Small Finance Banks (SFB) are catering to the demands of a particular customer segment which is not the main focus for the well-established banks. We have all the digital and technology solutions in place to deliver the best of service to our customers, says R Baskar Babu, Managing Director and Chief Executive Officer, Suryoday Small Finance Bank, in an interview with Rakesh Roy of Elets News Network (ENN). Excerpts:
Survodaya Micro Finance has recently transformed itself into a Small Finance Bank, how has been the transition?
The journey so far has been very challenging but exciting as well at the same time. As we were transforming from a microfinance institution into a bank, we had to put new structures, functions, policies, processes, systems and technology solutions in place, just within 18 months. So, in that sense, it was challenging. Simultaneously, it was a huge learning experience and the thought of launching a bank was always exciting. It propelled us to complete the transformation in less than 16 months after we received the in-principle approval from the Reserve Bank of India (RBI).
How are the small finance banks contributing to the financial inclusion and social inclusiveness?
As eight of the small finance banks were microfinance institutions, we were always a part of the financial and social inclusiveness initiatives. All microfinance institutions have played a significant role in providing much-needed credit facilities to the unbanked and under-served segments of the population. Now as small finance banks, these institutions will be able to further enhance financial inclusion by offering savings and investment products to their existing and new customers.
Tell us about the measures taken by your institution in this regard.
When we started as an MFI, we realised that our services would be restricted only to one side of the customer’s financial needs i.e., providing credit facilities. But without getting constrained by this limitation, we started imparting financial literacy and facilitated opening of bank accounts for all people in our sphere of operations, not just our customers. We are now building a comprehensive savings, credit and investment product suite for our customers as a SFB, which would help them in achieving higher incomes leading to better standards of living.
How have IT and Digital technologies evolved in the small finance banks in the last few years?
Even as MFIs, our technology solutions were quite advanced and we had already implemented robust front-end and back-end applications that were scalable as also invested in supporting infrastructure, analytics, etc. As we transformed into a Small Finance Bank, we did need a host of new solutions but we have had the benefit of planning afresh and putting in place all the necessary technology solutions without being burdened by legacy systems.
How has Suryoday Small Finance Bank adopted technologies in providing digital banking to its customers?
As we were planning our proposed technology architecture and solutions, we made a very critical decision – to put a Customer Relationship Management application at the forefront of all on-boarding and servicing transactions thereby enabling us to have a 360-Degree view of the customer in a seamless manner rather than have to stitch it with multiple applications each with their own on-boarding and servicing transactions. Our system architecture has been designed to be able to easily integrate with any future applications we will implement. We also have developed front-end/field-force mobility solutions that integrate real-time for credit decisions, eKYC validation, etc and would eliminate the need for paper-based processes and improve turn-around times.
In addition, we have also invested in many support systems for Compliance, Risk Management, Governance and Analytics.
What are the challenges and opportunities you foresee for small finance banks in India, looking at their counterparts Public Sector Banks and large private banks?
At this point, one of the key challenges for Small Finance Banks, being new in this area, is the need to build trust with our potential customers. Further, as we transform into a bank it is critical to diversify the asset portfolio and include non-microfinance products. We have already launched additional products including secured and unsecured Micro, Small & Medium Enterprises and small business loans and will also be starting our affordable housing business this financial year.
There is an ocean of opportunity and lots of space for all players. The Small Finance Banks are in particular targeting a customer segment that is not the main focus for the well-established banks. And as stated earlier, we have all the digital and technology solutions in place to deliver the best of service to our customers.
With the changing business scenario and penetration of more digital technology in the banking and non-banking finance sectors, what are your business growth plans for the future?
We believe that the future for financial services is in digital and analytics. We have invested in both and shall continue to do so to stay in tune with the changing scenarios. Given our existing microfinance customer base, we are hopeful of delivering technology-enabled yet cost-efficient banking services to them while also focusing on new products and customers. However, this cannot happen overnight and our aim is to build a best in class financial institution with a strong compliance and risk framework.