PSU banks go after young, affluent India
On the face of it, the private sector banks seem to be deep in the throes of service-related activity. Their achievements and offers occupy the hoardings, their commercials play out on all the channels in primetime, and even the radio sings their jingles. But a quiet revolution seems to be unfolding elsewhere. India’s public sector banks, traditionally perceived as slow, steady but stodgy, are launching a slew of activities and stealthily moving into new territories.
In 2010, State Bank of India (SBI), the country’s largest banker, did something that none of the country’s other banks had anticipated. It set up an exclusive branch in Hyderabad, for people looking to set up accounts with a minimum balance of `1 crore.
In 2008-09, at a time when most banks were going after the urban customer, Canara Bank, India’s second-largest public sector bank, started offering credit cards to farmers.
SBI and Canara are not the only ones taking the innovation route; other state-run banks too are putting their best foot forward in the service section. For instance, the Central Bank of India was one of the first to introduce a savings account with personal accident cover, while the Bank of Baroda started offering loans to salaried clients to buy electronic goods that range in price between `2,400 and `15,000. IDBI Bank’s Royale Account service for privileged customers, meanwhile, allows personalized services including a dedicated relationship manager while Union Bank of India’s student combo card acts as a debit card as well as an identity and access card in the library.
The intent is clear. State-run banks are out to aggressively compete with private and foreign banks. Having consolidated their position in small towns, they are re-inventing themselves by introducing innovative products and services to attract a customer segment that they had largely ignored earlier—affluent clients under the age of 40.
Of the 250-odd banks operating in India, 21 are from the public sector, 22 are private, 36 are foreign and the remaining comprise cooperative and regional rural banks. In 2010, only 32 per cent of the customers of state-run banks were under the age of 40; the private and foreign banks had 60 per cent of the kitty. The foreign players also enjoyed a much higher share of business from the more profitable mass affluent segment (aka High Networth Individuals or HNIs). Now, that looks set to change.
“In the services industry, you have to offer products that no one else has. One also has to build trust, which is essential for survival. We, at SBI, have built immense trust and also offer innovative products. That has been our success mantra,” says managing director A Krishna Kumar.
The crorepati concept supports his claim. Named ‘Kohinoor Banjara Premium Banking Centre’, after the famous diamond, the branch takes on customers only by invitation. Appropriately outfitted with plush interiors, a luxurious ‘Nizam’ lounge and a ‘Pearl’ coffee bar, the branch has got 85 customers, generating business of `500 crore, in less than 18 months of its opening. Following its success, SBI is now considering rolling out the initiative across the country. A second branch is coming up in Visakhapatnam this month.
That’s not the only innovative initiative launched by SBI. The bank has also come up with a concept called ‘SMS Unhappy’. The idea is to offer customers an interactive medium to resolve problems at the ATMs. “If a customer encounters a problem at an ATM during night, he has to wait until next morning to resolve it with the respective branch. This causes delays. Hence we launched ‘SMS Unhappy’. Our call centre works to each issue and resolves as fast as possible,” Kumar says.
For its part, Syndicate Bank is the first bank to have an exclusive all-women branch, run by women for women. The idea is an old one: the first such branch opened in Bangalore in 1962 but now all the major cities have a branch each. “We have women working from the clerical cadre up to general manager level. Of the total workforce, women constitute more than 25 per cent and growth opportunities are at par with their male counterparts,” says H N Vishweshwar, general manager, Syndicate Bank, adding: “Innovation doesn’t stop with the creation of such a branch. We also ensure that there’s immense customization in terms of product offerings.”
Then there’s Canara Bank, which has tied up with UNEP to initiate a unique solar loan programme to help accelerate the market for the financing of solar home systems in south India. “The key is to identify where a potential exists, and then design a product suiting the customers’ needs. Unlike private players who spend most of their time and effort in maximizing the image, we focus on products and services that speak for themselves,” explains S Raman, managing director, Canara Bank.
“This industry thrives on competition. And by virtue of being in the services sector, we have to ensure that customers are happy with the service they get. It’s our constant endeavour to innovate and fine-tune our service delivery mechanism,” reasons M Bhagavanth Rao, managing director, State Bank of Hyderabad.