Relationship Banking

CHAPTER 1 EXECUTIVE SUMMARY Relationship banking may be defined as the provision of financial services by a financial intermediary on the basis of long-term investment in obtaining firm or customer specific information through multiple interactions with diverse financial services (Boot, 2000). Banks have advantages in gathering/producing information about their clients, thanks mainly to the nature of information production. First, there

are

economies

gathering/production

is

of

scale:

reduced

by

the

cost

learning

of

information

through

repeated

transactions. Second, there may also be economies of scope: banks can utilize the information obtained on a type of service for other services (Petersen and Rajan, 1994). Third, financial contracts are typically incomplete: banks and customers can build commitment and reputation

through

repeated

transactions

across

services,

often

allowing the low-cost renegotiation of debt contracts (Lehmann and Neuberger, 2001). This characteristic of information production makes it natural for banks to be interested in relationship-based banking Indian banking industry is today at a crossroads. It is trying to make the transition from era of socialist rhetoric to the era of marketing mantra. At present under the Indian banking industry their are total of 289 banks which includes all private sector banks, public sector banks and the regional rural banks. There is a paradigm shift in a banking industry. In the current scenario when profits from traditional banking operations are reducing due to intense competition, banks are laying more and more emphasis on the income generated by the sale of third party products. Revenues generated through these

1

businesses are increasing day by day. Third party products are Mutual funds, Insurance products, Govt. of India Bonds and Infrastructure Bonds. Every big private sector banks are having separate company who works as a financial service provider. After the achievement of independence, banking industry gained a good deal of momentum. Several smaller banks were merged with the bigger ones. At present, there are only two commercial banks operating with their head offices in the entire South Kanara district. Of the total five which were started here, two were nationalized on July 19th, 1969. The five local banks are Canara Bank, Syndicate Bank, Corporation Bank, Karnataka Bank and Vijaya Bank. The State Bank of India and its subsidiaries have a total of 5 branches located at various important places of Udupi district. The present banks had their origin from indigenous bankers and moneylenders. Let us see how it used to operate in earlier days. The credit facilities were available with co operative societies, chit funds, financial corporations, moneylenders and so on. The merchants had to borrow money at very high rates of interest from individuals and no indigenous bank existed to give facilities for saving or for financing business. Later, the growth of commerce and wide circulation of money must have resulted in the increase of lending between individuals also. India is poised to become the world's fourth largest economy in the span of two decades [1].Economic prosperity is providing many in this populous nation with real purchasing power; it simply is an opportunity that cannot be overlooked by global banks. Despite its appeal, India remains a developing economy. Thus, global banks seeking a presence or expansion in India must craft a business strategy that considers the 2

country's

attendant

challenges:

long-established

competitors;

rudimentary infrastructure; dynamic political environment; restrictive regulations; and developing country operational risks Banking system is an orderly mechanism and structure available in an economy to mobilize the monetary resources/capital from various surplus sectors and allocate & distribute the same to various needy sectors.

They

transform

the

savings

into

Investments

and

consumption. But this function/role of the financial system did not emerge overnight. It has evolved over the years from the concept of ‘Barter’ prevalent in ancient times to the present system of Universal banking. Banking earlier was purely restricted to borrowing money as deposits, with a view to lending them as advances. Thus the main facets were confined to the acceptance of deposits and lending of loans. With the growth of the Indian economy and also an off-shoot of reform measures, banks have come to take upon themselves various other activities which may not measure up to this old definition of banking. Global banks in India: Gaining a foothold The competitive environment in India presents both challenges and opportunities to global banks seeking market entry. Entrenched domestic competitors and restrictive equity ownership ceilings imposed by the government create obstacles for banks establishing a foothold in

India.

Primary

challenges

include

tough

competition

and

government ceilings on foreign equity ownership. Opportunities exist because global banks often have technological advantages, well honed, efficient processes and appealing products and services.

3

For the most part, global banks must execute on an organic growth strategy to expand their footprint in India. Merger and acquisition activity

in

the

banking

sector

remains

limited

by

government

regulation. This is difficult news for global banks that have relied on acquisitions as a market entry or expansion strategy. Unless the government shifts its posture on foreign equity ownership, global banks will have to rely on organic growth to expand their presence in India. As we can see most of the banks either private or PSU banks are into the insurance as well as mutual funds, so it more of compulsion for them to integrate the three functions under one roof. There are some differences like cultural, business interest etc, but they have to give it up to exploit the customer base a bank provides and the income these services generate.

4

CHAPTER 2

Introduction There has been a paradigm shift in the Indian Banking landscape since the

last

two

decades.

LPG

(Liberalization,

Privatisation

and

Globalisation) of Indian economy has opened the banking sector to foreign

and

private

players

intensifying

competition.

