Submission of Assignment On

Present Status & Future Potential of Relationship Banking in Bangladesh (Present Status of Relationship Banking, Service Management, Relationship Monitoring, Overcoming Customer Complaints & Future Potential of Relationship Banking in Bangladesh)

Submitted to: Q.G.M. Farooqi & Rexona Yesmin, Honorable Course Co-ordinator

Submitted by:

Md. Shahidul Islam, EXIM Bank Ltd. Md. Nazmul Islam, BASIC bank Ltd. Farid Ahamed, BASIC bank Ltd. Mohammad Anisuzzaman, ONE Bank Limited Mohammad Kamal Uddin Patwary, Islami Bank BD. Ltd.

Introduction:
Relationship Banking is a strategy used by banks to enhance their profitability. They accomplish this by cross-selling financial products and services to strengthen their relationships with customers and increase customer loyalty. Relationship banking involves offering customers a broad array of financial products and services that go beyond simple checking and savings accounts. In addition to these two basic products, relationshipbanking products may include certificates of deposit, safe deposit boxes, insurance, investments, credit cards, loans and business services (e.g., credit card processing). They may also include specialized financial products designed for specific demographics, such as students, seniors or the wealthy. Banking has become increasingly competitive financial services industry with fragmented customer groups, their heterogeneous expectations and ever-changing global economic challenge. Besides, technology with sophisticated facility is making banking industry new every morning. To be fit against these challenges, it is necessary to appear close to the customers with technology driven long-term stable relationship. Reporting the attitude of the forty seven banks towards technology and relationship, we emphasized on imperative importance of technology and relationship in profit maximization, increase in quality of service, reduction in cost of bank operation and diversification of bank income sources. Private and Foreign Commercial Banks are pioneers banking facilities with technological development maintaining better relationship with the customers, while local public banks (NCB) are lagging behind. Only a few decades ago, bankers had little regard for relationship banking. The bank building was created in the image of a Greek temple, calculated to impress the public with the banks importance and solidity. The interior was austere, and the tellers rarely smiled. Going to the bank was just a nightmare. Customers waited in long queues for hours for one small service not to mention the unimaginably rude behavior of the employees. And asking for a loan was like facing a judgment in court. This was the banks posture before the age of relationship banking.

Present Status of Relationship Banking:

The concept of relationship banking received prominence in the 1970s when the world economy faced two-fold threats the oil shock in 1973 and the maturity of old industries like Coal, Steel, Iron etc. that forced banks to practice the KYC (Know Your Customer) concept in order to ensure stable earnings. This was further augmented as the world business environment entered an era of LPG (Liberalization, Privatization and Globalization) that increased competition and threats as well. As markets expanded and businesses boomed the world over the economy saw a mushrooming of banks catering to a varied segment of customers with each bank suitably tailoring its services to satisfy particular segments of customers. Banks began to position themselves in peoples mind for example, HSBC as the worlds local bank. Unlike before even the very average customer now had a choice of which bank he would want to go to. To the bank it meant carving out a niche in the customers mind, a very special place so that the customer would return to the bank over and over again. In fact, this is the basic philosophy of relationship banking where both bankers and customers would form solidarity to share joint success in business.

In Bangladesh, the practice of relationship banking is still in its nursery stage. Bankers of Bangladesh have recently learned the importance of relationship banking in management of earnings. Now, a bunch of private banks like DBBL, Trust bank, Dhaka Bank, BRAC bank, Jamuna Bank, Prime Bank, Bank Asia, Eastern Bank and so on is providing greater care to manage their depositors and customers. Banks are also spending a significant amount of money for selecting a good location for their branch, acquiring latest technologies, designing new products and services, offering good packages for their employees and designing friendly interiors for their branch. As competitions are growing in the banking sector, customers are being well treated by the bank officials as they fear that customers now have enough opportunities to change their banks. However, the relationship banking system which was so far being observed in the banking system of Bangladesh, is limited to improving customer cares only. The broader context of relationship banking , which

provide emphasis on building solidarity with regulators, customers, depositors and fellow bankers by way of designing superior products, services, and behavior, are yet to observe in Bangladesh. Nevertheless, the banking system in Bangladesh is now more customers oriented and competition oriented, which was not present in early 1990s, and now customers are not treated as an outsider to the bank. As the bankers of Bangladesh are approaching towards a new era of competition and efficiency, both in the domestic and international market, the popularity of relationship banking would surely smile on bankers in its full phase because of its power are stable earnings.

