CHAPTER III

THEORETICAL FRAMEWORK OF THE BANKING SECTOR

3.1 PROFILE OF THE STUDY AREA

The Tirunelveli district was formed in 1790 by the East India Company

later came under the direct control of the British Crown Queen Victoria. This had

several distinctive features of ethnological, religious and it was little wonder that

references to this little district were formed in our epics. The name Tirunelveli

had been composed from the three Tamil words, that was, “Thiru-Nel-Veli”

meaning “Sacred Paddy Hedge”. 1

For the purpose of effective administration, Tirunelveli district had

been divided into three revenue divisions namely Tirunelveli, Chermadevi and

Tenkasi and these three revenue divisions were sub-divided into eleven taluks

comprising nineteen blocks.

3.1.1 Revenue Divisions, Taluks and Blocks of Tirunelveli District

REVENUE DIVISIONS

TIRUNELVELI CHERMADEVI TENKASI

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 TALUKS

TIRUNELVELI AMBASAMUDRAM TENKASI

PALAYAMKOTTAI RADHAPURAM SHENCOTTAI
SANKARANKOIL NANGUNERI SIVAGIRI

VEERA
KERALAMPUDUR
ALANGULAM

DEVELOPMENT
BLOCKS

TIRUNELVELI AMBASAMUDRAM TENKASI

PALAYAMKOTTAI KADAYAM
SHENCOTTAI
MANUR CHERMADEVI
KADAYANALLUR
MELANELITHA PAPAKUDI
NALLUR
NANGUNERI VASUDEVANALLUR
SANKARANKOIL
RADHAPURAM
ALANGULAM
KURUVIKULAM
VALLIYOOR

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3.2 LOCATION

Tirunelveli district covers an area of 6,823 sq.kms. It is in the south eastern

part of Tamil Nadu and is triangular in shape. It is bounded by the Virudhunagar

district in the north, Kerala in the West, Kanyakumari district and the Gulf of

Mannar in the south, and Thoothukudi district in the east. The district comprises

Tirunelveli, Chernmahadevi and Tenkasi revenue divisions, eleven revenue taluks,

twenty blocks, four hundred and twenty five panchayats and six hundred and

twenty eight revenue villages.

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3.3 FINANCIAL INSTITUTIONS

The district has a well-built banking structure catering to the needs of the

farming population. The district is well served by twenty banks with their two

hundred and fifty two branches including co-operative banks and five hundred and

odd non-banking finance companies. Both the public and the private sector banks

play an active role in extending finance to agriculture in line with the national

objectives.

The following table shows the financial institutions in Tirunelveli district

as on 31st March 2012.

Table 3.1

FINANCIAL INSTITUTIONS IN TIRUNELVELI DISTRICT

No. of No. of
Sl.No. Banking Sectors
Banks Branches
1. Public Sector Banks 50 127
2. Private Sector Banks 14 27
3. Pandiyan Grama Bank 1 51
4. TCCB Ltd. 1 26
5. Land Development Bank 1 8
6. Urban Co-operative Bank 1 10
7. TIIC 1 1
8. TAICO 1 1
9. REPCO 1 1
Total 71 252

Source: Annual Credit Plan, IOB, Tirunelveli, 2010-11.

It is ascertained from the above table that there were fifteen public sector

banks with one hundred and twenty seven branches spread across the district,

whereas the private sector banks and other financial institutions account for seven

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each. Pandian Grama Bank had fifty one branches. The Tirunelveli District

Central Co-operative Bank had twenty six branches and the urban co-operative

bank has ten branches in the district.

Table 3.2

BANKING NETWORK – AREA-WISE BRANCHES AS ON 31.03.2012

TIRUNELVELI DISTRICT

Sl. Semi- Panchayat

Banking Sector Rural Urban Total
No. Urban Allotted
1. Public Sector Banks 41 45 40 126 259

2. Private Sector Banks 14 4 9 27 21

3. Regional Rural Bank 34 12 5 51 145

4. Co-operative Banks 7 24 13 44 --

5. Other Financial 1 -- 3 4 --
Institutions

Total 97 85 70 252 425

Source: Annual Credit Plan, IOB, Tirunelveli, 2010-11.

It is inferred from the above table that under the public sector bank

category forty one branches were serving in the rural side, forty five branches

were in the semi-urban area and forty branches were functioning in the urban area.

Two hundred and fifty nine panchayats were allotted to these branches. Among

the private sector banks, four branches were there in semi-urban area and nine in

the urban area. Twenty one panchayats were served by twenty seven branches.

The Regional Rural bank (RRB) has the maximum of thirty four branches in the

rural areas and one hundred and forty five panchayats had been allotted to them.

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 TABLE 3.3

BLOCK-WISE BRANCHES IN TIRUNELVELI DISTRICT AS ON

31.3.2012

Public Private TAICO

Sl. RRB Co-
Name of the Block Sector Sector LDB REPCO Total
No. (PGB) Op.
Banks Banks TIIC
1. Alangulam 4 1 2 1 -- -- 8
2. Ambasamudram 8 -- 3 4 1 -- 16

3. Cheranmadevi 7 1 1 4 -- -- 13
4. Kadayam 3 2 1 1 -- -- 7
5. Kalakad 6 -- 2 1 -- -- 9
6. Kadayanallur 4 -- 5 1 -- -- 10
7. Kilapavoor 3 2 3 1 -- -- 9
8. Kuruvikulam 4 -- 4 1 1 -- 10

9. Manur 4 -- 2 -- -- -- 6
10. Melaneelithanallur 5 -- 3 -- -- -- 8
11. Nanguneri 5 -- 4 1 1 -- 11
12. Palayamkottai 11 -- 3 1 -- -- 15
13. Pappakudy 2 -- 2 -- -- -- 4
14. Radhapuram 3 3 4 1 -- -- 11
15. Sankarankoil 6 1 2 1 1 -- 11

16. Shencottai 4 1 2 2 -- -- 9
17. Tenkasi 10 3 1 1 1 -- 16
18. Valliyoor 4 3 2 2 1 -- 12
19. Vasudevanallur 4 1 3 2 1 -- 11
20. Tirunelveli Urban 29 9 2 11 1 4 56
Total 126 27 51 36 8 4 252

Source: Annual Credit Plan, IOB, Tirunelveli, 2010-11.

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 It is inferred from the above table that the public sector banks accounted

for one hundred and twenty six branches in twenty blocks. Private sector banks

ranks next with fifty one branches. Tirunelveli block had fifty six branches.

Ambasamudram and Tenkasi blocks had sixteen branches each, while

Palayamkottai block had fifteen branches.

