4

Executive Summary

Customer satisfaction is a measure of how products and services supplied by a company meet or

surpass customer expectation. Customer satisfaction is defined as "the number of customers, or

percentage of total customers, whose reported experience with a firm, its products, or its services

exceeds specified satisfaction goals.

Banking industry is playing a vital role in the economy of our country and customers are the

heart of a bank. To be successful in such competitive market a bank must satisfy its customers

properly with its various services.

To do a study on the customer satisfaction towards the services of a bank I‟ve selected United

Commercial Bank Ltd. (UCBL) as its one of the old and successful local private bank. The Bank

is primarily oriented towards extending financial assistance in the trade and the commercial

sector besides lending in the industrial sector. The Bank, aiming to play a leading role in the

economic activities of the country, is firmly engaged in the development of trade, commerce and

industry thorough a creative credit policy.

The objective of this study is to determine whether the customers of UCBL are satisfied with the

services of UCBL or dissatisfied. In my study I‟ve tried to find out in which area of services

customers are mostly satisfied and dissatisfied; customers‟ preference level about UCBL; which

services are demanded by the existing customers base and also which services are required to

achieve more customers; and the relative position of UCBL compared to other banks. From the

company‟s perspective this study will help UCBL to understand its position in terms of

satisfying its customers. It will help them to know which service attributes are most important for

the customers. They will be able to understand in which area of services UCBL lack most and

thus improve the quality of their service. They will understand which customer groups are more

potential. They will also be able to know which products of UCBL are mostly preferred by the

customers. This study will also help other banks and service and financial organization to

understand the factors that affect the satisfaction level the customers and thus they will be able to

improve their services.

5

Chapter # 1: Prefatory

6

1.1 History of Banking in Bangladesh

After achieving independence in 1971, the government of the newly-found Bangladesh declared

the Dhaka branch of 'State Bank of Pakistan' the new Central Bank and named it the 'Bangladesh

Bank'. Bangladesh Bank was responsible for controlling currency and credit and monitoring

exchange control. It was also the official foreign exchange Reserve. The government took over

all the existing national banks and renamed them. The existing foreign banks were given

permission to continue their business in Bangladesh.

Bangladesh Bank has been entrusted whit all of the traditional central banking functions

including the sole responsibilities of issuing currency, keeping the reserves, formulating and

managing the monetary and credit policy, regulating the banking system, stabilizing domestic

and external monetary value, preserving the par value of Bangladesh Taka, fostering economic

growth and development and the development of the country‟s market.

The Bangladesh Banks (Nationalization) Order enacted in 1972 nationalized all banks except

foreign ones. Six nationalized banks were formed through merging the existing banks of the

period.

The rate of growth and development of banking sector in the country was extremely slow until

1983 when the government allowed to establish private banks and started denationalization

process: initially, the Uttara Bank in the same year and thereafter, the Pubali Bank, and the

Rupali Bank in 1986.

Modern banking system plays a vital role for a nation‟s economic development. Over the last

few years the banking world has been undergoing a lot of changes due to deregulation,

technological innovations, globalization etc. These changes in the banking system also brought

revolutionary changes in a country‟s economy. Present world is changing rapidly to face the

challenge of competitive free market economy. It is well recognized that there is an urgent need

for better, qualified management and better-trained staff in the dynamic global financial market.

Bangladesh is no exceptions of this trend. Banking Sector in Bangladesh is facing challenges

from different angles though its prospect is bright in the future.

7

History of Private Banks in Bangladesh

There were no domestic private commercial banks in Bangladesh until 1982; When the Arab-

Bangladesh Bank Ltd. commenced private commercial banking in the country. Five more

commercial banks came up in 1983 and initiated a moderate growth in banking financial

institutions. Despite slow growth in number of individual banks, there had been a relatively

higher growth of branches of nationalized commercial banks (NCBs) during 1973-83.

Financial sector reforms to strengthen the regulatory and supervisory framework for banks made

headway in 2006 although at a slower than expected pace. Overall health of the banking system

showed improvement since 2002 as the gross Non-performing Loans (NPL) declined from 28

percent to 14 percent while net NPL (less Provision) reduced to 8 percent from 21 percent. This

led significant improvement in the profitability ratios. Although the Private Commercial Banks

(PCB) NPL ratio registered a record low of 6 percent, the four Nationalized Commercial Banks

(NCB) position are still weak and showed very high NPL at 25 percent. The NCBs have large

capital shortfalls with a risk- weighted capital asset ratio of just 0.5 percent (June 2006) as

against the required 9 percent. For the PCBs risk-weighted capital asset ratio stood at 10 percent.

Bangladesh Bank issued a good number of prudential guidelines during the year 2006 and the

first quarter of 2007 which among others relate to:

• Rationalization of prudential norms for loan classification and provisioning,

• Policy for rescheduling of loans,

• Designing and enforcing an "integrated credit risk grading manual",

• Credit rating of the banks, and

• Revisions to the make-up of Tier-2 capital.

Bangladesh Bank has also taken up the task of implementing the Basel II capital accord. Further,

the recent enactment of the Micro-credit Regulatory Authority Act (MRAA) for the regulation of

the Micro Finance Institutions (MFI) has been a major development in the year 2006. Since 1998

CAMEL rating of banks gradually improved and in 2006 Bangladesh Bank updated this rating

model by incorporating the market risk and the new model is known as CAMELS.

Modern banks play an important part in promoting economic development of a country. Banks

provide necessary funds for executing various programs underway in the process of economic

development. They collect savings of large masses of people scattered through out the country,

which in the absence of banks would have remained idle and unproductive. These scattered

8

amounts are collected, pooled together and made available to commerce and industry for meeting

the requirements. Economy of Bangladesh is in the group of world‟s most underdeveloped

economics. One of the reasons may be its underdeveloped banking system. Government as well

as different international organizations have also identified that underdeveloped banking system

causes some obstacles to the process of economic development. So they have highly

recommended for reforming financial sector. Since, 1990, Bangladesh government has taken a

lot of financial sector reform measurements for making financial sector as well as banking sector

more transparent formulation and implementation of these reform activities has also been

participated by different international organization like world Bank, IMF etc.

1.2 Current Structure of Banks in Bangladesh

Bangladesh Bank (BB) has been working as the central bank since the country's independence.

Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing

transaction facilities of all public monetary matters. BB is also responsible for planning the

government's monetary policy and implementing it thereby.

The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are

Nationalised Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks

and the rest five are Development Financial Institutions (DFIs). Sonali Bank is the largest among

the NCBs while Pubali is leading in the private ones. Among the 12 foreign banks, Standard

Chartered has become the largest in the country. Besides the scheduled banks, Samabai

(Cooperative) Bank, Ansar-VDP Bank, Karmasansthan (Employment) Bank and Grameen bank

are functioning in the financial sector.The number of total branches of all scheduled banks is

6,038 as of June 2000. Of the branches, 39.95 per cent (2,412) are located in the urban areas and

60.05 per cent (3,626) in the rural areas. Of the branches NCBs hold 3,616, private commercial

banks 1,214, foreign banks 31 and specialised banks 1,177.

Bangladesh Bank (BB) regulates and supervises the activities of all banks. The BB is now

carrying out a reform programme to ensure quality services by the banks.

9

1.3 Background of the Research

United Commercial Bank Ltd. (UCBL) was incorporated in Bangladesh as Banking Company

under the Companies Act 1913 and commenced operation on June 26, 1983 when the

Government allowed some commercial banks to operate in the private sector. As a scheduled

bank of the country the bank‟s activities are subject to the effective control, supervision and

guidance of the Bangladesh Bank. The Bank is primarily oriented towards extending financial

assistance in the trade and the commercial sector besides lending in the industrial sector.

UCBL started its operation in mid-1983 and has since been able to establish one of the largest

networks of 124 branches as on 31.12.2011 among the first generation banks in the private

sector. With its firm commitment to the economic development of the country, the Bank has

already made a distinct mark in the realm of Private Sector Banking through personalized

service, innovative practices, dynamic approach and efficient Management. The Bank, aiming to

play a leading role in the economic activities of the country, is firmly engaged in the

development of trade, commerce and industry thorough a creative credit policy.

In the 1972 the entire banking sector of Bangladesh was taken under nationalization in

accordance with the avowed policy of the Government. The objectives of the nationalization of

the banking sector was to create mass banking service is to the general people both in the rural

and urban areas are in the inadequacy of the physical and social infrastructure, a low industrial

and technological base, lack of private entrepreneurship and an under developed market provided

the ground for active participation of the public sector in the developed process. But over the

years, it has been experienced that public sector has become inefficient and continuous loosing

concern. As a result, there has been a visible change in the policy of the Government, which was

more favor of privatization, and a number of banks were launched as private commercial bank.

UCBL was one of the oldest and leading private commercial bank which started its operation on

mid-1983.

10

1.4 Customer Satisfaction

Customer satisfaction is a term frequently used in marketing, is a measure of how products and

services supplied by a company meet or surpass customer expectation. Customer satisfaction is

defined as "the number of customers, or percentage of total customers, whose reported

experience with a firm, its products, or its services (ratings) exceeds specified satisfaction

goals." It is seen as a key performance indicator within. In a competitive marketplace where

businesses compete for customers, customer satisfaction is seen as a key differentiator and

increasingly has become a key element of business strategy.

Customer satisfaction ratings can have powerful effects within organizations. They focus

employees on the importance of fulfilling customers‟ expectations. Furthermore, when these

ratings dip, they warn of problems that can affect sales and profitability. These metrics quantify

an important dynamic. When a brand has loyal customers, it gains positive word-of-mouth

marketing, which is both free and highly effective. Therefore, it is essential for businesses to

effectively manage customer satisfaction. To be able do this, firms need reliable and

representative measures of satisfaction.

Customer satisfaction provides a leading indicator of consumer purchase intentions and

loyalty. Customer satisfaction data are among the most frequently collected indicators of market

perceptions. Their principal use is twofold:

a. Within organizations, the collection, analysis and dissemination of these data send a

message about the importance of tending to customers and ensuring that they have a

positive experience with the company‟s goods and services.

b. Although sales or market share can indicate how well a firm is performing currently,

satisfaction is perhaps the best indicator of how likely it is that the firm‟s customers will

make further purchases in the future. Much research has focused on the relationship

between customer satisfaction and retention.

11

1.5 Measuring Customer Satisfaction

In researching satisfaction, firms generally ask customers whether their product or service has

met or exceeded expectations. Thus, expectations are a key factor behind satisfaction. When

customers have high expectations and the reality falls short, they will be disappointed and will

likely rate their experience as less than satisfying.

To measure customer satisfaction, face-to-face interview or survey with a structured

questionnaire is widely used in most of the companies now-a-days. A sample size of the

respondents is usually used by the organizations for conducting such survey/interview. Kano

Model and Multiple Linear Regression Model are the widely practiced models to analyze the

customer satisfaction from the data collected from the surveys.

Kano Model

The Kano Model of Customer (Consumer) Satisfaction classifies product attributes based on

how they are perceived by customers and their effect on customer satisfaction. These

classifications are useful for guiding design decisions in that they indicate when good is good

enough, and when more is better.

Project activities in which the Kano Model is useful:

Identifying customer needs

Determining functional requirements

Concept development

Analyzing competitive products

Other tools that are useful in conjunction with the Kano Model:

Eliciting Customer Input

Prioritization Matrices

Quality Function Deployment

Value Analysis

The Kano Model of Customer satisfaction (Figure: Kano

Model) divides product attributes into three categories:

threshold, performance, and excitement. A competitive

product meets basic attributes, maximizes performances

attributes, and includes as many “excitement” attributes

as possible at a cost the market can bear.

Figure: Kano Model

12

o Threshold Attributes: Threshold attributes are the expected attributes or “musts” of a

product, and do not provide an opportunity for product differentiation. Increasing the

performance of these attributes provides diminishing returns in terms of customer

satisfaction; however the absence or poor performance of these attributes results in

extreme customer dissatisfaction.

o Performance Attributes: Performance attributes are those for which more is generally

better, and will improve customer satisfaction. Conversely, an absent or weak

performance attribute reduces customer satisfaction.

o Excitement Attributes: Excitement attributes are unspoken and unexpected by customers

but can result in high levels of customer satisfaction, however their absence does not lead

to dissatisfaction. Excitement attributes often satisfy latent needs – real needs of which

customers are currently unaware.

o Other Attributes: Products often have attributes that cannot be classified according to the

Kano Model. These attributes are often of little or no consequence to the customer, and

do not factor into consumer decisions.

