Banking & Financial Interventions to Boost
Manufacturing in India
Khushnama Davar (MD & Head Transaction Banking Sales)
Rajat Bahree
February 2015
(Director, Transaction Banking Sales)
Key Themes Covered
1.
Innovative Solutions around bridging Working Capital Gaps– Banks perspective and
plans
2. Use of Information Technology to speed up and streamline delivery of
Working Capital Solutions
3. Facilitating International Trade
Looking Forward: Our Clients’ most Common Priorities
•Diverse collection points and instruments
•Convenience and ease
of placing and
redeeming deposits
•Access to broad range
of investment options
•Incomplete reference
information
•Finality of settlement
•Unmatched items
requiring manual
reconciliation
Order to cash
•Balancing safety,
liquidity and yield
Offer
Order
Invoice
Collect
Reconcile
Treasury management
•Sub optimal use of
liquidity due to trapped
or idle cash
Liquidity management
Investments
Risk management
Forecasting
•Inadequate central
controls
•Cumbersome intercoloan tracking
FX management
Funding
Trade finance
Account management
•Incomplete and nontimely visibility of
cash positions from
various subsidiaries
•Manual, error prone
process for
consolidating cash
flow from
subsidiaries
•Inaccurate sales
forecast and AR/ AP
positions
Procurement to pay
•Account receivables
and account payables
timing do not match
Purchase
order
Receive
invoice
Accounts
payable
• Multiple bank
accounts, multiple
statement sources and
formats
Payment
Reconcile
•Increased need for
working capital
• Managing multiple payment instruments, cut-off times
and settlement dates
•Inability to fully centralise all payments (e.g. tax
payments)
• Finality of settlement
•Tracking and enquiring payment status
•Cumbersome account
opening change
process
Linking your Objectives to your Working Capital Needs
Sales
 Funding requirements (as liquidity tied up in
receivables) to expand sales
while managing buyer risk (Credit and
Country risk)
Order
Cash /
Capital
 Avail innovative solutions like
Vendor Prepay and Bank Payment
Obligation.
 Rationalise Multiple accounts in
multiple locations (across clearing
zones in India)
 Competitive source of finance for buyers/
distributors to Support Sales growth
Receivables
Seamless
access and
Information
 Optimize returns on
trapped cash & increase control
and visibility
Raw
Material
Stock Holding
Production
 Payment to suppliers / vendors
in India & Abroad
 Free up liquidity tied up
in inventory
Finished
Goods
Work in
Progress
 Financial support for
manufacturing operations
4
Automated Financing for Suppliers (Vendor Prepay)
View receivables
View your payment instructions
You
1. Post dated Payment file
2. Request for finance
Supplier
(s)
(SCB purchases the
receivable from supplier)
3. Pre payment of the all/ selected
accepted invoices with advice
Objectives

Automated reconciliation of
payables

Cheaper source of finance
to suppliers

Reduction in DPO
4. Debit account & Update ERP on payment
effected
5. Liquidate asset OR payment to
supplier for non discounted invoices
Financing your suppliers based on our relationship with you..
Benefits to you
Why SCB
 Best Supply Chain Finance
Provider in Asia – Global
Finance

Based on our relationship, your suppliers will have access to alternative source of working
capital. You may be able to extend your DPO

Reconciliation of payables and automated processes ensure that you know when payments to
your suppliers need to be made.

Providing cheaper source of finance to suppliers and improving their liquidity helps create
more sticky and long term relationship with suppliers.
5
Procuring through Bank Payment Obligations
Letter of Credit
vs
Bank Payment Obligations
Contract
• Quicker process as it focuses only on
data relevant for financing
• Can be added at any time, for any
amount value
• Sellers gain certainty of the timing of
cash flow and can improve liquidity
forecasts
• Sellers may use BPO to get pre-/postshipment finance through their own
bank
• Sellers can offer commercial incentives
Data
Advice
Letter of
Credit
Buyer
Documents
Bank Payment
Obligation
Seller
Data
• Electronic presentation of data instead
of physical documents - Improve
quality and objectivity of compliance
verification
Seller
Documents
Application
Compared to Letters of Credit
Documents
Buyer
Contract
Documents
Data
Issuance
LC
Advising
Bank
LC
Issuing
Bank
BPO
Obligor
Bank
Payment
BPO
Recipient
Bank
Payment
Benefits to you
Operational Efficiency - Faster access to documents to take delivery of goods as documents bypass the banking
channel. Quicker resolution of deviations (Amendments) as both buyer and seller interact on an online portal,
Straight2Bank. Faster clarification on discrepancies. Documents of title can be received directly. Faster turnaround time
through initiation of import transactions electronically and timely execution and coverage of data reconciliation
Risk management - Quicker assurance for buyers in terms of security of supply with increased visibility
Cost Savings - With the ability to add payment commitment later in the transaction lifecycle, cost savings can be
achieved as the BPO issuance costs applies only to the tenor the BPO is issued for. Lowered banking costs due to the
removal of hidden costs associated with traditional documentary trade. More efficient use of the banking credit lines as
a result of Increased flexibility.
6
Rationalize Account Structure, Optimize Trapped Cash &
allow visibility and control
Cross Border Interest Optimization*
UK C/A
UK C/A
UAE C/A
UAE C/A
USD
GBP
USD
AED
Objectives:



