A crisis is not solved by one single bullet: Rajeev Yadav

Fincare Small Finance Bank is getting ready for a public listing. In this interview to EnterpriseStory, Fincare CEO and Managing Director Rajeev Yadav speaks about the digital-first company that wants to bring the bank to customers on a tablet. He also weighs in on leadership lessons during a crisis.

EnterpriseStory: What’s driven Fincare Small Finance Bank’s decision to go for a public listing?

Rajeev Yadav: The natural destination for a good bank is to get it listed in due course. Our decision is also linked to the regulatory requirement of listing a bank. But clearly in this long journey of being an NBFC and then a bank, we have reached a natural milestone of this size and scale of operations, and the profitability where a diversified set of shareholders and a great set of retail shareholders would be a good asset for the bank.

How has Fincare SFB responded to the challenges thrust by the pandemic?

We are experiencing something so severely strong and impactful for both health and business reasons. This is the first crisis in our life where the whole world has experienced it together, and every business has experienced it.

Normally, businesses have challenges in cycles all through their lives. As business leaders, we have been exposed to business cycles earlier, and we respond to them with the best actions we can take to get the business back to normalcy.

But, this is a challenge where everybody around us is together in the crisis. So, you don’t feel isolated. It has impacted multiple industries, and whole countries. In a sense, it makes the job that much easier because we don’t need to explain the problem.

Here, we are only involved in how we solve and how we handle the problem. In a typical crisis, we define ‘how did we get to this problem?’ before we define how to solve it.

The bad part of this crisis is that it is no longer an economic crisis. It is a crisis that concerns everybody’s health. Never have we had to take a business decision with either positive or negative impact on the health of team-members or customers.

In the past, we could trade off with a lot of variables: business with losses in a bank, with growth in the bank, with profits of the bank. Trade-offs were mostly business. But we never had to trade off or think of ‘how do we manage the health of our employees or customers?’ when we had to take a decision.

As a business leader, the simplest answer is: how do you protect the health of employees completely, and then take decisions that are good for the institution.

In tough times, the simple answer is to shut everything down. But, banking is an essential service. Bankers are COVID warriors too, not maybe in the league of doctors, healthcare workers, the police and others. If you create a ladder, we’ll probably be stacked in the third or fourth rung.

But they are COVID warriors who have to keep the branches open. In this crisis, the last thing that we want is people to feel insecure about their money and not have access to their funds. Keep the technology going, keeping the systems online. It has been a very tough phase because of the combination of variables we are dealing with.

What are some of the business innovations that have kept the company agile?

I found a few things interesting in my transition from an urban upper middle-class business—we are talking about affluent customers—to a rural base of pyramid customers or financial inclusion customers.

I found an interesting trend. Normally, you would think that there is more innovation in the former because technology is more easily understood or used by affluent customers. But, the level of innovation in that products segment is not very high. A lot of products are sold the way they are sold because the need to introduce technology is lower.

In financial inclusion, the customers are not as innovation savvy. So, products must be kept simple. But there are two or three fundamentals why business has to be done differently—ticket size or the value of business is very small. So, when you do business, you’re doing it at a very small transaction value.

That also means if your operating cost of doing business is not very small, you will never be able to make any profit on the business. We must get to a point where you automate or apply technology so much that we can bring the cost down to a level where the transaction still remains positive.

We’re dealing with very small loans, hence very small instalments, which forces us to automate and use technology. The second reason why we just cannot do without technology is we do millions of transactions a month.

We have lakhs of new customers and are servicing millions of customers every month. So, this space has far more opportunities to innovate than even the urban space. Fincare is a digital-first bank because we do not have any back office in our bank. We don’t do data entry. Everything happens from the front.

It is a bank that has leveraged Aadhaar as a service to the core, where we do eKYC of our customers, but all the work happens in the tablets that our employees carry. And they just talk to our core banking systems through the digital solutions to onboard customers. We do not have a plethora of people doing data entry.

This is the way accounts are opened, loans are disbursed. The moment you extend that, everything is done through a digital solution for the customer. The only difference is here, the customer is not using a digital solution. We have employee-led digital solutions.

The process is fully digitised. The bank is fully digitised. We can do cash withdrawals, cash deposits, and virtually every service at the doorstep of the customers. Because we are bringing the bank in the tablet. When an employee brings it through a tablet, he brings the full plethora of banking services. So, this space lends itself to innovation, and we saw it coming even before the banking phase. As a non-bank, we were fairly digitised in some of the work we did.

We quickly latched on to all these solutions, built the solutions inhouse because there are no readymade answers in the market. You need to have your own talent. You build the solutions, and then give it to the customers.

This is the way the bank got built up. And once we got into a crisis, this became the fulcrum of how Fincare operates and does business.

As we recover, how are you preparing yourselves? What are your plans going forward?

As leaders, we have been exposed to so many crises in our working careers that we are applying some basic principles of how to come out of the recovery.

When in the middle of a crisis, the natural reaction is to address the crisis. But to address a crisis, it doesn’t take months—you need to work limited hours of the day or a few weeks initially. In a large mature business, the answers to manage the crisis are very crystallised. There is the question of execution. 

One, the institution should never get bogged down with thinking about the crisis in the middle of the crisis. Focus on it for a little while—but you cannot be paralysed by a crisis for three to six months.

