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IFRS ——- What is IFRS ?

IFRS for SMEs  — What is IFRSs and IFRSs for SME

Scope of IFRS All International Accounting Standards (IASs) and Interpretations issued by the former IASC (International Accounting Standard Committee) and SIC (Standard Interpretation Committee) continue to be applicable unless and until they are amended or withdrawn. IFRS sets out recognition, measurement, presentation and disclosure requirements of transaction and events in general purpose financial statements. IFRSs apply to the general-purpose financial statements and other financial reporting by profit-oriented entities i.e. those engaged in commercial, industrial, financial, and similar activities, regardless of their legal form. Entities other than profit-oriented business entities may also use IFRSs with certain changes in terminologies. General purpose financial statements are intended to meet the common needs of shareholders, creditors, employees, suppliers, government and the public at large for information about an entity’s financial position, performance, and cash flows. IFRS apply to consolidated as well as separate financial statements. If an IFRS allows both a ‘benchmark’ and an ‘allowed alternative’ treatment none of them is preferred treatment. However, in developing Standards, IASB intends not to permit choices in accounting treatment. Further, IASB intends to reconsider the choices in existing IASs. IFRS presents fundamental principles in bold face type and other guidance in non-bold type (the ‘black-letter’/’grey-letter’ distinction). Paragraphs of both types have equal authority. IFRS does not prescribe as who should apply IFRS. It left upon the national standard setters to decide which entities would be bound to comply with IFRS. The focus of international standard setting is on profit-oriented reporting entities, including non-corporate entities such as mutual funds. Despite concentrating on profit-type entities, the IASB envisages that non-profit entities in the private and public sectors may nevertheless find its Standards an appropriate basis for financial reporting. The specific needs of the public sector have been acknowledged by the International Federation of Accountants (IFAC), whose Public Sector Committee has on its agenda the preparation of standards based on IFRS, for use by public sector entities. However, a non-profit entity that states compliance with IFRS should comply with IFRS in full. A profit-oriented reporting entity is one that reports to users, who rely on the financial statements as a major source of financial information about the entity. Financial Statements are directed to the information needs of users such as investors and potential investors, employees, lenders, suppliers, creditors, customers, governments and the public at large. The term financial statements refer to statements that display different aspects of the entity’s financial performance and position. Financial position is reflected in the statement of financial position and a statement of changes in shareholders’ equity (excluding transactions with shareholders). Financial performance is reported in the income statement and liquidity position in the cash flow statement. These statements are supplemented by a series of detailed notes. Some Standards permit different treatments for certain types of transactions or events. One treatment is designated as the benchmark treatment, and the other the allowed alternative. Neither is designated as the IASB’s preferred approach. The Board intends to develop future Standards that require similar transactions and events to be accounted for in the same way. The IASB intends to reconsider the choices given in current IFRS with a view to reducing and potentially eliminating them. Structure of IASB The IASB is organised under an independent Foundation named the International Accounting Standards Committee Foundation (IASCF). That Foundation is a not-for-profit corporation created under the laws of the State of Delaware, United States of America, on 8 March 2001.

Components of the new structure of IASB are as follows:

1. International Accounting Standards Board (IASB) – has sole responsibility for establishing International Financial Reporting Standards (IFRSs). 2. IASC Foundation – oversees the work of the IASB, the structure, and strategy, and has fundraising responsibility. 3. International Financial Reporting Interpretations Committee (IFRIC) – develops interpretations for approval by the IASB. 4. Standards Advisory Council (SAC) – advises the IASB and the IASCF. 5. Working Groups – expert task forces for individual agenda projects. 6. Monitoring Board of Public Authorities- effective 01.02.2009 Accounting Standards in India are issued by Accounting Standard Board (ASB) of Institute of Chartered Accountants of India and are largely based on IFRS. However, India has not been able to keep pace with the amendment and additions made in IFRS from time to time. This is largely because of its sensitivity to local conditions including the conflicting legal and economic environment. However, with the opening of Indian economy in near past, the convergence to IFRS has become unavoidable. Keeping this in view, ASB decided to form an IFRS task force in August 2006. Based on the recommendation of this task force, the Council of ICAI, in its 269th meeting decided to fully converge with IFRS from the accounting periods commencing on or after 1st April 2011. At initial stage, this convergence will be mandatory for listed and other public interest entities like banks, insurance companies, NBFCs, and large sized organizations with high turnover or annual income.

Why this convergence?

Converging with IFRS will have multiple benefits for Indian entities especially those who aspire to go global. Some of the benefits of convergence with IFRS are explained below:

a) Accessibility to foreign capital markets

The force of globalization has enabled the concept of ‘open economy’ and increasing numbers of countries has opened doors for foreign investment and foreign capital. Many Indian entities expanding and making their presence felt in international arena. Huge amount of capital commitment are required in this process for which entities have to list their shares in various stock exchanges around the world. Majority of stock exchanged either require or permit IFRS complaint accounts. Adaptation of IFRS will enable Indian entities to have access to international capital markets.

b) Reduced Cost

At present when Indian entities list their securities abroad they have to make another set of accounts which are acceptable in that country. Convergence with IFRS will eliminate this need for preparation of dual financial statements and thereby reduce the cost of raising capital from foreign markets.

c) Enhance Comparability

If the Financial statements of Indian entities are made in lines of IFRS, they will have greater comparability and will enable foreign companies to have broader and deeper understanding of the entities relative standing. This will also facilitate mergers, amalgamation and acquisition decisions.

d) Boon for multinational group entities

Entities in India may have a holding, subsidiary or associate company in some other nation. Compliance with IFRS for all group entities will enable the company management to have all the financial statements of the group in one reporting platform and hence will facilitate the consolidation process.

e) New Opportunities for the professionals

Migration to IFRS will not only be beneficial for Indian corporate, it will also be a boon to Indian accounting and other associated fields. India is a country with immense human resource. With knowledge of IFRS Indian professional can immerge as leading accounting service provider around the globe. This convergence will also open the flood gate of opportunities for valuers and actuaries as IFRS is fair value based accounting standard.

What is IFRSs?

 International Financial Reporting Standards comprise: – IFRSs – standards issued after 2001 – IASs- standards issued before 2001 – Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC) – issued after 2001 – Interpretations of Standing Interpretations Committee (SIC) – issued before 2001

Effective IFRSs as on date

• No of standards issued – effective 29 (total 41) IASs , 8 IFRSs • No of interpretations – effective 15 (total 18) IFRIC Interpretations, effective 11(total 33)SIC Interpretations • No of Financial Reporting Standards in force as on date – 63

 Grouping of IFRSs into eleven parts:

 1. Preface and framework

 Preface a. Objectives of the IASB b. Scope and authority of IFRSs c. Due process d. Timing of application of IFRSs e. Language

Framework a. Introduction b. Qualitative characteristics of financial statements c. The elements of financial statements d. Recognition of the elements of financial statements e. Measurement of the elements of financial statements f. Concepts of capital and capital maintenance

2. Other literature

 a. IASC Foundation Constitution b. Due process Handbook of IASB c. Due process Handbook of IFRIC d. Glossary

3. Presentation of Financial Statements

 Standard Number Standard Name IAS 1 Presentation of Financial Statements IAS 7 Statement of Cash Flows IAS 33 Earnings Per Share IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors IAS 10 Events after the Reporting period IAS 21 The effects of changes in foreign exchange rates IAS 29 Financial Reporting in Hyperinflationary economies SIC 7 Introduction of the EURO IFRIC 7 Applying the restatement approach under IAS 29 Financial Reporting in Hyper inflationary Economies

4. IFRSs on Interim Financial Statements

IAS 34 – Interim Financial Reporting

 5. IFRSs on Group Reporting Standard

 Number Standard Name IFRS 3 Business Combinations IAS 27 Consolidated and separate financial statements IAS 28 Investment in Associates IAS 31 Interest in joint ventures

 6. IFRSs on Assets

 Standard Number Standard Name IAS 2 Inventories IAS 16 Property, Plant & Equipment IAS 40 Investment Property IAS 38 Intangible Assets IAS 32, IAS 39, IFRS 7 Financial Assets / Financial Instruments IAS 41 Biological assets IFRS 5 Non-Current Assets held for sale & Discontinued operations IAS 17 Leases IFRS 6 Exploration and Evaluation of Mineral Assets

 7. IFRSs on Expenses and Liabilities

 i. IAS 19 – Employee Benefits ii. IFRIC 14- IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction iii. IAS 37 – Provisions, Contingent Liabilities and Contingent Assets iv. IFRIC 1 -Changes in Existing Decommissioning, Restoration and Similar Liabilities v. IFRIC 5- Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds vi. IFRIC 6- Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment vii. IAS 12- Income Taxes viii. SIC 21 – Income Taxes – Recovery of Revalued Non-Depreciable Assets ix. SIC 25- Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders x. IFRS 2- Share-based Payment xi. Financial liabilities / Financial Instruments a. IAS 32 Financial Instruments: Presentation b. IAS 39 Financial Instruments: Recognition and Measurement c. IFRS 7 Financial Instruments: Disclosure

 8. IFRSs on Income

 i. Construction contracts (IAS 11) ii. Revenue (IAS 18) iii. Agriculture income (IAS 41) iv. Service concession arrangements – IFRIC 12 & SIC 29 v. Customer loyalty programmes – Customer reward credit or points IFRIC 13

 9. IFRs on Disclosure

 A.  IAS 24 Related Party Disclosures B. IFRS 8 Operating Segments

 10. IFRSs on Industry

 i. IFRS 4 Insurance Contracts ii. IAS 26 Accounting and Reporting by Retirement Benefit Plans

 11. IFRSs on First time adoption – IFRS 1

 IFRSs for SME


 In Sept 2003: World Standard Setters survey n June 2004: Discussion Paper (117 comments) n April 2005: Questionnaire on recognition and measurement (94 responses) n Oct 2005: Roundtables on recognition and measurement (43 groups) n Feb 2007: Exposure Draft (162 comments) n Nov 2007: Field tests (116 real SMEs) n Mar – Apr 2008: Board education sessions n May 2008 – Apr 2009: Redeliberations n May 2009: Near-final draft posted on IASB website n 1 June 2009: Ballot draft sent to the Board n 9 July 2009: Final IFRS for SMEs issued

Why IFRSs for SME

A. Topics not relevant to SMEs are omitted. B. Where full IFRSs allow accounting policy choices, the IFRS for SMEs allows only the easier option. C. Many of the principles for recognizing and measuring assets, liabilities, income and expenses in full IFRSs are simplified. D Significantly fewer disclosures are required. E the standard has been written in clear, easily translatable language.

 What is SME as per IFRSs

 SME Small and medium-sized entities are entities that:  Do not have public accountability, and o Publish general purpose financial statements for external users. Examples of external users include owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies. General purpose financial statements are those that present fairly financial position, operating results, and cash flows for external capital providers and others. An entity has public accountability if: o Its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets), or o It holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. This is typically the case for banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks.

 Contents of IFRSs for SME – divided into 35 sections

 1. Small and Medium-sized Entities 2. Concepts and Pervasive Principles 3. Financial Statement Presentation 4. Statement of Financial Position 5. Statement of Comprehensive Income and Income Statement 6. Statement of Changes in Equity and Statement of Comprehensive Income and Retained Earnings 7. Statement of Cash Flows 8. Notes to the Financial Statements 9. Consolidated and Separate Financial Statements 10. Accounting Policies, Estimates and Errors 11. Basic Financial Instruments 12. Additional Financial Instruments Issues 13. Inventories 14. Investments in Associates 15. Investments in Joint Ventures 16. Investment Property 17. Property, Plant and Equipment 18. Intangible Assets other than Goodwill 19. Business Combinations and Goodwill 20. Leases 21. Provisions and Contingencies 22. Liabilities and Equity 23. Revenue 24. Government Grants 25. Borrowing Costs 26. Share-based Payment 27. Impairment of Assets 28. Employee Benefits 29. Income Tax 30. Foreign Currency Translation 31. Hyperinflation 32. Events after the End of the Reporting Period 33. Related Party Disclosures 34. Specialised Activities 35. Transition to the IFRS for SMEs Glossary Derivation Table Basis for Conclusions – published in a separate booklet Illustrative Financial Statements and Presentation and Disclosure Checklist – published in a separate booklet

 Omitted topics in IFRSs for SME The IFRS for SMEs does not address the following topics that are covered in full IFRSs: n Earnings per share n Interim financial reporting n Segment reporting n Special accounting for assets held for sale

 Examples of options in full IFRSs NOT included in the IFRS for SMEs n Financial instrument options, including available-for-sale, held-to-maturity and fair value options n The revaluation model for property, plant and equipment, and for intangible assets n Proportionate consolidation for investments in jointly-controlled entities n For investment property, measurement is driven by circumstances rather than allowing an accounting policy choice between the cost and fair value models n Various options for government grants.


 To conclude IASB put lot of efforts in coming out IFRSs for SME. IASB has received 162 comments on Exposure Draft for IFRSs for SME. IASB follows transparent approach for formulation of standards.

Always Yours —- As Usual — Saurabh Singh

Draft Lokpal Bill Ready for Consultation with Citizen of India – Comments Requested

The drafting of the Jan Lokpal bill, which is to be finalized by June 30th, 2011, is underway. You can play your part in this historic moment by giving your invaluable comments/suggestions about the different provisions in the draft of the Jan Lokpal bill which will make it the effective, accountable and independent anti-corruption body that India needs right now. Otherwise, it will remain a law which exists only on paper and has no impact on the ground. Please provide your comments. The provisions and options for submitting comments are as detailed below:

  • Online : To fill your comments directly in the form on the Website it hosted Click Here
  • Email : Send us an email at
  • Postal mail : Mail your comments to the following address
        Lokpal Bill Public Consultation
        A-119, Kaushambi
        Ghaziabad – 201010

To download the Full Text Draft of Jan Lokpal Bill Version 2.2 Click Here 

To download English Summary of Jan Lokpal Bill version 2.2 Click Here

[To Read These Documents You Will Require a Adobe Reader. It can be downloaded free from Adobe’s Website]

Your Participation is must…..Do not forego such Options…..This will help in bringing Good governance.

Expecting your full hearted participation…As it is basically non participation of learned and intelligence Citizen which Force Gifts a  Member of Parliament or Member of Legislative Assembly, who may not be most competent of all who are contesting polls. So, please let not the same happen again, and prove this by submitting your Comments or at least even by glancing through it.

Always Yours — As Usual — Saurabh Singh



Several African nations are now growing at a rapid pace. So, this way Ghana also is no exception. It’s unique only in a way that, no nation is witnessing the growth in GDP rate as high as Ghana. Since a long GHANAtime, unflattering adjectives like ‘worst managed’, ‘disastrous’, etc., were used when it came to talking of Ghana; but now they do not hold true. The Ghana of today has come a long way ahead in its journey towards prosperity and has earned the status of being the world’s fastest growing economy today. Ghana’s economy is growing at a phenomenal rate of 20.15 per cent. Ghana is oil-rich, has large gold and diamond deposits, while at the same time, the boom that is being witnessed by its tourism sector has added more glitter to its diamonds.


