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					                         EXECUTIVE SUMMARY

Small and Medium Enterprises (SMEs) form the backbone of the Indian economy and
have become engines of economic growth in India. It is estimated that SMEs account for
almost 90% of industrial units in India and 40% of value addition in the manufacturing
sector. Many of these SMEs also engage in exports of products and imports of raw
materials etc.

The SME department of the Commercial Banking Division of HSBC, Bangalore is
engaged in providing banking services and products to the SMEs based in the city. The
Business Development Team in particular is responsible for maintaining databases of the
customers and lead generation.

In order to generate leads of prospective customers it is imperative to know the specific
requirements of that particular company. To maintain good relationships with the existing
customers it is equally imperative to gauze their satisfaction with the current services.
This particular study aims to gauze the perception, awareness and satisfaction of existing
and prospective SMEs towards HSBC and their current banks respectively.

The research methodology employed in this study consisted of Survey method by
administering Structured Questionnaires to the respondents which consisted of a sample
of 202 SMEs based in Bangalore. The data so obtained was analyzed with the help of
Bar Graphs and Pie-Charts.

State Bank Of India emerged to be the most preferred bank. The topmost parameter for
choosing a bank was the services offered by it. Accessibility, Network of Branches,
Location also were some of the important parameters that customers look for in a Bank.
Providing adequate information about the specific products would make these SMEs
more inclined to bank with HSBC.

Making the bank more accessible to the SME customers, enhancing product knowledge,
maintaining a transparent pricing strategy would result in more business development.

                                   CHAPTER I

                            COMPANY OVERVIEW

1.1 HSBC Group Introduction

The HSBC Group is one of the largest banking organizations in the world 1. With a
network of approximately 10,000 offices in 90 countries in Europe, Asia, the Americas,
the Middle East and Africa, it positions itself as ‘the world’s local bank’. Its regional
businesses give customers locally tailored products and services wherever they are in the
world. HSBC is listed on the London, Hong Kong, New York, Paris and Bermuda stock
exchanges, and has almost 200,000 shareholders in 100 countries and territories. Through
an international network linked by advanced technology, HSBC provides a
comprehensive range of financial services; commercial banking; corporate, investments
and markets private banking and other activities.

1.2 The Group History

 The Hong Kong and Shanghai Banking Corporation opened in 1865 to finance the
growing trade between China and the West. Throughout the late 19th and early 20th
centuries the Bank established a network across China, Southeast Asia, the Indian
subcontinent, Japan, Europe and North America. Trade Finance was a key business,
along with bullion, exchange, merchant banking and the issuing of banknotes.

HSBC grew rapidly from 1960-1990, with subsidiaries in the Middle East, UK, Canada,
US, Germany, Egypt and Australia. Throughout the 1990’s, HSBC acquired banks in
Brazil, Argentina, Malta and Luxembourg, and began trading on the NYSE.

2001-2003 acquisitions were in Greece, Spain, Brunei, Taiwan, Turkey, France and
Mexico. At the end of 2003, HSBC acquired the US firm Household International Inc for
a consideration of US$ 14.2 billion. In 2004, HSBC acquired a 19.9% stake in China’s
Bank of Communications for US$ 1.75billion, representing the largest foreign bank
equity investment in a mainland China bank.

1.3 HSBC Bank in India

The Group’s links with India date back to 1853 when The Mercantile Bank (subsequently
acquired by HSBC) opened its first branch. In 1867, the Group opened its first – bank
staffed agency in Kolkata. In India, the Commercial Banking has a presence in 50
branches covering numerous key cities.

Timeline for Commencement of Operations in India

1853   The Mercantile Bank, China and London
1867   The Hong Kong and Shanghai Banking Corporation Limited (HBAP)
1995   HSBC Securities and Capital Markets (India) Private Limited (HSCI)
2000   HSBC Electronic Data Processing India Private Limited (HDPI)
2003   HSBC operations and Processing Enterprise (India) Private Limited (HOPE)

Firsts in India

2005 First Bank to provide a scorecard based unsecured overdraft offering to the Indian
     SME (Small and Medium Enterprise)
2004 First Bank to offer repayment flexibility for personal loan customers.
1999 First to introduce Export Factoring.
1999 First bank to integrate electronic banking platform with an ERP solution (SAP
1995 First to introduce Off-branch ATMs
1994 First bank to provide online access to accounts.
1987 First bank to provide ATMs
1985 First bank to computerize operations.

1.4 SME Profile in India

Worldwide, the small and medium enterprises (SMEs) have been accepted as the engine
of economic growth and for promoting equitable development. The major advantage of
the sector is its employment potential at low capital cost. The labour intensity of the SME
sector is much higher than that of the large enterprises. The SMEs constitute over 90% of
total enterprises in most of the economies and are credited with generating the highest
rates of employment growth and account for a major share of industrial production and
exports. In India too, the SMEs have played a pivotal role in the overall industrial
economy of the country. In recent years the SME sector has consistently registered higher
growth rate compared to the overall industrial sector. With its agility and dynamism, the
sector has shown admirable innovativeness and adaptability to survive the recent
economic downturn and recession.
As per available statistics (4th Census of SME Sector), this sector employs an estimated
59.7 million persons spread over 26.1 million enterprises2. It is estimated that in terms of
value, SME sector accounts for about 45% of the manufacturing output and around 40%
of the total export of the country.

       95% of industrial units in the country
       50% of India’s total exports
       45% of India’s industrial employment
       40% of the country’s domestic production

The overall growth rate of SMEs is 11.5%2, which is higher than the GDP. The SMEs are
a capital short sector. There has been a problem of inadequate financial reporting.
However, there have been certain Government initiatives such as SMERA (SME Rating
Agencies). This has led to improved financial disclosures. There is a need for efficient
domestic and international banking services to improve competitiveness.

HSBC’s definition of a SME- an SME is defined as a Commercial Banking (CMB)
customer with a turnover of less than INR 500M.

1.5 HSBC SME Strategy

Till 2005, the SME business focused on acquiring current accounts and fixed deposits.
From 2006, a strategic shift in the business model was implemented. The SME business
in now focused on selling transaction banking products to SME customers.

Transition in Strategy

Table 1: Comparison of HSBC’s SME Strategy in 2005 and in 2010

2005 Model                                      2009-10 Model
100% Float based income                         Combination     of   NII+NFI(Transaction
                                                Banking focus-PCM,HTV,FEX & FTG)
Focus on volumes                                Focus on value(USD 2K per customer)
One size fits all                               Suite of products and services to target
                                                industry verticals

The primary objectives of HSBC with respect to the SME customers are:

      To be the preferred transaction bank for the SME segment in India.
      Target both Upper and Micro SME Transaction Banking Customers based on
       Product Verticals (Trade, PCM, TRY,FTG)
      Acquire accounts with a minimum revenue earning capacity of USD 2K per

1.6 The target SME customers:

1. Sole Proprietors
2. Partners
3. Limited Companies
4. Trusts/Societies
5. Clubs and Associations
6. HUF

1.7 The target segments and sectors are:

1. Professionals                                        15. Telecom Products
2. Traders/Exporters/Importers                          16. Chemical Manufacturers
3. IT/ITES                                               17. Hardware Fittings
4. Cargo Agents                                         18. Construction Equipments
6. Auto Ancillaries
7. Garments/Textiles/Yarn
8. Food and Beverages
9. Metals and Minerals
10. Ayurvedics and Herbals
11. Medical Products
12. Rubber Products
13. Scientific Instruments and Machineries
14. Paper Products

1.8 Products and Services of HSBC1, 3

The following table gives an overview of the products and services offered by HSBC

Table 2: An overview of the products and services offered by HSBC
TRANSACTION BANKING PRODUCTS                Domestic and International Trade
                                                DC Advising
                                                DC Confirmation
                                                Exports Collections
                                                Imports Collections
                                                Remittances
                                                Transferable DCs
                                            Payments and Receivables Management
                                                RTGS/NEFT
                                                Cheque Outsourcing
                                                Local and Outstation Collections
                                            Treasury Products
                                                Spots
                                                Forwards
                                                Options

FINANCIAL PRODUCTS                            Domestic Products
                                                   Domestic FTG
                                                   Inland DC Discounting
                                                   LAS/LAM
                                              International Products
                                                   DC Negotiations
                                                   Export FTG
CASH BACKED LENDING                           Issue of SBLCs from International Banks of
                                              good repute.

