CHAPTER- II

CUSTOMER RELATIONSHIP

MANAGEMENT IN BANKING SECTOR

2.1 INTRODUCTION

2.2 SIGNIFICANCE OF CUSTOMER RELATIONSHIP MANAGEMENT

2.3 CRM IN BANKING SECTOR

2.4 CRM AND BANKS

2.5 CRM IN INDIAN BANKS

2.6 CUSTOMERS RELATIONSHIP MANAGEMENT– PRINCIPLES 

2.7 BENEFITS OF CRM

2.8 CHALLENGES FOR CRM IMPLMENTATION

2.9 METHOD OF EFFECTIVE CRM IMPLEMENTATION

2.10 PROFILES OF SELECTED PUBLIC AND PRIVATE SECTOR

BANKS IN MADURAI DISTRICT

2.11 PERFORMANCE OF SELECTED PUBLIC AND PRIVATE

SECTOR BANKS IN MADURAI DISTRICT

2.12 CONCLUSION


2.1 INTRODUCTION

In this chapter an attempt is made to analyze the significance of customer

relationship management in banking sector, its principles and benefits to their

customers, challenges for CRM implementation and the method of its effective

implementation. The profiles of sample banks and their working performance in

Madurai district are also analyzed.

2.2 SIGNIFICANCE OF CUSTOMER RELATIONSHIP MANAGEMENT

In this globalized world managing relationships with the customer and

making them contented has become a necessity. It is a ground reality for many

companies which had realized the customers need. They had started seriously

giving more care to them than ever before. The perception and understanding of the

bank is based on the customers varied experiences with their employees and

services. It is accepted that the cost to bring a new customer is ten times higher than

to retain the existing customer. In addition to this it is also agreed that the various

choices have opened today for the customers. Therefore all this require a better

understanding of the customer. What customer expects from the bank and their

requirements are to be understood, even though all customers do not contribute

equally to the profit kitty of the banks. If the customer relationship management is

attended to properly it will not only help to improve the bank but also help to focus

bank‘s effort where it required the most. Customer relationship management is the

most efficient and strongest approach while creating and maintaining relationship

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with consumers. It is not only pure business but also it develops strong personal

bonding with the customers. Through maintaining CRM it is very easy for them to

identify the customers’ actual requirement. It may help them to serve with a better

quality and way of services. It is said that if banks want to be strong and fruitful,

they should implement sophisticated strategies involved in customer relationship

management. It is also the most important tool for better future growth. Customers’

requirements and complaints are part of their banking business life.1

2.3 CRM IN BANKING SECTOR

Customer relationship management helps banking sector to use of

technology and human resources. These factors allow them to gain insight of

consumer behavior and their values. If CRM works better then the bank can

provide better customer service, help sales staff close deals faster, cross sell

products more effectively, make call centers more efficient, discover new

customers, simplify marketing and sales processes and increasing consumer

revenue. It could not happen with just buying software and installing into the

system. In this the bank must decide as what type of customer information that they

are asking. It has to further decide as to what they intend to do with the information.

After all these after that the banks decide and run a model considered by them

simply the best. Efficiently dealing with all the customers and providing them what

they actually need increases the customer satisfaction. This increases the chance of


1 www.crm.com

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getting more business which ultimately enhances turnover and profit. If the

customer is satisfied they will always be loyal to the bank and will remain with the

same bank forever resulting in increasing customer base and ultimately enhancing

net growth of banking business. In today’s commercial world, practice of dealing

with existing customers and get a thriving business by bringing in more customers

into loop is predominant. Installing a CRM system can definitely improve the

situation and help in challenging the new ways of marketing and business in an

efficient manner. Hence in the era of business every organization should be

recommended to have a full-fledged CRM system to cope up with all the business

needs. So, banking business is not an exception. 2

CRM is a powerful management tool that can be used to exploit sales

potential and maximize the value of the customer to the bank. Generally, CRM

integrates various components of a business such as sales, marketing, IT and

accounting. This strategy may not increase a business's profit today or tomorrow,

but it will add customer loyalty to the business. In the long run, CRM produces

continuous scrutiny of the bank's business relationship with the customer, thereby

increasing the value of his business. Although CRM is known to be a relatively new

method in managing customer loyalty, it has been used previously by retail

businesses for many years. The core objective of modern CRM methodology is to

help businesses to use technology and human resources to gain a better view of

customer behavior. With this, a business can hope to achieve better customer

2 www.sodhganga.com

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service, make call centers more efficient, cross-sell products more effectively,

simplify marketing and sales processes, identify new customers and increase

customer revenues.

As an example, banks may keep track of a customer's life stages in order to

market appropriate banking products, such as mortgages or credit cards to their

customers at the appropriate time. The next stage is to look into the different

methods of gathering customers', where and how this data is stored and how it is

currently being used. For instance, banks may interact with customers in a countless

ways via mails, emails, call centers, marketing and advertising. The collected data

may flow between operational (such as sales and stock systems) and analytical

systems that can help sort through these records to identify patterns. Business

analysts can then browse through the data to obtain an in-depth view of each

customer and identify areas where better services are required.

2.4 CRM AND BANKS

One of the banks' greatest assets is their knowledge of their customers.

Banks can use this asset and turn it into a key competitive advantage by retaining

those customers who represent the highest lifetime value and profitability. Banks

can develop customer relationships across a broad spectrum of touch points such as

bank branches, kiosks, ATMs, internet, electronic banking and call centers.

CRM is not a new phenomenon in the industry. Over the years, banks have

invested heavily in CRM, especially in developing call centers, which, in the past,

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were designed to improve the process of inbound calls. In future, call centers will

evolve to encompass more than just cost reduction and improve efficiency.

According to Gartner Group, more than 80 per cent of all US banks will develop

their call centers as alternative delivery channels and revenue centers, to be used for

the delivery of existing products and services. But to be successful, a bank needs

more than the ability to handle customer service calls. It needs a comprehensive

CRM strategy in which all departments within the bank are integrated.

2.4.1 Objectives of CRM in Banks

CRM, the technology, along with human resources of the banks, enables the

banks to analyze the behavior of customers and their value. The main areas of focus

are as the name suggests: customer, relationship, and the management of

relationship and the main objectives to implement CRM in the business strategy

are:

™ To simplify marketing and sales process

™ To make call centers more efficient

™ To provide better customer service

™ To discover new customers and increase customer revenue and

™ to cross sell products more effectively

The CRM processes should fully support the basic steps of customer life cycle. The

basic steps are:

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 ™ Attracting present and new customers

™ Acquiring new customers

™ Serving the customers and

™ retaining the customers

In today's increasingly competitive environment, maximizing organic

growth through sales momentum has become a priority for banks and financial

institutions. To build this momentum banks are focusing on customer relationship

management initiatives to improve

™ Customer satisfaction and loyalty

™ Customer insight/ 360º view of customer

™ Speed to market products and services

™ Increase products-to-customer ratio

™ Improve up sales and cross sales and

™ capitalizing on new market opportunities

The idea of CRM is that it helps businesses use technology and human

resources to gain insight into the behavior and value of those customers. If it works

as hoped, a business can: provide better customer service, make call centers more

efficient , cross sell products more effectively, help sales staff close deals faster,

simplify marketing and sales processes, discover new customers and increase

customer revenues .It doesn't happen by simply buying software and installing it.

For CRM to be truly effective an organization must first decide what kind of

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customer information it is looking for and it must decide what it intends to do with

that information.

For example, many financial institutions keep track of customers' life stages

in order to market appropriate banking products like mortgages of them at the right

time to fit their needs. Next, the organization must look into all of the different

ways of gathering information about customers who come into a business, where

and how this data is stored and how it is currently used. One company, for instance,

may interact with customers in a myriad of different ways including mail

campaigns, web sites, brick-and-mortar stores, call centers, mobile sales force staff

and marketing and advertising. Solid CRM systems link up each of these points.

The collected data flows between operational systems and analytical systems that

can help sort through these records for patterns. Company analysts can then comb

through the data to obtain a holistic view of each customer and pinpoint areas where

better services are needed.

2.4.2 Need of CRM in Banks

The bank merely is an organization as it accepts deposits and lends money

to the needy persons, but banking is the process associated with the activities of

banks. It includes issuance of cherubs and cards, monthly statements, timely

announcement of new services, helping the customers to avail online and mobile

banking etc. Huge growth of customer relationship management is predicted in the

banking sector over the next few years. Banks are aiming to increase customer

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profitability with customer retention. It is a sound business strategy to identify the

bank’s most profitable customers and prospects, and devotes time and attention to

expanding account relationships with those customers through individualized

marketing, pricing, discretionary decision making.

In banking sector, relationship management could be defined as having and

acting upon deeper knowledge about the customer, ensure that the customer such as

how to fund the customer, get to know the customer, keep in touch with the

customer, ensure that the customer gets what he wishes from service provider and

understand that when they are not satisfied might leave the service provider and act

accordingly. CRM in banking industry is entirely different from other sectors,

because banking industry is purely related to financial services, which needs to

create the trust among the people. Establishing customer care support during on and

off official hours, making timely information about interest payments, maturity of

time deposit, issuing credit and debit cum ATM cards, creating awareness regarding

online and e-banking, adopting mobile request and others are required to keep

regular relationship with customers.

The present day CRM includes developing customer base. The bank has to

pay adequate attention to increase customer base by all means. It is possible if the

performance is at satisfactory level, the existing clients can recommend others to

have banking connection with the bank he is they are connected. Hence seeking

references from the existing customers for the prospective future customers can

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develop their client base. If the base is increased, the profitability also increases.

Therefore the bank has to implement lot of innovative CRM measures to capture

and retain the customers. There is need for a shift from bank centric activities to

customer centric activities. The private sector banks in India deployed much

innovative strategies to attract new customers and to retain existing customers.