Qatar is an oil- and gas-rich nation with world’s third largest gas reserves. It has undoubtedly enjoyed the status of being a nation which is world’s largest exporters of petroleum, and has got something more remarkable added to it. The growth in GDP of Qatar has helped it in achieving a new distinction, and that is of being the world’s second fastest growing economy growing at a rate of 12.337 per cent. The economy of Qatar is QATARprimarily oil-based. High oil and gas prices have boosted the economy of this Gulf state over the last few years. The per capita income of Qataris stands at $66,100, which in comparative terms makes it, a nation with sixth highest per capita in the world, and still Qataris do not know a phenomenon known as Income Tax .


Turkmenistan is also not far away when it comes in terms of being blessed with reserves of natural gas. In this context Turkmenistan stands at the rank of being world’s fourth-largest nation in terms of owning the reserves of natural gas. In present story it has earned slot at number three, due to it being the world’s third fastest growing nation with a GDP growth rate of 12.18 per cent. Although oil and gas is the biggest revenue generator for Turkmenistan, agriculture too accounts for a healthy percentage of its GDP. Citizens in Turkmenistan get 120 liters of petrol free every month for car drivers, while TURKMENISTAANtruck/bus drivers get 200 liters of petrol free. Apart from this, electricity too is subsidized for the citizens. Probably, one should not expect beyond this and turn greedy.


China, which in this story has earned a slot at number four, also happens to be the world’s fourth fastest growing economy at 9.908% GDP growth rate. In monetary terms, it turns out to be of order of amazing $6 trillion. However, now certain not so desired elements have started to raise their heads. The rising inflation rate in China is a new challenge, which stands in way of growth, of the economy of the country. China’s gross domestic product grew 9.6 per cent in the third CHINAquarter as compared to the same period last year. The growth rate slowed down from 11.9 per cent in the first quarter and 10.3 per cent in the second quarter.


Even though, the nation still continues to live with dubious and infamous distinction of being one of the poorest countries on earth; Liberia has recorded robust economic activity in past couple of years. This African nation, despite of all said and done, has managed to steal the fifth rank when it comes to the list of world’s fastest growing economies. The Liberia, now as world’s fifth fastest growing economyLIBERIA has a GDP growth rate of 9.003 per cent. It is a $1.05 billion economy. The nation has rich reserves of iron ore, and also exports rubber. In the last few years, it has been receiving a lot of foreign direct investment which has resulted in higher employment, better infrastructure and spurt in economic activity.









————Always Yours — As Usual — Saurabh Singh

Finance in History – A compilation by Saurabh — Part II

Finance in History: Labor Days

The Lowell Mills offer a lesson in the perils of focusing on labor costs at the expense of technology.

The building of Samuel Slater’s mill in Pawtucket, Rhode Island in 1793 marked a genuine paradigm shift: the transition of cloth-making from the home to the factory. A decade or so later, wealthy Bostonian Francis Cabot Lowell followed Slater’s example by surreptitiously copying English spinning and weaving technology. After visiting the cotton mills of Manchester, England and taking copious mental notes, he returned to Boston and raised $400,000 from wealthy friends and family to recreate what he had seen in Great Britain.

Thus began the American Industrial Revolution, and with it, another sort of shift. The new cloth-making business put both capital and labor to work on a scale that demanded not just new machines, but new management. Unfortunately, the accounting and financial technology of the day wasn’t up to the task. Financial managers of the time focused on the familiar — costs of labor and materials — but oddly enough, often ignored the potential challenges of maintenance, obsolescence and technological change that came with their new machines. Without a good understanding of the importance of depreciation and reserves, writes one historian, “The known expense of labor received more attention than the largely unknown problems of capital expense.”

Initially, however, a management focus on labor seemed a happy development. An idealist, Lowell did his utmost to improve upon the grim working conditions he had witnessed in England, where, in the early 1800s, English laborers had no minimum wage and generally worked twelve to fourteen hours a day, six days a week.

Lowell set about creating a worker’s utopia. He recruited girls and women, ages 15 to 35, from surrounding farming communities and promised their understandably wary families that they would live in chaperoned boardinghouses and have access to a church, a library, and healthy social activities. They would receive weekly wages, an unheard-of luxury for a farm girl, even if she did have to work six 10- to 12-hour days (almost as long as her English counterparts) to earn it.

Lowell’s five-story factories were a brilliant early construct of vertical manufacturing. Each mill had machines to clean the raw cotton, turn it into yarn and thread, weave it into cloth, and then print the finished cloth with colorful designs. The U.S. Congress helped matters considerably by imposing prohibitive tariffs on imported cloth, protecting the Massachusetts producers from their British competition.

If the water wheels powered these mills along the Merrimack, treasurers ran them. Sitting at the top of the largest early American companies, treasurers (not presidents) held shares in their organizations and conveyed the wishes of the shareholders in Boston to the agents who managed the mills in Lowell. Although flawed, the structure made sense. For agents, labor costs were paramount, while shareholders worried most about the cost of raw cotton and the price of cloth — the most important U.S. export of the early 19th century. Detailed accounting information provided essential communication between managers and investors separated by the miles between Boston and Lowell.

As early as 1826, Lowell’s utopia began to give way to competitive pressures. England, which bought much of America’s raw cotton, continued to turn it into cotton cloth at a ferocious pace. In response, the U.S. mills tried to increase productivity by speeding up production and productivity. A woman who had once tended one loom soon found herself tending four.

In 1834, the Lowell Mill’s directors tried another tack — cutting fixed labor costs. When management announced that the women would have their wages cut, the Lowell Mill girls, as they were called, went on strike, or in the language of the day, they “turned out.” After only a few days, the strike collapsed and their attempt to forestall the wage cut failed.

Two years later, management decided it had to cut costs again, though not its own, and again it targeted its women operatives. Pay was to be cut by $1 a week, and simultaneously, the amount the girls paid the company for their rooms in the boardinghouses was to increase. At the time, they were sleeping two to a bed and eight to a room. This time, over a thousand women turned out, striking for several weeks.

Throughout, the women’s efforts to improve their working conditions were undermined by the willingness of later immigrants, first Irish, then Italian, to take whatever wages were offered. Ultimately a six-year depression that began in 1837, brought on by overly easy bank credit and rampant real estate speculation, ended any attempt at labor organization. Jobs disappeared by the thousands, and what little power the fledgling labor movement had evaporated.

Of course, if savings on labor costs created intolerable conditions for mill workers, the demand for cheap cotton had bred an even more ghastly system. The raw material used in the mills came from the South, and was grown and picked by slaves. Two-thirds of the Southern cotton was sold to England. The other third was shipped north to New England. Many workers sympathized with the plight of slaves and supported abolitionism, but also suffered themselves when the Civil War broke out. Realizing that they would make more selling raw cotton than by making cloth, Lowell’s mill owners closed their mills and sold off the contents of their warehouses.

Many of the mills reopened after the war, but eventually most moved to the South themselves. Although most attribute this development to the lure of cheaper labor and proximity to raw materials, another factor played a part. As the management hierarchy of the mills suggests, investors focused on finance and labor. Responsibility for technology — specifically, the machines that spun, wove, and finished the cloth — was relegated to an outside superintendent. As Steven Lubar reports in “Managerial Structure and Technological Style: the Lowell Mills, 1821-1880,” shareholders challenged the need for skilled (and therefore costly) managers for these machines. Neither the management system nor the accounting systems (this was before the day of useful cost accounting) fostered an appreciation for the role technology played in operations. As a result, the Lowell mills were slow to repair and slower to invent more efficient machinery. In the end, operators found it simpler to start over in a new location than to repair old machinery.

Today, of course, even the southern mills are closed, with almost all textiles made overseas. But you can still visit the remarkable cotton mills of New England. They’re museums.

Finance in History: Blood and Treasurers

Those who guard the crown jewels need good internal controls.

Roget’s Thesaurus has made a bizarre word familiar to many college students who have found themselves at a loss for words. Compiled by Dr. Peter Mark Roget and published in 1852, Roget’s Thesaurus is a vast categorization of English words — and their friends, siblings, and relatives.

But how did he come up with a word like “thesaurus?” Simple. It’s the Latin word for “treasure.” Back in the 15th century in Scotland, treasurers were called “thesaurers,” and the royal thesaurer had the plum job of guarding the royal treasure trove.

To become thesaurer, a fellow clearly had to be known for his honesty, strength, courage, martial experience, suspicious mind, and self-restraint. One wonders how often the inventory of the royal thesaury (treasury) was conducted and whether the King and Queen were there to congratulate themselves on their fine thesaurus.

Besides the psychological comfort of knowing you have a pile of jewels in a vault nearby — and a trusted thesaurer to make sure they don’t wander off — the king’s jewels must have helped convince lenders of his creditworthiness. A bit like Fort Knox when the United States was on the gold standard.

The flaw in that idea, though, is that crown jewels are anything but a liquid asset. They represent, instead, the classic buy-and-hold strategy. The British gem collection is a 900-year long position in precious stones and metals.

Despite the manifold and elaborate precautions taken by the thesaurer, an audacious brigand almost got away with stealing Britain’s crown jewels in 1671. The perpetrator was an Irishman with the improbable name of Colonel Blood, and he did it by preying upon the Assistant Keeper of the Jewels, an elderly dupe named Talbot Edwards. Revenge certainly played a part in the bloody plot, seeing that the British had taken Blood’s land in Ireland.

Disguising himself as a humble man of the cloth, a parson, Blood made several preliminary visits to the Tower of London, intent on insinuating himself into the good graces of the assistant jewel keeper. Like so many visitors to London who were soon to follow, he took the Tower tour to give the crown jewels a good once-over. The jewels first went on display in the 1600s, and even back then the jewel keeper was allowed to make some money on the side acting as tour guide.

After several increasingly chummy visits, Blood went so far as to propose that his nephew marry Edwards’s daughter, a nice match considering he claimed the nephew was worth 300 pounds a year. The assistant jewel keeper and his wife thought this sounded like a bit of all right.

A few days later, Blood brought his “nephew” (actually his son), to meet Edwards, and they were accompanied by two of their friends. While supposedly waiting for Blood’s wife to join them, Blood persuaded the jewel keeper to show him, his nephew, and their two companions the jewels one more time.

Once Edwards unlocked the vault, they decided the time was especially opportune to bash him in the head with a mallet and stab him to death. Scooping up the jewels, Blood crushed the king’s crown, the better to hide it under his frock. Before they could make their pious exit, however, Edwards’s son stumbled in on them and raised a hue and cry. The plunderers were apprehended, probably by a cohort of the Tower guards, the Beefeaters. The lucky king reclaimed his jewels and dented crown.

Besides housing the crown jewels, the Tower of London was the home of many famous prisoners. Some, including Richard III’s two nephews, Anne Boleyn, Lady Jane Grey, Sir Thomas More, and Guy Fawkes, never left. Queen Elizabeth I, Sir Walter Raleigh, and Rudolph Hess, on the other hand, were only temporary residents.

Weirdly enough, Colonel Blood never joined their ranks. King Charles II met with him after his disastrously botched heist, gave him back his confiscated Irish estates, and is thought to have taken him into his service as a spy. The moral of the tale, apparently, is that the bold entrepreneur often ends up a whole lot better than the treasurer.

Finance in History: Bankruptcy

Chapter 11 may be tough, but it beats death, dismemberment, slavery, exile, prison, and other insolvency solutions.

“Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” (Charles Dickens, David Copperfield)

Misery indeed. Bankruptcy is no picnic even today, but through the ages it has been the source of much literal pain. The word “bankruptcy” comes from an Italian practice of the Middle Ages — “banca rotta” — which means “bench-breaking.” The term describes the punishment administered to businesses that failed: local fiscal authorities came to the market and smashed the bankrupt business’s table.

Through the ages, people or businesses have gone bankrupt in two ways, either running out of money and thus being unable to repay debts, or being forced to close as a result of fiscal mismanagement. Either way, bankruptcy has often carried a punitive dimension.

Death, dismemberment, slavery (for the debtor and family members), indentured servitude, exile, and debtors’ prison have all been used as punishment. Dickens did not use the word “misery” lightly.

And yet the first known effort to regulate bankruptcy was surprisingly modern in its approach. Appearing in the Code of Hammurabi, which dates to Babylon around the 18th century B.C., the law stipulated that a bankrupt’s possessions were to be divided among creditors in proportion to the amount of money each was owed.

Alas, those would soon come to be seen as the good old days, because by 621 B.C., when Draco ruled Athens, the punishment meted out to “deadbeats” (literally, one who is “completely exhausted”) was death. Or they and their families might be sold into slavery, with the proceeds going to creditors. If that strikes you as Draconian, well, consider the source.

A generation later the Athenian statesman and poet Solon decided this was perhaps a bit too severe. Under his legal reforms the bankrupt and his family had to give up their citizenship but not their freedom — or their lives.

The Romans, however, soon turned back the sundial. Under the Twelve Tables of Rome, promulgated in 451 B.C., maiming became the appropriate sanction. Instead of getting his money back, the creditor was given a pound of flesh — or perhaps more, depending on how much was owed. Debtors were cut up and their parts distributed among creditors on a pro rata basis. (The Roman writer Petronius would later satirize this practice in The Satyricon, a portion of which describes a plutocrat whose will decrees that any friend, parasite, or hanger-on who wants to collect his inheritance must eat a piece of the dead man’s corpse.)

Fast-forward to Renaissance England, where Henry III established the practice of imprisoning debtors in the 13th century. By the time of Henry VIII, in the mid-16th century, the first bankruptcy statute (as opposed to insolvency law) was enacted. It applied only to merchants and traders, since they were considered the only people who had a legitimate reason to borrow money, and provided a way for their debts to be addressed (sans death, torture, or even prison) in the event that a storm at sea sank their boats and thus their fortunes, or similar circumstances beyond their control led to bankruptcy.

That statute did not get the common man off the hook, however. And once someone landed in debtors’ prison it was often nearly impossible to get out. Family or friends might come forward to pay the prisoner’s debts; if not, debtors had to rot, presumably coming to appreciate, as they did, the error of their ways.

The absurdity of debtor’s prison, of course, is that a bankrupt’s ability to repay his creditor from prison is precisely nil. That may be why, in some countries, creditors were required to pay the costs of incarcerating their debtors. The open-ended prison sentence could be cut short, therefore, should the creditor tire of throwing good money after bad.

If you were lucky you might end up a “peon,” a term that originally described a bankrupt person condemned to work without pay for a creditor until the debt was paid off.

While bankruptcy was generally a bigger problem for the debtor than for the creditor, that wasn’t true in every case. In the 14th century, Italian bankers unhappily discovered that England’s Edward III was an unreliable credit risk, but couldn’t do much about it. And in the 18th century, English goldsmiths, the principal bankers of the era, slid into bankruptcy after the Stuart kings found it inconvenient to pay back their loans. Worse, if the bankers were deemed to be charging too much interest their fingers would be burned.