DELIVERY                                             Committed TATs for Transaction
                                                      Processing CMB call centre
                                                     CMB Call Centre
                                                     Trade Call Centre
                                                     B2G and HSBCnet
                                                     Instant Advise

1. Payment and Cash Management (PCM) Services

Every businessman needs to manage the following 2 sides of the cash flow:
    Outflows-Payments for raw materials, labour etc
    Inflows-Money received from sales made/services rendered

Cash management is required to manage and monitor these flows. Cash management
involves outsourcing of:
    Payments- Payments to various suppliers
    Collections-Receipt/Pickup of payments from various customers.

2. Cash Management Products

The cash management products consist of:
1. Collections
   Cheque Pick Up and clearing
   Cash Pick Up( Restricted to a few customers)

2. Payments
   Cheque Outsourcing System (COS)
   Continuous Stationary
   Electronic Funds Transfer (EFT)
   Special Electronic Funds Transfer (SEFT)
   Real Time Gross Settlement ( RTGS)

3. Bankers-to-Issue (BTI)-collecting bank for IPO applications
4. Dividend Payments- Payments of dividends to shareholders.

3. Financing of a Commercial Contract

The commercial contract between buyer and seller covers:
    Method of delivery of goods by the seller
    Sale price
    Responsibilities of the respective parties, in relation to insurance, shipping and

Financing of a commercial contract is required:

        By the seller- In case of credit extended, exporter needs financing to pay for raw
        By the Buyer-If buyer has to make advance payment.

4. Key Information Needs

The key information needs required from the customer are:

1.   Total Exports/Imports in the current year
2.   Number of shipments/invoicing per month
3.   Currency of imports/exports
4.   Percentage backed by DC
5.   Percentage of documents sent for collection
6.   Percentage of transactions covered by advance payment/open account
7.   Requirement of guarantees for statutory/business purposes.

1.9 Methods of Trade1, 3

1. Advance Payment

This trade payment method is prevalent for transactions where the seller has a much
higher bargaining power than the buyer. Such payment method may also be employed
where the buyer may not have the ability to open letters of credit (formally called
Documentary Credits) through their bank/s. It is also possible that the buyer is a cash rich
company and therefore wants to avail a cash discount from the seller.

Obviously, the inherent risk in the transaction is borne by the buyer which involves
performance risk on the exporter as well as country risk where cross-border trade in
involved. Risk mitigants for the buyer could be an established relationship with the seller,
or any mutual dependence between the buyer & the seller. Bank Guarantee from the
seller covering the performance risk could also provide comfort to the buyer.

2. Open Account Payment

In an open account trading scenario, the buyer has a much greater leverage than the
seller. Under open account trade, the entre risk in the transaction is borne by the seller

since the payment is made by the buyer only after the latter has taken possession of the
goods. Seller’s risk is therefore of non payment or delayed payment.

Risk mitigants for the seller will be an established track record with the buyer, mutual
dependence between the buyer and the seller or alternative structures built into the
transaction such as avalisation, export factoring etc.

3. Collections

Trade between counterparties on collection basis is carried out where there is an inherent
comfort level between the buyer and the seller but each party desires to safeguard itself to
some extent. However, the buyer is at relatively lower risk than the seller. He can inspect
the documents before paying for them.

The risk to the exporter is much greater because he does not have a bank's undertaking as
in the case of a documentary credit; but he may retain control over the goods through the
collecting bank. This system is usually used when dealing with parties that have an
established track record or where the exporter is sure that the importer will not refuse the

4. Documentary Credit

DCs, more commonly known as letters of credit are a widely used method to effect
payments in domestic and international trade. A written undertaking is issued by a bank
(usually referred to as the issuing bank) on the instructions of the buyer of goods to the
seller. The payment is made under conditions stated in the undertaking. Payments are
always up to a stated limit and against stipulated documents.

The use of a DC provides enough safeguards for the parties involved. The seller is
ensured payment, provided he complies with terms he agreed to while the buyer can
include all terms and conditions within the DC that satisfy him on the quality and
quantity of goods without having to sight/inspect the goods themselves.

Since banks act as trustworthy third parties/intermediaries, the issues relating to trust
between the buyer and the seller are taken care of.

DCs are of 2 types:

   1. Sight- There is no credit term extended to the buyer by the seller
   2. Usance- There is a credit term extended to the buyer by the seller.

Important aspects to check for when a DC is received are:

      Payment terms
      Availability of the DC
      Acceptability of issuing bank
      Terms of shipmen
      Feasibility of complying with terms of the DC
      Workability of the DC
      Bank charges to whose account

Confirmation to a DC enhances security under the DC and mitigates any existing issuing
bank and/ or country risk since the same are taken over by the confirming bank.

1.10 HSBC’s Products for Exporters

Exporters can face significant risks when they undertake international trade, not least the
fear of delay or non-payment. HSBC’s trade services help reduce risks for new as well as
long established customers, allowing them to focus on their business.

To benefit from HSBC's export services, exporters need not have special facilities. The
buyers need to advice documentary credits through HSBC and they can benefit
immediately from its international network. If the exporter is the beneficiary of a
documentary credit issued by an HSBC Group office, he is entitled to the same level of
service excellence as any of the regular customers.

1. Export Collections

HSBC collects commercial / shipping documents through its banking network. For
exporters, it is a more secure option than trading on open account terms because the
shipping document will be delivered to the importer only against payment or an
acceptance to pay on due date. HSBC also offers instant email functionality, providing
details on the export collection transactions, to any designated person in office through
EDCA offering.

2. Export Financing

HSBC can address funding gaps in the trade cycle and support the exporter’s business, by
providing export financing options in foreign currency (at LIBOR linked rates) or in
Indian Rupees, both at the pre-shipment and post-shipment stage. HSBC also discounts
export receivables by negotiating bills drawn under a DC or discounting bills under

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collection, with the latter available both for D/P (Documents against Payment) and D/A
(Documents against Acceptance). HSBC also reduces country and bank risk, exposure to
interest and exchange rate fluctuations and turn the exporter’s receivables into cash. It
also provides instant e-mail advice.

3. Advance Remittances

Any payments into the country by overseas parties are processed expeditiously and
credited to the exporter’s account promptly.

4. DC Advising

A Documentary Credit ("DC") opened by the overseas importer's bank, is checked for
authenticity and couriered across to the exporter’s office. With a presence in over 100
countries and over 10,000 group offices, and global correspondent banking relationships
with over 2,500 banks, HSBC has Swift key arrangements with most of the major banks,
to facilitate straight through processing of DC advising. It also offers a real time
electronic DC advising functionality wherein the DC is sent through an automated email
to a designated person in the exporter’s office.

5. DC Confirmation

The bank and country risk are reduced effectively by enjoying the security of payment
commitments from both the issuing bank and the confirming bank. HSBC is one of the
largest institutional banks with global correspondent banking relationships with over
2,500 banks. If HSBC confirms the DC, and the documents are presented in compliance
with the DC terms, payment from HSBC will be final.

6. DC Transfer

DC Transfer is ideal for buyers working with sourcing agents who require credit cover.
HSBC provides guidance on the terms and conditions of the DC of the sourcing agents or
the first beneficiary and assists either fully or partially in transferring the DC to the
ultimate supplier.

7. Trade Solutions

HSBC has designed a special programme for exporters, supplying to certain large reputed
buyers in the US and Europe. As an established supplier to such large reputed overseas
buyers, these exporters are entitled to enjoy a range of extra benefits when they present
documents to HSBC for negotiation under Documentary Credits (DCs) issued by other
HSBC group offices. These extra benefits include lower bank charges such as handling

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charge, courier, cable charges, discrepancy fee, reimbursement fee etc which are to the
account of the beneficiaries:

      Faster communication and quicker turnaround times. As both the import and
       export legs of the transactions are handled by one bank you should receive funds
       6 days earlier on average, saving you interest charges
      Peace of mind that documents are only checked once and held by the local HSBC
       office until acceptance; and
      Opportunities for Pre and Post shipment finance.

8. Forfaiting

HSBC arranges for offshore financing on the export receivables to countries especially
high / medium risk with medium to long credit periods.

