Shri Vile Parle Kelvani Mandals

Mithibai College of Arts,, Chauhan Institute of Science & Amrutben Jivanlal college of Commerce and conomics Vile Parle !"est# Mumbai $%%%&' A P()J C* )+

COMPARATIVE ANALYSIS OF PRIVATE AND PUBLIC SECTOR BANKS

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Shri Vile Parle Kelvani Mandals

Mithibai College of Arts,, Chauhan Institute of Science & Amrutben Jivanlal college of Commerce and conomics Vile Parle !"est# Mumbai $%%%&'

EVALUATION CERTIFICATE
This is to certify that the undersigned have assessed and evaluated the project on Comparative Analysis of Private and Public Sector Banks ; submitted by Daroge Rashid Nisar Ahmed , student of M.Com. Part II (Semester III) for the academic year 2013-14. This project is original to the best of our knowledge and has been accepted for Internal Assessment.

Name & Signature of Internal Examiner

Name & Signature of External Examiner

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P(I+CIPA0 /(4 /4.41A/KA(I

Shri Vile Parle Kelvani Mandals

Mithibai College of Arts,, Chauhan Institute of Science & Amrutben Jivanlal college of Commerce and conomics Vile Parle !"est# Mumbai $%%%&'

DECLARATION BY THE STUDENT

I, DAROGE RASHID NISAR AHMED, student of M.Com. (Part II) Roll No.: 07 hereby declare that the project titled COMPARATIVE ANALYSIS OF PRIVATE SECTOR AND PUBLIC SECTOR BANKS for the subject RESEARCH METHODOLOGY submitted by me for Semester III of the academic year 2013-14, is based on actual work carried out by me under the guidance and supervision of PROF. BHARAT
PITHADIA. I further state that this work is original and not submitted

anywhere else for any examination.

Place: Mumbai Date: Name & Signature of Student: DAROGE RASHID NISAR AHMED ___________________________

ACK+)"0 /1 M +*
First and foremost I seek the blessings of my beloved TEACHERS who keep lot of expe tations on me and showering their infinite love for ever! I wo"ld like to thank #niversity of $"mbai for giving me this opport"nity of taking s" h a hallenging pro%e t& whi h has enhan ed my knowledge abo"t the 'Comparative Analysis of Private and Public Sector Banks I show my gratit"de to the (rin ipal& )i e (rin ipal and Co*ordinator of $ithibai College who gave me a lot of moral s"pport and "nder their g"idan e I was s" essf"lly able to omplete my pro%e t! And with deep sense of gratit"de I wo"ld like to thank (rof! Bharat Pithdia for his+her immense help and o*operation!

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Sr4 +o4 PA(*IC-0A(S Page +o4

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Inroduction

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Anal<sis I

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Anal<sis II

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Suggestions, (ecommendations and Conclusion

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94 I+*()/-CI*)+
The world of banking has assumed a new dimension at dawn of the 21st century with the advent of tech banking, thereby lending the industry a stamp of universality. n general, banking may be classified as retail and corporate banking. !etail banking, which is designed to meet the re"uirement of individual customers and encourage their savings, includes payment of utility bills, consumer loans, credit cards, checking account and the like. #orporate banking, on the other hand, caters to the need of corporate customers like bills discounting, opening letters of credit, managing cash, etc. $etamorphic changes took place in the ndian financial system during the eighties and nineties conse"uent upon deregulation and liberali%ation of economic policies of the government. ndia began shaping up its economy and earmarked ambitious plan for economic growth. #onse"uently, a sea change in money and capital markets took place. &pplication of marketing concept in the banking sector was introduced to enhance the customer satisfaction the policy of privati%ation of banking services aims at encouraging the competition in banking sector and introduction of financial services. #onse"uently, services such as 'emat, nternet banking, (ortfolio $anagement, )enture capital, etc, came into e*istence to cater to the needs of public. &n important agenda for every banker today is greater operational efficiency and customer satisfaction. The mew watchword for the bank is pretty ambitious+ customer delight. The introduction to the marketing concept to banking sectors can be traced back to &merican ,anking &ssociation #onference of 1-5.. ,anks marketing can be defined as the part of management activity, which seems to direct the flow of banking services profitability to the customers. The marketing concept basically re"uires that there should be thorough understanding of customer need and to learn about market it operates in. /urther the market is segmented so as to understand the re"uirement of the customer at a profit to the banks.

/ 6I+I*I)+ )6 .A+K *he )=ford dictionar< defines the .an> as, An establishment for the custody of money, which it pays out, on a customers order According to "hitehead, A Bank is defined as an institution which collects surplus funds from the public, safeguards them, and makes them available to the true owner when required and also lends sums be their true owners to those who are in need of funds and can provide security. ,anking #ompany in ndia has been defined in the ,anking #ompanies act 1-4-, 12ne which transacts the business of banking which means the accepting, for the purpose of lending or investment of the deposits of money from the public, repayable on demand, or otherwise and withdraw able be che"ue, draft, order or otherwise.3 The banking system is an integral subsystem of the financial system. t represents an important channel of collecting small savings form the households and lending it to the corporate sector. The ndian banking system has !eserve ,ank of ndia 4!, 5 as the ape* body for all matters relating to the banking system. t is the central ,ank of ndia. t is also known as the ,anker To &ll 2ther ,anks. V)0-*I)+ )6 I+/IA+ .A+KI+1 &ncient banking system of ndia constituted of indigenous bankers. They have been carrying on their age6old banking operations in different parts of the country under 7

