An Introduction to the Banking Sector in India

7/27/2019 An Introduction to the Banking Sector in India

1/56

AN INTRODUCTION TO THE BANKING SECTOR IN

INDIA

Banks are the most significant players in the Indian financial market. They are the biggest

purveyors of credit, and they also attract most of the savings from the population. Dominated by

public sector, the banking industry has so far acted as an efficient partner in the growth and the

development of the country. Driven by the socialist ideologies and the welfare state concept,

public sector banks have long been the supporters of agriculture and other priority sectors. They

act as crucial channels of the government in its efforts to ensure equitable economic

development.

The Indian banking can be broadly categorized into nationalized (government owned),

private banks and specialized banking institutions. The Reserve Bank of India acts a centralized

body monitoring any discrepancies and shortcoming in the system. Since the nationalization of

banks in 1969, the public sector banks or the nationalized banks have acquired a place of

prominence and has since then seen tremendous progress. The need to become highly customer

focused has forced the slow-moving public sector banks to adopt a fast track approach. The

unleashing of products and services through the net has galvanized players at all levels of the

banking and financial institutions market grid to look anew at their existing portfolio offering.

Conservative banking practices allowed Indian banks to be insulated partially from the Asian

currency crisis. Indian banks are now quoting al higher valuation when compared to banks in

other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems

linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are

nimble footed in approach and armed with efficient branch networks focus primarily on the high

revenue niche retail segments.


2/56

The Indian banking has finally worked up to the competitive dynamics of the new Indian

market and is addressing the relevant issues to take on the multifarious challenges of

globalization. Banks that employ IT solutions are perceived to be futuristic and proactive

players capable of meeting the multifarious requirements of the large customers base. PrivateBanks have been fast on the uptake and are reorienting their strategies using the internet as a

medium The Internet has emerged as the new and challenging frontier of marketing with the

conventional physical world tenets being just as applicable like in any other marketing medium.

The Indian banking has come from a long way from being a sleepy business institution to

a highly proactive and dynamic entity. This transformation has been largely brought about by the

large dose of liberalization and economic reforms that allowed banks to explore new business

opportunities rather than generating revenues from conventional streams (i.e. borrowing and

lending). The banking in India is highly fragmented with 30 banking units contributing to almost

50% of deposits and 60% of advances. Indian nationalized banks (banks owned by the

government) continue to be the major lenders in the economy due to their sheer size and

penetrative networks which assures them high deposit mobilization.

The Indian banking can be broadly categorized into

nationalized, private banks and specialized banking institutions.

The Reserve Bank of India acts as a centralized body monitoring any discrepancies and

shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The

nationalized banks (i.e. government-owned banks) continue to dominate the Indian banking

arena. Industry estimates indicate that out of 274 commercial banks operating in India, 223

banks are in the public sector and 51 are in theprivate sector. The private sector bank grid also

includes 24 foreign

banks that have started their operations here.

The liberalize policy of Government of India permitted entry to private sector in the

banking, the industry has witnessed the entry of nine new generation private banks.The major

differentiating parameter


3/56

that distinguishes these banks from all the other banks in the Indian banking is the level of

service that is offered to the customer. Their focus has always centered around the customer

understanding his needs, preempting him and consequently delighting him with various

configurations of benefits and a wide portfolio of products and services.These banks have

generally been

established by promoters of repute or by high value domestic financialinstitutions.

The popularity of these banks can be gauged by the fact that in a short span of time, these

banks have gained considerable customer confidence and consequently have shown impressive

growth rates. Today, the private banks corner almost four per cent share of the total share of

deposits. Most of the banks in this category are concentrated in the high-growth urban areas in

metros (that account for approximately 70% of the total banking business). With efficiency being

the major focus, these banks have leveraged on their strengths and competencies viz.

Management, operational efficiency and flexibility, superior product positioning and higher

employee productivity skills.

The private banks with their focused business and service portfolio have a reputation of

being niche players in the industry. A strategy that has allowed these banks to concentrate on few

reliable high net worth companies and individuals rather than cater to the mass market. These

well-chalked out integrates strategy plans have allowed most of these banks to deliver

superlative levels of personalized services. With the

Reserve Bank of India allowing these banks to operate 70% of their businesses in urban areas,

this statutory requirement has translated into lower deposit mobilization costs and higher margins

relative to public sector banks.

PEST ANALYSIS

TECHNOLOGICAL ENVIROMENT

Technology plays a very important role in banks internal control mechanisms as well as

services offered by them. It has in fact given new dimensions to the banks as well as services that


4/56

they cater to and the banks are enthusiastically adopting new technological innovations for

devising new products and services.

The latest developments in terms of technology in computer and telecommunication have

encouraged the bankers to change the concept of branch banking to anywhere banking. The use

of ATM and Internet banking has allowed anytime, anywhere banking facilities. Automatic

voice recorders now answer simple queries, currency accounting machines makes the job easier

and self-service counters are now encouraged. Credit card facility has encouraged an era of

cashless society. Today MasterCard and Visa card are the two most popular cards used world

over. The banks have now started issuing smartcards or debit cards to be used for making

payments. These are also called as electronic purse. Some of the banks have also started home

banking through telecommunication facilities and computer technology by using terminals

installed at customers home and they can make the balance inquiry, get the statement of

accounts, give instructions for fund transfers, etc. Through ECS we can receive the dividends

and interest directly to our account avoiding the delay or chance of loosing the post.

Today banks are also using SMS and Internet as major tool of

promotions and giving great utility to its customers. For example SMS

functions through simple text messages sent from your mobile. The messages are then

recognized by the bank to provide you with the required information.

All these technological changes have forced the bankers to adopt

customer-based approach instead of product-based approach.ECONOMICAL ENVIROMENT

Banking is as old as authentic history and the modern commercial banking are traceable

to ancient times. In India, banking has existed in one form or the other from time to time. The

present era in banking may be taken to have commenced with establishment of bank of Bengal in

1809 under the government charter and with government participation in share capital.

Allahabad bank was started in the year 1865 and Punjab national bank in 1895, and thus, others

followed


5/56

Every year RBI declares its 6 monthly policy and accordingly the various measures and

rates are implemented which has an impact on the banking sector. Also the Union budget affects

the banking sector to boost the economy by giving certain concessions or facilities. If in the

Budget savings are encouraged, then more deposits will be attracted towards the banks and inturn they can lend more money to the agricultural sector and industrial sector, therefore, booming

the economy. If the FDI limits are relaxed, then more FDI are brought in India through banking

channels.

POLITICAL/ LEGAL ENVIROMENT

Government and RBI policies affect the banking sector. Sometimes looking into the

political advantage of a particular party, the Government declares some measures to their

benefits like waiver of short-term agricultural loans, to attract the farmers votes. By doing so the

profits of the bank get affected. Various banks in the cooperative sector are open

and run by the politicians. They exploit these banks for their benefits.

Sometimes the government appoints various chairmen of the banks.Various policies are framed by the RBI looking at the present

situation of the country for better control over the banks.

SOCIAL ENVIROMENT

Before nationalization of the banks, their control was in the hands of the private parties

and only big business houses and the effluent sections of the society were getting benefits of

banking in India. In 1969 government nationalized 14 banks. To adopt the social development in

the banking sector it was necessary for speedy economic progress, consistent with social justice,

in democratic political system, which is free from domination of law, and in which opportunities

are open to all. Accordingly, keeping in mind both the national and social objectives, bankers

were given direction to help economically weaker section of the society and also provide need-

based finance to all the sectors of the economy with flexible and liberal attitude. Now the banks

provide various types of loans to farmers, working women, professionals, and traders. They also

provide education loan to the students and housing loans, consumer loans, etc.

