A

On

“A COMPARATIVE STUDY ON CUSTOMER RELATIONSHIP

MANAGEMENT OF STATE BANK OF INDIA AND KOTAK
MAHINDRA BANK"

In partial fulfillment of the requirements of

M£lSter of ManagRWent Studied

Conducted by

UnlVeruty of Mumbai

Thmugh

Rizvi Institute of ManB eMnt Studies & Research

Under the guidanCe Of

Mr. Gubasb Raje

Submitted by

MMS

Batch: 2017 — 2019.

'Th is is to certi/ t5o Mbs f4<eMn Blddiqu\ a swdent of Rizvi Institute of
Management Studies and Research, of MMS iii bearing Roll No.4O and
specializing in F''Jnance has successfully completed the project titled

“A COMPARATIVE STUDY £1N CUST£1MER RELATIONSHIP

MANAGEMENT OF STATE BANK OF INDIA AND K£ITA K
MAHINDRA BANK"

Under the guidance of Prof. Gubash Rate in partial fvlfllment of the requirertant of
Masters of Management Studies by University of Mumbai for the academic year 2017
—2019.

Prof. Subash Rsje

Project Guide

Prof. Umar Farooq Dr. W1i‹n Kit»

Academic Coordinator Director

2
I take this opportunity to thank 4›• u»i•«t/ ‹r ltumbai for giving me a chance to
do lliis project. Firstly, I owe njy deepest gra\ilude to my project S ide Prof’, S!\
iJbash Rajc for his guidance, case and moral support wilJ›ou\ which this project
r'niJIJ have really been a distant dream.

1 tkanl‹ the teaching and non-leaching slaff of Rim i Insrirute of K1anagcmcnt

Studies and Research for providing encouragement and \ aLsbTC Inp0ts required for
completion and enñcljmcn\ of \his yrojecL

I would like to lliant each end every..pmon u'ho directly or indirectly helped me jfl
the completion of the projni. This acknowlcdpefijcjtt u'ould surely be incolp}ilctc
without thanking ijjy purcnls, who raised me, tuughi mc end supported me II
rotiphoiit the years. A special thanks to my another u ho u’as instrumental in insfi)Iing
II\c love of food6 cool ink in mc, u'hich resulted in fljc \oyic of lA s yrojzct

To niypancns (d cNelhis diseuziozpmjec.Lu1ly,and

m0flinpuNant¿I flunkGodomuAingañofGWposibc
 ExecuGve Summary

CUSTOMER RELATIONSHIP MANAGMENT has become necessity in order

for brink to survive in the competitive enironnient vis-a-vis not only from the
public and private sector banks but also from the foreign banks. lt is an important
concept for fast emerging in the world of banking.

Due the advancement in the techixilogy and the competitive market C ustonier
Relationship Management is really much more a human function than a technology
implementation. And while banks need to constantly orient their employees and
vendors towards never losing focus of the customer, technology can be harnessed to
enable the human aspect to function more effectively are studied and interpreted in
light of banks performance.
 TABLE OF CONTENTS

Chapter hame Page No

No
Introduction to Banking
1.1 Introduction
1.2 Banking system in India
1.3 History of Banking
1.4 Classification ot Banking
2 Reserve Bank ot India
2.1 Introduction of RBI
2.2 Role of RBI in Indian Banking System
3 Customer Relationship Management in Banking Sector

3. I Introduction to CPJd
3.2 Meaning ot CPJd
3.3 Objecti›'e of CPJd in Banks
3.4 Need ot CRM in Banks
3.5 Benefits ot CRM in Banks
3.0 Implementation of C RM in Banking Sector
3.7 Challenges taced by banks for successtul
implementation CRM
3.8 Methods of Effective CRM Implementation
4 Company Profile
4.1 Introduction to SBI
4.2 Product and Services offered by SBI
4.3 CRM Initiatives oflered by SBI
4.4 Technology used by SBI
4.5 Introduction to KotaL Mahindra Bank
4.0 Product and Services offered by KMB
4.7 CRM Initiatives otlered by kMB
4.8 Technology used by KMB
Comparative Analysis between SBI and kMB

5
 Introduction
De tuition of
bank
Banking as “accepting for rhe pm pose of lending or in vestment, of deposits of
iiioiiey from the publ ic, repajabh on demand or orhem ise and u irhdraw able on
demand by cheque, di aft or or der otherwise"

