Introduction Let’s close our eyes and think about a government owned commercial bank. We will surely start to think of a very clumsy place filled up with a lot f old people working very slowly and the image will be accompanied with the image of a very dirty place. Actually that’s what we can see when we go to any bank like Sonali Bank in Motijheel or any other government bank in Bangladesh. BASIC is a bank with a lot of differences from this situation. In this report we will try to find out how it differs and what’s in common.
Origin of the Report As a mandatory part of the MBA program in Department of Marketing, University of Dhaka every student must attend an internship program and submit a report accordingly. This report was generated to meet up the requirement of the program.
Origin of the Study There are many sources of the information used all over this report. Due to the secrecy Bond attached with the appointment letter from BASIC Bank Limited it is impossible to define all the sources and also all the experiences too. The following list contains only the sources that can be used without conflicting with the company terms and conditions.
Primary Sources • • •
Face-to-face conversation with the respective officers and staffs of the branch and head office. Face-to-face conversation with clients visited the branch. Practical work experience in the different desk of the department of the branch covered.
Secondary Sources • • • •
Annual report of BASIC Bank Limited. Website of the BASIC Bank Limited. Desk report of the related department. Different circulars sent by head office or BASIC Bank Limited and Bangladesh bank.
Data collection method Pertinent data for this report has been collected primarily by direct investigations of different records, papers, documents, operation process and different personnel. The interviews were administered mostly in informal sessions due to the busy schedules of the key personals. They often feel uneasy due to the secrecy policies of the bank in case of answering some questions.
Data sources The information and data for this report have been collected from the primary and secondary sources.
Data Collection Data was collected from the primary and secondary sources. The data was supplied by many publications forms etc.
Data analysis and interpretation Qualitative approach has been adopted for data analysis and interpretation taking the processed data as the base.
Limitations The report has some weak points also that have evolved due to the following causes •
Secrecy policies of the bank.
•
First time working experience in Bank of the report writer.
•
Very Busy schedules of the bankers and the clients also.
•
Lack of Printed Documents
Company Profile This part of the report will try to explain the current financial condition of the BASIC Bank Limited as well as the corporate values too. It is a very important instrument for any bank because this is used to compare one with others.
History of the Bank The BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) was established as a banking company under the companies Act 1913 on the 2nd of August, 1988 & it launched its operations on 21st of January, 1989. It is governed by the Banking Companies Act 1913.The Bank was established as the policy makers of the country felt the urgency for a bank in the private sector for financing Small Scale Industries (SSIs). At the outset, the Bank started as a joint venture enterprise of the BCC Foundation with 70 percent shares and the Government of Bangladesh (GOB) with the remaining 30 percent shares. The BCC Foundation being non functional following the closure of the BCCI, the Government of Bangladesh took over 100 percent ownership of BASIC on 4th June 1992. BASIC Bank Limited is unique in its objective. It is a blend of development and commercial banks. The bank has 30 branches across the country and a wide network of correspondents all over the world. The bank has plans to open more branches in the current fiscal year to expand the network. Serving people for progress is the motto of BASIC Bank Limited. Whether in personal, corporate, treasury or trade transactions BASIC Bank Limited is committed to provide the best. Meeting the demand of their discerning customers is not their sole objectives. The bank venture to deliver a quality that makes every transaction a pleasurable experience. The bank has already been in the process of implementing centralized On-line banking system. Customer is the core of everything that the bank does. The services are regularly upgraded and realigned to fulfill customer expectation. Delivery standards are constantly monitored and improved to assure the highest satisfaction.
2008 at Glance 2008 was one of the worst years for the bank but good for the Rajshahi branch of BASIC Bank Limited. The bank faced a severe drop in profit this year. The Rajshahi branch stood first in case of earning profit between all the branches situated in the north Bengal. It earned 93 lacs of taka all alone. The following table shows the situation of the total organization. Amount in Lac
Authorized Capital
2000.00
Paid-Up Capital
1247.40
Total Deposits
31947.48
Total Assets
38773.91
Loans & Advances
2263.65
Corporate Strategy •
Steady and sustainable growth through appropriate use of resources.
•
Investment in a cautious way.
•
Profit maximization.
•
Establishing small industries.
Organizational Goals • • • • • • • •
Develop a realistic deposit mobilization plan. Develop appropriate lending risk assessment system. Develop capital plan. Develop a system to make good advances. Develop e a recruitment, compensation, training and orientation plan. Develop a plan for offering better customer service. Develop appropriate management structure, systems, procedure and approaches. Develop scientific MIS to monitor bank’s activities.
Financial Resources Property and Assets
Balance in Other bank, 6937 .5
Deffered tax, 49.4
Assets
Call Money , 1320.0
Investment , 5303.4
Cash, 2125 .0
Others, 57 Fixed 9.1 assets, 196 .1
During the year 2008, total assets of the bank increased by 31 .81 % to Taka 38773.91 million from taka 29417.09 million in 2006. As expected, loans and advances comprised the largest share in the assets portfolio of the Bank constituting 57.41 percent. Balances with other banks and financial institutions and Investment were the second and the third largest constituents being 17.89 percent and 13.67 percent of the assets portfolio respectively. Money at call and short notice came next in size with 3.40 percent of total assets.
Loans and Advances Loans and advances consist of industrial loans, micro credit, commercial loans and bills increased by 17.18 percent to Taka 22,263.34 million compared to Taka 19,000.00 million in 2006.
Industrial Loans The industrial loan reflected a significant growth of 13.54 percent over the previous year. Total outstanding industrial loans including term and working capital stood at Taka 13,901.40 million at the end of 2008 compared to Taka 12,243.56 million of 2006. Total outstanding term loan stood at Taka 5,055.58 million as on December 31, 2008 compared to Taka 3,897.12 million in 2006 reflecting a growth of 29.72 percent. The outstanding
working capital finance extended to industrial units stood at Taka 9,525.98 million at the end of the reporting period compared to Taka 8,346.44 million in 2006. Growth
Micro credit BASIC Bank also provides micro credit to the poor for generation of employment and income on a sustainable basis, particularly in urban and suburban areas. At the end of 2008, total amount of Taka 680.13 million remained outstanding as against Taka 359.24 million in 2006. Recovery rate during this period remained at a highly satisfactory level of 100.00 percent.