CRM in banking sector is still in an evolutionary stage. It is the time for taking

ideas from customers to enrich its service. The use of CRM in banking has gained

importance with the aggressive strategies for customer acquisition and retention

being employed by the banks in today’s competitive milieu. This has resulted in the

adoption of various CRM initiatives by these banks. 3

2.4.3 Steps to Follow

The following steps minimize the work regarding adoption of CRM strategy.

These are:

¾ Identification of proper CRM initiatives

¾ Implementing adequate technologies in order to assist CRM initiative

¾ Setting standards (targets) for each initiative and each person involved in that
circle

¾ Evaluating actual performance with the standard or benchmark and

¾ Taking corrective actions to improve deviations, if any


3 www.articlesbase.com

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 Customer relationship management is concerned with attracting, maintaining

and enhancing customer relationship in multi service organizations. CRM goes

beyond the transactional exchange and enables the marketer to estimate the

customer’s sentiments and buying intentions so that the customer can be provided

with products and services before they start demanding. Customers are the

backbone of any kind of business activities, maintaining relationship with them

yield better result.

2.4.4 CRM Strategies

This is a new way of thinking for many banks with thousands, even millions

of customers. Managing customer relationships successfully means learning about

the habits and needs of the customers, anticipating future buying patterns and

finding new opportunities to add value to the relationship.

2.4.4.1 Customer Behavior Patterns

In the financial sector, early beneficiaries of successful CRM strategies were

the banks. These banks use data warehousing and data mining technologies to learn

from the millions of transactions and interactions with their customers, and to

anticipate their needs. The patterns of customer behavior and attitude derived from

this information enable the banks to effectively segment customers on pre-

determined criteria. Detailed customer data can provide answers to the following

questions:

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 ¾ Which communication channel do they prefer?

¾ What would be the risk of giving up one bank for another bank? and

¾ What is the probability that the customer will buy a service or product?

This knowledge assists financial institutions with CRM solutions in place to

develop marketing programs that respond to each customer segment, support cross-

selling and customer retention programs. It enables the staff to understand how to

maximize the value of each customer’s interaction. CRM applications provide

functionality to enhance customer interactions. Banks known for their high level of

customer service might use this characteristic as a starting point for implementing a

CRM application. Another company may be very good at targeting profitable

customers. Each bank should seek a niche for itself on which to develop its CRM

strategy.

2.4.4.2 Customer Data

A common problem many organizations share is integrating customer

information. When information is disparate and fragmented, it is difficult to know

who the customers are and the nature of their associations or relationships. This also

makes it difficult to capitalize on opportunities to increase customer service, loyalty

and profitability. For example, knowing that other family members are also

customers provides an opportunity to up-sell or cross-sell products or services, or

knowing that a customer uses several sources of interaction with a supplier can also

provide opportunities to enhance the relationship. The creation and execution of a

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successful CRM strategy depends on close examination and rationalization of the

relationship between an organization’s vision and business strategy. Building

toward a CRM solution and evaluating the use of customer data requires analysis

and alignment of the following core capabilities:

x Customer value management

x Prospecting

x Selling

x Collection and use of customer intelligence

x Customer development (up-selling and cross-selling)

x Customer service and retention and

x protection of customer privacy

Successful CRM implementations result from the capability of the

organization and its employees to integrate human resources, business processes

and technology, to create differentiation and excellence in service to customers, and

to perform all of these functions better than its competitors. The current economic

context and financial crisis has most probably led many financial services

institutions to refocus their CRM strategies with the customer relationship being

more than ever the key to profitability of a retail activity. These institutions have to

design a new approach to regain and reassure customers. Even if they have only

started building a “how to win back trust" strategy, there is a general movement

towards “refocusing on the customer” for the “post-financial” crisis phase.

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2.4.5 Techniques in CRM

Techniques in customer relationship management can be classified as

follows. .

2.4.5.1 Customer Service and Retention

More competition and increased regulation made it more difficult for banks

to stand out from the crowd. However, the development of CRM gave banks

proactive access to technology that helped them improve customer retention by

using customer feedback to offer conveniences like ATMs and online banking.

Banks can also use CRM tools to improve customer loyalty by using data collected

through customer sign-ups, transactions and feedback processes.

2.4.5.2 Call Centers

Bank call centers use CRM solutions for various purposes. Cost-driven call

centers use CRM to track call transactions and troubleshooting techniques to fine-

tune the service resolution processes. Metrics like average handle time and

customer feedback ratings help bank call centers improve their customer support for

retention. Profit-driven call centers also leverage CRM customer account records

for add-on selling opportunities.

2.4.5.3 Sales

Sales have gained more importance in banks with the evolution of CRM.

Bundling of products and premier customer accounts are examples of techniques

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used by banks to build single-product customer accounts into full product suites

including a range of financial services. With CRM software, bankers can easily see

what products the customers currently use, what products they are eligible for and

what the benefits should be added to the additional product or service.4

2.4.6 Critical Success Factor of CRM

CRM is a holistic approach, which needs alignment of different aspects of a

business. Management and leadership, change of management, human resources

and using right technologies are the critical success factors of CRM.

2.4.6.1 Management and Leadership

Leaders/Mangers in a bank should have an important role by sharing CRM

team’s vision with the management. The leaders’ role has to be that of a facilitator

for implementing CRM. Effective Leadership skills result in the success of CRM

initiatives. Innovative mangers work with his team, make decisions by consulting

his team, while still maintaining control over the group as well as appreciate all the

feedbacks in the organization related with CRM implementation and strategies and

try to integrate people into it. Because CRM is the backbone of communication,

manager’s communication and coaching skills are important in CRM

implementation in any bank.


4 http://www.ehow.com

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2.4.6.2 Change Management

“CRM is an evaluation. Change is inevitable." When new IT systems, software,

and the like are deployed, the way people doing their jobs would also change.

Therefore the cultural change adaptation is crucial. It can be also be as Multi

Pronged Change Strategy. Instead of rushing, CRM team can prefer a gradual

change. Workshops and brainstorming meetings with sales, marketing, and

customer service staff can be conducted to discuss CRM strategies. Banks do train

employees and first of all, they tried to change employees’ mindset from operation

centric to customer centric ones. Change in management is crucial to promote user

adaptation. Major focus is based on training to achieve adaptation.

2.4.6.3 Information Technology

Nowadays many banks have begun to deploy new technologies according to

their needs. With advanced technologies, they get the advantage of doing tasks

faster and with more accuracy. There are various software tools for CRM like

Siebel systems for operational CRM; Teradata for data warehouse; Unica’s

Affinium for campaign management; SAS for data modeling activities. Banks also

develop a task manager program that helps sales representatives to see 360-degree

of customer view.

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2.4.6.4 Human Resources

CRM is the backbone for communication. For a successful CRM

implementation, human resources management of a company is very important.

Integrating employees into strategies and training them is very important to adapt

them to change. Employees are the interface of the company and so they can highly

affect the bank’s image.5

2.5 CRM IN INDIAN BANKS

In recent years, the banking industry around the world has been undergoing

a rapid transformation. In India also, the wave of deregulation of early 1990s had

created heightened competition and greater risk for banks and other financial

intermediaries. The cross-border flows and entry of new players and products have

forced banks to adjust the product-mix and undertake rapid changes in their

processes and operations to remain competitive. The deepening of technology has

facilitated better tracking and fulfillment of commitments, multiple delivery

channels for customers and faster resolution of miscoordinations.

Unlike in the past, the banks today are market driven and market responsive.

The top concern in the mind of every bank's CEO is increasing or at least

maintaining the market share in every line of business against the backdrop of

heightened competition. With the entry of new players and multiple channels,


5 Babin Pokharel, “Customer Relationship Management: Related Theories, Challenges and
Application in Banking Sector”, Banking Journal, Vol. 1, No.1, pp.20.

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customers (both corporate and retail) have become more discerning and less "loyal"

to banks. This makes it imperative that banks provide best possible products and

services to ensure customer satisfaction. To address the challenge of retention of

customers, there have been active efforts in the banking circles to switch over to

customer-centric business model. The success of such a model depends upon the

approach adopted by banks with respect to customer data management and

customer relationship management.

Over the years, Indian banks have expanded to cover a large geographic and

functional area to meet the developmental needs. They have been managing a world

of information about customers - their profiles, location, and the like. They have a

close relationship with their customers and a good knowledge of their needs,

requirements and cash positions. Though this offers them a unique advantage, they

face a fundamental problem. During the period of planned economic development,

the bank products were bought in India and not sold. What our banks, especially

those in the public sector lack are the marketing attitude. Marketing is a customer-

oriented operation. What is needed is the effort on their part to improve their service

image and exploit their large customer information base effectively to communicate

product availability. Achieving customer focus requires leveraging existing

customer information to gain a deeper insight into the relationship a customer has

with the institution, and improving customer service-related processes so that the

services are quick, error free and convenient for the customers.

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 Furthermore, banks need to have very strong in-house research and market

intelligence units in order to face the future challenges of competition, especially

customer retention. Marketing is a question of demand (customers) and supply

(financial products and services, customer services through various delivery

channels). Both demand and supply have to be understood in the context of

geographic locations and competitor analysis to undertake focused marketing

(advertising) efforts. Focusing on region-specific campaigns rather than national

media campaigns would be a better strategy for a diverse country like India.

Customer-centricity also implies increasing investment in technology. Throughout

much of the last decade, banks world-over have re-engineered their organizations to

improve efficiency and move customers to lower cost, automated channels, such as

ATMs and online banking. But this need not be the case.