Banking Regulation Act, 1949

Banking System in India

Banking sector plays a major role for the economic grow'rh of the counti y. W
ithour a sound and effecri ve banking system iii India it cannot have a healthy
econoiiij'. The bank ing sysreiii should not out j be hassle free bur ir should able to
iiieet new' chat lenses posed by the technology and any other external and internal
factor. .As per the Reset ›'e Bank of India jR Bl ), India’s banking sector is
sufficiently capitalized and z'ell-regulated. The financial and economic conditions
iii the country are far superior to any other country in the u orld. Credit, market and
liquidity risk studies suggest that Indian banks are generally i esilient and ha›'e u
itlistood rhe global dow'nrtirn w'ell.

Indian bank ing indtistr j has i ecentl j witnessed the roll out of inno v'ativ'e banking
models like payment s and small finance bank s. R Bl’s nez' measures may go a
long z'ay in helping rhe resti uctM ing of the doiiiesric banking industry.

The digital pa¿’ments s¿’sten4 in India has evolved the most an4ont 2S co‹inrries n ith
India‘s Immediate Pa}'n4enr See ice I I /v\ PS) being the only sy stein at level S in the
Fasrer Pa¿’nzents Innovation Index (FPI I ).

The Indian banking system consists of 27 public sector banks, 22 pri v are sector
banks, M for eign banks, 5ñ i epional rural banks, 1,589 urban cooperative banks
and 93,550 rural coopernriv'e bank s, in addition ro cooperate ve credit institutions.
6
 History of Banking in India

Banking in India has it origin as early or verdict period. During the mogul period the
indigenous banker played a very important role in lending money and financing
foreign trade and commerce.

During the days of east India Company it was the turn of agency house to carry on
the banking business. The general bank of India was the first joint stock bank
establis hed in 1786 the other which was followed was the bank of idindustan and
Bengal bank. The bank of idindustan is reported to have continue till 1906 while
other two failed in mean time in the first half of the 19th century the east Indian
company has established there bank. The bank of Bengal in 1809. The Bank of
Bombay in 1840 and the Bank of niadras in 1843.The three presidency banks were
subsequently amalgamated into the Imperial Bank of India (1BI) under the Imperial
Bank of India Act, 1920 which is now known as the State Bank of India. The
Reserve Bank of India (RBI) which is a central bank in April 1935.The central office
or RBI is in Mumhai and its control all the other banks in the country

In the wake of Swadeshi Movement number of banks with the India Management
were established in the country namely , Punjab National Bank Ltd. Bank of India
Ltd
,bank of Baroda ltd , Cannra bank. 14 major bank of the country nntionnlize an on 1
5tli April 1980 ,6 more commercial private hanks were taken over by the
government

The first bank in India through conserva0ve was established in till today. the journey
of Indian banking system can be segregated in to 3 distant phases these are
mentioned below

• Early phase from 1786 to 1969 of Indian bank

• Nationnlizntion of Indian bank and up to 1991 prior to Indian banking sector

• New phase of Indian banking system with the advent of Indian financial &
Banking sector reform afier 1991
The general bank of India was setup in the year 1786.Next came bank was Hindustan
and Bengal bank. The east India Company established the Bank of Bengal ( 1 809)
Bank of Bombay ( 1840) bank of madras (1843) as independent unit and called it
presidency bank.

These three bank were amalgamated in 1920 and Imperial bank of India was
established which started as private share holder barrk, Mostly Europeans shareholder

During the first phase the growth was slow and the bank also experience periodic
failure between 1913 and 1948. There were approximately 1 1 iXl banks. mostly
small. To streamline the functioning and activity of the commercial brink, the
government of India came up with the Bank ing companies Act 1949 which was later
change to Banking Regulation Act 1949 as per amending Act of 1965.Reseve Bank of
India was vested with the extensive power for the supervision of the banking in India
as the Central Banking Authority.

During those day's public has lesser confidence in the bank. As an aftermath
deposit mobilization

Was slow .Abreast of it the saving bank facility provided by the postal department
was completely snfer .Moreover the fund were largely given to traders

Phase II

Government tool major steps in this Indian Banking Sector Refomis after the
independence. In 1955. it nationalized Imperial Bank of India with the extensive
banking facilities on a large scale especially in rural and semi-urban aeras.it formed
State Bank of India to act as a principal agent of RBI and to handle bank ing
transaction of the union and state government all over the country.

