Adjustable Loans: Oracle Exadata gives Reliance Commercial Finance the flexibility to meet India’s expanding commercial loan market
by Monica Mehta
In 2010, Morgan Stanley predicted that the economy of India would outpace China’s within 5 years—and grow faster than any other large country’s for the next 25 years. Demographics are a significant market force: the median age in India is 26 (compared with the U.S. median of 37), and young entrepreneurs and wage-earners need capital—for new businesses, new homes, and new cars. This demand has caused India’s loan industry to expand rapidly since the 1990s, when the country was on the verge of economic collapse. By 2006, the Reserve Bank of India reported the Indian consumer credit market was growing by more than 40 percent per year.
“The consumer lending industry in India has witnessed huge growth in the 1990s and 2000s,” says Madhur Chaturvedi, an India-based director of Industry Strategy and Insight at Oracle. “The growing urban middle class has high aspirations to acquire assets such as houses, cars, and consumer durables, which has spurred growth in the consumer credit market.”
To serve this new, young market, Reliance Capital—one of India’s top three private-sector financial services and banking companies—launched Reliance Commercial Finance, offering mortgages, car loans and business credit to the emerging generation. Holding more than US$3 billion in loans for more than 100,000 customers, in just five years Reliance Commercial Finance has become one of the top three nonbank lending organizations in India.
To reach that position so quickly, Reliance Commercial Finance needed an IT infrastructure that supported business flexibility, so that employees could focus on improving service to win new customers and enabling new services that appealed to the growing Indian consumer base.
And so in March 2011, the company became the first in India to deploy the Oracle Exadata Database Machine, upgrading data infrastructure to improve performance of core lending applications, provide new analysis of financial and customer data, and add high-availability features that eliminate unnecessary system downtime.
“As a commercial lending organization, we need to be absolutely service-oriented, because our success is service-dependent,” says Shashi Kumar Ravulapaty, senior vice president and CTO at Reliance Commercial Finance. “The Oracle infrastructure ensures that we can provide our customers with access to loans as quickly and efficiently as possible, so that we can stay ahead in this highly competitive market.”
The engineering of hardware with software is what enables the extra processing capability. A similar hardware environment that doesn’t have a software combination will never give you throughput of 10 times. Oracle Exadata’s combination has worked out very well and has given us results.
Since the company’s inception, IT staff at Reliance Commercial Finance has relied on Oracle Database and Oracle Real Application Clusters running on Oracle’s SPARC servers to underpin the company’s core lending application—called FinnOne—which processes commercial and home-lending transactions. The combination of Oracle Real Application Clusters and a disaster recovery center using Oracle Active Data Guard helps ensure FinnOne will be available in case of server failure and handles automatic online data replication between servers in Mumbai and a disaster recovery center in Bangalore.
These efforts secured the availability and data integrity of the mission-critical FinnOne application. But in 2010, senior management began looking for ways to tackle two major IT-related business challenges: improving access to underwriting analytics, and reducing the processing time for the underwriting processes and monthly financial close.
The first issue, access to underwriting analytics, has a direct impact on underwriters’ ability to do their due diligence before funding a new loan. Previously, evaluating the risk of a potential customer was solely at the discretion of the customer and credit processing agents, who had limited access to internal sources that detailed the customer’s loan history and no immediate access to external sources such as credit agencies. “There’s a lot of risk evaluation required during the underwriting process,” says Ravulapaty. “But the majority of the risk evaluation was very subjective. We wanted to back it up with data that we already had in the system, along with market analytics and other information outside the system.”
Ravulapaty’s team needed a solution that would provide underwriting analytics in near real time, so bank representatives could access it while serving a customer. Access to these analytics would not only help staff identify quality loan recipients, but would also help them cross-sell or up-sell additional financial products. “The information has to be extremely accurate, and has to reach us very fast. We needed a very high I/O capability, and a system that could handle large data volumes,” says Ravulapaty.
The second challenge dealt with speeding up the month-end loan underwriting and financial close processes in the core lending system. Most of the underwriting and loan processing in India happens during the last week of the calendar month. During those seven days, almost all of the company’s employees log in to FinnOne. The IT team needed to improve the infrastructure for immediate service and to accelerate the month-end financial close process, which took 10 to 11 hours.
Real-time analytics and fast data-processing speeds are vital for financial services companies looking to gain and retain customers in India, says Chaturvedi. “The most-successful lending organizations need to know their customers very well, and offer loans tailored to their specific needs. They also must make loan decisions based on accurate information, and ensure high-quality customer service both during and after the sale. Technology is a critical enabler in achieving these goals.”
The business has gained more time to book loans and is able to pay out loans to customers faster, therefore increasing revenues.
To meet the needs of the Indian commercial finance market—and to address two critical business challenges that could limit access to new customers—the Reliance IT team moved the company’s data warehouse and business intelligence solution to Oracle’s Exadata Database Machine X2-2 Quarter Rack, which features Oracle Database 11g running the Oracle Linux operating system. The high-performance 21-terabyte data warehouse and online transaction processing system stores and analyzes enterprisewide financial data (such as the amount of unpaid debt per month) and customer data (such as the amount and term of a customer’s loan and the amount and frequency of their repayments).
