LALALAJPATRAI COLLEGE

Subject: service Sector Management.

TOPIC: Financial Sectors

Submitted To:-

Prof. Arun Pujari.

Sign: _________

Date: 3rd October, 2011.

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GROUP:-

NAME:- ROLL NO. :-

Kinjal Gajera 9100109

Hamza Burhani 9100116

Akshay Dedhia 9100125

Kairav Desai 9100127

Fatema Halvadwala 9100139

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Chap 1: Introduction to sectors

Service sector in India.

Service Sector in India today accounts for more than half of India's GDP. According to data

for the financial year 2006-2007, the share of services, industry, and agriculture in India's

GDP is 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively. The fact that the service

sector now accounts for more than half the GDP marks a watershed in the evolution of the

Indian economy and takes it closer to the fundamentals of a developed economy.

Services or the "tertiary sector" of the economy covers a wide gamut of activities like

trading, banking & finance, infotainment, real estate, transportation, security, management &

technical consultancy among several others. The various sectors that combine together to

constitute service industry in India are:

Trade

Hotels and Restaurants

Railways

Other Transport & Storage

Communication (Post, Telecom)

Banking

Insurance

Dwellings,

Real Estate

Business Services

Public Administration;

Defence

Personal Services

Community Services

Other Services

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There was marked acceleration in services sector growth in the eighties and nineties,

especially in the nineties. While the share of services in India's GDP increased by 21 per cent

points in the 50 years between 1950 and 2000, nearly 40 per cent of that increase was

concentrated in the nineties. While almost all service sectors participated in this boom,

growth was fastest in communications, banking, hotels and restaurants, community services,

trade and business services. One of the reasons for the sudden growth in the services sector in

India in the nineties was the liberalization in the regulatory framework that gave rise to

innovation and higher exports from the services sector.

The boom in the services sector has been relatively "jobless". The rise in services share in

GDP has not accompanied by proportionate increase in the sector's share of national

employment. Some economists have also cautioned that service sector growth must be

supported by proportionate growth of the industrial sector, otherwise the service sector grown

will not be sustainable. In the current economic scenario it looks that the boom in the services

sector is here to stay as India is fast emerging as global services hub.

The service sector now accounts for more than half of India's GDP: 51.16 per cent in

1998-99. This sector has gained at the expense of both the agricultural and industrial

sectors through the 1990s. The rise in the service sector's share in GDP marks a

structural shift in the Indian economy and takes it closer to the fundamentals of a

developed economy  (in the developed economies, the industrial and service sectors

contribute a major share in GDP while agriculture accounts for a relatively lower

share).

The service sector's share has grown from 43.69 per cent in 1990-91 to 51.16 per

cent in 1998-99.  In contrast, the industrial sector's share in GDP has declined from

25.38 per cent to 22.01 per cent in 1990-91 and 1998-99 respectively.  The

agricultural sector's share has fallen from 30.93 per cent to 26.83 per cent in the

respective years.

Some economists caution that if the service sector bypasses the industrial sector,

economic growth can be distorted. They say that service sector growth must be

supported by proportionate growth of the industrial sector, otherwise the service

sector grown will not be sustainable. It is true that, in India, the service sector's

contribution in GDP has sharply risen and that of industry has fallen (as shown

above). But, it is equally true that the industrial sector too has grown, and grown

quite impressively through the 1990s (except in 1998-99). Three times between

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1993-94 and 1998-99, industry surpassed the growth rate of GDP. Thus, the service

sector has grown at a higher rate than industry which too has grown more or less in

tandem. The rise of the service sector therefore does not distort the economy.

Within the services sector, the share of trade, hotels and restaurants increased from

12.52 per cent in 1990-91 to 15.68 per cent in 1998-99. The share of transport,

storage and communications has grown from 5.26 per cent to 7.61 per cent in the

years under reference. The share of construction has remained nearly the same

during the period while that of financing, insurance, real estate and business services

has risen from 10.22 per cent to 11.44 per cent.

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Chap 2: Growth of service sector in India.

Following the trade liberalization in 1991, the Indian economy embarked on a path of rapid

growth of aggregate output. In particular, it witnessed a high growth rate of service sector

output while that of industry was relatively muted. As a result, the share of services in GDP

has come to resemble that of a high income country while its per capita income still remains

that of a low income country. Further, we also observe a sharp increase in the rate of growth

of service sector trade after liberalization. In this paper, we build a quantitative model which

captures a falling share of agricultural output and a rapidly increasing share of service sector

output as the economy grows. We develop a three sector open economy growth model and

allow the economy to trade with the rest of the world by exporting as well as importing

services and industrial We focus on two steady state years, 1970 and 1994, and assume trade

to be balanced in these two years. In addition, we allow for exogenous productivity growth

in each of the three sectors. We find that it is high productivity growth, especially in the

service sector, rather than growth of trade in services which is the primary factor driving the

high growth witnessed by the Indian service sector.