Multiple Linear Regression Model

Multiple linear regression attempts to model the relationship between two or more

explanatory variables and a response variable by fitting a linear equation to observed

data. Every value of the independent variable x is associated with a value of the

dependent variable Y.

Formally, the model for multiple linear regression, given n observations is:

Y = 0 + 1 X1 +2 X2+ + n Xn + I

Where,

Y = Dependent Variable

X = Independent Variable

Unknown Parameter

Error Term

13

1.6 Objective of the study

The main objective of this study is to determine whether the customers of United Commercial

Bank Ltd. (UCBL) are satisfied with the services of UCBL or dissatisfied. In my study I‟ll try to

find out in which are customers are mostly satisfied and dissatisfied; customers‟ preference level

about UCBL; which services are demanded by the existing customers base and also which

services are required to achieve more customers; and the relative position of UCBL compared to

other banks.

As customers are the heart of a company to be successful in such a competitive industry where

competitors are availing same quality services to the customers to increase their customer base,

this study will be very helpful for UCBL to learn about their current status of services from the

customers‟ point of view. UCBL can understand its position in satisfying customers compare to

other competitors. It will help them to know which service attributes are most important for the

customers. They will be able to understand in which area of services UCBL lack most and thus

improve the quality of their service. They will understand which customer groups are more

potential. They will also be able to know which products of UCBL are mostly preferred by the

customers.

This study will also help other banks and service and financial organization to understand the

factors that affect the satisfaction level the customers and thus they will be able to improve their

services. Also a belief in customers‟ mind will settle that such study can help them to express

their complaints and satisfaction to the company authority so that the company can overcome the

drawbacks in providing services and provide better services to its customers.

14

1.7 Methodology

To do my research and to accomplish my objectives I have to go through different sources

and I will use the both primary and the secondary sources to collect the most appropriate

information.

The "Primary Sources" are as follows Face-to-face conversation with the customers and

if possible find their responses through questionnaire survey.

The "Secondary Sources" of data and information are:

a) Website of United Commercial Bank Ltd. (UCBL): www.ucbl.com

b) Various book, articles, compilations etc. regarding banking functions.

To prepare the research report and to find the output of my research I will use MS Excel

& SPSS software.

For doing the quantitative analysis of the data, I have used the Multiple Linear

Regression Model.

Hypothesis

o Hypothesis: The customers are satisfied with the services of United Commercial Bank

Ltd. (UCBL)

o Alternative hypothesis: The customers are not satisfied with services of United

Commercial Bank Ltd. (UCBL)

Independent variables:

There are huge factors which can act as a independent variables like- Age, gender, profession,

monthly income, environment of the bank, behavior and manners of the staffs, promptness and

capability of the staffs in solving customers‟ problems, knowledge of the staffs regarding various

services and banking system, waiting time for the customers to get the service, features of

different offers and packages, location of the branches, number of branches, ATM card facility,

service charges, interest rate of loans, interest rate of savings schemes, online banking, Credit

(Visa) card service, website, advertisement, security system etc.

15

For this study I’ve selected few of those mentioned above as the independent variable for this

study and those are – behavior and manners of the staffs, waiting time, service charges, interest

rates against loans, promptness and capabilities of staffs in serving the customers.

All these independent variables will determine the Dependent Variable: “Customer satisfaction

towards the services of United Commercial Bank Ltd. (UCBL)”.

Limitations:

Most of the time customers are not that friendly to fill up questionnaire or to talk for a

little while as they are very busy during office hours.

To measure the visibility, a sample survey is conducted which may not represent the

entire population.

Focus on limited factors and leaving out some other relevant factors which has been

discovered after collecting the data.

As I‟ve to do this survey by my own it was difficult for me to move different branches of

United Commercial Bank Ltd. (UCBL) throughout the country. For my convenience I‟ve

surveyed the customers who came to the Kawran Bazar branch of UCBL.

16

Chapter # 2: Overview of the Organization

17

2.1 About United Commercial Bank Ltd.

Sponsored by some dynamic and reputed entrepreneurs and eminent industrialists of the country

and also participated by the Government, United Commercial Bank Ltd. (UCBL) started its

operation on June 26, 1983 and has since been able to establish one of the largest networks of

124 branches as on 31.12.2011 among the first generation banks in the private sector. With its

firm commitment to the economic development of the country, the Bank has already made a

distinct mark in the realm of Private Sector Banking through personalized service, innovative

practices, dynamic approach and efficient Management. The Bank, aiming to play a leading role

in the economic activities of the country, is firmly engaged in the development of trade,

commerce and industry thorough a creative credit policy.

2.1.1 Management

The Bank has in its Management a combination of highly skilled and eminent bankers of the

country of varied experience and expertise successfully led by Mr. Muhammad Ali, a dynamic

banker, as its Managing Director and well educated young, energetic and dedicated officers

working with missionary zeal for the growth and progress of the institution.

2.1.2 Working Departments of United Commercial Bank Ltd.

United Commercial Bank Ltd. (UCBL) maintains the jobs in a proper and organized considering

their interrelationship that are allocated in a particular department to control the system

effectively. Different departments of UCBL are as follows:

Human Resources Division

United Commercial Bank Ltd. (UCBL) recognizes that a productive and motivated work force is

a prerequisite to leadership with its customers, its shareholders and in the market it serves.

UCBL treats every employee with dignity and respect in a supportive environment of trust and

openness where people of different backgrounds can reach their full potential.

The bank‟s human resources policy emphasize on providing job satisfaction, growth

opportunities, and due recognition of superior performance. A good working environment

reflects and promotes a high level of loyalty and commitment from the employees. Realizing this

18

UCBL has placed the utmost importance on continuous development of its human resources,

identify the strength and weakness of the employee to assess the individual training needs, they

are sent for training for self-development. To orient, enhance the banking knowledge of the

employees UCB Training Institute organizes both in-house and external training.

