Banking Sector as a Service
Content
Indian Banking 10 Sector Services Marketing
1
Contents
Objectives ............................................................................3 History of Banking in India ............................................4 Banks in India .........................................................4 Major Banks in India ..........................................................5 Banking Services in India…………………………………….6 Kinds of Banks .....................7 Products Offered………………………..7 PEST Analysis……………………………………….10 The 4I’s of Banking…………………………….12 RATER Analysis…………………………………………..14 Future……………………………………
BY: Ajita Singh Lucky Parashar 2
Pranay Goel Rakhi Jain
OBJECTVES Because of the following reasons, we preferred this project work to get the knowledge of the banking system. • • • • • •
Banking is an essential industry. It is where we often wind up when we are seeking a problem in financial crisis and money related query. Banking is one of the most regulated businesses in the world. Banks remain important source for career opportunities for people. It is vital system for developing economy for the nation. Banks can play a dynamic role in delivery and purchase of consumer durables.
Usually all persons want money for personal and commercial purposes. Banks are the oldest lending institutions in Indian scenario. They are providing all facilities to all citizens for their own purposes by their terms. To survive in this modern market every bank implements so many new innovative ideas, strategies, and advanced technologies. For that they give each and every minute detail about their institution and projects to Public. They are providing ample facilities to satisfy their customers i.e. Net Banking, Mobile Banking, Door to Door facility, Instant facility, Investment facility, Demat facility, Credit Card facility, Loans and Advances, Account facility etc. And such banks get success to create their own image in public and corporate world. These banks always accepts innovative notions in Indian banking scenario like Credit Cards, ATM machines, Risk Management etc.
3
HISTORY OF BANKING IN INDIA------Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money has become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: • • •
Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.
BANKS IN INDIA---------4
In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players. All these details and many more are discussed over here. The banks and its relation with the customers, their mode of operation, the names of banks under different groups and other such useful information are talked about. There are many upcoming foreign banks in India. The RBI has shown certain interest to involve more of foreign banks than the existing one recently. This step has paved a way for few more foreign banks to start business in India.
Major Banks in India -ABN-AMRO Bank
-Abu Dhabi Commercial Bank
-American Express Bank Andhra Bank
-Allahabad Bank
-Bank of Baroda
-Bank of India
-Bank of Maharastra
-Bank of Punjab
-Bank of Rajasthan
-Bank of Ceylon
-BNP Paribas Bank
-Canara Bank
-Catholic Syrian Bank
-Central Bank of India
-Centurion Bank
-Indian Overseas Bank
-IndusInd Bank
-ING Vysya Bank
-Jammu & Kashmir Bank
-JPMorgan Chase Bank
-Karnataka Bank
-Karur Vysya Bank
-Laxmi Vilas Bank
-Oriental Bank of Commerce
-Punjab National Bank
-Punjab & Sind Bank 5
-Scotia Bank
-South Indian Bank
-Standard Chartered Bank
-State Bank of India (SBI)
-State Bank of Bikaner & jaipur
-China Trust Commercial bank
-Citi Bank
-City Union Bank
-Corporation Bank
-Dena Bank
-Deutsche Bank
-Development Credit Bank
-Dhanalakshmi Bank
-Federal Bank
-HDFC Bank
-HSBC
-ICICI Bank
-IDBI Bank
-Indian Bank
-State Bank of Hyderabad
-State Bank of Indore
-State Bank of Mysore
-State Bank of Saurastra
-State Bank of Travancore
-Syndicate Bank
-Taib Bank
-UCO Bank
-Union Bank of India
-United Bank of India
-United Bank Of India
-United Western Bank
-UTI Bank
-Vijaya Bank
BANKING SERVICES IN INDIA:With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. With stiff competition and advancement of technology, the service provided by banks has become more easy and convenient. The past days are witness 6
to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south. This section of banking deals with the latest discovery in the banking instruments along with the polished version of their old systems.
