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ANALYZING THE GAP BETWEEN MANAGEMENT PERCEPTION AND CUSTOMER PERCEPTION WITH RESPECT TO THE SERVICES OFFERED IN RETAIL BANKING BY DIFFERNET BANKS
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ANALYZING THE GAP BETWEEN MANAGEMENT PERCEPTION AND CUSTOMER PERCEPTION WITH RESPECT TO THE SERVICES OFFERED IN RETAIL BANKING BY DIFFERNET BANKS

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ANALYZING THE GAP BETWEEN MANAGEMENT PERCEPTION AND CUSTOMER PERCEPTION WITH RESPECT TO THE SERVICES OFFERED IN RETAIL BANKING BY DIFFERNET BANKS

ANALYZING THE GAP BETWEEN MANAGEMENT PERCEPTION AND CUSTOMER PERCEPTION WITH RESPECT TO THE SERVICES OFFERED IN RETAIL BANKING BY DIFFERNET BANKS

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    ANALYZING THE GAP BETWEEN MANAGEMENT PERCEPTION AND CUSTOMER PERCEPTION WITH RESPECT TO THE SERVICES OFFERED IN RETAIL BANKING BY DIFFERNET BANKS ANALYZING THE GAP BETWEEN MANAGEMENT PERCEPTION AND CUSTOMER PERCEPTION WITH RESPECT TO THE SERVICES OFFERED IN RETAIL BANKING BY DIFFERNET BANKS Document Transcript

    • Gap Analysis of Services offered in Retail Banking“ANALYZING THE GAP BETWEEN MANAGEMENTPERCEPTION AND CUSTOMER PERCEPTION WITHRESPECT TO THE SERVICES OFFERED IN RETAILBANKING BY DIFFERNET BANKS”1
    • Gap Analysis of Services offered in Retail Banking Table of ContentsChapter No. Title Page No. PREFACE ACKNOWLEDGMENT EXECUTIVE SUMMARY INTRODUCTION1. RESEARCH METHODOLOGY 10 Descriptive Research 11 Objectives of the Study 11 Scope of the study 12 Methodology 13 Data Collection Source 14 Sampling plan 14 Data collection Method 15 Field Work 16 Limitation 162. INDUSTR PROFILE 17 Introduction 19 Types of Banks 20 Indian Banking Sector 21 Banking System 26 Retail banking 37 Retail Banking Product & Services 453. COMPANY PROFILE 54 HDFC Bank 55 ICICI Bank 57 State Bank of India 60 Corporation Bank 63 Standard Chartered Bank 65 Citi Bank 674. THEORY OF GAP 695. DATA ANALYSIS 75 Calculation of Hypothesis 111 Findings 114 Recommendation 116 Bibliography Annexure2
    • Gap Analysis of Services offered in Retail BankingPREFACERetail Banking has always been an integral part of the Banking activities the worldover, but it is only in the recent past that it has gathered special momentum. Thoughinternationally this revolution started in 80’s with the advent of credit cards followed byother products of retail financial services, yet, as far as India is concerned, the year1995 marks the starting point of Retail Banking Revolution with Foreign Banks andnew generation Private Banks taking the lead. Till 90’s only foreign Banks were themain players in Retail Banking activities.The paradigm shift in the Indian Banking Sector brought out by deregulation,liberalization and globalization of the Indian economy and characterized by intensecompetition and wafer thin margins has compelled banks to shift focus from CorporateBanking to Retail Banking and look upon retail banking as a solution to some of theirimmediate concerns. Only a few years ago the Retail Banking was scorned by manyspecialists as too voluminous, transaction heavy and unprofitable business. Consumerand personal loans were considered unproductive and were thus discouraged. Butthings have changed now. Retail Banking has regained banker’s interest not leastbecause it is the activity where many major banks are making most of their money butalso because of the more recurrent nature of its earnings. Many European banks thathad ventured into wholesale and investment banking activities in a big way had to pay aheavy price in the recent times. The economic downturn and gloomy capital marketenvironment has made investment banking lose mush of its shine making many banksto shift their focus back to Retail Banking.We therefore choose to do our project on Retail banking within the Banking Industry,which has seen tremendous changes in the past years, promising great scope in theyears to come.3
    • Gap Analysis of Services offered in Retail BankingEXECUTIVE SUMMARYThe report “Analyzing the Gap between Management Perception and CustomerPerception With Respect To the Services Offered In Retail Banking” aims to assimilatedata about the various aspects of Retail banking services, to analyze the perceptions ofthe management and the customers regarding the services offered in Retail banking andto find out whether any gaps do exist between the services offered and the customerexpectations. We have taken 6 Banks which represent the Nationalized, Private andMultinational Banks of the Banking Industry in India-  SBI  Corporation Bank  HDFC Bank  ICICI Bank  Citibank  Standard Chartered BankThe criteria for selecting these banks were their deposit base. We have limited ourService Category to the core services in Retail Banking and a few specialized services.The report is a mixture of Secondary and Primary data, with Questionnaires being ourmajor instrument to collect primary data.Major topics we have attempted to cover in this project are to:  Explore the services and products offered by the banks to individual customers.  Understand the perception of the management with respect to services offered by banks.  Understand the perception of the customers with respect to services offered by banks.  Analyze whether there is a gap between the customer and management perceptions about the services offered by the banks.  Conclude and enumerate the recommendations that might help to reduce the gaps that exist and foster the relationship of the customer more with the bank.4
    • Gap Analysis of Services offered in Retail BankingThe new game requires new strategies with an accent on innovation for organizationaltransformation and to achieve world-class competitiveness through improved efficiencyand reduced operational cost.An organization-centric agenda, policy, program accelerating interventions need tostrengthen core competencies of Indian banks; while exploring seeding options forfuture growth.Thrust on innovation is important particularly in the present context of consolidationand convergence both within and across segments of the financial system.5
    • Gap Analysis of Services offered in Retail BankingINTRODUCTIONService with a smile:Today’s finicky banking customers will settle for nothing less. The customer has cometo realize somewhat belatedly that he is the king. The customer’s choice of one entityover another as his principal bank is determined by considerations of service qualityrather than any other factor. He wants competitive loan rates but at the same time alsowants his loan or credit card application processed in double quick time. He insists thathe be promptly informed of changes in deposit rates and service charges and he bristleswith ‘customary rage’ if his bank is slow to redress any grievance he may have. Hecherishes the convenience of impersonal net banking but during his occasional visits tothe branch he also wants the comfort of personalized human interactions and facilitiesthat make his banking experience pleasurable. In short he wants financial house thatwill more than just clear his cheque and updates his passbook: he wants a bank thatcares and provides great services.So do banks meet these heightened expectations? Is there a gap that exists between themanagement perception and the customer perception with reference to the servicesoffered in Retail Banking? To find out answers to these questions we undertook asurvey of six banks selecting two banks from each of the following:  Private Bank  Nationalized Bank  Multinational BankA lot of surveys have been done in the past by many agencies to understand the aspectof customer satisfaction and to find out the customer friendly banks. Our research addsthe dimension of the ‘Gap Analysis’ between The Management and the customerperceptions regarding the services being offered.6
    • Gap Analysis of Services offered in Retail Banking CHAPTER-1 RESEARCH METHODOLOGY7
    • Gap Analysis of Services offered in Retail BankingDescriptive Research:Descriptive research, also known as statistical research, describes data andcharacteristics about the population or phenomenon being studied. Descriptive researchanswers the questions who, what, where, when and how.Although the data description is factual, accurate and systematic, the research cannotdescribe what caused a situation. Thus, descriptive research cannot be used to create acausal relationship, where one variable affects another. In other words, descriptiveresearch can be said to have a low requirement for internal validity.The description is used for frequencies, averages and other statistical calculations.Often the best approach, prior to writing descriptive research, is to conduct a surveyinvestigation. Qualitative research often has the aim of description and researchers mayfollow-up with examinations of why the observations exist and what the implications ofthe findings are.Objectives of the study:There has been an honest attempt to:  Explore the services and products offered by the banks to individual customers.  Understand the perception of the customers and the management with respect to services offered by banks.  Generate additional information to analyze the gap between the customer and management perceptions about the services offered by banks.  Conclude and enumerate the innovations required to reduce the gap and increase the customer base of banks.8
    • Gap Analysis of Services offered in Retail BankingScope of the Study:  Scope of the study is to understand the various services and the products offered by the banks to the individual customers and to find out the gaps in the services being offered and the customer expectations.  An effort is also made to suggest the banks as to where the gaps exist and what needs to be done to close the gaps.  The study was done taking six banks into consideration. They are ICICI Bank, HDFC Bank, Citibank, Standard Chartered, SBI, Corporation Bank.The survey was restricted to the bank customers in Ahmedabad.9
    • Gap Analysis of Services offered in Retail BankingMethodology:The report “Analyzing the Gap between Management Perception and CustomerPerception With Respect To the Services Offered In Retail Banking” aims to assimilatedata about the various aspects of Retail banking services, to analyze the perceptions ofthe management and the customers regarding the services offered in Retail banking andto find out whether any gaps do exist between the services offered and the customerexpectations. We have taken 6 Banks which represent the Nationalized, Private andMultinational Banks of the Banking Industry in India-  SBI  Corporation Bank  HDFC Bank  ICICI Bank  Citibank  Standard Chartered BankThe criteria for selecting these banks were their deposit base. We have limited ourService Category to the core services in Retail Banking and a few specialized services. The report is a mixture of Secondary and Primary data, with Questionnaires beingour major instrument to collect primary data.Major topics we have attempted to cover in this project are to: -  Explore the services and products offered by the banks to individual customers.  Understand the perception of the customers with respect to services offered by banks.  Analyze whether there is a gap between the customer and management perceptions about the services offered by the banks.  Conclude and enumerate the recommendations that might help to reduce the gaps that exist and foster the relationship of the customer more with the bank.10
    • Gap Analysis of Services offered in Retail BankingData Collection Source:The study required the understanding of the concept of Retail Banking and of thevarious products associated with it. The method used was that of secondary researchand primary research. Under secondary research a detailed study was done from thevarious books, journals, magazines written on the subject of banking ad retail bankingto obtain the required information and to have a precise idea of the services of retailbanking.Sampling Plan:Sampling Unit:Sampling unit on Grade scale from 1 to 5 for each question.Sampling Technique:Filling up common questionnaires with 15 questions under consideration bothby customers and the managers of the different retail banks.Sample Size:The sample size of the customers was 20 each from each of the six banks ie.120customers. The management sample size was restricted to 1 each, namely theBranch Manager from the six banks which is 6 managers.11
    • Gap Analysis of Services offered in Retail BankingData collection Method:Secondary Data:In order to have a proper understanding of the sector of Retail Banking a depth studywas done from the various sources such as Books like Marketing channel by AnneCoughlan and Service marketing by Valarie A Zeithaml, Magazines like RetailBanking and Business Today. A lot of data is also collected from the official websitesof the banks and the articles from various search engines like Google, yahoo search andanswers.com .Primary Data:The primary data was collected by means of a survey. Questionnaires were preparedand customers of the banks at various branches were approached to fill up thequestionnaires. The questionnaire contains 15 questions which reflect on the type andquality of services provided by the banks to the customers. The response of thecustomer and the managers is recorded on a grade scale of 1 to 5 for each question. Thefilled up information was later analyzed to obtain the required interpretation and thefindings.12
    • Gap Analysis of Services offered in Retail BankingField Work:The branch managers of each of the six banks were approached and questions were putto them as per the questionnaire, and the answers duly filled up. Appropriate probingwas done where ever necessary.For the customers ‘cold calling’ was the approach employed. The customers coming tothe banks were approached and as per their convenience and acceptance the questionswere put to them and the answers given by them duly filled up. Here too probing wasemployed where deemed necessary.Limitations:  The sample size was restricted with in the area Ahmedabad.  Further it was a convenience sampling.  There were time and cost limitations.  The six banks selected have been considered as representatives of the banking sector. Also the opinions have been generalized to the public. This project has been done for academic purpose – and not done as a professional researcher for the company.13
    • Gap Analysis of Services offered in Retail Banking CHAPTER-2 INDUSTRY PROFILE14
    • Gap Analysis of Services offered in Retail BankingINTRODUCTIONThe Banking Regulation Act 1949 defines banking as accepting the purpose oflending or investment, of deposits of money from the public, repayable on demandor otherwise and withdrawal by cheque, draft, and order otherwise. The essentialfunction of a bank is to provide services related to the storing of value and theextending credit. The evolution of banking dates back to the earliest writing, andcontinues in the present where a bank is a financial institution that provides bankingand other financial services. Currently the term bank is generally understood aninstitution that holds a banking license. Banking licenses are granted by financialsupervision authorities and provide rights to conduct the most fundamental bankingservices such as accepting deposits and making loans. There are also financialinstitutions that provide certain banking services without meeting the legaldefinition of a bank, a so called non-bank. Banks are a subset of the financialservices industry.The word bank is derived from the Italian “banca” which is derived from Germanand means bench. The terms bankrupt and "broke" are similarly derived frombanca rotta, which refers to an out of business bank, having its bench physicallybroken. Money lenders in Northern Italy originally did business in open areas, orbig open rooms, with each lender working from his own bench or table.Typically, a bank generates profits from transaction fees on financial services or theinterest spread on resources it holds in trust for clients while paying them intereston the asset.15
