CUSTOMER SERVICE IN BANKING SECTOR

INTRODUCTION
In the organized segment, banking system occupies an important place in nations 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 2 Public sector !P"#s$ and 2% private sector banks are functioning in the country presently. The &inancial "ervices is the backbone of service sector. #anks 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 e(ist without customers. )ustomer satisfaction, a business term, is a measure of how products and services supplied by a company meet or surpass customer e(pectation. It is seen as a key performance indicator within business. 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. )ustomer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and service to service. The state of satisfaction depends on a number of both psychological and physical variables. 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 . #anking 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. *ore recently, liberalization, the opening up of the economy in the +s and the government's decision to privatize banks by reduction in state ownership culminated in the banking reforms based on the recommendations of ,arasimha )ommittee. The prime mover for banks today is profit, with clear indications from the government to 'perform or perish'. #anks 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. -ith 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 e(pectations.

)ustomers in urban India no longer want to wait in long .ueues and spend hours in banking transactions. This change in customer attitude has gone hand in hand with the development of /T*s, phone and net banking along with availability of service right at the customer's doorstep. -ith 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. -ith 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. HISTORY OF THE BANKING SECTOR &or centuries banks have played an important role in in fnancial system of the country. The vital role continues even today although the form of banking have changed today with changing need of the economy and individuals. -ith e(pansion of trade and commerce, the concept of banking gained importance. The of banking transcended from individuals to groups and later to companies. 0uring the *oghul period the indigenous bankers played a very important role in lending money and financing foreign trade in India. 0uring #ritish rule the agency houses carried on the banking business. The #anking system in India has three tiers. There are scheduled commercial banks1 the regional rural banks1 and the cooperative banks. The scheduled commercial banks constitute those banks which are included in the second schedule of 2#I /ct 3 45. #anking in India originated in the last decades of the 36th century. The first banks were The 7eneral #ank of India which started in 3869, and the #ank of :industan, both of which are now defunct. The oldest bank in e(istence in India is the "tate #ank of India, which originated in the #ank of )alcutta in ;une 36+9, which almost immediately became the #ank of #engal. This was one of the three presidency banks, the other two being the #ank of #ombay and the #ank of *adras, all three of which were established under charters from the #ritish <ast India )ompany. &or many years the Presidency banks acted as .uasi=central banks, as did their successors. The three banks merged in 3 23 to form the Imperial #ank of India, which, upon India's independence, became the "tate #ank of India. Indian merchants in )alcutta established the >nion #ank in 364 , but it failed in 3656 as a conse.uence of the economic crisis of 3656=5 . The /llahabad #ank, established in 369% and still functioning today, is the oldest ;oint "tock bank in India. It was not the first though. That

honor belongs to the #ank of >pper India, which was established in 3694, and which survived until 3 34, when it failed, with some of its assets and liabilities being transferred to the /lliance #ank of "imla. &oreign banks too started to arrive, particularly in )alcutta, in the 369+s. The )omptoire d'<scompte de Paris opened a branch in )alcutta in 369+, and another in #ombay in 36921 branches in *adras and Pondichery, then a &rench colony, followed. :"#) established itself in #engal in 369 . )alcutta was the most active trading port in India, mainly due to the trade of the #ritish <mpire, and so became a banking center. The first entirely Indian ?oint stock bank was the @udh )ommercial #ank, established in 3663 in &aizabad. It failed in 3 %6. The ne(t was the Pun?ab ,ational #ank, established in Aahore in 36 %, which has survived to the present and is now one of the largest banks in India. The period between 3 +9 and 3 33, saw the establishment of banks inspired by the "wadeshi movement. The "wadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. / number of banks established then have survived to the present such as #ank of India, )orporation #ank, Indian #ank, #ank of #aroda, )anara #ank and )entral #ank of India.The favour of "wadeshi movement lead to establishing of many private banks in 0akshina Bannada and >dupi district which were unified earlier and known by the name "outh )anara ! "outh Banara $ district. &our nationalized banks started in this district and also a leading private sector bank. :ence undivided 0akshina Bannada district is known as C)radle of Indian #ankingC. The "tate #ank of India !"#I$ is the oldest and largest bank in the country. Its origins go back to the first decade of the 3 th century, when the #ank of )alcutta was established on 2 ;une 36+9. The bank got its present name after an /ct of Parliament in *ay 3 %% and the "tate #ank of India was constituted on 3 ;uly 3 %%. Today, "#I has a phenomenal ,%% branches and its /T* network is spread across 9,584 of its own locationsD total 6,+++/T*s including of those of its associate banks. "tate #ank of India is a successor to Imperial #ank of India, which was established in 3 23.The bank, came into being on 3.8.3 %% through the "tate #ank of India /ct, 3 %%."tates of India ?oined the "tate #ank 7roup, as subsidiaries under the "tate #ank of India !"ubsidiaries #anks$ /ct, 3 % .

