A

COMPREHENSIVE PROJECT REPORT

ON

A COMPARATIVE STUDY OF PUBLIC AND

PRIVATE SECTOR BANKS WITH RESPECT TO
RETAIL LOANS
Submitted To
Shayona Institute of Business Management
In partial fulfillment of the requirement of the award for the degree of
MASTER OF BUSINESS ADMINISTRARION
In
Gujarat Technological University
Under the guidance of:
Prof. Dhaval Shanghvi
Submitted By:

Chetan Laxmi Narayan (128200592008)

Hansola Rohit

(128200592018)

Batch: 2012-2014
SHAYONA INSTITUTE OF BUSINESS MANAGEMENT (SIBM-MBA)
MBA Programmed
Affiliated to Gujarat Technology University
Ahmedabad
Jan, 2014

DECLARATION

This Grand Project Titled A Comparative Study of Public and Private Sector bank with
respect to retail loans. has been prepared by us under the guidance of Prof. Dhaval
Shanghvi for partial fulfillment of requirement for Master of Business Administration
(MBA) of Gujarat Technological University. This study has been undertaken by us and
the report has not been submitted in any University/Academic Institute.

Place:

Date:

Name of the Students: Chetan Laxmi Narayan

Hansola Rohit

Signature of the Student:

Chetan Laxmi Narayan

Hansola Rohit

CERTIFICATE

This is to certify that Mr. Chetan Laxmi Narayan, Hansola Rohit student of MBA
(2012-2014 batch) at Post Graduate Centre of Gujarat Technological University-MBA,
SIBM has prepared a Comprehensive Project Report on A Comparative Study Of Public
And Private Sector Banks With Respect To Retail Loans in partial fulfillment of two year
full-time MBA Programme of Gujarat Technological University, Ahmedabad. This project
work has been undertaken under the guidance of Mr. Dhaval Shanghvi, Core Faculty at
MBA, SIBM, and Ahmedabad.

This is also to ascertain that this project has been prepared only for the award of MBA
degree and has not been submitted for any other purpose.

Date: 13th Jan, 2014

Prof. Dhaval Shanghvi

Place: Ahmedabad

Core Faculty- MBA Dept. &

Project Guide

Dr. B.K. Nirmal

Director- MBA Programmed

ACKNOWLEDGEMENT
On the eve of completion and submission of grand we would like to express our
deep sense of gratitude to our Management Institute and Gujarat Technological
University for providing us Platform of management studies.

We are immensely thankful to our guide Prof. Dhaval Shanghvi for providing us
great insight into the project and for sparing his valuable time with us. Without her cooperation it was impossible to reach up to this stage. We also thankful to all Faculty
members for their moral support during the project.

We humbly express our feelings and heartily thank Dr. Nirmal Sir who have
helped us in one or the other way during the completion of this report.

At last, our sincere regards to Prof. Dhaval Shanghvi who have directly or
indirectly helped us in the project. Without their inspiration and support we would not
have been where we are.

Regards,
Chetan Laxmi Narayan
Hansola Rohit

PREFACE
Learning is the best teacher this is a very true statement especially when you are a
management student aspiring to be a manager who can manage a unit under him. The
real test of acquired knowledge comes when it is put into practice, and based on the
same fundamental is the concept of comprehensive research being formulated.
Classroom learning makes you knowledgeable, but it is the practical learning which
makes you smart and lets you know the applicability of various aspects associated with
studies. The practical implementation of various topics helps a student in completing his
formal education.
Research work constitutes the backbone of any management education programs. A
management student has to do research work quite frequently during his entire span.
The research work entitle. A Comparative Study of Public and Private Sector Bank with
respect to Retail loans aims to analyze that which sector bank is more preferable for
retail loans from the consumer view point.

The scope of the project is to put the information derived from the research in use for
academic purposes. There may be some errors and omissions in the report making for
which we may ask an excuse due to the purpose and the level of the researchers.

EXECUTIVE SUMMARY
The project is on A Comparative Study on Public and Private Sector bank with respect
to retail loans.

The main objective of the study is to analyze that which bank is more preferable to the
customers when they opt for the retail loans. However in order to analyze the same
three banks from public sector banks and three banks from private sector banks are
taken into consideration. In the study three retail loans i.e. Home Loan, Car Loan and
Personal Loan are taken into consideration. In order to analyze which bank is more
preferable for this three retail loans, basically two methods are used.

The first one is the Total Cost of the Loan i.e. the total cost of all the three loans for all
the six banks are calculated. Secondly a rating model is created after considering
various parameters and on that basis analysis is done that which bank is best for each
type of the loan. Then this analysis is compared with the preference of customers for
the banks with respect to retail loans on the basis of questionnaire.

After doing the analysis, it has been found that as per total cost of loan, Public sector
bank is more preferable for all this three retail loans. However, as per rating model
public sector bank is more preferable for the Home loan while Private sector bank is
more preferable for the Car as well as for the Personal Loan. However comparing it with
customer preferences, they basically prefer Private bank for the Car loan while they
prefer Public bank for Personal loan and in case of Home loan, they give the equal
preference to both the sector banks.

