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Declaration
SSM - Banking Services – BMS – Vth sem
Thank you
Acknowledgement
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SSM - Banking Services – BMS – Vth sem
“Banking Services.”
With a deep sense of gratitude and obligation, we thank all those who directly and
indirectly helped us to complete our project.
We are grateful to Prof. Mr. PUJARI our subject guide, for providing us with a
wonderful opportunity to test our ability and for placing such faith in us and also
for the encouragement and valuable guidance at various stages during completion
of this project with whose guidance we could not have been able to complete our
project successfully.
We are also thankful to our parents for being with us throughout our course and
guiding us all the way. We also would like to thank all our friends and relatives for
being there as our motivators.
CERTIFICATE
This is to certify that the project on “Banking Services” is the
work of the following students:
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_____________
Prof. Sign.
Index:
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26. Conclusion 37
27. Bibliography 38
Summary:
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The banking sector in India has been widening its scope due to liberalization.
Banks today are not mere suppliers of money. They have become providers of
services such as selling insurance, mutual funds, investment opportunities, etc. In
the past, the banks did not find any attraction in the Indian Economy because of the
low level of economic activities and few business prospects. Today we find
positive changes in the National Business Development Policy. The private
sector banks failed in serving the society. This resulted in the nationalization of
14 commercial banks in 1969.
Banking Services
INTRODUCTION:
A bank is an institution that deals with money and credit. Different people
understand meaning of a bank in different ways. For a common man bank means a
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The users of banking services or the prospects play a very significant role in the
formulation of overall marketing strategies. The bank marketing activities are
concerned with the designing of product strategies keeping in view the needs and
requirement of prospects. It is also related with the place decisions i.e. location of a
bank at suitable points.
It has the following unique features:
(a) Intangibility
(b) Inseparability
(c) Variability and
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(d) Perishability
1. Intangibility
Financial services are generally intangible, but the service providers go to
considerable lengths to ‘tangibilise’ the service for customers. Regular bank
statements, ‘gold’ credit cards, and insurance policies are all examples of the way
in which the financial services are presented to customers. They can enhance the
image of the service and the provider can even bestow status or implied benefits
upon the user as with a gold card. Physical reminders of the service product, brand
name and value serve to reassure the consumer and help the organizations
positioning.
2. Inseparability
The degree of inseparability depends upon the type of service and the actual
supplier. Many everyday transactions are carried out now via automated services-
the automated teller machines (ATMs), net banking etc.
+Additionally, many financial services are sold by brokers and agents of various
kinds. Services are frequently handled by agents are credit card and other
currency/travelers cheque encashment.
3. Heterogeneity/variability
The complexity of the service transaction process will determine the extent of
variability and this can differ to a large extent between institutions and even with
one institution. The greater the degree of automation within any transaction
process, the greater the degree of standardization. Thus simple transactions may be
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carried out via ATMs and completely standardized or via branch counter where
they might be fairly standardized but subject to some variation in quality.
4. Perishability
The degree of Perishability depends on the type of service. If a cheque needs to be
cleared by a certain date and the system causes delay then the benefits to the
consumer are lost so the service could be said to be perishable. By and large,
money and financial services are enduring in nature. If a bank’s reserves are not
fully utilized profitably through lending or investment they will still retain their
worth and may be utilized again at a later date. A bank branch, which does not
have any customers at all on a particular day, may actually gain rather than lose
profit as staff may be able to use the peace and quiet to catch up on other work.
Users of Services:
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1. General Users
All persons having an account in the bank and utilizing the banking facilities at the
terms and conditions fixed by a bank are termed as general users.
2. Industrial Users
Industrialists or entrepreneurs having an account in the bank and utilizing the
credit facilities for the establishment or expansion of their business are known as
industrial users.
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The social and economic factors have a far-reaching impact on the behaviour of
customers. This is due to the fact that human beings are directly influenced by
the socio-economic consideration.
SOCIAL FACTORS
a) Group of family,
b) Family life-cycle,
ECONOMIC FACTORS
a) Disposable income,
b) Price Index,
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(b) NBFCs of high net-worth and good track record to convert themselves into
regular banks.
(c) It is necessary for promoters to have minimum net-worth of Rs. 200 crores
to set up a bank but they should raise it to Rs. 300 crores in three years.
