CHAPTER TWENTY THREE

Innovations in Products and Services in Banking—Cases of Public and Private Sector Banks

CHAPTER STRUCTURE

Case Study I Corporation Bank

Case Study II South Indian Bank

KEY TAKEAWAYS FROM THE CHAPTER

• Learn about the recent changes in the banking sector in the context of a public sector (Corporation Bank) and old private sector (South Indian Bank) bank.
• Understand how banks differentiate their products.
• Gain knowledge about the features of similar products to take wise decisions.

CASE STUDY I

CORPORATION BANK¹

Corporation Bank has a tradition of excellent performance and service and is one of India’s top state-owned banks. It is headquartered at Mangalore and was originally formed as a small nidhi in pre-independent India in 1906.

Corporation Bank constantly tries to upgrade its operations to take advantage of the latest technology and has formed a well-connected network of over 1000 branches. This has enabled the bank to provide the latest in banking service to its customers. Several new IT initiatives such as cluster banking, phone banking, any branch banking, Internet banking and networked automated teller machines (ATMs) have been implemented. The bank has been successful in retaining its premier position of having the lowest non-performing assets.

Personal Banking

Deposit Schemes

Corporation Bank offers a wide range of deposit schemes catering to the varied needs of the customers. The bank offers a range of schemes which encompass recurring, one-term, short-term, long-term and high-interest, high liquidity or both. These deposit schemes are discussed as follows:

Savings account: Corporation Bank offers the following products and facilities to its account holders:

• Any branch banking: Account can be accessed from more than 500 branches of the bank across the country.
• Corp Power Cheq (Multi-city cheque facility): The cheques are payable at par, at over 170 cities.
• Free international debit card (Corp Convenience)/ATM card: It allows the customer to shop at merchant establishments and to withdraw cash at all Visa ATMs worldwide. It can also access the bank’s network of online interconnected ATMs across the country.
• Facility of Internet banking.
• Corp Senior Account: This account is for monthly remittances to parents/elderly dependents.
• Corp Elite Account: It is a premium savings account with free add on facilities. This is an innovative product.
• Corp Classic Account: It is a savings bank account with the facility to earn interest at term deposit rates.
• Corp Jeevan Raksha: This account provides life insurance cover from the Life Insurance Corporation of India to the deposit account holders of the bank.
• Corp Anytime Premium: The payment of the Life Insurance Corporation of India (LIC) premium can be made through any of the Corporation Bank’s ATMs.

Current account: Current account is primarily meant for businessmen, firms, companies, public enterprises, etc. that have numerous daily banking transactions. In a current account, a customer can deposit any amount of money at any number of time and withdraw any amount as many times as he wants, as long as he has funds to his credit. Current accounts are meant neither for the purpose of earning interest nor for the purpose of savings but only for convenience of the business.

Apart from the services which are commonly offered, there are additional offers made to these account holders. There are four types of current accounts offered by the bank called Corp Business, Corp Business Premium, Corp Business Club and Corp Business Privilege. Explanation of these accounts, i.e., their product has been differentiated into four categories.

Term deposit: The following are the term deposits offered:

• Kshemanidhi Cash Certificates (KCC): KCC is a money multiplier deposit or reinvestment term deposit scheme that can be opened for a period ranging from six months to 10 years. It is a money multiplier deposit where the deposit amount grows rapidly as interest is compounded quarterly. The rate of interest depends on the period of deposit.
• Money flex: The flexible term deposit is a flexible fixed deposit scheme that do not block the customer’s money for the full term of the deposit. The scheme allows the customer to withdraw his money whenever he wants. The deposit can be made for a period ranging from 6–120 months. The minimum deposit is ₹5,000. Additional deposits can be made in multiples of ₹1,000. The rate of interest depends on the period of deposit. The customer can earn interest on his fixed deposit as per applicable rates. He can also withdraw a part of the deposit without having to permanently close the entire deposit.
• Fixed deposit: It is a term deposit scheme and interest can be paid at regular intervals namely monthly, quarterly, half yearly or yearly. The deposit can be made for periods ranging from 15 days to 10 years.
• Corp classic: High returns and total liquidity are the two major advantages of this account. It is an innovative technology-based account that combines the high liquidity of a savings bank account and the high returns of a term deposit to give customer the best returns for his money. It is fully computerized, carrying out all transactions based on standing instructions.

  The account works simply by fixing and unfixing the customer’s savings from a savings bank account to a term deposit and vice versa. Corp classic ‘fixes’ term deposit in units of ₹1,000 each on a ‘period’, ‘interest rate’ or ‘due date’ basis, whichever the customer prefers. The interest can either be withdrawn or compounded as required.

