CHANGES IN BANKING TOOLS ,

TECHNIQUES AND REACH DUE TO DOOR STEP BANKING. A STUDY IN THE REGION OF MUMBAI.
Synopsis SUBMITTED TO THE Somaiya Instiute of Management Studies and Research Mumbai UNIVERSITY, Maharashtra FOR THE Sem V Project of Masters in Marketing Management By Yuvaraj K Pawar
UNDER THE GUIDANCE OF

Prof. Dr. Sunil Pillai Somaiya Institute of Management studies and Research Vidyavihar, Mumbai, Maharashtra

TABLE OF CONTENTS

S.NO. 1 2 3 4 5 6 7 8 9

TOPIC Introduction Objective of the study Hypothesis Research Methodology Scope of study Utility of the study Limitation of the study Time Schedule Bibliography

PAGE No. 1 7 8 9 13 14 15 16 17

SYNOPSIS

INTRODUCTION
The purpose of a business is to create customers said Peter Drucker. Over a century ago, in a small town or village, before the advent of the super market and the mall, people went to the nearby general store to purchase goods. The owner and the staff of the shop recognized the customers by name and knew the customers needs and wants. The customer in turn, remained loyal to the store and made repeat purchases. As the economy and population grew, the consumer became mobile and the super markets and departmental stores were established to achieve economies of scale through mass marketing. Although prices were lower and goods were uniform in quality, the relationship between the customer and the merchant store became nameless and faceless. The personal relationship between the mall and the customer became a thing of the past. As a result customers became fickle and moved to the supplier who provided lower costs and more benefits. The new millennium is in the midst of explosive change, witness rapidly changing market conditions, volatile equity markets, reconstructed value chains and new global competitors.

Customers themselves are changing. Loyalty has become the thing of the past. The concept of Customer Relationship Management has taken center stage in the business world for sustainable business advantage. Companies and businesses are realizing that long-term success requires a great customer relationship management strategy. Therefore a technology enabled CRM strategy, to meet customer-focused objectives, involves the vast majority of any organization activity. Therefore, the last several years saw the rise of CRM as an important business approach. Its objective is to return to the world of personal marketing. The concept itself is relatively simple. Rather than market to a mass of people or firms, market to each customer individually. In this one to one approach, information about a customer ( eg. Previous purchases, needs and wants) is used to frame offers that are more likely to be accepted.

WHAT IS Doorstep Banking?

In a life full of hectic schedules and time constraints, the value of time is being increasingly felt. To save your precious time, many Banks (especially, Private) has

introduced doorstep banking. You can now receive or deposit cash and cheques at your office or home. WHAT DOOR STEP BANKING CONTAINS:
Opening of an Account Opening a Bank account has become hassle free today. Bank Manager comes to your premises with all the documentation and completes the formalities with such swiftness, which is unbelievable. Few banks have even provided the managers with Portable Photo machines to click instant photos of clients. Cash delivery

You dont need to travel to the branch or an ATM for cash withdrawal, we will deliver the same at your office or home (address registered with us). This is applicable for cash withdrawal between Rs 25,000 and Rs 500,000**.
Cash pickup

You dont have to worry about depositing high value cash anymore. Simply give us a call and we will pickup and deposit the money in your account, without compromising on the safety of your hard earned money. We offer you customised pickup limits depending on need and nature of your business ranging from minimum of Rs 25,000 per day to maximum of Rs 500,000**.
Cheque pickup

You don't have to leave your office or home and go to the branch for depositing your cheque, anymore. We will pickup your cheque from your mailing address registered with us and deposit it.
Demand Drafts delivery

You can request for delivery of Demand Drafts to your office or home. We will deliver your demand draft at over 500 key locations across the country.
Documentation for various Loans Banks nominate sales officers who liaison with various agencies such as Credit and appraisal departments, legal and valuation departments to help a client acquire Home loan or mortgage Loan or business loan or any other type of loan facility.

HOW A CLIENT CAN AVAIL OF THESE SERVICES? 1. The client needs to have a existing relationship with the bank to get assistance for various core retail banking related services, such as Demand draft delivery, cheque pick up or cash delivery.

2. The client may not have any relationship with the Bank or financial institution while application of Loan, may be secured or unsecured type. However, the bank may offer banking facility to this client post disbursement of Loan. 3. Many times such services are offered to exclusive clients only by Invitation. In this case the client is required to maintain certain balances, may be in fixed deposites or any other form of investments promoted by the service provider bank. 4. Most of the times, these services are offered free of cost to these clients. There can be limitations such as number of times the client can avail the services in month or amount of cash, which can be picked up or delivered in a month. Simply, register for our doorstep banking service one time and do your day-to-day banking from the comfort of your office or home. It should be noted that there are different regulations and rules for doorstep banking facilities offered t o individuals and Businesses. This is due to the sheer nature of volumes and business transactions.

The Goals of Doorstep Banking are to 1. Build long term and profitable relationships with chosen customers. 2. Get closer to customers (Engagement) at every point of contact. 3. Maximize companys share of the customer wallet. It is said IF YOU WISH TO PROSPER, LET YOUR CUSTOMER PROSPER.

INDIAN BANKING SCENARIO

The last decade has seen many positive developments in the Indian banking sector. The sector now compares favourably with respect to growth, profitability and non performing assets ( NPAs). A few banks have shown an outstanding record in innovation, growth and value creation. The banking sector index has grown at a compounded annual rate of 51% since April 2001 as compared to 27% growth in the market index for the same period(8).

a. RBI paves way for doorstep banking

After a gap of 21 years, the Reserve Bank of India has once again allowed domestic banks to offer doorstep banking, to their customers but with its prior approval. A circular issued on April 30 stated that, "A scheme for providing services at the premises of a customer within the framework of Section 23 of the Banking Regulation Act 1949 may be formulated by banks with the prior approval of their board and submitted to the Reserve Bank for approval". The practice was banned in May 24,1983 whereby banks were advised not to extend any banking facilities at premises of their customers without prior approval of the RBI. The decision, the circular stated, has been taken in view of several requests received from government departments such as railways and representation from banks. Till the time a separate scheme is worked out, agency banks in the business of conducting government business may continue to lift cash and

collect credit instruments from premises of central and state government departments. Government business, includes disbursing pension, distribution and collection under savings bonds among other things. Explaining the significance of the development, a banker said the facility follows the RBI's resolve to pay special attention to the needs of a typical Indian depositor who seeks safe avenues for his savings. In its annual credit policy announced last, the governor stated, "banks are urged to refocus on deposit mobilisation and empower depositors by providing wider access and better quality of banking services. Therefore, the RBI will persist with its efforts to ensure quality of banking services in particular to small individual depositors.

RBI issues norms for doorstep banking

Banking services will now be available at the doorstep. Individual customers can have cash and other bank instruments picked up from their home or office while only demand drafts will be delivered. Corporate customers can additionally have cash delivered against cheque received at the bank's counter. The Reserve Bank of India on Wednesday issued guidelines for banks on "Doorstep Banking" allowing banks to either deploy their employees or hire agents to extend these services. The new guidelines allow banks to extend cash delivery services to corporate clients, public sector units and departments of Central and state governments against the receipt of cheque at the branch, and not based on telephonic requests. Individual customers cannot, however, avail of this facility. Similarly, the delivery of demand drafts for both individual and corporate customers will be done by debiting the account on the basis of requisition in writing or cheque received and not against cash collected at the doorstep.

The RBI has, however, cautioned banks about risks arising out of these services and asked them to prescribe cash limits. "Banks are advised to take into account the various risks that may arise on account of offering doorstep banking services to customers directly or through agents and take effective steps to manage the same. Banks may specifically consider prescribing cash limits for their agents and customers in this regard," says the circular. According to the guidelines, banks have been asked to acknowledge cash collection by issuing receipts and ensuring that it is credited to the customer's account on the same day or the next working day. The charges for these services would have to be prominently indicated on brochures. These services will be provided only to those customers who have adequately fulfilled the bank's "Know Your Customer" norms. Banks will now have to prepare their own schemes based on the guidelines with the approval of their board. The central bank has also asked banks to appoint a Grievance Redressal Machinery for redressing complaints about services rendered by its `agents.' The name and the telephone number of the designated officer should be made available to the customers on the bank's website. Banks have been asked to educate their `agents' about the incidence of circulation of forged notes, particularly of high denominations. "Banks are advised to take suitable steps to educate their "Agents" to enable them to detect forged and mutilated notes so as to avoid frauds and disputes with the customers," said the circular.

RBI Guidelines for Doorstep Banking- 21st February 2007

Banks can offer through own employees and Agents the banking services like pick up of cash, instruments and delivery of cash and demand drafts to Corporate Customers/ Government Departments/ PSUs/ Individual Customers at their doorstep.

In order to ensure transparency in respect of the rights and obligations of customers, uniformity in approach and to clearly delineate the risks involved, RBI has laid down general principles and broad parameters to be followed by banks while offering "doorstep" services to their customers, Accordingly, banks may prepare a scheme for offering "doorstep" banking services to their customers, with the approval of their Boards, in accordance with the guidelines provided belowDetailed Guidelines for Doorstep Banking 1. Services to be offered Banks can offer the following banking services to their customers at their doorstep: (a) Corporate Customers/ Government Departments/ PSUs etc. (i) Pick up of cash (ii) Pick up of instruments (iii)Delivery of cash against cheques received at the counter (iv) Delivery of demand drafts (b)Individual Customers/Natural persons: (i)Pick up of cash (ii) Pick up of instruments (iii) Delivery of demand drafts

2. Modalities of Delivery (a)Through own employees (b) Through Agents Where banks engage the services of Agents for delivery of services, it should be ensured that the policy approved by the Board lays down the broad principles for selection of Agents and payment of

fee/commission etc. Banks may refer to the guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks issued on November 3, 2006 and ensure that the principles enumerated therein are complied with while offering Doorstep Banking services. 3. Delivery process (i) Cash collected from the customer should be acknowledged by issuing a receipt on behalf of the bank; (ii)Cash collected from the customer should be credited to the customers account on the same day or next working day, depending on the time of collection; (iii) The customer should be informed of the date of credit by issuing a suitable advice. (iv) Delivery of demand draft should be done by debit to the account on the basis of requisition in writing/ cheque received and not against cash or instruments collected at the doorstep; (v) Cash delivery services may be offered to the corporate clients/PSUs/departments of Central and State Governments against receipt of cheque only at the branch and not against telephonic request. No such facility, however, shall be made available to individual customers; 4. Risk Management It may be ensured that the agreement entered into with the customer does not entail any legal or financial liability on the bank for failure to offer doorstep services under circumstances beyond its control. The services should be seen as a mere extension of banking services offered at the branch and the liability of the bank should be the same as if the transactions were conducted at the branch. The agreement should not provide any right to the customer to claim the services at his doorstep. 5. Transparency

Charges, if any, to be levied on the customer for doorstep services should be incorporated in the policy approved by the Board and should form part of the agreement entered into with the customer. The charges should be prominently indicated on brochures offering doorstep services. 6. Other conditions (i) Doorstep services should be offered to only those customers in whose case proper KYC procedures, as laid down in RBI guidelines dated November 29, 2004 and subsequent circulars on the subject have been followed; (ii) The services should be offered at either the residence or office of the customer, the address of which should be clearly and explicitly mentioned in the agreement. (iii) The agreement/ contract with the customer shall clearly specify that the bank will be responsible for the acts of omission and commission of its agent. (iv) The "Scheme" should not be restricted to any particular client/customer or class of customers. (v) Banks may keep in view the restrictions imposed by Section 10 (1) (b) (ii) (b) of the Banking Regulation Act, 1949, while making payments for the services outsourced. 7. Redressal of Grievance a) Banks should constitute an appropriate Grievance Redressal Machinery internally for redressing complaints about services rendered by its agents. The name and telephone number of the designated Grievance Redressal officer of the bank should be made available to the customers including on the banks website. The designated officer should ensure that genuine grievances of customers are redressed promptly. b) If a customer feels that his complaint has not been satisfactorily

addressed, he will have the option to approach the Office of the concerned Banking Ombudsman for redressal of his grievance/s.

Section 23 of Banking Regulation Act, 1949 Doorstep Banking

1.in terms of which banks were advised to formulate a scheme with the approval of their Boards, for providing services at the premises of a customer and submit it to Reserve Bank for approval. 2. In order to ensure transparency in respect of the rights and obligations of customers, uniformity in approach and to clearly delineate the risks involved, it has been decided to lay down general principles and broad parameters to be followed by banks while offering "doorstep" services to their customers, Accordingly, banks may prepare a scheme for offering "doorstep" banking services to their customers, with the approval of their Boards, in accordance with the guidelines enclosed to this letter. 3. Attention of banks is also drawn to the incidence of circulation of forged notes, particularly, high denomination notes, in the market. Banks are advised to take suitable steps to educate their "Agents" to enable them to detect forged and mutilated notes so as to avoid frauds and disputes with the customers. 4. Banks are further advised to take into account the various risks that may arise on account of offering doorstep banking services to customers directly or through agents and take effective steps to manage the same. Banks may specifically consider prescribing cash limits for their agents and customers in this regard. 5. The operation of the scheme may also be reviewed by the Boards of banks on a half-yearly basis, during the first year of its operation and subsequently on an annual basis.