Seven banks forming subsidiary of the state bank of India was nationalized in 1960 on
19th July 1969, major process of nationalized was carried out . It was the effort of
the prime minister of India Mrs. Indira Gandhi thnt 14 major commercial bank in the
country were nationalized.

8
Second phase of nationalization Indian Banking sector Reform was carried out in
1980 with seven more banks. This step bought 80°A of the banking segment in
India under government ownership. The following step are taken by government
of India to regulate Banking institution in the country.
1949: Enactment of hanking regulation act.

1955 Nationalization of State bank of India.

1959 Nationalization of SBI subsidiary.

1961 insurance cover extended to

deposit. 1971 Nationalization of 14 major

bank.

1971 Creation of credit guarantee corporation.

1975 creation of regional niral bank.

1980 nationalization with 7 bank with deposits over 200 crores.

After the nationalization of the bank, the branches of public sector bank in India rose
to 800% in deposits and advance took a huge jump by 1 1000% .Banking under the
government ownership gave the public implicit faith and immense confidence about
the sustainability of these institution

Phase Ill

The third phase of evolution of banking in India started in 199 1 .The reforms are
needed to increase the efficiency of financial resource mobilizations and generate
higher levels of growth. Secondly, financial sector reforms are utmost necessary for
the macro-economic stability. India saw its worst economic crisis in the decade of
1980s. In 1991, India embarked into an era of E cononiic Reforms which led to
liberalization. privatization and globalization of the Indian Economy. The financial
sector reforms were an integral part to these reforms. It was the first Narasiniha
Committee that gave a blueprint of banking sector reforms. On the basis of these
recommendations, the go merriment launched a comprehensive financial sector
9
liberaliza0on program which included interest rates liberalization, reduction of
resen'ed rations. reduced government control in banking operations and establishment
of a market regulatory framework. Anodier outcome of liberalization was the
dismantling of prohibitions against foreign direct investment.

Some more outcomes of reforms that impacted the banking sector were:-

Steps were taken to move to a market determined exchange rate system and a unified
exchange rate was achieved in the 1990s itself. The government also released a slew
of norms pertaining to asset classifica0on. income recogni0ons, capital adequacy etc.
which the banks hnd to comply with current account convertibility was allowed for
the Rupee in accordance with IMF conditions.

Nationalized banks were allowed to raise funds from the capital markets to strengthen
their capital base .The lending rates for commercial banks was deregulated. thereby
freeing them to lend more or as they saw fit Also, banks were allowed to fix their own
interest rates on domestic term deposits that matures within two years. Customers
were encouraged to move away from physical cash, as RBI issued guidelines to the
brinks pertaining to the issuance of debit cards and smart cards.

The process of introducing computerisation in all branches of banks began in 1993 in

line with the Comm Mtce on Computerization in Banks’ recommendations. which had
been submitted in 1989.The NSE (National Stock Exchange) began its operations in
1994.

RBI began the practice of auctioning Treasury Bills spanning 14 days and 28 days.
Capital index bonds were introduced in India for the first time. The newly adopted
policy of liberaliz ation led the RBI to provide licenses to conduct han ¥ ing
operations to some private banks such as ICICI Bank, idDFC Bank etc. The growth
of industries and expansion of economic operations also revitalized banking
operations, which had to keep up with the demand for various banking operations by
the flourishing and even nascent enterprises. Bankers also responded to the renewed
demand from the industrial sector and regular customers. New technology and
customer-friendly measures were adopted by bankers to attract and retain customers.
 CHAPTER-2: RESERVE BANK OF INDIA

Introduction

The pattern of centml banking in India was based on the bank of England
.England had a highly de›'eloped banking system where the central bank
functioned as a banker’s bank. The central bank function has lender of last resort
was on a condition that bank should maintain stable cash ration as prescribe
from time to time

The Reserve Bank of India was established on 1 st April 1935, under the reserve bank
of India Act. 1934.The bank share capital was Rs5crore. The resen'e bank of India act
require the government to maintain reserve of equivalent paid up capital

The RBI plays an important part in the Development Strategy of the Government of
India. lt is a member bank of the Asian Clearmg Union. The general superinlendence
and direction of the RBI is entrusted with the 21-member Central Board of Directors:
th Governor, 4 Deputy Gov ernois, 2 F mance Ministry representatives. 10
government-nominated directns to impoñant elements frnn India’s
economy, and 4 directors to represent local boards headquartered at Mumbai, Kolkata,
Chennai and New Delhi. Each of these local boards consists of 5 members who
represent regional interests, and the interests of co-operative and indigenous banks.
The bank is also active in promoting financial inclusion policy and is a leading
member of the Alliance for Financial Inclusion

BstabJishznent:

The Reserve Bank of India was established in 1935 under the provisions of the
Reserve Bank of India Act, 1934 in Calcutta, eventually moved pennanentiy to
Mumbai. Though originally privately owned, was nntionnlized in 1949.

