Budget: - Banking Frontiers

Budget: Credit demand to get traction

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Vol. 15 No.11 March 2017 `75

Pages 56

Banking sector in Greece

Federal Bank’s digital initiatives

Cross border remittances

Credit card growth

Banking Frontiers March 2017 3

March 2017 - Vol. 15 No. 11

Group Publisher : Babu Nair

Group Editor : Manoj Agrawal

Editor : N. Mohan

Editorial Mehul Dani, Ravi Lalwani, V. Raghuraman, Surekha Galagoda

Research Editors Prof Venugopal Iyengar, V. Babu, Ratnakar Deole, W.A. Wijewardena, Sanchit Gogia, K.C. Shashidhar, L.S. Subramanian, Ajay Kumar

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Design Somnath Roy Choudhury

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Demonetization - a Philosophical Analysis

Much has been published about demonetization and corruption, but I haven’t come across a philosophical perspective – hence this analysis from that missing perspective.

There are multiple drivers of corruption – the biggest being greed. Greed applies not only to individuals, but also to states/kings/governments. Greed is a vast topic in itself, but its historical evolution is indeed revealing.

Greed was pretty insignificant before the invention of money. Money accelerated the growth of civilization and gave rise to kings, whose greed rose very quickly. Given the slightest opportunity, a typical king would attack his neighboring kingdom to conquer its territory and plunder its wealth. The common belief in those times was that a king has absolute right to expand his kingdom, just as we believe today that a business owner has every right to grow his business. In contrast to kings, ordinary people were far less greedy, mostly focusing on day-to-day living and trying to ensure a ticket to heaven as per their religious beliefs.

What is the scenario today? Countries no longer undertake wars of conquest and plunder – thankfully that greed is gone. But the frequency with which governments have been booted out in elections only shows the moral nadir to which the state has fallen. The vice of conquest and plunder has been replaced by the vice of corruption.

On the other hand, today’s common man has become far more greedier than his ancestors. Most people are actively pursuing enrichment, and for many, that is the foremost goal in life. This obsession has driven many to cross moral and legal boundaries, leading to crime. The moral standing of the individual has dropped compared to the past, but not dramatically. To recap, the sin of the state is corruption and the sin of the individual is crime.

Now, what is the best tool to understand greed – it is morality. Philosophy poses a very important question: Who is more moral – the state or the individual? The question is important because whoever holds the higher moral ground, holds the moral authority to dictate to the other. A good example is religion, that derives its power from its moral superiority.

For the first time in the history of Homo Sapiens, there is explicitly a morality race between the state and the individual, and the state has recognized that it is losing – it fears the diminishing of its moral authority. I view demonetization as one visibly bold step by the state to catch up in this race. I foresee many such morality booster steps in the days to come. No doubt citizens would welcome such moves, as they did demonetization.

Coming back to the issue of greed, my own research shows that greed results from differences between the emotional mind and the intellectual mind. Greed is a tough, but solvable, problem. In fact, greed is already on the decline. Youngsters today prefer to pursue their passions rather than aim for the highest paying job (me too). Once greed declines, corruption too will decline, giving mankind an opening to tackle other bigger problems.

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


Project Pipeline

UCO Bank to implement 2FAUCO Bank is proposing to create a new security system for online card transactions, which essentially is a 2FA system for eCommerce transactions. The bank describes the proposed system as SSOCT, or Security System for Online Card Transactions. It has called for proposals from service providers to develop the system, which should be in accordance with RBI guidelines

and those of card companies like VISA, MasterCard and RuPay. The bank wants the solution to cover debit/credit /prepaid cards (Visa, MasterCard, Maestro and RuPay) in addition to internet banking / mobile banking/mobile wallet transactions done through various channels.

Andhra Bank looking for system integrator for CBSAndhra Bank has called for proposals from service providers for undertaking maintenance and monitoring of its existing CBS, application version upgrade, supply and maintenance of hardware and software and facility management services. The bank has Finacle version 7.0.25 on HP hardware with Itanium family processor/ HP-UX / Oracle platform. The bank has implemented Near DR at Hyderabad for achieving zero data loss. There are several customizations built into the CBS by the existing system integrator. The selected service provider will have to take over the support and maintenance of the entire application, internet banking application, GBM application, database and system administration from the existing system integrator and maintain all the existing features of the application / interface built into the system. The bank is in the process of migrating internet banking application to the latest version of FEBA and the same also needs to be supported and maintained by the vendor. The contract with the existing vendor is expiring on 31 October 2017.

CBI to set up C-SoCCentral Bank of India has decided to build an on premise, in-house Cyber Security Operations Center (C-SoC). It is looking for service providers who can undertake procurement of systems, implementation and operating the SoC. The SoC should be compliant with internal guidelines, regulatory requirements and country wide regulations and laws from time to time. The SoC should be able to integrate various log types and logging options into SIEM, ticketing/workflow/case management, unstructured data/big data, reporting/dashboard, use cases/rule design (customized based on risk and compliance requirements/drivers, etc.), etc. The bank intends to set up the facility in two phases. It wants the set-up to be in compliance with ISO27001, PCI-DSS, OWASP requirements.

Bank of Baroda plans Heritage CenterBank of Baroda is proposing to set up a Baroda Heritage Center in Vadodara and is seeking proposals from qualified entities to undertake design and development of the structure and provide operational support. The bank intends the Heritage Center to be a gift to the people of Vadodara, for them to get inspired with the heritage of the city and the work of Maharaja Sayajirao Gaekwad III (establishment of bank, railroads, textile industry, spread of education, encouragement of fine arts etc.) to realize their entrepreneurial potential. It would be a fusion of history and technology and aims to be a living vibrant space that will use heritage to inspire and enable the youth of Baroda. The bank is looking for a firm to handle the work, which will broadly cover besides the design of the concept, development of operating model, architectural layout, development of digital content and system integration of different products/systems.

SBI to set up MAB State Bank of India is proposing proposals for setting up, managing and operating merchant acquiring business. The bank is already engaged in merchant acquiring activities and is the top acquirer in terms of terminals deployment. The bank wants to build complete in-house processing capabilities of its own or in association with other entities. The bank is now looking for a suitable organization to undertake this task. The selected service provider shall be capable of migrating all the merchant accounts set-up from existing TSP to its system and then to the bank’s platform if and when the bank decides and commissions its own acquiring platform.

LIC to set up EMKsL i f e I n s u r a n c e Corporation of India is implementing electronic multi-funct ion kiosks (EMKs) at various localities. It has sought offers from service providers. At present, the system is based on collection of premium, proposal deposits, loan and

loan interest etc. at its cash counters. Also, customers can make payments online or through authorized merchants. LIC wants the EMKs to be designed for collection of payment from customers by cash, cheque/demand draft, and credit/debit cards. The EMK machines will be unmanned beyond office hours and shall be operated by the customers themselves. The selected the service provider will be responsible for the design of EMKs, their deployment, manpower, software required for administration and integration with LIC systems, payment collection, remittance and reconciliation and creation of reports, besides maintenance. LIC will pay to the vendor for the services. The EMKs will initially be in Mumbai, Bhopal, Kanpur, Kolkata, Patna, New Delhi, Hyderabad, Chennai, Ahmedabad and Bengaluru.

N E W S Regulator

8 Banking Frontiers March 2017

Bahrain central bank promotes innovationBahrain wants to become the face of innovation in the Middle East and a hub for fintech in the region. This view has been expressed by Rasheed Al-Maraj, governor of the Central Bank of

Bahrain, who said there is need for a progressive approach to promote an environment conducive to new businesses. He told the 6th GCC Financial Forum in Manama that Bahrain plans to introduce the latest technology in the sector. Bahrain is in the process of setting up a regulatory sandbox, having a physical fintech hub for entrepreneurs and setting up a fintech fund. The Central Bank of Bahrain will be in charge of establishing the sandbox and the Singapore FinTech Consortium is part of this effort.

China regulator to curb shadow bankingThe People’s Bank of China has drafted new rules to tackle risks from shadow banking. China is now facing a record credit, mostly due to lending by non-bank institutions. Banks have worked with other financial institutions to shift loans off balance sheet, allowing them to evade credit quotas and capital adequacy requirements. Regulators have permitted the rise of shadow lending, which is necessary to generate the overall credit growth required to meet the government’s ambitious yearly growth targets without overburdening bank balance sheets. However, the central bank has said banks lack effective recognition and control of the risks from off balance sheet business. Chinese banks’ off balance sheet wealth management products (WMPs) exceeded Rmb26 trillion ($3.8 trillion) by the end of 2016, up 30% from a year earlier, compared with 10% growth for bank loans.