• Continuous deposit: This product is also called the cluster deposit. Here the customer can choose between simple interest and compound interest while keeping the deposits in a cluster form. All deposits are recorded in one account in a pass book, thus making it easy to keep track of deposits.
• Ready cash deposit: This high returns, high liquidity deposit is a fixed deposit scheme with a cheque facility to withdraw whenever funds are required by the customer. Under this scheme, a customer can deposit a minimum of ₹5,000 for a period ranging from 12 to 36 months. While the deposit earns at the agreed rate of interest, he can withdraw the money through cheques. There is a requirement to pay interest on the amount withdrawn as per the rates fixed by the bank.
• Recurring deposit: This account has a fixed sum to be deposited every month for a period ranging from 12 to 120 months. The rate of interest depends on the period of deposit and it is compounded quarterly. Accounts can also be opened in the name of minors.
• Premium deposit: It requires savings of a minimum of ₹100 per month for a period ranging from 1 to 10 years. On completion of that period, the deposit alongwith the interest is reinvested in minimum blocks to give maximum interest at the rate prevailing then and converted into a corpus.
• Janatha deposit: This deposit is for a period of 1–5 years. The bank’s collection agent is called at the place to collect savings at regular intervals, even daily if required. The small savings thus accumulate into a substantial amount over the deposit period.

Loan Schemes

Corporation Bank offers housing loans, education loans, consumer loans for purchase of consumer durables, loans against future rent receivables like leased out building/premises, loans to purchase two-wheelers and four-wheelers, loans against shares, loans for purchase of medical and other such sophisticated equipments, loan to acquire office premises/building and furniture, personal loans, loans to women to buy pure gold/jewellery and loan against mortgage of property.

Home Loan and Insurance Corporation Bank in association with LIC of India presents life insurance cover to the housing loan taken by the customer.

Cards

Debit Card: Corp Convenience

The following are the features offered by the debit card:

• Worldwide acceptance: Corp Convenience can be used to make purchases worldwide.
• Money management: Every purchase and ATM withdrawal appears on the monthly checking account statement, including the date, place and amount so that the customers can track their method of spending.

Credit Card

The following are the important features of the credit card offered by the Corporation Bank:

• Accepted at thousands of merchant establishments.
• Can be used for booking railway and air tickets.
• ATM facility at select centres.
• Cash withdrawal facility at the branches of eight banks.
• Free credit for upto 45 days.
• Free personal accident insurance cover for the customer and his spouse, baggage insurance cover and purchase protection cover.

High-Tech Banking Products and Services

Internet Banking

Corporation Bank has introduced a series of products and services for different consumer segments. CorpNet is one such product offered by the bank to its customers. On 1 January 2001, the bank had launched its Internet Banking (CorpNet) facilities for the corporate customers of its collection and payment services (CAPS), i.e., cash management services. Subsequently, the bank introduced the CorpNet facility for both corporate and retail customers of its computerized branches effective 28 March 2002.

The various online services provided by CorpNet are as follows:

• Verification of account balance.
• Viewing and downloading statements.
• Making payments to third parties and transfering funds using Corp E-cheque.
• Requesting for cheque books, demand drafts (DD), stop payments.
• Paying utility bill payments online.

CorpNet is a browser-based application and can be accessed through an Internet browser. CorpNet can be accessed at any time of the day irrespective of the location.

In the niche area of CAPS, Corporation Bank has a leadership presence in the country and caters exclusively to the cash management requirements of the corporates. The bank, within its network, has ten specialized CAPS branches which are fully automated and currently provide services to over 900 companies.

Functional Modules

Account information: Using this module, the user can view the account-related information like balance enquiry, transactions, statement of account, loan details and deposit details. Report and download options are also provided. The consolidated balance of all the accounts in all the branches with date and time of last updation is also available.

Funds transfer: This module enables the user to request the branch to transfer funds from one of his running accounts to his other running account. The requested transfer can be viewed by using the review option.

Payments: This module can be used for third party payments. For effecting payment using this module, users need to have beneficiaries approved by the bank. While applying for CorpNet, the customers shall mention the beneficiary details required to be created. It can be created later on also by giving a request through the branch.

Services: This module can be used to put request for cheque books, stop payment of cheques and remittances. The users can register for messages using the option alert message registration. The messages can be viewed using the option of message center.

Corp E-Cheque

Corporation Bank has launched Corp E-Cheque facilitating remittance of funds to pre-approved beneficiaries across banks within 48 hours.

Corp E-Cheque is an innovative product developed by Corporation Bank by combining the power of CorpNet with electronic funds transfer (EFT) scheme of the Reserve Bank of India (RBI).

The customers of Corporation Bank can make a remittance request to the branch where he maintains his account through an Internet banking transaction. The customer’s account gets debited at concerned branch of Corporation Bank and the remittance details are transmitted to RBI-EFT system through the service branch of Corporation Bank at the destination center.

RBI will debit Corporation Bank’s account and credit the beneficiary’s bank and pass on the remittances details to the service branch of the beneficiary’s bank through EFT.

