starts a series of interviews with the game-changers who have shaped India’s MF
industry. In this interview, we feature V Shankar, Director, CAMS, who entered
the challenging R&T business when mutual funds were still in their infancy
in the country.
You worked with Pond’s as a
Sales Manager. How did the transition to IT happen? What made you shift your
I could say that I was a visionary and immediately understood the
potential of IT, but that would be facetious. Even as Sales Manager in Pond’s,
my interest was in IT, but to an extent you can attribute it to serendipity.
Please understand that IT, particularly software, was an exotic and little
understood topic then, somewhat like genetic engineering is today. I guess
there was simply a good fit between my personality and the demands of IT
You started CAMS in 1988 as
an IT services company and then gradually moved to capital markets and then to
mutual funds. How did the idea of floating CAMS come to you?
Though my interest was in the software side of IT, software in those
days was considered like the chutney that was given (free) with the idlis. The concept of creating software
to one’s particular need and more importantly of paying for it did not arise.
At the same time, operating computer hardware was still a somewhat specialist
task. Hard disks were 10MB in capacity, the size of a dictionary and very
expensive. Employing people was still cheap. The general customer attitude was
that if someone was willing to take the effort of investing in a computer,
operate it, and produce a result cheaply that was fine, otherwise the customer
would just employ more staff to do the work manually.
In this scenario, the only real market opportunity was to produce an
outcome rather than deliver software. That opportunity for creating an outcome
turned out to be data processing for the capital market industry as it was
crying for a professional touch.
How did you get your first
client? How did you manage to bag the accounts of most fund houses?
CAMS had several Chennai-based clients in the very beginning. This may
have been because capital market vendors were mainly based in Mumbai in those
days and communication was not as easy then as it is nowadays. A Chennai-based
alternative was attractive for simple logistical considerations. However, once
we established a track record, customers from all over India came to us because
we rapidly built a reputation for integrity and efficiency.
The first large mutual fund account we signed on was that of Alliance
Capital Mutual Fund. We were very fortunate in having them as our first client,
as they helped us tremendously in many operational aspects of what was then a
nascent industry. In fact, we set up a JV with them, Acsys Software, to develop
software for the AMC industry.
We have been fortunate to get a number of AMC clients. I attribute it to
our single-minded focus on the development of not only our side of the
industry, but also in the growth of asset management itself in India. Like the
early AMCs, we were category creators.
The Indian mutual fund
industry has two dominant registrars who cater to a large section of the trade.
Has the limited competition in the R&T space helped you?
When the MF R&TA industry started its journey, it had almost eight
RTAs including certain marquee names like Citi, etc. What differentiated CAMS
(a) An unflinching commitment to the MF industry. We vacated the equity
R&TA business almost two decades back and did not consciously enter any
segment which would put us in a conflict situation. Our MF RTA value
proposition brought the difference through scale and specialisation benefits;
(b) A stream of product/process innovations like Active Statement,
MFDex, Fundsnet, etc;
(c) Continuous investment behind technology and front-office
infrastructure to increase reach and grow the assets.
All these factors sharpened our competitive advantage and led to a
two-player situation and not the other way round.
I believe that in infrastructure plays like exchanges, depositories, and
institutions like ours (a combination of the two), players need scale to
deliver economies and efficiency. Too many players will dilute scale and
investment ability to the ultimate detriment of society.
How have your systems and
process evolved since you started? What new technologies and processes have you
deployed over the years?
In the initial stages, we had an offline-data model with front offices
not having access to the core system on a live basis. Front offices used to
carry out limited data entry required for processing the transaction and send
the physical copies by courier. Web-enabled browser based technology was
introduced in the late ‘90s, once connectivity became affordable, and this
allowed our front offices and clients to access data on a real-time basis.
Image-based processing was introduced in 2000 which led to qualitative
change in the speed and manner with which we processed a transaction. We could
despatch account statements within three days as against the earlier norm of 10
days. Workflow-based processing was introduced in 2005, significantly enhancing
the speed while ensuring control.
