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Chapter1. ROLE OF CSR IN BANKING
CONCEPT OF CSR
Corporate social responsibility (CSR) is an expression used to describe what some sees as a company’s obligation to be sensitive to the needs of the stake holders in its business operations.
CSR is closely linked with the principles of “Sustainable Development” in proposing that enterprises should be obliged to make decisions based not only on the financial / economic factors but also on the social and environmental consequences of their activities.
Corporate executives and employees in turn have strong incentives to internalize the corporation’s statutory obligations to maximize profits, sometimes to the extent that they abdicate their individual moral and ethical obligation as human beings.
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NEED FOR CSR
Banks need to be more socially responsible as for the service sector organization business with the society has to be predominantly in the highest denomination of social responsibility, and more importantly banks are special and high leveraged business.
They have a large number of creditors and failure of one bank can lead to the failure of many other banks as the customers use faith.
Banks do not exist in a vacuum. They make a large contribution to the country’s GDP growth, meet the demand for the growing middle class contribute to infrastructure spending and reach out to the semi urban and rural areas.
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Pollution control Restoration or protection of environment Conservation of natural resource
Energy
Conservation of Energy in production and marketing operations. Efforts to increase the energy efficiency of products. Other energy saving programs.
Fair Business Employment and advancement of women and minorities. Practices
Employment and advancement disadvantaged individuals, Support For minority owned business.
Human
Promotion of employee health and safety. Employee training
Resources
and development. Remedial education programs for disadvantaged Employee Career Counseling
Community
Donations of cash, products, services or employee time.
Involvement
Sponsorship of public health projects. Support of education and the arts. Support of Community recreations programs. Co-operation in community projects
Products
Enhancement of product safety. Sponsorship of product safety education programs. Reduction of polluting potential of products. Improvement in nutritional value of product. Improvement in packaging and labeling
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Following factors encouraging companies to be socially responsible: 1. Changing consumer and employee expectations
2. Enhancing corporate reputation
3. Increasing legislation
4. Motivate Loyalty in staff 5. Increasing influence of NGO’s 6. The knock on effect of corporate accounting scandals such as Enron and World Com
7. A pervasive media in search of stories
8. Happy restful sleep and hassle free life for the people working in the business
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NECESSITY OF CSR IN BANKS
Banks are financial institution were customer money and finds are being managed by banks with a assurance of enhanced benefits Quality service and security, if customers are to retain their faith in the bank the banks should provide them with quality service. This is a most important major social obligation toward customers.
Failure to provide quality service is nothing but breach of basic social and legal responsibilities as rightly said by Mahatma Gandhi
“A customer is the most important visitor on our premises. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so.”
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OBJECTIVE OF RESEARCH To find out the potential for implementing a customer friendly practices in banks. To identify the areas where IT can help to improve the service quality and work culture.
To identify what are the ways and means to install IT based services to enhance CRM practices. To assess an overall impact of IT on development of a customer friendly culture.
HYPOTHESIS Fulfilling CRM obligation and enhancing customer satisfaction is the social responsibility of the banks. IT plays an important role in development of healthy CRM practices. 6
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POTENTIALS FOR IMPLEMENTING CUSTOMER FRIENDLY PRACTICES
To offer right advice regarding customers requirement regarding various banking services.
Fulfillment of KYC norms to inform, awaken and develop a sense of being right citizens among customers.
To inform the customers as to what are their duties as a disciplined bank customer.
To publish the customer charter of rights and duties and awake them as to how they can avail the bank services in the efficient manner.
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IT IS AN INSTRUMENT OF SYSTEM CHANGE Development of information kiosk to provide right and timely information.
Promotion of customer friendly and web enabled services.
Development of a paperless work system.
Touch screen single windows to settle doubts and queries of customers.
Offering a web based dispute settlement mechanism.
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WAYS AND MEANS TO INSTALL IT BASED SERVICES TO ENHANCE CRM BASED PRACTICES
The areas where web enabled and IT based services can be provided to the customer,
Mobile banking for prompt connectivity, information and deliverance. Rapid expansion of ATM network in the rural area. Providing financial literacy program through computer and web based services. Providing market intelligence and market information to specific segment in relation to banking and financial sectors. Development of depositors, interest protection program. Dissemination of banking and financial information. Grievance redressed system. Deposit insurance and deposit safety Development of credit and loan information systemDesigning customized product and services. 9
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JUSTIFICATION OF HYPOTHESIS In the present discussion the researcher has provided with a variety of area where customer service and customer care happens to be a most important aspect of bankers business.
