Commercial Banking in India

Introduction
Banks are the most significant Bodies in the Indian financial market.

This transformation has been largely brought about by:

 liberalization and economic reforms.
 Increased Competition from Domestic & foreign Banks.
 More Services Offered e.g. Credit cards, Insurance, Foreign
Currency loans and Investment Banking.
 Increase in FDI from 49% to 74% for Private banks.
 Increase in Retail Finance – Consumer Credit
 Banking Industry : Overview
• First bank established in 1786 named As ‘General Bank Of
India’.
• In 1920 ,three Presidency banks merged to form ‘Imperial
Bank of India’. Post Independence this bank was named as
SBI in year 1955.
• Banking Regulation Act 1949.
• Post liberalization reforms, we have approximately:
- 222 Commercial Banks
- 28 Public sector banks
- 29 Private Banks
- 31 Foreign banks

With a combined network of more than 60,000

branches and 17,000 ATMs across the Country.
Major Players in Banking sector
Indian Banks Foreign Banks
• ICICI BANK  HSBC
• HDFC  Standard Chartered
• State Bank of India Bank
• Punjab National Bank  Barclays Bank
• AXIS bank  Deutsche Bank
• Corporation bank
 CitiBank
• IDBI
 Bank of America
• Bank Of Baroda
Objective Of
Nationalization(1969)
1. Removal of control of few
2. Provision of credit to Agri & other small
industry, export
3. Giving professional bent to mgmt.
4. Encouragement of new Entrns.
5. Adequate training to Bank Staff.
Economic environment
 Existence of banking in one form or the other from time
to time.
 Commencement of the present era in banking with
establishment of bank of Bengal in 1809 under the
government charter and with government participation
in share capital.
 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. 3
 Union budget affects the banking sector to boost the
economy by giving certain concessions or facilities. For
e.g. encouragement of the savings in the Budget,
relaxation of the FDI limits.
 Social environment
• Nationalization of the banks in 1969 –
Only big business houses and the effluent sections of the society
getting benefits of banking in India

• To adopt the social development in the banking sector and speedy

economic progress, consistent with social justice.

• Help economically weaker section of the society and provide need-

based finance to all the sectors of the economy with flexible and
liberal attitude.
e.g. various types of loans to farmers, working women,
professionals, traders, education loans, housing loans, consumer
loans etc.

• Banks having big clients or big companies have to provide services

like personalized banking to their clients.

Banks have changed the culture of human life in India and have
made life much easier for the people.
Technological environment
• Much important and wider role of technology in bank’s internal
control mechanisms and services offered by them.

• Change of the concept of ‘branch banking’ to ‘anywhere banking’.

• An era of ‘cashless society’ with ‘electronic-purse’.

• Use of SMS and Internet as major tool of promotions and utility

to customers.

• Simplified operations and customer handling.

• Home banking and Internet banking.

All these technological changes have forced the bankers
to adopt Customer-Based Approach instead of Product-
Based Approach.
 7 P’S OF
BANKING SECTOR
PRODUCT MIX

It includes all different product lines a company offers to

its customers.

Savings Account
ATM Network
7-Day Banking
Telebanking
iConnect-Internet Banking
 Credit Cards
Rewards
Dial-A-Draft
Credit Limit Increase
24-Hour ATMs
Concession on Personal Remittances
Overdraft Facility
Free ATM Card
Other Features
PRICE MIX

It is nothing but the interest rates charged by the different

banks.

ATM Card Issue Free – 2 ATM cards issued

free if it joint account
Add – on Card RS. 100 – Beyond 2 cards

Duplicate Card Rs. 100

Other General Charges

  Current Account Savings Account

 

Transaction NIL NIL

Charges
Charges for issue of NIL NIL
Cheques book

Issue of duplicate Rs. 25 per page Rs. 25 per page

statement
Account closure Rs.100 Rs.100
PLACE MIX
It is the location analysis for banks branches. Some of the
factors affecting the location analysis are :-
The Trade Area
Population Characteristics
Commercial Structure
Proximity to other convenient Outlets
Real Estate Rates
Proximity to Public Transportation
Location of Competition
Visibility
Access
PROMOTION MIX
It is making the customer more and more aware of the
services and benefits provided by the banks.
Different ways of promotion are :-

Public Relations
Personal Selling
Sales Promotion
Word-of-mouth Promotion
Telemarketing
Internet
PEOPLE
• An essential ingredient to any service
provision is the use of appropriate
staff and people. Recruiting the right
staff and training them appropriately
in the delivery of their service is
essential if the organisation wants to
obtain a form of competitive
advantage. Consumers make.
PROCESS
• The process mix constitutes the overall procedure involved in
using the services offered by the bank. A process should be such
that the customer is easily able to understand and easy to follow.

• Let’s take for example the process for application for a car loan.
Now this mainly involves 3 things.
 
1. Producing of proper documents
2. Filling up of application form
3. Paying for the initial down payment.

The smaller and simpler the procedure, the better

the process, and the customer will be more satisfied.
PHYSICAL EVIDENCE
• Physical evidence is the overall layout of the place
i.e. how the entire bank has been designed.
Physical evidence refers to all those factors that
help make the process much easier and smoother.
• For example, in case of a bank, the physical
evidence would be the placement of the customer
service executive’s desk, or the location of the
place for depositing cheques.
The more the bank does to make the service easier
and better the more satisfied will be the customer.
Service Quality

Reasons why a customer should be given

QUALITY SERVICES -
– Industry is competitive
– Difficult to win back a lost customer
– Most customers don’t complain but just opt
out
 Tangibility
• The appearances of physical facilities, equipments,
personnel and communication materials.
• Indian Overseas Bank
• Entire premise is air-conditioned.
• Computerized systems in place - quick, accurate and
efficient service can be provided to the customers.
• Tables and chairs are conveniently located.
• Personnel always have a cheerful and helping behaviour.
• Entire place done up in bright colours - customer can
immediately feel the warmth and the radiance of the
place.
Empathy
• The caring, individualized attention the firm
provides its customers.
• Indian Overseas Bank
• Employees are always polite humble and helpful.
• Ready to go out of the way.
• Regularly holds seminars and training workshops
for employees so that they can understand the
consumer better and thus serve them better.
Responsiveness
• The willingness to help the customer and provide
him with immediate and fast service.
• Indian Overseas Bank
• Prompt at providing customers with information
and services they seek.
• Prompt when it comes to resolving complaints of
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.
 SERVICE RECOVERY

Service recovery pertains to the actions taken by an organization in

response to a service failure. When a customer complains, he
expects 3 types of fairness-

• Outcome Fairness : Charging the customer for a service which

was a result of a mistake on bank’s part.

• Procedural Fairness : No efforts made by any of the employees to

help the customer.

• Interaction fairness : Non-fulfillment of the promises to the

customer, lack of apologizing act.
COMPLAINT RESOLUTION MODEL
(CRM) of HDFC Bank

• Not as a mere complaint

but as an issue.
• If there is any complaint
either by an employee or
a customer in any
branch; it will be looked
into and resolved in 24
hours.