1.11 HSBC’s Products for Importers

1. Issuance of documentary credits (DCs) and standby letter of credits (SBLCs)

When issuing DCs or SBLCs through HSBC, the importers get the following benefits:

      Detailed advice on structuring the instruments to meet the import requirements
      Comprehensive guidance on the DC terms and conditions
      Access to HSBC's vast global expertise and resources
      Ability to turnaround transaction processing expeditiously

2. Import Collections services

This is a cost-effective solution for trading internationally. Under this arrangement, the
importer gets the shipping documents, after making payment or providing an acceptance
to pay at a future date. With its established strict service standards, HSBC ensures that
the customers are promptly informed of any documentary collections drawn on them.

3. Import Financing

HSBC takes care of the funding gaps in the trade cycle and supports the business, by
providing import financing options in foreign currency (at LIBOR linked rates) or in
Indian Rupees. HSBC also arranges for import buyer’s credit financing through its
branches and group entities overseas at internationally competitive LIBOR linked rates.

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4. Advance Remittances / Direct Remittances

HSBC provides a quick turnaround time for payments by way of Telegraphic Transfer,
Demand Drafts etc for the import payments to be made to overseas beneficiaries.

5. Issuance of shipping guarantees/delivery order or any other guarantee

A shipping guarantee or a delivery order can also be issued by HSBC, in case the goods
imported arrive before the transport documents, to facilitate taking delivery of goods. The
importer can then have immediate access to his goods and avoid expensive storage fees
and demurrage charges.

6. Advisory services on any Import transactions

HSBC provides expert advice for structuring the import transactions, whatever the
sourcing requirements may be. Due to its global presence, it can offer solutions where
HSBC group entities can handle the transaction on both sides thereby ensuring a
smoother, safer and a more cost effective execution of transactions.

1.12 Factoring Solutions

An adequate cash flow for working capital is one of the essentials for the smooth running
of any business. HSBC provides innovatively designed services to meet the business
Factoring Solutions for Small and Medium Businesses is a structured working capital
finance solution that includes finance against domestic or export receivables, collection
of receivables on due date, credit protection and credit advisory services. It is an
internationally accepted financing solution that allows the customers to convert their
accounts receivables to cash thereby releasing the cash generation potential of the

Features and Benefits of Factoring Solutions:

1. Instant Cash Raise:

Factoring enables the clients to raise cash against invoices. HSBC can pay up to 85% of
the values of all eligible invoices within a day of submission of invoice and the delivery

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2. No requirement of Collateral Security

No collateral security is needed to avail finance. Interest is paid only on the actual funds
utilization in the account.

3. Concentrate on the core business

HSBC helps in turning the invoices into cash. This enables the client to respond more
quickly to market opportunities. Collection of receivables is also managed by HSBC
enabling the client to concentrate on his core business activities.

4. Optimization of cash flows

The hidden costs associated with providing extended credit to the buyers are avoided.
Improved cash flows can help the customer to negotiate competitive purchase terms with
his suppliers. He can also choose additional services from HSBC’s offering including
Credit Protection service to protect him self from bad debts that may arise.

Types of Factoring Solutions

1. Domestic Factoring

Domestic factoring provides funding against invoices raised on customers within India.
In addition to this, HSBC also takes care of ledger management. Credit protection is also
offered as an additional optional service feature.

2. Invoice Factoring

Invoice Factoring is an alternate solution to domestic factoring if the client wants to avail
financing against his accounts receivables but would still like to continue managing
collections. The steps involved are the same, as domestic factoring except that the client
need not inform his customers about the arrangement with HSBC. His customers would
continue to pay directly to him. HSBC would not be responsible for collections of the
proceeds. As soon as the client’s customers make the payments, he would have to remit
the payment to HSBC.

3. Export Factoring

Export factoring provides immediate financing against the client’s export receivables.
Financing can be availed in Rupees or in foreign currency. HSBC offers credit protection
for the export receivables. As part of the full service package, HSBC also offers Sales

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Ledger Management wherein it handles all ledger administration and collection jobs
through overseas factor partners, to save both time and overhead costs.

Some of the target segments for Factoring are:

Any Business Enterprise with a Working Capital Cycle Gap:

1. Auto components & Ancillary suppliers
2. Light Engineering
3. Foundry, Casting, Forging, Precision & Machining
4. Suppliers to Construction companies
5. Textiles & Apparels
6. Processed Foods
7. Pharmaceuticals, Surgical & Biotech companies
8. Chemicals, Polymers & Plastics
9. Packaging & Printing
10. IT Sector
       Software Development / BPO / KPOs
       Manpower Services / Staffing Solutions
       Hardware devices
11. Services
       Consultancy , Media & Advertising
       Concierge / Security / House Keeping Services
       Travel, Logistics Services

The non-factorable segments are:

1.    Companies with two way trading relationship with the buyer
2.    Entities selling on consignment basis
3.    Subsidiary billing to Allied Concerns
4.    Companies with Staggered Payments
5.    Supplying mainly to government institution ( Defense / Railways )
6.    Companies dealing in perishable products e.g. Fish, Flowers etc
7.    Sales of natural products prone to disputes ( Granite , Leather)
8.    Exports to high risk countries
9.    Supplies toward arms & ammunitions

Factoring allows SMEs to sell on Open Account Terms

      Increasingly buyers are demanding open account terms
      Competitors locally & globally are willing to offer open account terms

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        Factoring allows sellers to mitigate risks associated with open account terms

Although outsourcing collections by SMEs is critical, it is still a non-core activity.
Factoring eliminates the hidden costs of collections.

         Delayed payments are very common in most industries
         Few SMEs have a well developed collections infrastructure
         Owners and top management get involved in collections

     The management dilemma becomes to collect or sell. Factors are more effective in
     handling collections.

         A professional intermediary is more effective
         Buyers are more aware of maintaining their payment track record
         Collections in accordance with the buyer’s business practices

1.13 Cash Management Services

I. Integrated Payment Solutions (IPS)

Payments entail a broad spectrum of requirements, with constantly varying payment
formats and systems. While paper-based payments currently constitute a majority of
payment modes in the country, electronic-payments are fast gaining importance.

Every business has constantly evolving and varied requirements. It becomes an
administrative burden to manage these requirements along with effecting payments in a
timely and accurate manner. Also the company would like to ensure that internal
guidelines and controls are adequately met.

Some of the features of Integrated Payment Solutions are:

         A single point of entry for real-time information & transaction - execution for all
          your accounts
         Solution for online creation or file uploads of payment instructions for execution
          through varied modes like Cheque, Drafts, RTGS, NEFT & Account Transfers
         Options for instruction level or file level authorization or pre-authorized modes of
         Flexible and scalable authorization matrix permitting multiple authorizing levels
         Availability of varied Account Statements and Reverse MIS files for automated
          reconciliation within your systems
         Safety and security through two-factor authentication

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      Industry benchmark security through 128 bit SSL encryption

The Integrated Payment Solution of HSBC has many benefits. Some of the key ones are:

      Reduction in the overall end to end cost of processing payments and accounts
      Enhanced reconciliation resource optimization in payments processing and
       account reconciliations
      Improved Risk Management and Controls
      Improved vendor relationships

1.14 HSBC IPS Products

1. Cheque Outsourcing Services

Cheque Outsourcing Services facilitate outsourcing of paper-based payment to HSBC. It
supports individual/bulk issuance of payable at par company cheques, Demand Drafts
and Cashier Orders. HSBC manages the paper-based payment processing by providing
solutions on:

      Printing of instruments with customized payment advices
      Online querying & reconciliation of instruments through varied reports
      Outsourcing of instrument dispatches directly to the beneficiaries
      Remote authorization of payments for your mobile signatories
      Rationalization of work flows and payment related activities

2. Priority Payments

Priority Payments is a suite of electronic payment products including NEFT & RTGS that
the customer leverages on to pay his beneficiaries in a timely fashion:

      Reduction in cost of Demand Drafts Rationalization of courier lead time and
      Urgent payments at over 1000 RTGS locations and 700 NEFT locations
      Reduction in the risk of fraudulent encashment associated with paper-based
      Reduction in administrative activities like maintenance of dispatch records,
       cheques etc

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3. SmartCheque

SmartCheque is suited for low value, urgent paper payments, a solution, which enables
customers to issue cheques at his end which are payable at par at all HSBC branches.