Banks having big clients or big companies have to provide services like personalized

banking to their clients because these customers do not believe in running about and waiting in


6/56

queues for getting their work done. The bankers also have to provide these customers with

special provisions and at times with benefits like food and parties. But the banks do not mind

incurring these costs because of the kind of business these clients bring for the bank.

Banks have changed the culture of human life in India and havemade life much easier for the people.

7 PS of BANKING SECTOR

It is very important for any bank to identify the 7 Ps of services so was understands their

customers better and provide them with best of service. The 7 Ps are:

1. PRODUCT MIX

2. PRICE MIX

3. PLACE

4. PROMOTION

5. PEOPLE

6. PROCESS

7. PHYSICAL EVIDENCE

PRODUCT MIX

The product mix of a company includes all different product lines a company offers to itscustomers. The product line of a bank might easily include more than 100 different services. In

todays competitive scenario it has become very necessary for a bank to provide its customers

with a wide variety of services and the best technology in order to attract them. Here is an

example of some of the products offered by UTI Bank to its customers.

Offering


7/56

UTI Bank's Savings Account is just the right product for everyone, salaried, employees or

businessmen, high net worth individuals and NRI's. The unmatched package of UTI Bank

Savings Bank account given below brings the benefits of better, efficient and hassle free

banking.

ATM Network

A Savings Bank Account with UTI Bank entitles you to a free ATM card, which enables you to

access your account anytime and at any ATM centre across the country. You can withdraw and

deposit money and cheques with your ATM card. Unlike most other ATMs, a UTI Bank ATM

allows you to withdraw up to Rs. 20,000 a day. In addition, cash can be withdrawn from any of

the ATMs against your MasterCard (domestic/international).

7-Day Banking

At select branches spread over the country, you can bank on all the 7 days of the week (except

for public holidays), over extended working hours.

Telebanking

Telebanking service provides you instant access to your account. It offers you a wide range of

services over the phone such as account information, Balance Enquiry, Transaction Details,

Statement of Account, Status of your Cheque , etc.

iConnect-Internet Banking

This is the concept of "the Bank on your desk-top". You can look-up the status of your account,

query and undertake a range of financial transactions, simply by clicking the mouse. Now don't

you think you have a great opportunity to see yourself laughing your way to the bank?

Offering


8/56

UTI Bank has joined hands with Citibank, to give rise to a new kind of card power - unique and

unmatched benefits and international utility at the most competitive rates. The UTI Bank

Citibank International Silver Card, the MasterCard and 'Unique' Card offers quite a few benefits.

Rewards

UTI Bank Citibank Card combines dual conveniences of high purchase power and flexible

payment facility. Purchase of high-value items is now convenient and when it comes to payback

time, your bill can be paid in installments, depending on your financial liquidity at a given

moment. The Revolving Credit Facility lets you pay as little as 5% of your total outstanding

every month. Giving you the power to buy now and pay later in parts!

Dial-A-Draft

One can use your UTI Bank Citibank Card to pay for your personal expenses at places where

credit cards are not accepted yet. Like paying for investments, telephone and electricity bills,

school fees and much more. Just call CitiPhone and the draft you need will be delivered to you!

Credit Limit Increase

You can call CitiPhone and ask for a Credit Limit Increase in the event that you have to make a

large purchase on your card urgently. It's especially handy for paying off vehicle repairs,

telephone bills and electricity bills.

PRODUCT WIDTH AND DEPTH

Width

Width of the product mix is the number of product lines a company is offering. The

product width could be a narrow one or a wide one depending from bank to bank. A wide mix

encourages more sales since the banks are able to diversify and provide more to their customers

and they also appeal to a larger target market.


9/56

DepthDepth of the product mix is the number of product items in each

product line. Banks with more schemes and services have more depths

than those offering only a few.

Here is table giving an example of Width and Depth in the Product Mix


10/56

Similarly, different banks plan out their product portfolios and based

on that, the depth and width of their product mix can be determined.

In todays scenario, where there is cutthroat competition and new foreign banks entering

the Indian markets, it has became more or less like a law to have very wide product lines with

more and more number of products in each line.


11/56

PRODUCT LEVELS

Core Benefit:

It is the main or core reason why the customer will buy the serviceof the bank. More like the basic purpose or necessity.

Basic Product:

The core benefit is converted into a basic product. That is theservice can used by the customer in order to fulfill his/her needs.Expected Product:

It refers to the set of attributes and conditions expected by the

customers when they purchase the service.Augmented Product

It is the additional feature that the banks provide which exceeds the

customers expectations.Potential Product:


12/56

Innovations and product differential is the bases of a Potential Product. If the banks alter

its services according to the requirements of the individual customers it reaches this level.

Core

ProductBasic

ProductExpected

Product

AugmentedProduct

Potential

Product

The basic

necessity to usebanking

services in

order to handle

finance more

efficiently

Safety of

deposits

Loanable funds

etc.

Timely service

Long banking

hours

Low interest

rates

Goods waiting

rooms

Extensive ATM

network

Promotional

Discounts

Mobile and

internet


13/56

Banking

New Schemes

tailored for

specific

customers

Thus it can be seen how a particular product passes through different levels. In todays

competitive scenario most banks try offering services at the Augmented and Potential level.

PRICE MIX

The price mix in the banking sector is nothing but the interest rates charged by the

different banks. In todays competitive scenario where customer is the king, the banks have to

charge them interest at a rate in accordance with the RBI directives. Banks also compete in termsof annual fees fors ervices like credit cards, DMAT etc. Another important aspect of the banks

pricing policy today is the interest charged on the Home Loans and Car Loans. With Indias

economy progressing, there are more and more buyers seeking these loans but at a very

competitive interest rate.

Lets understand this with an example. A particular buyer approaches a bank for a car

loan for a period of 3 years. He is charged Rs. 20,000 as interest. However, if a sale

representative of another bank comes to know of this deal, he will try to attract the customer by

giving

him a better deal i.e. a loan at a lower rate on interest. In this way, it is

the customer that ultimately benefits.

Here is an example of some of the prices charged by ICICI bank fortheir services

ATM Card Issue

Free2 ATM cards issued free if it

joint account

Addon CardRS. 100Beyond 2 cards

Duplicate CardRs. 100

Other General Charges

Current AccountSavings Account

Transaction Charges


14/56

NIL

NIL

Charges for issue ofCheques book

NIL

NILIssue of duplicate statementRs. 25 per page

Rs. 25 per page

Account closureRs.100

Rs.100

This example evinces some of the charges that the customer has to

pay for the services provided by the bank.

The pricing factor is very important because of the kind of competition that is

prevailing today in the Indian market. However it is very important to understand that in the

banking sector, the main pricing policy is concerned with the interest rate charged. This interest

rate is however regulated by the RESERVE BANK OF INDIA and THE INDIAN BANKING

ASSOCAITION. Any one particular bank or a group of banks does not regulate it. The interest

rate charged cannot be higher than that decide by the RBI and the INDIAN BANKING

ASSOCIATION.