Different

alternative solutions have been made available for both short-term and long-term requirement and investment of funds at comparatively attractive terms. People forget the monopolistic scenario of the public sector banks for financial needs, now they have a wide choice, greater expectation and lesser sacrifice in terms of cost, time and efforts. Customers have come into the main focus and bank managements are gradually recognizing that their ultimate success depends on the customers’

satisfaction—a

buzz

word

of

Customers

Relationship

Management (CRM). No business enterprise can sustain itself for long without customers’ support and loyalty. So every organization always attempts to maintain a cordial relationship with its customers to effect sales and thereby to generate income. Enterprises adopt different strategies to accomplish their goals. One such strategy practiced by banks is CRM. Its aim is to gain and retain customer’s loyalty in lieu of goods and services for their optimum satisfaction. With in-creasing competition and pres-sure on margin, banks need to practice CRM to enhance customer base for increasing capabilities for targeting market programs along with greater flexibilities to adopt processes and working methods to meet customer’s expectations.

5

CRM focuses on two major issues: (i)

Increase

in

knowledge

base

and

communication

management; (ii)

Understanding of customer’s micro environment. Being a customer centric approach CRM advocates responding to customers’

choices

and

preferences

and

exploiting

the

opportunities arising in the process. It is characterized by a more integrated and forward looking approach that utilizes a common language in align-ing strategy, process, people, technology and knowledge to the evaluation of customer relationship

and

its

management

in

banks.

With

the

development of banking technology and openness of Indian banking sector, of late, CRM has assumed a crucial role in marketing banking products and services. Due to globalization a new generation of private sector banks and many foreign banks have also entered the market and they have brought with them several useful and innovative products. Due to forced competition, public sector banks are also becoming more technology savvy and customer oriented. Thus,

Non-traditional

competition,

market

consolidation,

new

technology, and the proliferation of the Internet are changing the competitive landscape of the retail banking industry. Today retail banking sector is characterized by following:  Multiple

products

(deposits,

credit

cards,

insurance,

investments and securities)  Multiple channels of distribution (call center, branch, Internet and kiosk)

6

 Multiple customer groups (consumer, small business, and corporate) Today, the customers have many expectations from bank such as (i) Service at reduced cost (ii) Service Anytime Anywhere (iii) Personalized Service With increased number of banks, products and services and practically nil switching costs, customers are easily switching banks whenever they find better services and products. Banks are finding it tough to get new customers and more importantly retain existing customers. According to a research by Reichheld and Sasser in the Harvard Business Review, 5% increase in customer retention can increase profitability by 35% in banking business, 50% in insurance and brokerage, and 125% in the consumer credit card market. Therefore banks are now stressing on retaining customers and increasing market share. PRIVATE BANKING is emerging as an important segment of business for some banks and non-banking financial companies (NBFCs) in India. Banks and NBFCs say there has been an increase in the number of private banking or wealth management clients they are dealing with today. Foreign banks, which mostly cater to high net worth individuals, with financial surplus or investible incomes of over Rs 2 crore per year, say

7

that this segment is expected to grow by almost 20 per cent over the next couple of years. The recently released study, 2005 World Wealth Report, by Capgemini and Merrill Lynch, indicating that the number of High Net Worth Individuals (HNWI) in India grew at 14.6 per cent, twice that of the world's growth of 7.3 per cent in 2004, augurs well for some of these banks. The last decade has seen many changes taking place in the structure of banking and also in the way the Banking sector has opened up. Deregulation and entry of new players are changing the Banking scene. To say that the future belongs to a particular group, Private Banks or Foreign Banks or Public sector Banks is not correct. The future belongs to the player who keeps in touch with the time, who moves along with the time and is able to respond to the emerging needs of the customers. Today Banking is changing we are seeing technology

being

introduced in the sector. A greater amount of dis-intermediation is taking place in the higher segment of the corporate sector and there is a need for providing better quality customer service. The market is becoming more&more buyer dominated. In Banking, the final result as to who will actually be able to woo customers will depend on their ability to react and respond to the customer requirement. The customer is going to be the real decider of fate of Banks.

8

The Banks want to be a major retail consumer Banks in India. The part of retail Banking goes not only with Credit Card but Debit Cards and Smart Cards as well. The Customer can get a bunch of additional services with cobranded cards, which have tie-ups with petroleum COs, airlines, and hospital chains. Banks have introduced Debit Cards self-explanatory card that caters very well to the tastes of credit averse Indians. The banks are providing all products under one roof and that includes the retail staff as well. HDFC Bank, ICICI, UTI Bank and HSBC, Citi are wooing corporate to open salary accounts. The minimum balance required for these accounts is zero and hence customer base of these Banks is exponentially increasing. ATM network, which provides visibility and convenience and hence helps in increase customer acquisition, is set near railway station, petrol pump, shopping complexes etc. Internet Banking is available to the customer at his desktop, while the branches may be 2 to 3 kms. Away. Some banks have already ventured to maintain relationship with online banking through Internet. The latest trend in banking strategy is clicks bricks in which customer can debit or credit accounts, check balances and even trade on it. A car loan is other area in which banks are developing relationship with the customer. The ideal model of maintaining relationship with the customer focuses on the customer service issues. Banks are providing 9

customers with the highest quality services with special emphasis on recognizing

customer

needs

and

cross

selling

(expanding

relationship with existing clients to increase range of services delivered to the clients) appropriate bank services. In a nutshell the customer has become the fulcrum of all Banking activities.

