HDFC Bank Darshana Patel 0472

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.

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

2

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.


3

Declaration I hereby declare that this dissertation entitled, �TOTAL QUALITY

MANAGEMENT at HDFC Bank� 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:


4

Certificate

I hereby certify that this dissertation entitled �TOTAL QUALITY

MANAGEMENT at HDFC Bank� has been prepared by

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


5

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: (Dr. K V Prabhakar) Internal Guide


6

External Guides Certificate


7

Acknowledgement It is said �A teacher affects eternity; he can never tell, where his

influence stops.�

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.


8

Contents

Particulars Page Number

Introduction 10

Industry Profile 13

Company Profile 17

HDFC and Competitors 21

Area of study 24

Problem Statement 29

Research Objective 32

Research Methodology 34

Research Gap 38

Analysis and Data Interpretation 40

Recommendations 60

Annexure 66

Glossary 71

Bibliography 73

Directions for further research 76


9

List of tables and charts Particulars Page Number

Indian Banking Structure 15

Account Opening Procedure 27

Pareto Chart 41-46

Root Cause Diagram 47

Service Switching Behaviour 49

Table 1 52

Chart 1 52

Graph 1 53

Table 2 54

Graph 2 54

Table 3 55

Graph 3 56

Quality Function Deployment 58


10

CHAPTER 1: INTRODUCTION


11

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.


12

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 to 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 customer�s perception of the bank.


13

INDUSTRY PROFILE


14

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�.

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


15

working of the banking system are integral to a country�s

financial stability and economic growth.

The following chart gives the structure of the Indian Banking

Industry-

The factors that influence the growth of banks are the following-

1. Increase in national income.

2. Increase in banking habit.

3. Expansion in banking facilities.

4. Inflows of deposits from Non Resident Indians.

Indian Banking System Reserve Bank of India

Scheduled Banks Non-scheduled Banks

State Coop. Banks

Commercial Bank

Central Coop. Banks & Primary Credit Societies

Commercial Bank

Indian Foreign

Public Sector Banks

Private Sector Banks (Old & New)

State Bank of India & its subsidiaries

Other Nationalised Banks Regional Rural Banks


16

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.


17

CHAPTER 2: PROFILE OF HDFC BANK


18

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

magazine

"Best Bank in India"

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.


19

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 � 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.


20

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 STATEMENT-

To 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


21

HDFC AND ITS COMPETITORS


22

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


23

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

country�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.


24

CHAPTER 3:CRITICAL ISSUE INVOLVED IN THE STUDY

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


25

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


26

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.


27

AOProcess.igx

StartSales Pitch

made

Customer decides to

open account

Application form given to

customerYes

Customer fills in Account

Opening Form

Insta Account features

explained to customer

Customer walks into

branch

Customer consents for Insta Acount

PB Auth Checks

Application form for

completeness

ID Proof Address proof Photograph

Valid customer id provided

Existing customer

No

Customer submits form

Satisfactory

A

Yes

No

Manager Excepti

on

Satisfactory

Manager Excepti

on

No

No

Yes Satisfactory

Yes

Insta Account Kit Processed

Yes

Yes Yes

No

Approved Courier Control Sheet prepared

PB contacts customer to

clear exception.

Customer able to clear

exception

Yes

No

Yes Send forms to

CPU

Forms received at

CPU

Forms sent to DVU

DVU Identifies exception

Puts form on hold

Returns form to branchYes

No

Branch seeks exception approval

Form returned to PB

Customer requires A/c

number immediately

Yes

No No

Yes

Funds parked in Dummy A/c

Clear Funds

available

Yes

No

Form sent to

Imaging Dept

Addnl Docs Reqd

Yes

No

A

A

No

No

No

No

PB contacts customer for addnl docs

Customer able to

produce addnl Docs

Addnl Doc Verified by PB

Ac not opened. MC issued to

cust for IP funds

No

Yes

Satisfactory

No

B

B Yes

Send docs to

CPU

Yes

C

C

Doc satisfactory for

DVU Yes

No


28

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.


29

CHAPTER 4 : PROBLEM STATEMENT


30

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).


31

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.


