TOTAL QUALITY MANAGEMENT AT HDFC BANK by Sanjay Gupta

TOTAL QUALITY MANAGEMENT AT HDFC BANK

A Dissertation submitted in partial requirements for the award of MBA Degree of Bangalore University By Ms Darshana Patel (Reg no: 04XQCM6021) Under the guidance of Dr. K V Prabhakar Senior Professor, MPBIM, Bangalore

M.P. Birla Institute of Management, Associate Bharatiya Vidya Bhavan, No 53, Race Course Road, Bangalore-560001 2006.

EXECUTIVE SUMMARY The most important objective of this study is to reduce the turnaround time taken for a simple account opening. The tools used to determine the main reasons for such delays are identified in the Pareto Charts, Service Switching Diagram and surveys through questionnaires. The major findings of this research highlight customer expectation from the banks services, actual and expected turnaround time for account opening and how they rate their bank in terms of service provided. It was however found that change in RBI guidelines was the main cause of such delays with other minor causes. To eliminate the reasons for delays, separate instruction forms are recommended titled “Help us to serve You better” that brings about clarity while filling a form. Also the application forms can be simplified to make it easy for a lay man to fill in. The following pages give a detailed study on “Account Opening Delays” or AOD with suitable recommendations.

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Declaration I hereby declare that this dissertation entitled, â&#x20AC;&#x153;TOTAL QUALITY MANAGEMENT at HDFC Bankâ&#x20AC;? is a bonafide study, completed under the guidance and supervision of Dr. K V Prabhakar, Senior Professor, M.P.Birla Institute of Management, Bangalore, (Internal Guide) and Mr. Baban Balan, HDFC Bank, Bangalore (External Guide). I further declare that this dissertation is the result of my own efforts and that it has not been submitted to any other University or Institute for the award of a degree or diploma or any degree or other similar title of recognition.

Place: Bangalore

(Ms.Darshana.Patel)

Date: M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Certificate I hereby certify that this dissertation entitled â&#x20AC;&#x153;TOTAL QUALITY MANAGEMENT

HDFC

Bankâ&#x20AC;?

has

been

prepared

Ms.Darshana.Patel under the guidance and supervision of Dr. K V Prabhakar, Senior Professor, M.P.Birla Institute of Management, Bangalore. (Internal Guide) and Mr. Baban Balan, HDFC Bank, Bangalore (External Guide)

Place: Bangalore Date: (Dr.Nagesh S Malavalli) Principal

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Certificate I hereby certify that this dissertation entitled “TOTAL QUALITY MANAGEMENT at HDFC Bank” is the result of research work carried out by Ms.Darshana.Patel under my guidance and supervision.

Place: Bangalore Date:

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

(Dr. K V Prabhakar) Internal Guide

External Guides Certificate

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Acknowledgement It is said â&#x20AC;&#x153;A teacher affects eternity; he can never tell, where his influence stops.â&#x20AC;? I would like to take this opportunity to thank my project guide, Dr.K.V.Prabhakar, for highlighting certain aspects that I needed to cover and also in framing the final report. I would also like to thank Prof. Shanmugam for his guidance in the area of Quality Management. I am also grateful to Mr. Baban Balan, Manager, Quality Initiatives Group, HDFC Bank, for his guidance and support. Credit also goes to my parents, without whose moral support and inspiration, this report would have been incomplete. My sincere gratitude to Ms. Mona Mitter, Personal Banker, Kasturba Road branch,HDFC for helping me to choose this organisation for a detailed study.

THANK YOU ONE AND ALL.

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Contents

Particulars

Page Number

Introduction

Industry Profile

Company Profile

HDFC and Competitors

Area of study

Problem Statement

Research Objective

Research Methodology

Research Gap

Analysis and Data Interpretation

Recommendations

Annexure

Glossary

Bibliography

Directions for further research

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List of tables and charts Particulars

Page Number

Indian Banking Structure

Account Opening Procedure

Pareto Chart

41-46

Root Cause Diagram

Service Switching Behaviour

Table 1

Chart 1

Graph 1

Table 2

Graph 2

Table 3

Graph 3

Quality Function Deployment

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CHAPTER 1: INTRODUCTION

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Banking sector faces lot of challenges. It varies from improving

profitability,

reinforcing

technology,

risk

management, customer orientation to meeting international standards. Each challenge faces a set of steps and procedures. Lot of care needs to be taken while monitoring them. However, if at the initial steps, the performance deviates from the expected standard, the entire process can go haywire.

HDFC wants to implement the concept the Total Quality Management (TQM) in the process of account openings. A process is defines as a systematic series of actions directed to the achievement of a goal. The process therefore has to be:  Goal oriented  Systematic  Capable  Legitimate

TQM also involves Services Process Design and is different from manufacturing process design. They are Output of service processes are not well defined as manufactured products.  Most service processes involve greater interaction with customer.  Customers cannot define their needs for services until after they have some reference or comparison. M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

In the following pages, we will see how a primary function of the bank like account opening, even though perceived simple, undergoes certain procedures. If this procedure is not carried out effectively initially, it results in accumulation of delays and brings down the efficiency of the bank and finally fails to meet the customer's expectation. In

the

pages

come,

Customer

Relationship

Management is leveraged to Account Opening Delays at HDFC Bank to gain an insight into the banks problem. This detailed report relates the issue of account opening delays to the customerâ&#x20AC;&#x2122;s perception of the bank.