10

CHAPTER 3 Literature Review Source: http://www.iimcal.ac.in/imz/article.asp?code=jan_05_04 CRM in banking: 1/26/05 - by Shipra Surendra Before Internet era, consumers largely selected their banks based on how convenient the location of banks branches was to their homes or offices. With the Advent of new technologies in the business of bank, such as Internet banking and ATMs, now customers can freely chose any bank for their transactions. Thus the customer base of banks has increased, and so has the choices of customers for selecting the banks. This is just the beginning of the story. Due to globalization a new generation of private sector banks and many foreign banks have also entered the market and they have brought with them several useful and innovative products. Due to forced competition, public sector banks are also becoming more technology savvy and customer oriented. Thus,

Non-traditional

competition,

market

consolidation,

new

technology, and the proliferation of the Internet are changing the competitive landscape of the retail banking industry. Today retail banking sector is characterized by following: Multiple  products (deposits, credit cards, insurance, investments and securities)

11

Multiple  channels of distribution (call center, branch, Internet and kiosk) Multiple 

customer

groups

(consumer,

small

business,

and

corporate) Today, the customers have many expectations from bank such as (i) Service at reduced cost (ii) Service Anytime Anywhere (iii) Personalized Service With increased number of banks, products and services and practically nil switching costs, customers are easily switching banks whenever they find better services and products. Banks are finding it tough to get new customers and more importantly retain existing customers. According to a research by Reichheld and Sasser in the Harvard Business Review, 5% increase in customer retention can increase profitability by 35% in banking business, 50% in insurance and brokerage, and 125% in the consumer credit card market. Therefore banks are now stressing on retaining customers and increasing market share. Source:- http://www.indiainfoline.com/pefi/news/bnk2.html Privy To Wealth Management - II It would be worthwhile to make a check-list of the broad needs that your Private Banker should satisfy. To mention the more significant ones,

12

•

Customised, professional, unbiased investment advice

•

Single point service

•

Trust and confidentiality

•

Empowerment to take the final decision

•

Prompt, efficient service with minimal paperwork

•

Reliable, speedy, low-cost execution of transactions

•

After-sales service which includes regular performance reports and

pro-active

follow-up

of

post-transaction

delivery

and

corporate actions, and of course, •

A reasonable return

What your Private Banker will typically charge for service is a transaction fee of 1-1.5% per transaction, a custodial fee of 0.1%0.2% of the average assets under custody and may also charge an annual fee which could be Rs.10, 000-Rs.15, 000. The charges which may seem steep to begin with must be seen in conjunction with the level of service offered and if your Private Banker meets most of the above-mentioned criteria, the fees charged are well worth it! Source:http://www.themoneyvibe.com/wealth_management.html Money may be considered the root of all evil but it will forever be a necessity in your life. Possessing money brings on an abundance of responsibility. Wealth management is the only way to coordinate and structuralize the destination of your money and the abundance of your funds. Wealth management includes not only managing the funds you carry at the present time but also planning how your funds can work for you in the future. There is a whole world of investment opportunities just waiting for some funding so they can thrive and

13

profit. Some of these opportunities include stocks, bonds, mutual funds and annuities. By educating yourself on wealth management, this world can work for you and increase your profit. If you can obtain the knowledge of where to move your money at the right time, wealth management will become an easy task. The best way to educate yourself on wealth management is through professional help. There are services offered through banks and financial companies that can give you personal advice on your financial situation

and

the

wealth

management

of

your

future.

These

professionals can guide you in the management of your assets, banking accounts, credit and savings. Most companies can also offer services and counseling in areas like estate planning, insurance, financial planning and trust services. Wealth management is as important as the money itself. Making your money work for you through wealth management can increase or even double your overall funding. It’s amazing how much profit you can make with a little education and guidance. http://www.icai.org/members/CRM_banking.pdf

CRM-IN THE BANKING SECTOR AN EXPERIENCE While one hears international giants successfully implementing CRM, by and large the Indian business or the Indian arm of such giants give only a lip service to CRM and also there was an element of double speak in the context of customer relationship mgmt by Indian firms. A survey reveals that only 36% of the CEOs have CRM as one of the top activities in there agenda. We decided to check this out in the Udaipur

14

region and also to gain first hand experience in the field by talking to officials especially in the banking sector. For the purpose we met different officials from ICICI bank, IDBI bank, Bank of Rajasthan, HDFC finance. Although in the Udaipur region they do not have an established customer relationship mgmt solutions in place. But unanimously agree to the dramatic change in the approach that has swept not only their banks but also other state owned and private banks. At both ICICI and IDBI there is a mad rush to reach out to the customer through multiple channels like ATMs, cell phones, branch phones, or the Internet etc.

