05P014 Deepa v Retail Banking

7/31/2019 05P014 Deepa v Retail Banking

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Retailing and Franchising

A report on Retail Banking in India

Submitted to:

Prof. Sanjay Chandwani

Submitted by:

Deepa Venkatraman

Roll no. 05P014


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Introduction to Retail Banking in India

The stalwarts of India's financial community nodded their heads sagaciously when Prime

Minister Manmohan Singh recently said in a speech: "If there is one aspect in which wecan confidentially assert that India is ahead of China, it is in the robustness and soundness

of our banking system." Indian banks have been rated higher than Chinese banks by

international rating agency Standard & Poor's.

With the credibility of the Indian banking system on a high, a number of Indian banks are

now leveraging it to expand overseas. State Bank of India, the countrys largest bank has

acquired 76 per cent stake in a Kenyan bank, Giro Commercial Bank, for US$ 7 million.

Canara Bank is helping Chinese banks recover their huge non-performing assets (NPA).

To meet the challenges of going global, the Indian banking sector is implementing

internationally followed prudential accounting norms for classification of assets, income

recognition and loan loss provisioning. The scope of disclosure and transparency has also

been raised in accordance with international practices. India has complied with almost all

the Core Principles of Effective Banking Supervision of the Basel Committee. Some Indian

banks are also presenting their accounts as per the U.S. GAAP. The roadmap for adoption

of Basel II is under formulation.

The use of technology has placed Indian banks at par with their global peers. It has also

changed the way banking is done in India. Anywhere banking and Anytime banking

have become a reality. The financial sector now operates in a more competitive

environment than before and intermediates relatively large volume of international

financial flows.

Trendsand reasons for the shift in focus:

The Indian banking industry is currently in a transition phase. On the one hand, the public

sector banks, which are the mainstay of the Indian banking system, are in the process of

consolidating their position by capitalising on the strength of their huge networks and


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customer bases. On the other, the private sector banks are venturing into a whole new game

of mergers and acquisitions to expand their bases.

The system is slowly moving from a regime of large number of small banks to small

number of large banks. The new era will be one of consolidation around identified core

competencies.

In India, one of the largest financial institutions, ICICI, took the lead towards universal

banking with its reverse merger with ICICI Bank a couple of years ago. Another mega

financial institution, IDBI, has also adopted the same strategy and has already transformed

itself into a universal bank. This trend may lead to promoting the concept of a financial

super market chain, making available all types of credit and non-fund facilities under one

roof or specialised subsidiaries under one umbrella organisation.

With spreads shrinking, Indian banks are following their global counterparts and focusing

on increasing the share of their fee-based income. The ratio of non-interest income to total

funds has already increased for some banks and the first quarter results of the current fiscal

affirm this fact.

The slowdown could be attributed to lack of credit off-take by the industrial sector even as

food credit continued to surge. Because of the recession and industrial slowdown, most

corporates appear to have postponed their expansion plans and have put on hold greenfield

projects. Moreover big corporates are bypassing banks and raising money through the debt

market and commercial papers, which are cheaper than bank credit. Therefore, banks are

being forced to look at the mid-corporates. But, this is a risky strategy as the risk is

concentrated and delinquency higher. To compensate, most banks have devised strategies

to go in for retail banking as a major thrust area.

``The risk here is distributed and there is a huge market to be tapped,'' said Mr. Joseph.

Some of the banks which have been aggressive in this area are HDFC Bank, ICICI Bank,

State Bank of India (SBI) and Corporation Bank.


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A comparison of old and new private sector banks indicates a clear difference in

profitability. New private sector banks have shown higher ROA and a higher RONW as

compared to old private sector banks. It is also interesting to see the performance of banks

over the previous year.

With spreads shrinking, Indian banks are following their global counterparts and focusing

on increasing the share of their fee- based income. ``Fee-based income'' may increase

marginally in future. The ratio of non-interest income to total funds has increased for some

banks. A rising ratio is expected in the future.

