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 (SBI) and Bank of Baroda (BoB) — have already formed such units for servicing customers in rural and semi-urban areas.
After 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, customer service and grievance handling, call centre operations and support functions pertaining to IT and vendor management,” said 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 by Business Standard about plans for the proposed subsidiary.
The bank has over 20,000 touch points, which include 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 (PSB) executive, many PSBs are using the subsidiary route for providing support, especially to branch networks in semi urban and rural areas. They are keeping in mind the twin objectives of scaling up operations and cost optimisation. This helps on board local talent and enhances last-mile reach for financial inclusion as well as key asset quality function like recoveries.
In July 2022, country’s largest lender SBI set up a subsidiary State Bank Operations Support Services Pvt Ltd (SBOSS) for providing operations support services at branches in rural and semi-urban areas of the country.
SBOSS, which is headquartered in Delhi, will also work as a corporate business correspondent of the SBI.
SBOSS has deployed feet-on-street (FOS) with appropriate technology support for doorstep services to customers at a competitive rate. At present, it is providing support to more than 5,000 rural and semi-urban branches across 17 circles of the bank, according to SBI’s annual report for FY23.
Mumbai-based BoB 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, economies of scale and substantial cost savings.
Subsequent automation of various processes has freed the workforce at branches for drudgery and provided an opportunity to focus on core activities. This setup has enabled BoB to focus more on sales and service functions, according to the bank’s annual report for FY23.