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CHAPTER 4

IMPACT OF BUSINESS PROCESS REENGINEERING IMPLEMENTATION

ON PUBLIC SECTOR BANKS

4.1 Introduction:

An attempt has been made in the present chapter, to study and assess the impact

evaluation of the business process reengineering (BPR), which was undertaken by the

selected public sector banks. The impact assessment is analyzed with the help of

selected indicators, by using frequency distribution. The data was collected by way of

questionnaire from officers and clerks who are working in public sector banks in

Mumbai city. In order to assess and understand the impact evaluation of the BPR’s

implementation on Public sector banks operating in Mumbai city, the chapter is

organized as under:

4.1 Introduction

4.2 General Information of the selected banks for the study

4.2.1 Banks participated in study: An eye bird view

4.2.2 Year of establishment of Banks

4.2.3 Year in which Business Process Reengineering was introduced in

selected banks

4.2.4 Business Process Reengineering through Business Process

Reengineering department/IT department

4.3 Assessing impact of Business Process Reengineering on new processes or

innovations

4.3.1 Introduction of new processes in Business Process Reengineering

4.3.2 Impact of Business Process Reengineering on Core and Generic

Processes

4.3.3 Impact of Business Process Reengineering on usage of technology

4.3.4 Impact of Business Process Reengineering on the role of technology

4.3.5 Impact of Business Process Reengineering on uses of software solution

4.3.6 Impact of Business Process Reengineering on hiring of external

consultant

4.4 Assessing the impact of Business Process Reengineering on cost and

revenue of Public Sector Banks

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4.4.1 Impact of Business Process Reengineering on type of cost

4.4.2 Impact of Business Process Reengineering on cost of handling

processes

4.4.3 Impact of Business Process Reengineering on revenues of banks

4.4.4 Impact of Business Process Reengineering on the number of customers

4.5 Assessing the impact of Business Process Reengineering on the employees

of Public Sector Banks

4.5.1 Impact of Business Process Reengineering on the salary of the

employees

4.5.2 Impact of Business Process Reengineering on incentives of the

employees

4.5.3 Impact of Business Process Reengineering on the workload of the

employees

4.5.4 Impact of Business Process Reengineering on the timings(work hours)

of the employees

Business Process Reengineering forces bankers to take a radical approach to the way

their banking business is positioned, organized and run. For the success of BPR in the

public sector bank, full support of top management and commitment of employees is

must. The BPR was adopted by public sector banks in Mumbai city and impact of

implementation of BPR is assesses in subsequent sections..

4.2 General Information of the selected banks for the study:

For the purpose of the study, 10 public sector banks are selected as a sample. The

sample has been selected randomly from the total of 26 public sector banks operating

in India at the present stage. The sample selected includes Allahabad Bank, Bank of

India, Bank of Maharashtra, Central Bank of India, Punjab National Bank, State Bank

of India, UCO Bank, Union Bank of India, United Bank of India and Vijaya Bank.

These Banks have undertaken BPR exercise in their bank in the last ten years. (2000-

2010). Therefore to verify and understand the impact of BPR on public sector banks,

these banks are selected. Before understanding the impact, it is essential to know

these banks briefly. The brief sketch is presented here.

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4.2.1 Banks participated in study: An eyebird view:

(a) Allahabad Bank:

Allahabad Bank is one of the premier nationalized banks in India. It is also the oldest

joint stock bank of India. It was incorporated by a group of Europeans at Allahabad

on April 24, 1865. It was the time Indian economy had started shifting towards

organized trade and business affairs. After some years in 1920, the P&O Bank

brought Allahabad Bank and its headquarters at Kolkata. The Allahabad bank got an

entirely new identity when it was nationalized in 1969 along with 13 other banks in

India. Since then the Allahabad Bank had a smooth journey towards progress. Today

it is one of the leading banks in India with a whooping business of over Rs.1, 00,000

crores. Allahabad has adopted CBS (Core Banking Service) since 2006 and has

developed 24 hours connectivity with its 2165 branches across the length and breadth

of the country. In 143 years of it existence the bank has come a long way by

developing a wide grip over all the corners of India. At present the Allahabad Bank

has 44 Zonal Offices 6 Staff Training Colleges and 3 Staff Training centers for

imparting training centers in India. Apart from general branches, the bank has also

come up with specialized branches, like Industrial Finance Branches, International

Branches, Finance Branches, Recovery Branches, NRI Branches Specialized Personal

Banking Branches, Specialized Savings Bank Branches, Quick Collection Service

Branches, Trading Finance Branches and Service Branches in many major cities of

India.

(b) Bank of India:

Bank of India was founded on September 7, 1906 by a group of eminent businessmen

from Mumbai. In July 1969 Bank of India was nationalized along with 13 other

banks. Beginning with a paid-up capital of Rs.50 lakh and 50 employees, the Bank

has made a rapid growth over the years. It has evolved into a mighty institution with a

strong national presence and sizable international operations. In business volume,

Bank of India occupies a premier position among the nationalized banks. Presently,

Bank of India has 2609 branches in India spread over all states/ union territories

including 93 specialized branches. These branches are controlled through 48 Zonal

Offices.

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(c) Bank of Maharashtra:

Bank of Maharashtra was registered on 16th Sept 1935 with an authorized capital of

Rs 10.00 lakh and commenced business on 8th Feb 1936. Known as a common man's

bank since inception, its initial help to small units has given birth to many of today's

industrial houses. After nationalization in 1969, the bank expanded rapidly. It now has

1421 branches all over India. The Bank has the largest network of branches by any

Public sector bank in the state of Maharashtra. The bank has fine tuned its services to

cater to the needs of the common man and incorporated the latest technology in

banking offering a variety of services.

