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Andrews College, Bandra

Service Sector Management

Topic : Banking Services

Presented by:
1. Handrick Sequeira 3547
2. Leroy Correia 3505
3. Darcy Rodrigues 3545
4. Geoff Gonsalves 3523
5. Tanmay Patil 3536
6. Allwyn D’Silva 3511

Submitted to: Prof. Arun Pujari.

Date of submission: 9th Sep 08.

SSM - Banking Services – BMS – Vth sem

We the students of St. Andrews College, TYBMS ‘B’,

Semester 5, hereby declare that we have completed this
project on “Banking Services” for the subject “Service
Sector Marketing” for the academic year 2008-09.

The information submitted is true and original to the

best of our knowledge. Research Methodology adopted is
based completely on secondary information.

Thank you


SSM - Banking Services – BMS – Vth sem

We the students of TYBMS ‘B’ hereby present the project report on

“Banking Services.”

With a deep sense of gratitude and obligation, we thank all those who directly and
indirectly helped us to complete our project.

We are grateful to Prof. Mr. PUJARI our subject guide, for providing us with a
wonderful opportunity to test our ability and for placing such faith in us and also
for the encouragement and valuable guidance at various stages during completion
of this project with whose guidance we could not have been able to complete our
project successfully.

We are also thankful to our parents for being with us throughout our course and
guiding us all the way. We also would like to thank all our friends and relatives for
being there as our motivators.

This is to certify that the project on “Banking Services” is the
work of the following students:

SSM - Banking Services – BMS – Vth sem

➢ Leroy Correia 3505

➢ Allwyn D’Silva 3511
➢ Geoff Gonsalves 3525
➢ Tanmay Patil 3536
➢ Darcy Rodrigues 3545
➢ Handrick Sequeira 3547

These students belong to TYBMS ‘B’ of St. Andrews College,

Bandra. The project is submitted to Prof. Mr. Pujari.

The project submitted to me is authentic.


Prof. Sign.



01. Introduction 08
02. Marketing of Banking Services 09

SSM - Banking Services – BMS – Vth sem

03. Characteristics of Banking 10

04. Banking structure in India 12
05. Users of Services 13
06. Socio-Economic factors affecting Consumer 14

07. RBI norms for new Banks 15

08. Marketing mix – Product 16
09. Price 18
10. Promotion 19
11. Place 20
12. People 21
13. Process 21
14. Physical Evidence 22
15. Productivity 22
16. Market Segmentation – Importance 23
17. Segmentation in Banks – diagram 24
18. PEST analysis of Banking Services 25
19. Retail Banking 28
20. Interest Rates Calculations 29
21. Role of Technology in Banking 30
22. ATM 30
23. Tele banking and Electronic banking 32
24. Cell Phone banking and Internet 32
25. Emerging Challenges 33

SSM - Banking Services – BMS – Vth sem

26. Conclusion 37
27. Bibliography 38


SSM - Banking Services – BMS – Vth sem

The banking sector in India has been widening its scope due to liberalization.
Banks today are not mere suppliers of money. They have become providers of
services such as selling insurance, mutual funds, investment opportunities, etc. In
the past, the banks did not find any attraction in the Indian Economy because of the
low level of economic activities and few business prospects. Today we find
positive changes in the National Business Development Policy. The private
sector banks failed in serving the society. This resulted in the nationalization of
14 commercial banks in 1969.

Nationalization of commercial banks paved the way for the development

of Indian economy and canalized financial resources for the upliftment of
weaker sections of the society. The involvement of Public Sector banks
transformed the Indian economy. It was felt that bankers review their services not
only as financial intermediary but also as a pacesetter.

Adequate financial resources are required for completing welfare

projects. The entrepreneurs need large-scale credit facilities on liberal terms and
conditions. Individuals have developed new hopes and aspirations from banks and
the rural population and backward regions strongly claim their right for a sound
and balanced development.

