The Hindu Business Line : CRM in banks

FOR long, Indian banks had presumed that their operations were customer-centric, simply because they had customers. These banks ruled the roost, protected by regulations that did not allow free entry into the sector. And to their credit, when the banking sector was opened up, they survived by adapting quickly to the new rules of the game.

Many managed to post profits. For them an unexpected bonanza came from government bonds in which most were hugely invested.

Ironically, the Reserve Bank of India's moves to cut aggressively the interest rates after 1999, pushed up the prices of bonds. So banks had a windfall doing almost nothing. The bond profits, like manna from heaven, improved the balance-sheets of all banks irrespective of their core performance.

However, the era of lazy banking is soon to end. The mesh of rules that propped up the Indian banking industry is now being dismantled rapidly.

According to a RBI road-map, India will have a competitive banking market after 2009. As one of the most attractive emerging market destinations, India will see foreign banks come in, what with more freedom to come in, grow and acquire.

Therefore, it is imperative that Indian banks wake up to this reality and re-focus on their core asset — the customer. A greater focus on Customer Relationship Management (CRM) is the only way the banking industry can protect its market share and boost growth.

CRM would also make Indian bankers realise that the purpose of their business is to "create and keep a customer" and to "view the entire business process as consisting of a tightly integrated effort to discover, create, and satisfy customer needs."

What is CRM, and what will it deliver to the banks? CRM is, probably, one of the least clearly defined business acronyms, as there is no single definition for it. It is probably easier to say what CRM is not. Unfortunately, CRM has also become a misnomer for a range of solutions from IT vendors, each providing its own spin on the idea.

CRM is variously misunderstood as a fancy sales strategy, an expensive software product, or even a new method of data collection. It is none of these.

CRM is a simple philosophy that places the customer at the heart of a business organisation's processes, activities and culture to improve his satisfaction of service and, in turn, maximise the profits for the organisation.

A successful CRM strategy aims at understanding the needs of the customer and integrating them with the organisation's strategy, people, technology and business process.

Therefore, one of the best ways of launching a CRM initiative is to start with what the organisation is doing now and working out what should be done to improve its interface with its customers. Then and only then, should it link to an IT solution.

While this may sound quite straightforward, for large organisations it can be a mammoth task unless a gradual step-by-step process is adopted.

It does not happen simply by buying the software and installing it. For CRM to be truly effective, it requires a well-thought-out initiative involving strategy, people, technology, and processes. Above all, it requires the realisation that the CRM philosophy of doing business should be adopted incrementally with an iterative approach to learn at every stage of development.

Only time will tell how Indian banks embrace the CRM philosophy and take on thecompetition from foreign entities.

(The author is Associate Professor, Madras School of Economics, Chennai.)

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