History of Banking in India - Introduction

According to the Banking Companies Act of 1949, Banking is defined as, accepting for the
purpose of lending or investment of deposit money from the public, repayable on demand or
otherwise and withdrawable by cheque draft, order or otherwise. It also defines Bank as an
institution dealing in money and credit. It safeguards the savings of the public and gives loans
and advances.

The main functions of the banking sector are as following:

 It provides liquidity for economic growth of a country

 It acts as the main pillar of the whole financial system
 It offers safety for the depositors who want to deposit their savings in the Bank
 It offers liquidity for the borrowers both on short and long-term basis based on their need
 It provides credit or loan to dealers, households, small as well as large business houses
 It helps to manage all the financial transactions between different parties.
 It provides the Government with the flexibility to reach to the masses across the country

The banking sector was developed during the British era. British East India Company established
three banks,

1. Bank of Bengal – 1809

2. Bank of Bombay – 1840

3. Bank of Madras – 1843

These three banks were later amalgamated and called Imperial Bank, which was taken over by
SBI in 1955. The Reserve Bank of India was established in 1935, followed by the Punjab
National Bank, Bank of India, Canara Bank and Indian Bank.

In 1969, 14 major banks were nationalized and in 1980, 6 major private sector banks were taken
over by the government.
Indian banking system, over the years, has gone through various phases. For ease of study and
understanding, it can be broken into four phases:-

1. Early Phase: During the first phase, the growth was very slow and banks experienced
periodic failures during the Early Phase between. There were approximately 1100 banks,
mostly small which failed in the early phase.

2. Pre-Nationalisation Phase: Breakthrough happened in this phase, was Reserve Bank of

India. Reserve Bank of India (RBI) was created with the central task of maintaining
monetary stability in India. This phase of Indian banking was eventful and was a phase of
restructuring, regulation. However, despite these provisions, control and regulations,
banks in India except the State Bank of India, continued to be owned and operated by
private persons.
3. Post Nationalisation Phase: This phase of Indian banking not so happening for entry of
new banks. Undoubtedly, it was a phase of expansion, consolidation and increment in
many ways. The banking sector grew at a phenomenal rate, fruits of nationalization were
evident, and the common man was now banking with great trust.
4. Modern Phase: This is the phase of “New Generation” tech-savvy banks. This phase can
be called as “The Reforms Phase”. Currently, banking in India is generally fairly mature
in terms of supply, product range and reach-even though reach in rural India still remains
a challenge for the private sector and foreign banks.

Prof K.V. Bhanu Murthy has also segregated the Indian banking periods into four eras. These
are:
1. Early historical and formative era: 1770-19052
2. Pre-independence era: 1906-19463
3. Post-independence regulated era: 1947-19934
4. Post-independence deregulated era from 1993 onwards
Current Banking Scenario:
Banks in India can be categorized into Scheduled and Non-scheduled Banks.
 Scheduled Banks: Scheduled Banks in India constitute those banks, which have
been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934.
These banks should fulfill two conditions:
o Paid up capital and collected funds should not be less than Rs.5 lakhs
o Any activity of the Bank should not be detrimental or adversely affect the
interests of the customers.
It comprises Commercial Banks and Cooperative Banks. Commercial Banks are both
scheduled and Non-scheduled commercial banks regulated Banking Regulations Act
1949. Commercial Banks works on a ‘Profit Basis’ and are engaged in the business of
accepting deposits for the purpose of advances/loans.
There are four types of scheduled commercial Banks:
• Public Sector Banks
• Private sector Banks
• Foreign Banks
• Regional Rural Banks
  Non-scheduled bank: Non-Scheduled Bank in India" means a banking company as
defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949),
which is not a scheduled bank".

Reserve Bank of India is the central bank of the nation and all Banks in India are required to
follow the guidelines issued by RBI. Banks in India can also be classified in a different way:

• Public Sector Banks: They are those banks where Govt. is the owner or having more than 51%
stake in the capital. Currently, there are 21 Public Sector Banks in India including 19
Nationalized Banks. State Bank of India and its 5 Associate Banks together called State Bank
Group.

• Private Sector Banks: Private Banks is owned by private individuals/institutions. These are
registered under the Companies Act 1956 as Limited Companies.

