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Customer Services in Co-Operative Banks: A Case Study

Article  in  SSRN Electronic Journal · May 2012

DOI: 10.2139/ssrn.2066494

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 CUSTOMER SERVICES IN CO-OPERATIVE BANKS:
A CASE STUDY

Dr. A. H. Sequeira
Professor-NITK, Surathkal
Email: aloysiushs@gmail.com

Abstract

In this research paper, an attempt was made to address the issues related to
customer satisfaction and quickness of transactions in co-operative banks. The
customer satisfaction was measured through a questionnaire. The customer service
was evaluated on both objective and subjective basis. The questionnaire also
included investigation of bank employees’ attitude and the facilities offered by the
banks. It is clear from the survey results that the customer services are reasonably
satisfactory.

Key words : customer satisfaction , information technology

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Introduction

The parameters considered regarding profitability and productivity are

quantified to some extent, but these alone are insufficient for a proper delineation of
the notion of productivity. Some more adjuncts in addition are necessary to be
investigated. In this context, it is found necessary that two other important criteria
should also be included in the definition of productivity, as they have a crucial
bearing on the maintenance and furtherance of banking activity itself and its
profitability. These are:

a) “Customer Satisfaction”, and

b) “Quickness of Transactions”.

At first sight, it would appear to be farfetched to even think of these two

features as parts of a productivity program. Since last two decades there has been a
noticeable decline in these two areas and the co-operative banks have come in for
severe criticism. An attempt has been made in this chapter to address these issues
by defining and measuring the customer satisfaction and quickness of transactions in
the co-operative banks.

Customer Satisfaction

In the context of banking services, it is essential to have a conceptual

understanding of what does customer service or satisfaction actually means.
Virtually every customer is disenchanted, one way or another, with the level of
service provided by the Indian banks. So, to appreciate the key characteristic of
‘customer satisfaction’, it is not what is actually provided but what is perceived and
experienced by the customer that matters.

The diversity of customers in terms of their status, size and other related factors and
their changing levels of expectation from time to time, further exacerbate what is
already a complex problem.

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 Customer service has always been a major preoccupation of the banks. The
bank service repeatedly comes under heavy attack from bank users, newspapers,
legislation, and Government for poor quality of customer service. In the area of
customer service, expectation and demands of the customers generally rise at a
much faster pace than banks are equipped to deal with. It leads to enormity and
complexity of banking operations that give rise to complaints.

To improve the customer service, the Central Government, so far, appointed

banking commissions (1972) under the Chairmanship R.G. Saraiya, Working group
on customer services in Banks (1975) headed by R.K. Talwar and Committee on
customer service in Banks under the Chairmanship of M.N. Goiparia (1990). All
these committees suggested the importance of designing proper systems and
procedures as may be required to bring in qualitative improvements in customer
service. The Talwar Committee very aptly says “the main purpose of banking is to
create and deliver customer needed services in a customer satisfying manner”.

In July 1991, the Government of India announced the New Economic Policy,
which can be broadly divided into two packages. One set of policy package aims at
improving the efficiency of India’s internal economy and other at integrating Indian
market to the international market.

It aims at making certain structural and operational changes characterising

liberalisation, deregulation, and globalisation to foster competitive forms and promote
economy. The contents of the New Economic Policy speak of one philosophy i.e.,
‘Let Market Decide’ which means ‘Be Fit or Quit’. The wave of Liberalisation,
Globalisation and Privatisation brings in its wake severe competition. In India, it was
assumed that customer is one who needs services and he was therefore taken for
granted. At present, there is a shift in paradigm, as a result the organisation needs
customer, and customer has a choice of an ‘alternative’.

Evaluation of Customer Services

‘Customer Service' is an extremely dynamic concept. What is good customer
service today may be indifferent tomorrow and bad service the day after. However,
there is a general feeling that the nationalisation of major banks in 1969 had ruined
the competition resulting in the deterioration of banking services. There is a feeling
that the co-operative banks are also not rendering better customer service. There
have been frequent references through the mass media and discussions in
various fora about the declining quality of customer service offered by the banks to
the public in general. The complaints relating to the co-operative banks are mainly
delays in the;
a) collection of outstation cheques,
b) encashment of cheques,
c) acceptance of cash,
d) issuing of drafts and mail transfers,
e) submission of statement of account and pass books, and
f) processing of loan applications.

