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Has BFSI Reached Cloud Nine? ALSO FEATURES
A Report
JANUARY-FEBRUARY 2019 | VOLUME 05 | ISSUE 01 | US $20 | `200
Cover Story
Factors DRIVING
TechRevolution
in India’s BFSI Sector
Articles
Benjamin Henshall Country Manager India & Director of Sales, Financial Services APAC, Red Hat
Sabyasachi Goswami SVP – Head Sales & Strategy Perfios
Dr Saibal Paul Associate Director Sa-Dhan
Pinak Chakraborty Senior Vice President of Technology Digibank, DBS
Interviews
Pavan K Gupta Chief Executive Officer Muthoot Housing Finance Company Ltd
Abhijit Ray Co-founder and Managing Director Unitus Capital
Mehjabeen Taj Aalam Head of Information Technology at Muthoot Homefin (India) Limited
Protect your business and mitigate security risks
CONTENTS JANUARY - FEBRUARY 2019
ARTICLE
08
12 Andhra Pradesh -The Sunrise State
COVER STORY
INDUSTRY SPEAKS 16 Perfios Software Solutions
Real-time Analysis & Decisioning Sabyasachi Goswami SVP-Head Sales & Strategy, Perfios
20 Open Banking: A Strategic Approach to
Factors Driving Tech-Revolution in India’s BFSI Sector
Win Digital Consumer Benjamin Henshall Country Manager, India & Director of Sales, Financial Services APAC, Red Hat
28 Inclusive Growth in North-East India: The Way Forward
INDUSTRY PERSPECTIVE
18 Affordable Housing: Growth Driver for Banks and Housing
Through Alternative Channels of Microfinance Dr Saibal Paul Associate Director, Sa-Dhan
30 How Much Security is Enough?
Mehjabeen Taj Aalam Head of Information Technology at Muthoot Homefin (India) Limited
23 Tejora—Architecting Solutions to Meet Highest
54 Digital Transformation in Banking Sector: A Journey in the Making Pinak Chakraborty Senior Vice Presidents, Technology, Digibank, DBS
Finance Companies Pavan K Gupta Chief Executive Officer, Muthoot Housing Finance Company Ltd
Standards in BFSI Surabhi Shenoy Managing Director, Tejora Private Limited
56 Unitus Capital
Helping Businesses in Financial Inclusion Space Abhijit Ray Co-founder and Managing Director, Unitus Capital
CONFERENCE REPORT
32 5
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EDITORIAL JANUARY - FEBRUARY 2019
Technology Paving Way for Pro-Consumer BFSI Sector To remain aligned with the rising significance of technology, the Banking and Finance sector in India is making a lot of investment in the IT and digital advertising. The Indian Banking, Financial Services and Insurance (BFSI) sector spent $9.1 billion in IT in 2018, which is an 11.7 percent increase (Year-on Year), a leading research firm stated in a report. According to a report by Internet and Mobile Association of India (a non-profit body), the BFSI sector spent Rs 2,022 crore on digital advertising (46 percent of its total advertisement budget). The statistics show how there is a symbiotic relationship between IT and BFSI in India. While these numbers would match up to the Gross Domestic Product of a few African nations, what they prove is that the growth of the Indian IT market is still predominantly driven by the BFSI agenda. Similarly, for large banks, insurance companies or other fintech and financial services players, IT is perhaps the most critical catalyst to grow, both on their corporate enterprise and consumer front. This camaraderie between BFSI and IT has been prevalent from the early days of tech adoption in India: Banks have always shown the way. We can trace the evolution as BFSITech 1.0 (Internet adoption); BFSI-Tech 2.0 (migration to data centers); BFSI—Tech 3.0 (the SMAC- Social, Mobile, Analytics and Cloud, amalgamation with security, mobility, analytics and cloud defining banking agenda. We are presently in BFSI-Tech 4.0 phase — technologies like blockchain, contact-less payments using NFC mechanisms, AI and gameplay are driving this phase of digital transformation.
Dr Ravi Gupta Editor-in-Chief The Banking & Finance Post Magazine and Founder Publisher and CEO, Elets Technomedia Pvt Ltd
The magazine’s latest cover story “Factors Driving Tech-Revolution in India’s BFSI Sector” tries to outline and examine precisely these technologies and how they are helping BFSI adopt a more customer-friendly look. This digital transformation is not by choice but borne out of necessity to stay more relevant in a pro-consumer society and world. The issue also carries a special feature “Has BFSI Reached Cloud Nine?” that captures the nuances and dynamics of cloud deployment in banks and insurance companies. More importantly, there is an attempt to explore whether migration to cloud really enhances the transformation especially from the secure, agile and scalable perspective. Our magazine’s latest issue also features interviews with Pavan K Gupta, CEO, Muthoot Housing Finance Company and Abhijit Ray, Co-founder and Managing Director, Unitus Capital and interesting industry insights by Mehjabeen Taj Aalam, Head—IT, Muthoot Homefin, Pinak Chakraborty, SVP-- Technology, Digibank, DBS and Benjamin Henshall, Country Manager, India & Director of Sales, Financial Services APAC, Red Hat. We have also brought out a report of the 5th NBFC100 Tech Summit Mumbai, highlighting the future of Non-Banking Financial Companies (NBFCs) in today’s challenging times. The Summit touched upon challenges and future roadmaps of NBFCs, Payments Banks, Small Finance Banks, Microfinance Institutions (MFIs), Housing Finance Institutions and many more. Continuing our legacy of creating knowledge-sharing platforms for the BFSI sector, we are organising the 3rd Elets BFSI Leadership Summit in Mumbai. The summit aims to congregate CXOs and technology experts from across BFSI domain. We hope our collection of articles, interviews, reports and special stories will prove thought provoking and evoke invaluable feedback of our esteemed readers.
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COVER STORY
FACTORS DRIVING Tech-Revolution in India’s BFSI Sector
Technology is reinventing everything around us. The world is now entering an era of ‘Digital Darwinism’, a stage where various technologies are emerging faster than the adaptability speed of organisations. Amidst this transformation, the banking and financial sector is also aligning itself with the emergence of digital forces, leading to creation of new ways interpreting data and the means to do so costeffectively, writes Rashi Aditi Ghosh of Elets News Network (ENN).
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COVER STORY
EVOLUTION OF TECHNOLOGY IN THE BFSI SECTOR In the late 1990s, implementation of information technology helped some private sector lenders across the country in unveiling non-branch banking services. Initially, internet banking was presumed to be an insecure option for a transaction by the users. However, the particular mode of banking witnessed a whopping growth in the 2000s due to the initiatives taken by the government. The Reserve Bank of India (RBI) in a bid to popularise it. The cost of online transactions was also dropped significantly. The mode that earlier received negative reviews from the users, enhanced level of customer satisfaction gradually, by ensuring the benefits of banking anytime anywhere. It helped the users in performing all the important banking formalities without even visiting the bank branch. Ankur Gupta, Principal Secretary, Department of Electronics & Information Technology and Elections, Government of Haryana says, “Technology has indeed transformed banking but I still feel that there are a lot of areas requiring intervention when it comes to offering convenient options for consumers. Today, if you want to lodge a theft complaint or want to put up a service request, you will be made to call the customer care service. The customer care service rather than helping you out with your problem will keep you waiting for a long time, transferring your call from one department to other. It is important to offer better and hassle-free customer service options to the consumers much prior to implementing world-class technologies.” In the last few decades, the banking sector in India realised the rising significance of digital technologies and the urgent need to embrace the same for streamlining their services. The sector is making considerable investments in a bid to
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create digital infrastructure so that it can offer better solutions pertaining to mobile banking, e-wallets and virtual cards, etc. To name a few, Digital-only/ Virtual Banking, Biometric Technology, Artificial Intelligence, Blockchain Technology, Bitcoin and Robotics are key innovations in the digital banking segment. LR Ramchandran, CGM, Financial Inclusion & Banking Technology, NABARD says, “Banking is not an easy operation; it is a very complex activity. Digital transactions might look an easy activity but it involves a lot of touch points as far as cyber security measures are concerned. The sector has undergone a massive change. Banking activities that earlier needed human intervention, are now handled by machines. When technology was introduced in banking and operations started witnessing paradigm shift, the Reserve Bank of India (RBI) took several transformative measures to reinvent the entire banking industry and took it to the digital platform, at the same time ensuring safety and security.” Padma Jaiswal, Secretary, Department of Information Technology, Government of Puducherry said, “The complete Banking, Financial Services and Insurance (BFSI) sector has undergone massive changes due to technology. The
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sector is now extended to a lot of new segments apart from the financial genre as information technology is opening up new vistas for the industry. From urban to rural, banked to underbanked, BFSI industry is offering a bouquet of services that suit the requirements of all the consumers.” WHAT IS FINTECH? FinTech, an abbreviated term used to describe technology that proposes improvement in the delivery and usage of financial services. It is utilised to help companies in a better management of financial operations, processes and lives by utilising specialised software and algorithms that are used on computers and, increasingly, smartphones. In the 21st century, FinTech was initially applied to resolve the back-end systems of established financial institutions. Since then fintech has been expanded to ensure financial literacy as well as streamlining the wealth management, lending and borrowing, retail banking, fundraising, money transfers/payments, investment management and more. The role and the significance of FinTech have now escalated to a greater extent in India and its landscape in the country can now be clasified into three broad categories: payments, financial products and services, and other general-purpose
JANUARY - FEBRUARY 2019
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COVER STORY
The Indian Fintech market is forecasted to touch $2.4 billion by 2020 from a current $ 1.2 billion, as per NASSCOM.
technologies. According to B Raj Kumar, Deputy Chief Executive, Indian Banks’ Association says, “Earlier we used to define eras into BC and AD but in recent times we now perceive it as BT (Before Technology) and AD (After Technology). I represent the BT era and I am privileged to witness this entire transformation in banking in alignment with technology in India. Today, we cannot imagine a human being without a smart phone. This change is huge and I am thankful that I could witness both the eras. Technology has now given you the power of convenience. It also helps you in controlling the number of frauds associated with your cards and bank accounts. You can choose to maintain low balance in your particular card and then transfer the required amount to it through mobile banking whenever you need it. KEY TECHNOLOGIES TAKING INNOVATION AHEAD
In the last few decades, the banking sector in India realised the rising significance of digital technologies and the urgent need to embrace the same for streamlining their services.
In the digital era, there are several technologies that helped ensuring innovation across the sector. But in India’s context, three developments proved to the milestones. These innovations were the gamut of significant developments that we witness around us today. They are namely Core Banking Solutions, Immediate Payment Service, and Aadhaar. CORE BANKING SOLUTIONS Core Banking Solution (CBS) is one of the most important and nodal systematic change that completely transformed the way we see banking transactions today.
Core banking was recommended in the 1984 Rangarajan Committee report on bank computerisation. An expression of interest pertaining to CBS was invited in July 2000, and the actual implementation started in August 2003 when the first branch of the State Bank of India (SBI) was put on TCS’ BαNCS core banking solution.
The number of public sector bank branches in India with CBS implementation increased from 79.4 percent in March 2009 to 90 percent in March 2010. It is a process where all information regarding the transactions and accounts, and the business of the bank are hosted via single centralised data base. IMMEDIATE PAYMENT SERVICE (IMPS) Launched in 2010, the Immediate Payment Service or the IMPS was developed by National Payments Corporation of India (NPCI). The system facilitates immediate fund transfer from one account to another. Prior to the launch of IMPS, fund transfers were scheduled as per the bank operation hours, settlement hours, national holidays, etc. This innovation, after its implementation, is helping customers to transfer funds anytime immediately.
IMPS is the fastest growing immediate payment system in the world. The daily transaction volume of IMPS grew from about two million per day in 2017 to approximately 2.8 million per day in 2018.
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Unified Payments Interface (UPI) is one of the products based on this particular infrastructure. According to Rajagopal Devara, Principal Secretary, Department of Finance (Reforms), Government of Maharashtra, “ Innovation in terms of technology is taking us back to the olden times . Earlier, thumb impression was the only source of authentication and today also we rely on thumb impression for the final layer of verification. While a lot of things are getting obsolete, technology is reinventing a lot by transforming the older ones into a new advanced version. Smartphones, for example, have replaced several devices such as watches, music players etc.” AADHAAR Aadhaar, the national identity project to bring all citizens under a single identification system, was envisioned as the foundation of numerous services by the government. As a part of the project, detailed information about individuals were collected, such as biometric details, residential details, banking data, etc. The aim was to interconnect all services
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Launched in 2010, the Immediate Payment Service or the IMPS was developed by National Payments Corporation of India (NPCI).
availed by the individual through a common factor: Aadhaar. In the banking and financial services space, Aadhaar is being used in multiple ways to promote financial inclusion and reduce the frictions in transacting.