32

CHAPTER 5 : RESEARCH OBJECTIVE


33

The project is undertaken with the following objective-

i. Identifying the branches that are a victim to the

RBI�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.


34

CHAPTER 6:RESEARCH METHODOLOGY


35

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


36

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

strategies-

1. 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 �SERVICE QUALITY

LEVERAGED TO ACQUIRING NEW CUSTOMERS, RETAINING

EXISTING CUSTOMERS AND REGAINING THE LOST

CUSTOMERS�

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


37

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 studied�that it has a population mean.

Then, a Z test is applied to verify the hypothesis-

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 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.


38

RESEARCH GAP


39

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 customers�

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.


40

CHAPTER 7: ANALYSIS AND DATA

INTERPRETATION


41

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 AOD�s. The Pareto charts are given below related

to S1 and S2.

South 1

05

10152025

Nac

hara

m

Sec

unde

raba

dH

itec

City

Hyd

erab

adB

egum

pet

EC

Gun

tur

Him

ayat

Nag

ar

Sal

emS

anje

eva

Red

dy

Nag

ar

Meh

dipa

tnam

Cha

nda

Nag

ar

Gad

dian

aram

Jaga

dam

ba

Cen

tre

Nun

gam

bakk

am

RA

Pur

am

Branches

Val

ues

0.0020.0040.0060.0080.00100.00120.00

In numbers

Cumalative

Source-Field Investigation


42

South 2

020406080

100120140

Richd

mon

d ro

ad

Pallar

ivat

tom

BWSSB E

C

Electro

nic C

ity

Banne

rghatt

a Roa

d

Koram

angla

IT P

ark

Calicu

t

Airpor

t Road

Branches

0.0020.0040.0060.0080.00100.00120.00

In numbers

Cumalative


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-


43

At Sarjapur Branch, HDFC Bank.

0

5

10

15

20

25

30

Addre

ss re

lated

Signat

ure r

elate

d

Other

s

Alread

y hold

ing a

/c

Insu

fficien

t info

pro

vided

Co info

not

eno

ugh

Photo

grap

h re

lated

Name relat

ed

Originals

not

verif

ied

Postin

g re

quire

d

Funds n

ot ve

rified

0.00

20.00

40.00

60.00

80.00

100.00

120.00

in numbers

cumalative


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.


44

At M G Road Branch, HDFC Bank

0

5

10

15

20

25

30

Intr

oduc

tion

lett

er/I

DR

eqd

Sig

natu

reR

elat

ed

Adr

ess

rela

ted

Nam

ere

late

d

Co

Info

not

give

n

Oth

ers

0.00

20.00

40.00

60.00

80.00

100.00

120.00

In numbers

Cumalative


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.


45

At Jaynagar branch, HDFC Bank.

0

2

4

6

8

10

12

14

Sig

natu

rere

late

d

Add

ress

rela

ted(

142

&14

3)In

trod

uctio

nle

tter

not

give

n/ID

Nam

e re

late

d

Boa

rdre

solu

tion

isse

lf at

test

edC

ode

diff

ers(

prod

uct

and

LC c

ode)

Per

man

ent

add

reqd

inA

ML

form

FD

rel

ated

Bra

nch

code

not

indi

cate

d

0.00

20.00

40.00

60.00

80.00

100.00

120.00

In numbers

Cumalative


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).


46

At Indiranagar branch, HDFC Bank

0

5

10

15

20

25

30

insuf

ficien

t fun

ds

co. r

elated

relat

ed to

FD

Addre

ss re

late

d

othe

rs

sign

relat

ed

code

diffe

rs

Name re

lated

no pos

ting(

83)

no pr

oper

id su

bmitte

d

Pan/fo

rm 6

0

exist

ing sala

ry

0.00

20.00

40.00

60.00

80.00

100.00

120.00

In numbers

cumalative


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.


47

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.

RECOMMENDATIONS

External Factors

Management Policies

Customers Employees Training

Account Opening Delays (AOD)

1

2

3

4

5

6

7

8

9

10

11

12

13

14


48

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

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.

