Karvy Data Management Services, the registrar and transfer agent for asset management companies counts 24 of the 41 mutual fund houses as its customers. In an interview with Ravi Samalad, Karvy’s Director, V Ganesh, said the registrar and transfer agency has the ability to scale up the systems to handle any large new fund offer (NFO) of the size of large public issues. The following are the edited excerpts from the interview:
A few years back, Karvy did not have a good image as far as an RTA is concerned. But you seem to have made a strong comeback. How did this transformation happen?
We have revamped all the areas which were perceived as our weakness and got a good management team in place. We got the technology completely rewritten on various fronts. The process became easy thanks to PAN becoming mandatory. Both inbound and outbound call centers were put in place via some of the best technologies. Our first attempt was to endear ourselves to the client. The second attempt was to ensure that we take care of entire business holistically. We built a lot of tools to understand and support each segment of the AMC business. So these measures helped our positioning.
How about your online transaction website?
More than 50 per cent of the clients use our web transaction platform. Reliance Mutual Fund’s trading platform has been developed by Karvy. Similarly, UTI Mutual Fund and several other players have installed Karvy’s trading software.
You allow the front end to give a consolidated statement of all the folios. How is investor data protected?
There is no question of the branch printing a consolidated statement across all AMCs. Data leakage cannot happen by consolidated statement. There are several measures being taken at the industry level, AMC level and the R&T level. Data access is largely restricted to where the transaction is originated. Unless there is a written request from the investor, we do not facilitate a process for issuing an account statement.
What else do you do for data security?
There is a huge surveillance team which tracks access through various logins. The technology that we have developed helps track the identity of the person accessing information, kind of information and at what frequency. If any employee has accessed a particular customer name three times, our systems in the central IT team will immediately pop up an alert.
Are all your services priced?
If a process is a great enhancement but actually results in more automation and therefore, less manpower to be deployed by us, we would not charge for those services. If something has cost us, we will charge one time upfront fee but we’ll not put an annuity charge on it because there are technology related process savings that accrue to us.
How are disputes between the AMC and RTA tackled?
We handle such disputes in three parts. There is a manual process, semi-automated process and then there is an automated process. If an automated process goes wrong, we make it good. If a semi manual or manual process goes wrong, we figure out at which stage of the process that error has happened and in which context it has happened.
Do you have any overseas clients?
We handle overseas clients like Bank Muscat and Macquarie Global and now we have signed up for the entire pension administration system for the Maldives government. For Bank Muscat, which is based out of Oman, we do the entire mutual fund transfer agency from India. We print statements in Arabic. The entire work flow is based on an image based automated work flow system. All they have to do is scan and send it to us. We have taken a few people who speak Arabic in Hyderabad.
For the Maldives government, we have just signed up for a complete health administration. It’s like an NPS. We are developing a complete system and solution for them.
How would SWIFT (Society for Worldwide Inter Bank Financial Telecommunications), a global financial transactions network, help you?
I think the challenge with SWIFT would be on the pricing front and I think SWIFT itself is trying to address how they can make it economical for the Indian market. Apart from that, we are here to support the SWIFT network. I see multi-currency as a very critical milestone for us to fulfill our overseas objectives.
What’s the financial impact of complying with various regulatory requirements?
When we engage the services of World-Check for anti- money laundering we tie up with our clients or along with a body like AMFI. This is done to ensure everybody understands the cost. For an R&T, it’s no profit- no loss. World-Check will still make its money. We make sure that that those costs are kept as low as possible.
What if all mutual fund trustees needed to conduct systems audit?
SEBI had recommended to the trustees of each mutual fund that they should get a systems audit done of their transfer agents. If all twenty four AMCs were to come to us and do a systems audit, it would be a humongous cost for each of these AMCs. So we had discussions with our AMCs. We decided to shortlist some of the leading names shortlisted through a proper technical evaluation process who then came and audited us. These reports were shared with all other AMCs in a transparent manner.
So you had three advantages. First, the systems audit was thoroughly done. Secondly, there was commitment from both sides of the management. Thirdly, you achieved economies of scale because you spread the cost among 24 entities.
What kind of add-on services do you offer to AMCs?
We have a product called Fundswatch on the AMC’s table. It’s not just query driven. It’s an OLAP (online analytics processing) tool that we provide. It allows data mining, data dissection and so on. You can slice and generate reports the way you want. Around 90 per cent of the requirements get resolved by OLAP.
How do you handle a mega NFO like Reliance Infra?
Let me take a recent example of the Reliance NFO which we handled in five days. The response was much ahead of our expectations. This NFO was run across thirty branch locations with one bank and it had SIP plugged in the NFO itself with a couple of auto debit banks which would be required for SIP investors and with a demat capability. We handled a transaction volume of around 1.21 lakh applications in a span of five days. A large portion of that was managed through a complete paradigm change in the way that process was handled earlier and the new format of NFOs coming in.
Did the collecting bankers require any support?
We made sure that technology is made available to the bankers of the issue for scanning and sending the documents to Karvy’s central office in Hyderabad. As the scanning was happening at say Dehradun, we were processing it instantly at Hyderabad. So we were not dealing with multiple banks. Typically an NFO opens in 150 locations (cities) or more.
Do you see a new trend in mutual fund sales?
New fund offers (NFOs) might migrate to campaigns. Somebody may run a campaign for an existing scheme or a product and treat that as an NFO on an existing product and then see how they can build out business.