R
Rationalise Multiple accounts in
multiple locations (across
clearing zones in India)
Optimize internally generated
cash
Increase overall control and
visibility
USD
R

GBP
R
GBP
R
USD
R
R
USD
R
AED
R
AED
R
UAE
Local Sweep
Sweep via Multi party entrustment loan
Interest optimization
(Cross- City specific approvals might be required)
A/cs participating in notional aggregation (Interest optimisation not allowed)
One of the largest foreign
banks in India with
branches across multiple
cities.
Best bank for Liquidity
Management in Asia,
Africa & Middle East
(Global Finance award)
USD
R
R
UK
Why SCB

R
Benefits to you

Rationalise the number of Accounts held across cities within India from a single bank

Maximize the interest earned on net credit balance by domestic sweeping (3rd party bank
sweeping not permitted by regulation in India)

Notional Aggregation or Cross Border Sweeping for overall Control & Visibility and monitoring
7
purposes. (Interest optimization not allowed due to regulation in India)
Managing Payment efficiency through Multiple Purpose Driven
Choices
Multi – Print sites
File / Data
Transfer
Cheque
Print
File
Host to Host
Infrastructure
connection to Client
Cheque Print Sites
Onsite
Cheque
PrintingClient PC
Client
Prints
out
Cheques
Domestic
Supplier’s bank
Electronic
Client Sends Payment
Instruction (pay type) to
Straight2bank
Objectives


Client
Centrally Manage Multilocation Supplier Payments
Automate the payment
processes & administration
and save on costs
 Ability to offer innovative solutions
like Onsite Check Printing, 24 hour
book transfers, NACH, corporate
cheques on SBI stationary and IMPS.
ACH /Pay &
Direct settlement to Beneficiary bank
- - -NEFT network (SCB is a direct
Clearing member)
Beneficiary
RTGS
Overseas
Supplier’s bank
Reports
& Alerts
Route through
SWIFT network
Correspondent
bank
Beneficiary
Treasury Transformation
Benefits to you
Why SCB
 SCB provides electronic access to a
fully automated ACH and RTGS
payment capability to more than
60,000+ branches / 90+ banks
Payments

Enjoy float as account debited only upon cheque presentment

Centrally manage Multi-Location Supplier payments for faster turnaround time- Our
Straight2bank provides this automated capability.

Electronic Payments support payment to India wide ACH /RTGS connected branches and
Cheques through our direct clearing membership in India

Automation of payments via Straight2bank
8
…and Preventing Cheque frauds with “Positive Pay”
Corporate submits cheque issuance
information to
Bank Provider
Bank provider matches issuance
information to those presented to
the bank by the clearing house for
payment
Objectives


Beneficiary
Client
Centrally Manage Multilocation Supplier Payments
In the event of a mismatch, the
information will be presented to the
corporate for verification
Automate the payment
processes & administration
and save on costs
Beneficiary
We offer you
Why SCB
 SCB provides electronic
access to a fully automated
ACH and RTGS payment
capability to more than
50,000+ branches / 84+
banks
 A market leading cheque fraud prevention tool in Asia
 A secure mechanism with verification on:
– Cheque number and date
– Debit and credit account numbers
– Beneficiary name and amount
9
Monetize Your Receivables for Open account Sales and manage
buyer & country risks
Objectives


Funding requirements (as
liquidity tied up in
receivables) while ensuring
that we Mitigate Buyer
(Credit & Country risk)
Credit Insurance
SBLC
Internal Limits
Import Factors
X
Benefits to you
Manage Collections risk
Why SCB


Strong partnerships with
Insurance and
correspondent factors

Off-balance sheet funding solution and an option of a ‘With recourse’ or “without recourse”
solution, Additional benefit of credit protection.

