Vaishali, a district in Bihar, is known as the birthplace of Bhagwan Mahavir, the 24th Jain Thirthankara. But its historical significance aside, not many know that it’s one of India’s most backward districts.
Despite its backward status, you will be amazed to find that Vaishali houses a District Co-operative Central Bank (DCCB) which runs its banking operations on a cloud-based core banking solution.
So how such a small district co-operative bank with only six branches manage to get on to such a latest technology platform–is nothing less than a wonder.
Enter National Bank for Agricultural and Rural Development (NABARD), a financing agency that looks after providing investment as well as production credit for promoting various developmental activities in rural areas.
It is also one of those organizations that regulates and refinances financial institutions such as state co-operative agriculture and rural development banks, state co-operative banks, regional rural banks, commercial banks, and other financial institutions approved by RBI that provide financial help to rural folk.
Bumpy Road Ahead
Three and half years ago, NABARD commenced the last leg of its ambitious financial literacy and inclusion programme. Its aim was to improve financial awareness and make banking products available in rural areas. There were 201 state and central co-operative banks with 6,940 branches in 16 states and three UTs that were operating either in a manual or a partially computerized environment. This reduced efficiency.
“We wanted to make sure that these financial institutions have proper IT systems in place which will help them improve their everyday banking business and market the launch of new banking products,” says K.R. Bhat, GM-IT, NABARD.
Initially, NABARD gave these 201 state and central co-operative banks an option to select their own IT system—a banking solution—which would streamline their processes and systems. “For a bank to invest in a core-banking solution is a huge cost that involves buying the software, paying licenses, owning a datacenter, and a disaster recovery solution, as per RBI guidelines,” says Subrata Gupta, CGM, NABARD.
And, even if a bank buys the software, it needs to pay an annual maintenance cost to the solution vendor. So, the question is whether a small bank like Vaishali DCCP with just six branches could afford such a solution? Not really.
Also, all of the 201 state and central co-operative banks weren’t prompt in submitting their half-yearly and annual financial reports to NABARD.
As per Section 29 and 30 of the Banking Regulation Act, 1949, the state and district central co-operative banks are required to prepare their balance sheets and P&L accounts and get the same audited by statutory auditors.
The banks are also required to submit their balance sheets along with the auditor’s report and its copies need to be furnished as returns to the RBI as well as NABARD within six months from the end of the financial year (that is, by September 30). However, these banks were taking about six months to complete audit.
And thus began NABARD’s IT excursion to regulate the banking operations of 201 state and district co-operative banks by helping the co-operative banking sector move to a single cloud-based core banking solution. It was also one of its biggest initiatives towards institution-building where both business and IT teams collaboratively made decisions for its success.
In order to ensure that it’s successful, NABARD’s IT team had to identify the right solution which was not only scalable but also accessible by all 6,940 branches from 16 states and three UTs. For 103 banks, the team selected one vendor while for the other 98 banks, the software is managed by another vendor. The infrastructure facilities within their branches, head office, and other service equipment such as PCs, printers, branch servers, UPS, LAN, and switches, along with regular maintenance are handled by the co-operative banks, themselves. A certain amount of language localization was also necessary. Therefore, NABARD gave banks the option between two languages: One regional and Hindi or English.
“We chose an opex model barring the branch infrastructure in order to give these state and district co-operative banks access to a cloud-based platform on a minimum monthly subscription fee,” says Gupta.
Despite maintaining an outcome-based SLA with the vendors, NABARD wanted to get rid of a few apprehensions. One of the major concerns NABARD had was warranting bandwidth availability and data connectivity at the banks. At certain remote places, where lease lines weren’t available, NABARD wanted to ensure that the vendor was able to provide either VSAT or CDMA connectivity.
The other concern was IT support. NABARD guided the banks towards obtaining specifications of infrastructure facilities such as LAN, PCs, UPS etcetera.
“Every bank would identify a local IT staff that would be trained by the vendor on simple skills such as locally running backup, and performing day-start and day-end processes among others,” says Bhatt.
As of today, NABARD has managed to bring 200 banks and 6,939 branches on the CBS platform. This includes 114 new branches which were directly opened on the CBS platform. “It was one of the biggest cloud implementations in India, when it started and continues to function even when some districts and states are in darkness,” says Bhat.
“One of the biggest benefits of the project is that it ensured data transparency, regular settlement and balancing of books of account, as well as improvement in data quality,” says Bhat. The reports are generated automatically by the systems and as a result, almost all the co-operative banks are able to submit their annual reports within 10 days of annual closing in March. Additionally, Bhat says that the shifting of deposits and remittances to commercial banks is avoided and the credits are available to beneficiaries immediately.
Instead of finding their own solution, the banks can utilize services offered by NABARD. “By adopting the CBS platform, the co-operative banks have saved huge costs, and as a result, the banks will now have more time and money for finding business in rural areas and attracting new customers,” says Gupta.
NABARD has ensured that even smaller banks that could not afford to have their own solution now have access to basic banking facilities such as Any Branch Banking, NEFT, RTG, mobile services and ATMs, thanks to CBS.
For instance, today, a DCCB in Etawah in Uttar Pradesh can provision distribution of salaries of school teachers at the same time. This has automatically improved efficiency and created customer delight. In Chattisgarh, whenever money gets credited to a farmer’s bank account from the sale of paddy, the farmer receives an SMS as soon as the money gets transferred to his account. In Uttarakhand, when a district co-operative bank’s branch was washed out in the floods, the CBS platform ensured that it did not lose a single day’s data, all the accounts were operative from the bank’s other branch next day onwards.
“We are happy that the CBS project has taken us closer to our goal of financial inclusion in rural India,” says Bhat.
One of the biggest benefits of the project is that it ensured data transparency, regular settlement and balancing of books of account, as well as improvement in data quality