Banking Services

A bank is an institution that deals with money and credit. Different people
understand meaning of a bank in different ways. For a common man bank means a

SSM - Banking Services – BMS – Vth sem

storehouse where money is stored; for a businessman it is a financial institution

and for a day to day customer it is institution where he can deposit his savings.
In reality banks are service organization selling banking services.
Banks play an important role in the economy of any country as they hold the
savings of the public. Provide means of payment for goods and services and
provide necessary finance for development of business and trade.
Thus bank is a link in the flow of funds from savers to the users. Hence they
should render efficient customer service in order to retain the present customers
and also to attract the potent customers.
In the past the banks did not find any attraction in the Indian economy because of
the low level of economic activities and little business prospects. Today we find
positive changes in the National business development policy. Earlier, the money
lenders had a strong hold over the rural population. This resulted in exploitation of
small and marginal savers. The private sector banks failed in serving; the society.
This resulted in the nationalization of 14 commercial banks in 1969.
Nationalization of commercial banks paved ways for the development of Indian
economy and channelized financial resources for the upliftment of weaker sections
of the society. In 1980, the government was induced to nationalize more
commercial banks. There was a basic change in the banking concept with a
beginning in the Nationalization of big Commercial banks.
The involvement of public sector banks transformed the Indian economy. It was
felt that bankers review their services not only as financial intermediary but also a
Adequate financial resources are required for completing welfare projects. The
entrepreneurs need large-scale credit facilities on liberal terms and conditions, an
individual has developed new hopes and aspirations from banks and the rural
population and backward regions strongly claim their right for a sound and
balanced development.

SSM - Banking Services – BMS – Vth sem

For the accomplishment of all these tasks a rational approach is essential.


Marketing of banking services is concerned with product, place, distribution, and
pricing and promotion decisions in the changing, socio-economic and business
It means organizing right activities and programmes at the right place, at the right
time, at a right price with right communication and promotion.

The causes of Bank Marketing can be seen as:

➢ Rising customer needs and expectations due to improvements in general

standard of living.

➢ Entry of foreign and private sector banks in India.

➢ Economic liberalization of Indian economy.

➢ Phenomenal growth of competition due to economic liberalization.

➢ Rise in the Indian middle class with considerable resources.

➢ Government intervention in protecting the interests of consumers.

The users of banking services or the prospects play a very significant role in the
formulation of overall marketing strategies. The bank marketing activities are
concerned with the designing of product strategies keeping in view the needs and
requirement of prospects. It is also related with the place decisions i.e. location of a
bank at suitable points.
It has the following unique features:
(a) Intangibility
(b) Inseparability
(c) Variability and

SSM - Banking Services – BMS – Vth sem

(d) Perishability

CHARACTERISTICS OF SERVICES – with reference to Banking

1. Intangibility
Financial services are generally intangible, but the service providers go to
considerable lengths to ‘tangibilise’ the service for customers. Regular bank
statements, ‘gold’ credit cards, and insurance policies are all examples of the way
in which the financial services are presented to customers. They can enhance the
image of the service and the provider can even bestow status or implied benefits
upon the user as with a gold card. Physical reminders of the service product, brand
name and value serve to reassure the consumer and help the organizations

2. Inseparability
The degree of inseparability depends upon the type of service and the actual
supplier. Many everyday transactions are carried out now via automated services-
the automated teller machines (ATMs), net banking etc.

+Additionally, many financial services are sold by brokers and agents of various
kinds. Services are frequently handled by agents are credit card and other
currency/travelers cheque encashment.

3. Heterogeneity/variability
The complexity of the service transaction process will determine the extent of
variability and this can differ to a large extent between institutions and even with
one institution. The greater the degree of automation within any transaction
process, the greater the degree of standardization. Thus simple transactions may be

SSM - Banking Services – BMS – Vth sem

carried out via ATMs and completely standardized or via branch counter where
they might be fairly standardized but subject to some variation in quality.

Total standardization is not necessarily desirable from the consumer’s point of

view. A friendly greeting or being addressed by name can enhance service delivery
and while an ATM cannot arrange an emergency overdraft facility when funds are
low, branch staff can look at the standing of individual customers and make
arrangements when appropriate, satisfying the customer and profiting from charges
applying to the account.

4. Perishability
The degree of Perishability depends on the type of service. If a cheque needs to be
cleared by a certain date and the system causes delay then the benefits to the
consumer are lost so the service could be said to be perishable. By and large,
money and financial services are enduring in nature. If a bank’s reserves are not
fully utilized profitably through lending or investment they will still retain their
worth and may be utilized again at a later date. A bank branch, which does not
have any customers at all on a particular day, may actually gain rather than lose
profit as staff may be able to use the peace and quiet to catch up on other work.