Furthermore, not carrying out the special and specific instructions of customers
and discourteous behaviour are the reasons for complaints. Some of these delays
can be traced back to the deficiencies in systems and procedures prevailing in
banks, the growth in banks not being matched with adequate infrastructural
support, and the lack of necessary skills of bank personnel to manage their
tasks effectively and fulfill what is expected of them.

Pricing and placing strategies are some of the most powerful bank marketing
tools but they have limited scope in our banking industry as the interest rate, branch
expansion, and advertising are severely restricted by the policy guidelines
formulated by the Government. It is, therefore, by rendering efficient customer
services, the bank can retain its present customer and attract potential customers.
This in turn will help in generating higher deposits in bank. Banks are business
organisations selling bank services. It is essential for banks to continuously assess
how customers perceive bank services, what their expectations are, and how they
can be satisfied. Appraisal of customer service must be an important activity of the
banks.

The activities of the co-operative banks regarding services fall into two major
categories: a) Traditional services, and b) Non-Traditional services. Standard
transactions that come under traditional services are:
 a) Withdrawal of cash,
b) Acceptance of cash,
c) Updating of pass book,
d) Legibility of pass book,
e) Collection of local cheques,
f) Collection of outstation cheques,
g) Sending credit/ debit advise,
h) Intimation of maturity of fixed deposits,
i) Issue/renewal of fixed deposits, and
j) Issue of chequebooks.
Non-traditional functions of the banks are:
a) Purchase of bank draft,
b) Encashment of bank draft,
c) Receipt/issue of money through mail transfer, and
d) Receipt/issue of money through telegraphic transfer.
Other aspects, which determine the quality of bank services are:
a) Infrastructural facilities;
b) Attitude of bank employees;
c) Adequacy of the number of bank branches; and
d) Availability of general amenities at bank branches, like availability of drinking
water, place to sit and other factors.

One of the most important factor that determines the standard of customer
service in banks is the employees motivation and attitude.
The attitude of the Bank employees includes the following aspects:
a) Courtesy extended by bank employees to the customer,
b) Presence of bank employees during working hours,
c) Promptness in catering to customers, and
d) General attitude of bank employees.

Survey of Customer Services

The quality of customer service was evaluated based on two approaches:

objective type and subjective type. In the objective criterion, an optimal time for the
transactions to be completed for different services is used. The quality of customer
service is then measured by comparing the actual time for the transaction to the
optimal. Different time periods are fixed for different transactions as the time taken
for the withdrawal of cash to collection of cheques varies. The chief advantage of
these criteria is that they are tangible and need not be based on subjective
evaluation.

The transactions, which call for objective evaluation and the different time
frames required for evaluation, are given below:
a) Withdrawal of cash;
b) Depositing cash in the account;
c) Getting a new cheque book;
d) Getting a new fixed deposit receipt or renewing the old one;
e) Getting payment on the fixed deposit receipt;
f) Purchasing a bank draft;
g) Encashing of bank drafts, travellers cheques, gift cheques;
h) Getting accession of safe deposit lockers;
i)Getting the money credited to the account after submission of a local cheque;
j) Getting the money credited to the account after submission of outstation
cheque;
k) Getting the amount of a bill credited to the account after it is paid at the
other end;
l)Receipt of money through mail transfer; and
m) Receipt of money through telegraphic transfer.
The time frames selected were those already determined by NCAER and
NIBM. Since the type of operations in commercial banks and the co-operative banks
are similar, the same time frames have been applied in this research study.

The time frames for transaction (1) - don't know, less than 1 minute, 1-2
minutes, 3 - 5 minutes, and more than 5 minutes.

The time frames for transactions (2) to (8) - don't know, less than 5 minutes, 5 -
10 minutes, 10 - 30 minutes, 30 - 60 minutes, and more than 1 hour.
 The time frames for transactions (9) to (13) - don't know, 1 day, 2 - 3 days, 4 -
7 days, 7 - 15 days, 15 - 30 days, and more than a month.

Objective Standards of Customer Service

The Reserve Bank of India and Indian Banks' Association had recently fixed
the norms or standards for the time to be taken in execution of the various
banking services. This was necessitated because the banking industry itself
could not arrive at the appropriate or most likely standards. This is an
objective criterion set up by Reserve Bank of India and Indian Banks'
Association to measure the performance of commercial banks in terms of the
quality of customer service offered. However, it is not clear how the optimal
time limits for the transactions are obtained. In addition, time limits have
not been specified for all kinds of banking services as described in Section 2
of the Banking Regulation Act.

