The BFSI vertical in India has adopted IT on a wide scale. With banks spreading their operations in rural areas through micro finance and other arterial activities, they have been able to successfully bank the rural population as well. This has increased the complexity of operations at banks.

HDFC is an important player in this space and caters to not only retail but also wholesale and treasury banking. The role of IT becomes critical in handling the various customer verticals and simultaneously coming up with new banking products and customer delivery channels. The bank’s Executive VP – IT, G.V.Gopalakrishnan speaks with Biztech2.0 about the bank’s IT initiatives in 2007 and how the bank is planning to overcome the data management challenge.

What is your role as Executive VP, IT at HDFC Bank?

All the applications which are customer facing, transaction based like CBS (Core Banking Solution), undertaking strategic initiatives in the IT department, developing new IT applications for our new lines of business and designing the IT governance, come under my purview. The DR and BCP also come under my control.

Broadly, I manage all the new application enhancements and the new initiatives. We have recently decided on experimenting with a development process on the open source platform, which is focused on improving operational efficiency. For IT governance we are setting up a governance practice within the IT department for the COBIT centre and the ISO framework.

Which Open Source (OS) initiatives is the bank working on?

The IT head came up with the suggestion of developing the application on the OS platform after evaluating the standard products available and the total investment.

The development is not for a large requirement. In-house development has never been a part of the bank’s strategy since its inception. We came up with the idea of opting for OS last year during the SOX (Sarbanes Oxley) Audit. One of the findings that we came across was that the end consumer had developed some applications. They may not be in a controlled environment during the audit process. This scenario prompted us to experiment the OS platform for meeting such small requirements.

The application will not be customer facing since it requires a different architecture and additional investment as well. We have an eleven to twelve member team that is working on the project and the processes and the concept of the application are being mapped. We hope to start developing the application in the next six months.

What role will IT play in your new initiative in the investment banking space?

Initially we will run the Investment banking business on our current systems that support the functionalities of the business vertical. As the business grows and takes shape, we will start evaluating standard investment banking solutions for specific investment banking models.

We consider investment banking as a huge line of business. It is also very complicated because the bank is dealing with a different customer and expectations.

Are the IT Systems At HDFC arranged according to the different business segments?

No, it is not on the basis of the business segments but on the type of business. The need comes and it falls under a particular business.

The retail and wholesale core banking solution forms the base of all the systems the bank runs. Obviously, there is integration and interface of these systems internally between retail, wholesale and treasury solutions.

There are applications that cater only to a particular type of business while at the same time, some applications runs across all businesses. For instance, the treasury service is a very specific business, thus it requires a special application. It cannot be used for all the systems. Another instance is of Depository, which runs on a specific solution catering to the capital markets. The credit card is a different business and requires specific solution.

However, there are applications that are used across all the businesses like. The Switch, which authorises the ATM transactions as common for the retail and corporate customers. If a company opens an account for the employee, it is ultimately a retail account. In that case, for the middleware that we use for different systems to talk with each other, we have an STP solution to enable RTGS payment from retail, wholesale and treasury accounts.

How is the bank addressing the two-fold challenge of data handling and Basel II implementation?

Data storage and maintenance is a regulatory requirement. We have processes in place to make data available online.

In 2008, we are going to take the initiative of Data Archiving. There are two types of Data Archival solutions. Main archival and Data archival. The main archival is generally more talked about after the emergence of the SOX requirements. However we are opting for Data Archival since there are standards available today, which enable the data to be stored in an XML format. This makes the data independent from the core application that generated the data. As a result various data presentation models can be generated using the front end.

In a way Data Archiving will prove as a central repository of data. It will not be stored in a proprietary format like SQL or oracle database resulting in the data getting structured. Rather the data will be stored in standard XML format having a data dictionary feature to develop the front end for smooth data retrieval.

The bank has also implemented a solution for Basel II implementation.

As you look back, which IT initiatives did the bank undertake in 2007?

We initiated a CRM solution in 2007. There are some rural initiatives that we have taken which are in the initial stages. A project on the SOA architecture is also under implementation. This year the bank was licensed to acquire a NBFC, which will require a lot of technological solutions. Initiatives are also underway catering to the SME sector and business banking.

What are the challenges in coming up with new banking products and customer delivery channels?

The biggest challenge is the speed of service delivery. While we have solutions in place how fast are we able to come up with new services within a stipulated timeframe. SOA is an initiative that will be initiated this year. However it takes some time for the solution to mature and start rendering benefits. Manpower retention is also a big challenge but the retention rate is very high at HDFC.