• Regional Rural Banks (RRBs): Previously these were 196 Regional Rural Banks sponsored
by 27 State Cooperative Banks. As on 31st March 2013 due to mergers their number has come
down from 196 to 64

• Foreign Banks: These banks are incorporated outside India and are operating branches in India
also. Some foreign banks are also having their representative offices in India

• Development Banks: These include Industrial Finance Corporation of India (IFCI) established
in 1948, Export-Import Bank of India (EXIM Bank) established in 1982, National Bank for
Agriculture & Rural Development (NABARD) established in 1982, and Small Industries
Development Bank of India (SIDBI) established on 2nd April 1990

BANKING REFORMS IN INDIA:

• The Indian banking sectors is an important constituent of the Indian financial system.

• The banking sectors play a vital role in promoting business in urban as well as in rural areas in
recent years.

• Without in India cannot be considered as a healthy economy.

• For the past three decades, India’s banking system has several outstanding achievements to its
credit.

• NPA’s have increased since 2011 after a steady decline in 2000’s

The banking system in India, through a measure, gradual, caution and steady process has
undergone a substantial transformation. Banks have come a long way from the temples of the
ancient world, but their basic business practices have not changed. Even if the future takes banks
completely off your street corner and onto the internet, or has you shopping for loans across the
globe, the banks will still exist to perform this primary function.
The banking services sector has undergone significant changes in the last years. These changes
are due not only to large bank mergers and strategic alliances between banking groups, but also
to the increasing legislative deregulation of the banking market and the decreasing the state
intervention in banking the above have led to the creation of a new market which is characterized
by a slight increase in primary demands and less legislative restrictions. The preservation and
mainly the increase of market shares constitute the primary objective of all banking institutions
and many strategies have been implemented in order to maintain their clients. In this effort, bank
managers have been creating new products and services. Yet as such innovations involve
significant expenses and banking costs, it has been supported that a better approach would be to
focus on client trust, by offering better quality of services and aiming at satisfying clients to the
maximum extent.

Structure of Bank Market

Service: Recently, banks are in a period that they earn money in servicing beyond selling money.
The prestige is get as they offer their services to the masses. Like other services, banking
services are also intangible. Banking services are about the money in different types and
attributes like lending, depositing and transferring procedures. These intangible services are
shaped in contracts. The structure of banking services affects the success of institution in long
term. Besides the basic attributes like speed, security and ease in banking services, the rights like
consultancy for services to be compounded are also preferred.

Price: The price which is an important component of marketing mix is named differently in the
base of transaction exchange that it takes place. Banks have to estimate the prices of their
services offered. By performing this, they keep their relations with extant customers and take
new ones. The prices in banking have names like interest, commission and expenses. Price is the
sole element of marketing variables that create earnings, while others cause expenditure. While
marketing mix elements other than price affect sales volume, price affect both profit and sales
volume directly. Banks should be very careful in determining their prices and price policies.
Because mistakes in pricing cause customers' shift toward the rival’s offering likewise services.
Traditionally, banks use three methods called \cost-plus", \transaction volume base" and
\challenging leader" in pricing of their services.
Distribution: The complexity of banking services are resulted from different kinds of them. The
most important feature of banking is the persuasion of customer’s beneffting from services. Most
banks' services are complex in attribute and when this feature joins the intangibility
characteristics, offerings take also mental intangibility in addition to physical intangibility. On
the other hand, value of service and benefits taken from it mostly depend on knowledge,
capability and participation of customers besides features of offerings. This is resulted from the
fact that production and consumption have non separable characteristics in those services. Most
authors argue that those features of banking services makes personal interaction between
customer and bank obligatory and the direct distribution is the sole alternative. Due to this
reason, like preceding applications in recent years, branch offices use traditional method in
distribution of banking services.

Promotion: One of the most important element of marketing mix of services is promotion which
is consist of personal selling, advertising, public relations, and selling promotional tools.

 Personal Selling: Due to the characteristics of banking services, personal selling is the
way that most banks prefer in expanding selling and use of them. Personal selling occurs
in two ways. First occurs in a way that customer and banker perform interaction face to
face at branch office. In this case, whole personnel, bank employees, chief and office
manager, takes part in selling. Second occurs in a way that customer representatives go to
customers' place. Customer representatives are specialist in banks' services to be offered
and they shape the relationship between bank and customer.

 Advertising: Banks have too many goals which they want to achieve. Those goals are for
accomplishing the objectives as follows in a way that banks develop advertising
campaigns and use media.
o Conceive customers to examine all kinds of services that banks offer
o Increase use of services
o Create well fit image about banks and services
o Change customers' attitudes
 o Introduce services of banks
o Support personal selling
o Emphasize well service
Advertising media and channels that banks prefer are newspaper, magazine, radio, direct
posting and outdoor ads and TV commercials. In the selection of media, target market
should be determined and the media that reach this target easily and cheaply must be
preferred.
Banks should care about following criteria for selection of media.
o Which media the target market prefer
o Characteristics of service
o Content of message
o Cost
o Situation of rivals

Ads should be mostly educative, image making and provide the information as follows:
o Activities of banks, results, programs, new services
o Situation of market, government decisions, future developments
o The opportunities offered for industry branches whose development meets
national benefits.