The time frame for each service was to be as follows:

Nature of Transactions Time Limit

Payment of cheque 10-15 minutes

Receipt of cash Expeditiously (depending on
amount and denominations of
notes)
Collection of local cheque 2 - 3 days
Collection of outstation cheque 2 - 3 weeks
Pay order/Draft issue 30 minutes
Statement of current accounts To be provided monthly within 7
days of the following month
Updating of pass books for 1 - 2 days
Savings Bank Accounts
Issue of "Fixed Deposit Receipts" and 15 - 30 minutes
"Cumulative Deposit Receipts"
 In case the time taken for services of a bank exceeds the prescribed limits as
specified above, the question arises how one rates the performance of a bank in this
regard. In view of the banking reforms made by RBI to improve the customer service
in commercial banks, the same may be extended to the co-operative banks all over
India to improve the customer’s service and productivity. As a pilot study, the
researcher felt that this scheme should be introduced first in Dakshina Kannada
district to improve the efficiency and productivity in the co-operative banks.

Subjective Evaluation

The subjective criteria depend entirely on the attitude, perspective of the

individual customer regarding what is good, and what is bad. Only when a majority
of customers pronounce a service good, we can be sure of the quality.
The subjective criteria are of two types. The first type would elicit a ‘Yes’ or ‘No’ for
an answer to questions regarding:
a) Adequacy of space,
b) Adequacy of amenities, and
c) Adequacy of the number of branches in the locality
The second type has usually five possible responses from the customers when
asked to comment on some aspect of customer service. The services that needed
second type of subjective criteria are:
a) Speedy withdrawal of cash,
b) Speedy acceptance of cash for credit to your account,
c) Updating of pass books/writing of statements of account on time,
d) Legibility and accuracy of pass books/ statements of account,
e) Speedy collection of outstation cheques,
f) Speedy collection of local cheques,
g) Timeliness in sending credit/debit advice,
h) Intimation of maturity of fixed deposits,
i) Issue/renewal of fixed deposit receipts,
j) Quick issue of new cheque book,
k) Speedy purchase of bank draft,
l) Speedy encashment of bank draft,
 m) Receipt of money through telegraphic transfer with minimum delay, and
n) Receipt of money through mail transfer with minimum delay.

The different criteria for above transactions are:

For transactions (a) to (n) - very good, good, fair, bad, do not know.
For presence of bank employee during working hours - normally present, not
normally present, do not know.
For promptness in catering to customers - very prompt, usually prompt, slow, do not
know.
For general attitude of bank employee - positive, negative, do not know.

To summarise, three fundamental indicators involved to judge efficiency and

quality of customer service are:
a) The average time taken for transaction,
b) A ‘yes/no’ reaction to the questions on availability of basic amenities, and
c) A ‘subjective opinion’ about various aspects of customer services.

It is assumed that these three indicators collectively can give comprehensive

insight into the nature of customer service and help in answering vital questions
regarding the efficiency and quality of customer services delivered by the co-
operative banks. This will help in identifying potential areas of improvement so that
the co-operative banks can come up with better marketing strategies for deposit
mobilisation.

Scope of the Study

The study covers: Co-operative Banks, Customers, and Employees. ‘Co-

operative Bank’ denotes Urban Co-operative Bank, also referred to as the Primary
Co-operative Bank duly recognised by the Reserve Bank of India and regulated by
the Banking Regulation Act.

The study restricts its scope to thirteen banks in general and five banks in
particular within the Dakshina Kannada district , Karnataka state , which broadly
represent the trend of productivity in the co-operative banks in other regions.
Since this district has been a ‘Cradle of Banking’, these co-operative banks provide a
perfect setting for the study of present type. For the purpose of comparison, the
financial performances of the sample units for 1990-91 to 1997-98 are considered.

Methodology

The present study has extensively used the data from the field survey
conducted for the purpose. The data has been collected directly from the customers
and the survey has a wide and deep coverage in terms of geographic area, number
of customers covered and the variety and depth of information collected. The
sample size consisted of 2,400 customers covering eight taluks and the extent of
coverage is presented in Figure 1.
Some of the broad population groups of information on which data has been
collected pertained to customers’ personal and family information, income, savings,
investments, and usage of various bank services. The segments of customers
divided were based on demographic and socio-economic factors. Demographic
segments included urban, rural, and semi-urban. In socio-economic segmentation
base, the segments were age, education, number of family members, occupation,
income, savings, and investment. For each of the above segments qualitative and
quantitative analyses have been performed.