The major responsibilities of HR are as follows:

• Employee recruitment

• Posting

• Transfer

• Increment

• Established yearly performance bonus

• Provident fund

• Confirmation

• Training

Travel policy

• Telephone policy

Personal banking Division

The personal banking department deals with the consumer credit schemes such as the personal

loan, car loan, education loan, tax loan, personal secured loan that are tailored to meet the

demand of individual customers. The manager of United Commercial Bank Ltd. (UCBL) credit

who approves and administers all the activities heads this department. The approval officer

mainly rejects or approves the credit requests. After being checked by the approval officer, the

credit requests go to the processing officer for further processing of the application.

19

Treasury Division

Their main job is to take decisions regarding purchase and sell of foreign Currency. The purpose

of Treasury's operations is to utilize the funds effectively and arrange funds at a lowest possible

rate of interest, through maintaining effective relationship with other banks and following the

Government rules and foreign exchange regulations.

Computer and Information Technology Division

This department gives the software and hardware supports to different departments of the bank.

As United Commercial Bank Ltd. (UCBL) is engaged in online banking, the role of IT is very

crucial for the bank. This department is the most active department of UCBL where employees

always stand by to solve any problems in the system. The managers and executives of IT

division work continuously to develop the total IT system of UCBL so that it can be operated

with ease, accuracy, and speed. From the very beginning of its journey as commercial bank in

serving customers UCBL has been laying great emphasis on the use of improved technology.

Credit Division

The borrowing capacity provided to an individual by the banking system, in the form of credit or

a loan. The total bank credit the individual has is the sum of the borrowing capacity each lender

bank provides to the individual. Credit Policy Committee is composed of the managing director,

the general manager, the Chief Risk Officer and the assistant general manager responsible for

credits. Committee meets every other week, evaluates the banks overall lending portfolio and

determines principles and policies regarding portfolio management.

Operation Division

This is an integral and vital part of United Commercial Bank Ltd. (UCBL). The services

department ensures smooth operation and functioning within and between all the departments of

UCBL. It also provides continuous support to the core banking activities of UCBL. The Manager

of Services heads the department who formulates and manages various critical issues of the

services function of UCBL. He is followed by a group of executives who are the heads of various

subsidiary divisions that operate within the services department. The Services Department is

considered as the backbone of all other departments.

20

Card Division

United Commercial Bank Ltd. (UCBL) is one of the domestic commercial bank in Bangladesh to

introduce Visa Debit Card and Visa Credit Card at the same time as an addition to their services

for the customers. The total card related activities have been supervised by the card division in

all the branches of UCBL.

Finance & Accounts Division

This is considered as the most powerful department of United Commercial Bank Ltd. (UCBL). It

keeps tracks of each and every transaction made within UCBL Bangladesh. It is headed by

Manager of FCD who ensures that all the transactions are made according to rules and regulation

of UCBL group. Violation of such rules can bring serious consequences for the lawbreaker. The

functions of FCD are briefly discussed below along with an organ gram of the department.

Audit & Risk Management Division

The Risk Management Division of United Commercial Bank Ltd. (UCBL) is responsible for

measuring risks that the bank might face in the course of its operations, developing corporate risk

management policies and ensuring that risks remain within the limits in which the Bank prefers

to bear such risks in line with its own strategic targets and risk appetite. The primary goal of risk

management is to provide capital to businesses in line with their risks (economic capital),

maximize risk-adjusted return and increase the added value.

The risk management function consists of Market Risk, Credit Risk and Operational Risk

Management Units. Bank Risk Committee, Asset-Liability Committee, Credit Policy Committee,

and Operational Risk Management Committee are the other risk management bodies.

21

2.1.3 Services of United Commercial Bank Ltd.

Savings Accounts

Current Accounts

Salary Accounts

Home Loan

Car Loan

UCB Multi Millionaire

UCB Money Maximizer

UCB Earning Plus

UCB DPS Plus

Western Union Money Transfer

SMS Banking Service

On line Service

Credit Card

Time Deposit Scheme

Monthly Savings Scheme

Deposit Insurance Scheme

Inward & Outward Remittances

Travelers Cheques

Import Finance

Export Finance

Working Capital Finance

Loan Syndication

Trade Finance

Industrial Finance

Foreign Currency Deposit A/C

NFCD ( Non Resident Foreign Currency Deposit Account )

RFCD ( Resident Foreign Currency Deposit Account )

Consumer Credit Scheme

Locker Service

22

2.1.4 Branches of United Commercial Bank Ltd.

Dhaka: Bangshal, Bhulta, Bizoy Nagar, Banani, Bashundhara, Chashara, Corporate branch, Dhanmondi,

Donia, Dilkusha, Elephant Road, Faridpur, Foreign Exchange Br., Gazipur Chowrasta, Gulshan,

Gopalganj, Hasanabad, Islampur, Kawran Bazar, Kanchan, Keraniganj, Konabari, Kanaipur,

Madhabdee, Mirpur, Mirpur Rd, Mohakhali, Mohammedpur, Moulovibazar, Mymensingh, Mawna,

Munshiganj, Narayanganj, Narshingdi, Nawabpur, Nayabazar, New Eskaton, North Brook Hall Road,

Nabinagar, Paglabazar, Principle Br., Pragati Sarani, Rajbari, Savar, Shantinagar, Shatoirbazar, Shatarkul,

Shibchar, Sonargaon Janapath, Tangail, Tongi, Tongi Station, Tejgaon, Uttara, Uttarkhan, Zinzira.

Chittagong: Agrabad, Anderkilla, Anwara, Bahaddarhat, Brahmanbaria, Bhatiari, Battali, Chandpur,

Chawkbazar, Chokoria, Chowmuhoni, Comilla, Cox‟s Bazar, Dohazari, Dampara, Eidgaon, Fotikchori,

Feni, Gohira, Hathazari, Halisahar, Jubille Rd., Kadamtali, Kamal Bazar, Khatunganj, Laxmipur,

Lohagara, Modunaghat, Muradpur, Maijdee Court, Nazirhat, Noapara, Laxmipur, Lohagara, O.R. Nizam

Rd., Pahartali, Port, Rangunia, Raozan, Station Rd.

Other Districts:

Rajshahi - Bogra, Chapai Nabaganj, Naogaon, Natore, Pabna, Rajshahi, Sirajganj.

Khulna - Chuadanga, Jessore, Jhenaidah, Khan Jahan Ali Rd., Khulna, Kustia, Noapara Bazar.

Barisal – Barisal.