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Chap 3: Introduction to Financial sector.

The last decade witnessed the maturity of India's financial markets. Since 1991, every

governments of India took major steps in reforming the financial sector of the country. The

important achievements in the following fields are discussed under separate heads: 

Financial markets

Regulators

The banking system

Non-banking finance companies

The capital market

Mutual funds

Overall approach to reforms

Deregulation of banking system

Capital market developments

Consolidation imperative

Financial Sectors

Financial Markets

In the last decade, Private Sector Institutions played an important role. They grew rapidly in

commercial banking and asset management business. With the openings in the insurance

sector for these institutions, they started making debt in the market.

Competition among financial intermediaries gradually helped the interest rates to decline.

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Deregulation added to it. The real interest rate was maintained. The borrowers did not pay

high price while depositors had incentives to save. It was something between the nominal rate

of interest and the expected rate of inflation. 

The Banking System.

Almost 80% of the businesses are still controlled by Public Sector Banks (PSBs).

PSBs are still dominating the commercial banking system. Shares of the leading PSBs

are already listed on the stock exchanges.

The RBI has given licences to new private sector banks as part of the liberalisation

process. The RBI has also been granting licences to industrial houses. Many banks are

successfully running in the retail and consumer segments but are yet to deliver

services to industrial finance, retail trade, small business and agricultural finance.

The PSBs will play an important role in the industry due to its number of branches

and foreign banks facing the constraint of limited number of branches. Hence, in

order to achieve an efficient banking system, the onus is on the Government to

encourage the PSBs to be run on professional lines.

Development finance institutions.

FIs's access to SLR funds reduced. Now they have to approach the capital market for

debt and equity funds. 

Convertibility clause is no longer obligatory for assistance to corporates sanctioned by

term-lending institutions. 

Capital adequacy norms extended to financial institutions. 

DFIs such as IDBI and ICICI have entered other segments of financial services such

as commercial banking, asset management and insurance through separate ventures.

The move to universal banking has started.

Non-banking finance companies.

In the case of new NBFCs seeking registration with the RBI, the requirement of minimum net

owned funds, has been raised to Rs.2 crore. 

Until recently, the money market in India was narrow and circumscribed by tight regulations

over interest rates and participants. The secondary market was underdeveloped and lacked

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liquidity. Several measures have been initiated and include new money market instruments,

strengthening of existing instruments and setting up of the Discount and Finance House of

India (DFHI). 

The RBI conducts its sales of dated securities and treasury bills through its open market

operations (OMO) window. Primary dealers bid for these securities and also trade in them.

The DFHI is the principal agency for developing a secondary market for money market

instruments and Government of India treasury bills. The RBI has introduced a liquidity

adjustment facility (LAF) in which liquidity is injected through reverse repo auctions and

liquidity is sucked out through repo auctions. 

On account of the substantial issue of government debt, the gilt- edged market occupies an

important position in the financial set- up. The Securities Trading Corporation of India

(STCI), which started operations in June 1994 has a mandate to develop the secondary

market in government securities. 

Long-term debt market: The development of a long-term debt market is crucial to the

financing of infrastructure. After bringing some order to the equity market, the SEBI has now

decided to concentrate on the development of the debt market. Stamp duty is being

withdrawn at the time of dematerialisation of debt instruments in order to encourage

paperless trading. 

The capital market 

The number of shareholders in India is estimated at 25 million. However, only an estimated

two lakh persons actively trade in stocks. There has been a dramatic improvement in the

country's stock market trading infrastructure during the last few years. Expectations are that

India will be an attractive emerging market with tremendous potential. Unfortunately, during

recent times the stock markets have been constrained by some unsavoury developments,

which have led to retail investors deserting the stock markets. 

Mutual funds 

Mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996

and amendments thereto. With the issuance of SEBI guidelines, the industry had a framework

for the establishment of many more players, both Indian and foreign players. 

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The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of

nearly Rs.70, 000 crore, but its share is going down. The biggest shock to the mutual fund

industry during recent times was the insecurity generated in the minds of investors regarding

the US 64 scheme. With the growth in the securities markets and tax advantages granted for

investment in mutual fund units, mutual funds started becoming popular. 

The foreign owned AMCs are the ones w1hich are now setting the pace for the industry.

They are introducing new products, setting new standards of customer service, improving

disclosure standards and experimenting with new types of distribution. 