4. Advising Solution

In this, HSBC intimates the beneficiary of the customer of the payment and its underlying
details. In addition to the paper-advice that accompanies each payment instrument,
HSBC’s advising engine additionally provides:

      Advice delivery to multiple recipients through email, fax or mail
      All payment types initiated through HSBCnet are supported
      All payment types initiated through HSBCnet are supported Inter-account
       transfers, Cashier Orders, Demand Drafts, Corporate Cheques, EFT, NEFT &
      User defined templates for recipient information & advising details are supported.

Integrated Receivables Solutions (IRS)

Accounts receivable management is important in any business cycle. The more control
there is over the cash flow, the less will be need for working capital required for running
the business. The faster the receivables are converted into cash, the lower will be the risks
associated with the business. At the same time in today’s competitive environment, this
has to be matched with the minimization of transaction charges and must bring
efficiencies in the business processes.

HSBC’s Integrated Receivables Solutions (IRS) offers the businesses an opportunity to
outsource their receivables process, from picking up cheques from the customers, usage
of strong logistics management and correspondent bank relationships for faster
processing and clearance of receivables to world class systems and processes to allow the
businesses to have a complete control over the cash flows and receivables.

Some of the key features of HSBC’s IRS are:

      Local clearing of cheques at over 350 locations across India
      Faster realization of outstation cheques through correspondent banks with a strong
       regional presence covering over 5,000 locations across India
      Cheque pick-ups at over 350 locations directly from company's offices/customers
      Single collection account for cheque deposits across the country

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      Cash concentration in the centralized collection account
      Collection reports with details of cheque number, drawer's name, date and place
       of deposit and invoice details
      Online querying on instruments deposited across the country
      One platform for all forms of collections i.e. cheques, cash and electronic
       Automated Bank
      Automated Reconciliation through integration of collection reports with your
       Back Office Systems
      Reconciliation of invoices against receipts from your customers

Benefits of Integrated Receivables Solutions (IRS)

      Faster realization of receivables through HSBC’s strong logistics management &
       geographic reach
      Savings in interest costs and Bank charges through rationalization of account
       structure and local clearing at over 350 locations across the country
      Simplification of process through Online querying on receivables
      Simplification and automated Bank Reconciliation
      Outsource debtor's reconciliation

1.15 HSBC IRS Products

1. Paper Collection

IRS is structured to offer quick realization of all instruments, local or outstation. The
proceeds of all cheques deposited with HSBC can be concentrated into a designated
central account at any of the HSBC’s branches. Consequently, the customers can have
better control on their cash flows and the reconciliation and the monitoring requirements
associated with multiple accounts are eliminated. Information on these collections is
delivered to the customer through HSBCnet. IRS further delivers a variety of collection
reports that can be used for automating the reconciliation process at the customer’s end.

      Local Clearing Solutions: HSBC has an extensive network of its own branches
       and correspondent banks that provide the customers with the capability to clear
       the instruments in local clearing at over 350 locations across India. The funds
       collected from these instruments can directly be credited to the centralized
       collection account. At each of these locations, HSBC provides the clients with the
       option of directly picking up the instruments from their customers. Detailed

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       collection reports provide information on the instruments deposited at each of the

      Outstation Clearing Solutions: HSBC has correspondent bank relationships with
       strong regional banks covering over 5000 locations across India. This ensures
       faster realization of the upcountry instruments. Detailed collection reports and
       online querying options on HSBCnet ensure that the clients can track and have
       complete control over their receivables.

      Smartcollect: Smartcollect provides the client’s HSBC’s global reach of over
       10,000 offices in 100 countries for efficient collection of foreign currency

2. Electronic Collections

IRS helps your business process improvement objectives with a comprehensive array of
electronic collections, including

      Domestic electronic funds transfer such as RTGS, NEFT, ECS
      International wire transfer
      Direct debit

Receivables data accompanying these transactions is captured and delivered to the clients
electronically to support their customer order fulfillment, credit management and
reconciliation process.

3. Receivables Management System

Built with advanced modular technology, HSBC’s receivables management system
brings together all the IRS components. Its automated reconciliation and information
management modules are fully integrated with the collections and processing features of
IRS. As the backbone of IRS, HSBC’s receivables management system:

      Consolidates receivables information across electronic and paper collections
      Automates accounts receivables reconciliation using the client’s pre-defined
       matching parameters for funds received against various invoices
      Delivers collection reports structured to meet the specified needs
      Provides online transaction enquiry

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1.16 HSBCnet

HSBCnet provides online access to a suite of global markets, research, cash management,
securities, trade and commercial banking services presented in a format that can be
personalized to meet the client’s needs. HSBCnet Cash Management Solutions enable the
clients to access information on their accounts held with the Bank and other banks around
the world and make a range of payments easily and efficiently. HSBCnet provides secure,
real-time access to cash management solutions across multiple geographies through the
client’s browser.


      Secure access to real-time information and transaction management
      Comprehensive reporting, online and via file download
      Transaction initiations via direct input and/or file upload
      Seamless integration with the corporate accounting system.

Key Features of HSBCnet

Balance and Transaction Reporting

      Online access to accounts and transactions
      Online access to the accounts of the subsidiary/group companies banking with
       HSBC through the same user ID.


HSBCnet facilitates a variety of payment types including

      Electronic payments like RTGS & NEFT
      Inter-account transfers
      Cheque payments

HSBCnet also facilitates payments through a single screen from the accounts of the
subsidiaries and group companies in India and overseas thereby simplifying operations.


HSBC recognizes the importance of advising the beneficiary regarding the details of each
payment. Advising solutions become critical before any electronic payments like RTGS
& NEFT can be used for making supplier and employee related payments. HSBCnet

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provides with the capability to customize the payment advice as per the business needs
and send the same to the beneficiary through multiple channels like

      Emails up to 6 beneficiaries per payment
      Courier

Receivables Management

      Consolidated receivables information across electronic and paper collections
      Automated Accounts Receivables Reconciliation using pre-defined invoice
       matching parameters
      Online transaction enquiry

1.17 Foreign Exchange Services

HSBC's Treasury ranks among the largest such businesses in the world. It combines 24-
hour global coverage with detailed knowledge of local markets to service their
requirements. Backed by a network of some of the world's most experienced
professionals HSBC is one of the leaders in foreign exchange and derivatives solutions. It
offers spot, forwards and options in foreign currency to suit the client’s needs.

Forwards and options allow the clients to proactively manage their risks, thereby
minimizing the risk for both exporters and importers.

      Spot - Buy/Sell foreign currency at the prevailing rate in the market
      Forwards - Fix the rate today to buy/sell currency at a future date
      Options - Right to buy/sell foreign currency at a future date at a price fixed at the
       present date.

1.18 Escrow Accounts

An Escrow is a legal agreement that acts as an agent in transactions between 2 parties.
The transaction requires both parties to fulfill certain obligations. The third party is
required to act as trustee. The agreement between the parties, stating the role of all the
parties, is the Escrow agreemen

Types of Escrow Agreements

      Business Transfer Arrangements
      Venture Capital Investments
      Trust and Retention Escrow Accounts

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      Acquisition of a controlling stake in Private Limited Companies
      Open Offer Escrow, under the prevailing SEBI guidelines
      Software code Escrows
      Escrow Collection Bankers for Initial Public Offers (Book Build IPO)
      Escrow Bankers for Reverse Book-build issues (De-listing open offers)
      Real Estate Development

Role of Escrow Agent

The Escrow Agent is required to do the following:
    Draft the Escrow agreement/Vet agreement made by the parties.
    Risk-management for both parties
    Liaison with lawyers of both parties
    Be a trustee of both parties

The Escrow agent is required to draft the Escrow agreement/Vet agreement made by the
parties. He is required to manage the risk for both parties. Liaisoning with the lawyers of
both the parties is also a part of the agreement. He is also a trustee of both the parties

The value additions provided by HSBC is majorly the significant experience it has in
several types of Escrows, the availability of standard agreement templates. HSBC has a
centralized structuring team which leads to faster turn around times.