Today bankruptcy still entails pain, if only in the form of many, many meetings with lawyers. And Dickens’s lesson still rings true: having slightly more than you need is infinitely better than having even slightly less. Unless, of course, your credit card offers rewards points and a low introductory rate.

Still to Cont……………………………………………………………………

Always Yours— as Usual———–Saurabh Singh

Modeling Contract Risks — Provided for Students’ Interested in Retail & Supply Chain


Contract risks exist in nearly all economic sectors; however, some contracting and procurement organizations do not generate plans or perform rigorous evaluations on their suppliers to minimize this risk. One of the main goals in managing contracts is to avoid interruptions in the services performed by suppliers. To meet this goal, supply management professionals must evaluate each supplier that may have a contracting agreement with their organization.

From a technical point of view, there are several elements — certifications, tangible evidence, site visits and the like — that help supply management professionals minimize a potential breach of contract. This is not the case when we look at the financial side.

While many organizations include bidder’s financial statements and financial ratio evaluations as part of the technical qualification in a sourcing process, there is no standard methodology to quantify or evaluate the bankruptcy or insolvency risk of those bidders. Also, depending on the length of the contract, the financial stability of suppliers may have changed over time. Discriminant analysis may be the answer for those looking for a solution to this problem.


Discriminant analysis is the most common statistical method used to predict bankruptcy risk. It is a statistical model used to classify an element into two or more predefined groups. For this article, the predefined groups are those with high risk of insolvency and groups with minimal risk of insolvency. This method is used primarily in analyses where the dependent variable is presented in a qualitative form. To have a consistent outcome, the model needs to be applied on a sector-by-sector basis to achieve an apples-to-apples comparison.


Building a discriminant analysis model is a five-step process involving: 1) identifying the data, 2) preparing the data, 3) generating the function, 4) understanding the results and 5) choosing the predictive value. To illustrate the steps, consider a contracting company that expects to initiate a variety of sourcing processes related to trucking services. The company needs a tool to qualify the financial situation and indicate the likelihood of bankruptcy for each supplier it will eventually invite to participate. The outcome will be referred to as a dependent variable (referred to as “S”). The company also wants to calculate this likelihood based on specific financial ratios for each supplier — these ratios then become the independent variables.

STEP 1: INFORMATION REQUIRED FOR THE ANALYSIS. To build the model, the company needs two main pieces of information:

  • Two groups of companies: one group that actually went into bankruptcy and another group that didn’t during a specific period of time for the same sector being analyzed (in this example, trucking services). This is a key requirement. Without it, the formula cannot be built.
  • Financial statements for the past two to five years for the suppliers identified in the previous point. You can gather this information from public sources if the companies are publicly traded, or request the information from the suppliers. For example, if the supplier is privately held, you may need to request specific data; or, if the supplier is publicly traded, you can gather the information by examining the supplier’s filings with the government and other sources of publicly available information.

STEP 2: PREPARE THE DATA FOR ANALYSIS. The next step is to perform calculations using selected financial ratios, which allows us to generate the model, as shown in Figure 1 below. The number and type of financial ratios may vary by sector, but the common rule is to include as many as possible. In our example, we identified 10 financial ratios (see the sidebar on the right for their definitions) and separated the suppliers into two groups of three companies each. Then, we used the past financial statements, gathered in the previous step, to calculate each of the financial ratios for each supplier in the two groups.

STEP 3: GENERATE THE DISCRIMINANT FUNCTION. Once the financial ratio calculations are complete, a discriminant analysis can be conducted using statistical software currently available on the market (for instance, SPSS, SAS or Statistics). The software will create a formula (the discriminant function) that separates each potential supplier in both groups based on the independent variables (in this case, the financial ratios). If successful, the software identifies the discriminant function as well as a series of coefficients that measure how well the function discriminates or categorizes the groups.

STEP 4: UNDERSTAND THE RESULTS. After entering the data into the software, the program provides a variety of information, including:

  • Discriminant function. This formula separates a concept (in this case, suppliers) and classifies them into groups. The function reveals coefficients (in this case, the financial ratios) and a constant (an unchanged value).
  • Wilk’s lambda test statistic. This statistic shows how separated the groups are on a scale from 0 to 1. If the value is closer to 1, it will indicate low discrimination. On the other hand, if the value is closer to 0, there is a high difference between the groups. The implication of a low discrimination is that the groups cannot be easily compared and contrasted. Thus, a different financial analysis tool should be used.
  • Group centroids. Centroids represent the average value of the scores for a specific group. If centroids are quite different, then the groups have a high discriminatory power and vice versa. Again, a low discriminatory power reduces the comparison effectiveness of the discriminant analysis.

Going back to our example, the contracting company used the information on the table in Figure 1 and entered the data into a statistical software application. The software provided the discriminant: S = (2.15 x S3) – (0.12 x S6) + (1.20 x S7) + (114.5 x S8) – 0.14.

Financial Ratios

Financial Ratios

Within the discriminant function, the dependent variable S equals the score for the “n” supplier. The software identified coefficients including 2.15, 0.12, 1.20 and 114.5. And the software identified the independent variables to be used in the discriminant function as S3 (acid test ratio), S6 (working capital turnover), S7 (operating cycle) and S8 (debt ratio). From the 10 ratios analyzed, the software determined that only these four ratios were needed to

Discriminant Analysis Model

Discriminant Analysis Model

identify in which group the specific supplier is classified (high risk of insolvency or minimal risk of insolvency). In addition to the financial ratios, the function includes a parameter — the constant, which equals 0.14. However, it is the coefficients that weigh the importance of each ratio.

Our example also indicates a Wilks’ lambda test statistic (∧) that equals 0.002. Because the number is much closer to 0, this means there’s a large difference between the suppliers classified as solvent and insolvent.

The group centroids identified in our example were calculated as 37.24 for the onbankruptcy group and 1.55 for the Bankruptcy group. The difference in values between the two groups means they are highly discriminatory (there’s a large difference between the numbers to gain a clear comparison between the two groups). These two numbers are also critical in the next step when choosing a predictive value.

If the formula/function has a low discrimination power (for example, a Wilk’s lambda test statistic that is close to 1 or centroids that are close in range to one another), then it won’t work correctly, and it couldn’t be used to separate the suppliers into the groups. In some cases, this may occur and, in such cases, the discriminant analysis is not the appropriate tool.

STEP 5: CHOOSE THE PREDICTIVE VALUE. If the software provides the expected results — meaning it provides a function that can efficiently differentiate your predefined groups — the next and final step is calculating the predictive value. This value is used to compare the different scores the discriminant function provides for each of the suppliers under analysis. Depending on where the specific score falls, that particular supplier will be classified into one of the two groups.

Identify this predictive value by calculating an equidistant point between the centroids: Nonbankruptcy centroid (37.24) + Bankruptcy centroid (1.55) ÷ 2 = 19.39. Therefore, if the score S for a supplier is below 19.39, this supplier will be classified within the Bankruptcy risk group. On the other hand, scores above the predictive value are categorized within the Nonbankruptcy group. The function and the predictive value are valid only for the trucking services market and should be updated with new historical data periodically to guarantee accuracy in the categorization.


The supply management professional or category manager may use this valuable information in a pre- or post-award contract phase.

Pre-award phase. From a pre-award contract perspective, supply management professionals can use the bidder scores as part of the evaluation analysis in a sourcing process (that is, assign weights depending on the value each bidder obtained). In our example, the contracting company that built the model is now in the middle of a tender process for trucking services in the southern region. As part of a qualification process, “financially healthy” was included as a factor in the evaluation matrix, and scores need to be assigned to four suppliers. In our example, a scale of 50 (scores below 19.39) and 100 (scores above 19.39) representing poor and high financial health was used. Financial statements were requested from each one of these suppliers as part of the tender package.

Financial ratios S3 (acid test ratio), S6 (working capital turnover), S7 (operating cycle) and S8 (debt ratio) were calculated based on the financial statements and introduced in the function: S = (2.15 x S3) – (0.12 x S6) + (1.20 x S7) + (114.5 x S8) – 0.14.

Pre Award Phase

Pre Award Phase

Results are shown in Figure 2 above.

Consequently, bidders A and C received scores below the predictive value of 19.39 and were considered suppliers with a high risk of bankruptcy. Therefore, they are given 50 points in the qualification matrix. On the other side, bidders B and D are awarded with 100 points due to their financial health (their S scores are above the predictive value of 19.39).

Post-award phase. In a post-award contract situation, the same philosophy can be used as a monitoring system for current suppliers with contracts in place. This helps the contracting organization anticipate risk situations with a particular supplier and take preventive actions to avoid or minimize a potential service disruption. In the example in Figure 3, below, the same contracting company decided to award the trucking services contract in the southern region to supplier D. Two years have passed since the award, and the supply management organization has been recalculating the S score for this supplier on a year-by-year basis using updated data for each year to monitor its financial stability.

Post Award Phase

Post Award Phase

The downward trend in the supplier’s S score, as noted in Figure 3, illustrates that something occurred with this supplier since signing the contract two years prior. This clearly indicates that there is a high risk of bankruptcy that might affect the contracting organization. Supply management professionals can use this information to mitigate risk by trying to understand the current situation of supplier D and help them get back to the right path, or identifying a backup supplier in the event supplier D is not able to deliver the services requested in the future.

Supplier insolvency or bankruptcy risks remain prevalent in the current business environment. No matter how it is used, discriminant analysis is a tool that provides consistent and accurate information on an organization’s financial health at any point in the procurement process, providing supply management professionals with an additional and statistically correct option to evaluate or monitor their suppliers. Furthermore, the tool will improve the overall understanding of an organizational supplier base from a financial point of view, making the sourcing decisions more robust.

Going forward, the same analysis may be applied to other areas of the supply management function where predictive modeling for categorization is needed. A good example is on-time delivery suppliers versus suppliers with recurrent delivery delays. If we could generate a mathematical function that allows us to identify if a supplier will deliver on time, we could use this logic as a sourcing award decision based on the required on-site date for a specific material — thus optimizing the procurement process and guaranteeing material availability. There are many areas waiting to be analyzed. The possibilities are endless, and the tool is already here.

Always Yours——–As Usual—— Saurabh Singh

Source: August 2010, Inside Supply Management® Vol. 21, No. 8

Plane with 152 onboard crashes near Islamabad

A Pakistani passenger plane from private company Airblue on Wednesday crashed into hills behind the capital Islamabad, where smoke and flames were seen rising through heavy clouds, police said.

Initial reports suggested that all passengers and crew members (152) are feared dead.

It was not immediately clear how many people were on board. Thick smoke could be seen rising from between the trees on the Margalla Hills on the edge of Islamabad, according to media reports.

“We have reports that the plane fell into the Margalla Hills. There is smoke, but we have not been able to reach there. It is surrounded by the hills and there is no road access,” police official Sayed Subhan.

“We have reports that it was a private Airblue airline plane,” he said.

It was also reported that rescue operations were hampered due to bad weather.

Latter Pakistan Civil Aviation Authority Spokesman Pervez George said that 146 passengers and a six-member crew were on board the plane.

Islamabad has been hit by heavy rains for the past few days and the city was covered by fog and low-lying clouds. Civil aviation officials said the aircraft had disappeared from radar screens shortly before the crash was reported.

The crash occurred in an area that is not accessible by roads or trials. Rescue workers said they were facing problems in approaching the crash site. The heavy rains too were hampering rescue efforts, they said.

Footage aired on TV news channels showed white smoke rising from the thick forests in the Margalla Hills.

I pray to God that be enough merciful and let the search teems find as many survivors as possible. The nice human beings who in this incident departed their home planet, may god shower peace to their souls in heaven.

Always Your —————- As Usual—————–Saurabh Singh
[For more details please catch up with Pakistani Media and Authorities.]




The financial system consists of variety of institutions, markets and instruments that are related in the manner as represented diagrammatically below. It provides the principal means by which savings are transformed into investment. Given its role in the allocation of resources, the efficient functioning of the financial system is of critical importance to a modern economy. Finance manager negotiate loans from financial institutions, raise resources in financial marked and invests surplus funds in financial market. In very significant manner the Finance Manager manages the interface between the form and its financial environment, in tight rope walk situation..

Financial System plays a very important role in the development of a country. Through Financial System, entire money or money equivalents are channelized in such a way so that each sector of economy like industry, agriculture and services can be developed rationally. Financial sector can be dubbed as a locomotive force, as it makes you reach your own destination smoothly from the place or situation you happen to be facing. Thus, its contribution to economic development, can never be downplayed irrespective of geography and country.

Financial System - A Pictorial Representation


According to some economists the word ‘Bank’ has been derived from the German word BANC which means a Joint Stock Firm while others say that it has been derived from the Italian world ‘BANCO’ which means a heap or mound.

There is still another group of people who believe that word bank has been derived from the Greek work ‘BANQUE’ which means a bench. In the olden days, Jews entered into money transactions sitting on benches in a marked place. When a banker was not in a position to meet his obligations, the on which he was carrying on the money business was broken into pieces and was taken as bankrupt. Thus both the words Bank or bankrupt are said to have origin from the word ‘Banquet’.


According to Oxford English Dictionary, Bank is, “An establishment for custody of money received from or on behalf of, its customers. Its essential duty is the payment of the orders given on it by the customers, its profit mainly from the investment of money left unused by them”.

Banking Regulation Act, 1949 (Sec. 5(c)), has defined the banking company as, “Banking Company means any company which transacts business of banking in India”. According to Section 5B, “banking means the accepting of deposit of money from the public for the purpose of leading or investment, which are repayable on demand or otherwise and are withdrawable by cheque, draft, order or otherwise.”

Different economists, banking professionals and authorities explained their viewpoint regarding bank or commercial bank. It has been rightly said by A.K. Basu that a general definition of a bank or banking is by no means easy, as the concepts of banking differ from age to age, and country to country.


India is a vast country, before 1947, undivided India was equal to Europe excluding Russia in its area. It is situated in south of Asia. In spite of a part of Asia, it is separated from it. It is separated by Himalayas in North India. India has vast oceans in South, East and West. Due to its vastness it is also called sub continent. That vast country has given different names in different times. In Vedic period, it was called ‘Arya-V-arat’. In Bir period and ancient period, it as called Bharatvarash’. Perhaps due to fame of king Bharat, it was called ‘Bharatvarsh. Greek called it Indus on the name of river Sindh. Iranians called it Hindu. Chinese travelers called it Tienchu and Yintu. Ipsing called ‘Arya Desh’ and Brahmrashtra. Bible has called it Hoddu. In medieval period, it was called ‘Hindustan’ and Hind. European called it India. After Independence, it is return as Bharat Ganrajya or Indian Republic in Indian Constitution.


The Role of marketing in the banking industry continues to change. For many years the primary focus of bank marketing was public relations. Then the focus shifted to advertising and sales promotion. That was followed by focus on the development of a sales culture.