Reserve Bank is the Central Banking Authority in India. All the activities of banks
and non-finance companies are regulated and controlled by RBI through the credit
and monetary policy.
Commercial and Co-operative banks which are scheduled banks are included in the
second schedule to the Banking Regulation Act. They are entitled to some facilities
with RBI.

Users of Services:

SSM - Banking Services – BMS – Vth sem

The prospects or potential buyers of services constitute an important place,

particularly in the bank marketing. The line of services or product planning and
development, the offering of services, the pricing strategies or the interests or costs
charged for the services made available and the promotional measures depend on
the changing psychology of the actual and potential users. The emerging trends in
the level of satisfaction affect the formulation of marketing mix. As for instance,
the customers did not claim high rate of interest and other incentives yesterday as
they had limited wants and limited avenues for channelizing their savings. But
today, the customers prefer refined services and claim for an increased rate of
interest as they have copious avenues for channelizing their savings. Like this, the
industrial users also demand credit facilities on more liberal terms since there have
been numerous changes in the national and business environment. Today, almost
all the financial institutions appear interested in linking relationship with the
industrial users. This naturally requires a study of the changing psychology of

Fig: Users of Banking Services.

1. General Users
All persons having an account in the bank and utilizing the banking facilities at the
terms and conditions fixed by a bank are termed as general users.

2. Industrial Users
Industrialists or entrepreneurs having an account in the bank and utilizing the
credit facilities for the establishment or expansion of their business are known as
industrial users.

SSM - Banking Services – BMS – Vth sem

3. Potential Users or Prospects

General or industrial prospects at present not utilizing the services of a bank but
are expected to be motivated or induced are termed to be potential users.


The social and economic factors have a far-reaching impact on the behaviour of
customers. This is due to the fact that human beings are directly influenced by
the socio-economic consideration.


a) Group of family,

b) Family life-cycle,

c) Family decisions, and

d) Role of opinion leaders.


a) Disposable income,

b) Price Index,

c) Stages of economic transformation,

d) Global economic co-operation.


The RBI came out with new guidelines for setting up of new banks in Jan 2001.
The following are the guidelines:
(a) Minimum Net worth requirement for private banks - Rs. 200 crores.

SSM - Banking Services – BMS – Vth sem

(b) NBFCs of high net-worth and good track record to convert themselves into
regular banks.
(c) It is necessary for promoters to have minimum net-worth of Rs. 200 crores
to set up a bank but they should raise it to Rs. 300 crores in three years.
They should have NPAs of less than 5% and capital adequacy requirement
(CAR) above 12%. Triple credit rating is also needed.
(d) Corporates will not be permitted to set up banks irrespective of their net-
(e) New banks cannot set up a subsidiary or Mutual fund during the initial three
(f) The newly licensed banks have to observe all existing requirements of
priority sector. Additionally they should commit to having 25% of their
branches in rural and semi-urban areas.
(g) NRIs are allowed to pick up their equity share upto 40% of the total.



Savings, Current, Fixed etc.


(1) Fund Oriented:

a. Term Loan,
b. Clean Loan,
c. Bills Discounting,
d. Advances,
e. Pre-shipment Finance,

SSM - Banking Services – BMS – Vth sem

f. Post-shipment finance,
g. Secured and Unsecured lines of credit.

(2) Non-fund oriented:

a) Guarantees, and

b) Letter of Credit.


a) Letter of Credit, and

b) Foreign Currency.


a) Investment Counseling,
b) Project Counseling,
c) Merchant Banking, and
d) Tax Consultancy.


a) Traveller Cheques,
b) Credit card,
c) Remittances,
d) Collections,
e) Sale of Drafts,
f) Standing instructions, and
g) Trusteeship.

SSM - Banking Services – BMS – Vth sem

In banking the products are services. Services cannot be seen or protected like
goods. The potential buyer of the services can form an opinion about the services

The changing trends in the non-banking investments compel certain modifications

to be made in the existing product line. The product should suit the market needs.
Bank services are viewed in terms of the satisfaction they deliver and not just the
things that are created with value. For instance, a bank account is seen in terms of
customer satisfaction such as safety, convenience of paying dues, keeping records,
transferring funds, status, and pride in one’s bank. The various deposits, loans and
advances, consultancy services, international banking, safe deposits, credit cards,
etc. are the products sold by the bank. Bankers need to identify their core and
supplementary product services as it has more marketing implication. The banker
should offer an optimum mix of the core and augmented products.