More than 89 percent of the total population had been issued the biometric identifier Aadhaar as of mid-February 2018.
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Bipin Ramesh Khot, Assistant Director General, UIDAI, Government of India says, “Maintaining data privacy in the digital world is very difficult. For ensuring data security and in a bid to eliminate bogus identities, the concept of Aadhaar was brought into life. For getting an Aadhaar card, a person is asked to submit several details from date of birth, finger prints, Irish details and lot more. The Unique Identification Authority of India (UIDAI) has kept a mandate for so many verifications just to ensure that a person’s duplicate or bogus data does not enter the system.” In the past few decades, there have been some wide-ranging changes that have altered the very design of the banking system. A segment of experts opine these technological changes are making the banking business model obsolete. Many experts believe that the tech-driven revolution is indeed a significant step for the entire BFSI industry but it definitely has its own disadvantages as well. It is therefore, important to analyse the fitment of the technology implemented and put the security measures in place prior to its usage.
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ARTICLE
ANDHRA PRADESH THE SUNRISE STATE ANDHRA PRADESH – THE SUNRISE STATE The sunrise State of Andhra Pradesh is one of the fastest growing States in India with GSDP of 7% in 2013-14 to 11.2% in 2017-18. The State is seen as the gateway for the growing markets and promising opportunities, opening its doors for investments in various sectors. Besides rolling the red carpet to big ticket companies, the State is also encouraging Small and Medium Enterprises (SMEs) by giving them attractive incentives. A thrust to the IT sector is being given in Amaravati, Visakhapatnam, Anantapur, Tirupati and Godavari districts. AP VISION 2029
approach road for a world-class IT township is under development at Kapulapada where the government has earmarked 400 acres for a new layout. DEFINING FACTORS Under the Government of India’s BPO Promotion Scheme, the city has bagged highest number of seats in first phase. The second phase allotment is under process. The current incentive structure, talent availability and infrastructure facilities will go a long way in attracting more investments to the city. ANDHRA PRADESH:
KEY MILESTONES
Vision 2029 charts out an ambitious path for Andhra Pradesh to be amongst the top three States in India by 2022 and a developed State measured in terms of citizen life satisfaction and Happiness Index by 2029. Come 2050, the Sunrise State of Andhra Pradesh aims to be among one of the most prominent investment destinations in the world. KEY MILESTONES The government has taken it on a priority basis to develop the IT sector in the State, so given the much-needed boom to the IT jobs market. The State has witnessed creation of 40,109 jobs in IT sector since 2014 and is expected to add another 72,278 jobs in near future. FOCUSED APPROACH IN VISAKHAPATNAM Visakhapatnam has been attracting huge investment proposals because of its connectivity, infrastructure and cosmopolitan city status. In a significant development, Google X has also agreed to establish its first development center outside America in Visakhapatnam. The
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DEFINING FACTORS
DESTINATION FOR BANKING AND FINANCE The Government of Andhra Pradesh (GoAP) has a motto of “Visible Governance, Invisible Government”. In line with this, Andhra Pradesh has always been at the forefront of deploying innovative and new advanced technologies in governance. In fact, we are the first fully digital government in the country, and with innovative initiatives such as Real Time Governance Society (RTGS), we have reinforced our leadership position in digital transformation of governments. Further, GoAP has aligned its focus on creating a pro-development environment that stimulates growth across sectors and achieves common goals within stipulated timelines. The Sunrise State is emerging as India’s first blockchain Hub; aiming to transform Visakhapatnam as a world class Fintech ecosystem bringing government, academia, corporates, investors and entrepreneurs together. On the policy front, the State has created a robust policy framework to promote IT/ITeS and Electronics sectors, including Consolidated IT Policy, Electronics Policy, DTP Policy, GIC Policy, IIT Policy, Cybersecurity policy, Innovation and Startup policy, AI Cloud Hub Policy, and Animation Visual Effects and Gaming Policy.
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These policies, along with our country’s leading practices in Ease of Doing Business, where we have been ranked #1 for two consecutive years in 2016 and 2017, have enabled Government of Andhra Pradesh to attract investments from marquee names in Fintech such as Conduent, HDFC, Franklin Templeton Investments, Paytm, Cardlytics, Paytm, ICICI, Broadridge, Mastercard Mahindra Finance, Black Cactus Global Technologies, Conduent. Visa has also collaborated with GoAP to develop Visakhapatnam into India’s first ‘Less Cash’ City. GoAP’s digital initiatives combined with strong policy frameworks have also facilitated consistent double-digit growth rates for the State. In 2016-2017, the State has witnessed economic growth of 11.61%, compared to 10.95% in 2015-16, while the per capita income has increased from $1,517 to $1,990 during the same period. To ensure sustainable accelerated growth, GoAP is focused on creating a conducive business environment to attract investments from companies and wants to ensure that the local population can derive maximum benefits from the influx of such investments. The Government of Andhra Pradesh (GoAP) has identified Fintech Valley Vizag as a high priority impact project for the State, with the potential to create tremendous growth and employment opportunities. The Fintech Valley, a Government of Andhra Pradesh initiative, in Vizag is a self-sustainable global Fintech ecosystem where global financial services companies, government and academia come together in this valley to build capacity, infrastructure, market access, connectivity, funding channels, and incentive mechanisms to achieve unmatched business goals and successes. Further, GoAP understands the need of creating a critical mass of talent pool to support the fintech and banking ecosystem, in making Andhra Pradesh a Knowledge Economy focused on advanced technologies. GoAP has set up the Andhra Pradesh Information Technology Academy (APITA) and Andhra Pradesh State Skill Development Corporation (APSSDC) to address and bridge gaps in skillset among graduates and develop an industry-ready talent force. Further, the State established the International Institute of Digital Technologies (IIDT) to train and equip students in advanced digital technologies such as blockchain, machine learning, robotic process automation and analytics. To provide the right mentorship to advanced technology start-ups, a global fintech core group has been set up with industry experts to provide guidance and interact with start-ups to mentor them in building sustainable start-ups and, in turn, build a robust start-up ecosystem for the State.
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GoAP also has created the largest repository of use cases (for banks, regulators or government) in the world. This market access is nothing but the use cases that many financial companies have put forward for startups in Fintech Valley Vizag. The State of Andhra Pradesh has an already existing 50 million connected user base market, providing a readily available market base for the start-ups. GoAP aims to create a platform to connect start-ups with this user base. The Government of Andhra Pradesh is supporting banking and financial institutions for setting up operations or for expansion of business by providing the following incentives: Regulatory support and incentives Access to local and global investors Leverage learning from mentors Access to professional services providers (e.g. tax, recruitment) Access to talent pool Access to corporate partners Access to physical and technical infrastructure At the recently held Vizag Fintech Festival, GoAp has signed MoUs with CII, HDFC, Deloitte, Whub, SOSA from Israel, Wadhwani Foundation, Udhyam Association, FinTech Association of Hong Kong, UK-based Chartered Institute for Securities and Investment (CISI) to galvanise fintech corporates and start-ups, provide the necessary resources, and, in turn, help in nurturing and promoting Indian Fintechs/Insurtechs by developing a launchpad environment and support system that will enable them to thrive and flourish. The Government of Andhra Pradesh aims to develop Vizag as a Fintech innovation valley with the intent of making Visakhapatnam the Fintech epicenter of the world. The Government of Andhra Pradesh is going all out to create the best ecosystem for Fintech development in the city and providing incentives to entrepreneurs in the field. GoAP is focused on being the best in class in terms of implementation of blockchain and other advanced financial technologies to attract financial institutions and banks to invest and make the State of Andhra Pradesh as their business destination. IT LANDSCAPE IN THE STATE The city, which registered a turnover
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of approximately Rs 2,600 cr, during the financial year 2017-18 is further pushing to increase the turnover to Rs 3,500 cr at the end of 201819. Visakhapatnam has prominent IT players such as Wipro, Tech Mahindra, HSBC, Concentrix, IBM and Cyient. The city boasts of providing 12,000 jobs in the IT and IT enabled service sector and is estimated to add more than 20,000 jobs within a year. The city has experienced BPO talent pool serving F&A, Healthcare, Telecom Industry, HRO in voice and non-voice processes. IT RELATED POLICIES IT policy is based on key four pillars namely, Human Capital, Infrastructure, Incentives and above all, a system of Good Governance. The policy envisages abundant investment opportunities for the industry, employment generation and enhancing productivity and competitiveness. FISCAL INCENTIVES
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IT INCENTIVES The Sunrise State of Andhra Pradesh, with a keen emphasis on creating 1 lakh IT jobs by 2019-end, is offering best in class incentives to IT companies. The State also initiated various skill development programmess and ranks #1 in employable talent in India. ď‚— NON FISCAL INCENTIVES
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erfios Software Solutions (www.perfios.com) is the leading Product-Technology company in the FinTech space enabling Financial Institutions in real-time decisioning, analysis and credit underwriting. Headquartered at Bangalore, Perfios endeavors to create a substantial impact in the fintech ecosystem and thus brings to the fore, an expansive product suite for financial and banking services. Perfios has grown to serve 200+ Financial Institutions which include almost all the Large Banks, Progressive Non-Banking Financial Companies, FinTechs, Insurance Companies, Alternate Lending agencies, AMCs, etc.
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and have a trusted customer base of more than 50 million people. Perfios provides a varied range of solutions which covers the 360-degree aspect of financial underwriting by providing Bank, Financial, Tax and GST Statement Analysis. Being a technology driven company, Perfios has developed an extensible data platform that handles both structured and unstructured data – extracting, curating, analysing and providing vertical solutions in the area of real-time credit decisioning and Personal Finance management (PFM), leveraging some of the latest Machine Learning and AI techniques and algorithms. Perfios Insights solution, a B2B solution
is a real-time aggregation and analytics tool for Financial Institutions, Banks, NBFCs and new age FinTech lenders to automate and digitise the entire process of customer onboarding (Underwriting). It provides an edge over the manual system of FIs and some intangible benefits to the internal & external stakeholders by Cutting down the TAT for processing an application (loans, insurance, etc.) Lowering costs Providing higher accuracy Enhancing the user experience thus resulting in increased customer acquisition Facilitating Strategic Goals Providing better utilisation of resources
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It helps Financial Institutions get indepth analysis of data in real-time and thus aids them in well-informed decision making. The solution also provides some tangible benefits by Providing analysis in real-time, accurate information on customer’s financial worthiness. Eliminating later-stage expensive verifications Verifying the ‘Capacity to Pay’ Identifying relevant recurring income/expense transactions. Providing completely customisable output report listing out required information (average balance, recurring income/expense, debt-toincome ratio, bounced cheques, bank charges, overdrafts, late payments, penalty etc.) An integral part of the Insights solution is the analysis of various financial documents including Balance Sheets P&L Cash Flow Statements Schedules, etc. The synthesised report consists of all possible ratios and formulae necessary for calculating the finances of the prospects. This solution also provides the option of fetching data directly from the MCA portal and giving out an analysed report. It makes the entire customer journey seamless and hasslefree. The reports generated by Perfios is completely customisable. Perfios’ tax statement analyser fetches tax documents of customers which includes Form 26AS, ITR V & ITR forms for employment verification of salaried and professional customer type & income verification of all customer types required as part of credit assessment & decisioning. Perfios has the capability to build the final CAM (Credit Assessment Memo) sheet, by fetching and analyzing data from the ITR forms which is made
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Perfios has grown to serve 200+ Financial Institutions which include almost all the Large Banks, Progressive Non-Banking Financial Companies, FinTechs, Insurance Companies, Alternate Lending agencies, AMCs, etc.
available real-time, thus empowering the banks/financial institutions to make decisions on the fly. Our GSTN solution helps Banks & Financial Institution to analyse Goods Services and Tax Network (GSTN) data of the Goods Services and Tax (GST) Taxpayer by providing the information as desired by the lender for instant decisioning, approval and disbursement of loans. The FCU checks the authenticity of a bank document to figure out if there has been tampering or if there are any
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behavioral triggers which can help the lender in assessing the risk associated with it. In addition to providing core analysis of various data such as Bank statements, financial statements and tax statements, Perfios has created a new category of solutions that triangulate data across various data sources – banking, financials, Income Tax Return, Goods Services and Tax etc. and in the process establishing a single source of truth about a borrower and identifying frauds, if any. In addition to enabling customer on-boarding for lenders, the platform also provides a powerful suite of PFM solutions that enables a variety of deep analytics that can be leveraged by various FIs in getting more insights about their customers that let them offer more relevant recommendations to their customers and in the process increase their revenue. As a category creator and a pioneer in the credit decisioning and PFM space, Perfios is an established leader in its chosen area of focus and is the trusted partner for most Financial Institutions. As a result of constant innovation and creation of a new category of solutions, we have been recognised by both peer groups and media many times over.
