Indian Banks & the Global Challenges January 31, 2006 Outsourcing Opportunity: Strategic & Operational Level Mr.Shailesh Haribhakti Managing Partner & CEO Haribhakti Group

Indian Banks & the Global Challenges January 31, 2006 What is Outsourcing  Bank's use of a third party to perform activities on a continuing basis that would normally be undertaken by the bank itself, now or in the future.  Specific feature of outsourcing is that the direct control of these operations is shifted to an external service provider. External Service Provider Intra-group Company Independent third party JV with Independent third party

Indian Banks & the Global Challenges January 31, 2006 Phase II 2000’s Phase I Pioneers & Size Driven Factors Increasing adopters & strategy factors Phase III Bandwagon & Competition Factors Captive BPOs: American Express, GE Capital, British Airways Accenture, EDS, Bank of America AXA, Ford, HSBC, Citibank Emergence of Outsourcing Industry in India

Indian Banks & the Global Challenges January 31, 2006 Banks are under increasing pressure today…. Pressures on Banks Evolving socio- economic & political context (WTO etc) Changing consumer concerns and buying behaviour Increasing convergence Shifting Regulations (RBS, BASEL II) Broadening distribution patterns Increasing customer expectations Changing basis of competition Shift to a global / international market Emerging technology

Indian Banks & the Global Challenges January 31, 2006 Types of Outsourcing in Banks Outsourcing of activitiesOnly parts- Individual activities of a whole process are outsourced e.g. printing of accounts statements Outsourcing of processesThe whole business process- consisting of a set of activities is outsourced e.g. the entire management of customer accounts Core activities Non-core activities Types of Outsourcing

Indian Banks & the Global Challenges January 31, 2006 Draft Guidelines by RBI dated Activities that should NOT be outsourced Management control Corporate Planning Management of investment portfolio Compliance with KYC norms for account opening Sanction for loans

Indian Banks & the Global Challenges January 31, 2006 Management Structure for outsourcing

Indian Banks & the Global Challenges January 31, 2006 Outsourcing Opportunities for Banks Opportunities Of Outsourcing Lower Costs Focus on core competencies Greater flexibility Greater efficiency Higher service quality

Indian Banks & the Global Challenges January 31, 2006 Evaluation of Risks Types of Risks Strategic Risk Risk Reputation Risk SystemicRisk Operational Risk ComplianceRisk  The service provider may conduct business on his own behalf, which is inconsistent with the overall strategic goals of the bank  Privacy, consumer and prudential laws not adequately complied with  Arising due to technology failure, fraud, error, inadequate financial capacity to fulfill obligations and/or provide remedies  Due to lack of control of individual banks over a service provider, more so when overall banking industry has considerable exposure to one service provider.  Poor service from the service provider, its customer interaction not being consistent with the overall standards of the bank

Indian Banks & the Global Challenges January 31, 2006 The Whole Range Of Core Banking And Support Processes  Sample processes  Telesales  Customer service  Technical support help desk  support  Fax responses  Live interaction Customer facing Voice Non-voice Inbound Outbound  Telemarketing  Collections (bucket one) Business process off-shoring services  Benefits administration  Payroll processing  Retail banking (account maintenance, opening, check processing)  Fund administration  Reference data management  Claims processing  Database integration & analytical services  Secondary research  A/R and A/P management  Reconciliation Back office Core business Support HR/ Admin Consumer banking Wholesale banking Insurance Research Finance & Acctg.  Illustrative vendors

Indian Banks & the Global Challenges January 31, 2006 Key Initiatives  Current Activities Outsourced  Hardware and software maintenance  Management of data centers  Outsourcing of data center operations  Disaster Recovery  Network management & monitoring  Maintenance of websites  Maintenance and management of links at ATMs  Opportunities going forward  Help desk support  Outsourcing of customer complaints  Credit card processing & printing  Cheque processing & clearing  Cheque box clearing & collection  ATM cash replenishment  Loan servicing  Pay-roll & pensions  Data processing of day-to-day clearing instruments like drafts and dividend warrants

Indian Banks & the Global Challenges January 31, 2006 Contact : Thank You Address: 42-43, Free Press House 215, Nariman Point, Mumbai – URL: The Question is Not Whether to Outsource But What to Outsource Mr. Shailesh Haribhakti Managing Partner & CEO Haribhakti Group Tel: Fax: