Banking in India- Public Sector Banks- Changed outlook

Today, banking sector is seen as a catalyst in economic growth of a country and, lot is
expected from the banking fraternity. The recognition of banking, as a tool for all
inclusive growth by economists, financial planners, reformist etc has made it an
important sector in the Government’s planning of economic growth. The banking sector
in India is there fore witnessing tremendous changes because of political, social and
economic changes that are taking place domestically and internationally.

The concept of banking, which was earlier restricted to accepting of deposits from public
for the purpose of, has also undergone sea change. Today the banking sector is seen as a
vehicle for all inclusive economic growth, social responsibility and equiv-distribution of
national resources.

Because of the changed roles envisaged for the banking sector, the ownership structure of
banks in India is also changing. During the social sector reforms undertaken by
Government, private sector banks were nationalised to support the Government’s social
objectives to uplift underprivileged, backward and neglected sectors of society. However
with changes in Government policies and Liberalisation, Government plans to reform and
restructure the banking sector again through mergers/takeovers/privatizations etc to make
them strong and vibrant in international financial sector.

To keep pace with international developments in financial sectors, the banking activities
in India are also changing. It is now universal banking with twin objective to meet social
goals of the Government as well as to ensure commercial viability independently as
envisaged by the Government. Banks are now entering into new fields apart from the
business of core banking of deposits and lending. Government also wants domestic banks
to become stronger to face challenges from foreign banks as and when they enter in to
Indian financial sector post 2009-2010. These changes have brought in immense
competition among banks. Each bank now wants to grow vertically as well as
horizontally so as to save its identity in the market post 2009-2010 liberalised scenarios.

These changes have made the customers central point for banks. Today banks are wooing
existing customers, prospective customers by offering new facilities, products, and
services in order to retain/increase their base in market. The way the banking has
changed, so has the customer changed. The customer of today is not what he was
yesterday. Today the customer is more knowledgeable, demanding, analytical and aware
of his rights.

It is therefore a challenging task before the banking sector, specially the Public Sector
banks to revisit their entire working modules, up gradation of skills, technology, and
policies so that they are competent to withstand the international competitive
environment in future.

Public Sector Bank Customer.

When we talk about customer service, we tend to think it as a very simple issue of
customer satisfaction. However its very complex issue because customers of Public
sector banks comes from all walks of life;

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 1. From poorest to richest.
2. Youngest to oldest.
3. Illiterate to highly educated.
4. Sweeper to Chief Executive.
5. Individuals to Corporate.
6. People from all regions, religion, caste, age, service, profession etc.
7. People from different backgrounds, culture, temperament and ego levels.

All customers from different backgrounds have different expectations. Unless the service
standards fit to each person’s expectations, he will not be satisfied. Therefore one has to
understand each type of customer thoroughly to be able to provide customer specific
services.

Customer service- planning strategies

The entire process of customer service is dependent on following.

1. The human resources.
2. The products itself.
3. Processes.
4. The delivery channels.
5. Customer feedback.
6. Grievances redressal mechanism
7. Market study.

1. Human resources

Any organization’s success or failure is the result of success or failure of its employees
collectively. Here the employee doesn’t mean only the staff working down the ladder, but
also includes people right up to the top. All the functions in an organization are
undertaken by humans, whether it is selection of staff, development of product, making
software, formulating policies, devising systems, procedures, defining processes, delivery
channels, undertaking market studies etc. Humans may be assisted by the technology for
arriving at the decisions. In all the functions enumerated above, different departments do
the work separately but the same are ultimately linked to each other to achieve the
corporate goal. It is just like gears though rotating independently, move the entire
structure in the desired direction. If any gear malfunctions, it brings the entire process to
halt. Thus the human beings working in an organization are very important. Handling of
humans by humans is a very complex job also.

The job requirements of HRD are to select, train, develop, deploy, and motivate the
human resources in the organization so as to get optimum results for the organization.

2. Products/services

Banks do not provide physical goods to its customers. The products which a bank offers
are mostly financial products and along with these products also provide other services
which are not financial in nature, like safe deposit vaults, Locker facilities etc.

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In financial products there are basically two types of activities, namely deposit
procurement and its deployment profitably. These two activities constitute more than
80% of banking business in all the banks.

a) Deposits

Basic structure of deposit is to attract the customer by offering interest on funds or some
facility in lieu of interest. However depending upon the needs of different set of
customers various types of deposit schemes are formulated. For example, savings bank
accounts are for those who want short term savings with liquidity and to make regular
deposits and withdrawals etc. Term deposits are for those who want to invest for longer
duration having surplus funds not needed immediately. Some may want savings to grow
gradually by contributing smaller amounts at set intervals. The ultimate goal of depositor
is to keep his money safely in the bank and be able to use when needed. Like wise there
are various combinations of deposit schemes based on liquidity, returns and safety.

b) Advances

Banks, in a similar way deploy deposits by lending to those who need it at a cost in the
shape of interest. Here again the products differ depending upon the need of the customer.
It may be overdraft facility, working capital finance, term loan, etc for business or
personal needs.

c) Other products/ services

Apart from deposit and advances, banks offer various other facilities/services to their
clients, like remittances, investment services, fund management, financial advisory
services, tax collections, bill payment services etc. to earn fee based incomes.