JANUARY - FEBRUARY 2019 17
INDUSTRY PERSPECTIVE
Affordable Housing: Growth Driver for Banks and Housing Finance Companies
PAVAN K GUPTA Chief Executive Officer, Muthoot Housing Finance Company Ltd
Affordable Housing is gaining a lot of significance. Would you like to share the reason behind it? Today every discussion on housing starts and ends with affordable housing. In 2015, with a vision to provide a home to every Indian, the Government launched “Housing for All by 2022” scheme. This Centre’s initiative brought the focus of government authorities, builders, regulators and bank/Housing Finance Companies (HFCs) to affordable housing. About 95 percent of the housing shortage in India is in the low-income segment which comprises the EWS (Economically Weaker Section) having annual income up to Rs three lakhs and LIG (Low Income Group) having annual income of Rs 3-6 lakhs. The housing for all primarily focuses on the EWS and LIG segments. This scheme also covers people having annual income between Rs six lakhs to Rs 18 lakhs which fall under the
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In a bid to provide a home to every Indian by 2022, the Pradhan Mantri Awas Yojana (PMAY) housing for all scheme was launched by the Government in 2015. This has made affordable housing/ finance the most sought-after business, says Pavan K Gupta, Chief Executive Officer, Muthoot Housing Finance Company Ltd, in an interaction with Rakesh Roy of Elets News Network (ENN).
Middle Income Group -1 (MIG) and MIG-2 scheme. Affordable housing is defined differently by different people. Some define it on the basis of the size of the loan or carpet area of house or affordability. How has the Housing for All Mission/ PMAY helped in the growth of the affordable housing sector in India? The government has a vision to provide housing to every Indian by 2022. Under the Pradhan Mantri Awas Yojana (PMAY), the Centre plans to provide 20 million houses in Urban Area and 30 million houses in the rural areas. In order to boost the demand and supply for affordable housing, Government has implemented various initiatives like providing infra status to affordable housing, reduction of the Goods and Services Tax (GST) from 12 percent to 8 percent for
under construction properties under affordable housing, tax holiday to affordable housing developers for five years, allowing external commercial borrowing for affordable housing, Credit Linked Subsidy Scheme (CLSS) subsidy in urban areas and subsidy support for beneficiary lead construction. Credit linked subsidy is provided to economically weaker section (EWS), low in group (LIG), and Middle Income Group (MIG-1 and MIG2) beneficiaries. Under this scheme, eligible urban households get subsidy up to maximum of Rs 2.67 lakhs on home loans availed from Banks/ HFCs (Housing Finance Companies) etc. National Housing Bank (NHB) and Housing and Urban Development Cooperation (HUDCO) are the central nodal agencies to implement the scheme.
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INDUSTRY PERSPECTIVE the above. We customise products as per their clients’ needs. We have developed a robust credit appraisal process. It is during personal discussion, the customer needs, income and his repayment capacity is evaluated on the basis of which home loan is given. Invariably all our customers are end users. How does technology boost the growth of affordable housing finance in India?
National Housing Bank has issued around 35 new licenses in the last three years to start Housing Finance companies (HFCs). Most of these new HFCs are focusing on funding affordable housing customers in the informal sector. This has led to the easy availability of housing finance to the EWS/LIG segment of customers. All these above factors have led to spurt in the demand and supply of the affordable housing. What role does Muthoot Housing Finance Company Ltd (MHFL) play in providing housing finance to the masses, not addressed by the formal Banking sector? Muthoot Housing Finance Company Ltd extends housing loans to salaried and self-employed customers with formal and informal income. According to the Ministry of Housing, Urban Poverty Alleviation, the Economically Weaker Section (EWS) and Low Income Group (LIG) accounted for 95 percent of the total housing shortage in India. Out of the total working population in this category, 65 percent in the urban area and 90 percent in the rural area are engaged in unorganised or informal segment. These customers do not
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About 95 percent of the housing shortage in India is in the low-income segment which comprises the EWS (Economically Weaker Section) having an annual income up to Rs three lakh and LIG (Low Income group) having annual income of Rs 3-6
have a formal income proof and thus do not get home loan from the banks and large HFCs. MHFL is present in nine States and caters primarily to these underserved customers. To cater to the informal customers in the affordable housing segment, understanding of the customer business, evaluation of their income basis their cash flows and understanding of local property market is inevitable. At MHFL, we have been able to develop expertise to execute
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Technology has helped HFCs/ NonBanking Financial Companies (NBFC) to provide fast, efficient, cost effective, customised product and services to customers. It helps in increasing the productivity of the manpower, better utilisation of resources and automation of many manual procedures. It has helped in reaching out to larger geographies for business acquisition without setting up brick and mortar set-up. Use of mobile and mobile technology has made onboarding of a customer easy, fast and cost-effective. Technology helps to manage risk through analytics. It helps in taking informed credit decisions. Collection and recovery process have become far more effective and efficient and significant scale up of business across geographies at costeffective manner is possible with the help of technology. What are your future plans for the business growth? How do you think the affordable housing sector will grow in the next few years? Muthoot Housing Finance plans to have asset under management of more than, Rs 3,000 crores by 2021. The affordable housing finance is likely to grow at 35-40 percent in the next few years. This growth is enabled because of Centre’s focus to ensure housing to all by 2022, rapid urbanisation, migration of people from rural to urban areas, development of 100 smart cities, nuclearisation of families and rapid income growth in the EWS/LIG segment.
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INDUSTRY SPEAKS
Open Banking: A Strategic Approach to Win Digital Consumer becoming more open to switching financial services providers (even if the provider is not a bank) if they find one that offers them a better experience. By making the right technological investments and adopting more flexible business models, banks have the opportunity to enhance operational efficiency and accelerate innovation in order to improve customer satisfaction and increase revenue. Digital Banking in Asia-Pacific (APAC)
BENJAMIN HENSHALL Country Manager India and Director Sales, Financial Services, APAC at Red Hat
Introduction: Rapid innovation across industries has given rise to changing consumer behavior, especially in the banking and financial services sector. This has also enabled non-traditional players like PayTM and PhonePe to offer financial services in India. In fact, according to recent reports shared by McKinsey, it is estimated that digital banking penetration has grown 1.5 to 3 times in emerging Asia since 2014. This trend indicates the growing need to establish efficient digital channels for dayto-day operations. The need for banks to deliver exceptional customer experiences is now more important than ever, as customers are
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Banks in the Asia Pacific are recognising the advantages of going digital. Reports shared by market intelligence and advisory services firm IDC (International Data Corporation) indicate that about 80 percent of the region will operate on a hybrid cloud architecture by the end of 2018. By doing so, they may be able to lower the total cost of ownership and increase agility. Since cloud provides the ability to quickly provision resources, it allows banks to quickly develop and deploy new apps and services that address changing market and customer demands. Taking it a step further, those banks could also deploy automation tools to both improve operational efficiency and free up staff for revenue-generating tasks such as cross-selling and building relationships with customers. Open Banking is the way forward
Although banks have already started digitally transforming to better compete in the digital age, they should bear in mind that digital transformation is a journey, not a destination. As the business environment becomes increasingly volatile and uncertain, banks need to remain nimble and continuously innovate to quickly address the everchanging consumer and market demands. Banks have a duty to constantly refine their applications to keep up with times. This is where open banking can help. Open banking is a model in which banking data is shared between two or more unaffiliated parties through Application Programming Interfaces (APIs). It provides opportunities for banks to gain a 360-degree view of customers that can be used to help enhance their services and create new revenue streams. For instance, banks could use data from insurance companies to provide real-
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INDUSTRY SPEAKS
time comparisons of insurance plans and automatically suggest the best deal based on the customer’s financial capacity/needs. Recognising the benefits of open banking, some Asian banks are opening access to their APIs to co-create new and more customer-focused financial products and services. Such a move will enable banks to leverage each other’s strength and accelerate the speed of innovation. To further benefit from open banking, banks should take a microservice-based approach to building apps, in which large apps are broken into smaller, independently scalable components (also known as microservices) according to their functionalities. This enables app developers to make changes to specific microservices instead of a big piece of code, reducing the complexity and time it takes to release app updates. Moreover, microservices can help banks
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Open banking is a model in which banking data is shared between two or more unaffiliated parties through application programming interfaces (APIs).
accelerate software development as they can be reused as the foundation of new apps. With such a capability, banks will be able to constantly keep up with changing customer demands, which is crucial in ensuring good customer experience and retaining customer loyalty.
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Macquarie’s Banking and Financial Services Group is one such bank that has benefited from adopting microservices. By using microservices and containers, it now takes the Australian financial group minutes instead of hours to release software updates and features. It is able to update existing applications quickly without any downtime on the customer end, as well as meet customer demands for new services. Given the rapid pace of change, banks need to be agile to effectively deal with unknown disruptions that will come their way. Open banking is the key to achieving this. Elements of open banking such as APIs and microservices can not only help solve the challenges they face today, but also help banks build the right foundation to address future customer and business needs. (Views expressed in this article are a personal opinion of Benjamin Henshall, Country Manager India and Director Sales, Financial Services, APAC at Red Hat. )
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ADVERTORIAL
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n December 2018, the Reserve Bank of India (RBI) mulled over some new modes of electronic verification methods pertaining to the financial institutions of India. Video KYC (Know Your Customer) was one of the most plausible options among the others.
The Future of Banking and Insurance Sector: Video KYC
As Aadhaar based biometric customer verification is out of the picture now, Signzy, an active working committee member of the IAMAI (Internet and Mobile Association of India), has suggested video KYC (Know Your Customer) as an alternative solution. We at Signzy understand the power of Artificial Intelligence (AI) and how it can be leveraged to solve numerous problems associated with the financial institutions of India. We are aiming to build a global digital trust system with three major components: Identify an individual/entity accurately Know all the essential background information of an individual/entity Feature to reward or penalize the individual/entity to build a trust factor That is our mission, and we voraciously work to achieve the goal in this dynamic market. The Cons of Clumsy Old KYC Verifications Let’s have a look at some of the factors that showcase the clumsiness in the current offline KYC verification method: Maintainance of physical files, which requires time, manpower and space The offline process of documents collection brings the threat of misuse of documents The turn around time (TAT) per file increases which hampers the customer experience In-person verification requires customer’s availability which further delays the onboarding process These pointers are enough to highlight
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where the real problem lies. We at Signzy understand the time and cost involved from a banker’s point of view and customer’s experience in the whole process. This challenge has given us an opportunity to figure out a more affluent solution which will simultaneously abide all the regulatory requirements. The proposed solution is none other than the video based online identity verification method. Why is Online Identity Verification the Ultimate Solution? Online identity verification often leverages the artificial intelligence and computer vision technology, and views of a verification expert to deem whether the government-issued ID presented by the customer is legit or not. At Signzy, we developed a solution which performs validity checks via a real-time video session to ensure that the individual holding the ID is the same being showed in the ID. Some of the features are: Providing best-in-class face match score by matching the photo Identity with the real-time video session to eliminate the possibility of fraudulent activity Detection & elimination of static photographs or pre-recording videos
Liveliness is checked by matching the audio with the numbers or sentence that are asked to speak by the user Use of video forensics to detect if the video has tampered in any way Quick implementation of API, SDK, and Webcam for online video KYC Faster results as it typically takes only a few minutes to verify (Which can also be automated!!! Signzy has a secure and compliant solution Signzy reduces identity and behavioural fraud risk at digital onboarding through our proprietary Computer Vision Engine - ‘(K)Netra’ which brings human-like intelligence on people & documents and our Machine Learning (ML) based engine ‘Mimasa’ which detects behavioural risk using massive digital data. This innovation has been recognized several times in our journey including awards from Indian Banking regulatorReserve Bank of India ( Jul 16,18), IBM (Aug 16), Thomson Reuters (Nov 16), Forbes ( Jan 17) and HDFC Life (Mar 17), Monetary Authority of Singapore (Nov 17). Signzy today works with over 75 clients including the top public, private sector banks as well as large NBFCs.