The service branch of the beneficiary’s bank will send the information to the beneficiary’s branch for crediting the amount to the beneficiary’s account.

The facility is now available through Internet Banking enabled branches of Corporation Bank. Individuals, sole proprietorship concerns, partnership firms, companies and corporates having Internet banking account with the Corporation Bank can also avail of this facility.

How Corp E-Cheque is different from normal remittance? The features of Corp E-Cheque is as follows:

• Funds transfer can be effected across banks without visiting the branch by passing an instruction through the Internet.
• Remittance instructions can be issued from anywhere in the world.
• Credit to the account of pre-approved beneficiaries within 48 hours.

Tele-Banking

Tele-banking service offers the convenience of anytime, anywhere banking to the customers. The customer can check his account balance and have his latest transactions faxed. Tele-banking is available 24 hours a day, 7 days a week. The system is easy to use and secure. The customer can easily obtain information guided by the interactive voice response system.

Even a person who is not a customer of Corporation Bank can obtain general information about deposit interest rates, foreign exchange rates and gold selling rates.

Products and Services for Non-Residents

High level of customer satisfaction is ensured through computerized operations, interconnectivity between major centres through satellite-based communication system. Bank has an elaborate network of branches in non-resident Indians (NRI) belts like Kerala, Goa, South Karnataka, Gujarat, Mumbai and New Delhi. The bank maintains foreign currency accounts (called as Nostro) with reputed international banks in 15 major currencies.

Deposit Schemes

Schemes without repatriation facility: Non-resident ordinary (NRO) accounts (Current earnings repartriable)

• Savings: Normally operated for crediting rupee earnings/income, such as dividends, interest. Currently the interest rate is 3.5 per cent.
• Term deposits: Banks are free to determine their interest rates.

Schemes with repatriation facility: Non-resident external (NRE) deposits (Principal/interest repatriable)

• Savings: Interest is paid at par with the domestic deposits.
• Term deposits: Fixed or floating rates of interest within the ceiling rate announced by the RBI from time to time. Foreign currency non-resident. [FCNR(B)] deposits (Principal/interest repartriable)
• Term deposit can be placed with banks in India in five specific foreign currencies (USD, GBP, EUR, AUD, CAD).

RFC deposits (on return)

• Resident foreign current accounts can be opened by those people who return to their country in the following forms:
  • Current accounts (not in FCNR (B))
  • Savings Bank accounts (not in FCNR (B))
  • Fixed Deposits
  • Cash Certificates
  • Money-flex deposits
  • Recurring deposits (not in FCNR (B))

Payquik.com: It provides banks and other financial institutions with a complete front-end interface which enables their NRI customers to remit funds through a customized web-enabled interface. Corporation Bank has tied up with this company to process the online remittance instructions of its NRI clients. This product is the most modern technology-oriented facility which provides the NRIs a means to transfer funds quickly, securely, conveniently and in a cost-effective manner.

NRI remittances made easy: Corporation Bank is taking the advantage of modern means of communication and technology to make funds transfer in India secure, speedy, economical and convenient.

The options are as follows:

• DDs in rupees: A DD denominated in Indian rupees from any bank or Exchange House abroad, having arrangement with banks in India and made payable at a place nearest to the Corporation Bank branch where an account is maintained, and then mailed it to the branch.
• DD/personal cheques in foreign currency: Remittances can be sent by way of DDs/personal cheques in foreign currency and made payable abroad.

Telegraphic Transfer Telegraphic transfer (TT) or wire transfer is the most popular medium for quick money transfers. Corporation Bank offers the facility of speedy money transfer with unique features. Most of the citybased branches of Corporation Bank are provided with SWIFT connectivity. If the three-digit branch code of the beneficiary branch is mentioned alongwith the swift code of the Bank—CORPINBB***—the branch will receive an advice immediately on credit of funds into the bank’s account thereby facilitating the money transfer.

In the normal course, credit of international TT amount to the beneficiary’s account would be received on the same day/next day if remitted to a branch dealing in foreign exchange and 3 days in the case of other branches.

Portfolio Services Investment in shares, i.e., buying and selling shares through secondary market is called ‘portfolio investment’. NRIs can invest in shares/securities in terms of guidelines issued under portfolio investment scheme (PIS).

Important Services

Some of the product and services introduced with innovative features has been elaborated in the following sections:

Any Branch Banking Any branch banking (ABB) is a facility for customers to operate their account from any networked branch. The branch where the customer maintains his account is the base branch and the branch from where he carries out his transactions is referred to as the remote branches. Presently, more than 465 branches of the bank offer this facility.

Facilities available under ABB are as follows:

• Cash withdrawal: Withdrawal of cash from an account from any of the core-connected branches by presenting a self-drawn cheque. This facility is not extended for withdrawals by any third party.
• Cash deposit: Deposit cash for credit of an account through any of the core connected branches.
• Fund transfers: Instant transfer of funds between accounts or between an account and any third party account maintained at different core-connected branches.
• Purchase of DDs/pay orders: Purchase DDs/pay orders at any remote branch by debiting an account maintained at the base branch.
• Deposit of local cheques: Cheques can be tendered at remote branches for crediting the proceeds after realization to an account maintained at remote branches.