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INDUSTRY PROFILE

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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 â&#x20AC;&#x153;priority sectorsâ&#x20AC;?. Commercial banks are the oldest and fastest growing intermediaries in India. They are also the most important depositories of public savings and most important disbursers of finance. For a financial system to mobilize and allocate savings of the country successfully and positively and productively there must be a class of financial institutions. The structure and M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

working of the banking system are integral to a countryâ&#x20AC;&#x2122;s financial stability and economic growth.

The following chart gives the structure of the Indian Banking

Indian Banking System Reserve Bank of India

Scheduled Banks State Coop. Banks Indian Public Sector Banks State Bank of India & its subsidiaries

Non-scheduled Banks

Commercial Bank

Central Coop. Banks & Primary Credit Societies

Commercial Bank

Foreign Private Sector Banks (Old & New) Other Nationalised Banks

Regional Rural Banks

IndustryThe factors that influence the growth of banks are the following1. Increase in national income. 2. Increase in banking habit. 3. Expansion in banking facilities. 4. Inflows of deposits from Non Resident Indians.

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Even though Public Sector Banking accounts for 78% of total banking industry, use traditional ways of banking, Private sector banks have pioneered internet banking , phone banking, ATM’s and so on..

The banking industry is currently dominated by the following five top players-

1. HDFC Bank – headed by Aditya Puri 2. ICICI Bank – headed by K.V.Kamath (MD & CEO) 3. State Bank of India – headed by A.K.Purwar (Chairman) 4. Citibank- headed by Walter Wriston (CEO) 5. Canara Bank- headed by Mr. M B N Rao (CMD)

The following pages will give a detailed insight in to HDFC Bank, its main competitors and what problems the bank is facing with respect to account opening delays.

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CHAPTER 2: PROFILE OF HDFC BANK

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The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian Bank". Its awards and accolades for the year 2005 include the following-

Asiamoney Awards

Best Domestic Commercial Bank

Asiamoney Awards

Best Cash Management Bank India .

Hong Kong-based Finance Asia

"Best Bank in India"

magazine Economic Times Awards

"Company of the Year" Award for Corporate Excellence 2004-05.

The Business Today-KPMG Survey published in the leading Indian business magazine Business Today has named HDFC Bank "Best Bank in India" for the third consecutive year in 2005. M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

The Asset magazine named HDFC Bank "Best Cash Management Bank" and "Best Trade Finance Bank" in India, in 2006. HDFC Bank named the "Most Customer Responsive Company Banking and Financial Services in The Economic Times - Avaya Global Connect Customer Responsiveness Awards 2005" HDFC Bank has been named Best Domestic Bank in India in The Asset Triple A Country Awards 2005. It has also received a CII-EXIM Bank Commendation Cert. for commitment to TQM- 2000. Currently they have a net profit for the year quarter ended 31st March 2006 of Rs.870.8 Cr.

Background HDFC was incorporated in 1977 with the primary objective of meeting a social need â&#x20AC;&#x201C; that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.

Business Objectives The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets..

Organisational Goals HDFC’s main goals are to a) develop close relationships with individual households, b) maintain its position as the premier housing finance institution in the country, c) maintain its position as the premier housing finance institution in the country d) provide consistently high returns to shareholders, and e) to grow through diversification by leveraging off the existing client base.

VISION STATEMENTTo build a world class Indian bank.

MISSION STATEMENT – Use enabling technologies to provide value added products and services to customers at value for money price. SUBSIDIARIES AND ASSOCIATE COMPANIES       

HDFC Bank HDFC Mutual Fund HDFC Standard Life Insurance Company HDFC Realty HDFC Chubb General Insurance Company Ltd. Credit Information Bureau (India) Limited Other Companies Co-Promoted by HDFC

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HDFC AND ITS COMPETITORS

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The immediate competitor of HDFC Bank is ICICI Bank. ICICI Bank is India's second-largest bank with total assets of about Rs.1,676.59 billion(US$ 38.5 billion) at March 31, 2005 and profit after tax of Rs. 20.05 billion(US$ 461 million) for the year ended March 31, 2005 (Rs. 16.37 billion(US$ 376 million) in fiscal 2004). ICICI Bank has a network of about 573 branches and extension counters and over 2,000 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has subsidiaries in the United Kingdom, Canada and Russia, branches in Singapore and Bahrain and representative offices in the United States, China, United Arab Emirates, Bangladesh and South Africa. ICICI Bank's equity shares are listed in India on the Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE)

The next competitor bank is State Bank Of India or SBI.SBI is the largest bank in India with deposits of Rs M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