Now, when an agent looks up a customer during the underwriting process, the system delivers immediate access to the customer information.
“In two to three seconds I can tell you the customer detail, such as what kind of exposure we have, what kind of loans the customer already applied for earlier, which loans got approved, and what the interest rate is. This also greatly decreases data entry work,” says Ravulapaty.
According to Chaturvedi, organizing customer data in an accurate, easy-to-access system enables the kinds of analytics that can be a real boon for financial services companies. “It can enable sales teams to offer the right product at the right moment. It can also better manage risk, enabling early warning systems that prevent fraud and handle internal and external risks that may affect the portfolio,” he says.
|Percentage of population under 25|
|Number of middle class in 2007|
|Projected number of middle class in 2025|
|Rank of India’s consumer market in the |
world in 2007
|Projected rank of India’s consumer market in 2025|
|Sources: The ‘Bird of Gold’: The Rise of India’s Consumer Market (McKinsey Global Institute, 2007) |
The Middle Class in India: Issues and Opportunities (Deutsche Bank Research, 2010)
Economic Survey 2011-2012 (India Ministry of
Another major benefit Reliance Commercial Finance is gaining from Oracle Exadata is faster data processing. The company’s month-end batch process used to run 10 to 11 hours; the same process on Oracle Exadata completed successfully in 1 hour. In addition, the end-of-day financial close process went from 4 hours to 90 minutes. Oracle Exadata has also eased the load on Oracle Database by distributing transaction workloads easily, increasing the number of customer transactions processed per day from 5,000 to as many as 25,000.
“There’s a tremendous increase in the speed. I’m not talking of 1 time or 2 times—we have achieved more than 10 times in gains. That is really important,” says Ravulapaty. “We are able to plan our entire business architecture differently. Without this kind of processing capability, I wouldn’t have been able to provide a real-time analytics capability to my underwriting process at all. The increased processing speed will help business to hit the bottom line better.”
Sandip Parikh, head of operations and finance at Reliance Commercial Finance, says Oracle Exadata has increased the speed of a loan transaction by as much as 40 percent. Customer requests, loan applications, and loan disbursements are now completed much more quickly, increasing customer satisfaction. That translates into staff and system time that can be put to better use— growing the company.
“The business has gained more time to book loans and is able to pay out loans to customers faster, therefore increasing revenues,” says Parikh.
High-power data processing can enable lending organizations such as Reliance Commercial Finance to better satisfy customers, says Oracle’s Chaturvedi: “When customer application and underwriting data is processed quickly, this ensures quick turnaround times and faster response to customers, which provides a better customer experience.”
Beyond the initial scope of the Oracle Exadata project, Ravulapaty says Reliance Commercial Finance’s new data infrastructure will easily scale for future growth. According to Ravulapaty, the number of customers managed by the system will increase by four times over the next two years—to almost 4 million records. This increase in volume will double the transaction load.
Additionally, he expects the data warehouse—which includes online business analytics tools, a loan application tracking system, and an inventory funding system—to grow to 15 terabytes by 2013. But the architecture of the Oracle Exadata system will allow his team to handily expand to a full rack as the company grows.
“We believe the Oracle Exadata Database Machine will handle the increase easily, so there’s a lot of room for growth. Oracle Exadata’s capability to grow vertically means that the life of this particular appliance is much, much higher compared to my other hardware systems. We can depend on this infrastructure for a very long time,” says Ravulapaty.
Now that significant time and resources have been freed up with Oracle Exadata, Ravulapaty’s next technology steps involve enabling new services that can woo more customers to Reliance Commercial Finance. He plans to expand the company’s mobile technologies and create a company presence on social networks, keeping pace with India’s young, growing populace.
“Our employees and customers already have their own mobile devices, so now we are encouraging them to use those devices by extending mobile technologies to our business processes,” says Ravulapaty. “We are also getting onto the social networks, which will provide added benefits to our customers.”
Parikh has big plans for the business. Now that the company is benefiting from high-power data processing, he has time to focus on increasing the loan portfolio by 30 percent yearly, and on giving car, home, and business loans to self-employed customers. He and Ravulapaty expect Oracle Exadata to be an essential enabler of the company’s future business goals, highlighting its combination of hardware and software.
“The engineering of hardware with software is what enables the extra processing capability,” says Ravulapaty. “A similar hardware environment that doesn’t have a software combination will never give you throughput of 10 times. Oracle Exadata’s combination has worked out very well and has given us results.”
Most importantly, Ravulapaty and Parikh believe the capabilities of Oracle Exadata will enable the company to be agile in its business plans, thereby being able to meet the growing demands of the Indian population.
“Reliance Commercial Finance is a high-speed, fast-growing commercial nonbank lending organization that aims to keep up with the entrepreneurial development of India and its people,” says Parikh. “Oracle Exadata provides the oxygen for that growth.”
Monica Mehta is a frequent contributor to Profit.