Corp Powercheq—Multi City Cheque Facility (MCC) Multi City Cheques is a facility wherein the customer can issue cheques drawn at the base branch and payable at selected remote centers. These cheques will thus be treated as local cheques in the remote centre selected by the customer. The facility of MCC is available in all core-connected branches (more than 200 centres) of the bank.

Corp Mediclaim Corporation Bank offers a group mediclaim scheme in association with New India Assurance Company Ltd., the bank’s partner in general insurance. This product was devised to meet the medical insurance needs of the customers, who may be unexpectedly burdened with expenses to meet sickness requirements for themselves and their family members. The salient features of the scheme are as follows:

• Cashless claim settlement with a wide network of hospitals all over the country.
• Dependent members in the family up to a maximum of four members including self can be covered on a floater basis, i.e., cover floats among the family members without the need to pay separate individual premium for each member.
• Savings on actual mediclaim policy premiums.

Corp E-rail Corporation Bank has e-enabled railway reservation booking. It has entered into a tie-up with the Indian Railway Catering and Tourism Corporation Ltd. (IRCTC) for online booking of railway tickets. All customers who are availing of CorpNet Internet banking service and Corp Convenience international debit card can now book their tickets online over the Internet, by direct debit to their Corporation Bank account.

Corp Billpay At Corp Billpay one can pay bills and make other payments online. Instead of writing a cheque each time, one can use any device connected to the Internet (e.g., computer and kiosk) and make payments with the click of a mouse.

Corp Mobile Recharge Electronic recharge of pre-paid mobile phones is a facility which enables customers having prepaid mobile phones to electronically recharge their mobile phone cards by debiting their account through Corporation Bank ATMs or through SMS from their mobile phone. The facility is offered to all the ATM/Debit card holders of the bank free of any service charge.

Corp Anytime Premium Corporation Bank has introduced the Corp anytime premium facility to pay LIC premium through its ATM network spread throughout the country for its customers, holding a tie-up with Life Insurance Corporation, its strategic partner. Corporation Bank has become the first bank in India to introduce such a facility.

Through this facility, all ATM/debit card (Corp Convenience) holders of Corporation Bank can remit their LIC premium through Corporation Bank ATMs. The bank had already enabled the payment of LIC premium through its Internet banking facility CorpNet.

Corporation Bank now acts as a corporate agent for selling bank assurance products of LIC through its branch network. The bank has set up 100 service units including branches, extension counters and ATMs in LIC premises throughout the country.

Corp Junior Corp Junior leverages on the power and convenience of the free Corp Bank ATM card and the vast nationwide online interconnected ATM network of the bank. Corp Junior enables parents with children studying away from them to remit money at periodic intervals in a hassle free manner.

Mutual Funds The bank is aiming to become a financial supermarket where its customers are able to purchase a wide range of quality financial products under one roof. The bank offers a wide range of mutual fund products, be it equity, diversified or sectoral, debt or liquid or for that matter balanced funds.

Depository Services Majority of the security related transactions in the Indian capital market have shifted to the dematerialized form. Therefore, it has become all the more necessary for investors to maintain depository accounts. Corporation Banks also offers ‘demat’ account for investors.

Case Questions

1. Discuss the retail banking marketing strategy that the Corporation Bank follows
2. Has the corporation bank adapoted some innovative techniques to differentiate their products from other banks?

CASE STUDY II

SOUTH INdIAN BANK²

Introduction

The South Indian Bank (SIB) was incorporated 76 years ago in 1929 at Thrissur (Trichur), the cultural capital of Kerala with the view to establish a safe, efficient and service-oriented bank and also to free the business community from the clutches of greedy money-lenders by providing need based credit at reasonable rates of interest. The bank was converted into a public limited company in 1939 and became a scheduled commercial bank in 1946. It also took over 15 other small regional banks in the 1960s. SIB was listed on the domestic bourses after its initial public offering in 1999. Prior to its IPO, the bank had privately placed equity with the ICICI Group and UTI in 1995. It has now transformed itself into a vibrant, fast growing and trend setting financial intermediary. The bank has many firsts to its credit. It is the first private sector bank to open a NRI branch in November 1992; the first bank in the private sector in India to open a currency chest on behalf of the RBI in April 1992; the first bank in the private sector to start an industrial finance branch in March 1993 and many more.

Established by a small group of local citizens, SIB caters to the banking needs of traders and residents of the region. Over time, as a large proportion of the local population migrated to other countries, especially the Middle East, the bank has tied up with foreign banks to meet the banking needs of these expatriates.

