CHAPTER: 1INTRODUCTION TO RETAIL BANKING

INTRODUCTION

DIFFERENCE BETWEEN CORE BANKING AND RETAIL BANKING

ADVANTAGES AND DISADVANTAGES

DRIVERS OF RETAIL BUSINESS

OPPORTUNITIES AND CHALLENGES

SERVICES OFFERED

INTRODUCTION:

RETAIL BANKING is a banking service that is geared primarily toward individual consumers. Retail banking is usually made available by commercial banks, as well as smaller community banks. Unlike wholesale banking, retail banking focuses strictly on consumer markets. Retail banking refers to provision of banking services to individuals and small business where the financial institutions are dealing with large number of low value transactions. The concept is not new to banks but is now viewed as an important and attractive market segment that offers opportunities for growth and profits.

Excess of liquidity, increased dependence of corporate on capital markets, the rising income of middle class with increase in purchasing power and ability to handle debts, the increasing amount of NPAs from corporate portfolio and the growth and future growth potential of the credit card business has induced banks to shift from wholesale banking to retail banking.

Retail banking has immense opportunities in a growing economy like India. As the growth story gets unfolded in India, retail banking is going to emerge a major driver. Some of the key policy issues relevant to the retail-banking sector are: financial inclusion, responsible lending, and access to finance, long-term savings, financial capability, consumer protection, regulation and financial crime prevention.

DIFFERENCE BETWEEN CORE BANKING AND RETAIL BANKING

Often retail banking is referred to as "non commercial banking" this would be your common checking accounts and consumer loans. Where as "core banking" is often the very solid business accounts and commercial loans. It is referred to, as 'core' because it is a core or central to the banks business. Few banks survive from just retail banking services, they need those core business accounts that are perhaps more stable than retail business.

"Business Banking" tends to work with small-to-medium sized enterprises (SMEs). Business banking does all the things that retail banking does but adds the following things:

1) More services: Business Banking includes things like more treasury services, revolving credit, merchant credit, cash management, group insurance, corporate cards and secure Internet banking (e.g. server-to-server).

2) Better rates: Since SMEs bring in more money, they tend to get better rates than the retail banking customer, who tends to need lots of maintenance compared to their deposit sizes.

Retail, SME and corporate banking customers use the same infrastructure, but the sales platforms tend to be different to cater to their specific needs.

ADVANTAGES AND DISADVANTAGES OF RETAIL BANKING:

ADVANTAGES:Retail banking has inherent advantages outweighing certain disadvantages. Advantages are analyzed from the resource angle and asset angle.-RESOURCES SIDE

(a) Retail deposits are stable and constitute core deposits. (b)They are interest insensitive and less bargaining for additional interest. (c)They constitute low cost funds for the banks. (d)Effective customer relationship management with the retail customers built a strong customer base. (e) Retail banking increases the subsidiary business of the banks.

-ASSETS SIDE

(a) Retail banking results in better yield and improved bottom line for a bank.(b) Retail segment is a good avenue for funds deployment.(c) Consumer loans are presumed to be of lower risk and NPA perception.(d) Helps economic revival of the nation through increased production activity.(e) Improves lifestyle and fulfills aspirations of the people through affordable credit.(f) Innovative product development credit.(g) Retail banking involves minimum marketing efforts in a demand driven economy. (h) Diversified portfolio due to huge customer base enables bank to reduce their dependence on few or single borrower(i) Banks can earn good profits by providing non fund based or fee based services without deploying their funds.DISADVANTAGES:

(a) Designing own and new financial products is very costly and time consuming for the bank.(b) Customers now-a-days prefer net banking to branch banking. The banks that are slow in introducing technology-based products, are finding it difficult to retain the customers who wish to opt for net banking.(c) Customers are attracted towards other financial products like mutual funds etc. (d) Though banks are investing heavily in technology, they are not able to exploit the same to the full extent.(e) A major disadvantage is monitoring and follow up of huge volume of loan accounts inducing banks to spend heavily in human resource department(f) Long term loans like housing loan due to its long repayment term in the absence of proper follow-up, can become NPAs.

DRIVERS OF RETAIL BANKING IN INDIA ECONOMIC PROSPERITY and the consequent increase in purchasing power have given a fillip to a consumer boom. During the 10 years after 1992, India's economy grew at an average rate of 6.8 percent and continues to grow at the almost the same rate not many countries in the world match this performance. CHANGING CONSUMER DEMOGRAPHICS indicate vast potential for growth in consumption both qualitatively and quantitatively. India is one of the countries having highest proportion (70%) of the population below 35 years of age (young population). The BRIC report of the Goldman-Sachs, which predicted a bright future for Brazil, Russia, India and China, mentioned Indian demographic advantage as an important positive factor for India. TECHNOLOGICAL FACTORS played a major role. Convenience banking in the form of debit cards, internet and phone-banking, anywhere and anytime banking has attracted many new customers into the banking field. Technological innovations relating to increasing use of credit / debit cards, ATMs, direct debits and phone banking has contributed to the growth of retail banking in India. TREASURY INCOME OF THE BANKS which had strengthened the bottom lines of banks for the past few years, has been on the decline during the last two years. In such a scenario, retail business provides a good vehicle of profit maximization. Considering the fact that retails share in impaired assets is far lower than the overall bank loans and advances, retail loans have put comparatively less provisioning burden on banks apart from diversifying their income streams. DECLINE IN INTEREST RATES have also contributed to the growth of retail credit by generating the demand for such credit.

OPPORTUNITIES AND CHALLENGES FOR RETAIL BANKINGRetail banking has immense opportunities in a growing economy like India. As the growth story gets unfolded in India, retail banking is going to emerge a major driver. How does the world view us? The BRIC report is viewing India as an economic superpower. A.T. Kearney, a global management-consulting firm, recently identified India as the second most attractive retail destination of 30 emergent markets.

The rise of Indian middle class is an important contributory factor in this regard. The percentage of middle to high-income Indian households is expected to continue rising. The younger population not only wields increasing purchasing power, but as far as acquiring personal debt is concerned, they are perhaps more comfortable than previous generations. Improving consumer purchasing power, coupled with more liberal attitudes towards personal debt, is contributing to Indias retail banking segment.

The combination of above factors promises substantial growth in retail sector, which at present is in the nascent stage. Due to bundling of services and delivery channels, the areas of potential conflicts of interest tend to increase in universal banks and financial conglomerates. Some of the key policy issues relevant to the retail-banking sector are: financial inclusion, responsible lending, and access to finance, long-term savings, financial capability, consumer protection, regulation and financial crime prevention.

SERVICES OFFERED IN RETAIL BANKS

Any Time Banking: -

(a) This refers to banking service available 24 hours a day and 365 days a year.(b) Such facility is made available to the customer through the Automated Teller machine. (c) Banking, being a service industry, is primarily driven by customers needs. (d) Each customer is willing to pay a price for the services provided it is made available to him when he wants and where he wants. (e) In the present day of server competition, banking services are driven by technology, which is more oriented towards providing better services to the customer. (f) The concept of banking hours has been changed from the fixed 4 hours to 24 hours. (g) This has been made possible through use of ATMs. Even under the manual service, the banks have stated to extend the service from the traditional 4 hours to 5 hours and even up to 12 hours say from 8 AM to 8 PM. (h) Some banks have introduced the practice of Sunday Banking or Holiday Banking.

Automated Teller Machine (ATM): -(a) ATM is a machine in the nature of a computer in general sense, but is dedicated to do certain types of specific jobs only.(b) The hardware and the proprietary i.e. the software used in one machine can not be used in one machine. Customer Services: -The following customer services are offered through the system:(a) Cash withdrawal (up to a specified limit)(b) Cheque/Cash deposit (the receipt being only for the deposit of the envelope containing cash but not for the amount therein).(c) Enquiry about balances(d) Printing of statement of accounts(e) Request for cheque book and standing instructions.(f) Transfer of funds(g) PIN change

Telebanking: -(a) From the conventional banking, where the services were provided manually across the table, it has come to a stage where the customer is not required to visit the bank enquiry of balance in the account, sending a remittance, to get a statement of account, etc. (b) The concept has become so popular that in USA customers do not visit the bank for 97% of their transactions and these are done from either customers residence or office using a telephone or a home PC.(c) In telebanking the customer is required to open the account with the bank initially by visiting the bank.(d) Telebanking services are, generally, provided by the bank over the telephone on a special number.(e) The number at the bank is connected to a terminal in the bank, which is either handled manually or is automated by connecting the same to the computer network.(f) Where the system is automated, two types of technology are used.