As is proved by the experience, banks are now realizing that one of their

best assets for building profitable customer relationships especially in a developing

country like India is the opening of branch-branches which are a key channel for

customer retention and profit growth in rural and semi-urban set up. However, to

maximize the value of this resource, our banks need to transform their branches

from transaction processing centers into customer-centric service centers. This

transformation would help them achieve bottom line business benefits by retaining

the most profitable customers. Branches could also be used to inform and educate

customers about other, more efficient channels, to advise on and sell new financial

instruments like consumer loans, insurance products, mutual fund products, and the

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like. There is a growing realization among Indian banks that it no longer pays to

have a "transaction-based" operating model. There are active efforts to develop a

relationship-oriented model of operations focusing on customer-centric services.

The biggest challenge the banks face today is to establish customer intimacy

without which all other efforts towards operational excellence are meaningless. The

banks need to ensure through their services that the customers come back to them.

This is because a major chunk of income for most of the banks comes from existing

customers, rather than from new customers.

Customer relationship management (CRM) solutions, if implemented and

integrated correctly, can help significantly in improving customer satisfaction

levels. Data warehousing can help in providing better transaction experiences for

customers over different transaction channels. This is because data warehousing

helps bring all the transactions coming from different channels under the same roof.

Data mining helps banks analyses and measure customer transaction patterns and

behavior. This can help a lot in improving service levels and finding new business

opportunities. It must be noted, however, that customer-centric banking also

involves many risks. The banking industry world over is being thrust into a wild

new world of privacy controversy. The banks need to set up serious governance

systems for privacy risk management. It must be remembered that customer privacy

issues threaten to compromise the use of information technology which is at the

very center of e-commerce and customer relationship management – the two areas

which are crucial for banks' future. The critical issue for banks is that they will not

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be able to safeguard customer privacy completely without undermining the most

exciting innovations in banking. These innovations promise huge benefits, both for

customers and providers. But to capture them, financial services companies and

their customers will have to make some critical tradeoffs.

2.5.1 Importance of CRM in Indian Banks

For long, Indian banks had presumed that their operations were customer-

centric, simply because they had customers. These banks ruled the roost, protected

by regulations that did not allow free entry of anybody into the sector. And to their

credit, when the banking sector was opened up, they survived by adapting quickly

to the new rules of the game. Many managed to post profits. For them an

unexpected bonanza came from government bonds. Ironically, the Reserve Bank of

India's moves to cut aggressively the interest rates after 1999, pushed up the prices

of bonds. So banks had a windfall doing almost nothing. The bond profits, like

manna from heaven, improved the balance-sheets of all banks irrespective of their

core performance. However, the era of lazy banking is soon to end. The mesh of

rules that propped up the Indian banking industry is now being dismantled rapidly.

According to a RBI road-map, India will have a competitive banking market

after 2009. As one of the most attractive emerging market destinations, India will

see allows foreign banks to come in with more freedom grow and acquire.

Therefore, it is imperative that Indian banks wake up to this reality and re-focus on

their core asset-the customer. A greater focus on customer relationship management

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is the only way the banking industry can protect its market share and boost growth.

CRM would also make Indian bankers realize that the purpose of their business is to

"create and keep a customer" and to "view the entire business process as consisting

of a tightly integrated effort to discover, create, and satisfy customer needs."

CRM is variously misunderstood as a fancy sales strategy, an expensive

software product, or even a new method of data collection. It is none of these.

Customer relationship management in the Indian banking system is fundamental to

building a customer-centric organization. CRM systems link customer data into a

single and logical customer repository. CRM in banking is a key element that

allows a bank to develop its customer base and sales capacity. The goal of CRM is

to manage all aspects of customer interactions in a manner that enables banks to

maximize profitability from every customer. Increasing competition, deregulation,

and the internet have all contributed to the increase in customer power. Customers,

faced with an increasing array of banking products and services, are expecting more

from banks in terms of customized offerings, attractive returns, ease of access, and

transparency in dealings. Retaining customers is a major concern for banking

institutions which underscores the importance of CRM. Banks can turn customer

relationship into a key competitive advantage through the strategic development

across a broad spectrum.

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 CRM is a simple philosophy that places the customer at the heart of a

business organization’s processes, activities and culture to improve his satisfaction

of service and, in turn, maximize the profits for the organization. A successful CRM

strategy aims at understanding the needs of the customer and integrating them with

the organization’s strategy, people, technology and business process. Therefore, one

of the best ways of launching a CRM initiative is to start with what the organization

is doing now and working out what should be done to improve its interface with its

customers. Then the only solution is to link an information technology. For large

organizations it can be a mammoth task unless a gradual step-by-step process is

adopted. It does not happen simply by buying the software and installing it. For

CRM to be truly effective, it requires a well-thought-out initiative involving

strategy, people, technology, and processes. Above all, it requires the realization

that the CRM philosophy of doing business should be adopted incrementally with

an iterative approach to learn at every stage of development.

2.5.2 Implementation of CRM in Indian Banks

Although CRM as a concept is of recent origin its tenets have been around

for some time. Field officers in the banks have always promoted close relationships

with customers, but the focus on customer orientation rather than product

orientation as a commitment had been on the Indian banking scene for nearly a

decade. But the fact remains that implementing customer relationship management

is not easy. There are really very few organizations that are actually optimizing

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customer experiences at all points of contacts. It is necessary to understand the

customers are and their value, select customer carefully, design products and

services that deliver the desired value, design effective sales channels and customer

touch points, recruit, equip employees to deliver, increase customer value, and

constantly refine bank’s value proposition to ensure customer loyalty and retention

With the advancement of banking technology and computerization and

networking of bank branches, bank customers are becoming more and more

dynamic and less loyal in their behaviour. The development of the Internet is further

adding to this trend and the whole market becomes transparent and customers are in

a position to move easily from one bank to another. In such a situation, customer

satisfaction is the key to bank marketing, which aims at retention of the old

customers and their bringing in new customers.

CRM deserves differential treatment to different class of customers at times.

Service can be given to customers either personally through individuals such as

customer service manager or the process that can be automated by using computers.

These different approaches are adopted depending on the value of relationship with

the customer. Personal management of relationship is extended to business

customers and high value personal customers and automated relationship

management to lower margin mass- market segments.

CRM system can open up new channels of delivery, which are most cost

effective. as in the case of the Internet and call centers. According to an estimate,

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cost per transaction through these modes can be reduced by 90 per cent when

compared to cost of transaction at branch. To offer better and extended services to

customers new technology platforms are being created through huge investment in

information technology in the banking sector. The recent development in this field

is the introduction of CBS (Core Banking Solutions). A CBS helps in centralizing

the transactions of branches and different banking channels and the customers start

banking with the bank instead of at different branches. This is the only way to offer

seamless transactions across different channels (branches, the Internet, the

telephone and Automated Teller Machines or ATMs). As such nowadays a

customer is called a customer of the bank rather than that of a branch.

Another problem generally faced by a bank in implementing CRM is

resistance to change. The banking industry is passing through a radical

transformation, from a seller’s market to a customer’s market, a regulated economy

to a more liberalized and open economy, advancement in technology and a lot of

other developments. These complex changes are forcing the banks to change the

way they do business. A change denotes making things in a different manner. It

should be planned properly, proactive and goal oriented. It requires two things:

Firstly, the ability of the organization to adapt changes in the business

environment is to be increased. Secondly, the mindset of the employees has got to

be changed in the development of right attitude, skills, expectations, perceptions

and behaviour. Implementation of CRM in Indian banking is still in its initial stage

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and has to go a long way to be developed to the global standards. But the Indian

banks including the public sector banks are coming in a big way to address this

issue to remain competitive with their counterparts—the foreign and private sector

banks.

2.6 CUSTOMER RELATIONSHIP MANAGEMENT– PRINCIPLES

Nowadays banks have to work keeping in mind the position of the

financial market and anticipate change in the market place and prepare themselves

accordingly. They have to make new resolutions to build further on their own

strengths to explore new avenues of customers relationship management. This is the

only strategic weapon to be pursued for excellence in the pursuit of performance

and achievement. Both the retention of old business as well as to search for new

business, CRM is the only choice. CRM, being the essence of modern banking, a

sound understanding of the key principles, its theories and practices should be

revisited and redefined to provide a road map to new ideas and techniques in the

field. Over the years, banking institutions have been feeling the pressing need of

putting up greater thrust on this initiative for improving their operations and

appearances.

2.6.1 CRM Principles

The main principles of CRM can be grouped into seven guiding factors:

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2.6.1.1 Customer Focus

The first and foremost important guiding principle in CRM is customer

focus. The first question that arises in this regard is to define the customer. This

question is very fundamental. A customer is a person or group of persons who

receives the product or service—the final output of a process or group of processes.

A customer is the final arbiter of quality, value and price of a product or service. A

satisfied customer only assigns value to a service, on the contrary, to a dissatisfied

customer a product or service has no value, even if the concerned service or product

has been designed with lot of effort, energy and cost after a thorough planning. A

satisfied customer motivates his fellow members to go in for the service or product

that he has already acquired. But a disgruntled customer always counsels his

friends, and fellow members not to go to banks where his experience proved to be

wrong bitter or other-wise. So customer’s delight or customer’s satisfaction is the

essence of any CRM program. As a part of this focus on customers, banks should

ensure that clients are identified; their requirements are determined, understood and

met duly enhancing customers’ satisfaction.

2.6.1.2Leadership

Persuasion, judgment and decision-making abilities are the main attributes

of quality leadership. When there is a slight chance of getting a business but the

client is hesitating or in a fix, or not in a position to decide properly, it should be

followed up by the relationship manager by patient hearing, mild counseling and to

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stand by the side of the prospective client to help clear his doubts and to make him

feel happy by realizing that he is going in the right direction and he is right in

choosing his requirements.

The following points may be found helpful in this regard:

¾ It is to be communicated to all employees that all customers should be given

a proper hearing and it should be supported from all levels.

¾ Ways and means should be identified and practiced in getting and staying

closer to customers.

¾ Proper regard should be extended to the customers. All relevant information

about them should be collected from them with a humble and discrete

approach. Proper value should be given to their feedback.