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INDUSTRY PERSPECTIVE
Give us an overview of your products and services. Tejora is a Technology and Consulting company with a team of 250 skilled professionals. Over 15+ years, we have delivered 100s of Enterprise-grade innovative solutions using various cutting edge technologies. Our products mainly cater to Banking and Trading and Securities verticals. Various technologies and platforms we have been working with are AWS, Azure, Dockers, Kubernetes, Jenkins, Java, .Net, PHP, Python, NodeJS, AngularJS, ReactJS, Native and Hybrid Mobile development. Some of our popular Products are Property Finance Appraisal System This platform helps Banks and Housing Finance companies to approve Builder projects and provide Finance to Individual which includes cases like LAP, Resale etc. The platform helps appraise the property and helps in decision making of exposure and sanction limits. Post loan approval, it helps in tracking project progress, and disbursement. Quick Pay A revolutionary Value Added Service platform enabling banks and financial institutions to acquire Small and Medium-Ssized Enterprises (SMEs). This platform helps Bank’s merchants (SMEs) generate, track and setup invoices for multi-channel payment collection with additional support on E-Tendering system. Implemented at Axis Bank, IndusInd, Yes Bank. Chatbot Enabling intelligent dialogue between your customers and systems to facilitate smarter, higher-value purchase and service interactions. Allocations and Collectable App The solution allows automated assignments and tracking of all delinquent cases using an engine to both internal and to external agencies for smoother collection and to get a real-time update. What new technologies have you implemented to streamline BFSI services? BFSI has been adopting technologies to provide better Customer Experience in every aspect. Technology has been enabling them to Connect with us on
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Tejora-Architecting Solutions to Meet Highest Standards in BFSI Tejora’s “Client-first” attitude keeps fostering its drive to understand client’s business needs and equip them with the right solution to reach goals, says Surabhi Shenoy, Managing Director, Tejora Private Limited, in conversation with Elets News Network (ENN). offer newer and better products at much faster pace. The landscape will continue to change rapidly in near future. We keep ourselves ahead of the curve, and continue to work on Turn-key and Digital Transformation initiatives. On top of my mind I recall, path-breaking progress on, Re-engineering legacy systems with a Microservices Architecture Decoupling monolithic systems for swifter integrations Leveraging APIs with an API Manager and SURABHI SHENOY API Gateways Managing Director, Tejora Private Limited Orchestration of Infra and Development through Dockers and Kubernetes Slowly enabling CI-CD through Jenkins and Ansible Exploring Apache Spark and Kafka for streaming and processing large volumes of data Cloud Support andLift-Shift services Cloud and Data mining holds a significant position across the industry. How do you ensure safety for the services you offer in the segment? We relate to the challenges towards identity and access management capabilities designed to strengthen compliance management and reduce risk in today’s cloud environment. Discovery Understand the enterprise-readiness of cloud services with our objective Confidence Index. We use this information to assess risk and inform the needed security policies. Secure data Detect sensitive content at rest in sanctioned cloud services or en-route to or from any cloud service or website with advanced, enterprise DLP. By settinggranular policies on identity, service, activity and data we automatically protect data, application, threats and more. Stop threats Protect organisation from cloud threats such as malware and ransomware while we set tools to detect unusual data movement and malicious user activity to averse an active and passive threat. What new innovations are you planning for 2019? In the age of robotic assembly lines driverless cars and drones, cutting-edge automation and robotics are scripting a silent revolution in the sector shifting focus from cost reduction through labor arbitrage to driving business value through innovation. Challenges to overcome automation drive new age innovation and introduce the right tools that meet regulatory requirements and maintain data privacy remains our 2019 focus. The Banking and Finance Post
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JANUARY - FEBRUARY 2019 23
TOP MOMENTS OF 2018
Top Moments of 2018: NBFCs’ Ranking, Magazines and Five Conferences
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he year 2018 had come to an end and it brought several significant changes across the banking and finance sector. The year saw emergence of several new non-banking leaders and implementation of vital tech-driven innovation. Being a leading B2B voice of the Banking, Financial Services and Insurance (BFSI) sector The Banking & Finance Post through its print as well as the online version and the conferences, highlighted several vital topics. The Banking & Finance Post in association with Elets Technomedia organised five premier conferences across the country and also launched five special issues of the magazine. The year was also eventful because we released the second edition of India’s Top 50 NBFCs’ Ranking 2018 and it gained a lot of popularity amongst our readers.
Highlights of Conferences Organised in 2018 In 2018, we organised five conferences across India focusing on several significant issues pertaining to the Banking, Financial Services and the Insurance (BFSI) sector. Around the year, our conferences witnessed the participation of over 200 speakers, more than 80 partners and over 800 delegates.
February 2018:
2nd BFSI Cloud & Security Summit, Mumbai Delving into the role of cloud and the need for security measures, Elets Technomedia organised 2nd BFSI Cloud & Security Summit in Mumbai, where experts highlighted the need
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to offer customer first banking armored with secured systems. The summit focused upon some of the most emerging issues pertaining to cyber security and safe banking. It highlighted the use of technologies such as cloud computing, Blockchain and Artificial Intelligence in the Banking, Financial Services and Insurance (BFSI) Sector. In the summit, experts also talked about the various reforms initiated by the Centre for promoting the usage of digitisation in the banking sector. They opined that banking sector institutions are opening up and showing their acceptance towards new technology up-gradations. They are now collaborating with external interfaces. Rama Vedashree, Chief Executive Officer, Data Security Council of India inaugurated the summit. Several other dignitaries namely Brijesh Singh, Secretary and Director General, Directorate General of Information and Public Relation, Government of Maharashtra ,K Ramachandran, Senior Advisor-Banking Technology, Indian Banks’ Association and Haresh Krishna Kumar N, Country Manager-Vertica, Micro Focus were part of the inaugural session and deliberated about their expertise pertaining to the banking and financial industry.
April 2018:
3rd NBFC100 Tech Summit, New Delhi Holding a big potential and spark to innovate and remove several roadblocks currently existing in the banking sector, the Non-Banking Financial Companies (NBFCs) should be perceived as future leaders of the BFSI sector, experts opined at the 3rd NBFC100 Tech Summit held recently in New Delhi. Some of the experts stressed on exploring the reasons behind NBFCs’ success at a time when a lot of banks are not
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TOP MOMENTS OF 2018
succeeding. Some of them underlined the game-changing role of technology be it in terms of customer onboarding or loan approvals where technology has been the key enabler for NBFCs. Prem Narayan, Deputy Director General, Unique Identification Authority of India (UIDAI), Government of India, earlier in the day inaugurated the summit organised by Elets Technomedia and powered by The Banking & Finance Post, Asia and the Middle East’s premier bimonthly magazine. Several other eminent dignitaries namely Raman Aggarwal, Chairman, Finance Industry Development Council, Alexis Bossuyt, Trade and Investment Commissioner, Flanders Investment and Trade, Embassy of Belgium and Deepak Kapoor, Co-founder, InfoAxon Technologies, were present on the occasion. Be it the role of NBFCs in redefining the financial inclusion scenario in India, technology transforming NBFCs, modifying framework of NBFC or the role of regulatory bodies etc. were included in the list of issues on which various esteemed dignitaries, who were a part of this congregation, deliberated. Here is a bird’s eye view of the grand extravaganza held in the national capital in April.
June 2018:
4th NBFC100 Tech Summit, Hyderabad As the Government is steadily working on ensuring financial inclusion in the country, the BFSI sector has acquired an unprecedented significance to facilitate it the real way. Innovation and tech-driven banking sector along with big financial companies are big factors behind this financial transformation happening at a fast pace. In this light, highlighting the excellence and understanding the innovations made in the field of Non-Banking Financial Companies (NBFCs) in South India, Elets Technomedia organised the 4th NBFC100 Tech Summit in Hyderabad in June. The mega congregation of experts from across financial institutions was inaugurated by Ajay Mishra, Special Chief Secretary, Department of Energy, Government of Telangana. Jayesh Ranjan, Principal Secretary- Information Technology, Industry & Commerce, Department, Government of Telangana also attended the summit and shared his valuable insights of
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NBFCs. Other eminent dignitaries namely Gowra Srinivas, President, Federation of Telangana and Andhra Pradesh Chambers of Commerce & Industry, Dr Ruchi Agarwal, Senior Researcher, Indian School of Business, Dr B Yerram Raju, Adviser and Telangana Industrial Health Clinic Limited, Government of Telangana addressed the inaugural session and shared their views on Hyderabad and its financial landscape..
August 2018:
3rd BFSI CTO Summit, Goa
In an endeavour to highlight the rising implementation of technology across the Banking, Financial Services and Insurance (BFSI) sector, Elets Technomedia organised the 3rd edition of BFSI CTO Summit in Goa this August. The summit was inaugurated by Ankur Gupta, Principal Secretary, Department of Electronics & Information Technology and Elections, Government of Haryana and Rajagopal Devara, Principal Secretary, Department of Finance (Reforms), Government of Maharashtra. Other eminent personalities namely Padma Jaiswal, Secretary, Department of Information Technology, Government of Puducherry, B Raj Kumar, Deputy Chief Executive, Indian Banks’ Association and LR Ramchandran, Chief General Manager (CGM)– Financial Inclusion & Banking Technology, NABARD, also participated in the inaugural session and later shared their insights on reinventing financial services.
November 2018:
5th NBFC100 Tech Summit, Mumbai In November 2018, NBFC100 Tech series travelled to the financial capital of the country Mumbai. This conclave focused on the rising significance of NBFCs and the growing implementation of technologies in them. The summit witnessed a massive participation of over 125
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JANUARY - FEBRUARY 2019 25
TOP MOMENTS OF 2018
NBFCs and 25 partners from across the country. Several eminent dignitaries namely Dr Amitabh Rajan, Chairman, Reserve Bank of India Services Board, Dr Kavita Gupta, Managing Director, SICOM Ltd, Pavan K Gupta, Chief Executive Officer, Muthoot Housing Finance Co Ltd, Shashi Kumar Ravulapaty, Group Chief Technology Officer, Art Fintech and Navin Mehra, Regional Director, Fortinet were a part of the inaugural session.
Magazines
In 2018, we published five magazines focusing on several vital topics pertaining to the banking and financial sector. While the September-October Issue focused on India’s Top 50 NBFCs’ Ranking 2018, September-October Issue elaborated the role of Chief Technology Officers. Our May-June Issue was focused on the BFSI landscape of South India and March-April Issue was dedicated to “India’s Inspiring Leaders”, an initiative to highlight the role of trendsetters. January-February Issue focused on emerging technologies such as cloud computing, Artificial Intelligence and lot more.
Web Portal The appreciation of our stakeholders was not just limited to our conferences and magazines, our portal received a lot of acknowledgment. India’s Top 50 NBFCs’ Ranking 2018 was the most viewed post on 2018 and a lot of our guest columns also remained as the top favourites around the year. Most Viewed Article India’s Top 50 NBFCs’ Ranking
Total Online Posts in 2018 News: 800+ Articles: 90+ Interviews: 50+ Videos: 100+ 26 JANUARY - FEBRUARY 2019
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MICROFINANCE PERSPECTIVE
Inclusive Growth in North-East India: The Way Forward Through Alternative Channels of Microfinance North East India, Financial Inclusion: A Dimension
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he eight States located in India’s north-east cover an area of 2,62,179 sq km constituting 7.9 percent of the country’s total geographical area, but have only 46 million people, which constitute 3.7 percent of country’s population. According to Planning Commission’s statistics, Assam has 116.4 lakh people living below the poverty line, Manipur 12.5 lakhs, Meghalaya 4.9 lakhs, Mizoram 2.3 lakhs, Tripura 6.3 lakhs, Nagaland 4.1 lakhs and Arunachal Pradesh 3.5 lakhs; significantly, Tripura and Arunachal Pradesh, have shown a dip in the poverty scale. North East India characterise with sparsely populated internationally sensitive, geography with a
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considerably poor population, having the enormous potential for development.