The growth in the economy has been sluggish and banks can no longer afford to rely on big

corporate customers. There is a shift in focus towards retail banking. Most banks are

targeting the middle class and lower middle class segment. Huge non- performing assets

(NPAs) are plaguing old private sector banks. The asset quality of banks is largely

dependent on economic growth and makes it difficult for them to recover loans till the

economy revives.

Some positive policy initiatives have been taken by the Government which will give an

impetus to consolidation in the banking industry. The limit of foreign direct investment

(FDI) in private sector banks has been raised to 49 per cent from 33 per cent. This willallow foreign banks to buy a strategic stake in private sector banks having the latest

technology and better quality assets. This year, the banking industry has witnessed two big

mergers. Times Bank merged with HDFC Bank and Bank of Madura with ICICI Bank.

Banks could increase their revenue base and leverage on their distribution network by

investing in the growing insurance sector. However, the inflows would be slow to begin

with. There has also been a thrust on the housing sector.

Flexible financing with lower interest rates has resulted in brisk activity in the sector. SBI

and other banks have launched voluntary retirement scheme (VRS), an effort to bring down

operating cost. There is an increased focus towards auto loans, car loans, funding for

infrastructure, and other fee-based services such as guarantees and commissions on drafts,

gold banking, derivatives and the like.


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These banks are changing their strategy and shifting focus from big corporates to mid-

corporates and also retail banking and housing finance. The Indian banking system is in the

midst of a technological revolution with banks offering anywhere banking, 24/7 and also

attempting to become a one stop financial shop offering all financial solutions.

It is believed that new private sector banks such as HDFC Bank and ICICI Bank have

demonstrated their ability to improve other income, which was previously the forte of

foreign banks due to good service.

This trend is expected to continue. Nationalised banks and old private sector banks will

also follow suit and there is hardly any progress in this area. If old private sector banks

have to survive they will have to compete on service.

Growth statistics:

Scheduled Commercial Banks (SCBs) in India are categorised into five different groups

according to their ownership and / or nature of operation. These bank groups are (i) State

Bank of India and its associates (ii) other nationalised banks (iii) regional rural banks(iv)

foreign banks and (v) other Indian SCBs (in the private sector).

The banking sector witnessed strong growth in deposits and advances during the year

2004-05. As of March 2005, the number of commercial banks stood at 289. The aggregate

deposits of SCBs increased from US$ 331 billion in March 2004 to US$ 374 billion in

March 2005; credit increased from US$ 185 billion to US$ 242 billion; and investments

swelled from US$ 149 billion to US$ 162 billion.

Net domestic credit in the banking system has witnessed a steady increase of 17.5 per cent

from US$ 445 billion on January 21, 2005 to US$ 523 billion on January 20, 2006. The

growth in net domestic credit during the current financial year up to January 20, 2006 was

14.4 per cent.

Nationalised banks were the largest contributors to total bank credit at 47.8 per cent as of

September 2005. While foreign banks' contribution to total bank credit was low at 6.7 per


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cent, the contribution of State Bank of India and its associates accounted for 23.8 per cent

of the total bank credit. Credit extended by other SCBs stood at 18.9 per cent.

Banks and consumer finance:

Indian banks, particularly private banks, are riding high on the retail business. ICICI Bank

and HDFC Bank have witnessed over 70 per cent year-on-year growth in retail loan assets

in the second quarter of 2005-06. Annual revenues in the domestic retail banking market

are expected to more than double to US$ 16.5 billion by 2010 from about US$ 6.4 billion

at present, says a McKinsey study.

The home loan sector is also on a smooth course. The average loan size of home finance

companies is increasing. HDFC, the second largest player in the home finance business,

has seen average loan increase from US$ 10,773 in FY04 to US$ 13,467 in FY05, a change

of almost 25 per cent. For ICICI Bank, which is the largest player in the business, the

average ticket size is about US$ 13,467 US$ 15,711 and has increased by 10-15 per cent

over last year.

Foreign banks are working on expanding their bases in the country. The Ministry of

Finance and Reserve Bank of India have agreed to allow foreign banks to open 20 branches

a year as against 12 now. At present, 40 odd foreign banks have over 225 branches in India.