So it can be concluded that:

People prefer interest rate as one of the important criteria but they also consider
others factors while availing for loan due to which they may prefer other sector bank.

 If people see cost aspect as important factor while availing loan then they should opt
for the public sector bank.

One should opt Public Sector Bank for the Home loan as it is more preferable from
the view point of cost effectiveness as well as from view point of other factors which are
considered in rating model.
One should opt Private Sector Bank for the Car loan as well as for the Personal loan
as it is more preferable from view point of other factors which are considered in rating
model.

INDEX
Sr. No.

Particulars

Page

Semester

no.
Declaration

III

College Certificate

III

Acknowledgement

III

Preface

III

6-7

III

Executive Summary
Chapter 1

Project- An Introduction
1.1 Introduction of topic

10

III

1.2 Scope of the Study

10

III

11-12

III

12

III

1.3 Literature review

1.4 Importance of the topic
Chapter 2

About major banking industry

2.1 History

Chapter 3

III

III
13

III

2.2 Structure of Banking Industry

13-14

III

2.3 Current Scenario of Banking

14-15

III

2.4 Background of the Banks

15-17

III

Retail Banking
3.1Introduction to retail banking

III
18

III

3.2 Retail Loans

18-20

III

3.3Retail Loan Schemes Of Targeted Banks

21-49

III

a) Home Loan
b) Car Loan
c) Personal Loan
Chapter-4

Introduction of the study

4.1 Literature review

50-51

III

4.2 Background of banks

51-54

III

54

III

4.3 Problem statement

III

Chapter 5

4.4 Research objective

54

III

4.5 Hypothesis

54

III

Research Methodology
5.1 Research Design

56

III

5.2 Sampling Design

56

III

56-57

III

5.4 Tools and techniques of analysis

57

III

5.5 Future Scope of the Study

57

III

5.3 Methods of data collection

Chapter 6

III

Data Analysis& Interpretation

IV

6.1 Calculation

IV

6.2 Rating Model

IV

6.3 Questionnaire Analysis

IV

Chapter 7

Result and findings

IV

Chapter 8

Limitation of the study

IV

Chapter 9

Conclusion/Suggestions

IV

Chapter-1 Project Introduction

1.1 Introduction to the Topic
In general, banking may be classified as retail and corporate banking. Retail banking,
which is designed to meet the requirement of individual customers and encourage their
savings, includes payment of utility bills, consumer loans, credit cards, checking
account etc.. Corporate banking, on the other hand, caters to the need of corporate
customers like bills discounting, opening letters of credit, managing cash, etc.

However, now a days the retail banking is on a booming sector. Most of the Indian
banks have been retail banks in their business composition. The term Retail Banking
encompasses various financial products viz., different types of deposit accounts,
housing, consumer, auto and other types of loan accounts, demat facilities, insurance,
mutual funds, Credit and Debit Cards, ATM and other technology-based services, stockbroking, payment of utility bills, reservation of railway tickets, etc., catering to diverse
customer groups, offering a host of financial services, mostly to individuals. It takes care
of the diverse banking needs of an individual.
However, this report basically focuses on the retail loans which are the one of the
products of retail banking. There are various types of retail loans but in report, only
three retail loans are taken into consideration. However in order to compare which loan
is more preferable from which bank from the consumer view point, six bank are taken
into consideration, three from public sector and three from private sector bank.

1.2 Scope of the Study:

The Scope of the study is limited to three retail loans i.e. home loan, car loan, and
personal loan as these are loans which are more preferred by the customers. However
for comparison three banks are taken from public sector i.e. State Bank of India, Bank
of Baroda, Bank of India and three from private sector i.e. ICICI bank , HDFC bank,
AXIS bank. However these banks are taken on the basis of their market share.

10

1.3 Literature Review

Several previous research studies have examined the choice criteria in bank selection,
but

most

have

focused

on

the

choice

of

retail

banking

service

provider(devlin,2002a:devlin and Ennew,2005). A review of relevant literature reveals

that majority of researchers tried to identify the factors influencing the choice of bank.
In as early as 1985, Marten son examined the choice criteria for bank selection in
Sweden and found that bank location, availability of loans are among the most
important factors that formed bank choice. Moreover according to her findings,
customers tend to select the bank where their salary is paid through, while a great
number of customers choose their bank at random. Similarly, Aroraet al (1985) tried to
identify the factors influencing the choice of banks and found that customers choice is
based on reputation of the institutions, convenience of non-person banking, ease o
transaction, variety of services and interest competitiveness. One year later, Larocheet
al (1986) showed that location, convenience, speed of service, competence and
friendliness of bank personnel are critical factors in determining customers choice of
banks.
Following this, McKechnie(1992) refers to the dependability and size of institution,
location, convenience and ease of transaction, professionalism of bank personnel and
availability of loans, as some of the common bank choice criteria.
Khazeh and Decker (1992) investigated the consumers decision making criteria in the
USA, considering also the degree of dissimilarity among banks with respect to this
criteria and found that service charge policy, reputation, competitiveness of interest
rates, time required for approval are the most important factors in explaining how
customers choose banks. On the contrary, availability of financial advice was among the
lowest ranking determinant attributes.
Boyd et al (1994) also studied selection criteria of banks and how this differ according to
customers behavioral and demographic characteristics such as marital status, size and
income of household, occupation of household head. The researchers managed to
identify five most important factors in explaining how customers choose banks :

11

reputation, interest charged on loans, quick service, easy availability of loan and
locations.

