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A Dissertation submitted in partial requirements for the

award of MBA Degree of Bangalore University
Ms Darshana Patel
(Reg no: 04XQCM6021)

Under the guidance of

Dr. K V Prabhakar
Senior Professor, MPBIM, Bangalore

M.P. Birla Institute of Management,

Associate Bharatiya Vidya Bhavan,
No 53, Race Course Road,

The most important objective of this study is to reduce the

turnaround time taken for a simple account opening. The tools used
to determine the main reasons for such delays are identified in the
Pareto Charts, Service Switching Diagram and surveys through
The major findings of this research highlight customer
expectation from the banks services, actual and expected turnaround
time for account opening and how they rate their bank in terms of
service provided. It was however found that change in RBI guidelines
was the main cause of such delays with other minor causes.
To eliminate the reasons for delays, separate instruction forms
are recommended titled “Help us to serve You better” that brings
about clarity while filling a form. Also the application forms can be
simplified to make it easy for a lay man to fill in.
The following pages give a detailed study on “Account
Opening Delays” or AOD with suitable recommendations.

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I hereby declare that this dissertation entitled, “TOTAL QUALITY
MANAGEMENT at HDFC Bank” is a bonafide study, completed
under the guidance and supervision of Dr. K V Prabhakar, Senior
Professor, M.P.Birla Institute of Management, Bangalore, (Internal
Guide) and Mr. Baban Balan, HDFC Bank, Bangalore (External
I further declare that this dissertation is the result of my own efforts
and that it has not been submitted to any other University or Institute
for the award of a degree or diploma or any degree or other similar
title of recognition.

Place: Bangalore (Ms.Darshana.Patel)


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I hereby certify that this dissertation entitled “TOTAL QUALITY
MANAGEMENT at HDFC Bank” has been prepared by
Ms.Darshana.Patel under the guidance and supervision of Dr. K V
Prabhakar, Senior Professor, M.P.Birla Institute of Management,
Bangalore. (Internal Guide) and Mr. Baban Balan, HDFC Bank,
Bangalore (External Guide)

Place: Bangalore
(Dr.Nagesh S Malavalli)


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I hereby certify that this dissertation entitled “TOTAL QUALITY

MANAGEMENT at HDFC Bank” is the result of research work
carried out by Ms.Darshana.Patel under my guidance and supervision.

Place: Bangalore
Date: (Dr. K V Prabhakar)
Internal Guide

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External Guides Certificate

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It is said “A teacher affects eternity; he can never tell, where his
influence stops.”

I would like to take this opportunity to thank my project guide,

Dr.K.V.Prabhakar, for highlighting certain aspects that I needed to
cover and also in framing the final report. I would also like to thank
Prof. Shanmugam for his guidance in the area of Quality

I am also grateful to Mr. Baban Balan, Manager, Quality

Initiatives Group, HDFC Bank, for his guidance and support. Credit
also goes to my parents, without whose moral support and inspiration,
this report would have been incomplete.

My sincere gratitude to Ms. Mona Mitter, Personal

Banker, Kasturba Road branch,HDFC for helping me to choose this
organisation for a detailed study.


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Particulars Page Number

Introduction 10

Industry Profile 13

Company Profile 17
HDFC and Competitors 21

Area of study 24
Problem Statement 29

Research Objective 32

Research Methodology 34
Research Gap 38

Analysis and Data Interpretation 40

Recommendations 60

Annexure 66

Glossary 71
Bibliography 73

Directions for further research 76

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List of tables and charts

Particulars Page Number

Indian Banking Structure 15

Account Opening Procedure 27

Pareto Chart 41-46

Root Cause Diagram 47

Service Switching Behaviour 49

Table 1 52

Chart 1 52

Graph 1 53

Table 2 54

Graph 2 54

Table 3 55

Graph 3 56

Quality Function Deployment 58

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Banking sector faces lot of challenges. It varies from
improving profitability, reinforcing technology, risk
management, customer orientation to meeting international
standards. Each challenge faces a set of steps and procedures.
Lot of care needs to be taken while monitoring them. However,
if at the initial steps, the performance deviates from the
expected standard, the entire process can go haywire.

HDFC wants to implement the concept the Total Quality

Management (TQM) in the process of account openings. A
process is defines as a systematic series of actions directed to
the achievement of a goal. The process therefore has to be:
 Goal oriented
 Systematic
 Capable
 Legitimate

TQM also involves Services Process Design and is different

from manufacturing process design. They are-
 Output of service processes are not well defined as
manufactured products.
 Most service processes involve greater interaction with
 Customers cannot define their needs for services until
after they have some reference or comparison.
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In the following pages, we will see how a primary
function of the bank like account opening, even though
perceived simple, undergoes certain procedures. If this
procedure is not carried out effectively initially, it results in
accumulation of delays and brings down the efficiency of the
bank and finally fails to meet the customer's expectation.
In the pages to come, Customer Relationship
Management is leveraged to Account Opening Delays at
HDFC Bank to gain an insight into the banks problem. This
detailed report relates the issue of account opening delays to
the customer’s perception of the bank.

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The Indian Banking Industry, which is governed by the
Banking Regulation Act of India, 1949 can be broadly
classified into two major categories, non-scheduled banks and
scheduled banks. Scheduled banks comprise commercial banks
and the co-operative banks. In terms of ownership, commercial
banks can be further grouped into nationalized banks, the State
Bank of India and its group banks, regional rural banks and
private sector banks (the old/ new domestic and foreign).
These banks have over 67,000 branches spread across the

The first phase of financial reforms resulted in the

nationalization of 14 major banks in 1969 and resulted in a
shift from Class banking to Mass banking. This in turn resulted
in a significant growth in the geographical coverage of banks.
Every bank had to earmark a minimum percentage of their loan
portfolio to sectors identified as “priority sectors”.