Like other countries banks are important role players to the economy of Bangladesh. However, to survive in a competitive business environment banks need to focus on building and maintaining client relationships and to identify how their employees influence these relationships. Today, many businesses such as banks, insurance companies, and other service providers realize the importance of customer relationship and its potential to help them acquire new customers retain existing ones and maximize their lifetime value. At this point, close relationship with customers will require a strong coordination between IT and marketing departments to provide a long-term retention of selected customers. Relationship banking is a sound business strategy to identify the banks most profitable customers and prospects and devotes time and attention to expanding account relationships with those customers through individualized marketing, re-pricing, discretionary decision-making and customized service- all delivered through the various sales channels that the bank uses. Now a days relationship banking includes financial services marketing in which a banks customer service representative (also called account officer, customer relationship representative, personal banking officer etc.) attempts to meet a customers need with a complete package of facilities. The package may include most or all of services such as cash management, credit cards, deposits, loans, money market investments, etc., that may be summarized.

Relationship banking emphasizes on managing relations among depositors, borrowers and regulatory bodies with ultimate object to earn sustainable growth in banking business. It enables banks to provide a cost-effective, win-win service to the valued customers. Relationship banking requires developing and internalizing customer care values and listening to the most critical voice in the market. It is aimed at creating a long term, mutually beneficial and exclusive problem solving relations between customers & bankers with a view to holding loyalty of t he customers. Side by side, relationship banking focuses on building solidarity with the fellow banks and regulators. Hence, in todays competitive banking industry market, the practice of relationship banking is viewed as a key to corporate successes. Bankers of Bangladesh have started recognizing the importance of relationship banking in management of earnings. Now, our banks are providing greater care to manage their depositors and customers. Banks are also spending a significant amount of money for selecting a good location for their branch, acquiring latest technologies, designing new products and services, offering good package for their employees and designing friendly interiors for their clients. As competitions are growing in the banking system of Bangladesh, customers are being well treated by the bank officials, as they fear that customers now have enough opportunities to change their banks.

Relationship Monitoring:
Bankers of Bangladesh have started recognizing the importance of relationship banking in management of earnings. Therefore, relationship monitoring process has been adopted by almost all the banks of our country in which existing and potential customers are being monitored softly. Now, our banks are providing greater care to manage their depositors and customers. Banks are also spending a significant amount of money for selecting a good location for their branch, acquiring latest technologies, designing new products and services, offering good package for their employees and designing friendly interiors for their clients.

Relationship monitoring is being observed by the private commercial banks as competitions are growing in the banking system of Bangladesh. Now a days, Customers are being well treated by the bank officials named as Relationship Manager, as they fear that customers now have enough opportunities to change their banks.

The main responsibility of Relationship Manager of a bank to improve the relationship between an organization and its clients using methods such as efficient communication means and implementing measures to improve customer services provided.

Other roles of relation managers include managing disputes raised by customers and conflict resolution between customer and company.

They are also performing Marketing activities that are aimed at developing and managing trusting and long-term relationships with larger customers.

In relationship monitoring, customer profile, buying patterns, and history of contacts are maintained in a sales database, and an account executive is assigned to one or more major customers to fulfill their needs and maintain the relationship.

Customer service, which includes service over the counter, over the telephone and through correspondence, is a question of customer relations. Our main motto or slogan is Relationship Banking through Relationship Monitoring

In relationship monitoring the customer deserves the most courteous and attentive treatment that we can give him. We listen more than we speak; smile more than we frown.

We always believe, remember and endeavour to live up to to the banks ideal: The Bank with a Personal Touch.