1.4 Importance of the topic

Getting a loan is an important financial procedure. People get loans to help them make
big purchases or to consolidate debt or for a variety of reasons. Loans are something
that usually last over the course of a year or more. They can also be costly. When
looking for a loan it is important for borrowers to understand the value of comparing
loans.
There are many lenders out there and the market is huge with possibilities. When a
borrower takes the time to compare loans they win in the end. Plus, as more borrowers
learn about the importance of making sure that they compare loans, more lenders start
realizing they have to be more competitive and offer much better deals on loans. So,
overall comparing the loans, benefits everyone.
The loan market is one of greed. Lenders are not really looking to help out a borrower,
but to make money from them. Loans cost money and many times, lots of money. The
lenders make their money off high interest rates and fees. It is up to the borrower to
search out the lender who is going to give them the best deal.
If one compare loans it allows him to look at different loans and see which is going to
save them the most money and which is going to be best suited for their needs.
Additionally, comparing loans can be a good way to explore different loan options.

12

Chapter-2 About major Banking Industry

2.1 History of Banking
Banking in India originated in the last decades of the 18th century. The first banks were
The General Bank of India, which started in 1786, and Bank of Hindustan, which started
in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of
India, which originated in the Bank of Calcutta in June 1806, which almost immediately
became the Bank of Bengal. This was one of the three presidency banks, the other two
being the Bank of Bombay and the Bank of Madras, all three of which were established
under charters from the British East India Company. For many years the Presidency
banks acted as quasi-central banks, as did their successors. The three banks merged in
1921 to form the Imperial Bank of India, which, upon India's independence, became
the State Bank of India.
The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct
phases. They are as mentioned below:

2.2 Structure of Banking Industry

The Indian banking industry, which is governed by the Banking Regulation Act of India,
1949 can be broadly classified into two major categories, non-scheduled banks and
scheduled banks. Scheduled banks comprise commercial banks and the co-operative
banks. In terms of

ownership, commercial banks can be further grouped into

nationalized banks, the State Bank of India and its group banks, regional rural banks
and private sector banks (the old / new domestic and foreign). These banks have over
67,000 branches spread across the country. The Indian banking industry is a mix of the
public sector, private sector and foreign banks. The private sector banks are again spilt
into old banks and new banks.

13

Banking structure
Reserve bank of India (Controlling Authority)

Development Financial institutions

IFCI IDBI ICICI

NABARD NHB

Commercial

Banks

IRBI

Regional Rural

Banks

EXIM Bank

Land Development

Banks

Banks

Public Sector Banks

SBI Groups

Nationalized Banks

SIDBI

Co operative
Banks

Private Sector Banks

Indian Banks

Foreign Bank

2.3 Current scenario of banking industry

The growth in the Indian Banking Industry has been more qualitative than
quantitative and it is expected to remain the same in the coming years. Based on the
projections made in the "India Vision 2020" prepared by the Planning Commission and
the Draft 10th Plan, the report forecasts that the pace of expansion in the balancesheets of banks is likely to decelerate. The total assets of all scheduled commercial
banks by end-March 2010 are estimated at Rs 40, 90,000 corers. That will comprise
about 65 per cent of GDP at current market prices as compared to 67 per cent in 2009-

14

10. Bank assets are expected to grow at an annual composite rate of 13.4 per cent
during the rest of the decade as against the growth rate of 16.7 per cent that existed
between 1994-95 and 2002-03. It is expected that there will be large additions to the
capital base and reserves on the liability side. The Indian Banking Industry can be
categorized into non-scheduled banks and scheduled banks.

2.4 Background of banks

1. State Bank of India
The State Bank of India the countrys oldest Bank and a premier in terms of balance
sheet size, number of branches, market capitalization and profits is today going through
a momentous phase of Change and Transformation the two hundred year old Public
sector behemoth is today stirring out of its Public Sector legacy and moving with agility to
give the Private and Foreign Banks a run for their money.
The bank is entering into many new businesses with strategic tie ups Pension Funds,
General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale
Merchant Acquisition, Advisory Services, structured products etc each one of these
initiatives having a huge potential for growth.

2. Bank of Baroda

Bank of Baroda, a leading banking institution in India, has a wide range of products for
almost every user segment. The Bank has classified its range of products into six
lines of business (Personal, Business, Corporate, International, Treasury and Rural).

The bank has had a web presence for some time however to tap the potential of the
online medium remained a daunting task. The Bank also faced several issues regarding
management of database that was being generated through use of the website.
Moreover the ability of the online medium to be used as a marketing vehicle was a
territory never visited. The look & feel lacked human touch and the six lines of business

15

were lost between excessive irrelevant information. The website failed to educate the
users about the Banks impressive international presence and new age products such as
credit cards, debit cards, fund transfers, etc.