3.4 BANKING SECTOR – AN OVERVIEW

Banking is a service oriented industry which is fast moving from a seller’s

market into a buyer’s market. Banks are also adapting their systems, procedures,

policies and thinking to the felt needs of their customers as the depositors or

borrowers. They are also trying hard to meet the perception of customers who

increasingly articulate their needs and grievances. All customers expect bank and

bankers to be polite, courteous, helpful and understanding. They also expect to be

treated as important individuals. Generally they would be satisfied if prompt,

accurate and speedy attention is given to their work and banking problems.

Customers do not like a banker if he is rigid, inflexible and unhelpful in his

approach. He is also disliked if he is too rules bound. 1

Customer service in banks is a significant concept. It is natural for banks to

compete with one another in winning over the customers. In a competitive

environment not only winning new customers but also retaining the existing

customer base assumes greater importance. It is much more profitable and cost-

effective to retain the customers rather than getting new customers. A successful

bank of the future will be the one that excels in customer service, provides the

customers a range of service and products and does continuous exercise in

providing its potential to serve better.

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 The service standards of Indian banks have improved with the entry of

private banks and introduction of technology driven delivery channels. This has

resulted in continuous rise of expectations of the customers. The product features

and technology are not the only differentiators anymore and the service attitude of

the frontline staff plays a vital role in differentiating banks amongst themselves.

World over, the technology driven key delivery channels such as ATM, net

banking and mobile banking have reduced walk-in customers to the bank

branches. However, in India, it is observed that the customers still find it difficult

to use these technology based channels and they are more comfortable in

transacting banking business traditionally over-the-counters personally to ensure

error-free and risk-free banking service. The ever increasing customers at the

bank branches will pose new challenges in the area of customer service at the

front office. While struggling to provide better and efficient service at the

counters, the staffs are also confronted with various regulatory norms to mitigate

risks in operations. There is a general tendency in frontline to avert any risk. The

fear of errors and monetary risk involved in processing the transaction suppresses

‘service attitude’ in the front office.2

3.5 HISTORY OF INDIAN BANKS

The first banks were The General Bank of India started in 1786 and Bank

of Hindustan started in 1790; both are now defunct. The oldest bank in existence

in India is the State Bank of India, which originated in the Bank of Calcutta in

June 1806, which almost immediately became the Bank of Bengal. This was one

of the three presidency banks, the other two being the Bank of Bombay and

the Bank of Madras, all three of which were established under charters from the

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British East India Company. For many years the Presidency banks acted as quasi-

central banks, as did their successors. The three banks merged in 1921 to form

the Imperial Bank of India, which, upon India's independence, became the State

Bank of India in 1955.

Indian merchants in [Calcutta] established the Union Bank in 1839, but it

failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad

Bank, established in 1865 and still functioning today, is the oldest Joint Stock

bank in India. Then the Bank of Upper India was established in 1863 survived

until 1913. 2

Foreign banks too started to approach, particularly in Calcutta, in the

1860s. The Comptoire d’Escompte de Paris opened a branch in Calcutta in 1860,

and another in Bombay in 1862 with branches in Madras and Pondicherry, then a

French colony, followed. HSBC established itself in Bengal in 1869.

The first entirely Indian joint stock bank was the Oudh Commercial Bank,

established in 1881 in Faizabad. It failed in 1958. The next was the Punjab

National Bank, established in Lahore in 1895, which has survived to the present

and is now one of the largest banks in India. Around the turn of the 20th Century,

the Indian economy was passing through a relative period of stability. Indians

established small banks, most of which served particular ethnic and religious

communities.

The presidency banks dominated banking in India but there were also

some exchange banks and a number of Indian joint stock banks. All these banks

operated in different segments of the economy. Indian joint stock banks were

generally under capitalized and lacked the experience and maturity to compete

with the presidency and exchange banks. This segmentation let Lord Curzon to

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observe, "In respect of banking it seems we are behind the times. We are like

some old fashioned sailing ship, divided by solid wooden bulkheads into separate

and cumbersome compartments."

The period between 1906 and 1911, saw the establishment of banks

inspired by the Swadeshi movement. The Swadeshi movement inspired local

businessmen and political figures to found banks for the Indian community. A

number of banks established then have survived to the present such as Bank of

India, CorporationBank, Indian Bank, Bank of Baroda, Canara Bank and Central

Bank of India. Until the independence of India, it was challenging for Indian

banking.

3.6 POST-INDEPENDENCE

The partition of India in 1947 adversely impacted the economies

of Punjab and West Bengal, paralyzing banking activities for months.

India's independence marked the end of a regime of the Laissez-faire for the

Indian banking. The government of India initiated measures to play an active role

in the economic life of the nation, and the Industrial Policy Resolution adopted by

the government in 1948 envisaged a mixed economy. This resulted into greater

involvement of the state in different segments of the economy including banking

and finance. The major steps to regulate banking included:

The Reserve Bank of India, India’s central banking authority, was

established in April 1934, but was nationalized on January 1, 1949 under the

terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948

(RBI, 2005b). In 1949, the Banking Regulation Act was enacted which

empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the

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banks in India". The Banking Regulation Act also provided that no new bank or

branch of an existing bank could be opened without a license from the SBI, and no

two banks could have common directors. 3

3.7 NATIONALISATION

Despite the provisions, control and regulations of Reserve Bank of India,

banks in India except State Bank of India , continued to be owned and operated by

private persons. By the 1960s, the Indian banking industry had become an

important tool to facilitate the development of the Indian economy. At the same

time, it had emerged as a large employer, and a debate had ensued about the

nationalization of the banking industry. Indira Gandhi, then Prime Minister of

India, expressed the intention of the government of India in the annual conference

of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank

Nationalization.” The meeting received the paper with enthusiasm.

The Government of India issued an ordinance ('Banking Companies

(Acquisition and Transfer of Undertakings) Ordinance, 1969'))

and nationalized the fourteen largest commercial banks with effect from the

midnight of July 19, 1969. These banks contained 85 percent of bank deposits in

the country. Jayaprakash Narayan, a national leader of India, described the step as

a "masterstroke of political sagacity." Within two weeks of the issue of the

ordinance, the Parliament passed the Banking Companies (Acquisition and

Transfer of Undertaking) Bill, and it received the presidential approval on 9

August 1969.

A second dose of nationalization of 6 more commercial banks followed in

1980. The stated reason for the nationalization was to give the government more

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control of credit delivery. With the second dose of nationalization, the

Government of India controlled around 91% of the banking business of India.

Later on, in the year 1993, the government merged New Bank of India with

Punjab National Bank. It was the only merger between nationalized banks and

resulted in the reduction of the number of nationalized banks from 20 to 19. After

this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer to

the average growth rate of the Indian economy.

