sara-full report on commercial banks

THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

CHENNAI

“CONSUMER SATISFACTION STRATEGIES IN INDIAN BANKING SECTOR

THESIS

BY

---------------------------------

UNDER THE GUIDANCE OF

---------------------------------------------

BATCH: FW 2008-10

THESIS ID:

1

ABSTRACT

Financial intermediaries are going through significant changes all over the world under

the Impact of globalization, technological up gradation and financial innovations. Indeed

the traditional face of banking is no longer as it was even a few years ago. The financial

services as are being provided are changing dramatically because a great deal of churning

is taking place to attract more and more customers. Banks are now providing services that

do not come under the domain of traditional banking. The old institutional demarcations

are getting increasingly blurred. The increased competition has led to a decline in

traditional banking wherein banks only accepted deposits and made advances that stayed

on their books till maturity. The business of banking has been moving rapidly in recent

years to a ‘one stop shop' of varied financial services to maximize satisfaction of the

consumer and generate loyalty so a to be more competitive. The challenge is how to

create a service package, which wins customers and assures their loyalty as well as

delight. This book examines how far the Indian banking industry has stood up to the new

challenges thrown by the ever increasing customers' expectations, which is the ground

reality and what more needs to be done to ensure customer loyalty and delight in the

banking sector.

2

ACKNOWLEDGEMENT

I am thankful to our Dean Mr. R. Krishnan for his unstinting support in initiating this

thesis and providing valuable suggestions and insights on the subject.

I am grateful to thank -------------- who shared his experience and also for making

corrections and clarifications during the course of my thesis which guided me in the right

direction during my research and for successfully completing the thesis.

I thank IIPM for providing the adequate infrastructure and helping me to get the valuable

information from the corporate.

I thank the people who helped me to design the project report.

3

SIGNATORY PAGE

TO WHOM SO EVER IT MAY CONCERN

This is to certify that, ------------------- a bonafide student of IIPM, Chennai has worked for the thesis titled “CONSUMER SATISFACTION STRATEGIES IN INDIAN BANKING SECTOR” under my guidance for partial fulfillment of the requirement for the award of Master of Business Administration.

Under my direct supervision and guidance to the best of my knowledge and belief, he had

worked sincerely to bring out this thesis work from ----------------------

With Regards,

4

THESIS SYNOPSIS

1. DETAILS

Name: Sara

Batch:

Specialization:

Phone No:

Email Id:

2. DESIRED AREA OF INTEREST: Marketing – Consumer Satisfaction

3. TITLE OF THE THESIS: “Consumer Satisfaction Strategies in Indian Banking

Sector”

4. PROBLEM DEFINITION

Banking sector in India is facing a rapidly changing market. In today’s competitive

environment relationship marketing is critical to banking corporate success. Banking is a

customer oriented services industry and Indian banks have started realizing that business

5

depends on client service and the satisfaction of the customer. This is compelling them to

improve customer service and build relationships with customers. This study is intended

to cover the consumer satisfaction in Indian banking sector and factors which are

affecting the consumer satisfaction.

5. LITERATURE RELATING TO THE PROBLEM

“The biggest challenge to Indian banks comes not from trade unions or foreign banks but

from customers who are demanding more, Banking Ombudsman for Kerala and

Lakshwadeep V. Krishnamurthy has said.

Shopping for banks was a trend with which the banking industry had to cope with, he

said inaugurating the 15th general body meeting of the Indian Bank Officers' Association

(IBOA) Kerala here on Sunday.

Rising expectations from the customers and narrow margins of profit are challenges

before the banking industry as a whole, he said. Mr. Krishnamurthy said the role of the

Ombudsman was one of conciliation and not confrontation. It was a democratic and not

an autocratic set up, he said.

He said that bank workers who had to cope with the increase in working hours had to

make sure that they juggled their roles well so that their health, family life and work were

taken care of.

According to the Ombudsman, a sense of belonging and stability needed to be created

when postings are done. This was specially so at the senior level, he said.

P. Vijayakumar, chairman of the reception committee welcomed the gathering. C. V.

Mohandas, President, IBOA Kerala, delivered the presidential address.

K. Rajan, Deputy General Manager and Circle Head of the Indian Bank, said that the

bank management had always an open mind and congratulated the bank officers who

were responsible for turning the bank around.

6

P. V. Mathew, vice-president of All India Bank Officers' Confederation (AIBOC), pointed

out the new challenges facing the bank officers. He said that bank officers had to put up

with up to 12 hours of work.

Even women officers were not spared, he said. He said the increased workload

encroached on family life.

The speakers pointed out that while the customers could raise their grievances with the

Banking Ombudsman, the bank officers had no forum to raise their problems. P.B.

Thomas, president, AIBOC, Kerala, and V.K. Jagannathan, secretary, AIBOC, Kerala,

were among those who spoke at the inaugural function.”1

6. SCOPE OF THE THESIS

To study the Initiative taken by banks for consumer satisfaction

To study the consumer satisfaction in various banks

To identify the factors affecting consumer satisfaction

To recommend banks on various measures to be taken for satisfying their

customers

7. RESEARCH METHODOLOGY

Sampling Segment: Customers, Bankers and Industry experts.

Sample Size : 100 respondents

Sample Techniques: Simple Random Sampling

Type of Data collection:

Primary data:

Analysis through questionnaire

Secondary Data:

Books, Business Journals, and company websites

1 Customer satisfaction key to growth of bank

7

8. JUSTIFICATION OF THE THESIS RESEARCH PROPOSAL

This study is aimed at identifying customer satisfaction variables which lead to relationship building, and developing a conceptual framework of relationship marketing practices in Indian banks by capturing the perspectives of customers with respect to their satisfaction with various services. It also sought to identify whether telemarketing have a role to play in customer satisfaction.

BIBLIOGRAPHY

1. Customer satisfaction key to growth of bank –

http://www.thehindu.com/2006/08/07/stories/2006080702851700.htm

9. DETAILS OF THE EXTERNAL GUIDE

10. APPROVAL LETTER FROM EXTERNAL GUIDE

TABLE OF CONTENTS

CHAPTER 1............................................................................................................5

INTRODUCTION...........................................................................................................5

CHAPTER 2............................................................................................................7

RESEARCH METHODOLOGY.....................................................................................7

Research Design...............................................................................................................7

Methods of data collection...............................................................................................7

Limitations of the Study...................................................................................................8

CHAPTER 3............................................................................................................9

LITERATURE REVIEW................................................................................................9

CHAPTER 4..........................................................................................................34

DATA ANALYSIS & INTERPRETATION.................................................................34

CHAPTER 5..........................................................................................................54

FINDINGS.............................................................................................................54

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http://www.thehindu.com/2006/08/07/stories/2006080702851700.htm

CHAPTER 6..........................................................................................................57

RECOMMENDATION AND CONCLUSION....................................................57

RECOMMENDATION.................................................................................................57

CONCLUSION..............................................................................................................59

APPENDICES.......................................................................................................60

BIBLIOGRAPHY..................................................................................................64

LIST OF TABLES

TABLE SHOWING TYPE OF ACCOUNT.....................................................................34

TABLE SHOWING FACILITIES LOOKED IN TO START A RELATIONSHIP WITH BANK................................................................................................................................35

TABLE SHOWING BANK CATERING TO ALL THE BANKING NEEDS................36

TABLE SHOWING FRQUENCY OF VISTING BRANCH IN LAST 3 MONTHS......37

TABLE SHOWING RATING OF FRIENDLY AND COURTEOUS MANNER...........38

TABLE SHOWING RATING OF WILLINGNESS TO LISTEN AND RESPOND TO YOUR NEED....................................................................................................................39

TABLE SHOWING RATING OF FAST AND EFFICIENT SERVICE.........................40

TABLE SHOWING RATING OF RECONGNITION AS VALUED CUSTOMER.......41

TABLE SHOWING RATING OF PROFESSIONAL AND ATTRACTIVE APPEARANCE.................................................................................................................42

TABLE SHOWING SATISFACTION LEVEL OF AVAILABLE TO CUSTOMERS WHEN NEEDED..............................................................................................................43

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TABLE SHOWING FACTORS BANK NEEDS TO IMPROVE....................................44

TABLE SHOWING CONTACTED THE BRANCH BY TELEPHONE IN THE LAST 3 MONTHS..........................................................................................................................45

TABLE SHOWING FREQUENCY OF CALLS MADE TO CONTACT THE BRANCH IN A YEAR.......................................................................................................................46

TABLE SHOWING RATING OF SERVICE OFFERED BY BANK.............................47

TABLE SHOWING SEPARATE DEPARTMENT TO HANDLE CUSTOMER GRIEVANCES..................................................................................................................48

TABLE SHOWING THE SPEED OF HANDLELING CUSTOMER GRIEVANCES. .49

TABLE SHOWING CUSTOMER SATISFACTION STRATEGIES FOLLOWED IN VARIOUS BANKS...........................................................................................................50