KINDS OF BANKS-----Financial requirements in a modern economy are of a diverse nature, distinctive variety and large magnitude. Hence, different types of banks have been instituted to cater to the varying needs of the community. Banks in the organized sector may, however, be classified in to the following major forms: 1. Commercial banks 2. Co-operative banks 3. Specialized banks 4. Central bank
Products offered Lending Products:I. Housing Loans II. Loan for Consumer goods III. Personal Loans for marriage, honeymoon, medical treatment and holding etc. 7
IV. Education Loans V. Auto Loans VI. Gold Loans VII. Event Loans VIII. Festival Loans IX. Insurance Products X. Loan against Rent receivables XI. Loan against Pension receivables to senior citizens XII. Debit and Credit Cards XIII. Global and International Cards XIV. Loan to Doctors to set up their own Clinics or for purchase of medical equipments XV. Loan for Woman Empowerment for the Setting up of boutiques Setting up of beauty parlours Setting up of creches Setting up of flower shops For making jaipuri quilts etc. Preparation and supply of Food Tiffins XVI. Loan for purchase of acoustic enclosures for Diesel Gen. Sets etc.
Banking Products for Depositors:Banking products for depositors in various segments of customers like; children, salaried persons, senior citizens, professionals, technocrats’ business men, retail traders and farmers etc. include:
8
a.
Flexi deposit Accounts
b.
Savings Bank Accounts
c.
Recurring Deposit Accounts
d.
Short Term Deposits
e.
Deferred pension Linked Deposit Schemes
Today pure deposit type products are giving way to multi-benefit, multiaccess genres of banking products. Most of the innovation is taking place in saving bank accounts to make the meager return of 3.5% p.a. that they earn, more attractive. Most of the banks now offer Sweep in and sweep out account, called 2-in-1 accounts or value added savings bank accounts. This account is a combination of savings bank and term deposit accounts and offers twin benefit of liquidity of a savings bank account and higher interest earning of term deposit accounts.
Add-ons and Freebies:To make their products and services more service more attractive so as to woo maximum number of customers, the banks are vying with each other with whole lot of frills, goodies, freebies are as under:
1.
Free collection of specified number of outstation instruments
2.
Instant credit of outstanding cheques up to Rs.15000/-
3.
Concession in exchange on demand drafts and pay-orders and commission on bills of exchange
4.
Issuance of free personalized cheques books
5.
Free issuance of ATM, Debit, Credit and add-on Cards 9
6.
Free investment advisory services
7.
Grant of redeemable reward points on use of credit cards
8.
Free internet banking, phone banking and any where banking facilities
9.
Issuance of discount coupons for purchase of various products like computer accessories, music CDs, cassettes, books, toys, garments etc.etc.
10.
Last but not the least, issuance of free PVR, Trade Fair tickets etc. etc.
11.
Concession in rate of interest on Group advances
12.
Exemption in upfront fees
These concessions, freebies and add-ons are based on the True Relationship Value of customers and is calculated by the return on various products and services of the banks availed by them. These concessions and freebies are usually offered for purchase of consumer goods but now they have become an integral part of retail Banking products and services also.
Other Banking Services:Offer of several frills and goodies is not the end of the game. Banks also offer following Banking services free of charges to customers:
1.
Payment of utility bills like water, electricity, telephone and mobile phone bills
2.
Payment of insurance premiums on due dates
3.
Payment of monthly/quarterly education fee of children to their respective schools
10
4.
Remittance of funds from one account to another
5.
Demating of shares, bonds, debentures, and mutual funds
6.
Payment of credit card bills on due dates
7.
Last but not the least, the filing of income tax returns and payment of income tax
PEST ANALYSIS TECHNOLOGICAL ENVIROMENT Technology plays a very important role in bank’s 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 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 losing 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.
11
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 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 in turn 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 farmer’s 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 12
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 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.
THE 4 I’s OF BANK MARKETING There are four distinctive characteristics of service, which create challenges and opportunities. They are commonly known as the four I’s namely: • • • •
Intangibility Inconsistency Inseparability Inventory
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 13
the intangibles” 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.
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 don’t know that person 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 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 of quality 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.
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:
14
(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 equipments of the service providers and self serves it. Eg. ATM.
