Note : Both the sections are compulsory.
Section I
CASE I : BANKING ON RELATIONSHIP
The birth of ABC Bank took place after the RBI issued guidelines for the entry of new private sector banks in January 1993. Subsequently, the promoter of ABC Bank sought permission to establish a commercial bank and retained KPMG, a management consultant of international repute, to prepare the groundwork for establishing a commercial bank. The Reserve Bank of India conveyed its approval in principle to establish ABC Bank on February 11, 1994. Thereafter, the Bank was incorporated under The Companies Act in September 1994. The bank started its operations in November 1995. The ABC Bank was promoted by the tenth largest development bank in the world, which had a magnificent record of promoting world-class institutions in India. The promoter was a strategic investor in a plethora of institutions, which had revolutionized the Indian financial markets.
Keeping in line with its policy of leveraging technology to drive its business, ABC Bank deployed Finacle, the e-age banking solution from Infosys to consolidate its position, meet challenges and quickly seize new business opportunities. The entire Finacle rollout was remarkable, considering the fact that it was implemented across all branches in a record timeframe of 5 months. Finacle provided the critical technology platform to propel the bank’s operations with new thrust and direction. The bank also implemented Kondor – a treasury front office software from Reuters and ITMS – treasury back office software from Synergy Login. The achievement of these significant milestones was consistent with ABC Bank’s continued focus to create customer and shareholder value through deployment of superior technology. Investments in technology were a part of the plan to put in place building blocks for creating the right organizational infrastructure. In future, it would help ABC Bank to consistently deliver superior products, convenient access channels and efficient service to its retail and corporate customers. Large investments had been made in back-end technology to strengthen processes, systems and control. This, in the long run, propelled by a top quality management team, clearly set ABC Bank apart from its competitors.
ABC Bank was a pioneer and an innovator in bringing state-of-the-art services to its customers. It was the first private bank to enter and capture new markets. It was the first Indian Bank to provide – ATM Next (an information portal on ATMs); Instant Account Opening; Talking ATMs; GiftCard (Prepaid Gift Card); EasyFill (Instant Mobile Refill Service) – along with other services. The Bank introduced a SMS alert service, which gave the customers, updated information on any transaction. The Bank had collaboration with other organizations rendering related services –Insurance, National Saving Certificates and Post office Service –providing a platform to interact with potential customers as well as offering other services to its existing customers. It also tried to tap potential rural market segments, which had not been explored by any other private bank. A key achievement for the Bank was that it emerged as the highest distributor for two top Mutual Fund Schemes consistently in the past, thereby demonstrating the strength of the Bank’s distribution channel of TPD business. It had registered huge success as a collecting bank to several market IPOs that consequently leveraged the IPO financing business. It launched a strategic B2B E-Commerce platform with BPCL to facilitate online payments from BPCL to its dealers, thereby enhancing corporate business through new-age technology and offering Supply Chain Financing Solutions. Corporate banking relationships were offered at 20 locations across the country and total Banking Solutions to its corporate customers (Annexure).
The Value Chain Management Group also offered Supply Chain Finance Solutions to various Corporates and special products like loan against credit card receivables. The lifeline of ABC Bank were its people, growing at a very fast pace. The average age of the employee at ABC Bank was 31 years. Approximately 83% of the employee strength was in the junior management category (which included trainees and probationers), while 14% made up the middle level management. The remaining constituted the senior and top management. The various business units comprised of 75%, while support functions made up for 12%, and operations for the remaining 13% of the total manpower strength of the Bank. The bank had rolled-out broad based grant of stock options covering 75% of the employees to align their interests with those of its shareholders. The bank had a stats-of-the-art training centre at Mumbai and every employee received on an average 40 hours of training, annually.
ABC Bank entered Nagpur market in two phases. In the first phase, it started with corporate banking and established itself as the best service provider. Afterwards, it leveraged its strengths by entering into retail banking. Although, relatively a late entrant in the retail banking sector, it acquired easy access in the new segment due to its brand image in corporate banking. In retail banking, ABC Bank opted for selective penetration based on two main factors – volume of business and credibility of the account. This enabled them to create greater satisfaction in the customers’ mind. Initially, it started with the criteria of an average quarterly cash balance of Rs 25,000 focusing on premium segment. Later on, to further penetrate the market, it reduced the average quarterly cash balance to Rs 5,000 and segmented the market on the basis of nature of business, volume and number of transactions per month. In this phase, by reducing the minimum available balance, it tapped other individual customer accounts during the course of its expansion.