different names. The modern age of banking constitutes the fundamental basis of economic growth. The term ,ank is being used since long time but there is no clear conception regarding its beginning. &ccording to the viewpoint, in good old days. talian money leaders were known as Banchi because they kept a special type of table to transact their business. IMP)(*A+C )6 .A+KS Today banks have become a part and parcel of 8otak ,ank9s life. There was a time when dwellers of the city alone could en:oy their services. ;ow banks offer access to even a common man and their activities e*tend to areas hitherto untouched. ,anks cater to the needs of agriculturalists, industrialists, traders and to all the other sections of the society. n modern age, the banking constitutes the fundamental basis of economic growth. Thus, they accelerate the economic growth of a country and steer the wheels of the economy towards its goals of 1self reliance in all fields3. t naturally arouses 8otak ,ank9s interest in knowing more about the <,ank= and the various men and the activities connected with it. I+/IA+ .A+KI+1 S2S* M ,anking in ndia has its origin as early as the )edic period. t was believed that transition from money lending to banking must have occurred even before $anu, The great >indu ?urist, who has devoted a section of his work to deposit advance and laid down rules relating to rates of interest. 'uring the $ogul period, the indigeneous,ankers played a very important role in lending money financing foreign trade and commerce. 'uring the days of @ast ndia #ompany, it was turn over the agency houses to carry on the business. 1The Aeneral ,ank of ndia3 was the first to :oin sector in the year 17.0.The others that followed were the ,ank of >industan and the ,engal bank. The bank of >industan is reported to have continued till 1-B0 while the other two failed in the meantime. n the first half of the 1-th century the @ast ndia #ompany established three banks+ 1. ,ank of ,engal 41.B-5. 2. ,ank of ,ombay 41.4B5. 3. ,ank of $adras 41.435. .

These three banks are also known as (residency ,anks were independent units and functioned well. These three banks were amalgamated in 1-2B and mperial ,ank of ndia was established on 27th :anuary1-21, which started as private shareholders banks, mostly @uropeans shareholders, with the passing of time mperial bank was taken over by the newly constituted Ctate bank of ndia act in1-55. n 1.05 &llahabad ,ank was established and first time e*clusively by ndians, (un:ab ;ational ,ank Dtd. was set up in 1.-4 with head"uarters at Dahore. ,etween 1-B0 and 1-13, ,ank of ndia, #entral ,ank of ndia, ,ank of ,aroda, #anara ,ank, ndian ,ank, and ,ank of $ysore were set up. !eserve ,ank of ndia came in 1-35. 2n ?uly, 1-0-, 14 ma:or banks of ndia were nationali%ed and on 15th &pril, 1-.B si* more commercial private banks were also taken over by the government. (eserve .an> of India The ,anking system is an integral sub6system of the financial system. t represents an important channel of collecting small savings from the households and lending it to the corporate sector. The ndian banking system has The !eserve ,ank of ndia 4!, 5 as the ape* body from all matters relating to the banking system. t is the 1#entral ,ank3 of ndia and act as the banker to all other banks. 6unctions of (.I3 #urrency issuing authority ,anker to the government. ,anker to other ,ank. /raming of monetary policy. @*change control. #ustodian to foreign e*change and gold reserves. 'evelopment activities. !esearch and development in the banking sector. -

C0ASSI6ICA*I)+ )6 .A+KS On the basis o O!ne"shi# P-.0IC S C*)( .A+KS (ublic sector banks are those banks that are owned by the government. The government owns these banks. n ndia 2B banks were nationali%ed in 1-0- and 1-.B respectively. Cocial welfare is there main ob:ective. P(IVA* S C*)( .A+KS These banks are those banks that are owned and run by private sector. &n individual has control over these banks in proportion to the shares of the banks held by him. C)7)P (A*IV .A+KS These are those banks that are :ointly run by a group of individuals. @ach individual has an e"ual share in these banks. ts shareholders manage the affairs of the bank. A$$o"%in& to the La! SC, /-0 / .A+K Cchedule banks are the banks, which are included in the second schedule of the banking regulation act 1-05. &ccording to this schedule bank+ 1. $ust have paid6up capital and reserve of not less than !s5BB, BBB. 2. $ust also satisfy the !, that its affairs are not conducted in a manner 'eterminate to the interest of its depositors.

1B

Cchedule banks are sub6divided as+6 a5 Ctate co6operative banks b5 #ommercial banks +)+7SC, /-0 / .A+KS ;on 6schedule banks are the banks, which are not included in the second schedule of the banking regulation act 1-05. t means they do not satisfy the conditions lay down by that schedule. These are the banks having paid up capital, less than !s.5Dakhs. They are further classified as follows+6 &. #entral #o6operative banks and (rimary #redit Cocieties. ,. #ommercial banks A$$o"%in& to F'n$tion C)MM (CIA0 .A+KS These are the banks that do banking business to earn profit. These banks make loans for short to business and in the process create money. #redit creation is the main function of these banks. 6)( I1+ .A+KS These are those banks that are incorporated by foreign company. They have set up their branches in ndia. These banks have their head offices in foreign countries. Their principle function is to make credit arrangement or the e*port and the import of the country and these banks deals in foreign e*change. I+/-S*(IA0 .A+KS ndustrial banks are those banks that offer long term and medium term loan to the industries and also work for their development. These banks help industries in sale of their shares, debentures and bonds. They give loan to the industries for the purchase of land and machinery.

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A1(IC-0*-(A0 .A+KS &gricultural banks are those banks that give credit to agricultural sector of the economy. SAVI+1 .A+KS The principle function of these banks is to collect small savings across the country and put them to the productive use. n ndia department of post office functions a savings banks. C +*(A0 .A+K #entral ,ank is the ape* bank of the banking system of the country. t issues currency notes and acts a banker9s bank. @conomic stability is the principle function of this bank. n short, it regulates and controls the banking system of the country. !, is the #entral ,ank of ndia. P(IVA*I?A*I)+ )6 I+/IA+ .A+KI+1 /or the public sector banks, the era of bumper profit is over. /or much of the last decade the process of collaborated financial liberali%ation had cleared up the ,ank=s balance sheet enabling them to with stand increased competition, global financing, turmoil and even unprotected industrial slow down. ,ut the cycle of liberali%ation has run its full course. ;ow it is the time for the big structural leap, rationali%ation, mergers, and privati%ation. Enless the banks undertake these fundamental changes, their profit will stay under pressure. There are twp areas of competitions which banking industry is facing internationally and nationally. n the pre6liberali%ation era, ndian banks could grow in a closed economy but the banking sector opened up for private competition. t is possible that private banks could become dominant players even within ndia. t has been recorded a rapid rise of the new private sector banks and it has tracked the transformation of the public sector banks as they grapple with the changes of financial deregulation. Ese of &T$ cards, nternet ,anking, (hone ,anking, $obile ,anking are the new innovative channels of banking which are being widely used as they result in saving both 12

time and money which are two essential things that every one is short of and is running to catch hold of them. $oreover private sector banks are aligning its infrastructures, marketing "uality and technology to build deep commitment in building consumer and retail banking. The main focus of these banks is on innovative range of services or products.