(d) Central Bank of India:

Central Bank of India is one of the oldest commercial banks of India, and reportedly

is the first truly Indian bank which was totally owned and established by Indian

without any foreign help. In the year 1969 the bank was nationalized by the

Government of India. Central Bank of India claims to be the first bank to be conferred

with the National Award for Excellence in Micro and Small Enterprises (MSE)

Lending for the year 2007-08. Central Bank of India offers a host of banking services

to its customers including Regular Banking Services such as Deposits and Loans,

International Banking Services, and other services including Centralcard, Electronic

Cards, Debit Cards, No-Frills Savings Deposit Account under the name Cent Bachat

Khata, and Finance options for domestic and international tours under the name Cent

Safar. Central Bank of India has a strong presence in the country with over 3000

branches and more than 250 extension counters nationwide as of April 2009. The

headquarters of the bank are located in Mumbai, the financial capital of India, along

with 16 other zonal offices established in different cities of the nation, including Agra,

Ahmedabad, Bhopal, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata,

Lucknow, Mumbai Metro Zonal Office, Muzaffarpur, Nagpur, New Delhi, Patna,

Pune and Raipur.

(e) Punjab National Bank:

Punjab National Bank was incorporated in 1895 in Lahore. It was sole bank that had

started its operations with Indian money. Along with 13 other banks, Punjab National

Bank was nationalized in July 1969. At present, total client count of Punjab National

Bank is around 35 million. It has 4540 offices, which include 421 extension counters.

It is regarded as having potential to challenge blue chip companies in future. Punjab

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National Bank provides its products and services in three separate categories –

personal banking, corporate banking and social banking. Besides, it also provides

some services in SSI sector. In personal banking section, Punjab National Bank offers

savings fund accounts, credit schemes, current account, ATM or debit cards, fixed

deposit schemes and nomination facilities. Its social banking services are provided to

farmers and women. In corporate banking section, Punjab National Bank provides

loans against future lease rentals, cash management services, EXIM finance and gold

card scheme for exporters. In SSI sector, Punjab National Bank provides Sarthak

Udhami, PNB Kushal Udhami, PNB Vikas Udhami, PNB Laghu Udhami Credit

Card, PNB Karigar Credit Card and PNB Pragati Udhami. It also serves traders

finance sector.

(f) State Bank of India:

The origin of the State Bank of India goes back to the first decade of the nineteenth

century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806.

Three years later, the bank received its charter and was re-designed as the Bank of

Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of

British India sponsored by the Government of Bengal. The Bank of Bombay (15 April

1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These

three banks remained at the apex of modern banking in India till their amalgamation

as the Imperial Bank of India on 27 January 1921.An act was accordingly passed in

Parliament in May 1955 and the State Bank of India was constituted on 1 July 1955.

More than a quarter of the resources of the Indian banking system thus passed under

the direct control of the State. Later, the State Bank of India (Subsidiary Banks) Act

was passed in 1959, enabling the State Bank of India to take over eight former State-

associated banks as its subsidiaries (later named Associates).The State Bank of India

was thus born with a new sense of social purpose aided by the 480 offices comprising

branches, sub offices and three Local Head Offices inherited from the Imperial Bank.

The concept of banking as mere repositories of the community's savings and lenders

to creditworthy parties was soon to give way to the concept of purposeful banking sub

serving the growing and diversified financial needs of planned economic

development. The State Bank of India was destined to act as the pacesetter in this

respect and lead the Indian banking system into the exciting field of national

development. State Bank of India (SBI) is the country’s largest commercial bank. The

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government-controlled bank--the Indian government maintains a stake of nearly 60

percent in SBI through the central Reserve Bank of India--also operates the world's

largest branch network, with more than 13,500 branch offices throughout India,

staffed by nearly 220,000 employees. SBI is also present worldwide, with seven

international subsidiaries in the United States, Canada, Nepal, Bhutan, Nigeria,

Mauritius, and the United Kingdom, and more than 50 branch offices in 30 countries.

Long an arm of the Indian government's infrastructure, agricultural, and industrial

development policies, SBI has been forced to revamp its operations since competition

was introduced into the country's commercial banking system. As part of that effort,

SBI has been rolling out its own network of automated teller machines, as well as

developing anytime-anywhere banking services through Internet and other

technologies. SBI also has taken advantage of the deregulation of the Indian banking

sector to enter the banc assurance, assets management, and securities brokering

sectors. In addition, SBI has been working on reigning in its branch network, reducing

its payroll, and strengthening its loan portfolio. The bank has a network of 66

offices/branches in 29 countries spanning all time zones. The SBI’s international

presence is supplemented by a group of Overseas and NRI branches in India and

correspondent links with over 522 leading banks of the world. SBI’s offshore joint

ventures and subsidiaries enhance its global stature.

(g) United Commercial Bank(UCO):

UCO Bank is a commercial bank established in 1943. The idea to establish the bank

was first conceived by G.D. Birla, the famous industrialist, after the historic 'Quit

India Movement' in 1942. The idea was culminated on the 6th of January 1943, when

The United Commercial Bank Ltd. was born with its Registered and Head Office at

Kolkata. A commercial bank and a Government of India Undertaking, it comprises of

government representatives as well as renowned professionals like accountants,

management experts, economists, businessmen, and so on, in its Board of Directors.

United Commercial Bank has stretched out to of all segments of the economy - be it

agriculture, industry, trade and commerce, services or infrastructure. Along with 13

other major commercial banks of India, United Commercial Bank was nationalized on

19th July, 1969, by the Government of India. Thereafter the Bank expanded rapidly.