• CORE PRODUCT: It is the fundamental benefit the customer buys from

the bank. They define what kind of business the firm does, for example, the
business of commercial bank. But customers do not buy the core product, they only
buy the benefit. The role of the bank marketer is to convert the core products into a
generic product, which satisfies the needs of the customer.

• AUGMENTED PRODUCT: This is the basic product with some ancillary

attached to it. For example, when one opens a Suvidha Account with Citibank,
he gets an ATM Card free. The bank marketer must offer a multidimensional
product or what is called a ‘product package’.

The product related strategy includes:

✔ Introduction of new schemes- EXAMPLE: DEMAT ACCOUNT.

✔ Modification of the product offered by incorporating technological

development – EXAMPLE: Telebanking, Online Banking, etc.

SSM - Banking Services – BMS – Vth sem

✔ Change in the product line or package – EXAMPLE: from

Corporate Banking to Personal Banking; or even deleting an existing service

Pricing in Banking relates to the interest rates paid by the banker on deposits,
interest charged by the banker on loans and demand drafts, charges for various
types of transactions and fees for certain services. In India, banks adopt
administered pricing structure to some extent as the deposit and lending rates are
prescribed by RBI. The charges for banking services are agreed upon by
Indian Banks Association. Pricing policy of a bank is considered important for
raising the number of actual customers. But even in this regulated pricing
environment, pricing can be used as a tool in their marketing strategy. The specific
pricing methods that can be adopted in deregulated environments are:

 Cost plus pricing which calls for a detailed analysis of cost structure of
various bank products and services.

 Market Oriented Approach which indicates what the market can bear or
accept as in the case of a corporate client who may not be price sensitive as against
an individual client.

 Competition related Approach, where the price is decided based on the

competitor’s price. In this case, the ‘value’ like high return, convenience, and
speedy service must be highlighted.

The banks are required to frame two-fold strategies. Strategies concerned with
interest and commissions to be paid to the customers and interest and
commissions to be paid by the customer for different types of services.

SSM - Banking Services – BMS – Vth sem

The objects of a promotion programme are to inform about the new service
product, to persuade the customer, to remind the customer, build image of the
bank, etc.

Banking services can be promoted in two ways:

1. Personal promotion: The bank marketer gets the best opportunity to

tangibilise the product through personal selling; persuasion is more effective with
direct contact. It helps in creating impulse buying.

2. Impersonal Promotion: i.e. advertising, publicity and sales promotion

measures. An advertisement in banking is a promise- a promise of satisfaction to
prospects who buy the service offered by the bank. Banks use all types of
advertisement such as newspaper, radio, television, magazines and hoardings.
Also, sales promotion devices such as Point of Purchase material, brochures
and advertisement specialties like ball pens, calendars, diaries, etc.

Publicity is a major strength as a promotion tool than advertising as customers

tend to believe a news item rather than an advertisement. Word of promotion is
yet another important promotion tool as it is a better persuader and convincer
than advertising and personal selling, as banking services are narrated by
customers themselves. Besides, as Social Welfare and Corporate Social
Responsibility are considered to be an important part of banking services, the
publicity measures need due care.

The place decision mainly deals with selection of a suitable location for the
branch. Sound location decisions help in activating the business. The location

SSM - Banking Services – BMS – Vth sem

should have adequate availability of transportation, communication, electricity

and other necessary facilities for the smooth functioning of the bank.
Technological developments, increased customer satisfaction, inadequacy of the
traditional channel to serve all customer segments have brought bout ATM,
telebanking, home banking, Internet banking and now SMS Banking.

Another significant development is a strategic alliance set up by the private

banks to overcome the handicap of limited branch network. In such alliances
the branch network of one branch will be used by the other for selected
transactions like bill collection, cheque collection, etc.

Banking products cannot be separated from the person (banker) who markets them.
The product and the seller together constitute the banking product. Banks
should adopt internal marketing in order to make the whole business customer-
oriented. The bank products should be marketed to the employees first before they
are marketed to customers. The corporate mission should be communicated
repeatedly and effectively to all employees by the top management.

The placement policy should emphasize that the recruits should not only be
conversant with all aspects of banking business but also have the skill for
social interaction and tolerance for interpersonal contact.