Public can own shares of South African regulatorPublic can now buy shares of the South African Reserve Bank. A share is now priced at R3. The regulator has invited South Africans to acquire 149‚200 shares in the central bank. These became available for sale after the High Court of South Africa directed some SARB shareholders and their associates to sell shares that were in excess of the statutory limit of 10‚000 shares per person‚ together with their associates. The South African Reserve Bank Act was amended in September 2010 to extend the 10‚000 limitation on shareholding in the SARB to include associates of shareholders. The 10‚000 limit was then applied to a shareholder and their associates. The central bank said it would like to use this opportunity to diversify its shareholder base by encouraging all eligible South Africans to take up this opportunity to own shares in the central bank of the country. The SARB has a share capital of R2 million which is divided into 2 million ordinary shares of R1 each.

RBI sets up panel to review cyber securityThe Reserve Bank of India has set up an 11-member inter-disciplinary standing committee on cyber security which is expected to review the threats emanating from use of technology, study adoption of new technology standards and suggest appropriate policy interventions to strengthen cyber security. The committee will be headed by Meena Hemchandra, ED, RBI. The central bank had in 2016 issued guidelines to banks mandating them certain cyber security preparedness rules for addressing risks emerging form new technology. A notification issued by RBI said while banks have taken several steps to strengthen their defenses, the diverse and ingenious nature of cyber-attacks necessitates an ongoing review of the cyber security landscape and emerging threats.

MAS relaxes rules on loans to SMEs, startups

Saudi motor insurance sector to be Saudised

The Saudi Arabian Monetary Authority (SAMA) has issued a directive stating that most jobs within the motor insurance industry in the country must be Saudised in 2017. SAMA said the new rule would come into effect on 2 July. It will affect jobs in branches and centers for receiving claims, debris management and recovery, surveyors, customer care, complaints departments and other administrative roles. Companies are also required to provide training to Saudi employees. The new directive comes following the abrupt Saudisation of the kingdom’s mobile market in March 2016, when mobile shop owners were told they had three months to make sure 50% of their staff were Saudi and six months to completely Saudise their workforce.

The Monetary Authority of Singapore (MAS) is relaxing current rules regarding how finance companies provide loans to SMEs and startups. At present, a finance company faces a cap of 10% of capital funds for total uncollateralized lending, with a S$5000 maximum to a single borrower. MAS intends to gradually relax these limits, raising the cap to 25% of capital funds, while a single borrower can obtain a loan of up to 0.5% of total capital funds. There are only three finance companies currently licensed by MAS to take deposits and loans – Hong Leong Finance, Sing Investments and Singapura Finance – with combined assets amounting to S$16 billion. The new limits would allow finance companies to provide up to S$550 million in uncollateralized loans.


Bank of Maharashtra

What prompted Bank of Maharashtra to go for a Fraud

Management System? What were the challenges the

bank was facing at that time?

Ravindra Marathe: The rise of frauds in cards industry is beginning to endanger the business model of the banks in India. With a view to encounter such a rapidly changing ecosystem, we shifted focus to mitigating frauds at the originating channel where debit cards are used. We have been in the forefront of monitoring this problem and envisaging solutions to counter it for some time now.

We are popularly known as the “Common Man’s Bank”. We serve more than 15 million customers through 1900 branches/offices and 1891 ATMs. We offer widespread solutions ranging from treasury, corporate banking to retail banking. Rise of frauds in financial services is a significant threat to the economics of the bank and the country in general. It has been observed that the most susceptible customer segment to the frauds are the underbanked or the rural population. Since majority of Bank of Maharashtra customers come from this segment and use debit cards more than online banking, we felt a greater need for a solution that can prevent the frauds originating from card related channels such as ATM, POS and e-commerce.

How did you implement the solution for Fraud Management?

Mukund Kulkarni: The bank selected FIS’ open systems-based switching solution, card management solution and its card fraud and risk monitoring system to modernize its payments platform. Once onboarded, FIS fraud analysts did a thorough assessment of the transactions and found that there have been fraud patterns that were followed over a specified period. They proposed a holistic solution covering this complex relationship of people, process, data, and transactions. Finally, business rules were setup in the system to prevent or create alerts for such fraudulent transactions.

How did you manage the system implementation? What were

the main challenges?

MK: Since frauds are dynamic in nature, analyzing and mitigating them is a continuous task. The bank and FIS have been working together to ensure that there is clear demarcation between genuine and fraudulent alerts. We try to reduce the chance of a ‘false negative’ to the minimum. Using best practices of handling fraud trends across the globe, we have stayed a step ahead of the fraudsters. This has resulted not only in preventing significant financial losses but also enhancing customer trust and satisfaction.

What is outcome of the Fraud Analysis that you

have performed?

MK: To give an example, the transactions for the months of August, September and October 2016 were analyzed to understand the fraud pattern and overall financial losses. Analysis of the disputed transactions revealed that majority of the alerts were detected for e-commerce transactions. The fraud solution was also able to detect alerts originating from countries outside India. Such fraudulent transactions were blocked in the real time. Since its setup, the solution has been keeping strict vigil on such transactions and has been able to successfully stop the fraud transactions at the point of origination itself. Over 98% of the disputed transactions were e-commerce related and less than 1% originated from ATMs.

We also found 1-2% fraud cases originating from a foreign country. On an average, we prevented over 80% of the fraudulent transactions. We are working with FIS to increase this percentage as we learn from our experience. These data insights give the behaviour changes in customer spending, fraud patterns and provides an overview of why bank needs to mould their traditional system to

counteract card based frauds.

How has the bank benefitted from this exercise?

RM: There is no doubt that we prevented significant monetary loss for the bank and its customers. We have been able to curb financial crime targeting the bank. This has helped in gaining trust from our customers along with a faith and confidence boost from them, translating to increase in business from our customers.

What does the short-term fraud perspective look like?

RM: With Indian government’s drive towards a cashless economy, there is a greater risk of card details being exposed to fraudsters online as well as gullible people being scammed. This should not break their trust from using the cashless system. This is very relevant as a recent case study showed that top 51 banks of the country have lost close to `485 crore in the last 3 years.

As more and more customers and their card data are getting online, it becomes increasingly important for the bank to be proactive in preventing frauds rather than being reactive after suffering significant monetary and reputation loss. These systems will stand guard to ensure we can totally prevent these financial crimes from happening in our country.

Reducing Frauds, Reinforcing TrustRavindra Marathe, MD & CEO, and Mukund Kulkarni, GM - IT, Bank of Maharashtra, share their views on frauds and their prevention

Mukund Kulkarni

Ravindra Marathe

Cover Story


Mehul Dani: How will Budget 2017-18

facilitate credit growth for banks?

Mayank Mehta: The budget is progressive with its emphasis on inclusive development while being fiscally prudent. It has given special emphasis to development of infrastructure, agriculture, the rural economy and the MSME sector. As activities in these spaces get a boost, demand for credit is expected to get traction.

Harideesh Kumar B: This year’s budget was formulated against risks of global slowdown and turbulence, likely increase in policy rates in 2017 by the US Federal Reserve, uncertain crude oil prices, rising protectionism and additional fiscal burden due to 7th Central Pay Commission recommendations and OROP. The union budget has several welcome proposals,

such as, `221,246 crore total outlay for infrastructure, amendments in Motor Vehicles Act to open up the road transport sector in the passenger segment and revival of unserved and underserved airports. The target amount to be sanctioned under Pradhan Mantri Mudra Yojana has been increased to `180,000 crore and there are various measures aimed at promoting affordable housing. All these steps would help credit growth in banks.

What increase in credit flow to agriculture,

SMEs, industries and retail do you expect

from the budget provisions?

Mayank Mehta: After demonetization, banks are flushed with low cost deposit and banking system expects to retain this deposit for coming 5-6 months. This

surplus fund has resulted in softening of interest rates. For agriculture, the budget has provided for an all-time high farm credit target of `10 lakh crore in FY 2017-18. Bank of Baroda’s share in agricultural credit of the banking system has increased from 4.8% in November 2015 to 5.3% in November 2016 registering a growth of 22.2% vis-a-vis banking system growth of 10%. At present, we are financing micro irrigation in a big way in Rajasthan. The provisions related to expanding the scope of crop insurance and micro irrigation will be of good help. We will try to leverage the micro irrigation fund by exploring possibility of refinance or other ways. The SME segment is expected to get a boost with the reduction in the applicable corporate income tax rate and the enhancement of

Mayank Mehta, Executive Director, Bank of Baroda and Harideesh Kumar B., Executive Director, Canara Bank, expect credit growth boost from the Union Budget 2017

Budget: Credit demand to get traction

Cover Story


limit under the CGTSME scheme. Under retail, we at present are offering one of the most competitive rates for home loan and car loan. The tax reduction in income tax for small companies and individuals is expected to increase our retail portfolio. We are centralizing the loan processing system with a view to reduce turnaround time.