S*(-C*-( )6 .A+KI+1 S2S* M 'ifferent countries of the world have different types of banking systems. >owever, commercial banking had grown under all these banking systems. To understand the structure of banking system, let us take up various types of banking systems one by one. These types are+ !9# -+I* .A+KI+1 Enit ,anking originated in the Enited Ctate of &merica. t grew in the Enited Ctates of &merica. &s a counter part of independent or industrial units. An independent unit bank is a corporation that operates one office and that is not related to other banks through either ownership or control. Thus under unit banking, a single bank is a complete organi%ation in itself having its own management. The scale of operation is small and the area is restricted to a locality only. Enit banking is locali%ed banking and is much more responsive to the needs of the locality. t has better understanding of the local problems and conditions, which helps it to cater to the needs of the area in a better way. The staff of the unit bank is generally local and is in a better position to determine the standing or desirability of the customers. The failure of the unit bank will not endanger the banking system and economy. t is free from the difficulties and diseconomies of large scale operations. t will not drain out the financial resources of villages and small towns to big industrial centers and will ensure a balanced growth. !8# .(A+C, .A+KI+13

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@conomic and $anagerial problems faced by the unit banks let to the emergence of banking system. ;ow, This the most popular and important banking system. n branch banking, a bank has a large network of branches scattered all over the country. ,ranch banking developed in @ngland. Cubse"uently most of the countries of the world adopted the system. n terms of branches, the Ctate ,ank of ndia has emerged as one of the largest banks in the world. &s under the system the resources of a number of branches get pooled under the same management, any individual branch is in a better position to face e*cessive withdrawals by the customers. t facilitates diversification of activities because the area covered by the branches is generally widespread. Ender the system branches can operate without keeping large idle cash reserves. t becomes possible for the bank to hire the services of competent and professionally "ualified managers, capable of understanding the handling technical problems and comple* situations. The cost of remitting or transferring funds from one place to another works out to be less. The staff stays at a branch only for a limited period, so the chances of ob:ective decision making in the branch banking are high. ,ranch ,anking tends to bring homogeneity in the prevailing nterest !ates as it increases the mobility of resources from one place to another. t is easier for the #entral ,ank to e*ercise #ontrol. t will communicate only with a few !egistered F>ead 2ffices of the ,anks and not with each individual branch. n this system there more safety and li"uidity of funds. The choice of securities and investments is larger. ,ranch banking makes complete banking services available to the smallest communities. The branches in small localities can be initially operated at loss in e*pectation of future gains. The comparative study of unit banking and branch banking is a case of small scale banking versus large scale banking. t is evident that the scale is clearly titled towards branch banking. Gith the growth of large scale business it is no wonder that the trend is almost every country towards the branch banking i.e. big banks with a network of branches all over the country. @ven in the E.C.&. The birthplace of unit banking. The ,ank of &merica has now more than 5BB branches in the state of #alifornia itself. !:# C,AI+ .A+KI+13 14

Chaper, Colomon and Ghite have defined #hain ,anking as An arrangement by which two or more banks each of which retains its identity, capital and personnel are brought under common control by any device other than a !olding "ompany. Ender the system there is pooling of resources. #hain banking overcomes certain limitations of unit banking. ,ut the system suffers from certain limitations of its own. There may be a lack of co6ordination, proper control etc. The system is infle*ible. !$# 1()-P .A+KI+1 3 t is similar to #hain ,anking, the difference being that under Aroup ,anking two or more banks are brought under the control of the same management through a >olding #ompany. ,oth the systems aim at gaining the advantages of large scale operations. The banks are able to pool their resources in case of emergency or when large amount of cash is re"uired to meet the loan re"uirements of the customer. The advantages and disadvantages of both the systems are similar. ,oth the systems developed in the Enited Ctate of &merica as a result of attempts to overcome the difficulties or limitations of unit banking. !&# C)(( SP)+/ +* .A+KI+13 Ender #orrespondent banking, small banks serving local communities hold deposits with :oint banks serving in big cities. This kind of banking is prevalent in E.C.&. The correspondent banks perform two important services of outstation che"ue clearing and loan participation for the respondent banks while they benefit for the deposit funds of respondent banks.

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6-+C*I)+S )6 .A+KS P(IMA(2 6-+C*I)+S3 15 &ccepting of 'eposits+ & bank accepts deposits from the public. (eople can deposit their cash balances in either of the following accounts to their convenience+6 a. #i$ed or %ime &eposit Account' #ash is deposited in this account for a fi*ed period. The depositor gets receipts for the amount deposited. t is called /i*ed 'eposit !eceipt. The receipt indicates the name of the depositor, amount of deposit, rate of interest and the period of deposit. This receipt is not transferable. f the depositor stands in need of the amount before the e*piry of fi*ed period, he can withdraw the same after paying the discount to the bank. b. (avings Account' This type of deposit suits to those who :ust want to keep their small savings in a bank and might need to withdraw them occasionally. ,anks provide a certain rate of interest on the minimum balance kept by the depositor during the month. c. "urrent Account' This type of account is kept by the businessman who are re"uired to withdraw money every new and then. ,anks do not pay any interest on this account. &ny sum or any number of withdrawals can be presented by such an account holder. 25 &dvancing of Doans+ The bank advances money in any one of the following ways. a. )verdraft #acilities' #ustomers of good trading are allowed to overdraw from their current account. ,ut they have to pay interest on e*tra amount they have withdrawn. 2verdrafts are allowed to provide temporary accommodation since the e*tra amount withdrawn is payable within a short period. b. *oney at "all' t is the money lent for a very short period varying from 1 to 14 days. Cuch advances are usually made to other banks and financial institutions only. $oney at call ensures li"uidity. n the nterbank market it enables bank to make ad:ustment according to their li"uidity re"uirements. 17