It involves all activities right from the product conception stage, to product
designing and development down to its marketing at the branch level. Banks
which were more focused or activity-oriented have shifted to customer-oriented
service delivery. This is essentially due to the technological advances. Automation

SSM - Banking Services – BMS – Vth sem

of transactions, accounting procedures, data handling, as well as process re-

engineering has helped reduce delays in processing transactions- example: Loan
applications, clearing cheques, etc.

Banking products are intangible and physical evidence focuses the banker’s
attention on this aspect. The environment of banks is changing. It is becoming
friendlier with attractive layouts and décor. Most private and foreign banks like
ICICI, Citibank, and HDFC portray a new welcoming and friendly look to the
customers rather than drudgery banking counters. Attractive brand names,
logos, symbols, etc. add to the customer’s perception of service quality.

Productivity relates to how inputs are transformed into outputs that are valued
by customers. Improving productivity keeps cost in control.

Banks have improved productivity through computerization, by changing

transaction systems – like the new banks do not have pass books – they only send
quarterly statements; the specimen signatures are also checked through the

SSM - Banking Services – BMS – Vth sem


In banking services, the banks are expected to satisfy rural customers, urban
customers, and high-earning and low-earning customers, small-scale and large-
scale entrepreneurs and so on.


Since the banks have to deal with different types of customers from different fields
and localities, banking services need segmentation.

The purchasing power of potential customers is different. In respect of term

deposits of different maturities or deposit schemes, the potential customers are
required to be influenced. These potential customers may be located in various
pockets of urban areas.

In the Indian setting, we find the emergence of a wide rural market. Here, it is
necessary that the segmentation be done in tune with the changing socio-economic
conditions of the rural customers.

Thus, market segmentation is important not only from the perspective of

expanding the market but also with the motto of satisfying the client. If the
marketing decisions of the banks are on the basis of micro-level market segment,
only then a fine blend of service and profit elements is possible.

According to Philip Kotler, "Market segmentation is the sub-division of a market

into homogenous sub-sets of customers where any sub-set may conceivably be
selected on a market target to be reached with a distinct marketing mix."

SSM - Banking Services – BMS – Vth sem

(A) (B) (C) (D) (E) (F)

Sub-segment Sub-segment (i) Religious (i) Financial (i) Wholesalers (i) Private Sector
(i) 10 acres and (i) Above Rs. 1 lac (ii) Educational Services (ii) Retailers (ii) Public Sector
above P. A. (iii)Charitable (ii)Non (iii)Merchant (iii) Co-operative
and Clubs financial Exporters Sector
(ii) 5 to 10 acres (ii) Rs. 50,000 to Services
(iii) 2 acres and Rs. 1,00,000 (iv) Large-scale
below (iii) Rs. 25,000 to Sector
(iv) landless Rs. 50,000 (v) Small-scale
(iv)Rs. 25,000 and Sector
below (vi)Tiny Sector
(v)Above Rs.5,000
(vi)Rs. 2,000 to
Rs. 5,000

PEST Analysis for Banking Services

Political/ Legal

SSM - Banking Services – BMS – Vth sem

Influences which have an impact on banking services and consumer confidence

include the following:

• State provision of pensions

• Government encouragement of savings and investment (for e.g. via tax
• Regulatory control and protection (to prevent the collapse of financial
institutions and protect investors money)


Economic factors are key variables which have an impact on the activity in the
banking services sector. The level of consumer activity is governed by income
levels and personal wealth. As income levels grow, more discretionary income is
available to spend on banking services. Consumer confidence in the economy and
in job security also has a major impact; if lean times are foreseen ahead, savings
will take priority over loans and other forms of expenditure. Consumers may also
seek easy access savings and be willing to tie up their money for longer periods
with potentially more attractive investments.

The main economic factors that should be monitored with regard to banking
services marketing are as follows:

• Personal and household disposable income

• Discretionary income levels
• Employment levels

SSM - Banking Services – BMS – Vth sem

• The rate of inflation

• Income tax levels and taxation structures
• Savings and investment levels and trends
• Stock market performance
• Consumer spending & Consumer credit


Many demographic factors have an important bearing on banking services markets.

