I have been working on various types of Software throughout my professional career. Heck, I even have a patent or two in Software. I know how hard it is to replace an existing, robust software product that has served the customer well for many years. Then explain this to me… Laser Soft’s Core Banking solutions product, that cost the customer Rs.40 crores over a period of 12 years, including maintenance and support, was replaced by allegedly a lesser capable, more expensive software called Finacle by Infosys that had a one-time cost of Rs.380 crores and would end up costing the customer around Rs.1000 crores over a period of ten years. Yes, the big banks of India replaced a perfectly functioning software product with another that cost 25x (25 times) the price! If this happened in the United States, the entire Corporate Suite of the buying company will be sacked and the company will have shareholder lawsuits by the dozen! But this is India, most banks are Public Sector owned and the chief executive most likely did not know what “benefits” he or she was getting from the new product.
The inspiring story of Suresh Kamath
Suresh Kamath of Laser Soft made his mark as an entrepreneur who was interested in creating employment opportunities to thousands of people. He started with Rs.200 and five people in 1986 in Chennai and after 23 years of growing it, sold his company to Polaris Software in 2009 for Rs.52 crores ($11 million) in an all-cash deal. During this time, he built up an impressive clientele of Banks to whom he sold Core Banking Licenses at a cost of INR 3.5crore (35 million) and these Core Banking licenses were deployed in thousands of branches. The software Laser Soft sold was robust, complex and contained several checks and balances to ensure that no errors slipped through.
At the time of acquisition, Laser Soft had proven solutions in Core Banking, Trade Finance, Treasury, Cash Management, Mutual Funds and Loans serving over 50 customers including leading banks such as Corporation Bank, State Bank of India, ICICI Bank, Mashreq Bank, Catholic Syrian Bank, Andhra Bank, EXIM Bank of Tanzania and KEP Trust, Kosovo. The solutions won several Best Technology Awards consistently for their ability to deliver high-performance banking at the lowest total cost of ownership.
Why was Finacle bought?
Perhaps the geniuses who made the decision to buy this software can explain this question. When a replacement product costs 25 times the product it is replacing and does not have simple checks and balances, it can only mean that there were other factors in play while making this decision. What factors you ask? Over-invoicing a product is a euphemism for a bribe. I am not saying that is what happened but look at the consequences now…
A Banking Software expert I talked to said that Finacle allows a user to make a credit entry without creating a corresponding debit entry! If this is true, then god save the users!
A senior banking specialist who has been in this field for over 25 years said that Laser Soft’s offerings were robust, with high-end security features and it regulated all activities ensuring that all approvals were taken. Their only fault was that they priced it very low and the Head honchos at the big banks felt that they needed software that cost 100s of crores. A reliable source in a big bank confided in me that Finacle software has been installed on their computers and even after 3 years, was still buggy and limping along.
Who were all involved?
It is laughable to say that only two individuals of PNB were involved in this scam. Several release control mechanisms have to be executed before a Letter of Undertaking (LoU) can be issued. This kind of a bypass of the Core Banking System could have happened only with the collusion of several individuals, including key officials at the Reserve Bank of India, Ministry of Finance (such as Secretary-Banking) etc. According to this senior banker, there is no way a Secretary in FinMin would have approved it without the Minister’s approval. Who were the Finance Ministers? Messrs. Palaniappan Chidambaram and Arun Jaitley. They must explain how this happened on their watch. Dr. Subramanian Swamy, a member of Rajya Sabha echoed similar sentiments:
— News18 (@CNNnews18) February 17, 2018
Are Diamonds forever? Nirav Modi may disagree.