 Public Relations: Public relations in banking should provide

o Establishing most effective communication system.
o Creating sympathy about relationship between bank and customer.
o Giving broadest information about activities of bank.

 Selling of Promotional tools: Another element of the promotion mixes of banks is

improvement of selling. Mostly used selling improvement tools are layout at selling
point, rewarding personnel, seminaries, special gifts, premiums, contests.
Following trends have been observed in the marketing strategies of banks recently:
 Advertising remains the undisputed promotional tool for banks so far among the other
promotional tools. Advertising, which includes direct mail, accounted for the largest
 share of marketing expenditures at 52 percent, compared to 58 percent in 2007. Public
relations accounted for 27 percent of marketing budgets compared to 21 percent in 2007
 Consumer expectations are growing. With the increase in the education of the consumers,
they are now demanding more and more value added services and are ready to pay
premium for it.
 Mobile banking is the need for today. It has become the blessing for the consumers who
don't have the time to visit the bank personally. The biggest advantage that mobile
banking offers to banks is that it drastically cuts down the costs of providing service to
the customers. Also service providers are increasingly using the complexity of their
supported mobile banking services to attract new customers and retain old ones.
 Social media is also a tool for marketing the banking services. Forty percent of banks
used social media for marketing purposes in 2009. 29 percent used social networking
(i.e., Face book, Twitter,etc.). Facebook, used by 76percent of banks, is the most popular
among various social media outlets, followed by Twitter at 37percent. The main reasons
for using social media were for communication and competitiveness.
 Due to increased use of technological bases has increased the operational efficiency of
the Indian banks. By 2009, virtually all banks had embraced the Internet and most had
websites. Marketer said e-newsletters were the most effective form of Internet marketing,
followed by search engine marketing and then sponsorships.
 Marketing expenditure has witnessed the tremendous growth in last few years as the
percentage of total banking expenditure. Despite the overall state of the economy and the
banking industry, marketing expenditures were up in 2009 . Nearly 60 percent of banks
said they planned to increase their marketing expenditures in 2009, the same amount as in
2007. Most of the banks view marketing as a strategic driver for their business.
 Focus on Incremental New Customer Growth: Instead of generating as many accounts as
possible, banks will be focusing on the potential value of relationships including the
likelihood of engagement and retention.
 Gathering Email Addresses: With other communication channel cost increasing and the
improved results achieved when email is combined with more traditional channels, the
importance of collecting (and using) email addresses has never been more important.
PROBLEMS FACING MARKETING OF BANK SERVICES

Banks are generally faced with certain problems in marketing their banking services. Among
these problems are:
1. Low Quality Product (Service): The quality of services provided by the financial institutions
(banks) these days are of very low quality. Some patronize these financial institutions just
because there are no readily available alternatives around. Cash lodgment, withdrawal, fund
transfer, cheque casement etc. take much time tan necessary lack of prompt services is the talk of
the day once the quality of services is below standard or taste of the customer, he tends to with
draw from such institution.
2. Inadequate Promotional Activities: Promotional activities like advertisement and publicity
are still lacking. People have not been enlightened enough on packages available from these
financial institutions. Confidence has not been restored in the case of those that have lost
confidence in the financial sector. Most of the time, information to promote their activities
thereof making it difficult for the impact of their promotional activities to be felt by the
population.
3. Inadequate Place or Channel of Service: This is one major weakness of the marketing
strategy. The places where these services are obtainable have not been adequate and they tend to
make the banks ineffective and inefficient Branch offices providing these services are not
equitably distributed and as such needy individuals cannot receive bank service promptly. These
are those who are interested in patronizing these financial institutions but cannot do so owing to
lack of accessible branch network.
4. Unappealing Prices: Users of the services of the banks usually consider the prices charged by
these institutions for their services not appealing. Also depositors consider the interest paid on
deposits very low and unattractive when compared to the earning yield in other sectors of the
economy. The inadequate pricing tend to discourage people from patronizing the bank and in
turn it leads to reduced sales volume on the part of the banks.