Service Management:
In order to promote customer loyalty and satisfaction, the feeling has to be good. Some major tools that can be leveraged to promote customer satisfaction: Differentiation-Service should be extended in such a way that the customer is easily able to appreciate the difference. It should be designed for distinction. In marketing differentiation plays a major role in securing businesss. Speed- Speed is another parameter of importance in service. Faster the progress of work and lesser the time taken, the more satisfied is the customer. Many times the customer becomes impatient with the processing time taken in the service because he is more worried with the result and secondly it is difficult to set quality standards in service. In ebusiness, if the speed of download is slow, the customer is not going to wait; he will switch to another site. Trust Building- Trust is very important in service. Most of the service contracts are awarded based on trust. Since service is a feeling, it is necessary that trust is built up right from the beginning with the customer to ensure that he has both comfort and confidence. Personalise- personalising the service, making the customer feel important and devoting time to understand his requirement makes the customer attached to the vendor and builds a bond of emotion and trust. Personalisation of the service is the biggest Satisfaction provider. Deliver End-to End service- Any service provider should offer total service (end-to-end service). Total service capability also increases the customer retention rate. Many banks are now offering savings-cum-fixed deposit combined facility. They are also taking separately portfolio management services. The bank can offer such services to valued customers in a focused and combined way. Price/Cost of Service- This is one of the greyest areas that cause widespread dissatisfaction among customers. It must be remembered that the cost of the service is a sensitive issue for the customer and plays a major role in his satisfaction. Listen to another people around you- no matter what their experience or lack of it and listen without judgment- every opinion is a valid one. If you listen two or three ideas together they

can often spark a fourth, which you wouldnt have arrived at if youd heard them with a judgment Use praise- use praise more frequently and more sincerely than youve ever done in the past. If you cant say something positive, dont say anything. Always be seen to be fair and honest. Share your concerns- Managing a customer service team is not an easy job. You need to be decisive and have the confidence and courage that inspires people, there is much to be gained from being open and sharing your own hopes, dreams and concerns. Remind people what youre doing, where youre going and why you do what you do Become a teacher- Instead of finding fault, managing by exception, and pointing out where people are going wrong, become obsessed with helping people become twice as good as they are now. There is nothing more satisfying than seeing other people around you do well, especially if you know youve contributed to that. Dont ask yourself what can I do for myself? Instead, ask yourself how Can I help my team become a better team? Only do the most important things- Ask yourself that question or a version of it every single minute of the day: Is what Im doing now helping directly or indirectly to increase the number and quality of the customers our organization has? Because if it doesnt affect the customer, it shouldnt be done.

Overcoming Customers Complaints:

The customer will raise an objection to buy the product when he has an unanswered question in his mind. Sometime this objection will be due to a lack of information, or poor understanding of various aspects of the product. It is essential that the seller can recognize objections, determine how to overcome them, and whenever possible anticipate them in a systematic way. Types of Objections: 1. Fundamental Objection: The fundamental objection is the most difficult to deal with since the customer is rejecting the product outright. However, before accepting this, be certain that it is a truly fundamental objection by proving for his real problems. This type of objection may raises because of say, lack of knowledge. For example-

Statement: I have no use for a credit card. 2. Credibility Objection: It is raised when the customer is uncertain of your standing in the market and can be overcome, for example, be pointing to business levels in the market and any favorable press comments. 3. Loyality Objection: Many prospective customers raise a loyality objection arising out of their long association with their existing bank. In overcoming the objection do not criticize the competitors, but concentrate on the positive reasons for buying the product from you. 4. Delay Objection: The customer at times will introduce reasons for postponing a decision. Such a delay often hides the true reasons for objecting. For example, he may say: The decision is not mine, I have to talk my Chairman. To overcome this objection seeks out the reasons for postponing the decision to buy, If he needs more information give it to him. 5. Hidden Objection: This objection can be an extension of the delay, which is simply not being expressed openly. 6. Price Objection: Sometime customers compare the price you offer with the competitors. In handling a price objection always prepare for the negotiations in advance, concentrate on explaining the benefits and bring out the added value compared with competitors. 7. General feature Objection: More generally, objections will be raised over features of the product, which represents a misunderstanding of the benefits to him. To overcome this problem it is needed to prepare the benefit analysis in although manner and ensure that the benefits are strongly presented to the customer. Advantages of complaints Feedback Deficiency Identification Generic Defects Identification Market trends and behaviour Customer needs and perception

Classification of Complaints:

How to make every Customer a SPECIAL Customer S peed P ersonalise E xceed exceptions C ompetence I nformation A ttitude Can do L ong-term relationship Some Features of Customer complaints In spite of all the best efforts made, by not coming up to his expectations a customer being frustrated may raise complaints. A complaint is a positive indication that though the customer is unsatisfied, he is still not ready to migrate and if his grievances are addressed properly, he may continue to remain with the supplier. The most redeeming feature of a complaint is that the customer is still talking and is hopeful of some positive outcome. The relationship is still in place. The complaints are like early warning system and are to be taken like that. They indicate dissatisfaction of the customer. If not handled properly or given due attention or discouraged, it may lead to loss of customer himself.