Clearly, there will be an end to the crisis. The question is over the timing of it. Good business leaders need to do the tradeoffs with the risk questions that come up in the middle of the crisis. Should you be investing at this point? Should you be betting on a new product? Should you be hiring at this point of time? Fundamentally, there is no one answer.

Every answer is customised to the business you are in, to the industry you are in, and then to the specific institution you are in. Because everybody has a unique element, and one size does not fit all.

So, first judge the risk element of it. If you do business, how will the risk play out? How will the incremental business remain stable on its lost performance? But it takes a little while—sometimes, you must wait for one or two months for the crisis to be playing out to see how long the crisis will go.

Will it go to a higher level before it improves? The forward answers cannot be framed in the first two or three weeks. The first few weeks are for crisis management. But the forward answers become either a one-month forward or two-months forward kind of window, depending on the kind of crisis you are dealing with.

In that framework, Fincare has been lucky that we have reached a point where we can think of expanding our branches. We are expanding our branches at this point of time. We are putting up new branches. We are actually hiring.

From March 2020, when the first lockdown started, we have added 15-20% people in this period. Besides, investing in the core business and technology solutions. Because we know, this is the phase to build things out without the pressure of a very strong timeline.

So, we are keeping the future in mind—six months away or 12 months away. But clearly, we are making investments in all directions—be it people, infrastructure, digital frameworks. Those investments will be needed.

What are the efforts you have made for Fincare’s employees?

Again, there are two dimensions to this. One is straight employment-based actions. The other are health-based actions. Both aspects are of a very different scale in this crisis.

Firstly, once you realise that this crisis in finite, it doesn’t have a permanent negative impact on the business which we are in. In financial services, there will be some impact to a portfolio or new businesses in the next three or six months. But the crisis doesn’t fundamentally have a permanent negative impact on the business.

The moment a bank is in that position, you can take all the right calls. Our board of directors has been absolutely aligned to this thinking.

There is no question of reducing headcount in this phase. We only increased headcount. We had a very normal increment cycle last year, and a normal bonus cycle in the previous financial year.

We did not step away from doing that last year. And we are following the same principles this year. Coming to the things that employees needed from an employment perspective, two questions come up—do I have my job, and will I get my bonus and increments, or will that be cut? We said we can run a normal increment cycle.

So, the confidence that we are in a business which has short-term impact of a few months, as opposed to a permanent impact which means reconstruct the institution in its current form—we took all those calls. And once the team members had that clarity of thought and conviction, they did wonders in the crisis. How they solved the bank’s problems, and how quickly they did that for us to be at a good point after COVID 1.

The other element is on the health side of it. COVID-19 did not hit the bank from a health perspective that hard. We had to manage 100-200 COVID-positive cases, which was easily manageable.

But we have been totally tested in this phase of what we can do in the second wave. In this phase, it has been about how to ensure we prevent illness, how do we beat the illness, even if it’s immediate or extended family members of bank employees.

We helped create a whole medical infrastructure—buying medicines, oxygen cylinders, and using our full power to try and get somebody a bed. This is a service we are providing to every single employee in 400 locations for them and their family members. This phase has been about humanitarian work.

From your CEO playbook, what are some of the things that have worked for you?

Every CEO and leader has a playbook which overlap in their own ways. First, stop grieving about the fact of why we got there. When you’re there, you are there. What is it? Can you quantify it? And can you put your arms around it?

We have ‘X’ amount of business at risk, ‘X’ amount of capital at risk, because whoever you deal, the question that will get asked is, ‘How bad can it get?’ 

And from the variables, you are judging how bad it can get. So, the first thing to do is get your arms around it and quantify it. 

After that, the problem becomes simpler because an unquantified crisis is what gives every human being discomfort. So, the moment we quantify it—it takes a few weeks to assess the scale of the crisis. Getting that closure is very important. That leads us to the root causes, and actions to be taken.

From a soft skills perspective, communication upwards and downwards must increase dramatically. Talking to team members, and a leader should be seen in a crisis. But I also have a clear learning in my career when it comes to upward communication because you are running a certain business which is in a crisis. And your shareholders or directors—or in an MNC, global leaders—do not have an appreciation of it. Here, the leader muct be more proactive in keeping stakeholders engaged.

In normal times, it is OK to delegate things. But in abnormal times, the integration must be greater.  So, communication—upward and downward—is key.

Third, it helps to get the team aligned in a crisis. It gets very naturally aligned because everybody comes together in a crisis. But getting your own leadership team or the team downwards aligned to what the specific problem is and what the specific solution is. 

Focus on the three things—not 50 things—that will make an impact, getting the buy-in on that, and the team aligned to that is very important. This helps in ensuring that everybody is doing a few things right.

After that, there is a lot of data, numbers, MIS and technology support tools that are very specific. But to get the whole wherewithal going to make it work.

Because a crisis is not solved by one single bullet. It requires 100 different things. In a crisis, you have to forget that you have a five-day week job or six-day week job. It becomes a seven-day week job, and you should be ready for it. It is a contract we have with ourselves: in good times, nobody questions us when you don’t work late hours. But in a crisis, it requires extraordinary effort to work through a crisis for one to three months.