Internship Paper- Spring, 2012

Acknowledgement

I earnestly thank Mr. Mehedi Hassan Chowdhury, Senior Relationship Manager, Premium Banking, BRAC Bank, Chittagong Cluster, for acting as a mentor round-the-clock and showing me the right direction whenever I started going off-track. Nevertheless, I must acknowledge the continual support I got from my Internship Supervisor Mr. Sanjoy Bose, Relationship Manager, Premium Banking, BRAC Bank Chittagong region through guiding me during the whole Internship period.

Most importantly I would like to thank my supervisor Mr. Md. Ayub Islam. Without his support and guidance this report would not have been possible.

Also I would like to thank my parents and my friends especially Mr. Arup Ratan Barua whose constant support and advice inspired me in every sector including accomplishing the research.

Finally I thank all other BBL staffs whose cooperation I found to be really kind and supportive. Indeed, I wish every success of BRAC Bank Limited in future.

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Letter of Transmittal
May 28, 2012 To Mr. Mehedi Hassan Chowdhury Senior Relationship Manager Premium Banking, Chittagong Cluster, BRAC Bank Limited.

Subject: Submission of Internship Report.

Dear Sir, With due respect I am very pleased to enclose herewith the internship report on Product Centric Business Model & Customer Centric Business Model: A comparative Study of BRAC Bank. I have tried my best to prepare a good report with providing all of my effort and to cover all aspects regarding the matter. I think that this report contains the information that you need to get an idea about my research also.

I, therefore, hope that you would be kind enough to accept my internship report.

Sincerely Yours,

Priyanka Barua

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Internship Paper- Spring, 2012

Executive Summary
This is the internship report based on the experience I had and research I made during three months long program I worked as an intern at BRAC Bank Limited, Agrabad Branch, and Premium Banking division. The topic of my repot is Product Centric Model & Customer Centric Model: A Comparative Study of BRAC Bank. For this purpose I have divided the report in four main parts that firstly differentiates the Customer Centric Banking Model with Product Centric Banking Model. Then discusses about the services provided in this new model and existing Premium Banking Model. I have tried to find out the Customer satisfaction whether it is focused on service or product. And lastly I have tried to find out the profitability of the existing Premium Banking business model and thus tried to assume whether the new business model shall be successful or not. Banking is the heart and soul of an economy. Bangladesh with a developing economy linked its almost every sector with banking. So there is a need for efficiency and development in the banking sector. Over the last few decades many international banks has set its foot on Bangladesh. They have improved and developed their systems and benefitted the economy of this country as well. Along with multinational banks a domestic bank that has competed and successfully set its standards in the sector of banking in Bangladesh is BRAC Bank Limited. Modern bank has an important role in the maintenance and development of the economy. In simple words, bank collects the money from the mass people which would remain idle otherwise. And then reallocates the money in different industrial, financial or personal sectors where it is needed and properly utilized. In other words it can be said that banks provide necessary funds for executing various programs underway in the process of economic development. It utilizes the productivity of the money and thus earns profit. As a twenty first century bank BRAC Bank dont just do the baking particularly, rather it is continuously becoming something new- by offering new services, merging a consolidating into much larger and more versatile business. Now it has diverted its orientation from product centric point of view to customer centric point of view. Thus not
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Internship Paper- Spring, 2012 by just satisfying its customer needs than to amazing the customer in the competitive financial world. In this report I have tried to discuss the retailed banking sector of BRAC bank. To understand its retail customer needs and satisfy it BRAC Bank has divided its retail banking into four different segments according to customer profile. These are Premium Banking Supreme Banking Excel Banking Easy Banking

The core reason for the segmentation of retailed banking sector is to develop a model that will reach beyond mere cross selling and contribute towards offering life cycle based products for the customer and establish the need to understand customers needs comprehensively. As per the guideline for internship project and suggestion by my supervisor I have tried to differentiate the ongoing scenario of BRAC Banks customer centric model with the traditional model. This model is being introduced to get greater profit by giving the customers better service. In the research what we have found out is that customers value service more than product quality (Interest Rates, FD, Features). So if the customers are provided better service they can be loyal customers of the bank and thus increase banks profitability and growth. Like anything new introduced, has the problem of facing the first bluster. What BRAC Bank is trying to do is completely a new idea in the sector of banking in Bangladesh. So they are expected to face some difficulties and thus i have tried to give some recommendations. Finally the thing I must mention is that I have thoroughly enjoyed the period of internship with BRAC Bank Limited. It could not have been better what I experienced in BRAC Bank Limited. I got the opportunity to see personally know the corporate world. What I have learnt in here will surely help in my advancement towards my goal.
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Table Of Contents
S. L. 1.0 2.0 3.0 4.0 4.1 INDEX Introduction Company Overview Literature Rivew Findings PAGE NUMBER 1-3 4-6 7 8

A Light on Differentiation Between Customer 8-16 Centric Model And Product Centric Model

4.2

Service Provided in New Model

17-20

4.3

Satisfaction of Customers Comparing Product 21-27 Centric Model with Customer Centric Model

4.4

New Banking Model and Traditional Banking 28-32 Model Evaluating Profitability:

5.0 6.0 7.0

Conclusion and Recommendation Bibliography Appendix

33-34 35-36 37-39

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Index for Figure and Graphs S. L. 1 2 3 Name Shareholders of BRAC Bank LTD Management Structure Page Number 5 6

Model showing the relationship between Customers 9 Experience and Banks Offered Value and Interaction of touch Point.