Home Banking: -(a) Under home banking the customer is served at his residence and there is no need for the customer to visit the banks premises for a number of routine transactions.(b) If the customer needs some information the same can be got by contacting the bank over the phone as described in the telebanking.(c) If the customer wants to put through transaction and wishes to see his account or to get a statement of his account, he may have to use a PC.(d) This type of facility is available with a town, city or metropolitan area.(e) Under such a situation the customer should have a:(i) PC(ii) Modem(iii) Telephone line (iv) A compatible software for the home PC(f) The home banking service can be broadly classified under two groups, one without using the information technology and another using information technology.(g) When customer contacts the bank o the phone no specific technology is involved and the services of telebanking are provided to him.

Electronic Fund Transfer (EFT): -(a) In India the fund transfers are basically done through Mail Transfer, Draft or Telegraphic Transfer.(b) In case of Telegraphic Transfer (TT) again the Department of Telecommunication was the sole provider of Telephone, Telex and Telegram facilities.(c) With the process of liberalization private operators have started providing alternative voice communication channels through mobile phones and vast communication as an alternative channels for data communication. (d) It was normal for any TT to be credited to the beneficiarys account after delay of 2 to 4 days(e) The different forms of EFT prevalent in the use are:(i) EFT through Electronic Data Interchange (ii) BANKNET(iii) RBINET(iv) IDRBT VSAT Network(v) EFT from Point of Sales (vi) Electronic Cash (vii) SWIFT- Global System for Funds Transfer(viii) Electronic Clearing Settlement

Internet Banking:-

Introduction: -The delivery channels include direct dialup connections, private networks, public networks, etc. with the popularity of computers, easy access to Internet and World Wide Web (WWW), Internet is increasingly used by banks as a channel for receiving instructions and delivering their products and services to their customers. This form of banking is generally referred to as Internet Banking, although the range of products and services offered by different banks vary widely both in their content and sophistication. Banking Services through Internet: -(a) The Basic Level Service is the banks web sites which disseminate information on different products and services offered to customers and members of public in general. It may receive and reply to customers queries through e-mail,(b) The Second level are Simple Transactional Web sites which allows customers to submit their instructions, applications for different services, queries in their account balances, etc. but do not permit any fund-based transactions on their accounts,(c) The Third level of Internet banking service are offered by Fully Transactional Web sites which allow the customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the bank and to transact purchase and sale of securities, etc. The above forms of Internet banking service the customer or by new banks, who deliver banking service primarily through Internet or other electronic delivery channels as the value added services. Some of these banks are known as Virtual banks or Internet only banks and may not have physical presence in a country despite offering different banking services

CHAPTER-2 OVERVIEW OF ICICI BANK

OVERVIEW HISTORY 7 PS OF MARKETING MIX OF ICICI BANK PRODUCT(1)DEPOSITS(2)LOANS(3)CARDS(4)MOBILE BANKING OF ICICI BANK(5)DEMAT(6)INVESTMENTS(7)INSURANCE(8)INTERNET BANKING

OVERVIEW

ICICI Bank is India's second-largest bank with total assets of Rs. 3,997.95 billion (US$ 100 billion) at March 31, 2008 and profit after tax of Rs. 41.58 billion for the year ended March 31, 2008. ICICI Bank is second amongst all the companies listed on the Indian stock exchanges in terms of free float market capitalization*. The Bank has a network of about 1,308 branches and 3,950 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Unites States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

HISTORYICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICIs shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.

7 PS OF MARKETING OF ICICI BANK

PRODUCTS

(1)DEPOSITSICICI Bank offers wide variety of Deposit Products to suit consumer requirements. Convenience of networked branches/ ATMs and facility of E-channels like Internet and Mobile Banking Savings Account (a) Debit-cum-ATM Card (b) Money Multiplier Facility (c) Internet Banking (d) Customer Care (e) Mobile Banking (f) Standing Instructions (g) Nomination facility (h) Bank @Home(i) DD Call and Collect

Fixed Deposit(a) Wide range of tenures (b) Choice of investment plans (c) Partial withdrawal permitted (d) Auto renewal possible (e) Loan facility available Life Plus Senior Citizen ServicesICICI Bank brings the following benefits along with new 'Life Plus' Senior Citizen account(a) Designated Senior Citizen Desk (b) Higher Interest Rates on Term Deposits (c) Demand Loans against your deposit (d) Free collection of outstation cheque drawn on any ICICI Bank location.(e) Special Senior Citizen 'Life Plus' Debit card (f) Money Multiplier Facility (g) Anywhere Banking (h) Internet Banking (i) Customer Care (j) Nomination Facility, and more

Young Stars Savings AccountYoung Stars is a banking service for children, aged up to 18 years, brought to consumers by ICICI Bank to help the parents meet the present and future aspirations that they hold for their child. It offers various savings and investment options to the parent along with teaching the child to manage his/her personal finance in a more responsible and independent manner.

Recurring Deposit

ICICI Bank's Recurring Deposits are the ideal way to invest small amounts of money every month and end up with a large saving on maturity.(a) Encourages savings without stress on your finances. (b) High rates of interest (identical to the fixed deposit rates). (c) Non-applicability of Tax Deduction at Source (TDS).

Easy receive Saving account Easy receive account is a unique savings account that caters to domestic banking needs, while offering additional benefits for remittances received in the account from abroad.

(2)LOANS

Home Loan(a) Home Loan tenure upto 25 years (b) Simplified Documentation (c) Doorstep Delivery of home loan papers (d) Sanction approval without having selected a property. (e) Free Personal Accident Insurance (Terms & Conditions) (f) Insurance options for your home loan at attractive premium

Personal Loan(a) Key Benefits of ICICI Bank Personal Loan: (b) Loan up to 15 lakhs(c) No security/guarantor required (d) Faster Processing (e) Minimum Documentation (f) Attractive Interest Rates (g) 12-60 Months repayment options

Farm Equipment Loans

(a) Comfortable repayment tenures from 1 year to 6 years. (b) Flexible repayment options in tandem with the farmer's seasonal liquidity(c) Financing farm equipments in over 381 locations spread across the country

Business Installment Loans (a) Loans upto 25 Lakhs (b) No security/guarantor required (c) Faster Processing (d) Minimum Documentation (e) Attractive Interest Rates (f) 12-48 Months repayment options

Farmer Finance Providing finance to the farmer for his various needs of inputs and consumption in the form of crop loans, dairy loans and loans for allied activities to agriculture like irrigation etc. For input needs and auto loans (two, three and four wheeler) and personal loans for consumption needs. The customer can also avail of working capital term loan for setting up a poultry project. Flexible repayment pattern and tenure to align to the cash flow of the customers

(3)CARDS

Travel cards

The ICICI Bank Travel Card is a powerful new concept for international travelers: a pre-paid card that you can buy using Indian rupees, and withdraw in any local currency in the world. The ICICI Bank Travel Card has made travel abroad convenient and safe. Available in US Dollars, Australian Dollars, Canadian Dollars, Swiss Francs, Euros and Pound Sterling, the International Traveler gets the widest of the choices. Some of the powerful features are Replacement Card (part of kit), SMS alerts for every transaction, online access both to customers and corporate, card useable over the Internet etc. making travel totally hassle-free.BENEFITS(a) Easy Purchase: Easy purchase through ICICI Bank branches or select authorized Money Changers. For a location nearest to the customer, he should call up 24 hour customer care center. Pay in rupees; buy across the counter ICICI Bank Travel Card in the currency of your choice

(b) Easy Cash: Access to over 1 million VISA ATMs all over the world. Although the card may be in the base currency i.e. currency with which it was loaded, you can withdraw cash in the local currency of the country you are in.

(c) Easy Shopping: The ICICI Bank Travel Card can be used to shop at over 14 million Merchant Establishments accepting VISA cards. So there is no need to carry cash. Besides, there are no charges for using the card at Merchant Establishments but the card cannot be used in India, Nepal and Bhutan.

(d) Replacement Card: A Replacement card is issued along with the Primary Card, as part of the Travel Card Kit. This ensures that incase you misplace your Primary card; you don't have to wait 2-3 days for the Replacement Card to be couriered to you.