Cash upfront and flexibility in funding
Best Supply Chain
Finance Provider –
Global Finance

Ability to offer competitive deferred payment terms to Your Buyer, potentially allowing you to
increase Sales

Control over collections from a widespread number of Buyers

Robust monitoring process for buyer payments and reconciliation of account receivables
10
Providing Short Term Pre-Shipment Financing for Supporting
Manufacturing Operations
Dispatches Purchase Order (PO)
1
Dispatches Invoice, B/L and other documents
4
4a
You
Funding against PO
Objectives


2
Financial support for
manufacturing operations
Buyer
Copy of
documents
to bank
Payment
on due
date
6
3
Lower cost on FCY loan
5
Copy of Purchase Order
Conversion to
Post Shipment
Finance
Why SCB


Benefits to you
Robust and liquid balance
sheet

Lower cost on FCY loan booking as compared to local currency financing in India.
Liquidity available in US $

Available in INR as well as FCY

Helps to maintain a better cash flow for your business as financing is available against every
confirmed export order.

Eliminates currency risk between receivables and bank payables
11
Buyer & Country Risk Mitigation - LC Confirmations
With trade finance limits on over 1700 banks in over 100 countries, Standard
Chartered offers various flexible solutions to help mitigate issuing bank and
country risk for the countries that you export to.
LC Confirmation Foot Print (countries and # of banks)
Objectives


Coverage of Buyer Credit
Risk

11
Coverage of Country Risk
Why SCB

304
26
83
37
148
118
113
92
29
Strong presence in more
than 90+ countries with
1,600 branches
8
Trade finance limits on
over 1700 banks in over
100 countries
Benefits to you
Standard Chartered offers various flexible solutions to help mitigate issuing bank and country risk
for your Export transactions
12
12
Monetise Inventory to free up liquidity
Objectives

Financing that will free up
liquidity tied up in inventory

Take advantage of
favourable market
conditions to build
inventory to maximise
profitability
Why SCB


Deep local presence in
more than 90+ markets in
Asia, Africa and the Middle
East
Footprint in the key
commodity countries
Benefits to you

Access to incremental financing on the back of the collateral with lesser reliance on balance
sheet

Able to build inventory when conditions are favorable

Flexibility in amount of financing as it is tied to the market value of the commodity
13
Supporting your Sales Growth by funding your Distributors
Goods + Bill + Invoice
1
You

Funds
Competitive source of
finance for distributors/
buyers

Buyer
buyer in case
of default
4
Ability to grow sales
One of the leading
International banks to
offer buyer finance in
India .
Best Supply Chain
Finance Provider in Asia
– Global Finance
Repayment on
due date
Accepted Bill +
Invoice
Why SCB

2
 Contacts
3
Objectives

Accepted Bill + Invoice + Transport
Docs
Benefits to you

Increasing your sales by financing your distributors/ buyers (providing liquidity to your
distributors/buyers)