OrgAoiuNoosndMxoagemeot:

The Reserve Bank’s affairs are governed by a central board of directors. The board is
appointed by the Government of India for a period of four years, under the Reserve
Barrk of India Act.
 • Full-time officials: Governor and not more than four Deputy C;ovemors. The
current Governor of RBI is MR. Urjit Patel.
+ There are 3 Deputy C;overnors presently: B P Kanungo, N S V ishwannthan
and Viral V Achnrya.
• Nominated by Government: Ten Directors from various fields and two
government Officials.
• Others: four Directors: One each from four local boards.

Role of RB I in Indian banking sector

As the central bank of the country, the RBI performs a wide range of functions such
as
1) Acts as the currency authority- — The Reserve Bank manages currency in India.
The Gov emmenE on the aA'ice of the Reserve Bank. decides on the various
denominations. The Reserve Bank also co-ordinates with the Government in the
designing of bank notes, including the security feature. The Reserve Bank estimates
the quantity of notes that are likely to be needed denomination-wise and places the
indent with the various presses through the Government of India.

The Reserve Bank derives its role in currency management on the basis of the Reserve
Bank of India Act, 1934. All the currency notes except one rupee note are issued by
RBI. The RBI act permits RBI to issue notes in the denominations of rupees 2. 5, 10.
20, 50, 100, 500, 1000, 50tXl, l00iXl. Currently 5tXl0 and l0tXl0 rupee notes are not
in circulation.

1} Controls money supply and credit — RBI controls the supply of money in the
economy by exercising its control over interest rates in order to maintain price
stability and achieve high economic growth. RBI takes into account the following
monetary policies to control money supply and credit.

a) Cash rmerve rqtio: Cash Reserve Ratio lt refers to the mminium amount
of funds in cash (decided by the RBI) thnt a commercial bank has to maintain with the
Reserve Bank of India, in the fon of deposits. An increase in this ratio will
eventually lead to considerable decrease in the money supply. On the contrary, a fall
in CRR will lead to an increase in the money supply. Currently, it is 4%.
b) Statutory L iquidity- Ratio: SLR is concerned with maintaining the minimum
percentage (fixed by RBI) of assets in the fomi of non-cash with itself. The flow of
credit is reduced by increasing this liquidity ratio and vice-versa. As SLR rises the
brinks will be restricted to pump money in the economy, thereby contributing towards
a decrease in money supply. The reverse case happens if there is a fall in SLR. it
increases the money supply in the economy. Currently, SRL is 19.5°A.

c) Banh Rate Policy: The rate at which central bank provides loan to commercial
brinks is called bank rate. This instrument is a key at the hands of RBI to control the
money supply in long temi lending. At present the barrk rate is 6.50%.

d} Repo Rate: Repo (Repurchase) rate is the rate at which the RBI lends short-temi
money to the banks against securities. When the repo rate increases borrowing from
RBI becomes more expensive. Repo rate is always higher than the reverse repo rate.
At present it is 6.25°A.

e) Reverse Repo Rete: It is the exnct opposite of repo. In a reverse repo transaction,
brinks purchase government securities fomi RBI and lend money to the banking
regulator. thus earning interest. Reverse repo rate is the rate at which RBI borrows
money from bank s. The banks use this tool when they feel that they are stuck with
excel s funds and are not able to invest anywhere for reasonable return. At present it is
5.75%.

I) Open JYiarket Operations: These include both, outright purchase and sale of
government securities, for both, injection and absorption of liquidity in the economy.

3) Manages foreign exchange — RBI ensures that short term fluctuations in trade do
not affect the exchange rate. In order to maintain stability in exchange rates. RBI
enters into foreign exchange transactions.

4) Acts as the banker of banks — As the hankers' bank, RBI holds a part of the cash
reserves of banks, lends the banks funds for short periods, and provides them with
centralized clearing and cheap and quick remittance facilities.