Description
The document that includes the loan disbursement process of a bank in india.
2009
Service Operations Management
Report prepared by: Garima Chandra XXXXXXXX for Service Operations Management
Service Operations Management
2009
Strategy Development and Deployment of LDP of an Indian Bank
HDFC (Housing Development Finance Corporation Limited) was incorporated in 1977 with the primary objective of promoting home ownership by providing long-term finance to households for their housing needs. Thus, in the paper, we are considering only housing loans (including home purchase loans, home extension loans and home improvement loans). The customers will broadly include individuals and corporate organizations. How has the bank addressed the Service Core Characteristics namely, a) intangibles and b) high customer contact? Intangibles Intangibles broadly include those elements that cannot be touched, defined or measured. The bank has addressed intangibles by ensuring the following: ? Reliability: Ability to perform the promised service dependably and accurately o Providing correct information about schemes o Consistency of service across all branches o Maintaining a good quality of service o Providing safety in all transactions Responsiveness: Willingness to help customers and provide prompt service o Speedy processing of loans (clubbing the process into shorter steps for the customer) o Quick loan sanctions (as customer volumes increased, the bank moved from loan approval by centralized committee – meeting once in a fortnight – to branch level committee – meeting once in a week, and finally to online system that makes loan approval much faster) o Customer care centre (eg. 24-hour helpline, online help, SMS alerts)* o Keeping the customer informed right from the beginning by means of customer charter/customer rights Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence o Trained front office staff o Friendly and cordial problem addressing that is easily understood by the customer o Hassle-free transactions Empathy: Caring, individualized attention the firm provides its customers. o By breaking down operations from centralized to branch-level to provide personalized services o By segmenting customers as individuals and corporate organizations and dividing them according to their net worth to provide customized services o Door-step services (since the form collection, submission and interview is clubbed into a single step)
?
?
?
*Assuming that since loan approval is now on-line, the bank has upgraded its service features also and online application and mobile alert facilities are available. High Customer Contact
2
Service Operations Management
2009
Although the LDP was redesigned in a manner to reduce customer visits to the bank, the bank still ensured high customer contact by ensuring the following: ? ? ? Speedy processing, thus shorter time to contact customer Making the system online. Thus the customer can download the application form according to his own convenience. SMS alerts, 24-hour phone helpline, online help
How the bank addressed the four key steps of the Strategy Development Process covering Mission, Objectives, Strategy and Tactics? Mission: To maintain itself as a dynamic, customer centric bank, while providing uniform value-added services across India, in an environment of trust and transparency. Objective: The objectives of the bank include: ? ? ? ? To respond quickly to environmental changes (both external and internal), keeping the priorities of the customer in mind To provide customized and flexible services to each customer To standardize the process keeping a pan-India presence in mind, to provide a uniform customer experience at each branch To keep the LDP system and loan approval/disapproval transparent for the customer and employees
Strategy: Changes in the Indian banking environment in the past few years: ? IT boom ? Foreign banks setting up branches in India ? Increased customer spending. As a result of increased competition, new service standards set by foreign banks, and increased customer spending, HDFC had to design the service process in a manner that approved the loans in the fastest and most convenient manner. Flexible and customized services also had to be provided. Bringing the whole loan distribution system online became a necessity. Product design and advertising strategies also had to be designed in a customized manner, and adequate market research had to be conducted. In wake of the increased competition, branding became another need, due to which customer “experience” at each branch had to be made uniform. Ethical practices and transparency also came into play by the influx of foreign standards in the Indian Banking scenario.
