Tripathi talks about the hindrances in the growth of these banks and how his firm can act as an enabler to them.
Small-sized banks often struggle to grow with their basic offerings. They depend extensively on technology to reduce their operational cost. In a discussion with Entrepreneur, Hanuman Tripathi, Founder and Group MD, Infrasoft Technologies Ltd, a specialist software solutions provider for banks, talks about the hindrances in the growth of these banks and how his firm can act as an enabler to them.
Tell us about Infrasoft Technologies.
Founded in 1995, Infrasoft Technologies is a specialist financial software solutions provider with the current presence in 32 countries. We offer products and services to banks. Products are in the areas of retail banking offering enterprise banking solutions that look after core banking operations for commercial banks and payments solutions, including mobile banking solution, ATM and Electronic Funds Transfer switch solutions, which are very critical today.
We also offer anti-money laundering solutions that look at anti-fraud measures and also compliance requirements in various countries in terms of money laundering prevention. Also, the enterprise banking solution, offered for core banking, is tweaked to make it applicable for micro finance organisations that have very specific requirements on lending. We are funded by Baring Private Equity.
Where do small businesses lack in terms of growing their business?
There are three areas of critical focus for small businesses – market expansion, branding and building a very strong compliance and governance fabric in the organisation. A small business needs to reinvest its profits to expand through sales, so unless they build channels, alliances, go into multiple geographies, do promotional expenditure, which small businesses usually avoid, the growth will be difficult.
They don’t invest in branding early because they believe only large organisations can afford that. However, the way small businesses conduct themselves has to be portrayed, and this is a good brand creation. For this, they have to put value systems in the business, keep customer services and HR track record to show.
Also, most of them don’t look at process certifications, audit certifications, taxation seriously, and hence their operations are not transparent. Because of this, they are not able to attract better people and investment. So they have to put a governance fabric around themselves. This is a mindset problem and not a money problem. If small businesses take care of these aspects, they will not remain small for a long time.
Many small businesses argue that they will not earn profit if they don’t evade taxes. How logical is that?
If small businesses evade taxes, they will only take that amount of evaded money. However, if they pay taxes, they will be able to get 10-20 times of the valuation of their profits depending upon the industry they are operating in. So for start-ups, which want to build a long-term business and attract bank loans or private investments or even go for IPO, having a better balance sheet showing profits, which are taxed, will be beneficial.
How are your solutions helping small cooperative banks to achieve growth?
Small cooperative banks always argue that they cannot provide services similar to large nationalised banks. However, through our cheap enterprise banking solutions – Omni Enterprise Solutions – we ensured that these cooperative banks are able to offer services like that of large banks’. The cooperative banks, which are using our solution, have grown 4-10 times in the last five years.
How do you help small banks with their issue of NPAs and revenue leakages?
Small banks are riddled with the issue of NPAs or revenue leakages. We have ensured that their risk management through our software services is so comprehensive that the culture of controlling rising NPAs and revenue leakages is automatically built in the system. This strengthened their profitability and compliance process to the extent that the Reserve Bank of India has now started treating these banks with respect.
Around seven year back, Mumbai-based small banks like Abhyudaya Co-operative Bank and North Kanara GSB Cooperative Bank were having 10-15 branches with under Rs 1000-crore business mix. Today, these banks are touching Rs 10,000-crore business and expanded to 100-branch network in different states.
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