PREFACE. The development of banking sector in India since after independence was by and

Transcription

1 PREFACE The development of banking sector in India since after independence was by and large a state-induced activity. The Reserve Bank of India (RBI) was nationalized in 1949 followed by nationalization of Empirical Bank of India (now the State Bank of India) in In 1969, 14 major commercial banks were nationalized and the exercise was repeated when 6 more commercial banks were further nationalized in Thus, prior to economic reforms initiated in early 1990s, banking business in India was a near-monopoly of the Government of India (GOI) and Indian banking sector suffered from lack of competition, low capital base, inefficiency and high transaction costs. Ever since the bank nationalization of 1969, the banking sector had been dominated by the Public Sector Banks (PSBs) along with a high degree of financial repression characterized by administrative interest rates and allocated credit. As the international standards became prevalent banks had to unlearn their traditional operational methods of directed credit and investments; fixed interest rates, all of which led to deterioration in the quality of loan portfolios, inadequacy of capital and the erosion of profitability. The recent international consensus on preserving the soundness of the banking system has veered around certain core themes. These are effective risk management systems, adequate capital provision, sound practices of supervision and regulation, transparency of operations, conducive public policy intervention and maintenance of macroeconomic stability in the economy. Until recently, the lack of competitiveness vis-à-vis global standards, low technological level in operations, iii

2 over staffing, high NPAs and low levels of motivation had shackled the performance of banking industry in India. The Indian banking sector has come far away from the days of nationalization. The Narasimham Committee (1991) laid the foundation for the reformation of the Indian banking sector. The Committee submitted two reports, in 1992 and 1998, which laid significant thrust on enhancing the efficiency and viability of banking sector in India. The Committee has presented a detailed analysis of various problems and challenges confronted by the Indian banking system and made wide-ranging recommendations for improving and strengthening its functions. The deregulation process has resulted in delivery of innovative financial products at competitive rates; this has been proved by the increasing divergence of banks in retail banking for their development and survival. The competitive environment created by financial sector reforms has nonetheless compelled the banks to gradually adopt modern technology to survive in the hyper-competitive market. The banking sector reforms have provided the necessary platform for the Indian banks to operate on the basis of operational flexibility and functional autonomy, thereby enhancing efficiency, productivity and profitability. The reforms also brought about structural changes in the financial sector and succeeded in easing external constraints on its operation, i.e. reduction in cash reserve ratio (CRR) and statutory liquidity ratio (SLR) reserves, capital adequacy norms, restructuring and recapitulating banks and enhancing the competitive element in the market through the entry of new banks. iv

3 The reforms also include increase in the number of banks due to the entry of new private and foreign banks, increase in the transparency of the banks balance sheets through the introduction of prudential norms and increase in the role of the market forces due to the deregulated interest rates. These have significantly affected the operational environment in Indian banking sector. In order to survive and maintain strong presence, mergers and acquisitions has been the most common development all around the world. In order to ensure healthy competition and providing customer the best of the services, the banking sector reforms have led to the development of a diversifying portfolio in retail banking, insurance, trend of mergers for better stability and also the concept of virtual banking. Today, banking sector is seen as a catalyst in economic growth of a country. The recognition of banking, as a tool for all inclusive growth by economists, financial planners, reformist etc. has made it an important sector in the Government s planning of economic growth. The banking sector in India is therefore witnessing tremendous changes because of political, social and economic changes that are taking place domestically and internationally. Indian banking sector has witnessed a paradigm shift in its operation with initiation of reform measures since The floodgate of economy marked the entry of private and foreign players with modern technology. The changed operating environment underpinned by globalization, deregulation and advances in information technology, has resulted intensified competitive ambience in the sector. Further, deregulation of interest rate and opening up of the financial sector made Indian banking sector competitive. Encouragement to foreign banks and private sector banks increased competition for all operators in banking sector. The protective v

4 regime by the authority is over and Indian banks are exposed to global competition. Even competition within the country has increased manifold. The almost monopoly position enjoyed by the public sector banks of India is no more in existence. At the time of nationalization of 14 major banks since 1969, the primary importance was given to more banking. Now the thrust has been shifted to better banking. Offering quality service is the important mantra for customer satisfaction. Improved customer service has assumed paramount importance with the entry of foreign banks and emergence of private banks. The concept of banking restricted to accepting of deposits from public has undergone sea change. Today the banking sector is seen as a vehicle for all inclusive economic growth, social responsibility and equiv-distribution of national resources. After nationalization, though the number of branches has increased, but no significant development in transfer of credit to the needy sector and improvement in customer service has been found. The customers are not satisfied with the existing banking facilities and services. With an intention to resolve this customer satisfaction problem, the Government of India (GOI) has been appointing committees from time to time to probe into the nature of customer service. The committees constituted under the head of Sri R. K. Talwar, the Chairman, State Bank of India, in 1975 and later under the head of Sri M.N. Goiporia, former Chairman, State Bank of India, in 1990 came out with one identical finding that the customer service in banks particularly PSBs was not up to the mark. The Saraiya Committee (1972), The Talwar Committee (1975) and Goiporia Committee (1991) emphasized on amicable bankercustomer relationship in this respect. vi