3,67,000 crore as on March 31, 2005. It dominates the Indian banking sector with a market share of around 20% in terms of total banking sector deposits. The increasing focus on upgrading the technology back-bone of the bank will enable it to leverage its reach better, improve service levels, provide new delivery platforms, and improve operating efficiency to counter the threat of competition effectively. Once the core banking solution (CBS) is fully implemented, it will cover over 10,000 branches and ATMs of the State Bank group, and emerge as the strongest technology enabled distribution network in India. The increasing integration of SBI with its associate banks (associates) and subsidiaries will further strengthen its dominant position in the banking sector and position it as the countryâ&#x20AC;&#x2122;s largest universal bank. Both these banks apply TQM to the services they provide. Also there are independent audits, such as Customer Operations Performance Center (COPC) and the eServices Capability Model (eSCM). External certifications have two basic advantages. First, because they are objective evaluations by credible, independent third parties that measure on specific operational parameters, the certification process is quite rigorous and adept at identifying problem areas. Second, they establish credibility with clients, as the auditing bodies are neutral and not connected with the vendor in any way. M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

CHAPTER 3:CRITICAL ISSUE INVOLVED IN THE STUDY

A/C Opening delays at various branches of the bank (South region)

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One of the important functions of the Bank is to accept deposits from the public for the purpose of lending. In fact, depositors are the major stakeholders of the Banking System. The depositors and their interests form the key area of the regulatory framework for banking in India and this has been enshrined in the Banking Regulation Act, 1949. The Reserve Bank of India is empowered to issue directives / advices on interest rates on deposits and other aspects regarding conduct of deposit accounts from time to time. With liberalization in the financial system and deregulation of interest rates, banks are now free to formulate deposit products within the broad guidelines issued by the RBI. This policy document on deposits outlines the guiding principles in respect of formulation of various deposit products offered by the Bank and terms and conditions governing the conduct of the account. The document recognises the rights of depositors and aims at dissemination of information with regard to various aspects of acceptance of deposits from the members of the public, conduct and operations of various deposits accounts, payment of interest on various deposit accounts, closure of deposit accounts, method of disposal of deposits of deceased depositors, etc., for the benefit of customers. It is expected that this document will impart greater transparency in dealing with the individual customers and create awareness among customers of their rights. The ultimate M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

objective is that the customer will get services they are rightfully entitled to receive without demand. While adopting this policy, the bank reiterates its commitments to individual customers outlined in Bankers' Fair Practice Code of Indian Banks' Association. This document is a broad framework under which the rights of common depositors are recognized. Detailed operational instructions on various deposit schemes and related services will be issued from time to time. As we all know, the primary function of a bank is to accept funds from public and henceforth, an account needs to be created. An account opening for a customer is easy as it involves just filling in a form and submitting it with proper id proofs. However, for a bank the processing of the application form involves a set of procedures with costs incurred at every stage. The RBI prescribes certain guidelines, which the bank has to necessarily follow while opening an account.

The following flowchart gives the various procedures involved in opening an account with the HDFC Bank.

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AOProcess.igx

Customer walks into branch

Start

Customer decides to open account

Sales Pitch made

Application form given to customer

Customer requires A/c number immediately

Yes

Insta Account features explained to customer

Customer consents for Insta Acount

Yes

Insta Account Kit Processed

Customer fills in Account Opening Form

ID Proof

Address proof

Photograph PB contacts customer for addnl docs

Yes

Existing customer

Satisfactory

Yes

Satisfac tory

Satisfactory

Yes

Customer able to produce addnl Docs

A Manager Excepti on Valid customer id provided

Yes

Manager Excepti on

Yes

Customer submits form

A Funds parked in Dummy A/c

Clear Funds available

Yes

PB contacts customer to clear exception.

No Form returned to PB

Yes

Customer able to clear exception

Addnl Doc Verified by PB Ac not opened. MC issued to cust for IP funds

Send docs to CPU

Satisfac tory Yes C

Yes No PB Auth Checks Application form for completeness

Forms received at CPU

Approved Yes

Forms sent to DVU

Courier Control Sheet prepared

DVU Identifies exception No

Form sent to Imaging Dept

Send forms to CPU

Yes

Returns form to branch

Puts form

on hold M.P.Birla Institute of Management Bharatiya Vidya Bhavan BranchAssociate seeks exception approval

Yes

Addnl Docs Reqd Yes

Doc satisfactory for DVU Yes No

At the presale stage, the customer has a choice of getting an Insta Account for an immediate account number or can fill in the form for a normal one. Once the form is filled in by the customer, it is verified by the PB (Personal Banker) and is sent to Chennai for verification. The PB requires all documents relating to ID proof, photographs and address proof. Once these are satisfactory, the funds to open the account are deposited in a Dummy account and the form is sent to Chennai for further verification. In the “Fulfill” step, DVU is Data Verification Unit that is located in Chennai for south region (for north and west being Mumbai). Here, it is seen if the application and documents comply with the rules of the RBI and depending on the outcome either the account is opened or the form is sent bank to the branch (can even be put on hold) for additional documents to be sent in. The main branches wherein such issues reached an alarming rate were the following Sarjapur  Jaynagar  Indiranagar  M G Road The following pages will contain a detailed study on the branches and solutions will be recommended. M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

CHAPTER 4 : PROBLEM STATEMENT

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HDFC Bank has 379 branches and 900 ATMs in 183 cities. It has grown at a blistering pace since 1995, with its net profit growing at an annualised average rate of 104 per cent. Its retail loans have risen from Rs 845 crore in 2001 to Rs 7,325 crore in 2004. Its size is now comparable to some of the smaller public sector banks which dominate India's landscape. The bank opens, on an average atleast 25-30 accounts per week for its customers compared to its competitors who have an average of just 15-25 (for ICICI) and 10-12 (for SBI). However, the recent changes in the RBI rules with respect to account opening have reduced the efficiency of the bank thereby causing delays. Account opening involves various steps and hence processing expenses and delays occur if the documents do not suffice. The RBI does not specify the documents to be obtained. For ensuring this, banks have followed know your customer norms (KYC). It is for the individual banks to determine list of acceptable documents. RBI has lately mandated that certain information pertaining to the applicant (individual/corporate) need to necessarily be captured at the time of account opening. This is called the AML/KYC form (AML-Anti Money Laundering i.e. source or destination of money is not revealed to the bank).

