1. A PROJECT REPORT
ON
“STUDY THE IMPACT OF CRM ON CUSTOMERS OF BANKS OF
JAIPUR CITY”
(Submitted in the partial fulfillment of course for the award of
The degree of Master of Business Administration)
Submitted to: Submitted By:
Miss. Jaya Pareek Divya Sharma
Mrs. Nidhi Tak PSOM, DMS
PART- II
POORNIMA SCHOOL OF MANAGEMENT
ISI-2, RIICO Institutional Area, Goner Road, Sitapura, Jaipur.

2. CERTIFICATE
Poornima School of Management
This is to certify that Miss Divya Sharma student of MBA 4th semester from Poornima
school of management, Jaipur had completed its project report on the topic of ―STUDY
THE IMPACT OF CRM ON CUSTOMERS OF BANKS OF JAIPUR CITY‖ under the
supervision of miss Jaya pareek faculty member DMS PGC.
To best of my knowledge report is original and has not been copied or submitted
anywhere else. It is an independent work done by him.
Dr. Vandana sharma
Director, PSOM
DMS, PGC

3. Declaration
Hereby I declare that the project report entitled ―STUDY THE IMPACT OF CRM ON
CUSTOMERS OF BANKS OF JAIPUR CITY‖ submitted for the degree of MBA is my
original work and the project report has not formed the basis for the award of any
diploma, degree, associated ship, fellowship or similar other title. It has been not
submitted to any other university or institution for the award of any degree or diploma.
Name
Divya Sharma
MBA 2 year 4th sem
nd

4. PREFACE
The title of this study is ―STUDY THE IMPACT OF CRM ON CUSTOMERS OF BANKS
OF JAIPUR CITY‖ This study shows that in current market why various banks are using
CRM activities, because overall goals of banks are to find, attract, and win new clients,
nurture and retain those the company already has, entice former clients back into the
fold, and reduce the costs of marketing and client service. This research is related to
basicly banks of Jaipur, specially HDFC and ICICI bank. The objective of this study is to
bring insight and deeper understanding into the objectives, strategies and the expected
benefits of CRM initiatives by organizations particularly service companies like banks
and to understand consumer psyche about CRM in banking area.
Method which used in this study is exploratory and source of data collection is both
secondary and primery data collections which are collect by the questionnaire, internet,
various types of newspapers, magazines and other books related to topic written by
various author. This study will show impact on customers of various CRM activities.
There are many limitation arise while study and prepare this research like The area of
study was Jaipur so it cannot be generalized to other cities and Time Period of the
project was not sufficient to study all the factors in deep. Key elements which consider
in this study are satisfaction of customers, use of technology in banks, types of CRM
activities etc. There are not so much data available on this topic which is his limitation of
this report. At last it is concluded that 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.

5. ACKNOWLEDGEMENT
I express my sincere thanks to the project guide Ms. Savita Panwar and Ms. Jaya
Pareek ,and Mrs. Nidhi Tak faculty, Department of Management Studies, Poornima
Group of Colleges, Jaipur, for guiding me right from the inception till the successful
completion of the project. I sincerely acknowledge both for extending the valuable
guidance, support for literature, critical review of project and the report but above all,
the moral support shehad provided to me during all stages of this project study.
I would also like to thanks Mr. R. K. Agarwal and all the supporting staff of Department
of Management Studies, Poornima Group of Colleges, Jaipur for their help and
cooperation throughout the project.
Divya Sharma

6. EXECUTIVE SUMMARY
“Customer relationship management (CRM) is a widely-implemented strategy for
managing a company‘s interactions with customers, clients and sales prospects. It
involves using technology to organize, automate, and synchronize business processes
principally sales activities, but also those for marketing, customer service, and
technical.‖
Most CRM initiatives begin with a strategic need to manage the process of handling
customer related information more effectively. For beginners it could simply mean better
lead management capabilities or sales pipeline visibility. However, as organizations
mature in their CRM initiatives, they begin to look at CRM as tool to acquire strategic
differentiators.
The objective of this study to find out that how the expected benefits of CRM can
initiatives by organizations be described, to find out positive impact on the overall
performance of the organization in the long run, to get more knowledge about CRM in
banking sector, to understand consumer psyche about CRM in banking area, to analyze
that how CRM works as a link between banks and customers. The study might be
limited by some factors like the primary data collected in form of questionnaires and
interview might have Inherent limitation of biasness and casual response, due to
competitive advantage banks don‘t disclose their policies in public, banking sector is
very big and not full covered in limited time, many people were not serious while filling
the Questionnaires, the sample size is very short.
This research concluded that 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.

7. INDEX
S.NO CONTENT PAGE NO.
1.
Introduction to industry 1-60
2. Introduction to organization 61-104
3. Research methodology 105-110
3.1. Title of study
3.2. Duration of the project
3.3. Objective of the project
3.4. Type of research
3.5. Sample size , method of selecting sample
3.6. Scope of study
3.7. Limitation of study
4. Analysis and interpretation 111-121
5. Facts and finding 122-122
6. SWOT analysis 123-126
7. Conclusion 127-127
8. Recommendation/ suggestion 128-129
9. Appendix 130-132
10. Bibliography 133-135

8. INTRODUCTION OF INDUSTRY
A bank is a financial intermediary that accepts deposits and channels those deposits
into lending activities, either directly or through capital markets. A bank connects
customers with capital deficits to customers with capital surpluses.
The banking section will navigate through all the aspects of the Banking System in
India. It will discuss upon the matters with the birth of the banking concept in the country
to new players adding their names in the industry in coming few years.
The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association
(IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well defined
under three separate heads with one page dedicated to each bank. However, in the
introduction part of the entire banking cosmos, the past has been well explained under
three different heads namely:
History of Banking in India
Nationalization of Banks in India
Scheduled Commercial Banks in India
The first deals with the history part since the dawn of banking system in India.
Government took major step in the 1969 to put the banking sector into systems and it
nationalized 14 private banks in the mentioned year. This has been elaborated in
Nationalization of Banks in India. The last but not the least explains about the scheduled
and unscheduled banks in India. Section 42(6)(a) of RBI Act 1934 lays down the
condition of scheduled commercial banks. The description along with a list of scheduled
commercial banks is given on this page.

9. History of Banking in India
Banking in India originated in the last decades of the 18th century. The first banks
were The General Bank of India, which started in 1786, and Bank of Hindustan, which
started in 1790; both are now defunct. The oldest bank in existence in India is the State
Bank of India, which originated in the Bank of Calcutta in June 1806, which almost
immediately became the Bank of Bengal. This was one of the three presidency banks,
the other two being the Bank of Bombay and the Bank of Madras, all three of which
were established under charters from the British East India Company. For many years
the Presidency banks acted as quasi-central banks, as did their successors. The three
banks merged in 1921 to form the Imperial Bank of India, which, upon India's
independence, became the State Bank of India.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as
a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in
1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock
Bank: A company that issues stock and requires shareholders to be held liable for the
company's debt) It was not the first though. That honor belongs to the Bank of Upper
India, which was established in 1863, and which survived until 1913, when it failed, with
some of its assets and liabilities being transferred to the Alliance Bank of Simla.
When the American Civil War stopped the supply of cotton to Lancashire from
the Confederate States, promoters opened banks to finance trading in Indian cotton.
With large exposure to speculative ventures, most of the banks opened in India during
that period failed. The depositors lost money and lost interest in keeping deposits with
banks. Subsequently, banking in India remained the exclusive domain of Europeans for
next several decades until the beginning of the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire
d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in
1862; branches in Madrasand Puducherry, then a French colony,

10. followed. HSBC established itself in Bengal in 1869. Calcutta was the most active
trading port in India, mainly due to the trade of the British Empire, and so became a
banking center.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established
in Lahore in 1895, which has survived to the present and is now one of the largest
banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a relative
period of stability. Around five decades had elapsed since the Indian Mutiny, and the
social, industrial and other infrastructure had improved. Indians had established small
banks, most of which served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also some exchange
banks and a number of Indian joint stock banks. All these banks operated in different
segments of the economy. The exchange banks, mostly owned by Europeans,
concentrated on financing foreign trade. Indian joint stock banks were generally under
capitalized and lacked the experience and maturity to compete with the presidency and
exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking
it seems we are behind the times. We are like some old fashioned sailing ship, divided
by solid wooden bulkheads into separate and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen and
political figures to found banks of and for the Indian community. A number of banks
established then have survived to the present such as Bank of India, Corporation
Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.
The fervour of Swadeshi movement lead to establishing of many private banks
in Dakshina Kannada and Udupi district which were unified earlier and known by the
name South Canara ( South Kanara ) district. Four nationalised banks started in this
district and also a leading private sector bank. Hence undivided Dakshina Kannada
district is known as "Cradle of Indian Banking".