• Changing attitude towards consumer credit and debt

• Changing employment patterns
• Numbers of working women
• The ageing population
• Marriage/divorce/birth rates
• Consumption trends


Technology has a major impact on many industries including financial services and
banking in particular. ATM services which not only provide cash but also allow for
bill payments, deposits and instant statements are widely used. From the
customers’ viewpoint, technology has played a major role in the development of
the process whereby the service is delivered. Automated queuing systems have
made visits to the bank easier and more convenient. Telephone Banking and

SSM - Banking Services – BMS – Vth sem

insurance services are now being used in place of the traditional branch-based
service process. Technology has also played a major role within organizations,
bringing about far greater efficiency through computerized records and transaction
systems and also in business development, through the setting up of detailed
customer databases for effective segmentation and targeting.

The main technological developments fall within these categories;

• Process developments
• Information storage and handling
• Database system


Retail banking is that part of a bank that offers products and services primarily to
individual customers, professionals, self employed individual or some business.
The focus is on creating products and services that meet the needs of the target
customers and are profitable for the bank as well.

SSM - Banking Services – BMS – Vth sem

The approach to retail banking product is more on a mass production basis wherein
all risk and operations are based on and geared to cater to a large number of
customers. This is therefore, significantly different from corporate banking or
wholesale banking where focus is on large sized customers accounts rather than
large number of customers.

Understanding retail banking will help in servicing your customer better as it

would give you a perspective and insight into how such products are structured and
specific requirement for each set of products. This would help you to advice your
customer in a more informed manner besides making you more informed

Interest Rate Calculations:

In India, the interest on home loans is usually calculated either on monthly

reducing or yearly reducing balance. In monthly reducing balance the principal on
which the interest is paid reduces every month as the EMI is paid.
In Annual reducing balance the principal is reduced at the end of the year. This
method of calculating interest is more expensive as the borrower continues to pay
interest on a certain portion of the principal, which is already been paid back to the
housing finance company by way of the EMI.

SSM - Banking Services – BMS – Vth sem

The effective interest rate is approximately 0.7 per cent higher than the monthly
reducing balance method.
Fixed and floating/adjustable rate of interest:
(1) Most housing finance companies offer both options of fixed and adjustable
rate and interest.
(2) In fixed rate of interest rate of interest remains unchanged throughout the
period of the loan. Thus, the benefit of interest rate fall is not incorporated in the
borrower's plan.
(3) The floating rate of interest is one that fluctuates as per the market lending
rate and therefore reflects the trends in the interest rates scenario.

Role of Technology in Banking:

1. Automated Teller Machines (ATMs):
The trend in banking has evolved from a cash economy to cheque economy and
there on to the plastic card economy. One of the channels of banking service
delivery is the ATM or the Automated Teller Machines, whose traditional and
primary use is to dispense cash upon insertion of a plastic card and its unique PIN
or personal identification number.
Current and saving account holders of a bank who hold a certain minimum balance
in the account are issued an ATM card. The card is a plastic card with a magnetic
strip with the account number of the individual. When the card is inserted into
ATM, the machines sensing equipment identifies the account holder and asks for
his or her identification code number. Usually this is referred to, as the PIN and is

SSM - Banking Services – BMS – Vth sem

issued by the bank's computers. This number is not known to the bank's staff and is
secret and unique to that individual. When the person uses the ATM card is asked
for the PIN, that the cardholder identifies himself or herself by pressing the
relevant number buttons on the machine.
The machines then verify the account number on the ATM card along with the
secret code number stored in the ATM. When the match is found, the ATM pops
up a menu screen which allows the user to transact almost all types of bank
transactions. A typical transaction would be that of cash withdrawal. The bank
generally restricts the maximum amount and the frequency with which one can
withdraw cash. The amount withdrawn is immediately debited to the concerned
account through accounting entries pre - programmed on the ATM.
Similarly, cash or cheques can be deposited through the ATM for credit to an
account. When the menu screen appears one should indicate that he or she wants to
deposit money. The ATM dispenses an envelope which is to be filled with the
cheque or cash. The account number to be credited is registered on the envelope
and stored. Later the bank staff collects the envelope to credit the account.
Account balance queries, fixed deposit details, debits and credits to the account etc.
can all be queried at the ATM.