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The list of documents acceptable is dependent on the type of accounts being opened. The bank has a comprehensive list of those documents which are acceptable for various account types on the basis of type of entity, utility of accounts and facilities provided. These recent changes brought in by the RBI with respect to account opening have brought in a problem of delay in account opening.

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CHAPTER 5 : RESEARCH OBJECTIVE

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The project is undertaken with the following objective-

i. Identifying the branches that are a victim to the RBIâ&#x20AC;&#x2122;s new rules. ii. Identifying the main reasons for the delays in account opening. iii. Application of various statistical models to minimize the delays. iv. Customer expectations about their bank through a survey with the help of a questionnaire.

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CHAPTER 6:RESEARCH METHODOLOGY

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The bank has divided the south region as S1 and S2 with branches under it. Some of these branches have a really high rate of delays in account opening.

The methodology used to conduct the research for the purpose of this dissertation includes:  Sample survey of bank customers to gauge an idea on Customer Satisfaction  Explore reasons for delays in account opening.  Study the database of the bank to get an insight into the working of the bank and its policies.

To make the above observations, the following tools of Total Quality Management were used-

Pareto analysis- is a bar chart that illustrates the frequency recurrence of a set of items. It is a technique based on Pareto principle of “the vital few and trivial many”. It is also called the 80-20 rule.

Root-Cause analysis- It is a diagram that gives the relationship between quality characteristic and its factors. It is

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a pictorial representation and is also called Fish Bone Diagram or Ishikawa diagram.

Quality Function Deployment- It refers to that concept that integrates a firms TQM efforts by unifying the four functional strategies1. Marketing 2. Sales 3. Product design 4. Operations management

The main quality characteristic is chosen and the major causes for the same are listed. Each cause is analysed thoroughly to find the most influential cause resulting in poor quality of service delivery. This will vary from place to place and environment to environment.

Sample Survey- A questionnaire titled â&#x20AC;&#x153;SERVICE QUALITY LEVERAGED EXISTING

TO ACQUIRING NEW CUSTOMERS, RETAINING CUSTOMERS

AND

REGAINING

THE

LOST

CUSTOMERSâ&#x20AC;?

The questionnaire aims at getting a perception about the services provided by the bank to the customers and leverage it to the efficiency of in account opening. The respondents included customers from HDFC, ICICI, SBI, Citibank, Canara M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

bank. A sample questionnaire is enclosed at the end in Annexure. The Z test was used to find any significant differences between the sample mean and a population mean. (The sample size taken was 50.) It indicates how likely it is that a sample with a certain mean and standard deviation came from the population being studiedâ&#x20AC;&#x201D;that it has a population mean. Then, a Z test is applied to verify the hypothesisH0: There is no difference between sample values and the population values. H1: There is a difference between sample values and the population values. The confidence level taken in this study is 95% i.e. z is greater than 1.96 or less than -1.96, and the difference is statistically significant. That is, it is so unlikely that the sample came from this population (5% chance or less) that we reject the null hypothesis and say that the sample is different from the population. All the data was fed into an excel sheet and necessary calculations for Z were done. It included average, median, mode and standard deviation. The in built statistical functions for a Z test was used to determine the values and conclusions were drawn based on the same.

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RESEARCH GAP

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The research includes analyzing the process of account opening. This procedure itself is divided into separate functions and is distribute in two places (Bangalore and Chennai). Hence, the study is focused mainly on problems at Bangalore and the problems faced in Chennai remain undiscovered. Also, the survey was used to gauge customersâ&#x20AC;&#x2122; perceptions about their banks, the size of the sample is not very large and hence any predictions made on the population, may at times be inaccurate. However, despite the gaps, an effort has been made to throw light on the process of account opening and the defects related to it. This had been leveraged to the concept of Customer Relationship Management.

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CHAPTER 7: ANALYSIS AND DATA INTERPRETATION

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Pareto analysis It was identified that certain branches in S1 and S2 were reaching a high AOD Rate (Account Opening Delay). On a detailed study it was found that the following branches in S1 and S2 were the main branches with high AODâ&#x20AC;&#x2122;s. The Pareto charts are given below related to S1 and S2.

In numbers Cumalative

RA Puram

Gaddianaram Jagadamba Centre Nungambakkam

Chanda Nagar

Salem Sanjeeva Reddy Nagar Mehdipatnam

Himayat Nagar

Guntur

120.00 100.00 80.00 60.00 40.00 20.00 0.00 Secunderabad Hitec City Hyderabad Begumpet EC

25 20 15 10 5 0 Nacharam

Values

South 1

Branches

Source-Field Investigation

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South 2 140 120 100 80 60 40 20 0

120.00 100.00 80.00 60.00 40.00 20.00 0.00 ad ro

i R

d ri on la m al d P ch

m tto va

ity C

c SB ni tta S ro t ha W c g B r le E ne an B

In numbers Cumalative

d oa R

d a k ut gl ar ic oa n l P R a a t C IT or am ri p or K A

Branches

Source-Field Investigation

The study in depth is divided into 4 branches wherein delays had reached an alarming rate compared to its competitors.