Commercial banks are the oldest and fastest growing

intermediaries in India. They are also the most important
depositories of public savings and most important disbursers of
finance. For a financial system to mobilize and allocate savings
of the country successfully and positively and productively
there must be a class of financial institutions. The structure and

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working of the banking system are integral to a country’s
financial stability and economic growth.

The following chart gives the structure of the Indian Banking

Indian Banking System

Reserve Bank of India

Scheduled Banks Non-scheduled Banks

State Coop. Commercial Central Coop. Banks Commercial

Banks Bank & Primary Credit Bank

Indian Foreign

Public Sector Private Sector Banks

Banks (Old & New)

State Bank of India Other Nationalised Banks Regional Rural Banks

& its subsidiaries

The factors that influence the growth of banks are the following-
1. Increase in national income.
2. Increase in banking habit.
3. Expansion in banking facilities.
4. Inflows of deposits from Non Resident Indians.

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Even though Public Sector Banking accounts for 78% of
total banking industry, use traditional ways of banking, Private
sector banks have pioneered internet banking , phone banking,
ATM’s and so on..

The banking industry is currently dominated by the following five

top players-

1. HDFC Bank – headed by Aditya Puri

2. ICICI Bank – headed by K.V.Kamath (MD & CEO)
3. State Bank of India – headed by A.K.Purwar (Chairman)
4. Citibank- headed by Walter Wriston (CEO)
5. Canara Bank- headed by Mr. M B N Rao (CMD)

The following pages will give a detailed insight in to

HDFC Bank, its main competitors and what problems the bank
is facing with respect to account opening delays.

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The Housing Development Finance Corporation Limited
(HDFC) was amongst the first to receive an 'in principle'
approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of the RBI's liberalisation of
the Indian Banking Industry in 1994. The bank was
incorporated in August 1994 in the name of 'HDFC Bank
Limited', with its registered office in Mumbai, India. HDFC
Bank commenced operations as a Scheduled Commercial Bank
in January 1995. HDFC Bank began operations in 1995 with a
simple mission: to be a "World-class Indian Bank".
Its awards and accolades for the year 2005 include the

Asiamoney Awards Best Domestic Commercial Bank

Asiamoney Awards Best Cash Management Bank -

India .
Hong Kong-based Finance Asia "Best Bank in India"
Economic Times Awards "Company of the Year" Award
for Corporate Excellence 2004-05.

The Business Today-KPMG Survey published in the leading Indian

business magazine Business Today has named HDFC Bank "Best
Bank in India" for the third consecutive year in 2005.
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The Asset magazine named HDFC Bank "Best Cash Management
Bank" and "Best Trade Finance Bank" in India, in 2006.

HDFC Bank named the "Most Customer Responsive Company -

Banking and Financial Services in The Economic Times - Avaya
Global Connect Customer Responsiveness Awards 2005"

HDFC Bank has been named Best Domestic Bank in India in The
Asset Triple A Country Awards 2005.

It has also received a CII-EXIM Bank Commendation Cert. for

commitment to TQM- 2000.

Currently they have a net profit for the year quarter ended 31st March
2006 of Rs.870.8 Cr.


HDFC was incorporated in 1977 with the primary objective of

meeting a social need – that of promoting home ownership by
providing long-term finance to households for their housing needs.
HDFC was promoted with an initial share capital of Rs. 100 million.

Business Objectives

The primary objective of HDFC is to enhance residential housing

stock in the country through the provision of housing finance in a
systematic and professional manner, and to promote home ownership.
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Another objective is to increase the flow of resources to the housing
sector by integrating the housing finance sector with the overall
domestic financial markets..

Organisational Goals

HDFC’s main goals are to a) develop close relationships with

individual households, b) maintain its position as the premier housing
finance institution in the country, c) maintain its position as the
premier housing finance institution in the country d) provide
consistently high returns to shareholders, and e) to grow through
diversification by leveraging off the existing client base.

To build a world class Indian bank.

Use enabling technologies to provide value added products and
services to customers at value for money price.

 HDFC Bank
 HDFC Mutual Fund
 HDFC Standard Life Insurance Company
 HDFC Realty
 HDFC Chubb General Insurance Company Ltd.
 Credit Information Bureau (India) Limited
 Other Companies Co-Promoted by HDFC

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The immediate competitor of HDFC Bank is ICICI
Bank. ICICI Bank is India's second-largest bank with total
assets of about Rs.1,676.59 billion(US$ 38.5 billion) at March
31, 2005 and profit after tax of Rs. 20.05 billion(US$ 461
million) for the year ended March 31, 2005 (Rs. 16.37
billion(US$ 376 million) in fiscal 2004). ICICI Bank has a
network of about 573 branches and extension counters and
over 2,000 ATMs. ICICI Bank offers a wide range of banking
products and financial services to corporate and retail
customers through a variety of delivery channels and through
its specialised subsidiaries and affiliates in the areas of
investment banking, life and non-life insurance, venture capital
and asset management. ICICI Bank set up its international
banking group in fiscal 2002 to cater to the cross border needs
of clients and leverage on its domestic banking strengths to
offer products internationally. ICICI Bank currently has
subsidiaries in the United Kingdom, Canada and Russia,
branches in Singapore and Bahrain and representative offices
in the United States, China, United Arab Emirates, Bangladesh
and South Africa.