    • Gap Analysis of Services offered in Retail BankingTYPES OF BANKS: There are several different types of banks including:  Central banks usually control monetary policy and may be the lender of last resort in the event of a crisis. They are often charged with controlling the money supply, including printing paper money. Examples of central banks are the European Central Bank and the US Federal Reserve Bank.  Investment banks underwrite stock and bond issues and advice on mergers. Examples of investment banks are Goldman Sachs of the USA or Nomura Securities of Japan.  Merchant banks were traditionally banks which engaged in trade financing. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike Venture capital firms, they tend not to invest in new companies.  Private Banks manage the assets of the very rich. An example of a private bank is the Union Bank of Switzerland.  Savings banks write mortgages exclusively.  Offshore banks are banks located in jurisdictions with low taxation and regulation, such as Switzerland or the Channel Islands. Many offshore banks are essentially private banks.  Commercial banks primarily lend to businesses (corporate banking)  Retail banks primarily lend to individuals. An example of a retail bank is Washington Mutual of the USA.  Universal banks engage in several of these activities. For example, Citigroup, a large American bank, is involved in commercial and retail lending; it owns a merchant bank (Citicorp Merchant Bank Limited) and an investment bank (Salomon Smith Barney); it operates a private bank (Citigroup Private Bank); finally, its subsidiaries in tax-havens offer offshore banking services to customers in other countries.16
    • Gap Analysis of Services offered in Retail BankingINDIAN BANKING SECTORBanking in India has its origin as early as the Vedic period. It is believed that thetransition from money lending to banking must have occurred even before Manu,the great Hindu Jurist, who has devoted a section of his work to deposits andadvances and laid down rules relating to rates of interest.During the Mogul period, the indigenous bankers played a very important role inlending money and financing foreign trade and commerce. During the days of theEast India Company, it was the turn of the agency houses to carry on the bankingbusiness.The General Bank of India was the first Joint Stock Bank to be established in theyear 1786. The others which followed were the Bank of Hindustan and the BengalBank. The Bank of Hindustan is reported to have continued till 1906 while the othertwo failed in the meantime.In the first half of the 19th century the East India Company established three banks;the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madrasin 1843. These three banks also known as Presidency Banks, were independentunits and functioned well.These three banks were amalgamated in 1920 and a new bank, the Imperial Bank ofIndia was established on 27th January 1921. With the passing of the State Bank ofIndia Act in 1955 the undertaking of the Imperial Bank of India was taken over bythe newly constituted State Bank of India.The Reserve Bank which is the Central Bank was created in 1935 by passingReserve Bank of India Act 1934. In the wake of the Swadeshi Movement, a numberof banks with Indian management were established in the country namely, PunjabNational Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian Bank Ltd, the Bankof Baroda Ltd, the Central Bank of India Ltd. On July 19, 1969, 14 major banks ofthe country were nationalized and in 15th April 1980 six more commercial privatesector banks were also taken over by the government.17
    • Gap Analysis of Services offered in Retail BankingToday the commercial banking system in India may be distinguished into: Public Sector Banks  State Bank of India and its associate banks called the State Bank group  20 nationalized banks  Regional Rural Banks mainly sponsored by Public Sector Banks Private Sector Banks  Old generation private banks  New generation private banks  Foreign banks in India  Scheduled Co-operative Banks  Non-scheduled Banks Co-Operative SectorThe co-operative banking sector has been developed in the country to thesupplement the village money lender.:  State Co-operative Banks  Central Co-operative Banks  Primary Agriculture Credit Societies  Land Development Banks  Urban Co-operative Banks  Primary Agricultural Development Banks  Primary Land Development Banks  State Land Development Banks18
    • Gap Analysis of Services offered in Retail Banking Development Banks  Industrial Finance Corporation of India (IFCI)  Industrial Development Bank of India (IDBI)  Industrial Credit and Investment Corporation of India (ICICI)  Industrial Investment Bank of India (IIBI)  Small Industries Development Bank of India (SIDBI)  SCICI Ltd.  National Bank for Agriculture and Rural Development (NABARD)  Export Import Bank of India  National Housing Bank19
    • Gap Analysis of Services offered in Retail BankingSTATUS OF INDIAN BANKING INDUSTRYIt is useful to note some telling facts about the status of the Indian banking industryjuxtaposed with other countries, recognizing the differences between the developedand the emerging economies.First, the structure of the industry: In the world’s top 1000 banks, there are manymore large and medium-sized domestic banks from the developed countries thanfrom the emerging economies. Illustratively, according to The Banker 2004, out ofthe top 1000 banks globally, over 200 are located in USA, just above 100 in Japan,over 80 in Germany, over 40 in Spain and around 40 in the UK. Even China has asmany as 16 banks within the top 1000, out of which, as many as 14 are in the top500. India, on the other hand, had 20 banks within the top 1000 out of which only 6were within the top 500 banks. This is perhaps reflective of differences in size ofeconomies and of the financial sectors.Second, the share of bank assets in the aggregate financial sector assets: In mostemerging markets, banking sector assets comprise well over 80 per cent of totalfinancial sector assets, whereas these figures are much lower in the developedeconomies. Furthermore, deposits as a share of total bank liabilities have declinedsince 1990 in many developed countries, while in developing countries publicdeposits continue to be dominant in banks. In India, the share of banking assets intotal financial sector assets is around 75 per cent, as of end-March 2004. There is,no doubt, merit in recognizing the importance of diversification in the institutionaland instrument-specific aspects of financial intermediation in the interests of widerchoice, competition and stability..Third, internationalization of banking operations : The foreign controlled bankingassets, as a proportion of total domestic banking assets, increased significantly inseveral European countries (Austria, Ireland, Spain, Germany and Nordiccountries), but increases have been fairly small in some others (UK andSwitzerland). Amongst the emerging economies, while there was marked increase20
    • Gap Analysis of Services offered in Retail Bankingof foreign-controlled ownership in several Latin American economies, the increasehas, at best, been modest in the Asian economies. Available evidence seems toindicate some correlation between the extent of liberalization of capital account inthe emerging markets and the share of assets controlled by foreign banks. As per theevidence available, the foreign banks in India, which are present in the form ofbranches, seem to enjoy greater freedom in their operations, including retailbanking, in the country on par with domestic banks, as compared with most of theother developing countries. Furthermore, the profitability of their operations inIndia is considerably higher than that of the domestically-owned banks and, in fact,is higher than the foreign banks’ operations in most other developing countries.India continues to grant branch licenses more liberally than the commitments madeto the WTO.Fourth, the share of state-owned banks in total banking sector assets: Emergingeconomies, with predominantly Government-owned banks, tend to have muchhigher state-ownership of banks compared to their developed counterparts. Whilemany emerging countries chose to privatize their public sector banking industryafter a process of absorption of the overhang problems by the Government, we haveencouraged state-run banks to diversify ownership by inducting private sharecapital through public offerings rather than by strategic sales and still absorb theoverhang problems.A noteworthy feature of banking reforms in India is the growth of newly licensedprivate sector banks, some of which have attained globally best standards in termsof technology, services and sophistication. In many respects related to performance,these domestically promoted banks have surpassed branches of foreign banks inIndia, and could be a role model for other banks.21
    • Gap Analysis of Services offered in Retail BankingBANKING SYSTEMIntroductionThe Reserve Bank of India (RBI) is Indias central bank. Though the bankingindustry is currently dominated by public sector banks, numerous private andforeign banks exist. Indias government-owned banks dominate the market. Theirperformance has been mixed, with a few being consistently profitable. Severalpublic sector banks are being restructured, and in some the government eitheralready has or will reduce its ownership.Private and foreign banksThe RBI has granted operating approval to a few privately owned domestic banks;of these many commenced banking business. Foreign banks operate more than 150branches in India. The entry of foreign banks is based on reciprocity, economic andpolitical bilateral relations. An inter-departmental committee approves applicationsfor entry and expansion.Capital adequacy normForeign banks were required to achieve an 8 percent capital adequacy norm byMarch 1993, while Indian banks with overseas branches had until March 1995 tomeet that target. All other banks had to do so by March 1996. The banking sector isto be used as a model for opening up of Indias insurance sector to private domesticand foreign participants, while keeping the national insurance companies inoperation.BankingIndia has an extensive banking network, in both urban and rural areas. All largeIndian banks are nationalized, and all Indian financial institutions are in the publicsector.22
    • Gap Analysis of Services offered in Retail BankingRBI bankingThe Reserve Bank of India is the central banking institution. It is the sole authorityfor issuing bank notes and the supervisory body for banking operations in India. Itsupervises and administers exchange control and banking regulations, andadministers the governments monetary policy. It is also responsible for grantinglicenses for new bank branches. 25 foreign banks operate in India with full bankinglicenses. Several licenses for private banks have been approved. Despite fairlybroad banking coverage nationwide, the financial system remains inaccessible tothe poorest people in India.Indian banking systemThe banking system has three tiers. These are the scheduled commercial banks; theregional rural banks which operate in rural areas not covered by the scheduledbanks; and the cooperative and special purpose rural banks.Scheduled and non scheduled banksThere are approximately 80 scheduled commercial banks, Indian and foreign;almost 200 regional rural banks; more than 350 central cooperative banks, 20 landdevelopment banks; and a number of primary agricultural credit societies. In termsof business, the public sector banks, namely the State Bank of India and thenationalized banks, dominate the banking sector.23
    • Gap Analysis of Services offered in Retail BankingLocal financingAll sources of local financing are available to foreign-participation companiesincorporated in India, regardless of the extent of foreign participation. Underforeign exchange regulations, foreigners and non-residents, including foreigncompanies, require the permission of the Reserve Bank of India to borrow from aperson or company resident in India.Regulations on foreign banksForeign banks in India are subject to the same regulations as scheduled banks. Theyare permitted to accept deposits and provide credit in accordance with the bankinglaws andRBI regulations. Currently about 25 foreign banks are licensed to operate in India.Foreign bank branches in India finance trade through their global networks.RBI restrictionsThe Reserve Bank of India lays down restrictions on bank lending and otheractivities with large companies. These restrictions, popularly known as "consortiumguidelines" seem to have outlived their usefulness, because they hinder theavailability of credit to the non-food sector and at the same time do not fostercompetition between banks.Indian vs. foreign banksMost Indian banks are well behind foreign banks in the areas of customer fundstransfer and clearing systems. They are hugely over-staffed and are unlikely to beable to compete with the new private banks that are now entering the market. Whilethese new banks and foreign banks still face restrictions in their activities, they arewell-capitalized, use modern equipment and attract high-caliber employees.24
    • Gap Analysis of Services offered in Retail BankingNeed to PonderDebates on Indias slowdown focus on the manufacturing sector which isdangerously misleading: one of the biggest areas of worry about Indias economicslowdown is being ignored - the systemic flaw of Indias banking sector. Storiesabout the real health of Indian banks get less publicised because banks are stilloverwhelmingly owned, controlled and directed by the government, i.e., theministry of finance (MoF). Banks have no effective mouthpiece either.Grey futureOne more reason being the opacity of the Reserve Bank of India. This does notmean a forecast of doom for the Indian banking sector the kind that has washed outsouth east Asia. And also not because Indian banks are healthy. We still have noclue about the real non-performing assets of financial institutions and banks. Manybanks are now listed. That puts additional responsibility of sharing information. It isnow clear that it was the financial sector that caused the sensational meltdown ofsome Asian nations. India is not Thailand, Indonesia and Korea. Borrowedinvestment in property in India is low and property prices have already fallen,letting out steam gently. Our micro-meltdown has already been happening.Conclusion Still, there are several other worries about the banking sector, mainly confusionover ownership and control. Sometime soon India will be forced to apply the normsof developed countries and many banks (including some of the biggest) will showvery poor return ratios and dozens of banks will be bankrupt. When that happensthe two popular reasons to defend bad banks will disappear. These are: one, to saveface in the remote hope of that fortunes will `revive and two, some banks are toobig to be allowed to fail, fearing social upheaval.25
    • Gap Analysis of Services offered in Retail BankingCHALLENGES THE INDIAN BANKS FACEIndia is one of the fastest growing economies in the world. Evidence from acrossthe world suggests that a sound and evolved banking system is required forsustained economic development. India has a better banking system in place vis avis other developing countries, but there are several issues that need to be ironedout.The challenges that the banking sector in India faces are:  INTEREST RATE RISK:Interest rate risk can be defined as exposure of banks net interest income to adversemovements in interest rates. A banks balance sheet consists mainly of rupee assetsand liabilities. Any movement in domestic interest rate is the main source of interestrate risk.Now as yields go up (with the rise in inflation, bond yields go up and bond pricesfall as the debt market starts factoring a possible interest rate hike), the banks willhave to set aside funds to mark to market their investment.This will make it difficult to show huge profits from treasury operations. Thisconcern becomes much stronger because a substantial percentage of bank depositsremain invested in government bonds.  INTEREST RATES AND NON-PERFORMING ASSETS:The best indicator of the health of the banking industry in a country is its level ofNPAs. Given this fact, Indian banks seem to be better placed than they were in thepast. A few banks have even managed to reduce their net NPAs to less than onepercent (before the merger of Global Trust Bank into Oriental Bank of Commerce,OBC was a zero NPA bank). But as the bond yields start to rise the chances are thenet NPAs will also start to go up. This will happen because the banks have beenmaking huge provisions against the money they made on their bond portfolios in ascenario where bond yields were falling.26