Harideesh Kumar B: Union budget 2017-18 focused on key areas such as agriculture, job generation, infrastructure, housing for all and digital economy while maintaining fiscal discipline. The continued spending on rural infra and social schemes is likely to be a key driver for the consumption demand. Similarly, the infrastructure theme focus is likely to be driven by increased allocation to roads, railways, energy and broadband infrastructure. The Budget measures are expected to boost the credit demand across the sectors like, agri, MSME and industrial sectors. As the measures taken in the budget are expected to create job creation, we may expect an increased spending there by creating a demand for retail lending.

Which particular industries are expected to

drive credit demand this year?

Mayank Mehta: Credit demand is a function of multiple factors including the overall growth prospects, sustained traction in global trade and industry specific factors and these things are quite dynamic in nature. Nonetheless, we look forward to credit demand in 2017-18 to emanate from manufacturing (pharmaceuticals, engineering and automobiles), selectively in infra projects including infrastructure – defense equipment manufacturing, power, commercial real estate, automobiles, renewable energy, IT and IT enabled services and trade finance and channel financing, at a good pace.

Harideesh Kumar B: Focus of budget on the rural, agriculture and social sector and on skill development is positive. In corporate and industry, the overall impact is positive for cement-construction (provision of `241,387 crore in FY18 for transportation including rail, roads and shipping), affordable housing, oil & gas, capital goods, automobile sector, iron & steel and power. National Housing Bank to

refinance individual housing loans of about `20,000 crore in FY18. It is proposed to feed about 7000 railway stations with solar power in the medium term. Solar is now being integrated across sectors road, port, rail, etc.

How do you view bank recapitalization

allocation of `100 billion allocated for

FY18? Do you think it is enough?

Mayank Mehta: Government has been allocating funds in the Budget towards meeting the capital needs in a planned way. In July 2015, the finance minister laid out the plan of infusing `70,000 crore to banks between April 2015 and March 2019. As part of the plan, the government was to infuse `25,000 crore each into PSBs in 2015-16 and 2016-17 and `10,000 crore each in 2017-18 and 2018-19. Government has already infused ̀ 25,000 crores in 2015-16 and the budget 2016-17 has provided for another `25,000 cores towards capital infusion. From a system point of view, it might fall short of the needed capital as per the stringent BASEL-III norms. The finance minister has reiterated a number of

times that government remains committed to meet the capital needs of PSBs. The idea was to have a mix of government infusing capital and raising funds from the market. Our capital position is quite strong and we will tap the market as and when it becomes necessary.

Harideesh Kumar B: Given the Basel requirements and the present financial position of banks, which is characterized by widespread stress, impaired assets and squeeze on profits and profitability, the sum allocated for bank recapitalization is not enough. But in view of the huge sum required, the process of bank recapitalization cannot be a one-off measure and this process has already been on for the last 2 years. Further, the government has clarified that more funds could be provided for bank recapitalization.

Which budget provisions are likely to

channelize higher savings into financial

investments, including bank deposits?

Mayank Mehta: Financial savings is as much a matter of habit as it is of ability to save. As far as ability to save is concerned, the reduction in applicable tax rate for more than 95% of SMEs and various budget measures which will boost rural income will be useful. The habit part is addressed in the budget through various measures to promote greater digitisation. Proposals in the budget such as to achieve 2500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards by the end of 2017-18 and to extend high speed broadband connectivity on optical fibre to more than 1,50,000 gram panchayats, under Bharat Net will go a long way in channelizing more transactions through the formal financial system.

Harideesh Kumar B: No cash transaction above `3 lakh would provide an impetus to less cash economy and usher in greater transparency and efficiency in the system. Investment in building a strong broadband digital infrastructure will improve coverage and quality of service in rural India and facilitate expansion of the digital economy, especially for financial transactions, government welfare schemes and education. Allocation under the Bharat Net programme is budgeted at ̀ 100 billion,

Mayank Mehta expects demand to emanate from manufacturing, selective infra projects, automobiles, renewable energy, IT and IT enabled services, trade finance and channel financing

Cover Story


which marks a near-two-thirds increase over the previous year. All these welcome measures would strongly boost the process of digitization and channelization of higher savings into financial investments.In what way will the budget provide a

boost to the micro finance industry?

Mayank Mehta: The Budget has provided a number of steps for the micro finance sector. SIDBI will be encouraged to refinance credit institutions providing unsecured loans at reasonable interest rates to borrowers based on their transaction history. Microfinance institutions and NFBCs will benefit from greater fund flow due to the availability of refinance from SIDBI. Besides, the abolishment of the Foreign Investment Promotion Board (FIPB) will dramatically improve the operational ease of raising foreign capital by MFIs.

Harideesh Kumar B: We feel the budget is generally positive for the microfinance sector. Micro credit sanction limit under the Pradhan Mantri Mudra Yojana has been doubled to `2440 bn. It is a boon to micro-finance companies as they can avail higher credit lines at lower interest rates from MUDRA Bank.

The period during which the benefit of profit-linked deduction of income tax that the start-up firms were entitled to for any 3 consecutive years out of the first 5 years from the date of their establishment has been extended to 7 years. That will also be a boon to the new entrants in the micro finance segment.

The decision of government to encourage SIDBI to refinance to credit institutions which provide unsecured loans, at reasonable interest rates, to borrowers based on their transaction history is boosting micro finance industry. The budget provisions will certainly go a long way in encouraging micro finance institutions.

What is the ratio of credit demand to be

generated from rural India, urban India and

semi urban India?

Mayank Mehta: 34% (1822) of our branches are located in rural area and 28% (1495) are located in semi urban area. With the special focus on agriculture and rural sector given in the budget 2017-18, major

demand is expected from the rural and semi urban areas. With favorable monsoon and satisfactory agriculture production, we expect revival in the rural economy. Other sectors such as automobiles, housing, consumer durables etc are also expected to get boost, reviving the credit requirements from rural and semi urban areas. Greater availability of funds to MFIs will expand the cash flows of MSMEs. Incentives for higher spending in the rural economy will lead to an increase in demand for tractors, microfinance, and 2-wheeler loans. The credit from urban and metro area is likely to pick-up in view of the expected GDP growth and thrust given for affordable housing and other infrastructure projects.

Harideesh Kumar B: About 61% of branches are situated in rural and semi urban areas, where as 39% of branches are in urban/metropolitan areas. Agriculture contribute to 23% of our advances. With increased outlay under agriculture disbursement, increase in irrigation area, stress on agro-processing units and allied activities, we expect agriculture contribution to reach 30% of advances in our bank by March 2018. With incentives given to

housing and other sectors, credit off take in retail section is also poised for takeoff in urban/metro area besides in upcoming town situated in semi urban areas.

What will be the BFSI industry’s overall

performance in the coming year, keeping

budget provisions in mind?

Mayank Mehta: The government has undertaken a number of path breaking reform initiatives be it the parliament enacting GST or the Bankruptcy Code in 2016-17. The 2017-18 budget should not be seen in isolation but as one more step in the series of initiatives taken by the government which underlines its commitment to achieve higher sustainable growth. The financial sector is not only a contributor to growth but also gets support from growth. In that sense, financial sector is a reflection of the real sector. As the growth prospects improve, business opportunities would also expand. We expect 2017-18 to be better than 2016-17. Credit growth is expected to be much better in the second half of 2017-18.

Harideesh Kumar B: The BFSI industry’s overall performance in the coming year would be reasonably good. The net market borrowing of the government is restricted to `3.48 trillion for next fiscal, much lower than the `4.25 trillion previously. Fiscal deficit for 2017-18 has been pegged at 3.2% and at 3% for the next 3 years. Measures of interest to the BFSI segment include introduction of a comprehensive Code on Resolution of Financial Firms, statutory basis for a monetary policy framework and a Monetary Policy Committee through the Finance Bill 2016, RBI to facilitate retail participation in government securities and development of new derivative products by SEBI in the commodity derivatives market.

One crore houses for poor by 2019 and introduction of new law to confiscate assets of offenders who escape abroad, are significant to the banking sector. The real estate sector initiatives would ease funding for affordable housing projects, provide tax relief to developers with unsold inventory, and increase demand. The abolition of Foreign Investment Promotion Board in 2017-18 is a bold move.

[email protected]

Harideesh Kumar B feels credit off take in retail sector is poised for takeoff in urban/metro areas besides in upcoming towns in semi urban areas


Business Prospects

As one of the fastest growing

economies in the world, Indian

companies and start-ups are often

looking for the right place to expand their

business. Thanks to initiatives such as the Self

Employment and Talent Utilization Fund and

royalty tax reductions for new enterprises, by

2020 it is expected that India will play host

to over 10,500 thriving start-up businesses –

so it is clear that these businesses will play a

vital role in the future of the Indian economy

and in Indian investment abroad.

