South Indian Bank is getting ready to launch its digital banking unit and is looking to collaborate with other fintech aggregators.

South Indian Bank CEO Murali Ramakrishnan discussed the bank’s digital aspirations for other areas, as well as other topics, in an interview with Inc42. Ramakrishnan also discussed the inauguration of the bank’s first digital banking business.

The bank has been concentrating its efforts on its digital projects, and it is currently exploring the possibility of forming partnerships with fintech aggregators in order to increase the scope of these initiatives. Ramakrishnan said

According to the CEO, the bank is employing data science in order to underwrite risks and is holding discussions with NBFCs in order to engage in co-lending via a digital platform.

As part of the government’s plan to launch 75 digital banking units by August 15, the private lender South Indian Bank is in the process of setting up its first digital banking unit (DBU) in the city of Thrissur in the state of Kerala, according to the bank’s managing director and chief executive officer, Murali Ramakrishnan.

“Thrissur has been designated as our location for the development of the DBU,” the official said. We are making good headway there,” he told Inc42 in an exclusive interview in which he outlined how the bank is charting out its digital plans in retail loans, the small and medium enterprises (SME) segment, credit card relationships, and co-lending, among other areas of lending. “We are progressing well there.”

The idea of banks that operate solely online was presented for the first time in the Budget 2022 by the Minister of Finance, Nirmala Sitharaman. She went on to say that there will be 75 digital-only divisions of banks and non-banking financing firms (NBFCs) established up in 75 different districts all throughout the nation.

The DBUs are a step in the right direction for the fintech ecosystem since it is anticipated that they would speed up the distribution of financial goods and increase small company owners’ access to financing.

There is a Potential for Additional DBUs Basis. How the First One Is Coming Along
DBUs are designed to make it easier for companies to conduct their daily operations. They also make it possible for clients to have a satisfying experience when doing transactions in a digital environment. Because digital is the way of the future, it is a fantastic idea to work toward expanding access to financial services.

Ramakrishnan noted that even after so many years of operations by banks and NBFCs, penetration in the rural regions remains low. Despite this, Ramakrishnan stated that the banking industry is heading toward digitalisation. When it comes to finance, digital banking’s penetration will increase proportionately with the amount of effort put into bringing it to Tier-II, Tier-III, and Tier-IV towns, among other places.

“I believe that people are gradually becoming more accustomed to the idea that they may take advantage of services through the means of mobile phones. Therefore, I believe that DBU as a concept is fantastic, especially with the goal of encouraging customers to engage in increasingly mobile and digital activities.

Even before the DBU was established, the South Indian Bank (SIB) decided to open two totally digital branches: one in Bengaluru, which is currently operational, and the other one in Ernakulam, which is located in the state of Kerala.

“As a general idea, it has been received quite favourably. I have no doubt that this will develop into a more significant issue in the future. “We will absolutely go in for more and more of such units,” he added, “based on how the first DBU turns out and what sort of experiences we are collecting from there, and if the experiment is actually worthy of repeating.”

Collaborations with other fintech companies in order to scale up operations
During the course of the past several years, SIB has prioritised digital projects while also making investments in various forms of technology. “We are unquestionably building skills in-house in a variety of domains. According to Ramakrishnan, “We are also looking at the possibility of having fintech aggregators, with whom we may work in order to scale up.”

SIB has a strong network presence in the rural areas of southern India, particularly in the states of Tamil Nadu and Kerala. It has a presence in all market segments, from large corporations to small and medium-sized businesses. Gold loans are just one component of its retail business, which also includes house loans, loans secured against property (also known as LAPs), personal loans, and credit cards.

The bank is putting more of its attention on digital operations, and as a result, it has begun employing credit models, which is essentially the same thing as using data science, for underwriting. We have numerous models for house loans, LAPs, and personal loans that we have devised. In order to do underwriting, we make use of credit models. In a similar manner, we will be utilising a platform developed by Nucleus Software Exports for onboarding retail customer cases. To put it simply, we’re going to use the Nucleus platform for onboarding the entirety of the loan process, starting from sourcing and ending with collection and recovery.

This project is now in the process of being worked on, and the bank intends to commission it within the next two to three months.

It provides us with a great deal of versatility in terms of bringing everything and carrying out everything digitally. Everything from customer relationship management to loan origination systems to loan processing to onboarding using fraud (detection) techniques and credit underwriting techniques can be integrated into the platform through application programming interfaces (APIs), as Ramakrishnan explained. This allows for digital interaction on the retail side of the business.

The Process of Digitizing Credit Card Businesses
In the area of credit card partnerships, SIB has formed a partnership with the fintech business FPL Technologies. The fulfilment process is carried out entirely via mobile devices. The FPL app is used to find new consumers and is operated by the company. The CIBIL cleaning is performed on each and every application for a credit card. After determining whether or not a consumer is qualified for a credit card, the lender will process their application based on the level of risk they are willing to take.

“We have observed a healthy increase in activity. We got started on this at some point in September of the previous year. And even as we speak, there have already been very close to 60,000 applications for credit cards submitted. “Everything having to do with the fulfilment of this takes place digitally,” Ramakrishnan explained.

Expanding Digital Footprint
When it comes to small and medium-sized enterprises (SMEs), the bank has decided to implement a lending model that was developed with McKinsey’s assistance. A methodology has been devised by the lender that will be used for underwriting small and medium-sized businesses on the lower end.

The average ticket size at the bank is approximately INR 8-9 Cr for SMEs with turnover between INR 100 Cr and INR 250 Cr, while the lower end of SMEs, those with turnover up to INR 100 Cr, have an average ticket size of approximately INR 1 crore. The higher end of SMEs have a turnover between INR 100 Cr and INR 250 Cr.

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