The advantages of an ATM over personal teller are as follows:

(1) ATM's can be accessed round-the-clock.
(2) No employee interface is necessary.
(3) Cash and cheques can be deposited and statement of accounts requirement,
transfer of funds etc. can be effected.
(4) It offers a cost-effective solution alternative to labour costs.
(5) Automatic and instantaneous accounting is possible.

SSM - Banking Services – BMS – Vth sem

(6) It eliminates the need for customers to travel to the branch where his or her
account is maintained, if the ATMs are conveniently located and networked.
(7) To depositors who do not have a credit card, ATM offers cash availability
when necessary.
(8) Scope for frauds, robberies and misappropriation is reduced considerably if
the PIN is maintained.


A customer can access information about his/her account through a telephone call
and by giving the coded Personal Identification Number (PIN) to the bank by
Telebanking. Some banks like SBI, Andhra Bank, etc. have made this facility
available to some branches.

Automatic withdrawals and transmission of cash balance data and other

information about an account is another facility that is offered by banks in a
consolidated form through fax or telex. Some banks have also adopted the use of
E-mail service for data and information transmission. Banks have also started with
the Electronic display of information through Satellite Communication System and
transfer of funds through the same channel for inter branch and inter-bank
adjustment and clearance of cheques, drafts, etc.

SSM - Banking Services – BMS – Vth sem


Through Inter-net banking one can visit the web-site of each bank by entering his
password and know the account balance and even pass his own credit and debit

This means that we can do our banking through our personal computer sitting at
home. Banks may soon allow zero balance savings accounts through Internet
facility only.

Customers can now make balance enquiries, download statements and open fixed
deposits over the net. They will soon be able to carry out all their transactions over
the net. So visiting a bank would become needless.

Time to come; Mobile phones will drive banking transactions. These mobile
phones will be equipped with smart cards that are embedded with banking and
other information. This mobile phone banking facility is yet to come but the
mechanics of linking the banking with the cell phone is being sorted out.

Teller machines are being installed in the banks for the Electronic banking facility.
The use of e-mail for banking will open up new avenues for Internet banking.
Banking will be on wheels and mobile by the use of smart banking.


"Change" is a continuous process and banking industry is no exception to this law
which is natural. Due to the implementation of the financial sector reforms and
policies for the country change in the banking industry is inevitable.
The main aim of the financial sector reforms is to promote an efficient, competitive
and diversified financial system in the country. After liberalization and
globalization process that was initiated in 1991, the Indian banking industry has

SSM - Banking Services – BMS – Vth sem

undergone tremendous transformation. These changes have forced the Indian

banking industry to adjust the product mix and to remain competitive in the
globalised environment.
In order to accommodate the changes and challenges that are taking place in the
present globalist ion scenario, the Indian banking industry has to re-orient its
strategy towards marketing of banking services. New ways and means have to be
found to compete in the future and to survive with profit and business growth.
The following are some of the vital challenges that threaten the Indian banking
(1) Competition from foreign banks and now new private sector banks: The
competition in the Indian banking industry have intensified with the entry of more
and more foreign banks and now private sector banks, with better technology,
market orientation and cost-effective measures. Financial institutions have also
stated entering into the domain of banks. The share of business of public sector
banks has considerably declined. Hence there is a compelling need for the Indian
banking Industry to either change or modify its marketing strategy in order to
attract the customers and also to withstand the stiff competition from foreign banks
and new private sector banks.
(2) Technological advancement: The methodology of banking business has
drastically altered due to the advent of technology both in terms of computers and
communication. It has opened new vistas in the banking sector and in turn has
brought new possibilities for doing the same work differently and in a most cost-
effective manner. With the help of technology it is now possible to have 24 hours
day banking and all seven days in a week. New business potentials and
opportunities which have remained unexplored have not opened up with Tele
banking, Internet banking and E-banking.
(3) Innovation: Innovation is another important force of change in the Indian
banking sector. Now-a-days banks have become innovative and pro-active and

SSM - Banking Services – BMS – Vth sem

offer top-class service to the customers. They play a dynamic role not only as a
finance provider but also as a departmental store of finance. Due to this new
instruments and new products like factoring, leasing, merchant banking, forfeiting
venture capital, corporate advisory services are emerging. These innovative
services may increase the revenue with cost effective measures.
(4) Diversified Activities: There is a universal trend towards banks' diversification
normally through insurance depository participant services, investment banking
etc. Furthermore banks have diversified their activities by rendering various
services like depositing gold, sale of gold, paying tax liability and telephone bills
and collecting interest on securities on behalf of the customers.
All these diversified activities have made the banks to develop and offer
consultancy counseling and customer designed packages for efficient management
of funds. The banks traditional roles as financial intermediaries are gradually
assuming lesser importance in their overall business as the banks diversify their
activities and redefine their roles. It is important to note that the percentage of non-
interest income is increasing and the interest income of the banks is decreasing.
This shows that the income through service exceeds the income through lending’s.