    • Gap Analysis of Services offered in Retail Banking  COMPETITION IN RETAIL BANKING:The entry of new generation private sector banks has changed the entire scenario.Earlier the household savings went into banks and the banks then lent out money tocorporates. Now they need to sell banking. The retail segment, which was earlierignored, is now the most important of the lot, with the banks jumping over oneanother to give out loans. The consumer has never been so lucky with so manybanks offering so many products to choose from. With supply far exceedingdemand it has been a race to the bottom, with the banks undercutting one another. Alot of foreign banks have already burnt their fingers in the retail game and have nowdecided to get out of a few retail segments completely.  THE URGE TO MERGE:In the recent past there has been a lot of talk about Indian Banks lacking in scaleand size. The State Bank of India is the only bank from India to make it to the list ofTop 100 banks, globally. Most of the PSBs are either looking to pick up a smallerbank or waiting to be picked up by a larger bank.The central government also seems to be game about the issue and is seen to beencouraging PSBs to merge or acquire other banks. Global evidence seems tosuggest that even though there is great enthusiasm when companies merge or getacquired, majority of the mergers/acquisitions do not really work.So in the zeal to merge with or acquire another bank the PSBs should not let theircommon sense take a back seat. Before a merger is carried out cultural issuesshould be looked into. A bank based primarily out of North India might want toacquire a bank based primarily out of South India to increase its geographicalpresence but their cultures might be very different. So the integration process mightbecome very difficult. Technological compatibility is another issue that needs to belooked into in details before any merger or acquisition is carried out.The banks must not just merge because everybody around them is merging. AsKeynes wrote,”Worldly wisdom teaches us that its better for reputation to failconventionally than succeed unconventionally". Banks should avoid falling into thistrap.27
    • Gap Analysis of Services offered in Retail Banking  IMPACT OF BASEL-II NORMS:Banking is a commodity business. The margins on the products that banks offer toits customers are extremely thin vis a vis other businesses. As a result, for banks toearn an adequate return of equity and compete for capital along with otherindustries, they need to be highly leveraged. The primary function of the bankscapital is to absorb any losses a bank suffers (which can be written off againstbanks capital). Norms set in the Swiss town of Basel determine the ground rules forthe way banks around the world account for loans they give out. These rules wereformulated by the Bank for International Settlements in 1988.Essentially, these rules tell the banks how much capital the banks should have tocover up for the risk that their loans might go bad. The rules set in 1988 led thebanks to differentiate among the customers it lent out money to. Different weightage was given to various forms of assets, with zero percentage weightings beinggiven to cash, deposits with the central bank/govt.etc, and 100 per cent weighting toclaims on private sector, fixed assets, real estate etc. The summation of these assetsgave us the risk-weighted assets. Against these risk weighted assets the banks hadto maintain a (Tier I + Tier II) capital of 9 per cent i.e. every Rs100 of risk assetshad to be backed by Rs 9 of Tier I + Tier II capital. To put it simply the banks hadto maintain a capital adequacy ratio of 9 per cent.The problem with these rules is that they do not distinguish within a category i.e. alllending to private sector is assigned a 100 per cent risk weighting, be it a companywith the best credit rating or company which is in the doldrums and has a very lowcredit rating. This is not an efficient use of capital. The company with the bestcredit rating is more likely to repay the loan Vis a Vis the company with a lowcredit rating. So the bank should be setting aside a far lesser amount of capitalagainst the risk of a company with the best credit rating defaulting Vis a Vis thecompany with a low credit rating. With the BASEL-II norms the bank can decideon the amount of capital to set aside depending on the credit rating of the company.28
    • Gap Analysis of Services offered in Retail BankingCredit risk is not the only type of risk that banks face. These days the operationalrisks that banks face are huge. The various risks that come under operational riskare competition risk, technology risk, casualty risk, crime risk etc. The originalBASEL rules did not take into account the operational risks. As per the BASEL-IInorms, banks will have to set aside 15 per cent of net income to protect themselvesagainst operational risks.So to be ready for the new BASEL rules the banks will have to set aside morecapital because the new rules could lead to capital adequacy ratios of the banksfalling. How the banks plan to go about meeting these requirements is somethingthat remains to be seen. A few banks are planning initial public offerings to haveenough capital on their books to meet these new norms.  IN CLOSING:Over the last few years, the falling interest rates, gave banks very little incentive tolend to projects, as the return did not compensate them for the risk involved. Thisled to the banks getting into the retail segment big time. It also led to a lot of banksplaying it safe and putting in most of the deposits they collected into governmentbonds. Now with the bond party over and the bond yields starting to go up, thebanks will have to concentrate on their core function of lending.The banking sector in India needs to tackle these challenges successfully to keepgrowing and strengthen the Indian financial system.Furthermore, the interference of the central government with the functioning ofPSBs should stop. A fresh autonomy package for public sector banks is in offing.The package seeks to provide a high degree of freedom to PSBs on operationalmatters. This seems to be the right way to go for PSBs.The growth of the banking sector will be one of the most important inputs that shallgo into making sure that India progresses and becomes a global economic superpower.29
    • Gap Analysis of Services offered in Retail BankingCHALLENGES AHEADFollowing highlights some thoughts on certain areas which have a key bearing onthe ability of Indian banks to remain competitive and enhance soundness. Needlessto state, these are more in the nature of random thoughts, rather than any structuredthinking, and are meant to invite discussion.First, cost management. Cost containment is a key to sustainability of bankprofits as well as their long-term viability. To highlight this point, we take recourseto some figures. In 2003, operating costs of banks as a proportion of total averageassets1 in the UK were 2.12 per cent, for those in Switzerland they were 2.03 percent, and less than 2 per cent in major European economies like Sweden, Austria,Germany and France. In India, however, in 2003, operating costs as proportion oftotal assets of scheduled commercial banks stood at 2.24 per cent. The tasks aheadare thus clear and within reach.Second, recovery management. This is a key to the stability of the banking sector.There should be no hesitation in stating that Indian banks have done a remarkablejob in containment of non-performing loans (NPL) considering the overhang issuesand overall difficult environment. Let me add that for 2004, the net NPL ratio forthe Indian scheduled commercial banks at 2.9 per cent is ample testimony to theimpressive efforts being made by our banking system. In fact, recoverymanagement is also linked to the banks’ interest margins. We must recognize thatcost and recovery management supported by enabling legal framework hold the keyto future health and competitiveness of the Indian banks. No doubt, improvingrecovery-management in India is an area requiring expeditious and effective actionsin legal, institutional and judicial processes.Third, technological intensity of banking: This is one area where perhaps Indianeeds to do significant ‘catching up’, notwithstanding the rapid strides made overthe last.130
    • Gap Analysis of Services offered in Retail BankingSome available figures indicate that in late 1999, the percentage of customers usingonline banking was less than 1 per cent in India, compared with anywhere between6-30 per cent in developed economies like US, UK, Germany, Finland and Sweden.Even in Latin America, these figures are much higher than for India. Whileadmittedly the numbers for India are likely to be much higher at present than thesefigures suggest, so would be the case for these other economies as well. The issue,therefore, remains what has been the extent of ‘catching up’ by India on this score?In fact, this seems somewhat intriguing: India happens to be a world leader ininformation technology, but its usage by our banking system is somewhat muted. Itis wise for Indian banks to exploit this globally state-of-art expertise, domesticallyavailable, to their fullest advantage.Fourth, risk management. Banking in modern economies is all about riskmanagement. The successful negotiation and implementation of Basel II Accord islikely to lead to an even sharper focus on the risk measurement and riskmanagement at the institutional level. Thankfully, the Basel Committee has,through its various publications, provided useful guidelines on managing thevarious facets of risk. The institution of sound risk management practices would bean important pillar for staying ahead of the competition. Banks can, on their part,formulate ‘early warning indicators’ suited to their own requirements, businessprofile and risk appetite in order to better monitor and manage risks.Fifth, governance. The recent irregularities involving accounting firms in the UShave amply demonstrated the importance of good corporate governance practices.The quality of corporate governance in the banks becomes critical as competitionintensifies, banks strive to retain their client base, and regulators move out ofcontrols and micro-regulation. As already mentioned, banks are special in emergingmarkets since they take a leading role in development of other financialintermediaries and of financial markets, apart from having a large recourse to publicdeposits. No doubt, there is nothing like an ‘optimal’ level of governance for one to31
    • Gap Analysis of Services offered in Retail Bankingbe satisfied with. The objective should be to continuously strive for excellence. TheRBI has, on its part, made significant efforts to improve governance practices inbanks, drawing upon international best practices. It is heartening to note thatcorporate governance presently finds explicit mention in the annual reports ofseveral banks. The improved corporate governance practice would also provide anopportunity to accord greater freedom to the banks’ boards and move away frommicro regulation to macro management. Banks in India are custodians ofdepositors’ monies, monies of the millions of depositors who are seeking safeavenues for their hard earned savings, and hence, banks must accept and perform aneffective fiduciary role. In this light, improvement in policy-framework, regulatoryregime, market-perceptions, and indeed, popular sentiments relating to governancein banks need to be on the top of the agenda – to serve our society’s needs andrealities while being in harmony with the global perspective.32
    • Gap Analysis of Services offered in Retail BankingRETAIL BANKINGRetail banking is typical mass-market banking where individual customers use localbranches of larger commercial banks. Services offered include: savings and checkingaccounts, mortgages, personal loans, debit cards, credit cards, and so forth. This is verydifferent from wholesale banking.RETAIL BANKING IN INDIA:India is poised to become the worlds fourth largest economy in the span of twodecades. Economic prosperity is providing many in this populous nation with realpurchasing power; it simply is an opportunity that cannot be overlooked by globalbanks. Despite its appeal, India remains a developing economy. Thus, global banksseeking a presence or expansion in India must craft a business strategy that considersthe countrys attendant challenges: long-established competitors; rudimentaryinfrastructure; dynamic political environment; restrictive regulations; and developingcountry operational risks.These challenges should be weighed against the potential gains from entering themarketplace, as well as the likely cost of doing nothing. Extensive research conductedby the IBM Institute for Business Value pinpointed four of the most promising productareas for global banks entering the Indian market: housing loans, automobile loans,small and medium enterprise (SME) banking and personal financial services. However,recognizing the growth opportunities is only the beginning. Global banks targetingIndia as a source of new growth will have to do much more than just "show up" -success will lie in the details of execution.With one of the most under penetrated retail lending markets in Asia-Pacific, Indiaoffers great potential. Indias mortgage debt in 2002 totaled only 2 percent of grossdomestic product (GDP), compared to 7 percent of Thailands GDP, 8 percent of GDPin China and much higher proportions in other parts of the region: Malaysia (2833
    • Gap Analysis of Services offered in Retail Bankingpercent), South Korea (30 percent) and Hong Kong (52 percent). While India remainscharacterized by extreme wealth and poverty, a middle class is beginning to emerge,with absolute demand for products and services on the rise. To seize this opportunity,new market entrants must exploit specific market niches and leverage best-in-classcapabilities while addressing the unique challenges of the Indian banking environment.During the last decade, India has emerged as one of the biggest and fastest growingeconomies in the world. The strengthening economy in India has been fueled by theconvergence of several key influences: liberalization policies of the government,growth of key economic sectors, development of an English-speaking, well-educatedwork force and the emergence of a middle class population.More liberal economic policies: Opening the marketplaceIndias debt crisis in the early 1990s forced the government to radically reform itseconomic policies. The resulting liberalization program opened the market forforeign investment, fostered domestic competition and spawned an era ofprivatization. In the 10 years after 1992, Indias economy grew at an average rate of6.8 percent . During April to June 2004, the economy continued to show its strengthand grew by 7.4 percent.Foreign direct investment (FDI) grew more than twenty-fold, from just underUS$0.13 billion in 1992 to almost US$2.86 billion in 2003. Meanwhile,privatization accelerated between 2000 and 2002, when 13 state-owned companieswere sold, while the Indian government recently raised another US$3.41 billion byselling off stakes in six state-owned firms. Since foreign investment and access toexternal markets remain critical to the growth of the country - and specifically, it’sbanking system - reform-minded institutional and foreign investors are monitoringthe early words and actions of the new administration that took control in May2004, uncertain whether its predecessors liberalization program will continue.34
    • Gap Analysis of Services offered in Retail BankingBooming businesses: Services, agriculture and manufacturingDomestic industries have prospered from the development of Indias capital marketsand the increased foreign trade and investment across sectors. The rapidlyexpanding services sector (including telecommunications and informationtechnology), has benefited from government spending and explosive demand for ITand IT-enabled services (ITES), such as call centers and back-office administration.Agriculture and core industries (such as steel, cement and automobiles) areexpected to remain strong over time because of affordable consumer credit and therobust economy. In addition, infrastructure spending is expected to be very strong -fueled by big-ticket projects involving national highway systems, establishment ofprivatized airports, and the modernization of ports and telecommunicationnetworks. An estimated US$440 billion is expected to be spent in public and privateprojects over the next five years.A growing labor force: English-speaking with IT savvyGlobal investors are attracted to India because of the growing number of well-educated, English-speaking workers who are comfortable working in informationtechnology. Indias IT work force will be augmented by a booming population ofengineering students. The number of engineering students admitted at the universitylevel rose in 2004 to 341,649 from 310,590 in 2003. Furthermore, Indias labor poolalso serves as an expanding customer base for retail bank products and services.The emerging middle class: Managing "new money"The development of Indias economy is boosting overall consumer purchasingpower. The percentage of middle to high income Indian households is expected tocontinue rising. The younger, more educated population not only wields increasingpurchasing power, but it is more comfortable than previous generations withacquiring personal debt35