The insurance industry is the latest to be thrown open to competition from the private

sector including foreign players. Foreign companies can only enter joint ventures with Indian

companies, with participation restricted to 26 per cent of equity. It is too early to conclude

whether the erstwhile public sector monopolies will successfully be able to face up to the

competition posed by the new players, but it can be expected that the customer will gain from

improved service. 

The new players will need to bring in innovative products as well as fresh ideas on

marketing and distribution, in order to improve the low per capita insurance coverage. Good

regulation will, of course, be essential. 

Deregulation of banking system

Prudential norms were introduced for income recognition, asset classification, provisioning

for delinquent loans and for capital adequacy. In order to reach the stipulated capital

adequacy norms, substantial capital were provided by the Government to PSBs. Government

pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash reserve ratio

(CRR) brought down in steps. Interest rates on the deposits and lending sides almost entirely

were deregulated. 

New private sector banks allowed promoting and encouraging competition. PSBs were

encouraged to approach the public for raising resources. Recovery of debts due to banks and

the Financial Institutions Act, 1993 was passed, and special recovery tribunals set up to

facilitate quicker recovery of loan arrears. 

Bank lending norms liberalised and a loan system to ensure better control over credit

introduced. Banks asked to set up asset liability management (ALM) systems. RBI guidelines

issued for risk management systems in banks encompassing credit, market and operational

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risks. 

A credit information bureau is being established to identify bad risks. Derivative products

such as forward rate agreements (FRAs) and interest rate swaps (IRSs) introduced. 

Capital market developments 

The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues

were abolished and the initial share pricing were decontrolled. SEBI, the capital market

regulator was established in 1992. 

Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after

registration with the SEBI. Indian companies were permitted to access international capital

markets through euro issues. 

The National Stock Exchange (NSE), with nationwide stock trading and electronic display,

clearing and settlement facilities was established. Several local stock exchanges changed over

from floor based trading to screen based trading. .

Buy back of shares allowed

The SEBI started insisting on greater corporate disclosures. Steps were taken to improve

corporate governance based on the report of a committee. 

SEBI issued detailed employee stock option scheme and employee stock purchase scheme for

listed companies. 

Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies

given the freedom to issue dematerialised shares in any denomination. 

Derivatives trading starts with index options and futures. A system of rolling settlements

introduced. SEBI empowered to register and regulate venture capital funds. 

The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating

agencies as well as introducing a code of conduct for all credit rating agencies operating in

India. 

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Chap 4: Segmentation of Financial sector.

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Chap 5: 7 P's of ICICI Bank. (A Financial Banking

Institution)

ICICI Bank is India’s second-largest bank with total assets of Rs. 3,663.74 billion (US$ 76

billion) at September 30, 2009 and profit after tax Rs. 19.18 billion (US$ 398.8 million) for

the half year ended September 30, 2009. The Bank has a network of 1,588 branches and

about 4,883 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of

banking products and financial services to corporate and retail customers through a variety

of delivery channels and through its specialised subsidiaries and affiliates in the areas of

investment banking, life and non-life insurance, venture capital and asset management. The

Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in

United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International

Finance Centre and representative offices in United Arab Emirates, China, South Africa,

Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches

in Belgium and Germany.

ICICI Bank’s equity shares are listed in India on Bombay Stock Exchange and the National

Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed

on the New York Stock Exchange (NYSE).

History:

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial

institution, and was its wholly-owned subsidiary. ICICI’s shareholding in ICICI Bank was

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reduced to 46% through a public offering of shares in India in fiscal 1998, an equity

offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank’s acquisition

of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary

market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was

formed in 1955 at the initiative of the World Bank, the Government of India and

representatives of Indian industry. The principal objective was to create a development

financial institution for providing medium-term and long-term project financing to Indian

businesses. In the 1990s, ICICI transformed its business from a development financial

institution offering only project finance to a diversified financial services group offering a

wide variety of products and services, both directly and through a number of subsidiaries

and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first

bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards

universal banking, the managements of ICICI and ICICI Bank formed the view that the

merger of ICICI with ICICI Bank would be the optimal strategic alternative for both

entities, and would create the optimal legal structure for the ICICI group’s universal

banking strategy. The merger would enhance value for ICICI shareholders through the

merged entity’s access to low-cost deposits, greater opportunities for earning fee-based

income and the ability to participate in the payments system and provide transaction-

banking services. The merger would enhance value for ICICI Bank shareholders through a

large capital base and scale of operations, seamless access to ICICI’s strong corporate

relationships built up over five decades, entry into new business segments, higher market

share in various business segments, particularly fee-based services, and access to the vast

talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI

and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance

subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services

Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI

Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by

the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002.