The Indian Banking system comprises of 1. Commercial Banks. a. Public Sector. b. Private Sector. c. Foreign Banks. d. Co-operative institutions. i) Urban co-operative banks. ii) State co-operative banks. iii) Central co-operative banks. iv) About 92% of the countrys banking segment is under state control while the balance comprises of private sector and foreign banks. The public sector commercial banks are divided into three categories.

1.STATE BANK GROUPS ( EIGHT BANKS).

This consists of State Bank of India (SBI) and associate banks of SBI. The Reserve Bank of India (RBI) owns the majority share of SBI and some associate banks of SBI. State Bank of India has 13 head offices governed each by a board of Directors under the supervision of a Central Board.

2.NATIONALIZED BANKS (19 BANKS).

In 1969, the Government arranged the nationalization of 14 Scheduled Commercial banks in order to expand the branch network, followed by 6 more in 1980. A merger reduced the number from 20 to 19. Nationalized banks are wholly owned by the Government, although some of them have made public issues. In contrast to SBI, nationalized banks are centrally governed i.e. by their respective head offices. The SBI and Nationalized banks together are referred to as Public Sector Banks (PSBs).

3.REGIONAL RURAL BANKS (RRBs).

In 1975, the State Bank group and Nationalized banks were required to sponsor and set up RRBs, in partnership with individual states to provide low cost financing and credit facilities to the rural masses.

Out of the above formats the Research study will specifically concentrate on one Bank each from Public Sector, one from Private sector, one foreign bank and another from the co-operative sector. 6

The financial services industry has entered a new era where personal attention is decreasing because the banks are using technology to reduce human contact in many application areas. Technical evolution has affected the banking industry. From time immemorial banks were using branch based operation. From late 80s things started changing with the advent of multiple technologies and applications. Global changes bought new trends, directions and new ways of doing business. In order to compete banks must recognize the need of balancing their performance, by achieving their strategic goals and meeting volatile customer needs and requirements. Different ways has to be analyzed to meet Customer needs , wants and demands.

OBJECTIVES OF THE STUDY

The background research work undertaken to arrive at the current set of objectives have eliminated the work, which has already been done in the defined area and helped the researcher to pin point the key objectives that needs attention in this research work. These objectives are presented in the form of questions as specified bellow. 7

1. How to manage Customer Relationship effectively in the banking industry? 2. How do different types of banks view CRM? 3. What types of relationship marketing tools and strategies are used by the banks to increase customer loyalty? 4. All customers are not equally profitable. What are the different methods used for identifying the profitability difference among existing customers? 5. How can CRM in banks be described? 6. What kinds of technology are used?

HYPOTHESIS
The formulation of hypothesis is another important step in conducting research. A hypothesis is tentative generalizations, the validity of which remains to be tested. Further hypothesis will be developed after the exploratory study stage.

8 1. Different customers, according to the profitability that they generate, are dealt differently. 2. Customer retention and continuous relationship marketing is what banks aim for. 3. CRM technology is of prime importance. 4. Less emphasis on CRM strategy, which should drive the organizational structure, which in turn should drive the technology implementation(10).

RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem. It can be understood as a science of studying how research is done scientifically. Zikmund ( 1994) states, nature of the problem affects whether research is going to be exploratory, descriptive or casual. Our research problem is to get better understanding of HOW CAN BANKS EFFECTIVELY AND EFFICIENTLY MAMANGE CRM? The aim of this research is clearly structured, so the purpose of research is descriptive. We intend to describe the area of research and try to find out the difference and similarities with the reviewed theories. However this thesis is also exploratory. 9 Because CRM is a rather new area of interest for banks and also by the fact that we have not been able to find studies that focuses exactly the same topic as we have chosen to do in this thesis. This therefore makes our study mainly descriptive but with exploratory and explanatory touches. Since we are conducting research on behaviors and not on figures, QUALITATIVE research will fulfill our requirements. Alvesson and Skoldbery (1994) discusses three ways to draw conclusions. a) Inductive.

b)Deductive. c) Abductive. We will use deductive approach as we are using existing theories in the area of CRM. We will not use inductive and abductive approach because it is time consuming and also out of scope of our research. Zikmund (1994) talks about different types of research strategies for descriptive and casual research. These are 1. Surveys. 2. Experiments. 3. Observation with experience survey. 4. Pilot study. 5. Case study in exploratory research strategy. SAMPLING AREA : Mumbai Region. 10 SAMPLING UNIT: One bank each from Public/ Private/ Foreign & co-operative sector in the region of Mumbai.