    • Gap Analysis of Services offered in Retail BankingA view of Indias banking industryIndias banking industry is one of the major beneficiaries of the countrys ascendanteconomic power. Improving consumer purchasing power, coupled with more liberalattitudes toward personal debt, is fueling Indias explosive banking segment. Globalbanks should be encouraged further by the relatively under penetrated status of thecountrys various retail lending segments. The retail market for mortgages, creditcards, automobile loans and other consumer loans is expected to jump from its 1999total of US$9.7 billion to US$36.7 billion in 2004 (see Figure 3). Even with thisstrong performance, significant opportunities for continued retail lending growthremain as retail lending figures lag Indias regional peers.Unlike most rapidly-expanding, emerging markets, Indias banking sector hasexhibited financial stability and a trend toward improved governance under themanagement of its central bank, the Reserve Bank of India (RBI). One challengethe RBI had to contend with was the legacy of policy-directed, corporate lending bythe state-owned banks that had produced high levels of non-performing assets(NPAs). Through structural reform, remedial legislative actions, and favorablereturns from the fixed income Treasury Markets, Indian banks have cut gross NPAlevels from 15.7 percent in 1997 to 8.8 percent in 2003. Fortunately, new entrants tothe market are not subjected to the same mandatory lending requirements asdomestic banks and can therefore "cherry-pick" the most desirable clients, allowingthem to lower their own risk of NPAs through more rigorous risk managementstrategies.36
    • Gap Analysis of Services offered in Retail BankingGlobal banks in India: Gaining a footholdThe competitive environment in India presents both challenges and opportunities toglobal banks seeking market entry. Entrenched domestic competitors and restrictiveequity ownership ceilings imposed by the government create obstacles for banksestablishing a foothold in India. Primary challenges include tough competition andgovernment ceilings on foreign equity ownership. Opportunities exist becauseglobal banks often have technological advantages, well-honed, efficient processesand appealing products and services.For the most part, global banks must execute on an organic growth strategy toexpand their footprint in India. Merger and acquisition activity in the banking sectorremains limited by government regulation. This is difficult news for global banksthat have relied on acquisitions as a market entry or expansion strategy. Unless thegovernment shifts its posture on foreign equity ownership, global banks will have torely on organic growth to expand their presence in India.Crafting an India-specific retail banking strategyAs global banks have experienced in the past, successfully competing in Indiarequires substantially more consideration than merely choosing the right market totarget. It warrants a well-crafted strategy that addresses the numerous risks andchallenges specific to Indias developing economy. The confluence of rapideconomic development, elevated consumer purchasing power levels and anunderserved retail banking population position India as a potential growth regionfor the 21st Century. However, Indias banking history has also seen global banksfailing to establish a profitable operation in the country. Success will truly lie in the details of execution.37
    • Gap Analysis of Services offered in Retail BankingREASONS FOR THE CHANGE OVER FROM CORPORATE BANKING TORETAIL BANKING:  The financial sector reforms undertaken by the Government since the year 1991 have accelerated the process of disintermediation which has encouraged blue chip corporate to access cheaper funds to meet their working capital requirements directly from investors in India and abroad through capital market instruments and external Commercial Borrowings route thus by-passing Banks in the process. The deregulation of markets and interest rates has lead to cut throat competition among Banks for corporate loans making them to lend even at PLR or sub PLR and offer other valued services at comparatively cheaper rates to big and high value corporate. In the process, most of the banks have experienced substantial reduction in interest spreads and drain on their profitability.  The introduction of stringent Asset Classification, Income Recognition and provisioning norms has resulted in growing menace of NPAs in corporate loans which has affected the asset quality, profitability and capital adequacy of banks adversely. The risks involved in corporate loans are very high as corporate have to keep all their eggs in one basket. The risks involved in retail Banking advances are comparatively less and well diversified as loan amounts are relatively small ranging from Rs. 5000 to Rs. 100 lace and repayable normally in short period of 3-5 years except housing loans (where repayment period is long up to 15 years in some cases) and from fixed source of income like salaries.  Whereas corporate loans give average return of just 0.5 to 1.5 percent only, the retail advances offer attractive interest spread of 3to 4 percent, because retail borrowers are less interest rate sensitive than the Corporate. Another reason for large interest spreads on retail advances is that the retail customers are too fragmented to bargain effectively.38
    • Gap Analysis of Services offered in Retail Banking  While corporate loans are subject to ups and downs in trade frequently, retail loans are comparatively independent of recession and continue to deliver even during the sluggish phase of economy.  Retail Banking gives a lot of stability and public image to banks as compared to corporate banking.  The housing loans, which form the major chunk of retail lending and where NPAs are the least, carry risk weight of just 50% for capital adequacy purposes. This is likely to come down further as new Basel Capital Accord or (Basel II) norms are put in place from the year 2006. This offers added incentive to banks for lending to this retail segment as against corporate lending where capital consumption is higher.  The greater amount of consumerism in the country with upswing in income levels of burgeoning middle class, which has propensity to consume to raise their standard of living, is enlarging the retail markets. This market is growing 2 50 percent per year and boosting the demand for credit from households. The potential is huge as present penetration level is just over 2 percent in the country. Given the easy liquidity scenario in the country the growth rate in this sector is likely to go up manifold in the years come. This offers great potential for banks to enlarge their loan books.  The Indian mindset is also changing and consumers prefer to improve their quality of life even if it means borrowing for facilities like housing, consumer goods vehicles and vacationing etc. Borrowing and lending is no longer considered a taboo. The peer pressure and demonstration effect is further pushing up demand for housing loans, consumer products and automobiles. The profiles of customers are fast changing from conservative dodos to fashionable peacocks. All these developments give big push to Retail Banking activities.  Retail Banking clients are generally loyal and tend not to change from one Bank to another very often.  Large numbers of Retail clients facilitate marketing, mass selling and ability to categorize/select clients using scoring system and data mining. Banks can cut39
    • Gap Analysis of Services offered in Retail Banking costs and achieve economies of scale and improve their bottom-line by robust growth in retail business volume.  Through product innovations and competitive pricing strategies Banks can foster business relationship with customers to retain the existing clients and attract new ones.  Innovative products like asset securitization can open new vistas in sustaining optimal capital adequacy and asset liability management for banks.  Retail Banking offers opportunities to banks to cross sell other retail products like credit card, insurance, mutual fund products and demate facilities etc. to depositors and investors.40
    • Gap Analysis of Services offered in Retail BankingRETAIL BANKING PRODUCTS AND SERVICES  Deposits: There are many products in retail banking like F.D., Savings A/c, Current A/c,Recurring A/c, NRI A/c, Corporate Salary A/c, Free Demat A/c, Kid’s A/c, SeniorCitizen Scheme, Cheque Facilities, Overdraft Facilities, Free Demand DraftFacilities, Locker Facilities, Cash Credit Facilities, etc. They are listed and explainedas follows:  Fixed Deposit: The deposit with the bank for a period, which is specified at the time ofmaking the deposit is known as fixed deposit. Such deposits are also known as F.Dor term deposit .A F.D is repayable on the expiry of a specified period. The rate ofinterest and other terms and conditions on which the banks accepted F.D wereregulated by the R.B.I. in section 21 and 35A of the Banking Regulation Act 1949. Each bank has prescribed their own rate of interest and has also permittedhigher rates on deposits above a specified amount. R.B.I has also permitted thebanks to formulate F.D. schemes specially meant for senior citizen with higherinterest than normal.  Savings A/c: Saving bank A/c is meant for the people who wish to save a part oftheir current income to meet their future needs and they can also earn in interest ontheir savings. The rate of interest payable on by the banks on deposits maintained insavings account is prescribed by R.B.I. The bank should not open a saving accountin the name of : 1. Govt. Department. 2. Municipal Corporation 3. Panchayat Samities 4. State housing Boards 5. Water and Sewerage Boards41
    • Gap Analysis of Services offered in Retail Banking Now a days the fixed deposit is also linked with saving account. Wheneverthere is excess of balance in saving a/c it will automatically transfer into Fixeddeposit and if there is shortfall of funds in savings a/c , by issuing cheque the moneyis transferred from fixed deposit to saving a/c. Different banks give different name tothis product.  Current A/c: A current A/c is an active and running account, which may beoperated upon any number of times during a working day. There is no restriction onthe number and the amount of withdrawals from a current account. Current accountsuit the requirements of a big businessmen, joint stock companies, institutions,public authorities and public corporation etc.  Recurring Deposit: A variant of the saving bank a/c is the recurring deposit orcumulative deposit a/c introduced by banks in recent years. Here, a depositor isrequired to deposit an amount chosen by him. The rate of interest on the recurringdeposit account is higher than as compared to the interest on the saving a/c. Banksopen such accounts for periods ranging from 1 to 10 years. TDS is not applicable tothis type of deposit. The recurring deposit account can be opened by any number ofpersons, more than one person jointly or severally, by a guardian in the name of aminor and even by a minor.  NRI Account: NRI accounts are maintained by banks in rupees as well as inforeign currency. Four types of Rupee account can be open in the names of NRI. 1. Non Resident Rupee Ordinary Account (NRO) 2. Non Résident External Account (NRE) 3. Non Resident (Non Repatriable Deposit Scheme) (NRNR) 4. Non Resident (special) Rupee Account Scheme (NRSR)42
    • Gap Analysis of Services offered in Retail Banking Apart from this, foreign currency account is the account in foreign currency.The account can be open normally in US dollar , Pound Sterling , Euro. Theaccounts of NRIs are Indian millennium deposit, Resident foreign currency, housingfinance scheme for NRI investment schemes.  Corporate Salary Account: Corporate Salary a/c is a new product by certain private sectorbanks, foreign banks and recently by some public sector banks also. Under thisaccount salary is deposited in the account of the employees by debiting the accountof employer. The only thing required is the account number of the employees andthe amount to be paid them as salary. In certain cases the minimum balance requiredis zero. All other facilities available in savings a/c is also available in corporatesalary a/c.  Demat Account: Dematerialization is a process by which physical sharecertificates / securities are taking back by the company or registrar and destroyedultimately. An equivalent number of shares are credited electronically to customersdepository account. Just like saving/current account with a bank one can open asecurities account with the depository through a depository participant (DP).  Kid’s Account: ( Minor Account ) Children are invited as customer by certain banks. Under this,Account is opened in the name of kids by parents or guardians. The features of kid’saccount are free personalized cheque book which can be used as a gift cheque ,internet banking , investment services etc.  Senior Citizenship Scheme : Senior citizens can open an account and on that account they can getinterest rate somewhat more than the normal rate of interest. This is due to some43
    • Gap Analysis of Services offered in Retail Bankingsocial responsibilities of banks towards aged persons whose earning are mainly onthe interest rate.  Loans and Advances: The main business of the banking company is lending of funds to the constituents, mainly traders, business and industrial enterprises. The major portion of a bank’s funds is employed by way of loans and advances, which is the most profitable employment of its funds. There are three main principles of bank lending that have been followed by the commercial banks and they are safety, liquidity, and profitability. Banks grant loans for different periods like short term, medium term, and long term and also for different purpose.  Personal Loans: This is one of the major loans provided by the banks to the individuals. Therethe borrower can use for his/her personal purpose. This may be related to his/herbusiness purpose. The amount of loan is depended on the income of the borrowerand his/her capacity to repay the loan.  Housing Loans: NHB is the wholly own subsidiary of the RBI which control and regulatewhole industry as per the guidance and information , home loan’s rates is going tobe cheaper so that infrastructure sector gets motivation for development home loansrate is decline up to 7.5% EMI at declining rate so that it becomes cheaper. Thepurpose of loan to purchase, extension , renovation, and land development.  Education Loans: Loans are given for education in country as well as abroad.44
    • Gap Analysis of Services offered in Retail Banking  Vehicle Loans: Loans are given for purchase of scooter, auto-rickshaw, car, bikes etc. Themarket size of auto finance is RS 7500 cr. Low interest rates, increasing incomelevels of people are the factors for growth in this sector. Even for second hand carfinance is available.  Professional Loans: Loans are given to doctor, C.A, Architect, Engineer or ManagementConsultant. Here the loan repayment is normally done in the form of equatedmonthly.  Consumer Durable Loans: Under this, loans are given for acquisition of T.V, Cellphones, A.C,Washing Machines, Fridge and other items.  Loans against Shares and Securities: Finance against shares is given by banks for different uses. Now a daysfinance against shares are given mostly in demat shares. A margin of 50% isnormally accepted by the bank on market value. For these loans the documentsrequired are normally DP notes, letter of continuing security, pledge form, power ofattorney. This loan can be used for business or personal purpose.Services Provided By the Banks:  Credit Cards: A credit card is an instrument, which provides immediate credit facilities toits holder to avail a variety of goods and services at the merchant outlets. It is madeof plastic and hence popularly called as Plastic Money. Such cards are issued by bank to persons with minimum income rangingbetween RS 50000 and RS 100000 per annum. And are accepted by a variety ofbusiness establishments which are notified by the card issuing bank.45