Table 1 shows the percentage distribution of the respondents. Nearly 60 per

cent belonged to urban, 26 per cent to rural and 14 per cent to semi-urban areas.
Among the total respondents 40 per cent belonged to a group who are less than 30
years age group, 48 per cent belonged to 30-50 years age group, and 12 per cent
belonged to more than 50 years of age group. About 53 per cent respondents were
males and 47 per cent females. Nearly 95 per cent of the respondents were literate
and 5 per cent were illiterate. Among the various social categories of respondents, 8
per cent belonged to scheduled castes, 3 per cent scheduled tribes and 22 per cent
to other backward classes. The remaining 67 per cent belonged to the general
category. Nearly 65 per cent were holding savings bank account, 14 per cent
recurring deposit account, 18 per cent term deposit account and 3 per cent were
current deposit holders. With respect to range of bank savings, 23 per cent saved
upto Rs.1,000; 41 per cent saved Rs.1,000 to Rs.5,000; 21 per cent belonged to
savings range of Rs.5,000 to Rs.10,000; and 15 per cent belonged to saving
category of above Rs.10,000. It is observed that nearly 57 per cent of the bank
customers were banking for more than three years with the co-operative banks, 26
per cent had business with the bank between 1 to 3 years, and only 17 per cent were
new entrants of less than 1 year experience.
 TABLE 1 Distribution of Respondents

Particulars Customers' Response

Location Rural Semi Urban Urban Total

624 336 1440 2400

(26) (14) (60) (100)
Less than 30 to 50
Age More than 50 years Total
30 years years
960 1152 288 2400
(40) (48) (12) (100)
Sex Male Female Total

1272 1128 2400

(53) (47) (100)
Education Illiterate Literate Total

120 2280 2400

(5) (95) (100)
Category SC ST OBC Others Total

192 72 528 1608 2400

(8) (3) (22) (67) (100)
Type of Bank Recurring Term
Current Saving Bank Total
Account Deposit Deposit
72 1560 336 432 2400
(3) (65) (14) (18) (100)
Range of Bank upto Rs.1000 to Rs.5000 to Above
Total
Savings Rs.1000 Rs.5000 Rs.10000 Rs.10000
552 984 504 360 2400
(23) (41) (21) (15) (100)
Below 1
Business with bank 1 to3 Years Above 3 Years Total
Year
408 624 1368 2400
(17) (26) (57) (100)
Note: Figures in parenthesis indicate percentage of total respondents

Source: Sample Data

MAJOR FINDINGS OF THE STUDY REGARDING CUSTOMER SERVICE

Objective Evaluation of Customer Services

The percentage distribution of responses with respect to objective evaluation

of quality of customer services is given in Table 2. The following are the

observations made from the Table:

a) Regarding withdrawal of cash, 1 per cent customers felt that it took less

than 1 minute, 14 per cent took 1-2 minutes, 40 per cent took 3-5 minutes

and 33 per cent took more than 5 minutes.

b) To deposit cash, 14 per cent customers took less than 1 minute, 31 per

cent 1-2 minutes, 44 per cent took 3-5 minutes, and 1 per cent took more

than 5 minutes.

c) For obtaining new cheque book, 19 per cent customers took 1-2 minutes,

36 per cent had to wait for 3-5 minutes, and 30 per cent had to wait for

more than 5 minutes.

d) To renewal of fixed deposit, 13 per cent customers waited for 1-2 minutes,

26 per cent for 3-5 minutes, and 52 per cent for more than 5 minutes.