The bank has tied-up with three banks and eight exchange houses in the Middle East and one exchange house in Singapore for providing foreign currency remittance facility to its customers. It has also tied-up with the ICICI Group to undertake distribution of life insurance and mutual fund products, and has an arrangement with the public sector general insurance company, United India Insurance, for distribution of non-life insurance products. The bank is also active in offering ‘gold loans’, a popular retail product in south India.

Over the years, SIB has enhanced its reach and visibility by expanding its branch network. Nearly 60 per cent of the bank’s branches are located in its home state of Kerala and given the high concentration of its business in the state, SIB can be viewed as a regional player.

SIB Deposit Schemes

South Indian Bank offers the following main products:

• Current account
• Savings account
• Fixed deposit

In addition to that, the bank has launched various innovative products. These schemes, some of them very unique to SIB are discussed at length in the following sections.

SIB Flexi Deposit Scheme This deposit scheme offered by SIB uses the positive features of both a fixed deposit as well as a saving account. In flexi deposit, a fixed deposit and the savings account are linked by a common identity number for the consumer. A fixed amount needs to be maintained in the savings account for this scheme to be activated. The amount above that minimum limit is automatically transferred (sweeped) by the bank in units of ₹1,000 to a fixed deposit.

The main advantage of this scheme is flexibility, i.e., it allows withdrawals of deposit without any restriction on the amount, even before the maturity of the deposit, without having a charge for premature withdrawal.

Kalpakanidhi Deposits It is a reinvestment plan with cumulative interest. The interest is added to the principal on quarterly basis, and hence, there is a scope for higher returns. Principal along with interest is paid only on the maturity date. This product offers a range of maturity periods ranging from 6 months to 10 years.

Fast Cash Deposits This is a facility provided by SIB where it allows the consumers to enjoy the interest rates of a fixed deposit for ultra short-term duration. Deposits can be made for as short as 30 days. The various schemes available in fast cash are of duration of 30, 46 and 91 days. Partial withdrawal from this deposit is permitted and the balance continues to earn interest at no penalty.

Recurring Deposits This scheme by the bank is targeted at people living on a monthly salaried income. Recurring deposit aims to improve the long-term savings for these salaried people. Since they would not have a large amount to deposit in the fixed deposit, this scheme allows people to deposit small amount of money on a monthly basis over a period in which it will reach maturity and they would get a large amount in hand when they withdraw the money. The interest rates on this scheme are similar to that of the fixed deposits. There is an added incentive in the form of no tax deduction at source for the amount deposited in this scheme.

Mangala Deposits This is a unique scheme offered by SIB. Mangala deposits are a kind of recurring deposit scheme in which the bank gives the customer the option to change the monthly installments at the beginning of every new financial year so that they can synchronize these payments with the new income. By the time, if a customer’s income increases substantially in a year, he/she can save more money that year without starting a new recurring deposit account and other hassles. This is a benefit for salaried employees in private companies, especially IT and BPO companies, whose salaries change significantly over the years. The scheme is offered for period between 24 and 120 months.

Holiday Recurring Deposit Holiday recurring deposit scheme is offered by the SIB for a period of 12 months. This is aimed at the customers who want to save some amount every month for going on a holiday or tour at the end of a year. In this scheme, the bank allows the customer to withdraw after a year-long deposit alongwith the maturity amount and an equal amount given by the bank as a repayable holiday loan.

Loans and Advances

The various products available under ‘the credit’ category are given below.

SIB Planters Choice It targets individuals and/or jointly with family members/firms/companies with traditional plantations—tea, coffee, rubber, coconut and cardamom. The purpose of the loan is for purchasing agricultural land/existing plantation and development. The rate of interest and the processing fee depends on the size of the land being acquired. The maximum repayment period is 15 years including gestation period. However, the loan has to be closed within the economic life of the crop.

SIB Utsav It is a family specific loan, intended to establish and retain a long-term relationship with the members of more than two generations of each family, who avail of this facility to celebrate auspicious occasions. The target group for this product is salaried class with adequate take-home pay and others with sufficient income to repay the loan, as reflected in their tax return.

The Retreat The Retreat home loan scheme details in a nutshell are as follows:

• Target group: Only those who are drawing pension from state/central government/banks/insurance companies and have completed the age of 55 years.
• Purpose: It is granted for the construction of house in own plot/purchase of land and construction of house/ purchase of ready-built house with plot/purchase of flat/repairs and/or renovation of existing houses owned.
• Rate of interest: 0.5 per cent less than the rate applicable for normal housing loans.
• Quantum of loan: Maximum 50 times of the monthly pension drawn at the time of application, subject to the condition that EMI should not exceed 50 per cent of the monthly pension.
• Repayment period: The maximum repayment period is 15 years or till the borrower attains the age of 75 years, which ever is earlier.