Consequent to the merger, the ICICI group’s financing and banking operations, both

wholesale and retail, have been integrated in a single entity.

7P’s of Marketing of ICICI Bank:14

1. PRODUCT MIX:

1. DEPOSITS:

ICICI Bank offers wide variety of Deposit Products to suit our requirements. Coupled with

convenience of networked branches/ over 1800 ATMs and facility of E-channels like

Internet and Mobile Banking, ICICI Bank brings banking at your doorstep.

Savings Account: ICICI Bank offers a power packed Savings Account with a host of

convenient features and banking channels to transact through.

Senior Citizen Services: The Senior Citizen Services from ICICI Bank has several

advantages that are tailored to bring more convenience and enjoyment in your life.

Young Stars: It’s really important to help children learn the value of finances and money

management at an early age. Banking is a serious business, but we make banking a pleasure

and at the same time children learn how to manage their personal finances.

Fixed Deposits: Safety, Flexibility, Liquidity and Returns!!!! A combination of unbeatable

features of the Fixed Deposit from ICICI Bank.

Recurring Deposits: Through ICICI Bank Recurring Deposit you can invest small amounts

of money every month that ends up with a large saving on maturity. So you enjoy twin

advantages- affordability and higher earnings.

Roaming Current Account: Only Roaming Current Account from ICICI Bank travels the

distance with your business. You can access your accounts at over 500 networked branches

across the country.

Bank @ Campus: Thanks to bank@campus, child can now surf the Net and access all the

details of his / her account at the click of a mouse! No need to visit the bank branch at all.

ICICI Bank Salary Account: is a benefit-rich payroll account for Employers and

Employees. As an organization, you can opt for our Salary Accounts to enable easy

disbursements of salaries and enjoy numerous other benefits too.

2. INVESTMENTS

Along with Deposit products and Loan offerings, ICICI Bank assists you to manage your

finances by providing various investment options such as:

ICICI Bank Tax Saving Bonds

Government of India Bonds

Investment in Mutual Funds

Initial Public Offers by Corporate

Investment in “Pure Gold”

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Foreign Exchange Services

Senior Citizens Savings Scheme, 2004

3. ANYWHERE BANKING

ICICI Bank is the second largest bank in the country. It services a customer base of more

than 5 million customer accounts through a multi-channel access network. This includes

more than 500 branches and extension counters, over 1800 ATMs, Call Centre and Internet

Banking.

Thus, one can access the various services ICICI Bank has to offer at anytime, anywhere and

from anyplace.

4. LOAN

a) Home Loans

b) Personal Loans

c) Car Loans

d) Two Wheeler Loans

e) Commercial Vehicle Loans

f) Loans against Securities

g) Farm Equipment Loans

h) Construction Equipment Loans

i) Office Equipment Loans

j) Medical Equipment Loans

5. CARDS

a) Credit Card

b) Debit cum ATM Card

c) Travel Card

6. DEMAT SERVICES

ICICI Bank Demat Services boasts of an ever-growing customer base of over 7 lacs account

holders. In their continuous endeavour to offer best of the class services to our customers

we offer the following features:

Digitally signed transaction statement by e-mail.

Corporate benefit tracking.

e-Instruction facility – facility to transfer securities 24 hours a day, 7 days a week

through Internet  Interactive Voice Response (IVR) at a lower cost.

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Dedicated specially trained customer care executives at their call centre, to handle all

queries.

7. MOBILE BANKING

With ICICI Bank, banking is no longer what it used to be. ICICI Bank offers Mobile

Banking facility to all its Bank, Credit Card and Demat customers. ICICI Bank Mobile

Banking enables you to bank while being on the move.

8. NRI SERVICES

ONLINE MONEY TRANSFER facility available to NRIs worldwide through

www.money2India.com at the click of a button!

Benefits:

FREE Money transfers into accounts with over 30 banks in India

Demand Drafts issued and payable at over 1250 locations in India

ONLINE Tracking of the status of your funds

SUPERIOR Exchange rates

OFFLINE MONEY TRANSFER facility is also available across geographies through

Local branches and in association with partner banks/ exchange houses.

2.PRICING MIX:

The pricing decisions or the decisions related to interest and fee or commission charged by

banks are found instrumental in motivating or influencing the target market.

The RBI and the IBA are concerned with regulations. The rate of interest is regulated by the

RBI and other charges are controlled by IBA.

The pricing policy of a bank is considered important for raising the number of

customers’ vis-à-vis the accretion of deposits. Also the quality of service provided has

direct relationship with the fees charged. Thus while deciding the price mix customer

services rank the top position.