One per cent had to wait for more than 1 hour, and 8 per cent responses

were ‘don’t know’.

e) For encashing fixed deposit receipt, 10 per cent customers waited for 1-2

minutes, 26 per cent for 3-5 minutes, 46 per cent for more than 5 minutes,

and 10 per cent for more than 1 hour.

f) For purchasing bank draft, 6 per cent customers waited for 1-2 minutes, 23

per cent for 3-5 minutes, 27 per cent for more than 5 minutes, and 32 per

cent for more than 1 hour.

g) For en-cashing bank draft, and travelers’ cheque; 8 per cent of the

respondents waited for 1-2 minutes, 19 per cent waited for 3-5 minutes.

h) For obtaining safe deposit lockers, 6 per cent customers waited for 3-5

minutes, 18 per cent waited for more than 5 minutes, and 60 per cent

waited for more than 1 hour.

i) For crediting local cheques, 21 per cent customers took one day, 48 per

cent took 2-3 days, 11 per cent took 4-7 days, 12 per cent waited for 7-15

days, and 1 per cent took 15-30 days.

j) For crediting outstation cheques, 8 per cent customers took one day, 28

per cent felt 2-3 days, 28 per cent took 4-7 days, 21 per cent took 7-15

days, and 9 per cent waited for 15-30 days.

k) For crediting bills, 15 per cent customers took one day, 24 per cent took 2-

3 days, 29 per cent took 4-7 days, 11 per cent took 7-15 days, 11 per cent

took 15-30 days, and 1 per cent waited for more than 1 month.

l) For receipt of money through mail, and telegraphic transfer, 81 per cent

customers took one day and 15 per cent waited 2-3 days.

m) For crediting foreign cheques, 1 per cent customers took one day, 8 per

cent took 2-3 days, 32 per cent took 4-7 days, 45 per cent waited for 7-15

days, and 6 per cent waited for 15-30 days.

 TABLE 2
Objective Evaluation of Quality of Customer Services
Type of Transaction Percentage Response

Less More
Don't 1 to 2 3 to 5 More than 5
TIME FRAME than 1 than 1 Total
know minute minute minute
minute hour

Withdraw of Cash 12 1 14 40 33 0 100

Depositing of Cash 10 14 31 44 1 0 100
Obtaining new Cheque
14 0 19 36 30 1 100
Book
Renewal of fixed
8 0 13 26 52 1 100
deposit
Encashing fixed deposit
8 0 10 26 46 10 100
receipt
Purchasing Bank Draft 12 0 6 23 27 32 100
Encashing bank draft,
14 0 8 19 45 14 100
travelers cheques,etc.
Getting safe deposit
16 0 0 6 18 60 100
lockers
More
Don't 2 to 3 4 to 7 7 to 15 15 to 30
1 day than a Total
know days days days days
month
Crediting local cheques 7 21 48 11 12 1 0 100
Crediting out-station
6 8 28 28 21 9 0 100
cheques
Crediting bills 9 15 24 29 11 11 1 100
Receipt of money
through mail/ telegraph 4 81 15 0 0 0 0 100
transfer
Crediting foreign
7 1 8 32 45 6 1 100
cheques
Note: Sample size N = 2400

Source : Sample Data

45 per cent waited for more than 5 minutes, and 14 per cent waited for more than 1
hour.
 TABLE 3
Bank Employees Attitude
Particulars Customers' Response
Not Don't
Courtesy extended by staff Satisfied Total
satisfied know
1728 624 48 2400
(72) (26) (2) (100)

Presence of Bank Manager/ Normally Not Do not

Total
Staff during working hours present present know
1848 432 120 2400
(77) (18) (5) (100)

Do
Promptness among Bank Very Usually
Slow not Total
Employees prompt present
know
624 1440 216 120 2400
(26) (60) (9) (5) (100)

Sub-
Attitude of staff Manager Officers Clerks
staff
Positive 448 486 436 502
Negative 106 130 155 99
Don't know 8 12 11 7
Total 562 628 602 608

Note: Figures in parenthesis indicate percentage of total respondents

Source: Sample Data

Bank Employees Attitude

The percentage distribution of responses regarding bank

employees’ attitude is given in Table 3.

a) Nearly 72 percent of the co-operative bank savers are satisfied

with the courtesy of bank staff.

b) Approximately 77 per cent observed that bank manager and staff

were ‘normally present' during the working hours of the bank
branches.

c) About 26 per cent have opined that bank staff are ‘very prompt' and 60 per

cent ‘usually prompt'.

d) Among the various categories of staff, 80 per cent of customers felt that

managers had ‘positive’ attitude, 77 per cent felt officers had ‘positive’

attitude, 72 per cent felt clerks had ‘positive’ attitude and 82 per cent

customers were of the opinion that sub-staff had ‘positive’ attitude. The

distribution of customers opinion on attitude of bank employees is shown in

Figure.2.

e) The critical value for the Chi-squared ( 2 ) test using 5 per cent level of

significance and 6 degree of freedom in 12.6. Since the actual computed

value of Chi-squared is 19.61, which is greater than the critical value, there

is sufficient evidence that there is relationship between the responses of

customers and the attitude of employees of co-operative banks.

