Indian Banking Sector

Abstract
The Purpose of this study to investigates relationship dimensions and studies the differences in perception of customers with respect to services provided by five Indian banks. The relationship dimensions which lead to customer satisfaction have been identified. This study reports on the different satisfaction levels of customers of private and public sector banks with respect to the services provided by their banks

Keywords : indian bank, SBI, PNB, IDBI,ICICI,HDFC, Customer Satisfaction Introduction

The liberalization process initiated by the government about a decade ago has changed the landscape of several sectors of the Indian economy. The financial sector like other sectors is also going through major changes as a consequence of economic reforms. The consumption-led boom in India has fuelled robust demand for financial products especially in the banking domain. Emerging competition has generated new expectations from existing and new customers. There is an urgent need to introduce new and more attractive customerfriendly products and services. The banking sector presently is at an inflexion point. Existing products need to be delivered in an innovative and cost-effective manner by taking full advantage of emerging technologies. Technology has swiftly become a business driver rather than a business enabler. This sector has seen phenomenal growth in terms of technology infusion and adoption in the recent past such as: Internet and Mobile Banking, CRM, etc. With increasing competition and tightening of prudential norms by the Reserve Bank, the players in the banking industry, both Indian and global are taking turns towards mergers and acquisitions. Only banks having adequate infrastructure, technology, economies of scale and well connected network of branches will be able to survive and meet the challenges of ever increasing competition and customer expectations. The book is divided into two sections. Section-I extensively covers the trends, issues and challenges related to the technology i.e. ATMs, e-banking, data warehousing and data mining, CRM solutions, etc. Section-II covers other contemporary issues in the banking sector such as Basel II, financial inclusion, service 1

quality, risk management, banc assurance, retail banking, universal banking etc. The book shall serve as a rich reference resource for decision makers in the banking industry, researchers, academicians and students. The traditional distinctions between banking and other financial services like insurance on one side; and between commercial banking, developmental banking and investment banking are getting blurred. The emergence of universal banking and banc assurance are clearly pointers. This global convergence of financial services may gather further momentum in the years to come. The banking and insurance sector reforms have encouraged private sector players to make forays into the business in collaboration with major international companies. This new scenario will witness financially sound and experienced players transforming the industry with best practices in product development, operational efficiency, marketing capability, service focus, and tech savy orientation. Thus there is a need for intensive, futuristic and career oriented programs in these two areas: Banking and Insurance. These developments in Banking and Insurance industry call for competent and professionally trained managers", Increasing competition, thinner spreads and introduction of new technology driven products are some of the trends that the Indian banking system is experiencing. "Recent trends in Indian banking have reflected the efforts of the major players to adapt to a rapidly liberalizing and globalizing environment. While the impact of these changes is possibly a subject of debate, there is one group which is not complaining the customers, the beneficiaries of the process of liberalization." Further, the technology oriented banking has become one of the latest mantras of success in the market, especially to win over the customers. To this, says SBI Chairman AK Purwar, "Indian banks need to fuel the market by bringing new products at par with the international standards, extending ATM facility to rural areas and vibrant networking countrywide to compete with the new generation and the MNC banks in India" As T.S. Anantharaman, Financial Analyst, mentioned, "The savings and investments scenario in our country has undergone total change in the past decade, since the country embarked on a course of liberalization and globalization of its economy. With the increasing sophistication of our economy, the variety and type of investments options available to us today have multiplied. Also, with the economy getting more and more integrated with the world economy, rapid changes in the options, instruments, rate of return etc. have become the order of the day." Such a change is visible in respect of shares, mutual 2

funds, fixed income, bank deposits, life insurance, pension plans etc. since change and innovation is involved in this process, and one can legitimately expect an exciting and lucrative career scenario in the banking, finance and insurance sector.

Customer Satisfaction
Customer satisfaction, a business term, is a measure of how products and services supplied by a company meet or surpass customer expectation. It is seen as a key performance indicator within business and is part of the four perspectives of a Balanced Scorecard. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. Organizations need to retain existing customers while targeting non-customers; Measuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace. Customer satisfaction is an abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other factors the customer, such as other products against which the customer can compare the organization's products. Satisfaction with banking services is an area of growing interest to researchers and managers. The commercial banking industry like many other financial service industries is facing rapidly changing market. New technologies, economic uncertainties, fierce competition and more demanding customers and the changing climate have presented an unprecedented set of challenges. Intangible assets, particularly brands and customers, are critical to any organization and in todays competitive environment relationship marketing is critical to banking corporate success. Banking is a customer oriented services industry. As we know that customer is the king therefore customer is the main focus and customer service is the differentiating factor. Banks have also started realizing that business depends on client service and the satisfaction of the customer and this is compelling them to improve customer service and build relationship with customers. With the current change in the functional orientation of banks, the purpose of banking being redefined. The main driver of this change is changing customer needs and expectations. Customers look for a relationship with bank when they receive benefits from its services. 3

The banking industry like many other financial service industries is facing a rapidly changing market, new technologies, economic uncertainties, fierce competition and more demanding customers and the changing climate has presented an unprecedented set of challenges . The banking industry in India has undergone dramatic change post independence. Banks have also starts realizing that business depends on client service and the satisfaction of the customer and this is compelling them to improve customer service and build relationship with customers. With the current changes in the functional orientation of banks, the purpose of banking is being redefined. The main driver of this change is changing customer needs and expectations. Customers In urban India no longer want to wait in long queues and spend hours in banking transactions. This change in customer attitude has gone hand in hand with the developments of ATMs, phone and net banking along with availability of service right at the customer doorstep. Further the world class banking experience provided by private and multinational banks with their ever evolving products and services has raised the bar of customer expectations. With the emergence of universal banking, banks aim to provide all banking products and service offering under one roof and their Endeavour is to be customer centric. The Indian banking industry is also embracing technology rapidly. Big players among the private and public sector banks are reengineering and automating their core banking processes.

Literature ReviewCustomer satisfaction is an important theoretical as well as practical issue for most marketers and consumer researchers. Customer satisfaction can be considered the essence of success in todays highly competitive world of business. Thus the significance of customer satisfaction and customer retention in strategy development for a market oriented and customer focused firm can not be overstated. Consequently, customer satisfaction is increasingly becoming a corporate goal as more and more companies strive for quality in their product and services. Customer satisfaction is the feeling or attitude of a customer towards a product or services after it has been used and is generally described as a full meeting of ones expectations. Customer satisfaction is a major outcome of marketing activity whereby it serves as a link between the various stages of consumer buying behavior. For instance, if customers are satisfied with particular service offering after its use, then they 4

are likely to engage in repeat purchase and try line extensions. A study conducted by Levesque and McDougall confirmed and reinforced the idea that unsatisfactory customer service leads to a drop in customer satisfaction and willingness to recommend the service to a friend. This would in turn lead to an increase in the rate of switching by customers. There can be potentially many antecedents of customer satisfaction as the dimensions underlying satisfaction judgment are global rather than specific. However, some argue that customers develop norms for product performance based on general product experiences, and these, rather than expectations from a brands performance, determine the confirmation /disconfirmation process. More recent work has argued that in addition to the cognitive components, satisfaction judgments are also dependent upon affective components as both coexist and make independent contributions to the satisfaction judgments. Researchers have established some of the key antecedents of customer satisfaction in retail banking with respect to customer satisfaction in the competitive world of business as well as the key antecedents to the formation of overall customer satisfaction. The bottom line is that organizations will always be attentive to maximizing profits and their success will be determined by how they manage customer relationships. Marketing has taken some initial steps to place the customer at the center of its efforts, such as information sharing in customer service channels, sales force automation and target market segmentation. Customer profitability management requires a multi-level marketing return on investment analysis covering a series of marketing activities that can be integrated and optimized for a customer or customer segment. Customer satisfaction, a business term, is a measure of how products and services supplied by a company meet or surpass customer expectation. It is seen as a key performance indicator within business and is part of the four perspectives of a Balanced Scorecard. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. There is a substantial body of empirical literature that establishes the benefits of customer satisfaction for firms. Organizations need to retain existing customers while targeting non-customer. Measuring customer satisfaction provides an indication of how successful the organization is 5

at providing products and/or services to the marketplace. Customer satisfaction is an abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other factors the customer, such as other products against which the customer can compare the organization's products. Work done by Parasuraman, Zeithaml and Berry (Leonard L) between 1985 and 1988 delivered SERVQUAL which provides the basis for the measurement of customer satisfaction with a service by using the gap between the customer's expectation of performance and their perceived experience of performance. This provides the researcher with a satisfaction "gap" which is semi-quantitative in nature. Cronin and Taylor extended the disconfirmation theory by combining the "gap" described by Parasuraman, Zeithaml and Berry as two different measures (perception and expectation) into a single measurement of performance relative to expectation. The usual measures of customer satisfaction involve a survey with a set of statements using a Likert Technique or scale. The customer is asked to evaluate each statement in terms of their perception and expectation of performance of the service being measured. Because the concept of customer satisfaction is new to many companies, it's important to be clear on exactly what's meant by the term. Customer satisfaction is the state of mind that customers have about a company when their expectations have been met or exceeded over the lifetime of the product or service. The achievement of customer satisfaction leads to company loyalty and product repurchase. There are some important implications of this definition: Because customer satisfaction is a subjective, no quantitative state, measurement won't be exact and will require sampling and statistical analysis. Customer satisfaction measurement must be undertaken with an understanding of the gap between customer expectations and attribute performance perceptions. There should be some connection between customer satisfaction measurement and bottom-line results. "Satisfaction" itself can refer to a number of different facts of the relationship with a customer. For example, it can refer to any or all of the following: 6