Helps create more sticky and long term relationship with the buyers

Upfront conversion of receivables into Cash

Reduced cost of collection
14
Improving your Collections efficiencies through Virtual Accounts
We offer you
 Single Virtual Account (across
paper/electronic and local and
foreign currencies) standardises
the cash application process
across payment methods,
currencies and markets
 Flexible Virtual Account
options facilitating seamless
implementation since your
Buyer ID is used as the Virtual
Account
 Enhanced reporting including
buyer name or
invoice/reference number
 Integrated bank statement
becomes a single source of
transaction information such as
payer reference
Part A identifies client’s account
Part B identifies the Payer
Benefits to you
 Immediate and unique payer level identification
 Achieve faster reconciliation, reduce Day Sales Outstanding (DSO)
 Increase sales by releasing client credit lines quicker
 Reduce manual processing through straight-through cash application
15
Ability to Automate Reconciliation using Artificial Intelligence
We offer you
Self-identification of automation
opportunities
Powerful pattern recognition:
automate data extraction and
enrichment from unstructured
information
Learn from experience; AND
manual actions performed on
unmatched transactions
Give suggestions with indicative
confidence level, allow user to
accept or reject
Benefits to you
Artificial Intelligence: learns from manual processing and incorporates the learning in subsequent runs
Automated reconciliation: ensures that receipts are automatically reconciled against outstanding invoices
Powerful pattern recognition tools: automate data extraction and enrichment to capture human provided
information
Advance exception management: triggers workflows, auto identifies, queues, tracks and monitors exceptions to
expedite exception resolution
Analytics Dashboard: provides slicing and dicing of data-dimensions with drill down on areas of focus.
16
Migrating Distributors to NACH debits
1NACH File
2File
validatio
n
ERP
Client
10
9
Back Office systems
Validation of mandates and
confirmation of successful
upload
3
Uniformity
• Central eco system for electronic
payment
Reverse file
8 forreturnsuccess /
• Pan India access to all participants
4
Debit Dealer /
Distributor
5
Destinatio
n bank
• Standard operating and business
rules pan India
Accessibility
File
distributio
n
NACH Clearing
System
7
Confirmation
of debit /
return
/
6Debit
Reject
Benefits to you
• Process file based transactions
 Reduction in bank accounts since NACH allows pulling of funds without opening an additional
account
Security & convenience
 Migrating to electronic collections in its entirety.
• Web based Centralized solution
with in-built security features and
multi-level data validation facility.
 Existing bank accounts of dealers can continue with the convenience a one-time mandates to
their existing bankers
• Web based Mandate Management
module along with on-line Dispute
Management module
 Operational efficiency since no housing, monitoring or lodgement of physical cheques into the
system
17
Standard Chartered
Standard Chartered Bank - 160+ year history across emerging markets
We bank the people and companies driving investment, trade and the
creation of wealth across Asia, Africa and the Middle East.
Financial Robust and liquid balance sheet,
strongly capitalised and predominantly
Strength deposit funded franchise
11.8%
76%
Core tier 1 capital ratio
Advances to deposit ratio
A+/A1/AA-
S&P/Moody’s/Fitch
Credit Ratings
4%
Trading assets to total assets
Unrivalled presence in growth markets
of Asia, Africa and the Middle East
Dynamic
Markets Present in Australia, Europe and the
Americas to facilitate cross-border
transactions.
Deep local International network with local
knowledge
knowledge Providing access to markets, assets
and capital across our footprint
132
Nationalities
A diverse group of people
challenging the norm to generate
value for you
Customised, value-added solutions to
meet your needs across the spectrum
Client
Spectrum Here for good: We stay open for our
clients, even in difficult times.
Global Reach - Over 150,000 touch points across 90+ markets
 Standard Chartered has a network of over 1,200 own branches and outlets in 40+ countries across Asia, Africa and
Middle East providing transaction banking services
 Through our branches, outlets and partners we have over 150,000 touch points across 90+ markets across the globe
COUNTRY BREAKDOWN
Botswana
18
18
China
104
66,156
Ghana
28
110
Hong Kong SAR
78
900
100
46,946
Indonesia
26
1185
Kenya
39
139
Malaysia
39
40
Nepal
15
15
Nigeria
44
1328
116
2,516
18
c.750
India
Pakistan
Singapore
South Korea
302
331
Taiwan
88
c.11,275
Thailand
26
c.11,140
Uganda
12
63
United Arab Emirates
11
c.110
Zambia
21
103
Zimbabwe
26
26
20+ Other Presence
138
10,524
Countries
40+ Non Presence
1,093
Countries
Total 90+ countries
1200+
150,000+
Branches, implants, subsidiaries and offices of
SCB PLC
Total touch points including partners
Franchise country with partner banks
Origination country with alliance banks
Franchise country without partners
Origination country without alliance banks
Non presence country with alliance banks
Our aspirations
Relationships
► Build trusted relationships with the people, companies and institutions shaping our
markets’ future
Investment
► Play a leading role in facilitating investment and deepening financial markets in our
economies
Trade
► Become the undisputed leader in commercial payment and financing for and in Asia,
Africa and the Middle East
