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Now, customer is king for banks

Arti Sharma | August 02, 2003

It will be a mini-revolution at the slow-moving Bank of Baroda. And it will come in the form of a 41-year-old IIM graduate who is about to become the bank's chief of marketing.

The new recruit, who has worked at leading advertising agencies and financial institutions, will earn four or five times more than the bank's chairman. More radically, it's the first time the bank has ever felt the need to sell its services to the public.

"It's a buyer's market and we have to find customers. We need people with experience and focus and unless we pay market salaries we won't get the best talent," says Anil Khandelwal, executive director, Bank of Baroda.

The Bank of Baroda isn't the only public-sector bank that is taking a drastic new look at the way it treats customers. Public-sector banks are turning the spotlight on the customer and offering quicker, better service.

That includes everything from ATM machines and computerised branches to never-before-seen marketing initiatives. Even once-dowdy branches are being modernised and turned into symphonies of chrome and glass.

These changes are taking place at a slew of banks including the State Bank of India, Corporation Bank, Indian Bank, Bank of Baroda and the Union Bank of India.

Take Indian Bank. The 96-year-old bank has just turned some executives into marketing officers at most of its 1,300 branches. To boost its selling efforts it pulled in 265 MBA students to market the bank's products during their summer training.

It has also introduced 24-hour customer care centres in Mumbai, Chennai and Bangalore. Says Ranjana Kumar, chairman and managing director, Indian Bank, "Competition has added to pressure. Banks can no longer confine themselves to selling the traditional way."

Bank of Baroda's plans for the future are equally ambitious. The new marketing head will have the tough task of kick-starting a marketing department and turning it into an aggressive force.

Also, the bank will back these marketing efforts by computerising its branches in about two years' time.

Then there's the monolith SBI. For a start, SBI is refurbishing key branches in a phased manner, to smarten up and give itself a more customer-friendly look.

By next April the makeover will have taken place at about 20 to 30 key branches. The bank is also turning customer friendly in other ways. It is developing customised loan packages like Doctor Plus and Teacher Plus and has tied up with companies like Maruti.

Apart from this, SBI has opened 69 Personal Banking Branches in key cities especially to cater to retail customers.

"Public-sector banks are doing what they never did before -- cater to the individual customer. Today the customer is the key," says T S Bhattacharya, chief general manager, product development, marketing and personal banking, SBI.

Also, the bank is trying to simplify systems so work is completed fast. Bhattacharya claims that from taking over a month for a loan sanction, today loans are disbursed within a week.

Also, by the end of this year, under a business process re-engineering plan, the bank will have a more focussed marketing team. SBI has computerised nearly 41 per cent of its branches and has 1,700 networked ATMs located in 176 centres. By next April, it plans to computerise all its branches and install 3,100 ATMs.

"While we have started responding to the changing market, it will be a slow process. Retail lending was earlier a prohibited area. So it also requires a huge mindset change for us conservative bankers," says V S R Murthy, general manager, retail banking department, Union Bank of India.

UBI is gradually changing the look of its big branches and pumping in Rs 25 lakh (Rs 2.5 million) to Rs 30 lakh (Rs 3 million) for each one. Smaller ones will undergo Rs 10 lakh (Rs 1 million) refurbishments.

Already, 800 branches out of 2,020 have a new look. And, from launching around one product in a year about six years ago, this year it has launched close to 30 new products.

"The idea is to follow a pull strategy. If we have good products, we will attract more customers as well as cross-sell to existing customers," says Murthy.

UBI also plans to increase the number of marketing officers. In 2001, for the first time 117 marketing officers were put in place in key branches. By the end of this year, there will be around 250.

To give itself a uniform look, in 2001, the bank changed its signages and its logo. Today all the branches sport the same boards. The bank spent close to Rs 11 crore (Rs 110 million) on mass media advertising last year. This year the budget will go up 20 per cent.

Similarly there are banks like Andhra Bank, which is using mass media advertising to highlight its ATM network and products. And there's Corporation Bank, which is no longer leaving marketing to the branch manager.

"Every employee is made to sell, right down to the chairman. There is a fixed-target- achievement approach that our employees have to follow," says Cherian Varghese, chairman and managing director, Corporation Bank. It has also introduced Internet banking and has 506 ATMs.

What has driven this change? Clearly, public sector banks have woken up to competition. Post liberalisation, several new-generation private-sector banks changed the face of the industry.

Customers no longer had to stand in long queues or make 10 trips for loans to be sanctioned. Private-sector banks brought in concepts like customer relations officers, focused marketing teams and single-window banking.

Moreover, with new technology, private-sector banks like ICICI Bank and HDFC Bank could offer customers services like ATMs, phone banking, Internet banking, automatic money transfers and computerised monthly statements.

By contrast, the public-sector banks were mired in the past and unions called the shots. The focus remained on industrial credit, which was slowing down.

"Lending to corporates meant higher margins for banks. As interest rates came down corporates began to consider alternate sources of funds. Banks then began to explore possibilities like retail lending," says Murthy.

While exact figures are hard to come by, industry estimates state that roughly 12 per cent to 15 per cent of public-sector bank customers shifted to private-sector banks in the late nineties. Now public-sector banks are finally getting their act together.

Still holding 82 per cent of the lending market, they are cashing in on their strengths. "We have everything -- experience, network, products, facility. All it takes is to package it and sell it well," says Khandelwal.

Adds Bhattacharya, "We will follow an area specific plan. In the metros, the emphasis will be customer retention, in mini-metros and cities it will be retention and acquisition, while in the interiors it will be just acquisition."

Murthy and others claim that customers who shifted to private-sector banks are slowly coming back. "They have found that while apparent costs are low, hidden costs are high," he says.

Banks are also trying to cut costs by sharing networks rather than deploying their own. So, UBI will be part of 'CashTree' along with Bank Of India, Syndicate Bank and four other banks. Customers from each of these banks will be able to access 1,200 ATMs across the country.

What has this meant for public-sector banks? Business per employee in most banks has gone up. UBI reported a 16.28 per cent increase in business per employee from Rs 2.15 crore (Rs 21.5 million) last year.

Indian Bank's business per employee also went up from Rs 158.75 lakh (Rs 15.9 million) last year to Rs 178.93 lakh (Rs 17.9 million) this year. Overall retail lending and deposit business is expected to go up substantially.

But there are still roadblocks. For one, while a new marketing head can be brought in, he will need higher levels of computerisation, supporting infrastructure, open-minded and better trained employees for his plans to yield results.

When that happens, private-sector banks will face the heat.

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