Although all the elements of the marketing concept – customer satisfaction, profit integrated framework and social responsibility – will remain important, customer satisfaction must receive the greatest emphasis in the years ahead.

The chief concerns of most bank executives still focus on legal and regulatory issues, according to most surveys. Community banks are particularly concerned with eliminating barriers that give unfair advantages to financial services competitors, such as credit unions. However, another concern pertains to technology: keeping non bank competitors out of the payment system.

Bankers Identify Near-Team and Long Term Concerns

Objectives of Banks

When this gateway system was first proposed, access to the Internet was very new and few banks had the resources and knowledge to set up their own direct-access lines for customers. Customers have shown a growing interest in online banking services, and banks have responded by quickly putting in place proprietary sites on the World Wide Web and offering PC banking.

Within the next five years, 93 percent of community bank executives surveyed say they plan to offer telephone banking, and 79 percent plan to offer PC banking.

When asked which technology holds the most potential for the future, bank executives identified call centers first. As customers continue the transition the transition into a high-tech world in which they want information and answers more quickly and accurately than ever before, call centers offer the ideal bridge. With 24-hour access to either automated information or live operators, customers do everything from check their accounts to apply for a loan. Bank executives also identified PC banking as having the most promise for the future, followed by Interest access and broad function kiosks.


In view of the declining profitability and productivity of the banking sector and extremely low rate of profit percentage, the determination of the financial health of the system requires drastic remedial measures not only to build up investor confidence but also to combat competition from all over. It is time that the pros and cons of the oncoming banking era are properly understood and advantage taken of various opportunities. This will require an efficient marketing approach to bank management in which target markets will be tackled successfully along with effective satisfaction levels and in which the usual basic elements – product, pricing, promotion and distribution will be taken care of in a proper format of an efficiently working marketing organization.

The nationalized banks must face competition from private banks, non-banking financial institutions, foreign banks and others. The competition is in the fields of deposits and credits, foreign trade, consumer credit and miscellaneous banking activities. The competition will benefit customers and force the banking system to raise its productivity, minimize expenses, and remain sensitive to evolving issues. Narasimham Committee Reports while recommending internal autonomy long with compliance with prudential norms suggested rule-based credit policies, fiscal balance and a gradual movement towards liberalization.

To deal with the competition from foreign banks, the Indian banks should go in for diversification and extension of services as well as expansion of products and business. Economic freedom and innovative spirit have contributed greatly to the success of the market-oriented financial sector in the Western countries. Directed credit and investment has done just the opposite. Interventionism is not necessarily bad provided it is associated with a committed leadership. Indian financial sector had for more than four decades, neither full economic freedom nor a well disciplined interventionism so that it cost operational flexibility as well as functional autonomy both of which were concerned with profitability performance and related factors.


Its application to Banking, When we apply marketing to the banking industry, the bank marketing strategy can be said to include the following –

i)                    A very clear definition of target customers.

ii)                  The development of a marketing mix to satisfy customers at a profit for the bank.

iii)                Planning for each of the ‘source’ markets & each of the ‘use’ markets (A Bank needs to be doubly market – oriented – it has to attract funds as well as were of funds & services.

iv)                Organization & Administration.


We define bank marketing as follows: “Bank marketing is the aggregate of functions, directed at providing services to satisfy customers’ financial (and other related) needs and wants, more effectively and efficiently that the competitors keeping in view the organizational objectives of the bank”. Bank marketing activity. This aggregate of functions is the sum total of all individual activities consisting of an integrated effort to discover, create, arouse and satisfy customer needs. This means, without exception, that each individual working in the bank is a marketing person who contributes to the total satisfaction to customers and the bank should ultimately develop customer orientation among all the personnel of the bank. Different banks offer different benefits by offering various schemes which can take care of the wants of the customers.

Marketing helps in achieving the organizational objectives of the bank. Indian banks have duel organizational objective – commercial objective to make profit and social objective which is a developmental role, particularly in the rural area.

Marketing concept is essentially about the following few thing which contribute towards banks’ success:

1)             The bank cannot exist without the customers.

2)             The purpose of the bank is to create, win, and keep a customer.

3)             The customer is and should be the central focus of everything the banks does.

4)             It is also a way of organizing the bank. The starting point for organizational design should be the customer and the bank should ensure that the services are performed and delivered in the most effective way. Service facilities also should be designed for customers’ convenience.

5)             Ultimate aim of a bank is to deliver total satisfaction to the customer.

6)             Customer satisfaction is affected by the performance of all the personal of the bank.

All the techniques and strategies of marketing are used so that ultimately they induce the people to do business with a particular bank. Marketing is an organizational philosophy. This philosophy demands the satisfaction of customers needs as the pre-requisite for the existence and survival of the bank. The first and most important step in applying the marketing concept is to have a whole hearted commitment to customer orientation by all the employees. Marketing is an attitude of mind. This means that the central focus of all the activities of a bank is customer. Marketing is not a separate function for banks. The marketing function in Indian Bank is required to be integrated with operation.

Marketing is much more than just advertising and promotion; it is a basic part of total business operation. What is required for the bank is the market orientation and customer consciousness among all the personal of the bank. For developing marketing philosophy and marketing culture, a bank may require a marketing coordinator or integrator at the head office reporting directly to the Chief Executive for effective coordination of different functions, such as marketed research, training, public relations, advertising, and business development, to ensure customer satisfaction. The Executive Director is the most suitable person to do this coordination work effectively in the Indian public sector banks, though ultimately the Chief Executive is responsible for the total marketing function. Hence, the total marketing function involves the following:

a)       Market research                          i.e. identification of customer’s financial needs and wants and forecasting and researching future financial market needs and competitors’ activities.

b)       Product Development                i.e. appropriate products to meet consumers’ financial needs.

c)       Pricing of the service                 i.e., promotional activities and distribution system in accordance with the guidelines and rules of the Reserve Bank of India and at the same time looking for opportunities to satisfy the customers better.

d)      Developing market                     i.e., marketing culture – among all the customer-consciousness ‘Personnel’ of the bank through training.

Thus, it is important to recognize the fundamentally different functions that bank marketing has to perform. Since the banks have to attract deposits and attract users of funds and other services, marketing problems are more complex in banks than in other commercial concerns.


After enquiring with all the public and 14 private sector banks whether they had undertaken any market research studies. The following board areas of market research were considered for the study:

(a)    New service development,

(b)    New service product acceptance,

(c)    Research and development of existing financial service,

(d)   Bank images study,

(e)    Measuring bank’s advertising effectiveness,

(f)     Measurement of market potentials,

(g)    Market research of competitive service products,

(h)    Customer’s opinion study,

(i)      Customer profile study, and

(j)      Market share analysis.

In response to the inquiry information was received from 17 banks. Out of these banks, 14 are public sector banks and 3 are private sector banks. Two nationalized banks and two private sector banks informed that they have not conducted any markets research studies.

Information regarding Bankwise Market Research Studies

Bank Title of the Market Research Study Remarks
  1. Allahabad Bank
  1. Bank of Baroda
  2. Survey on Customer Service
  1. Marketing of deposits and allied services to non-residents customers opinion (1958)
Not formal report prepared.MP Ranade: BMP Thesis.
  1. Canara Bank
  2. Marketing research study for two new deposit schemes (1989)

For internal use only
  1. Central Bank of India
  2. Market survey of customer services
  3. Marketing deposits (Customers)

Conducted by the students of BITS, Pilani. For internal use only service (1986)
  1. Indian Overseas Bank
  2. Potential areas for future business expansion

For internal use only
  1. Oriental Bank of Commerce
  2. Study of customer service in OBC with special reference to metropolitan branches (1989)

R Upendran MBP Thesis
  1. Punjab National Bank
  2. Sample survey on customer’s responses (1987)
  3. Sample survey on customer service (1988)
  4. Study on deposit linked housing loan scheme (1982)

For internal use onlyFor internal use only

Formal Report

  1. Punjab and Sind Bank
  2. Study on customer turnover (mail questionnaire based study of customers who have closed their accounts) (1989)
  3. Changing Profile of Punjab and Sind Bank’s Customers and their expectorations, a survey based study (1988)

For internal use onlyJ S Kalra:

BMP Thesis

  1. State Bank of Bikaner
  2. A survey on customer service, level of customer satisfaction and customer expectations (1998)

For internal use only
10.  Syndicate Bank
  1. Evaluation Study on the quality of customer service (1989)
  2. Marketing of bank service with special reference to branches in Bombay city of Syndicate Bank-customer service (1979)
For internal use onlyK M Kanath

BMP Thesis

11.  Union Bank of India
  1. Customer responses (Opinion) survey (1988)
For internal use only
12.  UCO Bank
  1. Customers’ opinion study (1989)
For internal use only
13.  United Bank of India
  1. Report of the survey on customer opinion (1987)
  2. Improvement of customer service in a metropolitan branch (1979)
For internal use onlyK P Ramesh Rao

BNP Thesis

14.  Vijay Bank
  1. Report of the customer service survey (1988)
Formal Report
15.  Karur Vysya Bank
  1. Study on the image of the bank (1989)
Undertaken by a Consultant

Most of these market research studies were conducted for internal use and no formal reports were prepared. It is important to note the subject or issue researched by the bank. The most important subject for market research in terms of the number of studies conducted, is the customer service / customer’ profile opinion studies. Few banks have conducted even more than one customer service / opinion studies.


Studies Conducted on Banks

The various other factors which have led to the increasing importance of marketing in the banking industry are categorized as follows:



The Indian economy embarked on the process of economic reform and various policy measures initiated by the government resulted in the increasing competition in the banking industry, thereby highlighting the importance of effective marketing. The Narasimhan Committee Report evidence of the Government’s desire to ‘re-regulate’ the banking industry so as to encourage efficiency through competition. The Government initiatives include:


The bank may reduce their Minimum Lending Rates so as to attract customers (individual and corporate). Such reduction in lending rates reduce the spread between the deposit rates and lending rates, i.e. the banks margins would decline and they would have to increase their volumes or provide attractive services so as to maintain profits. This calls for bank marketing.


With the Narasimhan Committee Report, banks have been directed to improve their efficiency, productivity and profitability. Banks are required to be self-sufficient. In fact, the report has adopted the BIS standards of capital adequacy (though in a phased manner).


Foreign banks offer stiff competition to the Indian Banks and with their superior services and technologies offer them a competitive advantage. Thus Indian Banks have to effectively apply marketing concepts to attract customers.


In the early ‘90s new competition emerged in the form of new Private Banks, who brought along with them a high technology-based banking matching with International Standards and have made a significant dent in the banking business by capturing substantial share in the profits of the banking industry.


With the Government’s aim of reducing the SLR to 25 percent, the banks will have surplus funds for which they will have to attract users.


INCREASING URBANIZATION, EDUCATION AND AWARENESS: The higher literacy level, migration to urban areas and higher awareness due to the boom in the mass media have important implications for the retail banker. He needs to be conscious of the fact the increasing proportion of people are aware of financial service and are, therefore demanding and expecting higher quality services.

INCREASING URBANIZATION, EDUCATION AND AWARENESS: The higher literacy level, migration to urban areas and higher awareness due to the boom in the mass media have important implications for the retail banker. He needs to be conscious of the fact the increasing proportion of people are aware of financial service and are, therefore demanding and expecting higher quality services.

Decline in Traditional Indian Values (Borrowing as Taboo), Rising Consumerism, Rise in the Percentage of Working Women.


Modernization of Technology has facilitated the introduction of new banking services as to attract new customers. An example of this is the ‘Automated Teller Machines’ or the facility of ‘Any Time Money’. Also in foreign countries, banks are experimenting with money transmission at Point of sale, e.g., petrol station linked with banking network.


GROWING IMPORTANCE OF NON-BANKING FINANCIAL INSTITUTIONS: Fixed Deposits being offered by the NBFC’s are very attractive for the public, because of the wide gap of interest rates offered by banks on term deposits and that offered by the NBCS’s. further, they offer a variety of specialized services to their customers so as to attract and retain them.

Disintermediation: The increasing role of capital markets in mobilizing funds is reducing the importance of banks as intermediaries. Companies are directly approaching the savers through the capital markets. Mutual funds help in attracting the small investors who do not want to take much risk.


When we apply marketing to the banking industry, the bank marketing strategy can be said to include the following:

  1. A very clear definition of target customers.
  2. The Development of marketing mix to satisfy customers at a profit for the bank.
  3. Planning for each of the ‘source’ markets and each of the ‘user’ markets (A bank needs to be doubly market – oriented – its has to attract funds as well as users of funds and services).
  4. Organization and Administration.


Need for segmentation

Philip Kotler has described the dilemma of the seller (especially, a seller dealing with masses, e.g. banks) as follows:

“How the seller determines which buyer’s characteristics produce the best partitioning of a particular market? The seller does not want to treat all customers alike nor does he want to treat them all differently”.

Banks deal with individuals, group of persons and corporates, all of whom have their likes and dislikes. No bank can afford to assess the needs of each and every individual buyer (actual or potential).

Segmentation of the market into more or less homogenous groups, in terms of their needs and expectations from the banking industry, provides a solution to this problem.

This involves dividing the market into major market segments, targeting one or more of this segments, and developing products and marketing programs tailor-made for these segments.

In the first segmentation, the market is divided from a unitary whole, to groups of buyers who might require separate products and marketing mix. The marketer typically tries to identify different segments in the market and develop profiles of resulting market segments.

The second step is market targeting in which each segment’s attractiveness is measured and a target segment is chosen based on tits attractiveness.

The third step is product positioning which is the act of establishing a viable competitive position of the firm and its offer in the target segment chosen.

In the process of segmentation, the market can be divided into major segments which are gross slices of the market, or into smaller specially formed segments, otherwise known as niches. Niche customers have a specific set of needs which the markerter tries to address. While a market segment attracts several competitors, a niche attracts fewer competitors and therefore, a company should clearly define its target segment and devise strategies to target the customer, so that it has a competitive advantage in the segment.

These concepts can be applied in personal banking by an Indian Bank. Traditionally, Indian Banks have not had any conscious strategy for selecting customers from the personal banking area, apart from some banks which have a geographic concentration strategy such as concentrating on a particular region or state. These banks will have to segment the market on certain basis, and identify market segments or niches which they want to cater to. For example, a bank like SBI may not be able to cater high income groups (say, managers, professional, NRIs, etc. who earn above Rs. 4,00,000 p.a. and who want a higher quality of products / services and who are willing to pay for them), as the services required by such a profile of customers are entirely different from the kind of products / services SBI can offer.

Initiation of Segmentation in India

Station Bank of India was the first Indian Bank to adopt the concept of market segmentation. In 1972, it reorganized itself on the basis of major market segments dividing customers on the basis of activity and carved out 4 major market segments, viz. Commercial and Institutional, Small Industries and Small Business Segment, Agriculture, Personal and Services Banking. The objectives of this scheme were:

  • Deeper penetration and coverage of market by looking outwards.
  • Adequate flexibility of organization to accommodate growth and rapid change,
  • Delegation of work for releasing senior management for more futuristic tasks.