The flexibility of banks to adopt changing needs and expectation of customers and bring
out products/ services to suit customers is an important area in banking services. A robust
Research and Development department which can effectively and efficiently bring out
newer products/ services based on market feel and futurist visualization of customer
preferences is an important aspect in banking services.

3. Processes.

Today’s customer is short of time and feels uncomfortable when the process involved in
getting the product or service is lengthy and cumbersome. The customer wants very
simple processes to get his work done. The processes for any product or service should be
at the minimum and at one go. Frequent back references and repeated information and
excessive documentation dissatisfy the customer. The processes devised for getting the
services should be very customer friendly, easy to understand and complete. The forms,
applications, documents should be simple, easy to understand with proper column and
space to write. Sometimes it is observed that the space provided for writing is very small.
The quality of paper, the font size and the language should be proper.

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4. Delivery channels.

Customer satisfaction is also dependent upon the delivery channels used by banks in
providing the services. Today’s customer wants effortless, efficient, secure, simple and
dependable channels of delivery, whether it is through humans or technology driven
channels. To quote an example, suppose a customer uses internet banking and made a
third party payment. He would like to know what happened to his payment instructions.
He should be able to track the payment on line till it reaches the beneficiaries account. If
this facility is not available, he may not be comfortable with the internet banking.
Another thing mostly observed in Public sector banks is that their websites are not
updated regularly and navigation is very tardy. The forms/ applications are scanned and
can not be filled on line. The information/ forms etc. are outdated and not properly
tagged.

5. Customer feedback and complaints.

Feed back from customers is of immense help in formulating products, fine tune services
and plug the loopholes. However most of the time, feed backs are generally not available
and public sector banks are normally not enthused about taking feed back on their
services. Rather wherever a customer gives his feedback (read complaint), it is not taken
in right spirit by the bank/ concerned staff. Instead of looking into the real cause an effort
is made to provide alibis or blame the staff. It may be possible that that the procedure
itself is the cause of complaint or it is because of reasons which are not under control of
the branch.

Customers may be of three types. One type of customer never complains and continues
the relationship. Second type of customer does not complain but changes the bank
silently and third type of customer complains. First and second type of customers does
not give an opportunity to bank to improve upon its services. Third type of customer
however gives opportunity to the bank to improve the service though he may not be
preferred over the other two types of customers.

Today no bank is willing to accept complaints from the customers and normally effort is
made to somehow get the complaint withdrawn or resolved without analyzing why the
complaint has originated. It becomes very difficult for field level staff to get the
complaint redressed when the cause or reason of complaint is not because of them.
However they are made to beg the customer to give satisfaction letter.

Each complaint when made may be because of so many factors, not necessarily the fault
of the person or branch against which it is made. It may be due to system lapse,
procedural deficiency, inapt technology, poor in-house work allocation, work flow
module etc. Some times the complaints are frivolous and made to harass the person
concerned. Though in customer oriented markets, customer is always right but care
should be taken that the staff is also protected from frivolous complainants. Each
complaint of the customer should be properly analyzed, assessed. It may be possible that
route cause may be some where else which should be rectified rather then the concerned
staff or branch made the scapegoat.

6. Grievances redressal Mechanism.

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Improving upon the services is an ongoing process. The essential inputs are customer
feedback, market surveys and the complaints received by an organization. No
organization can say that they have zero customer complaints. However an organization
which has robust mechanism to redress the complaints and resolve problem of the
customer gets recognition as a customer friendly organization. Accepting the mistake and
offering compensation goes a long way in retaining the customer. Most of the banks have
come out with their compensation policies and customer grievances cells. However they
are mostly on paper and seldom followed in the spirit in which they are framed. Even
where the compensation policy provides automatic payment of compensation, interest in
case of delays etc., it is seldom paid unless the customer demands it.

7. Market Studies.

Market studies are effective tools to study the behavior of customers and their response to
present standard of services. It also helps to understand future trends and requirements as
needs of the customer’s keeps of changing with change of times. Market research gives
way to innovations in products and services. Market studies may be done in-house, or
assigned to outside expert agencies or both depending upon the vision of the bank.