The branches visited were that of Sarjapur, M G Road, Jaynagar and Indiranagar, from which relevant information had to be extracted from their database. (The data is ranges from 4th February to 2nd May). Major reasons were identified and tabulated to give the following Pareto charts for each branch-

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At Sarjapur Branch, HDFC Bank.

120.00

100.00

80.00

60.00

40.00

20.00

0.00

in numbers cumalative

d h d d d d c ed ed er s ed a/ u g la te late r ifie uire r ifie id at elat h o v l g t e e o q n r v re O en h re e r e t v pr re di ot o ss tur e ot o p ol g m f n n e n a h n r in y dr Na als ost i nd s fo tog na nt in ad A d S ig in e o P i e o r Fu rig C f ic Ph f Al O u s In

Source-Field Investigation

Observation At this branch, most of the account holders were employees of Wipro. A bank official from this branch sits at the Wipro office and handles all queries of the account holders through e mails. On speaking to the official there, it was found that the introduction letter to the bank was signed by the team lead. Presently, due to change in the company policies, the signature of a senior level management is required. This causes a delay in the bank procedure of account opening. It was also found that the bank was understaffed.

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At M G Road Branch, HDFC Bank

60.00

40.00

20.00

0.00

In numbers Cumalative

Others

80.00

Co Info not given

Name related

100.00

Adress related

Signature Related

120.00

Introduction letter/ID Reqd

Source-Field Investigation

Observation This branch has a lot of corporate accounts and the value of transactions is also huge. Due to this it was found that most of the delays were caused by no proper introduction letter or ID proof (Refer graph). Either the company information was inadequate or there was a signature mismatch.

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At Jaynagar branch, HDFC Bank.

120.00

100.00

80.00

8 60.00 6

In numbers Cumalative

40.00

Branch code not indicated

FD related

Board resolution is self attested Code differs(product and LC code) Permanent add reqd in AML form

0.00 Name related

0 Address related(142 &143) Introduction letter not given/ID

20.00

Signature related

Source-Field Investigation

Observation This branch even though was well managed; the wok load seemed to be very heavy on all working days of the bank. The highest rate of delays was caused by signature mismatch. The increase of work load seemed to be the major cause of reducing the efficiency of the bank. Also, the new concept of AML form seemed to cause a lot of inconvenience to the customers (refer Glossary for the meaning of AML).

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At Indiranagar branch, HDFC Bank

120.00

100.00

80.00

60.00

40.00

20.00

0.00

In numbers cumalative

in su ffi ci en tf

un ds co .r el at re ed la te d A dd to re FD ss re la te d ot h si g n ers re la te co d de d i N am ffer s e re no no la te p pr d op ost in er g (8 id 3) su bm itt P ed an /fo ex rm is 60 tin g sa la ry

Source-Field Investigation

Observation This branch was the most unorganized of all the above. The work load was very high and the staff was unable to cope up to the work pressure. There was no proper co ordination between the employees and customers kept coming back with complaints that irked the staff as well as the customers. The above Pareto charts represent the reasons for which the application forms were rejected with the contributions of each reason indicated in the dotted lines. The meaning of certain banking terms are indicated in the glossary at the end.

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Root Cause Analysis This approach was used to analyse, in detail, the reasons that contribute to the delays in account opening. On observing the customer database and working of the banks, the following Fish Bone Diagram was formed.

Training

Employees

Customers

8 5

RECOMMENDATIONS 6 9

2 3

7 10 13

11 12

External Factors

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Account Opening Delays (AOD)

Management Policies

The numbers in the Root Cause Diagram indicated the following sub causes. These sub causes are a result of observations and analysis of database at the Sub reason Number

Reason

Customers are in hurry

Customers are illiterate

Customer needs to be educated on bank needs and requirements

Increase of work load

Reduction in efficiency due to miscommunications

Multi tasking

Communication gaps

Orientation

Fundamentals not clear

Change in RBI guidelines

Break down of support systems

Other uncontrollable factors

Lengthy procedures for just a verification

Application form is labourious to fill

The sub reasons identified are a result of observing the process the bank follows to open an account. The main reasons are the parties involved in account opening.

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

The following diagram gives another aspect to AOD that may result in service switching behaviour that needs to be avoided in any organisation.

SERVICE SWITCHING DIAGRAM

Response to Service Failure

Inconvenience

Service Switching Behaviour

Service Encounter Failures

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Core Service Failures

Competition

The head Inconvenience includes Location or time slots allotted  Waiting for service

The head Service Encounter Failure includes Uncaring  Impolite  Unknowledgeable

The head Responsive Service Failure includes Negative response  Reluctant response

The head Competition includes Found better service elsewhere

The head Core Service Failure includes Service mistakes  Processing errors  Service catastrophe

The survey conducted will reveal if the bank’s services suffer from any of the above traits. Also, it will aim at measuring the level of satisfaction the customers have when it comes to transacting with their bank. M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Survey with questionnaire The survey done with the help of questionnaire was aimed at knowing

the

customers

perception

about

their

bank.

