SERVICE MANGEMENT IN INDIAN BANKING SECTOR

AND SBI
Submitted In Partial Fulfillment of the Requirements
For The Award of the Degree Of
Master of Business Administration (MBA)

Undertaken At
Delhi Institute of Advanced Studies, Rohini

UNDER THE GUIDANCE OF

MS. CHARU GUPTA
ASST. PROFESSOR

SUBMITTED BY
JAGMOHAN SINGH
08912303914
ABHISHEK CHABBRA 10712303914
DAKSHAY PATIAL
10812303914

MBA 3 - B
Session 2014 2016

DELHI INSTITUTE OF ADVANCED STUDIES

Plot No. 6, Sector-25, Rohini, Delhi-110085
(NAAC Accredited A Grade Institute)
(Affiliated to GGS Indraprastha University, Delhi and Approved
by AICTE)
(An ISO 9001:2008 Certified Institution)

BANKING SECTOR DETAILS

Aggregate deposits of all Scheduled Commercial Banks (SCBs), as a percentage of GDP increased
from 61% in FY07 to 67% in FY13, driven by increasing demand from retail customers.
Credit to GDP increased from 45% in FY07 to 53% in FY13 indicating the improved lending of SCBs
to various industries, which has enhanced trade and economic development.
Within the Banking, Financial services and Insurance (BFSI) sector, financial intermediaries such as
DSAs, insurance agents, mutual fund advisors, etc. account for the largest share (65 70%) of
employment.
Banking stands second in terms of employment (average share of 28%). The banking sector is
projected to create up to 2 million new jobs in the next 5-10 years, driven by issuance of new licenses
and efforts to expand financial services into rural areas
The Indian banking system has been continuously expanding with the number of SCB branches
increasing at a CAGR of 7.8% during FY09 to FY13. The private sector banks have been expanding at
a faster rate (7.1% CAGR in number of branches) compared to public sector banks (-1.1%) and
foreign banks (-10%).
Of the total number of new branches opened in FY13, 24% were opened in unbanked centers. The
proportion of branches opened in unbanked centers has witnessed a consistent increase in recent years
driven by aggressive rural expansion by private sector banks.

Banking in India in the modern sense originated in the last decades of the 18th century. Among the
first banks were the Bank of Hindustan, which was established in 1770 and liquidated in 1829-32; and
the General Bank of India, established in 1786 but failed in 1791.
The largest bank, and the oldest still in existence, is the State Bank of India. It originated as the Bank
of Calcutta in June 1806. In 1809, it was renamed as the Bank of Bengal. This was one of the three
banks funded by a presidency government, the other two were the Bank of Bombay and the Bank of
Madras. The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's
independence, became the State Bank of India in 1955. For many years the presidency banks had acted

as quasi-central banks, as did their successors, until the Reserve Bank of India was established in
1935, under the Reserve Bank of India Act, 1934.
In 1960, the State Banks of India was given control of eight state-associated banks under the State
Bank of India (Subsidiary Banks) Act, 1959. These are now called its associate banks. In 1969
the Indian government nationalised 14 major private banks. In 1980, 6 more private banks were
nationalized. These nationalized banks are the majority of lenders in the Indian economy. They
dominate the banking sector because of their large size and widespread networks.
The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks. The
scheduled banks are those which are included under the 2nd Schedule of the Reserve Bank of India
Act, 1934. The scheduled banks are further classified into: nationalised banks; State Bank of India and
its associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector banks. The
term commercial banks refers to both scheduled and non-scheduled commercial banks which are
regulated under the Banking Regulation Act, 1949.
Generally banking in India is fairly mature in terms of supply, product range and reach-even though
reach in rural India and to the poor still remains a challenge. The government has developed initiatives
to address this through the State Bank of India expanding its branch network and through the National
Bank for Agriculture and Rural Development with facilities like microfinance.

