Technology for better customer service - Vepa Kamesam

By C. R. L. Narasimhan

THIRUVANANTHAPURAM, MAY 16. Mr. Vepa Kamesam, Managing Director of State Bank of Travancore since August 1998, will shortly take over as one of the two managing directors of State Bank of India in Mumbai. A career SBI officer with a strong background in international banking and technology aspects of modern banking, Mr. Kamesam explains how, during his 22 month tenure at SBT, he has been leading his team towards harnessing technology for better customer service.

Technology, more than for survival

A major thrust area, technology, has been harnessed by SBT to improve its house-keeping (accounting) areas and more spectacularly in upgrading its customer service. Elsewhere too in the entire financial sector, as indeed anywhere else, technology absorption is the key task. For the government owned commercial banks in India, technology application might be the only way to reduce their high transaction costs. However, it has not been an easy process. Apart from the onerous task of convincing the unions, banks and their managements are facing a few other all too familiar problems connected with technology application.

As Mr. Kamesam says about his bank's experience, the nuances of computer technology are better appreciated by the younger staff members. The middle-level managers - who are often likely to be middle-aged as well - are unable to cope with the change that technology brings with it. A related problem concerns the specialist officers who have either qualified in or through practice acquired computer related skills.

Since in these early days of financial sector computerisation those specialists will command a premium there will be a problem of frequent turnover, with trained staff moving towards greener pastures in the financial sector and even outside. The way out, according to Mr. Kamesam, is to build a base of skilled personnel and recruit from outside (the bank) software specialists. Once that happens it will be possible to manage the bank's key technology goals without being unduly concerned over the odd person or two leaving.

The SBI group as a whole has served as a training ground for the foreign banks and the new generation private sector banks. Throughout the Seventies and the Eighties there was a migration of trained staff from SBI and its associates. ``The SBI group has had to look at the people remaining, train them and motivate them,'' said Mr. Kamesam. Being a public sector bank however has its own limitations, he added.

It is however possible to view the specialised areas (such as technology departments) as separate profit centres. SBT has also made strides in developing its own software. Reverting to his SBT experience, Mr. Kamesam says that the software packages developed in-house can be profitably sold to other banks. ``I am willing to provide and maintain a server here for other banks to store their data,'' he said. ``They can store whatever data they want in top secrecy. We will not come to know what they are. But they can leverage on the software developed by us.''

Altogether 120 of its branches have been computerised and 52 of them are on the software developed in house. By 2001 all the branches will use the bank's own software, thereby ensuring compatibility at all levels. The in-house software is a key ingredient and effectively complements the bank's web strategy in servicing its large NRI clientele.

The bank's Internet banking operated through its website http://online.sbt.co.in has been found to be extremely useful by its NRI clients for updating their accounts. For most overseas account holders a serious handicap in dealing with banks in India is not being able to receive statements of account /credit/debit advices on time. Through the service provided by SBT, they can get their accounts updated on line. Since SBT's NRI clientele consists of the large Malayali diaspora in the Gulf, the online service has been particularly well received.

Profitability, the end result

The bank's currently sagging quotation ought to get buoyed up by the performance. During 1997-98, SBT made Rs. 63 crore net profit. Next year it came down to Rs. 43.20 crores. For fiscal 1999-2000 the results are expected to be much better, he said. ``'We have been weighed down by the NPAs and the high cost of deposits. A substantial portion of the high cost deposits has been replaced with low cost ones.'' Last year the deposit growth in SBT was good: the budget of Rs. 1,500 crores was easily achieved, almost 45 to 50 per cent having come from the NRI segment. On the credit side the bank disbursed Rs. 750 crores last year. This should give it a steady income. In addition substantial miscellaneous income will accrue from foreign exchange and investment operations. One of its unique services - offering demand drafts on tap (through 50 dedicated outlets) - has been well received by traders and others.

NPA - the bugbear

NPAs have been a serious problem. In 1997-98, the gross NPA level was almost 20 per cent. This came down to 18 per cent the next year. For 1990-2000 the level is 14.5 per cent. Net NPAs will be less than 9 per cent. Through a conscious NPA reduction policy compromises are encouraged. Committees to approve compromises have been formed at all levels. We have been able to make good recoveries. At the start of last year as per the balance sheet the NPA was Rs. 886 crores.

It peaked to Rs. 936 crores during the year. But by the end of the year it is expected to come down to Rs. 810 crores indicating a good recovery. Special asset recovery branches have been opened in Chennai and Delhi with a third one coming up soon at Ernakulam. The Kerala Government has been helpful. Through the ''Nithi'' melas repayment/compromises are encouraged for the small borrowers.

The cost of holding NPAs has been disseminated to every one in the SBT network, to messenger, clerk... For every Rs. 100 crores of NPAs the holding cost is almost 9 per cent.You also need a capital adequacy of 9 per cent. To these must be added the income foregone by the bank.

Taking into account the prime lending rate of SBT last year at 12 per cent, the bank loses a whopping 21 per cent. Only by spreading this message - the importance of reducing NPAs - can there be some salvation for the bank. Having achieved a respectable Rs. 120 crores in NPAs reduction, SBT is confident of reducing it further by Rs. 200 crores.

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