The

questionnaire was filled in by customers of the following banks to facilitate a comparative study of their efficiencies and leveraging it to account opening. The aim was also to find out the effect of the sub causes (mentioned in the Root Cause Diagram) on account opening and to what extent it affected the banks mentioned. The banks were HDFC Bank  ICICI Bank  SBI  Citibank  Canara Bank

The hypothesis is framed as follows-

H0: There is no difference between sample values and the population values. H1: There is a difference between sample values and the population values. The following findings show that H0 is accepted. The survey done, revealed the following findings. M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Table 1 The table will correlate the time taken by the three banks (HDFC, ICICI and SBI) to open an account. This will show the efficiency of the banks and will indicate which bank has a competitive advantage.

Bank name

HDFC ICICI

SBI Citibank Canara bank Total

Instantly Within Within More one hour one than day two days 1 0 7 1 3 0 2 4 1 1 2 3 1 3 2 1 1 1 6

Total

9 9 9 9 9

Source-Field Investigation

Chart1 Name of bank

Average

Median

Z value

Standard Deviation 3.20

2.25 2.25

2.5

.81

2.25

1.5

.79

.50

2.25

2.50

.73

.68

HDFC ICICI SBI Citibank Canara Bank

Source-Field Investigation M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Graph 1 Time taken by banks to open accounts 8 7 6 5 4 3 2 1 0

Instantly Within one hour Within one day More than 2 days HDFC

ICICI

SBI

Citibank

Canara Bank

Bank

Source-Field Investigation

Interpretation From the above tabulated data, it is seen that most of the banks open accounts of their customers in more than two days. HDFC Bank has the highest reading of “within one day” category. Inspite of this, it faces problems in certain branches that have been identified before. However it faces close competition with ICICI and SBI bank in the “within one day” category. From the z test done for the sample, all the values lie between +1.96 to -1.96, and hence it the null hypothesis can be accepted and it can be said that the sample does not differ from the population.

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Table 2 :Perceived levels of services by customers at their banks (out of 9). Statements

HDFC

ICICI

SBI

Canara Citibank Bank

Prompt service

6.16

5.83

7.83

6.11

Courteous employees

6.87

5.83

6.167

7.5

6.17

Caring employees

5.89

5.5

5.33

7.33

5.67

6.167

4.83

8.33

6.11

Visually appealing

6.5

6.67

4.83

6.5

5.89

Willingness to help

6.7

5.67

6.167

7.67

6.22

Instills confidence

6.78

6.167

5.167

6.5

6.56

Feel safe while transacting 8.11

6.167

7.67

7.64

Services at promised time

Source-Field Investigation

Graph 2 Perceived service levels of customers from their banks HDFC

10 8 6 4 2 0

ICICI SBI Citibank Prompt service

Courteous Caring Services at Visually Willingness Instills employees employees promised appealing to help confidence time

Made to feel safe while transacting

Canara Bank

Characteristics

Source-Field Investigation

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Interpretation We see that HDFC is perceived to be the safest bank while Citibank is perceived to be the most prompt bank. This is because Citibank encourages net banking and imposes a fine on the customer if he enters the branch for a simple query. ICICI though is a close competitor of HDFC. However, it was found in the survey that the traits of “courteous employees” and “caring for customers” were deteriorating. SBI is not perceived to be visually appealing. Old customers are used to the banks ways and are satisfied. However, the new customers expect more from the bank.

Table 3 Name of bank HDFC ICICI SBI Citibank Canara Bank

Overall rating of the bank (out of 9) 6.78 5.5 6.73 7 6 Source-Field Investigation

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Graph 3 Overall Rating of the banks 8 7

6.78

6.73

7 6

5.5

6 5 4 3 2 1 0 HDFC

ICICI

SBI

Citibank

Canara Bank

Source-Field Investigation

Interpretation According to a recent survey, it was revealed that the top most respected bank in India today is SBI after which ranks HDFC, Citibank, ICICI Bank and finally Punjab National Bank. However, when it comes to customer satisfaction in this survey, Citibank customers were the most satisfied as Net banking saved them lot of time and money. Hence it has the highest rating.

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Quality Function Deployment QFD is an excellent way of capturing â&#x20AC;&#x153;voice of customersâ&#x20AC;?. It refers to both determining what will satisfy the customer and secondly, translating those customer desires into the target design. In the manufacturing industry, it is used early in the production process to determine what will satisfy the customer and also where to deploy quality efforts. The two terms essential here are Expected quality and Exciting quality. Expected quality in this research refers to the fact that customers expect their account to be opened in a day or two. Exciting quality refers to traits that a customer does not expect and enhances the value of the product or process. The QFD process is linked by the following matrices-

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

The Quality Function Deployment Process

Operating Instructions

Customer Requirement Planning Matrix

Process Plan and Quality Control Charts

Technical Features Deployment Matrix

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In the first matrix of Customer Requirements and Planning identification of expected and exciting quality is done. In the survey it was revealed that customers wanted their accounts to be opened instantly or hardly in a day. To provide for exciting quality, HDFC has offered schemes to account opening to add value to its services.

