It is a hugely ambitious and exciting target: to empower women across all of India by boosting financial inclusion. Usha Ananthasubramaniam, chairman and managing director of India’s Bharatiya Mahila Bank tells Douglas Blakey that the start-up bank, only launched in November 2013, has got off to a flying start

By any standard metrics for banking start-ups, Bharatiya Mahila Bank (BMB) is re-writing history.
India’s first bank for women – the country’s first new state owned bank for over 60 years – was conceived in a matter of months.

Increasing women’s financial inclusion in India has been a government objective for many years and for good reason: the statistics make for depressing reading.

Just 26% of women in India have an account with a formal financial institution, compared with 46% of men.

The need to be seen to do something to kick-start financial inclusion was recognised by Indian Finance Minister Palaniappan Chidambaram.

When Chidambaram presented his budget to the Indian Parliament on 28 February, he committed government funds – almost $200m – to setting up BMB.

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Chidambaram told Parliament: "The bank will employ women, lend mostly to women and address gender-related issues, empowerment and financial inclusion".

Establishing a women’s bank has been tried elsewhere.

As long ago as 1989, Pakistan’s Prime Minister Benazir Bhutto oversaw the creation of a financial institution to boost the socio-economic empowerment of women: the result was the launch of First Women Bank.

On a similar theme, 2009 witnessed the launch of Tanzania Women’s Bank PLC. The Indian launch was given the kick-start of appointing one of the country’s leading bankers to lead what was become BMB.

Usha Ananthasubramaniam, who had served Punjab National Bank and before that, Bank of Baroda in a number of senior roles, was appointed chairman and managing director of BMB.

She tells RBI: "The launch of the bank is a huge challenge and been a cause for huge excitement. Here is a bank created from scratch and created in the shortest possible time."

Following the budget on 28 February, Ananthasubramaniam met with a number of colleagues on 8 March to kick off planning to establish the bank.

"I remember the date very clearly as it was International Women’s Day.

"A committee was formed comprising a team of six people, of whom I was one, to submit a report to the Finance Minister by a deadline of 30 April."

This had to incorporate the business model of the bank and set out plans for the bank’s IT strategy as well as set growth targets.

By the end of May, the bank’s management team was formed and Ananthasubramaniam was asked to head the project.

"The bank’s licence application was submitted on 20 September to the Reserve Bank and less than two months later the first branch opened."

The date of the launch selected was not just any date in the calendar.

"It was 19 November: the 96th birthday of the late Indian Premier Indira Gandhi. The build up was exciting and there was high tension but we enjoyed it," explains Ananthasubramaniam.

She is well versed and eloquent in promoting the arguments in favour of the new bank and, for India at least, its unique business model.

"There is a crying need for such a bank. The most under-utilised economic asset of India is the country’s women. We need to empower women and use them as an economic asset.

"The growth potential is mind-boggling. Indian women do save but their savings remain in the kitchen.

"We have too many women who have not come into the formal banking channels. If we can make women more confident and make them good economic assets for the country, we will promote savings and financial literacy."

The bank kicked off its marketing push supported by the powerful tagline ‘Empowering women empowering India’.

From day one, the bank opened offering a full range of products.

"We are working on products that will attract women, help empower women, focus on women and help them to explore their own entrepreneurial skills."

On the question of segmentation, the bank chairman is more inclusive.

"We cater to the entire spectrum of customers: women, men, company accounts. But for loans, we will look loan predominantly to women.

"For every INR100 ($1.60) that I have to lend, I would look to lend INR70 to women and INR30 to other customers."

As regards deposits, the bank is keen to attract deposits from both men and women.

"Both are welcomed into our branches. As for recruitment, we want to be staffed predominantly by women and the current split is about 70% women."

The eight-strong board of directors is however 100% female.

Product strategy

The bank has kicked off its marketing efforts by promoting attractive rates of interest for its savings accounts.

For balances up to INR100,000 it offers a rate of 4.5% with 5% on offer for balances in excess of that limit.

BMB has also rolled out innovative products to capture the attention of women such as loans to start home-based catering businesses; there are also loans for education, crèche loans and kitchen loans.

In the Indian banking sector, a key measure of the country’s retail banking sector success is the CASA (current account and savings account) ratio and BMB is no exception.

"We want to have as good a CASA ratio as possible. Over a period of time the sort of target we are looking at is maintaining a CASA ratio of at least 40%."

