Demonetization: Experiences from ground zero

While the demonetization drive has thrown up huge challenges, Indian CXOs have risen to the challenge by acting quickly. EC spoke to a few CXOs on how they they prepared their organizations once the landmark announcement was made by PM Narendra Modi.

Sanjay Narkar, Head- Technology, IDFC Bank

Demonetisation is a huge opportunity for pushing cashless, as it will be difficult to replace invalid currency in a short span of time. This is particularly true for IDFC Bank, since our aim right since inception has been to make everything cashless. As a part of the initiative, we are trying to reach people with our micro-ATM strategy. It is very convenient for people to transact. It gives almost equivalent amount of services that a normal branch would give. Through a tablet, the micro-ATM connects to our CBS, and through it, one can operate the account. The communication is online and real-time all the time. It is a tablet and a POS machine which also has a biometric authentication. It also works on swipe of a card, and it has a small printer attached to it for giving receipts. Customers have to go an agent who travels from village to village and has this micro-ATM with him.We have a BC network and official agents who work on behalf of the bank and we also have the micro-ATM, which can give all kinds of banking services including opening of an account. It is linked to the Aadhaar account of the customer. Currently, there are 1200 micro-ATMs deployed. We will be deploying an additional 3,000 micro-ATMs in the next three months. We will be increasing our point of presence through these micro-ATMs.

Behind the scenario of demonetisation

In midst of the demonetization process, all circulars come from RBI as far as operational restrictions are concerned. These are required to be configured on the system on a daily basis. Be it the limit, ATM withdrawal, cash withdrawal on the branch, cash withdrawal per day or per week — these are changes that are required to be managed at a software level. This is important as a customer can operate his account from anywhere and anytime, and this needs to be controlled as per the daily norms.

Everyday we need to change our configuration, as per norms that RBI gives every evening. Secondly, the currency management was a challenge. When the new currency started coming in the vault, we were also getting the old currency which we were giving back to RBI. Thus, we needed to track the old currency in terms of which account it came from, the account number, and which customer it came from. These details had to be captured. In the vault, we were required to have the bifurcation of the new cash and the old cash, denomination wise. There was a facility to exchange notes which was between customers and non-customers. It was required by RBI that not only should the details of the person be clear, but also how the person can be made to avoid taking advantage of the facility for the second time.

Thirdly, when the customer is giving his recording, from an IT perspective, we have to make sure that all branches are having cameras in the right places as his duplication should be avoided. That was another software control which was required to be put in place. We had to do certain software changes for the new currency and old currency denomination and the note management. Once we did the software changes, we had to manage it through configuration on a daily basis as per guidelines from RBI. Reporting is far more stringent. We are supposed to report to RBI across all branches on a daily basis.

The very first day when it was declared, we had an immediate meeting to find out the impact of the announcement. We gauged impact both from IT and operational perspective as well as from a branch management perspective. We planned and assessed the impact that requires to be managed at customer and non-customer level, as well as branch level. From an IT and CTO perspective, the impact was in terms of changing the software and making those changes available very quickly, and at the sametime reporting to the RBI. We actually started working overnight from that day. The software changes made had to be tested as well.

Adjusting to the new era

Recalibration of ATM for new currency was the biggest challenge. That was another focus area that the CTO’s office had. Since the dimensions of notes were different this was a huge task. We had to calibrate the ATM overnight in terms of cassettes to accommodate the size of the notes. And then the counting and disbursement of the note was done. All of this process had to be tested as well. In two days time which the RBI had given where ATMs would not be open to the public, we had to calibrate the ATMs. The testing itself took 2 ½ to 3 days. The most important thing was that the same night at 12 am, we had to disable the ATM, because machines could not be giving out illegal tenders.

One advantage was that the CBS we are using is BaNCS from TCS, where accounts of our customers are maintained. This is very flexible from a point of view of managing all these configurations. We had to write some codes, because the limits were different for saving and current accounts. Every night, a reconfiguration was required.