3.8 LIBERALISATION

In the early 1990s, the then Narasimha Rao government embarked on a

policy of liberalization, licensing a small number of private banks. These came to

be known as New Generation tech-savvy banks, and included Global Trust Bank

(the first of such new generation banks to be set up), which later amalgamated

with Oriental Bank of Commerce, Axis Bank (earlier as UTI Bank), ICICI

Bank and HDFC Bank. This move, along with the rapid growth in the economy of

India, revitalized the banking sector in India, which has seen rapid growth with

strong contribution from all the three sectors of banks, namely, government banks,

private banks and foreign banks.

The new policy shook the Banking sector in India completely. Bankers, till

this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at

4) of functioning. The new wave ushered in a modern outlook and tech-savvy

methods of working for traditional banks. All this led to the retail boom in India.

People not just demanded more from their banks but also received more.

Currently, banking in India is fairly mature in terms of supply, product

range and reach-even though reach in rural India still remains a challenge for the

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private sector and foreign banks. In March 2006, the Reserve Bank of India

allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private

sector bank) to 10%. This is the first time an investor had been allowed to hold

more than 5% in a private sector bank since the RBI announced norms in 2005

that any stake exceeding 5% in the private sector banks would need to be vetted

by them.

In recent years critics have charged that the non-government owned banks

are too aggressive in their loan recovery efforts in connection with housing,

vehicle and personal loans. There are press reports that the banks' loan recovery

efforts have driven defaulting borrowers to suicide.

3.9 PRELUDE OF SERVICES IN BANKS

While modern banking is just one hundred and fifty years old, India has a

5000-years-old tradition of indigenous banking and money lending, but depositors

had no role or position in them. Before the advent of modern banks, the

indigenous bankers who were popularly known as Seths adequately financed the

requirements of production, trade and commerce. They provide a reliable and

trustworthy hundi system all across the country. Two other ancestors of today’s

bankers were the moneylender and the goldsmith. While the indigenous banker

granted loans for trade and industry, the moneylender financed mainly

consumption.4 They had an impeccable credit standing and were highly esteemed,

but they had no depositors and no savings were received from them. These

moneylenders had a dubious and unsavory reputation for squeezing and cheating

their victims.

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3.10 ADVENT OF AGENCY HOUSE:

The advent of the East Indian Company which patronized the Agency

Houses and presidency Banks, had shorn off much of the glory of indigenous

bankers. As a result of this the indigenous banker lost their old predominance.

The origin of modern banking in India may be traced back to the establishment of

agency houses whose primary concern was trade. Like indigenous banker the

agency houses confined banking to general trading. In fact they were shopkeepers,

proprietors of breweries, tanneries, distilleries and cotton, flour and saw mills.

The majority of these agency houses were organized by foreigners employed in

civil or military services in India. These agency houses actually gave a start to the

idea of modern banking and they may be regarded as pioneers of modern banking

in our country. They performed three major functions like receiving deposits,

advancing loans and discounting of bills.

3.11 MASS BANKING

After nationalization in 1969 and 1980, banking in India has witnessed a

major metamorphosis from class banking to mass banking. The motto of bank

nationalization was to make banking service reach the masses that can be

described as “First Bank Revolution”.5

3.12 SOCIAL BANKING

Social banking policies started in the 1950s culminated in the social

control of banks in 1968 to ensure equitable and purposeful distribution of credit

within the resources available, keeping in view the relative priorities of

development needs. However, it was felt that the social control cannot sustain in

equitable distribution of bank credit and facilitates to main sectors of the economy

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and finally it led to the nationalization of banks in 1969. It was aimed at

mobilizing deposits and to ensure availability of credit to hitherto neglected areas

of the society. Thus the social banking began with inclusion of neglected sections

in concern with employment generation and economic development of those

areas. Post nationalization saw a rapid expansion of branches in areas and

availability of credit to hitherto neglected sections. Various agencies were set up

to direct credit and other banking facilities. As a part of social banking, the

nationalized banks were entrusted with the task of actively promoting the growth

of new and progressive enterprises with a view to create opportunities in

increasing scale in the neglected and backward sectors in various parts of the

country. The social banking awareness consists of expansion of banking activities

particularly in semi-urban and rural areas. The banking and social lending were

more concerned with the economic parameters such as employment, income

generation and so on.

Commercial banks extended their services to a large numbers of customers.

Banks were involved in social upliftment, priority sector lending and extending

banking services to unbanked areas and providing variety of services. 6

3.13 TECHNOLOGY PHASE IN CUSTOMER SERVICES

Extensive spread of bank branches and diversification of banking services

in India over the past one decade present different challenges in the areas of

customer service, speedy disposal of credit proposals, reconciliation of inter-

branch office transactions, productivity/profitability, better control and audit and

management information system required for quick decision making. For meeting

these emerging challenges it is essential to ensure branch level computerization or

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up gradation of technology and networking of the branches with their controlling

office and the head office. The objectives of the RBI’s response to those

challenges facing the banking industry have been directed towards improvements

and implementing an effective electronic network providing a robust, secure and

reliable communication backbone for the banking system. 7

3.14 CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

Internet is an excellent example of a worldwide cooperative movement

that is quickly spanning across countries. A few years ago Customers Relationship

Management (CRM) was only for establishing relationship between enterprise and

its customers. Today it is an integral part of the information technology strategy

for banking industry. Most of the CRM developments are taking place in the E-

commerce domain whether B2B (Business to Business) or B2C (Business to

Commerce). So now banks identify this internet banking as their thrust area.

Customer Relationship Management (CRM) enables to store customer

information in computers and they can be retrieved at the click of a button. These

arrangements are becoming popular among private, public and foreign banks.

This is what makes CRM in banking a challenging proposition. For example,

bankers can make up queries on the fly, searching for the information that lasts

them identify which customers to target with a new product or to find out which

bank branches have high loan default rates. Users can just as easily save their

search queries and use them as templates to gene rate additional query reports

from the save data metrics. At the back end, the system provides analysis that can

be tied to geographic, product, channel and customer dimensions. Bankers might

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need to address customers’ queries at a more personal level to convince them of

the benefits and enable them to use the services to their fullest extent. 7

3.15 QUALITY OF CUSTOMERS SERVICES IN BANKS

The progress of any organization particularly is service. Industry

organization like a bank depends upon the quality of service offered to clients.

The customers judge the employees not from what they say and talk, but by the

sincerity of approach to the customers they adopt in serving them. Catchy slogans

initially but ultimately it is efficient and prompt service that helps banker in

retaining customers patronage. Well-designed customer service must be

accompanied by good delivery. The four elements of good delivery are

v Courteous acts
v Customer care
v Speed
v Accuracy.