HSBC provides the following value additions:
      Significant experience in executing several types of Escrows.
      Availability of standard agreement templates.
      Centralized structuring team which leads to faster turn around times.
      The strong International brand of HSBC serves high level of trust.
However, Escrows involve high risks. A deal gone sour can lead to loss of brand value.
If the terms of litigation are not complied fully, it can lead to litigation.

However, Escrows involve high risks. A deal gone sour can lead to:
   Loss of brand value
   Prone to litigation if terms of escrow not complied fully
  Escrow accounts are highly profitable. Income sources include the NII on money
  deposited. The floats are available till the terms of agreement are completed.

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   The fees payable for the structuring of agreement are the standard Escrows-which is
   the carded tariff. The approximate income is around INR 250,000 per deal. For
   complex deals, the pricing is usually done in joint discussion with the payment and
   cash management team.

Escrow Accounts are highly profitable. Income sources include:
    NII on money deposited- Floats available till completion of terms of agreement.
    Fess payable for structuring of agreement:
          o Standard Escrows-Carded Tariff
                  INR 250,000 per deal
For complex deals, the pricing is usually done in joint discussion with the payment and
cash management team.

For business scoping, sourcing of leads is done through:
   1. Intermediaries-Lawyers, Chartered Accountants, Merchant Bankers, Consultants,
       private Equity Firms etc.
   2. Builder Relationships- Leverages on existing relationships within retail assets.
   3. IT companies – for software escrows
   4. MNCs establishing business in India.
   5. Companies involved in takeovers/joint ventures.

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                                  CHAPTER II


2.1 Statement of the Problem

This Study helps understand the customer’s satisfaction and perception about HSBC’s
banking services and products. This study also helps understand, how SMEs select,
organize and interpret the various products and service offered by HSBC as well as other

2.2 Need for the Study

      The deeper the company understands the needs of the SME businesses, the earlier
       the product or service is introduced ahead of competition and greater the expected
       contribution margin. Hence the study is very important.

      This study will help HSBC to customize the service and product, according to the
       needs of the SME businesses.

      This study will also help HSBC to understand the experience and expectations of
       the existing customers.

2.3 Scope of the Study

This study is meant for SMEs based in and around Bangalore, Karnataka. The study will
be able to reveal the preferences, needs, satisfaction of these businesses regarding the
banking services and products. It will also help HSBC to know whether the existing
products or services that is being offered really satisfies the company’s needs.

2.4 The objectives of the study are:

1) To conduct a market research among the SME customers in and around Bangalore.
2) To focus on the specific requirements of the SME businesses, their awareness levels of
HSBC’s products and services.
3) To analyze the SME customer satisfaction towards banking services in general and
HSBC in particular and to find out ways of improving the services and give
recommendations on the same.
4) To find out why some SME businesses prefer to bank with public sector banks and do
not want to shift their banking transactions to any other bank.
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5) To focus on ways of generating leads and businesses to garner more SME customers.
6) To analyse how specific events for SMEs organised by HSBC in collaboration with
trade bodies helps in increasing the awareness levels and also contributes to business
7) To gather data about the SMEs in and around Bangalore with the help of certain
databases and web portals having tie-ups with HSBC and manage the gathered data,
which in turn would result in lead generation.

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                                   CHAPTER III

                         RESEARCH METHODOLOGY

3.1 Research Design

A research design is a framework or blueprint for conducting the market research project.
It details the procedures necessary for obtaining the information needed to structure or
solve marketing research problems. It lays the foundation for conducting the project and
ensures that the project is conducted efficiently and effectively. The research design used
for this study is Conclusive Research Design in general and Descriptive Research in

The Descriptive Research consists of a pre-planned and structured design to describe the
market characteristics and functions. The Survey Method of descriptive research was
used in this particular study. Here there are clear statement of the problems and also
detailed information needs.

3.2 Information Needs

The Survey Method of obtaining information is based on the questioning of the
respondents. Respondents are asked a variety of questions regarding their behaviour,
intentions, attitudes, awareness, motivations etc. The questions are asked in writing
through proper forms/questionnaires. Typically the questioning is structured. Structured
here refers to the degree of standardisation imposed on the data collection process. In a
structured data collection, a questionnaire is prepared and the questions are asked in a
prearranged order; thus the process is also direct.

The structured direct survey, the most popular data collection method has several
advantages. It involves administering a questionnaire which is quite simple. The data
obtained is reliable because the responses are limited to the alternatives stated. The use of
fixed response questions reduces the variability in the results that may be caused by the
differences in interviewers. Also, coding, analysis and interpretation of data is relatively

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In this particular study, the survey method was administered by:

1. Personal Interviewing: Here the respondents (The SME customers) were interviewed
face to face by visiting their company offices, in events organised by HSBC and by
taking the help of trade bodies like FKCCI and FICCI. The respondents were contacted,
asked then questions and the responses were recorded.

2. Electronic Interviewing: The electronic survey was conducted by e-mail. The contact
persons in the various SMEs were mailed the questionnaires with specific and lucid
instructions as to how to fill up the questionnaire.

3.3 Data Collection from Secondary Sources

The secondary data was collected from internal sources. It was collected from
organizational files, official records, databases of the existing customers, newspapers,
magazines, journals, management books, preserved information in the company’s
database and the website of HSBC.

The secondary information collected helped in developing an approach to research
questions by diagnosing the problem, developing a sample framework and thereby
providing an appropriate research design

3.4 Data Collection from Primary Sources

The primary data was collected during April- May 2010.

For the primary data, survey research was conducted, wherein face-to- face interviews
with questionnaires and postal questionnaires in the form of e-mail were used. Face to
face interviews cannot obtain a large sample but they can have a high rate of response. It
is possible to correct any misunderstanding the interviewees may have about the question
and also to gain missing information, which is not covered in the questionnaire.

Postal questionnaire especially in the form of email can help to obtain a large sample but
obviously the response is not as high as face-to-face interviews. In this project, both face-
to-face and e-mail questionnaires were used to collect primary data.

The Internet represents an effective way of collecting data. First online questionnaire
provides responses with a high speed, second it costs a minimal price (from nothing to
the price of the software used plus the internet connection), and finally the rate of
response is higher than for any other way of administration.

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3.5 Questionnaire Design

To establish the perception, satisfaction levels and awareness of the SME customers
towards HSBC in particular and banking in general, a structured questionnaire was
developed to collect the data needed. The questionnaire seems to be the most appropriate
way to collect respondent’s opinion on. As the questionnaire can be administered
simultaneously to a large group of people, which is not possible in the case of an
interview as, it involves interviewing each individual separately. Further, the
questionnaire provides a standardized data gathering procedure and minimizes the effects
of potential human errors. Its use also eliminates any bias introduced by the feelings of
the respondents towards the interviewer (or vice versa).

As to the questionnaire design, it was believed that it would be advantageous to use
closed questions and one or more open questions asking something like suggestions for
the improvement of the service. “In a closed question, the question is dichotomous if
there are only two possible answers (apart from a ‘don’t know’ or ‘no preference’). If
there are more than two possible answers, apart from ‘don’t know’ the question is

Answers to question can be given by ticking the yes/no boxes or by ringing the correct
answers. As a result, closed questions and some open ended were employed in this
research in order to interpret the collected data.

The questionnaire used is listed in Appendix 1. It was formulated keeping in mind the
research question of the study. The first part of the questionnaire establishes the name of
the company, the contact person, the main activities/sector of the company its current

The second part helps in gathering the opinions or attitude of consumers’ as to why they
prefer their current bank. The customers’ opinion was also gathered towards the various
reasons behind their availing the services of the bank and the ranking of the parameters.

In this way the questionnaire was developed on the basis of research studies carried out
earlier and referred to by the researcher. Details of such studies are provided in the
references. 5,6,7,8

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3.6 Sampling

The objective of most marketing research projects is to obtain information about the
characteristics or parameters of a population. A population is the aggregate of all the
elements that share some common characteristics and that comprise the universe for the
purposes of the marketing research problem. A sample, on the other hand, is a subgroup
of the population selected for participation in the study. Sample characteristics called
statistics are then used to make inferences about the population parameters. Budget and
time limits are obvious constraints favouring the use of a sample.