Thus, inspite of the constraints in the pricing policy due to the RBI directives there aremainly three types of pricing methods adopted by banks. They are:

Value pricing:

Banks having unique or different products or schemes mainly do this type of pricing.

They usually charge a combination of high and low prices depending on the customer loyalty as

well as the products. This type of pricing strategy is usually coupled with promotion

programmes.

Going Rate pricing:


15/56

The most commonly used pricing technique is the going rate pricing. In going rate

pricing, the bank bases its price largely depending on the competitors prices. The banks

however have to stay within the RBI directives and compete. The banks may charge higher or

lower than their competitors. After 1991 when the foreign banks entered the Indian market thismethod of pricing has gained increasing importance.

Mark up pricing:

This is a pricing technique wherein the cost of the service is determined and a small

margin is added to it and then the final price is offered to the customers. This type of pricing is

the not very popular since in the banking sector it is not very easy to arrive at the cost of the

service. Thus most banks use a combination of markup pricing and going rate pricing.

THE MOST FAVORABLE PRICING STRATEGY


16/56


17/56

This model shows a pricing strategy, which should be adopted in order to ensure

maximum satisfaction to both the bank as well as the customers.

The price should be set in such a manner that the customer is assured that he is not being

cheated or overcharged by the bank and at the same time the bank is able to reap maximum

profits. Such a pricing stand helps the bank get maximum sales as well as profits since the

customer feels that by entering such a transaction he is winning.

PLACE MIX

Place mix is the location analysis for banks branches. There are number a factors

affecting the determination of the location of the branch of bank. It is very necessary a bank to

situated at a location where most of its target population is located.

Some of the important factors affecting the location analysis of a

bank are

1. The trade area

2. Population characteristics

3. Commercial structure

4. Industrial structure

5. Banking structure

6. Proximity to other convenient outlets

7. Real estate rates

8. Proximity to public transportation

9. Drawing time

10. Location of competition

11. Visibility

12. Access


18/56

1. The Trade Area:

The trade area is a very important factor determining the place where a bank branch

should be set up. For e.g. a particular location maybe a huge trading place for textiles, diamonds

or for that case even the stock market. Such locations are ideal for setting up of bank branches.

2. Population Characteristics:The demography of a place is a very important factor. This includes:

The income level of the population

The average age

The average male female population

The caste, religion, culture and customs

The average spending and saving habit of the people.

These factors are very important for a bank as the help them decide

the kind of business the branch will get

3. Commercial Structure:

The commercial structure refers to the level of commerce i.e. business activities taking

place at a particular location. The higher the level of business activities taking place in a

particular location the more preferable it is for setting up a bank branch.

4. Industrial Structure:

This is nothing but a combination of the trade area analysis and the commercial structure.

However the industrial structure focuses more on the kind of industries operating in a particular

location. For example, an area like SEEPZ is marked with a lot of electronic manufacturing

units. Thus the industrial stricture determines the kind of financial transactions that could take

place in a particular location.


19/56

5. Banking Structure:

The Banking structure refers to the existence of other banks in the area. Whether there is

already an efficient network of other bank branches operating at that particular area. Thus the

overall infrastructure needed for the working of a bank.

6. Proximity of other convenient outlets:This refers to the other branches of the same bank as well other

commercial, entertainment and industrial outlets.

7. Real Estate Rates:

This is mainly dealing with the cost factor involved in opening up a bank branch at a

particular location. The real estate rate is a very strong factor influencing the location decision

for a bank branch.

It is not necessary that all the above conditions have to be satisfied while selecting the location

but it should be tried to satisfy as many of them as possible.

8. Proximity to public transportation:

The location should be proximate to public transportation facilities. This means it should

have bus stops close by as well as it should be proximate to railway stations so as to make it

convenient for the common man.

9. Drawing Time:

Drawing time refers to the time period during which a customer can draw money from

the banks. It should be convenient to the customer and somewhat flexible to accommodate the

customers needs. No bank has more than a certain amount with them and in case a customer

wants to withdraw an amount more than that available with the bank, the bank needs to draw that

amount from other banks. Hence, a location must be such that it facilitates minimum drawing

time.


20/56

10. Location of Competition:

The existence of other banks also means competition. If the level of competition is very

high in a particular location, it is necessary that a bank does a lot of market research before

opening a branch so as to estimate the kind of business it would get.

10. Visibility:The location of a branch should be such that it is visible and easily

noticed by the customers as well other people.

10. Access:

The bank branch should be very easily accessible to the customers. If this is not the case,

the customer might switch to some other bank, which is more convenient to him and very easily

accessible. The location should be such that it is very convenient for the customer to reach.

Promotion Mix

Promotion is nothing but making the customer more and more aware of the services and

benefits provided by the bank. The banks today can use a lot of new technology to communicate

to their customers. Two of the fastest growing modern tools of communicating with the

customers are:

1. Internet Banking

2. Mobile Banking

This can be better explained with the example of ICICI bank.

SMS services

SMS functions through simple text messages sent from your cellular phone. These

messages are recognized by ICICI bank to provide you with the required information.


21/56

For example, when you enter IBAL your cellular phone screen will display the current

balance in your primary account. Thus with the help of SMS a wide range of query based

transactions can be performed without even making a call.

ICICI was the first organization in India to provide Wireless Application Protocol (WAP)

based services. Mobile commerce using WAP technology, allows secure online access of the

web using mobile devices. With WAP one can directly access the ICICI WAP server, check

ones account details and use other value added services.

Thus different methods are used by different banks to promoter itsservices.

A bank may have very attractive schemes and services to offer to their customers but theyare of no use if they are not communicated properly to the customers. Promotion is o inform and

remind the individuals and persuade them to accept, recommend or use of product, service or

idea. However there some very important points that is to be considered before the promotion

strategy is made. These points are:

Finalizing the Budget

Before the bank decides the kind of promotion that should be done, it very important to

finalize the budget for it. The formulation of a sound budget is essential to remove the financial

constraints in the process. The budget is determined on the basis of volume of business of the

bank. In addition to this the intensity of competition also plays a decisive role.

Selecting a suitable vehicle

Another very important task is to select a suitable vehicle for driving the message. There

are a number of devices to advertise such as broadcast media, telecast media and the print media.

The selecting of the mode of advertising is strongly influenced by the kind of budget decided.

Usually for promoting banks the most effective and economical form of advertising has been the

print media.


22/56

Making possible creativity

Making possible creativity is nothing but the kind of slogans, punch lines etc. that are

supporting the message. They should be very creative but yet simple to be understood by the

common man. It should appeal to the customers. It should be distinct from that of the

competitors and should be successful in informing and sensing the customers.

Testing the Effectiveness

It should be borne in mind that the advertisement is first tested for its effectiveness. This

should be done with the help of various techniques like testing effectiveness on a sample group.

This helps determine the success of the advertisement and in case of any problem the

advertisement can be altered and remedied.

Instrumentality of Branch Managers

At a micro level, it is the responsibility of the branch managers to promote and drive the

message to the people in the local area. They should organize small programs in order to attract

people and crate awareness in the local area about the new schemes of the bank.

Different Ways of Promotion

Public Relations:

In todays competitive scenario developing strong public relations is very important for

any bank to be successful. Most banks today have a separate Public Relations department.

However primarily it is considered as a responsibility of the various bank managers to develop a

steady and strong relationship with their present customers as well as potential customers. This

can be done by a constant follow up, small programmes etc.