TABLE SHOWING BANKS GIVING INDIVIDUAL ATTENTION TO EVERY CUSTOMER......................................................................................................................51

TABLE SHOWING PUBLIC SECTOR BANKS CONCENTRATING MORE ON CUSTOMER SATISFACTION........................................................................................52

TABLE SHOWING THE AREAS WHICH THE BANKS HAVE TO IMPROVE........53

LIST OF CHARTS

CHART SHOWING TYPE OF ACCOUNT....................................................................34

CHART SHOWING FACILITIES LOOKED IN TO START A RELATIONSHIP WITH BANK................................................................................................................................35

CHART SHOWING BANK CATERING TO ALL THE BANKING NEEDS...............36

CHART SHOWING FRQUENCY OF VISTING BRANCH IN LAST 3 MONTHS.....37

CHART SHOWING RATING OF FRIENDLY AND COURTEOUS MANNER..........38

CHART SHOWING RATING OF WILLINGNESS TO LISTEN AND RESPOND TO YOUR NEED....................................................................................................................39

CHART SHOWING RATING OF FAST AND EFFICIENT SERVICE.........................40

10

CHART SHOWING RATING OF RECONGNITION AS VALUED CUSTOMER......41

CHART SHOWING RATING OF PROFESSIONAL AND ATTRACTIVE APPEARANCE.................................................................................................................42

CHART SHOWING SATISFACTION LEVEL OF AVAILABLE TO CUSTOMERS WHEN NEEDED..............................................................................................................43

CHART SHOWING FACTORS BANK NEEDS TO IMPROVE...................................44

CHART SHOWING CONTACTED THE BRANCH BY TELEPHONE IN THE LAST 3 MONTHS..........................................................................................................................45

CHART SHOWING FREQUENCY OF CALLS MADE TO CONTACT THE BRANCH IN A YEAR.......................................................................................................................46

CHART SHOWING RATING OF SERVICE OFFERED BY BANK............................47

CHART SHOWING SEPARATE DEPARTMENT TO HANDLE CUSTOMER GRIEVANCES..................................................................................................................48

CHART SHOWING THE SPEED OF HANDLELING CUSTOMER GRIEVANCES..49

CHART SHOWING CUSTOMER SATISFACTION STRATEGIES FOLLOWED IN VARIOUS BANKS...........................................................................................................50

CHART SHOWING BANKS GIVING INDIVIDUAL ATTENTION TO EVERY CUSTOMER......................................................................................................................51

CHART SHOWING PUBLIC SECTOR BANKS CONCENTRATING MORE ON CUSTOMER SATISFACTION........................................................................................52

CHART SHOWING THE AREAS WHICH THE BANKS HAVE TO IMPROVE........53

11

CHAPTER 1

INTRODUCTION

Banking sector in India is facing a rapidly changing market. In today’s competitive

environment relationship marketing is critical to banking corporate success. Banking is a

customer oriented services industry and Indian banks have started realizing that business

depends on client service and the satisfaction of the customer. This is compelling them to

improve customer service and build relationships with customers.

The banking system occupies an important place in nation’s economy. It plays a pivotal

role in the economic development of a country and forms the core of the money market in

an advanced country. The commercial banks in India comprise of both Public sector as

well as private sector banks. There are total 28 Public sector and 27 private sector banks

are functioning in the country presently. Banks have to deal with many customers

everyday and render various types of services to its customer. It's a well known fact that

no business can exist without customers.

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“In recent years, the banking industry around the world has been undergoing a rapid

transformation. In India also, the wave of deregulation of early 1990s has created

heightened competition and greater risk for banks and other financial intermediaries.

The cross-border flows and entry of new players and products have forced banks to

adjust the product-mix and undertake rapid changes in their processes and operations to

remain competitive. The deepening of technology has facilitated better tracking and

fulfilment of commitments, multiple delivery channels for customers and faster resolution

of mis co ordinations.

Unlike in the past, the banks today are market driven and market responsive. The top

concern in the mind of every bank's CEO is increasing or at least maintaining the market

share in every line of business against the backdrop of heightened competition. With the

entry of new players and multiple channels, customers (both corporate and retail) have

become more discerning and less "loyal" to banks. This makes it imperative that banks

provide best possible products and services to ensure customer satisfaction. To address

the challenge of retention of customers, there have been active efforts in the banking

circles to switch over to customer-centric business model. The success of such a model

depends upon the approach adopted by banks with respect to customer data management

and customer relationship management.

Over the years, Indian banks have expanded to cover a large geographic & functional

area to meet the developmental needs. They have been managing a world of information

about customers - their profiles, location, etc. They have a close relationship with their

customers and a good knowledge of their needs, requirements and cash positions.

Though this offers them a unique advantage, they face a fundamental problem.”2

2 Customer-centric Banking

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CHAPTER 2

RESEARCH METHODOLOGY

Research methodology is simple framework or plan for the study that is as guide in

collection and analyzing the data. It is the blue print that is followed in completes the

study. Thus, good research methodology ensures the completion of project efficiency and

affectivity. Since there are many aspect of research methodology, the line of action has to

be chosen from the variety of alternatives, to choose the suitable method through the

assessment from various alternatives.

Research Design

The research design used in this study is descriptive. It includes survey and fact

finding enquiries of different kinds. The main purpose of descriptive research is

description of the state of affairs as it exists at present. In this design a structural

questionnaire was used to gather the information.

Methods of data collection

In case of data collection there are two types of data i.e. primary data and secondary data.

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Primary Data

Information obtained from the original sources by researcher is called primary data. In

this study primary data was collected using a Questionnaire and Interview with experts.

Secondary Data

Secondary data was collected from various reference books, websites and newspaper

articles.

Sampling Segments: Customers, Bankers, Industry expert

Sample Size: 100 respondents

Limitations of the Study

The primary research was carried out only in Chennai and it may not represent the

views of the entirety of India.

As the study was undertaken purely for academic purposes the coverage of the

study was limited.

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CHAPTER 3

LITERATURE REVIEW

AN OVERVIEW OF BANKING SECTOR IN INDIA

Without a sound and effective banking system in India it cannot have a healthy economy.

The banking system of India should not only be hassle free but it should be able to meet

new challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements

to its credit. The most striking is its extensive reach. It is no longer confined to only

metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even

to the remote corners of the country. This is one of the main reasons of India's growth

process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with

the nationalisation of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a

draft or for withdrawing his own money. Today, he has a choice. Gone are days when the

most efficient bank transferred money from one branch to other in two days. Now it is

simple as instant messaging or dial a pizza. Money have become the order of the day.

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The first bank in India, though conservative, was established in 1786. From 1786 till

today, the journey of Indian Banking System can be segregated into three distinct phases.

They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

New phase of Indian Banking System with the advent of Indian Financial &

Banking Sector Reforms after 1991.

Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan

and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of

Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency

Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was

established which started as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab

National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and

1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank,

and Bank of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic

failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To

streamline the functioning and activities of commercial banks, the Government of India

came up with The Banking Companies Act, 1949 which was later changed to Banking

Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of

India was vested with extensive powers for the supervision of banking in India as the

Central Banking Authority.

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During those days public has lesser confidence in the banks. As an aftermath deposit

mobilisation was slow. Abreast of it the savings bank facility provided by the Postal

department was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence.

In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a

large scale specially in rural and semi-urban areas. It formed State Bank of India to act as

the principal agent of RBI and to handle banking transactions of the Union and State

Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th

July, 1969, major process of nationalisation was carried out. It was the effort of the then

Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country

were nationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980

with seven more banks. This step brought 80% of the banking segment in India under

Government ownership.

The following are the steps taken by the Government of India to Regulate Banking

Institutions in the Country:

1949 : Enactment of Banking Regulation Act.

1955 : Nationalisation of State Bank of India.

1959 : Nationalisation of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalisation of 14 major banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

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1980 : Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to

approximately 800% in deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and

immense confidence about the sustainability of these institutions.

Phase III

This phase has introduced many more products and facilities in the banking sector in its

reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was

set up by his name which worked for the liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put

to give a satisfactory service to customers. Phone banking and net banking is introduced.

The entire system became more convenient and swift. Time is given more importance

than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any

crisis triggered by any external macroeconomics shock as other East Asian Countries

suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high,

the capital account is not yet fully convertible, and banks and their customers have

limited foreign exchange exposure.3

INDIAN BANKING SECTOR IN 2010

The last decade has seen many positive developments in the Indian banking sector. The

policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and

related government and financial sector regulatory entities, have made several notable

efforts to improve regulation in the sector. The sector now compares favourably with

banking sectors in the region on metrics like growth, profitability and non-performing

3 History of Banking in India

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assets (NPAs). A few banks have established an outstanding track record of innovation,

growth and value creation. This is reflected in their market valuation. However, improved

regulations, innovation, growth and value creation in the sector remain limited to a small

part of it. The cost of banking intermediation in India is higher and bank penetration is far

lower than in other markets. India’s banking industry must strengthen itself significantly

if it has to support the modern and vibrant economy which India aspires to be. While the

onus for this change lies mainly with bank managements, an enabling policy and

regulatory framework will also be critical to their success.