To keep pace with the developing scenario and expansion of business, the Bank

undertook an exercise in organizational restructuring in the year 1972. Under the act

74

of Indian Parliament, in 1985, its name changed from United Commercial Bank to the

present name, UCO Bank. As of 2005, the bank has 2000 Service Units spread all

over India. With the age of global banking, UCO bank has also changed to be adept

with the newest technology, boasting of specialized computerized branches in both

India and overseas. Headquartered in Kolkata, UCO Bank has about 35 Regional

Offices spread all over India. Overseas, it has two branches in Singapore and Hong

Kong. UCO bank has a total of 414 ATMs across the states of Andhra Pradesh,

Assam, Bihar, Chattisgarh, Chandigarh, Goa Gujarat, Haryana, Himachal Pradesh,

Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Meghalaya, Nagaland,

New Delhi, Orissa, Pondicherry, Punjab, Rajasthan, Sikkim, Tamil Nadu, Tripura,

Uttar Pradesh and West Bengal.

(h) Union Bank of India:

Union Bank of India was inaugurated by the Father of the Nation, Mahatama Gandhi,

on November 11, 1919. Started as a limited company in Mumbai, it was one of the

few Financial Commercial banks in India. Until 1947, UBI had only 4 branches - 3 in

Mumbai and 1 in Saurashtra, all concentrated in key trade centres. Catering to all the

sectors of the society, be it agriculture, industry, trade and commerce, services or

infrastructure, the bank has also played a major role in rendering services to the

financial needs of every section. Apart from this, the bank also extended financial

support to educational, housing and trade sector. Union Bank of India undertook the

task of establishment of village knowledge centers and self-employment training

centers. It was in 1975, that the Union Bank of India was nationalized. It was, then,

that it merged with the Belgaum Bank, a private sector bank. Another merger was on

cards in 1985, this time with the Miraj State Bank. Union Bank is a Public Sector Unit

with 55.43% Share Capital held by the Government of India. Presently 44.57 % of

Share Capital is presently held by institutions, individuals and others. With the age of

global banking, Union Bank of India also changed its style, boasting of urbanized and

computerized core banking systems. A front runner among public sector banks in

modern-day banking, it has all the facilities that a modern bank should have - internet

banking and centrally computerized branches. UBI was one of the pioneer public

sector banks, which launched Core Banking Solution in 2002. As of September 2005,

more than 670 branches/extension counters of Bank are networked under Core

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Banking Solution. The Bank has launched multiple Electronic Delivery Channels and

has installed nearly 423 networked ATMs.

(i) United Bank of India:

Originally established as United Bank of India Ltd., the bank was a result of merger

of four Bengali banks - Comilla Banking Corporation Ltd., Bengal Central Bank Ltd.,

Comilla Union Bank Ltd. and Hooghly Bank Ltd. in 1950. Almost two decade later,

in 1969, United Bank of India was one among the major banks that were nationalized.

Thereafter, the bank expanded in a major way, covering all the states of India. It also

was an active participant in the growth and developmental activities, mainly in the

rural and semi-urban regions. Acknowledging the efforts made by United Bank of

India, it was honored as a Lead Bank in several districts of India. Presently, it the

Lead Bank in 30 districts in the States of West Bengal, Assam, Manipur and Tripura.

The Bank also holds the position of being the Convener of the State Level Bankers'

Committees (SLBC) for the States of West Bengal and Tripura. The bank is known to

spread its banking services especially in the Eastern and North-Eastern parts of India.

United Bank of India supported the 4 Regional Rural Banks (RRB) at West Bengal,

Assam, Manipur and Tripura. Presently the Bank has a three-tier organizational set-up

consisting of the Head Office, 28 Regional Offices. Out of its total 1450 branches,

500 of them have been automated either fully or partially. Its branches in all the

metropolitan cities of India are equipped with Electronic Fund Transfer System. UBI

has ATMs all over the country and having Cash Tree arrangement with 11 other

banks.

(j)Vijaya Bank of India:

Vijaya Bank was flagged off on 23rd October 1931. Late Shri A.B.Shetty, along with

other enterprising farmers in Mangalore, Karnataka, founded the bank to inculcate

banking habits in the farming community of Dakshina Kannada district in Karnataka

State. In 1958, it was promoted and became a scheduled bank. From 1963 to 68, the

Vijaya bank grew both in terms of size and stature - 9 small banks had merged with it,

thus contributing to its growth and advancement. On April 15, 1980, the bank was

nationalized. Vijaya Bank boasts of being one of the few banks which has undertaken

the principal membership of VISA International and MasterCard International. Vijay

Bank has been constantly focusing on technological upgradation. As on October

2005, all the 913 branches have been computerized, covering 97% of the bank's total

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business. As of March 2009, Vijaya bank has a network of 1101 branches, 43

Extension Counters and 364 ATMs, spanning across all 28 states and 4 union

territories in the country, with the highest number of branches in its home state,

Karnataka. At present, 736 branches, 38 extension counters and 11 service branches

of Vijaya Bank, covering 93.3% of its total business, are functioning on CBS. At the

same time, 747 branches are enabled with RTGS and NEFT.

4.2.2 Year of establishment of banks:

Experience plays an important role in improving quality, productivity and efficiency

of any organization. The experience is a catalyst and greatest teacher (Guru) of any

successful organization. The experienced organization inspite of any hurdles will

progress past and implement any new idea quickly; as profitability is the reward of

innovation or new idea. BPR is a new concept which was introduced after 1999 by

banks. Hence establishment year is asked to bankers. Table 4.1 shows the year in

which the banks were incorporated.