Commercial Credit 25000
Loans & Advance
20000 15000 10000 5000 0 2004 Micro
2006 Commercial
2008 Indstrial
The Bank also supports development of trade, business and other commercial activities in the country. It covers the full range of services to the exporters and importers extending various facilities such as cash credit, export cash credit, packing credit, short term loans, local and foreign bills Purchase facilities. As on December 31 2008, total outstanding commercial loans stood at Taka 7,681.74 million compared to Taka 6,391.21 million in 2006.
Non-performing loan Classified (non-performing) loans and advances was 4.25 percent at the end of the year under review which was 3.70 percent in 2006. In absolute term classified loans and advances stood at Taka 723.23 million in 2008 from Taka 703.27 million in 2006. Additional
Export/Import The bank achieved substantial growth in both import and export in 2008. The Bank handled total import business of Taka 21,266.53 million and export business of Taka 16,794.96 million in 2008. The import and export business grew by 19.45 percent and 8.61 percent respectively. Major items of exports were ready made knit & woven garments, sweater, jute & jute products, leather and leather goods, handicrafts etc. Items of import included mainly industrial raw materials, garments accessories, capital machinery, raw cotton, electronic consumer goods, chemicals, tyre and tubes, reconditioned vehicles, bicycle spare parts, food items such as rice, wheat, garlic, onion, sugar, chilly and other essential commodities.
Investment and Placements Investment at the end of 2008 was for Taka 5,303.39 million, compared to Taka 3,270.87 million in previous year. Investment was concentrated in approved securities such
Foreign Exchange Business Export, 16794 Import, 21266
Import
Export
as Government treasury bills, Treasury bond, reverse repo and a few debentures and shares. During the year 2008 treasury bills, Treasury bond including reverse repo had the largest share (98.98%) in the investment portfolio. Debentures, shares in listed and unlisted companies and prize bond altogether constituted 1.02 percent. BASIC's placement in different Banks in Bangladesh and outside Bangladesh was Taka 6,937.53 million in 2008 compared to Taka 4,191.37 million in 2006.
Fixed assets and other receivables At the end of 2008 the fixed assets increased by 26.90 percent to Taka 196.12 million from Taka 154.52 million in 2006 and other assets increased to Taka 579.14 million from Taka 498.75 million in the previous year. Fixed assets included vehicles, equipment and computer, furniture and fixtures and leased assets. On the other hand, other assets included advance income tax, stock of stationery, security deposits, sundry debtors, and suspense account.
Liabilities & Shareholder’s Equity Deposit Deposit constitutes the core of BASIC Bank's fund mobilization. Total deposit of the Bank at the end of 2008 stood at Taka 31,947.98 million (82.40% of Total liabilities) compared to Taka 24,084.65 million (81.87% of Total liabilities) in 2006. The growth of deposit was 32.65 percent. During 2008, the fixed term deposit increased to Taka 27,903.72 million from Taka 20,467.17 million in 2006. Savings bank deposit decreased to Taka 886.30 million in 2008 compared to Taka 1007.79 million in 2006. Deposit in current and other accounts including bills payable increased to Taka 2,867.19 million in 2008 from Taka 2,370.45 million in 2006.
Borrowings
Borrowings 1385
1500 1000
690
937
500 0
2003 2005 2007 2003 2005 2007
Borrowings were made from various sources for long term funding specially for financing development-banking activities. The Bank enjoys a credit line facility from KFW, a German development bank for financing micro-credit scheme and small-scale industries. It has also utilized an ADB credit line for financing small industries.
Another loan of Taka 325.56 million was also received from ADB for financing Agro business development. Ministry of Finance (GOB) and Bangladesh Bank are the other sources of finance. Total outstanding borrowing against utilization of funds from the above sources in 2008 was Taka 1,385.81 million against Taka 830.06 million in 2006. An amount of Taka 600.00 million was allocated by the GOB and disbursed to BASIC Bank to finance Agro-based industry. BASIC was included in this scheme for its outstanding performance.
Equity
Sustainable Growth Rate 29.71% 23.34%
2003
19.37%
2004
15.75%
2005
2006
15.97%
2007
The bank started its journey with paid-up capital of Taka. 80.00 million in 1989 and the same had increased to Taka 1,247.40 million in 2008. The bank has decided to issue 1 bonus share for every 20 shares and the paid-up capital of the bank would thus be raised to Taka 1,336.77 million if the proposed bonus share is approved. Cash dividend of Taka 62.37 million has also been proposed for the year 2008. With this cash dividend, total cumulative cash dividend of Taka 538.00 million would be paid to the government.
Statutory Reserve As per section 24 of the Bank Company Act1991, 20 % of profit before tax needs to be transferred to statutory reserve until the total Statutory Reserve becomes equal to Paid-up Capital. Accordingly, the statutory reserve of the bank will stand at Taka 1045.08 million after transfer of an amount of Taka 161.62 million from the profit of 2008. Shareholders' equity of the Bank would increase by Taka 357.59 million to Taka 2,596.58 million in 2008 from Taka 2,238.99 million in 2006 registering a sustainable growth rate of 15.97 percent.
Operating Results Income The Bank's total income was 23.66 percent
Income
higher than that of previous year. Interest income from loans and advances increased
NonInterest Income 682.95
by 25.81 percent while other operating income increased by 38.18 percent over
Interest Income 2866.57
2006. Commission income was higher by 34.85 percent.
Expenses
Tax Paid Cumulative (million) 1199
2004
1434
2005
1777
2006
2245
2007
2790
2008
The total expenditure was 47.52 percent higher than that of 2006 due to increase of interest expenses as a consequence of increase of deposit substantially. Salary and allowances to employees increased by13.57percent mainly due to annual increment, dearness allowance, promotion of existing employees and fresh recruitment. General and administrative expenses (excluding salary and allowances) increased by 14.72 percent. Hiring of additional space for Head Office mainly contributed to this increase.