4 5 6 7

Pull Based Model Logo of New Retailed Banking Model Product centric model Pushed Based Model

10 12 14 15

8 9 10 11 12 13 14 15

Figure Differentiating Preference Based on age Figure showing account holders occupation Figure Comparing Reason for Account Opening Evaluation of Return Earnings per Share & Price Earning Ratio Changes Regarding Deposits Changes Regarding Profit after Tax Changes Regarding Total Asset:

21 22 23 29 30 31 31 32

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List of Acronyms BB BBL CX IFC RM BSSO EPS PE Ratio ROI ROE ROA Bangladesh Bank BRAC Bank Limited Customer Experience International Financial Corporation Relationship Manager Branch Sales & Service Officer Earning per Share Price Earning Ratio Return on Investment Return on Equity Return on Asset

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Internship Paper- Spring, 2012

CHAPTER 1

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Internship Paper- Spring, 2012

1. Introduction :
1.4. Origin of the Report:
This report was prepared in order to fulfill the requirement of internship in BRAC Bank Limited will be submitted to the company 2nd may 2012.

1.4.

Background of Internship:
BBA 499 (Senior Project/ Internship) is a mandatory course that allows the young graduates to learn and imply their knowledge in the practical corporate world, as soon as they reach the completion of their undergraduate program to achieve efficiency to become the future the leader of the corporate world.

1.3.

Objectives:
The objective of the report is,

To differentiate between Customer Centric Model (Premium Banking) and Product Centric Model (Traditional Banking).

To find out what services are provided to the priority customers. To identify the level of satisfaction comparing traditional banking with premium banking.

To check the profitability of the new model with traditional model.

1.4.

Rationale:
To satisfy the objectives of the study, the following measures were taken.

2. We have taken survey from the customers about their expectation and satisfaction level.
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Internship Paper- Spring, 2012

3. Observed both the traditional banking and premium banking environment, customers and employees. 4. Collected data by interviewing different personals of the bank and from their financial reports 5. Evaluated banks financial reports of both three years before the arrival of the Premium Banking and three years after it. 6. Summarize the evaluation and survey result. 1.5.

Methodology:
The nature of the research required both desk and field research. This helped us to generate both qualitative and quantitative data. The desk research helped us get information from Internet, Evaluate collected the Financial reports, and data

a. Observation: To get an insight idea of the BRAC Bank to understand the models they have in their retailed banking sector.

b. Experience Survey: During the research there were interactions with different experienced persons who enriched the materials with their wisdom.

Sampling: For the convenience and obtaining the goal of the study quota sampling has been used. As the objectives required both traditional banking service taker and premium banking service taker. [Sample size= 50 respondents. Two quotas 1. Traditional Banking customer; random 25 respondents. 2. Premium Banking customer; random 25 respondents.

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1.6.

Limitations of the project: As a bank maintains high privacy policy in sharing the information about their
customers many information could not be retrieved. And thus the research might not represent the accurate scenario.

Time factor greatly affected the result. If given more time the study could have
been more resourceful.

Generally premium customers dont come to the bank personally. They rather
send their representatives. So having their insights on the banking system was hard and rare.

Generally in bank people come for a specific reason with very specific time.
This made surveying them a little critical and biased.

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Internship Paper- Spring, 2012

CHAPTER 2

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Internship Paper- Spring, 2012

2.0.

Company Overview:

BRAC Bank Ltd, a commercial bank with local and international institutional participation is particularly encouraging the creation of opportunities and seek market niches not traditionally met by traditional banks. BRAC Bank has been striving to offer "Best in Class" services to its wide range of customers spread across the country on a platform of online banking. Today began BRAC Bank Limited, one of the latest generation of commercial banks, their existence on 4 July 2001 with a vision to be the market leader by offering the full range of banking services appropriate to the needs of the modern and dynamic banking and encourage broad participation in the economy of Bangladesh by providing high quality banking (BRAC Bank 1). BRAC Bank is owned in part by BRAC, the largest non-governmental organization in the world, the International Finance Corporation (IFC), the private sector arm of the World Bank and the International Shore Cap. The headquarters of the bank is located in Gulshan, Dhaka. BRAC Bank began his business throughout Bangladesh. BRAC Bank expanded its branch network rapidly across the country. BRAC Bank is a profitable and socially responsible business with financial institutions, market growth potential and focuses on the business, which will help to create a healthy, democratic and poverty free Bangladesh. BRAC Bank to its customers, shareholders, partners and communities on which future prosperity rests on their company's high standards for everything going on in full by the BRAC and the Grameen Bank in Bangladesh predicts all of the people -. Urban, across the spectrum - served on a special importance to the promotion of economic opportunities for businesses with access to increasing pressure to provide financing facilities. Currently, BRAC Bank has 100 branches and 60 SME service centers 3 SMEs / Krishi branches, more than 300 ATMs and 424 SME Unit offices across the country. It paid more than BDT10, 000 hundred thousand SME loans and more than 500,000 individual customers access to banking facilities. His services cut across all levels of customers, their businesses, retail or SME (BRAC Bank info 2)

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Internship Paper- Spring, 2012 BRAC bank launched its first Premium Banking lounge in March 24, 2009. (The Financial Express,
2009 3).

Premium Banking gives the high priority customers service they need with a dedicated

RM (Relationship Manager) for each and every one. And recently they have taken it one step ahead than all and launched a new model that mainly focuses on customer needs encouraging pull sale rather than push sale of old product oriented model on Feb 8, 2012 this will take effect from May, 2012.