¾ There should be proper re-action to the information and feedback provided

by the customers in designing, developing and providing desired products at

afford-able cost.

2.6.1.3 Process Approach

A process transforms an input into desired output by the use of resources,

energies and time. In producing an output there may one single process or a group

of inter-related processes. In case of inter-related processes, often the output from

one process directly forms the input for the next. For effective functioning of an

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organization, it has to identify and manage numerous linked activities with the help

of different processes for accomplishing its goal.

Proper attention should be given to the following points:

¾ All processes should be de-signed keeping in view the requirements and

desires of the customers, within the policy, resource availability, strategy of

the company.

¾ All processes should meet the legal and statutory requirements to perform

the activity or deliver the product or service.

¾ Time involved in processing should be less with least waiting time for the

customers. If required delegation of authority and assignment of account-

ability at various executive levels should be addressed, they should be

revised and fine-tuned to meet the requirements.

¾ All the processes should be properly integrated to meet the goal of

congruence and should not function at cross-purpose and

¾ There should be in built control mechanism for ease of measuring, reviewing

and taking corrective action.

2.6.1.4 System Approach

Customer’s requirement is one level of commitment. That level implies a

system that is reactive and provides customers what they want but the target should

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be to achieve more and to exceed the customer’s expectation to accommodate their

future requirements and to build a cushion against the competitors’ attributes. CRM

denotes the management of the entire system and is not confined to only one or the

other sub-systems or functional departments. CRM is based on a system approach

to management. Its primary objective is to increase value to customers on a

continuous basis by designing and improving organizational processes and systems

on an ongoing basis. Meeting each sub-system may have its own goal but the goal

and objectives of all sub-systems are to be integrated to achieve the overall goal.

There may be one sub-system to acknowledge the customer’s order, a

separate one to deliver the product within the delivery schedule, another sub-system

to comply with the complaints of the customers etc, but all directed to accomplish

the goal—value to the customers. The total system as a whole should decide on the

product to be manufactured, the services to be offered, the quality to be imbedded

, the price to be fixed , markets and customers to targeted upon and similar other

issues.

2.6.1.5 Involvement of People

The fundamentals of CRM bear the genes of customer relationship through

involvement of people, i.e., the work-force at the disposal of the organization. The

whole gamut of CRM is for the people, of the people and by the people. People’s

involvement at all levels is essential for the success of a CRM program. The bank

managers and staff must be in a position to exploit the concept of customer

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relationship completely. Customer relation may be defined as that dimension of

relationship marketing that seeks and ensures customer loyalty by fulfilling

promises and continuing to satisfy customer’s wants and needs so that defection is

zero. It comprises of three levels of; financial, social and structural relationships

The main focus of financial relationship is frequency marketing programs

based on financial incentives such as reduction of processing fees, lower rate of

commitment charges, organization of loan mela on special occasions and the like. A

social relationship program revolves round a social bonding between company and

its customers and establishes brand loyalty. Bankers, nowadays, make house calls,

offer different services outside their formal activities, share the feelings and

emotions of clients and even send clients bouquets on birthdays and anniversaries.

A marketing relation with the middleman and interested groups is developed in an

in-side-out manner mainly based on software, which would help in data

warehousing, data mining and data analysis. The optimization of structural

relationship lies in the replacement of physical resources by total service

replacement. Drawing of money through ATMs instead of physical presence in the

branch for withdrawal of cash through cheques or withdrawal forms may be cited as

an example. To obtain the full benefits of people involvement, the human resource

management should focus on employee empowerment, productivity linked reward,

and zero defeat service oriented training and total quality management.

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2.6.1.6 Mutually Beneficial Customer Relationship

The relationship with the customer should be based on a mutually beneficial

relationship. A bank should not concentrate its attention towards earning of profits

only, but focus should be directed to the customers’ wealth creation or value

enhancement with the motto of earning through service. As an example we can talk

of a savings account that’s ‘fixed up’ to give a customer more interest. It ensures

that any balance in your savings account above a certain amount, say, Rs 3,000

automatically gets transferred to a fixed deposit to give you higher returns, which

will be swept back into your savings account, when you need it.

Sometimes, other benefits are also extended, such as, free personal accident

insurance coverage along with fixed deposit scheme above a certain amount and

above a certain term. Banks are no more restricting their activities to deposit and

advances; rather they work with the motto of offering ‘integrated total package

solutions’ to all needs of a customer. Banks have gone to the extent of booking

cinema tickets, paying utility bills, school fees etc. for the ease of their clients who

are very busy and do not find time for such works. Many of such activities are not

profitable in terms of time and efforts spent by the bank. But banks are carrying out

such services for mutual benefits, which pays in the long run.

Wealthy individuals are in the habit of placing all sorts of demands on their

private bankers and a bank has to respond to such requests not merely for income

generation but as a gesture of goodwill and at times such activities add a consider-

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able percentage to a bank’s fee based income. According to an estimate, a bank can

earn Rs 35,000 to Rs 100,000 per an-num for a good customer. But generally it is

found that earnings start after the first two- three years of dealing with the customer.

In a mature relationship, such fee-based income is a regular feature and is very

much crucial in today’s banking where interest spread is getting reduced due to

competition and fee based income can increase the bottom line. But in many

instances, the expenses in terms of time, effort, recognizing individual needs and

offering a customized investment solution are high. Retention of customers and

building a long lasting relationship is the main criteria under this concept.

2.6.1.7 Continuing Improvement

Another objective of CRM is the efforts towards continuous improvement in

the customer relationship through the provision of value added services at a

favorable cost. Business processes in the areas of finance, system integration,

human resource management etc are to be automated and optimized with an aim to

increase the efficiency and effectiveness of operations.

The most effective way of improvement lies in innovation and change

management. Today’s successful organizations must stimulate and foster innovation

and master the art of change. Organizations that maintain their flexibility,

spontaneity and unpredictability, continually improve their quality and beat their

competitors in the market place with a constant stream of innovative products and

services. They will be the winners.

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The major areas to be targeted are:

¾ Improving the effectiveness of marketing.

¾ Implementing multichannel trigger driven marketing

¾ Implementing a strategic analysis capability to support strategic decision

making and

¾ the ability to deliver the increasing levels service demanded by customers.

Also building a transparent communication system and employee

participation to better define the needs of the customers and deliver the right

services and products are equally important.

2.7 BENEFITS OF CRM

Despite the fact that in most banks sometimes fail to get profits, they seldom

pay attention to or adopt any customer strategy. It has long been the misconception

that banks need not pay much attention to customer focus just because they had

customers. Some banks even if they possess good customer relationships are unable

to cross sell as they have not figured out the product or service with which to target

the customers. They also are unaware of what may happen when customers are

often approached with the wrong products. However the new millennium has

resulted in banks and financial agencies rethinking their strategies and goals. They

have come to understand the importance of banking on to the customer and keeping

him happy. The rules that once governed the banking industry have changed. They

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have realized that adopting a customer centric strategy is essential and needs to be

compulsorily undertaken. The vast majority of banks now realize that they need a

customer strategy and are opting for CRM.

Banking CRM software serves to increase the market share and boost

growth in the banking industry. CRM banking solutions change the way the

employees think and mould them into customer conscious people. CRM induces

bankers to know that they are required to maintain good relationships with their

customers and should strive to retain them. They are made to realize that the

business process should consist of efforts to discover and satisfy customer

requirements. Since the banking field now boasts of so much of technological

innovations there has been a wide variety of innovations in CRM banking as well.

Statistics show that bankers will bear staggering expenditure on CRM. The sector

will also evidence an increase in expenditure of 14 percent each year. With such

phenomenal statistics it is but a surety that with CRM, banking solutions sales will

improve in the coming years.

2.7.1 Benefits of CRM for Banks

2.7.1.1 Focus on the Customer

CRM manages to place the customer at the focal point of the organization in

order to cater to his needs, satisfy him and thus maximize its profits. CRM

understands the needs of the customer and integrates it with people, technology,

resources and business processes. It focuses on the existing data available in the

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organization and uses it to improve its relationship with the customers. Banking

CRM uses information and analytical tools to secure customer focus. Thus it is

completely essential that banks implement CRM in order to secure maximum gain

all-round.

2.7.1.2 Overall Profitability

CRM enables banks to give employee's better training that helps them handle

customers easily. It achieves better infrastructure and ultimately contributes to

better overall performance. The byproducts of CRM banking solutions are customer

acquisition, retention and profitability. Banks that don't implement CRM will

undoubtedly find themselves with lesser profitability coupled with a sharp decline

in the number of customers.

2.7.1.3 Satisfied Customers

It is important to make a customer feel as if he / she is the only one customer

in the bank. This will go a long way in satisfying and retaining them. Bankers need

a return on investment and it has been proved that increase in customer satisfaction

more than contributes a fair share to ROI. The main value of CRM banking lies in

satisfaction and increased retention of customers.

2.7.1.4 Centralized Information

CRM banking solutions manage to clearly integrate people, processes and

technology. CRM banking provides banks with a holistic view of all bank

transactions and customer information as well and stores it in a single data

warehouse where it can be studied later.

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2.7.1.5 CRM Banking Boosts Small Banks

Banking CRM software meets the needs of banks of all sizes in terms of

attaining the required accuracy and understanding of customers. Merely assuming

that banks that are considerably smaller in size have a better customer approach and

are able to deal with their customers in a better manner is wrong. They are just as

much in need of CRM aid as the others. Small banks on account of a limited

amount of money have had to realize that a large contribution to profits is directly

the result of good customer service. CRM makes sure that the bank delivers exactly

what the customer expects.

2.7.1.6 Customer Segregation

CRM enables a bank to see which customers are costing them and which are

bringing benefits. CRM provides them with the required analytical tools that will

help them focus on the importance of segregating these two and doing what is

required to avail of the maximum returns. After this segregation is done CRM easily

enables banks to increase their communication and cross-selling to their customers

effectively and efficiently.

