Gone are the days of lots of paper work and manual record maintenance. Few years ago you had to wait in que to deposit or withdraw money. Now we have ATM Machines, E-wallets, Internet Banking, Mobile banking and many other ways to do transactions. Use of Information Technology will bring IT revolution in Cooperative Banks. We see all private and nationalised banks are facing cut-throat competition from NBFC’s. In current scenario banks cannot live on interest income, they have to cut costs, improve service quality without affecting profitability. Despite of this, cooperative banks are far from this IT revolution. During budget Finance minister Arun Jaitley focused on digitization of Cooperative banks.
To discuss this we excursively interviewed Srinivas Dronamraju, President & Chief Operating Officer, VSoft Technologies.
Q. Can you brief us the Journey so far and the roadmap ahead of Vsoft
A. VSoft has been associated with the banking industry over the past 2 decades. During this journey of 2 decades VSoft has been constantly innovating various solutions for the banks and financial institutions, contemporary not only in respect of delivering most modern products but also has been adoptive to the changing environment rapidly. This approach of Vsoft helped its customers to handle growing complexity in the transaction processing and also to scale the rapid growth of its customers needs.
The way forward is to continue our pursuit of innovation and proactively design future proofed products. We also contemplate to provide a one stop solution to banks in respect of all the payment solutions as well as core banking so that customers need not interact with several vendors for delivering desperate solutions.
Q. What according to you has been the greatest change in this industry since the company was founded?
A. One is the scale in terms of manifold times growth in payments and the extent of digitization that has been seen in the industry. The complexity of the regulatory requirements and the huge effort in the industry to meet up with these requirement in a rapidly changing environment is the challenge. There has also been great adoption to the technology by all the stakeholders. Thanks to the digitization and awareness created, the reach of the delivery of the solutions has grown deeper to the micro interiors and to the commoners.
Q. In recent years, we have seen a drastic change in payment mechanism. After demonetization digital transactions have shown sharp increase. How do you see the future of digital transactions?
A. The size and demand for simplified products to handle complex transactions has grown up significantly. Since the scale has gone up manifold times, most of the stakeholders are looking for simple products in terms of operational ease with a wider scope of coverage. From the institutions side, this is mainly to avoid interaction and integrations with large number of vendors for delivering complete solutions end to end. With specific reference to India, there is a huge adoption for all types of payments through mobile even in the rural areas. We are of the strong opinion that the way forward is going to be to provide mobility to the end customer for all his banking needs, not only financial transactions but also the ancillary services through mobile so that the mobile itself becomes a bank in terms of all the customer requirements. The number of physical branches is going to be a non specific requirement for the customers to choose where to bank with and the same will be decided more by how technology oriented the bank is.
With all the above, we see that there will be humungous growth in the digital transactions of small value. There will be a serious drift of the end customer from cash to non cash. There would also be a major shift from the more expensive modes of digital transactions like use of cards to mobile and internet based transactions which are more cost effective.
Q. With the increase in digitization, the banking sector is moving towards non-branch approach. Do you foresee the same for Cooperative Sector? If yes, what are the measures of improvement that are required to be taken by the sector?
A. The cooperative segment of banks is the poorer cousin in terms of technology adoption and change. They do not have sufficient trained resources to adopt and use technology. IT and ITES are always investments that will become profitable when they stay on for a longer term. The banks suffer from lack of corpus for investment of huge sums in technology and maintain infrastructure. But contrary to all these issues, there has been a fast adoption of technology as there is a great opportunity to avail themselves of all these through hosted services offered by VSoft. There is also a compulsion for the cooperative segment to adopt technology as most of the commercial banks under the compulsions of the branch opening in tier V and tier VI centers are there in the immediate neighborhood and on ground zero all the banks compete for limited banking opportunity present in these locations.
Q. Just like demonetization, digitization dominated Finance Minister Arun Jaitley’s 2017-18 Budget speech. What provisions have been made in the budget in this regard in cooperative sector? Apart from this are there any rules and regulations to make digitization of cooperative sector? Are there any deadlines?
A. The main provisions of the budget has been a major uplift to the rural areas, more particularly to the cooperative sector. Like huge budgetary allocation for computerization of the Primary Agricultural Cooperative Societies (PACS) and bringing them on par with the banks in terms of adoption of technology. This not only helps the PACS in serving the growing demands of the customers but also to provide timely and accurate MIS for the policy makers to understand, sharply define and appropriately design policies to cover reliefs and remissions to the sector.
The rules are the general ground rules that are laid down for the banking industry but computerization of the entire Cooperative credit structure is the premise with which the budgetary allocations under this segment were drawn. The deadlines are that all this has to be achieved over a 3 year period commencing from the fiscal 2018. However, we have not seen much progress made in this direction. If the deadlines have to be met with a ready made solution designed to deliver the objectives envisaged by the Central Govt is what is required and that is where VSoft expresses its readiness for delivery and deployment of its applications which are tailormade to suite the requirements specified.