15

16

CHAPTER 4

Research Objective

Objective

To Study Relationship management for financial advisory services in banking sector

Sub-Objectives

1)

To study the role of relationship management across various public and private banks

2)

To study the various factors that constrains the growth of relationship management across banks

3)

To measure the customer satisfaction with financial advisory services 17

CHAPTER 5 RESEARCH METHODOLOGY Research Design Descriptive research: - Descriptive research provides data about the population or universe being studied. Descriptive Research is used when we are interested in knowing the characteristics of certain groups such as age, sex, educational level, occupation etc. But it can only describe the "who, what, when, where and how" of a situation, not what caused it. Descriptive research is used when the objective is to provide a systematic description that is as factual and accurate as possible. Sample Size :

34 Branches

Target Area :

West Delhi

Sampling Technique:

Convenient Sampling

In convenience sampling, the selection of units from the population is based on easy availability and/or accessibility. I am using this sampling method because sample will be selected on the basis of availability of the respondents who met the desired criteria.

18

Data Collection

Primary & Secondary

Primary Data Source

Questionnaires and Personal Interview

Dichotomous Questions

This has only two answers “Yes” or “No”.

Multiple Choice Questions Where respondent is offered more than two choices Data Collection Tool: - Structured Questionnaire A structured Questionnaire is a formal list of questions framed so as to get the facts. For Collecting Primary Data I used a Structured Questionnaire. I prepared two questionnaire one to be filled by Relationship Managers and the other to be filled by priority customers of the banks. I visited 34 branches of different banks in west Delhi where I got 34 questionnaire filled by relationship managers and 45 questionnaire by priority customers. SECONDARY DATA COLLECTION: MAGZINES AND WEBSITE

19

CHAPTER 6 DATA ANALYSIS I Table 1: Distribution of Relationship Manager as respondent by work Experience This question was asked to Relationship Manager of various banks across industry to know the average experience age of RMs across industry. It was found that almost 64% of the RMs have minimum three year experience in working with the bank.

Valid

One Year Two year Three Year Four Year Total

Frequency 3 6 22 3 34

Percent 8.8 17.6 64.7 8.8 100.0

Table 2: Distribution by Any prior work experience in working in same or any related industry.

Valid

Yes No

Frequency 15 19

Percent 44.1 55.9

Total

34

100.0

It was found that 44% of all the relationship managers questioned had prior experience

20

Table 3: Distribution By Internet banking as the service provided to priority customer

Valid

Yes

Frequency 30

Percent 88.2

No

4

11.8

Total

34

100.0

It was found that 88% of the banks in sample space were providing Internet banking to the customer. It was also noticed that the banks that were not providing the Internet banking to the customer did not have Internet banking facility. Table 4: Distribution by high cash withdrawal limit as service to priority customer

Valid

Yes No Total

Frequency 31 3 34

Percent 91.2 8.8 100.0

It was found that 91% of the banks in sample space were providing high cash withdrawal limit facility for priority customer

Table 5: Distribution by free pick up and delivery of cheques

21

Valid

Yes No Total

Frequency 10 24 34

Percent 29.4 70.6 100.0

Table 6: Distribution by International Debit Cards

Frequenc Valid

Yes

y

Percent

34

100.0

22

Table 7: Distribution by Relationship Management helps secure lucrative banking business.

Valid

Frequency Strongly Agree 26 Agree 8 Total 34

Percent 76.5 23.5 100.0

RM_Help_Cus tmer_Base Strongly Agree Agree

23

When relationship managers across banks were asked whether they think that relationship management help secure lucrative banking business, 76% of all the respondents were strongly agreed. And not a single manager was in disagreeing to it.

Table 8-11: A question was asked to the relationship managers to know there views on what may be the most likely factors that can make hinder the banks to develop such a relation with priority customer. Table 8: It was found that higher turnover of bank officer in charge of managing the relation was important by 55% of the respondent. While meager 8.8% believed it was the least important factor.

Valid

Important Not

Frequency 19 so

12 Important Least Important 3 Total 34

Percent 55.9 35.3 8.8 100.0

Table 9: It was that the 70% of all the respondents agreed that reluctance the priority customer to reveal his financial status was the most important factor in developing a good relationship with them. While 11% think that it was the least important factor. 24

Valid

Most Important Not

so

Important Least Important Total

Frequency

Percent

24

70.5

6

17.6

4

11.7

34

100.0

Table 10: It was that 47% of all the relationship managers believed that the inadequate expertise offered by the banks to meet the demand for diverse financial services is not so important factor to develop a good relation with clients.