Sub reason Number Reason

1 Customers are in hurry

2 Customers are illiterate

3 Customer needs to be educated on bank

needs and requirements

4 Increase of work load

5 Reduction in efficiency due to

miscommunications

6 Multi tasking

7 Communication gaps

8 Orientation

9 Fundamentals not clear

10 Change in RBI guidelines

11 Break down of support systems

12 Other uncontrollable factors

13 Lengthy procedures for just a verification

14 Application form is labourious to fill


49

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

Service Switching Behaviour

Inconvenience

Core Service Failures

Service Encounter Failures

Response to Service Failure

Competition


50

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.


51

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.


52

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

Instantly Within one hour

Within one day

More than two days

Total

HDFC 1 0 7 1 9 ICICI 3 0 2 4 9 SBI 1 1 2 3 9 Citibank 1 3 2 9 Canara bank

1 1 1 6 9

Total 7 2 15 16 45 Source-Field Investigation

Chart1 Name of bank

Average Median Standard Deviation

Z value

HDFC

2.25 1 3.20 .68

ICICI

2.25 2.5 2 .81

SBI

2.25 1.5 2 .79

Citibank

3 3 2 .50

Canara Bank

2.25

1

2.50

.73



53

Graph 1

Time taken by banks to open accounts

012345678

HDFC ICICI SBI Citibank CanaraBank

Bank

Instantly

Within one hour

Within one day

More than 2 days


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.


54

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

Statements HDFC ICICI SBI Citibank Canara Bank

Prompt service 6 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

Services at promised time 7 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 7.67 7.64


Graph 2

Perceived service levels of customers from their banks

02468

10

Promptservice

Courteousemployees

Caringemployees

Services atpromised

time

Visuallyappealing

Willingnessto help

Instillsconfidence

Made tofeel safe

whiletransacting

Characteristics

HDFC

ICICI

SBI

Citibank

Canara Bank



55

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 Overall rating of the bank (out of 9) HDFC 6.78 ICICI 5.5 SBI 6.73 Citibank 7 Canara Bank 6



56

Graph 3

Overall Rating of the banks

6.78

5.5

6.73 7

6

0

1

2

3

4

5

6

7

8

HDFC ICICI SBI Citibank Canara Bank


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.


57

Quality Function Deployment

QFD is an excellent way of capturing �voice of customers�. 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-


58

1 Customer

Requirement Planning Matrix

3 Process Plan and Quality

Control Charts

4 Operating

Instructions

2 Technical Features

Deployment Matrix

The Quality Function Deployment Process


59

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 firm�s efforts to meet the requirements set down in

the processes and services parameters.


60

CHAPTER 8: RECOMMENDATIONS


61

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.


62

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.


63

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


64

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 line-

Unmatched features . World class services. It is India�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:

Provide the bank employees first-hand best corporate

practices

Expose the bank employees to the environment in which

the bank customers use the bank's services


65

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


66

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

�Service Quality Leveraged to acquiring new customers,

retaining existing customers and regaining the lost

customers�. 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


67

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


68

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.


69

When it comes to -

My minimum level of service is:

My Desired level of service is:

My Perception of performance is:

1. Prompt service to customers

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9

2.Employees who are consistently courteous

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9

3.Employees deal with customers in caring fashion

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9

4.Provides service at promised time

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9

5. Visually appealing materials associated with services (eg.in-bank signs)

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9

6.Willingness to help customers

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9

7.Employees instill confidence in customers

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9

8.Making customers feel safe in transactions

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

1 2 3 4 5 6 7 8 9


70

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 features- Please 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


71

GLOSSARY


72

The study includes few banking terminologies. Their meanings are

given below-

No Posting- Funds that need to be parked in dummy account

are not yet done i.e. not posted.

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.

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


73

BIBLIOGRAPHY


74

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


75

Business Magazines:

Business World

Business Standard

Economic Times

Financial Express

Business India

Fortune

Websites Used:

www.google.com

www.hdfcbank.com

www.businessweek.com

http://www.google.com

http://www.hdfcbank.com

http://www.businessweek.com


76

DIRECTIONS FOR FURTHER RESEARCH


77

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.


78

Documents

HDFC Bank Darshana Patel 0472