c. +oans' Doans are granted by the banks on securities which can be easily disposed off in the market. Ghen the bank has satisfied itself regarding the soundness of the party, a loan is advanced. d. "ash "redit' The 'ebtor is allowed to withdraw a certain amount on a given security. The debtor withdraws the amount within this limit, interest is charged by the bank on the amount actually withdrawn. e. &iscounting Bills of ,$change' t is another method of making advances by the banks. Ender this method, bank gives advance to their clients on the basis of their bills of e*change before the maturity of such bills. f. -nvestment in .overnment (ecurities' (urchasing of government securities by the banks tantamount to advancing loans by them to the Aovernment. ,anks prefer to buy government securities as these are considered to be the safest investment. /or e*ample + ndira )ikas (atra + t enables the banks to meet re"uirement of statutory li"uidity ratio 4CD!5 35 #redit #reation' 2ne of the main functions of banks these days is to create credit. ,anks create credit by giving more loans than their cash reserves. ,anks are able to create credit because the demand deposits i.e. a claim against the bank is accepted by the public in settlement of their debts. n this process the bank creates money. /or this reason (rof. Cayers has called bank 1the manufactures of money.3 45 #he"ue system of (ayment of /unds+ & che"ue, a negotiable instrument, which in fact is a bill of e*change, drawn upon a banker, is the most popular credit instrument used by the client to make payments. #he"ue system is the main credit instrument in the banking world. &lthough a che"ue is not a legal tender money, the serves as a medium of e*change in a limited way as it is a negotiable instrument. ,ecause of 1clearing houses3 and 1clearing3 operations of the banks, che"ues can be and are used for transferring funds from one centre to another. n the modern days they can also be used for transferring funds from one country to another.

1.

S C)+/A(2 6-+C*I)+S ,esides the above primary functions, banks also perform may secondary functions such as agency functions, general utility and social functions. &5 &gency /unctions ,anks act as agents to their customers in different ways+6 i/ "ollection and 0ayment of "redit and )ther -nstruments' The #ommercial banks collect and pay che"ues, bills of e*change, promissory notes, hundies, rent, interest etc. 2n behalf of their customers and also make payments of income ta*, fees, insurance premium etc. on behalf of the customers. #ustomers can leave standing instructions with the banker for various periodic payments ensuring the regular payments and avoiding the trouble of performing it themselves. ii/ 0urchase and (ale of (ecurities' The modern commercial banks also undertake the purchase and sale of various securities like shares, stocks, bonds units and debentures etc. 2n behalf of the customers, banks do not give any advice regarding the suitability or otherwise of a security but simply perform the functions of a broker. iii/ %rustee and ,$ecutor' ,anks also acts as trustees and e*ecutors of the property of their customers on their advice. Cometimes banks also undertake income ta* services on behalf of the customers. iv/ 1emittance of #unds' The #ommercial banks remit funds on behalf of clients from one place to another through che"ues, drafts, mail transfers etc. v/ 1epresentation and "orrespondence' Cometimes commercial banks acts as representatives or correspondents of the clients especially in handling various applications. /or instance, passports and travel tickets, booking of vehicles, plots etc. vi/ Billion %rading' n many countries, the commercial banks trade is billions like gold and silver. n 2ct 1--7, . banks including C, , 2,, #anara ,ank and &llahabad ,ank have been allowed import of gold which has been put under open general licensed category. vii/ 0urchase and (ale of #oreign ,$change ' ,anks buy and sell foreign e*change, promoting international trade. This function is mainly discharged by foreign @*change ,anks.

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viii/ +etter of 1eferences' ,anks also give information about economic position of their customers to domestic and foreign traders and vice versa. ,5 A@;@!&D ET D TH C@!) #@C n addition to agency services, banks render many more utility services to the public. These services are+6 i5 Docker /acilities+ ,anks provide locker facilities to their customers. (eople can keep their valuables or important documents in these lockers. Their annual rent is very nominal. ii5 &cting as a referee + t desired by the customers, the bank can be a referee i.e. who could be referred by the third parties for seeking information regarding the financial position of the customers. The bank will acts as referee only and only if it is desired by the customer, otherwise the secrecy of a customers is account is maintained very carefully. iii5 ssuing letters of credit+ ,ankers in a way by issuing letters of credit certify the credit worthiness of the customers. Detters of credit are very popular in foreign trade. iv5 &cting as Enderwriters+ ,anks also underwrite the securities issued by the Aovernment and #orporate bodies for a commission. The name of bank as an underwriter encouraged investors to have faith in the security. v5 &cting as information banks+ #ommercial banks also acts as 1information3 bureau as they collect the financial, economic and statistical data relating to industry, trade and commerce. >'/# ,ank is providing information relating to ;! Cchemes and commentaries of e*perts on development in the areas of finance through nternet. vi5 ssuing Traveler=s che"ues and credit cards + ,anks have been rendering great service by issuing traveler=s che"ues, which enable a person to travel without fear of theft or loss of money. ;ow, some banks have started credit card system under which a credit card holder is allowed to avail credit from the listed outlets without any additional cost or effort. Thus, credit card holder

2B

need not carry or handle cash all the time. ;ow, international credit cards are :oining hands with ndian ,anks. vii5 ssuing of gift che"ues+ #ertain banks issue gift che"ues of various denominations, e.g. Come ndian banks issue gift che"ues f the denominations of !s. 21, 31, 51 and 1B1 etc. They are generally issued free of charge. viii5 'ealing in /oreign @*change+ $a:or branches of commercial banks also transact business of foreign e*change. #ommercial banks are the main authori%ed dealers of foreign e*change in ndia. i*5 $erchant banking Cervices+ #ommercial banks also render merchant banking services to the customers. They help in availing loans from non6banking financial institutions. *5 >elp in Transportation of Aoods+ ,ig businessmen or industrialists after consigning goods to their retailers send the !ailway !eceipt 4#onsignment ;ote5 to the bank. Dist of (ublic Cector ,anks
o o o o o o

Ctate ,ank of ,ikaner I ?aipur Ctate ,ank of >yderabad Ctate ,ank of ndore Ctate ,ank of $ysore Ctate ,ank of Caurastra Ctate ,ank of Travancore

2ther ;ationalised banks are+

&llahabad ,ank &ndhra ,ank ,ank of ,aroda ,ank of ndia ,ank of $aharastra #anara ,ank #entral ,ank of ndia 21

#orporation ,ank 'ena ,ank ndian ,ank ndian 2verseas ,ank 2riental ,ank of #ommerce (un:ab I Cind ,ank (un:ab ;ational ,ank Cyndicate ,ank E#2 ,ank Enion ,ank of ndia Enited ,ank of ndia )i:aya ,ank