(e) SMS Alert: SMS Alerts for each and every transaction act as a very powerful security feature incase there is a misuse of the card.

(f) Online Account Access: Both the customers and the corporate can have online access to the card details. Card balance, card statement, card blocking etc are some of the features available online.

(g) Internet Transactions: The ICICI Bank Travel Card has been enabled for usage over the Internet. The card first needs to be activated for Internet Usage, by the customer, through the customer log in screen, before the card can be used over the Internet.. User id is 16 digit card number and password is the web password (given along with ATM Pin)

FEATURES(a) Life Long Activation: The card can be kept active for internet usage lifelong(b) Activation in Hours: The card can be activated for Internet Usage for a certain number of hours. After the expiry of the said number of hours, the card would again be disabled for Internet Usage.(c) Activation for Days: The card can be activated for Internet Usage for a certain number of days. After the expiry of the said number of days, the card would again be disabled for Internet Usage.(d) Limit on the Amount per Transaction: Limit can be placed on the maximum amount per transaction, for which the card can be used over the Internet. If card is attempted to be used for an amount exceeding the amount as defined, the transaction would be rejected.(e) Easy Refund: At your nearest ICICI Bank branch or Money Changer. Fill up a refund form and provide a copy of your ICICI Bank Travel Card and passport. Your money will be refunded immediately. You can also request for your foreign exchange refund certificate.(f) Easy Reload: Easy reload on your existing card with an additional amount before your next trip. Visit an ICICI bank branch or authorized Money Changer. Use the reload coupon that comes with your card.(g) Remote Reloading: Corporate travelers can reload their ICICI Bank Travel Cards even when they are abroad. Contact your office, the ICICI Bank branch or the Money Changer for details. Subject to RBI regulationscurrently the maximum is $10,000 per year for individualshigher for corporate travelers. (h) Easy Replacement if Misplaced: Customer has to call up the 24-hour customer care center and request for hot listing the Primary Card and activation of the Replacement Card. Incase customer loses the Replacement card also, his existing card will be blocked and a replacement card along with its ATM-PIN will be couriered to the customer within 48 hours. Customer has zero liability from the time he reports it. As a security measure, the new card will be sent to him in a deactivated state. Call up the customer care center and confirm receipt of the card in proper condition to activate it. (i) Easy Statements: Easy Statements of monthly transactions on email, so the customer can access it wherever he is traveling. (j) Best Security Features: All cash transactions on the card are protected by customers personal 4 digit ATM-PIN. All purchases at merchant outlets are protected by the signature on the card. The card also comes with Zero Lost Liability.(k) Best Account Management Features: Internet access of the card statements, statement /balance alerts on email and free SMS alerts when card is loaded, reloaded or refunded, or for available balance

Credit Cards

(a) Auto Debit`Customer having an account with any ICICI Bank branch, has the option of making payment of his monthly credit-card statement (either the minimum amount due or the total amount due) directly through customers bank account

(b) Internet BankingICICI Bank offers access to Credit Card related information through the Internet at www.icicibank.com. Customer can make transactions like accessing account information - current and last statement - getting payment status, viewing monthly statement by e-mail, requesting a duplicate PIN, recording a change of address, ordering a draft, giving auto debit instructions, requesting a replacement card or an add-on card, redeeming points online from the Rewards catalogue and subscribing to statement by e-mail and mobile alerts.

(c) Payment options:

(i)CashCustomer may deposit cash towards his credit card payment at any ICICI bank branches from 8 a.m. to 8 p.m. The payment would reflect in his account within 24 hours. Payment should be made before the due date to avoid late payment charge and interest charge.

(ii) ChequeMake a cheque or Draft in favour of ICICI Bank Credit Card and drop it at any of the ICICI Bank branches / ATM locations / Skypak drop boxes.An ICICI Bank cheque will take 3 days to clear, whereas a non-ICICI-Bank cheque will take 5 days. Drop cheque well in advance to avoid any Late Payment charge and Interest charge.

(iii)Internet Bill Pay facilityIf customer holds a savings account with ICICI Bank he may even pay online through Bill Pay.

(iv)PhoneCustomer may even pay over the phone if he holds a savings account by calling at any of ICICI Banks 24-hour Customer Care numbers closest to you. It will take 3 working days for the payment to reflect in credit card account.

(d) Email Statement / Mobile Alerts Statement Online is a very simple, powerful and convenient way to view credit-card statement details instantly without any postal delays. Sign up for Statement Online and get faster, reliable access to account statement. Mobile alerts from ICICI Bank provide information to customer about his ICICI Bank Credit Card even when he is on the move.

(e) Balance Transfer ICICI Bank's Balance Transfer gives the option of transferring outstanding balances from any other bank's credit card to your ICICI Bank Credit Card. (f) Cash Advance With an ICICI Bank Credit Card in your wallet, customer will not be strapped for cash ever again. A customer can withdraw cash on his card, 24 hours a day from any VISA or MasterCard participating member bank ATM using APIN. During banking hours cash can also be withdrawn over-the-counter, from any ICICI Bank branch in cities where the ICICI Bank Credit Card has been introduced.For each cash transaction, there is a fee of 2.5% levied on the amount withdrawn subject to a minimum of Rs.300. In addition to the Transaction fee, an Interest charge will also be levied from the date of transaction to the date of repayment

(g) Dial-a-draft To order a draft from the customers convenience, he can simply call the ICICI Bank's 24-hour Customer Care and ask for a draft, payable anywhere in India and favour of any company or individual. The draft will be delivered to your mailing address. For each draft request, a transaction fee of 3% of the amount withdrawn, subject to a minimum of Rs.300, will be levied. In addition to the Transaction fee, an Interest charge will also be levied from the date of transaction to the date of repayment. The amount of the draft will be billed in customers monthly Credit Card statement.

(h) EMI on Call EMI-on-call gives the option to pay back credit card purchases in easy installments. Now customers can convert any of their credit card purchases of over Rs. 2,000 into EMI-on-call with just a phone call. They can avail of the EMI-on-call facility instantly without submitting any documents. Simply call 24-hour Customer Care and customer can put in his request.

(i) Cash In Cash-in is a personal loan on credit card. The loan can be against the credit/cash limit or over and above the credit limit. Not only is Cash-in pre-approved, it can be availed of without submitting any documents. Customer need to do is call 24-hour Customer Care and check eligibility limit. Cash-in is available at a very attractive rate of interest and at tenures of 6, 12, 18, 24, 36 and 48 months. A one-time processing fee will be applicable. Service tax as per the prevailing rate will be applicable on the interest component of the EMI, fees and all other charges.

(j)Add on Card Customer can freely present a maximum of two add-on Cards to his wife, sister, brother, parents or children above 18 years of age. To apply for this add-on Card, referred to as "Bandhan", customer can call 24-hour Customer Care and place request with the executive who answers. A form will be sent to customer and customer can also place your request online if he is linked with Internet Banking user-ID.

(k)Self Set Limit The only Card that allows you to pre-define your own credit limits. Customer can request a limit lower than what he is eligible for. He can even preset the monthly spending limits on the "Bandhan" Card. Any transactions over the specified 'Spend Limit' will be declined. This monthly spending limit can be reset every billing cycle by simply calling 24-hour Customer Care and placing the request with the executive. Customers spend limit will be changed on-line and come into force from the following billing cycle.

(l)Temporary Credit Limit Enhancement There may come a time when customer would feel the need for an increase in his credit limit to enable himself to make increased purchases on his Card. This facility is available only after 9 months of membership and on the basis of customers credit history.

(m)Permanent Credit Limit Enhancement There will be times when customer often feels the need for an increase in its credit limit to enable himself to make increased purchases on his Card. To avail of a permanent credit-limit enhancement, all customer need to do is to call 24-hour Customer Care. (n)Rewards Programme A special bonus plan that allows to earn points every time customer use his Card, every Rs.200 that customer spends earns him 1 point. One can redeem reward points against the products and services in the rewards catalogue or against his renewal fees.

Debit CardsCombining the wide acceptability of a credit card and the thoughtful prudence of an ATM card, the ICICI Bank Debit Card is the most convenient accessory for the customer. No more fear of overspending, No more searching for the nearest ATM, only more comfort and convenience! (a) Cashless Spending!This debit card enables instant on-line debit to customers ICICI Bank account. Every time the customer swipes his card at restaurants, shops, petrol pumps, multiplexes, etc., the amount that he spends is debited to his account.