Survival is the key responsibility of every business as Every business is a social custodian of economic resources therefore the true and primary social responsibility of bank lies toward customer which justifies the presumption of the current paper.
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CSR IN HDFC BANK LTD
1. Housing Development Finance Corporation Limited (HDFC) 2. HDFC bank was incorporated in August 1994 & currently Has a nationwide network of 4014 Branches & 11,766 ATM. 3. HDFC was ranked 32nd among India's most trusted brands.
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2. PREAMBLE CSR covers the entire process by which an organization approaches, defines and develops its relationships with stakeholders for the common good, and demonstrates its commitment in this regard by adoption of appropriate strategies and projects. Thus CSR is not charity or mere donations but a way of going beyond business as usual, creating shared value and contributing to social and environmental good.
3. PURPOSE HDFC Bank is committed to identifying and supporting Programs aimed at: Developing and advancing the community and in particular, those at the bottom of the pyramid who are unequally endowed/enabled, and also
Reducing negative impact of its operations on the environment
This policy will serve as a guiding document to help identify, execute and monitor CSR projects in keeping with the spirit of the policy. 12
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The CSR policy would function as a self-regulating mechanism for the Bank’s CSR activities and enable adherence to laws, ethical standards, and international practices in this regard.
4. POLICY STATEMENT / VISION The Bank’s CSR mission is to contribute to the social and economic development of the community. Through a series of interventions the bank seeks to mainstream economically, physically and socially challenged groups and to draw them into the cycle of growth, development and empowerment. At the core of this is its commitment to reach out to marginalized communities through its Sustainable Livelihood Initiatives.
The Bank’s strategy is to integrate its activities in community development, social responsibility and environmental responsibility and encourage each business unit or function to include these considerations into its operations.
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5. SCOPE This policy will apply to all projects/programs undertaken as part of the Bank’s Corporate Social Responsibility activities and will be developed, reviewed and updated by reference to relevant codes of corporate governance and international standards or best practices. This policy is also in line with the CSR Rules (Sec.135 of Companies Act, 2013).
6. GOVERNANCE Overall governance of CSR and approving of the CSR Policy will be the responsibility of the CSR Committee of the Board. The CSR Department of the Bank will be responsible for administering and executing the policy. As the Bank’s CSR activities evolve further, the policy may be revised with the approval of the CSR Committee of the Board.
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7. CSR COMMITTEE The Bank will institute least three times in a year. The following shall be the terms of reference of the Committee. A CSR Committee of the Board consisting of three or more directors including at least one Independent Director. The Committee will meet at To formulate the Bank’s CSR strategy, policy and goals To monitor the Bank’s CSR policy and performance To review the CSR projects/initiatives from time to time To ensure legal and regulatory compliance from a CSR Viewpoint To ensure reporting and communication to stakeholders on The Bank’s CSR projects/initiatives Consistent with the above, the CSR Committee of the Board currently has the following members: 1. Mr. Bobby Parikh (Independent Director) 2. Mr. Perth Data (Independent Director) 3. Mrs. Reno Kerned
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8. CSR BUDGET The overall amount to be committed to CSR will be approved by the Board as part of the Bank’s overall Annual Budget/Plan. Within the budgeted amount, specific CSR Initiatives / projects will be approved in line with the process approved by the CSR Committee of the Board. All projects undertaken by the Bank will be approved / ratified by the Banks CSR Committee.
9. SUPERVISION The Bank’s CSR activities will be driven by a dedicated CSR team under the guidance and support of senior functionaries, in particular, the DMD/MD. The CSR Committee and CSR Department would play a significant role in ensuring that the CSR policy is embedded across the Bank’s operations and the CSR initiatives are in line with the policy.
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10. IMPLEMENTATION The Bank will undertake CSR projects which are closely linked with the principles of sustainable development and shared value, with the involvement of local institutions and the community at large.
The CSR Department would assist in implementation and monitoring of the CSR projects/initiatives. The actual implementation of various initiatives will be broad-based with the involvement of various Banks employees/units or through implementing agencies like NGOs, Trusts, Societies, Section 8/ Section 25 companies, DST certified incubation centers or through collaborative projects with other corporate. In case of the implementing agency being a ‘not for profit’ organization, the entity should typically have not less than three years of experience in implementing projects in the respective area. The implementation partner will also be screened based on the Bank’s internal screening criteria to ascertain the entity’s credibility and its ability to execute the proposed projects.