Criteria for Segmentation

Segmentation in a right fashion makes the ways for profitable marketing. This helps policy planner in formulating and innovating the policies and at the same time also simplifies the task of bank professionals while formulating an innovating the strategic decisions. The following criteria make possible rig segmentation.

An important criterion for market segmentation the economic system in which we find agricultural sector, industrial sector, services sector, household sector, institutional sector and rural sector requiring of weightage while segmenting.

Agricultural Sector: In the agricultural sector, there are four category rise since the needs of all the categories cant’s be identical.

Bank - Agriculture Sector

The mechanization of agriculture, the improved or scientific system of activation, the help of nature, the magnitude of risk, the availability infrastructural facilities influence the level of expectations vis-à-vis the needs and requirements. The banking organization  are supposed to know and under stand the changing requirements of different categories of farmers.

Industrial Sector: The banking organizations subserve the interests of the industrial sector. The large-sized, small-sized co-operative and tiny industries use the services of banks. The expectations of all the categories cant’s be uniform.

Bank - Industrial Sector

The banking organizations are supposed to have an indepth knowledge of the changing needs and requirements of the industrial segment.

Services sector: It is an important sector of the economy where the banking organizations get profitable business. The two categories of organizations such as profit-making and not-for-profit making are found important in the very context.

Bank - Service Sector

The banking organizations need to identify the changing needs and requirements of the services sector. With the frequent use of information technologist and with the mounting pressure of inflation and competition, we find a change in the hierarchy of needs.

Household Sector: This is also constitutes an important sector where different income group have different needs and requirements. in below figure we find the different segments of the household sector.

Bank - Household Segment

Household Segment: The high income group, middle income group, low income group, substance level group and marginal income group have different hierarchy of need which influence the level of their expectations.

Gender Segment: In the gender segments, we find male and female having different needs and requirements. The banking organizations are supposed to identify the level expectations of both sexes.

Bank - Gender Segment

Some of the women are housewives and therefore they have different need and requirements whereas some of them are working ladies having different needs and requirements.

In the profession segments, we find different categories of professions an therefore we find a change in their needs and requirements.

The technocrats, bureaucrats, corporate executives, intellects, white and blue – collar employees have different needs and requirements and therefore the banking organizations should know their expectations.

Some of the organizations are known as cultural organizations, some of them are not for –profit making, some of them are philanthropic and some of them are related to trade and commerce. The emerging trends in the social transformation process determine the hierarchy of needs.

Markets segmentation thus simplifies the task of understanding the customers/prospects. The bank professional find it convenient to formulate and innovate the marketing mix of world class which simplify the process of excelling competition.

In the Indian perspective where we find agrarian economy contributing substantially to the transformation of national economy, it is pertinent that the banking organizations assign due weightage to the rural sector of the economy where we find tremendous opportunities.

The urbanization is likely to gain the momentum and villages, outskirts of big towns and cities are to be developed on a priority basis. Almost all the organizations are to get tremendous opportunities there. The marketing resources if of innovative nature would make the ways for capitalizing on the same profitably.


The formulation of marketing mix for the banking services is the prime responsibility of the bank professional who based on their expertise and excellence attempt to market the services and schemes profitably.

The bank professionals having world class excellence make possible frequency in the innovation process which simplify their task of selling more but spending less. The four submixes of the marketing mix, such as the product mix, the promotion mix, the price mix and the place mix, no doubt, are found significant even to the banking organizations but in addition to the traditional combination of receipts, the marketing experts have also been talking about some more mixes for getting the best result. The “People” as a submix is now found getting a new place in the management of marketing mix. It is right to mention that the quality of people/employees serving an organization assumes a place of outstanding significance. This requires a strong emphasis on the development of personally-committed, value-based, efficient employees who contribute substantially to the process of making the efforts cost effective. In addition, we also find some of the marketing experts talking about a new mix, i.e. physical appearance. In the corporate world, the personal care dimension thus becomes important. The employees re supposed to be well dressed, smart and active. Besides, we also find emphasis on “Process” which gravitates our attention on the way of offering the services. It is only not sufficient that you promise quality services. It is much more impact generating that your promises reach to the ultimate users without any distortion. The banking organizations, of late, face a number of challenges and the organizations assigning an overriding priority to the formulation processes get a success. The formulation of marketing mix is just like the combination of ingredients, spices in the cooking process.

THE PRODUCT MIX: The banks primarily deal in services and therefore, the formulation of product mix is required to be in the face of changing business environmental conditions. Of course the public sector commercial banks have launched a number of polices and programmers for the development of backward regions and welfare of the weaker sections of the society but at the same it is also right to mention that their development-oriented welfare programmes are not optimal to the national socio-economic requirements. The changing psychology, the increasing expectations, the rising income, the changing lifestyles, the increasing domination of foreign banks and the changing needs and requirements of customers at large make it essential that they innovate their service mix and make them of world class. Against this background, we find it significant that the banking organizations minify, magnify combine and modify their service mix.

It is essential that ever product is measured up to the accepted technical standards. This is due to the fact that no consumer would buy a product which contains technical faults. Technical perfection in service is meant prompt delivery, quick disposal, presentation of right facts and figures, right filing proper documentation or so. If computers starts disobeying the command and the customers get wrong facts, the use of technology would be a minus point, and you don’t have any excuse for your faults.

PRODUCT PORTFOLIO: The bank professional while formulating the product mix need to assign due weightage to the product portfolio. By the concept product portfolio, emphasis is on including the different types of services/ schemes found at the different stages of the product life cycle. The portfolio denotes a combination or an assortment of different types of products generating more or less in proportion to their demand. The quality of product portfolio determines the magnitude of success. It is excellence of bank professionals that help them in having a sound product portfolio.

Bank Product Portfolio

We find the composition of a family sound, if members of all the age groups are given due place. Like this, the composition or blending of a service mix is considered to be sound, if well established and likely to be profitable schemes are included in the mix. It is against this background that a study and analysis of product portfolio is found significant. The bank professionals are supposed to perform the responsibility of composing the same. A sound product portfolio is essential but its process of constitution is difficult. An organization with a sound product portfolio gets a conducive environment and successes in increasing the sensitivity of marketing decisions. The banking organizations need a sound product portfolio and the bank professionals bear the responsibility of getting it done suitably and effectively.

If the banks rely solely on their established services and schemes, the multidimensional problems would crop up in the long run because when the well established services/schemes would start saturating or generating losses, the commercial viability of banks would of course, be questioned. The banking organizations relying substantially on a profitable scheme and ding nothing for new scheme likely to get a profitable market in the future is to face is to face a crisis like situation. It is in this context, that we find designing of a sound product portfolio essential to an organsition. We can’t deny that the product portfolio of the foreign banks is found sound since they keep their eyes moving. The innovation, diffusion, adoption and elimination processes are taken due care. The public sector commercial banks need to innovate their service and this makes a strong advocacy in favour of analyzing the product portfolio.


In the formulation of product mix for the banking organization, the designing of package is found important. In this context, we find packaging decision related to the formulation of a mix of different schemes and services. Developing an attractive package required professional excellence and therefore, the bank professionals are required to be aware of the different key issues influencing the formulation process. What the package should basically be or do for the particular target. We re aware of the fact that a number of schemes and services are included in the service mix of bank product and all the services or schemes can’t be preferred by all. Of course we find some of the public sector commercial banks now evincing stage. This makes it essential that a bank manager thinks in favour of developing  a package. The importance of packaging can’t be underestimated considering the functions it performs and the effects which we witness in the process of attracting and satisfying the customers. In addition to other aspects, it is also pertinent that a bank manager is familiar with the package developed by the leading competitive banks since this would help them in innovating the package. It is an important component of the product mix and a bank manager while formulating or designing a package needs to assign due weightage to the formulation process. While developing a package, it is essential that the packages offered are efficacious in establishing an edge over the packages of competitors. Thus needs and preferences of the target market in addition to the packages offered by the competitors need due weightage while designing a package.

In the designing process the bank professionals can make a package, an ideal combination of both, the core and peripheral services. The main thing in the process is to make it profitable, convenient and productive to the customers so that they prefer to transact with the bank. For the bank professional, it is an important persuasive efforts that helps in increasing the business even without developing or innovating the services or schemes.

PRODUCTR DEVELOPEMNT: In almost all the services, the development of a product is an ongoing process. The banking organizations also need to develop new services and schemes. We can’t deny that the development of product specially in the banking services is found diffcult since they don’t have any discretion, however they can do it, of course in a limited way. By minifying, combining, modifying and magnifying, the banking organizations can give to the services or scheme a new look. The regulations of the Reserve Bank of India, no doubt stand as a barrier but professionally sound marketers make it possible even without violating the rules and regulations. The banking organizations in general have been found developing product by including some new properties or features. Generally we find two process for the development of product. The first process is found proactive since the needs of the target market are anticipated and highlighted. The second process is reactive and in this context the banks respond to the expressed needs of the target.

PROACTIVE PROCESS: In the pro-active process, we find product to market needs. This makes it essential that the branch managers are aware of the changing needs of the target market. There are six stages for the development of the product, such as idea generation, screening of the concept, assessing of market potential, analyzing the cost, test marketing and final commercial launching. The bank professionals have to be careful at all the stages so that whatever the services or schemes are developed are found instrumental in getting a positive response. The customers and competitors help bank professional substantially in generating a new idea. The screening of the product concept focuses on the process of narrowing down the list of the ideas generated to a small number of concepts.

The assessment of market potential is the third stage in which we find scanning of the market potentials at the apex level. The branch managers can assess the potential sin their command areas.

The fourth stage draws our attention on analyzing the cost on the basis of a cost-benefit analysis and the fifth stage before launching is test marketing which is found instrumental in minimizing the risk element. And finally, we find commercial launching. The Reserve Bank of India is also required to make the regulations liberal so that the pubic sector commercial banks get an opportunity to make their services or schemes internationally competitive. The unfair practices, illegitimate steps should be checked but fair practice should essentially be promoted to make the business environment conductive.

PROMOTION MIX: In the formulation of marketing mix the bank professionals are also supposed to blend the promotion mix in which different components of promotion such as advertising, publicity, sales promotion, word-of-mouth promotion, personal selling and telemarketing are given due weightage. The different components of promotion help bank professionals in promotion the banking business.

Advertising: Like other organizations, the banking organizations also us this component of the promotion mix with the motto of informing, sensing and persuading the customers. While advertising, it is essential that we know about the key decision making areas so that its instrumentality helps bank organization both at micro and macro levels.

Finalizing the Budget: This is related to the formulation of a budget for advertisement. The bank professionals, senior executives and even the police planners are found involved in the process. The formulation of a sound budget is essential to remove the financial constraint in the process. The business of a bank determines the scale of advertisement budget.

Selecting a Suitable vehicle: There are a number of devices to advertise, such as broadcast media, telecast media and the print media. In the face of budgetary provisions, we need to select a suitable vehicle. The latest developments in the print technology have made print media effective. The messages, appeals can be presented in a very effective way.

Making Possible creativity: The advertising professionals bear the responsibility of making the appeals, slogans, messages more creative. The banking organizations should seek the cooperation of leading advertising professionals for that very purpose.

Instrumentality of branch managers: At micro level, a branch manager bears the responsibility of advertising locally in his / her command area so that the messages, appeals reach to the target customers of the command area. Of course we find a budget for advertisement at the apex level but the business of a particular branch is considerably influenced by the local advertisements. If we talk about the cause-related marketing, it is the instrumentality of a branch manager that makes possible the identification of local events, moments and make advertisements condition-oriented.

Public Relations: Almost all the organization need to develop and strengthen the public relations activities to promote their business. We find this component of the promotion mix effective even in the banking organizations. We can’t deny that in the banking services, the effectiveness of public relations is found of high magnitude. It is in this context that we find a bit difference in the designing of the mix of promoting the banking services. Of course in the consumer goods manufacturing industries, we find advertisements occupying a place of outstanding significance but when we talk about the service generating organizations in general and the banking organizations in particular, we find public relations and personal selling bearing high degree of importance. It is not meant that the banking organizations are not required to advertise but it is meant that the bank executives unlike the executives of other consumer goods manufacturing organizations focus on public relations and personal.

Personal Selling: The personal selling is found instrumental in promoting the banking business. It is just a process of communication in which an individual exercise his/her personal potentials, tact, skill and ability to influence the impulse buying of the customers. Since we get in immediate feed back, the personal selling activities energies the process of communication very effectively.

The personal selling in an art of persuasion. It is a highly distinctive form of promoting sale. In personal selling, we find inter-personal or two-way communication that makes the ways for a feed back. There is no doubt in it that the goods or services are found half sold when the outstanding properties are well told. This are of telling and selling is known as personal selling in which an individual based on his/her expertise attempts to transform the prospects into customers.

Dynamics of Personals Selling

The dynamics of personal selling are found instrumental in activating the selling activities. Sales preparations are considered most crucial for the actual sales. Pre-sale activities and post-sale services can’t be left neglected to improve the marketing activities.  The customers may be interested in knowing the main features of the services, how a particular service would help them, rationale behind the technical services and proof in regard to its uses. The pre-sale activities would bring the positive results, if preparations are adequate.

Some of the customers are found highly aware of the developments, they are found well informed. On the other hand, we also find other category of customers who are in dark. Here, the branch managers are expected to match the level of awareness of customers. As for instance, Mr. A goes up the matrix but Mr. B has not enough time for the branch managers. The branch managers are supposed to prepare a synopsis of their sales talk. Not surprisingly the highly aware customers are found in apposition to make independent decisions and know all about. While selling to the less aware customers, the managers should stress on the main features of the services and the expected benefits of these services.

Sales Promotion: It is natural that like other organisations, the banking organizations also think in favour of promotional incentives both to the bankers as well as the customers. The banking organizations make provisions for incentives to the bankers and call this bakers’ promotion. Like this, the incentives offered to the customers are known as customers’ promotion. There are a number of tools generally used in the different categories of organizations in the face of the nature of goods and services sold by them. The gift, contests, fairs and shows, discount and commission, entertainment and traveling plans for bankers, additional allowances, low interest financing and retalitary are to mention a few found instrumental in promoting the banking business.

Bank Promotion Mix

As and when the banking organizations offer new services and schemes, the tools of sales promotion are required to be innovated. This is with the motto of stimulating the new and old customers. An important thing in the very context is the changing needs and requirements of customers/prospects. The bank professionals bean outstanding task of studying the competitors’ strategies which would he them in initiating the process of innovation. Here it is important to mention the promotional incentives to the customers would focus on decisions related to the selection of a tool. There are a number of considerations to streamline the process. The bank professionals are supposed to study the market conditions and make necessary suggestions, specially regarding the incentives.

It is a blending process and bank professional have to be sure the whatever the provisions, they make are fulfilled on priority basis. More incentives more efficiency or a vice-verse conditions more efficiency, more-incentives motivate bankers substantially.