3. Bank of India

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen
from Mumbai. The Bank was under private ownership and control till July 1969 when it
was nationalized along with 13 other banks.

Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50
employees, the Bank has made a rapid growth over the years and blossomed into a
mighty institution with a strong national presence and sizable international operations. In
business volume, the Bank occupies a premier position among the nationalized banks.

4. ICICI Bank
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition
of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses.

5. HDFC Bank

Housing Development Finance Corporation Limited, more popularly known as HDFC

16

Bank Ltd, was established in the year 1994, as a part of the liberalization of the Indian
Banking Industry by Reserve Bank of India (RBI). It was one of the first banks to receive
an 'in principle' approval from RBI, for setting up a bank in the private sector. The bank
was incorporated with the name 'HDFC Bank Limited', with its registered office in
Mumbai. The following year, it started its operations as a Scheduled Commercial Bank.
Today, the bank boasts of as many as 1412 branches and over 3275 ATMs across
India.

6. AXIS Bank

Axis Bank was the first of the new private banks to have begun operations in 1994, after
the Government of India allowed new private banks to be established. The Bank was
promoted jointly by the Administrator of the specified undertaking of the Unit Trust of
India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC) and other four PSU insurance companies, i.e. National
Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental
Insurance Company Ltd. and United India Insurance Company Ltd.

17

Chapter-3 Retail Banking

3.1 Introduction:
To keep in pace with the ever changing customer needs and preferences, banking
sector is undergoing a rapid revolution in the recent past. New financial products are
being innovated day by day. The bankers being aware of the fact that the plain vanilla
products cannot satisfy the demanding customers Several creamy layers have
developed .One such nourishing layer is the introduction of retail banking services.
Retail banking segment is continuously undergoing innovations, product re-engineering,
adjustments and alignments.
Meaning:
Retail banking is a typical mass-market banking in which individual customers use local
branches of larger commercial banks. Services offered include savings and checking
accounts, mortgages, personal loans, debit/credit cards and certificates of deposit
(CDs).

3.2 Retail Loans

India has emerges as one of the largest and fastest growing economies of the world
during the last decade. The strengthening of the economy in India has been fuelled by
the convergence of several key influences, like growth of the key economy sectors,
liberalization policies of the government, well-educated work force and the emergence
of a middle class population. India, having the second largest population in the world, is
on its way to become the world's fourth largest economy in a span of 2 decades.
Retail exposure of banks includes various types of retail credit, such as residential
mortgages, consumer credit cards, automobile and personal loans, loans against
securities, and small business loans.
Retail Loans Characteristics:

18

These are small size loans

These loans meet the needs of a large number of customers with well diversified

portfolios

The target customers are generally individuals or small organizations

These loans offer standard products to customers. Very rarely a customer's

requirement is customized

The operations of retail credit are centralized in most of the banks

Bankers can make quick credit related decisions because of decentralization

These loans are designed to cover varied segments of risks

High volume business

High number of transactions

Salient features of retail loans:

Types of facilities:

Loans are the finance facility of a fixed amount extended to meet a onetime requirement
of a customer, for a fixed tenure, to be repaid over a period in installments. To enable
customers to meet their emergency requirements, bankers permit them an overdraft
[OD]. This means that bankers allow the customer to withdraw more than the credit
balance in the customer's current account or give a temporary loan in the current
account itself.

Secured/Unsecured facilities:

Secured loans are always secured by an underlying asset against which funding is
extended. This lending is also known as asset based lending. A specific charge is
created against such an asset. This gives the banker/lender the right to take possession
of the asset and sell it to recover the loan in case of default. Unsecured loans do not
have any underlying security and are purely extended based on the creditworthiness of
the borrower. This is also known as non-asset based lending.

19

Interest:

On a loan given at a fixed rate, interest is charged throughout the tenure of the loan at
that rate which is fixed at the time of granting the loan. The customer has to pay interest
at the contracted rate irrespective of whether the interest rate in the market goes up or
down. In case of floating rate of interest, the rate at which the interest is charged on the
loan varies from time to time according to the movement of interest rate in the market.

Tenure:

The tenure for a loan depends upon the amount of the loan and repayment capacity of
the customer. However, the maximum tenure permitted depends upon the period over
which the asset financed could depreciate completely.

Loan to Value ratio:

Loan to Value ration [LVR] refers to the maximum percentage of the value of the asset
that is given as a loan. It varies according to the nature of the asset and also the rate at
which the asset is expected to depreciate or reduce in value.

Types of retail loans

Housing loan

Personal loan

Education loan

Gold loans

Loans to senior citizen

Property and mortgage loans

Vehicle loans

Agriculture loans

20

3.3 Retail Loan Schemes of Targeted Banks

Home loan

A)

Public Sector Bank

State bank of India:

Features:

Eligibility:

Minimum age: 18 years as on the date of sanction.