When Indian businesses look to

new frontiers, Bahrain is often a popular

choice due to historical, cultural, logistical,

and trade ties. Bahrain has the strongest

transport infrastructure in the region,

and links by air, sea and road help in

connecting foreign businesses to the Gulf

economy and the wider Middle East and

North Africa region. Bahrain has served

as a hub in the Gulf Corporation Council

(GCC) for some of the largest Indian

businesses for quite some time, and the

potential for strengthening business and

trade relations is stronger than ever.

Given the strengths of the Indian

technology and start-up scene, Fintech

presents a great opportunity for Indian

companies in the region. In Fintech, the

GCC is arguably playing catch-up, but

there is great potential. The region is

home to a young, growing population

where there are more smartphones than

people – in this environment the potential

to develop – and see the fast adoption of

– new products and services is clear.

BUSINESS ENVIRONMENTOne of the key drivers that make Bahrain

attractive to Indian investors is its favorable

business environment. For companies

looking to access the GCC, Bahrain is

a good option because it has one of the

lowest operating costs and taxation systems

in the region (a 2016 KPMG report showed

that costs for operating a financial services

firm are approximately 30% and 40% lower

than Dubai and Qatar respectively). It

provides a high quality of life for expats,

ranked among the top 10 globally by

HSBC Expat Explorer Survey. Additionally,

Bahrain offers a clearly established legal

and regulatory environment, and boasts a

bilingual and highly-skilled local workforce.

MOST IMPROVEDHowever, while we are proud of what we have

achieved, we know we need to continue to

adapt in order to remain a business-friendly

environment and enable companies in Bahrain

to reach their potential. According to World

Bank Group’s ‘Doing Business Report 2017,’

Bahrain was one of the ten most improved

countries, noting particular efforts in ‘starting

a business’, ‘getting credit,’ and ‘trading across

borders.’ These reforms highlight recent

initiatives that we have seen in Bahrain and

will certainly support prospective and current

businesses. Other reforms also expected

to take place include a new bankruptcy law

and the creation of a regulatory sandbox by

the Central Bank of Bahrain to support the

development of Fintech.Due to this environment, Bahrain

continues to be home to some of India’s

largest businesses such as Ion Exchange,

Electrosteel, Chemco, Bank of Baroda, ICICI

Bank, State Bank of India, Canara Bank, JBF

Industries and Tech Mahindra and is also a

sought-after destination for some promising

Indian start-ups. A strong example is

GetBaqala, which officially launched in

Bahrain in October 2016 by Indian tech

entrepreneur Amjad Puliyali. Amjad lived

in Dubai for nine years before deciding

to start his business in Bahrain, citing the

great testing environment for new ideas and

cost efficiency. The grocery delivery app is

already looking to expand elsewhere.

START-UP SCENEIn the last few years there has been

radical changes in the start-up scene in

Bahrain, including initiatives to support the

entrepreneurial tech culture. Some of this

progression is reflected in the formation

of the first cloud-based accelerator in the

MENA region, established by UK-based

C5 Accelerate in partnership with Amazon

Web Services. There are also several

government initiatives that support the

entrepreneurial ecosystem in Bahrain. For

example, in the funding space, the Bahrain

Development Bank offers financial services

that are tailored to meet an SME’s needs.

500 Startups, a leading global venture

capital seed fund and start-up accelerator

headquartered in Silicon Valley, recently

announced the launch of the $30 million

fund entitled 500 Falcons, targeting

the MENA region. Similarly, Tamkeen,

an organisation dedicated to providing

workforce training and education, provides

several opportunities for entrepreneurs to

receive mentorship and coaching to grow

their ideas and expertise.

As Indian businesses look to take the next

step in their growth and expansion, I believe

the Gulf can be at the heart of their future.

Indian businesses and entrepreneurs have

long thrived in Bahrain as they look to access

the wider region and have played a key role

in our economic development. As the world

changes and new opportunities open up in

areas such as Fintech, I am confident that

they will continue to lead the way. David Parker is Executive Director of Financial

Services, Bahrain Economic Development Board

David Parker

Bahrain - an established opportunity for Indian businesses and start-upsBahrain - an established opportunity for Indian businesses and start-ups

Indifi Technologies


Indifi Technologies is a platform that facilitates debt financing for medium and small businesses. What is unique

about the platform is that it ensures speed in the approval and disbursement processes, understands and identifies the relevant loan product for the specific business needs of the customers and finds out the best rates available in the market for them. It is the company’s mission to automating MSME financing in the country and it is becoming a one-stop shop for startups and small businesses to get seamless access to funding.

“We work with lenders to provide them with full customer lifecycle management and lenders pay us a fee for it, which is based on the product availed by the customer,” says Alok Mittal, CEO and co-founder of Indifi Technologies.

6 SECTORSMittal explains that the company has a sector-wise approach to provide the customized solutions. “We offer our services to 6 specific sectors at the moment - travel bookings, hotels, transportation, retail, eCommerce and manufacturing. Travel is the largest sector we cater to, followed by retail - both online and offline. We also continue to experiment with new sectors.”

He outlines the 3 stages through which a prospective borrower finds funding: “You submit your documents, and this can be done online or contacting us. Depending on your fund requirements, we will find a lender with the best terms and the approval is obtained post haste. And in the final stage the loan is credited straight to your account. The whole process is fast and seamless. This is possible because we have automated most of the steps from data collection to approval.”

A borrower can get funds between `1 lakh and `50 lakh through Indifi Technologies platform. The company offers 30-day and 60-day working capital loans to firms which are often denied funding by the traditional funding companies. It has its own methodology for gathering data on the business and the credit profile of the applicants. Says Mittal: “Our

lenders use a mix of conventional business assessment data such as banking and turnover and juxtapose it with segment-specific indicators around quality and transaction volume of customers to arrive at a composite credit model.”

The system then matches this information to the most relevant financiers available on the platform. Based on the information and further analytics, the lender can decide to offer the loan. The decision depends on the lender. What the platform does is to enable decision-making.

MARKETPLACEMittal says the platform has built a marketplace that allows for lenders and borrowers to be matched on the basis of their credit criteria. This ensures a quick turnaround and precise matching of borrowers with lenders.

It also manages the entire loan cycle of the borrower, including ensuring that repayments are made in time. The company normally caters to businesses that are underserved by traditional lenders.

RECOVERY PROCESSHow does the company involves itself in the recovery process?

“We have a completely process based humane approach in this regards,” says Mittal. “We have automated some key elements of the repayment process. Further, we believe that a lot of collection issues can be handled prior in the loan lifecycle through appropriate product design, customer fit, and business monitoring. We service the borrowers who come through our platform, though we are not the lenders.”

He adds: “We also partner with entities like Paytm, large retailers, and platforms like Makemytrip.” It has Edelweiss Capital, IDFC Bank and India Infoline among others as key partners.

What is the ratio of direct customer sourcing to partner customer sourcing that Indifi has seen so far? Says Mittal: “We have a mixed approach for sourcing. As I mentioned earlier, we have a sector wise focus on partner customer sourcing and direct customer sourcing. Performance is the primary criteria for both the channels,”

PRODUCT INNOVATIONWhat product innovation has the company brought into the lending marketplace? Says Mittal: “We design our products for each segment basis the segment’s working capital requirements. Further, we build linkages to their business, so that our loan provides them with not just the capital, but levers for growing their business.”

Indifi was launched in June 2015 and became operational in October 2015. Mittal says it was a personal trigger for him and his partner Sidharth Mahanot to explore a business proposition as they found that data is in business systems and not in credit systems. Today, it has over 2000 borrowers. While there is no restriction as such on the loan ticket size, the experience has been that borrowers need funds between `1 lakh and `40 lakh. It manages the operations with a staff of 50 who comprise tech professionals and customer service experts.

[email protected]

A startup helps MSMEs get loans in the shortest possible time

Connecting MSME borrowers with lenders

Alok Mittal claims the Indifi platform allows lenders and borrowers to be matched on the basis of their credit criteria ensuring quick TAT


Card Business

On-the-spot card delivery is increasingly becoming norm for banks and financial institutions

as it helps reduce operational costs and alleviate time-consuming logistical and fulfillment processes. According to recent research, in-branch installations for instant issuance of cards are expected to go up substantially and instant card issuance will be a mainstream service by 2018.

What are the benefits of instant issuance of cards?

In nutshell, the process is - a customer visits the branch location, the branch customer service representative takes application or account information, confirms identity, a desktop printer produces the activated card and the customer walks out with full purchasing power. From a customer perspective, the process enables acquisition of new credit/debit cards, replacement of lost, stolen damaged cards, virtually same day replacement after breach and personalization of the card. From a bank’s perspective, it can get increased activation rates, the branch can cross-sell other products, build goodwill with the customers and introduce more cards in the market increasing revenues.

INSTANT SERVICERecent research has shown that instant issuance can empower banks to address growing customer demand for immediate service and customers value the convenience and that extends to overall satisfaction with their bank. Also, banks can use the time it takes to print a card in-branch to deepen customer relationships and understand customers’ individual needs and then cross-sell relevant products and services.