Wealth
► Be recognised as a leader in growing and protecting our clients’ wealth
Relevant scale
► Establish sufficient scale, balance sheet and franchise strength to be relevant and
influential in our key markets
Financial strength working for you
Financial highlights
For the six months ended 30 June 2014
Capital and liquidity metrics
Reported results
Total capital ratio
Profit before tax
17.3%
(CRD IV)
H1 2013: 16.9% (Basel II) /
H2 2013: 17.0% (CRD IV)
Common Equity Tier 1 (CET1) ratio
10.5%
(CRD IV)
$3,268m
H1 2013: $4,088m /
H2 2013: $2,870m
Strong credentials
Primary listings in
London,
Hong Kong and Mumbai
Credit ratings
A+/A1/AA-
top 20
in FTSE 100 Index
(S&P/Moody’s/Fitch)
Loans and advances to customers
H1 2013: 11.4% (Core Tier 1 ratio – Basel
II) /
H2 2013: 10.9% (CET1 ratio – CRD IV)
$305bn
Advances-to-deposits ratio
H1 2013: $292bn /
H2 2013: $296bn
78.1%
Customer deposits
We bank the people and companies driving
investment, trade and the creation of wealth
across Asia, Africa and the Middle East.
H1 2013: 76.6% / H2 2013: 75.7%
CET1 ratio (end point basis)
$391bn
H1 2013: $381bn / H2 2013: $391bn
10.7%
(CRD IV)
Liquid asset ratio
30.5%
H1 2013: 28.3% / H2 2013: 29.8%
Credentials
22
Well-positioned for future growth
Confidence in the growth prospects of our
markets
Our global market position and share (%)
1
2013-2019 forecast GDP and trade growth (CAGR%)
8.6%
6.8% 6.5%
6.4%
7.7%
2
#2
6%
4.1% 5.2%
3.9%
3
10.8%
8.2%
4.5%
7.0%
#2
10%
3.5%
6.4%
3.9%
3.0%
4
#7
5.7% 6.2%
7%
5.2% 5.2%
“Here for good is about our commitment to our customers, our
1
2
Source: Market Research, International Monetary Fund; Oliver Wyman, Standard Chartered
analysis: 3 Thomson Reuters; 4 CHIPS, as at 30 Sept 2014
markets and ourselves. It is us at our best.”
Peter Sands
Group Chief Executive
Our Capabilities: Transaction Banking
Local expertise + Global capability ► Full range of innovative solutions
Transaction Banking
Cash Management
Trade Finance
•
•
•
•
• Letter of Credit Issuance
• Import and Export Financing
• Open Account Trade - Supply Chain Financing, Receivable services,
Structured Warehouse Financing
• Trade Guarantees
• Bank Payment Obligation (BPO)
• Bill Discounting on Buyer Risk (BDBR)
Payments (Domestic & Cross-border)
Collections (including Mobile)
Liquidity management
Account services
Securities Services
Electronic Channels
•
•
•
•
•
•
•
•
•
•
Custody and Clearing
Fund Accounting Services
Escrow Services
Derivatives Clearing Services
Securities Lending & Borrowing Services
Qualified Foreign Investors (QFIs)
Web (Cash, Trade & Custody)
H2H (Cash)
ERP Integration (Cash & Trade)
Expertise in SAP XI and Oracle e-business suite (Cash)
Network: Own branch nearly double of nearest foreign bank, Largest Correspondent Bank
tie-ups in India
Trade Corridors: Ability to provide solutions across geographies. Helping clients manage cross-border supply chains
and banking relationships smoothly
Full capability on RMB including LC issuance, Advising and Remittances
Recent Awards
Euromoney Awards
Global Finance Awards
Best Transaction Services House in Africa (2014)
Best Global Integrated Trade, Supply Chain Finance and
Best Transaction Services House in the Middle
Cash Management Solutions (2013 - 2014)
East(2014)
Best Supply Chain Finance Provider in Middle East
Best Structured Products House (2014)
(2014)
Best Bank in Zambia (2014)
Best Sub custodian Bank in India (2014)
#1 African Currencies (2014)
Bank Sierra Leone, Gambia and Cote d’Ivoire (2014)
The Banker Transaction Banking Awards
Best Consumer Internet Bank (Global, Africa) (2014)
Best Global Transaction Bank (2014)
Best Transaction Bank for Cash Management (2014)
Best Transaction Bank from Europe (2014)
The Asset Triple A Awards
Financial World Innovation Awards
Best in Working Capital and Trade Finance (2013 -
Winner: Innovation in Cash Management or Treasury
2014)
Services for Straight2Bank Liquidity
Best Transaction Bank (2013)
Disclaimer
This material has been prepared by Standard Chartered Bank (SCB), a firm authorised by the United Kingdom’s Prudential Regulation Authority and regulated by the United
Kingdom’s Financial Conduct Authority and Prudential Regulation Authority. This material is not research material and does not represent the views of the SCB research
department. This material has been produced for reference and is not independent research or a research recommendation and should therefore not be relied upon as such. It
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particular person.
Information contained herein, which is subject to change at any time without notice, has been obtained from sources believed to be reliable. Some of the information
appearing herein may have been obtained from public sources and while SCB believes such information to be reliable, it has not been independently verified by SCB. Any
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its affiliates may at times seek to do business with the companies covered in this material; hold a position in, or have economic exposure to, such companies; and/or invest in
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Appendices
Partnering in your Treasury Transformational Journey
Company Objective
Optimsation
Deliver
Banking
Services
Internally
Centralise
payments
ROB/
collections
Control
Actively
manage debt,
FX, liquidity
Coordinate
cash mgt,
funding, FX
SSC / Payments
Factory
Basic visibility over
positions
In-House
Bank
Full Service
Treasury Centre
Visibility
Basic Treasury
Centre
Decentralised
Degree of Sophistication