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11. DISBURSEMENT The disbursal of funds will be either in trenched drawdown form or onetime payment depending on the nature and requirement of the project. The terms, conditions and timing of disbursement will be discussed and agreed to with the CSR Department and project teams, and will typically form part of the Memorandum of Understanding with the entity implementing the project.
12. MONITORING The CSR Committee will ensure a transparent monitoring mechanism for ensuring effective implementation of the projects / programs/ activities proposed to be undertaken by the Bank. The CSR Department would have the responsibility of monitoring approved projects and funds disbursals for such projects. Monitoring mechanisms will include visits, meetings and progress/status reporting by the project teams. The Bank’s CSR activities will be reviewed by the CSR Committee. A system will be put in place to maintain a transparent monitoring and reporting mechanism across all the stakeholders involved in the CSR activities of the Bank, as desired by the CSR Rules (Section 135, Companies Act, 2013)
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13. CSR PROGRAMS / PROJECTS
The Bank is highly supportive of the involvement of its employees in its CSR initiatives and in community activities/charities of their choice, and will therefore proactively engage with employees and other key Stakeholders to solicit their active involvement in the Bank’s CSR programs.
To provide a focused and structured approach to the program, the Bank will focus its support and CSR spends on specific pre-determined causes and areas of intervention as outlined in the Annexure to the policy. The CSR Department would put up to the Committee appropriate details of proposed projects including implementation year, modalities of execution in the areas/sectors chosen, implementation schedules for the same etc. The CSR Committee will consider and approve (in line with the guidelines given below), CSR projects/programs to be undertaken during the year. a) The Bank will ensure that its CSR projects are none Discriminatory in nature and do not have any restrictive Political or religious affiliations.
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b) The programs/ projects will be within the areas recommended / listed by the CSR Committee and mentioned in the Policy.
c) The programs/ projects will be beyond business as usual.
d) The programs/projects will be implemented within the Country and preferably in areas where the Bank has its Presence.
e) The Bank will actively consider Programs/Projects that have Also those where employees are directly involved through Volunteering efforts.
f) Programs/Projects that integrate business models with social And environmental priorities and processes in order to create Shared value will be encouraged.
g) The Bank will consider Programs/Projects closely linked with The principles of sustainable development. 20
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h) Programs/Projects should not be exclusively for the benefit of Employees of the company or their family members or those That are conducted /undertaken exclusively in pursuance of The normal course of business.
I) any surplus, generated out of the CSR activities of the Bank, Will be ploughed back to the CSR Initiatives of the Bank.
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14. REPORTING Our Origins The housing development finance corporation limited (HDFC), founded in 1977, and is Indian’s largest mortgage company. It was amongst the first companies to receive an ‘In-Principle’ approval from the reserve bank of India (RBI) to set up a private sector bank, thus leading to the establishment of HDFC bank limited in august 1994. Headquartered in Mumbai, we began operations as a scheduled commercial bank in January 1995 & have today become India’s second largest private bank by balance sheet.
OUR JOURNEY
HDFC bank incorporated As a scheduled
Times bank limited merged with HDFC bank
Commercial bank
Amalgamation of Centurion bank of Punjab with HDFC bank
1995
2000
2008 22
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At HDFC bank, our mission is to be “a World class Indian Bank” in terms of product offerings, technology, service levels, risk management and compliance. We are committed to contribute towards inclusive growth, reaching out to the bottom-of-the pyramid segments by offering development & financial support.
Our objective is to build sound customer franchises across distinct businesses, to be the preferred provider of banking services for customers, and to achieve healthy growth in Profitability, consistent with our risk appetite. Coupled with efforts towards social responsibility and environmental preservation, we are driven by the highest levels of ethical standards, professional integrity, and corporate governance and regulatory compliance.
Since inception, our business philosophy has been guided by the core values of people, customer focus, operational Excellence and product leadership and these core values fuelled our growth over the years. In FY 2013-14, we adopted and established Sustainability as the fifth core value that defines our business.
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OUR CORE VALUES
CUSTOMER FOCUS
PEOPLE
OPERATIONAL EXCELLENCE
PRODUCT LEADERSHIP
SUSTAINABILITY
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Our Products and Services We cater to a wide range of banking services covering commercial and investment banking on the wholesale side and transactional/branch banking on the retail side. We serve customers through three key business segments which comprise mainly of:
Wholesale Banking With superior product delivery, service levels and strong customer orientation, we have made significant inroads into the banking consortia of a number of leading Indian corporate including multinationals, companies from the domestic business houses and prime public sector companies and are recognized as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.