The New Year kicked off with BMB enhancing its product line-up by partnering with the cards unit of State Bank of India (SBI): the first instance of a public sector bank promoting a white-label card issued by SBI Cards.

SBI will issue and process the credit cards as white-label cards, allowing BMB to brand the cards as their own without having to invest in infrastructure.

Branch expansion

At launch, the bank opened seven branches; that quickly became nine while the short term target is to have a branch presence in a further 16 Indian states by the end of March.

Launch plans also included a highly ambitious target of setting up 127 ATMs by the end of March while total customer account numbers were targeted at around 33,000.

The majority of the first wave of branches are being located in the state capitals; all capital cities will be covered as the bank establishes a pan-India presence.

The next stage of the bank’s branch growth will encompass opening outlets in tier 2 and tier 3 centres as well as growing a network in unbanked rural centres.

Usha

Usha Ananthasubramaniam, chairman and managing director of India’s Bharatiya Mahila Bank

In the year to March 2015, BMB plans to open an additional 55 outlets.

But as Ananthasubramaniam recognises, even hitting 100 and then 200 branches will mean that the bank will be serving only a tiny percentage of the country’s women in person.

The current medium term target is to grow its branch presence to around 700 by 2020-2021.

From fiscal 2015, the aim is to fulfil its obligation of meeting 25% of its branches in rural and unbanked areas.

"We will have to be innovative to grow our presence but we will do that by optimising the use of technology and by way of partnerships," she says.

So BMB will look to team up with NGOs and corporates as it ramps up its efforts to attract salary accounts.

By 2020, if all goes to plan, the target is to "achieve a business mix -total deposit and advances – of INR600bn."

Another long term plan flagged up by the finance minister is scope for the government reducing its 100% stake in BMB by way of a public listing.

IT challenges, opportunities

One of the key challenges for any bank start-up is to get its IT strategy right: BMB opted for the outsource model along the lines of the model adopted by UK start-up Metro Bank.

Unlike Metro Bank, BMB did not have the luxury of time between licence application being submitted and the bank opening for business.

FIS capped a successful 2013 (see box out) by winning a multi-year deal to provide BMB’s core banking platform, eBanking, debit card servicing, trade finance and payments services, data centre management, branch technology and ATM infrastructure management.

Ananthasubramanian says: "FIS was able to present us with a high-quality technology solution with a model that could be operationalised in the shortest time frame and is easily scalable for our planned growth."

She adds: "There was a thorough technical evaluation and we had a number of responses to our RFP. The proposals were considered by a committee of technical experts. More than anything, the timelines were so stringent but there was also, naturally, a commercial part to what was a clear and transparent process."

"This project was a mammoth effort," Ramaswamy Venkatachalam, general manager, FIS India, tells RBI.

"We are deploying all of BMB’s technology forum. Every piece of technology and all the back office services are being offered by FIS.

"I believe that we demonstrated to BMB that we are more than just a software company; we deliver the ability to go beyond software. And crucially, we helped the bank to come up to speed in record time and launch as planned, on schedule."

 

BMB caps successful 2013 for FIS

Indian-headquartered banking IT vendors abound – firms such as Infosys, TCS, Nucleus and Polaris spring to mind – so it was something of a feather in the cap for the US’ FIS to become BMB’s banking IT partner.

Indeed the BMB deal was arguably one of the highlights for what proved to be a successful 2013 for FIS.

The deal offers scope for FIS to grow its Indian business; with the likelihood of the Indian regulator granting more banking licences, FIS’ successful partnership with BMB will leave it well placed to win additional business in the country.

For fiscal 2013, revenue at FIS international business unit grew by 11% year-on-year to $1.3bn.
Group wide, FIS posted record revenue of $6.1bn and adjusted EBITDA of $1.8bn. Organic revenue growth of 5% came in at the high end of FIS’ guidance range. This marked the firm’s third consecutive year of delivering organic growth of 5%; earnings per share grew by 13% to $2.83.

Among other 2013 highlights:

– FIS finalised its contract with UK-based Sainsbury Bank, solidifying a 10-year agreement for a fully outsourced FIS solution;
– FIS successfully completed the deployment of a credit card management solution for Banco Popular in the Dominican Republic;
– Core platform enhancements included an expanded services relationship for solution integration for Capital One
– FIS implemented more than 280 clients to its mobile platform in 2013. It ended the year with a backlog of more than 150 additional institutions due to be implemented in the first half of 2014. Total FIS mobile clients now total 1,300 financial institutions, up 22% year-on-year.