DATA SOURCE The present study will be both descriptive and analytical. The data for this study is based on primary and secondary sources. Under mentioned shows the flow of data collection.

SOURCE OF DATA COLLECTION 1. Primary data. a) Survey. b)Structural Questionnaire. c) Personal Interview. d) Observational Techniques. e) Case Study.

2. SECONDARY DATA. a) Journal Articles. b) Research Publications. c) Magazines and periodicals. d) Books. e) Newspaper articles. f) Internet. 11 PRIMARY DATA. The primary data will be collected by the extensive use of a structured Questionnaire, Survey, personal interview, observational techniques and case study.

We will use CASE STUDY for our study as we have decided to use a qualitative approach and collect information from different situations. Case study are shown to be the most appropriate choice of our thesis.

SECONDARY DATA. The secondary data will be collected from various references which already exists in electronic or published form. We will make the use of Internet, Newspaper articles, magazines, Research journals and books. On the basis of our Research objectives we shall collect the data.

DATA ANALYSIS AND INTERPRETATION The collected data will be scrutinized for actual and genuine information. The data will be classified for suitable tabulations, graphs, tables and diagrams. Suitable statistical techniques will be used to analyse the data and draw meaningful conclusions and recommendations.

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SCOPE OF THE STUDY

The general aim of the study is to understand how the financial services industry, specifically banks can efficiently and effectively manage their customer relationship management.

Brief Literature Review on the concept of relationship management and the emergence of customer relationship marketing.

Study of practice of customer relationship management in different banking sectors in Mumbai market.

Study to identify the benefits of CRM and to suggest improvements to efficiently manage relationships.

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UTILITY OF THE STUDY

As the study will be conducted taking four types of banks, namely Public sector. Private sector, Foreign and Cooperative bank, we will be able to find out what are the different types of CRM strategy, technology, process and people orientation they use.

We will able to find out what are the good things that these banks are doing with respect to Relationship marketing.

Our attempt through research will be to conclude and suggest how effectively and efficiently banks can manage CRM and hence enhance their profitability.

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LIMITATION OF THE STUDY.

1.There could be possibility of sampling errors in the study. 2. The responses of respondents may not be genuine. 3. The questions included in the questionnaire may not be comprehensive. 4.The respondents may not be able to comprehend and hence explain a few questions as per the real situation. 5. The respondent explanations may not be to the point and hence vague, in nature. 6. The study is confined to banks in Mumbai region only, so the results of the research may vary, if the same survey is conducted in other parts of the country.

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TIME SCHEDULE

STAG E 1 2 3 4 5 6 7 8 9

WORK Defining research problem Review of literature Formulate hypothesis Pilot study( sample ) Collection of the data Data Analysis ( simultaneou sly) Testing of hypothesis Final report preparation Final print and binding

DURATI START ON IN DATE MONTHS 1 1/9/10 3 2 1 9 2 3 2 1 24 1/10/1 0 1/11/1 1 1/03/1 1 1/04/1 1 1/01/1 2 1/03/1 2 1/06/1 2 1/09/1 2 1/09/1

COMPLETI ON DATE 30/09/10 31/12/10 28/02/11 31/03/11 31/12/11 29/02/12 31/05/12 31/07/12 31/08/12 31/08/12

months

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BIBLIOGRAPHY

1. Paul Gray and Jongbook Byan (March 2001) Customer Relationship Management. 2. Hemamalini Suresh Sept 2002 PGS Institute of management. 3. Day 2003. 4. Ngai 2005, Romano and Fjermestad 2003. 5. Zikmund, mcleod and Gilbert 2003. 6. Kerin, Berkowitz, Hartley and Rudelies 2003, Mitusis o malley and Patterson 2006, Pelham 1997. 7. Gromoos 1990. 8. Banking Sector 2010 report Mckinsey and company. 9. The Indian banking sector G.H.Deolalkar. 10. Kristin A nderson and Carol CRM- Tata McGraw Hill Edition 2002.

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