The Indian banking system is generally well-regarded globally. It has successfully braved a number of global economic slowdowns over the last few decades, has a mature and respected regulator in the Reserve Bank of India (RBI), a good mix of banking spread and competition amongst a number of public, private and foreign banks in operation.

But there is always considerable discussion and ongoing debate on adequacy of population coverage of banking products and services financial inclusion) and the quality of banking services delivered, pointing to a need to strengthen banking infrastructure (including its penetration, NPA levels, capital adequacy and technology) and the quality of banking services in India.

Given the ambitious goal of faster economic development that India has set for itself, as it aspires to climb the ladder of success, relative to other developed and emerging economies, it may be necessary to strengthen the mothership of the economy — the banking and financing eco-system.

Scope for improvement

Banks in India are clustered in three broad groups based on ownership — public sector, private sector and foreign — and there are varying degrees of perception across sectors and consumers of the efficiency, efficacy and customer-centricity of different banks.

On customer service, the RBI’s approach focuses on driving protection of consumer rights and enhancing the quality of customer education, service and grievance redress. A walk-through of bank premises and websites of different banks indicates communication publicising the same.

However, even a cursory scan of customer feedback and complaint forums indicates that there is opportunity to improve the service levels being delivered on the ground in many banks.

The total number of banks in India is fairly large at 157 , of which 26 public sector, 20 private sector and 43 foreign banks together have a market share of over 90 per cent of the banking assets (although about 82 per cent of the branches are from the public sector banks).

As per the World Bank financial inclusiveness ranking data, banking penetration is about 53 per cent in India (i.e. from population of 15 years and above) against a global average of 62 per cent and with developed countries having a penetration rate in the 90 per cent plus range.

So should we add more banks/branches, or focus on improving the service levels of banks in India?

While the right answer is most likely “both”, the view being expressed is that it is necessary to measure and objectively benchmark the product and service quality being delivered to customers.

Measuring customer satisfaction And to establish this with unambiguous clarity and set a baseline for improvement, we should measure the banking sector’s effectiveness (as seen by customers) objectively and independently.

Is this possible?

Yes, this is already being done for several years in several countries such as Singapore, the US, the UK, Sweden and Canada.

Customer satisfaction is now an established body of measurement science and there are a few citizen satisfaction measurement and benchmarking methodologies in use such as the American Customer Satisfaction Index (ACSI) and more.

ACSI introduces prolific insights and highlights various benchmarks by players in the industry. It aids us to understand customer satisfaction rating based on a study of companies year on year. Through one of its recent reports,

ACSI has underlined the progress chart of various companies including PNC bank from 69 per cent in the year 1996 to 78 per cent in 2015, Bank of America from 67 per cent in 1995 to 68 per cent in 2015 and more.

Measuring such customer satisfaction enables the bank management, policy makers and managers to better understand their customers’ expectations, helping to identify sub-groups of users, their needs and expectation gaps. It also helps the bank management identify which specific elements of product and service delivery drive satisfaction and so which need to be actioned on priority for greatest impact on customer satisfaction, as well as monitor the impact of reforms on end-users.

Such methodology to measure end users’ satisfaction with banks can be done in India as well. Imagine how transformational

it will be if we can measure (objectively and independently) and publish the same openly and frequently (say every year or more frequently), end-customer satisfaction scores with banks. And not just publish the satisfaction scores to drive competitiveness but also provide banks the diagnostics on what specifically to improve to enhance their scores.

This will not just improve the operation and utilisation of India’s existing banking infrastructure but also improve end-customer satisfaction.

(Bawa Grover is Managing Partner, Hexagon Consulting)

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