Table 4.1

Year Of Establishment Of Banks

Name of the

bank

Year of

establishment

Year of

Nationalization

No. of years

completed in

2011 since

establishment

No. of years

completed in

2011 since

nationalization

Union Bank of

India 1919 1975 92 36

Bank of India 1906 1969 105 42

Punjab National

Bank 1895 1969 116 42

Central Bank of

India 1911 1969 100 42

Bank of

Maharashtra 1935 1969 76 42

United

Commercial Bank 1943 1969 68 42

Allahabad Bank 1865 1969 146 42

Vijaya Bank 1931 1980 80 31

State Bank of

India 1806 1955 205 56

United Bank of

India 1950 1969 61 42

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From the Table 4.1, it is revealed that State Bank of India is one of the oldest Bank

formed in the year 1806, followed by Allahabad Bank in the year 1865, followed by

Punjab National Bank in the year1895, then Bank of India in the year 1906, followed

by Central Bank of India in the year 1911, followed by Union Bank of India in 1919,

followed by Vijaya Bank in the year 1931, followed by Bank of Maharashtra in the

year 1935, followed by UCO bank in the year 1943, followed by United Bank of India

in the year1950 and State Bank of India in the year 1955. The ten public sector banks

have been in operation in India for more than 50 years and some for more than even

100 years also. Thus State Bank of India has completed 205 years of existence

whereas Allahabad Bank has completed 146 years indicating that State Bank of India

have longest experience than all the selected banks. 5 banks have more than 100 years

experience and 3 banks have more than 75 years experience and rest of 3 banks have

more than 50 years experience. It is observed that State Bank of India is the first bank

to go for nationalization in the year 1955, followed by most of the banks, which were

nationalized in the year 1969 namely Bank of India, Punjab National Bank, Central

Bank of India, Bank of Maharashtra, UCO Bank, Allahabad Bank, United Bank of

India, followed by Union Bank which was nationalized in the year 1975 and Vijaya

Bank which was nationalized in the year 1980. Thus it is observed that State bank of

India is the only bank that has a long experience of more than 50 years, after

nationalization of bank was undertaken. And Vijaya Bank has the least number of

years of experience i.e., less than 35 years since nationalization of the bank.

4.2.3. Year in which Business Process Reengineering was introduced in selected

banks:

The study was conducted to find out the year in which BPR has been introduced by

the banks so as to understand whether BPR exercise is a recent phenomenon in the

bank or it has been doing BPR since a long time. The table 4.2 shows the respective

years in which the selected banks have introduced the BPR exercise.

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Table 4.2

Year in which BPR was introduced in Banks

Name of bank

Year in which

BPR was

introduced

Total years

completed

after BPR

till 2011

Difference. in No of

yrs from banking

reforms(1991) till

BPR introduction

Punjab National Bank 2001 10 11

State Bank of India 2003 08 12

Bank of India 2004 07 13

Vijaya Bank 2004 07 13

Union Bank of India 2006 05 15

UCO bank 2006 05 15

Central Bank of India 2007 04 16

Bank of Maharashtra 2008 03 17

Allahabad Bank 2008 03 17

United Bank of India 2008 03 17

Figure 4.1

Year in which BPR was introduced in Banks

The Table 4.2 and Figure 4.1 reveal that almost all the banks have under taken BPR

after the year 2000 in their respective banks. The data reveals that of the banks,

2001

2003 2004 2004

2006 2006 2007

2008 2008 2008

1996

1998

2000

2002

2004

2006

2008

2010

Year

Name of the Bank

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Punjab National Bank and State Bank of India have started their reengineering efforts

from the year 2001 and 2003 respectively, compared to Bank of Maharashtra,

Allahabad bank and United Bank of India, who have started their reengineering effort

in the year 2008. Bank of India has started their reengineering efforts in the year

2004. Union Bank of India and UCO Bank has started their reengineering efforts in

the year 2006. Central Bank of India has started their reengineering efforts in the year

2008. It means that Punjab national Bank and State Bank of India are one of the

pioneers to start their reengineering efforts from the year 2001 i.e., it has been more

than 5 years that these banks have undergone BPR exercise. It can be seen from the

Table 4.2 that the banking reforms started in India in the year 1991 and introduction

of BPR for the first time was in the year 2001 with Punjab National Bank and State

Bank of India starting it for the first time in the year 2003. Thus it can be seen that it

took almost a decade and more for the public sector banks to bring in a radical change

after banking reforms were introduced in India. Almost all the selected banks for

study have taken more than 10 years to start BPR in the bank after banking reforms. It

can be seen that 4 public sector banks started their BPR exercise after 10 years and 6

public sector banks have started their BPR exercise after 15 years of banking reforms

in India. The data tend to reflect a long delay in implementing newer idea and taking

benefit of reforms on time.

4.2.4 Business Process Reengineering through Business Process Reengineering

department/InformationTechnology department:

While IT traditionally has been used for supporting the existing business functions,

i.e. it was used for increasing organizational efficiency, it now plays a role as enabler

of new organizational forms, and patterns of collaboration within and between

organizations. Information Technology department is basically concerned with the use

of computer systems and other forms of communication technology in the business.

Whereas, in BPR, information technology is generally considered as playing a role of

enabler of new forms of organizing and collaborating, rather than supporting existing

business functions. IT has traditionally been used to increase the speed of work but

not to transform it and BPR is about using IT to do things differently. Therefore, IT

plays an important role in BPR. Properly implementing IT can improve the

competitive position of organizations. But inappropriately implementing IT may

create barriers to responding to the rapidly changing business environment.

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The study was conducted to know, whether the banks have undertaken BPR exercise

through creation of a separate BPR department, which would undertake entire BPR

exercise under its supervision or through an existing IT department, which would

handle the entire BPR process. The Table 4.3 below shows the response from the

banks which is as follows:

Table 4.3

BPR implementation through department/IT department

Department

Frequency

No. %

BPR dept 180 60

IT dept 120 40

Total 300 100

It is visible from the Table 4.3, that out of 300 respondents, majority i.e., 180

respondents said that BPR exercise has been undertaken with the help of specialized

BPR department created especially for the purpose of undertaking BPR exercise,

whereas 120 respondents said that BPR was undertaken by the already existing IT

department itself and no separate BPR department was created for the implementation

of BPR.