ABC had always been particular about the specific needs of the customer and maintaining consistency in the quality of products and services provided. The bank emphasized on dealing with them on a one-to-one basis and providing tailor-made products. In course of penetrating this segment, ABC bank achieved great success due to its deep understanding of the needs and expectations of local customers. On the other hand, some of the competitors who displayed grand success in the beginning could not sustain it because of a mismatch between expectations of the customers and delivery of services. As promotion was mainly through word-of-mouth, the bank operated on the philosophy that 5 satisfied customers bring 5 new customers whereas 5 dissatisfied customers break 25 existing customers. Therefore, they focused about maintaining quality of services and customer satisfaction. The bank was very particular about reducing the turnaround time in extending its services to the customers. It also acted as an investment consultant for their individual customers.
Apart from offering ‘tailor-made’ products, the bank maintained a continuous personal relationship with each of its existing customer, based on their business potentials. They took regular feedbacks from the customers and responded sincerely to their suggestions or complaints. They used to call up their premium customers once a week, asking for their views on the services offered by the bank and suggestions to improve the same. To enable an impartial communication system, the bank created a dedicated e-mail ID for customers’ queries and complaints, which established a direct link between them and corporate office. The complaints and queries received from the customers were then forwarded to the concerned branch offices for immediate redressal and branch heads were asked to confirm the same. These complaint redressals formed an important component in performance evaluation of the branch as well as the concerned employee.
Even though a large group promoted ABC Bank, its independent asset base was limited, which posed a problem to finance large organizations. The limited asset base of the bank created hurdles in the expansion of its business. In view of having just two branches, RBI guidelines did not permit ABC to have its own currency chest at Nagpur, thereby affecting smooth management of hard cash. The bank had an insurance cover for a given amount of cash it could hold. When the cash inflow increased over the given limit, keeping additional hard cash with the bank increased risk. Therefore, it became necessary to transfer it to the right place. In the city of Nagpur, ABC had only two branches, though its customer base was very large and continuously increasing. The changing economic scenario was expanding business opportunities for the Bank. Butibori, a place 30 kms from Nagpur, was expected to be declared as a Special Economic Zone, which would attract more industries and accelerate the related business activities in the region.
An increasing number of private and foreign banks had begun entering Nagpur. The promotional activities of these multinational banks increased awareness about private banking amongst the people in the region. ABC Bank also planned to expand its services in credit cards and other value added services. With the entry of foreign and private banks in Nagpur, the scenario was becoming more competitive and complex. As the new players tried to grab experienced employees at higher salaries, the employee turnover at ABC Bank increased. Looking at the changing business scenario, the Branch Head, Nagpur, was wondering about the strategies and measures to be taken for sustenance and growth of the bank.
QUESTIONS FOR DISCUSSION
1. Analyze the case, using SWOT.
2. Comment on the strategies used by the bank for penetrating the Nagpur market.
3. Suggest strategies for sustenance and growth of the bank in view of the changing scenario of the Nagpur region.
Section II
Answer Any six :
1. Explain buyers credit and suppliers credit by giving examples of each type of credit. Also explain with a case study.
2. What is correspondent banking? Explain briefly the services offered by correspondent banking? Explain briefly the services offered by correspondent banks to the banks having account relationship with them? Give some examples?
3. Explain in brief, the role of Reserve bank of India in Indian Exchange control. Explain the role of EXIM bank in promotion exports, and describe briefly facilities given by EXIM bank? Give examples.
4. The organizational career is a responsibility of the organization and the individual. Discuss.
5. Explain the general architecture of an integrated banking system. How is it useful? Explain with examples.
6. What do you understand by MICR? How does it help in clearing of instructions? Explain the field structure of MICR cheque.