Personal Selling:


23/56

Personal selling is found to be one of the most effective and popular forms of promoting

bank business. The main reason for this is that banking is a service in which trust plays a very

important role. In personal selling, a bank representative goes to the customers and explains the

scheme to the customers. Also he gives the customers any kind consultation he might need. Heprovides the customers all the information sought by him. The representative tries to persuade

the customers to go for the scheme provided by the bank by telling him all the benefits. Here are

some of the important features of personal selling

It is a direct relation between the buyers and the seller

It is oral presentation in conversation

It is personal and social behavior

It is found to be more effective in service oriented organizations

It is based on the professional excellence or expertise of an individual

Sales Promotion:

Sales promotions are basically giving the customers some additional benefits, maybe at

times just some small gifts, in order to promote the schemes. The more innovative the sales

promotions the more positive are the results. Some of the most popular sales promotions

techniques are

gifts, contests, fairs and shows, discounts and commission, entertainment and traveling plans for

bankers, additional allowance, low interest financing etc. It is very important that the sales

promotions benefits are designed in such a manner that they are better than those of thecompetitors.

Wordofmouth Promotion:

This form of promotions is not only very effective in banking services but in any kind

of service. However it is more important in banking for the only reason that this is a service


24/56

where trust plays a very important role. If a particular banks services are recommended by

friends, relatives, or other well wishers the person is more influenced and inclined towards that

bank. It is very important to note that the internal employees of the bank play a very important

role in wordofmouth promotion technique. This is because they can start the process byrecommending the bank to their friends and relatives and after that it is like a chain, which

spreads like a wild fire.

Telemarketing:

In recent times telemarketing has gained increasing importance as an effective tool for

promotion. The telemarketing is a process of making use of sophisticated communication

network for promoting the banks. This includes promoting through television, telephone, and

radio. Nowadays, cell phones are used extensively for the same. This is the most popular form of

promotion. Banks today have started using SMS and many other services supported by cell

phones to provide benefits to their customers and thus have tried to increase their sales. In

todays competitive and modern scenario it very important that banks makes use of

telemarketing techniques very efficiently to have desirable results.

Internet:

The use of Internet as a promotional tool is increasing. More and

more banks are using Internet to promote their services. The onlinebanking has made it even easier for the customers to avail the banks services. No longer do

people have to go to their bank branches for small petty matters like checking their balance etc.All this can be done with the help of a few clicks.

Thus, these were the numerous ways in which a bank can promote

its services and create more awareness amongst the people.

banking has made it even easier for the customers to avail the banks services. No longer do

people have to go to their bank branches for small petty matters like checking their balance etc.

All this can be done with the help of a few clicks.

Thus, these were the numerous ways in which a bank can promote

its services and create more awareness amongst the people.People


25/56

People are the employees that are the service providers. In a banking sector, the service

provider plays a very important and determinant role in rendering the customers a satisfactory

and a good service. It is extremely essential that the service provider understand what his

customers expect from him. In the banking sector, the customer

needs to be guided in a lot of matters, which is possible only with the help

of the service provider.

The position in the eyes of the customer will be perceived by appearance, attitude and

behavior of the customer contact employees. Not only does the customer contact employee

influence the customers perception but also the customer base of the organization does so.

needs to be guided in a lot of matters, which is possible only with the help

of the service provider.

The position in the eyes of the customer will be perceived by appearance, attitude and

behavior of the customer contact employees. Not only does the customer contact employee

influence the customers perception but also the customer base of the organization does so.

Process Mix

The process mix constitutes the overall procedure involved in using the services offered

by the bank. It is very necessary that the process is very customer friendly. In other words a

process should be such that the customer is easily able to understand and easy to follow. Today if

particular banks formalities are long and the procedure very complicated the overall process fails

and the customer may not be inclined towards using that banks services.

Lets take for example the process for application for a car loan.

Now this mainly involves 3 things.


26/56

1. Producing of proper documents

2. Filling up of application form

3. Paying for the initial down payment.

Here the process may fail in the following cases:

1. If the customer is asked to produce a number of forms out of which some may not be necessary at

all. Thus it is very necessary that the customer be asked for the minimum but most necessary

document and not the other unnecessary documents.

2. In case of application form, the application form must be in a language best understood by the

customers and it should not be very lengthy one or demanding a lot of unnecessary information.

3. Finally the payment of initial amount. The customer should be given options as to how he would

like to pay by cheques or by credit card. Once again the amount should be very competitive not

very high above the regular rates prevailing in the markets.

The smaller and simpler the procedure, the better the process, and the

customer will be more satisfied.

PHYSICAL EVIDENCE

Physical evidence is the overall layout of the place i.e. how the entire bank has been

designed. Physical evidence refers to all those factors that help make the process much easier and

smoother. For example, in case of a bank, the physical evidence would be the placement of the

customer service executives desk, or the location of the place for depositing cheques. It is very

necessary that the place be designed in such a manner so as to ensure maximum convenience to

the customer and cause no confusion to him.

Let us see an example as to how banks try to make little changes so

as to make the service better for their customers.


27/56

The Hong Kong Shanghai Banking Corporation (HSBC) has decided in introducing a

common uniform for all the employees in all its branches all over India. The plan is possibly in

line with the aggressive retail banking adopted by HSBC. A common uniform its nothing like a

revolutionary change but however this little change makes it very easy for the customer toidentify with his service provider and makes the entire process very easy for him. The more the

bank does to make the service easier and better the more satisfied will be the customer.

Thus, these are the 7 Ps of services. Each of them plays a very important and a pivotal

role in determining the quality of the service provided to the customer.

BLUEPRINTING

A service blueprint is a picture or a map that accurately portrays the service system so

that different people involved in providing it can understand and deal with it objectively

regardless of their roles or their individual points of view. Blueprints are particularly useful at the

designing and redesigning stages of service development. A service blueprint visually displays

the service by simultaneously depicting the process of service delivery, the points of customer

contact, the roles of customers and employees, and the visible elements of the service. It providesa way to break the service down into its logical components and to depict the steps or tasks in the

process, the means by which the tasks are executed and the evidence of the service as the

customer experiences it.

Standard Beginning

Regardless of our mapping objective (to describe a new process or an existing process),

type of map selected (flow chart, risk management, cross-functional, time elapsed), and state (as-

is, should be, could be) selected, all process maps will have the same common beginning steps

1. Begin by defining the objective and the process boundaries. Our objective in this case is to

document the existing savings-deposit process for the purpose of training new cashiers. The


28/56

process boundaries will begin with the customers bringing a deposit into the bank (the input)

and end with the last step in the cashiers handling of the transaction: issuing a receipt to the

customer (the output).

2.List the basic steps that produce the output,

using as brief a description as possible, such as a verb followed by a noun. These may include:

complete deposit slip, greet customer, count cash, inspect deposit slip, post deposit, post

passbook, authenticate passbook posting, store cash, store deposit slip, thank customer. Arrange

these processes in the sequence in which they occur; this will help you construct your map

logically and easily.

3.Record the map title and reference number at

the top and centre of a landscape-formatted sheet. In the sample below, use B1 as the reference

number, where B refers to a series of savings-related process maps and 1 is the first map in

the series.

4.Record your name and the date prepared

below the map title line, at the left handmargin.

Constructing the Map: What Symbols Do I Use?

5.The starting point for this process is the

customer. Use the Start symbol and place this symbol in the upper left hand corner of your

paper.

6.