2.7.1.7 Aggressive Customer Acquisition

CRM solution supports the creation of demand generation through multi-

channel and multi-wave campaigns. The solution ensures that the bank’s marketing

message is appropriately personalized and targeted towards the most suitable

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segment of prospects. This optimizes marketing efforts and results in greater

conversion of prospects.

2.7.1.8 Improved Cross-selling Framework

The solution presents a unified 360° view of the customer, allowing single

point access to all the relationships the customer has forged with the bank. This

along with robust customer analysis effectively supports true relationship banking,

providing a robust framework for cross-selling opportunities. CRM solution also

integrates with other white labeled solutions to facilitate contextual and

personalized customer engagement, with a keen focus on right-talk driven right-sell.

2.7.1.9 Increased Operational Efficiencies and Collaboration

CRM solution supports business automation for processes and business

activities, eliminating manual tasks and reducing process time. Straight through

processing abilities enhance reduction in turnaround and processing time, increasing

output and enabling speedy completion of tasks. The multilingual web-based single

repository of information enables remotely located bankers to collaborate and

transact seamlessly.

2.7.1.10 Lower Total Cost of Ownership (TCO)

A web-based solution leveraging new-generation technologies, Finacle

CRM solution is future-proof and can be seamlessly integrated with other enterprise

applications. With a robust architecture and proven scalability, it ensures protection

for the bank’s technology investments.

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2.7.1.11 Campaign Management

Banks need to identify customers, tailor products and services to meet their

needs and sell these products to them. CRM achieves this through campaign

management by analyzing data from banks internal applications or by importing

data from external applications to evaluate customer profitability and designing

comprehensive customer profiles in terms of individual lifestyle preferences,

income levels and other related criteria. Based on these profiles, banks can identify

the most prospective customers and customer segments, and execute targeted,

personalized multi-channel marketing campaigns to reach these customers and

maximize the lifetime value of those relationships.

2.7.1.12 Customer Information Consolidation

Instead of customer information being stored in product centric silos, with

CRM the information is stored in a customer centric manner covering all the

products of the bank. CRM integrates various channels to deliver a host of services

to customers, while aiding the functioning of the bank.

2.7.1.13 Marketing Encyclopedia

It is the central repository for products, pricing and competitive

information, as well as internal training material, sales presentations, proposal

templates and marketing collateral.

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2.7.1.14 360-degree View of Company

This means whoever the bank speaks to, irrespective of whether the

communication is from sales, finance or support, the bank is aware of the

interaction. Removal of inconsistencies of data makes the client interaction

processes smooth and efficient, thus leading to enhanced customer satisfaction

2.7.1.15 Personalized Sales Home Page

CRM can provide a single view where sales mangers and agents can get all

the most up-to-date information in one place, including opportunity, account,

news, and expense report information. This would make sales decision fast and

consistent.

2.7.1.16 Lead and Opportunity Management

These enable organizations to effectively manage leads and opportunities

and track the leads through deal closure, the required follow-up and interaction with

the prospects.

2.7.1.17 Operational Inefficiency Removal

CRM can help in strategy formulation to eliminate current operational

inefficiencies. An effective CRM solution supports all channels of customer

interaction including telephone, fax, e-mail, the online portals, wireless devices,

ATMs, and face-to-face contacts with bank personnel. It also links these customer

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touch points to an operations center and connects the operations center with the

relevant internal and external business partners.

2.7.1.18 CRM with Business Intelligence

Banks need to analyze the performance of customer relationships, uncover

trends in customer behavior, and understand the true business value of their

customers. CRM with business intelligence allows banks to assess customer

segments, which help them calculate the net present value (NPV) of a customer

segment over a given period to derive customer lifetime value. Customers can be

evaluated within a scoring framework. Combining the behavior key figure and

frequency to monetary acquisition analysis with a marketing revenue quota can

optimize acquisition costs and cut the number of inefficient activities. With such a

knowledge, banks can efficiently allocate resources to the most profitable customers

and reengineer the unprofitable ones. Data warehousing solutions have been

implemented in Citibank, Reserve Bank of India, State Bank of India, IDBI, ICICI,

Max Touch, ACC, National Stock Exchange and PepsiCo. Business Intelligence

players hope many more will follow suit.

2.7.2 Benefits of CRM to Customers

Customer relationships are becoming even more important for banks as

market conditions get harder. Competition is increasing, margins are eroding,

customers are becoming more demanding and the life-cycles of products and

services are shortening dramatically. All these forces make it necessary for banks to

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intensify the relationship with their customers and offer them the services they need

via the channels they prefer.

2.7.2.1 CRM – Benefits to Customers

™ Service provisioning throughout the entire life cycle of the corporate

customer, from the initial stages to the establishment of a close, long-term

relationship with profitable clients,

™ Optimization of the use of bank resources, such as alternative channels of

distribution (internet and home banking),

™ Significant reduction in and limitation of operational costs through system

automation and standardization,

™ Low maintenance and expansion costs owing to the use of modern

administration tools which allow bank employees to make a wide range of

modifications to the system

™ CRM permits businesses to leverage information from their databases to

achieve customer retention and to cross-sell new products and services to

existing customers.

™ Companies that implement CRM make better relationships with their

customers, achieve loyal customers and a substantial pay back, increased

revenue and reduced cost.

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 ™ CRM when successfully deployed can have a dramatic effect on bottom-line

performance. For example, Lowe’s Home Improvement Warehouse, in a

span of 18 months, achieved a 265 percent return on investment (ROI) on its

$ 11m CRM investment.

™ According to a study conducted in the sector of banking, convenience of

location, price, recommendations from others and advertising are not

important selection criteria for banks. From customers’ point of view, the

important criteria are: account and transaction accuracy and carefulness,

efficiency in correcting mistakes and friendliness and helpfulness of

personnel. Thus, CRM, high-quality attributes of the product / service and

differentiation proved to be the most important factors for customers.

™ Another study conducted in a European bank shows that with CRM, the bank

was able to focus on profitable clients through efficient segmentation

according to individual behavior. Information about ‘who buys what and

how much’ enabled the bank to have a commercial approach based on the

client and not solely on the product. Thus, the bank was able to better satisfy

and retain its customers.

Eventually, CRM results both in higher revenues and lower costs, making

companies more effective and efficient: effective in targeting the right customer

base with the right services via the right channels, and they are efficient in doing

this at the lowest costs. For example, those banks that are moving transactions from

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the more expensive channels to less costly channels – like the call centre or

Internet– are therefore able to save money.

2.8 CHALLENGES FOR CRM IMPLEMENTATION

The most pervasive challenges to effective customer knowledge include:

¾ The difficulty of obtaining a complete view of customers.

¾ The need to move away from disjointed, standalone, and inconsistent

channels to provide a cohesive, multichannel offering.

¾ The burden of disconnected legacy systems and disparate databases

that store client financial data.

¾ The cost and complexity of meeting stringent government regulatory

and client security and privacy requirements.

¾ The pressure on margins and growth prospects from increased

competition.

¾ The costs associated with retaining customers and developing

customer loyalty.

Although CRM can help banking institutions efficiently manage their

customers, many banks fail to mold the concept into the prevailing work culture.

But the high incidence of CRM failure has very little to do with the CRM concept

itself. Usually it's a case of the banks failing to pay attention to customer data they

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already have. A lot of banks underestimate the magnitude of CRM. They tend to

treat it just like any other application technology, without realizing that CRM, if

done properly, is a strategic initiative that touches all areas of an organization.

2.8.1 Measuring CRM benefits

A key basic CRM challenge is establishing the measurement method. Banks

may find it hard to build the initial business case justification and then to prove the

worth or success of their investment What makes the latter task even more difficult

is the fact that the metrics that are best used to justify a significant IT investment are

not always the most appropriate for evaluating ongoing success. When banks seek

to justify the cost of their investment in CRM-related technology they usually focus

on hard numbers, typically those related to decreased costs and increased sales. In

other words, the proponents look to justify the top-line expenses with bottom-line

benefits.

Traditionally, banks have determined the success of any project or product

mainly in terms of internal business gauges such as return on investment, units sold,

asset growth, or service level agreement measures. One exception to the typical

practice of focusing solely on internal data for gauging success is market share, or

market performance. Interestingly, most CRM practitioners quickly default to

marketing and sales measures when asked about the success of CRM

implementations. The tendency to frame the discussion of CRM measurements in

terms of sales and marketing measures is completely understandable given the

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phased nature of most CRM projects. Since the majority of CRM projects are

expensive multiphase and multiyear projects that often involve multiple

technologies, the funding for CRM projects is also often phased. CRM sponsors

grant funding to project leaders at the completion of one phase and start of the next.

To ensure that the subsequent phases will get funding, project leaders typically

build into each phase of a CRM project’s demonstrable business benefits.

At completion of each phase of a project, business benefits are expected to

accrue rapidly to the bank. Revenue generation--whether through sales or marketing

improvements--is the preferred business benefit for CRM project sponsors. Not

surprisingly, it is far easier to continue funding large, intricate IT projects when

incremental revenue generation can be squarely identified.

2.8.2 Customer Profitability

Many banks use profitability as a key component in determining as how to

treat their customers. But measuring profit in a bank is not an easy task. Many

banks allow the use of an accountant's approach to the measurement process. This

means the accounting and finance people are in charge of the process, resulting in

textbook-accurate allocations that often do not accurately reflect the activities they

are intended to measure. For example, most bank costs are step-fixed. This means

that they are neither purely fixed nor purely variable, with the resource able to

process only a finite number of transactions before more investment is required.

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The way the step-fixed resources are allocated, they can dramatically affect the

resulting measurement of account level profitability.