Demonetisation has created an opportunity for us, in the area of mobile apps and wallet. We were trying to educate our customers about it. We will continue to push this initiative. We are also certified under UPI. These will be our focus area in 2017, in terms of how do we socialise our apps and track people to go for cashless. We have seen an increase in the usage of wallets. The acceptability of wallet in economy is still at a nascent stage. There are lot of pay settings which may not be seen as easy to a common person. For instance, when it comes to electronic money transfer, the person who has to receive also needs to be ready. Enquiries are definitely increasing. UPI will be a very big initiative which we will pushing hard in 2017.

As quality of data network increases and mobile penetration increases, the volume of cashless transactions will increase. One cannot do away with cash. So micro-ATMs will be there. We will be expanding and increasing our point of presence through agents like micro-ATM. For asset related kind of products, our branches will be equipped to handle queries. We are also looking at AI and IoT usage for improving customer service. As a new bank, our focus is on how to make customer service more convenient and easy.


Rajiv Anand, Executive Director (Retail Banking), Axis Bank

Axis Bank has set up micro-ATMs to provide easy access of cash withdrawals and other basic banking services to employees of the airport, CISF, airline employees, travelers and patients. They can access the services by using their Aadhaar card number and fingerprint as an identity proof.

We have also partnered with merchants to allow customers to withdraw cash at POS terminals. The bank has enabled the local kirana stores, autorickshaws, vegetable and milk vendors and other small ticket size vendors to accept payment digitally through QR code. We will also leverage our contactless technology at POS terminals for faster transactions.

Axis Bank has tried to facilitate the digitization journey of Patna Municipal Corporation by deploying 100 mPOS and 7 CDMs for tax collection. The bank will deploy 100 mPOS (mobile point of sale), dedicated wireless devices that will perform the functions of a cash register and electronic point of sale terminal for both debit and credit cards. The bank will also deploy and conduct maintenance of 7 Cash Deposit Machines (CDM), self-service terminals that will empower citizens to deposit and make payment transactions by cash.

We have also tied up with payments company, PayU, to allow our merchants to accept payments directly into their bank account through the Unified Payments Interface (UPI). In Jan 2017, we plan to integrate our mobile app with UPI.

Anand Natarajan, Head of Strategy and Business Execution, Fullerton India Credit Company

The principle issue of demonetization is the immediacy aspect in terms of people not having sufficient cash to pay. From an operational aspect, we have two verticals: urban India and rural India vertical. In the urban India vertical, our collections and re-payments have not really been impacted. Our clearing of installments even in December has been in fact slightly better. We attribute that largely due to people retaining money over their bank accounts rather than being able to withdraw. We have seen a slowdown in demand in the market, simply because people are dealing with economic outcomes. The expediency in urban India has not been impacted at least in the short term. What we are seeing is people wanting to hold on to their cash and pay at the last moment. Return of cash in some manner into the system and maturing of alternate payment channels, should help in next couple of months.

In rural India, we have seen a bit of a slowdown in some parts of the country. It is beginning to improve as cash comes back into the system. However, one most important development that we have seen in rural areas is the willingness of people to use e-payments and alternate channels for payments. In a month from a base of zero, we have had 40,000 internet payment gateway transactions from rural areas. We have had 100,000 swipes for re-payments through POS machines. The adoption of digital payment ecosystem and use of a digital platform for re-payments is clearly seeing a shift in rural areas.

Some of the work that we have done over the last year has been to provide a range of complete re-payment option to our customers. We have internet banking, and we have collaborated with payment aggregators to collaborate on wallets and POS machines. Post demonetization people are using these alternate channels to make payments.