ICICI Bank's equity shares are listed in India on the Bombay Stock
Exchange and the National Stock Exchange of India Limited and its
American Depositary Receipts (ADRs) are listed on the New York Stock
Exchange (NYSE)

The next competitor bank is State Bank Of India or

SBI.SBI is the largest bank in India with deposits of Rs
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3,67,000 crore as on March 31, 2005. It dominates the Indian
banking sector with a market share of around 20% in terms of
total banking sector deposits. The increasing focus on
upgrading the technology back-bone of the bank will enable it
to leverage its reach better, improve service levels, provide
new delivery platforms, and improve operating efficiency to
counter the threat of competition effectively. Once the core
banking solution (CBS) is fully implemented, it will cover over
10,000 branches and ATMs of the State Bank group, and
emerge as the strongest technology enabled distribution
network in India.

The increasing integration of SBI with its associate

banks (associates) and subsidiaries will further strengthen its
dominant position in the banking sector and position it as the
country’s largest universal bank.

Both these banks apply TQM to the services they

provide. Also there are independent audits, such as Customer
Operations Performance Center (COPC) and the eServices
Capability Model (eSCM). External certifications have two
basic advantages. First, because they are objective evaluations
by credible, independent third parties that measure on specific
operational parameters, the certification process is quite
rigorous and adept at identifying problem areas. Second, they
establish credibility with clients, as the auditing bodies are
neutral and not connected with the vendor in any way.

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A/C Opening delays at various branches of the bank

(South region)

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One of the important functions of the Bank is to accept
deposits from the public for the purpose of lending. In fact,
depositors are the major stakeholders of the Banking System.
The depositors and their interests form the key area of the
regulatory framework for banking in India and this has been
enshrined in the Banking Regulation Act, 1949. The Reserve
Bank of India is empowered to issue directives / advices on
interest rates on deposits and other aspects regarding conduct
of deposit accounts from time to time. With liberalization in
the financial system and deregulation of interest rates, banks
are now free to formulate deposit products within the broad
guidelines issued by the RBI.

This policy document on deposits outlines the guiding

principles in respect of formulation of various deposit products
offered by the Bank and terms and conditions governing the
conduct of the account. The document recognises the rights of
depositors and aims at dissemination of information with
regard to various aspects of acceptance of deposits from the
members of the public, conduct and operations of various
deposits accounts, payment of interest on various deposit
accounts, closure of deposit accounts, method of disposal of
deposits of deceased depositors, etc., for the benefit of
customers. It is expected that this document will impart greater
transparency in dealing with the individual customers and
create awareness among customers of their rights. The ultimate
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objective is that the customer will get services they are
rightfully entitled to receive without demand.

While adopting this policy, the bank reiterates its

commitments to individual customers outlined in Bankers' Fair
Practice Code of Indian Banks' Association. This document is
a broad framework under which the rights of common
depositors are recognized. Detailed operational instructions on
various deposit schemes and related services will be issued
from time to time.

As we all know, the primary function of a bank is to

accept funds from public and henceforth, an account needs to
be created. An account opening for a customer is easy as it
involves just filling in a form and submitting it with proper id
proofs. However, for a bank the processing of the application
form involves a set of procedures with costs incurred at every
The RBI prescribes certain guidelines, which the bank
has to necessarily follow while opening an account.

The following flowchart gives the various procedures involved in

opening an account with the HDFC Bank.

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Customer No
Sales Pitch decides to
Start walks into
made open

form given to Yes A

Customer Insta Account Customer

Yes Yes Insta Account
requires A/c features consents
number explained to for Insta Kit Processed
immediately customer Acount

No No

Customer fills
in Account
Opening Form ID Proof Address proof Photograph

PB contacts
customer for
addnl docs
Yes Yes No
Existing Satisfac
Satisfactory Satisfactory
customer tory

Yes No No Yes
A able to Yes
Manager Yes Manager Yes addnl Docs
Excepti Excepti
on on
Valid customer
No No Customer
id provided
submits form
Addnl Doc
A Verified by PB
Ac not opened.
MC issued to
Funds parked cust for IP
in Dummy A/c Yes funds
No Satisfac
PB contacts Customer
Clear No No Send
customer to able to
Funds Form returned docs to Yes
clear clear
available to PB CPU
exception. exception


PB Auth
Courier Control
Application Approved
Sheet prepared Send
form for Yes
completeness forms to

Forms DVU Returns form to

Forms sent to
received at Identifies branch C
CPU exception

No Puts form No

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satisfactory for
Form BranchAssociate
seeks Bharatiya Vidya Bhavan
sent to exception
Imaging approval No Addnl Docs No
Dept B
Reqd Yes
At the presale stage, the customer has a choice of getting
an Insta Account for an immediate account number or can fill
in the form for a normal one.
Once the form is filled in by the customer, it is verified
by the PB (Personal Banker) and is sent to Chennai for
verification. The PB requires all documents relating to ID
proof, photographs and address proof. Once these are
satisfactory, the funds to open the account are deposited in a
Dummy account and the form is sent to Chennai for further
In the “Fulfill” step, DVU is Data Verification Unit that
is located in Chennai for south region (for north and west
being Mumbai). Here, it is seen if the application and
documents comply with the rules of the RBI and depending on
the outcome either the account is opened or the form is sent
bank to the branch (can even be put on hold) for additional
documents to be sent in.
The main branches wherein such issues reached an
alarming rate were the following-
 Sarjapur
 Jaynagar
 Indiranagar
 M G Road
The following pages will contain a detailed study on the branches and
solutions will be recommended.