The banking organizations are required to frame two- fold strategies. First, the strategy is

concerned with interest and fee charged and the second strategy is related to the interest

paid. Since both the strategies throw a vice- versa impact, it is important that banks attempt

to establish a correlation between two. It is essential that both the buyers as well as the

sellers have feeling of winning.

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Pricing Bank Products Starts With Three Basic Questions.

1. What rate does the bank need to meet its financial objectives?

The answer is, it depends on,

Some considerations for loan and deposit pricing are:

Related income taxes

Earning assets to total assets

Equity-to-asset ratio

Pricing for the activities and risks associated with the product

Asset and liability mix

Another element to consider in the pricing of earning assets is the risk of loss. Most notably,

this is relevant in loan pricing. Many banks assign a risk weighting to individual loans over

a certain size or based on loan type and assign a credit risk charge based on those ratings.

Customer relationships are difficult to assign a value to in the pricing process. Customers

will generally press for some price concessions in consideration of other relationships they

have with the bank.

Asset and liability mix also impacts pricing results. Generally speaking, banks operating

with higher loan-to-asset ratios are able to afford to pay more for deposits Likewise, banks

can afford to be more competitive on certain deposit products if they have fewer maturities

in a particular timeframe or less total outstanding balances in a product line.

2. What is the market rate for the core product?

Customers have more distribution channels available to them today than at any other point

in history. In the past 10 years, the number of bank locations has increased 20%. Of course,

there are the mortgage bankers, the Internet, and a host of other financial service providers

competing for your customer’s loan and deposit business.

The point is, the competitive marketplace always ensures that if a financial institution is

charging too much for loans or paying too little for deposits, its share of the market will

likely dwindle as existing and prospective customers find alternative providers. You can do

all the math you want to determine required pricing points, but if your pricing is

uncompetitive, your market share will shrink.

3. What would the bank have to do to sales and operations to make its rates the most

competitive in its market?

Pricing is a key issue for the associates who sell bank products to your customers. The fact

is, lenders want the lowest rates, and people dealing with depositors want to pay the highest

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rates. You need the right balance of fee income, strategies to reduce operating costs, and a

healthy asset and liability mix to change your required pricing.

3. PLACE

This component of marketing mix is related to the offering of services. The services are

sold through the branches.

The 2 important decision making areas are: making available the promised services to the

ultimate users and selecting a suitable place for bank branches.

The number of branches OF ICICI: 1900 in India and 33 in Mumbai.

LOCATION OF BRANCH:

Shivam Shopping Centre, S.V.Road,

Opp. New Era Cinema, Malad (W), Mumbai.

MUMBAI , 400064.

LOCATION OF ATMS:

Malad subway

With branch

Mindspace

Orlem

Raheja township

Why they select this place as branch?

The selection of a suitable place for the establishment of a branch is significant with

the view point of making place accessible.

The safety and security provisions

Convenient to both the parties, such as the users and the bankers

Infrastructure facility

Near to station and located on s. v. road well crowded area.

Market coverage

4. PROMOTION MIX

Advertising: Television, radio, movies, theatres

Print media: hoardings, newspaper, magazines

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Publicity: road shows, campus visits, sandwich man, Sponsorship

Sales promotion: gifts, discount and commission, incentives,etc.

Personal selling: Cross-sale (selling at competitors place),personalized service.

Telemarketing: ICICI one source Call center (mind space)

5. PEOPLE:

All people directly or indirectly involved in the consumption of banking services are an

important part of the extended marketing mix. Knowledge Workers, Employees,

Management and other Consumers often add significant value to the total product or service

offering. It is the employees of a bank which represent the organisation to its customers.

In a bank organization, employees are essentially the contact personnel with customer.

Therefore, an employee plays an important role in the marketing operations of a service

organisation.

To realize its potential in bank marketing, ICICI become conscious in its potential in

internal marketing – the attraction, development, motivation and retention of qualified

employee-customers through need meeting job-products. Internal marketing paves way for

external marketing of services. In internal marketing a variety of activities are used

internally in an active, marketing like manner and in a coordinated way.

The starting point in internal marketing is that the employees are the first internal market for

the organization.

The basic objective of internal marketing is to develop motivated and customer conscious

employees.

A service company can be only as good as its people. A service is a performance and it is

usually difficult to separate the performance from the people.

If the people don’t meet customers’ expectations, then neither does the service.

Therefore, investing in people quality in service business means investing in product

quality.

6. PROCESS:

Flow of activities. All the major activities of ICICI banks follow RBI guidelines. There has

to be adherence to certain rules and principles in the banking operations. The activities have

been segregated into various departments accordingly.

