Keen to increase its presence in the cooperative banking industry in India, business software giant Oracle Corp. has tied up with Pune-based tech vendor EBZ Online Pvt. Ltd to offer a relatively less expensive banking information technology platform that will help operations at the country’s nearly 2,500 cooperative lenders.
Cooperative banks, most of whom operate in small towns and rural areas that every day face poor infrastructure and telecom connectivity, grapple with the problem of maintaining their homegrown technology solutions and databases, and providing efficient customer services.
At the same time, they face increasing competition from large private and nationalized banks, that can afford expensive software to run their banking operations.
According to the deal announced on Thursday, Oracle will provide the database and banking software in the initiative while EBZ Online will host and manage the front-end software that will cater to all categories of cooperative banks, including community banks, credit unions and agricultural banks.
“Around 90% of cooperative banks in India are in rural areas and they face the constraints of infrastructure, costs, power and connectivity in the deployment of core banking solutions. Today customers, whether in rural or urban India, want faster access to their money, to loans, and this solution enables that,” said Mandar Agashe, managing director of EBZ Online.
The country’s cooperative banks serve around 200 million people in the agricultural sector, members of cooperative housing schemes, and beneficiaries of government grants, among others.
The Oracle-EBZ solution allows computers in far-flung branches to connect through ordinary telephone lines using a 56K modem and transfer all customer data on a daily basis from branches to a central database at the head office in just three minutes. Consolidation of transactions was difficult given the low computer penetration at cooperative banks and their geographical spread leading to days being taken to update data.
The solution will initially be implemented across 300 branches of the 50 cooperative banks that are customers of EBZ today. It will be rolled out in 10 states, including Punjab, Haryana, Uttar Pradesh, Gujarat and Karnataka, in the next three years and will cover 3,000 branches.
Cooperative banks can deploy these solutions either by buying the software suite, which could typically cost about half that of a core banking solution which ranges between $1 million (Rs410 lakh) and $5 million, depending on the hardware, software and data centres used. The preferred mode for these banks is, however, to rent the software on a monthly basis or on the basis of the number of transactions of each branch.
“Most branches prefer the rental mode which comes up to Rs50,000 a year for each branch, because they don’t have to spend on infrastructure and are not worried about technology obsolescence. Besides, if the software does not deliver they have the choice of not paying the rent for it,” said Agashe.