The failure to respond to changing market realities has stunted the development of the

financial sector in many developing countries. A weak banking structure has been unable

to fuel continued growth, which has harmed the long-term health of their economies. In

this “white paper”, we emphasise the need to act both decisively addressed, could

seriously weaken the health of the sector. Further, the inability of bank managements

(with some notable exceptions) to improve capital allocation, increase the productivity of

their service platforms and improve the performance ethic in their organisations could

seriously affect future performance.4

Indian banks face foreign 'attackers'

Indian banks are outperforming their counterparts in Asia and the rest of the world in

crucial parameters, according to two new surveys on the Indian banking system. The

Indian banking market is growing at an "astonishing rate", with assets expected to reach

US$1 trillion by 2010, declared one of the surveys "Overview of Indian Banking Market"

by Celent, a Boston-based financial research and consulting firm.

An expanding economy, a more prosperous 320 million-strong middle class and

technological upgrades are feeding this growth, according to the 44-page Celent report

released on December 12.

The Celent findings come in the wake of a comprehensive survey of the Indian banking

system by global consulting firm McKinsey Personal Finances Services, which put a

global perspective on Indian banking. The survey studied how traditional government-

4 India Banking 2010

20

owned Indian banks measured up to competition from new private and foreign banks

across various parameters - ranging from customer satisfaction, profitability, innovation

and managerial skills to cope with emerging challenges.

The McKinsey survey profiled 13,000 customers in 12 Asian markets, of which it

covered 5,300 in India in both urban and rural areas with interviews and 150 questions. It

covered 14 leading banks in India - seven public sector banks, four private sector banks,

and three foreign banks.

"The Indian banking sector has grown at a CAGR [compound annual growth rate] of

24% from 2001 to 2006," Prathima Rajan, author of the Celent report, told Asia Times

Online. She said she expects Indian banks to reach the $1 trillion by 2010.

"Total assets of the Indian banking sector as of the end March 2006 were $602 billion,"

she said. Rajan said the pan-Asian and global implications on the phenomenal growth of

Indian banking will cut both ways: more foreign banks entering India as well as domestic

Indian banks expanding to overseas markets. "Overall global banks will see more

competitors with diversified products and services," she said.

Twenty-nine foreign banks presently operate in India, with approximately 268 offices

across the country, according to the Reserve Bank of India (RBI) annual report for the

year ending June 2007. Standard Chartered has the largest presence with 87 offices,

followed by HSBC with 47, Citibank 39 and ABN Amro with 28 offices in India. Thirty-

four other foreign banks run Indian operations through representative offices.

"Although the Indian banking sector is growing at an impressive rate, the industry should

target having a small number of large players that can compete globally rather than

having a large number of fragmented players," Dana Lautin of Celent's New York office

told Asia Times Online, quoting the Celent report. "Currently the State Bank of India is

the only bank that is among the top 100 banks globally."

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Realizing the importance of having a global presence, Indian banks are turning to

mergers and acquisitions to "take advantage of economies of scale and/or to comply with

the Basel II Capital Accord", said the Celent report.

The Basel II accord of 2004 sets an international standard for banking regulators to

manage capital reserves against market risks, the aim being to protect global financial

systems from domino effects such as when a major bank collapses.

India has been "quite generous and not merely liberal" with foreign banks, V Leeladhar,

deputy governor of the regulator RBI said at the Bankers' Conference 2007 in Mumbai on

November 26. Leeladhar said that India's licensing and operational guidelines for foreign

banks were generous by both global and World Trade Organization standards.

In association with the Indian Banks Association, the McKinsey report titled "India

Banking: Towards Global Best Practices, Insights from Industry Benchmarking Surveys"

surveyed 13,000 customers in 12 Asian markets, including 14 leading banks in India,

covering both urban and rural areas.

“The McKinsey report said that the customer satisfaction level with financial institutions

in India is the highest in Asia.”However, it is significantly lower in the metros," it

observed.

Dubbing foreign and private banks as "attackers" and the traditional government-owned

Indian banks as "legacy banks", the report concluded that customer satisfaction was

higher with the older Indian banks.

"Customers of newer banks have experienced higher negative moments of truth relative

to legacy banks," McKinsey said in a statement to the media while releasing the report”.

However, the McKinsey findings contrast with the RBI, which slammed Indian banks,

saying that the quality of service has deteriorated badly since June 2006. A December 10

report in the financial daily Livemint, published in association with Wall Street Journal,

claimed a 500% surge in complaints against banks in the period between July 2006 and

June 2007, increasing from 34,499 complaints in this period compared to 5,772

complaints in the previous 12 months.

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The RBI report said that it registered 8,597 complaints against India's largest bank, the

state-owned State Bank of India, 5,048 complaints against the largest private sector bank

ICICI and 1,182 complaints against Citibank. The complaints were filed with the RBI.

Government-owned banks - referred to as "public sector banks - banks have seen the

most increase in complaints, according to RBI. The number of complaints against public

sector banks increased 537%. New private banks that began operations in the mid-1990s

had a 525% increase in complaints against them. Foreign banks suffered a 332% rise in

complaints against their services. The RBI figures are an indicator to banking customer

base in India growing disproportionately to customer service infrastructure.

"Indian banks achieved the highest growth in the region and have maintained high

profitability," concluded the McKinsey report, and said that India's older banks scored

better over foreign and private banks in retail banking deposits, a key to retail banking

profitability.5

CUSTOMER SATISFACTION

“Customer satisfaction, a business term, is a measure of how products and services supplied by a company meet or surpass customer expectation. It is seen as a key performance indicator within business and is part of the four of a Balanced Scorecard.

In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy”.6

Customer Satisfaction in the Indian Banking Sector

In today’s competitive environment relationship marketing is critical to banking

corporate success. Banking is a customer oriented services industry and Indian banks

have started realising that business depends on client service and the satisfaction of the

customer. This is compelling them to improve customer service and build relationships

with customers.

5 Indian banks face foreign 'attackers'6 Customer satisfaction

23

Measuring customer satisfaction in banking sector

Banking operations are becoming increasingly customer dictated. The demand for

'banking supermalls' offering one-stop integrated financial services is well on the rise.

The ability of banks to offer clients access to several markets for different classes of

financial instruments has become a valuable competitive edge. Convergence in the

industry to cater to the changing demographic expectations is now more than evident.

Banc assurance and other forms of cross selling and strategic alliances will soon alter the

business dynamics of banks and fuel the process of consolidation for increased scope of

business and revenue. The thrust on farm sector, health sector and services offers several

investment linkages. In short, the domestic economy is an increasing pie which offers

extensive economies of scale that only large banks will be in a position to tap. With the

phenomenal increase in the country's population and the increased demand for banking

services; speed, service quality and customer satisfaction are going to be key

differentiators for each bank's future success. Thus it is imperative for banks to get useful

feedback on their actual response time and customer service quality aspects of retail

banking, which in turn will help them take positive steps to maintain a competitive edge.

The working of the customer's mind is a mystery which is difficult to solve and

understanding the nuances of what customer satisfaction is, a challenging task. This

exercise in the context of the banking industry will give us an insight into the parameters

of customer satisfaction and their measurement. This vital information will help us to

build satisfaction amongst the customers and customer loyalty in the long run which is an

integral part of any business. The customer's requirements must be translated and

quantified into measurable targets. This provides an easy way to monitor improvements,

and deciding upon the attributes that need to be concentrated on in order to improve

customer satisfaction. We can recognize where we need to make changes to create

improvements and determine if these changes, after implemented, have led to increased

24

customer satisfaction. "If you cannot measure it, you cannot improve it." - Lord William

Thomson Kelvin (1824-1907).

The Need to Measure Customer Satisfaction

Satisfied customers are central to optimal performance and financial returns. In many

places in the world, business organizations have been elevating the role of the customer

to that of a key stakeholder over the past twenty years. Customers are viewed as a group

whose satisfaction with the enterprise must be incorporated in strategic planning efforts.

Forward-looking companies are finding value in directly measuring and tracking

customer satisfaction (CS) as an important strategic success indicator. Evidence is

mounting that placing a high priority on CS is critical to improved organizational

performance in a global marketplace.

With better understanding of customers' perceptions, companies can determine the

actions required to meet the customers' needs. They can identify their own strengths and

weaknesses, where they stand in comparison to their competitors, chart out path future

progress and improvement. Customer satisfaction measurement helps to promote an

increased focus on customer outcomes and stimulate improvements in the work practices

and processes used within the company.