2.8.3 The 80-20 Rule

Most banks make critical pricing decisions based on the so-called 80-20

rule, the notion that 80 per cent of profits derive from 20 per cent of customers. This

may be true, but the use of incomplete or inaccurate cost information and unproven

hypotheses on customer buying behavior make this rule difficult to apply. One

significant problem is that banks let their customers use the bank's products and

services in an unprofitable way. By providing a lower level of service to these

customers, the bank faces the danger of driving them away to institutions that

provide better service. Given the step-fixed nature of bank costs as discussed, banks

should not view losing unprofitable customers as the way to improved profits.

2.9 METHOD OF EFFECTIVE CRM IMPLEMENTATION

Banks can take several steps to strengthen their customer relationship

management in an effective manner.

2.9.1 Acknowledge Email Enquiries

At the very minimum, banks should send out an automated email response

that acknowledges receipt of a customer's email and let the sender know when to

expect a more complete response. It is then vital to get back to the customer within

the promised time frame. Banks can earn more customer goodwill if they respond

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faster than the imposed deadline. To handle significant volumes of email, banks

need adequate routing technology. Many banks regard a voice call centre as a cost

of doing business, but they don't look at it the same way with email.

2.9.2 Develop the Right Contact Strategy

By knowing which offers and incentives to offer to which customers and

when, banks will not annoy customers with unwanted marketing offers, building

customer loyalty along the way. Such goals can be at least as important as realizing

cross-selling opportunities.

2.9.3 Providing Online ‘Chatting’

An alternative to telephone support, online chatting is providing a service

via emails or any other form of immediate response. This service also offers some

of the immediacy of the phone but primarily allows customers to remain online.

With online chatting, service agents can usually handle between one and three

customer inquiries at once. Given that the average call lasts about four minutes, a

customer-service representative can handle 10 to 12 customers per hour using

"chat", compared with six to eight per hour over the telephone. One of chat's

important advantages is that it keeps customers in an online store environment

where they remain exposed to merchandise and promotions.

2.9.4 Reduce costs by Improving Website Design and Self-Service

Email, telephone support, and chat all involve considerable staffing costs.

But to reduce these expenses a site should anticipate customer needs. Sites that are

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difficult to navigate and do not provide needed information chase away some

customers and force those who stay to resort to more expensive channels to satisfy

their service needs.

2.9.5 Analyses the Project's Scope

Before recommending or embracing CRM, bank executives must analyze

the business issues, the customer relationship model and the exact nature of

customer interactions and see how they tie together. Banks should not embrace top-

line growth as an objective until they can understand precisely how CRM

technology will provide those new revenues.

2.9.6 Limitations

Many CRM implementations are severely limited because they fail to

provide a complete and meaningful view of the customer. CRM is primarily a

business program, and it requires a genuine partnership between various

departments to ensure that both business and technology issues are managed

effectively. Furthermore, CRM not only takes existing business processes and

makes them more efficient, but it also requires these processes to be modified. For a

CRM implementation to be successful, decision makers within the bank need to

make sure that all the stakeholders understand and support the required process

changes.

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2.9.7 Treating Accounts as Customer

Traditionally banks have closely associated customers with accounts, to the

point of calling the account the customer and vice versa. Customers will tend to feel

alienated when they are treated like a number instead of a person. A conventional

account structure usually contains very little information about customers and their

needs, or their relationship with competitors or other divisions within the bank. The

banks in the forefront have excellent reasons to adopt comprehensive CRM

strategies to cultivate a lifetime customer relationship. As banks move from

transaction-centric to a relationship-centric business approach, effective leveraging

of customer relationship becomes all the more critical.

Today, customers are expecting even more individual attention,

responsiveness and product customization, yet are unwilling to pay a premium for

these services. They are willing, however, to build a long-term relationship with

banks that offers differentiated and more personalized services. This is where

electronic banking can offer a competitive advantage. Successful CRM

implementation in electronic banking needs to integrate data from all customer

touch points, employee feedback and even shareholders' perceptions. If used

effectively and in an innovative way, this approach will enable banks to develop a

strategy to deliver to the customer the most appropriate products and services.6


6 www.crmguru.com

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2.10 PROFILES OF SELECTED PUBLIC AND PRIVATE SECTOR BANKS

In this Section, the profile of selected public and private sector banks in

Madurai District are discussed.

2.10.1 State Bank of India

The origin of the SBI goes back to the first decade of the nineteenth century

with the establishment of the Bank of Calcutta in Calcutta on 2nd June 1806. Three

years later the bank received its charter and was re-designed as the Bank of Bengal.

It was the first joint-stock bank of British India sponsored by the Government of

Bengal. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July

1843) followed the Bank of Bengal. These three banks remained at the apex of

modern banking in India till their amalgamation as the Imperial Bank of India on 27

January 1921. Primarily an Anglo-Indian creations, the three presidency banks

came into existence either as a result of the compulsions of imperial finance or by

the felt needs of local European commerce and were not imposed from outside in an

arbitrary manner to modernize India’s economy. Their evolution was, however,

shaped by ideas gained from similar developments in Europe and England and was

influenced by changes occurring in the structure of both the local trading

environment and those in the relations of the Indian economy to the economy of

Europe and the global economic framework.7


7 www.freejobalert.com

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2.10.2 Canara Bank

Canara Bank is a state-owned commercial bank with headquarters in

Bangalore. The Bank operates in four segments, namely treasury operations, retail

banking operations, wholesale banking operations and other banking operations.8

The Bank provides a range of products and services to the customers. Canara Bank

was incorporated on July 1, 1906 with the name Canara Hindu Permanent Fund Ltd.

In the year 1910, the name of the Bank was changed to Canara Bank Ltd. In July

19, 1969, the Bank was nationalized. In the year 1976, they inaugurated their

1000th branch. Their achievements are many over the years and are recorded as

under.

At present they have a network of 3257 branches, including four overseas

branches one each at London, Leicester, Hong Kong and Shanghai. As of March 31,

2011, the Bank had a network of 382 correspondent banks spread across 80

countries.9

2.10.3 Indian Bank

A premier bank owned by the Government of India, the Indian Bank was

incorporated in the year 1907 as Indian Bank Limited and commenced operations in


8 The subsidiaries of the Bank include Canbank Financial Services Ltd, Canbank Venture
Capital Fund Ltd, Canbank Factors Ltd, Canara Robecco Asset Management Company Ltd,
Canbank Computer Services Ltd, Canara Bank Securities Ltd and Canara HSBC Oriental Bank
of Commerce Life Insurance Company Ltd.
9 www.indiainfoline.com

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 15th August of the year 1907 and cooperated with the Swadeshi movement. Indian

Bank has many deposit schemes tailored to suit the needs of its customers, both

individuals and organizations. It provides Credit/Advances/Loan Schemes

specifically designed for its customers. Also it offers various novel services to

customers, both individuals and organizations. The network of the bank comprises

100 per cent business computerization, 168 centers throughout the country covered

under 'Anywhere Banking', Core Banking Solution (CBS) in 1557 branches and 66

extension counters, 618 connected Automated Teller Machines (ATM) in 225

cities/towns and also 24 x 7 Service through 32,000 ATMs under shared network.10

2.10.4 ICICI bank

` ICICI Bank Ltd is a major banking and financial services organization in

India. The Bank is the second largest bank in India and the largest private sector

bank in India by market capitalization. They are a publicly held banking company

engaged in providing a wide range of banking and financial services including

commercial banking and treasury operations. The Bank and their subsidiaries offer

a wide range of banking and financial services including commercial banking, retail

banking, project and corporate finance, working capital finance, insurance, venture

capital and private equity, investment banking, broking and treasury products and

services. They offer through a variety of delivery channels and through their

specialized subsidiaries in the areas of investment banking, life and non-life

insurance, venture capital and asset management. Including these, their branch


10 www.indiainfoline.com

96
network increased from 1,707 branches at March 31, 2010 to 2,529 branches at

March 31, 2011. They also increased their ATM network from 5,219 ATMs at

March 31, 2010 to 6,055 ATMs at March 31, 2011.11

2.10.5 Karur Vysya Bank

Karur Vysya Bank is a privately held Indian bank, headquartered in Karur in

Tamil Nadu. The company operates in four business segments: treasury operations,

corporate/ wholesale banking operations, retail banking operations and other

banking operations. The company's investments are categorized into three

categories, held to maturity, held for trading and available for sale. Karur Vysya

Bank was incorporated on June 22, 1916. As of December 31, 2010, the Bank had

set up 360 branches, 437 ATMs, 7 satellite offices, 13 service centers and 24

administrative offices. They have implemented core banking solutions across all its

branches. The Bank has set up a Disaster Recovery Site (DRS) at Cyber Pearl, Hi-

Tech City, and Hyderabad. The Bank is ensuring less than 30 minutes old data

backup of the Primary Data Centre Databases at this DRS using a Disaster

Recovery Automation Solution.12

2.10.6 Tamilnad Mercantile Bank Limited (TMB)

Tamilnad Mercantile Bank Limited is a bank headquartered in Tuticorin in

Tamil Nadu, India. TMB was founded in 1921 as the Nadar Bank, but changed its

name to Tamilnad Mercantile Bank in November 1962 to widen its appeal beyond


11 www.indiainfoline.com
12 www.indiainfoline.com

97
the Nadar community. For the financial year 2011-2012, the bank reported a net

profit of 4,845.3 million. The bank currently has 379 full fledged branches

throughout India, nine regional offices and eleven extension counters, two mobile

banking branches, six central processing centers, three currency chests and 700

Automated Teller Machines(ATM). TMB has plans to open branches in Colombo,

Singapore and Malaysia to serve the Tamil community living in those countries.

The bank has been growing strongly throughout South India, making inroads into

new markets and opening up new branches. TMB was also set to go for an Initial

public offering in 2013. The growth model of the bank is said to be the most unique

of its kind in the country and is always depicted as the Bank of America of India.