Technical features deployment translates the features of the service to customer requirements. Here, services can be efficient to reduce turn around time in account opening delays.

Technical features deployment controls the critical processes with the help of quality control charts and process plans.

The final step of operating instructions ensures that the bankers contribute to the firmâ&#x20AC;&#x2122;s efforts to meet the requirements set down in the processes and services parameters.

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

CHAPTER 8: RECOMMENDATIONS

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The main causes of delays are identified now. If the very initial step of “filling in” the application form is taken care of, the rate of delays will reduce. It resembles the proverb “A battle well begun is half won.” Hence the following suggestions are recommended-

 Separate time slots can be allotted initially for accepting application forms, or even a separate counter can be maintained at the beginning to facilitate individual attention. This assistance provided to the customer will make sure that the form will be defect free.

 All details regarding the id proof can be explained to him. It was found in the survey that many of them forget how they have signed in the application form. Hence, a counterfoil can be given to the customer that contains his signature that he can refer to in future if he forgets the way he has signed. Also, the bank can explain their inability to the customer to process the application form if his signature differs from the documents presented for id proof. In such cases, a fresh form is filled that irks the customer too.

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 If the bank is not able to do the above, then when the application form is handed over to the customer, a separate instruction titled “Help us serve You better” can be given that contains all the requirements of the bank with respect to types of id proofs needed and other requirements based on customer type (i.e. individual, joint, company accounts etc.)

 The Personal Banker needs to verify the documents before it is sent to the head office at Chennai. If he is doubtful about the form being accepted, (yet it is sent Chennai) he may ask the customer to keep additional documents ready as id proof rather than wait till the form is sent back to the respective branch.

 When the customer is asked to fill in the application form, it has to be found out if he is an existing or a new customer. Existing customers’ details are already keyed into the system and hence the bank can take advantage of this and reduce the time taken to process the account opening. Separate application forms can be designed for existing customers and the processing of these can be diverted to a separate department so that the Data Verification Unit and Imaging departments can concentrate on the forms of new customers. This will also reduce the work load of the departments and increase efficiency and accuracy.

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

 In the survey, customers revealed that they found the filling in of application forms a labourious job. Also, they were apprehensive about filling in the form by themselves and preferred to fill in, in the presence of a bank official to avoid mistakes. Hence the bank can encourage net banking or simplify the application form to reduce the customers’ apprehensions.

 The bank needs to courier the application forms to Chennai. Inspite, it can fax it or scan it to the head office. If this does not work out, the bank can think of setting up a separate branch in Bangalore itself so that the turnaround time (presently 4 working days) can be reduced. Aspects like time and cost can be reduced and thereby the bank’s efficiency can be leveraged.

 It was found in the survey that Citibank had a very innovative idea to receive feedback from its customers. They send out a periodic questionnaire to its customers and every filled and submitted form would receive an incentive in the form of small gift like pens, diaries, desk calendars etc.. HDFC bank can apply the same procedure to reduce their costs and at the same time get back valuable feedback. Also, it can discourage customers to come to branch for any queries as it will cost the bank to attend a customer just for a simple issue. Customer M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

friendly websites can be designed to facilitate easy net banking to allow the bank to concentrate on other important issues. If this is not feasible for all customers, this can be encouraged among senior citizens and working officials.

It can be said that HDFC Bank is one of the most popular banks when it comes to customer satisfaction despite its conventional method of banking. It lives up to its punch lineUnmatched features . World class services. It is Indiaâ&#x20AC;&#x2122;s leading private sector bank. (An established brand in itself.) A customer enters into a bank with a decision to open an account only if he feels it is safe to transact with it and if he feels that the bank will live up to his expectations. Hence, account opening procedures can be simplified by the above suggestions and points to ponder on are highlighted in the Root Cause diagram and the Service Switching Diagram.

Macro-level recommendations:

ď ś Provide the bank employees first-hand best corporate practices ď ś Expose the bank employees to the environment in which the bank customers use the bank's services

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 Constantly retrain the bank staff in the theory and practice of TQM  Showcase the customer quality  Establish a continuous improvement culture in the Bank  Initiate vigorously continuous process improvement in the Bank. The process improvement can be brought about by;  (a) Breakthrough thinking;  (b) process stabilization; and  (c) Incremental improvement.  The following tools for continuous improvement in the quality of service in the Bank are quite helpful: 1. Brainstorming 2. Process mapping 3. Cause and effect diagrams 4. Asking why (five times) 5. Check sheets 6. Pareto analysis 7. Matrix analysis 8. Consensus building 9. Paired comparisons/emphasis on curve ranking 10.Force field analysis 11.Team purpose analysis 12.Cost/benefit analysis 13.Priorities grid 14.Time-cost analysis

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ANNEXURE A sample questionnaire is given below that was used in the survey.

M P Birla Institute of Management Bangalore (Associate Bharatiya Vidya Bhavan)

I am a student of M P Birla Institute of Management, Bangalore, pursuing my MBA program. As a part of the MBA curriculum, I have taken up a research project on â&#x20AC;&#x153;Service Quality Leveraged to acquiring new customers, retaining existing customers and regaining the lost customersâ&#x20AC;?. In this connection I need some information from you. The questionnaire is, herewith, enclosed. Kindly give your responses to the questions. I sincerely assure you that your responses will be kept strictly confidential and shall only be used for academic purpose. I shall greatly appreciate your cooperation.