Enhancing digital capabilities

Our work around digitization and getting digital delivery have been improved a lot. We have a variety of options for our customers. We have a fully adaptive website that easily allows customers to make payments. We have spent a fair amount of effort around implementing our collection infrastructure. We have improved the efficiency with which our collectors reach out to our customer in order to collect the overdue amount. We have a mobile app that sequences all field collections through geo-mapping exercise. It also provides the collector with Google maps. For example, it provides the best logistical route. It provides cash collection and POS swipe collection in some of our geographies, along with immediate electronic confirmation of collection. It significantly improves delinquent customer collectibility: both cash and non-cash, and we have seen migration to non-cash in the post demonetization period.

All channels that a customer can potentially use or wants to use is available for the customer. Over and above having infrastructure, it is around publishing the matter in a way that is relevant to the customer which makes it easier for the customer to utilize different channels. We have SMS, voice messages, emails that encourages them to use these channels. We also continue to invest in analytics. What we have done over the last year, is build information and intelligence — both through traditional and non-traditional channels.

A big chunk to be able to participate in the market and our ability to lend is due to the analytics capability that we have built. The analytics team has built a whole range of acquisition and behavioral capability in understanding of the customer. We have fully developed an internal analytics team. In the rural area, our focus is in actually getting more unstructured data. There are 1.5 million customers in the rural area. Every time our person meets someone there, some kind of intelligence or data is gathered. We have now built a database of a variety of information. It will help us in giving much more nuanced and focused products, and identifying specific needs. We are also using our data to cross-sell some of our products. We can also take portfolio action quicker as it enables us to identify vulnerable segments before market forces do.

In terms of origination, we have an entire infrastructure which enables customers to reach us through various channels. We now have a tab-based platform, where our representatives can reach out to customers and can do income verification instantaneously through income documents, KYC verification, IRIS scan, income certificate through API integration whether it be bureau or Aadhaar or IRIS or through PAN for PAN verification. The entire process of scoring and approval can be done almost instantaneously. We have a customer service capability that is available on IVR, which is personalized. We have internet and mobility based self-service capability as well. All of this is backed by the analytics capability.

The primary focus in 2017 will be to leverage on our investments to make it more relevant. Our game will be to make borrowing more easier and relevant and need-based.

Swapnil Jamsandekar, Associate VP, e-Banking, Cosmos Bank

With the demonetization drive, our IT team had to jump in to make the ATM configuration changes. There were circulars related to restrictions of withdrawal for customers. Those changes had to be put into the system and we had to make sure that everyone complied to those restrictions. The IT team was involved in making those changes and making them live. We had to put restrictions into our Finacle Core Banking system, as well as for POS, debit card systems and ATMs.

We are working on biometric enabled systems, and have already started putting our ATMs which are biometric enabled. Only the integration needs to be done with NPCI, which would be done in the next two months. The topmost priority for the coming year would be getting ATMs enabled with Aadhaar and biometrics. UPI would also be another priority for the bank.

We are tying up with mobile application developers to build applications as a different kind of mindset is required for application development using mobile. We are trying to make the applications AI enabled and we plan to use chatbots as well. Use cases for chatbots would be more around regular customer queries, for example, checking balance etc. Every application we will be developing will be PA DSS and PCI DSS compliant. That will be a measure to boost security.

We are also looking at how internet banking can be used on mobile banking applications. A customer should have same kind of options on mobile banking that he gets on internet banking. Our focus would be to make internet banking website mobile friendly. For internal employees we are trying to make ethical training from security as well as a sales development perspective. It will be driven through e-learning initiatives.

Suresh Shanmugham, Head-BITS, Mahindra & Mahindra Financial Services

Demonetization will be a big catalyst for encouraging all our stakeholders to go cashless. Once the initiative was announced by the government, we had to ensure that our machines could identify the new ` 2000 notes. This is important as we are extremely active in the rural economy, and most of our transactions are in cash. We are encouraging all our stakeholders to go increasingly digital as it can lead to better efficiencies and lead to a win-win situation for everyone. We are encouraging usage of eKYC and Aadhaar, and are educating our customers that usage of digital mediums can lead to faster approval of loans as the quality of data can lead to better decision making.

– As told to Jasmine Desai

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