The payments industry is today adopting Europay MasterCard Visa credit and debit payment cards that provide enhanced functionality for card authentication, cardholder verification and transaction authorization. As EMV is becoming norm, it is time to consider best practices for secure issuance including

multidimensional card validation, as part of a multilayered issuance system that supports both centralized and distributed issuance capabilities.

EMV CARDSIs instant issuance a challenge in the background of banks migrating to EMV compliant cards? Industry experts say it is not so. They are of the view that card issuers can continue to enable instant issuance at branch offices and other locations by adopting a multilayered approach for card validation and overall issuance system management ensuring optimal security. The EMV instant issuing system connects desktop EMV card printers to back office servers, enabling banks to instantly issue EMV chip cards to customers while in the branch.

What they would need are card personalization technologies that must ensure reliability at high volumes and advanced credentialing features of larger centralized printers with the lower cost and smaller footprint. Banks can ensure multilayered card validation through two- and three-dimensional personalization elements. Two-dimensional elements including standard-resolution photos as well as more secure high-resolution photos, holographic card over-laminates and laser-engraved attributes. A further security dimension is storing all payment information in a secure chip.

INTEGRITY OF SYSTEMAnother challenge that onsite card issuance faces is protecting the integrity of the overall issuance system. This is done through a multilayered security approach - use of mechanical locks on printers, use of personal identification numbers to control operator access and finally, ensuring automatic elimination of personal data on used print ribbon panels, and/or employ printers with integrated sensors that only permit the use of custom print ribbons and holographic card over-laminates in authorized printers.

Having said that, offering instant issuance of EMV enabled cards would need an expert knowledge of EMV to build the EMV profile parameters, EMV key management, EMV scripting, chip personalization, etc.

It is imperative that as EMV technology grows in adoption, financial institutions must deploy instant issuance systems that combine security with convenience, operational efficiency and reliability. This can be ensured by using retransfer technology to support EMV’s multidimensional card validation elements, multilayered security management to protect issuance system integrity and a distributed model that combines the reliability and advanced credentialing features of centralized printer/encoder systems with the low cost and small footprint of desktop units featuring single-wire connectivity capabilities.

Bank customers are invariably more satisfied with their bank if they have received an instantly issued debit card instead of a card sent by mail. For banks, since the cardholders start using the card instantly, there could be benefits by way of additional interchange revenue. Cards actually link the virtual with the physical in the financial services realm. In spite of online and digital claiming most of the banking operations, the branch is still a vital interface and instant issuance of cards at the branches can to a great extent retain the relevance of the branch in the bank’s customer interactions.

While instant issuance of cards has its benefits, there are challenges as in the case of EMV-compliant cards:

Instant card issuance combines convenience, security

N E W S Blockchain


Japanese consortium of banks to use blockchainA consortium of banks has been formed in Japan to explore the use distributed ledger technology offered by a Google-backed fintech start-up Ripple to make domestic and international payments. A pilot program in this regard has already been successfully implemented when the 47-member consortium used Ripple’s blockchain technology for a cloud-based payments platform called RC Cloud. The platform allows member banks to do real-time money

transfers in Japan as well as make cross-border payments at a significantly lower cost. The consortium was launched in October and represents over 30% of all banks in Japan. Members include AEON Bank, Nomura Trust and Banking, Resona Bank and Mizuho. Ripple’s technology records and stores all of the transactions online securely on a peer-to-peer network, which eliminates the need to have an intermediary bank or a central hub to do the clearing and settlement.

SBI, other banks form alliance for blockchain studyState Bank of India is pursuing an alliance with other commercial banks in India to use blockchain technology as a medium to fight banking related frauds. Axis Bank, ICICI Bank and 8 other commercial banks are part of the alliance, which also has as partners IBM, Microsoft and KPMG. Mrutyunjay Mahapatra, DMD, SBI, said SBI has taken the lead in initiating blockchain being the leading bank in the country and it is in talks with banks and other companies for this. Using blockchain technology, SBI along with other commercial banks aims to form a common database of defaulters and loan applicants, which can immensely help to stop future frauds. Finance and trade documents, which are handled physically as of now, would be now uploaded into a common platform, which can be accessed by all the participating banks. These would be digitally signed for extra security.

Banks to adopt blockchain by 2010Financial institutions across the world expect that mainstream adoption of blockchain technology will happen 2020. And nearly half of the financial institutions are already investing or planning to during 2017. A recent survey found that 33% of those involved in the survey expect to see commercial blockchain adoption by 2018 and the majority say they foresee mainstream adoption by 2020. Findings indicated that the blockchain rollout would be a priority within business areas where transparency would be improved, processes automated, and time saved on settlements and transactions. The top five use cases expected to go to production are cross border payments, digital identity management, clearing and settlement, letter of credit process and the syndication of loans. The study was carried out by Infosys Finacle and Let’s Talk Payments (LTP).

Blockchain academy in KeralaKerala will get the second ‘Blockchain Academy’ in the country, after the first one was set up in Bengaluru. The Indian Institute of Information Technology and Management-Kerala (IIITM-K) will set up the academy in association with the international learning and business development platform Blockchain Education Network (BEN). The academy will take up research and innovations and impart technical consultancy in the cutting-edge technology. A release from IIITM-K said banking, healthcare and governance are the three major avenues where blockchains will find applications. It said blockchains may evolve into a system with immunity to threats - with advances in artificial intelligence and predictive logic systems.

A blockchain platform for capital markets

Scotiabank does a pilot on blockchain

EquiChain, a London-based fintech firm, has developed a prototype blockchain platform for capital markets. The company plans to implement a full end-to-end ‘execution to custody’ in 2017. The company’s founder and CEO Nicholas Bone said the platform creates a verifiable, transparent and immutable flow of information, facilitating direct interaction and enabling the streamlining of market processes. The prototype is a hybrid system which consolidates the functions of a securities transaction such as an asset manager, custodian, broker, exchange and central securities depository.

Alphapoint, a San Francisco-based financial services infrastructure firm, has completed a blockchain proof-of-technology trial for Scotiabank. The pilot used Alphapoint Distributed Ledger Platform, which digitizes financial instruments on its proprietary distributed ledger to create trading venues for those blockchain assets and to manage pre-trade and post-trade workflows, along with existing systems. Scotiabank has evaluated how it can contribute to a variety of processes, in a project lasting several months. According to Joe Ventura, founder and CEO of Alphapoint, distributed ledger technology enables institutions to rethink how data flows within their organizations.


Domain Name

State Bank of India has a new web address - bank.sbi. It is part of the bank’s efforts in rebranding its

corporate website. What is unique about this url is that it is the highest domain protocol, called generic Top Level Domain, or gTLD. This protocol allows an organization to use its corporate name - in this case sbi - as the .extension and the website’s top level identifier rather than the usual .com or .co.in. The bank is the first financial services institution in India to use a gTLD as its web address. Besides, the branding, the domain is expected to provide enhanced security as well to its customers.

The bank said its own gTLD is aimed at simplifying the digital experience of customers and brings in enhanced security against phishing and lookalike websites. A gTLD site is non-replicable and the extension conveys an assurance to the customer that the site is authorized, genuine and is not an inappropriate or phishing site.

SECURITYArundhati Bhattacharya, chairman of the bank, said the bank has always been a pioneer in adapting new technology and it has always believed in providing high-tech yet secure internet experience to its customers. Adopting gTLD is another step in this direction, she added. The bank now intends to convert all its internet presence into gTLD.

DOMAIN NAMESWhat are the intricacies in domain name registrations? The original top level domains were .com (administered by Verisign), .org. (by Public Interest Registry), .net (by Verisign), .int (by Internet Assigned Numbers Authority), .edu (by Educause via Verisign), .gov (by General Services Administration via Verisign) and .mil which is US military. In addition, there are country specific code top-level domains, like .in, .ae, .fr, etc. The Internet

Corporation for Assigned Names and Number (ICANN), which is a Los Angeles-based non-profit group that oversees the distribution of domain names, had in 2000, approved 7 gTLDs - .biz, restricted to businesses; .info, open to anyone; .name, for personal registrations; .pro, for licensed professionals such as lawyers, doctors and accountants; .aero, for anything related to air transport; .museum, for museums; and .coop, for cooperative businesses such as credit unions. It had also approved several organizations to register domain names for individuals and businesses.