Symbols must be connected by arrows to show flow, which may represent either thesequence of the processes or the movement (transportation) of the inputs from process to

process. Automatically enter an arrow after posting a process, inspection, document/input, or

decision symbol to your map. By convention, movement is from left to right, and from top to

bottom; both directions are shown in the sample below. Alternating the vertical and horizontal

flows can help you show activities that occur almost simultaneously, and can also save space on


29/56

your sheet. For example, a down arrow is used to connect the Start Process (customer) with the

first two inputs (passbook and cash). You could have just as well used a horizontal arrow and

placed the two inputs to the right of the Start Process symbol. The choice is yours. Just

remember, our objective is to present as clear and understandable a map as possible.

7.

The customers deposit has three component inputs: the cash, the deposit slip (the banks

voucher), and the passbook (the customers receipt). These three inputs have different processes

performed on them, and are stored in different places at the end of the process, so they need to be

identified by distinct symbols. Note that the passbook and deposit slip use the Document

symbol, while the Input symbol is used to represent the cash. For the sake of clarity, insert the

document name into the centre of the symbol. From this point forward assume that these

documents flow with the arrows (transportation symbols) until otherwise indicated. At this point

in the process, you have only two inputs: the passbook and the cash. Place these next to each

other, with one arrow to the right, indicating that they flow together.

8. Your option forthis step is to use either the Process or Manual Operation symbol.

Because the customer must hand-write the document (rather than it being computer-generated,

for example), the better option is to select the Manual Operation symbol.

9.

At this point, the cashier processes the deposit. The first step is to ensure that the

customer has submitted a valid deposit slip containing all required information (which is listed in

the process description). Since this activity serves as a control point as well as a process point

the process cannot continue if the amount is not recorded, for exampleyou can select either a

process or an inspection symbol to represent the action. Because this step is an important control

for the further processing of the deposit, the better option is to select the Inspection symbol.

10. There is not sufficient space left on the sheet to post the next step, even though there is space

below the existing line of symbols. Since arrows move from left to right and top to bottom, you

cannot, by convention, draw a big arrow from the right side of the paper across to the left margin


30/56

in order to continue the flow in the space remaining on the paper. This means you continue on

another sheet of paper. Select the On Map connector symbol from the list. This symbol is used

twice: first where you discontinue, or break, the process, and second, where you resume it. (If

you have two breaks on a map, you will have four On Map symbols.) To let the reader knowwhich connectors go together (form a pair), insert a letter or number, assigned sequentially, in

each symbol. The first pair, for example, might be labeled A, while the second pair would be

labeled B. The reader knows which one of the pair represents the break in the flow, because

there are no more symbols below or to the right of the connector symbol. The reader knows

which one of the pair represents the resumption of the flow, because symbols will appear below

or to the right of the connector symbol.

11. In this step, the cashier counted the cash and found it to be either correct or incorrect. This

results in two possible courses of action that must be shown in the process. Use the decision

symbol. Insert a word or two inside the symbol to reflect what condition is being decided; in this

case, you are answering the question: Amount correct? The question has to be phrased so that

it can be answered either Yes or No. Both courses of action are mapped. The decision

symbol, therefore, has two arrows attached to it, one representing the Yes course of action, and

the other, the No course of action.

a.NO: This course of action represents arework loop. The customer has to either

make the correction to the deposit slip and initial the change, or make up/receive the difference

in the amount of cash deposited so that it will equal the amount shown on the deposit slip. After

the correction process, the arrow points back to the decision diamond because the cashier now

decides again whether the actual cash counted agrees with the amount reflected on the deposit

slip. If it does, then the process resumes the flow from the Yes arrow leaving the decision

diamond.

b. YES: the cashier has answered Yes to the question, Does the amount of cash received agree

with the amount shown on the deposit slip? The process continues to the next step.


31/56

12. Up to this point, the three inputsthe passbook, deposit slip, and cashhave been flowing

together. It is now time to separate their flow and to show storage of the cash. The deposit slip

and the passbook will these descriptions as you draw your symbols you may find,however,that

keeping up with the text while posting symbol on your map is cumbersome

The details of the inspection performed by the back office supervisor can be

described in the second tier of the map. Alternatively, you can shadow the inspection box (refer

to the Tier Your Maps section) and create a sub process map that describes what the back

office supervisor actually does.

14.

This step demonstrates a teaching point discussed above. Which

point is represented here? Hint: Describe what is happening here.

15. The passbook/receipt, posted with the deposit (the output), is returned to the customer. This

is the end of the process. Use the End Process symbol, (which is the same as the Start symbol)

and label it to show that the Customer is the endpoint. This now completes the first tier of your

Process Map

16. In the second tier, record the description for each step. This task serves a dual purpose,

because it forces you to proofread your symbols to make sure that you have complied with the

requirements described in the Proofread Map section above. You will also be able to see for

yourself whether your process map makes sense. Alternatively, you can complete

THE 4 Is OF BANK MARKETING


32/56

There are four distinctive characteristics of service, which create challenges and

opportunities. They are commonly known as the four Is namely:

1. Intangibility

2. Inconsistency

3. Inseparability

4. Inventory.

1.) Intangibility

It is that characteristics of a service indicating that it has no physical attributes that a person

may feel, hear, taste before they buy it.

For example, a person who is new to a bank and wants to open up an account in the bank

cannot feel or taste it and ascertain whether the bank is good or bad before opening an account.

He has to experience it, feel how the service is, how humbly do people or the staff members

behave with him, is his money invested or put in a safe account or not. It is only then he would

come to know about the services. This could be done only from the trust that he would have

built up, as these things cannot be inspected before the use. Therefore, most banks now a days,

indulge in tangibilizing theintangibles i.e. they provide tangible clues to the prospective

customers like the different awards that they have received for their superior services, their

annual records, etc. this helps the customers in selecting the banks more easily.

2.) Inconsistency

It refers to variability or heterogeneity. In case of a bank, a new customer or a rarely going

customer may not get the same type of service as a regular customer may get. This may be the

case because the staff members know the person well as he comes often but they dont know thatperson who does not come in again and again.

Also another point for inconsistency is that there is variability in the service delivered by

different people, that is services delivered differs from people to people. Like in case of a bank,

different staff members would provide different services. In the bank, a person may have lot of


33/56

work and may not attend to a customer .On the other hand, some other person with the same

work may attend him with great enthusiasm. In order to tackle this inconsistency aspect,

adequate training and motivation must be provided to the employees. This will result in higher

number of customers for the bank, higher profits and subsequently lower retention rate.

Eg. PUNJAB NATIONAL BANK prides itself for providing crown ofquality for customer

who is the king and is an ISO 9002 certified bank. Thus, they will have to ensure that their

service quality level is always consistent and up to the mark to meet the tall expectations of their

customers.

3.)Inseparability

Inseparability is that characteristics of a service indicating that it cannot be separated from

creator-seller of the product. Many services are created, delivered and consumed simultaneously

through

interaction between customers and service producers. This is a source of major limitation for the

bank. But technology has in a big way helped the banks to cope with this problem.

Production of services, when it comes to banks can be performed in

the following 3 ways:

(i) Co- production : In this case both the service provider and the customer

work together to produce services. When a customer wants to withdraw cash from the banking

premises, then both the customer and the service provider needs to be present.

(ii) Isolated production :It is that part of service that is done outside to an

organization. Eg. Tele-Banking.