Valid

Important Not Important Least Important Total

so

Frequency 15

Percent 44.1

16

47.1

3

8.8

34

100.0

25

Table 11: It was found that out of the entire respondent a significant 97% believed that declining dependence on financial advice was the least important factor in developing the relationship with clients. It shows that the dependence on financial advisory services is increasing.

Frequen Valid

Least Important Not so Important Total

Table

12-15:

A

question

cy

Percent

33

97.1

1

2.9

34

100.0

was

asked

to

the

relationship

managers across various banks that what specific actions they think are the important that will help banks build strong relations with the priority customers. Table 12: It was found that 47% of the Relationship Managers think it important that the banks should avoid the frequent changes in the bank officers (Relationship Managers) in handling a particular client. The reason behind that which I found while informally discussing with bank people was that in most of the cases priority customers develop trust and relations with the them and the customers feel uncomfortable.

Valid

Most Important Important Not so Important Least

Frequency 1 16

Percent 2.9 47.1

13

38.2

4

11.8 26

Important Total

34

100.0

Table 13: It was noticed that a significant percentage i.e.79% of Relationship Managers believed that it was most important to proactively identify, locate and advise the clients on new investment avenues.

Valid

Most Important Important Not so Important Least Important Total

Frequency 27 2

Percent 79.4 5.9

4

11.8

1 34

2.9 100.0

Table 14: It was found that 41% of Relationship Managers believed that it is important to organize customer meet time to time to flourish the relationship and develop confidence with the clients.

Frequency Valid

Most

3 Important Important 14 Not so 17 Important

Percent 8.8 41.2 50.0

27

Total

34

100.0

Table 15: It was found that 85% of the relationship managers believe that it is the most important to have highly trustworthy research to back the bank officers in making decisions in advising the clients.

Valid

Most Important Important Least Important Total

Frequency

Percent

29

85.3

3

8.8

2 34

5.9 100.0

Table 16-19: A question was asked to Relationship Managers about what they think behind the weak discipline in bank management.

Table 16: It was found that 61% of the respondents believe government ownership of the banks is least important factor behind weak discipline in bank management.

Valid

Frequency Most Important 6 Not so 7 Important Least 21

Percent 17.6 20.6 61.8 28

Important Total

34

100.0

29

Table 17: It was found that 41% of the respondents believe that the expectation from the government to bail out the troubled bank was not so important factor behind the weak discipline in bank management.

Valid

Frequency Most Important 7 Important 21 Not so 3 Important Least 3 Important Total 34

Percent 20.6 41.8 28.8 8.8 100.0

Table 18: It was found that that 55% of the relationship managers believed dereliction of duty was the most important factor behind the weak discipline in bank management.

Valid

Most Important Important Not Important Least Important Total

so

Frequency

Percent

19

55.9

7

20.6

7

20.6

1

2.9

34

100.0

Table 19: It was found that 50% of the relationship managers believe oligopolistic banking market structure is not so important

30

behind weak discipline in bank management.

Valid

Frequency Most Important 2 Important 6 Not so 17 Important Least 9 Important Total 34

Percent 5.9 17.6 50.0 26.5 100.0

Table 20-23: A question; does the government ownership of banks constrain the efficiency of banks, and the respondent was required to rank the reasons.

31

Table 20: It was found that 23% of the respondent believed that outside interference in bank management was the most important reason that constrains the efficiency of banks.

Valid

Most Important Important Not

so

Important Least Important Total

Frequency

Percent

8

23.5

6

17.6

8

23.5

12

35.3

34

100.0

Table 21: Thirty five percent of the Relationship Managers believed that appointment or dismissal of senior management not based on their capability or performance was the most important reason that constrains the efficiency of banks.

Valid

Most Important Important Not so

Frequency 12 3

6 Important Least Important 13 Total 34

Percent 35.3 8.8 17.6 38.2 100.0

Table 22: Forty one percent of the Relationship Managers believed that lack of professionalism in government employees was an important reason that constrains the efficiency of banks.

32

Valid

Most Important Important Not Important Least Important Total

so

Frequency

Percent

5

14.7

14

41.2

8

23.5

7

20.6

34

100.0

33

Table 23: Thirty two percent of the respondent believed that weak incentive for monitoring bank management was an important reason that constrains the efficiency of banks while similar percent of people believed it as not so important reason.