Precipitation of Financial Inclusion through partnership: An example
Prime Minister -Narendra Modi’s effort to make North East India more inclusive is definitely a welcome move. However, North East shouldn’t be weighed with the same parameters, like other parts of India. The identity of the population of North East is complex and multi-layered including tribal kinship, financial status, and political affiliation and sometimes cumulated with the status of education. In order to promote livelihood and bring people out of poverty, the key stimulus is availability of financial institutions and accessibility.
The Government is diligently working to include unreached geographies and population under the ambit of financial inclusion, however failing owing to inadequate convergence between different arrays. Let us understand the phenomena through data. The two reference sources used are CRISIL Inclusix, 2013 and 2015 along with the Reserve Bank of India’s Basic Statistical Returns. First CRISIL Inclusix 2013, which has considered the banking data of 2009 to
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MICROFINANCE PERSPECTIVE
2011 where all India score was 40.1 points and North Eastern Region, 28.5 in 100 point scale. However, while analysing the data of RBI, in the same span, the CAGR of number of offices (commercial bank) has seen anincrease; 5.79 percent nationally and 4.30 percent in North East India. It is showing despite of increase in the number of offices (commercial banks), the penetration is significantly low. However, the same CRISIL Inclusix 2015 is showing positive shift in financial inclusion of India which was 50.1 points, owing to the presence and penetration of Microfinance Institutions. The CRISIL Inclusix (2015) score for North East, in 2013, stood at 39.7 compared to 2011, which was 28.5. The augmentation of North East has been attributed to the presence of large MFIs in Tripura and Assam. Tripura reached to top 10 for the first time with a CRISIL Inclusix score of 63.8 and Manipur, however, continued to be the lowest-ranked State with a score of 21.6. It is clearly indicating that banking industry needs to be bridging ally with the microfinance industry. Microfinance Sector of North: The front-runner Let’s bring the insights of the microfinance industry. The next set of data has been sourced from Sa-Dhan, the sole data aggregating agency, which includes both Non-Banking Finance Companies (NBFCs) and Non-NBFC MFIs (Microfinance Institutions). The data is sourced upto 2014-15, as after that, themicrofinance industry has been seeing a substantial shift, so there may be chance of mixing up of data. Microfinance Industry of North East is visibly a front-runner in the country with CAGR of 93.70 percent in Gross Loan Portfolio and 34.91 percent client outreach, can be best ally for banking sector. According to Sa-Dhan Bharat Microfinance Report 2017, there are at least 21 good MFIs extending financial products in the different
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states of North Eastern India. There is a significant growth in clientele over the years, from 14 lakhs in 2012-13 to around 22 lakhs in 2014-15, before consolidation of the microfinance market. Small Industries Development Bank of India (SIDBI), North Eastern Development Finance Corporation Ltd (NEDFI), RGVN Microfinance Limited, NABARD and other agencies have always supported the endeavours of the microfinance sector by developing the capacities of the MFIs, providing resources and others. However, the appetite of the sector has been always substantially superseding the availability of the resources, especially term loans for the MFIs. Inclusive Finance in North East India: The Way Forward For proper financially inclusive growth of the North East Region, there is a need of developing public-private initiative, which is more than a grant-making and grantee relationship. The Ministry of Development of North Eastern Region needs to beef up the alignment of its associate organisations, NEC, North Eastern Regional Agricultural Marketing Corporation Limited. (NERAMAC), and North Eastern Handicrafts and Handloom Development Corporation (NEHHDC) with the alternative channels. Non-Governmental Organisations and MFIs have the lastmile reach to cater the people. A separate independent platform can be created for planning and implementation.
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RBI, through its notification, viz. DNBR. CC.PD.No.078/03.10.038/2015-16 has removed the regulation regarding maximum permissible variance in the interest rates for NBFC MFIs, in cases of channelising the government agencies’ loan for specified socio-economic class. The North Eastern Development Finance Corporation Ltd. (NEDFI) is already working with microfinance industry. Government schemes can be channelled through MFIs. Provisioning of term loan to the MFIs will be the better model as the MFIs can develop their own products as per need of the clients. The BC model has its own challenge as it does not build up self-dependant institutions, it builds up banking sector dependant institutions. BCs do not generally consider the need of the people, rather the policies and products of banks hover over the system. The new concept of loan co origination model can also be looked at. In order to facilitate the financial inclusion in North East, the Reserve Bank of India can think of subsets under the stipulated segments of PSL, specified for North Eastern Region. It will enhance the availability of finance for microfinance sector to cater the unreached people and enterprise development. (Views expressed in this article are a personal opinion of Dr Saibal Paul, Associate Director, Leading Policy, Membership and Strategic Initiatives, Sa-Dhan.)
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INDUSTRY SPEAKS
HOW MUCH
Security is Enough?
T
here has been a pioneer rush lately in the otherwise over cautious Banking, Financial Services and Insurance (BFSI) industry, the sector that in the good old days would have just waited and watched a certain technology perform for some years before even slotting it for a demo. Those dynamics are now changing, and quite frankly they have been changing for a while now. With the advent of mobile services, and their growing accessibility and diminishing cost over last couple of decades, there has been a major thrust to this digital wave.
and assortment of Bring Your Own Devices (BYODs) to be secured. With Vulnerability Assessment and Penetration Testing (VAPT) cycles becoming frequent, security dynamics are changing every day. Today there is a direct intrinsic value attached to these risks that every organisation tries to ward off with its security initiatives. There is no standard benchmarking – each company needs to define its own adequate level of security. A question that often pops up amongst the savvy and non-savvy circle alike is just about how much security is enough?
Financial industry being primarily made up of data is the most susceptible industry for digital transformation. And the pace at which these changes have got affected over the last few decades, coupled with the launches and advancement of new technologies in this domain, has been phenomenal, while also warranting a need for exercising some caution while embracing them.
Quite clearly, perfection, as with every other entity, is pretty unachievable when it comes to Information Technology (IT) security as well. You simply cannot protect and prevent everything. A lot of vendors work in a reactionary mode – which means security got compromised somewhere after which point the fix for it was included in the next product release. So even if you’ve managed to pull a guard against all known threats, hackers are working equally hard to come up with new ones. Such a constant evolving space can get overwhelming at times, making you feel as if you are chasing a moving target. Hence it’s important while putting together your security risk management framework that you ask the
Security was always on the agenda, but it is no longer about meeting the regulatory or compliance requirements alone or keeping your auditors happy. Security challenges have now started emanating from a variety of sources, rising just proportionally with all your digital channels of business.
30 JANUARY - FEBRUARY 2019
MEHJABEEN TAJ AALAM Head of Information Technology at Muthoot Homefin (India) Limited.
Today, organisations don’t just have to manage anti-viruses and spamwares, now there is mobile security to be looked into, cybersecurity to be handled, variety of access controls to be managed
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INDUSTRY SPEAKS
right questions and determine what the acceptable level of risks are for you and what your definition of adequate security is. Consider answering the following questions at a company level – E What are we protecting and why do we need to protect these? Do we have clarity on all aspects of business ‘value’ that we need to protect? E Which are the product services or processes translating into those values? Do we have complete or shared control on these? E What are the potential conditions (both internal and external) that need to be managed and avoided to protect them, and at what cost? What are the implications if they are not protected? E What is our risk tolerance capacity? How much damage can we take before we take action? E How do we identify and manage residual risk? E How often is our risk review cycle? Is it good enough given the nature of our industry? How dynamic is our business risk environment? Now depending upon your organisation characteristics and the markets you operate into, you are most likely to come up with a unique level of security adequacy. The complexity of your landscape, both business and IT, will determine the IT strategy you’ll frame and the calls you’ll take when it comes to managing IT security risks. For instance, if you depend heavily on IT systems and the internet to offer products and services to your customers, your reliance on a more stable and secure system will be relatively higher - system downtimes will translate into direct business losses for you. Similarly, if you are operating in a politically sensitive region where information leaks can have tumultuous impacts data security will be of paramount importance. Your security investment decisions will
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Digital transformations have given Information Technology (IT) security a whole new dimension. From being a check in the box directive, it has moved quite a few notches above to gain center stage prominence.
also be influenced by your spending capabilities – how much you have stashed in your Information Technology (IT) budget. However, if your risk scores are high, you wouldn’t have much choice unless you take an informed decision to live with the risk. Nonetheless, whatever your securityinvestment decisions are, ensure that your management understands, in their language, that there is always a residual risk that remains even post-mitigation. It is important that your leaders know and understand that 100 percent security is a myth. However, that is no excuse from shying away on making adequate investments in the right directions. Remember, achieving and sustaining adequate security is a continuous process, not a final outcome.
The Banking and Finance Post
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The world is all set on a digital journey and with a few bumps hither and thither, so far it has been a fun illuminating ride. Organisations, however, need to realise that while this might be the way to go, they need to adopt a technology only when they are ready for it. The whole idea of rush is a hype. They don’t have to ape a certain technology simply because their peers or competitors have it. Any technology should be adequately studied and assessed on all accounts – utility, business, risk, security – and an informed decision must be taken. Digital transformations have given Information Technology (IT) security a whole new dimension. From being a check in the box directive, it has moved quite a few notches above to gain centerstage prominence. With a direct impact on the bottom line, it’s no longer about reputational risk alone. Today, how much security you need totally depends upon your own understanding of your business, the value it creates and what part of that value you wish to protect. The one-sizefits-all vogue is over. Organisations have evolved from the days of simply adopting ‘Best Security Practices’ to charting and implementing their very own ‘Best-Fit security practices’. (Views expressed in this article are a personal opinion of Mehjabeen Taj Aalam,Head of Information Technology at Muthoot Homefin (India) Limited.)
JANUARY - FEBRUARY 2019 31
CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
5
MUMBAI 20 NOVEMBER 2018
5TH NBFC100 TECH SUMMIT: EXPLORING NEW PROSPECTS IN NBFCs
N
on-Banking Financial Companies (NBFCs) are the emerging leaders and their innovations will help them evolve innovatively in challenging times, said Dr Amitabh Rajan, Chairman, Reserve Bank of India Services Board as the recently organised 5thNBFC100 Tech Summit, Mumbai. Organised by Elets Technomedia in association with The Banking & Finance Post magazine, the summit witnessed significant discussions pertaining to NBFCs, Payments Bank, Small Finance Banks, Microfinance Institutions (MFIs), Housing Finance Institutions and many more. It focused on the ongoing liquidity crisis and the challenges associated with it for the nonbanking institutions and it witnessed a massive participation of over 125 NBFCs and 25 partners from across the country. Several eminent dignitaries namely Dr Kavita Gupta, Managing Director, SICOM Ltd; Pavan K Gupta, Chief Executive Officer, Muthoot Housing Finance Co Ltd; Shashi Kumar Ravulapaty, Group Chief Technology Officer, Art Fintech; and Navin Mehra, Regional Director, Fortinet were a part of the inaugural session titled “Non Banking Financial Company: Rising Significance of Providing Niche Banking and the Road Ahead.”In the one-day long conference the experts also discussed and deliberated on sessions namely Existing roadblocks and 32 JANUARY - FEBRUARY 2019
(From L to R): Pavan K Gupta, Chief Executive Officer, Muthoot Housing Finance Co Ltd, Shashi Kumar Ravulapaty, Group Chief Technology Officer, Art Fintech, Dr Amitabh Rajan, Chairman, Reserve Bank of India Services Board and Manu Raj Singhal of Elets Technomedia, inaugurating the 5th NBFC100 Tech summit in Mumbai.
emerging opportunities for NBFCs: key to new dawn for financial inclusion endeavour, embracing technology for secure and a brighter tomorrow of NBFCs, modifying credit and liquidity risk framework of NBFCs and the role of regulatory bodies, relevance of cloud computing and data centre in NBFC sector and implementation of innovative technologies for Nexgen banking. While Sa-Dhan joined as host partner, Finance Industry Development Council (FIDC) was the supporting partner, Pennat was Lanyard Partner, Nucleus Software was Lending Technology Partner, Leadsquared joined as Sales Execution Partner, Forntinet was the Security
Partner, AllCloud was Cloud Lending Partner, AxionConnect was Branding Partner, Exotel, Vaultedge and SysArc Informatix were Associate Partners of the Summit. The expo organised at the summit registered the participation of several brands such as Mortan, Vymo, Priya, Vxl Software, VXL, Systech, Quantific, aclmobile, UiPath, Indus, EBIX Cash, Teckinfo, Sesame, Ezetap, Tata Tele Business Services, Kuliza, Data Resolve, RaPL and Conneqt. The summit concluded with felicitation Ceremony and BFSI Leadership Awards that recognised the exemplary contribution made by NBFCs and Corporate. Here is a glimpse of the Summit:
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CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
INAUGURAL SESSION
NON BANKING FINANCIAL COMPANY: RISING SIGNIFICANCE OF PROVIDING NICHE BANKING AND THE ROAD AHEAD SPECIAL ADDRESS
DR AMITABH RAJAN
Chairman, Reserve Bank of India Services Board Non-Banking Financial Companies (NBFCs) are the emerging leaders. By and large, this sector is performing well in India. Their rising popularity is because of the support from the middle-class segment of the society. These institutions are now gaining acceptance because of the innovations that they are implementing. To do better in future and to survive in the market, NBFCs will have to be value driven. Merely innovation is not enough but every institution will have to develop itself completely to survive.