Maximum age: 70 years. i.e. the age by which the loan should be fully repaid, subject to
availability of sufficient, regular and continuous source of income for servicing the loan
repayment.

Security:

Equitable mortgage of the property

Margin:
Loan Amount

Margin (Min.) Maximum LTV Ratio

(Max.)

Upto Rs. 20 Lacs

10%

90%

Above Rs. 20 Lacs. 20%

80%

*LTV ratio - Loan to value ratio.

Repayment:

Repayment period: Maximum 25 years (or) Up to the age of 70 years (the age by which
the loan should be fully repaid) of the borrower, whichever is early.

21

Products:

a) SBI Easy Home Loan

(Base Rate: 8.25% p.a.)
Name

SBI Easy Home Loan

Loan

Up to (and including) Rs.30 Lacs

amount
Interest Rate Card Rate applicable for the tenor of the loan 1.50% above Base
Rate, Present effective rate being 9.75% p.a.
Ist Year

1% discount over Card Rate, present effective rate being 8.75%

p.a.

2nd and 3rd

0.25% discount over Card Rate, present effective rate being 9.50%

year

p.a.

4th year

Card Rate

onwards
No Fixed Interest Rate option.

b) SBI Advantage Home Loan

Name

SBI Advantage Home Loan

(Above Rs.30 Lacs and upto Rs.75 Lacs)

Loan amount

For Home Loans above Rs 30 lacs and upto Rs. 75.00 Lacs

Interest Rate

Card Rate applicable for the tenor of the loan 1.75% above Base Rate,
Present effective rate being 10.00% p.a.

Ist Year

1.25% discount over Card Rate, present effective rate being 8.75% p.a.

2nd and 3rd

0.50% discount over Card Rate, present effective rate being at 9.50%

year

p.a.

4th year

Card Rate

onwards
No Fixed Interest Rate option.

22

c) SBI Premium Home Loan

Name

SBI Premium Home Loan Above Rs.75 Lacs

Loan

For Home Loans above Rs 75.00 lacs

amount
Interest

Card Rate applicable over the tenor of the loan is 1.75% over the Base

rate

Rate, present effective rate being 10.00% p.a.

Concessions including discretionary concessions will be available over
the tenor of the loan
No Fixed Interest Rate option.

Processing Fee:

Loan Amount

Processing Fee

Upto Rs.5 Lac

Rs.1000/-

Above Rs.5 Lac and upto Rs.10 Lac

Rs.2000/-

Above Rs.10 Lac and upto Rs.20 Lac Rs.5000/Above Rs.20 Lac and upto Rs.50 Lac Rs.7,000/Above Rs.50 Lac and upto Rs.1 Cr

Rs.8,000/-

Above Rs.1 Cr and upto Rs.5 Cr

Rs.10,000/-

Above Rs.5 Cr

Rs.20,000/-

23

Documents:

List of papers/ documents applicable to all applicants:

Completed loan application
3 Passport size photographs
Proof of identify (photo copies of Voters ID card/ Passport/ Driving
license/ IT PAN card)
Proof of residence (photo copies of recent Telephone Bills/ Electricity Bill/
Property tax receipt/ Passport/ Voters ID card)
Proof of business address for non-salaried individuals
Statement of Bank Account/ Pass Book for last six months
Signature identification from present bankers
Personal Assets and Liabilities statement

B)

Bank of Baroda

Purpose:

Purchase of new / old dwelling unit.

Construction of house.

Purchase of plot of land for construction of a house.

Repaying a loan already taken from other Housing Finance Company / Bank.

24

Terms & Conditions

Income Criteria:
Monthly Income

Modified Criteria

Up to Rs. 20,000/-

36 times of monthly income

More than Rs.20,000/- & up to Rs. 1 lac

48 times of monthly income

More than Rs. 1 lac

54 times of monthly income

Margin:
Monthly income

Purpose

Margin

Upto Rs.20000/-

Purchase of plot

20%

House/flat already constructed from own

25%

resources

Above

All other cases

20%

Purchase of plot

20%

House/flat already constructed from own

20%

Rs.20,000/-

resources
All other cases

15%

Security:

Equitable mortgage of the property

Prepayment penalty:

In case of full prepayment or foreclosure (other than from own sources) fees will be
charged at 0.5% for each year of the residual period subject to maximum of 2%.

25

Repayment:

Repayment period: Maximum 25 years (or) Up to the age of 65 years (the age by which
the loan should be fully repaid) of the borrower, whichever is early.