Contribution to Government Exchequer From the very inception, BASIC Bank has been posting profit and paying income tax to the Government. The cumulative figure of contribution to the Government exchequer by way of corporate tax up to December 31, 2008 amounted to Taka 2,790.98 million, which is almost 35 times the amount of original paid-up capital of the Bank.
Other Activities Human resources BASIC has a well-diversified pool of human resource, which is composed of personnel with high academic background. Also, there is a positive demographic characteristic. Most employees are comparatively young in age yet mature in experience. As at end of 2008 the total employee strength was 820. The Bank follows a strict recruitment policy in order to ensure that only the best people are recruited. The Bank, so far, has recruited five batches of entry-level management staff, all of whom have got excellent academic background. Intensive training program, on a regular basis, is being imparted to employees of both management and non-management levels to meet the challenges in the banking industry and to help employees to adapt the changes and new working conditions. Human resource is the main driving force and quality human resources are the key sources for the success of today's banking business. Keeping this view in mind and recognizing the importance of training for professional excellence BASIC Bank Ltd. established its own training cell in 2005 with modern facilities. In 2008 the cell arranged 22 training courses and provided training to as many as 360 employees of the bank. The bank also sends its employees to BIBM and other local and foreign institutions with a view to sharpening their knowledge base. During the year 2008 a total of 379 employees of the Bank were provided with training in various fields. Out of them 16 employees participated in training courses held abroad. In 2008 total 122 employees of various stages were given promotion which is almost 17.00 percent of total employees of the bank.
Automation The Bank has been providing off-line computerized banking service to all its customers since its inception. To accelerate the speedy and accurate account ledger maintained and to make available all potential international banking products, the bank has already been in the process of implementing centralized On-line Banking system. It is expected that within the end of 2008 the bank will be able to serve its customers through the new system including ATM and Internet banking facilities.
Branch Network A great deal of investment for developing the physical resource base of the Bank has been made. BASIC Bank has its presence in all the major industrial and commercial centers of Bangladesh in order to cater to the need of industry and trade. At the end of 2009, there were thirty two conveniently located branches throughout Bangladesh; eleven branches in the capital city of Dhaka, seven in Chittagong and one each in Narayanganj, Narsingdi, Rajshahi, Sayedpur, Bogra, Khulna, Jessore, Sylhet, Moulvibazar, Comilla, Barisal and Sirajganj. Besides these, the bank has three bill collection booths at Ramna, Sher-eBangla Nagar and Gulshan exchange Office of BTTB, Dhaka. A Foreign Exchange booth was opened at Osmani Int'l Airport, Sylhet in April '05 for mobilizing foreign exchange. This is one of the areas where BASIC Bank is relatively lagging behind. The Bank has already signed an agreement with Placid NK Corporation, USA and MoneyGram International, Minneapolis, USA for obtaining foreign currency remittances. The bank is expected to sign agreement with Tele Money transfer, London, UK and some similar agreement with companies located in Saudi Arabia and UAE are going to be finalized shortly.
Functional division of BASIC Bank Limited: The bank has 30 branches, 6 Zones spread throughout the country. At the head office level there are 12 divisions most of which have more than one functional department which are headed by DGM and Training institute by a director with the rank of CGM. The divisions are as follows •
Human Resources Division
•
Establishment & Common Service Division.
•
Secretary’s Division (Aboard Division).
•
Commercial Credit Division
•
Industrial Credit Division
•
Trade Finance Division
•
Balance sheet & Back Office Division
•
Audits an inspection division.
•
R&D Division
•
Computer system and procedures division. And
•
Law division.
These are the different division of BASIC bank that are serving their services to the bank as well as to the country with great efforts according to their respective fields.
Basic Bank Rajshahi Branch It was the working place of mine for all these months from where I learned a lot about the banking functions. While preparing this report I feel it’s necessary to tell a few words about it. There are almost 20 people working in this branch heart and soul to earn for the organization and to provide
best possible services. There are two different departments in the branch. It is their cumulative hard work that makes it one of the biggest money spinners for BASIC Bank Limited in the North Bengal Zone. The very interior design even shows that how much control is there in the branch. The boss can go through surveillance from his very table on every employee either directly or through CC TV. I think it is really rare to find out such a clean office that is owned by government of Bangladesh. The departments that work in the branch are General banking & Loans & Advance Section. The general banking performs the very common task of creating; collecting; circulating; control the liquid money of the Bank. It also helps with Pay Orders and various sorts of Drafts too. The Loans & Advance Department performs the function related to loan disbursement and collection of loans. It also issues Bank Guaranties. In the changing banking world it is becoming harder everyday to work in this section by following all the rules stated by Bangladesh Bank.
Organizational Chart D.G.M -1 A.M. -5 Officer -2 A.O -2 Armed Guard-2
D.G.M Branch In-Charge
General General Banking Banking
Driver
-2
A.M In-Charge Loans & Advances and Foreign Exchange
A.M Branch Operation, 2nd Officer & In-Charge General Banking
A.M A.M
GCM
A.M
A.M
Loans & Advances
Loans & Advances
Officer
Officer
Assistant Officer
Assistant Officer
Cash
Cash
Cash
Cash
Armed Guard
Armed Guard
Guard-Cum-
Guard-Cum-
Messenger
Messenger
List of Employee of Rajshahi Branch as on 31-01-2010 Sl. No 01
02
03
Name
Designation
Education qualification
A.K.M. Masudur
Deputy General
B.A. (Hons), Economics, M.A,
Rahman
Manager
Economics
Md. Shamsuzzaman
Assistant Manager
M.A
Assistant Manager
MBA
A.T.G.M. Golam Faruque
04
Dinu Pramanik
Assistant Manager
MBA (Acc), BBA (Hon’s)
05
Md. Manirul Islam
Assistant Manager
MA
06
Md. Musarrat Hossain
Assistant Manager
BBA, DU
07
Md. Syed Ahmed
Officer (Cash)
M.A
08
Md. Moshiur Rahman
Officer (Cash)
B.A (Hons), M.A
09
Ms. Sanjeda Tamanna
Assistant Officer (Cash)
MSS, MBA
Comparative Position of Deposit, Advance, Foreign Trade & Profit from 2007-2009 (Amount in lac)
2008 Name of Target item
Achievement
[up to 31-01-2010] Achievement
Target Amt.