Consumer Delight This scheme is meant for the purchase of consumer durables. The target is any person having regular income and profit-making firms with 2 years of existence. The maximum loan amount granted is ₹2 lakh and margin is 25 per cent. The repayment period is 12–48 months as equal monthly installments (EMI).

Flexi Loan The purpose of the flexi loan is not limited by the bank. However, the purpose should not be for hoarding, speculation or activity restricted by the Government of India or state governments or local bodies. The purpose of the loan should be made by simple declaration on white paper.

The rate of interest is less than that of ‘consumer delight’ and the repayment period of the loan is minimum 6 months and maximum 84 months without holiday under EMI.

Gold Power The scheme in a nutshell is as follows:

• Target group: Individuals, partnership and proprietary firms
• Type of facility: Overdraft against pledge of gold ornaments
• Loan limit: ₹0.25 lakh to ₹25 lakh
• Security: Pledge of 22 ct gold ornaments
• Rate of advance: Maximum ₹500 per gram
• Period of sanction: 12 months

Gold Rush The scheme in a nutshell is as follows:

• Period of advance: 12 months
• Minimum amount of advance: ₹10,000
• Cut-off date for redemption auction: 13 months
• Rate per gram of 22 ct. gold ornament: ₹450
• Minimum interest: For 5 days or ₹50 whichever is higher

Home Loan The home loan is given for single or joint account holder. The loan for new construction/purchase and take over is maximum ₹50 lakh while for renovation/additions/major repair and improvement is maximum ₹5 lakh. The period of loan (including holiday) is minimum 5 years and maximum 20 years. The rate of interest could be fixed or floating.

Mercantile Credit It targets traders for the purpose of providing working capital. The quantum of finance is minimum ₹1 lakh and maximum ₹50 lakh.

NRI Flexi Loan It targets NRIs for investment in residential/commercial buildings except for investment in nonbanking business, in agricultural or plantation, real estate business and construction of farm house for trading in transferable development rights (TDRs). The loan amount is maximum ₹25 lakh. The repayment of loan is to be done within 84 months as EMI without holiday. The loan amount will be 50 per cent of the property as security assessed by a valuer from the bank’s panel.

Overdraft Facility for NRI It provides a facility of overdraft up to ₹25,000 in NRE SB account. The criteria is an equal amount of NRE/FCNR deposit with the bank. The rate of interest is deposits rate plus 1 per cent irrespective of the size of the loan/overdraft. The period of sanction is 1 week and repayment is through fresh inward remittance from abroad through normal banking channel or out of transfer of funds held in other NRE/FCNR accounts.

Personal Loans It targets permanent employees of government PSUs, blue chip companies and reputed institutions where salary deduction undertaking is available. It also provides line of credit to SB account holders, whose salary is being credited to the account, subject to a maximum of 11/2 times the monthly salary credited or ₹50,000 whichever is less. It is for personal purpose like repairs to house, medical treatment of self and family, consumption and purchase of consumer items. The mode of installment is through EMI and the repayment period is 60 months. Processing charges are ₹100 per loan.

Rental Loan Scheme It provides loan against lease rent receivables. Repayment is through EMI equal to unexpired lease period or extended lease period subject to a maximum of 7 years. Loan repayment period will be the remaining period of lease period or extended lease period. Upfront fee is 1 per cent with minimum ₹5,000 and maximum ₹2.50 lakh and processing charges are 0.25 per cent with minimum ₹5,000 and maximum ₹2.50 lakh. There are no other hidden charges and the primary security is the assignment of lease rentals.

Vitjan Pradan The borrowers of this loan scheme are students who have completed 18 years. In the case of minor students, parents will be the borrowers. The maximum amount is ₹5 lakh for domestic studies and ₹15 lakh for foreign studies. Margin is nil up to ₹25,000 and 15 per cent above ₹25,000 and 25 per cent for overseas studies. Repayment starts after holiday period of 6 months after obtaining employment or 1 year from the date of qualifying the exam whichever is earlier. For overseas studies, it is 6 months from the date of qualifying the exam.

SIB Life Line It is a unique family health care loan package with insurance cover designed to support financially for timely medical treatment of various ailments. The financial parameters are as follows:

Treatment	Minimum Loan	Maximum Loan	Margin
In India	₹25,000	₹3,00,000	10%
Abroad	₹1,00,000	₹10,00,000	25%

First installment starts 1 month after full availment of the loan. The rate of interest will be fixed, based on the repayment schedule, i.e., from the date of availment of the loan to the date of closure.

SIB Sthree Shakthi The targets of this loan scheme are the employed women and housewives whose husbands are employees, agriculturists, professionals or businessmen. Eligible amount of loan is total emoluments/income of permanent nature received by self/husband, as the case may be, for the past 1 year. Loan amount may range between ₹25,000 and ₹1,00,000 (100 per cent of the value without margin) and the repayment is within 60 months as EMI. The purpose of this scheme is to provide financing for the purchase of gold/platinum/diamond ornaments, electric/electronic equipments and modernising the kitchen.