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HDFC Bank has 379 branches and 900 ATMs in 183
cities. It has grown at a blistering pace since 1995, with its net
profit growing at an annualised average rate of 104 per cent. Its
retail loans have risen from Rs 845 crore in 2001 to Rs 7,325
crore in 2004. Its size is now comparable to some of the
smaller public sector banks which dominate India's landscape.

The bank opens, on an average atleast 25-30 accounts

per week for its customers compared to its competitors who
have an average of just 15-25 (for ICICI) and 10-12 (for SBI).
However, the recent changes in the RBI rules with respect to
account opening have reduced the efficiency of the bank
thereby causing delays.

Account opening involves various steps and hence

processing expenses and delays occur if the documents do not
suffice. The RBI does not specify the documents to be
obtained. For ensuring this, banks have followed know your
customer norms (KYC). It is for the individual banks to
determine list of acceptable documents. RBI has lately
mandated that certain information pertaining to the applicant
(individual/corporate) need to necessarily be captured at the
time of account opening. This is called the AML/KYC form
(AML-Anti Money Laundering i.e. source or destination of
money is not revealed to the bank).

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The list of documents acceptable is dependent on the
type of accounts being opened. The bank has a comprehensive
list of those documents which are acceptable for various
account types on the basis of type of entity, utility of accounts
and facilities provided. These recent changes brought in by the
RBI with respect to account opening have brought in a
problem of delay in account opening.

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The project is undertaken with the following objective-

i. Identifying the branches that are a victim to the

RBI’s new rules.
ii. Identifying the main reasons for the delays in
account opening.
iii. Application of various statistical models to
minimize the delays.
iv. Customer expectations about their bank through a
survey with the help of a questionnaire.

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The bank has divided the south region as S1 and S2 with
branches under it. Some of these branches have a really high
rate of delays in account opening.

The methodology used to conduct the research for the purpose

of this dissertation includes:
 Sample survey of bank customers to gauge an idea on
Customer Satisfaction
 Explore reasons for delays in account opening.
 Study the database of the bank to get an insight into the
working of the bank and its policies.

To make the above observations, the following tools of Total

Quality Management were used-

Pareto analysis- is a bar chart that illustrates the frequency

recurrence of a set of items. It is a technique based on Pareto
principle of “the vital few and trivial many”. It is also called
the 80-20 rule.

Root-Cause analysis- It is a diagram that gives the

relationship between quality characteristic and its factors. It is

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a pictorial representation and is also called Fish Bone Diagram
or Ishikawa diagram.

Quality Function Deployment- It refers to that concept that

integrates a firms TQM efforts by unifying the four functional
1. Marketing
2. Sales
3. Product design
4. Operations management

The main quality characteristic is chosen and the major

causes for the same are listed. Each cause is analysed
thoroughly to find the most influential cause resulting in poor
quality of service delivery. This will vary from place to place
and environment to environment.

Sample Survey- A questionnaire titled “SERVICE QUALITY




The questionnaire aims at getting a perception about the

services provided by the bank to the customers and leverage it
to the efficiency of in account opening. The respondents
included customers from HDFC, ICICI, SBI, Citibank, Canara

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bank. A sample questionnaire is enclosed at the end in
The Z test was used to find any significant differences
between the sample mean and a population mean. (The sample
size taken was 50.) It indicates how likely it is that a sample
with a certain mean and standard deviation came from the
population being studied—that it has a population mean.
Then, a Z test is applied to verify the hypothesis-
H0: There is no difference between sample values and the population
H1: There is a difference between sample values and the population
The confidence level taken in this study is 95% i.e. z is
greater than 1.96 or less than -1.96, and the difference is statistically
significant. That is, it is so unlikely that the sample came from this
population (5% chance or less) that we reject the null hypothesis and
say that the sample is different from the population.
All the data was fed into an excel sheet and necessary
calculations for Z were done. It included average, median, mode and
standard deviation. The in built statistical functions for a Z test was
used to determine the values and conclusions were drawn based on
the same.

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The research includes analyzing the process of account
opening. This procedure itself is divided into separate functions and
is distribute in two places (Bangalore and Chennai). Hence, the study
is focused mainly on problems at Bangalore and the problems faced
in Chennai remain undiscovered.
Also, the survey was used to gauge customers’
perceptions about their banks, the size of the sample is not very large
and hence any predictions made on the population, may at times be
However, despite the gaps, an effort has been made to
throw light on the process of account opening and the defects related
to it. This had been leveraged to the concept of Customer
Relationship Management.

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Pareto analysis
It was identified that certain branches in S1 and S2 were reaching a
high AOD Rate (Account Opening Delay). On a detailed study it was
found that the following branches in S1 and S2 were the main
branches with high AOD’s. The Pareto charts are given below related
to S1 and S2.

South 1

25 120.00
20 100.00

15 80.00 In numbers
10 40.00 Cumalative
5 20.00
0 0.00
Sanjeeva Reddy

Begumpet EC






RA Puram

Himayat Nagar

Chanda Nagar
Hitec City



Source-Field Investigation

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South 2

140 120.00
120 100.00
100 80.00
80 In numbers
60 60.00
40.00 Cumalative
20 20.00
0 0.00
ad d a ut d
EC ity oa gl ar
ro tto C R n P l ic
ri va SB ni
a t
on la S ro am or
dm al W ct
gha or ri p
B le r K A
i ch P
E ne

Source-Field Investigation

The study in depth is divided into 4 branches wherein

delays had reached an alarming rate compared to its

The branches visited were that of Sarjapur, M G Road,

Jaynagar and Indiranagar, from which relevant information had
to be extracted from their database. (The data is ranges from
4th February to 2nd May). Major reasons were identified and
tabulated to give the following Pareto charts for each branch-

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At Sarjapur Branch, HDFC Bank.