    • Gap Analysis of Services offered in Retail Banking Some banks insist on the cardholder being their customers while others donot. Few banks do not charge any fee for issuing credit cards while others imposean initial enrollment fee and annual fee also. If the amount is not paid within the time duration the bank charges a flatinterest of 2.5% Leading Indian Banks such as : SBI, BOB, Canara Bank, ICICI, HDFC and afew foreign banks like CITIBANK, Standard Chartered etc are the important issuersof credit card in India.  Debit Cards: It is a new product introduced in India by Citibank a few years ago inassociation with MasterCard. A debit card facilitates purchases or payments by the cardholder. It debits money from the a/c of the cardholder during a transaction. This impliesthat the cardholder can spend only if his account permits.  Net Banking: This facilitates the customers to do all their banking operations from their homeby using the internet facility. With Net Banking one can carry out all banking and shopping transactionssafely and with total confidentiality. With Net Banking one can easily perform various functions: 1. Check Account Balance 2. Download Account Statement 3. Request for a stop payment of a cheque. 4. Request for a new cheque book. 5. Make a FD/TDS enquiry. 6. Access DEMAT a/c 7. Transfer funds.46
    • Gap Analysis of Services offered in Retail Banking 8. Facilitate bill Payments. 9. Open a FD  Mobile Banking: To avail the mobile banking, one needs to have a savings, current and FD a/cand mobile connection. Using mobile banking facility one can – 1. Check Balance 2. Check last three transactions. 3. Request for a statement 4. Request for a cheque book. 5. Enquire on a cheque status. 6. Instruct stock cheque payment. 7. View FD details. 8. Transfer funds. 9. Pay Utility Bills.  Phone Banking: It helps to conduct a wide range of banking transactions from the comfort ofone’s home or office. Using phone banking facility one can 1. Check Balance 2. Check last three transactions. 3. Request for a cheque book. 4. Transfer funds. 5. Enquire on a cheque status, and much more.47
    • Gap Analysis of Services offered in Retail Banking  Anywhere Banking: One can operate his roaming current a/c at one centre at any other designated ofa particular across any other centre. One can deposit or withdraw cash from any branch of a particular bank all overthe country up to a prescribed limit. One can also transfer funds.  Automated Teller Machines ( ATM) :ATM features user-friendly graphic screens with easy to follow instructions. TheATMs interact with customers in their local language for increased convenience.Following are the features available on ATMs which can be accessed from anywhereat anytime: 1. Cash Withdrawal 2. Cash Deposit 3. Balance Enquiry 4. Mini A/c Statements 5. Cheque Book Request 6. Transaction at various merchant establishments.  Smart Card:The smart card, a latest additional to the world of banking and informationtechnology has emerged as the largest volume driven end-product in the world dueto its data portability, security and convenience. Smart Card is similar in size totoday’s plastic payment card; it has a memory chip embedded in it. The chip storeselectronic data and programmes that are protected by advanced security features.When coupled with a reader, the smart card has the processing power to serve manydifferent applications.To ensure the confidentiality of all banking service, smart cards have mechanismsoffering a high degree of security. These mechanisms are based on private andpublic key cryptography combined with a digital certificate, one of the mostadvanced security techniques currently available.48
    • Gap Analysis of Services offered in Retail BankingSOME ASPECTS OF RETAIL BANKING Impact of Retail Banking:  The major impact of retail Banking is that, the customers have become the Emperors – the fulcrum of all Banking activities, both on the asset side and the liabilities front.  The Non-Banking finance companies which have hitherto been thriving on retail business due to high risk and high returns thereon have been dislodged from their profit munching citadel  Retail Banking is transforming banks into one stop financial super markets.  The share of retail loans is fast increasing in the loan books of banks.  Banks can foster lasting business relationship with customers and retain the existing customers and attract new ones. There is a rise in their service as well.  Banks can cut costs and achieve economies of scale and improve their revenues and profits by robust growth in retail business. Reduction in costs offers a win situation both for banks and the customers.  It has affected the interface of banking system through different delivery mechanism  It is not that banks are sharing the same pie of retail business, the pie itself is growing exponentially. Retail Banking has fuelled a considerable quantum of purchasing power through a slew of retail products. .49
    • Gap Analysis of Services offered in Retail Banking CHAPTER-3 COMPANY PROFILE50
    • Gap Analysis of Services offered in Retail BankingTheHousingDevelopment Finance Corporation Limited (HDFC) was amongst the first to receivean in-principle approval from the Reserve Bank of India (RBI) to set up a bank inthe private sector, as part of the RBIs liberalization of the Indian Banking Industryin 1994. The bank was incorporated in August 1994 in the name of HDFC BankLimited, with its registered office in Mumbai, India. HDFC Bank commencedoperations as a Scheduled Commercial Bank in January 1995.HDFC Banks mission is to be a World-Class Indian Bank. The objective is to buildsound customer franchises across distinct businesses so as to be the preferredprovider of banking services for target retail and wholesale customer segments, andto achieve healthy growth in profitability, consistent with the banks risk appetite.The bank is committed to maintain the highest level of ethical standards,professional integrity, corporate governance and regulatory compliance. HDFCBanks business philosophy is based on four core values - Operational Excellence,Customer Focus, Product Leadership and People.HDFC Bank is headquartered in Mumbai. The Bank at present has an enviablenetwork of 1,725 branches spread in 771 cities across India. All branches arelinked on an online real-time basis. Customers in over 500 locations are alsoserviced through Telephone Banking.The Bank also has 4,000 networked ATMs across these cities. Moreover, HDFCBanks ATM network can be accessed by all domestic and international51
    • Gap Analysis of Services offered in Retail BankingVisa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.PromoterHDFC is Indias premier housing finance company and enjoys an impeccable trackrecord in India as well as in international markets. Since its inception in 1977, theCorporation has maintained a consistent and healthy growth in its operations toremain a market leader in mortgages. Its outstanding loan portfolio covers well overa million dwelling units. HDFC has developed significant expertise in retailmortgage loans to different market segments and also has a large corporate clientbase for its housing related credit facilities. With its experience in the financialmarkets, a strong market reputation, large shareholder base and unique consumerfranchise, HDFC was ideally positioned to promote a bank in the Indianenvironment.ManagementMr. Jagdish Capoor took over as the banks Chairman in July 2001. Prior to this, Mr.Capoor was a Deputy Governor of the Reserve Bank of India.The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25years, and before joining HDFC Bank in 1994 was heading Citibanks operations inMalaysia.The Banks Board of Directors is composed of eminent individuals with a wealth ofexperience in public policy, administration, industry and commercial banking.Senior executives representing HDFC are also on the Board.Senior banking professionals with substantial experience in India and abroad headvarious businesses and functions and report to the Managing Director. Given theprofessional expertise of the management team and the overall focus on recruitingand retaining the best talent in the industry, the bank believes that its people are asignificant competitive strength.52
    • Gap Analysis of Services offered in Retail Banking ICICI Bank is Indias second-largest bank with total assets of about Rs.132,780 crore at September 30, 2004 and profit after tax of Rs. 873 crore in the half yearended September 30, 2004 (Rs. 1,637 crore in fiscal 2004). ICICI Bank has anetwork of about 470 branches and extension counters and over 1,800 ATMs. ICICIBank offers a wide range of banking products and financial services to corporate andretail customers through a variety of delivery channels and through its specializedsubsidiaries and affiliates in the areas of investment banking, life and non-lifeinsurance, venture capital and asset management. ICICI Bank set up its internationalbanking group in fiscal 2002 to cater to the cross-border needs of clients andleverage on its domestic banking strengths to offer products internationally. ICICIBank currently has subsidiaries in the United Kingdom and Canada, branches inSingapore and Bahrain and representative offices in the United States, China, UnitedArab Emirates and Bangladesh.ICICI Banks equity shares are listed in India on the Stock Exchange, Mumbai and theNational Stock Exchange of India Limited and its American Depositary Receipts(ADRs) are listed on the New York Stock Exchange (NYSE).ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financialinstitution, and was its wholly-owned subsidiary. ICICIs shareholding in ICICIBank was reduced to 46% through a public offering of shares in India in fiscal 1998,53
    • Gap Analysis of Services offered in Retail Bankingan equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICIBanks acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal2001, and secondary market sales by ICICI to institutional investors in fiscal 2001and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, theGovernment of India and representatives of Indian industry. The principal objectivewas to create a development financial institution for providing medium-term andlong-term project financing to Indian businesses. In the 1990s, ICICI transformed itsbusiness from a development financial institution offering only project finance to adiversified financial services group offering a wide variety of products and services,both directly and through a number of subsidiaries and affiliates like ICICI Bank. In1999, ICICI become the first Indian company and the first bank or financialinstitution from non-Japan Asia to be listed on the NYSE.After consideration of various corporate structuring alternatives in the context of theemerging competitive scenario in the Indian banking industry, and the move towardsuniversal banking, the managements of ICICI and ICICI Bank formed the view thatthe merger of ICICI with ICICI Bank would be the optimal strategic alternative forboth entities, and would create the optimal legal structure for the ICICI groupsuniversal banking strategy. The merger would enhance value for ICICI shareholdersthrough the merged entitys access to low-cost deposits, greater opportunities forearning fee-based income and the ability to participate in the payments system andprovide transaction-banking services. The merger would enhance value for ICICIBank shareholders through a large capital base and scale of operations, seamlessaccess to ICICIs strong corporate relationships built up over five decades, entry intonew business segments, higher market share in various business segments,particularly fee-based services, and access to the vast talent pool of ICICI and itssubsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bankapproved the merger of ICICI and two of its wholly-owned retail financesubsidiaries, ICICI Personal Financial Services Limited and ICICI Capital ServicesLimited, with ICICI Bank. The merger was approved by shareholders of ICICI andICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India54
    • Gap Analysis of Services offered in Retail Bankingin April 2002. Consequent to the merger, the ICICI groups financing and bankingoperations, both wholesale and retail, have been integrated in a single entity.Board Members:  Mr. N. Vaghul, Chairman  Mr. Uday M. Chitale  Mr. P.C. Ghosh  Mr. S.B. Mathur  Mr. L. N. Mittal  Mr. Anupam Puri  Mr. Vinod Rai  Mr. Somesh R. Sathe  Mr. P.M. Sinha  Mr. M.K. Sharma  Prof. Marti G. Subrahmanyam  Mr. V. Prem Watsa  Mr. K.V. Kamath, Managing Director & Chief Executive Officer  Ms. Lalita D. Gupte, Joint Managing Director  Ms. Kalpana Morparia, Deputy Managing Director  Ms. Chanda Kochhar, Executive Director  Dr. Nachiket Mor, Executive Director55
    • Gap Analysis of Services offered in Retail BankingThe State Bank of India, the country’s oldest Bank and a premier in terms of balancesheet size, number of branches, market capitalization and profits is today goingthrough a momentous phase of Change and Transformation – the two hundred yearold Public sector behemoth is today stirring out of its Public Sector legacy andmoving with an agility to give the Private and Foreign Banks a run for their money.The bank is entering into many new businesses with strategic tie ups – PensionFunds, General Insurance, Custodial Services, Private Equity, Mobile Banking,Point of Sale Merchant Acquisition, Advisory Services, structured products etc –each one of these initiatives having a huge potential for growth.The Bank is forging ahead with cutting edge technology and innovative newbanking models, to expand its Rural Banking base, looking at the vast untappedpotential in the hinterland and proposes to cover 100,000 villages in the next twoyears.It is also focusing at the top end of the market, on whole sale banking capabilities toprovide India’s growing mid / large Corporate with a complete array of products andservices. It is consolidating its global treasury operations and entering into structured56
    • Gap Analysis of Services offered in Retail Bankingproducts and derivative instruments. Today, the Bank is the largest provider ofinfrastructure debt and the largest arranger of external commercial borrowings in thecountry. It is the only Indian bank to feature in the Fortune 500 list.The Bank is changing outdated front and back end processes to modern customerfriendly processes to help improve the total customer experience. With about 8500of its own 10000 branches and another 5100 branches of its Associate Banks alreadynetworked, today it offers the largest banking network to the Indian customer. TheBank is also in the process of providing complete payment solution to its clientelewith its over 8500 ATMs, and other electronic channels such as Internet banking,debit cards, mobile banking, etc.With four national level Apex Training Colleges and 54 learning Centres spread allover the country the Bank is continuously engaged in skill enhancement of itsemployees. Some of the training programes are attended by bankers from banks inother countries.The bank is also looking at opportunities to grow in size in India as well asinternationally. It presently has 82 foreign offices in 32 countries across the globe. Ithas also 7 Subsidiaries in India – SBI Capital Markets, SBICAP Securities, SBIDFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in theIndian Banking scenario. It is in the process of raising capital for its growth and alsoconsolidating its various holdings.Throughout all this change, the Bank is also attempting to change old mindsets,attitudes and take all employees together on this exciting road to Transformation. Ina recently concluded mass internal communication programme termed ‘Parivartan’the Bank rolled out over 3300 two day workshops across the country and coveredover 130,000 employees in a period of 100 days using about 400 Trainers, to drivehome the message of Change and inclusiveness. The workshops fired theimagination of the employees with some other banks in India as well as other PublicSector Organizations seeking to emulate the programme57
    • Gap Analysis of Services offered in Retail BankingBOARD OF DIRECTORS  Shri O.P. Bhatt Chairman  Shri S.K. Bhattacharyya MD & CC&RO  Shri R. Sridharan MD & GE(A&S)  Dr. Ashok Jhunjhunwala  Shri Dileep C. Choksi  Shri S. Venkatachalam  Shri. D. Sundaram  Dr. Deva Nand Balodhi  Prof. Mohd. Salahuddin Ansari  Dr.(Mrs.) Vasantha Bharucha  Dr. Rajiv Kumar  Shri Ashok Chawla  Smt. Shyamala Gopinath58