Word-of-Mouth Promotion: Much communication about the banking services actually take place by word-of-mouth information which is also known as word-of-mouth promotion. In the banking industry, we find use of different components of promotion and in the context it is essential that we also talk about word-of-mouth communication which makes the process of influencing the prospects effective by sensitizing the word-of-mouth recommendations. The persons engaged in communication, the hidden salesforce who play an incremental role in increasing the demand. An important question regarding the word-of-mouth communication is related to its intensity of sensitizing the persuasion process.

The problem before the bank professionals is to identify the persons to be included in the list of word-of-mouth promoters. It is supposed that a bank manager is well aware of the social composition of his/her command area. The oral publicity plays an important role in eliminating the negative comments and improving the services. This helps you know the feed back which may simplify the task of improving the quality of services.

It is important that a branch manager has an in-depth knowledge of his/ her command area and a list of word-of-mouth promoters is prepared. Organizing dinner, offering to them a gift and seeking their cooperation are the process to use this tool of promotion. A satisfied group of customers is considered to be the most successful hidden promoters. A branch manager showing his/her excellence in improving the quality of services in his/ her command area, establishing an edge over the services of the competing banks, promoting LGD marketing (lunch, golf, dinner marketing) successds in instrumentalist the word-of-mouth promotion. It is against this background that this component of the promotion mix is found getting due place.

In this component of the promotion mix, we find two important considerations, first the bank professionals are required to make it sure that the promised services reach to the ultimate users and second, the word-of-mouth promoters are offered small but new incentives which have not been offered by their competitors. The list of word-of-mouth promoters is to be based on a survey result or on the personal experiences of a branch manager. A revision in the list is made possible as and when circumstances necessitate so. The innovative peripheral services offered by the banks are well publicized and the word-of-mouth promoters focus on the same intelligently.


In the formulation of product mix, the pricing decisions occupy a place of outstanding significance. The pricing decisions or the decisions related to interest and fee or commission charged by banks are found instrumental in motivating or influencing the target market. The Reserve Bank of India and the Indian Banking Association are concerned with the regulations. The rate of interest is regulated by the RBI and other charges are controlled by the Indian Banking Association. To be more specific in the Indian setting, we find this component of the marketing mix significant because the banking organizations are also supposed to subserve the interests of weaker sections and the backward regions. The public sector commercial banks in particular are supposed to play developmental role with societal approach. It is natural that this specific role of the public sector commercial banks complicate the problem of pricing.

Pricing policy of a bank is considered important for raising the number of customers vis-à-vis the accretion of deposits. Of course, there are a number of factors to influence the process but it is also right to mention that the key role in the entire process is played by the Reserve Bank of India. A National Consumer Survey Conducted by the L.H. Associates reveals that the quality of Consumer service was one of the three top issues and the consumers ranked the quality of their bank relationships as even more important than the fees charged for the services. To be more specific when we find a number of domestic and foreign banks working in the Indian economy, the Reserve Bank of India bears the responsibility of making the business environment conductive. The non-banking organizations and foreign banks have been found attracting customers by offering to them a number of incentives. The potential customers or investors frame their investment plans in the face of pricing decisions made by the banking organizations. While formulating the pricing strategies, the banks have also to take the value satisfaction variable into consideration. The value and satisfaction can’t be quantified in terms of money since it differs from person to person, keeping in view the level of satisfaction of a particular segment, the banks have to frame their pricing strategies. The policy makers are required to be sure that the service offered by them are providing satisfaction to the customers concerned. The pricing decisions may be to bit liberal, if the potential customers are found shifting to the non-banking investments. In this context, it is pertinent that pricing is used as motivational tool.

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

The banks have to take the value satisfaction variable into consideration while designing the pricing strategies. McIver and Naylor opine that a marketing manager has to regard price as a variable to be traded off against product quality and promotion rather that as an absolute where the lowest price is not desirable.

Bank Price Mix

The RBI has to be more liberal so that the public sector commercial banks make decisions in the face of changing business conditions. There is no doubt in it that the commercial banks bear the responsibility of energizing the social marketing, they are also supposed to bear the social costs. It is also right that the foreign banks have been found making the business environment more competitive. These emerging trends necessitate a close look on the pricing problem. The policy makers find it difficult to bring a change since the regulations of the RBI make things more critical. The expenses are not regulated by the RBI and the banking organizations are forced to increase the budgetary provisions. The sources of revenue are regulated which complicates the task of bank professionals. This makes it essential that the Reserve Bank of India, the Government of India and the banking organizations thing over this complicated issue with a new vision.


This component of the marketing mix is related to the offering of services. The two important decision making areas are making available the promised services to the ultimate users and selecting a suitable place for bank branches.

The selection of a suitable place for the establishment of a branch is significant with the viewpoint of making the place accessible and in addition, the safety and security provisions are also found important. The banking organizations are not free to open a branch since the Reserve Bank of India regulates the subject of branch expansion but so far as the management of branch is concerned, the branch managers have option to select a place which is convenient to both the parties, such as the users and the bankers. In the Indian perspective, the protection to the bank’s assets and safety to the users and bankers need due weightage. The vulnerable area or regions need adequate provisions to make the branch safe. The management of office is also found significant with the viewpoint of making the services attractive. The furnishing, civic amenities and parking facilities can’t be overlooked.

Another important decision making area is related to the offering of services. This draws our attention on the behavioural profile of bankers. The bankers in general and the front-line-staff in particular bear the responsibility of making available the services-promised to the ultimate users without any distortion often a gap is found generated by front-line-staff that makes an invasion on the image of bank. The bank professionals or a branch manager is required to be sure that whatever the promise have been made regarding the quality of services are not distorted. The RBI and the different public sector commercial banks are required to manage the distribution process intelligently and professionally. Thus, the place mix is found to be an important decision making area which requires due attention, both at macro and micro levels. If the banking organizations sell the promises it is essential that the end users get the same without any distortion.


Sophisticated technologies, no doubt, inject life and strength to our efficiency but the instrumentality of sophisticated technologies start turning sour if the human resources are not managed in a right fashion. Generation of efficiency is substantially influenced by the quality of human resources. It is against this background that a majority of the management experts make a strong advocacy in favour of developing quality people and late, the people management has been include dint he marketing mix of organizations is general and the service generating organizations in particular.

Not only the public sector commercial banks but almost all the public sector organization and albeit other government departments, of late, have been facing the problem of quality people resulting into inefficiency, deceleration in the rate of overall productivity and profitability or so. The front-line staff are rough and indecent, the branch mangers are helpless and even the bankers have been found involved in the unfair practices. The public sector commercial banks need to assign on overriding priority to the development of quality people majority of the management of the experts have realized the significance of quality people in the development of an organization and the boardrooms are also found changing their attitudes. The first task before the banking organisatoins at the apex level is to overhaul the recruitment processes. While fixing criteria for selection, they need to assign due weightge to the ethical values. The education and training facilities are required to be innovated. The process of identification and inculcation need to be managed carefully.

The foreign banks and the private sector commercial banks reward for efficiency and at the same time also demotivate the inefficient bankers. This helps them in improving the efficiency of even the inefficient people. The development of human resources makes the ways for the formation of human capital. Incentives, of course, inject efficiency and the organizations offering more incentives succeed in motivating the people.

  • Having better and cost-effective control over operations.
  • Enriching the job content of employees at all level (by reducing the drudgery of mundane operations and increasing the analytical content of their work).
  • Improving the quality of decision-making, a must in the fast changing environment.

Thus, the key focus areas in which information technology can be employed are:

  • Automated processing of back-office operations like processing of forms, policy customization and product selection, pricing and preparation of quotations, etc.
  • Computer assisted telephone and intelligent voice processing for customer call handling, new business marketing or handling after office hours enquirer.
  • Image processing for documents storage and retrieval, folder management (or all documents related to a customer), and work flow management for the movement of documents with the bank.
  • Artificial intelligence and expert systems for complex decision-making like the appraisal of the creditworthiness of clients, designing of innovative instruments and strategy formulation.
  • Relational Database Management System (RDBMS) for the systematic use of information which would facilitate the cross-selling of products.
  • Electronic Data Interchange (EDI) for company-wise communication and inter-connection of systems for the benefit of both the bank’s MIS and the customer.
  • Office Management Systems for accounting and administrative support.

All the above systems should be “client-based systems” and not “line-of-business systems” since these would provide better marketing and service to clients, facilitate cross-selling and customerization of schemes and hence, a better packaging for the product. This would help Indian banks “thing customer”.

All these would, thus, help in the effective management of time. Recourse to mechanized systems like ledger posting machine, cash counting machine and cheque sorting machine would result in reduction in the number of tedious and routine jobs to be handled manually saving time for the people to focus on the customer.


Introduction: Since the inception of globalization in India, banking sector has undergone various changes. Introduction of asset classification and prudential accounting norms, deregulation of interest rate and opening up of the financial sector made Indian banking sector competitive. Encouragement to foreign banks and private sector banks increased competition for all operators in banking sector. The protective regime by the authority is over. Indian banks are exposed to global competition. Even competition within the country has increased manifold. The almost monopoly position enjoyed by the public sector banks of India is no more existence. Under this development Indian banks needs to reinvent the marketing strategy for growth.

The spread of the bank in Indian rural and semi urban areas are highly different from state to state and region to region. Many states have fewer networks of bank branches in the rural areas. Under such scenario different marketing approach for different areas is required. If the bank follows the same marketing strategy for all areas the success would be difficult.

Marketing approach for urban area: The urban areas of India are developed taking into account all parameters of development. The level of income of the people, the literacy rate and level of education as well as awareness of the people about rights of the customer are higher than that of the rural and even semi urban areas. Thus here for effective bank marketing different approach is necessary than that of rural areas.

The marketing strategy should be based on customer service and the use of modern technology in banking. Under competitive environment for the success of the business, better customers and retaining existing customers is possible only with customer service. Use of modern technology in urban areas will also go long way for marketing of banking services. Technology based service like credit card, debit card, ATM, anywhere banking, internet banking, and mobile banking are necessary for urban areas. This is because it enables customers to perform banking transactions at their convenience. Business hours of a bank are also an important factor for urban banking. India many private sector banks, especially co-operative banks and now even some of the public sector banks have also started this practice and they find it successful. To attract business and wholesale customers, banks need to adopt technology based product and service which is suitable to such class of customer. For instance RTGS, collection of out station cheques, issuing the cheques at par at any branch in the country, cash management facility, DD butiques etc. are necessary.

Another strategy for effective marketing is bank need to change the focus from the traditional banking to universal banking. In urban areas the extend and variety of economic activities demands that one institution should meet all financial need of a customer. Under such an expectation of people universal banking would prove successful approach for bank marketing. The term ‘universal banking’ in general refers to the combination of commercial banking and investment banking, i.e., issuing, underwriting, investing and trading in securities.

A universal bank is a supermarket for financial products. Under one roof, corporate can get loans and avail of other handy services, while individuals can bank and borrow.

For increasing customer base and retention of the existing cliental universal banking approach is effective strategy. Universal banking offers number of benefits to customers as well s the banks. For instance, economies of scale arise in multi-product firms because costs of offering various activities by different units are greater than the costs when they are offered together.

Universal banking with focus on retail customers made the ICICI banks to acquire first position in Indian banking sector. Universal banking approach is beneficial to bank also. For banks economies of scale relate to cost-savings through sharing of overheads and improving technology by jointly providing generically similar groups of services. Since universal banking basically provides financial services the inputs like manpower, infrastructure is more or less same. Necessary changes in the inputs can be made easily. For instance training can be given to staff for providing different financial services to customers. Moreover the most important benefit for the bank is that it is useful to increase the fee based income of the bank. Financial sector passing from lower interest rate regime at present and added to this the process of disintermediation is affecting the main and the traditional source of income for the banks i.e. interest income. All banks are striving hard to increase their fee based income to improve their bottom line. Universal banking can help the banks here positively.

Marketing approach for rural areas: Prior to nationalization of banks in 1969, the rural areas were virtually without banking facility. At that time unorganized sector was dominating in the rural finance. After nationalization of banks in 1969 branches of the banks were started gradually in the rural areas also. To day more than 50 percent branches of the banks are found in the rural areas. However, the distribution of banks in the rural areas is highly uneven. Here banks have to face competition with the unorganized sector. Moreover the rural banking is highly regularized activity by the Government in India. Lending as well as interest rate is regularized. Thus under such environment different marketing approach is required. For effective rural marketing product development, promotion and communication is important. All these parameters banks have to balance with socio-economic factors prevailing in the rural areas. Bank need to innovate product that could attract the depositors. Various loan schemes that are suitable for them for getting funds at right time and also they find convenient to repay. For instance traditional saving bank account may be given fixed deposit concept that once a particular limit of balance is reached the funds from saving account is automatically coveted into fixed deposit attracting higher interest rate.

Banks need t develop some scheme which would attract them to bank with. For loans and advances products which are suitable to farmers, small traders, small scale agro based rural industries are already in existence. Banks need to see the how value addition can be mad to these existing scheme. Banks also needs to tie up with Non Government Organisations and various Self Help Group for different types of loans, micro financing etc. This will help the bank for building good image and reputation in the rural areas over and above the business. Another potential area which can be explored by the banks in the rural area is retail banking. With the steady increase in the income of the rural people there is ample scope for retail loan products like housing loans and loan for consumer durables.

Marketing through customer services in rural areas is different from that of urban areas. Here personalized banking is the success mantra for banks. Because of high level of illiteracy people prefer to undertake banking transaction themselves. They hesitate to depend upon technology based service. For effective marketing in rural areas bank should have staff with right soft skill like concern for customers’ problem, positive attitude, good communication and negotiation skill. At every level of dealing with the customer bank need to educate them for banking activates and process. To attract the customers from the unorganized sector most important factor is to provide. The borrower the required finance of right amount at right time.


Banking sector has undergone various changes after the new economics policy based on privatization, globalization and liberalization adopted by Government of India. Introduction of asset classification and prudential accounting norms, deregulation of interest rate and opening up of the financial sector made Indian Banking sector competitive. Encouragement to foreign banks and private sector banks increased competition for all operators in banking sector. Banks in India prior to adoption of new economic policy was protected by Government and was having assured market due to almost state monopoly in banking sector. However, under the new environment, Indian banks needs to reinvent the marketing strategy for growth. In India geographical development is not even throughout the country, there are full-fledged urban areas covering the metropolitan cities and other big cities. On the other hand there are underdeveloped rural areas too. For effective bank marketing different approach for different areas is required. In urban areas customer services is of paramount importances as the level of literacy and therefore awareness of the people is more. Also technology based marketing would have higher degree of success due to typical urban life style of the people. Universal banking providing all financial service under one roof will have more success in urban areas. In the rural areas for bank marketing personalized banking will go in long way. Also banks need to offer innovative tailor made deposits and advances products to suit individual customers. Delivery of advances of right amount of right amount and at right time is essential in rural marketing.