(b) Use Online Safely!Customer can now use his VISA Debit Card online to shop, buy airline and movie tickets, pay bills and all of this from the convenience of home or office. To ensure that money stays safe, ICICI Bank has added a second level of security for online usage of card in addition to card details, customer also need to enter his Internet Banking User ID and Password to complete the transaction. VISA Debit Card can only be used on websites which are secured and Verified by VISA.

(c) Lost Card Protection! Card is safer than cash! Customer can feel safe even in the event of losing his card!! The customer need to do is to call 24-hour Customer Care, and a new card would be issued to him within a week. Customer is also protected from any financial liability arising from any purchase transaction made on his lost card. This insurance is valid only on non-cash transactions made at merchant outlets within 30 days prior to the date of reporting.

(d) Countrywide Acceptance!Customers debit card is accepted at over 3.5 Lakhs merchant establishments in India i.e. restaurants, department stores, grocery stores, petrol pumps, etc. Besides, customer can use it conveniently at more than 3,000 ICICI Bank ATMs and more than 18,000 VISA/Master Card ATMs all over India. (e) Worldwide Acceptance! Travel the world and enjoy the freedom of using your debit card. This debit card gives customer the access to over 24 million shops and 1 million Visa ATMs all over the world, giving him the freedom of payment anywhere in the world

(4)MOBILE BANKING OF ICICI BANKBank on the move with ICICI Bank Mobile Banking. With ICICI Bank, Banking is no longer what it used to be. ICICI Bank offers the Mobile Banking facility to all its Bank, Credit Card, Demat and Loan customers. ICICI Bank Mobile Banking can be divided into two categories of facilities:Alert facility: The ICICI Bank Mobile Banking Alert facility informs customer promptly of the significant transactions in his accounts. It keeps customer updated wherever he goes.Request facility: ICICI Bank Mobile Banking Request facility enables customer to ask for his account information.

ICICI BANK LAUNCHES IMOBILE

iMobile is a breakthrough innovation in banking where practically all internet banking transactions can now be simply done on mobiles phones. Customers can now transfer funds to ICICI and Non ICICI Bank accounts just with the click of their mobile. The application covers Savings bank, Demat, Credit Card and Loan accounts.Customers can also pay their utility bills and insurance premium through this facility. ICICI Bank offers this facility free of charge to customers.

(5)DEMAT

With Mobile Banking customer can remain updated while he is on the move, without even making a phone call or a visit or logging on the Internet. ICICI Bank Mobile Banking for Demat Accounts can be divided into two categories:Request FacilityThrough the ICICI Bank Mobile Banking Request facility, one can request information pertaining to your demat account anytime at his convenience. Customer can ask for: Balance enquiry The status of a transaction Bill enquiry ISIN enquiry Alert Facility Through this facility, customer will receive SMS alerts from ICICI Demat on the following events: Demat account getting credited Demat account getting debited Pledge creation Pledge closure Rejection of submitted instruction

(6)INVESTMENTSAt ICICI Bank, they care about all customer needs. Along with Deposit products and Loan offerings, ICICI Bank assists customer to manage his finances by providing various investment options ranging from ICICI Bank Tax Saving Bonds to Equity Investments through Initial Public Offers and Investment in Pure Gold. ICICI Bank facilitates following investment products: ICICI Bank Tax Saving Bonds Government of India Bonds Investment in Mutual Funds Initial Public Offers by Corporate Investment in "Pure Gold" Foreign Exchange Services Senior Citizens Savings Scheme, 2004

(7)INSURANCEICICI Provides: -Travel Insurance -Motor insurance -Home insurance -Life insurance -Health insurance

(8)INTERNET BANKING

(a) Transaction History(b) Transfer Funds Online(c) Card-2-Card Fund Transfer(d) Use your Debit Card Online(e) Pre-paid Mobile Recharge (f) Pay your Utility Bills (g) Send a Smart Money Order(h) Open Fixed Deposits and Recurring Deposits(i) Order a Demand Draft / Pay Order(j) Subscribe for Mobile Banking(k) Request a Cheque Book(l) Stop Payment Request(m) Re-issue/Upgrade of ATM/Debit Card(n) Request a Debit Card(o) Monthly Bank Account Statement by E-mail(p) Link Bank Accounts to ATM/Debit Card(q) Renewal / Premature Closure of FD/RD (r) Request a Duplicate Physical Bank Statement(s) Secure Mailbox

PRICING

The pricing decisions or the decisions related to interest and fee or commission charged by banks are found instrumental in motivating or influencing the target market. The RBI and the IBA are concerned with regulations. The rate of interest is regulated by the RBI and other charges are controlled by IBA.

The pricing policy of a bank is considered important for raising the number of customers with reference to the increase of deposits. Also the quality of service provided has direct relationship with the fees charged. Thus while deciding the price mix customer services rank the top position.

The banking organizations are required to frame two- fold strategies. First, the strategy is concerned with interest and fee charged and the second strategy is related to the interest paid. Since both the strategies throw a vice-versa impact, it is important that banks attempt to establish a correlation between two. It is essential that both the buyers as well as the sellers have feeling of winning.

(a) Pricing Bank Products:

Steps for bank to meet its financial objectives:

Some considerations for loan and deposit pricing are:(a) ROA or ROE objectives (b) Related income taxes (c) Earning assets to total assets (d) Equity-to-asset ratio (e) Cost to service earning assets being funded or deposits funding an earning asset (f) Pricing for the activities and risks associated with the product (g) Rate tiers based on product balances (h) Asset and liability mix

Another element to consider in the pricing of earning assets is the risk of loss. Most notably, this is relevant in loan pricing. Many banks assign a risk weighting to individual loans over a certain size or based on loan type and assign a credit risk charge based on those ratings.

Customer relationships are difficult to assign a value to in the pricing process. Customers will generally press for some price concessions in consideration of other relationships they have with the bank.

Asset and liability mix also impacts pricing results. Generally speaking, banks operating with higher loan-to-asset ratios are able to afford to pay more for deposits. Likewise, banks can afford to be more competitive on certain deposit products if they have fewer maturities in a particular timeframe or less total outstanding balances in a product line.

(b) Need right balance:Pricing is a key issue for the associates who sell bank products to your customers. The fact is, lenders want the lowest rates, and people dealing with depositors want to pay the highest rates. You need the right balance of fee income, strategies to reduce operating costs, and a healthy asset and liability mix to change your required pricing.

PLACEThis component of marketing mix is related to the offering of services. The services are sold through the branches. The 2 important decision making areas are: making available the promised services to the ultimate users and selecting a suitable place for bank branches. The number of branches OF ICICI: 1900 in India and 33 in Mumbai.

Headquarters ICICI Bank Ltd.,ICICI Bank Towers,Bandra Kurla,Mumbai, India

Reasons of selection of Bank(a) The selection of a suitable place for the establishment of a branch is significant with the view point of making place accessible.(b) The safety and security provisions a Convenient to both the parties, such as the users and the bankers(c) Infrastructure facility(d) Market coverage

PROMOTION

Advertising: Television, radio, movies, theatres

Print media: hoardings, newspaper, magazines

Publicity: road shows, campus visits, Sponsorship

Sales promotion: gifts, discount and commission, incentives, etc.

Personal selling: Cross-sale (selling at competitors place),personalized service

Telemarketing: ICICI one source Call center (Mind space)

PROCESS

(a) Flow of activities: All the major activities of ICICI banks follow RBI guidelines. There has to be adherence to certain rules and principles in the banking operations. The activities have been segregated into various departments accordingly.

(b) Standardization: ICICI bank has got standardized procedures got typical transactions. In fact not only all the branches of a single-bank, but all the banks have some standardization in them. This is because of the rules they are subject to. Besides this, each of the banks has its standard forms, documentations etc. Standardization saves a lot of time behind individual transaction.

(c) Customization: There are specialty counters at each branch to deal with customers of a particular scheme. Besides this the customers can select their deposit period among the available alternatives.

(d) Number of steps: Numbers of steps are usually specified and a specific pattern is followed to minimize time taken.