3.7 Defining the Target Population

The collection of elements or objects that possess the information sought by the
researcher and about which the inferences are to be made is the target population. The
target population in this particular study is defined as follows:
     Elements- Finance Managers/Managing Directors of the SMEs
     Sampling Units-SMEs
     Extent- In and around Bangalore, Karnataka.
     Time- April-May 2010.

3.8 Sampling Frame

A sampling frame is the representation of the elements of the target population. It
consists of a list or set of directions for identifying the target population. In this
particular study, the sampling frame used included the databases of HSBC listing the
existing customers, the website to identify prospective customers and
directories of trade associations such as FICCI and FKCCI

3.9 Sampling Technique

The sampling technique used in this particular study is Quota Sampling which is a non-
probability sampling technique that is a two-stage restricted judgmental sampling. The
first stage consists of developing control categories or quotas of population elements. In
the second stage, sample elements are selected based on convenience or judgment [2], [3].
Therefore, for the requirement of questionnaire effectiveness, control categories or quotas
were developed, i.e. respondents were considered valid if they are existing SME
customers of HSBC, or prospective customers engaged either in export/import,
manufacturing or in the services sector.

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3.10 Sample Size

The total sample size consisted of 202 SME companies based in and around Bangalore.
Of these 202, 100 are existing customers of HSBC and the rest 102 are prospective
customers who have been approached by Field Sales Officers or Sales Managers of
HSBC for conducting their banking transactions through HSBC.

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                                    CHAPTER IV

                       DATA ANALYSIS AND RESULTS


In this research, the method of quantitative analysis is chosen in which a structured
questionnaire, i.e. questions that pre-specify the set of response alternatives and the
response format, is used and the collected data is later a by the Microsoft Excel program.

Microsoft Excel helped in the collection of raw data for consumers’ in the form of
spreadsheet and helped to handle flexible data efficiently. Mainly, the data was analyzed
as descriptive analysis showing various figures, charts and frequency tables to get a
clearer view of preferences of ready meals within the sample size along with measuring
the most suitable factor affecting the growth of ready meals. In addition, along with the
primary data gathered, the secondary data collected from various academic journals and
reports are utilized to complement the information’s adequacy and biasness.

Through the analytical tools, like excel, it was ensured that the result collected is efficient
enough to be interpreted for the outcome of this study.

During the study, all the above mentioned ethical concerns related to a quantitative
research were given due importance and care has been given that within limited time of
frame, the result of the research is credible.

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Graph 1: Break-Up of the Current Banks of the SMEs (including HSBC)

The above pie-chart gives the break- up of the banks of the SMEs surveyed (Including

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Graph 2: Break-Up of the Current Banks of the SMEs (excluding HSBC)

The above pie chart gives the break-up of the banks of the SMEs surveyed. As is evident
from the graph, SBI accounts for 29% of the share followed by Canara Bank, ICICI etc.

Graph 3: SME Sectors

In this particular study, 202 companies were surveyed. Of these 109 are engaged in
export/import. 29 are engaged in manufacturing, 52 are in the services sector, and 12
engaged in other activities such as buying houses, trade bodies etc.

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Graph 4: Satisfaction with the current bank's service

With respect to the overall satisfaction 53% were satisfied, 34% were partly satisfied and
13% were dissatisfied with the overall performance of their current bank (including

Graph 5: Most Preferred Bank

SBI Group Banks emerged to be the most preferable bank among the SME customers,
closely followed by the private/foreign banks. This is a positive signal for foreign banks
like HSBC that customers would gradually like to shift their banking transactions to
banks with global presence especially for overseas deals.

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Graph 6: Reason for Preference of the current bank

41% of the respondents prefer their choice of banks because of accessibility and location
factors. Ease of transactions comes a very close second as the next reason for preference.
Trust also plays a role in preference.
Among the other reasons given for preference, one of the SME customers, Thought Net
Technologies, a software firm, preferred public sector banks because these banks did not
resort to short cuts to conduct their business, had rigorous but beneficial processes. On
the contrary Metalogic Systems preferred private/foreign Banks due to their flexibility
and did not prefer nationalised banks due to their rigid processes. Another SME, L.
Kamal & Co. Preferred private/foreign banks because of personal banking and accessible
representatives. Private/Foreign Banks were also preferred due to their global presence.

Handicraft Sourcing, an SME engaged in exports however felt that public sector banks
are accommodating while, private banks have too many rules and regulations.

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Graph 7: Awareness Of HSBC's Products For SMEs

54% of the respondents are not completely aware about the products/services offered by
HSBC and the rest are aware.

Graph 8: Respondents aware of HSBCs products but still not availing the service

Of the 54% of the respondents who said they were aware of HSBC’s products but still did
not avail the service, 44% gave the reason of being satisfied with their current bank
service for the same. However inadequate information about the specific products/service

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came a very close second. HSBC can easily leverage on this point and increase its
marketing and awareness efforts to make the customers educated about its products.
Locational constraints were another reason for not availing the services.
Among the other reasons given was the need for certain specific transactions that HSBC
was not able to provide, lending requirements etc.

Graph 9: Preference to bank with HSBC in case adequate information is provided

In case of the respondents who said they did not avail the services of HSBC due to lack
of adequate information, 64% were of the opinion that they would do so in case the
adequate information is provided to them. 21% were undecided and 15% said no.

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Graph 10: Top 3 Parameters for choosing a bank

Among the seven parameters given in the questionnaire, respondents were asked to rank
the top 3 parameters that they look for in a bank when they choose it. Services offered by
the bank emerged to be the top parameter with 78 respondents choosing it, followed by
the network of branches (47) and relationship banking at the SME level (39).

Graph 11: Product/Service availed from the current bank

Trade (Export/Import) services accounted for 50% of the services availed by the
respondents from their current bank. This was followed by working capital management
(23%), cash management services (14%) and current account (13%).

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Graph 12: Channels used for banking

51% of the respondents use the conventional channel for banking by visiting the branch
office etc. Doorstep banking is becoming increasingly common as is seen by the 21%
response with respect to the face to face meeting with the bank representative who visits
the office. 26% of the respondents availed the facility of internet banking while only 2%
availed the facility of telephone banking.

Graph 13: Reasons for having relationship with the current bank

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Among the most preferred reason given for banking with the current bank is the
association of the bank with the company ever since the business was established (26%).
This was followed by the trustworthiness and reliability of the current bank (19%), needs
and requirements being adequately met by the bank (17%), location preferences (11%),
competitive cost of service (9%), reputed brand name of the bank (9%), recommendation
by someone (7%) and dissatisfaction with another bank (2%).

Satisfaction of the prospective SME customers with their current bank on the
following parameters:

Responses of 102 prospective customers have been included in the following analysis of
the satisfaction of the SMEs with respect to different parameters with their current bank
(excluding HSBC). The current bank is defined as the bank that the SMEs are presently
doing their business with. It includes public sector banks like the State Bank of India,
State Bank of Mysore, Karnataka Bank, Vijaya Bank, Canara Bank, Indian Overseas
Bank, etc and private banks like HDFC, ICICI, Axis Bank, Citibank etc.

Graph 14: Satisfaction with respect to availability of products and services

There was a mixed response among the SME respondents with respect to the availability
of products and services. Only 39% of the customers were satisfied with their current
banks where products and services was concerned and 28% were partly satisfied. Thus
67% of the SMEs are dissatisfied in some way or the other with their current bank. Hence
if HSBC is able to leverage on this dissatisfaction factor by providing better products and
services, it would tremendously enhance business.

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Graph 15: Satisfaction with respect to availability of customer support

58% of the SME respondents were unsatisfied with the customer service that they receive
from their current banks. 22% were partly satisfied and only 20% were completely
satisfied. One of the advantages of HSBC is its dedicated customer support service.
Hence it would be ideal if HSBC leverages on this shortcoming of the other banks to lure

Graph 16: Satisfaction with respect to behavior of bank staff

With respect to the behaviour of the bank staff, 53% of the respondents were satisfied.
29% were not satisfied at all and 18% were partly satisfied.

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Graph 17: Satisfaction with respect to presence of bank in India

73% of the respondents were satisfied with the presence of their Current Bank in India
since the public sector banks like SBI, Canara Bank and also private banks like HDFC,
ICICI, Axis Bank etchave a wide presence in India. 20% were unsatisfied and only 7%
were partly satisfied.

