Syndicate Bank saves its way to success

When Syndicate Bank went in for a Centralised Banking System, it knew that the rollout of the system would have to be accompanied by business process re-engineering (BPR). The coupling of BPR and IT transformation has helped the bank save crores of rupees while launching a slew of products. Prashant L Rao has the details

B S Murthy feels that Syndicate Bank’s RoI is the massive cost savings that have resulted because of the core banking implementation

Syndicate Bank’s centralised banking system (CBS) deployment is one of the first projects of this nature undertaken by a public sector bank. The deployment was unique in more ways than one. To start with, the exercise was driven by business needs from day one. “We were looking for a solution to improve the productivity of the bank and its customers. It was never about an IT process,” says B S Murthy, general manager, Department of Information Technology, Syndicate Bank.

The bank formed a business council with five non-IT members (three were general managers and two were from functional departments) and one IT member. The bank came up with a business model and processes to deliver anywhere, anytime banking and a MIS that would provide both tactical and strategic information.

The bank had two alternatives:

• Implementing core banking by carving out a small area in existing branches while keeping the existing branch automation system intact so that only new customers would get into the core banking set-up.
• To go in for a wholly centralised system.

KPMG interacted with the bank’s business council at this stage. The decision was taken to go in for a core banking system where the bank would totally migrate to the new system as it was felt that splitting into two systems would pose too many accounting issues. Return on investment (RoI) was defined in terms of the cost of doing business (retaining existing customers would become difficult if the bank did not go in for core banking) and in terms of the investment that had to be made.

“We had 72 vendors bidding for this contract,” says Murthy. That number came down to a dozen and from that to six, then three. A detailed evaluation procedure was laid down before selecting FLEXCUBE from i-flex. This included floating a request for proposal (RFP) that specified the volumes in terms of the number of accounts and transactions and conducting detailed product walkthroughs where the bank looked at functions, business, technology and the overall cost of the solution.

Multi-city pilot

According to S Sriram, time was the biggest challenge during the project as similar implementations take between six to eight months

The project began in August 2001. The bank viewed it as an opportunity to reinvent itself. A business blueprint was created before the project began. The first branch went live on December 15, 2001. “The first branch went live in three-and-a-half months. We had to go live in that time with all the basics. We identified seven critical bits of customisation and went live with i-flex core banking. Time was the biggest challenge, as it normally takes six to eight months,” says S Sriram, associate partner at IBM Business Consulting Services.

Pilots were undertaken at six branches in six weeks by January 2002. The first was in Mumbai, which accounted for two of the six pilots, Delhi accounted for another two while Bangalore and Manipal had one each. “Branches from different cities were picked out deliberately to ensure uniform technology adoption across the country while WAN issues were ironed out in the pilot itself. Normally, pilots are undertaken in a single city,” says R Narasimhan, senior relationship manager, i-flex solutions.

After this came the launches of new delivery channels. ATMs were launched in February 2002 and today Syndicate Bank has 75 ATMs with 50 on the anvil in the next three to four months. For customers, the big boost has been the introduction of ATMs. Murthy cites the example of an ATM that was installed at the Central Railway Workshop in Matunga, Mumbai. 4,000-plus employees at the railway workshop now use this ATM and thanks to it they no longer spend an hour or two visiting the branch.

Syndicate Bank has joined Bank of India, Union Bank of India, Indian Bank and United Bank of India in creating a branded ATM network called CashTree. This countrywide network is expected to have 3,000 ATMs by end-March 2004. “We are trying to rope in a few more banks,” says Murthy. His goal is ambitious. “Ultimately, we want to be like a Visa in payment systems. In the next 10 years this will be the big opportunity. Already, we see more transactions at points of sale (PoS) than at our ATMs,” adds Murthy.

The telebanking launch (IVR) went live in July 2002, followed by Internet banking in January/February 2003.

Rolling out the CBS

The bank has spent Rs 35 to Rs 40 crore on deploying its CBS. 55 branches are already on the CBS, with 10 to 15 more in the pipeline. “We have stringent data cleaning standards,” says Murthy, stating that the bank is interested in quality and not the number of branches.

“We followed a consortium approach,” he adds. “From the start we were clear that only one consortium would be responsible for the entire project.” The IBM-i-flex consortium was picked for the CBS deployment. “It was a turnkey project, including core banking, ATM, telebanking, Internet banking and cash management. We worked with i-flex, HMA, Servion and CashTech on this project,” says Sriram. At the peak of the project, between IBM and i-flex, there were 25 project executives interacting with the bank.

The data centre is based

at Reliance Infocomm in Mumbai. Disaster recovery is being set up in Bangalore. Wipro Infotech is doing the network management part. Bandwidth has been purchased from BSNL and MTNL.

“The bank had multiple systems. Operations were automated using different systems. The data from these had to be moved into the centralised system being deployed. Since we are going for core banking, just dumb migration won’t do. Data migration needs considerable thought,” adds Narasimhan.

There was a project director from the bank’s side. The steering committee included senior executives from IBM and i-flex. The committee formed and met for three to four weeks, during which time all decisions were taken. To back up the efforts of the steering committee, another committee was constituted, headed by an internal GM.