11. During the First World War (1914-1918) through the end of the Second World
War (1939-1945), and two years thereafter until the independence of India were
challenging for Indian banking. The years of the First World War were turbulent, and it
took its toll with banks simply collapsing despite the Indian economy gaining indirect
boost due to war-related economic activities.
At least 94 banks in India failed between 1913 and 1918 as indicated in the following
table:
Number of banks Authorized capital Paid-up Capital
Years
that failed (Rs. Lakhs) (Rs. Lakhs)
1913 12 274 35
1914 42 710 109
1915 11 56 5
1916 13 231 4
1917 9 76 25
1918 7 209 1

12. Post-Independence
The partition of India in 1947 adversely impacted the economies of Punjab and West
Bengal, paralyzing banking activities for months. India's independence marked the end
of a regime of the Laissez-faire for the Indian banking. The Government of India initiated
measures to play an active role in the economic life of the nation, and the Industrial
Policy Resolution adopted by the government in 1948 envisaged a mixed economy.
This resulted into greater involvement of the state in different segments of the economy
including banking and finance. The major steps to regulate banking included:
 The Reserve Bank of India, India's central banking authority, was nationalized on
January 1, 1949 under the terms of the Reserve Bank of India (Transfer to Public
Ownership) Act, 1948 (RBI, 2005b).[Reference www.rbi.org.in]
 In 1949, the Banking Regulation Act was enacted which empowered the Reserve
Bank of India (RBI) "to regulate, control, and inspect the banks in India."
 The Banking Regulation Act also provided that no new bank or branch of an
existing bank could be opened without a license from the RBI, and no two banks
could have common directors.
Nationalization
Banks Nationalization in India: Newspaper Clipping, Times of India, July, 20, 1969

13. Despite the provisions, control and regulations of Reserve Bank of India, banks in India
except the State Bank of India or SBI, continued to be owned and operated by private
persons. By the 1960s, the Indian banking industry had become an important tool to
facilitate the development of the Indian economy. At the same time, it had emerged as a
large employer, and a debate had ensued about the nationalization of the banking
industry. Indira Gandhi, then Prime Minister of India, expressed the intention of
the Government of India in the annual conference of the All India Congress Meeting in a
paper entitled "Stray thoughts on Bank Nationalization." The meeting received the paper
with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India issued an
ordinance and nationalised the 14 largest commercial banks with effect from the
midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described
the step as a "masterstroke of political sagacity." Within two weeks of the issue of the
ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of
Undertaking) Bill, and it received the presidential approval on 9 August 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The
stated reason for the nationalization was to give the government more control of credit
delivery. With the second dose of nationalization, the Government of India controlled
around 91% of the banking business of India. Later on, in the year 1993, the
government merged New Bank of India with Punjab National Bank. It was the only
merger between nationalized banks and resulted in the reduction of the number of
nationalized banks from 20 to 19. After this, until the 1990s, the nationalized banks grew
at a pace of around 4%, closer to the average growth rate of the Indian economy.
Liberalization
In the early 1990s, the then Narsimha Rao government embarked on a policy
of liberalization, licensing a small number of private banks. These came to be known
as New Generation tech-savvy banks, and included Global Trust Bank (the first of such

14. new generation banks to be set up), which later amalgamated with Oriental Bank of
Commerce, Axis Bank(earlier as UTI Bank), ICICI Bankand HDFC Bank. This move,
along with the rapid growth in the economy of India, revitalized the banking sector in
India, which has seen rapid growth with strong contribution from all the three sectors of
banks, namely, government banks, private banks and foreign banks.
The next stage for the Indian banking has been set up with the proposed relaxation in
the norms for Foreign Direct Investment, where all Foreign Investors in banks may be
given voting rights which could exceed the present cap of 10%,at present it has gone up
to 74% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time,
were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning.
The new wave ushered in a modern outlook and tech-savvy methods of working for
traditional banks. All this led to the retail boom in India. People not just demanded more
from their banks but also received more.
Currently (2007), banking in India is generally fairly mature in terms of supply, product
range and reach-even though reach in rural India still remains a challenge for the
private sector and foreign banks. In terms of quality of assets and capital adequacy,
Indian banks are considered to have clean, strong and transparent balance sheets
relative to other banks in comparable economies in its region. The Reserve Bank of
India is an autonomous body, with minimal pressure from the government. The stated
policy of the Bank on the Indian Rupee is to manage volatility but without any fixed
exchange rate-and this has mostly been true.
With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong. One may also
expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake
in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor
has been allowed to hold more than 5% in a private sector bank since the RBI

15. announced norms in 2005 that any stake exceeding 5% in the private sector banks
would need to be vetted by them.
In recent years critics have charged that the non-government owned banks are too
aggressive in their loan recovery efforts in connection with housing, vehicle and
personal loans. There are press reports that the banks' loan recovery efforts have
driven defaulting borrowers to suicide.
The Indian Banking industry, which is governed by the Banking Regulation Act of India,
1949 can be broadly classified into two major categories, non-scheduled banks and
scheduled banks. Scheduled banks comprise commercial banks and the co-operative
banks. In terms of ownership, commercial banks can be further grouped into
nationalized banks, the State Bank of India and its group banks, regional rural banks
and private sector banks (the old/ new domestic and foreign). These banks have over
67,000 branches spread across the country.
The first phase of financial reforms resulted in the nationalization of 14 major banks in
1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in
a significant growth in the geographical coverage of banks. Every bank had to earmark
a minimum percentage of their loan portfolio to sectors identified as ―priority sectors‖.
The manufacturing sector also grew during the 1970s in protected environs and the
banking sector was a critical source. The next wave of reforms saw the nationalization
of 6 more commercial banks in 1980. Since then the number of scheduled commercial
banks increased four-fold and the number of bank branches increased eight-fold.
After the second phase of financial sector reforms and liberalization of the sector in the
early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete
with the new private sector banks and the foreign banks. The new private sector banks
first made their appearance after the guidelines permitting them were issued in January
1993. Eight new private sector banks are presently in operation. These banks due to
their late start have access to state-of-the-art technology, which in turn helps them to
save on manpower costs and provide better services.

16. During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for
a 25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized
banks accounted for 53.2 percent of the deposits and 47.5 percent of credit during the
same period. The share of foreign banks (numbering 42), regional rural banks and other
scheduled commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percent
respectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively
in credit during the year 2000.
Current Scenario
The industry is currently in a transition phase. On the one hand, the PSBs, which are
the mainstay of the Indian Banking system are in the process of shedding their flab in
terms of excessive manpower, excessive non Performing Assets (Npas) and excessive
governmental equity, while on the other hand the private sector banks are consolidating
themselves through mergers and acquisitions.
PSBs, which currently account for more than 78 percent of total banking industry assets
are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from
traditional sources, lack of modern technology and a massive workforce while the new
private sector banks are forging ahead and rewriting the traditional banking business
model by way of their sheer innovation and service. The PSBs are of course currently
working out challenging strategies even as 20 percent of their massive employee
strength has dwindled in the wake of the successful Voluntary Retirement Schemes
(VRS) schemes.
The private players however cannot match the PSB‘s great reach, great size and
access to low cost deposits. Therefore one of the means for them to combat the PSBs
has been through the merger and acquisition (M& A) route. Over the last two years, the
industry has witnessed several such instances. For instance, Hdfc Bank‘s merger with
Times Bank Icici Bank‘s acquisition of ITC Classic, Anagram Finance and Bank of
Madura. Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on
the lookout. The UTI bank- Global Trust Bank merger however opened a pandora‘s box

17. and brought about the realization that all was not well in the functioning of many of the
private sector banks.
Private sector Banks have pioneered internet banking, phone banking, anywhere
banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined
various other services and integrated them into the mainstream banking arena, while
the PSBs are still grappling with disgruntled employees in the aftermath of successful
VRS schemes. Also, following India‘s commitment to the W To agreement in respect of
the services sector, foreign banks, including both new and the existing ones, have been
permitted to open up to 12 branches a year with effect from 1998-99 as against the
earlier stipulation of 8 branches.
Talks of government diluting their equity from 51 percent to 33 percent in November
2000 has also opened up a new opportunity for the takeover of even the PSBs. The FDI
rules being more rationalized in Q1FY02 may also pave the way for foreign banks
taking the M& A route to acquire willing Indian partners.
Meanwhile the economic and corporate sector slowdown has led to an increasing
number of banks focusing on the retail segment. Many of them are also entering the
new vistas of Insurance. Banks with their phenomenal reach and a regular interface with
the retail investor are the best placed to enter into the insurance sector. Banks in India
have been allowed to provide fee-based insurance services without risk participation,
invest in an insurance company for providing infrastructure and services support and set
up of a separate joint-venture insurance company with risk participation.
Aggregate Performance of the Banking Industry
Aggregate deposits of scheduled commercial banks increased at a compounded annual
average growth rate (Cagr) of 17.8 percent during 1969-99, while bank credit expanded
at a Cagr of 16.3 percent per annum. Banks‘ investments in government and other
approved securities recorded a Cagr of 18.8 percent per annum during the same period.