When buyers are powerful, the health and strength of the company's relationship with its

customers – its most critical economic asset – is its best predictor of the future. Assets on

the balance sheet – basically assets of production – are good predictors only when buyers

are weak. So it is no wonder that the relationship between those assets and future income

is becoming more and more tenuous. As buyers become empowered, sellers have no

choice but to adapt. Focusing on competition has its place, but with buyer power on the

rise, it is more important to pay attention to the customer.

Customer satisfaction is quite a complex issue and there is a lot of debate and confusion

about what exactly is required and how to go about it. This article is an attempt to review

25

the necessary requirements, and discuss the steps that need to be taken in order to

measure and track customer satisfaction.

Service Quality and Customer Satisfaction

There is a great deal of discussion and disagreement in the literature about the distinction

between service quality and satisfaction. The service quality school view satisfaction as

an antecedent of service quality - satisfaction with a number of individual transactions

"decay" into an overall attitude towards service quality. The satisfaction school holds the

opposite view that assessments of service quality lead to an overall attitude towards the

service that they call satisfaction. There is obviously a strong link between customer

satisfaction and customer retention. Customer's perception of Service and Quality of

product will determine the success of the product or service in the market.

If experience of the service greatly exceeds the expectations clients had of the service

then satisfaction will be high, and vice versa.. In the service quality literature, perceptions

of service delivery are measured separately from customer expectations, and the gap

between the two provides a measure of service quality.

Expectations and Customer Satisfaction

Expectations have a central role in influencing satisfaction with services, and these in

turn are determined by a very wide range of factors lower expectations will result in

higher satisfaction ratings for any given level of service quality. This would seem

sensible; for example, poor previous experience with the service or other similar services

is likely to result in it being easier to pleasantly surprise customers. However, there are

clearly circumstances where negative preconceptions of a service provider will lead to

lower expectations, but will also make it harder to achieve high satisfaction ratings - and

where positive preconceptions and high expectations make positive ratings more likely.

The expectations theory in much of the literature therefore seems to be an over-

simplification.

26

The MODELS OF customer satisfaction

The KANO Model: The customer satisfaction model from N. Kano is a quality

management and marketing technique that can be used for measuring client happiness.

Kano's model of customer satisfaction distinguishes six categories of quality attributes,

from which the first three actually influence customer satisfaction:

Basic Factors. (Dissatisfies. Must have.) - The minimum requirements which will

cause dissatisfaction if they are not fulfilled but do not cause customer satisfaction

if they are fulfilled (or are exceeded). The customer regards these as prerequisites

and takes these for granted. Basic factors establish a market entry 'threshold'.

Excitement Factors. (Satisfiers. Attractive.) - The factors that increase customer

satisfaction if delivered but do not cause dissatisfaction if they are not delivered.

These factors surprise the customer and generate 'delight'. Using these factors, a

company can really distinguish itself from its competitors in a positive way.

Performance Factors. The factors that cause satisfaction if the performance is

high, and they cause dissatisfaction if the performance is low. Here, the attribute

performance-overall satisfaction is linear and symmetric. Typically these factors

are directly connected to customers' explicit needs and desires and a company

should try to be competitive here.

The additional three attributes which Kano mentions are:

Indifferent attributes. The customer does not care about this feature.

Questionable attributes. It is unclear whether this attribute is expected by the

customer.

Reverse attributes. The reverse of this product feature was expected by the

customer.

Steps in the customer satisfaction model

27

Kano developed a questionnaire to identify the basic, performance and excitement factors

as well as the other three additional factors.

For each product feature a pair of questions is formulated to which the customer

can answer in one of five different ways.

The first question concerns the reaction of the customer if the product shows that

feature (functional question);

The second question concerns the reaction of the customer if the product does

NOT show this feature (dysfunctional question).

By combining the answers all attributes can be classified into the six factors.

The Profit –Chain Model

Research has shown that organizational subunits where employee perceptions are

favourable enjoy superior business performance. The service profit chain model of

business performance (Heskett, Sasser, & Schlesinger, 1997) has identified customer

satisfaction as a critical intervening variable in this relationship.(profit-chain model) A

number of researchers have found that revenue-based measures of business unit

performance, for example, sales and profitability, are significantly correlated with

employees' work-related perceptions. The evidence suggests that business units in which

employees' collective perceptions are relatively favourable perform better.

Stated simply, the service profit chain asserts that satisfied and motivated employees

produce satisfied customers and satisfied customers tend to purchase more, increasing the

revenue and profits of the organization. Heskett et al. (1997), for example, define the

service profit chain as 'involving direct and strong relationships between profit; growth;

customer loyalty; customer satisfaction; the value of goods and services delivered to

customers; and employee capability, satisfaction, loyalty and productivity.' (p. 11). These

authors recommend the service profit chain as a framework for constructing a strategic

organizational vision, and suggest that, provided service profit chain concepts are

carefully interpreted and adapted to an organization's specific situation, they are capable

of delivering 'remarkable results' (p. 18).

28

The second crucial element of the service profit chain is the link between customer

satisfaction and financial performance. Management theorists and chief executives have

often argued that superior business performance depends critically on satisfying the

customer (e.g. Heskett et al., 1997; Peters & Waterman, 1982; Watson, 1963).

Consumer researchers have established that customers who are satisfied with a supplier

report stronger intentions to purchase from that supplier than do dissatisfied customers

(e.g. Anderson & Sullivan, 1993; Mittal, Kumar, & Tsiros, 1999; Zeithaml, Berry, &

Parasuraman, 1996). However, as noted by Verhoef, Franses, and Hoekstra (2001), the

link between customer satisfaction and actual, as opposed to intended, purchase behavior

is less well established. Indeed, the results are mixed, with both positive findings (e.g.

Bolton, 1998; Bolton & Lemon, 1999) and null findings (e.g. Hennig-Thurau & Klee,

1997; Verhoef et al., 2001).

The Service Expectation Model:

Customer satisfaction with a service/product (p/s) can be measured through a survey of

the actual perception of the users or otherwise comparing their actual perception with

their expectations. More appropriately in the first case "quality" is considered, in the

second "customer satisfaction" (CS) (Cronin et al.1992,1994). Therefore to measure the

CS we have to compare the evaluations of the user with his expectations connected to an

ideal p/s. For some kinds of p/s such expectations are typically "subjective", they have to

be gathered ad hoc; for others they can be suggested by the provider the p/s referring to

an optimum p/s; in this way the expectations are collected in an "objective" way.(degree

course)

Variability in the Service Process Model (Wharton):

Service quality has become an essential part of organizational success due to increased

customer expectations and customization of services in many markets. In fact, even the

definition of service quality is changing. Good service quality used to mean that the

output was made to conform to the specifications set by the process designers. Today, the

concept of service quality is evolving to mean uniformity of the service output around an

ideal (target) value determined by the customer. However, when the dimensions or

29

performance of a service output exceed allowable limits, the variation needs to be

identified so the problem can be corrected.

Four factors represent major explanations for the existence of process variation in

services: heterogeneous customers with different service expectations; lack of rigorous

policies and processes; high employee turnover; and nature of customization. The

financial performance of a financial service institution is driven to a large extent by its

ability to attract and retain customers. Customers increasingly have alternatives from

which they can choose. We are interested in whether a customer's decision whether to

stay with her current service provider might be more sensitive to variability of service

than the level of service quality.

While there is a significant body of theoretical (Morroni, 1992) and anecdotal (Davenport

and Short, 1990) evidence on the importance of process management, there is very little

statistical evidence that process management matters with respect to the 'bottom line' of

the institution.

The model shows that, while no individual process is correlated with firm performance,

the aggregate measure of process performance affects firm performance. More

importantly, the most significant finding is that while aggregate process performance is

correlated with financial performance, it is not correlated with customer satisfaction. The

process performance measure associated with both firm financial performance and

customer satisfaction is the measure of variation across processes. We have found that if

processes are managed in a consistent way, then both financial performance and customer

satisfaction are improved. By consistent process management, we mean that the

performance of individual processes within a firm are similar to one another and thus

provide a consistent service offered to the consumer. Consumers' desire consistency and

thus, the bank must align its various delivery processes to meet the consumer's needs.

Therefore, we define process variation as the variation in performance across the eleven

individual process performance scores for each bank. It is the variation that we have

found to be the best predictor of overall firm performance.

The Common Measurements Tool (CMT)

30

CMT is the result of an extensive study by researchers at the Canadian Centre for

Management Development and others, which examined a number of approaches to

standardising measurement of customer satisfaction with public services. The model they

have developed provides a useful example of how elements of different approaches can

be combined to improve our understanding of satisfaction and highlight priorities for

improvement. It incorporates five main questioning approaches, measuring:

expectations of a number of service factors;

perceptions of the service experience on these factors;

level of importance attached to each of a number of service elements;

level of satisfaction with these elements;

Respondents' own priorities for improvement.

