While Covid-19 gave tremendous pressure on Global and Indian banks, Indian banks surprisingly improved performance continuously in Covid-19. In the financial year 2022, public sector banks posted an 81 percent year-on-year (YoY) increase in net profit. The improvement in net interest income (NII) which was recorded at 18.5% and the reduction in provisions for bad loans resulted in the growth which resulted in a profit increase of 91.3 % for PSU banks. Pundits are saying the fall in the cost of funds and abundant availability of funds helped. Net interest margins were also between 3.6% for the majority of PSU banks.
We researched 9 PSU banks that have released their Q 4 results and found that four strategies were common with all the PSU banks which showed growth under Covid. All the banks transformed their operational model. Banks invested into customer services and data management by investing in customer back process transformation, banks also built more transparency and simplified their integrated marketing communication by product and service simplification , all the banks went for aggressive digitalization .
Let's see how one large bank SBI and a newly amalgamated bank PNB increased customer-backed process transformation to increase wealth for customs and value for the firm.
State Bank of India whose share value doubled in the last few months increased the service quality by launching PAPL (Pre-Approved Personal Loan), PAXC (Pre-Approved Xpress Credit), and PAPNL (Pre-Approved Pension Loan), INSTA Top-up for Xpress Credit and Insta Top-up for Pension Loan for individual clients. SBI increased its business-to-business value proposition by starting a Unified Corporate Banking setup for corporate clients. SBI YONO Business provided Single Sign-On for customers to access five applications via CINB, CMP, SCFU, e-Trade, and e-Forex.
Customers using digital applications not only help the bank in reducing costs but also give important data for future product and service enhancement venues. Hence to attract customers and make them digital savvy, customers were provided online onboarding of CINB, e-Trade, and e-Forex.
YONO mobile banking app positioned itself as a lifestyle app where in other than financial services varied portfolios like investment, insurance, and shopping solutions were provided. This helped SBI to reduce its operating expenses and customer acquisition and retention costs Cross selling further helped in increasing margins. SBI upgraded its online Complaint Management System (CMS) in which a customer in real time gets serviced.
Other banks were not far behind. Punjab National Bank (PNB ) which had its challenges with the integration of all branches of eOBC and eUNI with PNB did an amazing transformation which resulted in a reduction of % of net NPA to 4.8 in march 2022 from 5.73 in march 2021.
PNB upgraded from Finacle 7 to 10 in record time, without affecting customer services. started the Video KYC process for opening a Saving Account through online mode. PNB upgraded its digital infrastructure which resulted in digital transactions increasing by 56 percent and UPI transactions increased phenomenally to 123 percent.
Like SBI, PNB also launched a mobile app named -Bank’s ‘One for All’ and ‘All for One’ . This app crossed more than three million users. PNB customers required forex for multiple applications from personal to business reasons. PNB launched Trade Finance Redefined Portal. This portal helped excellent service to customers online as well as collects important data for future consumption.
PNB had a lot of rural customers too. Rural and semi-rural customers were scared of using online apps as well as did not trust the outsourced staff of the bank. PNB launched ‘Gram Sampark Abhiyan’, where more than thirty thousand camps were organized to make the rural customers directly interact with PNB staff and learn about digital usage of apps and enroll for social security and credit facilities. For outreach, PNB launched apps in various regional languages.
Backed by government policies PNB launched Online Overdraft (OD) Against Fixed Deposit (FD). These initiatives not only increased the trust of customers in PNB but also helped PNB in reducing costs, increasing services as well as attracting and retaining customers.
A small step by banks in the process of transformation linked to customer value creation not only helped Indian PSU banks to increase value for the customers thus willing to pay but also helped the bank reduce cost and increase margins and reduce risks.
Dr. Prashant Salwan, Professor of Strategy and International Business at IIM Indore.
Dr. Srinivas Iyengar, Director and Professor at JBIMS.