SOME IMPORTANT ISSUES CONCERNING PUBLIC SECTOR BANKS

The standard of services in public sector bank is normally compared with Private sector/
foreign banks. If we look at the range of products offered by Public Sector bank, they are
today more or less the same as in Private Sector. Today Public sector bank’s have also
entered into those areas which were earlier the monopoly of Private sector banks.
Whether it is credit card/ debit cards, ATMs, online transactions, mutual funds,
investments, insurance, online trading, joint ventures, and wealth management services or
demat services. Many of the Public sector banks are also undertaking financial advisory,
loan syndication and host of other activities which were earlier in the domain of Private/
Foreign banks. Today there is practically not much difference in the products/ services
being offered either by Public sector banks or private sector banks. Still when we
compare the customer satisfaction and quality of service, private sector banks certainly
takes lead over the Public sector banks, though the gap is reducing day by day. The
reasons may be due to;

1. Ownership. (Government/ Private).

2. Staff profile/ composition.
3. HRD Policies related to employment, deployment, promotions and transfers.
4. Compensation/ wage structure.
5. Geographical distribution.
6. Social responsibilities.
7. Technology adoption and absorption.
8. Multi-tier organizational setup.

In the following tabulation an effort has been made to look at the differences between
Public Sector and Private Sector banks which directly or indirectly reflect upon the
working of these banks.

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Serial Factor Effects on
Number Public Sector Banks
1. Ownership a) Policies as per directives of
Pattern Government
b) Board of Directors includes
Government nominees.
c) Social obligations as per
Government directives.
d) Comes under CVC provisions.
e) Right to information Act
applicable.
f) Reservation policies applicable.
g) CMDs/EDs normally from other
banks every 2 to 5 years. Changes
in long term corporate goals
effecting Continuity of corporate
plans.
2. Organizational a) Multi-layer set up. Normally there a) Few Layers among branch
structure are 4 to 5 layers in between branch
unit and Head office.
b) Two way communications
normally missing.
c) Multi-layer setup delays decision implementation.
taking.
3. Legacy The youngest Public Sector bank is
around 60 years old.
Old outlook.
Transformation problems.
4. Geographical Maximum number of offices in
distribution Rural/ semi-urban areas. Stress on
resources. Uneconomical, loss
making branches. Priority sector
lending including agriculture
advances requires huge resources.
5. Staff profile/ a) Average age of staff very much
working systems on higher side as fresh
recruitments are few and far
between.
b) Majority of senior level staff not
techno savvy.
c) Educational/ professional
competence on lower side.
d) Professionalism absent to a large
New Generation Private
Sector Bank/Foreign Banks
a) Independent policy
decisions.
b) Independent board of
directors.
c) No social obligations.
d) Not under CVC provisions.
e) RTI Act not applicable.
f) Reservation policies not
applicable.
g) Long term association of
top management with the
bank. Long term goals and
continuity in corporate plans.
unit and Head Office.
b) Effective two way
communications.
c) Fast decision taking and
Private sector banking is about
10 years old.
Younger outlook.
No such issues.
Mostly concentrated in Metro/
Urban centers. No presence in
rural areas. Savings on
resources and costs. No
priority sector lending. Save
on resources.
a) Average age between 30 to
40 years.
b) Very techno-savvy- able to
reap full benefits of
technology.
c) Highly qualified both
professionally and
academic wise.
d) Very professional.
e) No generation gap
problems.
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 extent.
e) Generation gap among old and
new staff due to age/
qualification differences.
f) Knowledge of all seats required.
No specialized cadre.
g) Mass banking. All types of
customers accepted. No
conditions attached.
6. Service conditions
1. Wages/ a) Industry level settlements.
perquisites/ b) One scale, one salary.
facilities c) Job security to a large extant.
2. Promotions. a) Normally time bound.
b) Performance evaluation not
uniform and scientific.
3. Transfers a) Transferable job.
b) Transfers as per transfer policy
not as per requirements.
c) Transfers results in
discontentment in staff because
of
- Family dislocation.
- Additional expenses.
- Affects Children education.
- Change in environment.
- Re-establishing customer
relationships at new place.
- Customizing with new people at
new place.
Therefore not keen to take
promotions/ shoulder higher
responsibilities due these
factors.
All above affects working of the
employee/ branch and the bank.
7. Technology a) Very slow and time consuming.
adoption and b) Resistance- non-acceptance of
absorption changes by senior people.
c) Data migration problems.
d) No outsourcing of jobs.
e) Research and development
f) Specific and specialized
jobs.
g) Class banking. All type of
customers not welcome.
Conditions attached.
a) Bank-wise package.
b) Different package in same
levels.
c) Hire & Fire policy.
a) Depending on performance,
not time bound.
b) Performance evaluations
uniform and scientific.
a) Very few transfers.
b) Transfers as per
requirements.
c) Staff able to strengthen
customer relationship on
long-term basis.
d) Family problems do not
affect employee’s working.
e) Enables staff to work
whole-heartily.
f) Enables employee to enjoy
family life.
e) Continuity of child/
children education do not
suffer.
a) From day one on
technology.
b) No question of resistance
from staff.
c) No data related problems.
d) Many activities
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missing outsourced.
e) Robust research &
development.