Figure 4.2

BPR implementation through department/IT department in %

60%

40% BPR dept

IT dept

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The Figure 4.2 revealed that 60% of the bank respondents said that their banks have

set up a separate BPR department to undertake the various activities of BPR, whereas

40% of the bank respondents said that their bank have been doing the same through

their existing IT department. The data reveals that majority of the respondents have

undertaken BPR efforts by setting up a separate BPR department, which has been

entrusted with the responsibility of undertaking BPR exercise, which exhibits a

concentrated and a focused approach by the banks for BPR. The data reveals an effort

by majority of the banks to delegate the BPR exercise to a specialized department so

that it can only concentrate on the efforts of proper implementation.

4.3 Assessing impact of Business Process reengineering on new processes or

innovations:

An attempt was made to understand the impact of BPR exercise on the processes of

the banks. It was found out that under BPR banks makes an effort to introduce newer

processes which take less time and are also cheaper compared to old and traditional

processes used in the banks. The study was conducted to know that in BPR which

new processes are introduced, whether new processes are core or generic or both,

whether BPR has been introduced with the help of technology, what role technology

has played in BPR, whether BPR was done with the help of hired external consultant.

The subsection 4.3.1 to 4.3.6 helps to know the impact of BPR on new processes.

4.3.1 Introduction of new processes in Business Process Reengineering:

The different respondents responded to this open ended question in the following

manner that the following new banking related processes have been launched under

the umbrella of BPR exercise, where the respondents emphasized on implementation

of technology so as to handle and undertake the following processes independently

(A) Core Processes:

Categorization of bank activities or branches in to Personal Banking, Business

Banking, Corporate Banking, Rural and Agricultural Banking

Faster processing and sanctioning of the retail loans and processing of loans at

loan processing units

Payment and settlement systems

Fund transfer

Centralized Inward and Outward cheque clearing system

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Customer centric processes: account opening, processing, delivery channels,

issue of cheque books, any branch banking, ATMs, Internet Banking, Utilities

(bill payment, ECS), Customer Request and Complaints management

Direct Provident Fund to Head Office

Centralized Payroll and Pension

(B) Generic Processes

Centralization of the back office operations

Strengthening Internal Control Mechanisms so as to keep a check on the

processes from various risks

Centralized Processing Centers

Removal of zonal structure

Setting up of Strategic Business Units for better product management

Better Sales force and Relationship Managers

It can be seen that there has been an introduction of the new processes (both core and

generic), so as to bring convenience to the customer by doing the processes with the

help of technology and increase the overall profitability of the banks under BPR.Thus

the study shows at least 8 core processes and 6 generic processes were introduced by

public sector banks; indicating core processes are higher than generic processes

4.3.2 Impact of Business Process Reengineering on Core and Generic Processes:

The core business process can be in simple words described the very basic job which

has to be compulsorily performed for the desired outcome. These processes can also

be termed as the major areas, which keep the organization going. A core business

process is the one, which creates value for the company for competitiveness. Core

processes are for the very existence of the business while generic processes are

performed to support the Core processes. It was also found out that whether banks

have introduced either core processes or generic processes or both the processes under

Business Process Reengineering Exercise. The data for the same is reflected in Table

4.4.

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Table 4.4

Core V/s. Generic process

Change in

Processes

Frequency

No. %

Core. 60 20

Generic 30 10

Both 210 70

Total 300 100

FromTable 4.4, it can be observed that out of 300 respondents, 210 officer and clerk

respondents i.e., 70 percent have brought a change in both the core as well as generic

processes, followed by 60 of the respondents saying that their bank had brought a

change only in the core processes and remaining 30 of the respondents have said that

their bank have changed only generic processes under BPR exercise.

Figure 4.3

Impact of BPR on Core and Generic Processes in %

20%

10%

70% Core.

Generic

Both

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Figure 4.3 reveals that 20% of respondents responded that the core processes have

been basically affected under the BPR exercise, whereas 10% reported that the BPR

exercise effected generic processes of Bank, whereas majority of the respondents i.e.,

70% reported BPR effected both, core & generic process of Bank. Thus it can be

observed that majority of the respondents i.e., 70% of the respondents were of the

opinion that both core and generic processes have been affected by the BPR exercise.

It can be observed that under BPR, it is the introduction of core as well as generic

processes that is undertaken by larger number of banks.

4.3.3 Impact of Business Process Reengineering on usage of technology:

Since BPR involves introduction of newer, thinner and leaner processes, it is

necessary to find out whether the processes are changed by bringing in technology in

the banks. It is also necessary to find out the role that the technology has played in the

processes introduction under BPR exercise. The respondent’s response on whether

technology was used in BPR is shown in Table 4.5.

Table 4.5

Usage of technology

Responses in

Frequency

No. %

Yes 240 80

No 60 20

Total 300 100

It can be seen from Table 4.5, that out of 300 respondents, 240 officer and clerk

respondents have agreed that their banks have used technology for the purpose of

effective implementation of BPR. Whereas. Only 60 respondents have said that no

technology was used for the purpose of smooth introduction of BPR in the banks.

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Figure 4.4

Usage of technology in %

The data depicted in the Figure 4.4 reveals that majority of the banks i.e., 80%

reported that the processes were changed by bringing in the technology; where as

20% responded in negative. Thus it is obvious that for BPR implementation, majority

of banks have brought in technology so as to take more benefits of BPR in the banks.

4.3.4 Impact of Business Process Reengineering on the role of technology:

An attempt was also made to study the role of information technology in the newer

processes launched by the banks. Here respondents were made to select more than one

role that IT has played in their banks for processes under BPR exercise. It is reflected

in Table 4.6 and Figure 4.5.