At the end of 2004-05, the total assets of foreign banks aggregated US$ 30 billion or 6.9

per cent of the assets of all scheduled commercial banks. They will also be allowed 74 per

cent stake in private banks. After 2009, the local subsidiaries of foreign banks will be

treated on par with domestic banks.

Gung ho Retail - that is exactly what can be said about the banking scenario in India.

Foreign banks have been early movers. Indian private banks have also zeroed on the

opportunity with vengeance. Public sector banks, though late entrants are found to be

equally aggressive in the market. RBI, the regulator is watching the market with keen

interest and has been actively rolling out a slew of guidelines and regulatory changes.

Potential for Retail in India:


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The Indian players are bullish on the Retail business and this is not totally unfounded.

There are two main reasons behind this. Firstly, it is now undeniable that the face of the

Indian consumer is changing. This is reflected in a change in the urban household income

pattern. The direct fallout of such a change will be the consumption patterns and hence the

banking habits of Indians, which will now be skewed towards Retail products. At the same

time, India compares pretty poorly with the other economies of the world that are now

becoming comparable in terms of spending patterns with the opening up of our economy.

For instance, while the total outstanding Retail loans in Taiwan is around 41% of GDP, the

figure in India stands at less than 5%. The comparison with the West is even more

staggering. Another comparison that is natural when comparing Retail sectors is the use of

credit cards. Here also, the potential lies in the fact that of all the consumer expenditure in

India in 2001, less than 1% was through plastic, the corresponding US figure standing at

18%.

Banking on Retail:

With a jump in the Indian economy from a manufacturing sector, that never really took off,

to a nascent service sector, banking as a whole is undergoing a change. A larger option for

the consumer is getting translated into a larger demand for financial products and

customisation of services is fast becoming the norm than a competitive advantage. With the

Retail banking sector expected to grow at a rate of 30% [Chanda Kochhar, ED, ICICI

Bank] players are focusing more and more on the Retail and are waking up to the potential

of this sector of banking. At the same time, the banking sector as a whole is seeing

structural changes in regulatory frameworks and securitisation and stringent NPA norms

expected to be in place means the faster one adapts to these changing dynamics, the faster

is one expected to gain the advantage.

How competitive are the players?

The fact that the statistics reveal a huge potential also brings with it a threat that is true for

any sector of a country that is opening up. Just how competitive are our banks? Is the threat

of getting drubbed by foreign competition real? To analyze this, one needs to get into the


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shoes of the foreign banks. In other words, how do they see us? Are we good takeover

targets?

Going by international standards, a large portion of the Indian population is simply not

bankable taking profitability into consideration. On the other hand, the financial

services market is highly over-leveraged in India. Competition is fierce, particularly from

local private banks such as HDFC and ICICI, in the business of home, car and consumer

loans. There, precisely lie the pitfalls of such explosive growth. All banks are targeting the

fluffiest segment i.e. the upwardly mobile urban salaried class. Although the players are

spreading their operations into segments like self- employed and the semi-urban rich, it is

an open secret that the big city Indian yuppies form the most profitable segment. Over-

dependence on this segment is bound to bring in inflexibility in the business.

The foreign banks have identified this problem but there are certain systematic risks

involved in operating in the Retail market for them. These include regulatory restrictions

that prevent them from expanding their branch network. So these banks often take the

Direct Selling Agent (DSA) route whereby low-end jobs like sourcing or transaction

processing are outsourced to small regional layers. So now on, when you see a loan mela or

a road show showcasing the retail bouquet of an elite MNC giant, you know that a

significant commission earned out of any such booking gets ploughed back to our own

economy. Perhaps, one of the biggest impediments in foreign players leveraging the Indian

markets is the absence of positive credit bureaus. In the west the risk profile can be easily

mapped and this information can be publicly traded.

PAN is a step in this direction but lot more work need to be done. What has been a positive

step towards this is a negative file sharing started by a consortium of 11 banks. However,

as a McKinsey study points out actual write-offs on NPAs show a strong negative

correlation with sharing of positive information. On top of this, the spend-now-pay-later

credit culture in India is just not picking up. A swift legal procedure against consumers

creating bad debt is virtually non-existent. Finally, the vast geographical and cultural

diversity of the country makes credit policy formulation a tough job and it simply cannot


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be dictated from a Wall Street or a Singapore boardroom. All these add up to the

unattractiveness of the Indian retail market to the foreign players.

