Banks play a pivotal role in the growth of developed as well as developing economies.

They are important to maintain financial stability in any country. In a developing
economy such as India, banks serve the household sector in their saving needs, providing them with safety and liquidity of their funds, and managing their financial risks as they have limited amount of income at their disposal. But with the growth in the financial sector, particularly in the banking sector, there is an increasing need for the development and progress to be inclusive. Former UN Secretary-General Kofi Annan said: “The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. Together, we can and must build inclusive financial sectors that help people improve their lives.” Dr. C Rangarajan Committee on Financial Inclusion defines financial inclusion as the “process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.”

In this context, the first paper of this issue, “An Assessment of Potential Financial Inclusion of Slum Dwellers Through Business Correspondent Model”, by Shrikrishna S Mahajan and Natha Kalel, states that financial inclusion may be considered as a key instrument for inclusive growth and inclusive development. Access to safe, easy and affordable credit and other financial services by the poor and vulnerable groups, disadvantaged areas and lagging sector is recognized as a precondition for accelerating growth and reducing income disparities and poverty. In India, RBI, NABARD and other government agencies have given priority to the policy of financial inclusion. This paper aims at identifying the status of financial exclusion of selected slum dwellers and assessing their probable financial inclusion through business facilitator/business correspondent model. As most of the slum dwellers are self-employed or employed in the unorganized sector, they require credit on a daily basis for their livelihood. On the other hand, some of the slum dwellers are paying the principal amount of the borrowed funds regularly to the moneylenders. Therefore, here is an opportunity for any bank branch to go for financial inclusion through business facilitator model (Briefcase Banking).

The next paper, “Automated Teller Machines (ATMs): The Changing Face of Banking in India”, by Lakshminarayana Bhat A and B Jayarama Bhat, gives a picture of the Quasi Banking Model of ATM, highlighting the fact that information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. The paper analyzes the development of this self-service banking in India based on secondary data.

Further on the subject of virtual banking, the next paper, “Customer Satisfaction with e-Banking: A Comparative Study of Public and Private Sector Banks”, by Poonam Sawant, R V Kulkarni and S D Mundhe, states that customer satisfaction is one of the major factors in measuring the performance of banks. This paper presents the impact of e-services on customer satisfaction. A comparative study of customer satisfaction level with regard to three major public sector banks (State Bank of India, Bank of Maharashtra and Bank of Baroda) and three major private sector banks (ICICI Bank, HDFC Bank and Federal Bank) is done, with special reference to the problems faced by customers using online services. The paper also examines the relationship between various online facilities, factors affecting the choice of Internet banking and its interplay with customer satisfaction.

The next paper, “Awareness of Banking Professionals About Performance Appraisal Methods: An Empirical Study”, by Somiya Mehrotra and Shalika G Phillips, states that performance management includes activities which ensure that goals are consistently met in an effective and efficient manner. Performance management can focus on the performance of an organization, a department, employee, or even the processes to build a product or service, besides many other areas. Professionals are often found discussing about performance management practices in organization even when they themselves are not aware of the proper meaning, evaluation criteria and applicability of various performance management practices. Performance management system is to be ensured in every organization irrespective of the size, nature and purpose of the organization.

The next paper, “Interest Rate Risk of Selected Indian Commercial Banks: An Application of GAP Analysis Model” by Anita Makkar and Shveta Singh, addresses the problem of interest rate risk in Indian commercial banks. GAP analysis model is used to measure the interest rate risk for the period 2008-09 to 2010-11. On comparing the combined performance of all public and private sector banks, it is found that private sector banks are in a better position than the public sector banks. Public sector banks have to be careful about the rate-sensitive assets and liabilities to avoid interest rate risk.

The last paper, “An Analysis of the Gap Between Customers’ Expectation and Perception Regarding Selected CRM Practices in Public and Private Sector Banks” by Anamica Chopra and Usha Arora, says that Customer Relationship Management (CRM) is the core business strategy that integrates internal process and functions and external networks to identify, cultivate and maintain long-term profitable relationships so as to provide those very customers with services quality exceeding their expectations. The paper focuses on the gap between customers’ expectation and customers’ perception regarding selected CRM practices in public and private sector banks.

-- S C Bihari
Consulting Editor