Table 4.6

Role of Information Technology in newer processes

Role of IT Response (%)

Transactional 90

Informational 90

Automation 90

Tracking 60

Knowledge management 60

Analytical 50

Geographical 40

Sequential 20

It is clear from the Table 4.6, that out of 300 respondents majority of respondents ie.,

90% of the respondents were of the opinion that IT has majorly been helpful in

transactional, informational and automational aspect of processes. This means that the

Yes 80%

No 20%

86

introduction of IT has majorily benefitted in carrying out various transactions in the

processes, carrying information of the processes, and also automating traditional

techniques of conducting the processes. Around 60% of the respondents were of the

view that IT has played the role in tracking information at various places in the

processes and has also been helpful in managing vast amount of the information

(knowledge) within the bank. 50% of the respondents were of the opinion that IT has

also been playing the role of analysing the information collected at various centres in

the bank. Around 40% of the respondent said that IT has been helpful in breaking

down geographical barriers with different branches of the bank. 20% of the

respondents were of the opinion that IT is also useful in performing various activities

and processes in sequence in the banks.

Figure 4.5

Role of Information Technology in newer processes in %

The Figure 4.5 reveals the data about the role that Information technology has played

in the newer processes, during the implementation of BPR, 90% of the respondents

were of the opinion that Information Technology (IT) has played the transactional,

informational and automation role. It was followed by 60% of the respondent’s

opinion that IT played the role of tracking, knowledge management, and analysis of

the data (50%). 40% acknowledged the role of IT in connecting various geographical

locations. And 20% acknowledged that IT plays a role in sequential processes. Thus it

is observed that under BPR exercise, majority (90%) of the respondents have said that

0

10

20

30

40

50

60

70

80

90

90 90 90

60 60

50

40

20 pe

rce

nta

ge

87

IT has majorly been playing the helpful role of completing the transactional,

informational and automation role for the processes in the bank.

4.3.5 Impact of Business Process Reengineering on usage of software solution:

The researcher also found out that the majority (70 percent) of the respondent banks

have used software solutions for the implementation of BPR exercise. This is

presented in Table 4.7 and Figure 4.6.

Table 4.7

Usage of software solutions

Responses in

Frequency

No. %

Yes 210 70

No 90 30

Total 300 100

Table 4.7 shows that out of 300 respondents, 210 officer and clerk respondents have

responded that the BPR was implemented with the help of various software solutions

installed in the banks for the effective working of various processes in the bank. 90

respondents were of the view that no software solutions were used.

Figure 4.6

Usage of software solution in %

From the Figure 4.6,it can be observed that majority of the respondents, i.e., 70% of

the respondents reported that they have used software solutions for the BPR exercise.

70%

30%

Yes No

88

Whereas 30% of the respondents responded that they have not used any software

solutions. Majority of the respondents mentioned that Finacle from Infosys was the

software solution that has been introduced while implementing BPR for different

processes. One of the respondents, State Bank of India also mentioned about

introduction of Workflow Software, which is aimed at achieving paper less flow of

process culture.

4.3.6 Impact of Business Process Reengineering on hiring of external consultant:

Whether the banks had hired external consultants for BPR exercise so as to introduce

technology in the launch of newer processes or have carried out the BPR exercise by

the bank itself was inquired. The responses are presented in Table 4.8 and Figure 4.7.

Table 4.8

Hiring of external consultant

Responses in

Frequency

No. %

Yes 180 60

No 120 40

Total 300 100

The Table 4.8 reveals that out of 300 respondents, 180 respondents said that their

banks have hired external consultants for the purpose of implementation of BPR

exercise. Whereas, 120 respondents said that their bank have not hired any external

consultant for the purpose of undertaking BPR exercise.

Figure 4.7

Hiring of external consultant in %

60%

40%

Yes No

89

In the Figure 4.7, it can be observed that, overall, 60 % of the respondents responded

that they had hired external consultant to carry out the BPR exercise, whereas 40% of

the respondents did not hire any external consultant. The respondents also named the

following organizations that they have hired as external consultants for the purpose of

BPR exercise which are Boston and Consulting Group, Mckinsey group, Ernst and

Young group.

Majority of the respondents (60 percent) have said that for the purpose of undertaking

and implementing BPR, their banks have hired external consultants, who have special

expertise in BPR and is helpful in better implementation.

4.4 Assessing the impact of Business Process Reengineering on cost and revenue

of Public Sector Banks:

The researcher has studied the impact that BPR brings on the cost of handling the

processes. It is studied in terms of its impact on the fixed cost or the operational cost

of handling processes or does it impacts both during the process of its implementation

of BPR. The impact of implementing BPR on the cost and revenues of the banks was

studied in subsections 4.4.1 to 4.4.4.

4.4.1 Impact of Business Process Reengineering on type of cost:

The BPR implementation cost can be classified into fixed and variable cost. In the

present study operational (variable) cost and fixed and operational cost classification

has been adopted. The summary of respondents responses is presented in Table 4.9

and Figure 4.8.

Table 4.9

Impact of BPR on the type of cost

Type of cost

Frequency

No. %

Operational cost 90 30

Both (fixed and operational) 210 70

Total 300 100

90

Table 4.9 shows that out of 300 respondents, 210 respondents have made a view that

BPR has an impact on both the fixed and the operational cost of the bank, whereas, 90

respondents were of the view that BPR affects only operational costs in the bank.

Figure 4.8

Impact of BPR on the type of cost in %

From the Figure 4.8, it can be seen that majority i.e. 70% of the respondents

responded that BPR implementation made a positive impact on both fixed as well as

operational cost, whereas 30% of the bank respondents responded that only

operational cost has been affected after the introduction of BPR.