CUSTOMER'S EXPECTATIONS & PERCEPTIONS IN THAT SECTOR

From the preceding discussion it is clear that the differential performance of public and private sector
banks in the post-liberalised phase of the Indian economy has, to a large extent, matched the graph of
customer perceptions and expectations from each of the two. Further, as the study shows, quality
parameters such as responsiveness, reliability, tangibles, convenience, assurance and empathy, and
trustworthiness greatly structure customers' expectations and perceptions of banking sector service
quality. These factors are similar to the factors identified in Tyler and Stanley's (1999) study, which
used orthodox grounded theory in their study with the objective of identifying key elements of
perceived service quality by large corporations. They found that the elements that were considered
important were reliability, assurance, empathy, responsiveness and proactivity. Last, managing the
perceived quality means that the firm has to match the expected service and perceived service with

each other so that consumer satisfaction is achieved. In order to keep the gap between the expected
service and the perceived service as small as possible, it is important that the promises about how the
service will perform, given by traditional marketing activities and communicated by word of mouth,
must not be unrealistic when compared to the actual service delivery that customers will eventually
experience.
The study concludes that in view of the stiff competition in the global business arena where businesses
have to survive and grow on the basis of volumes, instead of margins, service quality will constitute an
essential plank of service marketing. This implies that public sector banks will have to focus on the
reduction of the gap in customer expectations and perceptions about their service quality if they are to
compete in the global marketplace. To this end, public sector banks should continually assess and reassess how customers perceive their services to know whether these banks meet or exceed or fall short
of the expectations of their customers. Such a customer services quality audit, though tedious, will
help the banks to pay attention to potential failure points and service recovery procedure, which could
be made integral to employees' training. In other words, it amounts to empowering employees to
exercise responsibility, judgment and creativity in responding to customers' problems.

SERVICE QUALITY PARAMETERS

It is an evaluation process, where the Consumer Compare his/her expectations with the actual service
and his perception is received. It generally based on 5 dimensions

Reliability the service company ability to deliver promises on time.

Responsiveness the degree to which customers perceive service providers readiness to

assist them promptly.

Assurance the degree of courtesy of service providers workers and their ability to

communicate trust to customers.

Empathy the care and importance the service provider gives to an individual customer.
Tangibility the evidence of facilities, personnel, and communication materials used by
the company while offering services to customers

STRATEGIES ADOPTED BY SBI FOR CUSTOMER SATISFACTION

SBI`s Strategies in the current scenario
SBI have set up capacity in places where they are not very strong. It is time for them to follow overall
SBI philosophy of planning new branches, given the huge untapped potential. Besides, this is also the
best time to benefit from their past expansion, since there is a lot of trust in SBI.
Brand SBI is very strong, while people may be generally cautious about some other brands. They can
not only tap the potential better but can also provide a safe and transparent insurance alternative to the
public. The bank is entering into many new businesses with strategic tie ups - Pension Funds, General
Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition,
Advisory Services, structured products etc - each one of these initiatives having a huge potential for
growth.
Some of the strategies to cope with the current scenario are listed below:
It is the part of SBI`s philosophy to open new branches .The Bank is forging ahead with cutting edge
technology and innovative new banking models, to expand its Rural Banking base, looking at the vast
untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years. SBI
is planning to hire 11,000 employees in the current fiscal. It is also focusing at the top end of the
market, on whole sale banking capabilities to provide India's growing mid / large Corporate with a
complete array of products and services. It is consolidating its global treasury operations and entering
into structured products and derivative instruments. Today, the Bank is the largest provider of
infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the
only Indian bank to feature in the Fortune 500 list. The Bank is changing outdated front and back end
processes to modern customer friendly processes to help improve the total customer experience. With
about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks already
networked, today it offers the largest banking network to the Indian customer. The Bank is also in the
process of providing complete payment solution to its clientele with its over 8500 ATMs, and other
electronic channels such as Internet banking, debit cards, mobile banking, etc.