The Bank on September, 2013 won the ASSOCHAM’s Best Private Sector Bank

2013 award.13

2.11 PERFORMANCE OF SELECTED PUBLIC AND PRIVATE SECTOR

BANKS

In this Section, the working performance of selected public and private sector

banks in Madurai district as regards branches, deposits, advances- target and

achievements and credit deposit ratios are discussed. For the purpose of analysis the

time series data from 2004-2005 to 2013 – 2014 are taken into account from the

various issues of annual reports of the selected banks.


13 www.tmb.in

98
2.11.1 Number of Branches of Selected Public and Private Sector Banks (2004-

2005 to 2013-2014) in Madurai District

Branch expansion is an index of bank progress. The main purpose of both

public and private sector banks in the study area can be well served only by rapid

expansion of branches within the area of its jurisdiction. The growth of branch

expansion as measured by the increase in number of branches is reported in table

2.1.

TABLE 2.1
Number of Branches of Selected Public and Private Sector
(Rs. in Crores)

State
Karur Tamil Nadu
Canara bank Indian
Year ICICI Vysya Mercantile
bank of Bank
Bank Bank
India
2004 – 05 28 31 22 9 5 8
2005 – 06 28 31 22 9 5 8
2006 – 07 28 31 22 5 5 8
2007 – 08 29 31 22 18 5 8
2008 – 09 29 36 20 17 6 8
2009 – 10 31 41 22 17 6 8
2010 – 11 32 43 24 17 7 8
2011 – 12 34 44 29 17 8 9
2012 – 13 35 45 26 17 11 11
2013 – 14 37 52 32 17 13 13
Source: Lead Bank Report, Annual Credit Plan, 2004-05 to 2013-14.

99
 It is observed from the above table that the branches of selected public sector

banks in Madurai district in the year 2004-2005, the number of branches Canara

bank was 28 and it remained constant till 2006-2007. In the year 2007-2008, it had

increased to 29 and it remained constant till 2008-2009. Further it had increased

from 31 in the year 2009-2011 to 37 in the year 2013-2014. In the case of State

Bank of India, the number of branches was 31 in the year 2004-2005 and it

remained constant till 2007-2008. Further it had increased from 36 in the year 2008-

2009 to 52 in the year 2013-2014. In the case of Indian Bank, the number of

branches was fluctuating. It was 22 in the year 2004-2005 and it remained constant

till 2007-2008. In the year 2013-2014 there were 52 bank branches.

Further the table reveals that the branches of selected private sector banks in

Madurai district. In the year 2004-2005, the number of branches in ICICI bank was

nine and it remained constant till 2005-2006. In the year 2006-2007, it had

decreased to five. . Suddenly in the year 2007-2008 it had increased to 18. But in

the following years it came down to 17 and it remained constant till the year 2013-

2014. In case of Karur Vyshya Bank, the number of branches was five and it

remained constant till 2007-2008. But it had increased to 13 in the year 2013-2014.

The above table also reveals that the number of branches in Tamilnad Mercantile

Bank was eight in the year 2004-2005 and it remained constant till 2010-2011.

Later it had increased to 13 in the year 2013-2014.

100
 It is concluded that the public sector bank branches showed a good

development in Madurai District. In the case of private sector bank branches, it is

seen slow improvement because of poor customer relationship in banking sector.

Hence, the private sector banks have to improve the good customer relationship

management so as to attract the potential customers and retain the existing

customers in a better way.

2.11.2 Analysis of Deposits

The higher the deposits of the banks, the higher the productivity as they have

a higher financial self-support which is a paramount factor. The growth of deposits

of the selected public sector banks during the period from 2004-2005 to 2013-2014

is presented in table 2.2.

2.11.2.1 Deposit components of selected public sector banks in Madurai

District.

Table 2.2 presents the growth of deposits of selected public sector banks

during the year 2004-05 to 2013-14.

101
 TABLE 2.2
Deposits in Selected Public Sector Banks (2004 – 05 to 2013 - 14)

(Rs. in crores)

Year Canara Bank State Bank of India Indian Bank

2004 – 05 463.32 710.25 349.13

2005 – 06 484.26 499.38 393.15

2006 -07 549.60 968.21 465.38

2007 – 08 700.69 1061.55 548.84

2008 - 09 842.17 1438.73 733.54

2009 – 10 968.45 1868.43 944.54

2010 – 11 1023.89 2121.84 1029.46

2011 – 12 1161.35 2551.51 1157.61

2012 – 13 1244.71 2877.08 1349.85

2013 - 14 1531.49 3091.00 1245.84

Mean 896.90 1718.80 821.80

SD 355.074 923.90 372.21

CV (%) 39. 59 53.75 45.29

Source: Lead Bank Report, Annual Credit Plan, 2004-05 to 2013-14.

It could be seen from the above table 2.2 that the amount of deposits

mobilized by Canara bank had increased from Rs. 463.3218 crores to Rs.

1,531.4900 crores during the study period, recording more than a threefold increase.

Hence there was a steady growth in the deposits. It shows the reputation enjoyed by

the bank among the public. The mean value of the deposits was Rs. 896.90 crores.

102
The value of standard deviation was Rs. 355.074 crores. The co-efficient of

variation of the deposit worked out to 39.59 per cent.

Further the table reveals that the amount of deposits invested in the State

Bank of India had increased from Rs. 710.2537 crores to Rs. 3,091.0000 crores

during the study period, registering more than a fourfold increase. Hence there was

a steady increase in deposit mobilization by the banks. It proved that the bank had

attracted the public in a better way. The mean value of the deposits was Rs.

1,718.80 crores. The value of standard deviation was Rs. 923.903 crores. The co-

efficient of variation of the deposits worked out to 53.75 per cent.

The deposits of Indian bank had increased from Rs.349.1317 crores to Rs.

1,349.8507 crores from 2004-2005 to 2012-2013. In the year 2013-2014, it had

declined to Rs. 1,245.8400 crores due to non up gradation of technological services

by the bank. The mean value of the deposits was Rs. 821.80 crores. The value of

standard deviation was Rs. 372.219 crores. The co-efficient of variation of the

deposit worked out to 45.29 per cent.

It is concluded from the above table, that the State Bank of India had

garnered the highest deposits from the public viz., Rs. 3,091.0000 crores in the year

2013-2014 followed by Canara bank registering Rs. 1,531.4900 crores and Indian

bank recorded Rs. 1,245.8400 crores as deposits.

The compound growth rates of the deposits held by the selected public sector

banks are shown below vide Table 2.3.

103
 TABLE 2.3
Trend and Growth of Deposits in Selected Public sector Banks

Significan
Measures Linear R2 F CGR %
t

Canara Bank 115.691 0.973 289.116 0.000 14.5

State Bank of India 300.630 0.971 263.786 0.000 21.9

Indian Bank 120.533 0.961 198.350 0.000 17.6

Source: Computed From the Primary Data (Significant at 5 per cent level)

The growth rates of the deposits mobilized by the Canara bank, State bank of

India and Indian bank were analyzed and the results are given vide table 2.3 . The

R2 value of all the banks was more than 0.3 and ‘F’ value statistic was significant at

five per cent level. Therefore the growth values of the deposits were found

statistically significant. The compound growth rate for the Canara bank was 14.5

per cent, 21.9 per cent for the State bank of India and 17.6 per cent for the Indian

bank.

2.11.2.2 Deposits of Selected Private Sector Banks

The deposits accrual of private sector banks are presented vide Table 2.4

104
 TABLE 2.4
Deposits in Selected Private Sector Banks
(Rs. in Crores)

Tamilnad Mercantile
Year ICICI Karur Vysya Bank
bank

2004 – 05 331.50 75.22 265.22

2005 – 06 406.46 76.25 296.08

2006 – 07 329.12 76.25 343.76

2007 – 08 374.82 76.25 342.80

2008 – 09 436.49 143.25 594.64

2009 – 10 411.32 206.05 594.64

2010 – 11 419.92 249.89 707.18

2011 – 12 508.77 316.88 830.93

2012 – 13 543.24 398.93 928.66

2013 – 14 602.62 480.13 1036.87

Mean 436.40 209.80 594.20

SD 89.71 148.42 278.88

CV (%) 20.55 70.74 46.93

Source: Lead Bank Report, Annual Credit Plan, 2004-05 to 2013-14.

Table 2.4 indicates that the amount of deposits mobilized by ICICI bank had

increased from Rs. 331.50 crores to Rs. 602.62 crores during the study period.

There was a fluctuation in the deposits. It showed that the low rates of interest for

deposits provided by the ICICI might have been the reason for the low deposit

accrual. The mean value of the deposits was Rs. 436.40 crores. The value of

105
standard deviation was Rs. 89.71 crores. The co-efficient of variation of the deposit

worked out to 20.55 per cent.

The table also shows that the amount of deposits invested in Karur Vysya

bank had increased from Rs. 75.2252 crores to Rs. 480.1300 crores during the study

period, registering more than a six fold increase. There was a gradual increase in

deposit mobilization by the bank. It showed that the bank attracted the public in a

better way. The mean value of the deposits was Rs. 209.80 crores. The value of

standard deviation was Rs. 148.424 crores. The co-efficient of variation of the

deposits worked out to 70.74 per cent.

The table inferred that the deposits of Tamilnad Mercantile Bank had

increased from Rs. 265.23 crores to Rs. 1,036.87 crores during the study period. In

the year 2007-2008, there was a fluctuation in the deposits. It indicated that there

was a threefold increase in the deposits during the period. The mean value of the

deposits was Rs. 594.20 crores. The value of standard deviation was Rs. 278.879

crores. The co-efficient of variation of the deposit worked out to 46.93 per cent.

It is concluded from the above table, that Tamilnad Mercantile bank had

accorded the highest deposits from the public viz., Rs. 1,036.87 crores in the year

2013-2014 followed by ICICI bank registering Rs. 602.62 crores and Karur Vysya

Bank recording Rs 480.13 crores.