Shareholders of BRAC Bank Limited: Table 2.1 shows the share holders of the BRAC Bank Limited (As on 31 December 2011), Shareholders BRAC IFC ShoreCap International Shares 11,717,732 14,34,273 231,184 Percentage 43.77 5.2 1 45

Institution & General Public 133,84,381 Through IPO Mutual Funds Total 2,030 267,69,600

5 100%

Shareholders of BRAC Bank LTD

BRAC 5% IFC 43.77% 45% General Public Through IPO 1.00% 5.20% Non- Resident Bangladeshis Shore Cap International

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Internship Paper- Spring, 2012 Board of Directors S.L 1 2 3 Name Mr. Muhammad A. (Rumee) Ali Mr. Quazi Md. Shaiful Ala Status With Bank Chairman Director

Mr. Mark A. Coffey (Nominated by SHORECAP Director International Limited)

4 5 6 7

Ms. Tamara Hasan Abed Mr. Shib Narayan Kairy Ms. Nihad Kabir Mr. Sayed Mahbubur Rahman

Director Director Director (independent) Managing Director & CEO

Management of BRAC Bank Ltd: The Board of Directors is the top management and policy-making body of BRAC Bank limited. Presently the Board consists of a chairman and four directors. It is to be noted that the Managing Director, is also a member of the Board. The Directors are appointed from amongst those who have had experience and shown capacity in the field of finance and banking, trade, commerce, industry agriculture. The Chief Operations Officer executes all the activities under the direction of the Board. The officers and the other line and staff personnel are appointed by Banks own Recruitment Committee.
Managing Director

Deputy Managing Director

EVP & Chief Operation Officer

VP & Head of SME

AVP & Head of Credit

Fig2.3: Management Structure

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CHAPTER 3

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3.0. Literature Review:

4.0. The main focus of this study the Customer Centric Model of retail banking is a completely new design in sector of banking of Bangladesh. It will be fully functional this year. So the literature review observing this sector is scarce. The research made and explained in the following chapters shall add up to the existing knowledge and explain a new phenomenon. The Premium Banking sector was introduced in year 2008. So regarding the services Premium Banking study has been made ( Ashik, 2008
13).

In this report researchers

main focus was only to explain the services Premium Banking provide. The purpose of this report was to find out the customer satisfaction based on the Customer Service Delivery (CSD. So this gives the scope for a research to be made on Customer Centric Model of retail banking. I sincerely hope the objective I tried to meet was met. And thus gives reader the opportunity to learn about the model through comparative study of BRAC Bank.

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CHAPTER 4

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4.0. Findings
4.1. A

Light on Differentiation Between Customer Centric Model And

Product Centric Model

4.1.1. Customer Centric Model: In General by saying customer centric model we mean, a model that focuses mainly on customers need and thus satisfying it. It will enable the bank to reach beyond mere cross selling and contribute towards offering life cycle based products for customer.

4.1.1.a. Need For the Change: The recent global financial turbulence that started 2008to 2009 and had a large effect on 2010, made many company go through tough time and sometimes liquidation as well. And the market bubble created on 2003 and 2004 in stock market which led to the stock market crash in December 2010 to 2011. This immense catastrophe in financial market guided the crisis in trust among the customer in financial institutions. In this situation there was a need for an immediate change to restore the trust. This certainly established the necessity to institute the need to understand customers need comprehensively. So the demand driven business model instead of supply driven model was the order of the day. Regulatory changes which may impact profitability of key financial products and services. Also the there was a definite need to identify the alternative channels as a new competitive dimension and alternative to many brick and mortal services.

4.1.1.b. Customer Experience: The main focus of this change was to magnitude customer experience in greater length. These call for being acquainted with the term CX or Customer Experience.
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Internship Paper- Spring, 2012 Customer experience in banking is the sum of all experiences a customer gets over the duration of his/her relationship with the bank. These experiences might be positive to negative varying according to the interaction they have with the bank. And the perception of a bank is built as a result of customers interaction through multiple channels rather than a single channel. Positive feedback from customers end generally results in increased share of wallet and repeated business.

If we describe the CX with a figure it shall be,

4.1. Model showing the relationship between Customers Experience and Banks Offered Value and Interaction of touch Point.

The relation between these two variables is positive. Thus if the customers are offered high valued offer and provided with good interaction from the touch points the experience of the customers would go positive and the customers will be satisfied. Value Offer: It is the products bank offer. For example: Fixed Deposit and its rate. Touch Point: It is the interaction with the bank part. The representatives of the bank make the interactions with the customer. This touch points include; Physical (RM, Employee) Electronic ( ATM, POS) Non Formal ( Interaction outside the bank premises)

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Internship Paper- Spring, 2012 A customer does not just buys a product; he/she keeps buying from the same shop based on not just for the one reason Product. The relationship with the seller is a major factor as well. The products generally offered by banks are Loans Deposits

So SERVICE is the determining factor that makes one bank differentiates from the others. 4.1.1.c. Things Needed to know: To increase the customer value of the bank, understanding the customer is a must. For this reason following certain things we need to know, Customer Profile. Customer Earnings. Where does he/she spend money? What is his/her lifestyle? Customers family. To answer these questions a very close tie with the customer was needed. And old product centric model was a barrier to it. This called for the emerging of new retailed model. That is Customer centric model. This model dont just sell the product to the customers rather creates a friendly business relationship which grows over long term. This is in other words can be called Pull Based Model.

4.2. Pull Based Model

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Internship Paper- Spring, 2012 This pull based model thus generates exactly what the customer need. That means the bank understands customers need and thus suggest them with the proper financial solution not just push sale them the products. 4.1.1.d. Segmentation: BRAC Bank having 5, 05,541 (as to 08 Feb, 2012) retailed customers is a big family. These customers to provide better service and thus increasing the value needed to be segmented into customer niche to focus on their priority and exact need. Segments Threshold (BDT) % Number Clients 1,081 of Volume Deposit (BDT M) 12,660 wise %

PB ( PREMIUM BDT 50 Lac 0.21% and Above BANKING) AFFLUENT BDT 10 Lac 1.46% to below 50 Lac

28.06%

7,369

14,368

31.84%

EMERGING

BDT 50 K 14.71% 74,356 to 10 Lac

15,484

34.32%

TRANSACTIONAL Less than 50 83.62% 422,735 K

2,605

5.77%

Scenario:
Here the scenario is that the most percentage of the deposits is maintained by the Emerging to PB clients. And Emerging client has high chances of being affluent and Affluent clients have a chance of becoming PB client. And thus increasing the volume of deposits for the bank. So these clients need a little motivation and special care. As the most deposit holding clients would want to be treated like the priority customers. Otherwise they would not grow a bonding more than just financial with the bank. If they are given the required service along with the unique care they would remain loyal customers of the bank through their lifecycle.
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Internship Paper- Spring, 2012 Premium Banking, to satisfy these priority customers special needs had already been established. But BRAC Banks scenario previously mentioned shows that not only the Premium customers but also the Affluent and Emerging customers hold a big volume of deposit with the bank so they also needed to be treated with special care. To ensure the quality and to reach the customer experience goal the customers had to be segmented. This calls for the new customer centric model for the bank. 4.1.1.e. New Retail Banking Model: In descending order the mew banking model is Premium Banking Supreme Banking ( Affluent) Excel Banking ( Emerging) Easy Banking ( Transactional)