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Commercial
Working Capital, Term Loans, Bill / Invoice
Banking
discounting, Forex & Derivatives, Wholesale, Deposits, Letters of Credit, Guarantees
Transactional Banking
Cash Management, Custodial Services, Clearing Bank Services, Correspondent Banking, Tax Collections, Banker to Public Issues
Investment Banking
Debt Capital Markets, Equity Capital Markets, Project Finance, M&A and Advisory
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Retail Banking Our Retail Banking business provides customers with a full range of financial products and banking services, giving them a one-stop window for all their banking requirements. The products are backed by world class service and delivered to customers through our growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking. Loan Products
Auto Loans, Personal, Loans Home Loans, Vehicle Finance, Agriculture and Tractor Loans, Credit cards, Loans against Gold/Securities, Construction Equipment Finance, Education Loans, SHG Loans, Kisan Gold Card
Deposit
Savings Accounts, Current Accounts, Fixed/Recurring
Products
Deposits, Corporate Salary Accounts
Other Services
Depository Accounts, Mutual Fund Sales, Private Banking, Insurance Sales (Life, General), NRI Services, Bill Payment Services, POS Terminals, Debit Cards
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Treasury With the liberalization of the financial markets in India, corporate need more sophisticated risk management information, advice and product structures. Along with such services, fine pricing on various treasury products is provided through our Treasury business.
Foreign Exchange
Debt Securities
Equities
Derivatives
Asset Liability Management
Statutory Reserve Management
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Our Approach - Healthy Growth and Low Risk
Growing economy/
Nationwide network,
banking industry,
expanding semi urban and
gaining market share
rural footprint
Strong risk
Wide product range
management, Focus
and multiple customer
on asset quantity
segments
Leveraging organic and Inorganic growth opportunities
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HIGHLIGHTS Net Profit : Rupees 10,216 crore. An increase of 20.5% compared to the previous year. Balance sheet size : Rupees 590,503 crore. An increase of 20.1% compared to the previous year. Total Deposits : Rupees 450,796 crore. An increase of 22.7% compared to the previous year. Total Advances : Rupees 365,495 crore. An increase of 20.6% compared to the previous year. Capital Adequacy Ratio : 16.8% Tier I capital Ratio : 13.7% Gross Non- Performing Assets : 0.93% of Gross Advances Network : Branches: 4,014 ATMs: 11,766 Cities/Towns: 2,464
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OUR REACH
14000
12000
11766
11256 10000
10473
8913
8000
11-12 Year 12-13 Year 13-14 Year 14-15 Year
6000
4014
4000
3403
3062 2171
2000
2464
1845
2544 1399 0 Branches
ATMs
cities/towns
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PRADHAN MANTRI JAN- DHAN YOJANA
HDFC bank has been fulfilling the financial inclusion mandate of the Pradhan Mantri Jan-Dhan Yojana (PMJDY). It is among top private sector banks both in terms of account value and the number of accounts opened under the scheme.
PMJDY was launched on August 28, 2014 by the honorable Prime Minister to bring about total financial inclusion. The scheme relies heavily on technology to provide every unbanked house hold access to various banking services such as savings accounts within a set timeframe.
Under the scheme, the bank was allocated 1499, urban wards & 453 subservices areas (SSA) in 27 states, including 2 union territories. In the initial step, the bank completed a house-to-house survey covering all regions end of last year, well within the prescribed deadline of December 26 set by the department of financial services (DFS). In a 32
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landmark event, it completed account opening for 100% unbanked households by January 26, 2015, within the schemes stipulated deadline.
The bank relies on its technological edge to fulfill the schemes objectives. In a first, it has deployed Micro ATMs, allowing both Aadhaar & Rupay PIN based transactions on the same machine. Each correspondent point allows direct opening of accounts through Micro ATMs compliant with UIDAL specifications. The E-KYC facility is also provided at these points.
Underscoring the bank’s achievements under PMJDY, the government of Madhya Pradesh in December 2014 recognized it as the ‘Best Performing bank’ for overall performance. In October 2014, the Ministry of finance honoured the Yamunanagar branch as the ‘Best Branch’ for total deposits mobilized under PMJDY.
