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8/4/2019 Rupye Paise Prabandhak NMIMS
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Transformation
Series:2011
2010
Y
ESBANK
NMIMS MBA CORE 2009-11
Team Name
Rupye Paise Prabandhak
SVKM's, Narsee Monjee Institute of Management Studies, Vile Parle(W), Mumbai - 400 056, India
Aditya S Prakash
FTMBA Core, NMIMS
9833692253
aditya.s.prakash@gmail.com
Rohit Singh
FTMBA Core, NMIMS
9987311107
rohitkumar.singh7885@gmail.com
Shraddha Kamat
FTMBA Core, NMIMS
9222167824
shraddhakamat1984@gmail.com
mailto:aditya.s.prakash@gmail.commailto:aditya.s.prakash@gmail.commailto:rohitkumar.singh7885@gmail.commailto:rohitkumar.singh7885@gmail.commailto:shraddhakamat1984@gmail.commailto:shraddhakamat1984@gmail.commailto:shraddhakamat1984@gmail.commailto:rohitkumar.singh7885@gmail.commailto:aditya.s.prakash@gmail.com8/4/2019 Rupye Paise Prabandhak NMIMS
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EXECUTIVE SUMMARY
It is suggested that PBoIs selection of region for its pilot project should be based on two factors:
degree of financial exclusion (quantified through CASA accounts per 100 persons) and cost of
transaction. Analysis of above factors has led to Rajasthan being chosen as the ideal region for
the rollout strategy and that mobile technology is used so as to minimize the cost. The mobile
technology must use open standards and architectures to the extent possible. The essential
feature in infrastructure to make this option viable should include low cost repository of
accounts, a payments interface and PoS (Point of sale) devices operated by bank.
The credit & non-credit products are suggested taking into consideration the need for money
among rural & semi-urban people, risk profile of bank and returns that can be achieved through
those products. These suggested products can bring in `30 Cr of income in FY 2011-12 with
further profits in subsequent years because of increase in number of branches of PBoI.
Help of civil societies, religious association & committees (RACs) and panchayats along with
word-of-mouth publicity are the major marketing strategies that PBoI should use to enhance &
retain its customer base.
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SITUATION ANALYSIS
PBoI has emerged as the #1 Mid Sized Bank in the country. PBoI has since inception
invested in innovative business processes and technology platforms and has many firsts
to its credit. PBoI wants to make a rollout strategy for financial inclusion where it can
make use of its strategic capabilities. It needs to develop innovative & profitable means
to serve rural and semi-urban segment through low cost business models.
The roll out strategy should comprise of pilot location, product offering in terms of
credit & non-credit products and marketing strategy. This entire roll out strategy and
design of products should ensure that PBoI risk profile is not significantly affected.
ROLL-OUT OF THE STRATEGY
1. Selection of Region:Factors to be considered
Number of CASA accounts per 100 person (Proxy for penetration of financial inclusion)
Number of savings account per 100 persons and number of credit accounts per 100
persons (for rural as well as urban areas) are found to be lowest for north eastern,
eastern and western region1 . Thus, opportunities of financial inclusion in these
regions are high as compared to other regions.
Costs of Transactions
A look at the comparative costs of provision of services through various channels
shows that removing the physical presence of the bank is by far the cheapest method
of transacting (Graph: 1). So even banking business in general will profit through
technological advances and convergence with digital systems of payment. Therefore,
we will select those regions where mobile penetration is high (Graph: 2).
1Source: Rakesh Mohan, RBI, IDBI Gilts L
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Selected Region - Rajasthan
Graph 2: Circle-wise Mobile Penetration2
Mobile networking is better in this region as compared to other states
Southern states have relatively better financial inclusion therefore scope of
opportunity is less
2http://www.icra.in/Files/Articles/2009-March-TelecomInfra.pdf
0
0.5
1
1.5
Branch
Callcentre
ATM
InternetU
S$
BAI ICICISource: CGAP Focus Note 32, 2006
Rajasthan is
the most
promising
state with
both
opportunity
and
sufficient
mobile
penetration.