Deposit
2010
2009
%
Achievement Target
Amt.
%
Amt.
%
4600.00 4675.70 101.65% 5000.00 5442.41 108.85% 5600.00 5506.37 98.32%
Advance 4200.00 3370.26 80.24%
4500.00 4008.99 89.09%
4700.00 4167.92 88.68%
Foreign Trade
300.00
56.49
18.83%
200.00
69.79
34.90%
200.00
--
00%
80.00
47.37
59.21%
100.00
91.57
91.57%
--
5.51
--
(Import) Profit
List of Top 10(ten) Industrial Projects with their limits Sl. No
Name of the project
01
M/S. Natore Jute Mills
Proprietor/ Authorized Limit details person CC(H) Limit- Taka.150.00 lac TL Limit Taka.150.00 lac Mr. Shyam Sunder TL Limit Taka.130.00 lac Agarwala (B.Com) STL Limit- Taka.100.00 lac BG LimitTaka.27.50 lac
M/S. Uttoran Offset PS Plate Industries Ltd.
Mr. S.M. Ayub, M.D Most. Shamsun Nahar, Director Sadia Afroza, Director S.M. Ahsan Habib, Director.
03
M/S. Xylia Medicare
Dr. Md. Rabiul Islam Khan [MBBS, DTM&H, M.Sc. (Paed.)]
04
M/S. Rajshahi Silk Fashion
Mr. Md. Abdul Kader Munna
05
M/S. M.N.I & Co.
Mr. Md. Nazrul Islam
06
M/S. Khan Rice Mills
07
M/S. Mukta Farms
08
The Bengal Board Mills
Mr. Md. Mozemmal Haque Khan Mr. Md. Obaidul Muktadir Mr. Md. Mosfiqur Rahman
09
Laser Diagnostic Center
Mr. Md. Rashed Hossain
CC(H) Limit- Taka.40.00 lac STL LimitTaka.10.00 lac CC(H) Limit- Taka.7.00 lac STL LimitTaka.20.00 lac TL Limit - Taka.10.00 lac TL Limit Taka.15.00 lac TL LimitTaka.150.00 lac
10
M/S. Alimuddin & Co.
Md. Alimuddin
SOD Limit- Taka.25.00 lac TL (HBL)Taka.20.00 lac
02
CC(H) Limit- Taka.65.00 lac TL Limit - Taka.335.00 lac PADTaka.5.00 lac
CC(H) Limit- Taka.14.00 lac TL Limit - Taka.80.00 lac TL Limit Taka.30.00 lac TL (HBL)Taka.70.00 lac CC(H) Limit- Taka.15.00 lac Adhoc CC(H)- Taka.5.00 lac CC(H) Limit- Taka.25.00 lac STL LimitTaka.15.00 lac SOD (M) Limit- Taka.24.00 lac CC(H) Limit- Taka.20.00 lac STL LimitTaka.5.00 lac
List of Top 10(ten) Trading concern with their limits Sl.
Name of the
Proprietor/ Authorized
No
project
person
01
M/s. Usha Construction
Mr. Munzur Faruk Choudhury, B.SC.(Ag) in Agri. Engg Mr. Md. Shamsur
Limit details i. BG (Bid Bond)ii. BG (PG)iii. STL iv. SOD
Taka.250.00 lac Taka.300.00 lac Taka.300.00 lac Taka.100.00 lac
i. BGii. STL iii. SOD-
Taka.200.00 lac Taka.300.00 lac Taka.20.00 lac
02
M/s. J.K. Enterprise
03
Md. Anisur Rahman Md. Anisur Rahman
i. SODii. TL(HBL)-
Taka.40.00 lac Taka.100.00 lac
04
M/S. Biscuit Biponi
Mr. Md. Ali Ashraf
i. SODii. CC(H)-
Taka.15.00 lac Taka.15.00 lac
Md. Moniruzzman Lucky
i. CC(H)-
Taka.40.00 lac
05
M/s. Rajshahi Stationery
Rahman
06
M/s. Safa General Store
Mr. Md. Saidur Rahman
i. CC(H)-
Taka.30.00 lac
07
M/S. Kamaluddin Khan & Sons
Mr. Md. Akram Khan
i. CC(H)-
Taka.25.00 lac
08
M/s. Belal Hardware
Mr. Md. Belal
i. CC(H)-
Taka.75.00 lac
09
M/s. New Modern Furniture.
Mr. Md. Robiul Alam
i. CC(H)-
Taka.30.00 lac
i. CC(H)-
Taka.30.00 lac
10
M/s. Mukta Hardware
Mr. Md. Obaidul Wazid
ii. TL (HBL)-
Taka.20.00 lac
CRM in BASIC Bank Limited Traditionally, few people changed their banks unless serious problems occurred. In the past there was, to certain extent, a committed, often inherited relationship between a customer and his/her bank. The philosophy, culture and organization of financial institutions were grounded in this assumption and reflected in their marketing policies, which were product and transaction-oriented, reactionary, focused on discrete rather than continuous activities. Today, financial institutions can no longer rely on these committed relationships or established marketing techniques to attract and retain customers. As markets break down into heterogeneous segments, a more precisely targeted marketing technique is required, which creates a dialogue with smaller groups of customers and identifies individual needs. Also, before the Internet revolution, consumers largely selected their banks based on how convenient the location of bank's branches was to their homes or offices. With the advent of new technologies in the business of bank, such as Internet banking and ATMs, now customers can freely chose any bank for their transactions. Thus, the customer base of banks has increased, and so has the choices of customers for selecting the banks. This situation coupled with the pressures of competitive and dynamic markets has contributed to the growth of CRM in the Financial Services Sector.