3.15.1 Courteous Acts

Common courtesies and manners are very important, probably more

important than the banks may consider. Competence means that whoever serves

the customer or whoever supports people that serve customers has to do things

and do them well. It means getting things done rightly at the first time. It means

knowing what should be done and how best it can be done. Courtesy and

competence go hand in hand - it is a license to keep customers for life time.8

This is an absolutely essential requisite, which should become an

inseparable component of service, “service with smile”, people say. Extending

courteous service brings the customer close to the organization and in the process

the image of the organization grows in stature. Even when a banker has to say

87
“No” to some one he could still be warm and courteous, not hurting the feelings of

the prospective customer.

The front-line service providers are the most visible part of any service.

The front-line staff should make the customers express their views freely and

frankly and elicit their ideas. They should politely answer customers’ queries

regarding their deposits/collection of instruments.

3.15.2 Customer care

Customer care is an extension of customer services, but is wider in

context. Customer service implies an immediacy of action, the focal point being a

tactical response to customer requirement. Customer care on the other hand is

more strategic in the planned provision of service in anticipation of customers’

requirements. A service or product is of high quality it meets the demands and

expectations of the customers, if the service or product can be matched with the

customers actual needs and expectations. The satisfaction of customer needs

depends on how far the bank optimizes its internal procedures.

3.15.3 Speed

Speed and time measures are very important factors to many customers.

The speed with which the banks offer their services will actually gain a

competitive advantage and allow them to offer a competitive advantage and

higher satisfaction. On account of technological revolution at present products are

offered to take care of the element of “speed and time” like internet and mobile

banking, debit cards, anywhere banking, ATM and so on.

A large number of customers want that all services should be provided in

minimum time. Time is money for all customers. Leisurely and lethargic

handling of the customers’ transaction is a major block in the good delivery of

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customer services. Payments should be made immediately, since service delayed

is service denied. Prompt service is equated with quality of service. It is to be

understood that service time has three components:

i) Access time
Time required for the client to gain access to the banker and draw his

attention.

ii) Queuing time

This is the time that the customer has to wait after arriving at the bank.

iii) Action time

This is the time required for the banker to provide the service. It is

generally observed that the banker measures only action time and does not

take into account access time and queuing time which are critical to a

customer.

3.15.4 Accuracy
Bank staff should handle customers’ complaints very accurately.

Complaints are a part of life. A complaint is an expression of dissatisfaction,

created by non-fulfillment of an expectation or feeling of discrimination. Prompt

and sympathetic handling of complaints can turn a disgruntled customer into a

satisfied one. Customer can expect the staff to take personal interest in their

problems, apologize for mistakes and welcome feedback.

3.16 MONITORING CUSTOMER SERVICES

There are various forms for monitoring the quality of customer services at

the bank:

· Customer Contest
For providing quality customer service banks conduct customer contests.

Customer contest is a good promotional tool in selling bank products. The

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 theme of the customer contest may be designed to elicit views on how the

banks’ customer services can be improved for customers’ satisfaction and

delight.

· Customer Education

It is not enough for the present day banker to know the systems and

procedures in relation to customers’ transactions. He should be able to

interpret and explain these to the customers whenever necessary. It is to

be appreciated that customer services cannot be merely a subject dealing

with people using logic but dealing with people and their emotions. The

banker educates the customers on the various aspects of banking.

Customers’ expectation has been growing because of media publicity

given by banks for their various deposit/lending plans / schemes.

Customers sometimes misunderstand a particular scheme of a bank as

reported in newspapers. Customers’ education can reduce this information

gap, paving the way for better understanding.

Another area where customers need to be educated is the service charges

and the various lending schemes of the bank particularly the schemes for

financing small business and professionals. The amount of commission

charged after remitting money through post office, money order, is much

higher than the amount of exchange charged by banks for mail transfer /

demand drafts. Small businessmen and professionals have to be

enlightened regarding the formalities required to be complied with or the

documents that are necessary for the speedy disposal of their applications

for financial assistance. Customer education therefore should be viewed

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 as a fundamental issue in the attempt to improve the quality of customer

services.

· Customer Suggestions

Customer suggestions can be elicited at regular intervals. Banks write to

their customers inviting them to offer their suggestions for improving the

bank’s performance in their service areas. Banks provide forms on which

their customers can check the area in which they are satisfied and areas in

which they feel improvement is called for. The suggestions given by the

customer help the bank to improve its image. The complaints /

suggestions box kept on each branch premises has not evoked any useful

response. Hence writing letter to customers can be tried as a different

method of obtaining feedback.

· Customer Meeting and Customer Relation Programme

Customer meets and customer relation programmes may be organized at

regular intervals by banks with a view to getting their views on their

functioning. Such interaction with a cross-section of customers would

give an opportunity to the banker to get live feedback in various areas of

services. Besides, those would help the banker to build and mature a

rapport which would help him get more business and boost the image of

the bank. So the branches should practice relationship banking to ensure

the following for personal rapport.

1. The branch can build a relationship through sending seasons greetings

to customers on the eve of festivals, birthdays and wedding days.

2. The manager can participate in customers’ functions held at their

offices / residences.

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 3. They should chat about family matters with the customers.

4. They could adopt customers as a group and take care of their needs in

the branch with team spirit. Customer profile and customer evaluation

study will be useful to the bank branch manager to render expected

services to the customers.

· Customer Calls

The top level functionaries like the Assistant General Manager, the

Deputy General Manager, the General Manager and the Chief General

Manager should visit customers at periodical intervals at their residence /

office as well as visit branches to interact with customers to get firsthand

information on the quality of service. This will give a feeling of nearness

to existing customers.

· Customer Councils

At large branches customer council is formed where a few customers co-

opt along with the Customer Services Committee members to identify

problems faced by customers and to suggest solutions.

3.17 HUMAN RESOURCE DEVELOPMENT IN RENDERING QUALITY

CUSTOMER SERVICES

It is now well recognized that people are the key to success in any services

industry. A bank is a large organization with a massive workforce. The workforce

in banks has the competence and capability to innovate not only in the area of

product development and service sophistication, but also in the area of enhancing

the image of the organization. Markets are growing global and consumers’

expectations have also increased. With easy exchange of technology, the

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homogenization of products and services is found at surface. It is only the human

element that would possibly make a difference and help the organization to

succeed. The focus should be on human resource development and productive

purposes. 9

For rendering quality services to customers it is essential to analyze and

examine the psychological behavior and attitudes of the staff. No doubt human

nature is complex and people behave differently at different times and under

different circumstances, but some knowledge of human attitudes and behavior can

help the bankers improve their services to customers. All bank personnel need

customer oriented training. Some important aspect of staff training in this respect

should include the following.