(e) Simplicity: In ICICI banks various functions are segregated. Separate counters exist with clear indication. Thus a customer wanting to deposit money goes to deposits counter and does not mingle elsewhere. This makes procedures not only simple but consume less time. Besides instruction boards in national boards in national and regional language help the customers further.

(f) Customer involvement: ATM does not involve any bank employees. Besides, during usual bank transactions, there is definite customer involvement at some or the other place because of the money matters and signature requires.

PHYSICAL EVIDENCES

Physical evidence is the material part of a service. Strictly speaking there are no physical attributes to a service, so a consumer tends to rely on material cues. There are many examples of physical evidence, including some of the following:

Internet/web pages Paperwork Brochures Furnishings Business cards The building itself (such as prestigious offices or scenic headquarters)

The physical evidences also include reports, punch lines, other tangibles, employees dress code etc. Financial reports: The Companys financial reports are issued to the customers to emphasis or credibility. Tangibles: Bank gives pens, writing pads to the internal customers. Even the passbooks, cheque books, etc reduce the inherent intangibility of services.Punch lines: Punch lines or the corporate statement depict the philosophy and attitude of the bank. Banks have influential punch lines to attract the customers. Employees dress code: ICICI bank follows a dress code for their internal customers. This helps the customers to feel the ease and comfort.

PEOPLE

All people directly or indirectly involved in the consumption of banking services are an important part of the extended marketing mix. Knowledge Workers, Employees, Management and other Consumers often add significant value to the total product or service offering. It is the employees of a bank which represent the organization to its customers.

In a bank organization, employees are essentially the contact personnel with customer. Therefore, an employee plays an important role in the marketing operations of a service organization.

To realize its potential in bank marketing, ICICI become conscious in its potential in internal marketing - the attraction, development, motivation and retention of qualified employee-customers through need meeting job-products. Internal marketing paves way for external marketing of services. In internal marketing a variety of activities are used internally in an active, marketing like manner and in a coordinated way.

The starting point in internal marketing is that the employees are the first internal market for the organization. The basic objective of internal marketing is to develop motivated and customer conscious employees.

A service company can be only as good as its people. A service is a performance and it is usually difficult to separate the performance from the people.

If the people dont meet customers' expectations, then neither does the service. Therefore, investing in people quality in service business means investing in product quality.

CHAPTER-3INNOVATION IN RETAIL BANKS BY HEWLETT-PACKARD

HP AND RETAIL BANKING SPECIAL REPORT THREE PRONGED STRATEGY PORTFOLIO OF 23 SOLUTIONS GROWTH CONFORMITY COSTS

HP AND RETAIL BANKING:

How can a retail bank promote its growth, reduce costs, and deal with regulatory compliance in an increasingly competitive environment? To rise to these challenges, HP has developed the Retail Banking Initiative (RBI), an approach that allows it to work with its banking customers to identify their current and future needs in terms of growth and value creation, compliance and cost reduction.With this goal in mind, HP is working hand in hand with banks to anticipate customer needs and design the bank of the future. This approach and style are very different from what is generally seen on the market, but it is bearing fruit.

Dexia Bank chooses HP for its branch of the futureTo prepare its branch of the future, Dexia Bank like other institutions such as Bank of India has opted for customized banking solutions developed by HP. This ambitious project to transform Dexia Bank consists of consolidating the 1,100 servers in the branches into 300 HP Blade System servers installed in a data center. In addition, the 6,000 PCs in the branches have been replaced by 6,000 HPCompaq t5710 Thin Clients.OBJECTIVES ACHIEVED: (a) The solution streamlined operations and reduced maintenance costs.

(b) Personnel mobility was increased by using HP Mobile Office solutions. Bank agents now have easy access to all IT resources regardless of the branch. In addition, bank agents can visit customers for all types of operations with a laptop and portable printer, both contained in a business suitcase trolley.(c) Lastly, the architecture and technologies used allow more than cost reduction, streamlined management and increased reliability; most importantly, they offer customers a completely novel banking experience outside the walls of the branch.

(d) "With HP, its branches were able to acquire a powerful infrastructure that is perfectly suited to their needs. What's more, the HP solution will allow major savings."

Transforming retail banking:Though HP is known worldwide for its technology solutions for consumers and businesses, its operations in the world of banking seem to be a well-kept secret. Yet the company has been strategically investing for several years in vertical solutions specially designed to meet the needs of financial institutions. Heidi Ezzouaoui, Director Financial Markets, Worldwide Financial Services Industry, HP tells us about this HP strategy. "Just because we're showing an interest in the banking industry doesn't mean that HP wants to develop a financial consulting service. Our business is and remains IT technology and related services. However, by better understanding the needs of our bank customers, we can design technological solutions that are better suited to this industry.

SPECIAL REPORT:As part of HPs Retail Bank Initiative (RBI), the CIOs and business managers of the 15 largest European banks were interviewed in order to gain insight into their priorities and more specifically what they are looking for in a company such as HP. They then built a suite of banking solutions that are based on their technological portfolio and especially suited to the priorities stated by their customers."

THREE-PRONGED STRATEGY:

For a bank, this requires that it implements automated processes for reporting, on business processes that are sometimes still manual. As a company, HP has had to implement automatic reporting mechanisms, relative to the Sarbanes-Oxley Act for instance, and it therefore has the know-how to implement compliance solutions. The third area, cost control, remains a priority, though the goal today is to support growth and comply with the requirements of the regulatory authorities. 2 to 3 sales a day: Statistics show that out of 100 visits per day to a branch, only two customers leave with new products. How can these branch sales be increased? HP is working with John Ryan Ltd., specialized in consumer behavior. "Together we examined how a branch can optimize customer interaction. For example, when the customer is waiting in line, interactive screens can display information. HP employs roughly 151,000 people in 178 countries, with 86 billion dollars in revenues, 8 billion dollars in cash and 3.5 billion dollars invested in R&D per year.

To Support its growth, HP has developed a three-pronged strategy: Capital Strategy: Optimum management of the company's financial, intellectual and human capital.Efficiency: Increased efficiency in the production of technological solutions and in their deployment and monitoring. Deliver customers more value at less cost. The combination of these two areas supports the company's growth. Based on our experience as a multinational, we have applied it to the banking industry," explains Heidi Ezzouaoui."

Relative to RBI our customers encounter three types of problems.(a)They need to ensure steady growth. (b)One of the bank's priorities is to acquire and retain customers, not only through unique on- line services, but also by bringing customers back to the branch, where interactions are more conducive to the sale of new products than the Internet.(c)Furthermore, after the scandals in the business world and on the financial markets, the regulatory authorities are stepping up pressure to monitor the operations of financial institutions. The strategic importance of these three areas has been confirmed by all our customers."

PORTFOLIO OF 23 SOLUTIONS:

To better meet the needs of its customers in each of these three areas supporting growth, compliance and cost reduction HP has defined 23 solutions

GROWTH:

(a) Acquire-retain customers: With 1 billion customers, HP has extensive customer experience. "We have detailed insight into consumer behavior and the parameters that influence their satisfaction. We can share this insight with our bank clients and see how to optimize direct and indirect channels to attract and retain customers. By simply pressing a button, a customer can request information on a personal loan, and perhaps print information sheets. There are also other techniques, such as RFID. They identify customers as soon as they enter the branch, and are valuable in offering tailor-made services."

(b) E-statements: HP is known as a leader on the printer market. This experience is valuable for a bank seeking to reduce bank statement printing and mailing costs. "The goal is to encourage consumers to print their bank statements at home, reducing costs for the bank. We have developed a project with a bank in the form of a promotion. Any young person opening a new account receives an HP printer free. Consequently young people have an incentive to open a new account, and the bank acquires a new market share. In addition, it allows the bank to reduce its printing costs."

(c) Forthcoming innovations: The idea is to provide exposure to IT strategy managers in the banks and business managers on our R&D programs to help them design possible applications for our future technologies."

(d) Call centers and portals: Nothing is more frustrating than to start a procedure on a bank website, for example to request a loan, and then to suddenly run up against a parameter that you can't provide. "If you contact the call center, most of the time the operator can't access the data already entered during your Internet session, so you have to repeat the whole process on the phone. HP offers solutions to integrate these channels."

