Strategy Development

and Deployment of LDP

of an Indian Bank
Service Operation Management

Submitted to
Dr. R H G Rau

Submitted
by:

205 - Ankur Agrawal

 Service Operation Management

MBA Core II year, NMIMS

Re-designed Loan Distribution Process

A business absolutely devoted to service will have only one worry about profits. They will be
embarrassingly large. -Henry Ford

Service can be defined as work done for others for some consideration, generally money. In
economics and marketing, a service is the non-material equivalent of a good. Service
provision has been defined as an economic activity that does not result in ownership, and this
is what differentiates it from providing physical goods.
Product delivery also involves an element of service. Discussed below is one such service –
distribution of loans.
Loan distribution generally includes all steps from taking a loan application through disbursal
of funds. The loan distribution process has undergone significant changes over the last
decade. This report deals with the re-designing of the loan distribution process by a leading
Indianbank.

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 Service Operation Management

Visit 2
Visit 1 Visit 3 Visit 4
Visit 5
Customer submits
Customer purchases form with Customer is Customer submits
Customer collects
application form documents interviewed by legal legal documents to
disbursal cheque
from HDFC office required for credit appraiser legal appraiser
appraisal

Loan sanctioned by centralised credit Technical officer visits site and

committee that meets once a submits report. Date given for
fortnight disbursal

Visit 1 Visit 2 Visit 3

Visit 4
Customer takes Customer submits other Customer submits legal
Customer collects
free application documents for credit documents. A date is
cheque
form from HDFC appraisal, and is interviewed given for disbursal

Loan sanctioned by branch-level credit Technical officer visits site and submits the
committee that meets once a week report

Visit 1
Visit 2 Visit 3
Customer collects and submits
application form, and is
Customer submits all Customer collects
interviewed
remaining documents cheque

Technical officer visits site and

Loan approved on-line
submits report

1. How has the bank addressed the Service Core Characteristics?

The service core characteristics are:
i) Intangibility
ii) High Customer Contact
Intangibility is that part of service that cannot be touched, defined or measured.
By redesigning the loan distribution process, the bank has reaped the following intangible
benefits:
a) Improved integrity of customer and loan application information: The underlying
technology adopted by the bank would create a single view of customer and would
help monitor and synchronise the customer information across multiple systems in
real time.
b) Improved responsiveness of loan operations: Customised loan products can be created
based on customer’s requirements.

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 Service Operation Management

c) Increased flexibility: System provides enough flexibility to the employees to provide

the best of the service to the customers.
d) Enhanced Visibility: Customers would be able to view the application status on a real-
time basis. Also the bank would be able to do a profiling and trend analysis of the
applications.
e) Improved Agility: The bank would be in a better position to do workload balancing
and deadline management.
f) Higher process reliability: With much of the policy getting hard coded into the
system, lesser human intervention is required; making the process more consistent and
reliable.
The system used in 1992 by the bank had higher customer contact. The customer had to make
5 visits to the bank to get the disbursal cheque. The first three visits were such which did not
involved any processing on the part of bank between them. Over a period of time the bank
reduced this to 2 and finally to 1. Now, the customer collects the form, submits it and is
interviewed too – all in the first visit to the bank.
The customer information is entered into the system database after this first visit. The system
allows the bank to have a single view of the customer. The customer information changes can
be easily incorporated into the system. The customer is also able to track the status of the
application online.
In case of services, the service is analyzed at the time of consumption of the service itself.
Thus reduced number of visits to the bank will definitely impress the customer.
As the degree of contact lessens the freedom to design effective production and service
processes increases.

2. How has the bank addressed the four key steps of Strategy Development
Process?

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 Service Operation Management

The above diagram shows the relationship between the various steps of the Strategy
Development process. The same with respect to the bank are as explained below:

a) Mission:

- To make the bank the largest seller of loans.

b) Objectives:

- To achieve the share of market leadership in loan segment.

- Be known as the bank with highest efficiency in Loan Distribution Process.
- Be known as the bank with best service in the loan industry.

c) Strategy

- To improve customer responsiveness and customer contact by using the latest

information systems.
- Minimise operations cost on a continual basis.
- Make the loan distribution process adaptable to continuously evolving customer
needs.

d) Tactics

- Minimise the loan disbursal time by minimising human intervention and instead
using the latest in technology.
- Reduce customer contact by clubbing those sequential activities which do not
require any processing on the bank’s part.

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 Service Operation Management

3. How has the bank developed a suitable model for its Strategy
Deployment?

The
Service
Strategy

The
Consume
r

The
The
People
Systems

The bank’s model for Strategy Deployment is as shown in the diagram above.

The following six relationships are an essential part of this model:

1) Bank’s service strategy has been communicated to the customer. The bank wants to
provide the best service by increasing the customer responsiveness and reducing
customer contact; this commitment to excellence has been communicated to the
customer.

2) Employees also have been made aware of the bank’s service strategy. Bank’s
employees would play a very important role in determining whether the strategy is
successful or not as they are the people who would provide the service. Attitude is the
key thing in service.

3) Bank’s service strategy and the system developed to perform day-to-day operations
are consistent with each other; this forms the third relationship.

4) The systems developed by the bank will help in providing improved service to the
customers by reducing disbursal time and visits to the branch. This is the fourth
relationship in the model.

5) Right attitude of the employees and the system developed are in consistency with
each other. The system would provide the employees enough flexibility to deliver the
required service.

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 Service Operation Management

6) The most important relationship in this model is the service provider/customer

interaction. The quality of this interaction becomes the base for customer evaluation.

References:

• Christine Hope and Alan Muhlemann (1997), “Service Operations Management”,

Prentice Hall
• “Services Marketing” by R. Srinivasan
• http://www.xpastor.org/policy/first_baptist_fort_collins_terms.pdf

• http://www.softwareag.com/corporate/images/SAG_Lending_FS_Dec07-web_tcm16-
34163.pdf

• http://www.thoughtworks.com/pdfs/empowering-dealers.pdf

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