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Private sector banking has a long way to go

Filed under: People and society by Hari
Posted on Wed, Sep 12, 2007 at 12:12 IST (last updated: Thu, Oct 30, 2008 @ 08:16 IST)

Private Sector banking in India has a long way to go. At least that is my conclusion after my experiences with the customer care department of a popular private sector bank in India. Having struggled to add my debit card to my PayPal account for nearly a year (after which I gave up on the issue for a while), I recently tried to resolve this issue once again with the bank, but my frustrating quest to make the customer service department of this bank understand what PayPal is and what an online payment gateway means leads me to believe that the situation hasn't changed in a while now.

The problem with Public Sector banks

This does not mean that Public Sector banks in India are particularly good at customer service either. But with Public Sector banks, the problem is entirely different. The employees of PSUs generally belong to an older generation who were in the business long before banking became computerized, automated and centralized. Most employees at government banks at least know the basics of banking and can answer most simple questions (provided they are in the right mood). Their problem is one of lethargy, attitude, bureaucratic red tape, antiquated procedures and a lack of customer orientation. Government banks don't exactly cater to customers in double quick time but they usually get the job done in reasonable time. They are also a lot more approachable because government banks don't delegate customer service to a bunch of call-centers and telephone operators. It is possible to meet the local branch manager of any government bank provided your business is important enough. True, everything takes a while to get done but it does get done in the end and in recent times, government banks have shown a tendency to tighten up on the customer support front. They have a long way to get there, but at least they're modernizing now.

The biggest advantage of Public Sector banks is that they don't *have* to make profits. They don't have to look at cost-cutting. They also have the infrastructure and a large employee base which gives them a natural advantage in terms of geographic spread and coverage. They are also the mainstay of rural India. They will continue remaining the stronghold of banking in India because I don't forsee private banks making any headway in that direction.

And why private banking will continue to suck

Private banks in India have a completely different problem. Thanks to liberalization and globalization, they have tough competition on both fronts: private and public sector banking. They have to make profits and indulge in cost-cutting to remain in business. They also have to charge higher interest rates for loans than public sector bank for the same reason.

Customer support in private banks is usually computerized and modernized. But this has also taken away the most important factor in banking: personal contact and personalized service. True, many private banks do tend to make a lot of noise about "personalized" banking, but that's all a bunch of baloney. Their customer service, in theory, is supposed to provide excellent service, but in reality it is the opposite. Why?

The reason is that private banks usually have to employ a large workforce to keep up with the increasing needs of customers and in the process, they cut corners in quality. The bank support staff in private banks are usually young graduates who have very little experience in practical banking. They are also great at punching numbers into computers and generating reports, but are extremely poor in analyzing and understanding the core concepts of finance and technology. They cannot do a thing without the supporting software and hence are reduced to mere computer and telephone operators. I am willing to bet that a fairly computer-literate customer can actually use the software better than these ill-trained customer support personnel. While they are trained in being prompt to reply to queries, their promptness is akin to a robot, not a human being. They have very little ability to think about things that go beyond what can be generated out of a computer report. No doubt they have sophisticated technology at hand, but what can be achieved if the human being behind the computer cannot think?

And because of the recent trend of outsourcing support, private banks are also a lot less approachable. It's hard to meet somebody who's actually in a responsible or senior position in person. Their support systems are fairly well-organized, but the actual process of getting things done can be a frustrating, especially if the issue involves something different from their usual routine (like the example of using my Debit card online). Surprisingly I found that these younger employees also have very little idea of new technologies like internet banking, e-commerce and online payment gateways. The last straw was when the telephone banking staff had no clue about what PayPal was and how it was related to eBay. I have been referred to different kinds of support staff (from direct face-to-face to telephone support to internet banking support) but so far nobody has been able to answer my simple question: "Why does the bank keep rejecting my Debit card?" In fact, they had no idea what the bank policy was on online card usage. So much for support!


My feeling is that the talk of the private sector banks being competitive is rubbish. They cannot be competitive because they have to hire more and more staff in order to cater to customers, but at the same time they cannot afford to pay large salaries to attract really qualified personnel. From what I can see now, I don't expect this scenario to change in the forseeable future.

4 comment(s)

  1. Good analysis.

    Comment by Shrinidhi Hande (visitor) on Thu, Sep 13, 2007 @ 14:10 IST #
  2. Thanks Shrinidhi! :)

    Comment by hari (blog owner) on Thu, Sep 13, 2007 @ 16:02 IST #
  3. Very well-thought and well-argued, I'd say! I think what will eventually drive these people off their seats will be competition. If one bank tomorrow introduces all this even partially, then the rest of them will jump into the bandwagon. Of course, for one bank to do this we need a demand base of customers... but that is a completely different issue altogether!

    Comment by Sudipta Chatterjee (visitor) on Fri, Sep 14, 2007 @ 11:36 IST #
  4. Yes, Sudipta. But the problem with competition is the quality of competition. Because most private sector banks have the same handicap: they simply cannot compete with government banks in terms of personnel, branch coverage and interest rates. Because government banks can absorb loss and still remain in business.I must say though that the government banks are also starting to get smart and customer-friendly and that spells more worries for private banking.

    Comment by hari (blog owner) on Fri, Sep 14, 2007 @ 13:52 IST #

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