(e) Bank transformations and Branch of the future: Many banks still have vast branch networks that are cumbersome to manage, with PCs that are often obsolete, servers that are expensive to maintain, and applications that must be downloaded and updated. This means that deploying new applications is a slow process, incurring high costs. "With the banks, HP is examining how to streamline this model, for example by replacing PCs with thin clients that connect remotely to a centralized system. By reducing computer hardware in the branch to the strict minimum, we greatly decrease both investment and operational costs. Lastly, by centralizing the application logic of the branches, application updates can be managed more easily and more efficiently.

CONFORMITY:

(a) Disaster Recovery Plan (DRP) Solutions: Operational risk management is a key factor in compliance. For example, if you centralize the services of 1,500 branches in a data center, a Disaster Recovery Center must be established since there is an increased risk of failure in the data center. Banks therefore need to plan DRP solutions. "This is an HP core business. We have data centers for customers and we can provide the best in the field."

(b) Compliance and audit: HP has implemented efficient techniques to achieve compliance and they share them with the banks. This is particularly true for all aspects of traceability of customer advice, whether provided in paper or digital form or via voice, video or Internet sessions.

(c) Business Process Insight and Continuous Measuring and Monitoring: Our application and process monitoring technologies are a natural fit for enabling the banks to measure their business processes and meet customer service levels.

COSTS:

(a) Outtasking and Outsourcing: The Canadian Imperial Bank of Commerce (CIBC) first called on HP services more than 10 years ago."Gradually, the bank entrusted us with the management of their entire IT system - a 2 billion dollar contract that has just been extended through 2013. This is an excellent example of the level of responsibility we are ready to shoulder, in partnership with a bank, though in Europe the current trend is more toward selective out tasking."

(b) Migrations and re-platforming: Most of a bank's IT costs pertain to mainframes and their applications. HP believes that the use of mainframes or their equivalent in the form of a unix platform is justified. "In fact, we see a bank's architecture as having three layers. The first layer comprises factories that process the basic transactions, payments, credits, operations, etc. Since this consists of large volumes of simple transactions, a monolithic server is perfectly suited for the job. However, the second layer that implements the business logic needs to change quickly according to business needs. In this case, mainframe-type central platforms are no longer appropriate. We discuss with the customer about how to reduce mainframe costs and selectively migrate the applications on the central mainframe to less expensive platforms such as Unix, Linux and .Net. The third layer is the user interface,. Whether in a branch or on an electronic system, it becomes increasingly thin using virtualization techniques."

(c) IMAC services and Branch in a box: A banker's job is not to manage branch infrastructures. "We offer packaged services in which we take ever-increasing responsibility in managing the branch's infrastructure. If we send an engineer on site to repair the servers, PCs or printers, he can use the opportunity to check the network and ATMs as well. The bank reduces its costs and can focus more on customer services. Our other solutions are Thin Client Transformation, Information Life Cycle Management, Security Solutions, Integrated Network and Systems Management, Business Process Outsourcing, and Transformation of IT to Commodity TCO.

Business value assessment: a consultative approach: HP organizes discovery workshops with customers to present the 23 solutions tailored for retail banking. "It's a shared investment between the customer and HP; with the CIO's support, we explore the potential our RBI initiative represents for the bank. We interview both the CIO's team and the business managers that the CIO designates," explains Hdi Ezzouaoui. "With a joint customer-HP team, we evaluate each RBI solution and assess their applicability from a technical, functional and even economic standpoint. Together with the customer, HP selects three or four priority areas. For these areas, we develop the business case (current costs, future costs, transformation costs, risks and implementation plan). We've named this approach Business Value Assessment, or BVA. It's a consultative and partnership approach. BVA has drawn the interest of many of our large European bank customers."

CHAPTER-4CUSTOMER RELATIONSHIP MANAGEMENT IN RETAIL BANKING

INTRODUCTION BENEFITS CRM IMPLEMENTATION OF ICICI THE RETAIL STRATEGY THE CRM ROADMAP IMPLEMENTING CRM SELECTING AND IMPLEMENTING A TECHNOLOGY BASED CRM LESSONS SO FAR FROM THE ICICI EXPERIENCE

INTRODUCTION:Retail banks are facing greater challenges than ever before in executing their customer management strategies. Intensifying competition, proliferating customer contact channels, escalating attacks on customer information, rising customer expectations and capitalizing on new market opportunities are at the top of every bank executives agenda.In looking for ways to drive growth, banks need to evaluate their customer management strategies.

BENEFITS OF A CRM SOLUTION:Faced with these numerous and varied trends, retail banks are reshaping the way they must interact with their customers. A fully integrated, enterprise wide CRM platform ensures banks have the core capabilities to take full advantage of their customer relationships and capitalize on these market dynamics, rather than losing out because of them.

Gaining Sales Momentum

In todays increasingly competitive environment, where maximizing organic growth is a banks priority, sales momentum is essential. To build this momentum, banks need to focus simultaneously on:

(a) Increasing acquisition rates of new and emerging customer segments.(b) Improving retention of existing customers and saving at risk customers(c) Increasing profitability of customer relationships, either at the top-line through increased sales, or at the bottom-line through more cost-effective service(d) Improving integrated channel distribution strategies to get the right product, to the right client, at the moment the customer has the need(e) Maximizing the value and return from CRM investments that have already been made.

Increasing acquisition of new customersA CRM solution should help a bank target customers based on the value they bring to the bank, now and throughout the life of the customer (and beyond through next generation marketing). Banks need to ensure that their value propositions have grip with the right market segments. This will enable the bank to identify, target and capture new customers. Clearly, customer insight and strategy are the core differentiators for the bank. CRM solutions (people, applications, systems and processes) must support these strategies to get the right products and services to the right customers.

Improving Retention Of Existing CustomersCustomer retention can be achieved by enhancing customer satisfaction and loyalty, improving problem resolution, and creating the ability to identify and save at-risk customers. In fact, an at-risk customer actually represents a major opportunity for additional revenue if handled correctly. However, the greatest danger for banks is either not identifying at risk customers or not having the capabilities to do anything to recover them.For example, a customer makes a large withdrawal from his or her account. This may signal that the customer is switching funds to another bank. Or the customer may be buying a house, or paying college coaching, in which case there are clear opportunities to sell additional products or investments. The identification and treatment of this customer should reflect his or her lifetime value. CRM-driven techniques will help retain customers and can migrate mere account holders into loyal, long-term, profitable customers. Increasing the Profitability of Customer RelationshipsBoosting revenues requires improving the product pipeline and close rates, while reducing sales and service costs. On the revenue side, the banks CRM solution should use customer intelligence to target specific offers and manage marketing campaigns for a high likelihood of acceptance. Customer treatment strategies should be fully integrated with a CRM platform and the processes to support them. On the cost side, better channel management, CRM automation and integration will help increase the efficiency and effectiveness of sales and service.

Improving Distribution And Channel Management

To win profitable customers and build long-term relationships with them, banks need to have the right insight, products and services for the right customer at the lowest possible cost. From call centers to Web sites, every one of a banks multiple channels must be scalable, flexible, low-cost and fully integrated with all the other channels. This is the only way to consolidate customer information and provide consistent treatment across the enterprise. Each of the banks channels must also be able to accommodate change and adapt to future trends in the marketplace.

CRM IMPLEMENTATION OF ICICI BANKICICI has transformed itself into a technology intensive financial services group in the last decade. To achieve its long term goal of being in a position to practice 1to1 marketing. ICICI has taken a series of initiatives. As part of the plans, it is implementing various projects to establish world-class CRM practices; which would provide an integrated view of its customers to everyone in the organization. The paper discusses some of the lessons learnt while implementing these projects.

INTRODUCTIONICICI, set up as a Development Bank over four decades ago to provide products and services for the corporate segment, diversified into the retail segment of the financial markets in the early 1990s. In the last decade it has transformed itself to a technology intensive financial services group. The first such move came in the mid-nineties when ICICI raised debt from the retail market. Since then, ICICI has been increasing its reach to this segment in terms of resources mobilization, and by offering quality investor service through ICICI Infotech Services, its subsidiary. In 1994, it established ICICI Bank as a commercial bank that is flexible, In addition to the bank, the retail initiatives include (a) Prudential ICICI AMC a tie up with the Prudential Group of UK for its foray into the mutual funds business,(b) ICICI Personal Finance Services (PFS) to offer retail assets products like home finance, automobile finance, durables finance etc.(c) ICICI Capital Services to service retail liability products like bonds and deposits.(d) ICICI Web trade to facilitate end-to-end integrated web based trading service through the web site www.icicidirect.com(e) Prudential ICICI Life Insurance to offer the insurance services, and(f) ICICI Lombard General Insurance the latest venture to offer non-life insurance services,This apart the retail initiatives of ICICI also include a plethora of web-based businesses including city portals and various other utility sites such as billjunction.com, icicimoneymanager.com, magiccart.com, among others. All these group companies are jointly spearheading ICICI Groups foray into the retail market.