Technology is proving to be a vital tool in enhancing banking activities around the globe. The advent of ATMs, and Internet Banking are key pointers to this. The role of an information system can in no way be underestimated. The expanding role of information systems have aided banks achieving Anytime, Anywhere and Anyhow banking. The improvement in telecommunication infrastructure is redefining the was banking is being conducted.

Information Technology made its presence felt in banks in India a few decades ago. However, it is still being used as a support systems. Most of the software packages used in bank work on stand-alone systems and are not integrated.

Banks in India need to have an integrated systems that takes care of all the front-office and back-office operations. However, Indian banks should not be content with the integration of their activities. Banks in advanced countries are planning to have global electronic banking. Electronic banking or e-Banking is a generic name for a range of technologies that allow the electronic exchange of information related to banking transactions.

As Electronic Networks become more robust and widespread, they are beginning to attract the attention of retail banks – like ATMs and phone banking. However they tend to be viewed merely as one more cheap distribution channel. Accordingly banks are replicating the branch banking experience online, even to the extent of creating 3D virtual branches for their customers to navigate through. Such an approach is characteristic of early attempts to use new technology platform.

Indian Banks Cash in on Delivery Channels

From the staid over-the-counter delivery mode to ATMs, tele banking, Net banking, and now mobile banking the number of delivery channel deployed by banks has increased by leaps and bounds. Srikanth R.P. & Chitra Padmanabhan look at the evolution and impact of various delivery channels in the Indian banking scenario and forecast which delivery channel could be the next killer app for banking players.

While today each and every bank touts ‘The customer is King’ mantra, it was a quite a different story not so long ago. Customers patronizing PSU banks were greeted with the typical ‘babu’ culture, where getting even a cheque encashed used to take ages. Customers had to adjust their schedule to the bank and very rarely was it the other way around. A person in a city like Bombay usually had to wait for a weekend to deposit a cheque, because by the time he reached home, the bank would have closed. Today, while the timings of banks have not changed drastically – banks have become more customer – friendly. Now power has shifted into the hand of the customer.


Traditionally, banking players relied extensively on their reach to effectively put emerging banks out of competition. This forced new banks develop strategies, that could help them reach out to end-customers cost effectively. The solution came in the from of a delivery channel known as Automated Teller Machines or ATMs. And when new private banks started installing ATMs across the length and breadth of the country, customers started flocking in droves. A case in point is ICICI Bank. During the liberalization of the banking sector, ICICI Bank which did not have a huge national network, realized that it could use IT to enhance its value-added offerings.

Says O.P. Srivastava, head of the retail channel infrastructure group at ICICI Bank, “When the banking sector was liberalized we knew that to get a lead over the well entrenched PSU banks, we had to take the help of delivery channels like ATMs. This was the only way to counter the reach of national players. “ICICI Bank is the most aggressive deployer of ATMs and has seen its base surge from 125 ATMs in January 2000 to 1,200 ATMs today. Such has been the impact of ATMs that ICICI Bank’s customer base has grown from two million to five million in the last two years. Srivastava attributes this increase to the increase in ATM outlets.

HDFC Bank, is the other big player from the banking industry which has aggressively used ATMs to its advantage. Says Mudit Saxena, vice-president for retail marketing and head of Net Banking at HDFC Bank, “The average per-day transaction at an HDFC Bank ATM is 350-400, with some ATMs recoding as many as 700 transactions per day”. Other tech savvy banks like UTI Bank and ABN Amro Bank have also become extremely aggressive in installing ATMs.

In the case of UTI Bank, the ATMs have added a fillip to the bank’s customer base. Says V K Ramani, president for IT at UTI Bank, “Form the first year of ATM installation, we have seen a surge in our customer base. Currently, we have 647 ATMs servicing a base of 1.3 million customers. Over 90 percent of cash withdrawals are done through ATMs. The number of ATM transactions have also increased from one million in September 2001 to over 2.5 million in September 2002.” With growth figures like this, its no wonder that every branch manager wants an ATM installed in his area of operations.

Alok Shende, Industry manager for IT practice at Frost & Sullivan, summarieses the evolution of the Indian banking industry perfectly when he says, “Banks followed two broad approaches when adopting technology. The first approach was evolutionary. Banking players who had large brick and mortar legacy particularly the public sector banks, kept the banking channels intact and automated the bottleneck points. This approach was adopted by around 80 percent of the industry. However, some banks adopted a revolutionary approach and changed the banking scenario altogether. State Bank of India is a good example of the evolutionary approach, whereas HDFC Bank and ICICI Bank, are good examples of the revolutionary approach. “Some banks have gone a step ahead and share their ATMs with other banks. For instance, ABN Amro Bank has a private ATM sharing agreement with UTI Bank.

Banks are also developing new strategies to leverage their ATM outlets. For instance, rather than set up a branch in every suburb, ICICI Bank has hit upon a ratio of 8 ATMs to one branch office, thus effectively reaching out to a large customer base, at a substantially lower cost.

ABN Amro launched Royalties, India’s first banking rewards programme. In the programme, the customer gets rewarded every time he uses any of the bank’s electronic access channels. If the customer bites the bait, it not only reduces the work load, but also translates into huge cost savings.

As PSU banks gear up to win back their customers through the aggressive deployment of ATMs, the already vibrant ATM market has got a further boost. In India, ATM manufacturers like NCR and HMA Diebold are extremely bullish, as India is the fastest growing market for ATMs currently. India has close to 7,500 ATMs and analysts predict the market to grow at a rate of 60-70 percent year-on-year. Looking at the boom in ATMs NCR has decided to invest $6 million to set up its ATM manufacturing plant in India.

Says Lars Nyberg, chairman and chief executive officer of NCR, “India is undoubtedly the hottest market for ATMs today. Our decision to manufacturer in India is to accelerate supply to the local market. Initially, the manufacturing facility in Bangalore will have a capacity of produce 8,000-10,000 ATMs per year. “The potential of the Indian market has prompted NCR to design at ATM specifically for the Indian market.

Total cost advantage

While ATMs do help banks to attract customers, there is also one more critical aspect to consider – the immense cost savings from which a bank can benefit due to a transaction taking place over an ATM vis-à-vis a branch. Typically, it costs a bank close to Rs. 50 per transaction if conducted in a branch. The same if done an ATM costs about Rs. 15. A look at the volume of ATM transactions conducted reflects the level of success of this delivery channel.

Internet Banking

The  other important delivery channel, from a bank’s perspective & Internet banking. The adoption of Internet banking by the bank’s customers is important since the costs per transaction are even lower than those of an ATM. A net-based transaction costs the bank only around Rs. 4. Thus, banks are trying to get customers to switch over to this mode of banking registered users for Internet banking in India at over two million currently.

It represent a significant opportunity for banks. In addition, as a delivery channel, Internet banking does not require physical infrastructure, thus saving on prohibitive real estate costs.

Private banks like ICICI Bank, HDFC Bank, UTI Bank and ABN Amro Bank have seen a steady surge in the number of users registered for Internet banking does not require physical infrastructure, thus saving on prohibitive real estate costs.

Most banks today have facilities to enable internet banking customers to pay insurance premiums and utility bills over the Net. Though Internet banking as a concept has not caught the fancy of a majority of customers as yet-even the small percentage that does use it, makes a difference to the overall cost. Almost all leading banks in India are hoping that just as ATMs saw a period of inaction before they were accepted by Indian masses, Internet banking too would be adopted once customers are comfortable with the technology. For instance, in 1998 India had just 500 ATMs today it has close to 7,500.


While Internet banking is a potential and powerful delivery channel, it has failed to make a significant impact due to a variety of reasons. RBI in its report, ‘Trend and progress of Banking in India, 2001-02, says Internet banking has failed to take off due to a combination of psychological, technological and socio-economic factors. Further, the report states that additional hurdles relating to legal and infrastructural problems have also affected growth.

Although the government has made considerable progress in initiating a trust environment, with some Public Certification Authorities (PCA) already licensed to operate, the adoption of trust technology is still a daunting factor for many users. What needs to be developed is a simple way of integrating trust into online banking services.

Says Shende, “The compelling restraint for the user is the fear of security breaches. As long as the perceived notion that the Internet is not a safe place to conduct financial transactions prevails, large scale adoption will be challenging.” In addition, the low penetration of PCs and access to the Internet are crucial issues which act as roadblocks in the adoption of Internet banking.


What’s M-Banking?

M-Banking allows a customer to request for account balance, cheque books, cheque status, demand drafts, and banker’s cheques as well as stop payments, make fixed deposits inquiry and transfer bills online. HDFC customers, for instance, can pay their Max Touch and BPL Mobile both provide cellular services – Bombay State Electricity Supply, and Maharashtra State Electricity Board bills. Says Shyamlal Saxena, 33, Vice President (Liabilities Product Management), HDFC: “WE are, in a sense, content providers of banking information.”

Is it Better?

M-banking is no different from Net Banking, in fact it has many limitation. You still cannot transfer fund from one bank to another and, given the high air-time charges, it works out much more expensive than Net Banking. And for the mobile phone to access a site, the contents must be in Wireless Markup Language.

Once the mobile users’ population grows, access rates will fall, allowing customers to use more air-time. By then, the Reserve Bank of India would also have put its own gateway in place to do online what it does today on paper.

M-banking uses two kinds of communication technologies. One is WAP (Wireless application Protocal) and the other is SMS (Short Messaging Services). WAP is more user-friendly, as it allows download of graphic information. SMS, in contrast, allows text-only access. But as the time taken to download text is much les compared to graphics, SMS is cheaper to use.

Future Delivery Channels

Among all the delivery channels used by banks today, ATMs remain the most successful, followed by telephone banking and Internet banking. But the biggest potential could lie in mobile banking. With cellphone tariffs falling and increased bandwidth, the potential for banking player to tap this channel is enormous. Says Raman, “The future delivery channel will have various mobile portals using technologies such as GRPS. The customer would prefer to do banking transactions not only anytime, anywhere, but also through any device. With the current rate of evolution in the wireless industry, the mobile channel is poised to become the de-facto banking channel within the next three years.”

One more important factor to consider in the evolution of delivery channels is the requirement of a multi-channel architecture which should support all future delivery channels, while also seamlessly integrating with existing delivery channels. This is the reason why a majority of banks still have not launched Internet banking as a feature, since most do not have backend integration. Effectively, this means that if a person holding an account with the bank wants to apply for a loan, he would have to enter the same details already disclosed earlier to the bank. This is where players like HDFC Bank, Citibank or ICICI Bank hold an edge, as they have an end-to-end integrated system already in place. This gives them the ability to cross-sell their products, based on the customer profile they have with them.

one more delivery channel which will increase in the future is the deployment of call centres. For instance, looking at the cost effectiveness of call centers, ICICI Bank has commissioned the country’s biggest call centre in the banking sector (1,100 seats) in Hyderabad. This is to be followed by a 600-seat call centre in Mumbai)

As a delivery channel gains ground, it can be used to sell products of other vendors too. For example, the SBI ATM at CST railway station in Mumbai dispenses season tickets too. Analysts believe that as banks discover the marketing power of ATMs, one would see a trend where ATMs would be used to deliver products of other vendors as well. ICICI Bank has gone one step further by allowing devotees of Tirupati to offer payments to the temple at Tirupati temple through their ATM.

This could be the future of ATMs, where more non-cash transactions will be done. Some banks are even toying with the idea of selling movie tickets through ATMs. Going forward, as the volume of non-cash transactions increase, one can see a trend where banks maintain kiosks instead of ATMs, as there might not be a need for all the features of an ATM.

Says Chopra of ABN Amro, “The next five years will see a marked shift, wherein customers will show a preference for non- branch delivery channels. Also, the large number of customer calls will also necessitate use the of toll free numbers.”

Irrespective of the delivery channel, one thing is clear-it’s boom time for customers, as banks try a variety of options to lure them

Who knows, the next time you go to deposit your cheque, you just might fill in ‘Virtual’ in the space reserved for ‘Branch’.


The level of income, expec­tations, the rate of literacy, the geographic and demographic considerations, the rural or urban orientation, the changes in economic systems the frequent use of, technologies are some of the key factors governing the development plan of an organization. To be more specific in a welfare country like ours, the public sector commercial banks are supposed to play decisive role in fueling the processes of socio-economic emancipation. This makes it clear that the banking organization need a new vision, a new approach and an innovative strategy. They are sup­posed to bring about greater mobility in the financial resources to cater to the changing socio-economic requirements. Willingly or unwillingly, they have also to bear the social costs by advancing credit facilities to the weaker sections and the vulnerable regions. The foreign banks and a few of the private sector commercial banks have been found making sincere efforts to improve the quality of their services. The customers in general appreciate the functional style and ser­vice mix of foreign banks. This makes a strong advocacy favor of practicing marketing principles in the public sector commercial banks.

The nationalization of the Re­serve Bank of India is a landmark in the development of Indian banking system which in a true sense paved avenues for qualitative-cum quantitative improve­ments. Acquisition of extensive powers of supervision and control by the Reserve Bank of India under the Banking Regulations 1949 opened new vistas for the expansion of banking facilities. The structure of public sector bank was further strengthened in 1959. To curb concentration of economic power and promote a judicious use of the financial resources for the economic development activities, the banking system was regulated and supervised by the RBI subsequently in 1969 the Government acquired a direct control over a substantial segment of the banking system signifying its commitment to reshape the banking system so as to meet progressively and serve better the needs of the development of economy in conformity with the changing national policy and objective. The fruitfu11 re­sults of nationalization of 14 commercial banks in 1969 encouraged. government to nationalize more commercial banks in 1980. These developments necessitated a fundamental change in the functional responsibilities of the public sector com­mercial banks. Here it is pertinent to mention that nationalization was with the motto of improving the quality of services but the public sector commercial banks started disappointing the masses. Of late, the quality of services is so poor that customers in general are found dissatisfied. This makes it essential that the Reserve Bank of India and the policy makers of the public sector commercial banks think in favor of conceptualizing modern marketing  principles which would bring a radical change in the process of quality up-gradation.

The first task before the public sector commercial banks is to formulate the marketing mix which suits the national socio-economic requirements. They need to synchronize the core and peripheral services in such a way that product at­tractiveness is increased substantially. To be more specific the peripheral ser­vices need frequent innovation, since this would be helpful in excelling competi­tion. The personal selling and public rela­tions activities need an intensive care. It is pertinent to mention that the leading foreign banks have been found promoting telemarketing and the public sector commercial banks need to make it possible. Since we have world class communi­cation technologies, the task is easier. The word-of-mouth promotion also needs due care and for that we need to improve the quality of services vis-à-vis the cooperation of opinion leaders. The Reserve Bank of India and the Indian Banking Asso­ciation need an attitudinal change. The boardrooms also need to change their attitudes. The gap between the services-promised and services-offered is required to be bridged over. This requires professional excellence. The professionals need to make possible a fair synchronisation of performance-orientation and employee­ orientation. This is not possible unless the banking regulations are made liberal. The quality of people/employees serving the banking organizations needs an overriding priority. The bankers need to know about the behavioural manage­ment. The front-line-staff need empathy in their behaviour. This requires inten­sive training facilities. The domination of trade unions is required to be minimised. The contractual job system needs due attention. The bank professionals need to assign due weightage to their physical properties. They are supposed to look smart, active and attractive. Thus we need multi-dimensional changes which make a strong advocacy in favour of implementing the innovative marketing principles.