New Retailed Banking Model Logo

4.2. Logo of New Retailed Banking Model

In this picture above the logo of new retailed banking model (Customer Centric Model) is shown in descending order from left to right. 4.1.1.f. Major Differentiating Factor: Criteria
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Premium Banking

Supreme Banking

Excel Banking

Easy Banking

Internship Paper- Spring, 2012 Eligibility Threshold (Deposit) BDT 50 Lac and above VIP Customers as per recommendati on of HORB or MD BDT 10 Lac to below 50 Lac. BDT 50K Less than 50 k to Below BDT 10 Lac

*Stand Alone Asset Customer *Stand Alone Credit Card Customer

BDT 75 Lac BDT 25 Lac to Less than and Above below 75 Lac Lac Platinum Gold Classic

25

Stand Alone Asset & Credit Card customers revenue & cost will be booked segment wise as shown in the table. However they will not be eligible to enjoy benefits associated with respective segments unless meet the deposit threshold. 4.1.1.f. Premium Banking: It is the segment for the priority customer, which is made to serve the least numbered customers that maintain the most balance (above 50 Lac) with the BRAC Bank. As they are the high valued customers they need the most attention and utmost care. For this purpose an exclusive personalized sales and service channel has been made. BRAC Bank Premium Banking serves an exclusive bundle of benefits to the premium customers which are not enjoyed by other regular customers, these include exclusive Premium Banking Lounges at prime location throughout the country, wealth management services, rewarding relationship programs initiations to special events, financial seminars, movie previews and selected offers from magazines and publications.

4.1.1.g. Limitations of New Customer Centric Model: Inadequate training of sales team/ branch staff may cause knowledge/ understanding gaps about RRBBM. And this may lead to wrong customer communication resulting negative impact on revenue growth and reputation loss. Customer or any other external entities may perceive RRBBM as service discrimination and may pursue negative propaganda or may interpret regulators wrongly
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Internship Paper- Spring, 2012 Customers may react while rendering priority services at the branch for premium and supreme segments. Operational and technological error in segmenting the existing customers may occur. Communicating the new model may send a wrong message to the customer and thus effect the growth. There may be attrition in the existing sales force due to the redefined business targets after implementing the RRBBM.

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Internship Paper- Spring, 2012 4.1.2. Product Centric Model The main focus of product centric model is to maximize product profitability. In the traditional banking system, customers can open a bank account in the bank and deposited in local banks to his money. He may withdraw his money through cheques, pay orders, or bank note. He can meet the bank manager, and seek help physically. In traditional banking method, the client personally seeks assistance from the taller. In traditional banking the customer has no personal relationship with the bank they just appear at the premise of the bank and thus gets their guidance physically. In other words it can be called core banking. From the beginning of banking traditional product centric banking had taken the floor. Even now many banks follow this method. This method believes only the product has higher value to generate profit.

4.2. Product centric model

Product of Traditional Banking: In traditional banking bank offers the same product as the customer centric banking. Loan Deposits

These are the core banking products that in traditional banking the bank try to push sale. Parameters of Traditional Banking: Products are designed based on the profit margins and bank policy Bank tries to push sale the product to the customers regardless of what customer wants Bank service the customer first come first serve basis. No online or phone banking available. Customers experience weights less value.

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Internship Paper- Spring, 2012 Push Based Model: In this model regardless of what customer wants or needs the products are push sold. Push sales means, the products are generated by the bank committee based on their profit needs and then communicated and approached to the customers.

4.3. Pushed Based Model

In this scenario the research development team is purely unaware of customer needs and generates a product which they believe has a higher profit margin and thus sales them to the customer

Scope of Traditional Banking: As the bank generates the product which is most profitable to them, if they could sale those gets higher profit margin.

The bank does not need to be concerned about the customers experience which minimizes the cost

As it is a long tasted and used process employees dont need any extra training.

All the customers are treated equally thus no customers are dissatisfied.

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Internship Paper- Spring, 2012 The bank has only one touch point so less worried they have to be about brand image

Maximizes product profitability.

Limitation of Traditional Banking:

Traditional banking practice requires pre-existing assets as security, and loans carry no long-term commitment.

All the transactions are manually made and maintained. This calls for more human resource.

Customers are less valued thus loses faith in their relationship it the bank and seeks for new alternative.

Difference at a Glance: Product Centric Maximizes product profitability Customer Centric Segment wise approach

Overlook Customers need and push sale Focus on Customers need & customized products Customer experience is not important offers Customer experience is valued and provided through touch points, products, pricing Customer relationship Customers look for better alternative dissatisfied and destroy Relationship based banking creates long term relationship Customer will be attached through his life cycle with the bank Conventional banking Fundamental shift to value based Retailed Banking Business Model

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4.2.

Service Provided in New Model

4.2.1.

Exclusive features

Dedicated Relationship Manager: Premium banking clients enjoy dedicated services of relationship manager (RM) who caters all his /her personal banking needs such as discussing and assessing his portfolio, delivering cash management services, withdrawal of significant amount of cash and other benefits.

Wealth Max- Portfolio Management

Services: This is a one of a kind wealth

management product which enables the premium banking guests to enjoy the industrys lowest margin facility dedicated trader and hotline through Cap Edge and Managed Cap.