Country's largest lender, State Bank of India (SBI) has prepared a blueprint to go retail in its
international operations. Such strategy would help the bank to promote its lead in syndication of loans
in the overseas market, at a cheaper cost. The bank's overseas operations have been instructed to thrust
more on promoting retail banking locally, SBI is assessing that by opening more branches across
foreign locations and promoting retail services by mobilising deposits at interest rates as low as 33.5%, the bank will be able to increase its operating margins by 250-300 basis points in overseas
markets where syndication opportunities arise often. SBI is expected to open seven new branches over
next eight months in the United Kingdom where it operates six branches currently. Also, SBI's
Washington office is expected to get upgraded as a full-fledged branch by December 2009 and plans
are afoot to open more branches across North America under the control of California State chartered
subsidiary of State Bank of India (California).
In response to signals from the central bank, SBI have progressively reduced their PLR from 13.75%
to 12.25% during the past few months in stages, and further softening in interest rates cannot be ruled
out. SBI is introducing loan products at sub-PLR rates - in home loans at 8%, auto loans at 10%,
special products for SMEs and... agriculture sector at 8%, but it may not be possible for them to reduce
the interest rate beyond a certain point.
SBI is working on infrastructure sector projects, which has seen a growth of 26% in the current year.
For the year 2008 the Rs 10,000 crores was sanctioned for the infrastructure projects while in the
current year from April 08 to February 09 the amount sanctioned for the infrastructure project is Rs
13,000 crores,out of which project worth Rs 8000 crore is in pipeline. Despite of various viability
issues the growth in this sector for SBI is been intact.
With market-linked products finding fewer takers, insurance companies are launching more
"guaranteed" products to lure investors. The latest to join the bandwagon is SBI Life insurance with
SBI Smart ULIP, a product that guarantees returns based on the highest NAV recorded by the fund in
the first seven years.

SERVICE RECOVERY STRATEGIES

The State Bank of India is working aggressively on the recovery process. Arundhati Bhattacharya,
the chairperson of the country's largest bank SBI is doing a number of things on the risk side. One of
the main things is the dynamic rating of corporates. Earlier it was done just once a year, now it is more
dynamic, she adds. With respect to non-performing assets (NPA) control, one initiative that has picked
up pace is written off accounts. SBI has a clear way of looking at them and keeps them on radar. The
numbers are looking better with respect to repayments of such accounts. The strategy there has begun
to take shape, she adds.
SBI is working on quality delivery with McKinsey. The countrys largest bank has rolled out two pilot
branches. It has rolled out retail assets processing centre in Mumbai and Delhi. The bank has also
rolled out passbook printers called Swayam which can be operated by customers themselves. By the
end of the year 2500 of these printers will be deployed. Passbook holders will have to take it to the
counter once and it will be bar-coded. After which, the customers will be able to feed itinto the
machine, which will read the barcode and gives out the passbook duly printed. Another thing that has
come into operation is the Security Operating Centre (SOC). It is equipped to handle 60,000
equipments and it currently handles 30,000. Basically it looks for any kinds of attempt on SBIs
systems and handles upto five lakh events per second, says Bhattacharya, With this, she believes SBIs
systems have become more robust.
SBI is taking steps to clamp down on bad loans that include web-based tracking of assets and
"regular calls" to stressed accounts in retail as well as real estate segments, Chairperson of the
country's largest lender Arundhati Bhattacharya has said. In addition, the bank has initiated 'Dynamic
Credit Rating' review of borrowal accounts to capture deterioration in credit quality promptly and to
initiate corrective action and facilitate correct pricing of risk, she said in a message to shareholders
ahead of July 2 Annual General Meeting. ADVERTISING "During the year (2014-15), the bank has
embarked on a number of initiatives to clamp down on NPAs. Some of them are web-based Assets
Tracking & Monitoring and regular calls to stressed accounts (SMAs) in Retail segment and Real
Estate sector to prevent slippages...," she said. The bank's exposure in retail segment, which includes
housing, auto, education and personal loans, increased to Rs 2.72 lakh crore, from Rs 2.37 lakh crore
at the end of March 2014. Of this gross NPAs in retail was Rs 2,528 crore at the end of March 2015. It
has come down from Rs 3,034 crore at the end of 2013-14. Besides, she said, the bank has also set up

asset tracking centres at all circles, and formed various committees to review stressed assets
periodically and suggest resolutions and turn around strategies. The bank's gross NPA in absolute
terms declined to Rs 56,725 crore while the net NPA came down to Rs 27,591 crore at the end of
March 2015. During 2014-15, the bank's asset quality improved as net non-performing assets (NPAs)
or bad loans were trimmed to 2.12 percent of net advances as against 2.57 percent at the end of
previous fiscal. At the same time, gross NPAs also came down to 4.25 percent of gross advances, from
4.95 percent at the end of March 2014. With regard to capital requirement, Bhattacharya said: "As the
pace of economic activity gathers further momentum in the coming years, the bank will be required to
improve and strengthen its capital planning processes to support future business growth." Furthermore,
she added, in view of the implementation of Basel III Capital Regulations, the transitional period for
full implementation of Basel III Capital Regulations in India has already been extended up to March
31, 2019 by the Reserve Bank. SBI stock price On October 30, 2015, State Bank of India closed at Rs
237.20, up Rs 0.10, or 0.04 percent. The 52-week high of the share was Rs 335.90 and the 52-week
low was Rs 220.60. The company's trailing 12-month (TTM) EPS was at Rs 17.32 per share as per the
quarter ended June 2015. The stock's price-to-earnings (P/E) ratio was 13.7. The latest book value of
the company is Rs 165.49 per share. At current value, the price-to-book value of the company is 1.43.