The importance of financial inclusion on a countrywide scale cannot be overemphasized. The bank is well placed to meet the scheme’s objectives through its prime technologies and a nation-wide network. 33
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Following are the diagrams shows PROFIT AFTER TAX (rupees in crore) 12000 2006
10000
2007 2008
8000
2009
10216
6000
8478
2011
4000
2012
6726 2000
0
2010
871
1141
3926
1590 2245 2949
2013 2014
5167
2015
1
DIVIDEND PER SHARE (Rupees)
9
8.0
8
6.9
7
5.5
6 5
3.3
4 3 2 1
1.1
1.4
1.7
2.0
2.4
0
4.3
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1
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EARNING PER SHARE (Rupees)
45 40 2006
35
2007 30
2008
25
42.1 35.5
20
28.5
2010 2011 2012
15
22.1 10 5
2009
13.5
5.6
7.3
9.2
17.0
10.6
2013 2014 2015
0 1
Previous year figures have been changed to reflect split of share into FV of Rupees 2 per share
Proposed dividend
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BALANCE SHEET SIZE (Rupees in crore) 700,000
590,503
600,000
491,600 500,000 400,000
400,332 2013 2014
300,000
2015
200,000 100,000 0 1
DEPOSITS (Rupees in Crore) 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0
450,796 367,337 296,247 2013 2014 2015
1
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RETAIL ASSETS (Rupees in crore) 250,000
193,035 200,000
164,763 136,388
150,000
2013 2014
100,000
2015
50,000
0 1
ADVANCES (Rupees in Crore)
400,000
365,495
350,000 300,000
2013
250,000 150,000 100,000
2014
2015
303,000
200,000
2015
239,721
2014
50,000 2013
0 1
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SAVING DEPOSITS (Rupees in crore)
124,927
140,000 120,000 100,000
88,211
103,133
80,000
Datenr…
60,000 40,000 20,000 0 2013 2014 2015
NET INTEREST MARGIN (%)
4.50% 4.48% 4.46%
4.5%
4.44%
2013
4.4%
4.42% 4.40% 4.38%
2014 2015
4.4% 2015
4.36% 4.34%
2014 2013
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RETURN ON CAPITAL (%)
25 20
10
2013
20.4%
15
2015
20.1%
20.9%
2014
2014 2015
5 2013
0 1
CAPITAL ADEQUACY (%)
16.8%
16.8% 16.80% 2013
16.1%
16.60%
2014
16.40% 2015
16.20%
2015
2014
16.00% 15.80%
2013
15.60% 1
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DEBIT CARDS (Nos. in lac)
250 201 3
200
2014
216.3 150
2015
174.2 100 50
2015
157.6
0
2014 201 3
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CREDIT CARDS (Nos. in lac)
70
64.2
51.4
59.7
60 50 2013
40
2014
30
2015
20 2015
10 0
2014 2013
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RUPEE EARNED
Sales
11.5%
interest from advances
3.2%
interest from investment
19.6% commission, Exchange Brokerage
64.7%
FX & Derivative income
others
RUPEE SPENT
Sales
7.2%
4.5%
9.6% 48.7% 26.1%
interest expense opearting expense tax transfer to reserve dividend & tax on dvidend
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SUMMARY FINANCIAL PERFORMANCE For the year ended March 31,2015
March 31,2014
496,009
406,776.5
Advances
365,495.0
303003.3
Total income
57,466.3
49,055.2
Profit before depreciation and Tax
15,985.0
13,443.7
Net profit
10,215.9
8,478.4
Profit brought forward
14,654.2
11,132.2
Total profit available for Appropriation
24,870.1
19,610.6
Transfer to statutory Reserve
2554.0
2119.6
Transfer to General Reserve
1021.6
847.8
Transfer to capital Reserve
224.9
58.3
Transfer to Investment Reserve
27.5
3.2
Proposed Dividend
2005.2
1643.4
Tax including Surcharge and Education
408.2
279.3
0.8
4.8
18,627.9
14,654.2
Deposits and other Borrowings
Appropriations:
cess on Dividend Dividend (including tax/cess thereon) pertaining to previous year paid during the year Balance carried over to Balance sheet
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CONCLUSION OF THE STUDY The above areas are related with the protection of customer interest. There are various issues where bank as a service provider must come forward and provide suitable guidance and information to protect investors and depositors interest. If a bank offers a right kind of services to the potential and existing customer that it definitely leads to higher customer satisfaction. Unless Until banks work for customer development and customer care, expansion of business is usually not possible. One should always keep in mind that it takes month to acquire a customer but minutes to lose it. Therefore the primary social responsibility of banks in order to retain their existing business and expand their future business. Therefore the corporate social responsibility is towards customer.
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BIBLOGRAPHY WWW.GOOGLE.COM MODERN BANKING IN INDIA (RELATED TO CSR IN BANKING BOOK)
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