· Knowledge of Employees

In today’s competitive world one must learn new skills, sharpen one’s

talent and enhance professional expertise to keep abreast of the fast

changing developments in banking. A person adopt at his job is always

respected. Knowledge should be shared among the employees who

actively involve themselves in preparing /sharing desk profiles / other

material for educating their colleagues by organizing “readers' forum” and

group discussions to disseminate knowledge of the latest developments in

the fields of banking and related areas particularly new schemes of banks

and their implications.

· Listening Skill of Employees

For understanding the customers’ viewpoint in the proper perspective the

employees should have well developed listening skills. Much of the

discontent felt by customers is caused by the poor listening skills of the

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 bank staff. They should listen to the customers’ queries without

interrupting them. Misunderstanding can be removed if the bank staffs

listen attentively and respectfully to customers.

· Communication skills of employees

Communication serves as a mirror which reflects the image of the

organization to the outside world. Internal communication within the

organization must be clear, concise and correct. Unless communications

are right internally, with key messages properly communicated to all staff,

external communications are unlikely to be effective. Communication has

to be consistent and so unless everyone in the organization has the same

message and interprets it in the same manner the end result will differ.

The telephone and letters both are major media of communication that

enable the organization to expand the contacts with customers. A friendly

tone in response naturally catches customers. As regard letters, every letter

that goes out of the organization is an intimate form of contact with the

existing customers and prospective customers. The image and the culture

of the organization are reflected in the form of the tone and the way of

writing the letter.

· Attitude of the staff

Bank staff should consciously develop a positive attitude to help and assist

customers. The attitudes of an employee towards work, his colleagues,

seniors, juniors and the organization can determine his behavior in

different situations. The employee’s general satisfaction can also act as

catalyst towards developing a positive attitude towards work as well as

involvement with the organization. Although the transformation of

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 attitudes in a favorable direction is a slow process, once it takes place it

may lead to chain interaction with broader advantages for the organization

and in turn for both individuals. Customer orientation through right

attitudinal training is the hallmark of a successful marketing strategy for

any bank. Proper attitude orientation can be achieved in any organization

if both management and employees understand the need for rendering the

best service to customers.

· Promptness

One of the major irritants for customers is that they have to pay more than

one visit to the bank for completing a single transaction. A common

response they get from the bank staff is “come tomorrow”. There are often

avoidable delays in updating pass books, issue of DDS / cheque book /

term deposit receipts, collection of cheques and so on. Avoidable delays

are generally man-made delays and coupled with the “come tomorrow”

syndrome they progressively distance the customers from the bank. If the

front line staff is sensitive to the customer they may smile and say, “I’ll be

with you in a moment”. This goes a long way in reducing the frustration

of customers.

· Technology of customer services

Banks have taken up partial or full computerization of branches and

innovation such as the Electronic Funds Transfer and the ATM. Mostly

banks are automating the outdated procedures. But even today the uses of

information technology in the banks are looked upon as a specialist

function to be performed by technicians. The training methods need to be

redesigned to make information technology purposive and result-oriented.

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 Computer audit will have to be strengthened to guard against frauds. The

emphasis on customer service has helped to improve the service at

counters. Computerization ensures efficient and fast service. The

Ombudsman Scheme is well-intended and will prove to be a necessary

apparatus to redress the grievances of customers.

3.18 COMPUTERISATION IN CUSTOMER SERVICES

In today’s competitive scenario speed and sophistication are the essentials

of banking service. Here comes the value of computer technology which is

widely acknowledged to be the major enabling banking environment in the

country. Computer technology is used not only to improve the operational

efficiency, but also to change the very nature of banking. Bank computerization

was started with the signing of the mechanization agreement by the IBA with

trade unions in the year 1983. The technology changes have put forth the

competition among the banks. This has led to increasing total banking automation

in the Indian banking industry. New private sector banks and foreign banks have

an edge over public sector banks as far as implementation of technological

solutions is concerned. However, the latter are in the process of making huge

investment in technology.

The financial reforms that were initiated in the early 90s and the

globalization and liberalization measures brought in completely new operating

environment to the banks. Services and product like “Anywhere Banking,” “Tele-

Banking,” “Internet Banking,” ”Web Banking,” “E-Banking” and so on, have

become the buzzwords of the day and the banks are trying to cope with the

competition by offering innovative and attractively packaged technology based

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services to their customers.1 Some of the innovations that are made possible on

account of the infusion of computerization are described below.

· Total Branch Automation (TBA)

Total Branch Automation enables customers to transact all their banking

work through a single counter instead of going to different counters on the

premises. TBA helps significantly in improving the efficiency of

operations.

· Automated Teller Machine (ATM)

The Automated Teller Machine (ATM) is seen everywhere. This machine

has brought innovations in the Banking sector all over the world. The

customers are no more dependants on the brick and mortar branch of a

Bank. The advent of the ATM has made the concept of “24 X 7 – 365

days banking” a reality. The ATM has been helpful to both the bankers

and the customers. The long crowd of customers in the banking hall of a

branch waiting for their turn to collect cash is disappearing. The branch

business timings have lost significance to the customer after the

introduction of the ATM.

The ATM is a device used by bank customers to process account

transactions. The customer inserts into the ATM, a plastic card that is

encoded with information on a magnetic strip. The strip contains an

identification code that is transmitted to the bank’s central computer by

modem. Every card holder would be given a PIN (personal identification

number) that he should enter and after verifying the same with the records,

the ATM would allow operations. 10

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· Electronic Fund Transfer

The electronic funds transfer device enables early realization and transfer

of funds between different centers on the same or the next day through

electronic mail or satellite networks.

· Tele-banking

In tele-banking, the customer is essentially identified through a code. The

customers can access the Voice Mail System of the bank to obtain certain

information such as account balance and status of debit/credit to certain

cheques. The customer can do many of his non-cash related transaction

over the telephone.

· Mobile Banking

Mobile Banking is a system of providing service to a customer to carryout

Banking transactions on the ‘Mobile Phone’ through a cellular service

provider. It is a service of Banks to make available, the facility of

Banking, wherever the customer is and whenever he needs. This facility

shall be named as “Anywhere and Any moment Banking” but it is

restricted to only information about his account and not cash services.

· Automated cash Dispensers

These machines dispense a fixed amount of cash as soon as a pre-printed

voucher is inserted into the machine.

· Plastic cards

Credit card is a method of payment without the use of cheque or cash is

gradually giving ways to improved version such as debit cards, smart card

and co- branded cards.

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 · Internet Banking

Efforts are underway whereby a customer can route most of the

transactions through his/her personal computer, which will be up-linked

with the mainframe computer of the bank.