They should have NPAs of less than 5% and capital adequacy requirement
(CAR) above 12%. Triple credit rating is also needed.
(d) Corporates will not be permitted to set up banks irrespective of their net-
worth.
(e) New banks cannot set up a subsidiary or Mutual fund during the initial three
years.
(f) The newly licensed banks have to observe all existing requirements of
priority sector. Additionally they should commit to having 25% of their
branches in rural and semi-urban areas.
(g) NRIs are allowed to pick up their equity share upto 40% of the total.
MARKETING MIX
1. PRODUCT
BANKS PRODUCTS:
(A) DEPOSITS:
(B) ADVANCES:
a. Term Loan,
b. Clean Loan,
c. Bills Discounting,
d. Advances,
e. Pre-shipment Finance,
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f. Post-shipment finance,
g. Secured and Unsecured lines of credit.
a) Guarantees, and
b) Letter of Credit.
(D) CONSULTANCY:
a) Investment Counseling,
b) Project Counseling,
c) Merchant Banking, and
d) Tax Consultancy.
(E) MISCELLANEOUS:
a) Traveller Cheques,
b) Credit card,
c) Remittances,
d) Collections,
e) Sale of Drafts,
f) Standing instructions, and
g) Trusteeship.
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In banking the products are services. Services cannot be seen or protected like
goods. The potential buyer of the services can form an opinion about the services
offered.
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1. PRICE
Pricing in Banking relates to the interest rates paid by the banker on deposits,
interest charged by the banker on loans and demand drafts, charges for various
types of transactions and fees for certain services. In India, banks adopt
administered pricing structure to some extent as the deposit and lending rates are
prescribed by RBI. The charges for banking services are agreed upon by
Indian Banks Association. Pricing policy of a bank is considered important for
raising the number of actual customers. But even in this regulated pricing
environment, pricing can be used as a tool in their marketing strategy. The specific
pricing methods that can be adopted in deregulated environments are:
Cost plus pricing which calls for a detailed analysis of cost structure of
various bank products and services.
Market Oriented Approach which indicates what the market can bear or
accept as in the case of a corporate client who may not be price sensitive as against
an individual client.
The banks are required to frame two-fold strategies. Strategies concerned with
interest and commissions to be paid to the customers and interest and
commissions to be paid by the customer for different types of services.
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1. PROMOTION
The objects of a promotion programme are to inform about the new service
product, to persuade the customer, to remind the customer, build image of the
bank, etc.
1. PLACE
The place decision mainly deals with selection of a suitable location for the
branch. Sound location decisions help in activating the business. The location
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2. PEOPLE
Banking products cannot be separated from the person (banker) who markets them.
The product and the seller together constitute the banking product. Banks
should adopt internal marketing in order to make the whole business customer-
oriented. The bank products should be marketed to the employees first before they
are marketed to customers. The corporate mission should be communicated
repeatedly and effectively to all employees by the top management.
The placement policy should emphasize that the recruits should not only be
conversant with all aspects of banking business but also have the skill for
social interaction and tolerance for interpersonal contact.
3. PROCESS
It involves all activities right from the product conception stage, to product
designing and development down to its marketing at the branch level. Banks
which were more focused or activity-oriented have shifted to customer-oriented
service delivery. This is essentially due to the technological advances. Automation
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4. PHYSICAL EVIDENCE
Banking products are intangible and physical evidence focuses the banker’s
attention on this aspect. The environment of banks is changing. It is becoming
friendlier with attractive layouts and décor. Most private and foreign banks like
ICICI, Citibank, and HDFC portray a new welcoming and friendly look to the
customers rather than drudgery banking counters. Attractive brand names,
logos, symbols, etc. add to the customer’s perception of service quality.
5. PRODUCTIVITY
Productivity relates to how inputs are transformed into outputs that are valued
by customers. Improving productivity keeps cost in control.
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MARKET SEGMENTATION
In banking services, the banks are expected to satisfy rural customers, urban
customers, and high-earning and low-earning customers, small-scale and large-
scale entrepreneurs and so on.
Since the banks have to deal with different types of customers from different fields
and localities, banking services need segmentation.
In the Indian setting, we find the emergence of a wide rural market. Here, it is
necessary that the segmentation be done in tune with the changing socio-economic
conditions of the rural customers.