Interest Rates:

Baroda Home Loan to Individuals / NRIs / PIOs (W.E.F 04.02.2011)

Fixed Rate option

Not Available

Floating Rate option

Base Rate (per annum) w.e.f. 04.02.2011
Repayment Period

Up to Rs. 30 Lacs

9.50%

Above Rs. 30 Lacs

75 Lacs and above

and below Rs. 75

Lacs
Upto 5 years

0.50% above Base

1.25% above Base

Base Rate + 1.50%

Rate i.e. 10.00%

Rate i.e. 10.75%

i.e. 11.00%

Over 5 years & up

0.75% above Base

1.50% above Base

Base Rate +1.75%

to 15 years

Rate i.e. 10.25%

Rate i.e. 11.00%

i.e. 11.25%

Over 15 years & up

1.00% above Base

1.75% above Base

Base Rate +2.00%

to 25 yrs

Rate i.e 10.50%

Rate i.e.11.25%

i.e. 11.50%

Processing fees:

Loan upto Rs.30 Lacs : 0.50% (Minimum Rs.5000/-)

Above 30 Lacs
C)

Bank of India
Eligibility:

26

: 0.40% (Min. Rs.15,000/- & Max)

Salaried employees Professionals, Self-employed persons. Requests are also

considered in special cases from Group of individuals, NRIs, PIOs, HUF, Prop. Firm,
Partnership firms and corporate

Purpose:

To renovate/extend/repair existing house/flat.

To purchase a plot of land for construction of house.

To acquire household articles along with the house/flat-for furnishing the

house/flat.
Quantum of Loan:

For construction/purchase of a house/flat-Rs.300lacs

Repairs/renovation/extension/addition to house/flat - Rs.20 lacs.

Purchase of a plot - Rs.30 lacs.

Purchase/acquire household articles for furnishing the house/flat - Rs.1.00 lac.(15%

of

Home Loan amount)

Processing charges:

For loans upto Rs.30 lacs One time @ 0.55% of loan amount min. Rs. 3000/- and

max. Rs.10000.

For Loan over Rs.30 Lacs upto Rs.50 lacs One time flat Rs.15,000/-

For Loan over Rs.50 Lacs upto Rs.1.00 crore One time flat Rs.20,000/-

Loans over Rs.1.00 crore One time flat Rs.25,000/-

Loans over Rs.3.00 crores One time flat Rs.50,000/-

Margin :

For Loan upto Rs.10 Lacs 15%

For Loan over Rs.10 Lacs 20%

27

Prepayment charges :

No charges, if pre-payment is made from own sources of the borrower.

0.65% p.a. on the outstanding loan amount for remaining maturity of the loan,

subject to max.2.25% of outstanding loan amount in case of takeover by other bank/FI.

Repayment :

Maximum 20 yrs.
Rate of Interest: Base rate:8.5%
Upto

>5-

>10-

5 yrs

10

15 yrs

>15-20 yrs

yrs
Upto Rs.30 lacs:

10.25 10.50 10.75

11.25

Between 30 to 50

11.00 11.25 11.50

12.00

11.75 12.00 12.25

12.75

12.50 12.75 13.00

13.50

lacs.
Between 50 to 75
lac
For limits of Rs.75
lacs & above

Security:

Equitable Mortgage (1st charge) on land/flat/house.

Third Party guarantee(if mortgage could not be created at the time of disbursement ).

28


D)

Private Sector Bank

ICICI Bank

Features:

Interest Rates (Floating)

Up to 25 lakhs

: 9.5%

25 to 75 lakhs

: 10%

More than 75 lakhs: 10.25%

Eligibility:

Home Loans can be availed by Resident Indian whether salaried or Self-Employed and
also by Non- Resident Indian who are Salaried.

Loan Amount:

The home loan amount depends on repayment capability and is restricted to a

maximum of 80% of the cost of the property or the cost of construction as applicable. A
number of factors are taken into account when assessing the repayment capacity.

Documents required:

Repayment period:

Maximum 20 years (or) Up to the age of 65 years (the age by which the loan should be
fully repaid) of the borrower, whichever is early..

29

Service Charges & Fees:

Charges

Mortgages Loans
0.50% - 1.00% of the loan amount or Rs. 1500/-

Loan Processing Charges /

(Rs. 2000/- for Mumbai, Delhi & Bangalore),

Renewal Charges

whichever is higher + applicable Service Tax &

Surcharge

Prepayment Charges

E)

2% - 4% + applicable Service Tax & Surcharge

on full prepayment

HDFC Bank

Features:

Eligibility:

Home Loans can be availed by Resident Indian whether salaried or Self-Employed

and also by Non- Resident Indian who are Salaried.

Interest Rates :

Fixed Rate :11.5%

Floating Rate : Up to 30 lakhs
30 to 75 lakhs

: 9.75%
: 10%

More than 75 lakhs : 10.25%

Processing Fees:

0.5% of the loan amount applied plus applicable service taxes.

Security

Security for the loan is a first mortgage of the property to be financed, normally by way
of deposit of title deeds and/or such other collateral security as may be necessary.
Interim security may be required, if the property is under construction.

30

Prepayment Penalty:

No prepayments allowed in first 6 months

6 months - 5 years - 1.5% of original loan amount
5 years -10 years - 0.75% of original loan amount
> 10 years - No closure fee

F) Axis Bank
Features:

Eligibility:

A) Salaried Individuals

Any individual who is in permanent service in Government or reputed

companies.

The applicant should be above 24 years of age at the time of taking loan up to

the
age of 60 Years or superannuation, whichever is earlier at the time of loan
maturity.

B) Professionals

Professionals (i.e., doctors, engineers, dentists, architects, chartered

accountants etc.