General Facilities

The percentage distribution of responses regarding general facilities in banks is

presented in Table 4.

a) Nearly 75 percent of bank savers were satisfied with the space that is

available at bank branches, however, 20 percent of them are not satisfied with

the general amenities.

b) About 72 per cent of the bank customers were satisfied with the facilities

offered by the bank. The distribution of customers of customers’ opinion on

general facilities provided by bank is depicted in Figure 3.

c) Nearly 78 per cent of bank savers were satisfied with the existing network of

branches in their area/ locality, 22 percent of the bank savers are not

satisfied.

d) Regarding the bank timing, 33 per cent were satisfied and 57 per cent were

not satisfied.

e) About 75 per cent customers felt that the banks should work on holiday and

11 per cent were against it.

f) With respect to computerised services, 72 per cent were satisfied and 23

per cent were not satisfied.

 TABLE .4
General Facilities in the Bank
Particulars Customers' Response
Are your satisfied with adequate space Don't
Yes No Total
within bank know
1800 480 120 2400
(75) (20) (5) (100)

Are you satisfied with adequate facilities in Don't

Yes No Total
bank know

1728 552 120 2400

(72) (23) (5) (100)

Are you satisfied with the computerised Don't

Yes No Total
services know
1728 552 120 2400
(72) (23) (5) (100)
Do you feel adequate number of branches Don't
Yes No Total
exist in your locality know
1872 480 48 2400
(78) (20) (2) (100)

Not Don't
Are you satisfied with bank timings Satisfied Total
satisfied know

792 1368 240 2400

(33) (57) (10) (100)

Should
Don't
Should the Bank work on a Holiday Should work not Total
know
work
1800 264 336 2400
(75) (11) (14) (100)
Note: Figures in parenthesis indicate percentage of total respondents

Source : Sample Data

Subjective Evaluation of Customer Services

The percentage distribution of responses regarding subjective evaluation of quality

of customer service is given in Table 5.

a) With respect to speed of services like withdrawal of cash, 11 per cent

customers rated as very good, 70 per cent as good, 10 per cent as fair and 8

per cent as bad.

b) Regarding acceptance of cash, 10 per cent customers rated as very good, 77

per cent as good, 6 per cent as fair and only 2 per cent as bad.

c) Updating of passbook, 75 per cent customers rated as good and 11 per cent as fair.
d) Regarding legibility of passbook, 67 per cent customers rated as good, and 22 per

cent fair.

e) Nearly 83 per cent of the customers rated the services of collection of local cheques

as good, 6 per cent as very good and 3 per cent as fair.

f) About 79 per cent of customers opined positively regarding the speed of services

like collection of outstation cheques and issue/ renewal of fixed deposits.

g) Regarding the intimation of maturity of fixed deposits, 66 per cent customers rated

the service as good and 12 per cent as bad.

h) About 68 per cent customers rated the services of sending credit/ debit advices as
good and 19 per cent as fair.
i) Regarding the issue of cheque books, 74 per cent rated the service as good and 14
per cent as fair.
j) Nearly 54 per cent rated the service of purchase of bank draft as good, 26 per cent
as fair and 10 per cent as bad.
k) Regarding encashment of bank draft 56 per cent rated the service as good, 12 per
cent as fair and 12 per cent as bad.
l) Regarding the services of receipt/ issue of money through mail transfer and
telegraphic transfer, an average of 60 per cent customers rated as good and 15 per
cent as fair.
 TABLE .5

Subjective Evaluation of Quality of Customer Service

Type of Transaction Percentage Response

Very Don't
Good Fair Bad Total
Good Know

Withdrawal of cash 11 70 10 8 1 100

Acceptance of cash 10 77 6 2 5 100

Updating of Pass Book 3 75 11 3 8 100

Legibility of Pass Book 2 60 22 6 10 100

Collection of local cheque 6 83 3 1 7 100

Collection of outstation cheque 2 79 8 3 8 100

Sending credit/debit advice 0 68 19 2 11 100

Intimation of maturity of fixed
3 66 6 12 13 100
deposits
Issue/renewal of fixed deposits 5 79 3 1 12 100