KEYNOTE ADDRESS
DR KAVITA GUPTA
Managing Director, SICOM Ltd It is a time of challenge and reawakening for NBFCs. In these circumstances, it is a great opportunity for us to reestablish ourselves and re-instigate our identity in many ways. I remember after Harshad Mehta scam, the electronic mode of banking was implemented and transactions became so easy and convenient. NBFCs are definitely acting as a catalyst to growth in the Indian economy. The sector has shown good growth as per the industry reports and it also emerging as the alternative source of funding after banks.
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JANUARY - FEBRUARY 2019 33
CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
PAVAN K GUPTA
Chief Executive Officer, Muthoot Housing Finance Co Ltd NBFCs over the years have grown significantly. They are now working in microfinance, gold loans, consumer durables, housing finance and many more. These wide range of services are helping them in reaching out to the customers and meeting their diverse needs. Microfinance (MF) is altogether a different ball game. Microfinance customers are generally not catered by any other formal banking system. This segment was earlier dependent on private money lenders but not now MF institutions reach out to them and serve their requirements.
SHASHI KUMAR RAVULAPATY Group Chief Technology Officer, Art Fintech
NBFC as a sector is at a very interesting juncture today, from challenges point of view. Several activities that have occurred in the last two months have brought in major changes in institutions that deal into lending. Today, we see one new NBFC coming into existence every day. In the last two years, we have seen the formation of several big NBFCs, Small Finance Banks, Payments Banks etc. There is only one customer and there are several lenders today. Most of the technology providers are coming up and claiming to have all the services right from the customer targeting, customer onboarding, transaction management, loan management and finally the customer service.
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CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
TECHNOLOGY PRESENTATION BUSINESS TRANSFORMATION IN THE AGE OF DIGITAL TRANSFORMATION
NAVIN MEHRA
Regional Director, Fortinet NBFCs are emerging as leaders across several major banking domains, be it insurance, housing or any other. NBFCs have a lot of potential. Financial Institutions are changing in the digital era. Data have become the most popular subject and it has surpassed oil. Giving data the optimum importance, Centre is planning to chalk out its own General Data Protection Regulation (GDPR) for data privacy. In this regard, the Reserve Bank of India (RBI) has also come up with a circular and explained the areas that need security.
(From R to L): Shashi Kumar Ravulapaty, Group Chief Technology Officer, Art Fintech, Pavan K Gupta, Chief Executive Officer, Muthoot Housing Finance Co Ltd, Dr Amitabh Rajan, Chairman, Reserve Bank of India Services Board, Navin Mehra, Regional Director, Fortinet and Manu Raj Singhal of Elets Technomedia, launching the special issue of The Banking & Finance Post Magazine at the 5th NBFC100 Tech summit in Mumbai.
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JANUARY - FEBRUARY 2019 35
CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
TECHNOLOGY PRESENTATION HOW DO YOU BECOME THE DIGITAL LENDER OF TOMORROW – TODAY
SARBPREET ANAND
Global Head - Cloud Business, Nucleus Software With over 1.18 billion mobile subscribers in India, 90 percent Indians with bank accounts, 90 million online shoppers, 21 percent inflation in digital transactions, 50 percent reduction in ATM transaction, 100 percent acceptance of Unified Payments Interface (UPI) across banks, Bharat is truly getting digital.
TECHNOLOGY PRESENTATION AUTOMATIONS & ITS APPLICATION IN LENDING BUSINESS
NILESH PATEL
Chief Executive Officer, LeadSquared LeadSquared is a Sales Execution Platform used by High velocity sales teams for Digital Sales, Call Center Sales and Field Sales in a bid to achieve new customer acquisition Upsell, X-sell and Renewals for increasing Sales efficiency, Sales & Marketing and Return on Investments. It has over 800 customers.
36 JANUARY - FEBRUARY 2019
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CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
CEOS PANEL DISCUSSION
Existing Roadblocks and Emerging Opportunities for NBFCs: Key to New Dawn for Financial Inclusion Endeavour
PRABHAKAR BOBDE
Deputy CEO, Sustainable Agro-Commercial Finance Ltd
There are a lot of challenges that the stakeholders in the NBFC sector face as far as technology is concerned. We face a lot of challenges in terms of connectivity with our customers. Once we lend a farmer, it is quite a challenge for us to keep a tap on the customer’s cash flow.
KM VISWANATHAN
Managing and Chief Executive Officer, M Power Microfinance Pvt Ltd
The biggest challenge that is emerging as a roadblock to the entire NBFC sector is liquidity constraint. If you analyse the liquidity constraint, we will understand that it is nothing but a fear psychosis which has caught the lenders. One default by a firm and it had a contagious effect across the entire industry.
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DR KULDIP MAITY
MD & CEO, Village Financial Services Ltd
Microfinance institutions offer lending services to the most vulnerable sections of the society. We usually don’t have to face any problem from our borrowers’ side. Barring the Aadhaar verification has emerged as a major problem because using Aadhaar is the only identification number that helped us in analyzing the credit report of a particular borrower.
RAKESH DUBEY
Chief Executive Officer, SV Creditline Ltd
Concerns pertaining to liquidity in the Microfinance sector are not new. In addition, there are some more roadblocks in the country in terms of microfinance institutions. Political environment is one such roadblock. It plays a significant role in our decision making process pertaining to lending.
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JANUARY - FEBRUARY 2019 37
CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
SOMYA SRIVASTAVA
Chief Executive Officer, Prayatna Microfinance Ltd
Non-Banking Financial Companies (NBFCs) face a challenge in terms of fund raising. The cost at which Microfinance institutions raise funds is very high. We don’t get liquidity support from the banks and hence face challenges in terms of liquidity. Due on the ongoing liquidity crisis faced by NBFC sector, the cost of funding have inflated further.
ASHOK MITTAL
Chief Executive Officer, PrestLoans
There is a gap in terms of growth of business in financial sector. The role which is being played by credit rating agencies is crucial and a challenge for us. We see an overnight change in the credit rating of organisations given by the agencies which is quite sudden for us. So, we don’t get a lead regarding a particular entity and its position in future.
BHAVIN PATEL
Co-Founder and CEO, LenDenClub
The ongoing roadblock that we are facing as far as the current market position is concerned is the Supreme Court of India’s verdict on barring the financial institutions from using Aadhaar as an authentication tool. I believe that Aadhaar authentication would have brought a revolutionary change in future and helped in taking Financial Inclusion to a different level.
38 JANUARY - FEBRUARY 2019
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CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
PANEL DISCUSSION
Embracing Technology for a Secure and Brighter Tomorrow of NBFCs
NIKHIL BANDI
Senior Vice President and Chief Information Officer, Vistaar Financial Services Pvt Ltd
There is a huge difference between the demands of a customer and an organisation. A customer wants convenient ways to avail loan services. He wants to avail loan from an apt organisation at a reasonable rate of interest. On the other hand, an organisation expects that as soon as a customer posts a requirement for loan it should directly come from customer who has the ability to repay the loan on time.
MEHJABEEN TAJ AALAM
RADHAKRISHNAN VIJAYAKUMAR
NBFCs are going to touch times in terms of lending and borrowing. In these circumstances, technology can play a vital role in making things viable for the entire sector. If there is a need to quickly launch a tailored product, which has to fit in the ongoing environment, technology can bring in a lot of value.
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Chief Technology Officer, Dewan Housing Finance Corporation Ltd
The expectation of every customer is always getting the approval on the loan demand at the least possible time and that too in the most affordable loan interest rates. As a technology leader, it is always important to implement tech-driven innovations in alignment with customer requirements. Technology adaptability should be attempted for streamlining the services.
Head-IT, Muthoot Homefin Ltd
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Chief Information Security Officer, Mahindra Finance
NBFC, as an industry is entirely dependent on its customers. When it comes to customers, we have a lot of financial as well as personal data. These are two different aspects that every organisation is concerned about on a day-to-day basis. In this aspect, cloud technology acts as a significant piece of innovation for the entire BFSI sector.
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JANUARY - FEBRUARY 2019 39
CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
CEOS PANEL DISCUSSION
Modifying Credit and Liquidity Risk Framework of NBFCs, and the Role of Regulatory Bodies
PAVAN K GUPTA
Chief Executive Officer, Muthoot Housing Finance Co Ltd
SABYASACHI RATH
Executive Director and CEO, Essel Finance Business Loans Ltd
NBFCs are the backbone of the banking and financial services in the country. Total AUM of the NBFCs and HFC put together is almost 28 lakh crore currently. In 2012, NBFCs were contributing to 12 percent of the total credit in India. Today, this contribution has inflated to 20 percent of the total credit.
40 JANUARY - FEBRUARY 2019
NBFCs are now contributing a significant part to the credit growth in the country. It now stands at 25 percent which signifies a bigger chunk and it is growing gradually. The challenge is that the NBFCs are fragmented and we don’t have a forum where the concerns can be shared with the regulator.
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CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
D S TRIPATHI
Chief Executive Officer, Aadhar Housing Finance Pvt Ltd
Banking sector should come forward and start funding in a bid to ease the ongoing liquidity crunch prevailing across the NBFC sector. Another banking system that has graciously come out to help is the assignment of pools. In order to meet their liquidity needs, NBFCs in the financial services sector enter into transactions which involve sale of loans to other lending entities through direct assignment, or conversion of their loan assets into marketable securities, known as asset-based securitisation.
SRIHARI ADURTY
Co-Founder and Chief Risk Officer, FundsCorner
In India, NBFCs face a lot of restrictions from the regulators’ end despite being the only financial entity that reaches the last mile for meeting the credit demands of the underserved segments. As far as debt instruments are concerned, NBFCs’ face a lot of challenges in India. We have to invest a lot of time in a bid to access the capital markets.
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PS HOODA
Managing Director, Prayatna Microfinance Ltd
Refinancing replaces an existing loan with a new loan that pays off the debt of the old loan and it is definitely a solution but the question that appears before us is, “Who will give it?” Small Industries Development Bank of India (SIDBI) has been doing it. But is the NBFC sector organised enough to handle it?
SHRIHARI KULKARNI
Executive Director, UC inclusive Credit Pvt Ltd
It is high-time that the regulator encouraged NBFCs to scale up. Regulators must now starting designing norms keeping the NBFCs in mind rather than measuring them as per the standard yardstick. Different sectors have different ways of reaching out to the people particularly in a country like India that comprises around geographical diversities.
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JANUARY - FEBRUARY 2019 41
CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
NILESH THAKKAR Chief Financial Officer, Kreditech
As a new-age NBFC, our biggest challenge from a credit risk point of view is the nonavailability of e-KYC (Electronic Know Your Customer).Our entire business model is based on disbursement of instant loans. Instant loans can only be disbursed it they are authenticated and acquired by the customers in a cost efficient manner.
TECHNOLOGY PRESENTATION
TECHNOLOGY PRESENTATION
Why Tech-fin?
Digitisation and Marketplaces- What does it mean for lenders?
RAHUL JAIN Co-founder, All Cloud
Every financial institute is a Fintech. At AllCloud provide solutions that can be deployed at the very heart of Lending innovation or at the very edge of your ecosystem to give you the flexibility to stay with your legacy system at the core but experiment and innovate at the front end. Our solution provides the flexibility to introduce new products, monitor and assess their performance. That is how Fin-tech works, their agility in thought and implementation is what delivers the competitive edge.