30 120.00

25 100.00

20 80.00
in numbers
15 60.00 cumalative
10 40.00

5 20.00

0 0.00

ed ed er s a/
c ed h d d d d d
l at elat h v id ou g la te late r ifie uire r ifie
t g e e
re r O di
n pr
o en h re e r e t v re
q v
ess tur e ol f o n ot p m no g not
h in a n
dr na y fo tog
r Na als ost i nd s
A d S ig ad ent in in
f ic
i o
P Fu
Al u f C O

Source-Field Investigation

At this branch, most of the account holders were employees of
Wipro. A bank official from this branch sits at the Wipro office and
handles all queries of the account holders through e mails. On
speaking to the official there, it was found that the introduction letter
to the bank was signed by the team lead. Presently, due to change in
the company policies, the signature of a senior level management is
required. This causes a delay in the bank procedure of account
opening. It was also found that the bank was understaffed.

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At M G Road Branch, HDFC Bank

30 120.00
25 100.00
20 80.00
In numbers
15 60.00
10 40.00
5 20.00
0 0.00
Co Info not






Source-Field Investigation

This branch has a lot of corporate accounts and the value of
transactions is also huge. Due to this it was found that most of the
delays were caused by no proper introduction letter or ID proof
(Refer graph). Either the company information was inadequate or
there was a signature mismatch.

M.P.Birla Institute of Management 44

Associate Bharatiya Vidya Bhavan
At Jaynagar branch, HDFC Bank.

14 120.00

12 100.00
8 In numbers
6 Cumalative

2 20.00

0 0.00

self attested


Name related

add reqd in

FD related

Branch code
not indicated
resolution is

and LC code)

AML form

letter not




Source-Field Investigation


This branch even though was well managed; the wok load seemed to
be very heavy on all working days of the bank. The highest rate of
delays was caused by signature mismatch. The increase of work load
seemed to be the major cause of reducing the efficiency of the bank.
Also, the new concept of AML form seemed to cause a lot of
inconvenience to the customers (refer Glossary for the meaning of

M.P.Birla Institute of Management 45

Associate Bharatiya Vidya Bhavan
At Indiranagar branch, HDFC Bank

30 120.00

25 100.00

20 80.00
In numbers
15 60.00
10 40.00

5 20.00

0 0.00






g n ers


am ffer














op ost















Source-Field Investigation


This branch was the most unorganized of all the above. The work
load was very high and the staff was unable to cope up to the work
pressure. There was no proper co ordination between the employees
and customers kept coming back with complaints that irked the staff
as well as the customers.

The above Pareto charts represent the reasons for which

the application forms were rejected with the contributions of
each reason indicated in the dotted lines. The meaning of
certain banking terms are indicated in the glossary at the end.

M.P.Birla Institute of Management 46

Associate Bharatiya Vidya Bhavan
Root Cause Analysis
This approach was used to analyse, in detail, the reasons that
contribute to the delays in account opening. On observing the
customer database and working of the banks, the following Fish Bone
Diagram was formed.

Employees Training

4 8
6 9
3 Account
Opening Delays

External Management
Factors Policies

M.P.Birla Institute of Management 47

Associate Bharatiya Vidya Bhavan
The numbers in the Root Cause Diagram indicated the following sub
causes. These sub causes are a result of observations and analysis of
database at the

Sub reason Number Reason

1 Customers are in hurry
2 Customers are illiterate
3 Customer needs to be educated on bank
needs and requirements
4 Increase of work load
5 Reduction in efficiency due to
6 Multi tasking
7 Communication gaps
8 Orientation
9 Fundamentals not clear
10 Change in RBI guidelines
11 Break down of support systems
12 Other uncontrollable factors
13 Lengthy procedures for just a verification

14 Application form is labourious to fill

The sub reasons identified are a result of observing the process the
bank follows to open an account. The main reasons are the parties
involved in account opening.

M.P.Birla Institute of Management 48

Associate Bharatiya Vidya Bhavan
The following diagram gives another aspect to AOD that may result
in service switching behaviour that needs to be avoided in any


Inconvenience Response to
Service Failure


Service Competition
Encounter Core Service
Failures Failures

M.P.Birla Institute of Management 49

Associate Bharatiya Vidya Bhavan
The head Inconvenience includes-
 Location or time slots allotted
 Waiting for service

The head Service Encounter Failure includes-

 Uncaring
 Impolite
 Unknowledgeable

The head Responsive Service Failure includes-

 Negative response
 Reluctant response

The head Competition includes-

 Found better service elsewhere

The head Core Service Failure includes-

 Service mistakes
 Processing errors
 Service catastrophe

The survey conducted will reveal if the bank’s services suffer from
any of the above traits. Also, it will aim at measuring the level of
satisfaction the customers have when it comes to transacting with
their bank.

M.P.Birla Institute of Management 50

Associate Bharatiya Vidya Bhavan
Survey with questionnaire
The survey done with the help of questionnaire was aimed at
knowing the customers perception about their bank. The
questionnaire was filled in by customers of the following banks to
facilitate a comparative study of their efficiencies and leveraging it to
account opening. The aim was also to find out the effect of the sub
causes (mentioned in the Root Cause Diagram) on account opening
and to what extent it affected the banks mentioned.
The banks were-
 HDFC Bank
 ICICI Bank
 Citibank
 Canara Bank

The hypothesis is framed as follows-

H0: There is no difference between sample values and the population

H1: There is a difference between sample values and the population
The following findings show that H0 is accepted.
The survey done, revealed the following findings.