    • Gap Analysis of Services offered in Retail Banking Established in the year 1906, Corporation Bank is an organization based onthe traditional Indian values of service to the community. Corp Bank is regarded asone of the well-run banks in the comity of Public Sector Banks in the country. TheBank has a unique history of 98 years of successful Banking and has stood the test oftime by growing steadily, offering vast, varied and versatile services with a personaltouch. Today, its good customer service, pre-eminent track record in HouseKeeping, adherence to Prudential Accounting norms, consistent profitability andadoption of modern technology for betterment of customer service have earned theBank a place of pride in the Banking Community. The Bank has been richlyendowed with a relatively young, dynamic and efficient manpower, which is the keyfactor of the Bank’s success. The Bank is a Public Sector Unit with 57.17% of Share Capital held by theGovernment of India. The Bank came out with its Initial Public Offer (IPO) inOctober 1997 and 37.87% of Share Capital is presently held by the Public andFinancial Institutions. Corporation Bank is the first Public Sector Bank to publish the results underUS GAAP. The Bank has been publishing the results under the US GAAP since1998-99. The net profit of the Bank and its subsidiaries under US GAAP for the year2002-03 stood at Rs. 382.12 crore against consolidated net profit of Rs. 415.99crore. As on 31.03.04, the Bank has a highly dedicated team of 10,176 fulltimeemployees who have made the encouraging performance of the Bank possible by59
    • Gap Analysis of Services offered in Retail Bankingextending exemplary services to its customers. The Bank will continue its endeavorsin the development of human capital so as to provide unmatched services to itsclientele. Every institution has its start in modest initiatives but what makes it great isthe passion of the people behind it. Carrying the legacy forward with an undauntedcommitment to its vision, the journey of Corporation Bank truly epitomizes this. Started about 103 years ago in 1906, with an initial capital of just Rs.5000,Corporation Bank is all set to cross Rs. One Lakh Twenty five Crore mark inbusiness and even far more, with over 2086 service outlets across the nation,servedby committed and dedicated 12,000 plus Corp bankers. Proof of which is seen in itsenviable track record in financial performance. We have many reasons to cheer,predominant of them is, being able to participate in nation building by empoweringthe rural and urban population alike. Today, we are proud that we are significantcontributors to the growth of the countrys economy Corporate Vision “To emerge as the most preferred Bank with global standardsin financials, efficiency, technology, products and services.”60
    • Gap Analysis of Services offered in Retail BankingThe Chartered Bank opened its first overseas branch in India, at Kolkata, on 12 April1858. Eight years later the Kolkata agent described the Banks credit locally assplendid and its business as flourishing, particularly the substantial turnover in ricebills with the leading Arab firms. When The Chartered Bank first established itselfin India, Kolkata was the most important commercial city, and was the centre of thejute and indigo trades. With the growth of the cotton trade and the opening of theSuez Canal in 1869, Bombay took over from Kolkata as Indias main trade centre.Today the Banks branches and sub-branches in India are directed and administeredfrom Mumbai (Bombay) with Kolkata remaining an important trading and bankingcentre.Leading the way in Asia, Africa and the Middle EastStandard Chartered employs 30,000 people in over 500 locations in more than 50countries in the Asia Pacific Region, South Asia, the Middle East, Africa, the UnitedKingdom and the Americas. It is one of the worlds most international banks, with amanagement team comprising 70 nationalities.Standard Chartered is listed on both the London Stock Exchange and the StockExchange of Hong Kong and is in the top 25 FTSE-100 companies, by marketcapitalisation.It serves both Consumer and Wholesale Banking customers. Consumer Bankingprovides credit cards, personal loans, mortgages, deposit taking and wealthmanagement services to individuals and small to medium sized enterprises.Wholesale Banking provides corporate and institutional clients with services in tradefinance, cash management, lending, custody, foreign exchange, debt capital marketsand corporate finance.61
    • Gap Analysis of Services offered in Retail BankingStandard Chartered is well-established in growth markets and aims to be the rightpartner for its customers. The Bank combines deep local knowledge with globalcapability.The Bank is trusted across its network for its standard of governance and itscommitment to making a difference in the communities in which it operates.Executive Directors  Bryan Sanderson CBEMervyn Davies CBE  Mike DeNoma  Chris Keljik  Richard Meddings  Kai Nargolwala  Peter Sands62
    • Gap Analysis of Services offered in Retail BankingsCitibank is the consumer banking arm of financial services giant Citigroup. Citibankwas founded in 1812 as the City Bank of New York, later First National City Bankof New York. As of June 2009[update], Citigroup is the fourth largest bank holdingcompany in the United States by domestic deposits, after Bank of America, WellsFargo, and JP Morgan Chase.Citibank has retail banking operations in more than 100 countries and territoriesaround the world. More than half of its 1,400 offices are in the United States, mostlyin New York City, Chicago, Los Angeles, San Francisco/Silicon Valley, and Miami.More recently, Citibank has expanded its operations in the Boston, Philadelphia,Houston, Dallas, and Washington D.C. metropolitan areas, albeit with a mixedrecord of success. It was reported that Citigroup executives were pleased with theperformance of the Boston branches, but were less impressed with the Philadelphiaexperiment, according to a person familiar with the situation.On September 24, 2009, The Wall Street Journal reported that Citi planned tonarrow the focus of Citigroups U.S. branch network to just six major metropolitanareas, including New York, Washington, Miami, Chicago, San Francisco and LosAngeles, where City has a substantial presence but ranks no higher than No. 3 indeposits. The article also noted that City could abandon or scale back where it is an63
    • Gap Analysis of Services offered in Retail Bankingalso-ran, including Boston, Philadelphia and parts of Texas, according to peoplewith knowledge of the discussions.In addition to the standard banking transactions, Citibank offers insurance, creditcard and investment products. Their online services division is among the mostsuccessful in the field, claiming about 15 million users.As a result of the Global financial crisis of 2008–2009 and huge losses in the valueof its subprime mortgage assets, Citibank was rescued by the U.S. government underplans agreed for Citigroup. On November 23, 2008, in addition to initial aid of $25billion, a further $25 billion was invested in the corporation together with guaranteesfor risky assets amounting to $306 billion.Key People  Vikram Pandit — CEO, Citigroup  Sir Win Bischoff — Chairman, Citigroup  Sanjay Nayar — CEO, Citibank India.64
    • Gap Analysis of Services offered in Retail Banking CHAPTER-4 THEORY OF GAP65
    • Gap Analysis of Services offered in Retail BankingCUSTOMER SERVICECustomer Service is the service provided in support of a company’s core products.Customer Service most often includes answering questions, taking orders, dealingwith billing issues, handling complaints, and perhaps scheduling maintenance orrepairs. Customer Service can occur on site , or it can occur over the phone or viathe internet. Many companies operate customer service call centers, often staffedaround the clock. Typically there is no charge for customer service. Qualitycustomer service is essential to building customer relationships. It should not,however, be confused with the services provided for sale by a company. Servicestend to be more intangible than manufactured products. There is a growing marketfor services and increasing dominance of services in economies worldwide.There are generally two types of customer expectations. The highest can be termedas desired service: the level of service the customer hopes to receive. The thresholdlevel of acceptable service which the customers will accept is adequate service.Yet there is hard evidence that consumers perceive lower quality of service overalland are less satisfied.Possible reasons might be:  With more companies offering tiered service based on the calculated profitability of different market segments, many customers are in fact getting less service than they have in past.  Increasing use by companies of self-service and technology-based service is perceived as less service because no human interaction or human personalization is provided.  Technology-based services (Automated Voice Systems, Internet-Based Services, and Technology Kiosks) are hard to implement, and there are many failures and poorly designed systems in place.  Customer expectations are higher because of the excellent service they receive from some companies. Thus they expect the same from all and are frequently disappointed.66
    • Gap Analysis of Services offered in Retail Banking  Organizations have cut costs to the extent that they are too lean and are too understaffed to provide quality service.  The intensely competitive job market results in less skilled people working in frontline service jobs; talented workers soon get promoted or leave for better opportunities.  Many companies give lip service to customer focus and service quality; but they fail to provide the training, compensation, and support needed to actually deliver quality service.  Delivering consistent, high-quality service is not easy, yet many companies promise it. The gaps model positions the key concepts, strategies, and decisions in servicesmarketing in a manner that begins with the customer and builds the organization’stasks around what is needed to close the gap between customer expectations andperceptions. The central focus of the gaps model is the customer gap, the difference betweencustomer expectations and perceptions. Firms need to close this gap- between whatcustomers expect and receive – in order to satisfy their customers and build longterm relationships with them. To close this all important customer gap, the modelsuggests that four gaps- the provider gaps- need to be closed. The following four provider gaps, shown below are the underlying causesbehind the customer gap:  Gap 1: Not knowing what customers expect.  Gap 2: Not selecting the right service designs and standards.  Gap 3: Not delivering to service standards.  Gap 4: Not matching performance to promises.67
    • Gap Analysis of Services offered in Retail Banking68
    • Gap Analysis of Services offered in Retail BankingThe key points for each gap can be summarized as follows:. Gap 1: Not knowing what customers expect: CUSTOMER EXPECTATION   Inadequate marketing research orientation  Lack of upward communication  Insufficient relationship focus  Inadequate service recovery  COMPANY PERCEPTION OF CUSTOMER EXPECTATIONGap 2: Not selecting the right service designs and standards. CUSTOMER-DRIVEN SERVICE DESIGN & STANDARDS   Poor service design  Absence of customer-driven standard  Inappropriate physical evidence and servicescape MANGEMENT PERCEPTIONS OF CUSTOMER EXPECTATION Gap 3: Not delivering to service standards.69
    • Gap Analysis of Services offered in Retail Banking CUSTOMER-DRIVEN SERVICE DESIGN & STANDARDS   Deficient in human resource policies  Customers who do not fulfills roles  Problems with service intermediaries  Failure to match supply and demand  SERVICE DELIVERY Gap 4: Not matching performance to promises. SERVICE DELIVERY   Lack of integrated services marketing communication  Ineffective management of customer expectation  Over promising  Inadequate horizontal communication  EXTERNAL COMMUNICATIONS TO CUSTOMERS70
    • Gap Analysis of Services offered in Retail Banking CHAPTER-5 DATA ANALYSIS71
    • Gap Analysis of Services offered in Retail BankingQ-1.On a scale of 1-5 how do you rate the courtesy levels of your bank’s Personnel/Staff?Comparison Courtesy level of employee 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Bank s Grading given by managers Avg. grading given by customersPercentage Break up Rate Excellent Very Good Good Average PoorPercentage 34 50 16 0 0 Courtesy levels of bank employees (as per mgmt) 60 50 Percentage 40 Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating Rate Excellent Very Good Good Average PoorPercentage 7 60 34 0 072
    • Gap Analysis of Services offered in Retail Banking Courtesy Levels of bank employess (as per customers) 60 50 Percentage 40 Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThere is a gap that exists between the management and the customer perceptionregarding the courtesy levels of the staff. The proportion of management that rates thecourtesy aspect as “excellent” is very high but very few number of customers thinksthis aspect to be excellent. Majority of them feels it to be between “very good” and“good.”It is almost in all banks that this Gap exists except for one bank that is HDFC bank,this is because management may feel that the employees courtesy level is high butwhen asked to the customer they feel it a little lower than the management. This isbecause some times customers may be victimized from rude type of behavior ofemployee due to some internal factors.73
    • Gap Analysis of Services offered in Retail BankingQ-2.Rate as to how well informed/knowledgeable you feel the bank staff is in Answering/solving your questions/queries? Comparison Grading Average Given By Grading By Banks Managers Banks Customer SBI 4 SBI 3 Corporation Bank 3 Corporation Bank 3 ICICI 4 ICICI 5 HDFC 3 HDFC 4 Standard Chartered 4 Standard Chartered 4 Citibank 4 Citibank 3 Knowledge of bank Staff 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break up Rate Excellent Very Good Good Average PoorPercentage 0 66 34 0 0 Knowle dge posse ssed by bank e mploye e s (as Pe r manager) 70 60 Percentage 50 Excellent 40 V. Good 30 Good 20 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating74
    • Gap Analysis of Services offered in Retail Banking Rate Excellent Very Good Good Average PoorPercentage 20 34 36 10 0 Knowledge Possessed by bank employees (as per customers) 40 35 30 Percentage Excellent 25 20 V. Good 15 Good 10 5 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe management perceives the knowledge aspect of its employees to be between verygood and average. While a few customers perceive it to be excellent, a few as verygood, good and average.In this particular question customer of private bank has given high grade as far asknowledge of the staff is concerned, while the gap lies in public sector bank and sort ofin foreign banks this is because sometimes customer also failed to understand what theemployee is trying to convey ,due to this reason gap is existing .75
    • Gap Analysis of Services offered in Retail BankingQ-3. Rate the aspect as to how fast the personnel are in responding/attending to you?Comparison Banks Grading By Banks Average Grading Managers by customer SBI 3 SBI 3 Corporation Bank 4 Corporation Bank 4 ICICI 5 ICICI 4 HDFC 4 HDFC 4 Standard Chartered 5 Standard Chartered 4 Citibank 5 Citibank 2 Personal Respons 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent Very Good Good Average PoorPercentage 50 34 16 0 0 Fast/Speedy responce of bank employees (as per manager) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. Poor 0 Excellent V. Good Good Avg. Poor Rating76
    • Gap Analysis of Services offered in Retail Banking Rate Excellent VeryGood Good Average PoorPercentage 6 56 24 14 0 Fast/Speedy responce of bank employees (as per cutomers) 60 50 Percentage 40 Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe proportion of management that rates the speedy response aspect as excellent isquite high as compared to the customers who are very few. The customers perceive it tobe between very good, good and average.Customer perceive that bank management is not responding fast in many cases whilemanagement of the banks told that they have to follow the standardize procedure invarious types of queries of the customer , which may take some time which leads toslow response from bank management side.77
    • Gap Analysis of Services offered in Retail BankingQ-4 (a)How do you rate your bank with regards to the “Transaction time” taken forcash withdrawal/deposits?Comparison Banks Grading By Banks Average Managers Grading by customer SBI 4 SBI 4 Corporation Bank 4 Corporation Bank 3 ICICI 5 ICICI 5 HDFC 5 HDFC 4 Standard Chartered 5 Standard Chartered 3 Citibank 4 Citibank 4 Transaction time for withdrawal/deposits 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent Very Good Good Average PoorPercentage 50 50 0 0 0 Transaction time for cash withdrawal/deposits (as per manager) 50 40 Excellent Percentage 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating Rate Excellent Very Good Good Average Poor78