Sylhet - Amberkhana, Borolekha, Beanibazar, Biswanath, Goalabazar, Lamabazar, Moulovibazar,

Nabiganj, Sherpur, Shibganj, Sylhet, Shahjalal Uposahar, Subid, Zindabazar.

Rangpur – Dinajpur, Rangpur.

23

2.1.5 Organogram of United Commercial Bank Ltd.

`

Managing Director (MD)

Deputy Managing Director (DMP)

Senior Executive Vice President (SEVP)

Executive Vice President (EVP)

Senior Vice President (SVP)

Vice President (VP)

Senior Assistant Vice President (SAVP)

Assistant Vice President (AVP)

First Assistant Vice President (FAVP)

Senior Executive Officer (SEO)

Executive Officer (EO)

Principal Officer (PO)

Senior Officer (SO)

Management Trainee Officer (MTO)

Junior Officer (JO)

24

2.1.6 Mission, Vision & Objectives

Vision

“The mission of the organization to make United Commercial Bank Ltd. (UCBL) the mist

respected band leading private commercial bank in Bangladesh.”

Mission

Create and urban area base bank for

i) Mass people living in urban areas.

ii) Financial service institutions.

Aiming to satisfy our customers with high quality services.

Strategy

United Commercial Bank Ltd. (UCBL) is implementing the strategy through following

business:

i) Private Banking,

ii) Treasury,

iii) Commercial, industrial to gain control, profitability and growth.

Objectives

The objectives of United Commercial Bank Ltd. (UCBL) are to provide innovative products

supported by quality delivery of systems and excellence customer services, to train and

motivate staffs and to exercise social responsibility. By combining regional strengths with

group network UCBL‟s aim is to be the one of the leading banks in its principle markets.

UCBL‟s goal is to achieve sustained earnings growth and to continue to enhance shareholders

value.

25

Business Principles and Values

The corporate character of United Commercial Bank Ltd. defines the values and principles

inherent in all their everyday dealings.

United Commercial Bank Ltd. (UCBL) is committed to:

Outstanding customer service;

Effective and efficient operations;

Strong capital and liquidity;

Conservative lending policy;

Strict expense discipline;

United Commercial Bank Ltd. (UCBL) Operates According to Certain Key Business Values:

The highest personal standards of integrity at all levels;

Commitment to truth and fair dealing;

Hand-on management at all levels;

Openly esteemed commitment to quality and competence;

A minimum of bureaucracy;

Fast decisions and implementation;

Putting the Group‟s interests ahead of the individual‟s;

The appropriate delegation of authority with accountability;

Fair and objective employer;

A merit approach to recruitment, selection, promotion;

Promotion of good environmental practice and sustainable development and commitment

to the welfare and development of each local community.

26

2.2 History of the Parent United Commercial Bank Ltd.

Background of the Bank

In the 1972 the entire banking sector of Bangladesh was taken under nationalization in

accordance with the avowed policy of the Government. The objectives of the nationalization of

the banking sector was to create mass banking service is to the general people both in the rural

and urban areas are in the inadequacy of the physical and social infrastructure, a low industrial

and technological base, lack of private entrepreneurship and an under developed market provided

the ground for active participation of the public sector in the developed process. But over the

years, it has been experienced that public sector has become inefficient and continuous loosing

concern. As a result, there has been a visible change in the policy of the Government, which was

more favor of privatization, and a number of banks were launched as private commercial bank.

United Commercial Bank Ltd. (UCBL) was one of the oldest and leading private commercial

bank which started its operation on mid 1983.

Introduction of United Commercial Bank Ltd.

United Commercial Bank Ltd. (UCBL) was incorporated in Bangladesh as Banking Company

under the Companies Act 1913 and commenced operation on June 26, 1983 when the

Government allowed some commercial banks to operate in the private sector. As a scheduled

bank of the country the bank‟s activities are subject to the effective control, supervision and

guidance of the Bangladesh Bank. The Bank is primarily oriented towards extending financial

assistance in the trade and the commercial sector besides lending in the industrial sector.

Present United Commercial Bank Ltd.

United Commercial Bank Ltd. (UCBL) has 124 branches all over Bangladesh and carries out all

banking activities through its branches in our country and through international correspondent

outside the country. It is now hoping to open fifteen more branches to serve its customers more

frequently all over the country.

27

2.3 Organizational Status of United Commercial Bank Ltd.

At the end of the year 1996, United Commercial Bank Ltd. (UCBL) was in a steady and

reasonably satisfactory progress except a very few short coming due to some adverse economic

situation then the total assets of the bank was stating at BDT 9538.23 million which is an

increase of 11.10%.

Branch Expansion

According to the annual report 2008 the bank contributed their efforts to improve the client

service. All of its active branches along with Head Office and Principal Branch have been fully

computerized to provide prompt and efficient service. A few new branches are introduced this

year and the number of branches has increased to 84. To keep pace with the time and

requirements the bank is continuing to expand its network even to abroad. With the start of the

bank, it introduces three branches at the very beginning of the bank in mid 1983. And then the

number of its branches increased gradually. In 1987 it came to 40 and in 1988 it increased to 50.

According to the annual report of 1996, its branches were totaled 78 at that time.

Limitations of Branch Expansion and Computerization

Though the important branches are being computerized but the computer skill of the employees

is not that much satisfactory. Employees were in trouble in using the newly invented software.

Also, those computers, which were used, were not very modern PCs. Moreover, those are used

for a few purposes. As the employees have inadequate knowledge in using modern software so

they didn‟t like to use computer at that time. Also only branch expansion is not the requirements

rather than the quality of the service of the branch.

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2.4 Industrial Analysis

It is extremely crucial to analyze competitive forces in the industry environment to identify

opportunities and threats. Michael E. Porter‟s well-known framework, known as the five forces

model helps with this sort of analysis. The model focuses on five forces that shape competition

within an industry. The stronger the five forces, the more limited is the ability of established

companies to raise prices and earn greater profits. Therefore, we can conclude that a strong

competitive force can be considered as a threat because it depresses profit, whereas, a weak

competitive force can be viewed as an opportunity as it facilitates the companies to earn higher

profits. The situation of the industry changes overtime. The influence of the five forces in the

banking industry has been discussed below:

2.4.1 Analysis of United Commercial Bank Ltd. According to Porter’s Five

Force:

Threat of potential entrants

Potential competitors are companies that are not currently competing in an industry but have the

capability to get into the industry. The banking sector of Bangladesh seriously faces the threat of

new entrants. However the threat comes from two directions. The first threat comes with the

arrival of the multinational banks and their branch expansion particularly due to the booming

energy sector. Secondly, the continuous entries of local banks with lower cost structure also

possess a severe threat to this industry.