So over the past few years, in spite of the entry of MNCs in many industries, Retail

Banking has seen a flurry of panicky exits. Fewer than 40 remain in India and their share of

total bank assets currently 7.2% is falling. Those that remain might be thought to be likely

buyers of Indian banks. Yet Citibank, HSBC and Standard Charteredall in India for more

than a century, and with relatively large retail networksseem to have no pressing need to

acquire a local bank. Established foreign banks have preferred to take over customers or

businesses from other foreign banks that want to leave. Thus HSBC, in recent years, has

acquired customers from France's BNP, Germany's Deutsche Bank and Japan's Bank of

Tokyo-Mitsubishi. ABN Amro took over Bank of America's retail business.

So do we get to keep it all? Where do we go from here?

This will perhaps be the most wrongful inference that can be drawn from the above. We

just cannot afford to look inwards and repeat the mistakes that were the side effects of the

Nationalization of the Banking System. A growing market can never be an alibi for lack of

innovation. Indian banks have shown little or no interest in innovative tailor-made

products. They have often tried to copy process designs that have been tested, albeitsuccessfully, in the West. Each economic culture has its own traits and one who

successfully adapts those to the business is the eventual winner. A case in point is the

successful implementation of micro-credit networks in Bangladesh. Positioning a bank as a

tech-savvy financial vendor in a country where Internet penetration is an abysmal 1.65%

can only add to the over-leveraging as pointed out earlier. The focus of the sector should

remain in macroeconomic wealth creation and not increasing the per capita indebtedness

that will do little but add to the NPA burden. Retail Banking in India has to be developed in

the Indian way, notwithstanding the long queues in front of the teller counters in the Public

sector banks!

With a jump in the Indian economy from a manufacturing sector, that never really took off,

to a nascent service sector, banking as a whole is undergoing a change. A larger option for


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the consumer is getting translated into a larger demand for financial products and

customisation of services is fast becoming the norm than a competitive advantage. With the

Retail banking sector expected to grow at a rate of 30% [Chanda Kochhar, ED, ICICI

Bank] players are focussing more and more on the Retail and are waking up to the potential

of this sector of banking. At the same time, the banking sector as a whole is seeing

structural changes in regulatory frameworks and securitisation and stringent NPA norms

expected to be in place by 2004 means the faster one adapts to these changing dynamics,

the faster is one expected to gain the advantage. The reasons behind the euphemism

regarding the Retail-focus of the Indian banks is it worth the attention that it is attracting,

is a question worth exploring.

What the customer wants versus what he gets:

The moment one enters a bank, one looks for some assistance in our transaction. One

expects to be served immediately or at the earliest. What we do as soon we enter a bank is

to try and catch the eye of an employee. Depending on the size of the bank, there will be

any number of employees working unmindful of a customer's entry. With the exponential

growth of touch points and sophistication, the frontline sales force is assuming the role of a

relationship person and is constantly under the microscopic observation of the customer. At

a time when channel innovation has become the order of the day to encourage effective

banking habits among customers, a vital component of the supply chain, namely, customer

interface, is totally missing.

With the advent of liberalization, the banking industry had made a head start towards the

best banking practices at each interaction point of the supply chain. However, the Indian

landscape is not a replica of the west and is in fact unique. Here is a look at the flipside of

some of the common practices of Indian banks.

1. Multi channel distribution: The technological aggression has resulted in new modes of

distribution of banking products. Today consumers have various options to choose from.

Banks are trying their best to acclimatise customers to the new products and facilities in

anticipation of reduced costs and ease of operation and flexibility for the customers (A


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transaction costs Rs. 35-45 if done with physical presence of the customer at a branch, Rs.