The core team consisted of 20 to 30 people. Training them was easier than training thousands of bank employees in using the system. At this stage, job cards were created. These were quick reference guides. The core team was trained by i-flex and IBM—the training included product training and IBM AIX training. The bank organised training on Oracle. The core team began training end-users and so the acceptance level was higher. Training in setting up servers and other similar tasks is being given to bank employees; Syndicate Bank is keeping all these functions in-house. There are plans to decentralise the helpdesk operations by setting up a helpdesk in Delhi, in addition to the Bangalore operation.

“The biggest challenge is to retrain 3,000 officers. We have a 45-seat set-up in Manipal that is dedicated to CBS training. We run 42 programmes in a year, accounting for 1,800 officers,” adds Murthy. There is a second training set-up in Delhi.

“We had already integrated Servion’s solution in HDFC Bank. As far as IBM was concerned this was the first time we did a deployment in a public sector bank,” says Sriram.

Beyond the IT component, Syndicate Bank brought much more to the table in terms of:

• Branding—All branches on the CBS follow the same colour scheme (counter colours, etc.) and layout (floor design). The lobby space is greater than that occupied by the staff.
• Real single-window—Customers can approach officers seated at any desk.
• Uniforms—The bank has introduced uniforms for its staff. Women wear maroon saris while for men it is a white shirt, tie and black trouser combination.
• Data enrichment—The bank captures a greater amount of information about its customers today. “Data enrichment has been done to enable cross-selling. We collect more details about a customer than we used to,” says Vijayakumar.

Cost savings are the RoI

When it came to picking between cost savings and business growth, the bank picked cost savings. “It is front-ended and there is no extra cost,” says Murthy.

Existing business processes were revamped through a BPR (business process engineering) exercise that involved doing away with the ‘Maker Checker’ concept that was part and parcel of the existing branch automation set-up. S R Vijayakumar, deputy general manager (IT), Syndicate Bank, says, “We removed certain processes. The Maker-Checker process is not there up to a pre-determined limit.”

The benefits accruing from this step were:

• The bank was in a position to offer a single-window facility to its customers.
• The staffing requirement went down by as much as 40 percent, driving down space requirements. For instance, the Gandhinagar, Bangalore branch, that used to occupy 13,000 square feet now takes up less than a third of that area at 4,000 sq. ft., releasing 9,000 sq. ft. In Mumbai, where real estate is at a premium, the bank has saved crores of rupees as a direct result of the greater efficiency. The bank’s Fort branch used to occupy three floors. It had another branch within half a kilometre. By undertaking BPR and deploying the CBS (Centralised Banking System), three branches of Syndicate Bank now fit into the three floors that were earlier occupied by a single one. Consequently, Syndicate Bank has been able to surrender the second building, saving Rs 3 crore of outgo. Similarly, at Nariman Point, it had three premises. This has now come down to two, saving Rs 1 crore in the process. In Chennai, a single branch occupied two floors. That’s down to 3,500 sq. ft. now and the zonal office has shifted to the branch. “This is our RoI,” says Murthy.

The bank has shifted its surplus staff into a central marketing department. The deployment of a CBS has helped the bank launch a number of new products. The global debit card has been a smash hit, with the bank signing up 1,50,000 customers in 11 weeks. “We expect to have 3,00,000 card holders by December,” says Murthy.

Other new products or features introduced include any-branch banking and telebanking. “We are getting thousands of hits—mostly for enquiries,” says Murthy.

Internet banking, that’s mostly used by NRIs, is query-based at present. The transaction component will be launched in a month’s time.

The helpdesk generates a branch- and zone-wise report of the number of new accounts at all the branches every fortnight. This is then faxed to zonal heads. “Earlier, there was a lag in this process, it used to take a month for the information to reach the head office for consolidation. Today, we are in a position to send the July statement on August 3,” says Murthy.

The system returns a list of non performing assets (NPAs) and the credit department is the first to know of these. This makes monitoring and response a lot faster.

A high-tech bank within a bank

Syndicate Bank plans to have 225 branches on the CBS by March 2004. This will cover 75 cities and account for business worth Rs 25,000 crore. The idea is to create a high-tech bank within a bank. 1,500 branches will remain outside the CBS, of which 645 are rural branches, many in areas where there is no regular supply of power. The bank has plans for these branches as well. The manual system will continue to be used from 10 am to 2 pm in areas with chronic power problems. Employees will key in transactions in the afternoon, and that will be sent on a daily basis to the regional office over a VPN. The first pilot branch for this scheme is up and running in Chennai.

The bank has signed up with Billpay and is launching its bill payment service next month. It has also tied up with Bajaj Alliance for collecting insurance premiums. The CBS lets the bank pass on the premium on the same day. Similarly, it can transfer tax collections on the same day.

The success of Syndicate Bank’s deployment of IT can be linked to its commitment to re-engineering its business processes side-by-side with its IT initiatives. It has also proved that public sector banks can match, if not outdo private players while deploying IT.

Advantage Syndicate Bank

Syndicate Bank moved to a customer centric solution for the first time. The core banking implementation let the bank offer different services to its customers, such as the ability to pool funds across accounts. The bank is now able to consolidate accounts centrally from multiple locations. Housekeeping—The centralised database in a Mumbai data centre lets the bank conduct end-of-day and end-of-month operations from a single location. Business productivity has been defined in one place so that product usage is uniform across the bank. Credit card administration—credit limits for companies now available in a single place. Centralised clearing to a single location.

prashant@expresscomputeronline.com