(iii) Self Service production :In this case, the customer uses the equipmentsof the service providers and self serves it. Eg. ATM.4.) Inventory

Inventory relates to the perishable characteristics of the service marketing. If a customer

starts his day at eight in the morning and ends it at four, but if bank is open only from 9:00 a.m.


34/56

to 1:00 p.m. in the afternoon, then one might not be able to attend it. The demand for banking

services also fluctuates by day and hour. The day before the holiday, weekend, most Mondays

and Saturdays, pension and salary days are heavier than normal banking hours. So service faces a

lot of problem from inventory as it cannot be stored, saved and then used later.

RATER Analysis For Indian Overseas Bank

There are many reasons why a customer should be given QUALITYSERVICES. The most of them are:

1. Industry being so competitive that a customer should be given the best services as they have many

competitors (the company) and if even a single customer is lost in todays JLT world then it very

difficult to win back the customer.

2. Most of the customers do not complain as they just opt out and

do get satisfied with better services elsewhere.

When it comes to services, there are 10 quality dimensions. Each of the dimensions is of utmost

importance since human element is involved and it relates to services.

But Zeithaml, Bitner and Parsuraman have developed a new and concise model by

clubbing some points. This model consists of the following dimensions:

Reliability

Assurance

Tangibility

Empathy

Responsiveness


35/56

RELIABILITYRESPONSIVENESS

ASSURANCE

EMPATHYTANGIBILITY

RELIABILITYIt is defined as the ability to perform the promised service dependably and accurately. In its

broadest sense, reliability means that the company delivers on its promisespromises about

delivery, service provision, problem resolution, and pricing. It is also known as the NoExcuses service delivery.

Indian Overseas Bank faces stiff competition from many other banks within its vicinity

and some of these banks are foreign banks. But the existing customers have faith, loyalty and

trust in this bank. The customers are well aware that the bank will provide them back the best

and reliable services. For e.g., no person likes to wait to withdraw his/her money. In order to

correct this problem, Indian Overseas Bank has ensured that whoever comes in for cash

withdrawal will receive his/her cash within five to ten minutes.

accurate and efficient service can be provided to the customers. The tables and chairs are

conveniently located for the customers. The personnel always have a cheerful and helping veneer


36/56

and are always ready to help out the customers. The entire place is done up in bright colours and

thus the customer can immediately feel the warmth and the radiance of the place.

EMPATHY

Empathy is defined as the caring, individualized attention the firm provides its customers.

The essence of empathy is conveying, through personalized or customized service, the customers

are unique and unique special.

The empathy shown by the employees of the Indian Overseas Bank is good as they are

always polite humble and helpful. There was a case where once a customer misplaced Rs.

1,00,000 within the premises of the bank. He panicked but the bank personnel put him at rest and

assured him that they would locate the same for him. Since he was a regular customer, they knew

him very well and took the situation under control. They quickly located the cash and thus, the

customer was placated. The bank personnel went out of their way to help this customer and thus

understood his predicament. This bank regularly holds seminars and training workshops so that

they can understand the consumer better and thus serve him better.

RESPONSIVENESSResponsiveness is the willingness to help the customer and

provide him with immediate and fast service.

The Indian Overseas Bank is prompt at providing its customers with the information and

services that they seek. It is extremely prompt when it comes to resolving the complaints of the

customers. The customers, in their feedback form, mentioned this as one of the most important

factor that has prompted them to continue with this bank.

All the five dimensions basically aim at serving the customers to the best of their ability,

giving them quality services and if things are followed as they are demanded, (i.e., according to

the customers demand) then there would be no problems in facing any type of people. The

successful service organizations set up speeds for service standards.

MARKET SEGMENTATION


37/56

An organization is supposed to cater to the changing needs of customers; it is only natural

that all customers have their own likes and dislikes. They have some uniqueness, which throws a

big imprint on their lifestyles. This makes the task of understanding a bit difficult. It has the

context that we go through the problem of market segmentation in the banking service.

The study of the needs of customers invites a plethora of problems since in addition to

other aspects; the regional considerations also influence the hierarchy of needs. To be more

specific in the banking services, the banking organizations are supposed to satisfy different types

of customers living in different segments. The segmentation of market makes the task of bank

professionals easier. If the market segmentation is done in a right fashion, the task of satisfying

the customers is simplified considerably. The modern marketing theories advocate the

formulation of marketing policies and strategies for each segment, which an organization plans

to solicit.

The marketing segmentation is based in the principle of divide and rule. If we divide the

market into different segments, the size of market is made small and the process of study is

found convenient. We find market segmentation division and subdivision of a market based on

considerations. The bank professionals have to segment the market in such a way that the

expectations of all potential customers are

studied in a right perspective and the marketing resources are developed to fulfill the same. The

marketing efforts can be made more proactive if the process and bases of segmentation are right.

It is essential that the bank professionals assign due weightage to the difference that we

find in the market behavior due to geographical, age, sex, nationality, educational background,

income classes, occupation, social and other considerations. If they overlook or underestimate

key bases while segmenting, the study results cant be proactive to the formulation of creative

marketing decisions. This makes it essential that the bank professionals are well aware of the

criteria for market segmentation. The agriculture sector, industrial sector, services sector,

household sector are found important in the very context. The gender segment is found important

no doubt but we cant underestimate institutional and professional segments. Since the banking

organizations serve different sectors and segments, the segmentation should be done carefully.


38/56

IMPORTANCE OF SEGMENTATIONInstrumental

in

exploring

opportunities:

We find market segmentation very much

effective in exploring the profitable opportunities. It is well known to us that while segmenting,

the market is divided into different groups and sub-groups and this simplifies the process of

studying and understanding the customers in a right perspective. If we know about the rural

segment, the opportunities are explored to the rural areas. If we know about the women segment,

the opportunities are identified in that area. If we know about the low- income group, the

opportunities are identified in that group. Thus the segmentation helps the bank professionals in

exploring the profitable opportunities.

Instrumental in designing a sound marketing strategy: We cant deny

that market segmentation makes it easier to formulate a sound strategy. Since the bankingprofessionals are aware of the changing needs and requirements of a segment, the marketing

resources can be developed in tune with the needs and requirements of a segment. The

formulation of a package is found significant and the bank professionals can do it successfully on

the basis of market segmentation. The promotional measures can be satisfied in the face of

receiving capacity of a particular segment. The pricing strategy can be made operational and the

sales promotion measures can be made productive.

Helpful to the policy planners: In addition, the policy makers also

find segmentation since they are well aware of the emerging trends in the business environment.

They get detailed information about the changing needs and requirements of a segment. The


39/56

planning is an on going process. The banking professionals transmit necessary information to the

policy planners, which simplifies the process of making a sound policy.

Enriching the market resources: In addition to other aspects, we

find segmentation instrumental in enriching the marketing potentials. If we know about the

preference, needs, requirements, attitudes, lifestyles it is found easier for us to develop the

marketing resources accordingly. This in a natural way makes it convenient to develop marketing

resources. The process of innovation can be activated. The services, the promotional measures,

the pricing tool and the process of offering can be made more competitive. The development of

world-class marketing resources thus makes it convenient to influence the impulse of prospects.

The bank professionals find it easier to get the positive results for their productive marketing

efforts.

CRITERIA FOR SEGMENTATION

Segmentation in a right fashion makes the way for profitable marketing. This helps policy

planners in formulating and innovating the policies and at the same time also simplifies the task

of banking professionals while formulating and innovating the strategic decision. The following

criterion makes the segmentation right.