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SEGMENTATION IN BANKS
(A) (B) (C) (D) (E) (F)
AGRICULTURAL HOUSEHOLD INSTITUTIONAL SERVICE TRADE AND INDUSTRIAL
SECTOR SECTOR SECTOR SECTOR COMMERCE SECTOR
Sub-segment Sub-segment (i) Religious (i) Financial (i) Wholesalers (i) Private Sector
(i) 10 acres and (i) Above Rs. 1 lac (ii) Educational Services (ii) Retailers (ii) Public Sector
above P. A. (iii)Charitable (ii)Non (iii)Merchant (iii) Co-operative
and Clubs financial Exporters Sector
(ii) 5 to 10 acres (ii) Rs. 50,000 to Services
(iii) 2 acres and Rs. 1,00,000 (iv) Large-scale
below (iii) Rs. 25,000 to Sector
(iv) landless Rs. 50,000 (v) Small-scale
(iv)Rs. 25,000 and Sector
below (vi)Tiny Sector
(v)Above Rs.5,000
(vi)Rs. 2,000 to
Rs. 5,000
(vii)Below
Rs.2000
Political/ Legal
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Economic
Economic factors are key variables which have an impact on the activity in the
banking services sector. The level of consumer activity is governed by income
levels and personal wealth. As income levels grow, more discretionary income is
available to spend on banking services. Consumer confidence in the economy and
in job security also has a major impact; if lean times are foreseen ahead, savings
will take priority over loans and other forms of expenditure. Consumers may also
seek easy access savings and be willing to tie up their money for longer periods
with potentially more attractive investments.
The main economic factors that should be monitored with regard to banking
services marketing are as follows:
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Socio-cultural
Technological
Technology has a major impact on many industries including financial services and
banking in particular. ATM services which not only provide cash but also allow for
bill payments, deposits and instant statements are widely used. From the
customers’ viewpoint, technology has played a major role in the development of
the process whereby the service is delivered. Automated queuing systems have
made visits to the bank easier and more convenient. Telephone Banking and
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insurance services are now being used in place of the traditional branch-based
service process. Technology has also played a major role within organizations,
bringing about far greater efficiency through computerized records and transaction
systems and also in business development, through the setting up of detailed
customer databases for effective segmentation and targeting.
• Process developments
• Information storage and handling
• Database system
RETAIL BANKING:
Retail banking is that part of a bank that offers products and services primarily to
individual customers, professionals, self employed individual or some business.
The focus is on creating products and services that meet the needs of the target
customers and are profitable for the bank as well.
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The approach to retail banking product is more on a mass production basis wherein
all risk and operations are based on and geared to cater to a large number of
customers. This is therefore, significantly different from corporate banking or
wholesale banking where focus is on large sized customers accounts rather than
large number of customers.
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The effective interest rate is approximately 0.7 per cent higher than the monthly
reducing balance method.
Fixed and floating/adjustable rate of interest:
(1) Most housing finance companies offer both options of fixed and adjustable
rate and interest.
(2) In fixed rate of interest rate of interest remains unchanged throughout the
period of the loan. Thus, the benefit of interest rate fall is not incorporated in the
borrower's plan.
(3) The floating rate of interest is one that fluctuates as per the market lending
rate and therefore reflects the trends in the interest rates scenario.
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issued by the bank's computers. This number is not known to the bank's staff and is
secret and unique to that individual. When the person uses the ATM card is asked
for the PIN, that the cardholder identifies himself or herself by pressing the
relevant number buttons on the machine.
The machines then verify the account number on the ATM card along with the
secret code number stored in the ATM. When the match is found, the ATM pops
up a menu screen which allows the user to transact almost all types of bank
transactions. A typical transaction would be that of cash withdrawal. The bank
generally restricts the maximum amount and the frequency with which one can
withdraw cash. The amount withdrawn is immediately debited to the concerned
account through accounting entries pre - programmed on the ATM.
Similarly, cash or cheques can be deposited through the ATM for credit to an
account. When the menu screen appears one should indicate that he or she wants to
deposit money. The ATM dispenses an envelope which is to be filled with the
cheque or cash. The account number to be credited is registered on the envelope
and stored. Later the bank staff collects the envelope to credit the account.