3
Service Operations Management
2009
Due to all these factors, employee satisfaction, motivation and retention also became a major element for which strategy had to be implemented. Tactics: Online system: loan approval system to be made online, setting up of a call center/customer care centre that can respond to customer needs, online application forms and submission, legal documents to be submitted listed online, SMS alerts/queries To implement the strategies, services can be defined in the following manner: I. Pre purchase, During purchase, Post purchase a. Pre Purchase: Advertising, cold-calling, creating a value-statement that may help a cautious customer select bank more easily, corporate tie-ups, clear instructions of the loan schemes and documents while the customer making the decision. b. During Purchase: Maintaining a sound well-lit and accessible branch office, creating a customized product range according to customer segments (individual customers, corporate clients) and net worth of the customer (high income, low income), flexible repayment options, providing a personalized officer to each customer to cater to specific individual requirements and advise appropriately on different schemes(type of officer can be allotted according to the segment and type of the customer and the loan amount), standardized process(no scope for bargaining, speedy delivery). c. Post Purchase: Keeping in regular touch with the customer (to create repeat customers), use of call centre for query solving, FAQs on the website, online help, regular letters to the customer around the EMI schedule/on important festivals and occasions. Back office service, Front office service a. Back Office (making the service go to the customer): Technology (technical support, website maintenance, online query solving, mobile banking facility), Finance and risk management (site visit, verification of the customer, monitoring of the EMI payments, allotment of the personalized officer according to the loan amount), Sales and advertising (market research and promotional activities). b. Front Office (customer coming to service): Reception, help-desk, personalized officer, person to collect and verify documents, customer complaints addressing, prompt service (lines, cashiers etc.). Delivered service as expected, Delivered unexpected service at random, Delivered unexpected service as a routine a. Delivered service as expected: flexible and personalized service, hassle free transactions, friendly service, appropriate processing time, help in choosing the right home, fast customer complaints addressing and appropriate action, electronic funds transfer b. Delivered service at random: Doorstep service (to collect documents, explain loan schemes if loan amount is huge, or if customer is of high net worth/corporate client), thank you cards, free applications forms (after March 1995), extremely fast loan approval c. Delivered service as a routine: SMS alerts, free internet banking, e-cheque system, online status checking, request for amount to be increased over the phone/internet, reward and value card
II.
III.
4
Service Operations Management
2009
Development of a suitable model for the bank’s strategy deployment Loan distribution process of a competitor Indian bank: Step 1 - Initial Loan Application The first step involves discussing the borrowing needs and financial situation of the customer with a loan officer. This information assists in completing an initial loan application and the loan officer may also request available supporting documentation for some of the information provided on the application. Disclosure material, giving an estimate of fees involved in the loan transaction, may also be provided. Step 2 - Underwriting Based on the information on the application, any supporting documentation provided up-front, and the customer’s credit history, a loan decision is made. A loan approval might be contingent on additional supporting documentation or clarification of certain issues. Step 3 - Processing Once the loan is approved, it is processed to be prepared for funding. Processing includes: Ordering an appraisal for the subject property Opening escrow Ordering a title report Coordination with a variety of entities to collect and organize the supporting documentation and to clear all approval conditions determined at underwriting This requires close contact with the borrowers, realtor, appraiser, loan officer, credit report company, title company and escrow company. Step 4 - Loan Closing Document and Funding After the loan has been approved and all critical conditions are satisfied, the loan closing documents are prepared and sent to the escrow company for the customer’s signature. These documents consist of the note, deed of trust, and other legal/compliance related documents. The documents are then returned to the lender for review. If the documents are signed properly, and all approval conditions are met, the bank disburses the loan proceeds to the title company. The loan is now "funded". At HDFC, the loan distribution process is deployed in a similar manner, except that various steps are clubbed together to reduce the turnaround time and provide better customer service. The loan deployment process can be further improved by: ? ? ? ?
5
Service Operations Management
2009
Thus in this process, the customer actually needs to go to the bank only once or twice (Step 3 and Step 4). This makes the process speedy and convenient for the customer, making the whole process customer centric. To make the process simple and transparent for the employees, the entire task is not done by one individual but instead is broken down into jobs by different persons, according to the requirements and work specialization. The jobs may also be grouped together based on certain factors like functional or geographical factors. e.g. for each of the category, like loan verification/approval, dealing with cash, or sales, there may be a separate department. For geographical departmentalization, there may be regional managers. Since a single personalized officer is allotted to each customer, product and process departmentalization may not be present. Review and monitoring may also be performed by regional managers, if a loan is not approved/rejected within a given time frame, and appropriate actions may be taken. Conclusion The essence of a good Loan Distribution Process (LDP) of HDFC in India is well informed and well behaved staff, increased use of technology, standardization of the process, eliminating the contact between the staff and the loan approval committee leading to a more transparent system and leaving no bargaining power to the customer. The system should be such that it can actively respond to the changes in the environment, in accordance to the customer priorities. References ? ? ? ACCION International, Designing a Customer Service Strategy, SEEP Annual Meeting & Workshops, 23 October 2003 Websites of HDFC, Citibank, East-West bank, Rupee Times and Banklady.com Notes of Dr. R. H. G. Rau, Service Operations Management, NMIMS, July 2009
6
doc_591795607.docx
The document that includes the loan disbursement process of a bank in india.