42 JANUARY - FEBRUARY 2019
GOVIND GARG
Head Corporate, Strategy and Marketing, SysArc
SysArc’s core business is to provide loan automation solutions to the lending and funding industries across the world. Our flagship suite of products, LENDperfect, offers LOS, LMS, Collections, LENDperfect Credit Monitoring and NPA Management. It has helped many lenders automate their internal credit policies across their entire workflow. Whether it’s in the pre-sanction or post-disbursement phase of the life cycle, our company has a solution ready to implement.
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CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
PANEL DISCUSSION
SHASHI KUMAR RAVULAPATY
Relevance of Cloud Computing & Data Centre in NBFC Sector
Group Chief Technology Officer, Art Fintech
SANJAY PRASAD
Cloud adoption is in the initial stage as far as our ongoing assignments are concerned. This piece of technology holds a significant inclination across our organisation. We are also planning to start some of our businesses only on cloud.
Vice President Enterprise Sales, LeadSquared
India’s position in terms of cloud usage holds the second position in the world and it is only behind China. In 2017, the market of cloud usage was $1.8 billion in the country. This particular technology and its implementation is bringing paradigm shift across industries. It has a broad competitive landscape and it is bringing huge amount of opportunity in terms of NBFCs.
GAURAV CHAUDHRI
Chief Technology Officer, Reliance Commercial Finance
Adoption of cloud entirely depends on the strategy made by the company who is going to implement it and the demands of the customers associated with it. In our organisation, we do not blindly follow the implementation of cloud just because it is gaining significance across the sector but we analyse its usage on the basis of its relevance and demands.
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HARISH SHARMA CL
Group Vice President & Head-IT, Toyota Financial Services
A few years ago, the question surrounding cloud was whether an organisation should implement it or not. But today, the question is when and how should an organisation implement cloud computing? From our organisation’s perspective, cloud technology is important in terms of infrastructure development. Our motive is to hold a hybrid structure that can help us walking along with our legacy.
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JANUARY - FEBRUARY 2019 43
CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
ANAND SHARMA
Chief Technology Officer, Asirvad Microfinance Ltd
In my view, if you abbreviate the term Cloud as C for compliance, L for legal issues, o for outsourcing policies, u for better understanding of what you are looking for and d as deployment architecture and clear about all these five aspects then there are no challenges.
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DEEPAK MUDALGIKAR
Chief Technology Officer, SBFC India Pvt Ltd
We are one year old organisation with eight years of prior experience. With have some legacy applications with us and we have also implemented some new applications. In a bid to maintain the balance, we have shifted all our applications (both new and old) on cloud. SBFC has adopted software and services both the platforms.
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CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
TECHNOLOGY PRESENTATION
PANEL DISCUSSION
How Fintech Companies are Disrupting Banking and What Banks & NBFCs Can Do to Stay Competitive?
Implementation of Innovative Technologies for NexGen Banking
MURALI TIRUPATI Chief Executive Officer, Vaultedge Software
We at Vaultedge provide technology services to the Banking, Financial Services and Insurance (BFSI) sector. With our technology we try to help the banks and NBFCs in streamlining their services for their customers. We use artificial intelligence to automatically analyse contracts, extract relevant provisions and metadata and identify risks.
SUNIT VAKHARIA Chief Information Officer, BOB Financial Solutions Ltd
Innovation should be implemented at a relative base. It should be in alignment with the customer base that the organisation is interested in. For multinational banks and corporates outside India the level of innovation is widely different from that of the banks in India where majority emphasises on the PSU culture. I believe that technology should be used in a way that gives the customer a joy of using the services.
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ROHIT KILAM
Head-Technology and Digital, Aditya Birla Financial Services
In future, dialect-level improvisation will be introduced in the banking and financial sector and challenge the chatbots. A lot of innovations like this will come into effect in the near-future but the implementation of the same and its effect on customer compliance remains as a challenge.
PRAKASH BHATIA Head-IT, Muthoot Housing Finance Co Ltd
Muthoot is moving into a whole new digital platform. The people in the sector are taking about analytics, blockchain and infrastructural changes. Innovation is important but it is associated with a lot of challenges. For e.g if an organisation has a robotics in place then the challenge would be getting a feedback from the customers and implementing them in the system.
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JANUARY - FEBRUARY 2019 45
CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
SRIVATHS VARADHARAJAN
Chief Information Officer, Niyogin Fintech Ltd
The first thing that came to our mind when we planned to implement NexGen Banking in our organisation is how can we put our architecture our place where your entities can seamlessly access your text stack across all verticals. For example, how do you place your employees, partner and customer in such a manner that they have a seamless view your ecosystem that is driven through your technology orientation.
VITTHAL NAIK
Chief Technology Officer, Profectus Capital
If you want to implement any innovation in your organisation, it is important to look at the agility of the architecture. In the absence of agility, it is next to impossible to achieve the benefits of technology completely. Agility and labour architecture is a key thing even for traditional NonBanking Financial Companies (NBFCs). Building an API layer helps you to integrate with the partners.
46 JANUARY - FEBRUARY 2019
SURESH A SHAN
Head-Innovation & Future Technology, Mahindra Finance
Technology market dynamism changes the level and a type of innovation. BFSI market itself is changing from corporate digital to customer digital. Now, individual customer is treated as a corporate and the technology should revolve around the fact that the customer’s demand remains as the prime focus.
DOMINIC VIJAY KUMAR
Deputy Vice President and Head-IT, Art Housing Finance India Ltd
Two years ago we decided to implement innovations in terms of technology. Our organisation wanted to innovate something totally different from the standard procedure. We brought in a process called virtual branch. At Art Housing Finance India Ltd is running 15-20 virtual branches but we do face several channels while running the operations in those branches.
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CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
RAMAN M K
Senior Business Evangelist, Exotel
Chatbots, particularly in the banking sector, has witnessed a lot of developments. In this segment, voicebased authentication or voice bio-metrics is the new innovation wherein you try to store customer voice prints based on his voice and speech analysis. But there are several security challenges associated with this.
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JANUARY - FEBRUARY 2019 47
Glimpses of Awards CONFERENCE REPORT
5TH NBFC100 TECH SUMMIT 2018
48 JANUARY - FEBRUARY 2019
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Glimpses of Expo
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CONFERENCE REPORT 5TH NBFC100 TECH SUMMIT 2018
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JANUARY - FEBRUARY 2019 49
5
CONFERENCE REPORT
5TH NBFC100 TECH SUMMIT 2018
MUMBAI 20 NOVEMBER 2018
Thank You Elets Technomedia and The Banking & Finance Post thank the esteemed speakers, delegates and partners for attending the 5th NBFC100 Tech Summit, Mumbai on 20th November 2018. We believe that you found the conference informative and worthwhile. We believe that our diverse and dynamic group of speakers and panelists provided in-depth insight.
Host Partner
Supporting Partner
Security Partner
Cloud Lending Partner
Lanyard Partner
Lending Technology Partner
Associate Partners
Sales Execution Partner
Branding Partner
Exhibitors
Good people to work with
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SPECIAL STORY
HAS BFSI REACHED CLOUD NINE? Why Cloud Technology is Beneficial for Banking Sector?
The banking sector is home to a huge volume of consumer data and in a bid to offer best of the services pertaining to data protection, the sector has to deploy tech-driven innovations. In such a scenario, the cloud computing serves as one of the significant and transformative solutions that is ensuring security, agility and scalability, writes Rashi Aditi Ghosh of Elets News Network (ENN).
Experts across the banking and financial sector believe that strategically implemented cloud computing services assist the banks in optimum utilisation of its resources in a highly flexible and efficient manner with the help of data storage, batch processing and data analytics. Further, the cloud technology facilitates the banking industry in improving revenues, operational efficiency, and the client servicing department.
computing in terms of the Banking, Financial Services and Insurance (BFSI) sector, T V Ramanmurthy, General Manager - IT, Bank of Maharashtra, says, “Before implementation of cloud computing in the BFSI sector, it is important to accept the relevance of the technology first. In 2017, when BHIM and Unified Payments Interface were implemented National Payments Corporation of India (NPCI) took six months to realise the vitality of cloud technology in the implementation of the above mentioned interfaces.”
Talking about the relevance of cloud
Explaining about the implementation
52 JANUARY - FEBRUARY 2019
of cloud services further, Zulkernain Kanjariwala Head - IT, Doha Bank says, “Each and every financial institution in India has its own perception pertaining to leveraging cloud technology in their institution completely. In reference to the current level of digitisation in the country, it is evident to make use of tech-driven initiatives and cloud is definitely going to play a major role in the transformation.” Benefits of Cloud Technology:
Flexibility The cloud helps the banking sector in swiftly adapting to frequently modifying
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consumer demands and market requirements. It offers an additional room for financial institutions in meeting the consumer needs and this flexibility helps banks to streamline the services. Explaining the vitality of cloud implementation across the banking and financial institutions, Prasanna Lohar, Head-Innovation and Architecture, DCB Bank, said, “Today’s consumers and their needs are hyperactive. It is therefore important for the brands to evolve and shift to cloud in alignment with the consumer’s dynamic requirements. Cloud comes with lots of opportunities that help the brand in offering hyper- personalised services to the customers.
Agility Cloud-based offerings/ services have a great power to boost the efficiency, agility and productivity of the banking industry. It assists the banks in reallocating resources and allowing their IT staff to take a leap from the administration of IT infrastructure, enabling them to bring their focus to more innovative tasks. “Cloud Computing is a buzzword in the recent times. Organisations and experts are now relating it to the virtualisation of the application, storage, infrastructure and several other domains. People now perceive that this piece of technology will give rise to a lot of benefits and opportunities,” says Manoj Nayak, Chief Information Security Officer, SBI Life Insurance Co. Ltd.
Auto Scalability Cloud-based services help the banking and financial institutions in automatically scaling down their resources on the basis of the customer requirements. This helps in lowering down the capacity, redundancy, and resiliency risks that are likely to be associated with traditional technologies. Operational Efficiency Cloud technology assists the financial institutions in integrating futuristic technologies and applications in future that
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Cloud-based offerings/ services have a great power to boost the efficiency, agility and productivity of the banking industry
helps in levelling-up the productivity of their operations. Leveraging a data managed centrally by cloud can also help the banks in eliminating complexities pertaining to the changes and increase of data. “The days of saving the data within the premises have phased out. In
today’s world there are several software available as services. Thinking about cost effectiveness and ease of operations, organisations are now going for cloud services,” says, Gautam KS, Head, IT, Auxilo Finserve. Cloud has its own benefits. Apart from being a significantly growing technology it is also a cost efficient option. Mehjabeen Taj Aalam, Head-IT, Muthoot Home Finance, says, “Cloud is going to be one of the fastest growing
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technologies in terms of banking. Its growth is entirely connected with the benefits it offers. The major advantage that cloud has is its cost efficiency.”
Better Client Servicing Cloud technology helps the banks in streamlining their products and services. It not only assists the banks in boosting their computing power but also allows them in offering better insights which helps banks for creating customised services for their clients. “Implementation of cloud technology in financial institution is significant. However, the companies must make sure that the storage of the data is done within the geographical premises of the country. Companies should make sure that all the security parameters are met before putting any new technology in place,” says Vijayakumar Radhakrishnan, Chief Information Security Officer, Mahindra Finance.
While most of the experts opine that the cloud computing technology has the power to ensure transformation across the banking and financial sector, however, it is extremely vital to implement this technology only if helps in streamlining the services for the consumer. Experts across the sector also believe that the cloud-based services should be implemented taking all the safety related matters in mind and only leading and trusted cloud services providers should be chosen.
JANUARY - FEBRUARY 2019 53
INDUSTRY SPEAKS
PINAK CHAKRABORTY Senior Vice President of Technology Digibank at DBS
Rationalisation of multiple technologies - “Brevity is also the soul of wit” - as well as of clarity This is somewhat obvious but needs to be reiterated to challenge the status quo of existing technology. Banks began computerisation many decades ago to primarily adopt core banking systems, which have served their purpose quite well in traditional model of bank branches and ATMs. However, banks may now find themselves entangled to many applications which may no longer be fit-toserve scalability and “always” availability demands of digital channels. Moreover, many times, banks adapted different applications and technology stacks to serve a common business goal because of an absence of a consistent technology strategy. It is not uncommon to find that many different software functions to return a simple query like customer balance. Therefore, the first step towards digital adoption is to look into the set of applications that were not developed with a consistent digital technology strategy in mind, but were rather built to fulfil some past requirements drawn in isolation.