Graph 18: Satisfaction with respect to presence of bank outside India

88% of the SME respondents felt dissatisfied with the absence of their Current Bank
outside India as it serves as an impediment to their trade business. Since these public
sector banks and private banks do not have their counterparts outside India, they charge
more processing fees for overseas transactions. HSBC because of its wide global

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presence and counterparts in over 90 countries, reduces the processing fees required for
the overseas transactions and thus provides an advantage to its customers.

Graph 19: Satisfaction with respect to the response time taken by the bank to revert
to queries

Only 47% of the respondents were satisfied with their current banks with respect to the
response time taken to revert back to queries. 38% were dissatisfied and 15% were partly

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Graph 20: Satisfaction with respect to the processing time

With respect to the processing time, only 30% were satisfied with their banks, and an
overwhelming 70% were either dissatisfied or only partly satisfied.

Graph 21: Satisfaction with respect to Accessibilty

With respect to accessibility, 60% of the SME respondents were satisfied, 23% were not
satisfied and 17% were partly satisfied.

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Graph 22: Satisfaction with respect to the fees involved in availing the services

59% of the SME respondents were partly satisfied with the fees that are charged from
them by their current banks. 31% were dissatisfied and only a low percentage (10%) was

Graph 23: Satisfaction with respect to the value added services provided by the

With respect to the value added services, majority of the customers were dissatisfied i.e.
57%. 28% were satisfied and 15% were partly satisfied.

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Satisfaction of the existing customers of HSBC with respect to the
following parameters:

Graph 24: Satisfaction of HSBC customers with respect to availibilty of products
and services

45% of the SME respondents were completely satisfied with respect to the products and
services offered by HSBC. 32% were only partly satisfied and the rest were not satisfied
at all. This implies that less that around 55% of HSBCs customers are not completely
satisfied at least with respect to the products and services and the bank should concentrate
in improving its efforts to meet the needs of these businesses by proving the desired
product and service.

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Graph 25: Satisfaction of HSBC customers with respect to availibility of customer

With respect to customer support, 65% of the customers appeared to be satisfied. 18%
were partly satisfied and 17% were not satisfied.

Graph 26: Satisfaction of HSBC customers with respect to the behaviour of HSBC

With respect to the behaviour of the HSBC staff, 72% of the respondents were
completely satisfied. However, the bank should also improve its efforts to make its staff
more aware their behaviour affects the attitude of the customer towards the bank in a
major way.

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Graph 27: Satisfaction of HSBC customers with respect to presence of the Bank in

Since HSBC has only 50 branches in India, as compared to the thousands of public sector
banks and some other private banks, it is but natural that 62% of the SME respondents
were not satisfied with the extent of network of HSBC in India.

Graph 28: Satisfaction of HSBC customers with respect to presence of the Bank
outside India

Being one of the largest banking giants, one of HSBC’s core competencies is its
extremely wide global presence. It has been able to leverage on this factor to emerge as

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one of the most preferred banks for export and import services. Hence 81% of the SME
respondents were satisfied with HSBC’s presence outside India.

Graph 29: Satisfaction of HSBC customers with respect to the time taken by the
Bank to revert to queries

With respect to the response time taken to revert back to queries, less than half (44%) of
the SME businesses were satisfied with HSBC’s service. 25% were partly satisfied and
31% were not satisfied at all.

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Graph 30: Satisfaction of HSBC customers with respect to the processing time

The turnaround time (TAT) for HSBC is one of the lowest in the banking industry and
also the time taken to process requests, open accounts etc is also quite less as compared
to other banks. Hence 83% of the customers were satisfied with the processing time at

Graph 31: Satisfaction of HSBC customers with respect to accessibility

There was a mixed response with respect to the accessibility factor. 32% were satisfied
with the accessibility of HSBC, 31% were partly satisfied and 32% were not satisfied at
all. Hence the bank needs to be more accessible to these customers to provide better
service and to enhance customer satisfaction.

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Graph 32: Satisfaction of HSBC customers with respect to the fees involved in
availing the services

Majority (47%) of the SMEs feel that the fees could be more competitive and hence are
not satisfied with the current fees charged by HSBC. 19% are partly satisfied and 34 %
are completely satisfied. It is usually, the new smaller enterprises in the market who can
ill-afford the high prices. The bigger players usually do not face much problem because
their transaction size is large.

Graph 33: Satisfaction of HSBC customers with respect to the value added services
provided by the bank

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An overwhelming majority (75%) of the SME respondents were satisfied with the value
added services provided by HSBC. Value added services included internet banking,
movie and IPL tickets for premier customers etc.

Graph 34: Whether the respondents would recommend HSBC to other SMEs like

An overwhelming majority of the SMEs were of the opinion that they would have no
hesitation in recommending HSBC to other SME businesses like them. This is indeed a
positive point in favour of the bank. However, the bank should also improve its efforts to
turn around the rest of the customers who were either neutral on the subject or said no on
the same.

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Graph 35: Media in which the respondents have heard of/ seen HSBC recently

When the SME respondents were asked as to where (in which media) they had heard of
HSBC recently, majority (33%) replied Television. Business Magazines play an
important role in increasing awareness about the brand. The importance of word-of-
mouth cannot be ignored as it creates a positive attitude towards the brand. Internet too
helps in enhancing the brand awareness. Seminars organised by HSBC in collaboration
with the various trade bodies play a significant role in educating the customers about the
existing as well as the new products/services as well as in enhancing the brand image.

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Graph 36: Ways to serve SMEs better

The majority of SMEs feel that HSBC should enhance its marketing efforts to widen its
reach. Also being more proactive in selling the products and services would prove
beneficial. Better ease of transactions, faster service and cooperative staff respectively
feature as the next important parameters for improvement of service.

Some other suggestions given by the SME customers were to completely do away with
hidden costs in day to day transactions. Another SME customer dealing in exporting
handicrafts to China felt that it should also provide a translator who would make the
dealings with HSBC china hassle free. Cusen Sytems, an SME, which manufactures
electronic microwaves, felt that HSBC should have more number of branches, especially
for the SMEs which are located far away from the city centres. Singhania and Company,
Law Firm based in Bangalore, acts as a channel partner for HSBC by providing good
quality leads for prospective customers. It was of the opinion that HSBC should reduce
the cost of services to serve customers better.

Metalogics Systems, a company dealing in software services was completely satisfied
with the services of HSBC. It felt that HSBC is more proactive than other banks and it
has been able to remove the mind block that HSBC is meant only for the big players in
the market.

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                                   CHAPTER V

                      DISCUSSION AND CONCLUSION

The project was divided into 2 phases:

1) The first phase consisted of developing a database with the help of the business portal to find out the prospective SME customers in and around Bangalore. The
database so developed was divided into sectors like Ayurvedic & Herbals, Medical
Products, Metals & Minerals, Electronic Goods, Telecom Products, Computer Products
and Software and so on depending on the nature of business of that particular company.
A total of 16 sectors were obtained in this way consisting of details of approximately 600
SMEs based in Bangalore. A brief profile of the SME, address, contact details etc were
uploaded in the database.

Similarly, another larger Pan-India Database was prepared with the help of
This database had around 10 sectors which showed good business opportunity. The Pan-
India database had the details of around 2000 SMEs. The Pan-India database was sent to
the HSBC Global Resource Centre, Hyderabad, where the prospective leads were
assigned to the HSBC branches all over India depending on the city where that particular
SME is based.

From the Bangalore database, telecalling was done on the contact numbers. 30
appointments were generated. Once the prospective customers gave the appointment,
they were visited along with the sales mangers/team leaders to pitch about the products
and to scope. 5 sales calls were successfully concluded and new customers were thus

Another important part of the project was business development. Business is enhanced
through collaboration with Chartered Accountants (CAs), Trade Bodies, Law Firms,
Venture Capitalists, Real Estate Bodies etc. The CAs provide leads of prospective SME
customers, because they are well versed with the finances of their client company and
know about their requirements in detail. Similarly trade bodies such as FKCCI, FICCI,
FIEO etc and Law Firms provide business leads.