Valid

Most Important Important Not Important Least Important Total

so

Frequency

Percent

9

26.5

11

32.4

12

35.3

2

5.9

34

100.0

CHAPTER 7

34

Data Analysis II Before I get into detailed analysis it is necessary to give in brief that from where I get raw data and what has been the objective of this data collection. A questionnaire was got filled by the priority customers of different private and public banks to study the satisfaction level and their perception towards financial advisory services. Table 1: This table shows that 44% of the respondent priority customers have their monthly income between 5-10 Lacs. Monthly Income

Valid

Less

Than

Lacs 5-10 Lacs Above 10 Lacs Total

Five

Frequency

Percent

12

26.7

20 13 45

44.4 28.9 100.0

Table 2: This table shows the frequency distribution of priority customers on the basis of number of years of availing financial advisory services. Maximum percentage 55 was of the customers who were availing financial advisory services since last 1-2 years.

Frequenc y

Percent

35

Valid

Less

Than

Year 1-2 Year More Than

one

One

Year Total

16

35.6

25

55.6

4

8.9

45

100.0

Table 3: This table shows that 57% of the priority customers across banks were satisfied by the advisory services.

Frequency Percent Valid

completely satisfied satisfied cant say Total

6

13.3

26 13 45

57.8 28.9 100.0

Table 4: When customers were asked that how they perceive the services of their banks with respect to other banks. Sixty two percent of all the respondent feels that the services of their bank were slightly better than other banks.

Valid

Much Better Slightly Better Slightly Worse Total

Frequency 16 28 1 45

Percent 35.6 62.2 2.2 100.0

Table 5-8: A question was asked to rate the different functions

36

of financial advisory services to measure the satisfaction level of the priority customers. Table 5: It was found that 55% percent of the priority customers are completely satisfied by the investment guidance provided across banks.

Frequenc Valid

satisfied completely satisfied Total

y 20

Percent 44.4

25

55.6

45

100.0

Table 6: It was found that 71% of the customers were satisfied by regular market information given to them by the banks.

Frequenc Valid

Dissatisfied satisfied completely satisfied Total

y 10 32

Percent 22.2 71.1

3

6.7

45

100.0

Table 7: It was found that a significant percentage of customers i.e. 82% were satisfied by the query handling of the banks.

Frequenc

Percent

37

Valid

Dissatisfied satisfied completely satisfied Total

y 1 37

2.2 82.2

7

15.6

45

100.0

Table 8: When respondents were asked to rate their satisfaction level in terms of overall quality of service of banks, it was found that 73% were satisfied.

Frequenc Valid

Dissatisfied satisfied completely satisfied Total

y 6 33

Percent 13.3 73.3

6

13.3

45

100.0

Table 9: When respondents were asked whether they will continue with bank as priority customer it was found that a significant number of customers said that they will continue. It is intimated from this fact that once a person becomes the priority customer of a bank he/she is reluctant to change the bank because they develop relations with the banker.

Valid

Frequency Certainly Yes 10 Yes 33 No 2 Total 45

Percent 22.2 73.3 4.4 100.0

38

Table 10: It was found that 37% of the customers were priority customers of some other bank also.

Valid

yes No Total

Frequency 17 28 45

Percent 37.8 62.2 100.0

Table 11-15: A question was asked in which the priority customers were asked to rate the various relationship efforts of bank. Table 11: It was found that 57% of the respondent said that query handling of their banks Relationship Managers was good.

Valid

poor Good very good Total

Frequency 1 26

Percent 2.2 57.8

18

40.0

45

100.0

Table 12: It was found that 55% of the priority customers agreed that the relationship managers’ effort in giving greeting on selected occasion was good.

Frequency

Percent 39

Valid

poor Good very good Total

17 25

37.8 55.6

3

6.7

45

100.0

Table 13: It was also found that Relationship Managers efforts in providing information about new service were also good by 57% of all the respondents.

Valid

poor Good very good Total

Frequency 6 26

Percent 13.3 57.8

13

28.9

45

100.0

Table 14: Eighty percent of the respondent believed that Relationship Managers efforts in providing promptness in service were good.

Valid

Good very good Total

Frequency 36

Percent 80.0

9

20.0

45

100.0

Table 15: It was found that 66% of the respondents felt that the Relationship Managers efforts in providing priority in service are good.

40

Valid

poor Good very good Total

Frequency Percent 6 13.3 30 66.7 9

20.0

45

100.0

Table 16: A question was asked to the priority customers whether Relationship Manager of their bank take efforts to monitor your investment portfolio. It was that 75% of all the respondent agreed that the Relationship Manager take effort to monitor investment portfolio.

Valid

Yes No Total

Frequency 34 11 45

Percent 75.6 24.4 100.0

Table 17: A question was asked to the customers that whether the Relationship Manager of their bank is skilled or knowledgeable enough to give them investment advice. It was found that 91% of all the respondent agreed that their RM is skilled.

Valid

Yes No

Frequency 41 4

Percent 91.1 8.9

Total

45

100.0

41

Table 18: A question was asked to the priority customers about what are the important motivations or expected benefits for having such a relationship. It was found that 44% percent of the priority customers agreed that advice from bankers on their business and future financial planning is an important motivation for carrying relation with bank.

