by Yi may be taken by Qian Wenhui, chairman of the bank’s board of supervisors. The reports also said Jiang is likely to be in charge of establishing a fund to provide financial support for the cooperation between China and 16 central and eastern European countries.

Amer Sajed to head BarclaycardBarclays announced Amer Sajed, who is handling the bank’s Barclaycard business now will be the permanent head of the credit and payment operations of the bank. The bank said Sajed, who joined Barclays from Citigroup in 2006, becomes chief executive of the Barclaycard business immediately.

James E. Staley, chief executive of the bank, said Barclaycard enjoyed its most successful year in 2015, and he is confident that under Sajed’s leadership, the business will continue to go from strength to strength. Sajed has been chief executive of the Barclaycard business in Britain and the United States. He has also served as interim chief executive of the overall Barclaycard business since May 2015.

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