Customer Relationship Management: The Concept Customer Relationship Management is the establishment, development, maintenance and optimization of long-term mutually valuable relationships between consumers and the organizations. Successful customer relationship management focuses on understanding the needs and desires of the customers and is achieved by placing these needs at the heart of the business by integrating them with the organization's strategy, people, technology and business processes. At the heart of a perfect CRM strategy is the creation of mutual value for all the parties involved in the business process. It is about creating a sustainable competitive advantage
by being the best at understanding, communicating, and delivering, and developing existing customer relationships in addition to creating and keeping new customers. So the concept of product life cycle is giving way to the concept of customer life cycle focusing on the development of products and services that anticipate the future need of the existing customers and creating additional services that extend existing customer relationships beyond transactions.
Need of CRM in the Banking Industry A Relationship-based Marketing approach has the following benefits: -Over time, retail bank customers tend to increase their holding of the other products from across the range of financial products / services available. Long-term customers are more likely to become a referral source. The longer a relationship continues; the better a bank can understand the customer and his/her needs & preferences, and so greater the opportunity to tailor products and services and cross-sell the product / service range. Customers in long-term relationships are more comfortable with the service, the organization, methods and procedures. This helps reduce operating cost and costs arising out of customer error. With increased number of banks, products and services and practically nil switching costs, customers are easily switching banks whenever they find better services and products. Banks are finding it tough to get new customers, and more importantly, retain existing customers. According to a research by Reich held and Sasser in the Harvard Business Review, 5% increase in customer retention can increase profitability by 35% in banking business, 50% in insurance and brokerage, and 125% in the consumer credit card market. Therefore, banks are now stressing on retaining customers and increasing market share.
Private Banking and CRM Private Banks have traditionally viewed themselves as exceedingly 'Customer Centric' offering what they believe to be highly personalized services to the High Net Worth Customers. However, changes in the customer behavior and accumulation of wealth are
resulting in the needs of HNW customers becoming more diverse and complex in terms of the sorts of products they want, the channels through which they want to access them and the associated range of advice. The wealthier the customers, the more demanding they are - and the clients expect more and more from their banks. Competition for "Supremely elite" is increasing
Customer Experiences The first step towards successfully winning, retaining and growing the profitability of private banking customers is to understand what their wants and needs are, so that the organization can be built around serving those needs. Only when an organization has done this and incorporated this into its strategy can it start to design its value proposition and a customer experience that will enable it to achieve a differentiated competitive
Advise & Expertise Give me independent advice specific to my needs
High Quality Services Provide Consistent error free high quality services
HNW HNW Customers Customers
Personal Relationship Provide me with a single adviser to manage my affairs
Performances Provide me with best possible return on my assets
Position in the private banking market, and more importantly, do so in an economically viable way There is a basic 'generic' customer experience that many private banking customers are seeking. To be a credible player in the market, a private bank must be able to deliver this 'base' experience. This represents a common set of needs that are shared by most HNW customers. Therefore, the private bank must have the capabilities required to meet these needs for the majority of its customer base.
All customers, regardless of wealth levels, have similar emotional needs, which drive their need for advice and their purchase of products. Different wealth levels impose different priorities on meeting these needs and open up new avenues for doing so. Take a simple example, HNW customers can afford on it to fund their retirement, so their priorities may be associated with growing wealth, rather than preserving it, allowing them to choose a product option with a higher risk/reward ratio. If this is true, it means all HNW customers start with a basic, common set of what they want and need from a bank, which might include: •
Personal, long-term relationship
•
Advice combining industry expertise and knowledge of personal circumstances
•
High quality, consistent quality
•
Security, privacy, confidentiality
At this basic level, grouping together these core wants and needs produces a set of generic characteristics that an HNW individual seeks from an organization before he or she will even consider placing any of his or her wealth with it. Underlying these generic characteristics is a set of capabilities covering organization, process and technology, which the private bank must process to operate in the high net worth market.
Advise & Expertise Give me independent advice specific to my needs Flexibility Cope with me
High Quality Services Provide Consistent error free high quality services
Personal Relationship Provide me with a single adviser to manage my affairs
HNW HNW Customers Customers
Performances Provide me with best possible return on my assets
Discretion Treat my affairs with utmost discretion
The Segment-Specific Experience To build this 'base' experience, private banks also need to consider the segment-specific needs of their target customers. This in itself requires a capability to identify and justify target customers and understand their needs beyond banking, to ensure that their emotional needs are met. It is here that the customer is made to feel like an individual, but it is also at this point that costs and infrastructure spiral, as customers' needs start to diverge. The segmentation process identifies groups of customers with similar wants and needs, who are seeking a similar experience from the provider. Importantly, from the organizations' viewpoint, this means that they can also be served by similar sets of capabilities. The channel preferences of each segment and associated channel experience - for example, a self-directed group of customers will use internet for transacting, information gathering and even some advice, whereas advice seekers and less financially sophisticated segments require more access to an adviser / relationship manager and a more basic experience over the Internet. The product and service preferences of that segment - for example, the more sophisticated customers are more likely to demand more complex products such as alternative investments, whilst others may prefer discretionary portfolio management. The new components are added to the experience and the 'base' experiences elements become defined in more depth, according to the specific needs of the customer segment. Once the segment experiences have been defined, the associated capabilities must again be identified. The hierarchical approach to defining customer experiences helps filter these capabilities as: •
It is possible to identify experience elements that are common to more than one segment - this will carry a higher priority for development as they will benefit more customers;
•
The segmentation exercise will provide comparative sizing for the target segments.
•
Capabilities required for the larger, more profitable segments take precedence over those needed for smaller segments.
The Organization-Specific Experience Having identified the base and segment specific elements of HNW customer experience, the final step is to identify how the experience that each organization offers its customers is distinct from other banks. Now this would mean that one has to distinctly identify the components of the experience that are not only associated with a particular bank but also be the key differentiator. This process will define: •
Elements of the organization style and culture.
•
Products and Services to be provided.
In the same way, every brand is different, so is the experience. Finances can be a complex matter. The challenges faced by banks and their customers are many but the trick lies in de-mystifying complex financial relationships. Technical solutions deployed by banks today are flexible, user-friendly and meant to facilitate specific workflow and requirements in implementation processes. In order to simplify lives, banks have begun to implement end-to-end technologies through all departments with the intention of removing human error from processes. Previously existing manual environments could not have been adequate for future visions, growth plans and strategies.