On the other hand, if handled properly, they may result in enhanced customer satisfaction and loyalty. It may also add to the mutual understanding already existing and may further strengthen the relationship bond between the banker and the customer.

Thus those managers, who are allergic to complaints, must realize that it is not a bad thing in itself and it is the outcome of positive feeling. It is what a banker does after receiving the complaint that makes all the difference. Characteristics of Good Complaint Management System A good complaint handling system should have the following features:

There should be a single window to receive complaint from the customer and respond to it. It should work directly under a senior management cadre official reporting directly to board level.

The system should be responsive. The customer will then find it easier to share their concern, comments and compliments. The system should be able to maintain confidentiality. It should have the facility to sort out complaints and classify them in different categories as per classification discussed. It should be able to segregate casual complaints from serious ones. It should have a mechanism to acknowledge the complaint and keep the customer regularly informed of the status of his complaint redressal. The company can also provide access to customer ON LINE complaint status system through CRM software. It should ensure that the status is regularly updated. The customers frustration increases if he is not able to get the status of his complaint redressal.

It should be able to fix a time schedule for resolving the complaint. This helps in fast action and at the same time it sets a target for concerned people to work for and improve upon. The system should be able to refer complaints to the proper division depending on its nature and have a mechanism to monitor the complaint resolving progress like identification of cause, proposed action plan and its status. As a company, it should, on its own, convey to customers at regular intervals important information related to his complaint and status on the rectification plan and time schedule. It should also keep the customer informed of any unusual thing noticed in a fully transparent way.

Once the complaint is resolved, it should send a formal reply to the customer mentioning in brief the identified cause with related details and the remedial action taken. This will help in

restoring confidence of the customer. In case the failure was a result of negligence of the customer, this must be politely but firmly indicated to customer along with advice to avoid its recurrence in the future. In case the failure is attributed to the customer and the supplier would like to charge for his services, the company should inform the charges and details thereof to the customer along with the cause of failure and should undertake future work only on acceptance of charges or finalisation of same with the customer. It should be able to keep a record of complaints so as to identify generic complaints and alert the concerned departments to take appropriate measures. It should compile and monitor statistical data on complaints to look into its orientation and rate of variation of numbers. This will provide important insight into the suppliers product quality, process and effectiveness of measures taken by the supplier for complaint management. If the type of complaint and its frequency is not showing any decline, it only indicates that either the companys divisions are not taking the complaints redressal measures seriously or there is something fundamentally wrong somewhere. The complaint should be analysed to ascertain whether it is generic or having a past history or is an entirely new one. In case it is of generic nature, the company must revisit earlier actions that were taken and examine reasons for their failures and take corrective measures. If need be, it can refer problems to R & D department or constitute Cross Functional Team (CFT) of experts or may take the help or renowned experts in the field so that a permanent solution can be established. If the problem is a new one, it should be referred to the concerned group for further investigation and cause identification. This group should take help of others if so required so that comprehensive investigation can be done and cause can be identified. In order to address the complaint fully, it is necessary to identify the cause correctly and the factors contributing to it. After identifying the cause, the company must work out the action plan. After the remedial measures are taken, the company must demonstrate to the customer that the deficiency has been removed. It is also advisable to share with the customers reasons for such deficiencies and the action plan. This helps in reclaiming customer confidence and trust and in comforting the customer that the problem has been fully taken care of.

The Objection handling process Step-1:Encouraging Encouraging is the most important and difficult step because it runs counter to what most people do when they feel thay are being attacked. Key encouraging actions: - Do not try to answer the objection at this point. - Acknowledge the customers right to object and indicate your willingness to let the customer express his or her reservations completely. - Listen carefully to what he or she has to say. Show empathy. Understand how the customer feels by putting yourself in his or her place. - Use this step to begin thinking about the best way to resolve the objection. - Encouraging the customer is not the same as agreeing with the customer. You do not need to agree with the customers opinion. You do need to agree with his or her right to express honest feelings during the sales calls. - When in doubt, ask the customer to elaborate. Step 2: Questioning Frequently, the real objection is different from what the customer first expressed. Ask question to: - Clarify the objection - Discover the customers specific concern. Key questioning actions; - Do not assume that you understand the objection. - Do not belittle the questioning phase or appera to cross-examine the customer. - Encourage the customer to keep him or her involved. Step 3: Listening When the customer talks, listen attentively for: - Feelings the person seems to be conveying - Factual information that he or she is sharing with you. Key Listening actions: Take notes to remind you of key points to return to at a later date. - Do not interrupt - Actively listen, so you really understand the objection.

