SAMPLE CASE STUDIES – PGDBA(CRM)

Case Study 1

Details to Follow

Headquartered in London, the London Paris Banking Corporation (LPBC) is one of the
largest banking and financial services organization in the world.

LPBC's international network comprises over 10,000 offices in 83 countries and

territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa.

LPBC’s private banking is about delivering sophisticated solutions to complex financial

problems, seeing customer’s affairs in totality and offering individual advice and tailored
solutions.

The Uniform Customs and Practice for Documentary Credits (UCP) are the most
successful private rules for trade ever developed. Bankers, traders, lawyers, transporters,
academics and all who deal with letter of credit (LC) transactions worldwide, including
LPBC will refer to UCP 600.

Foreign banks are likely to succeed in their niche markets and be the innovators in terms
of technology introduction in the Indian domestic market scenario. The outlook for the
private sector banks indeed looks to be more promising vis-à-vis other banks. While their
focused operations lower but more productive employee force etc will stand them good,
possible acquisitions of PSU banks will definitely give them the much needed scale of
operations and access to lower cost of funds. These banks will continue to be the early
technology adopters in the industry, thus increasing their efficiencies. Also, they have
been amongst the first movers in the lucrative insurance segment. Already, banks such as
ICICI Bank and HDFC Bank have forged alliances with Prudential Life and Standard
Life respectively. This is one segment that is likely to witness a greater deal of action in
the future. In the near term, the low interest rate scenario is likely to affect the spreads of
majors. This is likely to result in a greater focus on better asset-liability management
procedures. Consequently, only banks that strive hard to increase their share of fee-based
revenues are likely to do better in the future.

LPBC bank is also part of stiff competition for luring Indian customers. It has estimated
properly the growing Indian banking market and made its entry to Indian banking market
at the proper time.

It opened its branches at all the major Indian cities like Mumbai, Pune, Nagpur, Kolkata,
Delhi, Hyderabad, Bangalore, Chennai etc.
LPBC camp branch is a very dynamic, proactive branch since beginning. Its presence is
felt by all leading banks in Pune city which lost heavily their customer base to LPBC in
the last financial year.

Mr. Prakash Kumar –Branch Manager LPBC bank, Camp branch, Pune, was approached
by their client Mr.Suresh Chandra with a request to open an Import LC.

The LC was sanctioned by an appropriate authority and the importer Mr.Suresh Chandra
required some time to comply with the sanction conditions like depositing of margin
money etc.

The importer Mr. Suresh Chandra requested Mr.Prakash Kumar –Branch Manager LPBC
bank, Pune Camp branch that though the bank can not open LC until sanction terms are
compiled with , the bank should send a pre-advice of LC by SWIFT message as under:-

“Opened LC No.185/2008 on 24th April, 2008 for US$ 500000.00

Applicant: Sharmila Enterprises Pvt. Ltd.
Beneficiary: Clarisa INC, New York, USA
Covering: Titanium Plates

However, LPBC bank, camp branch Pune modified the pre-advice by incorporating the
words “Details to Follow” so that pre-advice does not become LC under UCP 600.

In the absence of words “Details to follow”, beneficiary can treat pre-advice as LC and
can present documents to the bank for negotiations and subsequent reimbursement.

Although the importer Mr. Suresh Chandra was little unhappy for modification of pre-
advice, Mr. Prakash Kumar the Branch Manager-LPBC bank convinced him the
importance and adhering to standard working practices under Uniform Customs and
Practices (UCP600).

Questions

1) Why Mr.Prakash Kumar accepted immediately first request of Mr. Suresh Chandra
for opening of Letter of Credit?
2) What was the sanction condition for opening of Letter of Credit?
3) What was the second request made by Mr. Suresh Chandra?
4) What was the reason for modification of pre advice by incorporating the words
“Details to follow”?
5) What was the reaction of Mr. Suresh Chandra for modification of pre advice?
6) How Mr. Prakash Kumar- Branch Manager LPBC handled unhappiness of his client
Mr. Suresh Chandra?
7) What is the key issue involved in the above case?
Possible Solutions

1) Mr. Prakash Kumar was interested in developing bank’s business. Hence he

accepted immediately first request of Mr. Suresh Chandra for opening of Letter of
Credit.
2) Depositing of margin money was the sanction conditions for opening of Letter of
Credit.
3) Mr. Suresh Chandra’s second request was that the bank should send a pre-advice of
LC by SWIFT message to the advising bank.
4) If the word “Details to Follow” are omitted, the pre-advise can be treated as good as
Letter of Credit and bank has no choice other than to accept all bills of exchange
under the aforesaid pre-advise under Uniform Customs and Practices (UCP600)
5) Mr. Suresh Chandra was little unhappy for modification of pre-advice.
6) Mr. Prakash Kumar the Branch Manager-LPBC bank convinced him the importance
and adhering to standard working practices under Uniform Customs and Practices
(UCP600).
7) Customer satisfaction is to be given due importance at the same time standard
working practices norms should also be observed. Also proper guidance should be
given to customer for better work performance.