HOW TO IMPROVE MARKETING OF BANK SERVICE

There are some lay down principles or measures to be taking in order to improve marketing of
bank services. These measures include the following:
1. Customer Orientation: The banks should focus on their customers while designing their
marketing strategies customers’ needs change and a bank’s ability to meet those needs must
change.
2. Long Term Profitability: Without customers, bank would have no revenue. Marketing is
directed at protecting and expanding the stream of revenue. It does so by keeping existing
customers, broadening their banking relationships by cross-selling services and attracting new
customers.
3. Organizational Commitment: Marketing is the responsibility of every bank employee.
Whether at work or in their leisure time, every employee who comes into contact with potential
or existing customers is marketing the bank. Good training for all bank employees on how to
interact with the public is the responsibility of a bank that wants to survive the competition in the
financial sector.
4. Branch Network: Extensive branch network of banks constitutes an effective retail outlet for
their services. The branches should be adequately distributed to serve the populace for whom
they are meant.
5. Effective Advertisements: An effective advertisement should serve as a supporting instrument
to the branch banking in achieving effective marketing of financial services. Outright
advertisements in professional journals, magazines, radios, television jingles, coupon adverts and
other are recommended.
6. Automation: The operators of these financial institutions should be automated. Payment
system, fund transfer system, documentation services and so on, should be handled with the use
of computers.
7. Correspondent Banking: In situations where it is not possible to establish branches,
correspondent banking relationship should be used by banks to boost effective and speedy
services for their customers.
8. Time Stipulation: Time required for the delivery of each service should be specified and
defined to avoid spending too much time on one particular job. The time required for each
service should be ensured so as to effect implementation.
9. Promotional Activities: These are those activities or steps taken by financial institutions to
boost awareness and sales of their various services. These activities include: special offers to
customers and distributors, conferences, exhibitions, educational courses and seminars should be
included in the marketing communication efforts.
10. Sales Agents and Representative: Agent and representatives should be used to reach those in
the remote parts of the country.
11. Increased Social Responsibilities: The banks social responsibilities to the citizens or public
should be increased so as to create more awareness.
12. Sales Bonanza: As is practiced in some other industries, and of the year and special bonanza
is recommended so as to encourage existing customers, attract more customers and create more
awareness.
13. Matching Concept: High bank charges and commissions should be matched with high
interest rates. Increase in bank charges and commissions should be compensated with a
proportionate increase in interest rates and improved quality of bank services.

MARKETING MANAGEMENT CONCEPTS

There are five alternative concepts under which business organizations can conduct their
marketing activities.
PRODUCTION CONCEPT: This is a management orientation which assumes that consumers
will favour those products or services which are available and affordable, and therefore the major
task of management is to pursue improved production and distribution efficiency. The
organizational task is to keep improving production and distribution efficiency to attract the
customers.
PRODUCT CONCEPT: The product concept is a management orientation which assumes that
consumers will favor those products that offer the most quality for their prices, and therefore the
organization should devote its resources to improving product quality. The task of the
organization is to improve product quality as the key to attracting and holding customers.
SELLING CONCEPT: This is the management orientation that assumes that consumers will
either not buy or not buy enough of the organization’s products unless the organization makes a
substantial effort to stimulate their interest in its products. Here the organization has the task of
organizing strong sales oriented department as the key to attracting and holding customers.
MARKETING CONCEPT: This is a management orientation which holds that the key task of
the organization is to determine the needs and wants of target markets and to adapt the
organization to delivering the desired satisfactions more effectively and efficiently than its
competitors. The organizational task is to reachand choose target markets and develop effective
offers and marketing programmes as the key to attracting and holding customers.
SOCIETAL MARKETING CONCEPT : This is the management orientation which holds that
the key task of the organization is to determine the needs and wants of target markets and to
adapt the organization to delivering the desired satisfactions more effectively and efficiently than
its competitors in a way that preserves or enhance the consumer’s and society’s wellbeing. Task
of the organization is to serve target markets in a way that produces not only want satisfaction
but long run individual and social benefits as the key to attracting and holding customers.

