"HDFC Bank-CBOP Merger Will Be Least Disruptive For Customers"

HDFC Bank and Centurion Bank of Punjab (CBOP) have decided to merge. It is the largest merger in the banking space in recent times and perhaps heralds the beginning of the consolidation wave in the BFSI sector. The merger of IT systems is a highly critical aspect of the business merger. We spoke to C N Ram, Head IT, HDFC Bank–the man on the hot seat when it comes to ensuring that the HDFC Bank-CBOP merger is a smooth exercise when it comes to the marriage of technology at both banks.

How do you look at the HDFC Bank-CBOP merger from an IT perspective?

We have not done any due diligence regarding the type of systems and infrastructure CBOP has, apart from having an overall idea of their set up. We will have to start that process. So I will meet the head of IT at CBOP and we will decide on the approach since it is not just an IT integration but also business and branch integration. Deliberations will be held with the business associates at HDFC Bank on the type of products to be continued and changed; a system comparison will be done and even if both the banks have similar systems, the versions will be checked.

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In fact, HDFC Bank also merged with Times Bank in 2000; however, the only difference was that the banks were small, in terms of the number of branches. The branch strength of Times Bank was about 40 and we were about 85. We are ten times that size now and CBOP is also larger than Times Bank. Also, on the offerings side we have a larger portfolio of products to offer industry segments like SMEs, big business etc. Our priority will be to conduct the merger exercise in a manner that is least disruptive for our customers.

Could you recollect the experience and learnings from the Times Bank merger and also describe the challenges expected from the CBOP merger?

Although every initiative has an inherent learning in itself, one of the learnings from the Times Bank merger was the elimination of a lot of manual processes and going for automation, conventionally known as ‘bridging’. We extracted data from the Times Bank system into the Finware systems that we use. The level of automation was fairly high. We started slowly by automating two branches in the first weekend and subsequently learning from our mistakes, we completed six branches the following weekend, followed by scaling up to nine branches in the next week. As a result, we completed the branch automation in six weeks time (working only on weekends).

There is a lot of communication that is to be delivered to the customer during the process and also identifying common customers between both banks. There are a lot of processes like ‘data scrubbing’ and ensuring that the cheque books and cheques in circulation will all get accepted as and when we issue them. We have to train new users on the system and customers as well. Net banking offerings and the ATM system will also have to be merged and there will also be challenges on the physical infrastructure level.

What is the value addition that a CIO brings to a merger exercise?

As a CIO, one has the visibility to all businesses. We participate in all kinds of discussions and strategy meetings and execution in all geographies. Let’s see this from a relative viewpoint. A CIO does not suggest that the CEO should take over a particular company just because both the companies run similar systems. The decision for a merger or acquisition culminates after matching business synergies and the perceived weaknesses of both the companies. It depends on the business value that the combined entity brings to the business, customers and shareholders.

Having said that, it is the role of technology to quickly complete the merger to offer a single view, so that the CEO can better perform his job of taking the organisation to the next level.

How will your inputs as a CIO prove to be a differentiator for the business?

The CEO and CIO render complementary skills. The CEO’s role is strategical, whereas the CIO’s role has to be a blend of strategy and tactics. It is up to the CEO as to how he conducts the business and adapts it to the CIO’s capabilities. With regards to the combination of operations and technology, the CIO’s capability to deliver will actually influence the CEO’s thinking about what he can deliver. So for example, in the case of credit cards, liabilities and assets, if the CEO wants a turnaround time of half an hour on loans, he cannot make this statement in isolation. He is aware about the operations and technology processes that will be able to support that vision. Hence, the CIO would try and help the CEO in deciding the strategy and commit his support based on the status quo of the availability of operations and systems to translate the vision of the CEO into reality.