Issue of cheque book 1 74 14 1 10 100

Purchase of Bank Draft 0 54 26 10 10 100

Encashment of Bank Draft 2 56 12 12 18 100

Receipt/Issue of money
2 66 12 12 8 100
through mail transfer
Receipt/Issue of money
7 54 18 11 10 100
through telegraphic transfer
Note: Sample size N = 2400

Source : Sample Data

Information Technology (IT) in Banks

For effective operations of the banks, one of the recommendations made by the
Banking Commission (1972) was: “Banks should develop a scientifically organised
management information system that will provide comprehensive, compact and
condensed information necessary for policy formulations, performance evaluation,
control and economic analysis. The information should be available promptly and
regularly so that it can serve as an effective aid to decision making and can serve to
signal approaching events and developments. The management information system
will ensure compliance with statutory requirements and credit policies, improve
operational efficiency and help maintain effective public relations.” But until now the co-
operative banking industry in India has not given any serious thought for an well-
organised Management Information System (MIS).

Banking industry is an information intensive industry. The most important

resource the banks deal in apart from cash is ‘information’. As such, information is the
key-task (the critical factor for success) area in banks. Rangarajan says, “For the
purpose of sanctioning loans, banks deal with and rely upon the information. Apart from
the physical handling of cash or securities, much of banks’ work consists of input of
information, recording of information in various places, re-organising it, storing it, taking
decisions on it, recording decisions transmitting information over long distances,
analysing it and using it for policy-making and decision-taking”. Undoubtedly such an
important resource, viz., the ‘information’ needs to be handled through a well-designed
management information system.

Automation and mechanisation of banking processes in India have been debated

since the nineteen seventies. The National Institute of Bank Management had
appointed a study group for the purpose as far back as in 1972, the Talwar Committee
had addressed this issue in 1976. The Rangarajan Committees whose
recommendations did lead to some activity on this front followed these in 1983 and
1988.

As could be expected, the whole process met with resistance from the bank
employees and it was not until 1983 when an industry level agreement was reached
between the Indian Banks Association and the workmen’s unions, that mechanisation
was eventually accepted. With the Reserve Bank of India stipulating in 1994 that four
thousand bank branches be computerised by end-1996, the issue has since become
urgent and more serious.

Even otherwise, Indian banks (meaning, collectively, all the Public Sector Banks in
India) were, in the meantime, caught up in the global tide of phenomenal advances in
Information Technology greatly impacting upon all transaction - intensive businesses.
Economic liberalisation in the country and the consequent competition from foreign
banks and domestic private banks also turned out to be powerful catalysts in hastening
mindset changes. Most of the new as well as later entrants have started with an IT
based infrastructure, with resulting benefits such as: minimal workforce numbers and
costs, ability to offer their clients well focused transaction applications relying upon
exclusive databases, and a head start with the state-of-art technology without the
economic and cultural burden of legacy systems.

Information Technology has clearly helped such banks even out, in terms of
defining their market positioning, concentrating on class banking catering to a limited
number of highly profitable corporate and high net worth clients and emphasizing the
low-profit, high volume mass banking. The effects of these strategies are evident in
bottom line profits and customer service orientation. In any business, IT cannot be an
end in itself. It must enhance its contributions to the value-adding capabilities of the
organisation that also applies to banks.

The Rangarajan Committee distinctly set out the key objectives of automation in
banks: improvements in customer service, decision making and productivity.
Eventually, these would enhance the competitive capabilities of Indian banks helping
them to survive and grow in the harsh market place bristling with several other
advantaged players.

CONCLUSION
The study indicates that there is a great need to conduct periodic survey on the
time taken for banking services by interviewing a sample of bank customers either
directly or by mail questionnaires. The paper also included a discussion on study of the
applications of information technology in co-operative banking. All the banks were
surveyed through a questionnaire to find out the extent of computerisation and its
effectiveness. The survey revealed that there was sufficient evidence to prove that
many co-operative banks have adopted information technology through computerisation
of various activities of the bank. In order to probe in detail the impact of IT in co-
operative banks, a case study of one of the oldest Banks was also taken up. The case
reveals that the Bank had made appreciable progress after the installation of
computers. The Bank has proved that a positive approach for total computerisation has
helped the bank to achieve tremendous success. The Information Technology
implementation at the referred bank is an example of broad vision and commitment of
management for customers. The bank has proved that how positive approach for total
computerisation helped the bank. The bank is taking every care in the area of customer
satisfaction.
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