The applicant should be above 24 years of age at the time of commencement

and up to 65 years or less at the time of loan maturity.

C) Self Employed Individuals

Any individual filing Income Tax returns can apply

31

The applicant in all the cases should be above 24 years of age at the time of loan
commencement and up to 65 years or less at the time of loan maturity

Loan Amount:

Minimum - Rs 1 lac
Maximum - Rs 50 lac

Margin

20% in case of Home loans

25% in case of improvement or renovation loans.

Repayment:

Repayment period for home loans shall not exceed 25

years.
Interest Rates: Base Rate - 8.75%
Type

Loan amount (Rs.)

Base Rate +

Effective

Mark Up

Rate Of
Interest

Floating Less than Rs. 20 Lac

Base rate + 0.75

Rate

Fixed
Rate

32

9.5% p.a.

Loans greater than Rs.

Base Rate + 1.0

9.75% p.a.

20 lac - Rs. 30 lac

Loans greater than Rs.

Base Rate + 1.25

30 lac - Rs. 75 lac

Loans greater than 75

Base rate + 1.5

lac

Top Up - All loans

Base rate + 3 %

11.75% p.a.

Renovation

Base rate + 3 %

11.75% p.a.

All Loan Category

14% p.a.

10% p.a.

10.25% p.a.

 Other Charges:
Loan

Prepayment Charges for

Charges for

Charges

Processing

Charges

Late

changing

for

Payment of

from fixed to changing

EMI

floating

from

rates of

floating to

interest

fixed rates

Charges

of interest
Power 1% +
Home

Nil

Rs 500 +

Min. Rs.

Min. Rs.

Service tax

taxes per

5000 or 1%

5000 or 1%

as

cheque

of the

of the

applicable

bounce and a

outstanding

outstanding

penal interest

amount

amount

@24% per

whichever is

whichever

annum i.e. @

higher

is higher

2% per month
on the
overdue
installment/s

Car loan

A)

Public Sector Bank

State bank of India:

There are two schemes under the car loan.

1.

SBI Ezee Car Loan

Features:

Eligibility:

33

To avail an SBI Car Loan, a person should be:

Individual between the age of 21-65 years of age.

A Permanent employee of State / Central Government, Public Sector

Undertaking.

A Professionals or self-employed individual who is an income tax assesses or

A Person engaged in agriculture and allied activities.

Net Annual Income Rs. 100,000/- and above.

Loan Amount:

Maximum Loan amount will be 2.5 times of net annual income. Spouses income could
also be considered provided the spouse becomes a co-borrower in the loan.
Loan amount below Rs. 5 lacs will cover under the scheme.

Documents Required:

Repayment:

Max.84 months

Processing Fee:

Only 0.50% of Loan amount to be paid up front as processing fee, with minimum: Rs.
500/- and maximum Rs. 10,000
25% of Processing fee will be retained if application is rejected after pre-sanction
survey.

Security:

As per Bank's extant instructions.

Interest rates: (Base Rate 8.25 % p.a.)

Sr.no.

34

Parameter
scheme

Details

Applicable to

All New Car Loans to Public of loan amount less than 5

lacs
At present the following limited period offer will apply till
31st March 2011:
For Term Loan:
Card Rate: 3.00% above Base Rate i.e. min 11.25%
p.a.

Interest Rate
For 1st year: discount of 2.00% on Card Rate, i.e. 9.25%
p.a.
For 2nd& 3rd year: discount of 1.00% on Card Rate, i.e.
10.25% p.a.
For 4th to 7th year: At Card Rate i.e. 11.25% p.a.

2.

SBI Advantage Car Loan Scheme

Eligibility:

To avail an SBI Car Loan, a person should be:

Individual between the age of 21-65 years of age.

A Permanent employee of State / Central Government, Public Sector

Undertaking.

A Professionals or self-employed individual proprietary/partnership firms .

Net Annual Income Rs. 250000/- and above.

Loan Amount:

There is no upper limit for the amount of a car loan. A maximum loan amount of 4
times the net annual income can be sanctioned. Spouses income could also be
considered provided the spouse becomes a co-borrower in the loan.

35

Documents Required:
Margin:

15% of the on the road price (which includes vehicle registration charges, insurance,
one-time road tax and accessories).

Repayment:

Max.84months

Processing Fee:

Only 0.50% of Loan amount to be paid up front as processing fee, with minimum: Rs.
500/- and maximum Rs. 10,000
25% of Processing fee will be retained if application is rejected after pre-sanction
survey.

Security:

As per Bank's extant instructions.

Interest Rates:
Sr.no.

Parameter
scheme
Applicable to

Details
All New Car Loans to Public of loan amount Rs
5 lacs and above
At present the following limited period offer will
apply till 31st March 2011:
For Term Loan:

Interest Rate
Card Rate: 2.75% above Base Rate i.e. min
11.00% p.a.
For 1st year: discount of 1.75% on Card Rate,

36

i.e. 9.25% p.a.

For 2nd& 3rd year: discount of 0.75% on Card
Rate, i.e. 10.25% p.a.
For 4th to 7th year: At Card Rate i.e. 11.00% p.a.