The compound growth rates of the deposits held by the selected private

sector banks are shown below vide Table 2.5

106
 TABLE 2.5
Trend and Growth of Deposits in Selected Private Sector Banks

CGR
Measures Linear R2 F Significant
%

ICICI 26.715 0.813 34.758 0.000 6.2

Karur Vysya Bank 46.642 0.905 76.425 0.000 27

Tamilnad Mercantile Bank 90.339 0.962 202.040 0.000 17.7

Source: Computed From the Primary Data (Significant at 5 per cent level)

The growth rates of the deposits mobilized by the ICICI bank, Karur Vysya

Bank and Tamilnad Mercantile Bank were analyzed and the results are given vide

Table 2.5. The R2 value of all the banks was more than 0.3 and ‘F’ value statistic

was significant at five per cent level. Therefore the growth values of the deposits

were statistically significant. The compound growth rate of ICICI bank was 6.2 per

cent, 27 per cent in Karur Vysya Bank and 17.7 per cent for the Tamilnad

Mercantile Bank.

2.11.3 Analysis of Advances

The success of these banks should be judged as much by their efforts at

extending and expanding the area of credit as by the conventional yardstick of

profitability. Therefore the advances issued by the banks to the public are analyzed

in this section.

107
2.11.3.1 Advances of Selected Public Sector Banks
The advances made by the selected public sector banks are presented in

Table 2.6.

TABLE 2.6
Advances of Selected Public Sector Banks
(Rs. in crores)

Year Canara Bank State Bank of India Indian Bank

2004 – 05 336.70 659.36 116.97

2005 – 06 373.64 310.32 154.12

2006 – 07 493.75 1227.53 199.40

2007 – 08 588.16 1278.69 334.00

2008 – 09 714.43 2007.13 462.13

2009 – 10 766.74 2331.61 605.73

2010 – 11 923.11 2377.04 617.82

2011 – 12 1072.46 2703.56 792.82

2012 – 13 1200.10 2951.28 1032.55

2013 – 14 1715.64 3655.00 1175.25

Mean 818.50 1950.20 549.10

SD 425.26 1061.28 367.06

CV ( %) 51.96 54.42 66.85

Source: Lead Bank Report, Annual Credit Plan, 2004-05 to 2013-14.

It is evident from Table 2.6 that there was an increase in the advances of

Canara bank from Rs. 336.71 to 1,715.64 during the study period. The mean value

108
of the advances was Rs. 818.50 crores. The value of standard deviation was Rs.

425.27 crores. The co-efficient of variation of the advances worked out to 51.96 per

cent.

In case of State bank of India, there was an increase in the advances from Rs.

659.37 to Rs. 3,655.00 during the study period except in the year 2005-2006. There

was a fluctuation in the year 2005-2006. The mean value of the advances was Rs.

1,950.20 crores. The value of standard deviation was Rs. 1,061.28 crores. The co-

efficient of variation of the advances was 54.42 per cent.

The advances in Indian Bank had increased from Rs. 116.98 crores to Rs.

1,175.25 crores during the study period. The mean value of advances was Rs.

549.10 crores. The value of standard deviation was Rs. 367.06 crores. The co-

efficient of variation was worked out to 66.85 per cent.

It is concluded that all the selected public sector banks showed an increase in

issuing advances. This is because of the government policy which encouraged the

issue of extending credit in a liberal manner to the public.

The compound growth rates of the advances issued by the selected public

sector banks are shown below vide Table 2.7.

109
 TABLE 2.7
Trend and growth of Advances in Selected Public Sector Banks

Measures Linear R2 F Significant CGR %

Canara Bank 134.188 0.913 83.615 0.000 18.6

State Bank of India 342.121 0.953 160.779 0.001 25.2

Indian Bank 119.036 0.964 214.375 0.000 29.9

Source: Computed From the Primary Data (Significant at 5 per cent level)

Table 2.7 shows the compound growth rate and the growth of advances in

the selected public sector banks. It is seen from the table that the R2 value was more

than 0.3. So it was considered that the model was fit to analyze the advances

position of selected public sector banks . The level of significance was less than

0.05 in all cases and so the growth values of advances of the above banks were

statistically significant. The compound growth rate was 18.6 per cent, for the

Canara Bank, 25.2 per cent for the State Bank and 29.9 per cent for the Indian bank.

2.11.3.2 Advances of Selected Private Sector Banks

The following table shows the advances made by the selected private sector

banks in Madurai district.

110
 TABLE 2.8
Advances Made by Selected Private Sector Banks
(Rs. in crores)

Tamilnad
Year ICICI Karur Vysya Bank
Mercantile Bank
2004 – 05 67.41 36.35 159.98
2005 – 06 318.95 37.28 182.07
2006 – 07 448.97 37.28 201.64
2007 – 08 583.27 37.28 203.71
2008 – 09 665.42 72.01 320.70
2009 – 10 409.20 81.28 320.70
2010 – 11 306.34 126.68 372.87
2011 – 12 538.94 238.39 525.44
2012 – 13 583.08 432.73 699.31
2013 – 14 519.06 612.56 831.65
Mean 443.90 171.10 381.90
SD 76.44 200.12 231.98
CV (%) 17.22 116.96 60.74
Source: Lead Bank Report, Annual Credit Plan, 2004-05 to 2013-14.

It is seen from the table 2.8 that there was an increase in the advances of

ICICI bank from Rs. 67.41 crores to Rs. 519.06 crores during the study period from

2004-2005 to 2013-2014 except in the years 2009, 2010 and 2013. The mean value

of the advances was Rs. 443.90 crores. The value of standard deviation was Rs.

76.44 crores. The co-efficient of variation of the advances worked out to 17.22 per

cent.

111
 In case of Karur Vysya Bank, there was an increase in the advances from Rs.

36.35 crores to Rs. 612.56 crores during the study period. In the year 2005 – 2006

the advances were Rs. 37.28 crores and it remained constant till 2007-2008 and it

had increased from Rs. 72.02 crores in the year 2008 – 2009 to Rs. 612.56 crores in

the year 2013 – 2014. The mean value of the advances was Rs. 171.10 crores. The

value of standard deviation was Rs. 200.12 crores. The co-efficient of variation of

the advances worked out to 116.96 per cent.

The advances in Tamilnad Mercantile Bank had increased from Rs. 159.98

crores to Rs. 831.65 crores during the study period. The mean value of advances

was Rs. 381.90 crores. The value of standard deviation was Rs. 231.98 crores. The

co-efficient of variation worked out to 60.74 per cent. It is concluded that all the

selected private sector banks had increased their issual of advances

The compounded growth rate of the deposits held by the selected public

sector banks is shown below wide Table 2.9.

TABLE 2.9
Trend and Growth of Advances in Selected Private Sector Banks

Measures Linear R2 F Significant CGR %

ICICI Bank 31.994 0.301 3.452 0.100 13.7

Karur Vysya Bank 56.055 0.719 20.491 0.002 40.3

Indian Bank 71.448 0.870 53.331 0.000 20.6

Source: Computed From the Primary Data (Significant at 5 per cent level)

112
 Table 2.9 shows the compound growth rate of advances by the selected
private sector banks. It is seen from the table that the R2 value was more than 0.3.
So it was considered that the model was fit for the analysis of advances of selected
private sector banks. The level of significance was less than 0.05 in all cases and so
the growth values of advances of the above banks were statistically significant. The
compound growth rate for ICICI bank was 13.7 per cent, for the Karur Vysya Bank
was 40.3 per cent and for the Tamilnad Mercantile Bank it was 20.6 per cent.

2.11.4 Analysis of Credit – Deposit Ratio

The credit – deposit ratio is an important parameter to assess the
functioning and performance of a bank. The computed credit-deposit ratios of
Canara bank, State Bank of India, Indian bank, ICICI bank, Karur Vysya Bank and
Tamilnad Mercantile Bank are given in Table 2.10.

TABLE 2.10
Credit Deposit Ratios of both the Public and Private Sector Banks

State Karur Tamil Nadu

Canara Indian
Year Bank of ICICI Vysya Mercantile
bank Bank
India Bank Bank
2004 – 05 72 84 31 16 48 58
2005 – 06 77 62 40 78 48 62
2006 -07 89 116 43 136 48 59
2007 – 08 94 120 61 156 49 59
2008 - 09 85 140 63 152 50 54
2009 – 10 79 125 64 99 39 54
2010 – 11 90 112 60 73 51 53
2011 – 12 92 106 68 106 75 63
2012 – 13 96 103 76 107 108 75
2013 - 14 112 118 100 86 128 80
Source: Lead Bank Report, Annual Credit Plan, 2004-05 to 2013-14.

113
 It is seen from Table 2.10 that credit deposit ratio of Canara bank had

fluctuated during the year 2008-2009 and 2009-2010. In SBI, it had fluctuated

during the study period. In the case of Indian Bank, it had a steady increase except

in the year 2010-2011.

In ICICI bank, it showed a fluctuating ratio during the study period. In the

case of Karur Vysya Bank, credit deposit ratio had declined from 48 per cent in

2004-2005 to 39 per cent in 2009-2010. In the case of Tamil Nadu Mercantile Bank,

credit deposit ratio had declined from 58 per cent in 2004-2005 to 53 per cent in

2010-2011.

The gradual lowering of credit-deposit ratio should be viewed as a slight

improvement in the banking habit of the borrower and not entirely as a matter of

change in the policy alone.

2.12 CONCLUSION

Significance of Customer relationship management, CRM in banking sector

and their benefits to their customers, principles of CRM, challenges for

implementation, profile of sample banks and their working performance were

discussed in this chapter. The major theme of the thesis, viz., perception of service

quality of public and private sector banks and their expectations in this regard are

discussed in forthcoming chapters. In the next chapter the socio economic profile of

the respondents is discussed.

114