Account balance queries, fixed deposit details, debits and credits to the account etc.
can all be queried at the ATM.
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(6) It eliminates the need for customers to travel to the branch where his or her
account is maintained, if the ATMs are conveniently located and networked.
(7) To depositors who do not have a credit card, ATM offers cash availability
when necessary.
(8) Scope for frauds, robberies and misappropriation is reduced considerably if
the PIN is maintained.
A customer can access information about his/her account through a telephone call
and by giving the coded Personal Identification Number (PIN) to the bank by
Telebanking. Some banks like SBI, Andhra Bank, etc. have made this facility
available to some branches.
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Through Inter-net banking one can visit the web-site of each bank by entering his
password and know the account balance and even pass his own credit and debit
entries.
This means that we can do our banking through our personal computer sitting at
home. Banks may soon allow zero balance savings accounts through Internet
facility only.
Customers can now make balance enquiries, download statements and open fixed
deposits over the net. They will soon be able to carry out all their transactions over
the net. So visiting a bank would become needless.
Time to come; Mobile phones will drive banking transactions. These mobile
phones will be equipped with smart cards that are embedded with banking and
other information. This mobile phone banking facility is yet to come but the
mechanics of linking the banking with the cell phone is being sorted out.
Teller machines are being installed in the banks for the Electronic banking facility.
The use of e-mail for banking will open up new avenues for Internet banking.
Banking will be on wheels and mobile by the use of smart banking.
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offer top-class service to the customers. They play a dynamic role not only as a
finance provider but also as a departmental store of finance. Due to this new
instruments and new products like factoring, leasing, merchant banking, forfeiting
venture capital, corporate advisory services are emerging. These innovative
services may increase the revenue with cost effective measures.
(4) Diversified Activities: There is a universal trend towards banks' diversification
normally through insurance depository participant services, investment banking
etc. Furthermore banks have diversified their activities by rendering various
services like depositing gold, sale of gold, paying tax liability and telephone bills
and collecting interest on securities on behalf of the customers.
All these diversified activities have made the banks to develop and offer
consultancy counseling and customer designed packages for efficient management
of funds. The banks traditional roles as financial intermediaries are gradually
assuming lesser importance in their overall business as the banks diversify their
activities and redefine their roles. It is important to note that the percentage of non-
interest income is increasing and the interest income of the banks is decreasing.
This shows that the income through service exceeds the income through lending’s.
(5) Customer Awareness and Satisfaction: In the Urban and metropolitan sector
customers demand more facilities than offered since they are more knowledgeable.
They look for services that are cheaper, faster and better in quality. IDBI is
offering 110% loan of the cost of the project in case of construction of the
building. Such type of loan is given to meet the documentation expenses.
Now-a-days customer can know the status of their accounts, request for a cheque
book or a financial statement, transfer funds or "Stop-payment" of cheques from
his desktop.
(6) Development of skills of Banks Personnel: In order to meet the new
challenges, banks have to develop novel ways of meeting the customers' demands.
To get sufficient knowledge and exposure to technology, suitable packages relating
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The business prospects of our public sector banks have gradually started shrinking
as such they are forced to revise their strategy of banking operations so that they
can meet the threats posed by the foreign banks.
Lastly in order to survive and succeed the domestic banks must identify their
marketing areas, develop adequate resources, convert these resources into efficient
services and distribute them effectively so that the customers are satisfied.
Conclusion:
The opening up of the economy in 1991 paved the way for the next
revolution in Indian banking: the emergence of private banks. It has change the
face of retail banking, bringing in enhanced competitiveness, product mix and
customer satisfaction.
Further, foreign banks (and private domestic banks in some cases) have generally
performed better than other banks in terms of profitability and income efficiency.
This suggests that ownership matters and foreign entry has a positive impact on
banking sector restructuring.
The emergence of retail banking has also brought into focus the performance of the
private banks and their aggressive banking practices. The new private banks have
used technology to grow.
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The PSUs are now becoming more customer-centric and tech-savvy. The battle for
the Indian consumer’s mind is in full swing.
Bibliography:
Books referred:
1. Service Sector Management – C. Bhatacharjee.
2. Service Sector Management - Prof. R. Subramanian.
3. Banking Sector Reforms in India - Sultan Singh.
4. Services Marketing - Dr. S.M.Jha.
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