2 CATEGORIESIn fact, generic TLDs are in two categories: sponsored and non-sponsored. To obtain an internet address with a sponsored TLD, certain requirements must be fulfilled. These conditions are determined by the sponsors (companies or organizations) that are also responsible for monitoring guidelines and general management of their TLD. Some examples of sponsored domain extensions are .gov (for US government institutions), .int (for international organizations), and .jobs (for company job offers). The non-sponsored TLDs, on the other hand, are monitored and managed centrally. ICANN is primarily responsible for these and works together with various partners. When the first non-sponsored TLDs were introduced, it was originally planned for them only to be purchased under certain conditions. Like sponsored gTLDs, they should denote a clear frame of reference for websites: .com was initially only available for companies, .net was intended for internet service providers, and .pro for professional use in various occupations. These plans, however, were gradually dropped and now almost every non-sponsored gTLD is available for individuals, businesses, organizations, etc. to use.

BENEFITSInternet experts say one of the major

attractions of the new gTLDs is their potential for branding purposes. The new domains are no doubt a differentiator, which can quickly and simply associate a company with a particular location, subject or aspiration. Another aspect is the boost the gTLDs could give to search rankings and web traffic. Thirdly, enterprises obtaining gTLDs can prevent others from getting them. However, the cybersquatters can still choose to hi-jack the domain of a brand either to tarnish its image or sell it back to them at a price.

Is acquiring a new gTLD the same as acquiring a domain name? ICANN has an interesting explanation: It says on its website: “No. Nowadays, organizations and individuals around the world can register second-level and, in some cases, third-level domain names. (In a url, such as maps.google.com, ‘google’ is a second-level name and ‘maps’ is a third-level domain.) They simply need to find an accredited registrar, comply with the registrant terms and conditions and pay registration and renewal fees. The application for a new gTLD is a much more complex process. An applicant for a new gTLD is, in fact, applying to create and operate a registry business supporting the internet’s domain name system. This involves a number of significant responsibilities, as the operator of a new gTLD is running a piece of visible internet infrastructure.”

[email protected]

bank.sbi is the new address for State Bank of India on the web. It has acquired this highest domain protocol, called generic Top Level Domain, or gTLD recently and became the first bank in the country to have such a web address

SBI gets a new web address

Card Boom


There has been potential rise in the overall credit card business in India with demonetization and cashless

transactions leading to the rise of this business. While demonetization has driven up card usage, there has in fact been a drop in the overall value of credit card transactions. Credit card transactions are seen as a proxy for consumer confidence.

The overall drop in credit card spends has been due to a drop in high-value discretionary spending like purchase of jewelry and consumer durables. This is despite a 30-35% jump in the number of card transactions due to increased usage for daily needs such as groceries. There has also been a sharp drop in EMI sales, which facilitate discretionary purchases, usually of consumer durables.

YES Bank credit cards portfolio saw a very healthy growth in frequency and value of usage post demonetization. The sharp growth in number of transactions indicates a shift towards greater adoption of digital payments especially for low ticket and everyday spends categories. Pralay Mondal, senior group president, Retail and Business Banking at YES Bank, says credit card spends and growth in November and December 2016 over October 2016 was at 20% and 86% respectively. The growth in number of transactions in the same period was 46% and 123%. “We continue to see the growth momentum across all usage parameters for credit cards,” he adds.

RISE IN APPLICATIONSKotak Mahindra Bank is among the newer players in the credit card business in the country. Post demonetization, the bank

saw a rise in the applicants by 22% and new customer applications by 5%. The bank says it continues to register 30% of growth on a monthly basis.

According to Navin Chandani, chief business development officer, BankBazaar.com, the company saw 26% rise in the applications for credit cards in January 2016 as compared to the pre-demonetization months of September and October.”

Says Mondal: “With well-differentiated products, YES Bank has seen a strong growth of 26% in credit card applications in November 2016 and 75% in December 16 over October 2016. This is also indicative of

a greater need and acceptance for electronic payment products in the market.”

SALES, MARKETINGBankBazaar.com has recently launched a marketing campaign ‘Finance Mega Mela’ in February 2017 to promote sales of the financial products including credit cards. Chandani said the company is using all the social marketing channels to promote this campaign. The company has released a special YouTube vie and has tied uo with the Akshay Kumar starrer Jolly LLB for this, he adds.

YES Bank has a multi-media, multi-channel strategy to promote sales of its credit cards. New card applications are sourced through the bank’s branches, corporate channels, digital/online campaigns, tele-sales and external partners. In addition, the bank also promotes credit cards through alliance partnership with leading brands from time to time to drive visibility and salience of the products. “Social media is a key channel for promoting our products and offers to the potential and existing customers,” says Mondal.

Kotak Mahindra Bank mainly targets its existing account holders for its credit cards sales. As much as 80-85 % of its credit card holders are its existing account holders. The bank mainly uses email marketing to reach its customers.

FOR CORPORATEAccording to Sumit Bali, senior EVP & head - Personal Assets at the bank, corporate customers are an important base for the bank. “We reach out to them via targete marketing activities,” he says. In the past,

Banks in India are using multi-channel strategy to promote the sales of the credit cards:

26% rise in new credit card applications

Pralay Mondal focuses on integrated model to deliver multiple products and services to its corporate customers


the bank has put up stalls in the companies like Wipro, Cognizant, etc to sell the cards to the corporate employees.

The bank also has a co-branded credit card with popular multiplex chain PVR.

YES Bank has an integrated model to deliver multiple products and services to its corporate customers. The bank has corporate salary and credit cards teams, which work in close tandem to deliver combined value of a salary account and credit card. “Our credit cards are designed to deliver the best in class benefits like choice of 7 product variants across premium lifestyle, rewards and cashback proposition and a powerful rewards proposition with points that never expire. We have industry leading benefits like lowest interest rate of 1.2% per month and lowest foreign currency mark up of 1.75%,” says Mondal.

The bank has also NFC enabled contactless credit cards, premium alliances and offers from Taj Group, BookMyShow, JetPrivilege lounge access in partnership with priority pass and MasterCard golf privileges in partnership with MasterCard for our customers.

NON-METRO CITIES Axis Bank targets smaller centers for its card business and it has seen its business growing in these centers compared to the top 8 cities, mainly fueled by the eCommerce boom. Earlier, the bank had confined tto the 8 top cities but now over half of its growth in this portfolio is coming from smaller cities and towns, which have contributed to 60% of the incremental growth in cards and 50 % of the growth in spends during 2015-16, compared to the previous fiscal. The bank says a large part of the spends is coming from the eCommerce segment.

On the other hand, Kotak Mahindra Bank receives 50% of the business from the metro cities of Mumbai, Delhi and the rest from cities like Pune, Hyderabad and Ahmedabad. Bali believes in providing credit card for every account holder in the bank. “We have opened 24 centers in the metro cities. We hope to have 30 million credit card users in the coming months. We have recently introduced fast track option to improve the journey of the credit card transaction,” says he.

YES Bank currently issues credit cards from the top 10 cities - Mumbai, Delhi NCR, Bengaluru, Chennai, Pune, Hyderabad, Ahmedabad, Jaipur, Chandigarh and Kolkata. In terms of volumes, Delhi NCR, Mumbai and Bengaluru are the top 3 locations and this is in line with the market demand for credit cards.

SECURITY TRENDSWith demonetization pushing people towards a less cash society, there is a lurking fear about cyber frauds. Credit cardholders with high limits are more worried. Realizing the need to make their elite customers feel secure, some banks have developed apps that allow them to block, unblock or change transaction limit on their cards. ICICI Bank, Axis Bank and City Union Bank have their versions of such an app. Cardholders can set geographical limits in a way that a card can be used only in a 5 km or 25 km or even 250 km radius. This eliminates the possibility of money being siphoned off from a distant ATM.

Blocking and unblocking a card using these apps is as easy as switching on or switching off an FM station. City Union Bank, which has implemented this for users, has done so as a counter measure against recurring data breaches in the banking system. Axis Bank is also looking at active prevention of hacking, overseas transactions and fraudulent use of debit cards with their switch-on and switch-off facility.

State Bank of India’s card unit SBI Card is planning to come out with credit cards for anyone who has a `25,000 fixed deposit in any bank. The card will not have any charges and will be available without any proof of income or a credit history. It also plans to issue credit cards to students of top 100 educational institutions in India without any income proof. This coincides with the bank’s plan to install around 5 lakh additional card swipe machines. Besides servicing shops without machines, the bank will launch an app which will enable offline card payments using QR code. Most of the merchants in small cities can accept payments through QR codes. The credit card will reside in the mobile and by scanning the code, the cardholder can make the payment. With interoperable QR acceptance, aggregators are expected to enroll shopkeepers, enabling wider acceptance of cards. The other advantage in getting first-time users into credit cards is that the bank will be able to get a credit history, making it possible to extend personal loans in future.