18. In FY01 the economic slowdown resulted in a Gross Domestic Product (GDP) growth of
only 6.0 percent as against the previous year‘s 6.4 percent. The WPI Index (a measure
of inflation) increased by 7.1 percent as against 3.3 percent in FY00. Similarly, money
supply (M3) grew by around 16.2 percent as against 14.6 percent a year ago.
The growth in aggregate deposits of the scheduled commercial banks at 15.4 percent in
FY01 percent was lower than that of 19.3 percent in the previous year, while the growth
in credit by SCBs slowed down to 15.6 percent in FY01 against 23 percent a year ago.
The industrial slowdown also affected the earnings of listed banks. The net profits of 20
listed banks dropped by 34.43 percent in the quarter ended March 2001. Net profits
grew by 40.75 percent in the first quarter of 2000-2001, but dropped to 4.56 percent in
the fourth quarter of 2000-2001.
On the Capital Adequacy Ratio (CAR) front while most banks managed to fulfill the
norms, it was a feat achieved with its own share of difficulties. The CAR, which at
present is 9.0 percent, is likely to be hiked to 12.0 percent by the year 2004 based on
the Basle Committee recommendations. Any bank that wishes to grow its assets needs
to also shore up its capital at the same time so that its capital as a percentage of the
risk-weighted assets is maintained at the stipulated rate. While the IPO route was a
much-fancied one in the early ‗90s, the current scenario doesn‘t look too attractive for
bank majors.
Consequently, banks have been forced to explore other avenues to shore up their
capital base. While some are wooing foreign partners to add to the capital others are
employing the M& A route. Many are also going in for right issues at prices considerably
lower than the market prices to woo the investors.
Interest Rate Scene
The two years, post the East Asian crises in 1997-98 saw a climb in the global interest
rates. It was only in the later half of FY01 that the US Fed cut interest rates. India has
however remained more or less insulated. The past 2 years in our country was
characterized by a mounting intention of the Reserve Bank Of India (RBI) to steadily

19. reduce interest rates resulting in a narrowing differential between global and domestic
rates.
The RBI has been affecting bank rate and CRR cuts at regular intervals to improve
liquidity and reduce rates. The only exception was in July 2000 when the RBI increased
the Cash Reserve Ratio (CRR) to stem the fall in the rupee against the dollar. The
steady fall in the interest rates resulted in squeezed margins for the banks in general.
Governmental Policy
After the first phase and second phase of financial reforms, in the 1980s commercial
banks began to function in a highly regulated environment, with administered interest
rate structure, quantitative restrictions on credit flows, high reserve requirements and
reservation of a significant proportion of lendable resources for the priority and the
government sectors. The restrictive regulatory norms led to the credit rationing for the
private sector and the interest rate controls led to the unproductive use of credit and low
levels of investment and growth. The resultant ‗financial repression‘ led to decline in
productivity and efficiency and erosion of profitability of the banking sector in general.
This was when the need to develop a sound commercial banking system was felt. This
was worked out mainly with the help of the recommendations of the Committee on the
Financial System (Chairman: Shri M. Narasimham), 1991. The resultant financial sector
reforms called for interest rate flexibility for banks, reduction in reserve requirements,
and a number of structural measures. Interest rates have thus been steadily
deregulated in the past few years with banks being free to fix their Prime Lending
Rates(PLRs) and deposit rates for most banking products. Credit market reforms
included introduction of new instruments of credit, changes in the credit delivery system
and integration of functional roles of diverse players, such as, banks, financial
institutions and non-banking financial companies (Nbfcs). Domestic Private Sector
Banks were allowed to be set up, PSBs were allowed to access the markets to shore up
their Cars.

20. Implications of Some Recent Policy Measures
The allowing of PSBs to shed manpower and dilution of equity are moves that will lend
greater autonomy to the industry. In order to lend more depth to the capital markets the
RBI had in November 2000 also changed the capital market exposure norms from 5
percent of bank‘s incremental deposits of the previous year to 5 percent of the bank‘s
total domestic credit in the previous year. But this move did not have the desired effect,
as in, while most banks kept away almost completely from the capital markets, a few
private sector banks went overboard and exceeded limits and indulged in dubious stock
market deals. The chances of seeing banks making a comeback to the stock markets
are therefore quite unlikely in the near future.
The move to increase Foreign Direct Investment FDI limits to 49 percent from 20
percent during the first quarter of this fiscal came as a welcome announcement to
foreign players wanting to get a foot hold in the Indian Markets by investing in willing
Indian partners who are starved of networth to meet CAR norms. Ceiling for FII
investment in companies was also increased from 24.0 percent to 49.0 percent and
have been included within the ambit of FDI investment.
The abolishment of interest tax of 2.0 percent in budget 2001-02 will help banks pass on
the benefit to the borrowers on new loans leading to reduced costs and easier lending
rates. Banks will also benefit on the existing loans wherever the interest tax cost
element has already been built into the terms of the loan. The reduction of interest rates
on various small savings schemes from 11 percent to 9.5 percent in Budget 2001-02
was a much awaited move for the banking industry and in keeping with the reducing
interest rate scenario, however the small investor is not very happy with the move.
Some of the not so good measures however like reducing the limit for tax deducted at
source (TDS) on interest income from deposits to Rs 2,500 from the earlier level of Rs
10,000, in Budget 2001-02, had met with disapproval from the banking fraternity who
feared that the move would prove counterproductive and lead to increased
fragmentation of deposits, increased volumes and transaction costs. The limit was

21. thankfully partially restored to Rs 5000 at the time of passing the Finance Bill in the
Parliament.
April 2001-Credit Policy Implications
The rationalization of export credit norms in will bestow greater operational flexibility on
banks, and also reduce the borrowing costs for exporters. Thus this move could trigger
exports growth in the future. Banks can also hope to earn increased revenue with the
interest paid by RBI on CRR balances being increased from 4.0 percent to 6.0 percent.
The stock market scam brought out the unholy nexus between the Cooperative banks
and stockbrokers. In order to usher in greater prudence in their operations, the RBI has
barred Urban Cooperative Banks from financing the stock market operations and is also
in the process of setting up of a new apex supervisory body for them. Meanwhile the
foreign banks have a bone to pick with the RBI. The RBI had announced that forex
loans are not to be calculated as a part of Tier-1 Capital for drawing up exposure limits
to companies effective 1 April 2002. This will force foreign banks either to infuse fresh
capital to maintain the capital adequacy ratio (CAR) or pare their asset base. Further,
the RBI has also sought to keep foreign competition away from the nascent net banking
segment in India by allowing only Indian banks with a local physical presence, to offer
Internet banking.
Crystal Gazing
On the macro economic front, GDP is expected to grow by 6.0 to 6.5 percent while the
projected expansion in broad money (M3) for 2001-02 is about 14.5 percent. Credit and
deposits are both expected to grow by 15-16 percent in FY02. India's foreign exchange
reserves should reach US$50.0 billion in FY02 and the Indian rupee should hold steady.
The interest rates are likely to remain stable this fiscal based on an expected downward
trend in inflation rate, sluggish pace of non-oil imports and likelihood of declining global

22. interest rates. The domestic banking industry is forecasted to witness a higher degree of
mergers and acquisitions in the future. Banks are likely to opt for the universal banking
approach with a stronger retail approach. Technology and superior customer service will
continue to be the imperatives for success in this industry.
Public Sector banks that imbibe new concepts in banking, turn tech savvy, leaner and
meaner post VRS and obtain more autonomy by keeping governmental stake to the
minimum can succeed in effectively taking on the private sector banks by virtue of their
sheer size. Weaker PSU banks are unlikely to survive in the long run. Consequently,
they are likely to be either acquired by stronger players or will be forced to look out for
other strategies to infuse greater capital and optimize their operations.
Foreign banks are likely to succeed in their niche markets and be the innovators in
terms of technology introduction in the domestic scenario. The outlook for the private
sector banks indeed looks to be more promising vis-à-vis other banks. While their
focused operations, lower but more productive employee force etc will stand them good,
possible acquisitions of PSU banks will definitely give them the much needed scale of
operations and access to lower cost of funds. These banks will continue to be the early
technology adopters in the industry, thus increasing their efficiencies. Also, they have
been amongst the first movers in the lucrative insurance segment. Already, banks such
as Icici Bank and Hdfc Bank have forged alliances with Prudential Life and Standard
Life respectively. This is one segment that is likely to witness a greater deal of action in
the future. In the near term, the low interest rate scenario is likely to affect the spreads
of majors. This is likely to result in a greater focus on better asset-liability management
procedures. Consequently, only banks that strive hard to increase their share of fee-
based revenues are likely to do better in the future.
Without a sound and effective banking system in India it cannot have a healthy
economy. The banking system of India should not only be hassle free but it should be
able to meet new challenges posed by the technology and any other external and
internal factors.