Southern
states have
low scope
of growth
opportunity
Graph 1: Costs of Transaction
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Rajasthan is near to NCR which can very well act as its infrastructure backup
Suggestion for Strategic Advances
To set the future of PBoI Ltd. in micro-finance, as per RBI guidelines, the amount of
advance to an individual will not be greater than ` 50,000. The rate of interest to be
charged would be not less than the open interest rate of 2% p.m.3, as people in the
rural areas need very small amount loans (say ` 1000) for very small duration, say
about 15-30 days, very frequently. The formalities involved for the issuance of such
very short term loans should be minimal.
The micro loan process should be fast and simple.
Daily collection of interest (`50-100) should be done.
TECHNOLOGY DRIVEN
Mobile Technology would be a critical factor in spreading of our strategy as it would
provide the banks with a means of communicating with the customers based in far
flung villages. The mobile technology must use open standards, and architectures to the
extent possible.The essential pieces of technology infrastructure:
1. Low cost repository of accounts
2. A payments interface among the accounts (G2P and P2P)
3. PoS (Point of sale) devices operated by bank, business correspondents and
merchants
FINANCIAL PRODUCTS
Products Description Risk Mitigation
CREDIT PRODUCTS
3it comes out to be 24% p.a. for the bank
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Loan-surance In this product, the insurance premium will be
included in the loan amount itself, which would
ensure that the loan liability is secured.
The loan will
be insured in
the Banks
name.
Mobile
Overdraft
facility
(MOD)
MOD can be availed through short text
messages (SMS) only for business purpose by
the members who have opened an account with
the bank under micro finance schemes.
Mobile can be given to any civil society center in
the village or kept with the BC/BF or it can also
be available with the traders and merchants.
The member
must have a
credit balance
in the account
at least once in
2 months.
Credit Loan
Certificates
Life 6 months interest 6-7% p.a. for ` 5,000,
10,000, 20,000 for all customers with loan facility
upon it interest rate 12-13%.
The member
must have
fixed deposits
with PBoI
Dairy-
Business
Promotional
Loans
In India, there is a shift to organic farming,
where the fertilizers, pesticides, etc., which are
obtained from plant and animal products.
Government is willing to take strong actions in
promoting the conservation of cows which is
generally taken up by women in rural areas. So,
with all this in the background, PBoI should try
to get a first mover advantage by introducing
such a product.
To be approved
to only credit
worthy
customers who
have good
historical
record
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Current
account with
overdraft
facility
It is meant for small businessman, self employed
persons, religious associations and committees
For example, Ramlila committees, Mandir,
Maszid, Church and Gurudwara etc., small public
schools
Minimum
current account
balance to be
maintained
Credit
Capacity
Card
Prepare credit capacity card a of an individual
with the help of his / her property and wealth
once in a year, whenever he / she demand loan
within the capacity, there will be no paper
formalities.
Secured by
property and
wealth of the
borrower
NON CREDIT PRODUCTS
MNFB
Facility
Mobile Non Fund based credit facility up to a
prescribed limit can be availed through short
text messages (SMS) by the members who have
opened an account with the bank under micro
finance schemes.
Its a
contingent
based liability
and bank will
give this facility
only to
customers with
good track
record.
MARKETING STRATEGY
Business correspondents can be trained through training centers, seminars and
lectures. Initial training would include the knowledge of the product, its benefits,
8/4/2019 Rupye Paise Prabandhak NMIMS
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documentation and bank norms. Further training would include ways of expanding
and branching out further in other villages.
Direct marketing through posters describing the various benefits of the product in
the regional languages displayed at prominent places such as temples, post office,
weekly markets and at village panchayats can be done
Credit counseling centers can offer advice as to which PBoI product best suits the
needs of the customer and could also provide specialized advice to farmers, small
enterprises and self-help groups. Institutions such as temples and local community
could also be made part of this credit counseling center which would lend
authenticity to the centers. These Financial Counseling Centers (FCC) to be opened
in 5 lead districts.
Customers can also be encouraged through availing of gifts such as mixers, cookers,
bicycle and farm equipment. Festival gifts for FDRsof more than 1 year (gift value 1%
of the amount).
Word-of-mouth publicity plays through the village panchayat and elders of the
village can be tapped in to publicise the products of PBoI.
Women folk, who generally have more savings or access to savings in a household,
can be made the focus of these marketing strategies.