M.P.Birla Institute of Management 51

Associate Bharatiya Vidya Bhavan
Table 1
The table will correlate the time taken by the three banks (HDFC,
ICICI and SBI) to open an account. This will show the efficiency of
the banks and will indicate which bank has a competitive advantage.
Bank Instantly Within Within More Total
name one hour one than
day two
HDFC 1 0 7 1 9
ICICI 3 0 2 4 9
SBI 1 1 2 3 9
Citibank 1 3 2 9
Canara 1 1 1 6 9
Total 7 2 15 16 45
Source-Field Investigation
Name of Average Median Standard Z value
bank Deviation
2.25 1 3.20 .68
2.25 2.5 2 .81
2.25 1.5 2 .79
3 3 2 .50

Canara 2.25 1 2.50 .73

Source-Field Investigation

M.P.Birla Institute of Management 52

Associate Bharatiya Vidya Bhavan
Graph 1

Time taken by banks to open accounts

6 Instantly
5 Within one hour
3 Within one day
2 More than 2 days
HDFC ICICI SBI Citibank Canara

Source-Field Investigation


From the above tabulated data, it is seen that most of the banks open
accounts of their customers in more than two days. HDFC Bank has
the highest reading of “within one day” category. Inspite of this, it
faces problems in certain branches that have been identified before.
However it faces close competition with ICICI and SBI bank in the
“within one day” category. From the z test done for the sample, all
the values lie between +1.96 to -1.96, and hence it the null hypothesis
can be accepted and it can be said that the sample does not differ
from the population.

M.P.Birla Institute of Management 53

Associate Bharatiya Vidya Bhavan
Table 2 :Perceived levels of services by customers at
their banks (out of 9).

Statements HDFC ICICI SBI Citibank Bank
Prompt service 6 6.16 5.83 7.83 6.11
Courteous employees 6.87 5.83 6.167 7.5 6.17
Caring employees 5.89 5.5 5.33 7.33 5.67
Services at promised time 7 6.167 4.83 8.33 6.11
Visually appealing 6.5 6.67 4.83 6.5 5.89
Willingness to help 6.7 5.67 6.167 7.67 6.22
Instills confidence 6.78 6.167 5.167 6.5 6.56
Feel safe while transacting 8.11 6.167 7 7.67 7.64

Source-Field Investigation

Graph 2
Perceived service levels of customers from their banks

2 Citibank
Prompt Courteous Caring Services at Visually Willingness Instills Made to Canara Bank
service employees employees promised appealing to help confidence feel safe
time while

Source-Field Investigation

M.P.Birla Institute of Management 54

Associate Bharatiya Vidya Bhavan

We see that HDFC is perceived to be the safest bank while Citibank

is perceived to be the most prompt bank. This is because Citibank
encourages net banking and imposes a fine on the customer if he
enters the branch for a simple query. ICICI though is a close
competitor of HDFC. However, it was found in the survey that the
traits of “courteous employees” and “caring for customers” were
deteriorating. SBI is not perceived to be visually appealing. Old
customers are used to the banks ways and are satisfied. However, the
new customers expect more from the bank.

Table 3

Name of bank Overall rating of the bank (out of 9)

HDFC 6.78
SBI 6.73
Citibank 7
Canara Bank 6
Source-Field Investigation

M.P.Birla Institute of Management 55

Associate Bharatiya Vidya Bhavan
Graph 3

Overall Rating of the banks

6.78 6.73 7
6 5.5
HDFC ICICI SBI Citibank Canara Bank

Source-Field Investigation


According to a recent survey, it was revealed that the top most

respected bank in India today is SBI after which ranks HDFC,
Citibank, ICICI Bank and finally Punjab National Bank. However,
when it comes to customer satisfaction in this survey, Citibank
customers were the most satisfied as Net banking saved them lot of
time and money. Hence it has the highest rating.

M.P.Birla Institute of Management 56

Associate Bharatiya Vidya Bhavan
Quality Function Deployment

QFD is an excellent way of capturing “voice of customers”. It

refers to both determining what will satisfy the customer and
secondly, translating those customer desires into the target design. In
the manufacturing industry, it is used early in the production process
to determine what will satisfy the customer and also where to deploy
quality efforts.
The two terms essential here are Expected quality and Exciting
quality. Expected quality in this research refers to the fact that
customers expect their account to be opened in a day or two. Exciting
quality refers to traits that a customer does not expect and enhances
the value of the product or process.
The QFD process is linked by the following matrices-

M.P.Birla Institute of Management 57

Associate Bharatiya Vidya Bhavan
The Quality Function Deployment Process

4 1
Operating Customer
Instructions Requirement

3 2
Process Plan Technical
and Quality Features
Control Deployment
Charts Matrix

M.P.Birla Institute of Management 58

Associate Bharatiya Vidya Bhavan
In the first matrix of Customer Requirements and Planning
identification of expected and exciting quality is done. In the survey
it was revealed that customers wanted their accounts to be opened
instantly or hardly in a day. To provide for exciting quality, HDFC
has offered schemes to account opening to add value to its services.

Technical features deployment translates the features of the

service to customer requirements. Here, services can be efficient to
reduce turn around time in account opening delays.

Technical features deployment controls the critical processes

with the help of quality control charts and process plans.

The final step of operating instructions ensures that the bankers

contribute to the firm’s efforts to meet the requirements set down in
the processes and services parameters.