    • Gap Analysis of Services offered in Retail BankingPercentage 16 54 24 6 6 Transaction time for cash withdawal/diposits (as per customers) 60 Percentage 50 40 Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingsInterpretationThe management rates the transaction time taken for cash withdrawals/deposits to bebetween excellent and very good. But the customers rate it to be very few for excellent,a sizeable amount for very good, few for good , and a very few of them for average.Due to introduction of new core banking technology transaction time has reducedsignificantly though some of the customers surveyed have said that banks are taking toomuch time , this is because some customer are in hurry and bank can not entertainhis/her issue or some times the amount of customer that visit bank at a certain time isvery large hence transaction time automatically increases.79
    • Gap Analysis of Services offered in Retail BankingQ-4 (b) Rate the bank with regards to the transaction time taken to issueDD/Cheque/Statements?Comparison Banks Grading By Banks Average Grading By Managers Customers SBI 4 SBI 3 Corporation Bank 3 Corporation Bank 4 ICICI 5 ICICI 5 HDFC 5 HDFC 4 Standard Chartered 5 Standard Chartered 4 Citibank 4 Citibank 2 Transaction time for DD/Cheque/Statement 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent VeryGood Good Average PoorPercentage 50 34 16 0 0 Transaction time for DD/Che que (as pe r manage r) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating Rate Excellent VeryGood Good Average Poor80
    • Gap Analysis of Services offered in Retail BankingPercentage 14 50 16 16 4 Transaction time for DD/Cheque (as per coutomer) 50 Percentage 40 Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe management rates the transaction time taken for dd/cheques/statements to beexcellent and very good. But the customers rate it as – very few for excellent, highproportion for very good an equal amount for good and average and a few of them aspoor.Almost each and every bank takes some required time for issuing demand draft/ cheque/ statement due to their routine checking and clearance due to this more customer rateas very good not as excellent.81
    • Gap Analysis of Services offered in Retail BankingQ-5. Rate how hassle frees it was/is for you to open an account with the bank?Comparison Banks Grading By Banks Average Managers Grading by customer SBI 4 SBI 4 Corporation Bank 4 Corporation Bank 3 ICICI 5 ICICI 5 HDFC 5 HDFC 4 Standard Chartered 4 Standard Chartered 4 Citibank 3 Citibank 2 Hasslefree Account Opening 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent Very Good Good Average PoorPercentage 34 50 16 0 0 Hasslefree Account Opening (as per manager) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating82
    • Gap Analysis of Services offered in Retail Banking Rate Excellent VeryGood Good Average PoorPercentage 15 50 15 10 10 Hasslefree Account Opening (as per customer) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe management rates the hassle free account opening as- a sizeable amount forexcellent, a large amount for very good, a few say it’s good. The customers rate it as- afew say it is excellent and good, a very high proportion say it is very good, still few sayits average and poor.Now a days it is less hassle free to opening an account in any bank due to lowering ofthe paper work and fast and transparent practices by the banks , still there lies a gapdue to documentation and signature and some other aspects due to which customer rateit somehow low as compared to management.83
    • Gap Analysis of Services offered in Retail BankingQ-6.How do you rate your bank’s product or service innovation in the past two years?Comparison Banks Grading By Banks Average Grading by Managers customer SBI 4 SBI 4 Corporation Bank 5 Corporation Bank 4 ICICI 5 ICICI 4 HDFC 5 HDFC 4 Standard Chartered 4 Standard Chartered 3 Citibank 4 Citibank 3 Product/Service Innovation 5 4 Percentage 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent Very Good Good Average PoorPercentage 50 50 0 0 0 Product/Service Innovation (as per manager) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating84
    • Gap Analysis of Services offered in Retail Banking Rate Excellent VeryGood Good Average PoorPercentage 6 50 32 12 0 Product/Service Innovation (as per customer) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe management rates the product or service innovation as – a high number betweenexcellent and very good. The customers rate it as- a few say it is excellent, a highamount say it is very good, a sizable amount says its good and very few say it isaverage.Management perceive that it has takes steps in innovating services and products butactually customer feel other way that bank is less innovative in terms of services andproduct offered by them.85
    • Gap Analysis of Services offered in Retail BankingQ-7 How do you rate your bank regarding its promptness in keeping you informed ofdeposit rates /service charges?Comparison Banks Grading Banks Average Grading Given By by Customer Managers SBI 3 SBI 2 Corporation Bank 3 Corporation Bank 1 ICICI 4 ICICI 3 HDFC 5 HDFC 4 Standard Chartered 5 Standard Chartered 2 Citibank 4 Citibank 2 Promptness in Iforming Rates/ Service charges 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Bank Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent VeryGood Good Average PoorPercentage 33 34 33 0 0 Promptnee in Informing About Deposit/services changes by bank (as per manager) 35 30 Percentage 25 Excellent 20 V. Good 15 Good 10 5 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating86
    • Gap Analysis of Services offered in Retail Banking Rate Excellent VeryGood Good Average PoorPercentage 4 20 26 40 10 Promptness in Informing about Deposit/services charges by bank (as per manager) 40 35 30 Percentage Excellent 25 20 V. Good 15 Good 10 Avg. 5 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe management rates its promptness in keeping the customers informed of service ordeposit rates as- a sizeable and almost equal amount say it is excellent, very good andgood. The customers rate it as- very few for excellent, few for very good, good, and ahigh amount as average and a few as poor.Informing about current interest rates and other new policies that RBI introduced bankfails highly, customer rates this particular parameter very low hardly banks takes stepsin informing this type of aspect to customers. Customer faces this problem at the timeof investments because they have planned according to old interest rates while newones are in effect.87
    • Gap Analysis of Services offered in Retail BankingQ-8 (a) Rate how positive or negative the bank is in entertaining your grievances.Comparison Banks Grading By Banks Average Grading Managers By customer SBI 4 SBI 3 Corp. Bank 4 Corp. Bank 3 ICICI 5 ICICI 4 HDFC 4 HDFC 4 Std Chartered 4 Std Chartered 3 Citibank 4 Citibank 2 Customer Grienances 5 4 3 Rank 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent Very Good Good Average PoorPercentage 5 26 40 25 4 Entertainnment of Grievences by bank (as per customer) 40 30 Percentage Excellent 20 V. Good Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretation88
    • Gap Analysis of Services offered in Retail BankingThe customers rates it Reponses to grievance as – a very few for excellent, poor, fewfor very good ,average and a very high for good.Customer of public sector bank and foreign banks give very low rating as far as theirresponse to grievances are concerned because employee sometime ignore theircomplaints . This situation is good in private sector banks.89
    • Gap Analysis of Services offered in Retail BankingQ-8(b) How do you rate your banks grievance redressal system?Comparison Banks Grading By Banks Average Grading Managers By Customer SBI 4 SBI 3 Corp. Bank 5 Corp. Bank 3 ICICI 5 ICICI 4 HDFC 4 HDFC 4 Std Chartered 5 Std Chartered 4 Citibank 4 Citibank 4 Grievances Redressal System 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent VeryGood Good Average PoorPercentage 17 83 0 0 0 Grievance Redressal system (as per manager) 100 80 Percentage Excellent 60 V. Good 40 Good 20 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating90
    • Gap Analysis of Services offered in Retail Banking Rate Excellent Very Good Good Average PoorPercentage 3 23 46 24 4 Grievance Redressal system (as per customer) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe management rates its grievance redressal system as – a few rate it as excellent, avery high proportion as very good. The customers rate it as – a very few for excellent,few for very good, average and a very high proportion for good and very few for poor.Grievance redressal system of private banks and foreign banks is good as compared topublic sector banks as private and foreign banks are more keen in customer service theytend to give good services to maintain the relation with the banks.91
    • Gap Analysis of Services offered in Retail BankingQ-9. How do you rate your bank/ branch facility in terms of the comfort facilities itoffers with reference to?- Seating Arrangements - Restroom- Ac - Drinking waterComparison Banks Grading By Banks Average Managers Grading By Customer SBI 4 SBI 3 Corp. Bank 4 Corp. Bank 2 ICICI 5 ICICI 4 HDFC 3 HDFC 4 Standard Chartered 5 Standard Chartered 4 Citibank 5 Citibank 3 Comfort Facilities 5 4 Ratings 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent VeryGood Good Average PoorPercentage 50 34 16 0 0 Infrastucture of the bank (as per manager) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating92
    • Gap Analysis of Services offered in Retail Banking Rate Excellent VeryGood Good Average PoorPercentage 4 53 20 20 3 Infrastucture of the bank (as per customer) 60 50 Percentage 40 Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe management rates its infrastructure as- a very high as excellent, a sizeable amountas very good and a few as good. Customers rate it as a very few as excellent , poor, avery high proportion as very good, and a few as good and average.There lies a gap in comfort facility given by the banks in private and foreign banks.Comfort facility in private sector is good as compared to the public sector banks.Private and foreign banks have an idea that by giving such facility customer will thinkpositively for the banks93
    • Gap Analysis of Services offered in Retail BankingQ-10. How do you rate the quality of ATM services provided by the bank?Comparison Banks Grading By Banks Average Managers Grading By Customer SBI 5 SBI 5 Corporation Bank 4 Corporation Bank 4 ICICI 5 ICICI 4 HDFC 3 HDFC 4 Standard Chartered 5 Standard Chartered 3 Citibank 5 Citibank 3 Quality of ATM Service 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent VeryGood Good Average PoorPercentage 50 50 0 0 0 Quality of ATM Service 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. Poor 0 Excellent V. Good Good Avg. Poor Rating94
    • Gap Analysis of Services offered in Retail Banking Rate Excellent VeryGood Good Average PoorPercentage 24 36 16 20 4 Quality Of ATM Service (as per customer) 40 35 30 Percentage 25 Excellent 20 V. Good 15 Good 10 5 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe management rates its ATM services as – a very high and equal number as excellentand very good. Customers rate it as few as excellent, a high as very good, a few asgood, average and very few as poor.There lies a gap in few banks as far as ATM service is concern this is becausesometimes ATMs are out of its service like availability of cash, technical problems.Overall ATM service is match with customer expectation.95
    • Gap Analysis of Services offered in Retail BankingQ-11(a) How do you rate the Debit card services offered by your bank?Comparison Banks Grading By Banks Average Grading Managers By Customer SBI 4 SBI 4 Corp. Bank 5 Corp. Bank 4 ICICI 5 ICICI 5 HDFC 5 HDFC 4 Std Chartered 4 Std Chartered 4 Citibank 5 Citibank 3 Debit Card Services 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Bank Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent VeryGood Good Average PoorPercentage 66 34 0 0 0 Debit card Services (as per manager) 70 60 Persentage 50 Excellent 40 V. Good 30 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating96
    • Gap Analysis of Services offered in Retail Banking Rate Excellent Very Good Good Average PoorPercentage 11 46 36 7 0 Debit card Services (as per customer) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationThe management rates its Debit card services as- a very high as excellent and few asvery good. Customers rate it as – a few as excellent, a high amount of them as verygood, a sizeable amount as good and very few as average.As far as debit card service is concerned few banks has more or less it exist with littlegap due to their hidden charges sometimes debit card not accepted for shopping due tothis reason customer given less rating.97
    • Gap Analysis of Services offered in Retail BankingQ-11 (b) How do you rate the Credit card services offered by your bank?Comparison Banks Grading By Banks Average Grading Managers By Customer SBI 4 SBI 4 Corp. Bank 4 Corp. Bank 3 ICICI 5 ICICI 3 HDFC 5 HDFC 4 Std Chartered 5 Std Chartered 4 Citibank 5 Citibank 3 Credit card Services 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent Very Good Good Average PoorPercentage 0 66 17 17 0 Credit card Services (as per managers) 70 60 Percentage 50 Excellent 40 V. Good 30 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor Rating98
    • Gap Analysis of Services offered in Retail Banking Rate Excellent Very Good Good Average Poor Percentage 0 50 27 17 6 Cerdit card Services (as per customer) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. 0 Poor Excellent V. Good Good Avg. Poor RatingInterpretationBoth the management and the customers rate the credit card services as same except ina few cases. That is a very high amount of them as very good and a few as good andaverage.There is high gap that exists as far as credit card service of the bank is concern in mostof the banks this is because customer do not read all the required information regardingtime duration, payment option etc. hence sometime banks charge some amount whichcustomer may not be actually aware about that charges. Due to this reason customerexpectation are not matching with the management.Q-12 (a) Rate your bank as to how fast you feel it is in processing and disbursing loans.99
    • Gap Analysis of Services offered in Retail BankingComparisonBanks Grading By Banks Average Managers Grading By CustomersSBI 4 SBI 4Corporation Bank 5 Corporation Bank 4ICICI 5 ICICI 5HDFC 5 HDFC 4Standard Chartered 4 Standard Chartered 4Citibank 5 Citibank 3 Time taken in Processing and Disbursing loans 5 4 Rating 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Banks Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent Very Good Good Average PoorPercentage 50 34 16 0 0 Fastness in Processing and Disbursing loans(as per manager) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. Poor 0 Excellent V. Good Good Avg. Poor Rating Rate Excellent Very Good Good Average PoorPercentage 6 46 36 7 5100
    • Gap Analysis of Services offered in Retail Banking Fastness in Processing and Disbursing loans(as per customer) 50 40 Percentage Excellent 30 V. Good 20 Good 10 Avg. Poor 0 Excellent V. Good Good Avg. Poor RatingInterpretationThe management rates its speed in processing /disbursing loans as – a very fewpercentage say it is excellent, a high percent say it is very good and a few say it is good.The customers rate it as – a very few percent as excellent, a very high as very good, ahigh percentage as good, a few as poor and very few as poor.In disbursing and processing loans banks have to follow very strict steps hence it maytake time and force management to ask more questions and investigate more aboutcustomer ability to repay the loan which customer sometime feels useless ,thus the gapis existing in this case.101
    • Gap Analysis of Services offered in Retail BankingQ-12 (b) Rate the interest rates currently being offeredComparison Banks Grading By Banks Average Managers Grading By Customer SBI 4 SBI 4 Corporation Bank 2 Corporation Bank 2 ICICI 3 ICICI 3 HDFC 4 HDFC 4 Standard Chartered 4 Standard Chartered 4 Citibank 4 Citibank 4 Interest Rates 4 Percentage 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Rating Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent Very Good Good Average PoorPercentage 17 67 0 16 0 Interest rate(as per manager) 70 60 50 Percentage Excellent 40 V. Good 30 Good 20 Avg. 10 Poor 0 Excellent V. Good Good Avg. Poor Rating102