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Standardization: ICICI bank has got standardized procedures got typical transactions. In

fact not only all the branches of a single-bank, but all the banks have some standardization

in them. This is because of the rules they are subject to. Besides this, each of the banks has

its standard forms, documentations etc. Standardization saves a lot of time behind

individual transaction.

Customization: There are specialty counters at each branch to deal with customers of a

particular scheme. Besides this the customers can select their deposit period among the

available alternatives.

Number of steps: Numbers of steps are usually specified and a specific pattern is followed

to minimize time taken.

Simplicity: In ICICI banks various functions are segregated. Separate counters exist with

clear indication. Thus a customer wanting to deposit money goes to deposit’s counter and

does not mingle elsewhere. This makes procedures not only simple but consume less time.

Besides instruction boards in national boards in national and regional language help the

customers further.

Customer involvement: ATM does not involve any bank employees. Besides, during usual

bank transactions, there is definite customer involvement at some or the other place because

of the money matters and signature requires.

7. PHYSICAL EVIDENCE:

Physical evidence is the material part of a service. Strictly speaking there are no physical

attributes to a service, so a consumer tends to rely on material cues. There are many

examples of physical evidence, including some of the following:

Internet/web pages

Paperwork

Brochures

Furnishings

Business cards

The building itself (such as prestigious offices or scenic headquarters)

The physical evidences also include signage, reports, punch lines, other tangibles,

employee’s dress code etc.

Signage: Each and every bank has its logo by which a person can identify the company.

 Thus such signage’s are significant for creating visualization and corporate identity.

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Financial reports: The Company’s financial reports are issued to the customers to

emphasis or credibility.

Tangibles: Bank gives pens, writing pads to the internal customers. Even the passbooks,

chequebooks, etc reduce the inherent intangibility of services.

Punch lines: Punch lines or the corporate statement depict the philosophy and attitude of

the bank. Banks have influential punch lines to attract the customers.

Employee’s dress code: ICICI bank follows a dress code for their internal customers. 

This helps the customers to feel the ease and comfort.

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Chap 6: Quality Dimension.

Dimension 1: Performance

Does the product or service do what it is supposed to do, within its defined tolerances?

Performance is often a source of contention between customers and suppliers, particularly

when deliverables are not adequately defined within specifications.

The performance of a product often influences profitability or reputation of the end-user. As

such, many contracts or specifications include damages related to inadequate performance.

Dimension 2: Features

Does the product or services possess all of the features specified, or required for its intended

purpose?

While this dimension may seem obvious, performance specifications rarely define the

features required in a product. Thus, it’s important that suppliers designing product or

services from performance specifications are familiar with its intended uses, and maintain

close relationships with the end-users.

Dimension 3: Reliability

Will the product consistently perform within specifications?

Reliability may be closely related to performance. For instance, a product specification may

define parameters for up-time, or acceptable failure rates.

Reliability is a major contributor to brand or company image, and is considered a

fundamental dimension of quality by most end-users.

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Dimension 4: Conformance

Does the product or service conform to the specification?

If it’s developed based on a performance specification, does it perform as specified? If it’s

developed based on a design specification, does it possess all of the features defined?

Dimension 5: Durability

How long will the product perform or last, and under what conditions?

Durability is closely related to warranty. Requirements for product durability are often

included within procurement contracts and specifications.

For instance, fighter aircraft procured to operate from aircraft carriers include design criteria

intended to improve their durability in the demanding naval environment.

Dimension 6: Serviceability

Is the product relatively easy to maintain and repair?

As end users become more focused on Total Cost of Ownership than simple procurement

costs, serviceability (as well as reliability) is becoming an increasingly important dimension

of quality and criteria for product selection.

Dimension 7: Aesthetics

The way a product looks is important to end-users. The aesthetic properties of a product

contribute to a company’s or brand’s identity. Faults or defects in a product that diminish its

aesthetic properties, even those that do not reduce or alter other dimensions of quality, are

often cause for rejection.

Dimension 8: Perception

Perception is reality. The product or service may possess adequate or even superior

dimensions of quality, but still fall victim to negative customer or public perceptions.

As an example, a high quality product may get the reputation for being low quality based on

poor service by installation or field technicians. If the product is not installed or maintained

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properly, and fails as a result, the failure is often associated with the product’s quality rather

than the quality of the service it receives.

Chap 7: Small Case study on ICICI Company.

When anytime, anywhere banking came to our country, ICICI Bank had to move away from

the branch-centric model and make its services available nationwide. The solution was to

centralize its applications.