Dist of (rivate Cector ,ank

,ank of (un:ab ,ank of !a:asthan #atholic Cyrian ,ank #enturion ,ank #ity Enion ,ank 'hanalakshmi ,ank 'evelopment #redit ,ank /ederal ,ank >'/# ,ank # # ,ank ', ,ank ndus nd ,ank ;A )ysya ,ank ?ammu I 8ashmir ,ank 8arnataka ,ank 8arur )ysya ,ank Da*mi )ilas ,ank 22

Couth ndian ,ank Enited Gestern ,ank ET ,ank

0ist of 6oreign .an>s in India

&,;6&$!2 ,ank &bu 'habi #ommercial ,ank ,ank of #eylon ,;( (aribas ,ank #iti ,ank #hina Trust #ommercial ,ank 'eutsche ,ank >C,# ?($organ #hase ,ank Ctandard #hartered ,ank Ccotia ,ank Taib ,ank

-@coming 6oreign .an>s In India ,y 2BB- few more names is going to be added in the list of foreign banks in ndia. This is as an aftermath of the sudden interest shown by !eserve ,ank of ndia paving roadmap for foreign banks in ndia greater freedom in ndia. &mong them is the world9s best private bank by @uro $oney maga%ine, Cwit%erland9s E,C.

*he folloAing are the list of foreign ban>s going to set u@ business in India

!oyal ,ank of Ccotland Cwit%erland9s E,C EC6based A@ #apital #redit Cuisse Aroup 23

ndustrial and #ommercial ,ank of #hina

$errill Dynch is having a :oint venture in ndian investment banking space 66 'C( $errill Dynch. Aoldman Cachs holds stakes in 8otak $ahindra arms.

A@ #apital is also having a wide presence in consumer finance through A@ #apital ndia. ndia9s A'( is seen growing at a robust pace of around 7J over the ne*t few years, throwing e*pected up to opportunities continue for over the the banking ne*t sector four to to profit five from. years. The credit of banks has risen by over 25J in 2BB46B5 and the growth momentum is (articipation in the growth curve of the ndian economy in the ne*t four years will provide foreign banks a launch pad for greater business e*pansion when they get more freedom after &pril 2BB-.

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)bBectives of the Stud< This study has been conducted with a variety of important ob:ectives in mind. The following provides us with the chief ob:ectives that have tried to achieve through the study. The e*tent to which these ob:ectives have been met could :udged from the conclusions and suggestions, which appear in the later of this study. The #hief 2b:ectives of this study are+ 1. To find the bank sector that is largely availed by the customer. 2. To study the factors the factors influencing the choice of a bank for availing services. 3. To find and compare the satisfaction level of customers in public sector as well as in private sectors bank. 4. To study the problem faced by customer. 5. To get suggestions for improvement or change in the services of public and private sector banks. 0. To study what do people e*pect in the new era of banking.

25

84 A+A02SIS I
( S A(C, M *,)/)0)12 !esearch is an art of scientific investigation. n other word research is a scientific and systematic search for pertinent information on a specific topic. The logic behind taking research methodology into consideration is that one can have knowledge about the method and procedure adopted for achievement of ob:ectives of the pro:ect. Gith the adoption of this others can evaluate the results also. ts main aim is to keep the researchers on the right track. The methodology adopted for studying the ob:ectives was surveying the account holders. Co keeping in view the nature of re"uirements of the study to collect all the relevant information regarding the comparison of saving account of #enturion ,ank of (un:ab with other banks, direct personal interview method with structured "uestionnaire was adopted for the collection of primary data. Cecondary data has been collected through the various maga%ines and newspapers and by surfing on nternet. &nd the guide in the organi%ation was consulted at many times. SAMP0 / SI1+37& sample design is a definite plan for obtaining a sample from a

given population. t refers to the techni"ues or the procedure the researcher would adopt in selecting items for the sample. Cample design may as well lay down the number of items to be included in the sample i.e., the si%e of the sample. Cample design is determined before data are collected. >ere we select the population as sample in our sample design. The selected respondents should be as representatives of the total population. P)P-0A*I)+37 The persons holding saving account related to business class were taken into consideration. /A*A C)00 C*I)+ 'ata was collected by using main two methods i.e primary data and secondary data. 20

P(IMA(2 /A*A (rimary data is the data which is used or collected for first time and it is not used by anyone in the past. There are number of sources of primary data from which the information can be collected. 2e choose the following resources for our research. C- S*I)++AI( 37This method of data collection is "uite popular, particular in case of big en"uiries. >ere in our research we set 15 simple "uestions and re"uest the respondents to answer these "uestions with correct information. ( SP)+/ +*S37!espondents helps in creation of more accurate idea about our research. Ge personally meet the respondents inside and outside the banks. S C)+/A(2 /A*A Cecondary data is the data which is available in readymade form and which is already used by people for some purposes. There may be various sources of secondary data such as6newspapers, maga%ines, :ournals, books, reports, documents and other published information. .A+KS A++-A0 ( P)(*S+6 ,anks issues there annual reports to get the people informed with the profitability and growth of the bank. These annual reports helps us a lot to get the latest data and other related information for our research. t tells us about the increase or decrease in profits and other facilities. J)-(+A0S A+/ P-.0ICA*I)+S )6 /I66 ( +* .A+KS 37 Ge also take into consideration the :ournals and publications issued by the bank at different times. we comes to know about the ,ranches, &T$, locations and other useful information. MA+-A0S A+/ .()AC, (S )6 /I66 ( +* .A+KS37 Ge take the help of bank staff and other people who gives us deep information and data which may not be available at anywhere. They gives us there full co6operation.

27

I+* (+ *37Ge also take into consideration the internet facility with which we collect lot of latest information. SAMP0 P0A+3 SAMP0 SI? 3 8eeping in mind all the constraints the si%e of the sample of the study was selected as .B. SAMP0I+1 * C,+IC- 37 Ctratified convenient sampling. &ll the saving account holders were taken into consideration. !esearch was conducted on clear assumptions that the respondents would give frank and fair answers in a pragmatic way and without any bias. SAMP0I+1 / SC(IP*I)+37 n order to understand the nature and characteristics of various respondents in this study, the information was collected and analy%ed according to their socio economic background which included the characteristic of their respondents like education, age marital status and monthly income. This description shows that respondents included in this survey belong to different backgrounds and this turn increase the scope of the study.