Four events were conducted by the SME department of HSBC in April-May in
collaboration with FKCCI and FIEO for exporters/importers to increase product

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knowledge as well to enhance brand awareness. This was highly appreciated by the
SMEs and resulted in conversion of the leads as well, thus leading to new business

2) The Second phase of the Project was the market research, which has been described in
detail in the previous pages.

SBI features as the most preferred bank, closely followed by other PSUs. Among the
private banks ICICI and Axis follow second. One of the reasons attributed to this is the
wide presence of these banks across India and the large network of branches. HSBC has
only 2 branches in Bangalore, while SBI has hundreds and HDFC has 70. These banks
could be potentially competed for customer acquisition/churn.

Location and accessibility has consistently emerged as one of the most important factors
for choosing the bank. More than half of the respondents (Prospective Customers) were
unaware of specific products for SMEs which could help them enhance their business.
Increasing awareness would go a long way in generating new customers. An
overwhelming majority of the SMEs felt that they would like to bank with HSBC in case
they are provided with adequate information and educated about the products and

Not surprising, the service factor emerged as the topmost parameter in choosing a bank.
Hence in order to acquire new customers and to retain existing ones, service should
always be the topmost priority.
The prospective customers who bank with other banks (excluding HSBC) rely on the
conventional channel of visiting the branch office to conduct their business. However,
online banking is fast gaining popularity as a preferred means of banking. One of the
advantages that HSBC’s customers get is doorstep banking, where the bank
representative visits the SME offices and everything from document collection to cheque
pickup is done for him.

Although, long association emerged as the top reason for banking with the current bank,
it should not be seen as hindrance. Good service and specific products would be helpful
in luring these customers.

Customer support, Fees, processing time, presence of bank outside India and value added
services were the top parameters where the prospective SME customers were the most
dissatisfied with their current bank. Leveraging on these shortcomings would prove
beneficial to HSBC.

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In the case of existing customers of HSBC, they are most dissatisfied with the thin chain
of branches in India, Fees involved, accessibility, response time etc. Working to
overcome these would hence be advantageous in enhancing customer satisfaction.
Global Presence, Customer Support, Behaviour Of Bank Staff and processing time
appear to be the most satisfactory parameters.

A large number of respondents were ready to recommend HSBC to other SMEs like
them. This is indeed a positive sign. Television appears to be most preferred media to
enhance brand awareness. Word of Mouth and events like seminars etc also play a very
important role in increasing the brand image of the bank and in creating a feel good

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                                CHAPTER VI


   Make the bank more accessible to the customers. Although it may not be possible
    to increase the number of branches in a short span of time, accessibility can be
    enhanced with the help of making customers aware about door step banking
    facilities’, cheque pick up and collection services, document pick up etc.

   Enhance product knowledge of the customers by organising seminars, events etc
    so that the SMEs are aware about the right kind of banking product needed for
    their business and avail the same.

   Introduce more lending and factoring products and make it easier for the SMEs to
    avail them. This would result in more business generation because lending and
    factoring products make sure that the working capital needs of the SMEs are
    adequately met.

   Remove any hidden costs in day to day transactions and keep the pricing strategy
    transparent so that the customer realizes he is getting value for his money as well
    as a safe and secure banking transaction.

   Remove the mental block of the SMEs that only PSUs would be able to provide
    secure transactions. Make them aware of HSBCs competitive rates and strict
    compliance procedures.

   Ask for the customer feedback at regular to know whether they are really satisfied
    or dissatisfied with the services/ product of the bank. If they are dissatisfied, then
    the reasons for the same should be found out and should be corrected in future.

   The Field Sales Officer (FSO) who makes the initial sales call should be
    constantly updated on the product/services and should be provided adequate
    training to pitch the right kind of product according to specific business needs.

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                                  CHAPTER VII


This research was conducted with some limitations:

      The sample size was restricted to only 202 companies because of limited time and
       budget. The findings could be more generalized and better explanatory by extending
       the number of sample size along with including other major cities of India.

      This study pertains to the companies based in and around Bangalore only. The
       findings could have been more generalized and better explanatory by including other
       major cities. However, this was not possible due to the time constraints

      The personal interviewing method had some refusals from the respondents due to
       time constraints and unwillingness to answer questions.

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1. Company Name :

2. Address:

3. Contact person:

4. Main Products & Activities/Sector:

5. Do you have an existing banking relationship?
    1. Yes
    2. No

6. If Yes, which Bank/s?

7. Are you satisfied with your current Bank’s service?
    1. Yes
    2. No
    3. Partly

8. If you had a choice, which of the following would you most prefer to bank with?

    1. SBI Group Banks
    2. Other Public Sector banks
    3. Private/Foreign Banks

9. Why would you prefer to bank with the above?
    1.   Trust
    2.   Accessibility/Location
    3.   Ease of Transactions
    4.   Others- (please specify)

10. Are you aware of HSBC’s commercial banking services/products for SMEs?
    1. Yes
    2. No

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11. If yes, then what made you not avail the services/products of HSBC?
    1. Happy with the services of the current bank.
    2. Inadequate Information about HSBC’s products.
    3. Accessibility / Location
    4. Others-

12. If adequate information is provided will you like to bank with HSBC?
    1. Yes
    2. No
13. Please rank the top three parameters for choosing a bank
          1. Level of documentation involved in export related transactions.
          2. Services offered by the bank
          3. Value Added Services provided by the bank.
          4. Fees involved in availing the services of the bank.
          5. Relationship banking at the SME level.
          6. Ease of opening a current account.
          7. Network of branches.

14. What are the products or services that you avail from your bank?
         1. Working Capital Management
         2. Export Collections/Finance
         3. Import Collections/Finance
         4. Cash Management Services
         5. Current Account

15. What channels do you use for banking with your banker?
         1. Face to face meeting with the bank representative who visits the office.
         2. Online Transactions using the internet banking facility
         3. Conventional banking transactions by us visiting the branch
         4. Telephone Banking.
16. Reasons for having relationship with the existing banker?

    1.   Associated with the bank ever since the business was established.
    2.   Needs and requirements are adequately met by the bank.
    3.   Proximity of establishment/Location Preferences
    4.   The bank provides service at competitive cost
    5.   Reputed brand name of the bank
    6.   Trustworthy and reliable
    7.   Dissatisfaction with a previous bank.
    8.   The bank was recommended by someone
    9.   Any other reason (Please Specify)

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17. By responding as Yes/No/Partly, please specify how satisfied you are with your bank on the
following parameters:

    1. Availability of Products and services
    2. Availability of Customer Support
    3. Behaviour of the bank staff
    4. Presence of bank in India
    5. Presence of bank outside India
    6. Response time taken by the bank to revert to queries
    7. Processing Time
    8. Accessibility
    9. Fess Involved in availing the services
    10. Value added services provided by the bank

18. Would you recommend your bank to other SMEs like you?
     1. Yes
     2. No
     3. Can’t Specify

19. In which of the following media have you seen or heard of HSBC recently?
       1. Business Magazines
       2. Business Newspapers
       3. Internet
       4. Television
       5. Word of Mouth
       6. Seminars
       7. Any Other (Please Specify)

20. What according to you, should HSBC do to serve you better?
       1. Should provide faster service
       2. Should provide better ease of transactions
       3. Should be proactive in selling the products to the customers
       4. Should improve marketing efforts to reach more number of SMEs like you
       5. Staff should be more cooperative
       6. Others- (Please Specify)

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1. HSBC SME Handbook (2009-2010)
2. Annual Report (2009-2010), Government of India, Ministry of Micro, Small and
   Medium Enterprises.
4. Regan Lam, Suzan Burton (1983), SME banking loyalty (and disloyalty): a
   qualitative study in Hong Kong, International Journal of Bank Marketing.
5. Madill, L Feeney, A Riding, GH Haines Jr (2002), Determinants of SME owners'
   satisfaction with their banking relationships: a Canadian Study, Marketing.
6. SP Bornheim, TH Herbeck (1998), A Research Note on the Theory of SME–Bank
   Relationships, Small Business Economics.
7. Bbenkele K (2007), An investigation of small and medium enterprises perceptions
   towards services offered by commercial banks in South Africa, African Journal of
   Accounting, Economics, Finance and Banking Research Vol. 1. No. 1
8. M Zineldin (1995) - Bank-company interactions and relationships, International
   Journal of Bank Marketing, Vol. 8, pp.85-102

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