2009
Service Operations Management
Report prepared by: Garima Chandra XXXXXXXX for Service Operations Management
Service Operations Management
2009
Strategy Development and Deployment of LDP of an Indian Bank
HDFC (Housing Development Finance Corporation Limited) was incorporated in 1977 with the primary objective of promoting home ownership by providing long-term finance to households for their housing needs. Thus, in the paper, we are considering only housing loans (including home purchase loans, home extension loans and home improvement loans). The customers will broadly include individuals and corporate organizations. How has the bank addressed the Service Core Characteristics namely, a) intangibles and b) high customer contact? Intangibles Intangibles broadly include those elements that cannot be touched, defined or measured. The bank has addressed intangibles by ensuring the following: ? Reliability: Ability to perform the promised service dependably and accurately o Providing correct information about schemes o Consistency of service across all branches o Maintaining a good quality of service o Providing safety in all transactions Responsiveness: Willingness to help customers and provide prompt service o Speedy processing of loans (clubbing the process into shorter steps for the customer) o Quick loan sanctions (as customer volumes increased, the bank moved from loan approval by centralized committee – meeting once in a fortnight – to branch level committee – meeting once in a week, and finally to online system that makes loan approval much faster) o Customer care centre (eg. 24-hour helpline, online help, SMS alerts)* o Keeping the customer informed right from the beginning by means of customer charter/customer rights Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence o Trained front office staff o Friendly and cordial problem addressing that is easily understood by the customer o Hassle-free transactions Empathy: Caring, individualized attention the firm provides its customers. o By breaking down operations from centralized to branch-level to provide personalized services o By segmenting customers as individuals and corporate organizations and dividing them according to their net worth to provide customized services o Door-step services (since the form collection, submission and interview is clubbed into a single step)
?
?
?
*Assuming that since loan approval is now on-line, the bank has upgraded its service features also and online application and mobile alert facilities are available. High Customer Contact
2
Service Operations Management
2009
Although the LDP was redesigned in a manner to reduce customer visits to the bank, the bank still ensured high customer contact by ensuring the following: ? ? ? Speedy processing, thus shorter time to contact customer Making the system online. Thus the customer can download the application form according to his own convenience. SMS alerts, 24-hour phone helpline, online help
How the bank addressed the four key steps of the Strategy Development Process covering Mission, Objectives, Strategy and Tactics? Mission: To maintain itself as a dynamic, customer centric bank, while providing uniform value-added services across India, in an environment of trust and transparency. Objective: The objectives of the bank include: ? ? ? ? To respond quickly to environmental changes (both external and internal), keeping the priorities of the customer in mind To provide customized and flexible services to each customer To standardize the process keeping a pan-India presence in mind, to provide a uniform customer experience at each branch To keep the LDP system and loan approval/disapproval transparent for the customer and employees
Strategy: Changes in the Indian banking environment in the past few years: ? IT boom ? Foreign banks setting up branches in India ? Increased customer spending. As a result of increased competition, new service standards set by foreign banks, and increased customer spending, HDFC had to design the service process in a manner that approved the loans in the fastest and most convenient manner. Flexible and customized services also had to be provided. Bringing the whole loan distribution system online became a necessity. Product design and advertising strategies also had to be designed in a customized manner, and adequate market research had to be conducted. In wake of the increased competition, branding became another need, due to which customer “experience” at each branch had to be made uniform. Ethical practices and transparency also came into play by the influx of foreign standards in the Indian Banking scenario.
