IT enables Bank of Rajasthan to get out of the red

A change in the top management saw Bank of Rajasthan, which had been suffering losses for more than four consecutive years, finally get out of the red. The same management realised the importance of IT to make the bank globally competitive. Stanley Glancy has the details

According to Vinod Juneja, Bank of Rajasthan is the only private sector bank in India to have skipped two dividends to invest in IT

What would a bank do if after a hiatus of four years it finally makes enough profits to be able to pay dividends to its stockholders? Pay up, of course—what better way to make customers happy and increase confidence in the bank. But Jaipur-headquartered Bank of Rajasthan (BoR) decided otherwise. The private sector bank actually skipped two dividends to invest in information technology.

And if Bank of Rajasthan executive director Vinod Juneja is to be believed it is the only private sector bank in India to do so. The bank has till date made an investment of more than Rs 20 crore in scaling its operations to current levels.

Losses prompt need for IT
BoR had accumulated losses amounting to Rs 157 crore by the year 1999. This was when chairman P K Tayal realised that to survive in the highly competitive banking arena it was imperative to invest in IT. The bank had a few legacy systems in place but this couldn’t support the customers’ ever-increasing business needs. Also, there was no connectivity between the more than 400 BoR branches spread across the country. Says Juneja, “Earlier it was a nightmare handling back-office operations. Not only was it time-consuming, but we couldn’t provide the customer with any value-added services.” Employees used to dread Fridays, when balances of all current accounts were taken. Even a Rs 100 difference in the tally usually consumed up to two days before the problem could be sorted out.

End-to-end
BoR has deployed Infosys’ Finacle as its core banking solution. The bank chose an open standards international platform for driving its ATM and other retail delivery channels. The bank has already connected more than 100 branches for anytime banking, and plans to connect another 200 by the end of 2004. BoR has also entered into an agreement with the Mangalore-based Corporation Bank and UTI Bank for sharing of ATM networks. This partnership is expected to reduce the cost of transactions and investment in information technology initiatives for all the banks concerned.

The IST switching technology has been provided by Oasis Technology, a global e-payment solution provider. The switch, says Juneja, is not only cost-effective, but is advantageous when compared to proprietary switching solutions, it due to the support provided to multiple protocols, different vendors and multiple operating systems. HMA Starware, Oasis’ implementation partner for the SAARC region, will deploy the solution across all the branches of BoR. Currently all the branches are connected to a centralised data centre at Jaipur. The centre is equipped with IBM servers and Cisco networking products. According to Juneja, this will provide customers a wider reach with respect to accessibility to cash withdrawal facilities.

BoR has also implemented Onward Novell’s NetServices Software, including Novell’s directory services product—edirectory and NetWare 5.1, messaging solution Novell Groupwise, Novell’s Internet security management suite Novell BorderManager, and Novell’s desktop management solution Novell ZEN Works (Zero Effort Networks). The bank has also invested in a 2 Mbps point-to-point leased line and 64 Kbps Internet leased line. BoR expects to reduce communication costs, increase employee productivity, and ensure data availability through this deployment.

For managing its treasury BoR has deployed integrated treasury management system (ITMS), a back-office solution developed by Synergy-Login for integrating local currency operations with foreign exchange dealings. ITMS is an integrated front-office, middle-office and back-office system. Its processes deal in money market instruments, securities and foreign exchange end-to-end. Also, in keeping with current trends, the bank has deployed a negotiated dealing system (NDS), a solution developed by TCS for online transactions. The NDS of the RBI is a screen-based mechanism for trading in government securities. NDS is expected to eliminate many manual systems involved in the phone-based dealing system practised by dealers, financial institutions and banks like BoR.

The bank has also developed in-house software for areas like term deposit receipt (TDR), general ledger and profit and loss (GLPL), and also a composite banking system (CBS).

25 of the bank’s branches offer demat services through national depository services and BSE. The technology used is VSAT. But, according to Juneja, “The process is slow and not at all customer friendly.” The bank is currently looking at an alternative to this technology.

All profit for no loss
The bank claims that its current account balance has increased because of anywhere banking. Also, the bank has seen a slew of current accounts being opened over the past year. Says Juneja, “With IT we have got extended hours to serve the customer and invest more resources into marketing. We can also offer customers more time for conducting transactions. This has proved advantageous both for the bank as well as the customers.” The strategy definitely seems to have paid off. Today, the bank boasts of a net worth exceeding Rs 233 crore and a business to the tune of Rs 7000 crore. Juneja expects the bank to see a return on its investments in IT in a short span of three years.

BoR is very bullish on industries like cotton, steel, soyabean, edible oil rich seeds and other such markets. The bank aims to provide these disparate industries with the ability to conduct online trading instead of issuing DDs and cheques. The priority for the bank is to automate all its branches by 2005.

BoR is also in the process of setting up a disaster recovery site in India’s IT capital, Bangalore.

But it doesn’t plan to stop here. The bank is planning on launching credit card services for the small-scale industries sector. This is expected to enable the bank with speedy disbursement of credit to this sector. The bank is also planning to offer services like Internet banking, e-banking and mobile banking in the near future.