Customer Requirements: Caiib Retail banking (Module B),Unit 1

Customer Requirements: Caiib Retail banking (Module B),Unit 1

Dear Bankers,
We all know that CAIIB exams are conducted by the Indian Institute of Banking and Finance (IIBF).  CAIIB is said to be one of the difficult courses to be cleared for the bankers. But we assure you that with the help of our “CAIIB study material”, you will definitely clear the CAIIB exam.
CAIIB exams are conducted twice in a year. Candidates should have completed JAIIB before appearing for CAIIB Exam. Here, we will provide detailed notes of every unit of the CAIIB Exam on the latest pattern of IIBF.
So, here we are providing “Unit 1: Customer Requirements of “Module B: Retail Products” from “Optional Paper: Retail Banking”.

The Article is CAIIB Unit 1: Customer Requirements

♦Customer Requirement

  • Retail Product Overview
  • Approval Process for Retail Loans
  • Due Diligence (Verification of KYC with relevant documents, Pan Number, House visit etc etc..)

Quantum of loan

  • Quantum of loan is either related to the product or to the income of the individual.
  • The quantum is expressed as 12th times the monthly income in the case of loans for personal expenses.
  • 4 times the annual income in the case of vehicles,
  • 48 to 60 times the monthly income for the purpose of housing etc.
  • Margin may vary from 15% to 30% of the value of asset, depending on the type of loan/scheme.

Payment Period

  • The repayment period may vary from 3yrs to 30 yrs depending on the purpose.
  • Loans for personal expense are to be repaid within 3 years.
  • Auto loans are given for duration of 5 to 7 years;
  • Housing loans for 5 to 30 years.

Customer Requirements

Let us first try to understand the customer segment first before discussing about their requirements. Broadly customers are segmented based on their income levels as their need pyramid will vary with the rise in their income levels. Banks develop and market their products based on this segmentation and target the relevant segment for maximum conversion of business. The basic segmentation of customers based on their income levels is presented below.

Income Levels (Rs. Lakhs) Customer Segment
2-10 Mass Market
10-50 Mass Affluent
50-400 Super Affluent
400-4,000 HNW
4000-120,000 Super HNW
Above 120,000 Ultra HNW

The fundamental assumptions about customers for building retail banking products and services are briefly explained as follows:

  • Customers are different.
  • Needs of the customers are different
  • Each customer will have different sets of need for financial services.
  • The need requirements of customers for financial services will be unique.
  • Customers can be broadly grouped together based on their need pyramids.
  • Customers can be grouped together based on their income, age, geography, profession, employment, vocation gender and family size.
  • Product and services can be developed for a single or a combination of the above elements to satisfy most of the needs.
  • Products and services can be structured on a niche basis within one or any of the above elements.

♦Moslow’s Theory and Customer Requirements

 Maslow has defined five needs of individuals in their various stages of life. The needs start from the basic requirements and move up the value chain during the life stage progression. Obviously, the need ladder will also move up with the change in the life stage of the customers. If banks structure products and services to match the different stages in the need spectrum, banks will achieve the twin objectives of

customer satisfaction and business conversion. Let us demonstrate the above concept with the following

illustration:


Need Level  Matching Banking
Investment and Insurance Products
Physiological Needs Core Savings Accounts
Personal Accident Cover
Housing Loans
Security/Safety Needs Recurring, Fixed Deposit Products.
Life Insurance Products Endowment Products with low premium, long tenor and high maturity amounts.
Tax Planning Banking, Insurance and Mutual Fund Products
Social Needs  Consumer Loans
Personal Loans
Home Loans
Car Loans
Loans for Professional Development for Doctors, Engineers, Lawyers, Chartered Accountants, Management Consultants, Architects etc.,
Insurance Cover tagged to above loans.
Retail Gold Coins.
Health Policies for self and family.
Investment Products like Mutual Fund Schemes.
Systematic Investment Plans of Mutual Funds.
Unit Linked Insurance Products.
Esteem Needs Special Term Deposit Products.
Term Insurance Products.
Second Housing Loans/ Home Improvement/ Home Decor Loans.
Self Actualization Needs Pensioners Loans
Retirement Solutions in Banking & Pension Plans in Insurance
Senior Citizens Term Deposit Products
Customer Requirements about Service Quality

Service quality is what customers expect from Banks and has different dimensions. Following are some of the requirement s/expectations form the customers about the service quality of banks.

