L&T Finance Cashes In Big Returns With BPM

L&T Finance Limited (L&T Finance), a subsidiary of L&T Finance Holdings Limited made a strong foray in the financial services sector in 1994. Eyeing rapid business expansion at controlled costs, the company decided to centralise its retail loan processing. This left the branches free to concentrate on selling and building relationships with the customers and channels (dealer), and also bringing in its wake easier management of loan sanctioning and standardisation of the entire process. But, enabling this hub (the two centralised centres for loan processing) and spoke (branches) model to operate efficiently required orchestrating a smooth workflow between the key stakeholders. Business Process Management (BPM) technology provided L&T Finance the backbone for this seamless workflow.

Underlying Challenges Lurking Behind Centralisation

Before coming to the challenge it is important to understand how centralisation works at L&T Finance, and the ensuing requirements. Post centralisation, the company’s structure comprised of two centres that would process the loans, and the branches – i.e. the sales outlets – would simply be document collection centres. The process of lending also includes ‘credit sanction’, which is underwriting to approve the loan. These underwriters are again based at the two centres. Under the centralised model, this is how a typical case of loan processing should work: the case file is prepared with actual documents, customer’s signature, etc. collected on the field. The sales person at the branch submits the case, which is then processed at the two centres. In case of any exceptions that the processing team may raise (Ex: KYC document not being legible, unclear scanning, discrepancy in name in two documents, etc.), the sales person at the branch needs to know about it immediately so that action can be taken immediately. Overall, the sales person at the branch is able to monitor the loan’s status right up to the point of closure.

The key stakeholders involved in this process include: the sales person at the branch, the centralised operations team that is processing the loan, and the underwriter who is sanctioning the loan. All three need to work together in order for the centralisation model to work effectively. And, herein, lied the main challenge that Venkateswaran Krishnan, Vice President – IT (National Head – India), L & T Finance, had to overcome. “There are elementary things we could do like scan and keep the KYC documents in a shared folder, but that raises the issue of lack of visibility. The purpose of knowing what’s going on across the country would simply not be achieved with an elementary solution like that,” says Krishnan.

How BPM Made It Possible

L&T Finance found its answer in the form of Business Process Management (BPM) technology. “We realised that if we want to centralise efficiently then we need to look at this technology, without which it simply doesn’t make sense to try and centralise,” says Krishnan. As the company started looking around for the right solution, it came upon Newgen’s offering.

The solution from Newgen was chosen based on its track record and the fact that its an Indian company that has been around for over a decade and a half. According to Krishnan, “An Indian company is tuned in to the requirements and the pricing here in India. Also, the dialogue would be much easier to carry out.”

Newgen’s vast experience with BPM implementation came in handy, as it had thought through how a BPM solution should work in a commercial enterprise, even though for L&T Finance it was going through centralisation for the first time. The BPM solution is connected to FinnOne system, which is L&T Finance’s core processing system that handles the actual business transactions. The company opted for the following solutions: workflow tool OmniFlow, Scanning tool – OmniScan, and centralised document management system – OmniDocs, built upon its BPM platform.

The OmniFlow application can be accessed from L&T Finance’s network. The OmniScan application can be accessed from branches having Intranet or Internet connections. The BPM suite supported easy building of highly efficient functional desktops for human interaction. By using Web 2.0 based desktop, analysts could compose an end-user interface where users could simultaneously view the electronic form and the document images, checklists, to-do lists and exceptions. The Newgen solution was been rapidly rolled out across 106 branches within a short timeframe of three months.

Bottom Lines Boost, Operational Costs Cut Down

Implemented over the web , the solution helped L&T Finance undergo rapid business expansion across geographies. With the solution on the web, today the company doesn’t need infrastructure at the branch for it to become operational. In fact, it doesn’t have to open a branch in order to start selling retail loans. All that is required is a one man set-up with a laptop, data card, scanner, etc. “Because of this technology we were able to start business in certain parts of the country, which the company was reluctant to venture into earlier, says Krishnan. The sales person in the branch just needs to compile all the files correctly, get the documents scanned and then submit it into the software, which is not difficult to learn. And, from there the centralisation process takes over. Besides providing business the scalability to expand rapidly, this also helped in bringing down drastically the average cost and average skill required in the branch office.

To encapsulate some of the key benefits accrued:

• Able to open new shops at low costs.
• Can start small operations/open an exploratory office in a location to gauge the market potential and yet give the sense of a large and efficient operation because of the back-end supported by the BPM platform.
  Enabled the company to easily map Business Rules, User Roles and Loan Policies in the system.
• Helping to file over 2, 00,000 cases in 6 months
• Reducing turn-around-time by 75 percent
• Reducing operational costs by 80 percent
• Enhancing operational agility
• Improving process control
• Improving customer satisfaction
• Reducing end-to-end loan processing time
• Ensuring efficient process tracking
• Faster loan processing time. One day as opposed to three-seven days earlier.

According to Krishnan, “With these tangible as well as intangible benefits, L&T Finance’s return has exceeded the traditional cost of capital, which is what you compare the returns against. The business case has certainly met the criteria by far.”

Future Plans

Next on target is moving to the tablet the whole process of form filling, taking photographs of the documents and signature, and attaching all these documents at the dealer location itself, and sent wirelessly to the central loan processing team. This mobile solution will then integrate with the current solution. This will help save further time and get additional customers as the hassle of going back to the office or business centre to send the files will be eliminated. Currently L&T Finance is piloting this mobile solution from Newgen. This, indeed, will complete the picture for L&T Finance in the entire loan processing value chain.