Flexibility Cope with me
Global Global accessibility
High Quality Services Provide Consistent error free high quality services
Advise & Expertise Give me independent advice specific to my needs
HNW HNW Customers Customers
Performances Provide me with best possible return on my assets
Personal Relationship Provide me with a single adviser to manage my affairs
Brand Modern innovative image that suits my image
Discretion Treat my affairs with utmost discretion
In this day and age, customers enjoy complete luxury in terms of customized technical solutions and banks use the same to cement long-term, mutually-beneficial relationships.
CRM in Practice in BASIC Bank Limited In Bangladesh banking is not yet a very developed industry and that has happened due to various strict rules and regulation set by the central authority of banks, the central bank. Due to the weak infrastructural condition and economic vulnerability the central bank often has to play a very protective role and has to play it safe. In my short experience in BASIC, I have found a very interesting thing and that is huge use of CRM tools. Although this methods are not formally used as CRM tools but the goal they pursue are similar to those of the CRM goals, building and maintaining profitable relationships. The CRM practice is mainly in customer experience level as the dealing customers are not of a very qualified level. Some of the tools used in bank’s CRM are as follows
Advice & Expertise A banker’s job is not only to develop his or her banks asset base or profit but to ensure sustainable development of all the parties he or she is going to serve. This is a huge dilemma for any banker that which one he should choose between the clients benefit or the bank’s one. Bankers of BASIC Bank Limited have always given importance on ensuring their clients’ maximum benefit until it harms the rules and regulation of the bank. The organization believes that if a client is served with a good advice than sooner or later the thing is going to pay back and will create a long term relationship with the bank. Advices The clients often expect good and logical advises from the bankers as they believe that the bankers know better than them about which of the loan scheme is going to give him
maximum benefit or which one is going to ensure them maximum return on their asset in case of depositing. There are several aspects where a client can be advised on Selection of appropriate loan packages a. There are various types of loans available in the bank which serves different purpose. It is often hard for the clients to find out which one is the best one for them. In such a case it very important for the banker to help the client to find out the most profitable loan package for him. Such as a client needs a certain amount for 4 months, in this circumstances the clients can achieve the fund by taking a CC(H) loan for one year on the other hand the banker can advice him to go for a STL limit for the short period of time which will save him money and will also save hassle. Selection of appropriate investment packages b. There are a lot of people who have enough idle money but can’t invest due to their other problems, in this situation bank borrow that idle money from them and then lend them to others. The principle of banking is to transfer money from the surplus unit to deficit unit. An investor can invest in different ways; a banker helps him to select the most profitable investment opportunity available for him in the bank.
Selection of appropriate loan repayment method c. After disbursal of loan, it needs to be repaid. Generally the clients select the loan repayment method. A loan can be repaid through monthly installments or just through daily transactions. Even in some cases the loan can be repaid just by completing a work order and receiving a bill against it. The bankers will advice to select the best possible loan repayment method that suits the customers’ business type and loan size. Tax redemption d. There are several ways to get tax redemption in the national Tax rule and the bankers help the client to take necessary action to ensure lesser tax. Cost cutting e. There are several cost attached to the loan disbursal process which can often be reduced just because of the bankers good will. Ensuring the availability of all the services at a cheaper rate will easily cut the cost of the loan and thus the EIR and will ensure delighted customers. Expertise A banker can lend his expertise in the following sections 1. Preparing financial statements 2. Preparing stock reports 3. Preparing valuation reports 4. Planning financial plans 5. Preparing financial projections 6. Preparing L/C applications and other applications
Personal Relationship Personal relationship is very important for any banker customer relationship. There is always a sense of belonging in the clients mind because of the long term association with the bank.
In the banks it is always tried that the customers always face the same officer as it makes the process of relationship building easier. There are benefits of this sort of personal relationship because this saves both time and effort of both the parties. The person who deals with the same client comes to know nooks and corners of the clients taken benefits and his business criteria also. It becomes much easier for him to get hold of the problem that the client might face.
Client
Banker
Better Service
Faster Service
Error Free Service
Long term bonding
On the other hand, the client feels comfortable about the person who is dealing with all the problems as he knows that the person sitting in front of him know a detail view of all his loans, advances or deposits. The interpersonal bond helps the parties to discuss matters more freely and to reach a solution instead of just getting into a dead block which can become very fatal for both of them.
Performance There is no alternative of high quality performance in banks as the organization is a strictly service based organization. This specific CRM tool is useful in case of the deposit making customers. They always demand a very high quality performance in investing their hard earned money. The customers expect performance in the following sectors. 1. Safe fund management 2. Profitable investment
3. Investment in sustainable development sectors The bank just can’t collect deposit from the depositors but it also must ensure that the bank is going to invest the hard earned depositor’s money is sectors where it will earn most achievable value.
Customer’s Assets
High Performance Banking
Higher return Higher Satisfaction
Quality Service The clients dealing with the banks need high quality error free service as their business depends a lot on the banks. There hard earned reputation and capital are glued together with the bank’s performance. If the bank fails to perform in a fast & error free manner, than there is a good possibility that the client will face severe difficulties in running his/her business. There many parties and points where a bank needs to take faster decision and error free performance because of attachment of money with time. A simple mistake in L/C can cause a customer to lose a huge business, thus face a severe damage in his business and
finally not being able to pay back the facilities he is enjoying from the bank. That would be fatal for both the parties and can cause serious damage to the partnering attitude prevailing between the parties.
Flexibility Flexibility is one of the advanced tools of banking CRM which is generally used only in case of the older trusted clients. In Rajshahi branch only two parties are enjoying this type of facilities regularly. They are two of the oldest and biggest parties of the branch who have a very good track record. These parties generally enjoys flexibility in case of banking hour, banker’s duty, extra services, extra facilities exceeding the limit to meet urgent need of funds. The bank shows this sort of flexibilities with two different goals. One of them is just to ensure financial soundness of the party on the other hand the second goal is to create a sense of partnering in the customers mind.