RURAL BANKING 2ural banking in India started since the establishment of banking sector in India. 2ural #anks in those days mainly focused upon the agro sector. ,ational #ank for /griculture and 2ural 0evelopment !,/#/20$ is a development bank in the sector of 2egional 2ural #anks in India. It provides and regulates credit and gives service for the promotion and development of rural sectors mainly agriculture, small scale industries, cottage and village industries, handicrafts. FOREIGN BANKS IN INDIA &oreign #anks in India always brought an e(planation about the prompt services to customers. /fter the set up foreign banks in India, the banking sector in India also become competitive and accusative. ,ew policies are introduced by 2#I for themEThe policy conveys that foreign banks in India may not ac.uire Indian ones !e(cept for weak banks identified by the 2#I, on its terms$ and their Indian subsidiaries will not be able to open branches freely, *ain competitors for banking sector. Post offices, *utual fund, "hare market, Insurance, *oney lenders, &amily and friends, Present scenario banking industry has been undergoing a rapid transformation, #anks today are market driven and market responsive. -ith the entry of new players and multiple channels, customers !both corporate and retail$ have become more discerning and less CloyalC to banks. This makes it imperative that banks provide best possible products and services to ensure customer satisfaction. They have been managing a world of information about customers = their profiles, location, needs, re.uirements, cash positions, etc. &urthermore, banks have very strong in=house research and market intelligence units in order to face the future challenges of competition, especially customer retention. They are focusing on region=specific campaigns rather than national media campaigns as effective strategy for a diverse country like India. )ustomer=centricity also implies increasing investment in technology. /part from the *obile #anking, including of "*" #anking, ,et #anking and /T*s are the ma?or steps taken by the banks in India towards modernization. "ervices given by banks 0=mat account, Aockers, )ash management Insurance product, *utual fund product, Aoans, <)" !<lectronic clearance system$ Ta(es.

NATIONALIZATION OF BANKING SECTOR The nationalization of banks in India took place in 3 9 by *rs. Indira 7andhi the then prime minister. It nationalized 35 banks then. These banks were mostly owned by businessmen and even managed by them. )entral #ank of India, #ank of *aharashtra,0ena #ank Pun?ab ,ational #ank "yndicate #ank, )anara #ank Indian #ank Indian @verseas #ank, bank of #aroda, >nion #ank, /llahabad #ank >nited #ank of India >)@ #ank. /fter that #anks have introduced many more products and facilities in the banking sector in its reforms measure. In 3 3, under the chairmanship of * ,arasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their /T* stations. <fforts are being put to give a satisfactory service to customers. Phone banking and ,et banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. CONSOLIDATION )ountry can e(pect some consolidation in the Indian banking sector by merger of the remaining five associate banks of "#I with the parent to help "#I become one of the large players in the international field. The already merged banks !"tate #ank of "aurashtra and "tate #ank of Indore$ were unlisted and small in size and therefore did not pose much difficulty e(cept for internal reorganisation. *erger of other associate banks may also not pose much difficulty in terms of either culture of the employees or continuity of business for the merged banks, but for the procedural issues since 4 of the remaining banks like "#*, "#T, "##; are listed companies. @ne of the significant facilitator in the merger of associate banks with the parent is that all the associate banks work on the same technology platform. In fact this is one of the burning issues if the entities to be merged work on different IT platforms. >nlike the "tate #ank group, merger of other nationalised banks will be a comple( task for the authorities. /part from taking the employee unions into confidence, the merger of cultures will also be a daunting task. There is always be a problem of Fbig brother attitudeG in merger e(ercise and will create the skirmishes in cultural integration. In spite of a few decades after nationalisation, the cultures of each of the nationalised banks are different. To minimise this impact on mergers, a merger of banks located in each of the different regions will be attempted