ECONOMIC SYSTEM

An important criterion for market segmentation is the economic system in which we find

agricultural sector, industrial sector, services sector, household sector, and rural sector requiring

the weight age while segmenting.

A). AGRICULTURAL SECTOR: In the agricultural sector, there are four

categories since the needs of all categories cant be identical.


40/56

The mechanization of agriculture, the improved or scientific system of cultivation, the

help of nature, the magnitude of risk, the availability of infrastructural facilities influence the

level of expectations vis--vis the needs and requirements. The banking organizations are

supposed to know and understand the changing requirements of different categories of farmers.

B). INDUSTRIAL SECTOR: The banking organizations are supposed to

have an in-depth knowledge of the changing needs and requirements of the industrial sector. The

largesized, small- sized co-operative and tiny industries use the services of the banks. The

expectation of all the categories cant be uniform.


41/56

The banking organizations are supposed to have an in-depth knowledge of the changing

needs and requirements of the industrial segment. The emerging tends in competition, the

pressure of inflation, the use of sophisticated technologies, and the business regulations are some

of the important aspects influencing the hierarchy of needs.

C). SERVICES SECTOR: It is an important sector to the economy where

the banking organizations get profitable business. The two categories of organizations such as

profit-making and non- profit making are found important in the very context.


42/56


43/56

The banking organizations need to identify the changing needs and requirements of the

services sector with the frequent use of IT and with the mounting pressure of inflation and

competition, we find a change in the hierarchy of needs.


44/56

HOUSEHOLD SEGMENT

This also constitutes an important sector where different income groups have different

needs and requirements. In the below figure we can see the different segments of household

sector.

A). HOUSEHOLD SEGMENT: The high income group, middle income

group, subsistence level group and marginal income group have different hierarchy of needs

which influence the level of their expectations.

B). GENDER SEGMENT: In the gender segment we find males and

females having different needs and requirements. The banking

organizations are supposed to identify the level of expectations of both

sexes as shown in the below figure

Some of the women are housewives and therefore they have different needs and

requirements whereas some of them are working ladies having different needs and requirements.

PROFESSION SEGMENT

In the profession segment, we find different categories of professions and therefore we find a

change in their needs and requirements. As shown in the figure below:

The technocrats, bureaucrats, corporate executives, intellects, white-collar and blue collar

employees have different needs and requirements and therefore the banking organizations shouldknow their expectations.

INSTITUTIONAL SECTOR

In this sector we find different categories of organizations. Some of the organizations are

known as charitable organizations, some of them are cultural/ social organizations, some of them


45/56

are industrial and many of them are profit making and many are philanthropic and many of them

are related to trade and commerce. It is natural that the needs and requirements vis--vis the level

of expectations cant be identical in all cases. To satisfy and to increase the market share it is

imperative that the banking organizations are familiar with changing needs and requirements.The emerging trends in the social transformation process determine the hierarchy of needs.

Complaint Handling-HDFC Bank

Whatever a service firm may do for customer, even the best firms are going to find

themselves facing complaints from customers who feel that they are not being treated fairly. In

dealing with these situations, it is important to know how to diffuse them and then turn them into

positive experiences for all involved.

However, when it came to complaint handling, HDFC Bank turned to the airline industry for

inspiration. Impressed by the way an airline takes care of its customers from the time they enter the

airport till they collect their luggage after landing, the bank maps the customer flow at its branch. The

first change it brought to its branches was the 'May I help you' desk at the reception to guide the

customer to the

right counter. Next, it laid down efficiency parameters for each sub- process carried out at the branch.

"We are constantly fine-tuning our processes to reduce time taken, especially on routine tasks. We

monitor how long it takes for customer transactions as well as complaints to get processed".


46/56

The bank's 'moments of truth' surveys too are modeled after the airline industry's satisfaction

surveys. These are given to customers just before they exit a branch after a transaction.

HDFC Bank introduced changes for consumer convenience, starting with the reception area

and with good reason. A traditional branch has always been an infrequent user's nightmare: cryptic

boards are placed on counters leaving one as confused as ever, bank officials sit behind wire-meshes

making it impossible to seek any guidance, and the long queues are frustrating, all the more so when

you realize you stood in the wrong long line. But HDFC branch models are trying to address this

confusion, as well as the jail-like counters.

HDFC believes that unless they change to create convenience for that customer, and add to

his brand experience, they will fail to capture the loyalty they're trying so hard to earn. And unless

they achieve this loyalty and increase their share of the customer's wallet substantially, the majority

of their retail customers will continue to be unprofitable for them.

COMPLAINT RESOLUTION MODEL (CRM)HDFC bank takes complaint not as a mere complaint but as an

issue. They have got this unique CRM technique where in if there is

any complaint either by an employee or a customer in any branch; it will be looked into and resolved

in 24 hours. Within 24 hrs, if the branch manager does not handle the complaint it goes to the higherauthority. And then again if the same complaint is not handled in 12 hours by the higherauthority it

goes to the Managing Director. Once if it reaches the MD, either the branch manager is sacked or

necessary action is taken against him.


47/56

CASE STUDY-IPhase IThe reason why the customer decided to open an account with

ABC Bank was their constant boasting of being the best online trading bank in India. So one day the

customer called their customer center to open an account. The lady was very polite and after talking

with her for some 5 minutes, she told the customer that one of their representatives will visit her

soon. She gave the lady her office address and asked her to send the person to her office. The next

day the customer gathered all the necessary documents to open an account. It

took exactly a week for their representative to turn up and on her inquiring about the delay, he gave

her a silly reason, like he was busy with many more clients and so could not come on the promised

date. She felt that the employees attitude towards the customers depend upon

theirmood

onthatparticular

day.Phase II

Within a month the customer got a letter from the bank saying that her account has been

activated. So the next day she went to her nearest branch to deposit a cheque. As she entered inside,

it was over crowded with people in each and every corner; most of them were the employees

themselves. In most of the branches that she had visited in last 5 months, she had got the feeling that

the branches were over employed.

Phase III

After going through all this she decided to use their Phonebanking facilities, and its did not

turn out any better than Central Railway Inquiry. Every hour you find some different people to

answer your query, and most of the time you are put on HOLD.


48/56

Phase IV

They used to claim that their trump card was the ATM. To some extent it was ok but what the

customer noticed is that most of the ATMs are located in a very isolated place and its down during

evening time.

The Finale

Here is something that made the customer to finally say GOODBYE to ABC. Initially they

told her that their share trading service is free, so she did most of her trading through ABC direct.

The service was not of much help. Just a week from then, she got a mail asking her to pay for using

share-trading service. Again she got in touch with the concerned person and informed them about the

mail and also that she was no more interested in continuing her account in ABC. Then they informed

her that this mail is not for current year its the advance payment for the coming year. In the end she

had to pay them for the service, which she never utilized. She stopped using ABC Bank and asked all

her colleagues never to have an account with the bank after her

experience.

ANALYSIS OF THE CASE

As can be seen in this case, there is a definite failure in the service delivery. Now apply thedifferent dimensions of service quality to this particular case and find out reasons for the failure.

RATERReliability: The lady assured the customer that the representative would

visit her the next day. Instead he took a week to turn up. Also instead of apologizing to the customer,

he gave the excuse that he was busy with other clients and so he could not attend to him. In a service

industry the customer is the king and you should make each customer feel special. As can be seen,

the attitude of the employees in the bank is indifferent. In fact, the customer concludes his review by

saying that

the employees attitude towards the customer depends on their mood.This shows tremendous inconsistency in service delivery.