    • Gap Analysis of Services offered in Retail Banking Rate Excellent Very Good Good Average PoorPercentage 3 56 41 0 0 Interest rate(as per customer) 60 50 Percentage 40 Excellent 30 V. Good 20 Good Avg. 10 Poor 0 Excellent V. Good Good Avg. Poor RatingInterpretation The management rates its interest rates as – a very high percentage as very good and afew as excellent and average. The customers rate it as- A very few as excellent, a veryhigh as very good and a high amount as good.Interest rates offered by the banks are generally fixed by the central bank that isReserve Bank of India which varies by very little percent in different banks hencemostly customer agrees with the management, so management perception almostmatching with the customer expectation.103
    • Gap Analysis of Services offered in Retail BankingQ-13 (a) Do bank uses the phone/net banking facility offered?If ‘Yes’ (a) proceed to 13 (b). If ‘No’ specify the reason.Comparison Banks Grading By Banks Average Grading By Managers Customer SBI Yes SBI No Corporation Bank Yes Corporation Bank No ICICI Yes ICICI Yes HDFC Yes HDFC Yes Standard Chartered Yes Standard Chartered No Citibank Yes Citibank NoTotal Number Break Up yes No 6 0 Phone/Net Banking whether being used(manaer) 6 5 4 Number 3 Yes 2 No 1 0 Yes No Response104
    • Gap Analysis of Services offered in Retail Banking yes no 56 64 No. of customer using phone/net banking 64 62 60 Number 58 Yes 56 No 54 52 Yes No ResponseInterpretationAll the management agreed to providing the facilities of phone/net banking. But not allcustomers agreed to be using this facility. A high amount of them refused when askedwhether they were using this facility, a sizeable about were using it.In this case management of all the banks providing the facility of phone banking andnet banking but more number of customers are not agreeing with that because they arenot aware about the service and those are aware have little knowledge about using thisfacilities.Q-13 (b) Rate the quality of the phone/net banking facility offered by your bank105
    • Gap Analysis of Services offered in Retail BankingComparisonBanks Grading Banks Average Given By Grading Managers GivenSBI 3 SBI 3Corporation Bank 2 Corporation Bank 2ICICI 5 ICICI 4HDFC 4 HDFC 4Standard Chartered 4 Standard Chartered 4Citibank 5 Citibank 4 Quality of phone/Net banking 5 4 Percentage 3 2 1 0 SBI Corp. ICICI HDFC Std. Citi bank bank chartered Bank Grading given by managers Avg. grading given by customersPercentage Break Up Rate Excellent VeryGood Good Average PoorPercentage 33 33 17 17 0 Quality of phone/Net banking(manager) 35 30 25 Percentage Excellent 20 V. Good 15 Good 10 Avg. 5 Poor 0 Excellent V. Good Good Avg. Poor Rating Rate Excellent VeryGood Good Average Poor106
    • Gap Analysis of Services offered in Retail BankingPercentage 0 71 21 8 0 Quality of Phone/Net banking(cutomer) 80 70 60 Percentage 50 Excellent 40 V. Good 30 Good 20 Avg. 10 Poor 0 Excellent V. Good Good Avg. Poor RatingInterpretationThe management rated its quality of phone/net banking facility as – a very high asexcellent, very good and a few as good and average. The customers rated it as- veryhigh percent as very good, few as good and very few as average.Those customers who are using this facilities have given rating mostly same as therating given by the bank management reason is that those customer using this facilitiesare taking utmost benefit out of it hence they agrees with the service provided by thebanks expect for few banksCALCULATION OF HYPOTHESIS: Managers Customers Plus Minus Zeros107
    • Gap Analysis of Services offered in Retail Banking 4 3 1 + + _ 0 4 3 1 + + _ 0 5 4 1 + + _ 0 4 4 0 + 0 5 4 1 + + 0 4 3 1 + + 0 4 3 1 + + 0 3 3 0 + 0 4 5 -1 _ + 0 3 4 -1 _ + 0 4 4 0 + 0 4 3 1 + + 0 3 3 0 + 0 4 4 0 + 0 5 4 1 + + 0 4 4 0 + 5 4 1 + + 5 2 3 + + 4 4 0 + 4 3 1 + + 5 5 0 + 5 4 1 + + 5 3 2 + + 4 4 0 + 4 3 1 + + 3 4 -1 _ + 5 5 0 + 5 4 1 + + 5 4 1 + + 4 2 2 + + 4 4 0 + 4 3 1 + + 5 5 0 + 5 4 1 + + 4 4 0 + 3 2 1 + + 4 4 0 5 4 1 + 5 4 1 + 5 4 1 + 4 3 1 + 4 3 1 + 3 2 1 +108
    • Gap Analysis of Services offered in Retail Banking 3 1 2 + 4 3 1 + 5 4 1 + 5 2 3 + 4 2 2 + 4 3 1 + 4 3 1 + 5 4 1 + 4 4 0 4 3 1 + 4 2 2 +HYPOTHESIS:H0: There is Gap between management perception and customer perception in regardof the service provided by the bank.H1: There is not a Gap between management perception and customer perception inregard of the service provided by the bank.H0: P = 0.5H0: P ≠ 0.5PH0: Hypothesized proportion of the population that feels GapPH1: Hypothesized proportion of the population that feels no Gapp Bar: Proportion of success in the sample 0.92q Bar: Proportion of failure in the sample 0.08n = 39 p − ˆ P Z = P⋅Q n109
    • Gap Analysis of Services offered in Retail Banking 0.42 Numerator 0.08006 Denominator 4 5.28 Ratio of N to D = Z calculated  Z tabulated at 0.05 level of significance = ± 1.96  Therefore Ho is rejected Means H1 is accepted  Conclusion:There is a Gap between management perception and customer perception in regard of the service provided by the bank.110
    • Gap Analysis of Services offered in Retail BankingFINDINGS OF THE REPORT  Except HDFC bank in all other banks there is a Gap existing in the employee’s courtesy level. This is type 1 Gap :( Not knowing what customers expect.)Each might have occurred due to lack of inward communication and insufficient relationship focus mostly by the employee and sometimes by the customers.  The staff’s level of being informed and knowledgeable is seen to be high in private sector banks as compare to the public sector bank., but still there seems to be a huge gap of Type 4 ( Not matching performance to promises) & Type 1 (Not knowing what customers expect) between the bank management perceptions & customers perceptions; where in it could be a result of ineffective management of customers expectations or it could be due to lack of communications as some of the customers also lack the knowledge of understanding.  The figures show that except in SBI & Citi Bank the speed at which personnel work is very good. The gap between the management and the customer’s perceptions is mostly because some customers feel that bank management is not responding fast but the management says it has to follow the standardized procedures in various types of queries, hence the slow response. This is basically Type 3 Gap (Not delivering to the service standards) where in the reason could be failure to match supply & demand and the problems with service intermediaries.  Due to introduction of new core banking technology transaction time has reduced significantly, still some of the customers during the survey complained of long transaction time. This is because of Type 3 Gap (Not delivering to the service standards) where some customer do not fulfill their roles ie. they are in a hurry to have their work done with high expectations towards management and some times this also results due to managements failure to match supply and demand.  Today it is hassle free to open an account in most of the banks due to lowering of the paper work and fast and transparent practices .But still there exists a gap between the management and customers perceptions in few banks, like in public111
    • Gap Analysis of Services offered in Retail Banking sector banks the services are poorly designed & in some private banks like the Citi Bank target very rich client to be their customers that have very high income capacities thus the rest of the common customers feel that the amounts to open an new account is very high and a complex set of documentations are also needed like income proof , proof of any other deposits else were etc.  Management perceives that they have introduced enough innovating services and products in past 2 years but customer are not entirely satisfied. Hence it is seen that there is Type1 Gap (Not knowing what customers expect) which is existing, where in inadequate marketing research & orientation is not done matching the customers expectations.  Contradicting the managements promise the customers feels that banks are not keeping the customers well informed about the changing deposit & service charge rates .Such a gap is result of Type 4 Gap where in inadequate horizontal communications & ineffective management of customer expectations is experienced.  In case of entertaining the grievances of the customers and the grievance redressal systems is concerned there is a huge gap between the customers & banks perceptions. This could be due to Type 4 & 3 Gap where in banks are deficient in human resources policies, their over promising nature about the services and ineffective management of customers expectations is experienced.  The management and the customer’s perceptions are matching to some extents in the case of comfort facility provided by the banks. It is observed that public sector banks tend to ignore these services where as private banks think that providing such facilities will make a positive impact on customers.  In the case of ATM service there is little gap because of technological advancements, today most of the ATM centers can be shared by customers of all banks. But were debit /credit card service is concerned there is huge gap due to the hidden costs that are imposed on customers by some of the banks.  In disbursing and processing loans banks have to follow very strict steps hence time taken is more due to which a huge Gap is observed by customers.  Phone/net banking are new facilities hence little gap is observed in perceptions.112
    • Gap Analysis of Services offered in Retail BankingRECOMMEDATION  According to findings of the survey the customer demand more courtesy level from the employees of the banks recent campaign “KHAYAL AAPKA” of ICICI bank has focus the same  Proper training about the various products of the banks should be provided and proper follow should be taken to increase the knowledge of employee.  Transaction time can be reduced by increasing people or adding new branches.  Transparency at the time of account opening from the both the sides will make account opening process smooth.  Government banks should timely update about the account and also new services.  The functioning of the complaint department should be fast and to the customer’s expectation.  Transparency in charges and transaction is lacking in credit card and debit card services.  Reduction in time period of loan processing and disbursing  Awareness and uses of phone and net banking should increase to decrease the rush at the bank.113
    • Gap Analysis of Services offered in Retail BankingBIBILIOGRAPHY1. Book Valarie Z, Mary B. 4th edition Services Marketing – Chapter 2 Theory of Gap: (pp………….) Tata McGraw-Hill2. Web Links: http://www.google.com http://www.sbi.co.in http://www.corpbank.com http://www.hdfcbank.com http://www.icicibank.com http://www.citibank.co.in http://www.standardchartered.co.in114
    • Gap Analysis of Services offered in Retail BankingANNEXURE Questionnaire:- For CustomersPlease Tick (√) on a scale of 1-5 the number you feel is the most appropriate (1 being the least and 5 being the highest. Where 5=Excellent; 4=Very Good; 3=Good;2=Average; 1=Poor)Q1. On a scale of 1-5 how do you rate the courtesy levels of your bank’s Personnel/Staff? 1 2 3 4 5Q2. Rate as to how well informed/knowledgeable you feel the bank staff is in answering/solving your questions/queries? 1 2 3 4 5Q3. Rate the aspect as to how fast the personnel are in responding/attending to you? 1 2 3 4 5Q4. How do you rate your bank with regards to the “Transaction time” taken(a) for cash withdrawal/deposits? 1 2 3 4 5  What problems (if any) are faced?Q4. Rate the bank with regards to the transaction time taken to issue (b) DD/Cheque/Statements. 1 2 3 4 5  What problems (if any) are being faced by you with regards to facilities offered in DD/Cheque/Statement.115
    • Gap Analysis of Services offered in Retail Banking  Suggestions if any.Q5. Rate how hasslefree it was/is for you to open an account with the bank 1 2 3 4 5Q6. How do you rate your bank’s product or service innovation in the past two years? 1 2 3 4 5  Any Problems faced?  Any SuggestionsQ7. How do you rate your bank regarding its promptness in keeping you informed ofdeposit rates /service charges? 1 2 3 4 5Q8. Rate how positive or negative the bank is in entertaining your grievances.(a) 1 2 3 4 5Q8. How do you rate your banks grievance redressal system?(b) 1 2 3 4 5  Any problems faced?  Any suggestions116
    • Gap Analysis of Services offered in Retail BankingQ10. How do you rate your bank/ branch facility in terms of the comfort facilities itoffers with reference to - Seating Arrangements - Restroom - Ac - Drinking water 1 2 3 4 5  What suggestions if any would you like to add?Q11. How do you rate the quality of ATM services provided by the bank? 1 2 3 4 5  What problems if any are faced by you?Q12.a. How do you rate the Debit card services offered by your bank? 1 2 3 4 5  Any Problems  Any suggestions117
    • Gap Analysis of Services offered in Retail BankingQ12.b How do you rate the Credit card services offered by your bank? 1 2 3 4 5  Any Problems  Any suggestionsQ13. Rate your bank as to how fast you feel it is in processing and disbursing loans.(a) 1 2 3 4 5Q13. Rate the interest rates currently being offered(b) 1 2 3 4 5Q14. Do you use the phone/net banking facility offered by your bank? If ‘Yes’ (a) proceed to 14 (b). If ‘No’ specify the reason.Q14. Rate the quality of the phone/net banking facility offered by your bank. (b) 1 2 3 4 5Q15. Do you hold more than one account? Yes/No If Yes please specify.118
    • Gap Analysis of Services offered in Retail Banking Questionnaire for ManagersDear Sir/MadamAs a student of MBA, we are conducting a survey for our academic purpose which apart of our curriculum. We are carrying out a survey for finding out the Gap betweenmanagement perception and customer perception in regard of the service provided bythe bank.Please Tick (√) on a scale of 1-5 the number you feel is the most appropriate (1 being the least and 5 being the highest. Where 5=Excellent; 4=Very Good; 3=Good;2=Average; 1=Poor)Q1. On a scale of 1-5 how do you rate the courtesy levels of your bank’s Personnel/Staff? 1 2 3 4 5Q2. Rate as to how well informed/knowledgeable you feel the bank staff is in answering/solving your customer’s questions/queries? 1 2 3 4 5Q3. Rate the aspect as to how fast the personnel are in responding/attending to customer? 1 2 3 4 5Q4. How do you rate your bank with regards to the “Transaction time” taken(a) for cash withdrawal/deposits? 1 2 3 4 5  What problems (if any) are faced?119
    • Gap Analysis of Services offered in Retail BankingQ4. Rate the bank with regards to the transaction time taken to issue (b) DD/Cheque/Statements. 1 2 3 4 5  What problems (if any) are being faced by customer with regards to facilities offered in DD/Cheque/Statement.  Suggestions if any.Q5. Rate how hasslefree it was/is to open an account with the bank 1 2 3 4 5Q6. How do you rate your bank’s product or service innovation in the past two years? 1 2 3 4 5  Any Problems faced?  Any SuggestionsQ7. How do you rate your bank regarding its promptness in keeping you informed ofdeposit rates /service charges? 1 2 3 4 5120
    • Gap Analysis of Services offered in Retail BankingQ8. Rate how positive or negative the bank is in entertaining customer’s grievances.(a) 1 2 3 4 5Q8. How do you rate your banks grievance redressal system?(b) 1 2 3 4 5  Any problems faced?  Any suggestionsQ9. How do you rate your bank/ branch facility in terms of the comfort facilities itoffers with reference to - Seating Arrangements - Restroom - Ac - Drinking water 1 2 3 4 5  What suggestions if any would you like to add?Q10. How do you rate the quality of ATM services provided by the bank? 1 2 3 4 5  What problems if any are faced by you?121
    • Gap Analysis of Services offered in Retail BankingQ11.a. How do you rate the Debit card services offered by your bank? 1 2 3 4 5  Any Problems  Any suggestionsQ11.b How do you rate the Credit card services offered by your bank? 1 2 3 4 5  Any Problems  Any suggestionsQ12. Rate your bank as to how fast you feel it is in processing and disbursing loans.(a) 1 2 3 4 5Q12. Rate the interest rates currently being offered(b) 1 2 3 4 5Q13. Do bank use the phone/net banking facility offered ? If ‘Yes’ (a) proceed to 14 (b). If ‘No’ specify the reason.Q13. Rate the quality of the phone/net banking facility offered by your bank. (b) 1 2 3 4 5122
    • Gap Analysis of Services offered in Retail Banking123