Skills required for the Customer Managers There are several skills generally used by the managers of the bank to deal with the customers. They are as follows 1. An understanding of how business works 2. An ability to counsel 3. An ability to identify key result areas 4. An ability to plan human and other economic resources to ensure maximum output 5. An ability to orchestrate banker customer contact over various functionalities 6. An ability to balance company and client interest 7. An understanding of cultures.
Generic strategies of CRM There are four generic strategies of CRM used in BASIC Bank Limited in case of maintaining relationship with the customer. They are 1. Target for development 2. Defend against competition 3. Maintain with minimum resources 4. Withdraw The developer strategy is used for selected customers who have a high attractiveness factor with a good prospect for greater penetration. The defend strategy is designed to safeguard existing customers from competitive inroads, particularly where potential growth will be limited. Both these strategies will absorb resources but the potential customers are likely to be crucial to the achievement of the company objective.
weak
average
Strong
High
Maintain selectively
Develop
Develop Defend
Medium
Maintain Minimally
Defend Maintain
Develop
low
Customer attractiveness
Relationship status with suppliers
Withdraw
Maintain Minimally
Defend Selectively
Maintenance with minimum resource is a strategy for customers with whom good business is enjoyed despite the fact that they may not really fit BASIC Bank Limited’s competitive advantage. The policy will be to ensure limited resource allocation. Use of resources is generally trimmed by substituting personal care taking with offsite supervision.
Withdrawing is an appropriate strategy where the customer is patently using more valuable resources than is likely to be justified. Customers failing in these two strategic classifications are unlikely to become important customers. Although there are certain initiatives taken to try to convert them to key customers, but these initiatives rarely does work as these sort of organization slowly becomes very expensive for the bank to service and thus very soon the bank tries to dump them.
Use of two ‘P’ Dynamics in CRM In the service marketing there are seven P’s which causes all the dynamics in the marketing of any certain organization which are 1. Product 2. Price 3. place 4. promotion 5. people 6. process 7. physical evidence in case of CRM two of them are most important and they are people and process. CRM is nothing but a tool that diminishes the gap between the customers and the bank as a result it causes long term relationship with the customer. People People are the delivery point of the services provided by the bank. The people servicing the customers generally become the face of the organization and their performance is closely tied with the bank’s performance. As a result maintain the peoples’ performance becomes very important for the organization to maintain long ter relationship. If the service providers are not properly trained then there are chances that they are not going to meet the customer’s expectation and going to deliver erroneous services which will cause damages to both the bank’s goodwill and also to the client’s business. As a result
the bank always tries to create a very good employee base who are well trained and motivated. This ensures better and faster delivery of services which in turn ensures long term customers association with the bank. Process
Employees
Service Delivery
Monitoring
Problem Solving
New relationship development
Customers
Process is the way the service is delivered. Process is also very important for any bank because the process of service delivery can also play a vital role in making customers satisfied or dissatisfied. If the process is long and complex then there is a rare chance that the customer is going to be happy about it as it is costing him more time than he is used to spend on the matter as a result the process are needed to be monitored extremely well and time gaps are needed to be cut down. Making the process easier to understand also helps a lot. In BASIC Bank Limited the process of service delivery has
been made easier in the customer’s end because of the customers’ demand for it but has not been possible to do so in the whole process because of the rules and regulation attached to the service delivery of the banks by the central authority of the banks, the central bank.
Problems of CRM efforts of BASIC Bank Limited There are several problems of the CRM efforts of the bank as the bank has not yet developed a clear cut guideline for its CRM effort but it is used only as a marketing tool in the bank. 1. Need of properly specified guidelines 2. Need of proper planning 3. Need of more customer centric decision making process 4. Need to deliver more discretionary power to the customer services managers 5. Motivational steps to be taken to motivate all the employees to focus on CRM 6. Need of authorizing more resources to development and maintaining relationship 7. Need of using a CRM computer system that will help the bankers to communicate, monitor and keep contact with all the customers of the bank.
What Customers like about BASIC Bank During the long time I worked in BASIC Bank Limited, I had met a lot of businessmen from different level of the society and commercials of different organizations. Whenever we discussed about service and other aspects of the bank they gave importance on some aspects of the branch. So, I decided to make a simple list of questions to ask them during conversations. It was very hard to ask them directly as they were very busy, so most of the questions were asked during the break time or lunch time. While talking to them I had to feel up the questionnaire by myself as they themselves were not interested to feel up them. It wouldn’t be ok to tell it a research but it surely can define the perception of the customer of the Rajshahi branch because these are the people who help Rajshahi branch most of its profit. They also have got the biggest amount of loan from the branch.
I was able to interview 26 people during the internship period but I had to exclude 4 of them and that’s why all the results are shown in terms of 22 people. In the following sections I will try to show the answer pattern about different aspects of the branch. PRODUCT RANGE This question was made to find out whether the customers are happy with the product range the bank is providing or not. Q1 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied Mean
x -2 -1 0 1
f 9 5 8 2
% 41% 23% 23% 9%
fx -18 -5 0 2
2
1
5%
2
22 -0.86
100%
-19
From the graph it is evident that 41% of the respondents were very satisfied with the product range offered. 23% respondents answer was satisfied and another 23% were neither satisfied nor dissatisfied about the product range. Although it’s very important to inform that most of the unsatisfied customers own a personal account and their dissatisfaction is caused by the lack of deposit skim, and personal loans.