Frequency Percent Valid

Advice from bankers on

your

business

and future financial plans Easy access to other Financial markets Better Credit availability Behavior of banker Total

the

20

44.4

15

33.3

7

15.6

3

6.7

45

100.0

42

Imp_Motivations_ for_RM Advice from bankers on your business and future financial pl Easy access to other Financial markets Better Credit availability Behavior of the banker

Table 19: A question was asked to the customers whether relationship management lowers their investment risk. Hundred percent of the customers

believed

that

relationship

management

lowers

their

investment risk.

Frequenc Valid

Yes

y

Percent

45

100.0

43

CROSSTABS: Cross tabulation between Work Experience of the Relationship Manager and the Satisfaction level of the customers

Satisfaction Level completely Work Experience of RM

One Year Two year Three Year Four Year

Total

Total

satisfied 1 1 4

satisfied 0 1 15

cant say 2 4 3

3 6 22

0

3

0

3

6

19

9

34

Bar Chart Satisfaction_Lev el

15

completely satisfied

12

satisfied cant say

t n u o C

9

6

3

0 One Year

Two year

Three Year

Four Year

Work_Time_Bank

44

It is quite clear from the table and the graph that higher the experience of the relationship manager higher the satisfaction level of the priority customers.

45

Cross

tabulation

between

satisfaction

level

and

the

continuation of the priority customers with bank

Continuation with bank as customer Certainly Satisfaction

completely

Level

satisfied satisfied cant say

Total

Total

Yes

Yes

No

5

1

0

6

2

19

0

21

1

6

2

9

8

26

2

36

Bar Chart Continuation_Bank

20

Certainly Yes Yes No

t n u o C

15

10

5

0 completely satisfied

satisfied

cant say

Satisfaction_Level

46

It is evident higher the satisfaction level of the customer higher is the customer retention.

Cross tabulation between Relationship Managers effort to monitor the portfolio and the satisfaction level of the priority customers

RM’s

effort

monitor

the

portfolio Satisfaction Level

completely satisfied satisfied cant say

Total

to

Total

Yes

No

4

2

6

17

4

21

6

3

9

27

9

36

47

Bar Chart RM_Effort_Monitor_ Portfolio

20

Yes No

t n u o C

15

10

5

0 completely satisfied

satisfied

cant say

Satisfaction_Level

It was found that higher is the Relationship Managers efforts to monitor the investment portfolio of the customers higher is the satisfaction level of the customers.

Cross

tabulation

Relationship

Managers

skill

and

the

satisfaction level of the customers

48

RMs

Satisfaction

completely

Level

satisfied satisfied cant say

Total

Skilled

for

giving Advice Yes No

Total

6

0

6

19

2

21

8

1

9

33

3

36

Bar Chart RM_Skilled_for_Adv ice

20

Yes No

t n u o C

15

10

5

0 completely satisfied

satisfied

cant say

Satisfaction_Level

It was found that higher the skills of the relationship manager higher are satisfaction level of the customers.

49

CHAPTER 8 RESULTS AND FINDINGS 1. All the private and public banks are recognizing importance of the relationship

management in their growth and customer

retention. 2. It was found that there is high correlation between the experience

of

the

relationship

manager

and

customer

satisfaction. 3. A large number of relationship managers believed that higher turnover of bank officers in charge of managing the relation was an important factor that was making priority customers reluctant to develop such a relation. 4. Priority Customers reluctant to reveal his/her financial status was constraining the quality of financial advisory services. 5. Very high percentage 85% of all the relationship managers believed that they should be backed by highly trustworthy research on different financial avenues available in the market. 6. All the priority customers were found to be agreed that the relationship management lowers the risk of their investment

50

CHAPTER 9 SUGGESTIONS

1. As there is high co-relation between experience of relationship manager and customer satisfaction so the banks should keep an experienced person as a relationship manager. 2. Banks should try to minimize the turnover rate of relationship managers as it was found that customers develop relations with the

manager

with

the

course

of

time

and

they

feel

uncomfortable. 3. Every bank should have its own research house that provides quality research on different investment avenues available in the market according to the risk appetite of the priority customer.

51

CHAPTER 10 LIMITATIONS

1. The sample was taken from 34 branches of west Delhi which may not be the true representative of entire banking industry. 2. Since inferences have been drawn on the basis of information provided by the respondent, chances of response error might have crept in. 3. I have completed this project while I was working with SHAREKHAN Securities .Ltd. , so the time constraint was also a limitation.