54 JANUARY - FEBRUARY 2019
Digital Transformation in Banking Sector : A Journey in the Making Digital transformation of large organisations like banks is bound to be arduous, protracted and varied. Although there may not be a panacea for this varied and complex problem, but there are a few common threads that can be discerned. This article attempts to sketch a brief outline of these common threads that banks can consider as they embark on their digital transformation journey. A consolidation of these applications will not only reduce time to market for new features, but also the cost to run the applications necessary of day to day operations. From monolith to loosely coupled architecture – “the elephant in the room” – let’s talk about that A loosely coupled architecture of software application enables rapid software development, increases resiliency and
fault tolerance, and makes software systems easily scalable with the increase in user base in digital channels. These are also tailor-made to be deployed to cloud and utilise benefits of distributed system. However, the software applications that sit at the back of mobile applications or website may not have been developed with these principles and are mostly monolithic, which are difficult to change and maintain. Any digital transformation can consider evolving to a loosely coupled architecture of these bank-end applications to take
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advantages of distributed systems. Increased adoption of test automation – “to err is human”- so automate Automation in tests during build to ensure quality up-fronting the development process will lead to early identification of potential bugs in the software and ensure quality up-front in the delivery process. Advancement of technology and adoption of test engineering practices like Behaviour Driven Development means that user requirement, in the form of user stories, can be written in a manner that it can be automatically converted to test cases, which will reduce manual testing efforts and will enable traceability of requirements to test cases and actual testing performed. These automatic and repeatable test cases for the entire applications in a regression test suite can enable rapid and frequent deployment of software in production without impacting quality adversely. Continuous integration and continuous deployment – “the more the merrier” let’s deploy often then Automation of build pipeline of software deployment including automated code scans not only for coding standards, but also for any potential security issues, performance bottlenecks integrated with automated test cases can create software which is always release-ready. This automated and accelerated product release processes will lead to on-time and frequent product releases reducing or eliminating system down-time completely. Moreover, production release should eventually become a non-event with little or no manual effort needed from engineering teams. Conversion data points generated from customers footprint to digital channels into actionable insights–“You see, but you do not observe” – let’s do both Right from gaining an insight into user pain-points while using an App that might lead to app abandonment, potential areas
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of opportunities for optimising customer journeys, to determining an offer and a deal most appropriate to the customers, advances in machine learning algorithms can offer a lot features to be developed for the benefit of customers. Data and resultant insight into app usage pattern of customers can also make it possible to provide contextual help to the customers as they are using the app, find out patterns in their transactions leading to better detection and prevention of fraudulent usage. It can open up possibilities of almost a separately channel of interaction for the customer, where they can interact with the app using audio-visual inputs instead of current touch or keypad-based textual inputs. Real-time visual monitoring, logging and altering systems– “nothing can dim the light that shines from within” – let system logs shine a light upon themselves Logging and monitoring systems can now deliver actionable insights in real time from centralising infrastructure logs and metrics to keep a pulse on customers concurrently using the app or websites. The response time to server requests from digital channels during a certain time-frame can be monitored for
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an average, or a maximum or minimum response time. If a request is detected to be taking too long to process beyond normal limits, an alert can be generated automatically for further investigation. Similarly, system load over a set timeframe can be monitored which is useful for traffic tracking. If there is an unusual spike in user activity, e.g. in non-business hours or on weekends, this can be altered and investigated. It could be caused, for instance, by web crawlers who index the web-site content or evil bots scanning system for vulnerability. Many of the monitoring tools have a built-in alerting engine (e.g. email or Slack notifications) for some conditional rules. This makes it possible to move away from a reactive system monitoring to a proactive and aggressive approach to resolve system issues. This also helps in reducing manual efforts to operate a production system and time in debugging the underlying cause for an issue while providing a superior customer experience by increasing resiliency and fault-tolerance and availability of the system. (Views expressed in this article are a personal opinion of Pinak Chakraborty, Senior Vice President of Technology, Digibank at DBS. He is developing a mobile first and paperless banking experience for customers.)
JANUARY - FEBRUARY 2019 55
INDUSTRY PERSPECTIVE
UNITUS CAPITAL
Helping Businesses in Financial Inclusion Space Unitus Capital has in-depth expertise in handling investor relationships and insights, maximising engagement of impactaligned investors, and streamlining execution of raising capital. As an advisor to the clients, it has provided insightful and actionable advice on mergers and acquisitions, financial restructurings, and other strategic and financial matters, says Abhijit Ray, Co-founder and Managing Director of Unitus Capital, in conversation with Elets News Network (ENN).
Unitus Capital has completed 11 years of its operation in India. How has been the journey so far? Challenging, exhilarating, overwhelming, and greatly satisfying! In 2008, when Eric (my fellow Co-founder and Chief Executive Officer) and I joined hands to launch Unitus Capital (UC), our aim was to help businesses in the financial inclusion space to raise institutional equity and debt by putting professional team in place, organised structures and reporting, improve corporate governance practices, help understand the investment thesis and approach of institutional investors, and how to work with them. Later, this transformed into arranging capital for all types of businesses that work with the mass markets to provide affordable products or services or help in preserving and conserving the nature. The name Unitus signifies our intention to “unite” the haves and the have-nots. This was also the time when renowned investment banks across the world imploded, which had a cascading effect on the financial services sector everywhere. In the beginning, UC started raising capital for the Micro Finance (MF) Industry Within a short time of commencing 56 JANUARY - FEBRUARY 2019
work with Microfinance Institutions (MFIs), the Andhra Pradesh MFI crisis struck. However, UC manoeuvred the difficult phase and now, in the 11th year of operations, I am happy to state that Unitus Capital has become a name to reckon as the Investment Banker of choice for investors and businesses which are not only scaling very fast but also creating great social, environmental and financial impact through their work. During the last decade we have been able to arrange capital for multiple sectors including microfinance, affordable housing finance, Micro, Small and Medium Enterprises (MSME) lending, agrifinance, education finance, affordable healthcare, affordable education, agriculture, renewable energy, and women empowerment etc. Looking back, I am proud that we have been able to accomplish so much within such short time span by helping more than 100 impactful businesses in raising over US$ Two billion of equity as well as led the investment banking deals table in India in terms of largest number of deals makers, for the past five years in a row. Your vision is to deliver capital and change lives. What services do you offer in a bid to accomplish this aim?
ABHIJIT RAY Co-founder and Managing Director Unitus Capital
Unitus Capital (UC) is a boutique investment bank that facilitates access to capital for businesses to innovate and scale, as well as deliver deep social and environmental impact. Our services can be broadly classified into three major categories: Equity Debt,Structured Products, and Advisory. On the equity side, Unitus Capital offers end-to-end services to businesses at various stages of their life cycle, right from early to growth stages, as well as mature businesses. UC works closely with clients in preparing collaterals to reach out to potential investors, identifying such investors, negotiating term sheets and transaction documents, and compliance of conditions precedent, and finally facilitate closing of the investments. On the debt side, UC is involved in raising term loans (secured and unsecured), as well as subordinated debt and working capital
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facilities from domestic and international debt investors. This includes commercial banks, Non-Banking Financial Companies (NBFCs), Small Finance Banks (SFBs), Development Finance Institutions (DFIs), Micro Investment Vehicles (MIVs), Socially Responsible Investors (SRIs) and Family Offices. UC has helped clients to raise funds through Non- Convertible Debentures (NCDs) (listed and unlisted), External Commercial Borrowings (ECBs), securitisation of portfolio, assignment transactions, rated loan pool sale, loan portfolio sale, etc. In many instances, UC was the sole arranger of multiple issuances of non-convertible debentures and external commercial borrowings for various businesses. Non-Banking Financial Companies (NBFCs) are going through challenging times. What is your view pertaining to their future in India? The liquidity issues in the NBFC sector occurred during a year that was best in terms of performance as far as the sector was concerned. The said liquidity situation is a wake-up call for the sector to conserve capital, possess a strong equity base, be adequately leveraged (and avoid stretching leverage ratios), and curb unnecessary expenditure. The Reserve Bank of India has stepped in at the right time to address the difficult situation by reducing the minimum holding period requirement for NBFCs raising funds via securitisation of loans of original maturity above five years. This also came at a time when many of Public Sector Undertaking banks are under PCA and many others plagued by their own Non-Performing Assets (NPA) levels resulting in most of the Banks reducing their lending to the retail, Housing and SME sector. However, many of the wellrun NBFCs were still able to raise debt, albeit with slightly higher interest rates and shorter maturity period.In my opinion, the worst for the NBFCs is over and I foresee continued funding and strong growth for the sector in years to come. Wealso need to appreciate that most NBFCs— especially MFIs, MSME lending entities, affordable Connect with us on
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housing finance companies, etc. — fill a vital gap in making funds available to segments that otherwise lack easy access to institutional credit and majority of them have been able to service their debt on time despite the tight liquidity situation in the market. Apart from non-banking, your operations are spread across education and dairy sector as well. What new innovations have your initiated or planning to implement in the above sector? UC has worked with numerous businesses engaged in education, agriculture, healthcare and dairy sectors. Apart from advising entities that provide financial services to families to help meet feerelated expenses of their children, UC has worked with innovative organisations that structure educational programmes for the disadvantaged and provide training/employment opportunities to the differently abled people. UC has also worked with businesses that made learning easier for students in the affordable private schools as also in the Government schools. In agriculture sector, UC has worked with entities that are providing value-added services to farmer producer organisations in agri supply chain management. UC has also worked with dairies, especially in eastern States of India, to help raise equity and identify strategic partners to expand their dairy processing capacity, deliver value-added milk products, improve distribution outreach, and set up chillers in remote rural areas to bring in more dairy farmers within their ambit. UC has done great work in the healthcare sector, by raising capital for companies which manufacturer low costs stents/ catheters and low cost ophthalmology devices for five tests of the eyes. UC has also worked with maternity hospitals that offer pre-and post-natal healthcare facilities and traditional medicinal therapies, as well as expanded outreach of diagnostic services through technologically enabled point-ofcare devices. The Banking and Finance Post
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The founders of Unitus Capital have also facilitated setting up UC Inclusive Credit (UCIC) Private Limited, a NonBanking Finance Company (NBFC) for providing innovative debt products to impactful businesses in the areas of agriculture, education, financial inclusion, healthcare, renewable energy, and women empowerment. UCIC has commenced operations after receiving necessary statutory approvals from RBI and has already began disbursing loans to those type of businesses. Tell us about the latest tech-driven implementations planned for 2019. Fintech is a fast-emerging sector in India. The expansion of telecommunications and internet network across the country, availability of smartphones even in remote corners of the country, the government’s Jan Dhan Yojana for bringing in the unbanked sections of population in formal banking channels, and uptick in technology-enabled payment channels have resulted in a range of services available to customers through technology driven processes and systems.This has enabled an entire ecosystem of interesting business ideas to provide various services including credit scores, funds for meeting short-and long-term financial needs, savings and investment options, healthcare and fitness services, travel and tourism, etc. Rapid advances in artificial intelligence, machine learnings and blockchain technologies will see more sophisticated services being offered to customers in the days to come. UC is also seeing an increasing trend of established tech players looking at becoming aggregators of products and services as also building their lending books. Many international investors, including large VC and PE funds from China focused on fintech companies, are actively looking at India as the next frontier in fintech. At Unitus Capital, we’re working closely with such investors and fintech companies to make innovative capital available for fintech companies. JANUARY - FEBRUARY 2019 57
Organiser
Knowledge Partner
15 MARCH 2019
Meet the Unconventional
Non-Banking Players & Explore Best Business Prospects Get connected with the emerging players of the non-banking finance industry and explore the best possible business prospects by networking with them. Elets Invites you join the 6th presentation of the NBFC100 Tech series, commencing on March 15, 2019 in New Delhi.
Why Join 6th NBFC100 Tech Summit? • •
Power Packed Conference Networking
• •
Insightful Technology Presentations Awards & Expo
Key Focus Areas • • • • •
NBFCs and its Diversifying Role Financial Inclusion Challenges & Opportunities in NBFCs Modifying Framework of NBFCs Role of Regulatory Bodies
• • • • •
Role of Technology in NBFCs Digital Banking Cloud Computing Cyber Security NextGen Banking
For Queries Contact: Manu Raj Singhal | +91 9871543890 | banking@eletsonline.com Elets_BFSI
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