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. 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 There are many reasons why a customer should be given QUALITY SERVICES. The most of them are: 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 today’s JLT world then it very difficult to win back the customer. 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: 15
• • • • •
Reliability Assurance Tangibility Empathy Responsiveness
RELIABILITY
RESPONSIVENESS
ASSURANCE
EMPATHY
TANGIBILITY
16
RELIABILITY It 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 promises– promises about delivery, service provision, problem resolution, and pricing. It is also known as the “No Excuses” 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.
ASSURANCE Assurance is defined as employee’s knowledge and courtesy and the ability of the firm and its employees to inspire trust and confidence. It includes the ability, knowledge, genuineness, and honesty to provide the best services to the customer from the frontline staff. In this dimension the front line staff is more important rather than the owner. At Indian Overseas Bank, every customer who comes is treated with utmost care and any problem that takes place is solved with great enthusiasm. It assures the customers coming up to the bank that the money they invest is secure; the interest rate that is being provided to them is at par or sometimes even higher as compared to other banks. Also, it assures the customers that the money they have invested will be returned to them as and when required with proper interest. It tries to empower their customer contact people and regularly train them in skills to build trust and loyalty between employees and the customers. They have assigned some of their staff members to build relationships with the customers by getting to know them personally.
TANGIBLITY
17
Tangibles are defined as the appearances of physical facilities, equipments, personnel and communication materials. All of these provide physical representations or images of the service that customers, particularly new customers, will use to evaluate quality. At Indian Overseas Bank, the entire premise is air-conditioned. They have computerized systems in place and therefore quick, 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 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.
RESPONSIVENESS Responsiveness 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., 18
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. Banks have changed the culture of human life in India and have made life much easier for the people.
Future •
The pervasive influence of information technology will continue to revolutionize banking.
•
Internationally, the number brick and mortar structure has been rapidly yielding ground to click and order electronic banking with a plethora of new products.
•
Banks will strongly rely on the merits of relationship banking.
•
CRM has, therefore, will become the new mantra in customer service management, which is both relationship based and information intensive.
•
Boom in housing loan market, the sign of overheating has also started surfacing with potential problem for banks that have not exercised sufficient caution.
•
The pressure on margins is mounting partly because of fierce competition and partly as a result of falling interest rates environment.
19
1
Contents
Objectives ............................................................................3 History of Banking in India ............................................4 Banks in India .........................................................4 Major Banks in India ..........................................................5 Banking Services in India…………………………………….6 Kinds of Banks .....................7 Products Offered………………………..7 PEST Analysis……………………………………….10 The 4I’s of Banking…………………………….12 RATER Analysis…………………………………………..14 Future……………………………………
BY: Ajita Singh Lucky Parashar 2
Pranay Goel Rakhi Jain
OBJECTVES Because of the following reasons, we preferred this project work to get the knowledge of the banking system. • • • • • •
Banking is an essential industry. It is where we often wind up when we are seeking a problem in financial crisis and money related query. Banking is one of the most regulated businesses in the world. Banks remain important source for career opportunities for people. It is vital system for developing economy for the nation. Banks can play a dynamic role in delivery and purchase of consumer durables.
Usually all persons want money for personal and commercial purposes. Banks are the oldest lending institutions in Indian scenario. They are providing all facilities to all citizens for their own purposes by their terms. To survive in this modern market every bank implements so many new innovative ideas, strategies, and advanced technologies. For that they give each and every minute detail about their institution and projects to Public. They are providing ample facilities to satisfy their customers i.e. Net Banking, Mobile Banking, Door to Door facility, Instant facility, Investment facility, Demat facility, Credit Card facility, Loans and Advances, Account facility etc. And such banks get success to create their own image in public and corporate world. These banks always accepts innovative notions in Indian banking scenario like Credit Cards, ATM machines, Risk Management etc.
3
HISTORY OF BANKING IN INDIA------Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money has become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: • • •
Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.
BANKS IN INDIA---------4
In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players. All these details and many more are discussed over here. The banks and its relation with the customers, their mode of operation, the names of banks under different groups and other such useful information are talked about. There are many upcoming foreign banks in India. The RBI has shown certain interest to involve more of foreign banks than the existing one recently. This step has paved a way for few more foreign banks to start business in India.