23. For the past three decades India's banking system has several outstanding
achievements to its credit. The most striking is its extensive reach. It is no longer
confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system
has reached even to the remote corners of the country. This is one of the main reasons
of India's growth process. The government's regular policy for Indian bank since 1969
has paid rich dividends with the nationalization of 14 major private banks of India.
Not long ago, an account holder had to wait for hours at the bank counters for getting a
draft or for withdrawing his own money. Today, he has a choice. Gone are days when
the most efficient bank transferred money from one branch to other in two days. Now it
is simple as instant messaging or dials a pizza. Money has become the order of the
day.
The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct
phases. They are as mentioned below:
Early phase from 1786 to 1969 of Indian Banks
Nationalization of Indian Banks and up to 1991 prior to Indian banking sector
Reforms.
New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.
To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and
Phase III.
Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan
and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of
Bombay (1840) and Bank of Madras (1843) as independent units and called it
Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of

24. India was established which started as private shareholders banks, mostly Europeans
shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank,
and Bank of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small.
To streamline the functioning and activities of commercial banks, the Government of
India came up with The Banking Companies Act, 1949 which was later changed to
Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
Reserve Bank of India was vested with extensive powers for the supervision of banking
in India as the Central Banking Authority.
During those days public has lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal
department was comparatively safer. Moreover, funds were largely given to traders.
Phase II
Government took major steps in this Indian Banking Sector Reform after independence.
In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large
scale especially in rural and semi-urban areas. It formed State Bank of India to act as
the principal agent of RBI and to handle banking transactions of the Union and State
Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th
July, 1969, major process of nationalization was carried out. It was the effort of the then
Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country
were nationalized.

25. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980
with seven more banks. This step brought 80% of the banking segment in India under
Government ownership.
The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:
1949: Enactment of Banking Regulation Act.
1955: Nationalization of State Bank of India.
1959: Nationalization of SBI subsidiaries.
1961: Insurance cover extended to deposits.
1969: Nationalization of 14 major banks.
1971: Creation of credit guarantee corporation.
1975: Creation of regional rural banks.
1980: Nationalization of seven banks with deposits over 200 crore.
After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%. Banking
in the sunshine of Government ownership gave the public implicit faith and immense
confidence about the sustainability of these institutions.
Phase III
This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was
set up by his name which worked for the liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being put
to give a satisfactory service to customers. Phone banking and net banking is
introduced. The entire system became more convenient and swift. Time is given more
importance than money.
The financial system of India has shown a great deal of resilience. It is sheltered from
any crisis triggered by any external macroeconomics shock as other East Asian

26. Countries suffered. This is all due to a flexible exchange rate regime, the foreign
reserves are high, the capital account is not yet fully convertible, and banks and their
customers have limited foreign exchange exposure.
Nationalization of Banks in India
The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the then
prime minister. It nationalized 14 banks then. These banks were mostly owned by
businessmen and even managed by them.
Central Bank of India
Bank of Maharashtra
Dena Bank
Punjab National Bank
Syndicate Bank
Canara Bank
Indian Bank
Indian Overseas Bank
Bank of Baroda
Union Bank
Allahabad Bank
United Bank of India
UCO Bank
Bank of India
Before the steps of nationalization of Indian banks, only State Bank of India (SBI) was
nationalized. It took place in July 1955 under the SBI Act of 1955. Nationalization of
Seven State Banks of India (formed subsidiary) took place on 19th July, 1960.
The State Bank of India is India's largest commercial bank and is ranked one of the top
five banks worldwide. It serves 90 million customers through a network of 9,000

27. branches and it offers -- either directly or through subsidiaries -- a wide range of
banking services.
The second phase of nationalization of Indian banks took place in the year 1980. Seven
more banks were nationalized with deposits over 200 crores. Till this year,
approximately 80% of the banking segment in India was under Government ownership.
After the nationalization of banks in India, the branches of the public sector banks rose
to approximately 800% in deposits and advances took a huge jump by 11,000%.
1955: Nationalization of State Bank of India.
1959: Nationalization of SBI subsidiaries.
1969: Nationalization of 14 major banks.
1980: Nationalization of seven banks with deposits over 200 crores.
Banks in India

28. In India the banks are being segregated in different groups. Each group has their own
benefits and limitations in operating in India. Each has their own dedicated target
market. Few of them only work in rural sector while others in both rural as well as urban.
Many even are only catering in cities. Some are of Indian origin and some are foreign
players.
All these details and many more is discussed over here. The banks and its relation with
the customers, their mode of operation, the names of banks under different groups and
other such useful information are talked about.
One more section has been taken note of is the upcoming foreign banks in India. The
RBI has shown certain interest to involve more of foreign banks than the existing one
recently. This step has paved a way for few more foreign banks to start business in
India.

29. ABN-AMRO Bank Indian Overseas Bank
American Express Bank IndusInd Bank
Andhra Bank ING Vysya Bank
Allahabad Bank Jammu & Kashmir Bank
Axis Bank (Earlier UTI Bank) JPMorgan Chase Bank
Bank of Baroda Karnataka Bank
Bank of India Karur Vysya Bank
Bank of Maharastra Laxmi Vilas Bank
Bank of Punjab Oriental Bank of Commerce
Bank of Rajasthan Punjab National Bank
Bank of Ceylon South Indian Bank
BNP Paribas Bank Standard Chartered Bank
Canara Bank State Bank of India (SBI)
Catholic Syrian Bank State Bank of Bikaner & Jaipur
Central Bank of India State Bank of Hyderabad
Centurion Bank State Bank of Indore
Citi Bank State Bank of Saurastra
City Union Bank State Bank of Travancore
Corporation Bank Syndicate Bank
Dena Bank Taib Bank
Deutsche Bank UCO Bank
Development Credit Bank Union Bank of India
Federal Bank United Bank of India
HDFC Bank United Western Bank
HSBC Vijaya Bank
ICICI Bank Kotak Mahindra Bank
IDBI Bank Yes Bank
Indian Bank
Scheduled Commercial Banks In India

30. The commercial banking structure in India consists of:
Scheduled Commercial Banks in India
Unscheduled Banks in India
Scheduled Banks in India constitute those banks which have been included in the
Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only
those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a)
of the Act.
As on 30th June, 1999, there were 300 scheduled banks in India having a total network
of 64,918 branches. The scheduled commercial banks in India comprise of State bank
of India and its associates (8), nationalized banks (19), foreign banks (45), private
Sector banks (32), co-operative banks and regional rural banks.
"Scheduled banks in India" means the State Bank of India constituted under the State
Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of
India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted
under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank
included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934),
but does not include a co-operative bank".
"Non-scheduled bank in India" means a banking company as defined in clause (c) of
section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled
bank".
The following are the Scheduled Banks in India (Public Sector):
State Bank of India

31. State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Saurashtra
State Bank of Travancore
Andhra Bank
Allahabad Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
Indian Overseas Bank
Indian Bank
Oriental Bank of Commerce
Punjab National Bank
Punjab and Sind Bank
Syndicate Bank
Union Bank of India
United Bank of India
UCO Bank
Vijaya Bank
The following are the Scheduled Banks in India (Private Sector):
ING Vysya Bank Ltd
Axis Bank Ltd
Indusind Bank Ltd

32. ICICI Bank Ltd
South Indian Bank
HDFC Bank Ltd
Centurion Bank Ltd
Bank of Punjab Ltd
IDBI Bank Ltd
Jammu & Kashmir Bank Ltd.
Banking services in India
With years, banks are also adding services to their customers. The Indian banking
industry is passing through a phase of customers market. The customers have more
choices in choosing their banks. A competition has been established within the banks
operating in India.
With stiff competition and advancement of technology, the services provided by banks
have become more easy and convenient. The past days are witness to an hour wait
before withdrawing cash from accounts or a cheque from north of the country being
cleared in one month in the south.
This section of banking deals with the latest discovery in the banking instruments along
with the polished version of their old systems.
Financial and Banking Sector Reforms
The last decade witnessed the maturity of India's financial markets. Since 1991, every
governments of India took major steps in reforming the financial sector of the country.
The important achievements in the following fields are discussed under separate
heads:

33. Financial markets
Regulators
The banking system
Non-banking finance companies
The capital market
Mutual funds
Overall approach to reforms
Deregulation of banking system
Capital market developments
Consolidation imperative
Now let us discuss each segment separately.
Financial Markets
In the last decade, Private Sector Institutions played an important role. They grew
rapidly in commercial banking and asset management business. With the openings
in the insurance sector for these institutions, they started making debt in the market.
Competition among financial intermediaries gradually helped the interest rates to
decline. Deregulation added to it. The real interest rate was maintained. The
borrowers did not pay high price while depositors had incentives to save. It was
something between the nominal rate of interest and the expected rate of inflation.
Regulators
The Finance Ministry continuously formulated major policies in the field of financial
sector of the country. The Government accepted the important role of regulators.
The Reserve Bank of India (RBI) has become more independant. Securities and
Exchange Board of India (SEBI) and the Insurance Regulatory and Development
Authority (IRDA) became important institutions. Opinions are also there that there
should be a super-regulator for the financial services sector instead of multiplicity of

34. regulators.
The banking system
Almost 80% of the business is still controlled by Public Sector Banks (PSBs). PSBs
are still dominating the commercial banking system. Shares of the leading PSBs are
already listed on the stock exchanges.
The RBI has given licences to new private sector banks as part of the liberalisation
process. The RBI has also been granting licences to industrial houses. Many banks
are successfully running in the retail and consumer segments but are yet to deliver
services to industrial finance, retail trade, small business and agricultural finance.
The PSBs will play an important role in the industry due to its number of branches
and foreign banks facing the constrait of limited number of branches. Hence, in order
to achieve an efficient banking system, the onus is on the Government to encourage
the PSBs to be run on professional lines.
Development finance institutions
FIs's access to SLR funds reduced. Now they have to approach the capital market
for debt and equity funds. Convertibility clause no longer obligatory for assistance to
corporate sanctioned by term-lending institutions. Capital adequacy norms extended
to financial institutions. DFIs such as IDBI and ICICI have entered other segments of
financial services such as commercial banking, asset management and insurance
through separate ventures. The move to universal banking has started.
Non-banking finance companies
In the case of new NBFCs seeking registration with the RBI, the requirement of
minimum net owned funds, has been raised to Rs.2 crores Until recently, the money

35. market in India was narrow and circumscribed by tight regulations over interest rates
and participants. The secondary market was underdeveloped and lacked liquidity.
Several measures have been initiated and include new money market instruments,
strengthening of existing instruments and setting up of the Discount and Finance
House of India (DFHI).
The RBI conducts its sales of dated securities and treasury bills through its open
market operations (OMO) window. Primary dealers bid for these securities and also
trade in them. The DFHI is the principal agency for developing a secondary market
for money market instruments and Government of India treasury bills. The RBI has
introduced a liquidity adjustment facility (LAF) in which liquidity is injected through
reverse repo auctions and liquidity is sucked out through repo auctions.
On account of the substantial issue of government debt, the gilt- edged market
occupies an important position in the financial set- up. The Securities Trading
Corporation of India (STCI), which started operations in June 1994 has a mandate to
develop the secondary market in government securities.
Long-term debt market: The development of a long-term debt market is crucial to the
financing of infrastructure. After bringing some order to the equity market, the SEBI
has now decided to concentrate on the development of the debt market. Stamp duty
is being withdrawn at the time of dematerialization of debt instruments in order to
encourage paperless trading.
The capital market
The number of shareholders in India is estimated at 25 million. However, only an
estimated two lakh persons actively trade in stocks. There has been a dramatic
improvement in the country's stock market trading infrastructure during the last few
years. Expectations are that India will be an attractive emerging market with
tremendous potential. Unfortunately, during recent times the stock markets have

36. been constrained by some unsavory developments, which has led to retail investors
deserting the stock markets.
Mutual funds
The mutual funds industry is now regulated under the SEBI (Mutual Funds)
Regulations, 1996 and amendments thereto. With the issuance of SEBI guidelines,
the industry had a framework for the establishment of many more players, both
Indian and foreign players.
The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of
nearly Rs.70,000 crores, but its share is going down. The biggest shock to the
mutual fund industry during recent times was the insecurity generated in the minds
of investors regarding the US 64 scheme. With the growth in the securities markets
and tax advantages granted for investment in mutual fund units, mutual funds
started becoming popular. The foreign owned AMCs are the ones which are now
setting the pace for the industry. They are introducing new products, setting new
standards of customer service, improving disclosure standards and experimenting
with new types of distribution.
The insurance industry is the latest to be thrown open to competition from the private
sector including foreign players. Foreign companies can only enter joint ventures
with Indian companies, with participation restricted to 26 per cent of equity. It is too
early to conclude whether the erstwhile public sector monopolies will successfully be
able to face up to the competition posed by the new players, but it can be expected
that the customer will gain from improved service.
The new players will need to bring in innovative products as well as fresh ideas on
marketing and distribution, in order to improve the low per capita insurance
coverage. Good regulation will, of course, be essential.
Overall approach to reforms

37. The last ten years have seen major improvements in the working of various financial
market participants. The government and the regulatory authorities have followed a
step-by-step approach, not a big bang one. The entry of foreign players has assisted
in the introduction of international practices and systems. Technology developments
have improved customer service. Some gaps however remain (for example: lack of
an inter-bank interest rate benchmark, an active corporate debt market and a
developed derivatives market). On the whole, the cumulative effect of the
developments since 1991 has been quite encouraging. An indication of the strength
of the reformed Indian financial system can be seen from the way India was not
affected by the Southeast Asian crisis.
However, financial liberalization alone will not ensure stable economic growth. Some
tough decisions still need to be taken. Without fiscal control, financial stability cannot
be ensured. The fate of the Fiscal Responsibility Bill remains unknown and high
fiscal deficits continue. In the case of financial institutions, the political and legal
structures hve to ensure that borrowers repay on time the loans they have taken.
The phenomenon of rich industrialists and bankrupt companies continues. Further,
frauds cannot be totally prevented, even with the best of regulation. However,
punishment has to follow crime, which is often not the case in India.
Deregulation of banking system
Prudential norms were introduced for income recognition, asset classification,
provisioning for delinquent loans and for capital adequacy. In order to reach the
stipulated capital adequacy norms, substantial capital were provided by the
Government to PSBs. Government pre-emption of banks' resources through
statutory liquidity ratio (SLR) and cash reserve ratio (CRR) brought down in steps.
Interest rates on the deposits and lending sides almost entirely were deregulated.
New private sector banks allowed to promote and encourage competition. PSBs

38. were encouraged to approach the public for raising resources. Recovery of debts
due to banks and the Financial Institutions Act, 1993 was passed, and special
recovery tribunals set up to facilitate quicker recovery of loan arrears.
Bank lending norms liberalized and a loan system to ensure better control over
credit introduced. Banks asked to set up asset liability management (ALM) systems.
RBI guidelines issued for risk management systems in banks encompassing credit,
market and operational risks. A credit information bureau being established to
identify bad risks. Derivative products such as forward rate agreements (FRAs) and
interest rate swaps (IRSs) introduced.
Capital market developments
The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital
Issues was abolished and the initial share pricing were decontrolled. SEBI, the
capital market regulator was established in 1992.
Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets
after registration with the SEBI. Indian companies were permitted to access
international capital markets through euro issues.
The National Stock Exchange (NSE), with nationwide stock trading and electronic
display, clearing and settlement facilities was established. Several local stock
exchanges changed over from floor based trading to screen based trading.
Private mutual funds permitted
The Depositories Act had given a legal framework for the establishment of
depositories to record ownership deals in book entry form. Dematerialization of
stocks encouraged paperless trading. Companies were required to disclose all
material facts and specific risk factors associated with their projects while making
public issues.