7. Explain how a digital signature is generated? Explain its use with examples.
8. How can Indian banks use legal recognition of digital signature for development of business.
9. What is market segmentation? Why is it important to advertisers? How is it useful for banking.
Section I
CASE I : BANKING ON RELATIONSHIP
The birth of ABC Bank took place after the RBI issued guidelines for the entry of new private sector banks in January 1993. Subsequently, the promoter of ABC Bank sought permission to establish a commercial bank and retained KPMG, a management consultant of international repute, to prepare the groundwork for establishing a commercial bank. The Reserve Bank of India conveyed its approval in principle to establish ABC Bank on February 11, 1994. Thereafter, the Bank was incorporated under The Companies Act in September 1994. The bank started its operations in November 1995. The ABC Bank was promoted by the tenth largest development bank in the world, which had a magnificent record of promoting world-class institutions in India. The promoter was a strategic investor in a plethora of institutions, which had revolutionized the Indian financial markets.
Keeping in line with its policy of leveraging technology to drive its business, ABC Bank deployed Finacle, the e-age banking solution from Infosys to consolidate its position, meet challenges and quickly seize new business opportunities. The entire Finacle rollout was remarkable, considering the fact that it was implemented across all branches in a record timeframe of 5 months. Finacle provided the critical technology platform to propel the bank’s operations with new thrust and direction. The bank also implemented Kondor – a treasury front office software from Reuters and ITMS – treasury back office software from Synergy Login. The achievement of these significant milestones was consistent with ABC Bank’s continued focus to create customer and shareholder value through deployment of superior technology. Investments in technology were a part of the plan to put in place building blocks for creating the right organizational infrastructure. In future, it would help ABC Bank to consistently deliver superior products, convenient access channels and efficient service to its retail and corporate customers. Large investments had been made in back-end technology to strengthen processes, systems and control. This, in the long run, propelled by a top quality management team, clearly set ABC Bank apart from its competitors.
ABC Bank was a pioneer and an innovator in bringing state-of-the-art services to its customers. It was the first private bank to enter and capture new markets. It was the first Indian Bank to provide – ATM Next (an information portal on ATMs); Instant Account Opening; Talking ATMs; GiftCard (Prepaid Gift Card); EasyFill (Instant Mobile Refill Service) – along with other services. The Bank introduced a SMS alert service, which gave the customers, updated information on any transaction. The Bank had collaboration with other organizations rendering related services –Insurance, National Saving Certificates and Post office Service –providing a platform to interact with potential customers as well as offering other services to its existing customers. It also tried to tap potential rural market segments, which had not been explored by any other private bank. A key achievement for the Bank was that it emerged as the highest distributor for two top Mutual Fund Schemes consistently in the past, thereby demonstrating the strength of the Bank’s distribution channel of TPD business. It had registered huge success as a collecting bank to several market IPOs that consequently leveraged the IPO financing business. It launched a strategic B2B E-Commerce platform with BPCL to facilitate online payments from BPCL to its dealers, thereby enhancing corporate business through new-age technology and offering Supply Chain Financing Solutions. Corporate banking relationships were offered at 20 locations across the country and total Banking Solutions to its corporate customers (Annexure).
The Value Chain Management Group also offered Supply Chain Finance Solutions to various Corporates and special products like loan against credit card receivables. The lifeline of ABC Bank were its people, growing at a very fast pace. The average age of the employee at ABC Bank was 31 years. Approximately 83% of the employee strength was in the junior management category (which included trainees and probationers), while 14% made up the middle level management. The remaining constituted the senior and top management. The various business units comprised of 75%, while support functions made up for 12%, and operations for the remaining 13% of the total manpower strength of the Bank. The bank had rolled-out broad based grant of stock options covering 75% of the employees to align their interests with those of its shareholders. The bank had a stats-of-the-art training centre at Mumbai and every employee received on an average 40 hours of training, annually.
ABC Bank entered Nagpur market in two phases. In the first phase, it started with corporate banking and established itself as the best service provider. Afterwards, it leveraged its strengths by entering into retail banking. Although, relatively a late entrant in the retail banking sector, it acquired easy access in the new segment due to its brand image in corporate banking. In retail banking, ABC Bank opted for selective penetration based on two main factors – volume of business and credibility of the account. This enabled them to create greater satisfaction in the customers’ mind. Initially, it started with the criteria of an average quarterly cash balance of Rs 25,000 focusing on premium segment. Later on, to further penetrate the market, it reduced the average quarterly cash balance to Rs 5,000 and segmented the market on the basis of nature of business, volume and number of transactions per month. In this phase, by reducing the minimum available balance, it tapped other individual customer accounts during the course of its expansion.