like a north based bank getting merged with another north based bank and a south based bank getting merged with another from the same region. @ne can e(pect some actions in the private sector as well, as some of the old private sector banks are candidates for takeover by new private sector banks who can get the reach and spread .uickly. "uch takeovers have already happened in the recent past like the >nited -estern #ank was taken over by I0#I #ank, #ank of *adura and #ank of 2a?asthan were taken over by I)I)I #ank. In the days to come, technology will continue to play a far more important role in customer service. The country has already witnessed several offerings in the internet and mobile banking space by the banks, especially the private sector banks for improved customer convenience. #anks in India can now boast of matching all the facilities which are available to the customers abroad. It will be a matter of time that many of the services available on the internet and mobile phones are taken to the remote locations and therefore penetration will be the issue on hand for the banks. /part from this, banks which are lagging behind in technology especially some of the nationalised banks and old private sector banks will be left behind if they do not catch up very .uickly with the front line banks. It is not uncommon to find people having accounts with the new generation banks and other tech savvy nationalised banks purely for the purpose of the ease of banking using their net banking facilities though they may continue to have accounts with other traditional banks. EMERGING TRENDS IN BANKING SECTOR The liberalization process initiated by the government about a decade ago has changed the landscape of several sectors of the Indian economy. The financial sector like other sectors is also going through ma?or changes as a conse.uence of economic reforms. The consumption=led boom in India has fuelled robust demand for financial products especially in the banking domain. <merging competition has generated new e(pectations from e(isting and new customers. There is an urgent need to introduce new and more attractive customer=friendly products and services. The banking sector presently is at an infle(ion point. <(isting products need to be delivered in an innovative and cost=effective manner by taking full advantage of emerging technologies. Technology has swiftly become a business driver rather than a business enabler.

This sector has seen phenomenal growth in terms of technology infusion and adoption in the recent past such asH Internet and *obile #anking, )2*, etc. -ith increasing competition and tightening of prudential norms by the 2eserve #ank, the players in the banking industry, both Indian and global are taking turns towards mergers and ac.uisitions. @nly banks having ade.uate infrastructure, technology, economies of scale and well connected network of branches will be able to survive and meet the challenges of ever increasing competition and customer e(pectations. The traditional distinctions between banking and other financial services like insurance on one side1 and between commercial banking, developmental banking and investment banking are getting blurred. The emergence of universal banking and banc assurance are clearly pointers. This global convergence of financial services may gather further momentum in the years to come. The banking and insurance sector reforms have encouraged private sector players to make forays into the business in collaboration with ma?or international companies. This new scenario will witness financially sound and e(perienced players transforming the industry with best practices in product development, operational efficiency, marketing capability, service focus, and tech savvy orientation. Thus there is a need for intensive, futuristic and career oriented programs in these two areasH #anking and Insurance. These developments in #anking and Insurance industry call for competent and professionally trained managers.Increasing competition, thinner spreads and introduction of new technology driven products are some of the trends that the Indian banking system is e(periencing. 2ecent trends in Indian banking have reflected the efforts of the ma?or players to adapt to a rapidly liberalizing and globalizing environment. &urther, the technology oriented banking has become one of the latest mantras of success in the market, especially to win over the customers. -ith the increasing sophistication of our economy, the variety and type of investments options available to us today have multiplied. /lso, with the economy getting more and more integrated with the world economy, rapid changes in the options, instruments, rate of return etc. have become the order of the day.C "uch a change is visible in respect of shares, mutual funds, fi(ed income, bank deposits, life insurance, pension plans etc. since change and innovation is involved in this process, and one can legitimately e(pect an e(citing and lucrative career scenario in the banking, finance and insurance sector.