3
Service Operations Management
2009
Due to all these factors, employee satisfaction, motivation and retention also became a major element for which strategy had to be implemented. Tactics: Online system: loan approval system to be made online, setting up of a call center/customer care centre that can respond to customer needs, online application forms and submission, legal documents to be submitted listed online, SMS alerts/queries To implement the strategies, services can be defined in the following manner: I. Pre purchase, During purchase, Post purchase a. Pre Purchase: Advertising, cold-calling, creating a value-statement that may help a cautious customer select bank more easily, corporate tie-ups, clear instructions of the loan schemes and documents while the customer making the decision. b. During Purchase: Maintaining a sound well-lit and accessible branch office, creating a customized product range according to customer segments (individual customers, corporate clients) and net worth of the customer (high income, low income), flexible repayment options, providing a personalized officer to each customer to cater to specific individual requirements and advise appropriately on different schemes(type of officer can be allotted according to the segment and type of the customer and the loan amount), standardized process(no scope for bargaining, speedy delivery). c. Post Purchase: Keeping in regular touch with the customer (to create repeat customers), use of call centre for query solving, FAQs on the website, online help, regular letters to the customer around the EMI schedule/on important festivals and occasions. Back office service, Front office service a. Back Office (making the service go to the customer): Technology (technical support, website maintenance, online query solving, mobile banking facility), Finance and risk management (site visit, verification of the customer, monitoring of the EMI payments, allotment of the personalized officer according to the loan amount), Sales and advertising (market research and promotional activities). b. Front Office (customer coming to service): Reception, help-desk, personalized officer, person to collect and verify documents, customer complaints addressing, prompt service (lines, cashiers etc.). Delivered service as expected, Delivered unexpected service at random, Delivered unexpected service as a routine a. Delivered service as expected: flexible and personalized service, hassle free transactions, friendly service, appropriate processing time, help in choosing the right home, fast customer complaints addressing and appropriate action, electronic funds transfer b. Delivered service at random: Doorstep service (to collect documents, explain loan schemes if loan amount is huge, or if customer is of high net worth/corporate client), thank you cards, free applications forms (after March 1995), extremely fast loan approval c. Delivered service as a routine: SMS alerts, free internet banking, e-cheque system, online status checking, request for amount to be increased over the phone/internet, reward and value card
II.
III.
4
Service Operations Management
2009
Development of a suitable model for the bank’s strategy deployment Loan distribution process of a competitor Indian bank: Step 1 - Initial Loan Application The first step involves discussing the borrowing needs and financial situation of the customer with a loan officer. This information assists in completing an initial loan application and the loan officer may also request available supporting documentation for some of the information provided on the application. Disclosure material, giving an estimate of fees involved in the loan transaction, may also be provided. Step 2 - Underwriting Based on the information on the application, any supporting documentation provided up-front, and the customer’s credit history, a loan decision is made. A loan approval might be contingent on additional supporting documentation or clarification of certain issues. Step 3 - Processing Once the loan is approved, it is processed to be prepared for funding. Processing includes: Ordering an appraisal for the subject property Opening escrow Ordering a title report Coordination with a variety of entities to collect and organize the supporting documentation and to clear all approval conditions determined at underwriting This requires close contact with the borrowers, realtor, appraiser, loan officer, credit report company, title company and escrow company. Step 4 - Loan Closing Document and Funding After the loan has been approved and all critical conditions are satisfied, the loan closing documents are prepared and sent to the escrow company for the customer’s signature. These documents consist of the note, deed of trust, and other legal/compliance related documents. The documents are then returned to the lender for review. If the documents are signed properly, and all approval conditions are met, the bank disburses the loan proceeds to the title company. The loan is now "funded". At HDFC, the loan distribution process is deployed in a similar manner, except that various steps are clubbed together to reduce the turnaround time and provide better customer service. The loan deployment process can be further improved by: ? ? ? ?
5
Service Operations Management
2009
Thus in this process, the customer actually needs to go to the bank only once or twice (Step 3 and Step 4). This makes the process speedy and convenient for the customer, making the whole process customer centric. To make the process simple and transparent for the employees, the entire task is not done by one individual but instead is broken down into jobs by different persons, according to the requirements and work specialization. The jobs may also be grouped together based on certain factors like functional or geographical factors. e.g. for each of the category, like loan verification/approval, dealing with cash, or sales, there may be a separate department. For geographical departmentalization, there may be regional managers. Since a single personalized officer is allotted to each customer, product and process departmentalization may not be present. Review and monitoring may also be performed by regional managers, if a loan is not approved/rejected within a given time frame, and appropriate actions may be taken. Conclusion The essence of a good Loan Distribution Process (LDP) of HDFC in India is well informed and well behaved staff, increased use of technology, standardization of the process, eliminating the contact between the staff and the loan approval committee leading to a more transparent system and leaving no bargaining power to the customer. The system should be such that it can actively respond to the changes in the environment, in accordance to the customer priorities. References ? ? ? ACCION International, Designing a Customer Service Strategy, SEEP Annual Meeting & Workshops, 23 October 2003 Websites of HDFC, Citibank, East-West bank, Rupee Times and Banklady.com Notes of Dr. R. H. G. Rau, Service Operations Management, NMIMS, July 2009
6
doc_591795607.docx