Satisfaction with the quality of a particular product or service Satisfaction with an ongoing business relationship Satisfaction with the price-performance ratio of a product or service Satisfaction because a product/service met or exceeded the customer's expectations Each industry could add to this list according to the nature of the business and the specific relationship with the customer. Customer satisfaction measurement variables will differ depending on what type of satisfaction is being researched. For example, manufacturers typically desire on-time delivery and adherence to specifications, so measures of satisfaction taken by suppliers should include these critical variables. Clearly defining and understanding customer satisfaction can help any company identify opportunities for product and service innovation and serve as the basis for performance appraisal and reward systems. It can also serve as the basis for a customer satisfaction surveying program that can ensure that quality improvement efforts are properly focused on issues that are most important to the customer.

Need For Research

While relationships have been extensively studied in marketing channels ,industrial settings, and some consumer setting in western cultural contexts such as Europe ,US, the UK ,and even Australia ,few studies have examined the paradigm in an eastern cultural context such as India. The maturing of services marketing, the increased recognition of potential benefits for customer and technological developments are the main factors driving the developments of relationship marketing. the presence of these factors in the Indian banking sector motivated this research. With banks losing 8% of their clients every year relationship marketing strategy to satisfy customers and improve their profitability has moved to the forefront. For centuries banks have played an important role in financial system of the country. The vital role continues even today although the form of banking has changed today with changing need of the economy and individuals. The Banking system in India has three tiers. There are scheduled commercial banks; the regional rural banks; and the cooperative banks. The scheduled commercial banks constitute those banks which are included in the second schedule of RBI Act 1934.In the organized segment; banking system occupies an important place in nations economy. It 7

plays a pivotal role in the economic development of a country and forms the core of the money market in an advanced country. The commercial banks in India comprise of both Public sector as well as private sector banks. There are total 28 Public sector and 27 private sector banks are functioning in the country presently. Banks have to deal with many customers everyday and render various types of services to its customer. Its a well known fact that no business can exist without customers.

The Need to Measure Customer Satisfaction:

Satisfied customers are central to optimal performance and financial returns. In many places in the world, business organizations have been elevating the role of the customer to that of a key stakeholder over the past twenty years. Customers are viewed as a group whose satisfaction with the enterprise must be incorporated in strategic planning efforts. Forwardlooking companies are finding value in directly measuring and tracking customer satisfaction as an important strategic success indicator. Evidence is mounting that placing a high priority on CS is critical to improved organizational performance in a global marketplace. With better understanding of customers' perceptions, companies can determine the actions required to meet the customers' needs. They can identify their own strengths and weaknesses, where they stand in comparison to their competitors, chart out path future progress and improvement. Customer satisfaction measurement helps to promote an increased focus on customer outcomes and stimulate improvements in the work practices and processes used within the company. Customer satisfaction is quite a complex issue and there is a lot of debate and confusion about what exactly is required and how to go about it. This article is an attempt to review the necessary requirements, and discuss the steps that need to be taken in order to measure and track customer satisfaction.

Expectations and Customer Satisfaction:

Expectations have a central role in influencing satisfaction with services, and these in turn are determined by a very wide range of factors lower expectations will result in higher satisfaction ratings for any given level of service quality. This would seem sensible; for example, poor previous experience with the service or other similar services is likely to result in it being easier to pleasantly surprise customers. However, there are clearly circumstances where negative preconceptions of a service provider will lead to lower expectations, but will also make it harder to achieve high satisfaction ratings - and where positive preconceptions and high expectations make positive ratings more likely.

Factors affecting customers towards particular bank

Relationship marketing; financial performance; electronic commerce; e-commerce; online banking; electronic banking;; internet banking; information technology; privacy; business research; customer research; business innovation;

Research Methodology Objective Of The Research

The main objective of this study are-

To identify customer satisfaction variables which lead to building relationship with

customers in the Indian banking sector

To study the difference in perception of the customers of the bank towards various
services provided by bank.