4.4.2 Impact of Business Process Reengineering on cost of handling processes:

For understanding the impact of BPR on the cost of handling the processes, the cost

impact is classified as (1) less that 10 percent impact, (2) 11-20 percent impact, (3)

21-30 percent impact, (4) 31-40 percent impact, (5) 41-50 percent impact and (6)

more than 50 percent impact. The summary of result is shown in Table 4.10 and

Figure 4.9.

30%

70%

Operational cost Both (fixed+operational)

91

Table 4.10

Impact of BPR on the cost of handling processes

Reduction in cost

Frequency

No. %

less than 10% 60 20

11 to 20% 210 70

21 to 30% 30 10

31 to 40% 0 0

41 to 50% 0 0

more than 50% 0 0

Total 300 100

Table 4.10 shows that out of 300 respondents, 210 respondents have an opinion that

BPR has resulted in the reduction of cost to an extent of 11-20% in the bank, whereas,

60 respondents were of the view that the cost have been reduced to an extent of 1-

10% and 30 respondents were of the view that the cost have reduced to an extent of

21-30%. None of the respondents had a reduction of cost above 30%.

Figure 4.9

Impact of BPR on the cost of handling processes in %

20

70

10

0 0 0 0

10

20

30

40

50

60

70

80

less than 10

11 to 20 21 to 30 31 to 40 41 to 50 more than 50

respondents

per

cen

tage

92

From Figure 4.9, it can be seen that majority i.e., 70% of the bank respondents

responded that there has been savings in the direct cost of handling the process to an

extent of 11 to 20% after the introduction of newer processes, whereas 20% of the

respondent responded that after the BPR exercise cost has been reduced within a

range of 0 to 10%, and 10% of the respondents responded that there has been a

reduction of 21-30%. It can be seen that for the majority of the banks, there has been

reduction in the cost after the introduction of BPR ranging between 11-20%. Thus it is

clear from Table 4.10 and Figure 4.9 that majority (i.e. 70 percent) respondents

agreed on 11-20 percent impact of BPR implementation on cost reduction.

4.4.3 Impact of Business Process Reengineering on revenues of banks:

An attempt was made to understand the extent of impact of BPR on the revenues on

an average, for the selected respondents in the last five years. The respondents were

given a range of increase in the revenue (1) below 10%, (2)11-20 %, (3) 21 to 30 %,

(4) 31 to 40 %, (5) 41 to 50 % and (6) above 50%.Table 4.11 shows the responses of

the respondents on the area i.e., to what extent revenue was increased due to

implementation of BPR.

Table 4.11

Distribution of respondents for increase in revenue

Increase in revenue

Frequency

No. %

below 10% 30 10

11 - 20% 180 60

21 - 30% 90 30

31 - 40% 0 0

41 - 50% 0 0

above 50% 0 0

Total 300 100

From Table 4.11, it can be seen that out of 300, majority i.e., 180 of the respondents

were of the view that revenues was increased to the extent of 11 to 20%, whereas, 90

of the respondents responded that the increase in the revenue was to the extent of 21-

30% and 30 of the respondents said that the increase in the revenue has been less than

93

10%. But overall for majority of banks, the increase in the revenues has been between

11-20%.

Figure 4.10

Increase in revenue in %

From Figure 4.10, it has been observed that for the majority of respondents, ie, 60%,

the increase in the revenue has been between 11-20%, followed by 30% of

respondents with the increase in revenue between 21-30% and 10% of respondents

with an increase in the revenue less than 10%. Thus it can be said that for majority of

the banks, BPR has brought an increase in revenue to an extent of 11-20%. Thus

Table 4.11 and Figure 4.10 shows majority respondents (60 percent) agreed that only

11-20 percent revenue is increased due to implementation of BPR. It is interesting to

know that Table 4.10 shows only cost handling was reduced 11-20 percent. It means

effectively increased revenue and decreased cost is more or less the same. Hence it is

difficult to show that BPR increased the profitability.

4.4.4 Impact of Business Process Reengineering on the number of customers:

The Linkert scale was adopted to know the extent of BPR impact on customers. The

result is presented in Table 4.12 and Figure 4.11.

10

60

30

0 0 0 0

10

20

30

40

50

60

70

below 10% 11 - 20% 21 - 30% 31 - 40% 41 - 50% above 50%

increase in revenue

per

cen

tage

94

Table 4.12

Increase in customers

Increase in customers.

Frequency

No. %

More than 10% 60 20

More than 20% 90 30

More than 30% 30 10

More than 50% 30 10

Any other 90 30

Total 300 100

Figure 4.11

Increase in customers in %

The Table 4.12 and Figure 4.11, shows that out of the total respondents, 20% of the

respondents responded that there has been an increase in the customers of the banks to

an extent of more than 10% but less than 20%. 30% of the respondents responded that

there has been an increase in the customers to an extent of more than 20% but less

20

30

10 10

30

0

5

10

15

20

25

30

35

1 More than 10%

2 More than 20%

3 More than 30%

4 More than 50%

5 Any other

% o

f re

sp

on

de

nts

extent of increase in customer

95

that 30%. 10% of the respondents responded that there has been an increase in the

customers to an extent of more than 30% but less that 40%. 10% of the respondents

responded that there has been an increase in the customers to an extent of more than

50%. Whereas 30% responded that there has been no initiative taken to measure this

aspect yet in the bank.

Thus it is clear from Table 4.12 that majority of the respondents 90 (30 percent)

agreed that there is an increment in customers due to BPR implementation up to 30

percent.

4.5 Assessing the impact of Business Process Reengineering on the employees

of Public Sector Banks:

The researcher has studied the impact of BPR implementation on the employees by

studying BPR’s impact on the salaries, incentives, and the workload of the employees.

The researcher has also studied whether there has been any impact on the working

hours of the employees at the time, when BPR was implemented. The researcher got

the following response.