Exclusive Premium Banking Lounge: Premium customers enjoy a Premium Lounge dedicated to service their needs solely. Lounges are at prime locations throughout the Bangladesh like in Gulshan, Banani, Motijheel, Dhanmondi, Moghbazar, Uttara, Agrabaad, CDA Avenue, and New Market in CTG and Uposhahar in Sylhet.

Exclusive Supreme Desk: Customers of Supreme segment will enjoy the dedicated desk and BSSO to assist them for their every need at branches in prime locations.

Privileged Treatments & Discounts: Customer will get this fro different hotels, restaurants, shopping outlets and hospitals

Pre-Approved VISA Platinum Card Free Auxiliary services ( SMS/Internet/ Phone Banking)

Home delivery service (for Premium Guests Only): Accounts statement Drafts/Pay Orders/Fixed Deposit/ Flexi DPS

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Internship Paper- Spring, 2012 Travelers Cheque ATM Card/ PIN Cheque Books Any non cash banking service as per request.

Honorary Premium Banking Status for Family: This allows the family members of the Premium Customers to gain Premium Banking status and thus avail the Premium Banking services of the bank.

Special Medical, Study & Travel Services: Student facilities offered include Campus account Financial document verification for Visa processing Complementary student file Easy transfer of tuition fees Foreign Currency purchase Admission processing with reputed universities and schools in the country. Study loan Medical Facilities Include: To assist in receiving relevant approvals for medical treatment abroad Liaison with Bangladesh Bank Affiliation with most popular hospitals Medical testing fee collection for UK Visa applicants Foreign currency purchase and encashment Travel Facilities Include:

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Internship Paper- Spring, 2012 Visa processing: Dedicated relationship manager will help to arrange processing of visa related issues with selected embassies Ticket booking and purchase Foreign currency purchase and encashment Exclusive Debit Card And Cheque Book Preferential rates, fees and charges Pre- approved Visa Platinum Card

These special services and offers are exclusively provided to the premium customers and supreme customers. The basic idea behind Premium Banking is in the provision of fast and easy service. By providing regular banking items right to the customers residence or office, the Home Delivery service reduces the customers reliance on the branch. This means that the customer can save time and effort simply by instructing his or her dedicated RM to make a delivery. While it is very basic concept, home delivery of regular banking services is not being provided in a structured manner by any other bank in the country. As such, this facility will highlight BRAC Banks unique approach to personalized banking and give Premium Banking an edge over similar services. Segmentation Wise Value Creation & Service Provided: The four distinctive segments of the bank would enjoy some unique services as the PB customers used to enjoy. Every customer with a unique segment and special services

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Criteria

Premium Banking

Supreme Banking

Excel Banking

Easy Banking

Debit Card

Platinum Debit Card

Planet Debit Card

Planet Debit Card

Planet Debit Card

Identifying Customer

the

Platinum Debit Card POP up Message in Finnacle

Supreme Privilege Card POP up Message in Finnacle Existing BSSO from Selective Branches will be assigned as RM Dedicated Counter in Selective Branches Discounts and Benefits from Tie up Partners Special Rates Discounts and benefits from banking products Home Loan Auto Loan Personal Loan

Value Proposition

PB Lounge Dedicated RM Home delivery Discounts and Benefits from Tie up Partners Special Rates Discounts and benefits from banking products

Excel Privilege Card POP up Message in Finnacle Service Through Branches Discounts and Benefits from Tie up Partners

Only card

Planet

Service through ATM, CDMs, IVR, bKash etc

Asset Products

Home Loan Auto Loan N/A TBSA Special Deposits

Home Loan Auto Loan Personal Loan

N/A Auto Loan Personal Loan Ezee/ Savings Classic /Current Classic/ Payroll Accounts/ Aporajita

Deposit Products

TBSA/ Fixed Special Fixed Deposits

TBSA/ Special Fixed Deposits/ Savings Classic /Current Classic

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4.3. Satisfaction of Customers Comparing Product Centric Model with Customer Centric Model:
4.3.1. Orientation towards Service Based on Age: In the survey based on the questionnaire the researcher prepared and interview, one thing stood out that young generation given the choice between better product and better service they preferred service. The attributes & quality of service is their main concern. This indicates that the banking sector of our country is developing from product centricity to customer
9 8 7 6 5 4 3 2 1 0 21-30 Years 31-40 Years 41-50 Years 51+ Years Better Service Better Product Relationship with the Bank

centricity.

4.5. Figure Differentiating Preference Based on age

From the figure above we can notice some certain things that 1. People of age group 31 to 40 preferred service the most. So this can be said, that the main earning emerging group ( 31-40 age Group) wants to have the better facilities like home delivery of pay orders, cheque books etc. 2. 41 to 50 age group people want service along with the better product. But they value relationship as well. 3. Here a trend can be seen of growing need preference of service and a good relationship with bank and decreased demand for product variety and quality.

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4.3.2. Account Holders & Their Occupations: Respondents sometimes had different accounts with different banks and sometimes they had several accounts in the BRAC bank. There was a certain difference between their occupations and their preferred account cluster.
8 8 7 6 5 4 3 2 1 0 Premium Banking General Banking Student Other (Doctors, Engineers, etc) SME Service Holder

Businessman

4.6. Figure showing account holders occupation

From the Figure above we see 1. Premium Banking account holders are mostly businessman and other professionals 2. A large portion of general banking account holders are SME (Small Enterprise) and Service holders who have a salary account in the BRAC bank. 3. Student mainly opens account for education purpose and in general banking. 4. Housewives have Aporajita Accounts (special account designed for women) in general banking and Saving Account in Premium Banking. The reason of no SME in Premium Banking is because the requirement of having 50 Lac Tk balances in the account which is rarely afforded by the SME businessmen. Most of the businessmen prefer premium banking because of the service. As premium clients have their personal lounge so they dont need to wait in a long queue for their turn. This saves them money and time. Also service like home delivery for non cash products is really very
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Internship Paper- Spring, 2012 convenient for them. They hardly ever have to wait for the banking services. The services come to them. The product of both general banking and Premium Banking is the same but the major difference is that Premium customers are treated as VIP customers. This is most preferred by the businessmen. Businessmen are the most valued customers as they generate the most profit and thus desired by the bank. So giving them the service they need and saving their valuable time attracts them towards banks and makes them loyal customers eventually. Students and housewives mostly open bank accounts in general banking. Housewives for savings purpose by opening fixed deposits and student open student accounts for studying abroad, maintaining student file, visa purpose etc. 4.3.3. Reason for Opening the New Account:

Premium Banking
0 8 20 0 0 Relationship Manager (RM) Personal Choice 72 Experience Promotional Activity

General Banking
12 40 0 44 40 Branch Sales & Service Officer (BSSO) Personal Choice

4.7. Figure Comparing Reason for Account Opening

Premium Banking
Percentage 72 20 8 0 0 0 100 Frequency 18 5 2 0 0 0 25

Reason
RM/ BSSO Personal Choice Experience Promotional Activity Influence of Others Image Total

General Banking
Frequency 11 10 3 1 0 0 25 Percentage 44 40 12 4 0 0 100

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Internship Paper- Spring, 2012 The Sample size was 50 respondents from each quota containing 25 respondents of Premium Banking account holders and General Banking account holders. From the survey and interview conducted for the purpose of the study, the reasons for opening bank account in BRAC Bank were made clear. In case of Premium Banking main reason for choosing BRAC bank is RM (Relationship Manager). RM influences and maintains relationship with the clients directly. This gives the Premium clients an advantage of having any banking problem resolved through the RM and thus has a better banking experience. Few of the Premium clients want to have the experience of the Premium Banking and opens and account for personal choice. In case of General Banking is by the persuasion of the BSSO (Branch Sales & Service Officer). They generally dont get the first hand services through the BSSO. The General clients personally choose BRAC bank for the convenient location and personal choice. In the survey and interview with the sample none found with the reason to open an account for the banks brand image or influence of others. So this can be said in case of banking person to person influence is playing the main role to the customers. Brand image or the influence of others caries a little value.

4.3.4. Service Diversification and Preference Most of the respondents argued that, service provided in Premium Banking is far better than that of the general banking. If given the choice and capacity to open an account in Premium Banking division most of them would want to open an account in here. Service quality is the most important factor from the viewpoint of the respondents. As better service provides better satisfaction and quality in all area including banks employees behavior, products and facilities. This is why service quality is the supreme reason for choosing premium banking. Differentiating service quality that determines the preferences of the clients for opening bank account in Premium banking are,

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Internship Paper- Spring, 2012 In Premium Banking the daily banking service as cash transaction are provided in instance with haste. But in General banking clients has to wait in long queue for their turn to have the service.

Premium banking clients can get any information regarding their account by phone which General Banking clients cannot.

Premium clients are treated as VIP customers but General banking customers do not.

General banking customer has to be himself present for any non cash transaction as cheque book collection, issuing pay order etc. but the Premium clients do not need to be present for these purpose the appointed RM takes care of his personal banking requirements.

Anytime the Premium clients can check and have their banking transaction records without any fee. But the General banking customers has to pay a certain fee for this purpose.

This factors above mentioned, differentiates the General Banking customers from the Premium Banking customers. To get these offered services a person wants to open an account with Premium Banking Division. Also these are the factors make banking easier in the eye of the customer thus they get the service they deserve and desire.

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Internship Paper- Spring, 2012 4.3.5. Limitation of Premium Banking & General Banking:

A. General Banking: There are a lot of limitations of general product driven banking that makes them unappealing in the eye of the clients. From the customers point of view these are as follows: 1. General banking service are lengthy it takes a long time and patience.

2. The customers are not provided services in first hand basis.

3. During busy working days in week (Sunday & Thursday) the queue are even longer and service offering process is even slower.

4. The interior of the General banking is less attractive than that of Premium Banking.

5. The General banking is not that much concerned about the customers as it is product driven. This makes the customer less satisfied with the services.

6. The behaviors of the bank personnel are less cordial than that of the premium banking personnel.

7. The idea of computerized banking service is a little new to the customers and sometimes they feel unsecured.

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Internship Paper- Spring, 2012 B. Premium Banking Though the Premium Banking provides the better services to their respective customers but the customers think the Premium Banking also have some limitation. These limitations are as follows:

1. Premium Banking has a very limited number of lounges. For example, it has only two Premium lounge in the whole Chittagong Region. Though it is in the prime location of the city at Agrabad & Halishahar, but still to take the cash and other non cash services they have to travel all the way there.

2. The cash transaction at Premium lounge is provided only till 4 pm. Any service required after that has to be taken from either the branch as like as general customers or an RM has to be informed. It is a minor problem as most Premium clients take the service before closing time.

3. To be a Premium Client one has to have a half yearly minimum balance of Tk 50 Lac. So not everyone with a desire to be a Premium client can afford it.

4. Sometimes Customers feel unsecured due to the complexity of the model and also because of the computerized system.

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4.4. New Banking Model and Traditional Banking Model Evaluating Profitability:
All businesses are essentially profit driven. Banking is not above the theory. BRAC bank from the beginning of its journey had the view to make profit by giving the better service to the customer as a local business. They tried to innovate ideas apart from others. They had the vision to work for the missing middle (SME) and successfully became the pioneer in this segment. After that in year 2009 they introduced preferred banking in their model and gave birth to Premium Banking. Though preferred banking was not the new idea then but still they acquired a large number of premium clients. Now they are introducing an even newer idea in the sector of banking in Bangladesh that is Customer Centric Retail Banking Model. The answer to whether this banking model shall be successful or not lies in the success of the previous preferred model. This is why main focus of this segment is to check whether the new model of intruding Premium Banking has been successful as in profitability.

To check the profitability of the Premium Banking the financial reports of 2008 to 2010 has been checked with profitability ratios.