7 through a cheque and Rs. 2 on the Internet. Private and foreign banks have even sought

approval to introduce a new product that can best be described as home banking). These

new creations have resulted in different channels of distribution of banking products and

services. The transaction simplicity through these channels is drawing people to these

banks, not just for banking products but for other ancillary products such as payment of

utility bills and insurance premium.

In India there are around 4,500 ATMs and if they continue to grow at the current pace,

there will be around 35,000 by the end of the year 2005. The cash movement through

ATMs is between Rs. 35,000 and Rs. 45,000 crores each year. So will the other channels

grow along with ATMs? The moot question remains to be answered, if they are managinginteractions among channels as rigourously as they manage each channel in isolation. (The

winners of the micro banker award were GTB (multi channel integration) and ICICI Bank

(migrating customer transactions to low cost remote channels)). Whenever new channels

are introduced, such offerings should be integrated, indicating strategic use of channels to

enhance customer information and value. Hence for mere survival, banks need to think in

terms of integrating the different channels that are bound to grow with time.

2. Call centres (support services): Banks have picked up the nuances of getting closer to

the ultimate customer and separated the sales and service functions. With call centres,

services are being offered by stimulating customer interaction. The initiation of such call

centre services was much appreciated but very few changes have been effected since then

and they are losing their efficacy. The model since inception being the same, data are

increasingly built around it. With such huge database, calls are being queued up, causing

irritation to customers due to high waiting time. Customers also want a human voice to

answer the phone rather than automated call operators who request you to press endless

number of buttons and information. Banks have two options before them.

(a) Change the model and develop call centres around customers (accessing different

accounts of a particular customer) instead of products per se. The objective then would be


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to dig up the information across products and service them in a jiffy without much waiting

time.

(b) With the help of technology banks can redefine the acceptable waiting time of callers

(customers) before they terminate the call for want of service from tele-executives, towards

improving the service levels of the banks.

3. Technology: Technology underlies the above two features. This is taken to be the

cutting edge among banks and for real product differentiation the public and private players

are becoming tech savvy. With increasing emphasis on technology, banks try to leverage

the good aspects of it and venture into new areas of cross selling their products through

various channels. The cost savings and the ease of effecting a transaction through

technology are increasingly recognised and are compelling banks to carry the same to

almost all the dimensions of banking. Incidentally, the more advanced the technology, the

higher the cost savings generated with much wider coverage resulting in quicker, cheaper

and reliable service. However one should not get lost in the maze of new technologies as

statistics do not support the proposition of technology aggression. (The number of people

accessing Internet is 7 per 1000 people, Personal computers in use are 6 per 1000, cellular

subscribers 6 per every 1000, Urban population 27.9 per cent of total population and this

will grow to 32.2 per cent by 2015). This reminds one of better channel synchronisation

and integration but not proliferation. Banks should allow the earlier facilities to sink into

the culture of the customers before any new facilities are launched. Also, the earlier

facilities should be embedded with services so that customers not only appreciate new

technology, but are also in a position to operate.

Banks should remember that technology cannot replace people. In many places people still

go to banks where they expect to be serviced by people in their own language. Today

technology disappoints a lot of customers.

4. Rural exposure: What is happening on the rural front? Why is there a reduction in the

number of new bank branches? Is it because the rural areas suddenly lacked in potential or

they lacked in infrastructure for banking in such areas. Looking at the statistics, the


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scenario seems to have changed drastically after the Narisimham committee proposal in

1991. It has forced the philosophy of free markets and could successfully circumvent the

intentions of the Government about building a stable financial system unique to the Indian

economy.

The following matrix depicts the rural banking scenario on different parameters. Between

March 1994 and March 2000, the number of bank offices in rural areas (population below

10000) came down from 35,329 to 32,734, while the number of branches in semi-urban

areas(population between 10,000 to 1,00,000) rose from 11,890 to 14, 723. The figures

have been going up in urban (population between one lakh and 10 lakhs) and metros

(population above 10 lakhs) from 8,745 to 10,447 and 5,839 to 8,557 respectively.

However, around 98.5 per cent of the rural borrowers still look to informal financing withcredit limits below Rs. 2 lakhs. Today agricultural lending by commercial banks has almost

equalled the outstanding personal loans of rural consumers.