TECHNOLOGY PLAY @ne of the important factors in the growth of banking is adapting to technology. The taste of convenience banking through /T*s, Internet banking, and *obile banking has led to a spurt in the number of banking transactions. The latest entrant in the technology play in banking is the *obile banking. The mobile handset manufacturers say that internet will happen on mobiles and their plan is to push sales with underlying internet usage. The country is the worlds second largest mobile phone users with over 68% million mobile connections as of @ctober 2+34. &urther % E 8 million new mobile users are being added every month. /s far as internet is concerned, India ranks 4rd in the world after )hina and >" with an estimated 233 million users. The addition to the number of users is about %=8 million every month. These figures should give an idea of the size of alternate channels of banking that would be available though all the mobile and internet users may not end up using the banking services through these medium. :owever, these two mediums will get a big push from the banks as even a fraction of users is good enough. This will not only reduce the paper work drastically, but will reduce other cost of operations to a great e(tent though it would involve initial investment in technology. GREEN BANKING -ith a view to reduce the use of paper at the branches, some banks are promoting the concept of 7reen #anking in a big way. It provides the )ustomers with a simple, secure and .uick way of e(ecuting daily #anking transactions. -ith only the /T* cum 0ebit )ard and PI,, a customer can operate his #ank /ccount at the branch. It is a counter manned by a Teller where a Transaction Processing 0evice !TP0$, similar to a Po" machine, is attached to the terminal. )ustomer swipes the "hopping cum 0ebit )ard, selects a particular transaction and enters the amount and the PI,. Post authentication, the transaction gets transferred to the Tellers terminal who enters denominations of cash to be paid I received, then pays I receives cash and completes the transaction. The )ustomer completes the transactions with no paperwork. This facility has been e(isting in many other countries and #anks which are yet to adopt this will implement it in a big way .

SHARING OF ATM INFRASTRUCTURE In the initial stages of introducing /T*s some of the private sector banks were looking for a return from their /T* network E an acronym 2@TI meaning 2eturn on Technology Invested. :owever, soon they realised that /T*s are more of an e(tension of service what a branch does. It is not only to enhance the customer convenience, but offers many hidden benefits to the banks themselves. / few years back, we could not have thought of banks sharing their /T* network with other banks, but now it has now become a necessity as it has been established that setting up their own network of /T*s by each of the banks will be a costly proposition. The capital re.uired for such an infrastructure could well be used for other purposes like propping up the capital ade.uacy re.uirement. Though individual banks will continue to e(pand their own network of /T*s, one may not witness the same speed at which they were opened a few years back. FUTURE OF BANKING SECTOR BANKS TO LEAD THE FINANCIAL INCLUSION The 7overnment of Indias effort to bring financial inclusion and avoid too many layers in reaching the subsidies to the poor and weaker sections will offer a great opportunity for the banks to e(tend their services to the rural segment of the country. -hile this may re.uire branch e(pansion in the interiors of the country, whether it will be a cost effective e(ercise for banks will be a difficult .uestion to answer. @ne can e(pect nationalized banks to take up this task being a national and social re.uirement with limited participation from the private sector banks. RETAIL BANKING WILL CONTINUE TO GROW The growth of retail banking in emerging market is said to be on account of advance in IT infrastructure, financial sector reforms, younger population, increase in affordability, change in lifestyles etc. 2etail banking refers to the banks dealing with individuals which include savings bank accounts and current accounts on the liabilities side and housing loans, auto loans, personal loans, education loans, consumer durable loans, debit and credit cards on the assets side. -ith the deregulation of interest payable on savings bank accounts, one could witness the competition hotting=up for the sharing of this vital source of cheap funds for the banks. @n the

