Introduction

Evolution of Banking
The evolution of the commercial banking industry in India has been governed by the social objective of expanding the reach of banking services and the mobilisation of domestic savings. The roots of this social character of Indian banking can be traced to the passing of the State Bank of India Act, 1955, by which the undertaking of the imperial Bank of India was taken over by the newly Constituted State Bank of India (SBI). The SBI was established in 1955 by an Act of Parliament, nationalising the former imperial Bank of India. This institution and its seven associates banks, which becomes SBI subsidiaries in 1960, were distinct from the other major Indian commercial banks, which remained in private hands until two rounds of nationalisation in 1969 (14 banks) and, in 1980 (6 banks). In February 1969, the Government of India's (GOI's) nationalisation of 14 largest private sector banks was the culmination of pressures to use the banks as public instruments of development. The GOI imposed "social control" on banks, of which priority lending was a major aspect. It introduced restrictions on advances by banking companies. These were intended to ensure that bank advances were confined not only to large scale industries and big business houses, but were also

directed, in due proportion to other important sectors like agriculture, smallscale industries and exports. Since 1969, there has been a significant spread of the banking habit in the economy and banks have been able to mobilise a large amount of savings. However, by the 1980s, it was generally perceived that the operational efficiency of banks was declining. Banks were characterised by low profitability, high and growing nonperforming assets, and low capital base. Poor internal controls and the lack of proper disclosure norms led to many problems being kept under cover. The quality of customer service did not keep pace with the increasing expectations. All these reasons led to the next phase of nationalisation. The 1969 nationalisation had raised public sector banks' share of deposit from 31 %to 86% while the nationalisation of 1980 raised the same to 92%. In 1991, a fresh era in Indian banking began with the introduction of banking sector reforms as part of the overall economic liberalisation in India.

Active and predominant financial intermediaries in the country

Public Sector Banks The banking sector in India has been characterised by the predominance of PSBs, which include the SBI and its seven associates, and 19 other nationalized banks. As on March 31, 2000 the assets of PSBs aggregated Rs. 8,910 billion, representing 80.2% of the total assets of all SCBs. Together, PSBs accounted for 82% of public deposits 79% of advances and 90% of branches of all commercial banks in 1999-00, thus clearly demonstrating their dominance of the Indian banking sector.

Table No. 01

Table showing size of public sector banks in Indian banking sector

Sl. No. 1. 2. 3. 4. 5.

Particulars Assets Deposits Advances Income Net Profit

Graph No. 01

Graph showing the size of Public Sector Banking Banks in Indian Sector
3521. 09 90 51.1 9 4 Asse ts Deposi tsts tsts Advanc eses Inco mem Net e Profit

8909. 52

7373. 13

Table No. 02

Table showing report on trends and progress of Private sector banks in India.

Sector Banks

Old Private Banks Rs. In Billion 777.0 9 8 6 669.8 335.8 87.50 6.55 %of total SCBs 7.0 7.4 7.6 7.6 9.0

New Private Banks Rs. In Billion 588. 57 82 56 7 466. 221. 54.0 5.69 %of total SCBs 5.3 5.2 5.0 4.7 7.8

Particulars Assets Deposits Advances Income Profit

Graph No.02

Graph showing Report on Trend and Progress of Privat Sector Banks in India 800 700 600 500 400 300 200 100 0

Old Private Banks New Privvate Banks

At end-March 2000, the total assets of private sector banks (old and new combined) aggregated Rs. 1,365.66 billion and accounted for 12.3% of the total assets of all SCBs Further they accounted for 9.8% of the total branches of commercial banks in the country (as of end-June 2000).

Foreign Banks

Advances

Deposits

Income

Assets

Profit

Currently, 42 foreign banks are operating in India, accounting for 6.2% of e public deposits and 8% of loans of all SCBs. The biggest foreign banks India by asset size are Standard Chartered-Grindlays, followed by Citibank and the Hongkong & Shanghai Banking Corporation.

Table No.03

Table showing Progress of foreign banks in India

Graph No.03

Graph showing Progress of Foriegn Banks in India

103.28 356.17

9.68 828.5

Assets Deposits Advances Income

493.24

Profit

New challenges The challenges posed to the financial sector in the market place are the following Deregulation Advanced information technology Globalized markets and growing volumes of financial transactions Volatility of the markets and Increased customer demands and sophistication of markets and customers.