In the context of United Commercial Bank Ltd. (UCBL) the various new & upcoming Banks

pose a significant threat, being late entrants in the banking sector of Bangladesh. But UCBL is

aware of these potential competitors. So it is trying to expand countrywide to make the sector

unattractive & to create entry barrier.

Government policies for banking industry are not so strong in this country. We don't have strong

rules and regulation from Bangladesh Bank for regulating the private banking sectors. If

government doesn't regulate the banking sector strongly than lots of new banks will come and

will make the competition more intense.

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Rivalry among established companies

In the banking sector, the market size is measured in terms of total deposits and total advances.

Banking industry in Bangladesh is highly fragmented with categories like: Nationalized

Commercial Banks (NCBs), Development Financial Institutions (DFI) or Specialized Banks

(SBs), Private Commercial Banks (PCBs) and Foreign Commercial Banks (FCBs). The banking

sector is at the growth phase as different types of businesses are mushrooming all over the places

in Bangladesh, the need for banks has emerged, resulting in lots of banks operating in the market

making the present situation quite intense. There are more than 50 commercial banks in the

market, which are constantly fighting for the share in the market. Among the international banks,

Standard Chartered Bank has the largest network in the metropolitans of Bangladesh, operating

quite aggressively which can be a severe threat for the other banks in the banking sector of

Bangladesh.

Threat of substitutes

There are substitute financial institutions that do many of the activities and transactions of a bank

in the leasing field but these financial and leasing institutions are too small in size. These

institutions can shrink the profit margin of commercial banks. Industrial Leasing and

Development Company Ltd. (IDLC), Industrial Promotion and Development Corporation

(IPDC), United Leasing Company are the key players. They provide industrial leasing to many

companies in the country. But some of the operations of the banks like exporting/importing have

no substitutes. In banking industry substitute products are very easy to find. We need to consider

all types of substitute products for the banks. Different private and nationalized banks are

offering similar products, which are close substitutes. On the other hand some non-bank banks

like insurance companies and leasing companies are also competing indirectly with the

commercial banks product.

All the products of the commercial banks perform the similar functions. Taking the money from

the depositor and sanctioning loan to investors are the main functions. They all do it in a same

manner. United Commercial Bank Ltd. (UCBL) is not different from them. Since functional

similarity is high in banking industry so competition is also high because customer can switch at

any time they want.

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Product offered in banking industry is very identical. All the banks offer virtually the same

products with same characteristics. Only few large multinational banks of our country are

offering some differentiated products but the ratio is very low. UCBL offers products that are

highly identical with other banks products. So, we can say that product identity is high in

banking industry which means competition is also high. For example, the launch of premier

banking by SCB poses a strong threat on UCBL‟s premium customer group and UCBL is at a

condition where it should launch an even better product. Moreover the various consumer credit

schemes offered by various local banks with lower interest rates and cost also poses a strong

threat on the UCBL personal banking products. Again the lower service charges at national

banks also discourage a wide group of customers to hold account in UCBL. So these are some of

the threats posed by substitute products in the market place.

Bargaining power of buyers

Bargaining power of the buyer can be viewed as a competitive threat when they are in a position

to demand lower prices from the company or when they are in a position to demand better

service that can increase operating costs. On the other hand, when buyers are weak, a company

can raise its prices and earn greater profits. For the banking industry buyer means customers who

take loan from the banks. Switching cost is very low in banking industry. Every bank is giving

the similar types of loan at similar interest rate. So, an individual who wants to take loan from

banks can switch easily to other banks if he or she doesn't like the terms and conditions.

Customers of United Commercial Bank Ltd. (UCBL) are switching to other banks because of

low interest rate and lots of other reasons. Lower switching cost makes the industry more

competitive. In banking industry, there is always a chance for threat of backward integrations.

Big multinational companies or corporations can give threats to the commercial banks that they

will arrange their funds by forming another bank where the cost of fund is low compare to other

banks. For this reason, giant customers of this industry always possess more power than their

banks. Creditors are considered to be the buyers of the banks. There are thousands of creditors

from all walks of life. Mainly businessmen are the major buyer of bank‟s credit. Big amount

creditors have strong powers in determining interest rate of their credit amounts. Banks

distinguish their prime customers from others by setting a prime interest rate for them.

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Bargaining power of suppliers

Bargaining power of suppliers can be viewed as a threat when they are able to force up the price

that a company must pay for its inputs or reduce the quality of the inputs they supply, thereby

depressing the company's profitability. On the other hand, if suppliers are weak, this gives the

company the opportunity to force down prices and demand higher input quality. For the bank the

main supplier of fund is depositor. Bank also gets its funds from the directors. United

Commercial Bank Ltd. (UCBL) has one of the largest capitals among all other private banks. The

bank doesn't want more money right this moment because there is a very few good opportunities

for investment. So, it is offering lower interest rates on depositors for their funds. Bargaining

power of the fund suppliers is low in banking industry because there are lots of individual

savings in the economy but banks don't have opportunities for investment. Sometimes suppliers

of funds can give threat to the bank as well. Corporations or big multinational companies can

give threat to the private bank that they will form another bank for depositing their money. They

will not supply any fund to other banks. We all know that bank makes money by investing other

money. So, this can be lead to a higher competition in procurement of fund. Depositors are

considered to be the suppliers of the banks. There are thousands of depositors from all walks of

life. There are businessmen, service holders, farmers, students and people from virtually any

other profession who are depositors of the banks. Big amount depositors have strong powers in

determining interest rate of their deposits.

2.4.2 SWOT Analysis of United commercial Bank Ltd.

Strength

Client‟s deposit in the bank is much secured. The vault is insured.

United Commercial Bank Ltd. (UCBL) is one of the largest & profitable private

commercial bank in Bangladesh.

For any difficulty faced by clients the relevant officer is responsible.

The department incharge is always very much considerate and maintain a very good

relation with his subordinates.

The branches are very much solvent regarding the fund.

