Chennai-based Indian Bank plans to set up an operations support subsidiary to provide value-added services while optimising costs, especially for operations beyond large cities.
Two large public sector banks – State Bank of India and Bank of Baroda — have already formed such units for servicing customers in rural and semi-urban areas.
According to Indian Bank’s Request for Proposal (RFP) to empanel manpower consultants for the subsidiary, the bank has received in-principle approval from the Reserve Bank of India (RBI).
‘The proposed subsidiary would be providing services related to Business Correspondent Activities, Business Operations Activities, Customer Service and Grievance Handling, Call Centre operations and Support functions pertaining to IT, Vendor Management,’ according to the RFP which has been reviewed by Business Standard.
“Activities to be undertaken by the proposed wholly-owned subsidiary will be in compliance with the guidelines issued by the RBI from time to time,” the RFP said.
Indian Bank did not respond to queries sent by Business Standard about the plans for the proposed subsidiary.
Indian Bank has over 20,000 touchpoints that include about 5,798 domestic branches and 10,805 Business Correspondents. Its total business – deposits plus advances – stood at about Rs 11.33 trillion at the end of September 2023.
According to a senior public sector bank executive, many of the public sector banks (PSBs) are using the subsidiary route for providing support, especially to branch networks in semi-urban and rural areas, keeping in mind twin objectives — scaling up operations and cost optimisation. This helps to take on board local talent and enhance last-mile reach for financial inclusion as well as key asset quality function like recoveries.
In July 2022, the country’s largest lender, SBI, set up a subsidiary, State Bank Operations Support Services Private Limited (SBOSS), for providing operations support services at branches in Rural and Semi-Urban (RUSU) areas of the country. SBOSS, which is headquartered in Delhi, will also work as a Corporate Business Correspondent of SBI. SBOSS has deployed Feet-On-Street (FOS) with appropriate technology support for doorstep services to customers at a competitive cost. At present, it is providing support to more than 5,000 RUSU branches across 17 Circles of the Bank, according to SBI’s annual report for FY23.
Mumbai-based Bank of Baroda has established Baroda Global Shared Services, a wholly-owned subsidiary, to integrate service functions into a single entity. This was intended to reduce service duplication and business unit silos, creating synergies and economies of scale and substantial cost saving because of centralisation.
Subsequent automation of various processes has freed the workforce at branches from drudgery and provided an opportunity to focus on core activities. This set-up has enabled BoB to focus more on sales and service functions, according to the bank’s annual report for FY23.
First Published: Jan 08 2024 | 6:30 PM IST