3.19 INFORMATION TECHNOLOGY IN CUSTOMER SERVICES

Information technology is absolutely essential for the overall progress in

the banking sector. Technology introduction by itself will have certain effects on

the process. Appropriate technology shall smooth the processes of financial

intermediation, develop an efficient payment system, improve customer service,

handle larger volumes, and generate efficient MIS and so on.

The absorption of technology in Indian Banking scenario has witnessed a

gradual but steady transgression in the last two decades. In the branch banking

segment, the transformation from the Ledger Posting Machines (LPMs) Advanced

Ledge Posting Machines (ALPM) and Local Area Network (LAN) to the

contemporary Wide Area Network (WAN), centralized Core Banking Solution

(CBS) and extensive Automated Teller Machine (ATM) networks opened up

rewarding avenues for the Banks to explore. Needless to mention, the directives

of the Central Vigilance Commission to achieve cent percent computerization

before 31st December 2004 also hastened up the computerization drive in Indian

Banks.

In Indian banking scenario, there are two distinct groups as far as infusion

of technology is concerned. The public sector banks (PSBs) which command over

three quarters of the marker share and old generation private banks (OGPSBs)

who are relatively smaller entities form the first group. These banks were very

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slow in imbibing technology in their operations, had a large branch network

spread over the length and breadth of the country.

The second group which consists of the new generation private sector

banks (NGPSBs) and Foreign banks (FBs) were early adopters of technology in

their operations. The issues relating to technology therefore are distinctly

different for these two groups of banking organizations with the latter being able

to introduce technology in their operations with relative ease as they started

disposal and with their operations being mainly restricted to the urban /

metropolitan areas. The bank being essentially the processor of information in

large quantities, Information Technology (IT) is used to achieve the following:

I. Ability to handle large volume of business with the desired level of

efficiency.

II. Maximizing profitability of operations and

III. Exercising a strict vigil on cost. 11

· Smart cards

The arrival of the smart card technology has opened up a new world of

application in the banking sector. This card, the size of a visiting card,

with a computer processor and memory built in with a vast range of

applications which will revolutionize banking in India. The smart card can

be used as a portable pass book for the holder’s bank account storing the

current balance without the need for a central computer and telecom lines

connecting the branches. The bank is able to provide the service that a

customer desires, draw cash, make deposits or enquire about the balance in

his account at any branch of the bank in any city, town, or village

regardless of where an account is primarily maintained.

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· Multimedia

Multimedia is the most significant advancement in Information

Technology (IT) since the PC revolution.

· E – Mail

Information is exchanged through electronic media. Such exchange takes

place between remote locations or within the office. The linking devices

are facsimile, teletypewriter, computer and any other electronic device. It

is very useful to the NRI customers to transfer funds directly to their

accounts without manual intervention. This is one of the least costly

methods of transmission.

· Bank Net

It means transmission of data quickly and effectively between the RBI and

various banks. The transmission line of the Department of

Telecommunication largely terrestrial (pertaining to the various branches)

is used.

· Satellite-Based Cheque Clearing System

Customers can encash their cheque in any of the branches with the help of

the technological network. The images of the cheque are transmitted

through the bank’s e-mail.

· Internet

Internet is World Wide Web (WWW) of the interconnected computerized

networks. Simply, it is a network of networks. It provides information

service of products and services and helps to reach existing customers and

prospective customers across the world.

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3.20 ADOPTION OF INFORMATION TECHNOLOGY BY BANKS

The IT revolution had a great impact in the Indian banking system. The

use of computers had led to introduction of online banking in India. The use of the

modern innovation and computerization of the banking sector of India had

increased many fold after the economic liberalization of 1991 as the country's

banking sector had been exposed to the world's market. The Indian banks were

finding it difficult to compete with the international banks in terms of the

customer service without the use of the information technology and computers.

The RBI in 1984 formed Committee on Mechanization in the Banking

Industry (1984) whose chairman was Dr C Rangarajan, Deputy Governor, Reserve

Bank of India. The major recommendations of this committee was introducing

MICR Technology in all the banks in the metropolis in India. This provided use of

standardized cheque forms and encoders.

In 1988, the RBI set up Committee on Computerization in Banks

(1988) headed by Dr. C.R. Rangarajan which emphasized that settlement

operation must be computerized in the clearing houses of RBI in Bhubaneshwar,

Guwahati, Jaipur, Patna and Thiruvananthapuram.It further stated that there

should be National Clearing of inter-city cheques at Kolkata, Mumbai, Delhi,

Chennai and MICR should be made Operational. It also focused on

computerization of branches and increasing connectivity among branches through

computers. It also suggested modalities for implementing on-line banking. The

committee submitted its reports in 1989 and computerization began form 1993

with the settlement between IBA and bank employees’ association.

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 In 1994, Committee on Technology Issues relating to Payments System,

Cheque Clearing and Securities Settlement in the Banking Industry (1994) was set

up with chairman Shri WS Saraf, Executive Director, Reserve Bank of India. It

emphasized on Electronic Funds Transfer (EFT) system, with the BANKNET

communications network as its carrier. It also said that MICR clearing should be

set up in all branches of all banks with more than one hundred branches.

Committee for proposing Legislation On Electronic Funds Transfer and other

Electronic Payments (1995) emphasized on EFT system. Electronic banking refers

to DOING BANKING by using technologies like computers, internet and

networking, MICR, EFT so as to increase efficiency, quick service, productivity

and transparency in the transaction.

Total numbers of ATMs installed in India by various banks as on end

March 2005 is 17,642. In case of the ATMs the highest with new private sector

banks, then with the SBI and its subsidiaries and then followed by new private

banks, nationalized banks and foreign banks. While on site is highest for the

nationalized banks of India.

3.21 PRIVATE SECTOR BANKS IN INDIA

All those banks where greater parts of stake or equity are held by the

private shareholders and not by government are called as the private sector banks.

These are the major players in the banking sector as well as in expansion of the

business activities India. The present private sector banks are equipped with all

kinds of contemporary innovations, monetary tools and techniques to handle the

complexities are a result of the evolutionary process over two centuries. They

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have a highly developed organizational structure and are professionally managed.

Thus they have grown faster and stronger since past few years. 12

3.21.1 History and Evolution of Private Banks

Private sector banks have been functioning in India since the very

beginning of the banking system. Initially, during 1921, the private banks

like Bank of Bengal, Bank of Bombay and Bank of Madras were in service, which

all together formed Imperial Bank of India, Reserve Bank of India (RBI) in 1935

became the centre of every other bank taking away all the responsibilities and

functions of Imperial bank. Between 1969 and 1980 there was rapid increase in

the number of branches of the private banks. In April 1980, they accounted for

nearly 17.5 percent of bank branches in India. In 1980, after 6 more banks were

nationalized, about 10 percent of the bank branches were those of private

sector banks. The share of the private bank branches stayed nearly same between

1980 and 2000.