It has good worldwide corresponding maintaining NOSTRO A/C.

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Maintaining privacy and confidentiality the bank is not comparable.

All the branches are well equipped and have enough technical support.

United Commercial Bank Ltd. (UCBL) also has Management by Objectives (MBO)

everywhere. Each person has multiple objectives. All the employees must have to get the

approval of their bosses on what they are going to do. Later they review as how well they

have performed their job with their management as well as the peer group.

The MBO makes the review a communication device among various groups. The key to

the system is a “one-to-one” meeting between a supervisor & a subordinate. In the

meeting, the problems in dealing with customers are put forward first & every one dug it

to solve them.

At United Commercial Bank Ltd. (UCBL) the main objective is to setting up workshops

are to remove authority from an artificial spot at the top & place it where the most

knowledgeable people are, the people closest to the operations. The free exchange of

ideas is reinforced by a policy of “constructive confrontation”. Each employee is

expected to challenge ideas openly & aggressively, but never attack an individual‟s

motives for presenting an idea.

At United Commercial Bank Ltd. (UCBL) workshops are conducted periodically. On the

workshops, all people participate as equals, with new members free to openly challenge

top managers.

HRD has tried hard to avoid communication barriers & structural bureaucracies. The

little existence of authoritative barriers among the different level of management

stimulates a feeling of importance as their work get priority over the position.

The human resource of United Commercial Bank Ltd. (UCBL) is extremely well thought

& perfectly managed. As from the very first, the top management believed in empowered

employees, where they refused to put their finger in every part of the pie. This

empowered environment makes UCBL a better place for the employees. The employees

are not suffocated with authority but are able to grow as the organization matures.

The selection & recruitment of United Commercial Bank Ltd. (UCBL) emphasizes on

having the skilled graduates & postgraduates who have little or no previous work

experience. The logic behind is that UCBL wants to avoid the problem of „garbage in &

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garbage out‟. & this type young & fresh workforce stimulates the whole working

environment of UCBL.

United Commercial Bank Ltd. (UCBL) employees are one of the major assets of the

company. The employees of UCBL have a strong sense of commitment towards

organization and also feel proud and a sense of belonging towards UCBL. The strong

culture of UCBL is the main reason behind this strength.

Weakness

As United Commercial Bank Ltd. (UCBL) is a very large and busy organization the

clients might face some problems. They might be bothered because of some unexpected

inconvenience like waiting time, maintaining queue etc.

The recruitment is not well enough. Those who are being appointed here are not enough

technologically literate sometimes. Then few training sessions are much needed.

The local office branch must be well decorated but this is not so.

The bank management always instructs the official to know all the clients which is not

under practice.

The computer installing in UCBL branches is not modernized.

The workload is very high so that the personnel cannot always maintain well

communication with the clients.

The bank is maintaining a conservative banking method.

There is no open door culture.

UCBL are not introducing new and dynamic innovation like ATM services which is

already been introduced by other private banks in the country.

Most of the employers from messengers to the top level are from a particular region of

the country.

UCBL currently do not have any strong marketing activities through mass media e.g.

Television. TV ads play a vital role in awareness building. UCBL has no such TV ad

campaign.

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Opportunity

United Commercial Bank Ltd. (UCBL) is noted for its distinct operating procedures.

Repayment capacity as assessed by UCBL of individual client helps to decide how much

one can borrow. As the whole lending process is based on a client‟s repayment capacity,

the recovery rate of UCBL is close to 100%. This provides UCBL financial stability &

gears up UCBL to be remaining in the business for the long run.

The ultimate goal of United Commercial Bank Ltd. (UCBL) is to expand its operations to

whole Bangladesh as its mission is to create both urban and rural base bank for mass

people. Nurturing this type of vision & mission & to act as required, will not only

increase UCBL‟s profitability but also will secure its existence in the long run.

The top management team of United Commercial Bank Ltd. (UCBL) is expert in banking

activities. The operating policies established by them are unique & unified. All the

members of the team carry out their management roles exhaustively. They equally

contributed to UCBL‟s superior leadership, by carrying out their unique roles. They

worked well together, respecting each other‟s abilities, & arguing openly & without any

rancor when they disagree.

An ATM service is one of the most popular and emerging products in Bangladesh, which

offers customers total financial mobility. Various other banks and institutions are

currently offering this product. United Commercial Bank Ltd. (UCBL) has started this

facility in collaboration with the Prime Bank. But, to be the market leader it has to

introduce its own ATM card.

United Commercial Bank Ltd. (UCBL) is one of the experts in acquiring various firms

and organizations. In Bangladesh it can also diversify quickly by acquiring various local

established banks and increase its total operation within Bangladesh rapidly.

Threats

The upcoming private local & multinational banks posses a serious threat to the existing

banking networks of United Commercial Bank Ltd. (UCBL). It is expected that in the

next few years more commercial banks will emerge. If that happens the intensity of

competition will rise further and banks will have to develop strategies to compete against

and win the battle of banks.

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United Commercial Bank Ltd. (UCBL) should continuously improve its customer service

strategies and the overall service quality needs to win the customer satisfaction

undoubtedly.

Default culture is a major problem in Bangladesh. As United Commercial Bank Ltd.

(UCBL) is an old organization the problem of non-performing loans or default loans is

very minimum or insignificant. However, as the bank becomes older this problem will

arise enormously and the bank may find itself in a more threatening environment. Thus

UCBL has to remain vigilant about this problem so that proactive strategies are taken to

minimize this problem.

2.4.3 Issues of UCBL

Strategic Issues

One of the main strategic issues of United Commercial Bank Ltd. (UCBL) is to capture majority

of market share. Currently there are more than 50 banks in the country and majority of the

market share is captured by the local banks. Hence, UCBL need to strengthen its footprint by

increasing the market share. UCBL is also facing intense competition in the market as there are

so many foreign and local banks. Standard Chartered Bank is still its main threat and posses

more market share than UCBL. Increasing the sales is also a major issue of UCBL. Without

increasing the sales the bank cannot generate money and cannot survive in the market. As a

Muslim country it is important for a bank to do banking in Bangladesh that is compliant to

Shariah or Islamic law. As a foreign bank it is a major issue for UCBL to provide customers

Islamic banking service. Product feasibility is also a major issue of UCBL. UCBL also need to

provide products that are highly potential and feasible.