Ms Darshana Patel M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

SERVICE QUALITY LEVERAGED TO ACQUIRING NEW CUSTOMERS, RETAINING EXISTING CUSTOMERS AND REGAINING THE LOST CUSTOMERS

(A research project for HDFC Bank, Bangalore)

Name:

Gender:

Age:

Occupation:

Name of your Bank:

Type of account held:  Savings Bank  Current account  Term Deposit  Recurring Deposit

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Time taken by your bank to open your account:  Instantly  Within one hour  Within one day  More than two days How long have you been a customer:  Less than a year  One to two years  Two to five years  More than five years PART-I I would like to know your impression about how well your bank provides services relative to your expectations. Please think about the 2 levels of expectations defined below: Minimum Service Level: The minimum level of service you consider adequate. Desired Service Level: The level of service performance you desire. For each of the following statements please indicate – (a) your minimum service level by encircling one of the numbers in the first column. (b)your desired service level by encircling one of the numbers in the second column (c) your perception of service by encircling one of the numbers in the third column.

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When it comes to 1. Prompt service to customers 2.Employees who are consistently courteous 3.Employees deal with customers in caring fashion 4.Provides service at promised time

My minimum level of My Desired level service is: of service is:

My Perception of performance is:

1 2 3 4 5 6 7 8 9

5. Visually appealing materials associated with services (eg.in-bank signs) 6.Willingness to help customers 7.Employees instill confidence in customers 8.Making customers feel safe in transactions

1 2 3 4 5 6 7 8 9

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PART-II 1. How would you rate the overall quality of services provided by the bank? (Circle one number below) Extremely poor

Extremely good

1 2 3 4 5 6 7 8 9 2. Listed below are 5 general features pertaining to the bank and services it offers. I would like to know how important each of these features are to you. Please allocate a total of 100 points among the following 5 featuresPlease be sure that the points you give add up to 100 1. The appearance of the bank’s physical facilities, Fixtures, personnel and communications material __________ points

2. The bank’s ability to perform the promised services dependably and accurately __________ points

3. The bank’s willingness to help the customers and provide prompt services __________ points

4. The knowledge and courtesy of the bank’s employees and their ability to convey thrust and confidence __________ points

5. The caring, individualized attention the bank provides to you __________ points Total Points allocated 100 Points THANK YOU FOR SPARING YOUR VALUABLE TIME IN GIVING YOUR RESPONSES M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

GLOSSARY

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

The study includes few banking terminologies. Their meanings are given belowď ś No Posting- Funds that need to be parked in dummy account are not yet done i.e. not posted. ď ś AML- Anti Money Laundering. A set of procedures, laws or regulations designed to stop the practice of generating income through illegal actions. In most cases money launderers hide their actions through a series of steps that make it look like money coming from illegal or unethical sources was earned legitimately.

ď ś Pan form 60- Permanent Account Number is a number by

which the Assessing Officer can identify any person. Presently the Income Tax Department is allotting PAN under the New Series to all assessees which consists of ten alphanumeric characters and is issued in the form of a laminated card. The General Index Register Number is a number given an Assessing Officer to the assessees in the General Index Register maintained by him which also contains the designation and the particulars of the Assessing Officer

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

BIBLIOGRAPHY

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

This research project is well supported by facts from the following journals and websites-

Books:  "Total Quality Management" by Mr. Sridhar Bhatt (7th Edition)

 "Banks and Financial Institutions" by Mr. L M Bhole , Tata McGraw -Hill Publications, 4th Edition

 "Total Quality Management" by Oakland John S, Heinemann publications, 1980

 "How to Lead Your Business Beyond TQM" by Michel E Joyce, Pitman Publications, 1995

 "Quality Improvement through Standards" by Dale Barrie G and

Oakland John S,

Stanley Thornes Publishers Ltd.,

London 2000

 "What is Total Quality Control" by Ishikawa Kaoru (Translated by David J Luj), Prentice Hall Publications NJ, 2004

 "Quality, Productivity and Competitive Position" by Deming Walter F, MIT Cambridge, Mass Publications, 20 M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Business Magazines:  Business World  Business Standard  Economic Times  Financial Express  Business India  Fortune

Websites Used:

 www.google.com

 www.hdfcbank.com

 www.businessweek.com

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

DIRECTIONS FOR FURTHER RESEARCH

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan

Based on our research findings, I give below fertile areas for future research:

 Energizing the Customer Care through TQM  Making World Class Performance a Reality through TQM  Bench marking the Best Corporate Practices in the Application of TQM in the Banking Sector  Cascading Effects of TQM on the Performance of Banks  Using Banking Resources Effectively through Total Quality Management  Total Quality Control-The Japanese Way in the Banking Sector  Appropriate Tools of TQM in Banking Operations  Flow Charting the Customer Service Operations through TQM in Banking Sector

In our view, the aforesaid areas constitute 'green pasture' for future research in this vital segment of the Banking Sector. Perhaps the line of thinking, on which our research investigation is based, is quite helpful.

M.P.Birla Institute of Management Associate Bharatiya Vidya Bhavan