The approach is therefore made up of three distinct strands. The measures of expectations

and perceptions of the service experience tend to focus on a relatively small number of

very specific factors, such as how long customers wait to be served etc. This allows the

gap analysis approach through comparing expected service quality with experience.

The second strand involves asking levels of satisfaction with a more extensive list of

elements, followed by asking how important each of these aspects are to respondents.

This allows the comparison of satisfaction and importance that asking people to think

about what should be provided by an ideal or excellent service. As noted above, this

approach has also been taken by Berry in later studies.

The Customer Satisfaction Index (CSI)

The Customer Satisfaction Index represents the overall satisfaction level of that customer

as one number, usually as a percentage. Plotting this Satisfaction Index of the customer

against a time scale shows exactly how well the supplier is accomplishing the task of

customer satisfaction over a period of time.

31

Since the survey feedback comes from many respondents in one organization, the bias

due to individual perception needs to be accounted for. This can be achieved by

calculating the Satisfaction Index using an importance weighting based on an average of

Calculate the average of all the weightings given by the customer. Divide the individual

weightings by this average to arrive at the weighting on the basis of average of 1.

Customer's higher priorities are weighted more than 1 and lower priorities less than 1.

The averages of the Customers Importance Scores are calculated and each individual

score is expressed as a factor of that average. Thus Customer Satisfaction can be

expressed as a single number that tells the supplier where he stands today and an

Improvement plan can be chalked out to further improve his performance so as to get a

loyal customer.7

Case Study

Introduction

The banking industry like many other financial service industries is facing a rapidly

changing market, new technologies, economic uncertainties, fierce competition and more

demanding customers and the changing climate has presented an unprecedented set of

challenges . Banking is a customer oriented services industry, therefore, the customer is

the focus and customer service is the differentiating factors.

The banking industry in India has undergone sea change since post independence. More

recently, liberalization, the opening up of the economy in the 90s and the government's

decision to privatize banks by reduction in state ownership culminated in the banking

reforms based on the recommendations of Narasimha Committee. The prime mover for

banks today is profit, with clear indications from the government to 'perform or perish'.

Banks have also started realizing that business depends on client service and the

satisfaction of the customer and this is compelling them to improve customer service and

build up relationship with customers.

7 Measuring Customer Satisfaction in The Banking Industry

32

With the current change in the functional orientation of banks, the purpose of banking is

redefined. The main driver of this change is changing customer needs and expectations.

Customers in urban India no longer want to wait in long queues and spend hours in

banking transactions. This change in customer attitude has gone hand in hand with the

development of ATMs, phone and net banking along with availability of service right at

the customer's doorstep. With the emergence of universal banking, banks aim to provide

all banking product and service offering under one roof and their endeavor is to be

customer centric. With the emergence of economic reforms in world in general and in

India in particular, private banks have come up in a big way with prime emphasis on

technical and customer focused issues.

ICICI Bank

ICICI Bank (formerly Industrial Credit and Investment Corporation of India) is India's

largest private sector bank and second largest overall. ICICI Bank has total assets of

about USD 56 Billion (end-Mar 2006), a network of over 619 branches and offices, and

about 2400 ATMs. 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 specialized subsidiaries and affiliates in the areas of investment banking, life

and non-life insurance, venture capital and asset management. ICICI Bank's equity shares

are listed in India on stock exchanges at Kolkata and Vadodara, the Stock Exchange,

Mumbai and the National Stock Exchange of India Limited and its ADRs are listed on

the New York Stock Exchange (NYSE). During the year 2005, ICICI Bank was involved

as a defendant in cases of alleged criminal practices in its debt collection operations and

alleged fraudulent tactics to sell its products.

About ICICI Bank

ICICI was established by the Government of India in 1960s as a Financial Institution (FI)

other such institutions were IDBI and SIDBI with the objective to finance large industrial

projects. ICICI was not a bank--it could not take retail deposits; nor was it required to

comply with Indian banking requirements for liquid reserves. ICICI borrowed funds from

many multilateral agencies (such as the World Bank), often at concessional rates. These

33

funds were deployed in large corporate loans. All this changed in 1990s. ICICI founded a

separate legal entity--ICICI Bank which undertook normal banking operations--taking

deposits, credit cards, car loans, etc. The experiment was so successful that ICICI merged

into ICICI Bank "reverse merger" in 2002.

ICICI Bank is the largest issuer of credit cards in India. It was the first bank to offer a

wide network of ATMs and had the largest network of ATMs till 2005, before SBI

caught up with it. ICICI Bank now has the largest market value of all banks in India, and

is widely seen as a sophisticated bank able to take on many global banks in the Indian

market the bank is expanding in overseas markets. It has operations in the UK, Hong

Kong, Singapore and Canada. It acquired a small bank in Russia recently. It has tie-ups

with major banks in the US and China. The Bank is aggressively targeting the NRI (Non

Resident Indian) population for expanding its business.

Objectives of the Study

To ascertain the perceptions of customers regarding the service quality in banks.

To analyze and compare the perceptions of the customers in private (ICICI) and

public (SBI) banks.

To identify the areas which need improvement so that the quality of service of

these banks is enhanced?

To study the strategies those are being adopted by ICICI in order to get more

market share.

To study the strategies that are being adopted by SBI this can lead to its better

performance.

The study provides a comparative analysis of the performance of ICICI and SBI in

Yamuna Nagar district.

Hypothesis

The hypothesis of the study is:

34

H0--There is no significant difference between the quality perceptions and customer

satisfaction of public and private sector banks.

H1--There is significant difference between the quality perceptions and customer

satisfaction of public and private sector banks.

Measurement of Customer Satisfaction with Service Quality

Customer satisfaction is an important theoretical as well as practical issue for most

marketers and consumer researchers. Customer satisfaction is increasingly becoming a

corporate goal as more and more companies strive for quality in their products and

services Customer satisfaction is the feeling or attitude of a customer towards a product

or service (6) after it has been used and is generally described as the full meeting of one's

expectations (7) Customer satisfaction is a major outcome of marketing activity whereby

it serves as a link between the various stages of consumer buying behavior. For instance,

if customers are satisfied with a particular service offering after its use, then they are

likely to engage in repeat purchase and try line extensions (8). A study conducted by

Levesque and McDougall (9) confirmed and reinforced the idea that unsatisfactory

customer service leads to a drop in customer satisfaction and willingness to recommend

the service to a friend. This would in turn lead to an increase in the rate of switching by

customers.

To measure customer satisfaction with different aspects of service quality, Parasuraman,

Valerie Zeithaml and Berry developed a survey research instrument called SERVQUAL

(10). It is based on the premise that the customers can evaluate a firm's service quality by

comparing their perceptions of its service with their own expectations. SERVQUAL is

seen as a measurement tool that can be applied across broad spectrum of service

industries. In its basic form, the scale contains 21 perception items and a series of

expectation items, reflecting the five dimensions of service quality.

Their findings suggest that, in reality, SERVQUAL scores measure only two factors:

intrinsic service quality (resembling what is termed functional quality) and extrinsic

35

service quality (which refers to the tangible aspects of service delivery and "resembles to

some extent what Gronroos refers to as technical quality"). Generic dimensions

customers use to evaluate service quality are credibility, security, access communication,

understanding the customer, tangibles, reliability, responsiveness, competence, courtesy.

SERVQUAL Scale

The SERVQUAL scale includes five dimensions: tangibles, reliability, responsiveness,

assurance and empathy. Within each dimension are several items measured on a seven-

point scale from strongly agreed to strongly disagree, for a total of 21 items.

SERVQUAL Questions

For actual survey respondents, instructions are also included, and each statement is

accompanied by a seven-point scale ranging from "Strongly Agree--5" to "Strongly

Disagree--1". Only the end points of the scale are labeled; there are no words above the

number 2 through 4.

Comparing performance to expectations works well in reasonably competitive markets in

which customers have sufficient knowledge to purposefully choose a service that meets

their needs and wants. However, in uncompetitive markets or if customers do not have

free choice, there are risks to defining service quality primarily in terms of customers'

satisfaction with outcomes relative to their prior expectations.

Zeithaml, Parasuraman, and Berry proposed a series of steps for closing gaps 1 to 6.

Their prescriptions are summarized in following:

Gap 1 Prescription: Learn What Customers Expect?

Understand customer expectations through research, complaint analysis, customer panels,

etc. Increase direct interactions between managers and customers to improve

36

understanding. Improve upward communication from contact personnel to management.

Turn information and insights into action.

Gap 2 Prescription: Establish the Right Service Quality Standards

Ensure that top management displays ongoing commitment to quality as defamed by

customers. Set, communicate, and reinforce customer-oriented service standards for all

work units. Train managers in the skills needed to lead employees to deliver quality

service. Establish clear service quality goals that are challenging, realistic and explicitly

designed to meet customer expectations. Clarify which job tasks have the biggest impact

on quality and should receive the highest priority. Ensure that employees understand and

accept goals and priorities. Measure performance and provide regular feedback. Reward

managers and employees for attaining quality goals.