(5) Customer Awareness and Satisfaction: In the Urban and metropolitan sector
customers demand more facilities than offered since they are more knowledgeable.
They look for services that are cheaper, faster and better in quality. IDBI is
offering 110% loan of the cost of the project in case of construction of the
building. Such type of loan is given to meet the documentation expenses.
Now-a-days customer can know the status of their accounts, request for a cheque
book or a financial statement, transfer funds or "Stop-payment" of cheques from
his desktop.
(6) Development of skills of Banks Personnel: In order to meet the new
challenges, banks have to develop novel ways of meeting the customers' demands.
To get sufficient knowledge and exposure to technology, suitable packages relating

SSM - Banking Services – BMS – Vth sem

to hardware and software applications are to be provided. Furthermore a separate

marketing wing may be created in every bank to market their banking services.
They must be suitably trained to keep pace with ever-changing environment. For
meeting the challenges the human resource departments in banks have to prepare a
proper manpower plans and strategies.
(7) Profitability Nature: Profit is a barometer for a judging the performance of
any bank Profits are needed to meet the expectations of the stake holders, benefit
of employees and also for building capital. Banks have to pay attention to the
following emerging areas order to protect and enhance their profitability.
• Product development and management skill.
• Skills for operating in electronic environment.
• Modern credit management skills.
• New risk management practices.
• New focus on customer and his needs.
• New internal audit skills in a changing business environment.
(8) Corporate Governance: Corporate Governance plays a highly significant role
in corporate governance. It is seen that though the corporate governance revolves
around enhancing shareholders value, it has also the responsibility of marketing the
banking services by introducing and producing new products and services.
Accountability at all levels; transparency and enhancing the image of the
organization would be the major ingredients of good corporate governance. After
the globalization and financial sector reforms, corporate governance has been
receiving a lot of-attention in banking sector.
To conclude we say that the recent trend of globalization and liberalization has
posed serious problems to the domestic banks. The public sector banks have been
pushed to a tight corner because of the aggressive marketing strategies from their
foreign counterparts. Potential customers have started moving towards the private
sector banks and foreign banks.

SSM - Banking Services – BMS – Vth sem

The business prospects of our public sector banks have gradually started shrinking
as such they are forced to revise their strategy of banking operations so that they
can meet the threats posed by the foreign banks.
Lastly in order to survive and succeed the domestic banks must identify their
marketing areas, develop adequate resources, convert these resources into efficient
services and distribute them effectively so that the customers are satisfied.


The opening up of the economy in 1991 paved the way for the next
revolution in Indian banking: the emergence of private banks. It has change the
face of retail banking, bringing in enhanced competitiveness, product mix and
customer satisfaction.

Allowing banks to engage in non-traditional activities has contributed to improved

profitability and cost and earnings efficiency of the whole banking sector,
including public-sector banks. By contrast, investment in government securities
has lowered the profitability and cost efficiency of the whole banking sector,
including public-sector banks. Lending to priority sectors and the public-sector has
not had a negative effect on profitability and cost efficiency, contrary to our

Further, foreign banks (and private domestic banks in some cases) have generally
performed better than other banks in terms of profitability and income efficiency.
This suggests that ownership matters and foreign entry has a positive impact on
banking sector restructuring.

The emergence of retail banking has also brought into focus the performance of the
private banks and their aggressive banking practices. The new private banks have
used technology to grow.

SSM - Banking Services – BMS – Vth sem

The PSUs are now becoming more customer-centric and tech-savvy. The battle for
the Indian consumer’s mind is in full swing.


Books referred:
1. Service Sector Management – C. Bhatacharjee.
2. Service Sector Management - Prof. R. Subramanian.
3. Banking Sector Reforms in India - Sultan Singh.
4. Services Marketing - Dr. S.M.Jha.