MARKETING MIX:
Marketing mix is the set of controllable variables and their levels that the firm uses to influence
target market. A bank has to decide, how to allocate the total marketing mix element. Bank
normally focuses on the marketing mix when developing a marketing plan. The factors below
defined the total relationship between a bank and a particular customer and include:

PRODUCT: Product is the most important element in the marketing mix. By a product, we
mean anything that can be offered to a market for attention, acquisition, use or consumption. A
product has three dimensions, the core or generic product, tangible or formal product and
extended or augmented product. Banks always provide the best product customers want against
their competitors.
PLACE : This is concerned with the efforts a firm or bank makes or order to get its products to
the target market. It has to do with selection of distribution channel and the intermediaries,
location of distribution outlets, channel management, inventory management, order processing,
transportation, merchandising and sales management. Banks product must be at the right place,
spot, when, and how they are needed for them to successful in today competitive economy.
PROMOTION: Marketers of financial services promote their service through the use of normal
tools of promotion such as:
Advertising
Personal selling
Sales promotion
Publicity
Premiums
Public relations
Direct mail
PRICING: In setting a price, the firm must pay attention to pricing objectives, policies, and
procedures. The firm can draw guidance from the theoretical pricing model of the economists.
The model suggests how the firm can find the short-run profit, maximizing price when estimates
of demand and cost are available.
The model, however, leaves out several factors that have to be considered in actual pricing
situations, such as the presence of other objectives, multiple parties, marketing mix interactions,
and uncertainty surrounding like estimates of demand and cost.
When a firm considers changing its established price, it must carefully consider customers’ and
competitors reactions. The firm that faces a competitors’ price change must try to understand the
competitors’ intent and the likely duration of the change.
STRATEGIC MARKETING PROCESS
This is a managerial process of analyzing market opportunities and choosing marketing
positions, programmes, and controls that create and support viable businesses that serve the
company’s purpose and objectives. The specific step is strategic marketing process include the
following:
(a) Marketing opportunity
(b) Target market selection
(c) Competitive positioning
(d) Marketing systems development

WHAT ARE SURVIVAL STRATEGIES

Strategy as defined by Chambers learner’s dictionary is the art of managing an affair, cleverly:
following the Oxford dictionary, ‘strategy is the planning and directing of the whole operation of
a compaign, or war; a plan, a policy.
Whereas survival according to Chambers Dictionary means ‘the state of surviving.’ Therefore, to
survive means to remain alive, in spite of a disaster. In the researcher’s opinion, survival
strategies are those plans mapped out by a company or an institution to remain alive. So
marketing of banks services rendered by bank’s management are plans to survive the current
fierce competitive nature of banking business.

TECHNIQUES FOR SURVIVAL

Ogbodo (1993:6) said that the success or failure of any bank depends on a large measure of the
capability, integrity and enthusiasm of its directors and other employees. He however, stated that
with competition getting tougher in a guided deregulated environment, banks have become
market driven organizations. He further opined that banks should evolve strategic planning
process by formulating action plans through marketing of bank financial services and products
delivery. According to him, the techniques adopted for survival are:
Scientific management approach
Strategic planning
Public relations
Infrastructure ad modern technology
Banking regulations
Human resource approach

SCIENTIFIC MANAGEMENT APPROACH

The quality of the management of an institution or company determines to a great extent the
quality and how much achievement such an institution can make within a given period.
In Ogbodo’s view, the poor financial conditions of some banks are directly related to the quality
of their management. Furthermore, rampant board room quarrels, insider abuses, fraud and
forgeries, weak internal control systems, litigation and conventions of statutory, regulations that
have overtaken some banks’ management often result to distress in the banking industry as most
of them are unable to cope in the present competitive environment.
Anyanwaokoro (1996:209) cited management competence as one of the factors that must be
adequately maintained to avoid crises in the banking industry. He further explained that based on
the “CAMEL” bank examination rating system, a bank is bound to fail unless serious corrective
measure are taken if it starts having problems with the issues covered under the aforementioned
acronym. According to him CAMEL stands for:
C – Capital Adequacy
A – Asset quality
M – Management Competence
E – Earning Strength
L – Liquidity Sufficiency
Ogbodo (1995:5) identified that banks as tools for survival have introduced discipline, inculcated
good management qualities as well as put – in place improved credit policies and faithfully
implement them.

STRATEGIC PLANNING
In First Bank’s Business and Economic Report, (May, 1998) it was stated that, to survive today,
and possibly remain in business tomorrow, intensive planning must be the focus of any
organization that is aspiring to meet the challenges of the modern time. Strategic planning was
defined in the report as a managerial process of developing and maintaining a balance between
the organization goals and abilities and its changing environment. Strategic planning is
essentially people oriented, hence it involves everybody and in particular those whose inputs
would assist in the achievement of the target set by the bank. It is the strategic planning done and
implemented by the management of a company that assists them to achieve whatever goals set.