What is important:

In the competitive environment of retail banking there is constant pressure to innovate and

develop new ways to improve customer service. In the context of retail banking, customer

service is the long-term person-to-person relationship between a financial institution, its

distributors and its customer. Customer service is seen as an important factor if a retail

bank is to achieve a competitive advantage. Good customer service is essential for

relationship retention between the customer and the retail organization. The importance of

customer service can be gauged by the fact that two-thirds of customers stop doing

business with a particular organization because they have received poor customer service

and that attracting a new customer to replace a lost one takes five times as much effort,

time and money as it would have taken to keep the existing one. In brief, good customer

service is the key to a successful organization and customer retention. Furthermore, good

customer service fosters growth because each satisfied customer will tell at least five other

people about the business, some of whom will become customers. In the financial services

industry, the marketing key is now customer service. A survey of bank customers in the

US found ease of doing business as the principal factor and quality of personal service

as the second most important factor in choosing a financial institution. These two service-


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related factors clearly outpolled other factors such as location. Factors influencing the

decision to switch financial institutions provide interesting insights into customer wants.

The first five factors, in descending order of importance, affecting the decision to switch

financial institutions were:

convenience of branch location;

poor counter service;

disrespectful staff attitudes;

excessive questioning and hassles by staff;

penalties and charges

While the location convenience was the most important factor it is impossible to overlook

the significance of the remaining factors. Three out of the remaining four factors for

switching a financial institution could involve the provision of customer service by

customer-contact personnel. Thus all previous research confirms the importance of

customer service to retail banking.

Customer-contact Personnel

The major providers of customer service in a retail banking organization would be the

nonsales people or customer-contact personnel and include such positions as managers,

officers, customer service epresentatives, and tellers. In recent years the customer-contact

function has evolved into an important tool of retail sales. Many thousands of employees

work as customer-contact employees in retail banks in Australia. Customer-contact

employees often find themselves answering questions, taking payment for goods and

services, and helping customers find what they are seeking. In spite of the important

functions customer-contact personnel perform in banks, many of them have not made a

career commitment to retail sales and customer service. Often they are first-time job

holders, those seeking temporary employment, or those returning to the labour market after

a long absence to supplement their income. Many work for a minimum wage. The

customer-contact employee in a retail bank is considered as being first in line when it

comes to providing customer service to walk-in customers. Their perceptions of how

they are treated will influence what they believe the company will do for the customer. In a


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study of customer-contact personnel in retail banks, Kelley found that employees holding

different positions within retail banks would have varying degrees of customer orientation,

satisfaction, motivation, and role clarity owing to a variety of factors. It was found that

employees who are more satisfied, motivated and have a clearer understanding of their

position tend to be more customer-oriented. Also of significance is that tellers, the principal

customer contact person in a retail bank, were found to have the lowest level of motivation

and were less satisfied with their jobs than managers, officers or customer service

representatives. Employee motivation and satisfaction were found to be directly related to

an employees level of customer orientation. Previous research has identified the need for

retail organizations to adopt customer-oriented cultures. In order for an organization to

adopt a customer-oriented culture they must develop customer-oriented values and

behaviour at all levels of the organization structure. These customer-oriented values were

found to be absent among tellers, arguably the most important customer-contact employee

in a retail bank. The perceptions of culture and image of a retail bank held by its customers

are often based on their interactions with bank employees. As a result, it is extremely

important that tellers, the employees who customers interact most frequently with, are

motivated and satisfied. Given the nature of a tellers duty this is not an easy task. The

training and socialization programmes that tellers are involved with will play a major role

in their level of job satisfaction and motivation. Improved training techniques and

procedures will give the tellers a clearer understanding of what is expected of them and

assist them to maintain higher motivation and satisfaction levels. This will lead to tellers

who are more customer-oriented and consequently a more customer-oriented

organizational culture. The review of the literature highlights the importance of the

customer contact role and the need for further research into ways to maintain the customer-

contact personnels level of motivation and job satisfaction and to enhance their role in the

marketing programme.