4.5.1 Impact of Business Process Reengineering on the salary of the employees:

Table 4.13 and Figure 4.12 present impact of BPR on the salary of the bank

employees.

Table 4.13

Impact on the salary of the employees

From Table 4.13, it is observed that out of 300 respondents, 185 officers and 85 clerk

respondents have said that there was no increase in the salary after the implementation

of BPR exercise. 15 officer and 15 clerk respondents have said that there was an

increase in their salary after the implementation of BPR. It seems that only a fewer

Responses

in

Officers Clerks Total

No. % No. % No. %

yes 15 7.50 15 15 30 10

no 185 92.50 85 85 270 90

Total 200 100 100 100 300 100

96

percentage of employees have got hike in salaries after BPR exercise. Overall, 270

employee respondents have said that there was no increase in the salaries of the

employees, whereas, total 30 officer and clerk respondents said that their salaries have

increased after BPR.

Figure 4.12

Impact on the salary of the employees

Figure 4.12 shows that 7.5% of Officers and 15% of the Clerical staff responded of

having any increment in their salaries whereas, 92.5% of the Officer respondents

responded that there has been no increment in their salary after the BPR exercise and

85% of the Clerical staff responded in negative about increment of their salaries after

BPR exercise. The majority (90 percent) were of the opinion that there has been no

increase in the salaries of the employees after implementation of BPR. Overall

according to the majority (90 percent) of the officer and clerk respondents, the salary

has not increased after BPR exercise.

4.5.2 Impact of Business Process Reengineering on incentives of the employees:

It was asked to employees whether there has been any increment in the employee’s

incentives after BPR exercise. The respondents view result is presented in Table 4.14

and Figure 4.13.

7.5%

92.50%

15.0%

85.00%

0%

20%

40%

60%

80%

100%

Officer Clerk

Yes No

97

Table 4.14

Impact on incentives of the employees

Responses in

Officer Clerk

Total

No. % No. %

No. %

yes 7 3.50 5 5.00 12 04

no 193 96.50 95 95.00 288 96

total 200 100 100 100 300 100

Table 4.14 shows that out of 300 respondents, 193 officer and 95 clerk respondents

have said that there has been no increase in their incentives during or after

implementation of BPR, whereas, only 7 officer and 5 clerk respondents have said

that there was an increase in their incentives. Overall 288 officer and clerk

respondents responded in negative over the increase in their incentives during or after

the implementation of BPR exercise.

Figure 4.13

Impact on incentives of the employees in %

3.5%

96.5%

5.0%

95.0%

0%

20%

40%

60%

80%

100%

Officer Clerk

Yes No

98

Figure 4.13 shows that 3.5% of Officers and 5% of the Clerical staff responded of

having any increment in their incentives, whereas, 96.5% of the Officer respondents

responded that there has been no increment in their incentives after the BPR exercise

and 95% of the Clerical staff responded in negative about non-increment of their

incentives after BPR exercise.

Overall, the result shows that majority of the officer and clerk respondents agreed that

there has been no increase in their incentives under BPR exercise.

4.5.3 Impact of Business Process Reengineering on the workload of the

employees:

Whether there has been any increment in the employee’s workload after BPR

exercise, it is presented in Table 4.15.

Table 4.15

Impact on the workload of the employees

Responses

in

Officer Clerk Total

No. % No. % No. %

yes 75 37.50 41 41.00 116 38.66

no 125 62.50 59 59.00 184 61.33

total 200 100 100 100 300 100

From Table 4.15, it is visible that out of 300 respondents, 125 officers and 59 clerk

respondents have viewed in negative over the question of increase in the workload of

the employees due to introduction of newer processes, whereas, 75 officer and 41

clerk respondents have an opinion that after BPR implementation, their workload

have gone up. Overall, 116 officer and clerk respondents have said that their workload

have increased after BPR, whereas, 184 officer and clerk respondents have responded

that their workload have not increased.

99

Figure 4.14

Impact on the workload of employees in %

The Figure 4.14 reveals that 37.5% of Officers and 41% of the Clerical staff

responded of having any increment in their workload, whereas,62.5% of the Officer

respondents responded that there has been no increment in their workload after the

BPR exercise and 59% of the Clerical staff responded in negative about increment of

their workload after BPR exercise.

The study shows that majority of the respondents (61 percent) have responded that

there has been no increase in the workload of the employees

4.5.4 Impact of Business Process Reengineering on the timings(work hours) of

the employees:

The researcher has studied from the employees, whether there has been any increase

in their working hours after the BPR implementation

Yes

37.50%

62.50%

41.00%

59.00%

0%

10%

20%

30%

40%

50%

60%

70%

Officer Clerk

No Yes

100

Table 4.16

Impact on the working hours of the employees

Responses

in

Officer Clerk Total

No. % No. % No.

%

yes 99 49.50 51 51.00 150 50

no 101 50.50 49 49.00 150 50

total 200 100 100 100 300 100

Figure 4.15

Impact of BPR on the working hours of the employees in %

The Table 4.16 shows that out of 300 respondents, 99 officer and 51 clerk respondents

have said that there has been an increase in their working hours in the bank after

implementation of BPR, whereas 101 officer and 49 clerk respondents said that there

has been no increase in their working hours/timings in the bank after implementation

of BPR. In other words Figure 4.15 shows that out of the 300 respondents, 49.5%

officers and 51% clerical staff acknowledged that there has been an increase in

timings of job after BPR implementation. In the above data, 50.5% of officer

respondents and 49% of the clerical staff responded in negative regarding the increase

in the timings of their job. Overall, the responses of officer and clerk respondent

regarding the increase in their timings/workload have been 50:50.

49.50% 50.50% 51.00% 49.00%

0%

10%

20%

30%

40%

50%

60%

Officer Clerk

Yes No