Today most of our clients’ CRMs are powered by our replication tool
which enables the AMCs to respond to investor queries on an instantaneous
We constantly add value to our clients through product/process
innovations, which has resulted in better services to investors and
distributors while bringing down the cost. A few such innovations are:
MFDex, a Business Intelligence tool;
eSTR, a tool to identify and report transactions which require
investigation for compliance with Prevention of Money Laundering Act;
- Active Statement, first of its
kind, providing a single view of the investments held across the participating
mutual funds. It also allows investors to interact with it, showing charts,
accepting service requests, updating static information etc. CAMS was the
original innovator of the Common Accounts Statement bringing convenience to
investors and cost efficiency to AMCs.
Our role has evolved from that of a service provider to a knowledge
partner and business enabler, boosted by our extensive domain knowledge. We
enable growth of the industry through our reach, physical and electronic. Our
electronic platform, Fundsnet, has enabled IFAs who are located in Tier-III
& Tier-IV cities to participate in the MF industry with the assurance of
same day NAV.
How do you make sure that
investor data is secure and confidential?
CAMS is ISO 9001:2008 certified for process excellence and ISO 27001
certified for Information Security practices. The spirit of ISO 27001 Information
Security standards is that Information Security should be built into the very
DNA of the organisation, i.e., in the hiring, induction, training, physical
access, data access, application and network security etc., from the design
stage itself. CAMS does indeed do exactly that.
Data confidentiality is ensured through multiple levels of control. Who
can access what data is documented, implemented and audited for verification of
the efficacy of the control systems. Access to all our systems is password
protected. Information that may be accessed by an employee is based on the need
for access, thus restricting the data to which she has access. For instance, an
employee working in X unit will not have access to data of other units,
irrespective of his level. Within the unit, the access rights are layered
depending on the role/work level. Audit trail is detailed and covers even a
simple view access. Data transmission and access are secured and encrypted.
Data centres are protected against physical/electronic intrusion. We
have several layers of redundancy built in to protect our data and
applications. Our Disaster Recovery & Business Continuity plan are well
documented and periodically tested to ensure effectiveness when required. We
have both in-city and off city Business Continuity Plan centres.
The R&T business is
both manpower and technology driven. How do you manage costs in a challenging
environment? What is the differentiating factor in the R&T business? What
would be CAMS’s differentiating factor?
All our major cost elements—people, infrastructure and technology—are
inflation prone. Despite that, CAMS has delivered cost efficiencies through
appropriate use of technology and process innovations. Scale, technology and
process innovations have helped CAMS to deliver superior value to mutual funds
and investors. CAMS led the initiatives on increasing electronic pay-outs,
email communication to investors, Consolidated Account Statements, distributed
printing of communication/cheques to reduce postage cost, etc.
Having said that, we are severely challenged now on the cost front, with
the industry not growing as it used to earlier, along with inflation running at
The MF R&TA industry is different from that of the equity market in
terms of the sweep of scope, technology and front office infrastructure that is
required and the 24/7 demand on the R&TA resources. An MF R&TA manages
the entire life-cycle of the investor including acceptance and execution of
transactions (which is done by a broker in case of the secondary market),
maintenance of records (done by a depository), access and reach (provided by
broker and DP), reconciliation/movement of funds (done by broker, Clearing
Corporation), processing of dividends (done by the RTA in case of the secondary
market) and issuance of account statement done by DP in case of the secondary
market) on a platform owned by R&TA (the stock exchange, in case of the
secondary market). As can be seen from the above, an MF R&TA performs a
role which is holistic and covers the entire spectrum while in case of the
secondary market the same is executed by multiple agencies (stock exchange,
depository, DP, broker and R&TA). However, the MF R&TA manages to
deliver this at a fraction of the cost of that of the secondary market.
(Read the second part here).