PUBLIC RELATION
Ikechukwu and Ekwo (1996: 34) stated that some public relations experts look at the practice of
public relations as a strategy for overall corporate survival and more narrowly as a marketing
support system or tool. Public relations is defined as a philosophy and function of management,
which evaluates public attitudes, identifies the policies of an individual or organization with
public interest and executes a programme of actions to earn public understanding and acceptance
(PR, News , 1947). Secondly, public relations is defined as a promotional activity that aims to
communicate a favourable image of the product or its marketer and to promote goodwill
(Shewem, 1987, 491).
The First Banks Business and Economic Report (1998) pointed out that the need for good public
relations in the marketing of financial services cannot be over-emphasized. It observed that good
public relations has helped most banks to increase higher profit – spinning business at reasonable
margins. It is however through good public relations that some banks offer other services and
new products to their customers.

Characteristics of Retail Bank Marketing Services

Most people do not automatically affiliate the term “retail” with banking. However, that is
precisely the description used within the banking industry for services that focus on providing
services to consumers. Retail banking typically focuses on consumer oriented banking and
financial service products, including checking, savings, money market instruments, residential
home loans and business loans. Retail banks are typically located in areas that are accessible and
convenient to service a broad base of prospective and existing customers.
Consumer Banking Focus: Most retail banks focus on the needs of consumers versus
commercial account holders. Teller cages are most often dedicated to walk-in consumer patrons.
Retail bank tellers are trained to focus on consumer checking and savings needs. Branch
managers are trained to offer customer-service issues in regards to those accounts. Commercial
account transactions are typically limited to on to two separate stations dedicated to merchant
accounts.
Internal Promotions to Cross-Sell Services: Retail banks utilize their internal and external
space to promote and cross-sell services. Inside of the bank, customers will see standing floor
signs to promote interest rates on mortgages and savings accounts. Desks that house deposit slips
are typically topped with brochures about various checking and savings instruments. Tellers
might even wear a badge or button that states “ask me about …” to promote new services.
CRM Practices : Customer Relationship Management (CRM) techniques are growing in
application among most major retail banks. Websites assist and guide current and prospective
customers to branch locations. Site visitors are offered the opportunity to provide feedback about
their online banking experiences as well as their on-site banking experiences. Retail banks use
this information to track and monitor customer satisfaction, gauge the feasibility for new
products and services, and to identify areas for improvement of the customer service experience
inside of branches.
Extended Hours, Services, Locations: Retail banks are often governed by state banking
regulations in terms of hours of operation. Banks deploy savvy strategies to make sure that no
opportunity is missed to service customers. Most understand that customer’s hours may not
match bank hours. As a result, most retail banks have ATM machines that can accommodate
every banking need from making a deposit and inquiring about account balances, to transferring
funds between checking and savings accounts. Banks are now also offering their services inside
of major grocery stores, retail super stores, gas stations and convenience stores, to make their
services accessible on a 24-hour basis so customers have “touch point” access to retail banking
services near where they work, live and shop.
New Customer Incentives :Retail banks have a major marketing mission to increase new
customers. They utilize many advertising tactics and strategies to achieve their new customer
goals. This often includes broadcast television and radio advertising, print and magazine
advertising, and public relations efforts to sponsor national and local events. Some retail banks
will provide a cash reward up to several hundred dollars to open a new account. The overall goal
is to increase new accounts, among both prospective and existing customers. Banks capture
information to rate and rank new customers via information furnished on credit applications to
assess credit worthiness and approve new account applications.
CROSS SELLING
To cross-sell is to sell related or complementary products to an existing customer. Cross-selling
is one of the most effective methods of marketing. In the financial services industry, examples of
cross-selling include selling different types of investments or products to investors or tax
preparation services to retirement planning clients.
Upselling is a sales technique used to get a customer to spend more by buying an upgraded or
premium version of what's being purchased.

How can Banks and NBFIs improve and create opportunities for cross-selling and up-selling?

 Stay relevant. If you overload customers with too many unrelated cross-selling
suggestions, you may blow it. But if your attempts to cross-sell are not closely related to
the original purchase, they are far less likely to succeed.
 Post expert recommendations. One way to facilitate successful cross-selling and up-
selling is to state specific recommendations from professionals, experts or other
customers on social media channels , PR, testimonials , online opinion.
  Train employees in cross-selling, up-selling techniques. The approach must be built
around serving the customer, not just selling more products. For example, you might
describe how the additional products or services would complement the original purchase
and further solve the customer’s problem.
 Timing is important. Cross-selling and up-selling can occur at different times, depending
on the products and services you are offering. In some cases by advising client of another
scheme when there is a special promotion of a product or service, chances of convincing
and a high string sale.
 Try product or service bundles. Bundling has long been used as a way to entice
prospective or existing customers to buy not just a single product or service, but an entire
group of items that go together. Offering a price break on package deals will help close
the sale.
 Have an effective customer relationship system (Combination of Social CRM) integrated
with your core banking system to identify changing customer behavior , needs and
extract timely information in order to promote the required product or service to target
groups.
 Provide staff at various Omni channel touch points a 360º view of the customer
indicating the current products and services used what could be sold, purchase patterns,
future potential, predicting what next
 Have the corporate website interfaced with Web.3.0 software, mobile responsive and
optimized for search engines which can drive exceptional customer experience along
with social media initiatives at multiple touch points which can support multiple channels
to target prospects for cross sell or up sell via inbound marketing.
 Leverage the cross-selling potential of your website. Position cross-sell and up-sell items
throughout your site in places where they can help educate visitors on the depth and
variety of what your business offers. Try mixing and matching different products and
services to see what works best.