Customer satisfaction

Banks are service organizations whose customer service is poor and need a lot of organizational and personal skills. So this is the case of the life and general insurance, whose reputation for quality and delivery of services is probably poorer than that of banks. This has been the result of protracted market monopoly and semi-monopoly elements in the market and poor quality of human element and personal skills, which are the basic brick for service marketing. Both in banking and insurance, whose customer base is as wide as the whole household sector, "customer is not treated as the king and their marketing strategies are weak. The prerequisites for customer satisfaction are the following. Identification of customer needs for financial and non- financial services Develop appropriate plans and schemes for them Price them reasonably on a cost plus basis in a competitive

spirit and not on monopoly basis. Strategies for marketing through personal contact, letters,

advertisement through agents as in the case of insurance and in media. Use of development officers, R&D and customer based

research for scheme and pollicies, which are innovative and need

based. Services with quality and time consciousness of depositors,

customers and policy holders

Market research: That is identification of customers' financial needs and wants and forecasting and Researching future financial market needs and competitors' activities. Product development: That is a appropriate product to meet financial needs of the customer. Developing a product which can help the customer and which satisfy their expectation.

Pricing of the service: That is promotional activities and distribution System in accordance with the guidelines and rules of the Reserve Bank of India and at the same time looking for opportunities to satisfy the customers better.

Developing market orientation & Customer consciousness:

That is marketing culture--among all the 'Personnel' of the bank Customer consciousness through training.

INTERIM REPORT OF THE WORKING GROUP ON CUSTOMER SERVICE IN BANKS In the present day circumstances, especially after the nationalisation of the 14 major banks in the country, more and more attention is being paid to revolutionize the various factors of commercial banking. With this end in view the government of India appointed a working group on customer service in banks headed by Shri. RK Talwar. The group in its interim report made a number of recommendations to improve the customer service. These recommendations are as under:

Banking is nothing but a service. Banks are business organizations selling bank services. It is necessary for banks to continuously assess and reassess how

customers perceive bank services what are the new emerging customer expectations and how these can be satisfied on an ongoing basis. Appraisal of customer service thus must be an essential activity for all banks to be carried out meaningfully. Unfortunately, there has been so far no integrated, unified and organised effort for a study of customer service, in all its aspects by banks

in India. Even individually, we are afraid, not much attention, at least on a regular basis, has so far been devoted to these banks. The low priority given to such appraisal and study might perhaps have been due to inadequacy of bank services compared to large unsatisfied demand all these years_ banks have been operating in a seller's market and this continue to have, ready customers and large waiting lists. It is true that customer service is an extremely dynamic concept. What is good customer service today may be indifferent service tomorrow and bad service the day after. But even in absolute terms, there is general consensus that the service presently rendered by banks needs, and is capable of, vast improvement. There is general feeling today, both amongst bankers themselves and in the public at large, that customer service rendered by banks leaves much to be desired, and in certain respects, had indeed reached very low levels. This can be ascribed to many reasons. Maybe the enormous branch expansion program undertaken by banks along with the ever-widening range of the activities and responsibilities particularly after nationalisation has weakened the structural fabric of the organisations. Simultaneously, public expectations have been constantly, often justifiably, increasing, and with the growing public awareness, dissatisfaction over the service has assumed growing expression. And the time has come for banks to look inward to find out what is the nature and quality of the things they sell, what is the product

demanded by their customers and have to go about marrying the two.

Briefly speaking,
Customer dissatisfaction is seen to be pointedly acute in the following aspects; Delay in putting through transactions Delay in correspondence Delay in decision making In regard to credit applications particularly, questions asked and

data required are not fully Relevant. All the enquiries not made at one time. Lack of counseling. Undue emphasis of staff on observance of rules and procedures and General attitude of unconcern and apathy for the client.

Ascertaining these expectations therefore is necessary. Expectations vary from one class of customers to another--the underprivileged, the common man, the agriculturist, the professional, the trader, the industrialist, etc., also as between rural, semi-urban and urban customers. Circumstances under which expectations would be met also differ as between bigger and smaller offices. Further, dynamics of customer expectations and aspirations and the resultant futuristic demands on banks also call for detailed investigation and long-term measures. One major component of customer service is related to the

involvement and commitment of people rendering such service, and the other major component covers the systems and procedures aspects; and The entire range of customer service will have to be, thus, studied against the backdrop of other major interdependent factors:

Demands on and expectations from banks Quality and job knowledge of banks personnel Attitude and motivation of bank employees Back-up systems and procedures

Some of these and other related factors have a direct and immediate impact on customer service, while others have a long-term significance, but are, nonetheless, very relevant and important. The critical service areas needing urgent attention have been identified as: attention. Encashment of Cheque. Issuance of receipts. Statements of accounts. Collection of Cheque and bills and Deposits accounts. Remittances and collections areas needing immediate

Remittances including issue and encashment of drafts.

Staff attitudes To conclude, banking which is one of the major service industries playing its role in removing the hindrances involved in trade and commerce. The services of the banks cannot be neglected at any point of time. The role of banking service enables not only individuals but also a nation as a whole. It has been rightly said in the interim report submitted by R. K. Talwar Committee to the government that the customer is a focal point in any service industry, and particularly in banking. The report throws light on various areas where there are possibilities for improvement in customer service. The customer who expects the services in good quality is due to the changes in lifestyles.