P (S)+A0 / *AI0

A1 Particulars ,-*.- years .-*0- years 0-*1- years 1-*2- years

%age of Respondent ,-/ 1-/ ,-/ 3-/

2.

Anal<sis & Inter@retation3 /rom the above study we find that, 1. 2BJ respondents are between 2B63B age groups. 2. 5BJ respondents are between 3B64B age groups. 3. 2BJ respondents are between 4B65B age groups. 4. 1BJ respondents are between 5B60B age groups. S D

Particulars $ale Female Total

No of Respondent 4.3--

%age 4-/ .-/ 3--/

2-

Anal<sis3 /rom the above result we come to know that out of 1BB, 02 respondents are male and 3. are female which is 02J and 3.J are respectively. Inter@retation3 /rom the above data we conclude that most of our respondents are male. MA(I*A0 S*A*-S

Particulars $arried #nmarried Total

No of Respondent .. 24 3--

%age ../ 24/ 3--/

3B

Anal<sis3 /rom the above study we find that out of 1BBJ, 33J respondents are married and 07J respondents are unmarried. Inter@retation+ $ost of the respondents of our survey are Enmarried.
C$3 ,I1, S* /-CA*I)+A0 C-A0I6ICA*I)+37

Particulars $atri Senior Se ondary 5rad"ate 6professional (ost grad"ate Total

No of Respondent 0 30 02 .2 3--

% age 0/ 30/ 02/ .2/ 3--/

31

Anal<sis3 This analysis shows that out of 1BB respondent, 40J respondents are graduate I professional, 30J respondents are post graduate, 14J respondents are senior secondary and 2J respondents are of $atri* category. &ll the respondents of our survey are "ualified. Inter@retation3 /rom the above data we conclude that most of our respondents are Araduates I professional degree holders.

)CC-PA*I)+

Particulars 7"sinessman 5overnment Employee St"dent 9thers

No of Respondent ., ,8 ,0 32

%age of respondents .,/ ,8/ ,0/ 32/

32

Occupation
Businessmen Government E mployee S tudents Others

16% 32%

24%

28%

Anal<sis3 /rom the above analysis it is clear that 32J respondents are doing their own business, 2.J are employees and 10J respondents belong to other category and 24J of our respondents are students. $ost of the respondents of our survey are ,usinessmen. Inter@retation3 /rom the &bove data we conclude that most of our survey respondents are businessmen.

33

/A*A C)00 C*I)+3 'ata was collected using two main methods+

")++,"%-)3 )# &A%A

Cecondary 'ata

(rimary 'ata

.an>s Annual (e@orts

Kuestionnaire

Journals and Publications of /ifferent ban>s

!espondents

ManualsE.roachers of /ifferent .an>

conomics times and financial Aorld

34

0IMI*A*I)+S )6 *, S*-/2 'ue to constraints of time and resources, the study is likely to suffer from certain limitations. Come of these are mentioned here under so that the findings of the study may be understood in a proper perspective. The limitations of the study are+ Come of the respondents of the survey were unwilling to share information. The research was carried out in a short period of 0 weeks . Therefore work within the given time frame. The information given by the respondents might be biased because some of them might not be interested to give correct information. The officials of the bank supported me a lot, but did not have sufficient time to make the points more clear. the sample si%e and other parameters were selected accordingly so as to finish the

35

:4 A+A02SIS II
94 *he res@ondents Aere as>ed about Ahich ban>ing sectors services do their avail4 Table1+ banking sector=s services which the respondents avail.

Banking sector Public Private Both

Number of respondents ! " #

40 35 30 25 !u"li# 20 15 10 5 0 No o respondents !riv$te Both

Araph 1+ ,anking Cector=s services which the respondents avails

I+* (*( *A*I)+37 t was found that most of the respondents were availing services of private sectors banks while those of the public sector banks were less as compare to public sector.

30

84 $he respondents %ere asked about the type of account they have in the public sector as %ell as Private sector banks

Table 2.1 ;umber of type of account held in (ublic sectors banks $ype of Accounts $otal no of respondents Savings )# Current *) &emat + 'i(ed deposits *) Salary *,

Total no of respondents
60 50 40 30 20 10 0 S $vin% &urrent 'em$t (i)ed deposits S $l$ry *ot$l no o respondents

Araph 2.1 +6 ;umber of type of accounts held in (ublic sector banks

Anal<sis3 5BJ people own Caving &ccount, 15J own #urrent account, 0J demat, 15J fi*ed deposits account and 14J salary &ccount

Inter@retation3 t was found that in case of public sector banks,

ma*imum number of account holders owns Caving &ccount. &fter Caving account most prefer account is salary account prefer by people and the ne*t priority goes to fi*ed deposits &ccounts.

:4 *he basic @ur@ose of this Fuestion Aas to >noA the most @referred ban>4 37

Table 3. ;umber of respondents preferring different banks

+ames of .an>s # # ,ank >'/# ,ank Ctate ,ank Aroup ,ank of $aharashtra (un:ab &nd Cind ,ank

+umber of res@ondents 8G 8' 88 9' 9%

30

25

20 +&+&+ "$n, 15 -'(& B$n, S t$te B$n, Group B$n, o .$h$r$shtr$ !un/$" $nd sind B$n,

10

0 Num"er o respondents

Anal<sis3 /rom above graph, it is seen that 2.J stake of the respondents follows to (un:ab ;ational bank followed by # # bank. t is the bank which provide 126hour banking.also the &T$ machine is more as compared to the other private sector banks. Inter@retation 3 /rom the above graph, it is seen that (un:ab national is the most preferred bank as compared to other (ublic and (rivate sector ,anks. The reason for preference of public sector bank is the minimum amount of deposit for saving account. $4 *he aim to as> this Fuestion Aas to >noA he reasons for their @reference in different ban>s37

Table 4+6 !eason for account in different banks

3.