Gap 3 Prescription: Ensure That Service Performance Meets Standards

Clarify employee roles. Ensure that all employees understand how their jobs contribute to

customer satisfaction. Match employees to jobs by selecting for the abilities and skills

needed to. Perform each job well. Provide employees with the technical training needed

to perform their assigned tasks effectively. Develop innovative recruitment and retention

methods to attract the best people and build loyalty. Build teamwork so that employees

work well together, and use team rewards as incentives. Treat customers as partial

employees; clarify their roles in service delivery; and train and motivate them to perform

well in their roles as co-producers.

Gap 4 Prescription: Ensure that Communication promises are Realistic

Seek inputs from operations personnel when new advertising programs are being created.

Develop devising campaigns that feature real employees performing their jobs. Allow

service providers to preview advertisements before customers are exposed to them. Get

sales staff to involve operations staff' in face-to-face meetings with customers. Develop

internal educational, motivational, and devising campaigns to strengthen links among

marketing, operations, and human resource departments. Ensure that consistent standards

of service are delivered across multiple locations. Ensure that devising comment

37

accurately reflects those service characteristics that are most important to customers in

their encounters with the organization. Manage customers' expectations by setting them

know what is and is not possible and the reasons why. Identify and explain uncontrollable

reasons for shortcomings in service performance. Offer customers different levels of

service at different prices, explaining the distinctions.

Gap 5 Prescription: Debriefing and Offering of Tangible Evidence

The perceptions gap-recognizes that customers do not always correctly understand what

the service has done for them. This situation is particularly likely to occur with credence

services, for which it is difficult to judge performance even after delivery. Some service

personnel make it a point to not only keep customers informed during service delivery

but also debrief them at the end and, sometimes, offer tangible evidence.

Gap 6 Prescription: Pre-testing of Communication Materials in Advance of Publication

The interpretation gap-communication specialists in the firm need to pre-test all

advertising, brochures, telephone scripts, and website contents before they are published.

Pre-testing, widely used by advertising agencies, involved presenting communication

materials to a sample of customers in advance of publication.

Gap 7 Prescription: Ensure That the Customer Expectations and Perceptions of the

Service Are Matched

There is need to end the service gap. Closing service quality gaps is an essential step to

maximize customer satisfaction in the service industries. It is commonly said that what is

not measured is not managed. Without measurement, managers can't be sure whether

service quality gaps exist, let alone what types of gaps, where they exist, and what

potential corrective actions should be taken. And, of course, measurement is needed to

determine whether goals for improvement are being met after changes have been

implemented.

Conclusion and Policy Implications

38

The banking sector in India is undergoing major changes due to competition and the

advent of technology. The customer is looking for better quality services which enhance

his/her satisfaction. This study derives its basis from various research findings and is also

in line with empirical findings with respect to customer satisfaction by other researchers.

To sum up, the results of the study lead us to the following conclusion and policy

implication:

The customer satisfaction in terms of service quality is a relational marketing

paradigm. The relationships are mostly viewed from the perspective of the firm

providing services. For service firm in our case the banks, building strong

relationship is important for improving customer satisfaction through service

quality.

Public sector banks like SBI fall much below the perceptions of their customers

on all dimensions of service quality. Private Banks such as ICICI bank are

exceeding the perceptions of their customers on tangibility and reliability

dimensions of service quality.

Banks like ICICI are closer as regards expectations of their customers. They are

also not far away from the perceptions of their customers as far as other

dimensions of service quality are concerned. This observation undoubtedly

reveals the bleak reality that SBI does not meet the expectations of their

customers. In delivery of quality service in banks, what matter are speed,

accuracy, promptness, reliability, individualized attention, etc. Better results can

be achieved through proper use of relevant banking technology. These are the

areas where our banks are still lagging behind.

The above findings suggest the need and relevance of heavy investment on

tangibles particularly computer based banking, internet and intranet services, tele-

banking, 'anywhere and anytime banking', etc., besides physical facilities and

communication material. This will help in delivering quick and accurate services

to customers as well as reducing the workload of frontline staff and thereby

providing ways to employees to respond to customer requests. This investment

39

will also ensure convenient banking hours on which the services of our banks are

perceived by the customers to be very low.

Banks should continually assess and reassess how customers perceive bank

services so as to know whether the bank meets or exceeds or is below the

expectations of their customers. Such an appraisal, however, is a tedious task

because customer service is complex in nature and dynamic in action. Moreover,

it can vary greatly from one branch to another. Also, what is 'good service' today

may become 'indifferent service' tomorrow and 'bad service' the next day.

Frequent customer surveys, therefore, throw light on ratification and refinement

which will go a long way to improve the service quality in banks.

Customer service must match with marketing efforts, otherwise a customer would

remain a dissatisfied soul and all marketing efforts will go down the drain. The

process of fulfilling customer needs, therefore, requires tailoring bank services to

what customers want, rather than making them accept whatever banks can

conveniently provide. The needs and expectations of the customer changes from

time to time and, as such, innovating of new services and refinement of existing

services is imperative. Today, customers are exposed to the standards of

international banking and expect the same range of service quality from Indian

banks. If public sector banks fail to regulate the quality and efficiency of their

financial services to match or surpass those of private banks or foreign banks,

time is not far away when they will lose substantial market share to private and

foreign banks.

Banks must pay attention to potential failure points and service recovery procedures,

which become integral to employees' training. In other words, it amounts to empowering

employees to exercise responsibility, judgment and creativity in responding to customers'

problems.8

8 Customer satisfaction in Indian banking: a case of Yamuna Nagar District in Haryana

40

CHAPTER 4

DATA ANALYSIS & INTERPRETATION

TO THE CUSTOMER

1. Which type of account do you have?

TABLE SHOWING TYPE OF ACCOUNT

Options No of respondents Percentage %Savings 22 44%Current 13 26%Zero balance 8 16%Recurring deposit

7 14%

Total 50 100

CHART SHOWING TYPE OF ACCOUNT

41

Inference: From the above analysis it is found that 44% of them have savings account, 26% of them have current account, 16% of them have zero balance account and 14% of them have recurring deposit account.

2. What do you look for in a bank when you decide to start a relationship?

TABLE SHOWING FACILITIES LOOKED IN TO START A

RELATIONSHIP WITH BANK

Options No of respondents Percentage %Wide branch network 13 26%ATM network 15 30%Customer service 17 34%Choice of product 5 10%Total 50 100%

CHART SHOWING FACILITIES LOOKED IN TO START A RELATIONSHIP WITH BANK

42

Inference: From the above table it is found that 34% of them look in for customer service, 30% of them look in for ATM network, 26% of them look in for wide branch network and 10% of them look in for choice of product.

3. Do you think that the bank caters to all your banking needs?

TABLE SHOWING BANK CATERING TO ALL THE BANKING NEEDS

Options No of respondents Percentage %

Yes 37 74%

No 13 26%

Total 50 100%

CHART SHOWING BANK CATERING TO ALL THE BANKING NEEDS

43

Inference: From the above table it is found that 74% of them say that bank caters to all their banking needs and 26% of them say no.

4. Approximately how many times have you visited your branch in last 3 months?

TABLE SHOWING FRQUENCY OF VISTING BRANCH IN LAST 3

MONTHS

Options No of respondents Percentage %Never 16 32%1-3 times 12 24%4-9 times 18 36%More than 10 times

4 8%

Total 50 100%

44

CHART SHOWING FRQUENCY OF VISTING BRANCH IN LAST 3 MONTHS

Inference: From the above table it is found that 32% of them say that they have never gone to the branch in last 3 months, 8% have gone more than 10 times, 36% have gone for 4-9 times and 24% of them have gone for 1-3 times.

5. In terms of the service received by you from the bank kindly rate, how satisfied

you are with the following?

5.1 Friendly and courteous manner

TABLE SHOWING RATING OF FRIENDLY AND COURTEOUS

MANNER

Options No of respondents Percentage %Very satisfied 20 40%Satisfied 8 16%Dissatisfied 14 28%Very Dissatisfied 8 16%Total 50 100%

45

CHART SHOWING RATING OF FRIENDLY AND COURTEOUS MANNER

Inference: From the above table it is found that 40% of them say they are very satisfied with friendly and courteous manner, 16% say they are satisfied, 28% say dissatisfied and 16% say they are very dissatisfied with the service.

5.2. Willingness to listen and respond to your need

TABLE SHOWING RATING OF WILLINGNESS TO LISTEN AND

RESPOND TO YOUR NEED


46

CHART SHOWING RATING OF WILLINGNESS TO LISTEN AND RESPOND TO YOUR NEED

Inference: From the above table it is found that 46% of them say that they are very satisfied with willingness to listen and respond to the need, 20% of them are satisfied, 14% say of them are very dissatisfied and 20% of them are dissatisfied.

