Recently, a good friend of mine was complaining about the behaviour of her bank ever since she took a home loan from it. Though she took the loan at ‘fixed’ rate, the bank promptly increased the interest rate when the rates went up. To top it all, when she called up to enquire about the change, she was curtly told to read the loan agreement where the bank had clearly reserved a right to increase the ‘fixed’ interest rate.   

Grumbling about the bank’s behaviour, she happened to mention the sharp contrast in their behaviour when she had applied for the home loan. As both she and her spouse work at the middle management level for a leading MNC and individually draw a six-figure pay packet per month, the bank actually went overboard when she applied for the home loan.

She confessed that the sales person from the same bank, not so long ago, was wooing them and willing to answer her every query to get her as a client. All in all a very satisfying experience as she did not even have to move out of her office even for a minute during the entire loan process. 

Nostalgia took over when she laughingly compared the bank’s behaviour with her spouse’s when she was a girlfriend and later now when she turned the wife. The courtship period was dazzling with taxi drives and dinners at top restaurants while post-marriage it became autorickshaw rides (before they bought their car) and the neighbourhood Udipi joint. Of course, she did not sound as unhappy with her spouse as she did with the bank.

Girlfriend vs wife!
However, her deft comparison of the ‘girlfriend versus wife’ set me thinking. Study after study have come to the conclusion that it is far more profitable to retain an existing consumer than to get a new one. Yet in the retail lending industry in India there are numerous instances of banks clearly giving step-motherly treatment to their existing consumers while running behind new consumers with ever more attractive offers and discounts. 
Take the case of interest rates on a ‘floating’ basis - which are supposed to come down when interest rates are falling and increase when the interest rates are increasing. While as a girlfriend (read new consumer) you can negotiate a sweet deal, problems start occurring after marriage. The spouse (read the bank) forgets to reduce rates when they drop but is prompt in increasing rates. 

Losing out
Why does this happen? The only answer I can think of is the nature of the banking organisation. When a lot of promotions and bonus packages begin to hinge on the addition of new clients rather than retention of existing clients, the onus is automatically on gaining in numbers rather than retaining them. Also, hardly anybody within the bank is adversely impacted when an existing consumer is dissatisfied, leaves the bank and refuses to come back to the bank for other needs in the future. However the bank itself pays a huge price for this consumer dissatisfaction.

The only possible reason for the continued state of these affairs is the Indian system where divorces are not taken lightly.

However, the new Indian consumers (like the new-age Indian women) are refusing to take things lying down and are increasingly preferring to take a stand on various issues that impact them.
The trend is now so noticeable that very soon the banks will have no option but to sit up and take notice of this phenomenon. Retaining, as they say, is much cheaper than gaining new customers.

The author is CEO, apnaloan.com and can be contacted at ceo@apnaloan.com

apanaloan.com is a guide to home loans in India and also enables consumers get the best home loan rates by making banks compete for their loans.