To analyze the satisfaction level of customers with respect to the various service
provided by the banks To identify the strategies of banks to satisfy their customers.

Research Design:
This study is exploratory in nature. It provides a description of contemporary satisfaction parameter in the Indian banking sector. Exploratory research provides insights into and comprehension of an issue or situation. Exploratory research helps to determine the best research design, data collection method and selection of subjects.

SOURCES OF DATAThere are many sources of data collection, such as secondary data collection and Primary data collection.

Primary data-There are various ways to undertake the gathering of primary data, including conducting surveys to create market data or using other research instruments such as questionnaire. Sample size- 100, Sample techniques- Convenience sampling, area-Thanjavur District

Secondary data
This involves information that already exists somewhere, such as in studies already undertaken on this area as well as published books, articles in journals, articles on the internet 9

and other sources. Relationship marketing dimensions were identified by conducting a customer satisfaction survey of five banks in India. The research process involved the following steps. First, a literature review was undertaken to identify what parameters to consider in research. It outlines the previous research with respect to customer satisfaction in the banking industry. Second, in-depth interview were held with customers to establish the evaluation criteria and factors which results in customer satisfaction. Third, a questionnaire was constructed and piloted. Last, the population and sampling procedure were established and methods of data collection and analysis determined. The present research is exploratory in nature and aims to develop hypothesis which can be tested later. It provides description of contemporary satisfaction parameters in the banking industry. It is not explanatory as it does not test any casual relationships.

Research Instrument
The questionnaire was designed from the literature review as well as from the results of in-depth interviews. It included sixteen variables which determined the satisfaction of the customers of the five banks chosen for the study. Two of these banks were national banks namely ,state Bank of India(SBI) and Punjab National Bank(PNB) and three were Private sector Banks namely, Housing Development Finance corporation(HDFC),Industrial Credit and Investment Corporation of India(ICICI),and Industrial Development Bank of India(IDBI). SBI and PNB were chosen because they have the largest network of branches in India. ICICI, HDFC and IDBI were the first private banks to introduce intelligent banking in India. These banks have a strong retail presence and offer a comprehensive range of information to the customer. They have taken initiatives to satisfy customers and provide value added services. Data from 100 customers were collected. The five banks were contacted individually to obtain the contact addresses of the customers and the questionnaire was administered to customers who had been with the bank for three years. The questionnaire is divided in to five sections. The second part of questionnaire dealt with respondent satisfaction with respect to services and the third part dealt with variables which involve transactions. Customer satisfaction was recorded on a 7 point semantic differential scale ranging from extremely good/satisfied to extremely bad/dissatisfied. The other parts of the questionnaire recorded information about customers experience with their respective banks, their banking habits and demographic information.

Limitations
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There are certain limitations of this study. Sample size is small so there may be possible that the desired level of accuracy not exist. This study is conducted only in small area so there may be chance of Inaccuracy of the result. In selecting the Sample, there are chances of sampling errors. Sometimes some respondent do not give right answers, thats why variations may be possible. This study is applicable in Thanjavur District only not in whole India.

Finding
Looking at the demographics of the customer and satisfaction with the services,64 percent customers of IDBI ,ICICI and HDFC are in age group of 25-35 years ,are post graduates and their satisfaction is highest with multi channel banking.71 percent of the customers of SBI are above 35 years, are graduates and their satisfaction is highest with traditional facilities. These findings propose that the private banks namely ICICI, IDBI, and HDFC have been able to attract the younger customers, with higher educational levels, who are comfortable with the usage of multi channel banking. On the other hand the customer of national bank, SBI are older in age and are satisfied with the traditional facilities.SBI with the largest network of branches in India, has given competition to the private banks and has retained its older customers by satisfying them with the traditional facilities. Perceptual mapping has been extensively used in marketing for various applications where a manager wants to know the cognitive dimensions that consumers use to evaluate products and services. Perceptual mapping can also assess the relative positions of various products and services. This study has created a perceptual map using factors scores of each of five banks under study. These maps will help identify how each bank is positioned in the customers mind. We can see from exhibit 6 that customers find most satisfaction with the traditional facilities of state bank of India and least satisfaction with HDFC bank. Customers have maximum satisfaction with multi channel banking facilities of ICICI bank and least satisfaction with Punjab national bank. Internal marketing provides maximum satisfaction to customers of ICICI bank and least to those of state bank of India. Though SBI has a largest 11