assets side, with the corporate sector not showing any significant growth opportunities and with a very crucial advantage of spreading the risk available in retail lending, banks will spare no effort to grow this segment. CUSTOMER SATISFACTION )ustomer satisfaction, a business term, is a measure of how products and services supplied by a company meet or surpass customer e(pectation. It is seen as a key performance indicator within business and is part of the four perspectives of a #alanced "corecard. 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. @rganizations need to retain e(isting customers while targeting non=customers1 *easuring customer satisfaction provides an indication of how successful the organization is at providing products andIor services to the marketplace. )ustomer satisfaction is an abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and productIservice to productIservice. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other factors the customer, such as other products against which the customer can compare the organization's products. "atisfaction with banking services is an area of growing interest to researchers and managers. The commercial banking industry like many other financial service industries is facing rapidly changing market. ,ew technologies, economic uncertainties, fierce competition and more demanding customers and the changing climate have presented an unprecedented set of challenges. Intangible assets, particularly brands and customers, are critical to any organization and in todays competitive environment relationship marketing is critical to banking corporate success. #anking is a customer oriented services industry. /s we know that customer is the king therefore customer is the main focus and customer service is the differentiating factor. #anks 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 relationship with

customers. -ith the current change in the functional orientation of banks, the purpose of banking is being redefined. The main driver of this change is changing customer needs and e(pectations. )ustomers look for a relationship with bank when they receive benefits from its services. 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. The banking industry in India has undergone dramatic change post independence. #anks have also starts realizing that business depends on client service and the satisfaction of the customer and this is compelling them to improve customer service and build relationship with customers. -ith the current changes in the functional orientation of banks, the purpose of banking is being redefined. The main driver of this change is changing customer needs and e(pectations. )ustomers In urban India no longer want to wait in long .ueues and spend hours in banking transactions. This change in customer attitude has gone hand in hand with the developments of /T*s, phone and net banking along with availability of service right at the customer doorstep. &urther the world class banking e(perience provided by private and multinational banks with their ever evolving products and services has raised the bar of customer e(pectations. -ith the emergence of universal banking, banks aim to provide all banking products and service offering under one roof and their <ndeavour is to be customer centric. The Indian banking industry is also embracing technology rapidly. #ig players among the private and public sector banks are reengineering and automating their core banking processes.

RESEARCH METHODOLOGY
OBJECTIVE OF THE STUDY Primary o !"#$i%"& To study, analyze and evaluate the customer satisfaction level towards the different services rendered by the bank and to identifying the critical success factors. To identify customer satisfaction variables which lead to building relationship with customers in the Indian banking sector To study the difference in perception of the customers of the bank towards various services provided by bank. To analyze the satisfaction level of customers with respect to the various service provided by the banks. To identify the strategies of banks to satisfy their customers.

S"#o'(ary o !"#$i%"& To evaluate the awareness level of the customer on the product and services. To find out the differences among perceived service and e(pected service. To evaluate the process efficiency in customer .uery and re.uirement handling To understand consumers preferences. To access the degree of satisfaction of the customers

RESEARCH DESIGN E)*+ora$ory ("&i,'

The study is e(ploratory in nature. It provides a description of contemporary satisfaction parameter in the Indian banking sector. <(ploratory research provides insights into and comprehension of an issue or situation. <(ploratory research helps to determine the best research design, data collection method and selection of sub?ects. SAMPLING )onvenience sampling method is used for the survey of this pro?ect. It is a non= probability sample. This is the least reliable design but normally the cheapest and easiest to conduct. SAMPLE SIZE "ample size denotes the number of elements selected for the study. &or the present study, 3++ respondents were selected. %+ percent of the data were collected in face=to=face interviews of customers coming to banks. &or the remaining %+ percent, the data were collected by visiting the customers homes. SOURCES OF DATA There are many sources of data collection, such as secondary data collection and Primary data collection. PRIMARY DATA Primary data are those collected by the investigator himself for the first time and thus they are original in character, they are collected for particular purpose. / well=structured .uestionnaire was personally administrated to the selected sample to collect the primary data. "ample size= 3++ "ample techni.ues= )onvenience sampling SECONDARY DATA "econdary data are those, which have already been collected by some other persons for their purpose and published. "econdary data are usually in the shape of finished products. Two types of secondary data were collected for the preparation of the pro?ect workH I'$"r'a+ Da$a was generated from companys brochures, manuals and annual reports

E)$"r'a+ Da$a- on the other hand, was generated from magazines, research books, intranet and internet !websites$.