[email protected]

Navin Chandani advocates innovative social marketing campaigns to increase sales of credit cards

Sumit Bali reveals that 80-85% of the credit card holders of Kotak Mahindra Bank are its existing account holders


Conference

In its golden jubilee year, the Gems & Jewelry Export Promotion Council (GJEPC) organized a seminar, ‘Diamond

Financing 2017: New Opportunities, New Realities’ in Mumbai. Panelists felt there was a need for banks to do their due diligence carefully, understand the ecosystem of the diamond industry and that the diamond trade should come forward to provide information about the players within it. Indian banks have restrained themselves from lending to the gem and jewelry sector at a time when margins have reduced and prices have become more volatile.

“The Indian diamond sector gets $6 bn from India and around $5.5 bn from international banking channels. Different banks charged different rates. Banks use ECGC cover which adds to the burden, in some cases, raised the cost of finance by 5 times. GJEPC has intensified measures for corporatization of MSME units in diamond cutting and polishing. We also seek the formation of a Banking Committee that meets regularly, engages the trade and gives direction to the gems and jewelry sector.”

Praveenshankar Pandya, Chairman, GJEPC

“The trade should closely work with the banks to foster better engagement and cooperation on key issues. Banks need to create specialized branches / cells to understand the intricacies of the diamond business better. The trade has to support the banks to recover past dues.”

P.S. Jaykumar, MD & CEO, BoB

“The global gems and jewelry business is facing liquidity issues. The new order has banks getting stricter in their lending policies and emphasizing on due diligence to mitigate risk. It’s time to introduce new financing models for the business such as peer to peer (P2P) lending, government supported lending schemes, etc. A financing task force has to be set up including members of the trade from all centers and for continuous round table dialogues with the financial institutions.”

Ernest Blom, President, WFDB

“Many issues are unique to the diamond business and banks have to approach them with an open mind. It’s time to moot the idea of a new diamond lending policy. MSME businesses in the gems & jewelry sector have to get priority. If the industry stands firm in supporting banks to get rid of defaults, then banks will stand firm in supporting the gems & jewelry sector.”

Karnam Sekar, DMD, SBI

“Bankability is an issue. There were shortcomings on both sides – bankers did not conduct their due diligence in a thorough manner while certain players within the industry did not conduct themselves with the required fiscal probity.”

Biju Patnaik, EVP, IndusInd Bank

“Pre-shipment credit will always be the focus of lending. The greatest challenge lies in assessing the value of the goods. Sometimes it is difficult to pinpoint which remittance was in lieu of which goods, and the lack of clarity could mean that companies managed to stretch the period when receivables were due. There is an elongated working capital cycle, which is a real challenge.”

T. Ravindranath, GM, Syndicate Bank

“The sheer size of the diamond industry made it the safest sector for the banks to finance. Post demonetization more and more sections of the industry were getting digitalized. Most of the larger firms have been getting the bulk of the financing, MSMEs should get their share now.”

Anoop Mehta, Chairman, Bharat Diamond Bourse

“Banking regulations have changed since last few years and it has moved towards a collateral based system where risk perception matters a lot.”

Ajesh Mehta, Convener-BITC, GJEPC

“I will urge banks to come forward and provide financing options for the G&J industry.”

Sudhir Mungantiwar, Finance Minister, Maharashtra State

“90% of the NPAs are related to large companies and only 10% are of those in the MSME sector. We have devised a new offering for clients which is currently in a pilot stage and will be announced soon.”

Rajneesh Sharma, GM BoB

“Over 60% of the $40 bn exports in gems & jewelry in 2014-15 came from diamonds. Banking sector has to create customized solutions for the gem and jewelry business in terms of standardized structures, new credit rating parameters, a modified modern relevant version of ECGC, guidelines for minimizing risk and stimulating growth amongst MSMEs. NPAs amongst MSMEs are generally low and banks have to offer sops to MSME sector.”

Manoj Dwivedi, Jt Secretary, Ministry for Commerce

“There is a US$ 1.6 trillion gap in trade financing, which was only increasing.”

Walter Gontarek, CEO, Channel Capital Advisors [email protected]

Time for a new diamond lending policy

Speakers at the conference

Cyber Security


Mehul Dani: You have fought numerous

cyber-crime cases. Please tell nature &

scope of such crimes happening in the BFSI

segment in India in recent times.

Prashant Mali: While the adoption of information technology for banking services offers unprecedented convenience, cost-effectiveness and speed of delivery, it is riddled with several external threats and suffers from lack of coordination. Even though the advanced analytics on banking platforms attempt to prevent fraudulent transactions, such transactions continue, as several banks and telecom companies fail to comply with suggested and mandated safety norms. Major commercial banks have also been accused of not filing reports of suspicious transactions, an obligatory requirement when there has been an instance of unsatisfactory identification, which allows for speculation that more fraudulent transactions are attempted than are reported.

In recent times, financial services industry is becoming a prime target for cybercrime in the nature of financial fraud, identity theft, unauthorised access, loss of data, denial of service attacks, phishing, skimming, spyware or malware attacks, key logging, and other internet-based frauds. Hackers and organised criminal groups with potential government funding have been constantly developing and improving techniques to circumvent information security controls and safeguards, in order to commit fraud, financial theft and other cybercrimes with advanced capabilities to execute persistent and targeted attacks.

What is your estimate of the total number

of cyber-crimes and amount of loss to the

Indian BFSI sector in 2016-17?

India has witnessed a massive surge in cybercrime incidents in the last 10 years - from just 23 in 2004 to 72,000 in 2014-15. As per the government’s cyber security arm, Computer Emergency Response Team-India

(CERT-In), 62,189 cyber security incidents were reported in just the first 5 months of 2015-16.

What remedies, legal & civil, are available

to those aggrieved in BFSI segment and to

what are thier remedies?

There are several challenges of cyber-crimes related to mobile and online banking. Tracing cyber criminals is very difficult because criminal investigations and criminal activity itself is borderless by nature. The fight against cyber crime is the growth of an underground cyber crime economy. The underground economy attracts many digital experts and talented individuals with a specialty around cyber initiative.

There is shortage of skilled cyber crime fighters. Skilled manpower is requiring implementing cyber security measures and encountering such cyber-attacks. The most important challenge is preventing the cyber-crime. There has been prevalence of software piracy, as pirated software is more prone to attacks by viruses, malware and Trojans.

Aggrieved BFSI segment can claim compensation as provided in section 43 of the Information Technology Act, 2000 and if he

needs criminal cases to be filed then section 66 of the IT Act, 2000 provides punishment for computer related offences.

How vulnerable is the BFSI segment in India

to different kinds of cyber crimes? Are PSUs

more prone vulnerable?

With ever-increasing use of technology in the banking system, cyber frauds have proliferated and are becoming even more sophisticated in terms of use of novel methods. The data reveals that more than 95% of fraud cases and amount involved in fraud comes from commercial banks. Among the commercial banks, public sector banks account for just about 18% of total number of fraud cases, whereas in terms of the amount involved, the proportion goes as high as 83%.

This is in stark contrast with private sector banks, with around 55% of number of fraud cases, but just about 13% of the total amount involved in such cases. The PSUs are more vulnerable in case of big-ticket frauds (`1 crore or above) in terms of both number of fraud cases reported and total amount involved.

To what extent banks in India are exposed

to various risks in the digital payment

space, which is increasing of late post

demonetization?

As more penetration happens, more frauds would come to limelight. In places like Noida, Jharkhand and Haryana, there are villages who are involved only in digital frauds. Banks should invest in digital literacy and invest in making police machinery cyber aware.

What are your suggestions to banks to

safeguard sensitive data, customers’

interests and overall trust in the system?

With an increasing number of cyber-crimes activities, security of sensitive data such as personally identifiable information, commercial banking details, personal

Prashant Mali, President, Cyber Law Consulting, advises BFSI segment to conduct regular IT Act 2000 Compliance Audits

PSUs more vulnerable to big-ticket frauds

Prashant Mali


banking details, and the confidential corporate information is at a high risk. Owing to these reasons, the demand for BFSI security solutions has witnessed a high demand in the past few years and this trend will continue to grow. Any type of data breach incidences in such environment mainly occur due to non-compliance with various operational standards. BFSI security not only includes cyber security but also includes physical security of banking and financial institutions.

I advise BFSI segment should conduct regular IT Act,2000 compliance audits. Prevention would only come when this segment works towards bringing a change in the society. The change would only happen when a cyber security culture is developed and BFSI starts investing towards it.

Please cite a few inspiring instances you

have pursued.

Following are 3 landmark BFSI cases won by me:

Case No 1: Sanjay Dhande V/s ICICI BANK & Vodafone. Dhande was given compensation of ̀ 18 lakhs for online banking fraud and it was held that the data which telecom companies hold is ‘sensitive personal data’ under section 43a of the IT Act, 2000.

Case No 2: Chander Kalani Vs SBI. Money was transferred to bank accounts in London on the basis of just the email by breaking the fixed deposits of an NRI when he was abroad. Fraud amount was `63 lakh, interim amount given was `17 lakh and compensation granted by the authority was `40 lakh. In his order to SBI, the presiding officer has observed that the Banking Codes

and Standard Board of India (BCSBI) unit has issued a Code of Bank’s Commitment wherein customers of such fraud will be liable to the extent of `10,000 only and the bank has to make good the rest of the amount. But acceptance of this code by banks is not visible.