4.4.1. Financial Review 2008- 2011 For the research purpose to check the financial over view of BRAC Bank over the year from before and after the change in retail banking model, few ratios with visual and informative analysis has been made.

Profitability Ratios

2008

2009 12.30% 1.56% 19.19% 3.94 17.45

2010 9.00% 1.55% 18.95% 5.05 16.96

2011 12.41 1.36% 17.90% 5.15 8.87

Return on 12.61% Investment Ratio Return on Asset Return on Equity Earnings Per Share (BDT) Price Earning Ratio (BDT) 1.64% 22.88% 2.95 28.07

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Internship Paper- Spring, 2012 4.4.2. Evaluation of Return:

Return on Investment (ROI)

15 In the financial12.3 12.61 review there h 12.41 10 9 5 0 2008 2009 2010 2011 Return on Investment (ROI) 2 1 0

Return on Asset (ROA)

1.64 1.56 1.55 1.36 Return on Asset (ROA)

2008 2009 2010 2011

Return on Equity (ROE)

30 20 10 0 2008 2009 2010 2011 22.88 19.19 18.95 17.9 Return on Equity (ROE)

In 2010 was the time of great recession which our financial sectors specially banking sector are facing the problem of. Mass people have less income and moreover lack of trust in financial corporation. This caused a bad impact on the returns of banks. Regarding returns on interest BRAC bank has a progress during the period of time. In year 2010 the ROI decreased a little bit to 9% but again in 2011 it attained its position by increasing to 12.41%. But in both the case of ROE & ROA the returns has decreased over time. This means BRAC Bank generates lesser return on asset & equity it has. Last years ROA dropped to 1.36 % from 1.55% of previous year 2010. And the ROE dropped in 2011 17.90% from 18.95 % that of previous year 2010.

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Internship Paper- Spring, 2012 4.4.3. Earnings per Share & Price Earning Ratio

Earning Per Share (EPS)

2011 2010 2009 2008 0 2 2.95 4 6 3.94 5.15 2011 5.05 Earning Per Share (EPS) 2010 2009 2008

Price Earning Ratio (PE Ratio)

8.87 16.96 17.45 Price Earning Ratio (PE Ratio) 28.07 0 10 20 30

The figure above depicts that there have been a steady progress in the earning per share. It rose from BDT 2.95 in the year 2008 to BDT 5.15 in year 2011. This means that the shareholders are getting more earnings against each share. On contrary the PE ratio has decreased over time form year 2008 to year 2011. Analysis: The increasing ROI depicts that BRAC Bank has a good return from the investment done through wise decision making. And that is a good sign.

Steady decrease in ROA indicates that BRAC Bank is not generating sufficient net income from the asset it has to invest. ROE as well has steadily decreased. It measures how much a company earns within a specific period in relation to the amount that's invested in its common stock.

EPS had a slight sharp growth from 2008 to 2010 and then a steady growth in 2011. This indicates that earning against one share has increased over this indicates the steady growth in banks profitability.

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Internship Paper- Spring, 2012 On contrary the PE ration has decreased over time which is a desirable as stock with high PE ratio indicates that the stock is overpriced.

4.4.3. Changes Regarding Deposits

Deposits
120,000 100,000 80,000 60,000 40,000 20,000 0 2008 2009 2010 2011 58,007 Deposits 88,158 75,220 103726

BDT In Million

In the selected period of time the deposit of BRAC Bank has increased. It increased 29% from the year 2008 to 2009 (Introducing Premium Banking). After that there was increase, but not that significant about 17.20% in 2010 and 17.65% in 2011.

4.4.3 Changes Regarding Profit after Tax

Profit
2008 1009 2010 2011 0 500 1,000 1,500 973 1,304 1,670 1,702 2,000 Profit

Interest Income of the bank has increased by 25.9% from the year 2010 to 2011.
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Internship Paper- Spring, 2012 4.4.4. Changes Regarding Total Asset:

Total Asset
140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2008 2009 2010 2011 72,442 Total Asset 95,127 117,298 133,201

Total asset of the bank rose to BDT 133,201 in the year 2011 from BDT 117,298 of year 2010. These increased by 13.6%. The Increased asset indicates banks good financial position. 4.4.5. Observation From above scenario this can be said that, the banks overall financial position is good. Due to the Global Financial Meltdown it faced a little downside in year 2010. But at the year 2011 it took its pace again. Banks earnings against asset and equity had an unsatisfactory scenario. But earning per share showed a steady growth. Also banks deposit has increased greatly from year 2009. This indicates that people are now keeping more money in the bank and or opening new accounts. Total asset of the bank has increased. So the banks financial performance has been satisfactory.

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CHAPTER 5

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5.0. Conclusion & Recommendation:

5.1.Conclusion: BRAC Bank from the beginning of its journey has tried to stand out from others and focused its business towards successful decision making. It has started its segment of PREMIUM BANKING in the year 2009. From then it has tried to not just satisfy the customers but also to change the view in the sector of banking. Keeping that in mind they are initiating an even newer trend in banking sector of Bangladesh that is Customer Centric Business Model. In the research the main focus of the researcher was to explain this model along with its service and project the profitability of it. In the journey there some limitations have been found. And regarding that some recommendations are given.

5.2.Recommendation: First of all as the model is completely new in the banking industry, the employees will be less informative regarding this. That is why, Training Programs: Adequate training program explaining the model and its criterion to the employees need to be taken. Also time to time refresh training should take place to re-inform the employees their dos and donts. Monitoring: To keep the image of the bank in the eye of the customer, the activities of the employees has to be carefully monitored by the line manager and senior manager. Communicating with Customer: The customers shall be curious or sometimes confused about the idea of new model, so the BBL personnel have to provide them the correct guideline and information. Communication Among the Bank Personnel: Verbal and also printed communication shall be maintained. Any confusion of any employee shall be instantly eradicated by the manager or line manager so that the employee doesnt mis-communicate with the customer. In this regard the senior manager or line manager has to be informative about the latest idea at all times.