Assurance: Here the staff has failed to live up to its promise. Instead of


49/56

coming in a day as promised, the representative came after a week. He didnt even apologize for his

mistake. As a result the customer was inconvenienced. The customer was angry that the bank made

false promise just to woo customers. Also she was told that the share trading service was free.

Afterwards she was made to pay for the service, which she had hardly used.

Tangible: The tangible cues here will be the facilities that they provide,

like the phone banking and the ATM. The customer here describes the ATM service as okay. She

says that it works only sometimes. She compares their phone banking facility to the central railway

enquiry, where every hour different people come to answer his query and most of the time he was put

on hold.

Empathy: From the case, it seems that they are not understanding

towards the customer grievances. All the branches this customer has gone to have been very

crowded. There was no effort on the part ofthe employees to help this customer. Also in the case of

their phone banking, they make the customer wait for long periods of time without answering their

query.

Responsiveness: In the case of this customer, the bank and its staff were

not able to respond quickly. When the particular representative was not able to reach the next day,

the bank should have sent another representative in his place. Also they should not have charged this

customer for using the share trading service, especially since it was a mistake on their part.

Service Recovery


50/56

Service recovery pertains to the actions taken by an organization In response to a service

failure. When a customer complains he expects 3 types of fairness.

Outcome fairness: In this case the customer decided to use the share

trading service as she was told it was free. She did not find the service of much help. In the end she

had to pay for a service, which she hardly used. The bank should not have charged the customer for

this service especially since it was a mistake on their part.

Procedural fairness: When the customer entered the bank to deposit a

cheque, she found it overcrowded. There was no effort made by any of the employees to help this

customer. Using the phone banking facility was also not of much help.

Interaction fairness: After promising the customer that the representative

would come the next day, he came after a week. After committing this mistake, he made no effort to

apologize for it. Instead he gave the excuse that he was too busy with other clients to attend to him.

Fish-BoneCUSTOMEREQUIPMENTFRONTPROCEDURE

DELAY INSERVIC

OTHERSMATERIAL

SUPPORTINGINFORMATION

Equipment: - Phone banking system of ABC Bank was really bad. Every

hour there was a new person on the phone and most of the time the customer had to wait as the phone

was kept on hold. The customer had some difficulty using the ATM machines, as they were located

on isolated places, which was very inconvenient for the customer to access. Secondly, during the

evening time they were not working. The customer had been told about that the share trading facility


51/56

was free but later on they charged for the next years trading in advance. So, there was certainly a

failure in equipments.

Material:The material aspect of HDFC bank would be its ATM and

Phone Banking services that are described by the customer as a totalflop and a waste of time. This

shows a complete material failure, as the services are not up to the extent of the customers

perception and expectations.

Front line staff:The customer has rated employees attitude towards

him as depends upon the mood. In a service industry this is not acceptable, whatever might be the

mood his attitude towards the customers should be good. The front line staffs job is to make the

work easier for the customer and not to complicate further which is not the case in this particular case

study.

Supporting Activities: The supporting staff in this case would include the

front desk receptionist who fails to act in haste and inform the same to the concerned representative.

Also, the customer is not informed about the different service charges, which the back office should

have notified by sending some mails or notifications

Procedure:In the second phase the customer went to the bank to

deposit cheque, she found out that the place was very crowded and

there were no proper signboards for the counters to guide her.Information: In phase 1, the customer was told that the bank


52/56

representative would be coming to his place in a days time. But these representatives came after a

week. So there was wrong information given on the part of the customer. Again in the final phase,

the customer was not given any information about the next years share trading charges and charged

her in advance.

Company Profile

ICICI Bank is India's second-largest bank with total assets of over Rs. 1 trillion and a

network of about 540 branches and offices and over 1,000 ATMs. ICICI Bank offers a wide range of

banking products and financial services to corporate and retail customers through a variety of

delivery channels and through its specialized subsidiaries and

affiliates in the areas of investment banking, life and non-life insurance, venture capital, asset

management and information technology. ICICI Bank's equity shares are listed in India on stock

exchanges at Chennai, Delhi, Kolkata and Vadodara, the Stock Exchange, Mumbai and the National

Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the

New York Stock Exchange (NYSE).

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial

institution, and was its wholly owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to

46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of

ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an

all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors

in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the

Government of India and representatives of Indian industry. The principal objective was to create a

development financial institution for providing medium-term and long-term project financing to

Indian businesses. In the 1990s, ICICI transformed its business from a development financial

institution offering only project finance to a diversified financial services group offering a wide

variety of products and services, both directly and through a number of subsidiaries and affiliates like

ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial

institution from non-Japan Asia to be listed on the NYSE.


53/56

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards universal

banking, the managements of ICICI and ICICI Bank formed the view that the merger

of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would

create the optimal legal structure for the ICICI group's universal banking strategy. The merger would

enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater

opportunities for earning fee-based income and the ability to participate in the payments system and

provide transaction- banking services. The merger would enhance value for ICICI Bank shareholders

through a large capital base and scale of operations, seamless access to ICICI's strong corporate

relationships built up over five decades, entry into new business segments, higher market share in

various business segments, particularly fee-based services, and access to the vast talent pool of ICICI

and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the

merger of ICICI and two of its wholly owned retail finance subsidiaries, ICICI Personal Financial

Services Limited and ICICI Capital Services Limited, with ICICI Bank. Shareholders of ICICI and

ICICI BANK approved the merger in January 2002, by the High Court of at Ahmedabad in March

2002, and by the High Court of Judicature at Bombay and the Reserve Bank of India in April 2002.

Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and

retail, have been integrated in a singularly.

CASE STUDY-II

The Customers Association with the Bank

The customer became an ICICI bank customer in 1998 when he became an NRI customer. Things

were rather mundane and normal. Compared to the other big nationalized banks and Citibank, the

customer felt ICICI Bank was the best and got some great feedback from friends and relatives alike.

His initial relationship was excellent


54/56

This continued till 2001. All the facilities were of the highest grade. Their email follow-ups, request

resolution, customer service and everything they served were of the highest grade. They also baffled

him by calling him overseas with regard to certain transactions and request. So, he would have given

a 5 star rating in 1998. But it did not continue for long.

What has changed since then?

This bank grew leaps and bounds ever since the IPO in 1998 as well as the NYSE listing in

2000. The numbers of customers were huge and the merger with Bank of Madura added to the woes

of the service. As there is a saying Quality is inversely proportional to Quantity, ICICI bank

yielded to this very true philosophy. The customer sent a letter to their NRI center regarding a change

of address for his NRI account. This took considerable amount of time since ICICI misplaced the

letter twice and he head o mail the letter again. This frustrated and infuriated the customer. Then,

they sent a courier to the customer but at the wrong address. They sent one to the wrong address, and

other one to the right address but with the wrong password for the bank account.

Snippets from mail correspondence that took place between the customer and the banking personnel

are provided as follows providing us

with

aninsight:

If doing an address change should take such a long time and if your processes are so sterner and

baseless with a mediocre customer-care follow-up, I definitely need to reconsider my options. I had opened an

account in ICICI though I had

An Introduction to the Banking Sector in India

Documents

Transcript of An Introduction to the Banking Sector in India