General Comment

This case is an example of a practical situation wherein a manager is facing dilemma for
customer satisfaction against organisational interests. When organisational interests are in
danger, manager has no choice other than to sacrifice customer satisfaction issues. Thus
customer relationship management exists only in the light of economic survival of an
organisation. However, this naked truth is to be dealt delicately to avoid customer
confrontation in day to day operating practice. In the long run, unhappy customers may
affect business potential of a company. A customer relations manager, in practice, is
always trying to achieve a golden mean of the aforesaid issues.

Many times, a customer is treated as a king and there is a keen competition amongst
employees to accept all sermons as Ten Commandments. This may lead to financial
losses to an organisation if it is not understood properly that each customer request adds
to cost. This cost is to be balanced equally by subsequent revenue from services given to
a customer. Any negative deficit in the above means threat to economic survival of an
organisation.

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 Case Study 2

Helping the customer

American financial magazine "Global Finance" has chosen Bank Vienna, Austria as
Austria's best bank, based on the results of its "The World’s Best Banks in Developed
Markets" annual survey.

Bank Vienna’s CEO Fredic Tully says, "The award from 'Global Finance' acknowledges
our employees' commitment and professionalism and reflects the fact that we are not only
Austria's biggest bank, but also its best."

A letter of credit was opened by Mr. Roberts- Chief Manager-Bank Vienna, Austria to
Mr. Aloknath an Indian exporter for US$ 10 million for 500 tons, which were to be
shipped from India, each month from October 2007 to February 2008 and the export
invoice for US$ 2 million were to be drawn for each month’s shipment. This was the
principle condition of Letter of Credit which was issued by Bank Vienna, Austria.

The export invoices for first two months were duly retired.

There was no shipment made by Mr. Aloknath, an Indian exporter and no export invoice
was raised during the month of December, 2007.

In the month of January, 2008, an export invoice for US$ 4 million was received by the
opening bank- Bank Vienna, Austria, covering 200 tons of goods from Mr. Aloknath.

Mr. Roberts-Chief Manager, Bank Vienna-Austria observed following discrepancies:

• Containers numbers mentioned in export invoice were not matching with containers
numbers as mentioned in Bill of Lading (BL)
• Price of goods was indicated in packing list
• Bill of Lading dates were prior to date of certificate of origin of goods.
• There was no shipment and export invoice in the month of December, 2007.

Letter of Credit opened by Mr. Roberts, Chief Manager, Bank Vienna, Austria is a case
of LC with specific condition. In case there is no shipment during any particular month,
the LC automatically expires as per provisions of UCP600.Somehow this important point
was overlooked by the Indian exporter, Mr. Aloknath.

Thus Bank Vienna, Austria was unable to honour export documents due to the above
mentioned discrepancies in accordance with article 16 of Uniform Customs and
Practice for Documentary Credits (UCP 600).
However, Mr. Roberts –Chief Manager, Bank Vienna, Austria, advised the Mr. Aloknath
the Indian exporter through SBI, the Indian negotiating bank to approach the foreign
customer for export document acceptance and held the export documents at exporter’s
risk and disposal. Further he coordinated export document acceptance activities with
principal foreign client. Accordingly Mr. Aloknath approached his principal foreign
client who arranged the acceptance of export documents in due course of time.

The export invoice for the month of January, 2008, was duly retired after securing
document acceptance from the foreign customer with necessary discrepancies charges.

Questions

1) What was the principle condition of Letter of Credit?

2) What were the discrepancies in general observed by Mr. Roberts in exports
documents?
3) What was the effect of discrepancies?
4) How Mr. Roberts helped Mr. Aloknath?
5) What was the reason for providing help by Mr. Roberts to Mr. Aloknath?

Possible Solutions

1) Letter of Credit was of US$ 10 million for 500 tons, which were to be shipped from
India, each month from October 2007 to February 2008 and the export invoice for
US$ 2 million were to be drawn for each month’s shipment.

2) Following discrepancies in general observed by Mr. Roberts in exports documents:

a) Containers numbers mentioned in export invoice were not matching with

containers numbers as mentioned in Bill of Lading (BL)

b) Price of goods was indicated in packing list

c) Bill of Lading dates was prior to date of certificate of origin of goods.

d) There was no shipment and export invoice in the month of December, 2007.

3) Mr. Roberts - Chief Manager, Bank Vienna, Austria was unable to honor export
documents due to the various discrepancies in accordance with article 16 of
Uniform Customs and Practice for Documentary Credits (UCP 600).

4) Mr. Roberts - Chief Manager, Bank Vienna, Austria, advised Mr. Aloknath the
Indian exporter through SBI, the Indian negotiating bank to approach the foreign
customer for export document acceptance. Further he coordinated export document
acceptance activities with principal foreign client.
5) Mr. Roberts main intension was to increase business and not to use provisions given
under UCP600 as a shield to avoid payment against export documents which were
submitted by Mr. Aloknath, the Indian exporter. Helping customers may fetch good
long term results.

General Comments

This case is an example of a proactive customer relationships manager who takes

initiative to solve customer’s problems in view of long term good customer relations and
possible increase in business.

Mr. Roberts would have remained neutral and would have rejected export documents.
Instead of that he advised Mr. Aloknath, the Indian exporter properly to sort out
document acceptance and payment problem. Thus, the course of action of Mr. Roberts
confirms that bank’s employees' commitment and professionalism and reflects the fact
that this organisation is not only Austria's biggest bank, but also its best. It cares truly for
its customers.

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