5.3. Fast and efficient service

TABLE SHOWING RATING OF FAST AND EFFICIENT SERVICE


CHART SHOWING RATING OF FAST AND EFFICIENT SERVICE

47

Inference: From the above table it is found that 28% of them are very satisfied, 12% of them are satisfied, 36% of them are dissatisfied and 24% of them are very dissatisfied with fast and efficient service.

5.4. Recognition of you as valued customer

TABLE SHOWING RATING OF RECONGNITION AS VALUED

CUSTOMER


48

CHART SHOWING RATING OF RECONGNITION AS VALUED CUSTOMER

Inference: From the above table it is found that 26% of them are very satisfied of

Recognition as valued customer, 54% of them are satisfied, 14% of them are dissatisfied

and 6% of them are very dissatisfied of Recognition as valued customer

5.5. Professional and attractive appearance

TABLE SHOWING RATING OF PROFESSIONAL AND ATTRACTIVE

APPEARANCE


49

CHART SHOWING RATING OF PROFESSIONAL AND ATTRACTIVE APPEARANCE

Inference: From the above table it is found that 26% of them are very satisfied of

Professional and attractive appearance, 54% of them are satisfied, 14% of them are

dissatisfied and 6% of them are very dissatisfied of Recognition as valued customer

5.6. Available to customers when needed

TABLE SHOWING SATISFACTION LEVEL OF AVAILABLE TO

CUSTOMERS WHEN NEEDED

Options No of respondents Percentage %Very satisfied 14 28%Satisfied 6 12%Dissatisfied 18 36%Very Dissatisfied 12 24%

50

Total 50 100%

CHART SHOWING SATISFACTION LEVEL OF AVAILABLE TO CUSTOMERS WHEN NEEDED

Inference: From the above table it is found that 28% of them are very satisfied, 12% of them are satisfied, 36% of them are dissatisfied and 24% of them are very dissatisfied of Available to customers when needed.

6. Where do you feel the bank needs improvement?

TABLE SHOWING FACTORS BANK NEEDS TO IMPROVE

Options No of respondents Percentage %Customer Service 18 36%Quick response 12 24%Product range offered 14 28%Ambience 6 12%

51

Total 50 100%

CHART SHOWING FACTORS BANK NEEDS TO IMPROVE

Inference: From the above table it is found that 36% of them say customer service, 24% say quick response, 28% of them say product range offered and 12% of them say ambience.

7. Have you contacted your branch by telephone in the last 3 months?

TABLE SHOWING CONTACTED THE BRANCH BY TELEPHONE IN

THE LAST 3 MONTHS

Options No of respondents Percentage %Yes 32 64%No 18 36%

52

Total 50 100%

CHART SHOWING CONTACTED THE BRANCH BY TELEPHONE IN THE LAST 3 MONTHS

Inference: From above table and figure it is found that 64% of them have contacted the bank through telephone and 36% say no.

8. Approximately how often do you contact the branch by telephone in a year?

TABLE SHOWING FREQUENCY OF CALLS MADE TO CONTACT THE

BRANCH IN A YEAR


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Never 16 32%1-3 times 12 24%4-9 times 18 36%More than 10 times

4 8%

Total 50 100%

CHART SHOWING FREQUENCY OF CALLS MADE TO CONTACT THE BRANCH IN A YEAR

Inference: From the above table it is found that 32% of them say that they have never contacted the branch through telephone, 8% have gone more than 10 times, 36% have gone for 4-9 times and 24% of them have gone for 1-3 times.

TO THE BANKERS

1. How would you rate the services offered by your bank to the customer?

TABLE SHOWING RATING OF SERVICE OFFERED BY BANK

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Options No of respondents

Percentage %

Very good 15 50%Good 5 17%Average 8 26%Poor 2 7%Total 30 100%

CHART SHOWING RATING OF SERVICE OFFERED BY BANK

Inference: From the above table and graph it is found that 50% of them say that the service is very good, 26% of them say average, 17% say good and 7% of them say poor.

2. Is there a separate department in your bank to handle customer grievances?

TABLE SHOWING SEPARATE DEPARTMENT TO HANDLE

CUSTOMER GRIEVANCES

55

Options No of respondents Percentage %Yes 20 67%No 10 33%Total 30 100%

CHART SHOWING SEPARATE DEPARTMENT TO HANDLE CUSTOMER GRIEVANCES

Inference: From the above table it is found that 67% of then say that there is a separate department for customer grievances and 33% of them says no.

3. How fast the customer grievances are handled in your bank?

TABLE SHOWING THE SPEED OF HANDLELING CUSTOMER GRIEVANCES

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Options No of respondents

Percentage %

Within24 hrs 12 40%Within 48 hrs 8 27%Within 96 hrs 7 23%More than 96 hrs 3 10%Total 30 100%

CHART SHOWING THE SPEED OF HANDLELING CUSTOMER GRIEVANCES

Inference: From the above table it is found that 40% of them say they handle customer complaints within 24hrs, 27% of them say within 48hrs, 23% of them says within 96 hrs and 10% of them say more than 96 hrs.

TO THE INDUSTRY EXPERTS

1. What do you think about the customer satisfaction strategies followed in various banks?

57

TABLE SHOWING CUSTOMER SATISFACTION STRATEGIES

FOLLOWED IN VARIOUS BANKS

Options No of respondents Percentage %Very good 2 10%Good 4 20%Average 6 30%Poor 8 40%Total 20 100%

CHART SHOWING CUSTOMER SATISFACTION STRATEGIES FOLLOWED IN VARIOUS BANKS

Inference: From the above analysis it is found that 10% of them say that the customer satisfaction strategies followed in various banks are very good, 40% of them say poor, 30% of them say average, 20% of them say good.

2. Do you think the banks have to give individual attention to every customer?

58

TABLE SHOWING BANKS GIVING INDIVIDUAL ATTENTION TO

EVERY CUSTOMER

Options No of respondents Percentage %Yes 8 40%No 12 60%Total 20 100%

CHART SHOWING BANKS GIVING INDIVIDUAL ATTENTION TO EVERY CUSTOMER

Inference: From the above table it is found that 40% of them say the banks have to give individual attention to every customer and 60% of them No.

3. Do you think the public sector banks have to concentrate more on customer

satisfaction?

59

TABLE SHOWING PUBLIC SECTOR BANKS CONCENTRATING

MORE ON CUSTOMER SATISFACTION


Yes 15 75%

No 5 25%

Total 20 100%

CHART SHOWING PUBLIC SECTOR BANKS CONCENTRATING MORE ON CUSTOMER SATISFACTION

Inference: From the above table it is found that 75% of them yes the public sector banks have to concentrate more on customer satisfaction and 25% say no.

4. In which areas do you think the banks have to improve?

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TABLE SHOWING THE AREAS WHICH THE BANKS HAVE TO

IMPROVE

Options No of respondents Percentage %Customer Service 7 35%Quick response 4 20%Product range offered 6 30%Ambience 3 15%Total 20 100%

CHART SHOWING THE AREAS WHICH THE BANKS HAVE TO IMPROVE

Inference: From the above table it is found that 35% of them say customer service, 30% of them say product range, 20% of them say quick response and 15% of them say ambience.

61

CHAPTER 5

FINDINGS

From the analysis it is found that 44% of them have savings account, 26% of them

have current account, 16% of them have zero balance account and 14% of them

have recurring deposit account.

From the analysis it is found that 34% of them look in for customer service, 30%

of them look in for ATM network, 26% of them look in for wide branch network

and 10% of them look in for choice of product.

From the analysis it is found that 74% of them say that bank caters to all their

banking needs and 26% of them say no.

From the analysis it is found that 32% of them say that they have never gone to

the branch in last 3 months, 8% have gone more than 10 times, 36% have gone for

4-9 times and 24% of them have gone for 1-3 times.

From the analysis it is found that 40% of them say they are very satisfied with

friendly and courteous manner, 16% say they are satisfied, 28% say dissatisfied

and 16% say they are very dissatisfied with the service.

From the analysis it is found that 46% of them say that they are very satisfied with

willingness to listen and respond to the need, 20% of them are satisfied, 14% say

of them are very dissatisfied and 20% of them are dissatisfied.

From the analysis it is found that 28% of them are very satisfied, 12% of them are

satisfied, 36% of them are dissatisfied and 24% of them are very dissatisfied with

fast and efficient service.

From the analysis it is found that 26% of them are very satisfied of Recognition as

valued customer, 54% of them are satisfied, 14% of them are dissatisfied and 6%

of them are very dissatisfied of Recognition as valued customer

62

From the analysis it is found that 26% of them are very satisfied of Professional

and attractive appearance, 54% of them are satisfied, 14% of them are dissatisfied

and 6% of them are very dissatisfied of Recognition as valued customer

From the analysis it is found that 28% of them are very satisfied, 12% of them are

satisfied, 36% of them are dissatisfied and 24% of them are very dissatisfied of

Available to customers when needed.