ICICI Bank, India's second-largest bank with a network of about 540 branches and offices

and over 1,000 ATMs offers banking products and financial services to corporate and retail

customers through a variety of delivery channels. The legacy systems at ICICI group (now

called ICICI Bank) were stand-alone systems, networked only for basic e-mail and none of

the core applications were linked to the network. Around 1998 the company realized that to

improve its operations and increase efficiency it needed to centralize its core banking

applications.

Legacy systems

The traditional systems at ICICI Bank were very centric to the branch. For example a server

at New Delhi was specific to the branch in that city; the ATMs were standalone catering only

to the city branch. The banking transactions were thus limited to the respective branch offices

as customer data was not available in other branches. This made banking a limited service

and very branch specific. ICICI realized the importance of offering nationwide banking but

this would be possible only by having a centralized data repository.

The shift

The basic network was set up for providing the e-mail facility, but none of the applications

were linked to the network. The network comprised of a mix of servers running different

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applications at various branches of the bank. With growing business and rapidly increasing

accounts, the company found it extremely difficult to administer and manage the system.

This also resulted in duplication of backend services and procedures, as the systems were not

centralized for the core banking applications.

"There was a lot of additional cost being incurred due to the duplication of the backend

procedures at the branch offices," said Manoj Kunkalienkar, Joint President ICICI Infotech

Services Limited.

The centralization procedure started around late 1999. ICICI Infotech (a company promoted

by ICICI) made the first network design for the group in 1999—it was a hub and spoke

architecture.

Utmost care was taken to design a network with a strong backbone. According to Manoj, the

key strength of a network is its back-bone. The group's various centers are connected by 2

Mbps or 4 Mbps leased lines.

Manoj said the design considerations not only included high bandwidth availability but also

the fact that a single point of failure should not result in lines going down.

The group realized that it had to enter into the retail space, have local regional presence, and

provide alternate channels to the customer. They needed a solution whereby they could offer

services across the country.

"Centralizing the operations was not the solution, but centralization of data was. We had

already centralized some of the operations but we still had some branch applications running

independently which were not centralized and had ATMs which were stand-alones. Two

major criteria considered before designing were not only the network, but also the

infrastructure available in our country," said Manoj.

In the past, the infrastructure here was such that a company could not rely on leased lines

completely. So ICICI needed backups on ISDN and VSATs, along with the 64 Kbps leased

lines. "The leased lines were too expensive then, now the lines are better, more stable and

offer good connectivity. The cost has also come down by around 15 percent."

Manoj opined that what was really important was to have a world class data center and

centralize everything in one place, as that's where the network can be used at the maximum.

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To ensure 24x7 service access and connectivity to customers one needs to have reliable

backups and a robust network in place. From a business perspective, the main reason to go in

for a network was centralization of data, provide all channels of communication and at the

same time provide anytime, anywhere banking. "The problem we faced with our legacy

systems was that they were stand-alone systems and the data from one branch was not

available with another branch."

These problems led us to the new design of the hub and spoke architecture.

The big solution

What ICICI was looking for was a robust network, which would enable it to offer services at

the retail level throughout the country. The in-house ICICI Infotech was the obvious choice

for consultation. The ICICI Infotech team designed the initial network topology in 1999. The

team had put forward a series of designs, not radically different from each other.

Eventually, a design with a mix of VSATs, leased-lines, radio-links and ISDN was selected.

A mixed design was selected because of the disparate locations of the group across the

country. There were different technical problems in different locations and the next best

available solution had to be included.

"The basic topology has withstood over the years. What we have today is still the basic

architecture with just new additions in terms of just more bandwidth," said Manoj.

The advantage in a hub and spoke architecture is that multiple nodes (spokes) are connected

with a hub location through a ring of single-mode fiber. Each hub-node connection can

consist of single or multiple wavelengths (lambdas), each carrying a full Gigabit Ethernet

channel. Protection from fiber cuts in the ring is achieved by connecting the hub and nodes

through both directions of the optical ring. Service provider Gigabit Ethernet metro access

rings are the main applications for this architecture. And another advantage is that nodes can

be added to the network more easily.

Methodology

The most important aspect to setting up a network is to have a good relation between the

technology consultant (network integrator), the vendor and the client.

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"The vendors in the market are more or less capable of giving the same results, like the same

amount of redundancy or strength of the network," said Manoj. "What really matters is the

relation between the three. If there is harmony amongst the three, then better results will be

achieved."

The client plays the most important role as he has very low time to market, and delivery is

required at the earliest.

"A series of products are available in the market. As the time to market is so short, we (ICICI

Infotech) select the products available in the market and integrate them. This takes care of 98

percent of the solution requirement and then we build the other two to three percent around it

and deliver the perfect solution to the client," explained Manoj.