52

CHAPTER 11

BIBLIOGRAPHY Books:Rubin, R.S., Marketing Research, New Delhi: PHI, 2004

Internet:http://www.iimcal.ac.in/imz/article.asp?code=jan_05_04 http://www.indiainfoline.com/pefi/news/bnk2.html http://www.themoneyvibe.com/wealth_management.html http://www.icai.org/members/CRM_banking.pdf

53

CHAPTER 12

APPENDIX Questionnaire For Relationship Manager Name:-…………………………………………………………………… Bank:-…………………………………………………………………… Branch:-………………………………………………………………… Q. (1)Since how long have you been working with this bank? 1 year[

] 2 year [

] 3Year [

]

4 year [

]

5 Year or more

Q.2. Had you any prior experience of working in banking industry or any related industry before joining this bank? Yes [

]

No [

]

Q.(3) your qualification …………………………………………………. Q.(4) No of priority customer at your branch…………………………….

54

Q.(5)

Mark the services that your bank is providing to the priority

customer a. Internet Banking b. Higher Cash Withdrawal limit c. Free pickup and delivery of cheques and cash d. International Debit Cards Q.(6).How many customer availed the financial advisory services? …………………………………………………………………………………….. Q.(7). Relationship management is helping banks to secure customer base for lucrative banking business. (i)

Strongly agree

[

]

(ii) Agree

[

]

(iii) Neither agree nor disagree

[

]

(iv) Disagree

[

]

(v) Strongly disagree

[

]

Q.(8). What factors may make priority customer reluctant to develop such a relationship? (Rank them on scale of 4 – 1 from Most Important to Least Important) 1. Higher turnover of bank officers in charge of managing the relationship 2. Reluctance of the priority customer to reveal his/her financial status 3. Inadequate expertise offered by banks to meet the demand for diverse financial services 4. Declining dependence on financial advice and needs.

55

Q.(9) What specific actions of a bank will help build strong relationship banking with its clients? ( Rank them on scale of 4 – 1 from Most Important to Least Important ) 1. Avoid frequent changes in banks officers in charge of managing the relationship with particular clients. 2. Proactively identifying ,locating and advising the clients on new investment avenues 3. Time to time organizing customer meets to flourish the relationship and develop confidence with the clients. 4. Highly trustworthy research to back the bank officer in making decisions Q.10. What are the most important factors behind the weak discipline in bank management? (Rank them on scale of 4 – 1 from Most Important to Least Important) 1. Government ownership of banks and political or bureaucratic interference in banking operations. 2. Expectations from the government to bail out the troubled bank. 3. Dereliction of duty by the financial advisory services officials of banks 4. Oligopolistic banking market structure Q.11. does the government ownership of banks constrain the efficiency of banks because of the following reasons. Rank 4 to 1 from Most important to least important 1. Outside interference in bank management

56

2. Appointment or dismissal of senior management not based on their capability or performance. 3. Lack of professionalism in employees. 4. Weak incentives for monitoring bank management

57

Questionnaire For Priority Customer Name:……………………………………………………………….. Age :………………………………. Gender:

Male

[

]

Female

[

Above

10

] Occupation:…………………………………………………………. Monthly Income: Less than 5 Lacs [ Lacs

[

]

5-10

Lacs

[

]

]

Q.1 Name of the bank from which you are availing financial advisory services? ……………………………………………………………………………………. Q.2 Since how long have you been priority customer of the bank? Less than one year [ two year [

]

1-2 Year

[

]

More than

]

Q.3 Mark your satisfaction level with the priority services of your bank? Completely Satisfied

[

]

58

Satisfied

[

]

Cant say

[

]

Dissatisfied

[

Completely Dissatisfied

]

[

]

Q.4 How do you perceive the priority services of your bank in relation with the other banks. Much Better

[

]

Slightly Better

[

]

Slightly Worse

[

]

Much Worse

[

]

Q.5 Rate the financial advisory services of your bank on the following parameters. 4- Completely satisfied

3- Satisfied

2- Dissatisfied

1- Completely Dissatisfied Investment Guidance

[

Regular Market Information

[

] ]

Query Handling

[

]

Quality of services

[

]

Q.6 Would you like to continue as a priority customer with the bank? Certainly Yes [ [

]

Yes

[

]

No [

]

Certainly No

]

59

Q.7 Are You priority customer of any other bank? Yes

[

]

No

[

]

If yes specify the bank’s name ……………………………………………………………………………………… Q.8 Please rate the following relationship efforts of your bank 4-Very good

3-Good

2- Poor

1- Very Poor

(i) Query handling by officials. (ii) Greeting on selected occasions (iii) Information about new service (iv)Promptness in service (v)Priority in service Q.9 Is relationship manager of your bank take efforts to monitor your investment portfolio? Yes

[

]

No

[

]

Q.10 Is relationship manager skilled /knowledgeable to give you investment advice? Yes [

]

No

[

]

Q.11 What are the most important motivations or expected benefits for having such a relationship?

60

(i) Advice from bankers on your business and future financial planning (ii) Easy access to other financial markets (iii) Better credit availability (iv)Behavior of the banker Q.12 Does relationship banking lowers your investment risk? Yes [

]

No

[

]

61