ACCESS TO SERVICE The physical approachability of service location, including the ease of finding one’s way around the service environment and the clarity of route. Regarding access to services, the answers obtained from customers and the answers obtained are as follows
Q2 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied
x -2 -1 0 1 2
f 13 5 2 1 1 22 -1.27
Mean
% 59% 23% 9% 5% 5% 100%
fx -26 -5 0 1 2 -28
From the above graph it is evident that consumers are overall satisfied with access to services. 23% respondents are satisfied while 59% respondents are very satisfied with access to services. ACCURACY OF SERVICES Regarding accuracy of services, the answers obtained from customers are as follows Q3 Very Satisfied Satisfied
x -2 -1
f 6 7
% 27% 32%
fx -12 -7
Neutral Dissatisfied Very Dissatisfied
0 1 2
6 2 1 22 -0.68
Average
27% 9% 5% 100%
0 2 2 -15
From the graph it is evident that consumers are a bit satisfied with the accuracy of services. However there is room for improvement. 27% of the respondents rated accuracy of services as neutral. SPEED OF SERVICES Regarding speed of service, the answers obtained from customers are as follows: Q4 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied Average
x -2 -1 0 1 2
f 2 3 10 5 2 22 0.09
% 9% 14% 45% 23% 9% 100%
fx -4 -3 0 5 4 2
9% of the respondents are very dissatisfied with the speed of service while 45% respondents are neither satisfied nor dissatisfied with the service. The bank seriously needs some improvement in this sector. CHARGES CHARGED Regarding financial charges of services, the answers obtained from customers are as follows Q5 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied
x -2 -1 0 1 2
Average
f 10 6 4 2 0 22 -1.09
% 45% 27% 18% 9% 0% 100%
fx -20 -6 0 2 0 -24
From the above graph it is evident that respondents are very satisfied with the financial charges for services. The reason being low amount of charges charged for account maintenance & other services.
PUBLISHED MATERIAL ABOUT SERVICES Regarding published material about services, the answers obtained from customers are as follows Q6 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied
x -2 -1 0 1 2
f 0 1 1 4 16 22 1.59
Average
% 0% 5% 5% 18% 73% 100%
fx 0 -1 0 4 32 35
73% of the respondents are very dissatisfied with the published material about services. 5% respondents were neither satisfied nor dissatisfied with the published material about services. It’s a disaster for this bank and that is created because there not a single publication about services is available in the branch. BRANCHES LOCATION Regarding banks location, the answers obtained from customers are as follows: Q7
x
f
%
fx
Very Satisfied
-2
6
27%
-12
Satisfied Neutral Dissatisfied Very Dissatisfied
-1 0 1 2
6 5 4 1 22 -0.55
27% 23% 18% 5% 100%
-6 0 4 2 -12
Average
27% of the customers’ were very satisfied and other 27% is satisfied about the location of the branch. This happened due to the location being around a huge 50 feet road and in a place with no traffic congestion. INTERIOR DESIGN & AREA MANAGEMENT About this aspect the clients showed the following feeling Q8 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied
x -2 -1 0 1 2
Average
f 6 10 3 2 1 22 -0.82
% 27% 45% 14% 9% 5% 100%
fx -12 -10 0 2 2 -18
Overall statistics shows client feelings range from Neutral to Satisfied. 45%of them are satisfied about the interior designing of the bank. NUMBER OF SERVICE EMPLOYEES
Regarding number of service employees, the answers obtained from customers are as follows Q9 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied
x -2 -1 0 1 2
f 5 6 8 2 1 22 -0.55
Average
% 23% 27% 36% 9% 5% 100%
fx -10 -6 0 2 2 -12
Customer answers range from Neutral to Satisfied and there is a need of improvement in this sector. EMPLOYEE ATTITUDE Regarding attitude of employees, the answers obtained from customers are as follows Q 10 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied Average
x -2 -1 0 1 2
f 2 11 6 2 1 22 -0.50
% 9% 50% 27% 9% 5% 100%
fx -4 -11 0 2 2 -11
50% of the respondents are happy with the employee attitude and 27%of them are Neutral and they expect better employee attitude.
KNOWLEDGE OF EMPLOYEES Regarding knowledge of employees, the answers obtained from customers are as follows Q 11 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied Average
x -2 -1 0 1 2
f 5 6 8 1 2 22 -0.50
% 23% 27% 36% 5% 9% 100%
fx -10 -6 0 1 4 -11
36% OF THE CUSTOMER FEELS CONFUSED ABOUT THE EMPLOYEE KNOWLEDGE LEVEL AND THIS CAN OCCUR DUE TO THE VARYING KNOWLEDGE LEVEL OF THE EMPLOYEES IN DIFFERENT MATTERS .
EASE OF THE PROCESS & PROCEDURES Regarding processes and procedures, the answers obtained from customers are as follows Q 12 Very Easy Easy Neutral Hard Very Hard
x -2 -1 0 1 2
f 2 2 5 6 7 22 0.64
Average
% 9% 9% 23% 27% 32% 100%
fx -4 -2 0 6 14 14
32% of the respondents feel that the procedures are hard to follow. This might occur due to the strict Bangladesh Bank rule that is totally followed by BASIC Bank Limited PROBLEM R ESOLUTION Regarding problem resolution, the answers obtained from customers are as follows Q 13 Very Satisfied Satisfied Neutral Dissatisfied Very Dissatisfied Average
x -2 -1 0 1 2
f 7 5 6 3 1 22 -0.64
% 32% 23% 27% 14% 5% 100%
fx -14 -5 0 3 2 -14
32% respondents are satisfied with problem resolution. However 14% respondents are dissatisfied with problem resolution. Measures must be taken to minimize problems and problem occurs it has to be resolved in an effective manner. SECURITY ARRANGEMENT IN BASIC B ANK LIMITED Regarding security arrangements at BASIC Bank Limited, the answers obtained from customers are as follows Q 14 Very Satisfied Satisfied Neutral
x -2 -1 0
f 6 8 5
% 27% 36% 23%
fx -12 -8 0
Dissatisfied
1
2
9%
2
Very Dissatisfied
2
1 22 -0.73
5% 100%
2 -16
Average
36% OF THE RESPONDENTS HAVE MIXED REVIEW. 27% IS VERY SATISFIED AND 9% IS DISSATISFIED. Bibliography 1. Several annual report of the bank 2. Rose, S. Peter; Commercial Bank Management
3. Debnath; Business of Banking 4. Jim Eckenrode, TowerGroup; Improving customer relationship management in banking with integrated delivery channels 5. Rohit Perera & Tamsin Brew ; The Basic HNW Customer Experience 6. Luther S.; How banks manage CRM 7. Sympson’s; Making it simple for FIs 8. Gupta & Gupta; CRM in Indian Banks. 9. CRM in ICICI Bank 10. Other web based sources that helped by providing various types of help.