| Public sector banks: A brand new mould |
| Sapna Agarwal / Mumbai February 24, 2009, 0:04 IST |
Long dismissed as sitting ducks for private and foreign banks, state-owned banks have undergone a complete makeover to attract new customer segments. Here's how.
In December 2008, IDBI Bank put on air a new television commercial designed by Ogilvy & Mather. It showed two boys, initially scared, playing football with a baby elephant. “Not just for the big boys,” said the tagline. Complimenting it was a radio commercial which ended with the line “IDBI Bank — chote, bade, sabke liye (big and small, for everyone).”
After four years in retail banking, the bank found that awareness about its products and services were low. The parentage of a term-lending institution was hard to shed. As a result, it was finding it hard to grow. Hence, it launched a brand new campaign to spread awareness.
| DEPOSIT AND CREDIT GROWTH | ||
| DEPOSIT | As on Jan 4, 2008 | As on Jan 2, 2009 |
| Public sector banks | 24.2 | 24.2 |
| Foreign banks | 34.1 | 12.1 |
| Private sector banks | 26.9 | 13.4 |
| Scheduled commercial banks* | 25.1 | 21.2 |
| CREDIT | ||
| Public sector banks | 19.8 | 28.6 |
| Foreign banks | 30.7 | 16.9 |
| Private sector banks | 24.2 | 11.8 |
| Scheduled commercial banks* | 21.4 | 24.0 |
| *Includes regional rural banks | ||
Two months later, IDBI Bank Chairman Yogesh Agarwal finds it difficult to hide his glee. Small businessmen, the target of the advertisements, have started visiting in large numbers and attrition has fallen. “Our staff, prospective customers and management now speak the same language,” says he.
It is not clear if the extra business has resulted just from the campaigns. With global banks under financial strain, several companies and individuals have moved from private banks to state-owned banks such as IDBI Bank. Still, the campaign highlights a crucial point: Long dismissed as sitting ducks for private and foreign banks, state-owned banks are fast changing their spurs.
They have begun to offer Internet banking and personalised cheque books. Some of them promise to evaluate loan proposals within a stipulated period. Many run processing centres and back offices. Special teams have been formed to sell customised products to high net-worth clients. Then there is cutting-edge technology. For instance, State Bank of India, India’s largest bank, has introduced two-faced ATMs.
Global consultants like McKinsey, Boston Consulting Group and IBM have been hired to advise the banks on their makeover. Most banks have launched high-decibel campaigns to tom-tom their new look and feel.
Driven to change
Private and foreign banks started out in India by focusing on high net-worth individuals. But they soon realised that they could not survive with that business alone. So in came salary accounts which gave them access to low-cost deposits. They next latched on to internet banking, which made it easy for companies and salary account holders to transact from their offices. This enabled private and foreign players to increase their presence even with a limited number of branches. By offering higher interest rates, private and foreign banks managed to wean away corporate deposits.
“Private banks looked glitzy, fancy and attractive. This made it essential for state-owned banks to enact an image makeover,” says DDB Mudra Chief Creative Director Bobby Pawar.
The perception of the public sector banks had taken a beating over the years. For instance, a survey carried out by Ogilvy & Mather for State Bank of India showed that close to 70 per cent of the respondents never related the services provided by the bank to it!
“Research showed that these were seen as the father’s bank, with their fuddy-duddy looks. They were complacent about their look and feel,” says Ogilvy & Mather Executive Chairman and National Creative Director Piyush Pandey.
Intrinsic with the image was the clientele the banks were attracting. While 70 per cent of the country’s population was under 35 years of age, the client profile of state-owned banks was: 45 years, socio-economic category B&C and essentially male. “The young customer required a brand pull to make a conscious choice. Clearly, these banks were missing out on a large client base,” adds Sujata Keshavan, managing director, Ray & Keshavan, a WPP Group company responsible for brand image consulting for Bank of Baroda, Canara Bank and Jammu & Kashmir Bank.