Q. How is digitization going to help the cooperative sector in risk management?
A. Since most of the institutions in the bottom of the Cooperative segment depend largely on the data maintained in the manual ledgers, collation of information, compiling the same, accurate and timely submission of the information to the policy makers is always difficult. Also, an integrated approach combining various parameters is always difficult as references have to be made to various ledgers for a 360 degree view of the customer. Since the Cooperative segment has a refinancing mechanism at each of its tiers, the original collateral is always at the bottom most part of the credit pyramid whereas the same is the basis for drawing refinance at the Apex level from NABARD. Since there are no linkages between two successive tiers in terms of a straight through processing, the data at different levels does not reflect the realtime position. Also, there are so many manual operations the efficiency of which largely depend upon the intelligence and capability of the person handling it. All these entail a huge risk. Digitization helps in mitigating all these risks.
Q. What makes it necessary for the cooperative banks to opt for digitization? Can you please throw some light on specific areas in which digitization is needed? Do you think digitization of cooperative sector is must for effective financial inclusion?
A. Maintenance of data in different ledgers for one customer, scale of operations, posting of some of the entries in ledgers with backlogs, accurate and timely submission of data for policy making, sustaining competition among the banks in the rural areas some of them are Public Sector Banks and also the New generation private sector banks are the impediments which could be addressed only through digitization. Financial inclusion could be achieved effectively to its best only on digitization as real time data flow will be there and also a realtime MIS could be derived. It will also help the end customer in getting on to the national network of ATMs and thus a Cooperative bank operating in a micro interior with a small set up can afford mobility to their customers by digitizing their applications and get hooked on to the national networks be it the ATM, POS, UPI or Internet based transaction.
Q. In which of these areas Vsoft provides solutions?
A. While VSoft has complete suite of banking products in the payment space as well as the core banking side, the scope and coverage of VSoft is present in the entirety of the requirements of both commercial and cooperative segments. More particularly on the Cooperative Credit structure which is a pyramid with PACS at the bottom most part, DCCBs at the middle, Apex is on the top portion with NABARD being above the pyramid, we have a comprehensive approach towards providing Core solutions with effective linkages to each of the above tiers with the other tiers. Thus, the approach is to provide an integrated end to end solution. At every stage it has also been ensured that digital banking enablements are provided to the fullest extent so that VSoft becomes one stop shop for the entire solution suite. However, these applications work on a stand-alone mode also.
Q. What makes Vsoft distinct from many big players in the market providing these services?
A. Understanding the intricacies including various compliance and risk mitigation requirements is the strength of VSoft. We have officials at senior levels who had hands-on experience of several decades in both Commercial and Cooperative segments. Thus, the applications are always designed with a thorough insight balancing carefully the operations, compliance, risk and also cost effectiveness as the number of vendors that the banks have to deal with comesdown substantially. Our approach is always modular so that we can de-construct the application and ensure that the modules required are only deployed, where as the same may not be possible for the other large applications available in the market. Being a one stop shop and offering hosted services are also an added advantages when we deal with VSoft.
Q. Has absence of a core banking facility emerged as a deficiency in the transformation of the cooperative banks towards a digital economy? What are the reasons for the lag? How these issues can be overcome by the cooperative sector?
A. Absence of a comprehensive solution linking the various tiers of the Cooperative segment is the serious deficiency in the transformation of the cooperative banks in the digital era. While some of them have solutions covering few of the requirements, the entire scope is not covered by any single company so far. The reason for such gaps in the banks in the cooperative segment is mainly the awareness for the products availability, capability to evaluate such applications if the same are available in the market The quest for solutions is a continuous process for any financial institution till they land on an optimal solution. The banks will have to see successful models like the state of odisha where an entire integrated approach has been adopted by the state and all the institutions in the cooperative segment in the state are interlinked. This not only affords wider coverage of the customer operations as the entire set is treated as on one core, it would also help in consolidation of costs for operations for the entire cooperative segment in the state.
Q. Security is the cause of concern in this Digital era. How does your company help in coping up with this threat to security in banks?
A. We have thoroughly tested our applications on all security audits and we have already been certified by various agencies for security risks mitigations. Audit and qualitative improvements is a continuous process in VSoft which helps us fine-tuning the applications against latest developments that are needed in terms of the risk as well as compliances.
Q. Can you provide few of the names of your satisfied customers? And their success story in short?
A. We have large number of satisfied customers in the Commercial banks as well as cooperative bank segments. Many MNC banks are our customers for various products. As regards Cooperative bank segment is concerned we have large number of customers on hosted model. While the references and success stories could be many, the largest success story is the Odisha model where we have developed a common data centre for the apex bank, hosted our application there, connected all the DCCBs and UCBs on to the same application and as a last mile we are connecting the large number of PACS in the state to the same so that the entire cooperative credit pyramid stands inter-connected and many of the interlinking entries are passed seamlessly through STP. The application facilities digital banking to about 5 million customers of the entire cooperative segment over there. At every level a 360 degree view has been provided to the stakeholders. That is the transformation of the cooperative segment which the govt. desires to achieve as provided in the budget for the previous year.
VSoft has been very proactive in understanding the requirement thoroughly and developed applications capable of delivering the objectives of financial inclusion and digitization, well in advance, as this requirement was a latent need for quite sometime from now in the cooperative segment.