From the analysis it is found that 36% of them say customer service, 24% say

quick response, 28% of them say product range offered and 12% of them say

ambience.

From the analysis it is found that 64% of them have contacted the bank through

telephone and 36% say no.

From the analysis it is found that 32% of them say that they have never contacted

the branch through telephone, 8% have gone more than 10 times, 36% have gone

for 4-9 times and 24% of them have gone for 1-3 times.

From the analysis it is found that 50% of them say that the service is very good,

26% of them say average, and 17% say good and 7% of them say poor.

From the analysis it is found that 67% of then say that there is a separate

department for customer grievances and 33% of them says no.

From the analysis it is found that 40% of them say they handle customer

complaints within 24hrs, 27% of them say within 48hrs, 23% of them says within

96 hrs and 10% of them say more than 96 hrs.

From the analysis it is found that 10% of them say that the customer satisfaction

strategies followed in various banks are very good, 40% of them say poor, 30% of

them say average, 20% of them say good.

From the analysis it is found that 40% of them say the banks have to give

individual attention to every customer and 60% of them No.

63

From the analysis it is found that 75% of them yes the public sector banks have to

concentrate more on customer satisfaction and 25% say no.

From the analysis it is found that 35% of them say customer service, 30% of them

say product range, 20% of them say quick response and 15% of them say

ambience.

64

CHAPTER 6

RECOMMENDATION AND CONCLUSION

RECOMMENDATION

The following are some of the consumer satisfaction strategies which can be followed in Indian Banking sector.

Encourage Face-to-Face Dealings

This is the most important thing in the banking business. If you're not used to this sort of

thing it can be a pretty nerve-wracking experience. It's important for all the bank

employees to meet the customers face to face at least once or even twice during the

course of business.

My experience has shown that a client finds it easier to relate to and work with someone

they've actually met in person, rather than a voice on the phone or someone typing into an

email or messenger program. When you do meet them, be calm, confident and above all,

take time to ask them what they need. I believe that if a potential client spends over half

the meeting doing the talking, you're well on your way to satisfy the customer.

Respond to Messages Promptly & Keep the Clients Informed

This goes without saying that don’t make your customer to wait for a long time. We all

know how annoying it is to wait for hours together in the queue to do a transaction and

wait for days for a response to an email or phone call. It might not always be practical to

deal with all customers' queries within the space of a few hours, but at least email or call

them back and let them know you've received their message and you'll contact them

about it as soon as possible. Even if you're not able to solve a problem right away, let the

customer know you're working on it.

Be Friendly and Approachable

It's very important to be friendly, courteous and to make your clients feel like you're their

friend and you're there to help them out. There will be times when you want to beat your

65

clients over the head repeatedly with a blunt object - it happens to all of us. It's vital that

you keep a clear head, respond to your clients' wishes as best you can, and at all times

remain polite and courteous.

Have a Clearly-Defined Customer Service Policy

This may not be too important when you're just starting out, but a clearly defined

customer service policy is going to save you a lot of time and effort in the long run. If a

customer has a problem, what should they do? If the first option doesn't work, then what?

Should they contact different people for billing and technical enquiries? If they're not

satisfied with any aspect of your customer service, who should they tell?

There's nothing more annoying for a client than being passed from person to person, or

not knowing who to turn to. Making sure they know exactly what to do at each stage of

their enquiry should be of utmost importance. So make sure your customer service policy

is present on your bank’s website - and anywhere else it may be useful.

Attention to Detail

Have you ever received a Happy Birthday email or card from the bank were you are a

client of? Have you ever had a personalized sign-up confirmation email for a service that

you could tell was typed from scratch? These little niceties can be time consuming and

aren't always cost effective, but remember to do them.

Even if it's as small as sending a Happy Holidays email to all your customers, it's

something. It shows you care; it shows there are real people on the other end of that

screen or telephone; and most importantly, it makes the customer feel welcomed, wanted

and valued.

Honour Your Promises

When you promise something, deliver. Clients don't like to be disappointed. Sometimes, something may not get done, or you might miss a deadline through no fault of your own. In this case a quick apology and assurance it'll be ready ASAP wouldn't go amiss.

66

CONCLUSION

In today’s competitive environment relationship marketing is critical to banking

corporate success. Banking is a customer oriented services industry and Indian banks

have started realizing that business depends on client service and the satisfaction of the

customer. This is compelling them to improve customer service and build relationships

with customers

It's a well known fact that no business can exist without customers. Customer service,

like any aspect of business, is a practiced art that takes time and effort to master. All we

need to do to achieve this is to stop and switch roles with the customer. What would you

want from your business if you were the client? How would you want to be treated? Treat

your customers like your friends and they'll always come back.

67

APPENDICES

QUESTIONNAIRE

TO THE CUSTOMER

1. Which type of account do you have?

a. Savings

b. Current

c. Zero balance

d. Recurring deposit

2. What do you look for in a bank when you decide to start a relationship?

a. Wide branch network

b. ATM network

c. Customer service

d. Choice of product

e. Others

3. Do you think that the bank caters to all your banking needs?

a. Yes

b. No

4. Approximately how many times have you visited your branch in last 3 months?

a. Never

b. 1-3 times

c. 4-9 times

d. More than 10 times

5. In terms of the service received by you from the bank kindly rate, how satisfied

you are with the following?

5.1. Friendly and courteous manner

a. Very satisfied

b. Satisfied

c. Dissatisfied

d. Very Dissatisfied

68

5.2. Willingness to listen and respond to your need

a. Very satisfied

b. Satisfied

c. Dissatisfied


5.3. Fast and efficient service

a. Very satisfied

b. Satisfied

c. Dissatisfied


5.4. Recognition of you as valued customer

a. Very satisfied

b. Satisfied

c. Dissatisfied


5.5. Professional and attractive appearance

a. Very satisfied

b. Satisfied

c. Dissatisfied


5.6. Available to customers when needed

a. Very satisfied

b. Satisfied

c. Dissatisfied

69


6. Where do you feel the bank needs improvement?

a. Customer Service

b. Quick response

c. Product range offered

d. Ambience

e. Others

7. Have you contacted your branch by telephone in the last 3 months?

a. Yes

b. No

8. Approximately how often do you contact the branch by telephone in a year?

a. Never

b. 1-3 times

c. 4-9 times

d. More than 10 times

TO THE BANKERS

1. How would you rate the services offered by your bank to the customer?

a. Very good

b. Good

c. Average

d. Poor

2. Is there a separate department in your bank to handle customer grievances?

a. Yes

b. No

3. How fast the customer grievances are handled in your bank?

a. Within24 hrs

b. Within 48 hrs

c. Within 96 hrs

70

d. More than 96 hrs

TO THE INDUSTRY EXPERT

1. What do you think about the customer satisfaction strategies followed in various

banks?

a. Very good

b. Good

c. Average

d. Poor

2. Do you think the banks have to give individual attention to every customer?

a. Yes

b. No

3. Do you think the public sector banks have to concentrate more on customer

satisfaction?

a. Yes

b. No

4. In which areas do you think the banks have to improve?

a. Customer Service

b. Quick response

c. Product range offered

d. Ambience

e. Others

71

BIBLIOGRAPHY

Websites:

1. Customer-centric Banking: http://www.iba.org.in/ibahenley.asp

2. History of Banking in India :

http://finance.indiamart.com/investment_in_india/banking_in_india.html

3. India Banking 2010:

http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/india_banking_20

10.pdf

4. Indian banks face foreign 'attackers':

http://www.atimes.com/atimes/South_Asia/IL18Df02.html

5. Customer satisfaction: http://en.wikipedia.org/wiki/Customer_satisfaction

6. Measuring Customer Satisfaction in The Banking Industry:

http://www.indianmba.com/Faculty_Column/FC328/fc328.html

7. Customer satisfaction in Indian banking: a case of Yamuna Nagar District in

Haryana: http://findarticles.com/p/articles/mi_7058/is_1-2_17/ai_n28556199/

pg_11/?tag=content;col1

Books:

72

http://findarticles.com/p/articles/mi_7058/is_1-2_17/ai_n28556199/pg_11/?tag=content;col1

http://findarticles.com/p/articles/mi_7058/is_1-2_17/ai_n28556199/pg_11/?tag=content;col1

http://www.indianmba.com/Faculty_Column/FC328/fc328.html

http://en.wikipedia.org/wiki/Customer_satisfaction

http://www.atimes.com/atimes/South_Asia/IL18Df02.html

http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/india_banking_2010.pdf

http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/india_banking_2010.pdf

http://finance.indiamart.com/investment_in_india/banking_in_india.html

http://www.iba.org.in/ibahenley.asp

sara-full report on commercial banks

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