THE RETAIL STARTEGY ICICI has ambitious plans for its retail business initiatives. The retail strategy revolves around intensive deployment of technology. Information technology will help reduce cost of service, increase customer retention, help in cross-selling and up-selling while improving process efficiencies. Electronic channels including internet, ATMs , call centers, contact centers, desktops, kiosks, mobiles and other hand held devices will perform financial activities while ensuring that customer has multiple options for access and transactions.The group has adopted a click and brick strategy to leverage the power of electronic channels and physical presence to ensure rapid product delivery, fulfillment of financial deals and documentation.As part of the plans, it is implementing various projects to establish world-class CRM practices, which would provide an integrated view of its customers to everyone in the organization. CRM at ICICI involves increased communication between the virtual universal bank and its customers and prospects, as well as within the group itself. The underlying idea is to enhance every instance of contact with the customer. ICICI believes that a true customer-centric relationship can only be accomplished by considering the unique perspectives of every single customer of the organization. Hence the pressing need to put in place a technology enabled CRM solution.

THE CRM ROADMAPCRM, at ICICI, is viewed as a discipline as well as a set of discrete software technologies, which will focus on automating and improving the business processes associated with managing customer relationships in the areas of sales, marketing, customer service and support. The organization aims to achieve the end goal of one-to-one marketing.The CRM software applications will not only facilitate the coordination of multiple business functions but also coordinate multiple channels of communication with the customer-face to face , call centre, ATM, web, telephone, kiosk, bank, branch, sales associates, etc. so as to enable ICICI carry out cradle-to-grave customer management more efficiently. It should allow ICICI to engage in one-to-one marketing by tracking complete customer life-cycle history. To begin with, it will automate process-flow tracking in the product sales process, and be able to generate customized reports and promote cross product sales process, and be able to generate customized reports and promote cross face for definition, tracking, execution and analysis of campaigns.From an architecture perspective, the enterprise-wide CRM solution should seamlessly integrate non-transactional information housed in the Back Office. Creating the enterprises CRM strategies required the combination of nine distinct steps as shown below.

CUSTOMERSTRATEGYPROCESSORGANISATIONPEOPLEINTELLIGENCEAUTOMATIONDATATECHNOLOGY

By combining these nine steps can one really start listening to the customers, and understand what they are saying, maybe even in real time. Once that is achieved, profits begin to follow as optimization techniques are applied. Only then will the two crucial goals for a successful business-case driven project be achieved, viz.1. Effective change management2. Technology-enabled evolutionCRM will essentially focus on providing optimal value to customers through the say we communicate with them, how we sell to them, and how we service them as well as through the traditional means of product, price, promotion and place of distribution. ICICI recognize that customers make buying decisions based on more than just price more than just product. Customers make buying decisions based on their overarching experience that includes product and price,-and sales, service, recognition and support. IMPLEMENTING CRMA very detailed and comprehensive CRM Action Plan was developed based on the understanding that CRM will require an enterprises wide transformation.The CRM Business Transformation Map below shows the various aspects of that change. There are five inter-related areas. These include:1. Business Focus2. Organizational Structure3. Business Metrics 4. Marketing Focus5. Technology

FIVE FOCUS AREAS OF BUSINESS TRANSGORMATION

BUSINESS FOCUS Product Sales Channel Marketing Service Customer ORGANISATIONAL STRUCTURE Product Place Promotion Channel Contact CustomerManagement Management Management Management Management Management Product Place Program Customer Customer patterns CustomerPerformance Performance Performance Revenues and Profitability lifetime valueBUSINESS METRICSMARKETING FOCUS Mass Sales Marketing Integrated Segment Customer Advertising Promotion Campaigns Marketing Specific Relationship Communication Marketing ManagementTECHNOLOGY Transaction Data Data Data Data Customer Processing Maintenance Access Warehouse Marts Touch point Systems

The Key to building the CRM action plan was in understanding where the organization stood relative to each of the five aspects of change. Interviews with key individuals throughout the organization helped identify different initiatives that have been launched, all focused on CRM. While all of these initiatives may have merit, failure to address the total business transformation requirements can lead to very short-lived success.The next step in the planning process was a Gap Analysis. This analysis essentially and specifically describes the gaps. In addition to the more obvious gaps, this analysis helped identify the CRM organizational holes:1. Marketing Sales and services practices2. Collection, capture, processing and deployment of customer information3. Distribution and operations effectiveness at customer touch pointsAnother key factor in identifying gaps is to understand how the organization functions relative to the CRM Business Cycle. There is a universal, underlying cycle of activity that should drive all CRM initiatives and infrastructure development. All initiatives and infrastructure development should somehow be tied to this core cycle of activity. Careful evaluation of he organizations ability to execute this cycle will pinpoint and qualify additional organizational gaps.

SELECTING AND IMPLEMENTING A TECHNOLOGY BASED SOLUTIONTechnology:The success of the CRM initiatives was contingent on various decisions pertaining to technology. Some of the key issues were:(a) Make or Buy the decision to buy was based on an evaluation of an identified set of criteria. The criteria set included the following : Functionality Flexibility in incorporating changes. Fit with existing architecture (legacy systems) Fit with global best practices Upgradability which basically means that if the technology that enables CRM advances tomorrow, the installed system should be able to take into its fold the increased functionalities? Commercial impact evaluated in terms of the life time of the solution.

Taking into account all the above factors, it was decide to purchase an off-the-shelf CRM solution and customize it to suit ICICIs requirements.(b) From whom to buy Once the decision to buy was made, the next step was to identify the product seller and the system integrator.The global CRM product market was scanned to shortlist about 15 large players from a very fragmented market comprising of over 150 players claiming to have some sort of CRM capability. Based on discussions with a global technological analysis group, another set of criteria was drawn to shortlist the prospective product providers. This included: CRM expertise Retail finance expertise Implementation worldwide specially in Asia Pacific Company focus on CRM (specially important in the context of many large ERP providers having moved into the CRM space in recent times). Credentials including financials, client list, life history etc. Understanding of ICICIs experience Suggested solution including implementation timeline. Technical handholding expected Training and maintenance

A similar process was followed to shortlist the system integrators. Some of the criteria included. CRM expertise & Retail finance expertise Focus on CRM Project team specifics including indicative CVs of project team Product preferencesAfter short listing two product vendors and system integrators, reference calls were made to several of the past clients of all the short listed companies. The reference calls followed a specific pattern, and were qualitatively adjudged. Some of the parameters included strengths and weaknesses of the vendor/system integrator, timeliness, cost and time overruns, commitment, training, quality control of customization and post-implementation support.

Processes:All processes were mapped on to product by understanding the details. During the course of the process mapping, several opportunities for improvement were identified and implemented. To illustrate, the buying process of a loan product involves the following steps (a) Prospect contacts the call center and leaves details(b) Call center personnel passes on this lead to the DMA responsible for the area from where the lead has come in(c) The DMA contacts the prospect and collects documents. The DMA also fires a Field Investigation (FI) request from a FI agency. The FI agency is external to ICICI, and checks on the basic veracity of the statements submitted by the prospect (e.g. that he has his own house in New Delhi etc.)(d) The documents collected by them are filed and forwarded to the Credit Processing Agency (CPA). The CPA also receives the FI report.(e) The CPA checks for completion of the file, generates a credit scorecard, and passes on the document to the Credit Buyer.(f) The Credit Buyer (CB) is an ICIC personnel, and takes the final call on the loan sanctioning. He in turn passes oin the documents to the central operations team for the processing. The central operations team is also internal to ICICI.The Sales Process Pre-CRM and Post-Implementation of CRM