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Internship Paper- Spring, 2012 Report to the Authority: Any adverse incident immediately needs to be reported to the authority. And incident with customers like this shall be delicately handled. Questions: The customers and sometimes the employee might have questions regarding some rules in new model. These questions shall be noted and taken seriously as this may furnish the model in greater strength. Feedback From Customer: The success of the new model depends completely on the perception of the customer. So the opinion of the customers needs to be collected. In this regard, the RM or the recruited person shall skillfully understand the response of the customers and thus communicate it with the authority in timely manner. Motivation: The employees of the bank are the representative of it as well. So if they are satisfied, they would try to give the better service. Any miscommunication may hamper the image of the bank. So the employee satisfaction should also be given high preference. In this regard, bank can upgrade the salary structure and also the loyal senior employees those has been working for the bank more than 3 years with satisfactory performance shall be motivated through bonus, promotion etc.

Customer always asks for better service which has been found out earlier in this research. Regardless if it is Premium banking or General Banking. Products differ a little in the sector of banking. So the main determining factor is the quality of service for choosing a bank. Some recommendation in the light of the limitation the customer understood the customer General Banking model and Premium Banking Model has. Increase employee efficiency Take necessary steps against corruption. Redesign the Interior of the bank. One stop information desk for customers. Answer any query a customer has, patiently. Make the Premium Lounge more available throughout the city and therefore the Bangladesh.

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CHAPTER 6

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6.0. Bibliography
1. Brac Bank http://www.bracbank.com/ retrieved on 15 Feb 2012.

2. Bank Info http://bankinfobd.com/banks/3/BRAC_Bank retrieved on 15 Feb. 2012.

3. Prospectus of BRAC Bank Limited, retrieved on 18 Feb, 2012.

4. The Financial Express (2009), Published on March 24, Retrieved on 20 Feb 2012. Link: http://www.thefinancialexpress-bd.com/more.php?news_id=62061

5. Global Recession retrieved on 22 Feb, 2012 Link: http://en.wikipedia.org/wiki/Global_recession

6. Traditional Banking Vs E- Banking (2010) published on June 10, retrieved on 22 Feb, 2012. Link: http://www.svtuition.org/2010/06/traditional-banking-vs-e-banking.html

7. Benchmark profits to insure banks meet obligation in traditional banking market (2011) published on November 9, retrieved on 25 Feb, 2012. Link: http://www.examiner.com/article/benchmark-profits-to-insure-banks-meet-obligationtraditional-banking-market

8. Rose, S. P & Hudgins, C. S, Bank Management & Financial Service (Sixth Edition) retrieved on 25 Feb, 2012. 49 | P a g e

Internship Paper- Spring, 2012

9. Brac Bank, Retrieved on 28th Feb, 2012. Link: http://www.bracbank.com/Management.php?drgn=1

10. BRAC Bank Annual Reports retrieved on 15 April 2012. Link: http://www.bracbank.com/reports.php

11. Investopedia, retrieved on 15 April 2012. Link: http://www.investopedia.com/terms/r/returnoninvestment.asp#axzz1uDiIoKru

12. Return on Investment, retrieved on 17 April 2012. Link: http://en.wikipedia.org/wiki/Return_on_investment

13. Ashik0526, Internship Report on BRAC Bank (2008) published on 18 April, retrieved on 17 March 2012. Link: http://www.scribd.com/doc/55429556/Intern-Report-BRAC-Bank

14. Malik, H Y Report on BRAC Bank Limited (2010) retrieved on 18 April 2012. Link: http://www.scribd.com/doc/55308403/Report-on-BRAC-Bank-Limited-2010

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7.0.

Appendix
QUESTIONNAIRE

Dear Respondents,

For the purpose of a study Customer Centric Banking & Product Centric Banking; A Comparative Study of Brac Bank, by the student of Independent University of Bangladesh of School of Business Administration, the Survey is needed to be conducted. For this purpose we need your valuable cooperation. Your information will be used in only research purpose and will be kept strictly confidential. Please read carefully the questions bellow and tick ( ) or fill accordingly. Personal information Name of the client: ___________ Occupation: ____________ Age: ____________ Gender: Male / Female Frequency of transaction with BBL per month: ___________ Date of survey: ____________

1) Monthly income: Bellow Tk.50000 Tk.100000 Tk.150000 Tk.150000 Tk.20000 0

Tk.50000 Tk.100000

Tk.200000 Tk.250000

Tk.250000 +

2) Family members: 13 7 9

35 9+

57

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3) In which bank(s) do you have your account(s) other than Brac Bank Ltd? I. _____________________________ II. _____________________________ III. _____________________________

4) What types of accounts those are: Current accounts Joint accounts

Savings accounts others _________________

Fixed accounts

8) If it is a joint account then who does the transaction: Myself My partner

9) Reason for opening the account in Brac Bank Ltd, Traditional banking/ Premium Banking: Close to the office Number of branches To get the banking service scholarship) 10) Which Bank do you think provide better service? Premium Banking Traditional Banking Close to the residence Salary goes through the bank For the educational purpose (fees,

11) What are the reasons, do you think that make the difference? Please rank:

Reasons Service quality Image Availability Enterer design

1st

2nd

3rd

4th

5th

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Promotion Facilities Location Time consuming service

12) If you have a second option to open another account then which bank do you prefer? Premium Banking Traditional Banking

13) Why you chose this specific banking? Relationship Manager Influence of other users Other _________ Experience Image Promotional activities Personal Choice

14) Mention at least three limitations of both the private and public sectors: Premium Banking: I. ___________________________________________________ II. ___________________________________________________ III. ___________________________________________________

Traditional Banking: I. ___________________________________________________ II. ___________________________________________________ III. ___________________________________________________

15) If you have any farther comments about the service of the bank, please specify: I. ___________________________________________________ II. ___________________________________________________ III. ___________________________________________________

Thank you once again

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