In view of the above, it is right to mention that in the face of new perception of quality developed by the foreign and private sector commercial banks, the public sector commercial banks have no option but to improve the quality of services. The marketing principles bear the efficacy of initiating qualitative improvements. It is against this background that we go through the problem of bank marketing. Of late the foreign banks have been found promoting the use of sophisticated information technologies. This makes it essential that we realize gravity of the situation and make possible a rational use of technologies which is not to aggra­vate the problem of retrenchment. The marketing principles would be helpful in making an assault on the multi-dimensional problems. Of course, we find good auguries because the policy makers have been found exploring ways for imple­menting the marketing principles but till now, the efforts are at the very nascent stage. It is high time that the public sector commercial banks conceptualize inno­vative marketing for bringing the banking system on the rail.

The first thing is that the future of bank marketing is gonna be fabulous. If you are thinking to go for field than you must…You can study the charts how it rose since last 5 years and you will he impressed. In past bank were not in competition with each other in India but now they are and that’s where bank marketing is coming up…eg. In Ahmadabad ICICI rose by 70% in terms of advancing loans to local public…Sales guys are doing very well.,This is going to rise until 80% of Indians are not having credit cards.. Compare the banking to developed countries and you will find bank marketing in India to be great.

The bank of the future has to be essentially a marketing organization that also sells banking products. New distribution channels are being used; more & more banks are outsourcing services like disbursement and servicing of consumer loans, Credit card business. Direct Selling Agents (DSAs) of various Banks go out and sell their products. They make house calls to get the application form filled in properly and also take your passport-sized photo. Home banking has already become common, where you ~an order a draft or cash over phone/internet and have it delivered horn. ICICI bank was the first among the new private banks to launch its net banking service, called Infinity. It allows the user to access account information over a secure line, request cheque books and stop payment, and even transfer funds between ICICI Bank accounts. Citibank has been offering net banking to its Suvidha program to customers.

Products like debit cards, flexi deposits, ATM cards, personal loans including consumer loans, housing loans and vehicle loans have been introduced by a number of banks.

Corporates are also deriving benefit from the increased variety of products and competition among the banks. Certificates of deposit, Commercial papers, non-convertible Debentures (NCDs) that can be traded in the secondary market are gaining popularity. Recently, market has also seen major developments in treasury advisory services. With the introduction of Rupee floating rates for deposits as well as advances, products like interest rate swaps and forward rate agreements for foreign exchange, risk management products like forward contract, option contract, currency swap are offered by almost every authorised dealer bank in the market. The list is growing.

Public Sector Banks like SBI have also started focusing on this area. SBI plans to open 100 new branches called Personal Banking Branches (PBB) this year. The PBBs will also market SBI’s entire spectrum of loan products: housing loans, car loans, personal loans, consumer durable loans, education loans, loans against share, financing against gold.

The bank of the future has to be essentially a marketing organisation that also sells banking products. New distribution channels are being used; more & more banks are outsourcing services. ICICI bank was the first among the new private banks to launch its net banking service, called Infinity.

Products like debit cards, flexi deposits, ATM cards, personal loans including consumer loans, housing loans and vehicle loans have been introduced by a number of banks.

Public Sector Banks like SBI have also started focusing on this area. SBI plans to open 100 new branches called Personal Banking Branches (PBB) this year. The PBBs will also market SBI’s entire spectrum of loan products: housing loans, car loans, personal loans,

Always Yours—– As Usual —— Saurabh Singh

International Relations, International Trade and Business & Administration


Scholars in “Business Administration”, irrespective of the time and span of domain, are required to understand the role and importance of History. This paper builds on the same theme supported by valid arguments and facts. The assumption made is “Scholars of any established body of knowledge, probably possess the capacity to, understand the evolution of that particular discipline as an organized body of knowledge”, while initiating the study. It is specifically mentioned that in case of even collapse of assumption too, the study would hold good. The attempt here is targeted on detailing, in a brief manner, the evolution of the discipline named Business Administration as an organized body of knowledge.


In the initial days of human civilization, when population inhibiting the earth was very low, the vacancy for individuals with best mental faculty existed so as to entrust them with the responsibility of policy making. This happened for the reasons of complexities involved in the science and art of policy making; and the individuals responsible for the task were supposed to work in a non – self – involving manner.


Consequent to phenomenon of rapid increase in population and passage of time, the learned policy makers were forced to realize that, if seen in a comparative perspective, probably ‘Policy Making’ as an art had become easier as compared to ‘implementation of the policy‘; which is must for proper governance and control the individuals and societies.


The time couldn’t have been better for initiation of new thought process, and the same was ultimately but brilliantly done by a devoted scholar “Mr. Woodrow Wilson”.  Mr. Wilson, a scholar of knowledge domain termed “Political Science & International Relations”, is credited as first individual who established a dichotomy separating “Political Science” & “Public Administration”. Thus a new domain of knowledge was born and christened as “Public Administration”.

Mr. Woodrow Wilson, later on, got elected to the office of President of ‘United States of America’.


A logical deduction that can be drawn from the deliberations is that ‘with the increase in the number of people to be administered, the sub system ‘Public Administration’ that used to be a part of super system ‘Political Science and International Relations’ got inflated as super system itself.

Journey called Public Administration

It is of significant to mention that, as a full fledged discipline, the discipline of “Public Administration” equipped itself with tools possible from all disciplines worth contributing fruitfully in the achievement of its objectives as a body of knowledge. This can be held responsible for the multidisciplinary nature of the body of knowledge.

The is to clarify further that the disciplines contributing in this manner for achievement objectives of ‘Public Administration’ do not get the status of related or concerned stream or subject matter and should not be dubbed so.


The domain of knowledge named ‘Physics’ makes use of tools provided by ‘Mathematics’ in a significant manner. Even in such a scenario scholars of neither ‘Mathematics’ nor ‘Physics’ would ever claim these to be related disciplines of either of them. The similar is the case with ‘Economics’ and ‘Statistics’ too, specifically while dealing with ‘Econometrics’.

[Note: Other domains of learning, viz, Agriculture Economics or Live Stock Economics etc. is being considered here, as this may be considered, by scholars of domain,  as degrading these respected disciplines of knowledge. These domains are in no way comparable to either ‘Economics’ or ‘Administrative Sciences’. In fact these turn out to be too specific domains developed to address the problems of the specific to these domains, and these problems are vital in nature for survival and welfare of humanity. ]


In the domain of ‘Public Administration’, the word public is used to represent a congregation of people, [where congregation is significant in terms of number of people], good enough to be called as a Society, Public, State or Nation.


Any individual, prudent enough, would be in agreement with the author, in comprehending that Business happens to a ‘niche area’ of any society while working, in and for the society, in a congruent manner to achieve the objectives of the society. In common terms it can be explained as, ‘Goals’ set by Business for being achieved by it, positively contribute towards achieving the overall goal of society. It can be in many forms viz., generating employment, producing the products or services which are required for smooth functioning of society,  while spending a part of its earnings for the welfare of less privileged or less fortunate people of society and area inhabited by them.


Ensuring the efficient and symbiotic functioning of niche area of society termed ‘Business’ so as to result in win – win situation for both, business on one side, and rest of society on the other end, created the need for a domain of knowledge that is developed to specifically address this area.

The easiest way to do this is, just extracting out the relevant portions, addressing the administration or governance of business, from the domain of knowledge called ‘Public Administration’.

Now, It is time to celebrate, the birth of a new and specialized domain of knowledge and this child has been christened ‘Business Administration’.

Moving further on the same direction in search of the nearest relatives of Science and arts of ‘Business Administration’; one is bound to land up in and around the domains viz., Political Science, International Relations, Public Administration, Political Economy, History of International Business, Development of Mechanism of Revenue Collection, Span of Control, Numerous types of Organizational Structure for providing an efficient and just administration. The strains like Human and Social Psychology, Sociology, law of land, science of decision making.


The issue now is to learn and establish the fact that is the body of knowledge being deliberated here, so new in nature, as to be taken to be born in late Twentieth or Early Twenty First Century. Or the same was born in past, flourished, reached its youth and also touched its possible top possible mature status and got extinct like many of the other living and non living phenomenon found on earth due to the changes occurring with time on earth.

Any person of my level probably would do what I am doing. I am now moving in fold of history to get, if possible, some cues on it. The reason for same can cited as below:

1. The times when I was in my adolescences, I got to here many times and occasions, the words in the language [a mix of Sanskrit and Hindi] “VASUDHAV KUTUMBKAM”, meaning, ‘the world is our home’.


Probably, it is difficult to believe for me, today, when I have for last over a decade am hearing of the phenomenon called ‘Globalization’.

The part of Asia, which I happen to be born, grown and learning new concepts and philosophies, even as on date, has advocated as profession known as Business and/ or Trade to me much respectful than providing service of any kind.

The population inhabiting the landmass still narrates the stories, theses days called as Arabian Knights, precious stones and gems, [related to Arab World], of Rulers like Alexander [Roman Empire], the stories of Panchtantra [much older than Europe, with nothing like USA of today in place], the European Dark Ages etc.

The stories of various scholars like Huentsang, Fahyan, Albaruni and many of the kind visiting the land with the specific purpose of learning and discovering knowledge from the area called Gulf and middle Asia to the Universities like Nalanda and Takshshila etc.

Every body from Gulf, Middle Asia and even post tenth century from Europe visited the land to make fortunes via trade in the area.

The influence of area was so vast even in terms of Administration that states or nations today called as Combodia [Angkorvat], Malaya [Maldives], Singapore, Sri Lanka, Myanmar, and many more like that were in its fold of Governance. The area today may be visualized as Greater India [an old concept – not much alive today].

The United States of America was lucky and should be thankful to the area [may be called INDIA], as it got noticed, only when a great sailor cum trader started on journey to discover the trade route to India. Luckily for USA and may be not so lucky for Columbus, that he got disoriented, to touch the landmass called America.

What all this could be dubbed if not as “a society at pinnacle of its development, and the phenomenon called as Globalization in today’s context”?

All these facts are coaxing the author to embark on a journey in time, the time which is past and called history, to develop a clear understanding. So with permission from learned academician and scholars the author embarks on the journey to trace the origin of phenomenon called ‘Globalization’.

History has always come to the rescue of any individual aiming to be dexterous in the domain called administration, governance, international relations, evolution of a system for efficient administrative and governance, making policies for maximizing the welfare of mankind, exploring the unexplored universe etc.. and then too the list may remain illustrative in place of being exhaustive.

As an scholar committed to contribute to the discipline of Business Administration, author finds history to be a sound bazooka. The attempt can be made to trace and document the process of evolution of trade and commerce in past civilization, along with the horizon touched by them. The process of administration of nurturing and blossoming such relations over the past would be providing sound and fertile breeding ground.

The same then can be fruitfully, and economically utilized for developing the ways and means to counter the threats being faced by humanity in form of calamities of economic nature but probably not related too domain. Thus no tools discovered till now to cure the disease.

Here, as said by Professor Dereck D. Jones [2004] can be quoted as below

“International Business scholars often talk about history, but rarely take it seriously. Or so it would seem from reading the pages of JIBS. A simple search showed that the word “history” was mentioned in 119 articles and notes published in the journal since 1990. The word “evolution” occurred in 135 articles and notes. Yet not a single article was explicitly devoted either to the history of IB or employed historical data to explore an issue. Only a handful of articles contained longitudinal data covering more than a decade.” (Derek D. Jones 2004)

The discussions about History could be started from Eighth Century onwards, as the particular era is known as ‘Dark Age for Europe’ and any landmass like United States of America was not connected, even if present, to the main stream of Global/ World Society.

The present study being compiled for being presented to world community, may force the great philosophers of the discipline to revisit the theories and principals of globalizations just based on based on developments of yesterday. Simply because there have been many years prior to yesterday and one needs to get rid of Myopia while talking on such subject matters.


NOTE: Questions, Arguments, Discussions, Suggesstions are Welcome and is Open for Comments too.

This a paper in process to turn out as another monograph or Working Paper Series Publication.

Always Yours —  As Usual — Saurabh Singh

Competition now Turns Me Competing with Me – Research Papers now Contesting with Each Other for Top Slot

Gmail Your Paper Makes SSRN Top Ten List                                  20 February 2010 17:41 <> To: Dear Saurabh Singh: Your paper, “Potential of Information Technology as a Tool for Transforming Indian Agriculture”, was recently listed on SSRN’s Top Ten download list for Computing Technologies, ERN Partners in Publishing Journals, ERN: Agriculture (Topic), ERN: Natural Resources (Topic), MKTG: Channel Management & Retailing (Topic), MKTG: Internet Marketing & E-Commerce (Topic), MKTG: Sales Promotion (Topic), MKTG: Sales Promotion (Topic), Management Educator: Courses, Cases & Teaching, Marketing Science and OPER: Information Technology (Topic). As of 02/20/2010, your paper has been downloaded 14 times. You may view the abstract and download statistics at Top Ten Lists are updated on a daily basis. Click on the following link to view the Top Ten list for the journalComputing Technologies Top TenERN Partners in Publishing Journals Top TenERN: Agriculture (Topic) Top TenERN: Natural Resources (Topic) Top TenMKTG: Channel Management & Retailing (Topic) Top TenMKTG: Internet Marketing & E-Commerce (Topic) Top TenMKTG: Sales Promotion (Topic) Top TenMKTG: Sales Promotion (Topic) Top TenManagement Educator: Courses, Cases & Teaching Top Ten,Marketing Science Top Ten and OPER: Information Technology (Topic) Top Ten. Click on the following link to view all the papers in the journal Computing Technologies All PapersERN Partners in Publishing Journals All PapersERN: Agriculture (Topic) All PapersERN: Natural Resources (Topic) All PapersMKTG: Channel Management & Retailing (Topic) All PapersMKTG: Internet Marketing & E-Commerce (Topic) All PapersMKTG: Sales Promotion (Topic) All PapersMKTG: Sales Promotion (Topic) All PapersManagement Educator: Courses, Cases & Teaching All PapersMarketing Science All Papers and OPER: Information Technology (Topic) All Papers. To view any of the Top Ten lists, click the TOP button on any network, subnetwork, journal or topic in the Browse list reachable through the following link: Your paper may be listed in the Top Ten for other networks or journals and, if so, you will receive additional notices at that time. If you have any questions regarding this notification or any other matter, please email or call 877-SSRNHelp (877.777.6435 toll free). Outside of the United States, call 00+1+585+4428170. Sincerely, Michael C. Jensen Chairman Social Science Research Network

While having joined the network very recently – Got an Entry in All Time Top Ten too. See the Picture Below:

The Research and Status Papers make way to both --- Recent Top Ten as well as All Time Top 10

—Always Yours – As Usual — Saurabh

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