Independent database

Call CentreSales AgentScrutiny Credit Agent Operations

DatabaseCall CentreSales AgentScrutinyCredit AgentOperations

Similarly, even the customer service and support function also has well defined processes depending on the nature and type of query/complaint. LESSONS SO FAR FROM THE ICICI EXPERIENCEIf CRM involves optimizing product, price, place of distribution, promotion, sales and service, why are so many companies struggling? Hasnt anyone really mastered the art and CRM is difficult because it is an enterprise-wide initiative.(a) CRM is not a technology initiative. Many have confused CRM as a technology initiative, and assigned the CRM implementation project to their information system or IT group. CRM conferences after equate to technology exhibits and demonstrations. Technology is needed in order to implement CRM- particularly the customization part-but technology is not the driver of CRM or the solution to successful CRM implementation.(b) CRM is not exclusively a marketing initiative. Many organizations have merely equated CRM with customer-focused marketing or date-driven/database marketing. CRM results in more effective, data-driven marketing efforts: CRM requires marketing expertise. But CRM is not strictly a marketing initiative.(c) CRM is not exclusively a sales initiative. Similar to marketing, CRM is often lodged within the sales department. The sales-force, after all, is extremely close to their customers understanding their needs and wants, and trying to fulfill them. Sales, however just one functional area that can benefit from CRM and that is necessary for effective CRM.(d) CRM is not exclusively a service initiative. As with sales and marketing, customer service is one functional aspect of success CRM implementation. But customer service is not the sole driver of the process.CRM involves marketing, sales, service and technology, as well as the other inner-workings of an organization.Thus, it is properly described as an enterprises-wide initiative. It involves all areas of the organization and all functions of the organization, and it requires areas of the organization to be working together in harmony. CRM requires all areas of the organization to not only exist in harmony, but to be working toward the common goal of stronger customer relationships.Having even one broken spoke in the wheel one area of the organization that is less than committed to CRM can make the difference between success and failure.

CHAPTER-5FUTURE OF RETAIL BANKINGRetail banking will remain the dominant source of revenue for banks worldwide through 2015. In 2006, the retail banking business accounted for 1.22 trillion pound in revenues, or about 57% of the global banking revenue pool of 2.15 trillion euro.

Fourteen banking groups earned retail revenues in excess of 10 billion pound in 2006, with five groups bringing in more than 25 billion euro each. Even for most of the top ten banking titans, retail business is still a critical revenue source-representing an average of 37 percent of total revenues.

Through 2015, retail revenues will expand at an estimated compound annual growth rate (CAGR) of 3.2 percent in real terms. Factoring in an inflation rate of roughly 3 percent, overall growth should add up to about 6 to 7 percent. The retail banking business also continues to deliver high return on equity (ROE) than other banking segments. Most major banks currently achieve ROE above 25 percent (before taxes) from their retail banking activities.

By 2015, the share of global retail-banking revenues generated collectively in the top five European countries and in the United States-which are all mature markets-will have shrunk by an estimated 5 percent, with matching collective gains in strongly growing markets in Asia-pacific and the Middle east.

Vast numbers of unbanked consumers in emerging markets-what we call the next billion- will take up banking relationships over the next generation. If such consumers in China, India and brazil were to generate 50 percent of the revenues currently provided by banked, low income customers in these countries, the amount of total new revenues produced by 2015 in these markets could be above 20 billion euro-the bulk likely coming from china.(b) Competition in the global retail banking industry will become increasingly intense, driven by the continuing deregulation and opening of international markets, the opening regionalization and globalization of the industry, the expansion of direct and online banking, and rising customer expectations

The number of new entrants with attacking mindsets in the regional markets will increase. Aggressive players-be they direct banks, product specialist, or traditional banks seeking to expand their scope-will continue to battle incumbents with fresh price and value prepositions all over the globe.

The well known trend towards direct and online banking will change the nature of industry significantly in terms of channel usage. The trend will gain momentum as adoption rates across all age groups increase and as more young people-who have raised using the internet-reach bankable age. The dynamic will inevitably lead to a further decline in the importance of bank branches for some sale activities, although branches will remain critical for customer acquisition and advice-intensive products.

The transparency of the online world and the ability of sophisticated customers to compare offers and price positions will push the pendulum of power in the retail banking industry increasingly towards the customer, thus further pressurizing the competitive landscape.

(c)The grip of margin pressure will continue to tighten. From 2001 to 2006, the banks in our benchmarking survey showed average margin decline in their retail segments of about 21 percents. Many attackers poses highly cost efficient and scalable business models that allow them to offer cheaper prices on a sustained basis. This fact along with the ongoing shift towards online and direct banking will lead the industry towards a new structural equilibrium at lower margin and cost levels.

In some markets, attacking players have already taken sizable share from incumbents that have reluctant to fight proactively on the price front. This trend will gain momentum as more new competitors enter the fray. Incumbents will either have to offer commodity products for certain segments at competitive prices or accept loss of market share.

A key result of heavy price competition and its expansion into a wide range of products is that revenue pools will grow at a lower rate in many major markets over the next few years. This will make necessary for banks to drive down their cost growth in order to keep cost-to-income ratios and profitability levels stable-let alone achieve more ambitious targets. Resizing and reconstructing platforms to help achieve this will be a tall challenge for many banks over the next decade.

(d) Tougher competition and tighter pressure on margins and costs woll encourage increasing merger and acquisition (M&A) activity, especially in mature markets with low growth rates. In the future, we will see bigger, differently structured, and increasingly international deals. Given the current speed of both M&A activity and the forging of alliances, especially in the Asia-pacific region, it is very likely that by 2015 there will be five to ten truly global banks.

Cross border mergers should be seen having two, three or more phases to allow sufficient time for factors such as platform, scale, and market dominance to come into play-and for all potential synergies to materialize.

(e) The winning business models of the future have been taking shape in recent years and will continue to evolve. These models are exemplified by six general types of retail banks: global titans and regional expansionists, domestic champions, retail-oriented attackers, direct banks, specialists, and trading-up players. The first five categories of players have clearly outperformed the pack or showed the strongest improvements in recent years. They have an average advantage in their cost-to-income ratio of 10 percentage points, an average ROE advantage of 10 percentage points, and a revenue growth rate more than twice that of most other banks. They also dare to invest in organic growth and in acquisitions-their top-line growth allowing cost growth three times as high as that of most other players. The sixth category, trading-up banks, is well positioned to catch up in the future, especially if the leading players maintain the focus and expand more aggressively. Between 2001 and 2006, direct banks and retail oriented attackers showed the sharpest revenue growth of the six groups, with a CAGR above 20 percent, and at the same time achieved significant improvements in cost-to-income ratios. Nonetheless, despite direct banks strong influence on overall industry margins and channel strategies, the largest share of direct and online banking will remain with multi channel banks. All models will show a stronger online profile going forward, and some interesting new combinations may evolve as new players arrive on the scene.

(f) Over the next ten years, traditional incumbents will find themselves more engaged than ever on several fronts. Incumbents will need to develop sharper positioning and coherent new business models in order to defend their home markets and fight for share against an increasing number of attackers. Because they have mature footprints, many incumbents seeking competitive advantage will turn to product innovation and better customer service. Products and pricing should remain easy to copy, the latter providing sustainable advantage only to low cost players. Yet a small number of retail banks will realize long-term advantage by delivering a difficult-to-copy superior customer experience Incumbents will also need to make direct and online banking a stronger part of their multi channel strategies and upgrade their skills in online customer acquisition and loyalty management. Winners will learn quickly from other industries and will transfer recipes for success to retail banking Most future winners will have to be strong acquirers and integrators. Those that want to lead in emerging regional markets should be prepared to initiate at least one or two major mergers or acquisitions over the next five to ten years. Such move scan serve as powerful levers for defending market positions, widening scope, and increasing efficiency.

To deliver a superior customer experience and achieve better cost efficiency, incumbents will need to fully exploit the power of process. On average, cost savings of 15 to 30 percent can be achieved through improved process efficiency, internally shared services, and outsourcing and offshoring. Strong consolidators can go even beyond that level. The continuing deconstruction of the value chain will help banks improve efficiency and fight margin pressure. A number of incumbent banks, however, may not be able to close process efficiency gaps. Incumbents will also need to build meaningful presences in chosen emerging markets that offer the steepest growth potential. Simply planting flags in numerous markets and achieving inadequate shares will not be a successful and value-creating strategy.

CHAPTER-6PARADOX OF RETAIL BANKING-2015

Any serious discussion of the future of the retail banking industry eventually raises a basic question: will future customers still need retail banks? The answer, it turns out, depe