From early 1990’s, with the RBI's liberalization policy and the government

gave licenses to a few private banks, which came to be known as new private

sector banks. There are two categories of the private sector banks- “old” and

“new”. The old private sector banks have been operating since a long time and

may be referred to those banks, which were in operation before 1991 and all those

banks that had commenced their business after 1991 were called as new private

sector banks.

Housing Development Finance Corporation Limited was the first private

bank in India to receive license from RBI as a part of the RBI’s liberalization

policy of the banking sector, to setup a bank in the private sector banks in India.

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3.21.2 Old Private Sector Banks

The banks, that were not nationalized at the time of bank

nationalization that took place during 1969 and 1980 were known to be the

old private sector banks. These were not nationalized, because of their small size

and regional focus. Most of the old private sector banks were closely held by

certain communities and their operations were mostly restricted to the areas in and

around their place of origin. Their Board of directors mainly consists of locally

prominent personalities from trade and business circles. One of the positive points

of these banks is that, they lean heavily on service and technology and they were

likely to attract more business in days to come with the restructuring of the

industry round the corner.

3.21.3 New Private Sector Banks

The banks, which came in operation after 1991, with the introduction of

economic reforms and financial sector reforms were called as new private

sector banks. Banking regulation act was then amended in 1993, which permitted

the entry of new private sector banks in the Indian banking sector. However, there

were certain criteria set for the establishment of the new private sector banks.

Some of those criteria being:

· The bank should have a minimum net worth of ` 100 crores.

· The promoters holding should be a minimum of 25% of the paid up

capital.

· Within 3 years of the starting of the operations, the bank should offer

shares to public.

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3.22 DRIVERS OF CHANGE

Advantages previously held by large financial institutions have shrunk

considerably. The Internet has leveled the playing field and afforded open access

to customers in the global marketplace. Internet banking is a cost-effective

delivery channel for financial institutions. Consumers are embracing the benefits

of Internet banking. Access to one's accounts at anytime and from any location via

the World Wide Web is a convenience unknown a short time ago. Thus, a bank's

Internet presence transforms from 'brouchreware' status to 'Internet banking' status

once the bank goes through a technology integration effort to enable the customer

to access information about his or her specific account relationship. The six

primary drivers of Internet banking includes, in order of primacy are:

· Improve customer access

· Facilitate the offering of more services
· Increase customer loyalty
· Attract new customers
· Provide services offered by competitors
· Reduce customer attrition

3.22.1 Internet Banking

The Internet banking is changing the banking industry and is having the

major effects on banking relationships. Even the Morgan Stanley Dean Witter

Internet research emphasized that Web is more important for retail financial

services than for many other industries. Internet banking involves use of Internet

for delivery of banking products and services. It falls into four main categories,

from Level 1 - minimum functionality sites that offer only access to deposit

account data - to Level 4 sites - highly sophisticated offerings enabling integrated

sales of additional products and access to other financial services- such as

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investment and insurance. In other words a successful Internet banking solution

offers

· Exceptional rates on Savings, CDs, and IRAs

· Checking with no monthly fee, free bill payment and rebates on ATM
surcharges
· Credit cards with low rates
· Easy online applications for all accounts, including personal loans and
mortgages
· 24 hour account access
· Quality customer service with personal attention

3.22.2 Types of Internet Banking

· Informational

This is the elementary of Internet banking. Typically, the bank has

marketing information about the bank’s products and services on a

standalone server. This level of Internet banking can be provided by the

bank or outsourced. While the risk to a bank is relatively low, the server or

web site may be vulnerable to alteration. Appropriate controls therefore

must be in place to prevent unauthorized alterations to the bank’s server or

web site.

· Communicative

This type of Internet banking system allows some interaction between the

bank’s systems and the customer. The interaction may be limited to e-mail,

account inquiry, loan applications or static file updates (name and address

changes). Because these servers may have a path to the bank’s internal

networks, the risk is higher with this configuration than with informational

systems. Appropriate controls need to be in place to prevent, monitor and

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 alert management of any unauthorized attempt to access the bank’s

internal networks and computer systems. Virus controls also become much

more critical in this environment.

· Transactional

This level of Internet banking allows customers to execute transactions.

Since a path typically exists between the server and the bank’s or

outsourcer’s internal network, this is the highest risk architecture and must

have the strongest controls. Customer transactions can include accessing

accounts, paying bills, transferring funds etc.

3.22.3 Indian Banks on Internet Banking

The banking industry in India is facing unprecedented competition from non-

traditional banking institutions, which now offer banking and financial services

over the Internet. The deregulation of the banking industry coupled with the

emergence of new technologies, are enabling new competitors to enter the

financial services market quickly and efficiently.

Indian banks are going for the retail banking in a big way. However, much is

still to be achieved. This study shows some interesting facts:

· Throughout the country, the Internet Banking is in the nascent stage of

development (only 50 banks are offering varied kind of Internet banking

services).

· In general, these Internet sites offer only the most basic services. 55% are

so called 'entry level' sites, offering little more than company information

and basic marketing materials. Only 8% offer 'advanced transactions' such

as online funds transfer, transactions and cash management services.

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 · Foreign and Private banks are much advanced in terms of the number of

sites and their level of development. 13

3.22. 4 Emerging Challenges

Information technology analyst firm, the Meta Group, recently reported

that "financial institutions who don't offer home banking by the year 2000 will

become marginalized." By the year of 2002, a large sophisticated and highly

competitive Internet Banking Market will develop which will be driven by

· Demand side pressure due to increasing access to low cost electronic

services.

· Emergence of open standards for banking functionality.

· Growing customer awareness and need of transparency.

· Global players in the fray

· Close integration of bank services with web based E-commerce or even

disintermediation of services through direct electronic payments (E- Cash).

· More convenient international transactions due to the fact that the Internet

along with general deregulation trends, eliminate geographic boundaries.

· Move from one stop shopping to 'Banking Portfolio' i.e. unbundled

product purchases.

The Internet and its underlying technologies would change and transform not just

banking, but all aspects of finance and commerce. It represents much more than a

new distribution opportunity. It would enable nimble players to leverage their

brick and mortar presence to improve customer satisfaction and gain share. It

would force lethargic players who are struck with legacy cost basis, out of

business-since they are unable to bring to play in the new context.