M.P.Birla Institute of Management 59

Associate Bharatiya Vidya Bhavan

M.P.Birla Institute of Management 60

Associate Bharatiya Vidya Bhavan
The main causes of delays are identified now. If the very
initial step of “filling in” the application form is taken care of,
the rate of delays will reduce. It resembles the proverb “A
battle well begun is half won.”
Hence the following suggestions are recommended-

 Separate time slots can be allotted initially for accepting

application forms, or even a separate counter can be
maintained at the beginning to facilitate individual attention.
This assistance provided to the customer will make sure that
the form will be defect free.

 All details regarding the id proof can be explained to him. It

was found in the survey that many of them forget how they
have signed in the application form. Hence, a counterfoil can
be given to the customer that contains his signature that he can
refer to in future if he forgets the way he has signed. Also, the
bank can explain their inability to the customer to process the
application form if his signature differs from the documents
presented for id proof. In such cases, a fresh form is filled that
irks the customer too.

M.P.Birla Institute of Management 61

Associate Bharatiya Vidya Bhavan
 If the bank is not able to do the above, then when the
application form is handed over to the customer, a separate
instruction titled “Help us serve You better” can be given that
contains all the requirements of the bank with respect to types
of id proofs needed and other requirements based on customer
type (i.e. individual, joint, company accounts etc.)

 The Personal Banker needs to verify the documents before it is

sent to the head office at Chennai. If he is doubtful about the
form being accepted, (yet it is sent Chennai) he may ask the
customer to keep additional documents ready as id proof rather
than wait till the form is sent back to the respective branch.

 When the customer is asked to fill in the application form, it

has to be found out if he is an existing or a new customer.
Existing customers’ details are already keyed into the system
and hence the bank can take advantage of this and reduce the
time taken to process the account opening. Separate
application forms can be designed for existing customers and
the processing of these can be diverted to a separate
department so that the Data Verification Unit and Imaging
departments can concentrate on the forms of new customers.
This will also reduce the work load of the departments and
increase efficiency and accuracy.

M.P.Birla Institute of Management 62

Associate Bharatiya Vidya Bhavan
 In the survey, customers revealed that they found the filling in
of application forms a labourious job. Also, they were
apprehensive about filling in the form by themselves and
preferred to fill in, in the presence of a bank official to avoid
mistakes. Hence the bank can encourage net banking or
simplify the application form to reduce the customers’

 The bank needs to courier the application forms to Chennai.

Inspite, it can fax it or scan it to the head office. If this does not
work out, the bank can think of setting up a separate branch in
Bangalore itself so that the turnaround time (presently 4
working days) can be reduced. Aspects like time and cost can
be reduced and thereby the bank’s efficiency can be leveraged.

 It was found in the survey that Citibank had a very innovative

idea to receive feedback from its customers. They send out a
periodic questionnaire to its customers and every filled and
submitted form would receive an incentive in the form of small
gift like pens, diaries, desk calendars etc.. HDFC bank can
apply the same procedure to reduce their costs and at the same
time get back valuable feedback. Also, it can discourage
customers to come to branch for any queries as it will cost the
bank to attend a customer just for a simple issue. Customer
M.P.Birla Institute of Management 63
Associate Bharatiya Vidya Bhavan
friendly websites can be designed to facilitate easy net banking
to allow the bank to concentrate on other important issues. If
this is not feasible for all customers, this can be encouraged
among senior citizens and working officials.

It can be said that HDFC Bank is one of the most popular

banks when it comes to customer satisfaction despite its
conventional method of banking. It lives up to its punch line-
Unmatched features . World class services. It is India’s leading
private sector bank. (An established brand in itself.)
A customer enters into a bank with a decision to open an
account only if he feels it is safe to transact with it and if he
feels that the bank will live up to his expectations. Hence,
account opening procedures can be simplified by the above
suggestions and points to ponder on are highlighted in the Root
Cause diagram and the Service Switching Diagram.

Macro-level recommendations:

 Provide the bank employees first-hand best corporate

 Expose the bank employees to the environment in which
the bank customers use the bank's services

M.P.Birla Institute of Management 64

Associate Bharatiya Vidya Bhavan
 Constantly retrain the bank staff in the theory and practice
of TQM
 Showcase the customer quality
 Establish a continuous improvement culture in the Bank
 Initiate vigorously continuous process improvement in the
Bank. The process improvement can be brought about by;
 (a) Breakthrough thinking;
 (b) process stabilization; and
 (c) Incremental improvement.
 The following tools for continuous improvement in the
quality of service in the Bank are quite helpful:
1. Brainstorming
2. Process mapping
3. Cause and effect diagrams
4. Asking why (five times)
5. Check sheets
6. Pareto analysis
7. Matrix analysis
8. Consensus building
9. Paired comparisons/emphasis on curve ranking
10.Force field analysis
11.Team purpose analysis
12.Cost/benefit analysis
13.Priorities grid
14.Time-cost analysis

M.P.Birla Institute of Management 65

Associate Bharatiya Vidya Bhavan
A sample questionnaire is given below that was used in the survey.

M P Birla Institute of Management

(Associate Bharatiya Vidya Bhavan)

I am a student of M P Birla Institute of Management,

Bangalore, pursuing my MBA program. As a part of the
MBA curriculum, I have taken up a research project on
“Service Quality Leveraged to acquiring new customers,
retaining existing customers and regaining the lost
customers”. In this connection I need some information from
you. The questionnaire is, herewith, enclosed. Kindly give
your responses to the questions. I sincerely assure you that
your responses will be kept strictly confidential and shall
only be used for academic purpose. I shall greatly appreciate
your cooperation.