Major Banks in India -ABN-AMRO Bank
-Abu Dhabi Commercial Bank
-American Express Bank Andhra Bank
-Allahabad Bank
-Bank of Baroda
-Bank of India
-Bank of Maharastra
-Bank of Punjab
-Bank of Rajasthan
-Bank of Ceylon
-BNP Paribas Bank
-Canara Bank
-Catholic Syrian Bank
-Central Bank of India
-Centurion Bank
-Indian Overseas Bank
-IndusInd Bank
-ING Vysya Bank
-Jammu & Kashmir Bank
-JPMorgan Chase Bank
-Karnataka Bank
-Karur Vysya Bank
-Laxmi Vilas Bank
-Oriental Bank of Commerce
-Punjab National Bank
-Punjab & Sind Bank 5
-Scotia Bank
-South Indian Bank
-Standard Chartered Bank
-State Bank of India (SBI)
-State Bank of Bikaner & jaipur
-China Trust Commercial bank
-Citi Bank
-City Union Bank
-Corporation Bank
-Dena Bank
-Deutsche Bank
-Development Credit Bank
-Dhanalakshmi Bank
-Federal Bank
-HDFC Bank
-HSBC
-ICICI Bank
-IDBI Bank
-Indian Bank
-State Bank of Hyderabad
-State Bank of Indore
-State Bank of Mysore
-State Bank of Saurastra
-State Bank of Travancore
-Syndicate Bank
-Taib Bank
-UCO Bank
-Union Bank of India
-United Bank of India
-United Bank Of India
-United Western Bank
-UTI Bank
-Vijaya Bank
BANKING SERVICES IN INDIA:With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. With stiff competition and advancement of technology, the service provided by banks has become more easy and convenient. The past days are witness 6
to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south. This section of banking deals with the latest discovery in the banking instruments along with the polished version of their old systems.
KINDS OF BANKS-----Financial requirements in a modern economy are of a diverse nature, distinctive variety and large magnitude. Hence, different types of banks have been instituted to cater to the varying needs of the community. Banks in the organized sector may, however, be classified in to the following major forms: 1. Commercial banks 2. Co-operative banks 3. Specialized banks 4. Central bank
Products offered Lending Products:I. Housing Loans II. Loan for Consumer goods III. Personal Loans for marriage, honeymoon, medical treatment and holding etc. 7
IV. Education Loans V. Auto Loans VI. Gold Loans VII. Event Loans VIII. Festival Loans IX. Insurance Products X. Loan against Rent receivables XI. Loan against Pension receivables to senior citizens XII. Debit and Credit Cards XIII. Global and International Cards XIV. Loan to Doctors to set up their own Clinics or for purchase of medical equipments XV. Loan for Woman Empowerment for the Setting up of boutiques Setting up of beauty parlours Setting up of creches Setting up of flower shops For making jaipuri quilts etc. Preparation and supply of Food Tiffins XVI. Loan for purchase of acoustic enclosures for Diesel Gen. Sets etc.
Banking Products for Depositors:Banking products for depositors in various segments of customers like; children, salaried persons, senior citizens, professionals, technocrats’ business men, retail traders and farmers etc. include:
8
a.
Flexi deposit Accounts
b.
Savings Bank Accounts
c.
Recurring Deposit Accounts
d.
Short Term Deposits
e.
Deferred pension Linked Deposit Schemes
Today pure deposit type products are giving way to multi-benefit, multiaccess genres of banking products. Most of the innovation is taking place in saving bank accounts to make the meager return of 3.5% p.a. that they earn, more attractive. Most of the banks now offer Sweep in and sweep out account, called 2-in-1 accounts or value added savings bank accounts. This account is a combination of savings bank and term deposit accounts and offers twin benefit of liquidity of a savings bank account and higher interest earning of term deposit accounts.
Add-ons and Freebies:To make their products and services more service more attractive so as to woo maximum number of customers, the banks are vying with each other with whole lot of frills, goodies, freebies are as under:
1.
Free collection of specified number of outstation instruments
2.
Instant credit of outstanding cheques up to Rs.15000/-
3.
Concession in exchange on demand drafts and pay-orders and commission on bills of exchange
4.