Step 4: Confirming Check your understanding of the problem before responding. Before you proceed, you must: - Know what the customer is thinking - Demonstrate that you understand the objection. Key confirming actions: - Summarise what you have heard - Check your understanding with the customer.

Step 5: Providing You should answer the objection as specifically as possible. Objections and their appropriate responses usually fal into one of four general categories. Actions: -Clarify and explain - Provide examples, references or evidence. - Show how advantages outweigh disadvantages - Respond with a plan to address the complaint.

Step 6: Checking Check to see if the customers objection has been resolved. You might ask outright if your response has been satisfactory. If not, start the process again by encouraging the customer and by asking questions to draw out the real objection. Key checking actions: - Ask the customer directly if they are satisfied with the resolution. - If not, repeat the six-step process.

Future Potential of Relationship Banking in Bangladesh:

Relationship Banking is a broad approach for creating, maintaining and expanding customer relationships. This is the business strategy that aims to understand, anticipate, manage and personalize the needs of an organization's current and potential customers. At the heart of a perfect strategy is the creation of mutual value for all parties involved in the

business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering and developing existing customer relationships in addition to creating and keeping new customers. So the concept of product life cycle is giving way to the concept of customer life cycle focusing on the development of products and services that anticipate the future need of the existing customers and creating additional services that extend existing customer relationships beyond transactions. Bank merely an organization it accepts deposits and lends money to the needy persons, but banking is the process associated with the activities of banks. It includes issuance of cheque and cards, monthly statements, timely announcement of new services, helping the customers to avail online and mobile banking etc. Huge growth of customer relationship management is predicted in the banking sector over the next few years. Banks are aiming to increase customer profitability with any customer retention. This paper deals with the role of relationship banking in banking sector and the need for it is to increase customer value by using some analytical methods in relationship banking applications. It is a sound business strategy to identify the bank's most profitable customers and prospects, and devotes time and attention to expanding account relationships with those customers through individualized marketing, pricing, discretionary decision making. The present day relationship banking includes developing customer base. The bank has to pay adequate attention to increase customer base by all means, it is possible if the performance is at satisfactory level, the existing clients can recommend others to have banking connection with the bank he is operating. Hence asking reference from the existing customers can develop their client base. If the base increased, the profitability is also increase. Hence the bank has to implement lot of innovative relationship banking to capture and retain the customers. There is a shift from bank centric activities to customer centric activities are opted. The private sector banks in Bangladesh deployed much innovative strategies to attract new customers and to retain existing customers. Relationship banking is still in evolutionary stage, it is the time for taking ideas from customers to enrich its service. The use of relationship banking has gained importance with the aggressive strategies for customer

acquisition and retention being employed by the bank in today's competitive milieu. This has resulted in the adoption of various relationship banking initiatives by these banks.

Steps to follow The following steps minimize the work regarding adoption of relationship banking strategy. Identification of proper relationship banking initiatives Implementing adequate technologies in order to assist relationship banking initiative Setting standards (targets) for each initiative and each person involved in that circle Evaluating actual performance with the standard or benchmark Taking corrective actions to improve deviations, if any

Conclusion:
Relationship banking is concerned with attracting, maintaining and enhancing customer relationship in multi service organizations. Relationship banking goes beyond the transactional exchange and enables the marketer to estimate the customer's sentiments and buying intentions so that the customer can be provided with products and services before the starts demanding. Customers are the backbone of any kind of business activities, maintaining relationship with them yield better result. Technological shift in Banking sector can ensure convenient relationship with the customers. Technology and relationship are vital for banking decisions. Higher investment and proper use of technology can reduce cost, risk, asymmetric information and can increase profitability and banks competitive advantage. Respect toward relationship with customers will increase stability of profit, increase asset quality and will assist in setting up thirst sector.