network of branches its focus on customer satisfaction with respect to any time anywhere could do with improvement. Perceptual mapping is an important marketing research tool used in many areas of marketing. Strategies based on perceptual maps have led to increased profits, better market control and more stable growth. a ranking score sheet of the customer perception based on perceptual mapping .the result from this study could provide managerial lessons on assessment of strengths, improvement of services and in evolving a research strategy that will benefit the management of banks. Another finding from this study emerges with regard to information seeking. While most of the customers of the other banks in the study acquired information about the banks through the radio or hoardings. The customers of ICICI Bank got information from their friends and relatives. This implies that the bank is able to satisfy its customer who acts as a referral market for the bank. This helps the bank to acquire new customers at low cost. Thus banks must be actively involved in acquiring, satisfying and retaining customers. Also the results suggest that satisfaction of the customer is different across the five banks under the study. Traditional facilitiesDebit card Credit card Demand draft facility Fixed deposits Money transfer Locker facility ATM Networking Table 9(a)-Ranking score sheet of customer perceptionService SBI Dimension Traditional 1 facilities PNB IDBI ICICI HDFC Multi channel Banking Tele banking Net banking D-mat Internal Marketing Service scale Parking space Attitude of bank staff Dissemination of information Query Handling

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Multi channel banking Internal marketing

5 4 3 2 1 0
Traditional facilities Multi channel banking Internal marketing

SBI

PNB

IDBI

ICICI

HDFC

Graph 9(a)

INTERPRETATION- This is the graph showing Traditional facilities, Multi channel banking and internal marketing in five Indian banks SBI, PNB, IDBI, ICICI and HDFC. According to traditional facilities SBI is in number one position and HDFC comes in number five position. And IDBI, ICICI and PNB come under the second, third and fourth position respectively. In terms of Multi channel banking ICICI is in first position and PNB is in Number five position. And IDBI, HDFC and SBI come second, third and fourth position respectively. In terms of Internal marketing ICICI is in first position and SBI comes under the fifth position. And HDFC, PNB, IDBI comes under the position of second, third and fourth respectively.

5 4 3
Traditional facilities

2 1 0

SBI

PNB

IDBI

ICICI
13

HDFC

INTERPRETATION- According to traditional facilities SBI is in number one position and HDFC comes in number five position. And IDBI, ICICI and PNB come under the second, third and fourth position respectively.

5 4 3
Internal marketing

2 1 0

SBI

PNB

IDBI

ICICI

HDFC

INTERPRETATION- In terms of internal marketing ICICI is in first position and SBI comes under the fifth position. And HDFC, PNB, IDBI comes under the position of second, third and fourth respectively.

5 4 3
Multi channel banking

2 1 0

SBI

PNB

IDBI

ICICI

HDFC

INTERPRETATION- In terms of Multi channel banking ICICI is in first position and PNB is in Number five position. And IDBI, HDFC and SBI come second, third and fourth position respectively. Our findings imply that bank should take care of the needs of customers when introducing various services to them. Customers of ICICI, IDBI, HDFC, PNB, and SBI are either in services or are self employed. Many customers of SBI and PNB are retired. Thus banks could envisage a strategy to serve customers with different occupations and educational 14

backgrounds. Bank must advance their customer-centric strategies by providing satisfaction through their services which will lead to better relationship building and profits for the banks. The satisfaction of the customer with the services of Indian banks is linked with the performance of the banks .thus it is important for banks to look into satisfaction of the customer as relationship marketing strategy.

Conclusion
The Banking sector in India is undergoing major changes due to competition and the advent of technology. The customer is looking for better quality and services which can provide him/her with satisfaction. This study reveals the different levels of satisfaction that customer had with their banks and helps identify the factors (or relationship dimensions) responsible for satisfying the customer. This would help in enhancing the relationship between the two, and thus aid decision makers in banks to identify the major factors that determine satisfaction. Many service firms, including retail banks have been measuring customer satisfaction and quality to determine how well they are meeting customer needs. This study derives its basic findings and is also in line with empirical findings with respect to customer satisfaction by other researchers.

References 1. Lovelock, Christopher, 2001, services marketing; people, Technology, strategy, 4th
edition, prentice Hall. 2. C R Kothari Research methodology????????? 3. P N Varshney Banking law and Practice??????????????? 4. Customer Satisfaction Key Growth to Banks: An article from The Hindu Article on customer relationship management in banking sector by Dr.FB Singh. Article on Measuring Customer Satisfaction in the Banking Industry by Dr. Manoj Kumar Das.????????????? 5. John, Joby (2003). Fundamentals of Customer-Focused Management: Competing Through Service. Westport, Conn.: Praeger. ISBN 9781567205640. 6. Levesque, and MC Dougall (1996) Determinants of customer Satisfaction in Banking International Journal of Bank Marketing, 15

Note: any correction accepted

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