What is needed

High importance is placed on the role played by the service salesperson in the selling of

services. When purchasing a service, customers more often viewed the salesperson as the


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service itself, and a customers impression of the salesperson as being important in the

selling of services.

As customers perceive service purchases as being associated with high risk the sales person

is expected to mitigate the risk by reassuring the customer that their purchase is sensible

and sound to transform the buying experience from an unpleasant one and to minimize

cognitive dissonance. Therefore, training programmes to reinforce the ability of the

customer-contact personnel to tangibilize the service during their contact with customers.

The need to tangibilize the service is to reduce the perceived risk associated with

purchasing a service and to improve the buying experience. Additionally, customers tended

to view the quality of service purchases as being generally inconsistent.

The personality of the salesperson and the ensuing personal relationship make tangible for

the customer the intangible benefits sought. In every case, the customer buying the service

is buying the sellers time and the personal relationship is critical. Therefore, the person

doing the selling determines to a significant extent the amount of satisfaction a customer

derives from purchasing the service. Hence the importance of the customer-contact

personnel. One of the dominant customer purchase behaviour perceptions, was the high

importance placed on the role the service salesperson plays in determining the level of

satisfaction or dissatisfaction a customer receives in purchasing a service. Service

purchasers often find it difficult to judge the quality of the service that they are purchasing.

Finally, one of the most important implications is the impact of word-of-mouth

communications. Personal involvement, personal contact, and customer input are important

prerequisites in the marketing of a retail banks financial services. Because service selling

requires considerable skill levels and extensive training of its personnel, the bank will need

to place a high emphasis on teaching selling skills. One of the skills it will need to teach is

how to best maximize the reputation of the organization. Second, the role of the customer-

contact personnel in the marketing process of a retail bank is recognized as being important

by the customer-contact personnel and the organization.


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However, the customer-contact personnel felt they were not well rewarded for their

contribution to the retail banks marketing effort, were not involved in an official training

programme, and feel they receive greater blame, condemnation and threat of dismissal

than did salespeople. The significance of these findings highlights the low self-esteem

evident in the customer-contact personnel which could permeate itself within the

organization. A result of this apparent low self esteem could be poor customer service

being provided by these customer-contact personnel to the banks existing customers as

these customer contact employees may feel that it is satisfactory for them to treat the

banks customers the way the bank is treating them, i.e. without much respect. Third, the

relationship between the salesperson and the customer is perceived as being of great

importance in the marketing of the retail banks financial services. Finally, in the marketing

of the banks financial services the service salesperson requires significant input from the

customer if the service is to be successfully delivered.

The Road Ahead

The branding of banks in India is not popular (as it is in the west) at least for now. Sooner

or later it will assume importance and it will be a pertinent question for banks to identify

themselves in an otherwise messy market where the products are pretty much the same.

The motto will be to get more and more people involved in their banking business and such

a relationship will be hard to come by with plain vanilla products and services. The

banking scenario in India is at the crossroads and is continuously evolving, but the progress

has been remarkable over the past decade. Without much leeway in the avenues for

operations, the true challenge for the banks is to stand out in the midst of hard-hitting

regulations of the apex body. Globalization, consolidation and want of expertise are

drastically redefining the banking taxonomy. Companies will surely be looking forward to

seeking leadership and experienced management talent to deal with these challenges.


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References:

1. J P Morgan Report on Indian Retail Banking - Mahrukh Adajania

2. Wanted: Asian Credit Bureaus - Andre Bailey, Suzi Chun, and Jeffrey Wong

(The McKinsey Quarterly, 2003 Number 2 Organization)

3. Challenges before the Indian Banking Industry - Address by Shri Vepa Kamesam,

Deputy Governor, Reserve Bank of India on August 31, 2002 at the Annual General

Meeting of the Indian Banks Association at Mumbai

4. Come and Buy - Economist (print edition), May 1st 2003.

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Quality and its Implications for Future Research, Journal of Marketing

7. Rathmell, J., Marketing in the Service Sector, Winthrop Publishers, Cambridge, 1974.

8. Suchintan Banerjee, Banking in India: Banking on Retail

Documents

05P014 Deepa v Retail Banking