Little surprise then, these banks found that the new age professionals — high net-worth individuals and youngsters — had started banking with multinational and private banks. “All this boiled down to the need for public sector banks to respond and the smarter ones started changing internally,” says Keshavan.
The makeover was not easy as the employees and the unions had to be convinced. Union Bank of India Chairman & Managing Director M V Nair and his team started the task nearly two years ago. All zonal managers were asked to come up with presentations on where they would want their bank to be in five years. A similar discussion with the unions was also undertaken. “Broadly, everyone wanted the bank to be on the top. So, there was unanimity and that made our task easier,” said Nair.
Technological leap
The banks realised that if they have to survive, they will have to adopt modern technology. State Bank of India was amongst the first to focus on technology and a team is constantly at work to innovate in an attempt to lower costs. So, the bank has now introduced two-faced ATMs, which will increase efficiency.
Technology will not just help them reach out to young customers better but also help them cut costs and improve efficiency. Here’s how the economics work. While a transaction at a branch costs around Rs 50, one at an ATM works out to Rs 18, a senior State Bank of India executive said. Transactions through the Internet are even cheaper at around Rs 10 each.
As a result, banks like State Bank of India want 50 per cent of the transactions from non-branch channels such as ATMs, net banking and mobile phones.
New strategies
The biggest problem state-owned banks faced was the service meted out to customers at the branches. So, in came teams that focus on clients and offer products according to their needs. State Bank of India started with a specific focus on the corporate sector. Three groups were set up to deal with small and medium enterprises, large companies and mid-sized companies. Result? The Tatas are back to banking with the bank for its overseas acquisitions. The funding-related decisions for Tata Steel’s acquisition of Corus were cleared in 10 minutes flat.
In addition, the state-owned banks started focusing on new areas of business, ranging from wealth management to private equity. For instance, till a few years ago, only 3 per cent of State Bank of India’s customers belonged to mass affluent class. So, the country’s largest bank set about getting more business from the creamy layer. Now, it is training wealth managers to deal with high net-worth individuals and tailor products according to their needs.
The bread and butter business in small towns and cities is in any case thriving, partly due to the absence of private and foreign players as also due to the lack of trust with non-government entities in recent months.
Bank of Boroda has opened its gen-next branches in cities such as Pune, Hyderabad and Bangalore to attract the young information technology professionals. These new-age branches are a fusion of hi-tech banking and self-service.
Similarly, State Bank of India under its business process re-engineering programme has renovated several of its branches providing a 300-square feet area for 24/7, dedicated lounges with access to ATM, internet banking, phone banking and enabling other kind of hi-tech transactions.
Canara Bank has plans to set up self-service centres in the lobby of select branches where customers can also avail the help of the bank’s staff if required or access the bank’s network with the help of self service kiosks, ATMs and telephones.
Reaching out
Bank of Baroda was the first public sector bank to go for an image makeover. The bank was close to completing 100 years when it felt the need to redefine itself for the first time in 2005. It was losing market share, was unable to attract new customers or diversify its service offerings. It undertook research to understand what should be the course of action to attract this new segment of customers. The makeover exercise took almost an year.
| BANKING SHARE | |||||||||
| Public sector banks | Private banks | Foreign banks | |||||||
| 1998-99 | 2003-04 | 2007-08 | 1998-99 | 2003-04 | 2007-08 | 1998-99 | 2003-04 | 2007-08 | |
| Deposits | 87.16 | 79.92 | 74.32 | 7.95 | 14.96 | 19.85 | 4.89 | 5.12 | 5.83 |
| Advances | 85.00 | 75.26 | 72.93 | 8.37 | 17.71 | 20.46 | 6.63 | 7.03 | 6.61 |
| Assets | 85.72 | 76.40 | 70.17 | 7.73 | 16.71 | 21.29 | 6.55 | 6.89 | 8.53 |
| Net Profit | 76.55 | 72.13 | 62.44 | 9.44 | 17.86 | 22.03 | 14.01 | 10.02 | 15.53 |
The bank identified issues with its process and services. It underwent organisation restructuring, installed state-o