39. To reduce the cost of issue, underwriting by the issuer were made optional, subject
to conditions. The practice of making preferential allotment of shares at prices
unrelated to the prevailing market prices stopped and fresh guidelines were issued
by SEBI.
SEBI reconstituted governing boards of the stock exchanges, introduced capital
adequacy norms for brokers, and made rules for making client or broker relationship
more transparent which included separation of client and broker accounts.
Buyback of shares allowed
The SEBI started insisting on greater corporate disclosures. Steps were taken to
improve corporate governance based on the report of a committee.
SEBI issued detailed employee stock option scheme and employee stock purchase
scheme for listed companies.
Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished.
Companies given the freedom to issue dematerialized shares in any denomination.
Derivatives trading starts with index options and futures. A system of rolling
settlements introduced. SEBI empowered to register and regulate venture capital
funds.
The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new
credit rating agencies as well as introducing a code of conduct for all credit rating
agencies operating in India.
Consolidation imperative
Another aspect of the financial sector reforms in India is the consolidation of existing
institutions which is especially applicable to the commercial banks. In India the
banks are in huge quantity. First, there is no need for 27 PSBs with branches all
over India. A number of them can be merged. The merger of Punjab National Bank

40. and New Bank of India was a difficult one, but the situation is different now. No one
expected so many employees to take voluntary retirement from PSBs, which at one
time were much sought after jobs. Private sector banks will be self consolidated
while co-operative and rural banks will be encouraged for consolidation, and anyway
play only a niche role.
In the case of insurance, the Life Insurance Corporation of India is a behemoth,
while the four public sector general insurance companies will probably move towards
consolidation with a bit of nudging. The UTI is yet again a big institution, even
though facing difficult times, and most other public sector players are already exiting
the mutual fund business. There are a number of small mutual fund players in the
private sector, but the business being comparatively new for the private players, it
will take some time.
We finally come to convergence in the financial sector, the new buzzword
internationally. Hi-tech and the need to meet increasing consumer needs is
encouraging convergence, even though it has not always been a success till date. In
India organizations such as IDBI, ICICI, HDFC and SBI are already trying to offer
various services to the customer under one umbrella. This phenomenon is expected
to grow rapidly in the coming years. Where mergers may not be possible, alliances
between organizations may be effective. Various forms of banc assurance are being
introduced, with the RBI having already come out with detailed guidelines for entry of
banks into insurance. The LIC has bought into Corporation Bank in order to spread
its insurance distribution network. Both banks and insurance companies have
started entering the asset management business, as there is a great deal of synergy
among these businesses. The pensions market is expected to open up fresh
opportunities for insurance companies and mutual funds.
It is not possible to play the role of the Oracle of Delphi when a vast nation like India
is involved. However, a few trends are evident, and the coming decade should be as
interesting as the last one.

41. Reserve Bank of India (RBI)
Reserve Bank of India (RBI) is the central bank of the country and is different from
Central Bank of India.
The central bank of the country is the Reserve Bank of India (RBI). It was established in
April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of
the Hilton Young Commission. The share capital was divided into shares of Rs. 100
each fully paid which was entirely owned by private shareholders in the beginning. The
Government held shares of nominal value of Rs. 2, 20,000.
Reserve Bank of India was nationalized in the year 1949. The general superintendence
and direction of the Bank is entrusted to Central Board of Directors of 20 members, the
Governor and four Deputy Governors, one Government official from the Ministry of
Finance, ten nominated Directors by the Government to give representation to important
elements in the economic life of the country, and four nominated Directors by the
Central Government to represent the four local Boards with the headquarters at
Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each
Central Government appointed for a term of four years to represent territorial and
economic interests and the interests of co-operative and indigenous banks.
The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934
(II of 1934) provides the statutory basis of the functioning of the Bank.
The Bank was constituted for the need of following:
To regulate the issue of banknotes
To maintain reserves with a view to securing monetary stability and
To operate the credit and currency system of the country to its advantage.
Functions of Reserve Bank of India

42. The Reserve Bank of India Act of 1934 entrust all the important functions of a central
bank the Reserve Bank of India.
Bank of Issue
Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue
bank notes of all denominations. The distribution of one rupee notes and coins and
small coins all over the country is undertaken by the Reserve Bank as agent of the
Government. The Reserve Bank has a separate Issue Department which is entrusted
with the issue of currency notes. The assets and liabilities of the Issue Department are
kept separate from those of the Banking Department. Originally, the assets of the Issue
Department were to consist of not less than two-fifths of gold coin, gold bullion or
sterling securities provided the amount of gold was not less than Rs. 40 crores in value.
The remaining three-fifths of the assets might be held in rupee coins, Government of
India rupee securities, eligible bills of exchange and promissory notes payable in India.
Due to the exigencies of the Second World War and the post-was period, these
provisions were considerably modified. Since 1957, the Reserve Bank of India is
required to maintain gold and foreign exchange reserves of Ra. 200 crores, of which at
least Rs. 115 crores should be in gold. The system as it exists today is known as the
minimum reserve system.
Banker to Government
The second important function of the Reserve Bank of India is to act as Government
banker, agent and adviser. The Reserve Bank is agent of Central Government and of all
State Governments in India excepting that of Jammu and Kashmir. The Reserve Bank
has the obligation to transact Government business, via. to keep the cash balances as
deposits free of interest, to receive and to make payments on behalf of the Government
and to carry out their exchange remittances and other banking operations. The Reserve

43. Bank of India helps the Government - both the Union and the States to float new loans
and to manage public debt. The Bank makes ways and means advances to the
Governments for 90 days. It makes loans and advances to the States and local
authorities. It acts as adviser to the Government on all monetary and banking matters.
Bankers' Bank and Lender of the Last Resort
The Reserve Bank of India acts as the bankers' bank. According to the provisions of the
Banking Companies Act of 1949, every scheduled bank was required to maintain with
the Reserve Bank a cash balance equivalent to 5% of its demand liabilities and 2 per
cent of its time liabilities in India. By an amendment of 1962, the distinction between
demand and time liabilities was abolished and banks have been asked to keep cash
reserves equal to 3 per cent of their aggregate deposit liabilities. The minimum cash
requirements can be changed by the Reserve Bank of India.
The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible
securities or get financial accommodation in times of need or stringency by
rediscounting bills of exchange. Since commercial banks can always expect the
Reserve Bank of India to come to their help in times of banking crisis the Reserve Bank
becomes not only the banker's bank but also the lender of the last resort.
Controller of Credit
The Reserve Bank of India is the controller of credit i.e. it has the power to influence the
volume of credit created by banks in India. It can do so through changing the Bank rate
or through open market operations. According to the Banking Regulation Act of 1949,
the Reserve Bank of India can ask any particular bank or the whole banking system not
to lend to particular groups or persons on the basis of certain types of securities. Since
1956, selective controls of credit are increasingly being used by the Reserve Bank.
The Reserve Bank of India is armed with many more powers to control the Indian
money market. Every bank has to get a license from the Reserve Bank of India to do

44. banking business within India, the license can be cancelled by the Reserve Bank of
certain stipulated conditions are not fulfilled. Every bank will have to get the permission
of the Reserve Bank before it can open a new branch. Each scheduled bank must send
a weekly return to the Reserve Bank showing, in detail, its assets and liabilities. This
power of the Bank to call for information is also intended to give it effective control of the
credit system. The Reserve Bank has also the power to inspect the accounts of any
commercial bank.
As supreme banking authority in the country, the Reserve Bank of India, therefore, has
the following powers:
(a) It holds the cash reserves of all the scheduled banks.
(b) It controls the credit operations of banks through quantitative and qualitative
controls.
(c) It controls the banking system through the system of licensing, inspection and calling
for information.
(d) It acts as the lender of the last resort by providing rediscount facilities to scheduled
banks.
Custodian of Foreign Reserves
The Reserve Bank of India has the responsibility to maintain the official rate of
exchange. According to the Reserve Bank of India Act of 1934, the Bank was required
to buy and sell at fixed rates any amount of sterling in lots of not less than Rs. 10,000.
The rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the Bank was able to
maintain the exchange rate fixed at lsh.6d. though there were periods of extreme
pressure in favor of or against the rupee. After India became a member of the
International Monetary Fund in 1946, the Reserve Bank has the responsibility of
maintaining fixed exchange rates with all other member countries of the I.M.F.
Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as
the custodian of India's reserve of international currencies. The vast sterling balances

45. were acquired and managed by the Bank. Further, the RBI has the responsibility of
administering the exchange controls of the country.
Supervisory functions
In addition to its traditional central banking functions, the Reserve bank has certain non-
monetary functions of the nature of supervision of banks and promotion of sound
banking in India. The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949
have given the RBI wide powers of supervision and control over commercial and co-
operative banks, relating to licensing and establishments, branch expansion, liquidity of
their assets, management and methods of working, amalgamation, reconstruction, and
liquidation. The RBI is authorized to carry out periodical inspections of the banks and to
call for returns and necessary information from them. The nationalization of 14 major
Indian scheduled banks in July 1969 has imposed new responsibilities on the RBI for
directing the growth of banking and credit policies towards more rapid development of
the economy and realization of certain desired social objectives. The supervisory
functions of the RBI have helped a great deal in improving the standard of banking in
India to develop on sound lines and to improve the methods of their operation.
Promotional functions
With economic growth assuming a new urgency since Independence, the range of the
Reserve Bank's functions has steadily widened. The Bank now performs a variety of
developmental and promotional functions, which, at one time, were regarded as outside
the normal scope of central banking. The Reserve Bank was asked to promote banking
habit, extend banking facilities to rural and semi-urban areas, and establish and
promote new specialized financing agencies. Accordingly, the Reserve Bank has helped
in the setting up of the IFCI and the SFC; it set up the Deposit Insurance Corporation in
1962, the Unit Trust of India in 1964, the Industrial Development Bank of India also in
1964, the Agricultural Refinance Corporation of India in 1963 and the Industrial
Reconstruction Corporation of India in 1972. These institutions were set up directly or
indirectly by the Reserve Bank to promote saving habit and to mobilize savings, and to