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3.22.5 Main Concerns in Internet Banking

In a survey conducted by the Online Banking Association, member

institutions rated security as the most important issue of online banking. There is a

dual requirement to protect customers' privacy and protect against fraud. Online

Banking via the World Wide Web provides an overview of Internet commerce and

how one company handles secure banking for its financial institution clients and

their customers. Some basic information on the transmission of confidential data

is presented in Security and Encryption on the Web. PC Magazine Online also

offers a primer: How Encryption Works. A multi-layered security architecture

comprising firewalls, filtering routers, encryption and digital certification ensures

the account information is protected from unauthorized access:

· Firewalls and filtering routers ensure that only the legitimate Internet users

are allowed to access the system.

· Encryption techniques used by the bank (including the sophisticated public

key encryption) would ensure that privacy of data flowing between the

browser and the Infinity system is protected.

· Digital certification procedures provide the assurance that the data of the

customers receive is from the Infinity system. 14

3.23 PERCEIVED USEFULNESS

Perceived usefulness (PU) is one of the components of Technology

Acceptance Model (TAM), which has been widely used by information system

researchers. PU is the extent to which a person believes that using a particular

system will enhance his or her performance”. The importance of PU has been

widely recognized in the field of electronic banking. It is the primary prerequisite

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for mass market technology acceptance, which depends on consumers’

expectations about how technology can improve and simplify their lives. PU has a

positive effect on the adoption of information technology.

3.24 USERS' PERSPECTIVE ON BANKING INDUSTRY

Changing banking terminology without realizing its impact on the customer

that can leave an average customer baffled. A label like ‘Emonies National Funds

Transfer’ is very confusing for the customer. Changing it to a simpler ‘Funds

Transfer’ reduces confusion and allows the customer to complete their transaction.

· Another example is use of marketing gimmicks resulting in loss of

usability. If other banking portals have a link called ‘SMS Alert’, then

coining a similar link called ‘InstaAlert’ only serves to create confusion.

· Many banks have now understood that online banking is here to stay and

that they need to upgrade and enhance their offerings for simple solutions

and desired security to retain and attract customers.

· They also need to recognize that they must offer the same convenience and

service that people have come to expect at the branch as well as in other

areas of their life like shopping online. Payment for shopping too requires

users to invariably go through the online banking portals.

· Banks need to also understand that transition of a new user to an advanced

one is a gradual process that needs to be supported by encouraging users to

explore with confidence by offering intuitive processes and user-friendly

nomenclature. Only when users feel confident with the system, will it be

easy for them to explore new services through cross-sell banners and other

means that are popular and successful in banking.

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· Banks are however yet to regard online banking as a ‘person-less’ service

counter where the user is left to fend for himself/herself amidst stiff

usability barriers and realize that it costs them. The attention they accord

their other points of service are therefore deficient in online.

· Setting up the hardware for online banking, which is viewed as the end

point for the bank is often the beginning from a user’s perspective. That a

methodical user-centric rather than a technology-centric design approach

that creates satisfied customers, reduces costs and increases revenue is yet

to be accepted by the banking industry.

· Services offered via various banking channels design lessons and

recommendations are task-focused activity and also deals with people’s

money. Both need ease of use and psychological comfort of the user as

fundamental requirements.

· It specifically needs a clear task flow, clarity of language and terminology

and support available at all times. Further, if a task completion process is

intuitive and logical, the user is more likely to gain confidence and

increase usage of the internet for all their banking needs, thus increasing

revenue potential for the bank.

· An online demo of the service is an easy way to address both the task

centric nature of banking as well as address the comfort level of the wide

variety and vast numbers of novice users. To capitalize on that

opportunity, banks must understand and design for highly specialized user

behavior, expectations and critical aspects of the various cultures.

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 · There is a wide variety and large numbers of novice users among Indian

online banking customers today. Their views go beyond the novelty of

online banking. They expect their experience to be similar to what they get

at a service counter. The unfamiliar virtual experience cannot be

completely different from their familiar physical experience.

· Indian users have shown their readiness to accept online banking as a sales

channel by purchasing through cross selling online. But this is possible

only if they are able to navigate the bank site. Banks need to view and

reflect this through thoughtful designs of their offerings.

· While banks have clarity of their market segmentation, they must progress

to behavior-based segmentation and user-centered methods and move

beyond predesigned technology solutions. Online banking design must

create a 'quick in and out' experience, ensure success in transactions users

undertake, arouse curiosity and attract the customer to explore.

· Studying users, defining user types, benchmarking designs and testing for

ease of use are critical for this. Specific needs therefore are: clear task

flows, brevity and clarity of language and terms, basic functions made

obvious to average users and support available at all times.

· Besides short-term solutions, the long-term strategy needed is to not just

create but also measure user performance with the design to ensure it is

self-evident and transactions are truly self-controlled.

And hence the low transaction cost would make banking on the Net

irresistible, but also that would require institutions to carefully consider and plan

customer relations programs. It is believed that everything would be determined

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by content and context, and execution would be key. From a customer and service

provider perspective, this is where the world is moving-it is going to be real-time,

on-line, personalization for both marketing and the service experience. If existing

banks don't want to disappear, it is this challenge of integration that they need to

embrace in order to win and survive. In the months and years-ahead are going to

be how service providers integrate and market their offerings across different

channels. The strategic and executional battles of the future are going to be fought

for channel integration which means that an institution presents an identical face

to the customer-be it in the branch, on the web, at an ATM or for that matter,

through a sales representative or a broker. Channel integration across the phone

web could clearly lead to a gain of several percentage points of GDP. They feed

on each other to create incremental value for the customer, as well as the

institution. The incremental value comes from two distinct sources. Firstly, by

reducing inefficiencies and secondly, persuading people at the right time (the right

time from the customer's perspective, not from the service provider's perspective)

to opt for a tailor made offering. This too increases value. Actually, this has to do

with the Internet itself, and more to with the underlying technologies of the

Internet which allow incremental efficiency, and empowers the customer to make

more enlightened and timely choices. Lastly the product range is another issue

which becomes important. It would take a technological revolution to make

available advanced banking products on the net and given the rate at which the

technology is developing could be expected to happen in near future.

It is clearly in the interest of banks to encourage their customer base to

use online banking. Current designs of online banking systems do not address

users’ needs and expectations of online banking. User-centred design methods

can achieve this. In India, banking, like several other transactions, continues to be

relation-based and in need of human assurance and intervention, technology

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notwithstanding. Hence this is particularly significant. True benefits will be seen

when banks use this technology to offload customer service costs and increase

sales by maximizing self-service. As 21stcentury banking users entrust the care of

one of their most important assets to cyber space, a seamless, stress free and

successful experience is essential. Design with users’ success as focus, content

supported with demos and help to reduce intimidation, will justify investment in

online through increased usage by satisfied customers.

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