7 Ps FOR THE COMPANY

Product at SBI
Core product: The basic services in banking form a basic product Eg: Accepting deposits, granting
loans
Formal product: It is the set of attributes and conditions expected by the customers when they
purchase the product Eg: Insurance facilities, locker facilities, ATMs
Augmented product: It is the additional feature that banks provide which exceeds the customers
expectations Eg: Discounts, Good waiting rooms
Potential product: It includes Innovations and product differentiation. Banks alters its services
according to the requirement of the individual customers Eg: Mobile and internet banking, new
schemes tailored for specific customers Product at SBI
PRODUCTS OFFERED BY SBI
Personal Banking NRI Banking
Current Accounts Corporate Banking
Term Deposits Small Scale
Industries
Reinvestment Plan Small Business Finance
Public Provident Fund Agriculture Finance
Scheme Housing Government Business
Loans Car Loans
Education Loans
Consumer Durables Loans
Personal Loans
Loans against Shares & Debentures
Gold Loans
Price at SBI
Interest rates charged
Transaction charged
Value pricing
Going rate pricing
Mark up pricing
Charges for cheque books
Commmission charges
Place at SBI Important factors affecting the determination of the location of bank are:
The trade area
Population characteristics
Commercial structure
Industrial structure
Visibility
Access

Promotion at SBI
Public relations
Personal selling
Word of mouth promotion
Internet
Tele marketing
Physical evidence at SBI It refers to the overall layout of the place i.e. how the entire bank is
designed. Physical evidence refers to all those factors that makes process much easier and smoother.
Eg: In banks the physical evidence would be the placement of customer service executives desk or the
location of the place for deposting cheques.
Process at SBI
Process constitutes the overall procedure involved in using the services offered by the bank.
The process should be customer friendly
If the overall process is too complicated than the customer may not be inclined to use such services
People at SBI
SBI has provided employment to 222,933 people all over the world.
SBI has turned into the third-largest employer in India among listed companies after Coal India
Limited(383,347) and Tata Consultancy Services(226,751).

SERVICE PROCESS (SERVICE BLUEPRINT)

Ultimately, only one thing really matters in service encounters- the customers perceptions of what
occurred. - (Richard B Chase and Sriram Dasu)
WHAT IS A SERVICE BLUEPRINT?
It defines the architecture of services describing the method and sequence of how service operation
system work and how they link together to create a good service experience in the customers.
Badly designed process often leads in poor- quality, slow, and frustrating service delivery and annoys
the customers.
Thus, Badly designed processes can ultimately lead to service failure.
Customer Actions: The steps that customers take as part of the service delivery process.
Front stage (Visible Contact Employee) Actions: This element is separated from the customer
actions by a line of interaction. These actions are face-to-face actions between employees and
customers.
Backstage (Invisible Contact Employee) Actions: The line of visibility separates the onstage
from the Backstage actions. Everything that appears above the line of visibility can be seen by the
customers, while everything under the line of visibility is invisible for the customers.
A very good example of an action in this element, is a telephone call; this is an action between an
employee and a customer, but they dont see each other.

 Support Processes: The internal line of interaction separates the contact employees from the
support processes. These are all the activities carried out by individuals and units within the company
who are not contact employees. These activities need to happen in order for the service to be delivered.
Physical Evidence: For each customer action, and every moment of truth, the physical evidence that
customers come in contact with is described at the very top of the service blueprint. These are all the
tangibles that customers are exposed to that can influence their quality perceptions.
The service blueprint includes: BROCHURE Website phone calls, e-mails Deposit/ Withdraw Money
Apply For Loan, Open A New Account Receptionists Employees, Managers Carrying Out
Transactions Customer Records Billing System Maintaining Security System