Operational Issues

Direct sale is very critical for a bank. The customers need to be pursued to purchase United

Commercial Bank Ltd. (UCBL) products. The sales officers need to make the customers loyal to

UCBL. High level of customer service is a critical issue for customers. As a foreign bank UCBL

has to set a very high standard of customer service level. Providing different promotional offers

that provide benefit to both organization and customers are very critical for UCBL. Local banks

are taking various promotional activities that may take away some customers from UCBL. As an

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local bank it is important for UCBL to build strong relationship with media, government and

general people through public relations. UCBL has to undertake marketing research to explore its

market and to improve its products and performance.

Legal issues

United Commercial Bank Ltd. (UCBL) is bind by law to pay tax to the government of

Bangladesh regularly. Otherwise they cannot operate their business. UCBL must ensure that no

money laundering is occurred via their bank and they must ensure that each and every of their

transactions are complied with the government policy. Bribing is a culture of Bangladesh, but

UCBL has to fight against this illegal practice and make sure that their staffs don‟t take or give

any bribe to customers.

2.4.4 Strategies of UCBL

Direct sales strategy

An executive is assigned to this part of the marketing department. The Direct Sales division

coordinate & manages the sales activities of all the Mobile sales officers (MSO) of UCBL

Bangladesh. The MSO‟s basically makes sales of the company various Personal Banking

products such as, savings accounts, consumer loan, etc outside the banking premises. There are a

total of more than 150 mobile sales officers (MSO) employed in the cities of Dhaka and

Chittagong. MSO‟s are assigned to specific branches for making sales activities more smoothly.

The DS executive sets sales strategies & targets for the Sales officers and manages the whole

team of MSO‟s in Bangladesh. The direct sales department also decides upon the commission

and remuneration of the mobile sales officers as their salary structure is based on sales

performances. Thus this part of the marketing division is playing important role for the overall

growth of the Personal Banking Division.

Introduce new and competitive products

United Commercial Bank Ltd. (UCBL) constantly try to come up with new products and try to

refine its existing products. They design the products that are fully compatible to the individual

customer needs.

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Refine the interest rate

United Commercial Bank Ltd. (UCBL) constantly refine the interest rate of their saving schemes

and loans and make sure that it is within the range and preference of its customers.

Provide high standard customer service

United Commercial Bank Ltd. (UCBL) constantly promotes customer service by providing its

staffs with extra incentives. There are guidelines regarding the behavior to the customer and

level of the customer service. UCBL sends “Mystery Shoppers” in every branch, who provide

information about the service quality of each branch and staffs are reward or penalty according

to their performance.

Training of the staffs

The staffs of United Commercial Bank Ltd. (UCBL) get special training to improve their

customer service. In every there are small training and meeting sessions where the staffs get

feedback about their customer service.

Cultural strategy

United Commercial Bank Ltd. (UCBL) follows the local traditions. The high standard service

level and behavior of the staffs, environment of the bank reflects the local culture along with the

products and promotional activities of the bank. UCBL take different cultural initiatives. They

arranges different cultural program, like drama shows, language competition, celebrating „Pohela

Baishakh‟ and the like.

Compliance with foreign exchange policy of Bangladesh bank

United Commercial Bank Ltd. (UCBL) makes sure that all the foreign trade services and the

movements of inward and outward remittance are done under the guideline of foreign exchange

policy provided by Bangladesh Bank.

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CSR Strategy

United Commercial Bank Ltd. (UCBL) Bangladesh corporate social responsibility (CR) focuses

on the following four areas:

o Promotion of Bengali culture;

o Sponsored Bangladesh Cricekt Team;

o Education for underprivileged children;

o Assistance for the disabled/needy;

o Support for the environment; and

o Stand beside the acid victims.

Shariah Banking

Non interest Banking of United Commercial Bank Ltd. (UCBL) is an ethical and indigenous

form of community banking that is compliant with the Shariah (Islamic law). It involves

financing based on the sale or lease of assets; i.e. the bank is selling goods for use (trade) rather

than selling money itself. UCBL also offers Non-interest Current Account, which is a

relationship checking account, designed to comply with Shariah (Islamic Law) guidelines while

also providing the regular convenience and security of a current account.

Promotion

This part of the marketing department deals with all the promotional activities of United

Commercial Bank Ltd. (UCBL) Bangladesh. Prime responsibilities of this department are:

Maintaining strong public relations with various media intermediaries, advertising the

company‟s products and services, building a strong corporate image of UCBL in Bangladesh.

Public Relations

The promotion department organizes various environmental and social activities in order to

build a strong corporate image of United Commercial Bank Ltd. (UCBL) in the minds of

customers as well as in the media. Maintaining strong relationship with news media is another

major duty of this department.

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Advertising

The promotion also coordinates all the advertising of United Commercial Bank Ltd. (UCBL)

products within Bangladesh. Some of the advertising tools that are frequently used by the

company are as follows:

Newspapers Advertising: Regular advertisements of various products and services of UCBL

are given in some of the country‟s most renowned daily newspapers.

Billboards: Huge colourful billboards with UCBL logo are found in various major areas of

Dhaka and Chittagong. These billboards emphasize on the needs of customers and shows

UCBL logo as solution to their needs.

Mailers: various product updates and new product information are regularly sent to existing

customers of UCBL.

Brochures: Various colourful brochures featuring specific products of UCBL are being

displayed and distributed to existing and potential customers via branch offices and sales

officers.

Traffic Boxes: UCBL established some traffic boxes in different points of Dhaka and

Chittagong for the traffic force of our country.

Service marketing strategy

A close analysis of the marketing activities United Commercial Bank Ltd. (UCBL) reveals that it

has been following the Offensive strategies of Service Marketing. Some key aspects of this

strategy are presented below:

Marketing research strategy

This department formulates & executes various marketing strategies of United Commercial

Bank Ltd. (UCBL) Bangladesh. This department also administers various marketing research

activities on the existing and potential customers of UCBL. Some such research activities are:

mystery shopping, critical incident surveys, customer suggestion surveys, etc. The results of

these surveys are integrated while formulating various marketing strategies. This department

also deals with the billing and invoicing of various marketing & advertising costs of UCBL

Bangladesh.

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Chapter # 3: Findings & Analysis