(easons 6riendl< .ehavior of the Staff (eliabilit<Etrust Cuic> and fast services 0ocation

+o of res@ondents 9' 9$ && 9&

Chart Title
60 50 40 30 20 10 0 No o respondents

(riendly "eh$viour o the st$ 0eli$"ility1 *rust 2ui#, $nd $st servi#es 3o#$tion

Araph 4+6!easons for account in different banks

In@retation+ ,y analy%ing this graph, we can conclude that most of the people is influenced by the "uick and speedy services provided by the bank and location is given less preference than others.
&4 *he res@ondents Aere as>ed about the facilities the< Aere availing in @ublic as Aell as @rivate sector ban>s +6 Table 5.1 ;umber of people availing different facilities at public sector banks+ 3-

6acilities Availed &T$F'ebit card 'emat nternetF$obileF(hone ,anking nsurance

+o of res@ondents 0B 5 15 2B

60 50 40 30 20 10 0 No o 0espondents

4*.1 'e"it #$rd 'em$t +nternet1.o"ile1 !hone "$n,in% +nsur$n#e

Araph 5.1+ ;umber of people availing different facilities at public sector banks

Inter@retation3 /rom the above graph, it was found that was availed by most of the people at public sector banks was that of &T$F'ebit cards which hold -BJ of respondents. t is clearly observed by the graph that nsurance are neck to neck holding 2BJ of respondent each.

'4 *he @ur@ose of this Fuestion is to >noA the satisfaction level the< Aere having Aith their ban>s overall @erformance37 Public sector ban>s 4B

0evel of Satisfaction @*cellent Aood )ery Aood

;o.of respondents 12 21 27

Jage 24J 42J 54J

60% 52% 50% 40% 30% 20% 10% 0% E )#ellent Good S eries 1 5ery Good 44%

24%

Araph 0.1 Catisfaction level of #ustomers regarding the facilities availed from the public sector banks. Anal<sis3 t was found that in case of public sectors banks, 1.J of the respondents were highly satisfied ranked e*cellent from the products and services availed by them. 44J were :ust satisfied given very good and 3.J have moderate view. Inter@retation3 (eople have mi*ed type of view regarding public sector banks.

54 *he res@ondents Aere as>ed that if the< have given o@tion, Aould the< li>e to shift from the @resent ban>s37 Table+ 7 ;umber of customers ready to shift from present bank. 41

80

60

60

50

40

30

20

10

0 7 es No

Araph 7+6 ;umber of customers ready to shift from their present bank or not. Inter@retation3 /rom this above Araph, we can conclude that the number of respondents ready to shift from their present bank is 2.J while 7BJ customers seems to be satisfied from their bank and hence willing to shift from their present bank to other.

G4 *he aim to as> this Fuestion Aas to >noA Ahether the res@ondents faces an< @roblem regarding the services @rovided them b< their @referred ban> 37 Table . (roblem faced by customers.

42

*<@es of @roblem Time consuming ntroduction !eference Too many formalities ;o facility of photograph instantly ;o problem

+o of res@ondents 1B . 15 0 4 0

Inter@retation3 t was found that most of the respondents are facing problem of reference. !espondents also find that the time and too many formalities also cause problem in banks.

6I+/I+1S )6 *, S*-/2

$ore number of people has account with private banks. 43

$a:ority of the respondents whether in public sectors or in private sector banks have savings account with banks. ;umber of problem faced by the people is more in public sector banks. (eople want a change in the behavior of the staff of the public sector banks. (eople are more satisfied form the private sector banks due to their better services provided by them in terms of speedy transactions, fully computeri%ed facilities, more working hours 4in case of # # bank, the number of working hour are 125, good investment &dvisory services, efficient and co6operative staff, better approach to #ustomer !elationship $anagement.

n private sector banks proper promotional activities should be taken up so as to make the population aware of the services provided by the banks even in rural areas.

The facility that was availed by most of the people at public sector banks was that of &T$F'ebit cards. The least availed facility was that of 'emat account and foreign transfer of funds.

The facility that was availed by most of the people at private sector banks was that of nternetF(hone banking by &T$F'ebit card. $a:ority of respondents do not want to shift from their present bank. /rom the above study it is clear that private banks are providing better services than nationali%ed banks. -5J respondents favored that private banks are providing better services than nationali4ed banks while 5J respondents are not agree with it.

/rom the above study it is clear that ma:ority of the respondents said that the average balance re"uirement for operating their saving account is between 5BBB6 1BBBB. 2BJ said it is between 1BBBB62BBBB and remaining 5J said it is between 2BBBB65BBBB in private sector banks which as compared to (ublic sector bank is very high.

4BJ respondents said that the bank employees never pay any attention to them and 1BJ respondents said that their problems are not solved by bank e*ecutives. 44

The remaining 5BJ respondents give a positive reaction in the favour of bank. 3BJ respondents favored that their problems are solved by bank e*ecutives and 2BJ respondents said they are received with smile by bank e*ecutives. Co there is a mi* response.

$a:ority of the respondents said that the average time taken for transactions is between 25 to 5B minutes in their bank. 3BJ respondents said the average time taken for transaction is between 2B625 minutes, 2BJ said it is between 1B to 25 min. and remaining 1BJ said that the average time taken for transaction by their bank is 5 to 1B minutes.

/rom the above study is clear that the banks do not organi%e any

customer

meets. &ll the 1BBJ respondents said that their bank does not organi%e any customer9s meets to resolve their problems. #ustomer satisfaction is the demand of time, so the banks should organi%e customer meets to resolve the problems of their customers.

/rom the above study it is clear that ma:ority of the respondents are ready to pay nominal charges for better services provided by private banks while 4BJ respondents are not ready to pay any nominal charges.

The above study depicts that 0BJ respondent said that their bank updates them time to time about the latest facilities and remaining 4BJ said that their bank doesn9t update them.