5 Today banks are wooing existing customers and prospective customers by offering new facilities, products, and services in order to retain/increase their customer base in market. The way the banking has changed, so has the customer changed. The customer of today is not what he was yesterday. Today the customer is more knowledgeable, demanding, analytical and aware of his rights. It is therefore a challenging task before the banking sector to revisit their entire working modules, up gradation of skills, technology, and policies so that they are competent to withstand the international competitive environment in future. All customers from different backgrounds have different expectations. Unless the service standards fit to each person s expectations, he will not be satisfied. Therefore, one has to understand each type of customer thoroughly to be able to provide customer specific services. Satisfied customers are the best guarantee for the stability and growth. Customers will be satisfied only when the banks provide the customized and innovative products and services at reasonable cost. Many innovative services are currently available from Indian banks like E-Banking, ATMs, and Anywhere Banking. Globalization engulfed all the nations of the world since the beginning of the last decade of the past millennium, did not leave the banking industry untouched. The opening of the world trade has brought out several changes in the global banking map and consequently the banks have adapted to best practices in the context of providing services. The growing concern about the improvement in service quality can be the mantra for survival. Banks are putting their best face forward for improving service quality. With a view to attain better service quality, technology is rapidly transforming the banking industry and expanding its ability to reach the vii

6 unbanked. The nature of banking activities got shifted from social banking to commercial banking, traditional class banking to mass banking, brick and mortar banking (banking at fixed branch premises) to electronic banking, local banking to universal banking. Queue banking has been replaced by click banking and computerized banking substituted the manual banking. Many Innovative solutions in retail and corporate banking such as plastic money, electronic banking, phone banking, SMS banking, internet banking, core banking etc. become the need of the hour. CRM has been transformed into ECRM. The banking industry underwent profound changes of consolidation, spread of electronic banking and increased freedom to combine banking with other financial services. Innovation has become an industry phenomenon and innovative products with focus on information technology (IT), multiple channels and proliferation in the delivery system such as branch, internet, offsite ATMs, anywhere banking, credit, debit, smart cards, mobile or fixed-line phones and institutional channels at common place. Many Innovative solutions have been developed in retail and corporate banking such as credit cards, electronic cash management, relationship banking, credit appraisal, trade finance, e- commerce etc. Customer Service, Security, Know your Customer (KYC) and Anti-Money Laundering (AML) made it to the top priority list and followed closely by Alternate Payment Channels and Electronic Payment Products (APCEPP). The emergence of customer service as the topmost priority indicating the importance now being given to the customers in the banking sector. Many Indian banks have adapted to innovative service strategies and practices. Many Banks have established mobile banking facility, information center, waiting lounge, grievance cell for resolving customer complaints, organized customer feedback program etc. The banking sector started emphasizing on offering viii

7 excellent customer services in the turbulent market environment for attaining competitive edge and sustainable growth of this sector. Under the backdrop, the present study entitled Customer Services and Satisfaction: An Empirical Study on Banking Sector in the context of Barak Valley (comprising of three districts in southern part of Assam, viz., Cachar, Karimganj and Hailakandi) has been undertaken with a view to examine the plethora of customer services rendered by the banks and to measure satisfaction level of customer from such services offered. Further, the factors responsible for customer satisfaction in the area under study need to be reckoned with for formulating strategies with a view to ensure sustainable growth of the sector in the hypercompetitive globalized ambience. The entire research work has been presented in the following six chapters: Chapter 1: The first and introductory chapter entirely described the theme; statement of the problem; conceptual framework (which included the concept and definitions of bank; commercial bank; customer; services; customer services; and customer satisfaction), specific objectives; hypotheses; and research methodology. Further, the research methodology included the place of empirical study; exploration of data; identification of research population; defining sample units; sample design and sample size; sampling process; developing questionnaire for bank customers; tools and scaling techniques used; variable identification; brief operational definition of identified variables; scope and limitations of the study; and scheme of the study. Chapter 2: The second chapter is solely devoted to describe the review of literature for the study. This chapter reviewed the literature developed by the ix

8 earlier researchers in abroad, in India and in the area under the study by individual researchers as well as the researchers worked in group. This chapter primarily emphasized on identifying the research gap and major variables studied by the earlier researchers and identification of variables by the present researcher. Chapter 3: The third chapter is exclusively dedicated to describe the paradigm and dimensional shift of banking sector in India in respect of customer services since post liberalization banking regime. This chapter highlighted the introduction of modern banking services incorporated by the new set of private, public and foreign banks operating in India. It also exhibited the quantitative shift of banking services in India over the years with graphical representation. Chapter 4: The fourth chapter deals with primary data, tabulation, coding, crosstabulation, analysis and interpretation of data. This chapter described the customer profile, customer perception and level of satisfaction in respect of services rendered by the banks operating in the area under the study. It has also compared satisfaction level of customer based on demographic variable such as age, gender, education, occupation, monthly income etc. Further, it made the comparison of customer satisfaction level based on type of bank, type of bank branch, number of years of association of customers with the bank etc. Chapter 5: The fifth chapter delves the factors responsible for customer satisfaction in respect of banking services in the area under the study. Further, factor ranking has been made to highlight the future strategies of the banks operating in the area under study in respect of rendering better services. x

9 Chapter 6: Epilogue: The final chapter summarizes the major findings and draws conclusion of the study. Appropriate suggestions emanating from the study were forwarded to improve the customer services with a view to ensure customer satisfaction by the banks under the area of study. It has also presented further scope of research in the area under study. NIGAMANANDA BISWAS xi