The Network

As we said before, the network follows a hub and spoke architecture—a mix of VSATs,

leased lines, ISDN and radio links. It has around 800 leased lines, about 600 VSATs,

approximately 800 ISDN lines and multiple 34 Mbps lines.

The network supports the ICICI group offices, banks, branches, and over 1000 ATMs. There

is a primary site from where spokes go out to the regional branches and the other offices. The

secondary site has the disaster recovery system.

There are around eight hub locations, which have 3, 4 or 8 Mbps lines as per the requirements

for connecting to the branch and regional offices.

High-end Cisco routers and switches have been deployed for connectivity. The network is

monitored using HP OpenView and CiscoWorks. Over 30 portals are operating using a

highly secure state-of-the-art security architecture, which consist of firewalls, intrusion

detection systems, virus protection and various other tools.

The main production site is at Mahalaxmi, Mumbai (the primary site), and has been built to

international standards.

The disaster recovery site (the secondary site) is located at ICICI towers in Bandra-Kurla

complex, Mumbai and is used for replication of data. A distance of 25-30 kms separates the

two centers and they are linked with two 34 Mbps leased lines. To ensure reliability and 24x7

availability, the leased lines pass through separate exchanges.

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Before the data moves on to the leased lines, it passes through two CNT storage directors that

convert this data into WAN-related traffic before it is sent on the leased line to the other data

center. The high-speed leased lines make it possible to synchronize data in real-time between

the two centers.

Hardware at both these sites varies from low-end NT servers to the high-end SUN E 10K

along with 12 terabytes of data storage at each end connected through a SAN. The group's

facilities management team manages over 9,500 desktops, 500 servers and works around the

clock. CA Unicenter is used for managing the helpdesk, desktops and servers, asset

management, software delivery and remote control.

Unix is the preferred OS for most of the hardware while most of the databases use Oracle

with a few on Sybase and MS SQL. Over 200 databases are supported with 24x7 processing.

The state-of-the-art technology architecture adopted by ICICI Bank needed robust security,

and this was designed by qualified experts from its Systems Security Cell. This security

design includes preparation, implementation and maintenance of the Systems Security

policies and procedures across all systems, ensuring general user awareness about these

policies and enforcing the policies through systems audits. The security cell has developed

several tools, which are the first of its kind to address several vulnerabilities on Unix, NT and

MS-Exchange. The system security is audited by KPMG.

Challenges

Once the network was up, ICICI Infotech faced the challenge of ensuring smooth operation

and minimum downtime. Manoj agrees glitches cannot be avoided and while one has to try

and prevent these, one also has to think about the growth of the network, in line with business

expansion.

"No walk is very smooth. Glitches are, and will always be there," said Manoj. "What was of

prime importance was to keep pace with the business and its expansions. Technical problems

are not difficult to handle—there is always a solution to them but other problems like the

existing infrastructure of the country, the individual business needs are very taxing."

According to Manoj, the real challenge came while designing and deploying the network, as

the team had to view business processes at a very micro level. They had to identify the exact

areas where the business needed to be expanded, and then find the best suitable option to

connect to those locations.

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The ICICI VSAT network is large, with almost a thousand nodes. Keeping it going turned out

to be an even bigger challenge for the group. The entire network is monitored from one

center. Any error in the network at any point is rectified in a short span of time and the

system is up and running with minimum downtime.

Another challenge was to keep pace with business growth. "The only technological

challenges we face are in terms of the quality of the lines, as they are not same all the time.

Typically, the router and switch software is written assuming a certain quality of the line. As

a result, if the quality of the line is not stable and fluctuates, the systems do not function

efficiently. Ensuring the required line quality is a major challenge. An obvious solution to

this is to interact and talk with the vendors and get it customized for an Indian client's

requirements," explained Manoj.

Manoj reiterates that it's important for the vendor and the client to have a good rapport so that

they do not just provide the client with boxes but change the operating system (and other

relevant software) as and when needed.

The basic topology has not changed. "Initially we had started with connecting seven

locations. Today all the centers and offices are connected making virtual banking a reality,"

said a proud Manoj.

Benefits

With the centralization of data all applications are controlled, modified and administered

from one location. The network has enabled the bank to shift from traditional banking to

virtual banking thus offering modern banking services to its customers. All backend

applications run from a centrally located data center. This eliminates duplication of processes

like backend operations, training of staff, administration cost, and other system related costs

at branch levels. Clients can avail of anytime-anywhere banking on the Net and make use of

their ATM cards at any of the ATM centers across the country. Considerable amount of cost

has been saved as the backend operations of regional offices have been eliminated. The data

for all the customers is centralized and processed from the centrally located data centre.

Information for any ICICI client will be available at any of the ICICI branches.

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