SIB Help-Line for Nurses It is a special loan scheme for nurses proceeding for employment abroad. The purpose of the loan is to meet expenses like one way ticket charges, initial expenses with recruiting agency, initial expenses abroad till first salary is received and clothing to be purchased from India. Maximum amount provided through this loan is ₹2 lakh. The repayment period is 24 months as EMI/bulk payment. The candidates having passed general/B.Sc (Nursing) from a recognized college are eligible for the loan.

Agriflex The target group of this loan scheme is individuals and/or jointly with spouse/parents or joint property owners. The net worth in landed property should be at least twice the loan amount. The purpose of the loan is any agricultural and allied activity. The quantum of loan is minimum ₹1 lakh and maximum ₹25 lakh.

NRI Schemes

NRIs contribute a large number of the South Indian Bank customer base—this especially includes the residents of Kerala who are located in the Middle East. The various schemes, facilities and services offered for NRIs are elaborated below.

NRI Deposit Schemes The various schemes are NRE, NRO, FCNR (B) and RFC. For NRE, accounts can be in the form of current, savings, term deposit and recurring deposit. Joint accounts are also permitted.

FCNR (B) deposit is accepted in USD, GBP and Euro for various maturities insulated against exchange rate fluctuations. Balance and interest is repatriable.

NRO accounts are maintained in Indian rupees for routing bonafide local remittance like rent. Joint accounts are permitted. Interest earned in this type of account is subject to Indian income tax.

A person of Indian origin who returns to India for permanent settlement after a stay of a minimum period of one year abroad is eligible to open RFC account. Accounts can be maintained in USD, GBP and EURO. The assets acquired or held at the time of return are eligible for credit to RFC account.

Swift Centres SIB is the one among the few banks in India using new version of IP based SWIFT network. It is the fastest way for transfer of funds.

Online Money Transfer It can be done through various schemes like TT remittance, Xpress money, Wall Street instant cash and SIB express.

Loans and Advances Various types of loans are available for NRIs. Loan against deposits is available up to 90 per cent of the deposit amount against security of fixed deposits under NRE and NRO. The rate of interest for loan against NRE/NR deposit is deposit rate + 1 per cent. Foreign currency and rupee loans are available up to 75 per cent of FCNR (B) deposits.

Housing loans are available for purchase of ready-built house/flat or for construction of new house/flat. The rate of interest is less than that of the other loans. Floating rate is also available.

NRI Family Welfare Scheme This scheme provides reimbursement of hospitalization expenses for NRI and his family and also personal accident cover for the NRI at a reduced rate of premium. All NRIs who maintain account with SIB within the age limit of 3–75 years are eligible for this scheme. Hospitalization expenses up to a maximum of ₹2 lakh and personal accident insurance up to ₹10 lakh are covered. It is valid for 3 years from the date of the payment of premium.

Special Services SIB offers special services for NRIs. The bank has 13 NRI branches and NRI newsletter.

Tele-Transfer For tele-transfer of funds to India, NRIs can instruct their banks abroad to remit the amount directly to the correspondent bank, giving SIB account number to the correspondent bank and the name of SIB branch where the account is maintained.

Draft Drawing Arrangements NRIs can send remittance through DD through any bank/exchange companies abroad for credit of account with SIB. SIB has inward rupee drafts drawing arrangements with the following banks/exchange companies.

Banking Channels SIB’s motto of ‘blending tradition with technology’ can be very well seen in ‘Sibertech’, an initiative to connect its 264 key branches electronically and hence providing ‘anywhere banking’. The bank uses the Infosys’ banking solution software called Finacle for this purpose. The project was started in January 2001. Using this robust network, facilities like networked ATMs, Internet banking, mobile banking, global debit cum ATM card operations and other facilities are offered by the SIB in addition to its branch banking facilities.

Branch Banking SIB has over 650 branch offices across 14 states in India with the head office at Thrissur, Kerala. Almost all services are offered at the branch. However, the bank is increasingly trying to reduce the branch usage by providing anywhere, anytime banking facilities, since in that way it can increase its customer base at reduced cost and also expand its geographical reach.

Internet Banking Services Sibernet is now used to describe the Internet banking service provided by SIB. Using Sibernet, users can conduct banking operations from whatever location be it home, office, cyber-cafe or anywhere in the world where there is Internet connection and the service is available round the clock for 365 days a year.

The security of the site is done through a 128 bit encryption, which is certified by Verisign, a global pioneer in e-security. The software used is developed by Infosys. These facilities are offered to retail customers as well as corporate customers.

ATM SIB has its ATMs which allow the customers to enjoy the facilities of anywhere, anytime banking using SIB ATM card. It is present in all major cities in India and operating 24 hours a day.