Bank should give more microfinance loans to build faith in the villages that it will
not run away taking their money as banks own money is stuck in the village.
PROJECTIONS
Credit Projections
Sr.no
Financial Inclusion Products Mar-11 Mar-12 Mar-13 Total for 3years
1 Core Banking Solution (CBS)
a PBoI 100.00% - -
b RRBs 0.00% 10.00% 20.00%
2 No villages coverage under Total Financial
Inclusion
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a Branches 5 20 30 55
b Micro Finance Branches 2 5 8 15
c By BC s
> 2000 population4
100 400 600 1100
< 2000 population5
300 1200 1800 33003 No. of No-Frills accounts to be opened (in
thousands)6
30 50 50 130
4 No of BCs (RACs)7 500 2000 3000 5500
Individual 100 400 600 1100
5 No. of households to be covered (in
lakhs)8
1.221 4.875 7.314 13.41
6 Credit facilities (No. in lakhs )9
a. Credit Loan Certificates10
0.317 1.268 1.902 3.487
b. Loan-surance11
0.75 1.25 1.25 3.25
c. MOD 1.221 4.875 7.314 13.41d. Dairy Business Promotional Loan
120.061 0.244 0.366 0.671
e. Credit Capacity Card 1.221 4.875 7.314 13.41
7 Non Credit Facilities
MNFB 1.221 4.875 7.314 13.41
8 Technology Initiatives
Mobiles 600 2400 3600 6600
Kiosks 500 2000 3000 5500
ATMs13 5 20 30 55
9 FCT14
2 3 4 9
10 Business Volume (Crores)
Deposits 125.00 400.00 600.00
Advances 249.603 822.125 1170.902
4No of villages covered by BCs is 20 times the no of villages covered by branches
5No of villages covered by BCs is 60 times the no of villages covered by branches
6Average accounts 200 per branch per year, Number of branches by Mar 2011 is 157, Number of branches in year
subsequent to Mar 11 is 250 with PBoI objective of opening 100 branches7
Regional Associations and Committees and Individuals, 3 vi llages are covered between 2 BCs8 Average population per village = 1500 (http://cee45q.stanford.edu/2003/briefing_book/india.html), Average
number of persons per household = 5, Household per village = 1500/5 = 3009
Minimum 1 earner per household, conservative estimate10
26% of total household, exhibit 1 of Yes Bank Case Study11
Assuming 500 loans per branch (76.6million loan taking earners exhibit 3/number of branches in India 150,000)
(NABARD)12
5% of households13
Assuming one ATM in every village covered by branches14
Financial Counseling and Training
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Income Projection
Projections for
2011-12
Projections for
2012-13
Projections for
2013-14
Credit facilities (No.in lakhs )
CreditLimit
No. ofBeneficiari
es (in
Lakhs)
Amt (`In
Crores)
No. ofBeneficiari
es (in
Lakhs)
Amt (`In
Crores)
No. ofBeneficiari
es (in
Lakhs)
Amt (`In
Crores)
Credit Loan
Certificates
5000 0.32 15.87 1.27 63.38 1.90 95.08
Loan-surance 10000 0.75 75.00 1.25 125.00 1.25 125.00
MOD 500 1.22 6.11 4.88 24.38 7.31 36.57
Dairy Business
Promotional Loan
(Govt Sponsored)
50000 0.06 30.53 0.24 121.88 0.37 182.85
Credit Capacity Card 10000 1.22 122.10 4.88 487.50 7.31 731.40
Total Credits 249.60 822.13 1170.90
Interest Income15
29.95 98.66 140.51
Fee Based Income
(MNFB) (1% of total
Granted)
1000 0.12 0.49 0.73
Total Income 30.07 99.14 141.24
CONCLUSION
PBoI should roll out its strategy in semi-urban & rural areas of Rajasthan as a pilot
project. Since rural areas of Rajasthan have better mobile connectivity as compared to
that of other states and taking into account minimum cost of implementation, PBoI
should build communication infrastructure on mobile technology. It can provide
different innovative products (credit & non credit), as suggested. It can rely on word-of-
mouth publicity and rural RACs for marketing its products.
15Base Rate+5% average premium
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