Case No 3: Raatronics Vs Central Bank & Others. Mobile number in the KYC form was changed online from Central Bank’s database and fraud was committed. Raatronics, was defrauded of its account in the bank by changing the mobile number in the bank’s online database. Central Bank and Royal Bank of Scotland were asked to pay ̀ 8 lakh each for lack of due diligence. The adjudicating officer also ordered compensation of `1.3 lakh and `1.4 lakh for frauds committed upon users of SBI credit card and SBI int’l debit card.

[email protected]


Conference

Banking Frontiers organized a roundtable for HR heads of financial organizations on ‘Future of Work Places’, with Cornerstone and Aon as knowledge partners. Following are the points highlighted by participants during the discussion:

T h e F u t u r e o f WorkPlaces

EMPLOYEE APPRAISAL

“We have globally moved to a faster feedback. It has moved away from ratings, which is working really well. Instead of performance appraisal discussions which happen annually, we have 4 check-ins. We have trained our managers around coaching skills and has guided them to do the check-ins in 4 areas - progress, career aspirations, outcome and goal setting. The project was started in 2015 and completed one cycle now. The pilot was done in the US.”

FEEDBACK CULTURE

“It seems coincidental that reducing attention span is coinciding with a movement for a more frequent quality feedback. The more fundamental reason why we are moving towards this is that the old system clearly, in the minds of the rank and file, is broken. I think more than the process, if the cultural nuance of the feedbacking in an organization is attacked, we have a better chance of succeeding. It is more an outcome of the culture of feedbacking not being present. The ones who have paid the price for not receiving frequent quality feedback are actually leading the drive to shift once a year to many times a year. They have experienced the gap of not having been given regular feedback.”

“The current performance system has failed as managers are not playing the mentoring role. It is also true that we were always keen to give feedback. Either the ecosystem or the toolset was not ready. Today, our toolsets are ready and employees are also more vocal about it. The earlier generations also had a point of view, but they were not that vocal about feedback. People want platforms and forums to share their points and want to see actions around it.”

“Over a period of time, one sees that model of managing has become only carrot and stick. Some of the other aspects of leadership, which is about giving people purpose, empowering them, building them and making them capable somehow just got lost.”

“People now say that don’t wait till the end of the year. They don’t appreciate the absence of an infrastructure to give feedback. There are apps today you can give an instant feedback you can give on daily basis. The feedback can be bottoms up as well.”

KNOWLEDGE PARTNERS

A view of the roundtable in progress


COLLABORATION VIA WHATSAPP

“One simple rule in Whatsapp group is that you don’t overload pictures. The second rule is strictly no forwards. Another rule is that the timings for feedbacks is regulated to reasonable hours.”

“At IDFC Bank, a lot of people are onboarding on a daily basis. We created a Whatsapp group and use it to convey instructions. This really works well.”

MARKING ATTENDANCE

“Marking of the attendance is an important requirement of an organization and not the requirement of the employee. We explored how to mark the attendance of an employee without

the employee taking an effort to mark it. We launched an app for this. As soon as an employee

enters the office, his/her attendance is marked by tracking

the GPRS of the person’s phone.”

MANAGING INNOVATIVE TALENT

“Innovation has a gestation period. It needs 2-3 years show impact. Organizations have less patience. So, when you don’t see impact, these employees get low ratings. Result comes in 2-3

years but performance appraisal happens every year. We have seen people not wanting to get into any new growth engine of the organization. Somebody has to work 3-5 years to really show some impact. What happens to him/her in those years? If you don’t show any impact, you start seeing his rating getting lower and lower. One call we have taken is that anyone who gets into the new growth engine of the organization, for the next 3 years, his/her rating is protected. So, the innovator is completely protected for the next 3 years.”

JOB ENRICHMENT

“More than half the employees feel that they are more talented, resourceful and capable than the work that their organization is using them for. This gets addressed by that frequent feedback mechanism. The moment you are speaking to your employee 4-6 times in a year, the employees is communicating whether he feels he is fully utilized or not. Then you have various tools including job rotation or enrichment, giving them more challenging jobs, etc.”

“Jobs have become more mundane because corporate systems and tools are way better today than they were many years back. So you have individuals who are more capable but the nature of jobs has changed. So now you can actually get productivity out of people in the form of innovation, idea labs, and so on.”

RECRUITMENT

“When you think of Bharat vs India, English is over stated. Someone selling an insurance policy in the interior regions of Maharashtra, actually does

the selling in Marathi. You actually filter better performers when you overstate your English with all the corporate biases. Obviously English is the language which you need in corporate working but in some way when it comes to performance on ground, vernacular language has a bigger impact than English.”

A vigorous discussion in progress


Conference

SUCCESSION PLANNING

“Succession planning can be internal and external as well. We talk only about succession planning which is kind of in house, but now the organizations are realizing that when there is a dynamic talent available in the market, does it make sense for the organization to actually tap them. Organization also want to look at hiring from the outside the BFSI segment.”

“There is always an ambiguity in succession planning. We have to slice the organization into people whom we want to grow, the people whom we want to maintain and the people whom we are not sure what they are doing. We did an exercise with all the business heads and all the CEOs to get an understanding of their perspective about individuals. The CEOs can say who is the best performer in the team, but does that person have the potential to be CEO? We will see their potential by assessing them on competency mapping. Then we will see the perceptional feedback of the team about those competencies, whether it is demonstrated or not. Then we will use some psychometric test to understand the personality. We have been doing it for the last 2 years. We take around 50 people by this process and then we get individual to get them coached, one to one”

DATA QUALITY

“We find there is no problem with the software, with us the issue is the data quality. One of the steps which we have taken is that at the time of hiring, the candidate himself/herself keys in the data. Earlier data entry operators used to do that. We used to find a lot of issues around like typographical errors and missing information, etc. Now the entire information is filled in by the candidate before the offer letter is released. So, we have seen some improvement in the data quality and a long way to go yet.”

RE-CONFIGURING HR

“Banking continues to lead HR change. In fact, most progressive banks seem to be uprooting and changing platforms way faster. They are going back and reconfiguring HR in the organization. If you take a cloud platform and do not configure HR organization, you are never ready for a journey mindset. You are only taking it as a project mindset and it will not yield the same value. Because, platforms have new features which come every quarter. Obviously, you need not switch on everything but you need to know what really connects to your organization goals and how do you navigate and change to that. On HR technology, biggest bottleneck has been HR function with its silos. If you look at HR transformation research data, 55% of those fail because HR functions could not change. HR skills and capabilities take much longer to change than process change.”

Participants raised various questions in the roundtable

Insights 2017

An initiative of Glocal Infomart Pvt. Ltd.

The world of payments has tremendously undergone a revolution. Globally, at least 50% of the fintech companies are working in the payments space to create the next level of possibilities in payments. Needless to say, the financial organisations are also constantly innovating either themselves or through fintech partners in a sandbox environment to get that silver lining edge in payments, which could catapult their growth to substantial levels.

Paynext 2017 will focus on all those important areas which can bring in more and more Transparency, Instant, Experience and Security into the world of payments which in turn would revolutionize the world of omni commerce.

In the omni commerce world

Simplify to Amplify

Chief Guest

A P Hota MD & CEO National Payments Corporation of India

Venue : Taj Lands End, Mumbai

Date : 9th June 2017

CONTACT: [email protected]

KEY TOPICS:• Sustainability&DependabilityinaworldofOmnicommerce

• RedefiningthepaymentinfrastructuretomeettheneedsofPaynext

• EcosystemChallengesandHarmonization

• PaymentRevolutionsandtheirIndianimplications

• DriftinggoalpostsinthePaynextworld

• ExperienceNextforPaynextMonish Shah Partner Financial service consulting, Deloitte India

Abhay JohoreyHead Digital, IDFC Bank

Bharat Panchal Head - Risk Management & Chief Information Security Officer, NPCI

Sunder Krishnan CRO, Reliance Life Insurance

Ms. Ratna Vishwanathan CEO, MFIN

OUR SPEAKERS

Understanding the emerging frontiers in payments systems

For private circulation only among delegates of PayNext Insights event on June 21st, 2016

PayNext Research Report 2016

RNI REG. NO. MAHENG/2002/9930 POSTAL REG. NO. MCN/70/2016-2018 POSTED AT MUMBAI PATRIKA CHANNEL SORTING OFFICE, GPO, MUMBAI ON 16-17 OF EVERY MONTHPUBLISHING DATE 16th OF EVERY MONTH

Budget: - Banking Frontiers

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Transcript of Budget: - Banking Frontiers