ABC had always been particular about the specific needs of the customer and maintaining consistency in the quality of products and services provided. The bank emphasized on dealing with them on a one-to-one basis and providing tailor-made products. In course of penetrating this segment, ABC bank achieved great success due to its deep understanding of the needs and expectations of local customers. On the other hand, some of the competitors who displayed grand success in the beginning could not sustain it because of a mismatch between expectations of the customers and delivery of services. As promotion was mainly through word-of-mouth, the bank operated on the philosophy that 5 satisfied customers bring 5 new customers whereas 5 dissatisfied customers break 25 existing customers. Therefore, they focused about maintaining quality of services and customer satisfaction. The bank was very particular about reducing the turnaround time in extending its services to the customers. It also acted as an investment consultant for their individual customers.
Apart from offering ‘tailor-made’ products, the bank maintained a continuous personal relationship with each of its existing customer, based on their business potentials. They took regular feedbacks from the customers and responded sincerely to their suggestions or complaints. They used to call up their premium customers once a week, asking for their views on the services offered by the bank and suggestions to improve the same. To enable an impartial communication system, the bank created a dedicated e-mail ID for customers’ queries and complaints, which established a direct link between them and corporate office. The complaints and queries received from the customers were then forwarded to the concerned branch offices for immediate redressal and branch heads were asked to confirm the same. These complaint redressals formed an important component in performance evaluation of the branch as well as the concerned employee.
Even though a large group promoted ABC Bank, its independent asset base was limited, which posed a problem to finance large organizations. The limited asset base of the bank created hurdles in the expansion of its business. In view of having just two branches, RBI guidelines did not permit ABC to have its own currency chest at Nagpur, thereby affecting smooth management of hard cash. The bank had an insurance cover for a given amount of cash it could hold. When the cash inflow increased over the given limit, keeping additional hard cash with the bank increased risk. Therefore, it became necessary to transfer it to the right place. In the city of Nagpur, ABC had only two branches, though its customer base was very large and continuously increasing. The changing economic scenario was expanding business opportunities for the Bank. Butibori, a place 30 kms from Nagpur, was expected to be declared as a Special Economic Zone, which would attract more industries and accelerate the related business activities in the region.
An increasing number of private and foreign banks had begun entering Nagpur. The promotional activities of these multinational banks increased awareness about private banking amongst the people in the region. ABC Bank also planned to expand its services in credit cards and other value added services. With the entry of foreign and private banks in Nagpur, the scenario was becoming more competitive and complex. As the new players tried to grab experienced employees at higher salaries, the employee turnover at ABC Bank increased. Looking at the changing business scenario, the Branch Head, Nagpur, was wondering about the strategies and measures to be taken for sustenance and growth of the bank.
QUESTIONS FOR DISCUSSION
1. Analyze the case, using SWOT.
2. Comment on the strategies used by the bank for penetrating the Nagpur market.
3. Suggest strategies for sustenance and growth of the bank in view of the changing scenario of the Nagpur region.
Section II
Answer Any six :
1. Explain buyers credit and suppliers credit by giving examples of each type of credit. Also explain with a case study.
2. What is correspondent banking? Explain briefly the services offered by correspondent banking? Explain briefly the services offered by correspondent banks to the banks having account relationship with them? Give some examples?
3. Explain in brief, the role of Reserve bank of India in Indian Exchange control. Explain the role of EXIM bank in promotion exports, and describe briefly facilities given by EXIM bank? Give examples.
4. The organizational career is a responsibility of the organization and the individual. Discuss.
5. Explain the general architecture of an integrated banking system. How is it useful? Explain with examples.
6. What do you understand by MICR? How does it help in clearing of instructions? Explain the field structure of MICR cheque.
7. Explain how a digital signature is generated? Explain its use with examples.
8. How can Indian banks use legal recognition of digital signature for development of business.
9. What is market segmentation? Why is it important to advertisers? How is it useful for banking.
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