The key to successful cross-selling and up-selling is to focus your efforts on meeting the
customer’s needs, rather than simply pushing more products and services. This is one area
of startup marketing where you may need to do a little experimentation in order to find
just the right balance, use of right business intelligence and customer relationship
management tools.
You need to make cross selling and up-selling a key component of your list of sales
techniques. Further staff should be sales oriented and speak to clients with a right attitude
and should posses’ adequate knowledge on products, services, communication skills and
be motivated to convert customers to advocates.

Tips for effective Cross-selling and Up-selling

1. Make sure your customers know what other products and services you provide. If you
don't tell them you have a corresponding or alternative product or service, you can't
expect them to know.
2. Suggest only relevant products or services that your customer might actually need or
appreciate. There is no long-term value in selling someone something they don't really
need as they're less likely to buy from you again.
3. Recommend the product at the right time. Cross-selling is usually best to do before
checkout to maximize on the potential for impulse buys, while it is better to up-sell
earlier in the sales process before your customer has made up their mind.
4. Up-sells and cross-sells should be recommendations only – don't continue to push
products or services on your customers if they have said they don't want them.
5. Make sure all employees know your range well so that they can advise customers on
how you can best help them and which products go together.
6. Target your clients; Estimate which clients are suitable candidates for the cross-selling
process, create clients' behavior profiles and predictive modeling using BI/CRM tools.
7. Provide your clients with good customer service. This will help repeat sales, when you
have higher chances of cross-selling and especially up-selling.
8. Inform your clients correct about the opportunity to buy an additional product without
forcing them to wonder or search.
9. Keep track of refusals to accept cross-selling or up-selling offers and lost business report
in order to make follow up calls or visits.
Benefits of Cross-Selling and Up-Selling for banks and Non-bank financial institutions.

1. Enhances customer experience with the organization.

2. Enables acquiring of new to bank customers and retention of existing customers.
3. Enables clients to form opinions and introduce new clients to the bank.
4. Improves your customer base and help meet goals and objectives.
5. Encourages clients to use multiple products and services and prevent switching to
competitor banks.
6. Assist in developing new products and value propositions through constant engagement
7. Enjoy customer life time value (customer longevity), reduce acquiring cost.

Technology
Computers are getting more sophisticated. They have given banks a potential they could only
dream about and have given bank customers high expectations. The changes that new
technologies have brought to banking are enormous in their impact on officers, employees, and
customers of banks. Advances in technology are allowing for delivery of banking products and
services more conveniently and effectively than ever before - thus creating new bases of
competition. Rapid access to critical information and the ability to act quickly and effectively
will distinguish the successful banks of the future. The bank gains a vital competitive advantage
by having a direct marketing and accountable customer service environment and new,
streamlined business processes. Consistent management and decision support systems provide
the bank that competitive edge to forge ahead in the banking marketplace.
Major applications: The advantages accruing from computerization are three directional - to the
customer, to the bank and to the employee.