(a)Tangibles: Appearance of physical facilities. equipment, personnel and communication materials

  • Are bank’s facilities attractive?
  • Is my credit card statement easy to understand?

(b)Reliability: Ability to perform the promised service dependably and accurately.

  • Where an Officer says that the amount will be sanctioned in 2 days, does he follow up and inform the status?
  • Is my credit card statement accurate?

(c)Responsiveness: Willingness to help customers and provide prompt service.

  • When there is a problem with the bank statement, does the bank resolve the bank quickly?
  • Are the charges which are debited wrongly are recredited to my account properly,

(d)Assurance

  • Competence – Possession of required skills and knowledge to perform services.
  • Courtesy – Politeness, respect, consideration and friendliness of the contact personnel.
  • Credibility – Trustworthiness about the service provider.
  • Security – Freedom from risk and doubt.

(e)Empathy

  • Access – Approachability and ease of contact.
  • Communication – Keeping customers informed in a language that they understand.
  • Understanding the customer – Making an effort to know customers and their needs.

♦Service Quality

Savings Bank

The following dimensions revealed the service quality and delivery parameters for savings accounts:

  • Touch point Experience: Overall Measures – At an overall level, the PSU bank is comparable to the PS banks average across touch points.
  • Branch-Layout and Cash transactions: Performance across parameters above PS banks average.
  • Savings Account: No serious concerns on savings account; Parameters at or above par vis-a-vis private banks.
  • Branch Non-Cash Transactions: Scores on most parameters at par with PS Banks average.
  • Communication: Communication channels available along with information How to customer meets average expectations.
  • Problem Incidence/Recurrence – Very low problem incidence just like the industry.
  • Key Performance Indicator – Savings Account Activation Time – Account activation within 3-day window similar to industry average.
  • Key Performance Indicator – Welcome Kit Receipt Time – Close to 90% receive welcome kit within 14 days.
  • Customer Mindspace (Image Map) – The PSU Bank differentiated on problem resolution & delivering on promise, amongst its customers.
 Further Mreasures Needed to Enhance Service Quality

The study suggested further measures to improve the service quality to meet the customer expectations with regard to savings accounts.

  • Need to improve transaction time at the branch.
  • Branch offerings need to be relooked at, in terms of range of services offered, in light of people-related drivers being seen as driving overall customer satisfaction.
  • Lack of adequate channels is felt by the customer, in addressing his needs. Need to relook at current channels and their ease of access/usage for the customer.
Home Loans

The PSU Bank came second in the rankings for service quality with regard to Home Loans. Important service parameters satisfied by the Bank are listed below :

  • The PSU Bank index is above the average for the Cluster it belongs to.
  • Drivers of Satisfaction (Identifying the most important touch points): Product features and communication seen to be driving overall experience the most.
  • Overall Measures: At an overall level, the Bank scored above PS banks average across touch points.
  • Home loan parameters perform above PS banks average.
  • Communication channels & communication received from the bank, all score above PS banks average.
  • Loan Disbursement Time: Disbursement within the 14 day window for the bank far higher than Industry average.
  • Customer Mindspace (Image Map) -The Bank differentiated on responsiveness and customer service, amongst its customers.
Measures Needed to Enhance Service Quality

The bank has scored across parameters at par or above PSU banks’ average. But to enhance the service quality, bank has to take the following initiatives.

  • Bank has to focus on strengthening performance across parameters
  • Bank has to pay special attention to range of product features.
  • Proactive customer communication needs to have a systemic approach.
  • Customer-friendly modules on branch network, new products and services need to be developed.
  • Score comparatively lower on handling special requests.
  • Need to reorient employees, towards this key aspect of customer experience, through training and reviews around service time.
Customers’ Requirement from Banks

Generally, customers require the following from their bank/s for maintaining their accounts/relationship.

  • Right product mix to satisfy different customer segments.
  • Right channel mix (both direct channels and e channels).
  • Structured process time across products and adherence to the time prescriptions.
  • Delivery of the promises with regard to products/services and channels.
  • Satisfactory service experience from the delivery channels and the service personnel.
  • Effective Communication about the different products and services.
  • Transparent service charges.
  • Good ambience.
  • Effective and time bound greivance redressal mechanism.

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