46. provide industrial finance as well as agricultural finance. As far back as 1935, the
Reserve Bank of India set up the Agricultural Credit Department to provide agricultural
credit. But only since 1951 the Bank's role in this field has become extremely important.
The Bank has developed the co-operative credit movement to encourage saving, to
eliminate moneylenders from the villages and to route its short term credit to agriculture.
The RBI has set up the Agricultural Refinance and Development Corporation to provide
long-term finance to farmers.
Classification of RBIs functions
The monetary functions also known as the central banking functions of the RBI are
related to control and regulation of money and credit, i.e., issue of currency, control of
bank credit, control of foreign exchange operations, banker to the Government and to
the money market. Monetary functions of the RBI are significant as they control and
regulate the volume of money and credit in the country.
Equally important, however, are the non-monetary functions of the RBI in the context of
India's economic backwardness. The supervisory function of the RBI may be regarded
as a non-monetary function (though many consider this a monetary function). The
promotion of sound banking in India is an important goal of the RBI, the RBI has been
given wide and drastic powers, under the Banking Regulation Act of 1949 - these
powers relate to licensing of banks, branch expansion, liquidity of their assets,
management and methods of working, inspection, amalgamation, reconstruction and
liquidation. Under the RBI's supervision and inspection, the working of banks has
greatly improved. Commercial banks have developed into financially and operationally
sound and viable units. The RBI's powers of supervision have now been extended to
non-banking financial intermediaries. Since independence, particularly after its
nationalisation 1949, the RBI has followed the promotional functions vigorously and has
been responsible for strong financial support to industrial and agricultural development
in the country.

47. RESERVE BANK OF INDIA ADDRESS
Reserve Bank of India,
Central Office,
Shaheed Bhagat Singh Road,
Mumbai - 400 001. Website of Reserve Bank of India -www.rbi.org.in
Top Banks in India
With the advancement of technology and the birth of competition, banks are in the race
of becoming the best in the country. With an eye upon customer satisfaction policy they
are providing best of the best services with the minimum hazards.
Banks like ABN AMRO introduced banking with a coffee. It made a tie-up with one of
the best coffee bar in the country, Barista and remained open till late evening for
customers with a setup of a coffee bar in the premises.
Few banks have introduced world ATM card to make travelers across the globe more
safe and secure. What else. Internet and Phone Banking is the call of the day for banks.
In this race towards the best, we have selected top 20 banks in the country from all
segment. It is not the ranking of banks but only for general information about the top
banks in India.
Indian Banks Association (IBA)
The Indian Banks Association (IBA) was formed on the 26th September, 1946 with 22
members. Today IBA has more than 156 members comprising of Public Sector banks,
Private Sector banks, Foreign banks having offices in India, Urban Co-operative banks,
Developmental financial institutions, Federations, merchant banks, mutual funds,
housing finance corporations, etc.

48. The functioning of IBA
To promote sound and progressive banking principles and practices.
To render assistance and to provide common services to members.
To organize co-ordination and co-operation on procedural, legal, technical,
administrative and professional matters.
To collect, classify and circulate statistical and other information.
To pool together expertise towards common purposes such as reduction in costs,
increase in efficiency, productivity and improve systems, procedures and banking
practices.
To project good public image of banking through publicity and public relations.
To encourage sports and cultural activities among bank employees.
The Organizational Structure of IBA
The Managing Committee manages the affairs, business and funds of IBA. The
managing Committee is elected by the Ordinary members of the Association, and is the
highest management and policy making body of the Association.
The Chairman of the Association heads upon the working of the Association. He
provides guidelines to the Association. The administrative head of IBA is the Chief
Executive of IBA. He is also the Secretary to the Managing Committee. He leads a team
of executives, officers and other staff members.

49. Channels
Banks offer many different channels to access their banking and other services:
 ATM is a machine that dispenses cash and sometimes takes deposits without the
need for a human bank teller. Some ATMs provide additional services.
 A branch is a retail location
 Call center
 Mail: most banks accept check deposits via mail and use mail to communicate to
their customers, e.g. by sending out statements
 Mobile banking is a method of using one's mobile phone to conduct banking
transactions
 Online banking is a term used for performing transactions, payments etc. over
the Internet
 Relationship Managers, mostly for private banking or business banking, often
visiting customers at their homes or businesses
 Telephone banking is a service which allows its customers to perform
transactions over the telephone without speaking to a human
 Video banking is a term used for performing banking transactions or professional
banking consultations via a remote video and audio connection. Video banking can
be performed via purpose built banking transaction machines (similar to an
Automated teller machine), or via a videoconference enabled bank branch.
Products and Services of bank
Retail
 Business loan
 Cheque account
 Credit card
 Home loan
 Insurance advisor

50.  Mutual fund
 Personal loan
 Savings account
Wholesale
 Capital raising (Equity / Debt / Hybrids)
 Mezzanine finance
 Project finance
 Revolving credit
 Risk management (FX, interest rates, commodities, derivatives)
 Term loan
Types of banks
Banks' activities can be divided into retail banking, dealing directly with individuals and
small businesses; business banking, providing services to mid-market business;
corporate banking, directed at large business entities; private banking, providing wealth
management services to high net worth individuals and families; and investment
banking, relating to activities on the financial markets. Most banks are profit-making,
private enterprises. However, some are owned by government, or are non-profit
organizations.
Types of retail banks
 Commercial bank: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress required that banks
only engage in banking activities, whereas investment banks were limited to capital
market activities. Since the two no longer have to be under separate ownership,

51. some use the term "commercial bank" to refer to a bank or a division of a bank that
mostly deals with deposits and loans from corporations or large businesses.
 Community banks: locally operated financial institutions that empower employees
to make local decisions to serve their customers and the partners.
 Community development banks: regulated banks that provide financial services
and credit to under-served markets or populations.
 Credit unions: not-for-profit cooperatives owned by the depositors and often
offering rates more favorable than for-profit banks. Typically, membership is
restricted to employees of a particular company, residents of a defined
neighborhood, members of a certain labor union or religious organizations, and their
immediate families.
 Postal savings banks: savings banks associated with national postal systems.
 Private banks: banks that manage the assets of high net worth individuals.
Historically a minimum of USD 1 million was required to open an account, however,
over the last years many private banks have lowered their entry hurdles to USD
250,000 for private investors.[citation needed]
 Offshore banks: banks located in jurisdictions with low taxation and regulation.
Many offshore banks are essentially private banks.
 Savings bank: in Europe, savings banks took their roots in the 19th or sometimes
even in the 18th century. Their original objective was to provide easily accessible
savings products to all strata of the population. In some countries, savings banks
were created on public initiative; in others, socially committed individuals created
foundations to put in place the necessary infrastructure. Nowadays, European
savings banks have kept their focus on retail banking: payments, savings products,
credits and insurances for individuals or small and medium-sized enterprises. Apart
from this retail focus, they also differ from commercial banks by their broadly
decentralized distribution network, providing local and regional outreach—and by
their socially responsible approach to business and society.
 Building societies and Landesbanks: institutions that conduct retail banking.
 Ethical banks: banks that prioritize the transparency of all operations and make
only what they consider to be socially-responsible investments.