45

IV4 S-11 S*I)+S, ( C)MM +/A*I)+S A+/ C)+C0-SI)+

Suggestions ,ased on the study conducted, There are some of the suggestions given by the customers of how the modern banking should be. These are the comment given by them about the improvement of the banking sector in ndia. ,anks should obey the !, norms and provide facilitiesas per the norms, which are not being followed by the banks. Ghile the customer must be given prompt services and the bank officer should not have any fear on mind to provide the facilities as per !, norms to the units going sick. ,anks should provide loan at the lower interest rate and education loans should be given with ease without much documentation. &ll the banks must provide loans against shares. /air dealing with the customers. $ore contribution from the employee of the bank. The staff Chould be co6operative, friendly and must be capable of understanding the problems of customers nternet banking facility must be made available in all the banks. the customers @ach section of every bank should be computeri%ed even in rural areas also. !eal time gross settlement can play a very important role. $ore &T$ coverage should be provided for the convenience of the customers. ;o limit on cash withdrawls on &T$ cards. The bank should bring out new schemes at time6to6time so that more people can be attracted. @ven some gifts and pri%es may be offered to the customers for their retention. 24 hours banking should be induced so as to facilitate the customers who may not have a free time in the daytime. t will help in facing the competition more effectively. The charges for saving account opening are high, so they should also be reduced. 40

(rompt dealing with permanent customers and speedy transaction without harassing

 #ustomers generally complain that full knowledge is not granted to them. Thus the bank should properly disclose the features of the product and services to the customers. $oreover door to door services can also be introduced by bank. The need of the customer should properly be understood so that customer feels satisfied. The relationship value should be maintained. The branch should promote cooperation and coordination among employees which help them in efficient working. $aintenance of proper hierarchy should be done. & good hierarchy set up can ensure better results with in the bank. ,anking sector is improving by leaps but still it needs to be improved. (roper and efficient relationship staffs having knowledge for one stop banking, customer friendly atmosphere, and better rate of interest are need of the hour.the concept of privati%ation has overall improved the services in all the banks. >ome banking will be order of the day. (ecommendations 6or Public Sector .an>s3 ,ank staff should be customer friendly and highly motivated to serve the normal customer. &s far as possible, banks should reduce its documentation process while providing loans. #omputeri%ation should be done in banks at all level and the operators should de properly trained. Token system should be induced so as to minimi%e the waiting lines in the banks. (roper ambience in the banks can develop a healthy working culture. Kuick services should be provided.

47

6or Private sector .an>s 24 hours banking should be induced so as to facilitate the customers who may not have free time in the day time. t will help in facing the competition more effectively. Conclusion The customers now days are not only e*posed of what type of service is being provided by banks in ndia but in the world as a whole. They e*pect much more than what is actually being provided. Co the new coming banking sector has to provide and cater to all the needs of the customers otherwise it is difficult to survive in the competition coming up. They not only e*pect the safety of money but also best ways to invest that money which need needs to be fulfilled. ,anks need to have a better outlook towards to actually what customers are re"uiring. @ntries of the private sector banks have made the competition tougher. f a bank is not functioning properly it is being closed. Co it is difficult to face these types of conditions. >ere a simple philosophy can work that customers are Aod and we need to follow this to survive and serve better. The banking sector is poised for e*plosive growth. n this, scenario, it is imperative that banks adopt technology at an aggressive (ace, if they wish to remain competitive. $ani $amallan makes a case for banks to outsource their technology infrastructure re"uirement, thus enabling early adoption and increased efficiencies. n the prevailing scenario, a number of banks have adopt a new deployment strategy of infrastructure outsourcing, to lower the cost of service channels. &s a result, other banks too will need to align their reinvented business models. The re"uired changes at both the business and technology levels are enormous. n a highly competitive banking markets, early adopters are profiting from increased efficiencies. 4. $ore &T$ coverage should be provided for the convenience of the customers. #ustomer care services should be provided by banks.

.I.0I)1(AP,2 .))KS3 8othari #.!. 41--B# (esearch Methodolog<3 Method and *echniFuesL Gishva (rakashan, ;ew 'elhi. ,odie.M, 8ane.& I $racus.? 3 ssentials of Investments. (rof. @ Aordon I 'r. 8. ;atra:an 1.an>ing *heor< 0aA and Practice3. 1Indian financial S<stem & Commercial .an>ing3 by 8han $asood &hmed H.an>ing in India; b< (.;.)arshney

" .SI* S3 www.centurionbop.co.in www.pnbindia.com www.statebankofindia.com www.icicibank.com www.rbi.org.in www.iba.org.in www.knowledgestom.com www.igniter.com

.()AC, (S & PAMP,0 *S ,roachers and pamphlets of Caving &Fc

4-

(UESTIONNAIRE HCom@arative Stud< on @ublic and @rivate sector ban>s; K1. Ghich Cector bank do you have your accountN (ublic K2. (rivate ,oth

n which bank do you have your &ccountN 1. 2. 3. 4.

K3. Ghich type of account do you have in the bankN Caving 'emat Calary #urrent /.'

K4. n #ase you have yours &ccount in more than one a ,ank which one is your most preferred bank 4Aive only one bank5

K5. !ank the selection criteria for opening account with bankN ,rand mage Docation Cervices #harges

K0. 8indly rank the reasons for yours preference in this particular bankN Kuick and fast services Docation 5B

/riendly ,ehavior

!eliability

K7. Ghich facilities are you availing at your bankN &tmF'ebit card nsurance #redit card $obile ,anking

K..>ow often do you use debit card to shopN 2ccasionally ;ever

K-. >ow much Catisfied are you with your bank=s overall performanceN @*cellent Aood )ery Aood

K1B. &ny Cpecific services you e*pect from your bankN

K11. f an option is given to you, would you like to shift from the present ,ankN Hes ;o

K12. 'o you face any problem regarding the services provided by your preferred bankN f Hes,

K13. Gould you like to give any suggestions for the better functioning of banks in these sectorsN (ublic Cector (rivate sector

51

10.

&ny other suggestions please specifyN OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO

Thanks for your valuable time given to us. Ge assure you that the information provided by you will remain confidential. Thanks for your co6operation.

P (S)+A0 / *AI0S4 +AM 37 IIIIIIIIIIIIIIIIIIIIIIIIIII A1 37 IIIIIIIIIIIIIIIIIIIIIIIIIII444 1 +/ (37 IIIIIIIIIIIIIIIIIIIIIIIII444 /-CA*I)+37 IIIIIIIIIIIIIIIIIIIIIII444 A//( SS37 IIIIIIIIIIIIIIIIIIIIIIIII4 IIIIIIIIIIIIIIIIIIIIIIIIIIIIIII P,)+ +)437 IIIIIIIIIIIIIIIIIIIIIIII44 7MAI0 I/37 IIIIIIIIIIIIIIIIIIIIIIIII

SI1+A*-( )6 ( SP)+/ +*

52