Ms Darshana Patel

M.P.Birla Institute of Management 66

Associate Bharatiya Vidya Bhavan

(A research project for HDFC Bank, Bangalore)





Name of your Bank:

Type of account held:

 Savings Bank
 Current account
 Term Deposit
 Recurring Deposit

M.P.Birla Institute of Management 67

Associate Bharatiya Vidya Bhavan
Time taken by your bank to open your account:
 Instantly
 Within one hour
 Within one day
 More than two days

How long have you been a customer:

 Less than a year
 One to two years
 Two to five years
 More than five years


I would like to know your impression about how well your bank
provides services relative to your expectations. Please think about the
2 levels of expectations defined below:
Minimum Service Level: The minimum level of service you consider
Desired Service Level: The level of service performance you desire.

For each of the following statements please indicate –

(a) your minimum service level by encircling one of the numbers in
the first column.
(b)your desired service level by encircling one of the numbers in the
second column
(c) your perception of service by encircling one of the numbers in the
third column.

M.P.Birla Institute of Management 68

Associate Bharatiya Vidya Bhavan
When My minimum level of My Desired level My Perception
it service is: of service is: of performance
comes is:
to -
1. Prompt 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7
service to 9 8 9
2.Employees 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7
who are 9 8 9
3.Employees 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7
deal with 9 8 9
customers in
caring fashion
4.Provides 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7
service at 9 8 9
promised time
5. Visually 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7
appealing 9 8 9
with services
6.Willingness 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7
to help 9 8 9
7.Employees 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7
instill 9 8 9
confidence in
8.Making 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7
customers 9 8 9
feel safe in
M.P.Birla Institute of Management 69
Associate Bharatiya Vidya Bhavan
1. How would you rate the overall quality of services provided by the
(Circle one number below)

Extremely poor Extremely good

1 2 3 4 5 6 7 8 9

2. Listed below are 5 general features pertaining to the bank and

services it offers. I would like to know how important each of these
features are to you. Please allocate a total of 100 points among the
following 5 features-
Please be sure that the points you give add up to 100

1. The appearance of the bank’s physical facilities, Fixtures,

personnel and communications material __________

2. The bank’s ability to perform the promised services dependably

and accurately __________ points

3. The bank’s willingness to help the customers and provide prompt

services __________

4. The knowledge and courtesy of the bank’s employees and their

ability to convey thrust and confidence __________

5. The caring, individualized attention the bank provides to you

__________ points
Total Points allocated 100 Points

M.P.Birla Institute of Management 70

Associate Bharatiya Vidya Bhavan

M.P.Birla Institute of Management 71

Associate Bharatiya Vidya Bhavan
The study includes few banking terminologies. Their meanings are
given below-

 No Posting- Funds that need to be parked in dummy account

are not yet done i.e. not posted.

 AML- Anti Money Laundering. A set of procedures, laws or

regulations designed to stop the practice of generating income
through illegal actions. In most cases money launderers hide
their actions through a series of steps that make it look like
money coming from illegal or unethical sources was earned

 Pan form 60- Permanent Account Number is a number by

which the Assessing Officer can identify any person. Presently

the Income Tax Department is allotting PAN under the New
Series to all assessees which consists of ten alphanumeric
characters and is issued in the form of a laminated card. The
General Index Register Number is a number given an
Assessing Officer to the assessees in the General Index
Register maintained by him which also contains the
designation and the particulars of the Assessing Officer

M.P.Birla Institute of Management 72

Associate Bharatiya Vidya Bhavan

M.P.Birla Institute of Management 73

Associate Bharatiya Vidya Bhavan
This research project is well supported by facts from the following
journals and websites-

 "Total Quality Management" by Mr. Sridhar Bhatt (7th Edition)

 "Banks and Financial Institutions" by Mr. L M Bhole , Tata

McGraw -Hill Publications, 4th Edition

 "Total Quality Management" by Oakland John S, Heinemann

publications, 1980

 "How to Lead Your Business Beyond TQM" by Michel E

Joyce, Pitman Publications, 1995

 "Quality Improvement through Standards" by Dale Barrie G

and Oakland John S, Stanley Thornes Publishers Ltd.,
London 2000

 "What is Total Quality Control" by Ishikawa Kaoru

(Translated by David J Luj), Prentice Hall Publications NJ,

 "Quality, Productivity and Competitive Position" by Deming

Walter F, MIT Cambridge, Mass Publications, 20
M.P.Birla Institute of Management 74
Associate Bharatiya Vidya Bhavan
Business Magazines:
 Business World
 Business Standard
 Economic Times
 Financial Express
 Business India
 Fortune

Websites Used:




M.P.Birla Institute of Management 75

Associate Bharatiya Vidya Bhavan

M.P.Birla Institute of Management 76

Associate Bharatiya Vidya Bhavan
Based on our research findings, I give below fertile areas for future

 Energizing the Customer Care through TQM

 Making World Class Performance a Reality through TQM
 Bench marking the Best Corporate Practices in the Application
of TQM in the Banking Sector
 Cascading Effects of TQM on the Performance of Banks
 Using Banking Resources Effectively through Total Quality
 Total Quality Control-The Japanese Way in the Banking
 Appropriate Tools of TQM in Banking Operations
 Flow Charting the Customer Service Operations through TQM
in Banking Sector

In our view, the aforesaid areas constitute 'green pasture' for future
research in this vital segment of the Banking Sector. Perhaps the line
of thinking, on which our research investigation is based, is quite

M.P.Birla Institute of Management 77

Associate Bharatiya Vidya Bhavan
M.P.Birla Institute of Management 78
Associate Bharatiya Vidya Bhavan