SIB has also joined the National Financial Switch (NFS) network system on 4 May 2005. The NFS network is owned and managed by the Institute for Development and Research in Banking Technology (IDRBT) which is the technical arm of the RBI. This facility helps SIB customers to do ATM transactions from other bank ATMs at reduced charge rates.

With the providing of this facility, SIB is in a better position to serve its customers through more number of ATMs in the country. Moreover, the customers of other member banks of NFS will be able to transact their business through the bank’s ATMs located in all major centers.

SIB Premium This product is targeted towards current account and overdraft account holders who may require frequent transfer of funds in their course of business. Some of its features are as follows:

• Current deposit accounts are categorized as D-standard, C-silver, B-gold and A-platinum, based on the monthly average balance, for the purpose of collection of charges. D-standard category has to maintain a monthly average balance of ₹10,000, C-silver—₹50,000, B-gold—₹1,00,000 and A-platinum—₹5,00,000.
• One ordinary ATM card will be issued to individual and proprietary current accounts. They can draw cash up to ₹20,000 per day through any of the banks online ATMs.

SIB’s Global ATM-cum-Debit Cards SIB’s global ATM-cum-debit cards are now acceptable in the Master Card International (MCI) network system as well as in the domestic NFS network system. SIB’s debit cards are supported in more than 8,30,000 ATMs together within India and worldwide and also in around seven million point of sale (POS) terminals across the globe.

MCI is a leading global payment solutions company that provides a broad variety of innovative services in support of their global members’ credit, deposit access, electronic cash, business-to-business and related payment programs. MCI manages a family of well-known, widely accepted payment cards brands including MasterCard^®, Maestro^® and Cirrus^® and serves financial institutions, consumers and businesses in over 210 countries and territories.

SIB Mobile Service As a registered user of SIB mobile service, a customer can send pull requests and/or receive push alerts.

Pull Requests Customers send simple, standard SMS messages to a published number of the bank to get online information on his/her account(s). The requests which can be sent by the customers are as follows:

• Get the balance in any of his SB/CA/CC/OD account/s instantaneously
• Fetch the last five transactions in any of his SB/CA/CC/OD accounts
• Inquire on the status of a cheque issued by him in any of his SB/CA/CC/OD accounts
• Change his mobile banking PIN
• Disable his SIB mobile service temporarily
• Re-enable his SIB mobile service temporarily

These requests are known as pull requests.

SIB Privilege Card This is a multi-purpose photo card which can be used in all the ATMs of the bank and also at all the networked branches. The privilege card holders can withdraw money up to ₹25,000 at the networked branches.

Other Service Features Offered by SIB

General Insurance Business SIB entered into a MOU on 29 November 2002 with United India Insurance Company, a south-based general insurance major in public sector to act as their corporate agent. SIB is the first corporate agent of the United India Insurance Company. Through the corporate agency, SIB has already started distributing various general insurance products to the customers through its own branches (Bancassurance).

Exporter’s Credit Insurance Export credit guarantee corporation (ECGC) of India, a Government of India enterprise, established to promote export/import, has appointed SIB as its corporate agent to market their exporter’s credit insurance policies. As SIB is already extending the life and non-life insurance facilities, it is now equipped to cover the entire range of insurance products under one roof. ECGC provides a range of credit risk insurance covers to exporters against loss in export of goods.

RTGS for Customer Transactions Real Time Gross Settlement (RTGS) is an electronic payment system, which provides online settlement of payments between financial institutions. The SIB started RTGS operations since 16 July 2004. All the networked branches of the bank are RTGS enabled. Customers of all SIB’s networked branches can avail RTGS services for transferring funds to accounts of other banks; provided those bank branches are also RTGS enabled.

SIB Collect It was introduced by the bank to facilitate the fast collection of cheques and other outstation instruments.

SIB Cash Passport Cash Passport is offered by the SIB in agreement with Interpayment Services Limited (a subsidiary of Travelex Global and Financial Services, UK, formerly The Thomas Cook Group of England). Cash Passport card is to be loaded in US dollar, post which customers can use the card to withdraw money from VISA ATMs all over the world in the local currency or US dollar. Another attractive feature of the card is that the money can be loaded on it without the customer being physically present at the bank. Another feature of this product is that the customer need not maintain an account with the bank to own this card because the card is not linked to any account.

Case Questions

1. Do you think that the South Indian Bank has adopted some new innovations to improve their product offerings?
2. Discuss the retail banking strategy that the South Indian Bank follows.

ENDNOTES

1. This case was co-authored by Professor Justin Paul with Adarsh Mohta, Nikhil Gupta and Varun Kabra. The contribution by Vandana Mohan are also acknowledged. Cases in this chapter are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data or illustrations of effective or ineffective management.
2. Dr. Justin Paul co-authored this case study with Pramod Potti, Pallab Mukherjee and Parvez Qazi. Cases in this chapter are developed solely as the basis for class discussion. This case is not intended to serve as endorsement, sources of primary data or illustrations of effective or ineffective management.