52.  A Direct or Internet-Only bank is a banking operation without any physical bank
branches, conceived and implemented wholly with networked computers.
Types of investment banks
 Investment banks "underwrite" (guarantee the sale of) stock and bond issues,
trade for their own accounts, make markets, and advise corporations on capital
market activities such as mergers and acquisitions.
 Merchant banks were traditionally banks which engaged in trade finance. The
modern definition, however, refers to banks which provide capital to firms in the form
of shares rather than loans. Unlike venture capital firms, they tend not to invest in
new companies.
Both combined
 Universal banks, more commonly known as financial services companies,
engage in several of these activities. These big banks are very diversified groups
that, among other services, also distribute insurance— hence the
term bancassurance, a portmanteau word combining "banque or bank" and
"assurance", signifying that both banking and insurance are provided by the same
corporate entity.
Other types of banks
 Central banks are normally government-owned and charged with quasi-
regulatory responsibilities, such as supervising commercial banks, or controlling the
cash interest rate. They generally provide liquidity to the banking system and act as
the lender of last resort in event of a crisis.
 Islamic banks adhere to the concepts of Islamic law. This form of banking
revolves around several well-established principles based on Islamic canons. All
banking activities must avoid interest, a concept that is forbidden in Islam. Instead,

53. the bank earns profit (markup) and fees on the financing facilities that it extends to
customers.
INTRODUCTION OF CRM
CRM, or Customer relationship management, is a number of strategies and
technologies that are used to build stronger relationships between companies and their
customers. A company will store information that is related to their customers, and they
will spend time analyzing it so that it can be used for this purpose. Some of the methods
connected with CRM are automated, and the purpose of this is to create marketing
strategies which are targeted towards specific customers. The strategies used will be
dependent on the information that is contained within the system. Customer relationship
management is only used by corporations, and they will focus on maintaining a strong
relationship with their clients.
There are a number of reasons why CRM has become so important in the last 10 years.
The competition in the global market has become highly competitive, and it has
become easier for customers to switch companies if they are not happy with the service
they receive. One of the primary goals of CRM is to maintain clients. When it is used
effectively, a company will be able to build a relationship with their customers that can
last a lifetime. Customer relationship management tools will generally come in the for of
software. Each software program may vary in the way it approaches CRM. It is
important to realize that CRM is more than just a technology.
Customer relationship management could be better defined as being a
methodology, an approach that a company will use to achieve their goals. It should be
directly connected to the philosophy of the company. It must guide all of its policies, and
it must be an important part of customer service and marketing. If this is not done, the
CRM system will become a failure. There are a number of things the ideal CRM syste
should have. It should allow the company to find the factors that interest their customers

54. the most. A company must realize that it is impossible for them to succeed if they do not
cater to the desires and needs of their customers. Customer relationship management
is a powerful system that will allow them to do this.
It is also important for the CRM system to foster a philosophy that is oriented towards
the customers. While this may sound like on sense, there are a sizeable number of
companies that have failed to do it, and their businesses suffered as a result. With
CRM, the customer is always right, and they are the most important factor in the
success of the company. It is also important for the company to use measures that are
dependent on their customers. This will greatly tip the odds of success in their favor.
While CRM should not be viewed as a technology, it is important to realize that there
are end to end processes that must be created so that customers can be properly
served. In many cases, these processes will use computers and software.
Customer support is directly connected to CRM. If a company fails to provide quality
customer support, they have also failed with their CRM system. When a customer
makes complaints, they must be handled quickly and efficiently. The company should
also seek to make sure those mistakes are not repeated. When sales are made, they
should be tracked so that the company can analyze the m fro m various
aspects. It is also important to understand the architecture of Customer relationship
management.
The architecture of CRM can be broken down into three categories, and these are
collaborative, operational, and analytical. The collaborative aspect of CRM deals with
unication between companies and their clients. The operational aspect of
the architecture deals with the concept of making certain processes automated. The
analytical aspect of CRM architecture deals with analyzing customer information and
using if for business intelligence purposes. Each one of these elements are critical for
the success of a CRM system. A company must learn how to use all three properly,
and when they do this proficiently, they will be able to build strong customer
relationships and ensure their profits for a long period of time. As more businesses
continue to compete on a global level, it will become more important for them to use
successful Customer relationship management techniques.

55. MEANING OF CRM
Customer Relationship Management is the establishment, development,
maintenance and optimization of long-ter m 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, uncaring, and delivering, and
developing existing customer relationships in addition to creating and
keeping new customers.
DEFINITION OF CRM
―Customer Relationship Management (CRM) is a co-ordinate approach to the selling
process allowing the various operational, customer contact and sales
promotional functions of an organization to function as a whole.‖
INTRODUCTION OF CRM IN BANKS
Today, customers have more power in deciding their bank of choice.
Consequently, keeping existing customers, as well as attracting new ones, is a critical
concern for banks. Customer satisfaction is an important variable in evaluation and
control in a bank marketing management. Poor customer satisfaction will lead to
a decline in customer loyalty, and given the extended offerings from the competitors,
customers can easily switch banks. Banks need to leverage effectively on their

56. customer relationships and make better use of customer information across the
institution.
Competition in the financial services industry has intensified in recent years, owing to
events such as technology changes and financial industry deregulation.
Conventional banking distribution has been gradually supplemented by the emerging
use of electronic banking. Many bank customers prefer using ATMs or a website rather
than visiting a branch, while technology has also reduced barriers to entry for new
customers.
CRM--A POWERFUL TOOL
CRM is a powerful management tool that can be used to exploit sales potential
and maximize the value of the customer to the bank. Generally, CRM integrates various
components of a business such as sales, marketing, IT and accounting. This strategy
may not increase a business's profit today or tomorrow, but it will add customer loyalty
to the business.
In the long term, CRM produces continuous scrutiny of the bank's business relationship
with the customer, thereby increasing the value of the Customer‘s business. Although
CRM is known to be a relatively new method in managing customer loyalty, it has been
used previously by retail businesses for many years.
The core objective of modern CRM methodology is to help businesses to use
technology and human resources to gain a better view of customer behavior. With this,
a business can hope to achieve better customer service, make call centres more
efficient, cross-sell products more effectively, simplify marketing and sales processes,
identify new customers and increase customer revenues.
As an example, banks may keep track of a customer's life stages in order to market
appropriate banking products, such as mortgages or credit cards to their customers at

57. the appropriate time. The next stage is to look into the different methods customers'
information are gathered, where and how this data is stored and how it is currently
being used. For instance, banks
may interact with customers in a countless ways via mails, emails, call centres,
marketing and advertising. The collected data may flow between operational systems
(such as sales and stock systems) and analytical systems that can help sort through
these records to identify patterns. Business analysts can then browse through the data
to obtain an in- depth view of each customer and identify areas where better services
are required.
CRM AND BANKS
One of the banks' greatest assets is their knowledge of their customers. Banks
can use this asset and turn it into key competitive advantage by retaining those
customers who represent the highest lifetime value and profitability. Banks can develop
customer relationships across a broad spectrum of touch points such as at bank
branches, kiosks, ATMs, internet, electronic banking and call centres.
CRM is not a new phenomenon in the industry. Over the years, banks have
invested heavily in CRM, especially in developing call centres, which, in the past, were
designed to improve the process of inbound calls. In future, call centres will evolve to
encompass more than just cost reduction and improved efficiency. According to Gartner
Group, more than 80 per cent of all US banks will develop their call centres as
alternative delivery channels and revenue centres, to be used for the delivery of
existing products and services.But to be successful, a bank needs more than the ability
to handle customer service calls. It needs a comprehensive CRM strategy in which all
departments within the bank are integrated.

58. OBJECTIVES OF CRM IN BANKS
CRM, the technology, along with human resources of the banks, enables the
banks to analyze the behavior of customers and their value. The main areas of
focus are as the name suggests: customer, relationship, and the
management of relationship and the main objectives to implement CRM in the
business strategy are:
• To simplify marketing and sales process
• To make call centers more efficient
• To provide better customer service
• To discover new customers and increase customer
Revenue
• To cross sell products more effectively
The CRM processes should fully support the basic steps of customer life cycle. The
basic steps are:
• Attracting present and new customers
• Acquiring new customers
• Serving the customers
• Finally, retaining the customers
In today's increasingly competitive environment, maximizing organic growth
through sales momentum has become a priority for Banks and Financial institutions. To
build this momentu m banks are focusing on Customer relationship
management initiatives to improve

59. • Customer satisfaction and loyalty
• Customer insight/ 360º view of customer
• Speed to market for products and service
• Increase products-to-customer ratio
• Improve up sales and cross sales
• Capitalizing on New market opportunities
The idea of CRM is that it helps businesses use technology and human
resources gain insight into the behavior of customers and the value of those customers.
If it works as hoped, a business can: provide better customer service, make
call centers more efficient , cross sell products more effectively, help sales staff close
deals faster, simplify marketing and sales processes, discover new customers,
and increase customer revenues .It doesn't happen by simply buying software and
installing it. For CRM to be truly effective, an organization must first decide what kind of
customer information it is looking for and it must decide what it intends to do with that
information.
For example, many financial institutions keep track of customers' life stages in
order to market appropriate banking products like mortgages or IRAs to them at the
right time to fit their needs. Next, the organization must look into all of the different
ways information about customers comes into a business, where and how this data is
stored and how it is currently used.
One company, for instance, may interact with customers in a myriad of different
ways including mail campaigns, Web sites, brick-and-mortar stores, call centers, mobile
sales force staff and marketing and advertising efforts. Solid CRM systems link up each
of these points. This collected data flows between operational systems (like sales and
inventory systems) and analytical systems that can help sort through these records for
patterns. Company analysts can then comb through the data to obtain a holistic view of
each customer and pinpoint areas where better services are needed.