For the customer: Banks are aware of customer's need for new services and plan to make them
available. IT has increased the level of competition and forced them to integrate the new
technologies in order to satisfy their customers. They have already developed and implemented a
certain number of solutions among them:
  Self-inquiry facility: Facility for logging into specified self-inquiry terminals at the
branch to inquire and view the transactions in the account.
 Remote banking: Remote terminals at the customer site connected to the respective
branch through a modem, enabling the customer to make inquiries regarding his
accounts, on-line, without having to move from his office.
 Anytime banking- Anywhere banking: Installation of ATMs which offer nonstop cash
withdrawal, remittances and inquiry facilities. Networking of computerized branches
inter-city and intra-city will permit customers of these branches, when interconnected, to
transact from any of these branches.
 Telebanking: A 24-hour service through which inquiries regarding balances and
transactions in the account can be made over the phone.
 Electronic Banking: This enables the bank to provide corporate or high value customers
with Graphical User Interface (GUI) software on a PC, to inquire about their financial
transactions and accounts, cash transfers, cheque book issue and inquiry on rates without
visiting the bank. Moreover, LC text and details on bills can be sent by the customer, and
the bank can download the same. The technology used to provide this service is called
electronic data interchange (EDI). It is used to transmit business transactions in computer
readable form between organizations and individuals in a standard format. As
information is centralized and updates are available simultaneously at all places, single-
window service becomes possible, leading to effective reduction in waiting time.
For the bank: During the last decade, banks applied IT to a wide range of back and front office
tasks in addition to a great number of new products. The major advantages for the bank to
implement IT are:
 Availability of a wide range of inquiry facilities, assisting the bank in business
development and follow-up.
 Immediate replies to customer queries without reference to ledger-keeper as terminals are
provided to Managers and Chief Managers.
 Automatic and prompt carrying out of standing instructions on due date and generation of
reports.
 Generation of various MIS reports and periodical returns on due dates.
  Fast and up-to-date information transfer enabling speedier decisions, by interconnecting
computerized branches and controlling offices.

For the employees. IT has increased their productivity through the followings:
 Accurate computing of cumbersome and time-consuming jobs such as balancing and
interest calculations on due dates.
 Automatic printing of covering schedules, deposit receipts, pass book / pass sheet, freeing
the staff from performing these time-consuming jobs, and enabling them to give more
attention to the needs of the customer.
 Signature retrieval facility, assisting in verification of transactions, sitting at their own
terminal.
 Avoidance of duplication of entries due to existence of single-point data entry.

Mobile Banking
 Despite this rise in m-banking transactions in India, banks are yet to fully exploit this
technology even for their existing customers.
 The current penetration is low compared to the number of bank accounts and the vast
mobile subscriber base of more than 900 million.
 Some of the reasons for which consumers are not adopting mobile banking include the
lack of adoption of mobile as a channel for banking , limitations of services on mobile
banking, non-replication of mobile banking services in varied languages in India etc.
 Most mobile banking applications are designed for smart phones, which also limits the
customer base, but with the introduction of USSD-based applications
(USSD (Unstructured Supplementary Service Data) is a Global System for Mobile
(GSM) communication technology that is used to send text between a mobile phone and
an application program in the network. Applications may include prepaid roaming or
mobile chatting.), this may change in coming years.
 Mobile banking can be classified as follows:
o In an environment which has a paucity of advanced technology and mobile
handset capabilities a one-size-fits-all solution does not work. Therefore, there is
a need for banks to make investments on mobile banking applications like custom
 applications, mobile browser, etc to offer mobile banking services to cater to
various mobile / tablet platforms like iOS, Android etc which are available on
high-end phones / tablet platforms with good processing capabilities while at the
same time offer services like USSD to the low-end segment having java based
phones with limited data processing capabilities.
o There have been various developments over the past year in the mobile banking
space including new strategic partnership models (like banks and telcos) and
products / services (Inter Bank Mobile Payment System (IMPS), National Unified
USSD Platform (NUUP), etc) emerging in the Indian markets.
o M - Banking has lowered some of the key barriers to financial inclusion in India
by reducing start-up costs and service prices. Eko India Financial Services, as
business correspondent provides bank accounts, deposit, withdrawal and
remittance services, micro-insurance, and micro-finance facilities to its customers
(nearly 80% of whom are migrants or the unbanked section of the population)
through mobile banking.
Electronic Payments
The Indian payment system, which is primarily cash dominant, is now at a faster pace
transforming from paper to electronic. The share of electronic payments in non-cash payments
has shown an upward trend. The electronic payment system primarily comprises Real Time
Gross Settlement (RTGS), Electronic clearing services (ECS), credit and debit payments and
electronic fund transfers (EFTs) / National Electronic Funds Transfer (NEFT).
C2G (Consumer to Government) & G2C (Government to Consumer) Payments remain the focus
area for the regulator and government alike, both to drive inclusion and increase efficiencies in
payment processing and collections. The e-commerce and m-commerce platforms are poised for
a big stride in coming years. The Indian payment system, which is primarily cash dominant, is
now at a faster pace transforming from paper to electronic. The share of electronic payments in
non-cash payments has shown an upward trend. The electronic payment system primarily
comprises Real Time Gross Settlement (RTGS), Electronic clearing services (ECS), credit and
debit payments and electronic fund transfers (EFTs) / National Electronic Funds Transfer
(NEFT).