Issuance of free personalized cheques books
5.
Free issuance of ATM, Debit, Credit and add-on Cards 9
6.
Free investment advisory services
7.
Grant of redeemable reward points on use of credit cards
8.
Free internet banking, phone banking and any where banking facilities
9.
Issuance of discount coupons for purchase of various products like computer accessories, music CDs, cassettes, books, toys, garments etc.etc.
10.
Last but not the least, issuance of free PVR, Trade Fair tickets etc. etc.
11.
Concession in rate of interest on Group advances
12.
Exemption in upfront fees
These concessions, freebies and add-ons are based on the True Relationship Value of customers and is calculated by the return on various products and services of the banks availed by them. These concessions and freebies are usually offered for purchase of consumer goods but now they have become an integral part of retail Banking products and services also.
Other Banking Services:Offer of several frills and goodies is not the end of the game. Banks also offer following Banking services free of charges to customers:
1.
Payment of utility bills like water, electricity, telephone and mobile phone bills
2.
Payment of insurance premiums on due dates
3.
Payment of monthly/quarterly education fee of children to their respective schools
10
4.
Remittance of funds from one account to another
5.
Demating of shares, bonds, debentures, and mutual funds
6.
Payment of credit card bills on due dates
7.
Last but not the least, the filing of income tax returns and payment of income tax
PEST ANALYSIS TECHNOLOGICAL ENVIROMENT Technology plays a very important role in bank’s 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 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 losing 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.
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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 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 in turn 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 farmer’s 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 12
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 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.
THE 4 I’s OF BANK MARKETING There are four distinctive characteristics of service, which create challenges and opportunities. They are commonly known as the four I’s namely: • • • •
Intangibility Inconsistency Inseparability Inventory
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 13
the intangibles” 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.
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 don’t know that person 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 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 of quality 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.
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:
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(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 equipments of the service providers and self serves it. Eg. ATM.
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. 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 There are many reasons why a customer should be given QUALITY SERVICES. The most of them are: 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 today’s JLT world then it very difficult to win back the customer. 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: 15
• • • • •
Reliability Assurance Tangibility Empathy Responsiveness
RELIABILITY
RESPONSIVENESS
ASSURANCE
EMPATHY
TANGIBILITY
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RELIABILITY It 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 promises– promises about delivery, service provision, problem resolution, and pricing. It is also known as the “No Excuses” 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.
ASSURANCE Assurance is defined as employee’s knowledge and courtesy and the ability of the firm and its employees to inspire trust and confidence. It includes the ability, knowledge, genuineness, and honesty to provide the best services to the customer from the frontline staff. In this dimension the front line staff is more important rather than the owner. At Indian Overseas Bank, every customer who comes is treated with utmost care and any problem that takes place is solved with great enthusiasm. It assures the customers coming up to the bank that the money they invest is secure; the interest rate that is being provided to them is at par or sometimes even higher as compared to other banks. Also, it assures the customers that the money they have invested will be returned to them as and when required with proper interest. It tries to empower their customer contact people and regularly train them in skills to build trust and loyalty between employees and the customers. They have assigned some of their staff members to build relationships with the customers by getting to know them personally.
TANGIBLITY
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Tangibles are defined as the appearances of physical facilities, equipments, personnel and communication materials. All of these provide physical representations or images of the service that customers, particularly new customers, will use to evaluate quality. At Indian Overseas Bank, the entire premise is air-conditioned. They have computerized systems in place and therefore quick, 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 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.
RESPONSIVENESS Responsiveness 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., 18
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. Banks have changed the culture of human life in India and have made life much easier for the people.
Future •
The pervasive influence of information technology will continue to revolutionize banking.
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Internationally, the number brick and mortar structure has been rapidly yielding ground to click and order electronic banking with a plethora of new products.
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Banks will strongly rely on the merits of relationship banking.
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CRM has, therefore, will become the new mantra in customer service management, which is both relationship based and information intensive.
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Boom in housing loan market, the sign of overheating has also started surfacing with potential problem for banks that have not exercised sufficient caution.
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The pressure on margins is mounting partly because of fierce competition and partly as a result of falling interest rates environment.
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