B) Bank of Baroda:
Features

Eligibility:

To qualify as an applicant for this loan, you need to be an employee or a director of a

public limited company, businessman, professional, proprietor / partner in a firm or a
Govt employee.

Age:

Minimum - 21 years
Maximum present age + repayment period should not exceed retirement age in case
of salaried person and 65 years in case of others.

Loan Amount:

The maximum loan amount is Rs. 15 Lakh, or twice of your gross annual income if you
are salaried, and thrice of it (average of last 2 years gross annual income) if you are a
businessman, whichever is lower.

37

Repayment :

New Vehicles : 84 months

Second hand vehicles : 36 months

Margin:

New Vehicles : 15%

Second hand vehicle : 40%
Gas kit (new / old vehicle) : 15%

Interest Rates:

Loan up to 5 years- 2.50% above Base Rate i.e. 12.00%

Loan over 5 years- 3.00% above Base Rate i.e. 12.50%

Processing fees:

Loan up to Rs.15 lacs - 0.75% (Max. Rs.10, 000/-)

Loan over Rs.15 lacs - 0.50% (Min. Rs.10, 000/-, No maximum limit)
C)

Bank of India

Features

Eligibility:

Salaried employees, Professionals, Self-employed, individuals

with high net worth, People engaged in trade/commerce/
business, Directors of Companies, Senior , Pensioners,
Farmers, Staff Members, Retired employees (other than
dismissed/ compulsorily retired) of our Bank.

Loan amount:

Maximum limits for finance :

1) Individuals (Resident in India) :
For Indian make vehicles Rs.25 lacs
For imported vehicles Rs.75 lacs.

38

Interest rate:

i.

Fully Secured
Loans
For Loans upto
Rs.10 lacs
a. New Vehicles
Repayment upto 3
years

@3.00% over BR
12.50%

b. New Vehicles
Repayment over 3
years

@3.50% over BR
13.00%

c. Second Hand
Vehicles
ii.

@4.00% over BR
13.50%
For loans over
Rs.10 lacs

a. New Vehicles
Repayment upto 3
years

@3.50% over BR
13.00%

b. New Vehicles
Repayment over 3
years

@4.00% over BR
13.50%

c. Second Hand
Vehicles

@4.50% over BR
14.00%

Repayment:
A)For Individuals for new vehicles
4 wheelers imported vehicles-Max. 7 years.
4 wheelers - Indian vehicles 6 years.

Security:

39

i. Hypothecation of vehicle to be purchased out of Bank finance.

ii. Charge to be registered with RTO.

iii. Third party guarantee required in the following cases.

Margin:

Individuals (including NRIs) : (For new vehicles)

Upto Rs.2.00 lacs -

5%

Rs.2.00 lacs to Rs.10.00 lacs - 10%

Above Rs.10 lacs to Rs.25 lacs - 15%
Above Rs.25.00 lacs - Min. 25%
For second hand vehicles Min. 30%

Processing

a)Loans upto Rs.25,000/- - one time Rs.1,000/b)Loans above Rs.25,000/- upto Rs.25 lacs one time 1.10% of

fees:

loan amount Min.Rs.1,500/- & Max. Rs.5,000/c)Loans above Rs.25 lacs one time 0.25% of the loan amount
Max.15,000/Service Tax as applicable.

Private Sector Bank

D)

ICICI Bank

Features:

Eligibility

Particulars Salaried Individual

Self-Employed

Partnership

Private /

Individual

Firm

Public Ltd Co

Age

The applicant

Criteria*

should be above 25 partner,

years old at the

40

Any proprietor,

professional or

Limited
-

companies
should have

time of application,

director above 28

been in

and upto 58 years

years but below 65

existence for

of age at the time of years at the time

at least 3

maturity of the loan. of the loan

years.

maturity.
Income

Gross annual

Gross annual

Firm should

Minimum PAT

Criteria*

income of at least

income of at least

have a

(profit after

Rs. 2.50 lakhs.

Rs. 2.00 lakhs.

minimum PAT

tax) of Rs.

(profit after tax) 2.00 lakhs.

of Rs. 2.00
lakhs.
Stability

The total

Business stability

Business

employment

should be more

stability should stability should

stability should be

than 3 years.

be more than 3 be more than

more than 2 years

years.

Business

3 years.

and current
employment
stability of minimum
1 year.

Processing fees:

Amount less than 250000

Rs.2500

Rs. 250000 to 390000

Rs.3500

Rs.400000 to 490000

Rs.4000

Rs. 500000 to 900000

Rs. 4200

Equal or more than 1000000

Rs. 5000

41

Repayment: Max.5 years.

Interest Rates:

Up to 23 months:15.5%to 16.75%

24 months to 35 months:13.5% to 15.75%

36 months to 60 months:11.25% to 14.5%

Margin:10%

E)

HDFC Bank

Features:

Eligibility:

Salaried Individuals

Eligibility Criteria:

Minimum age of Applicant: 21 years

Maximum age of Applicant at loan maturity: 58 years

Minimum employment: 1 year in current employment .

Minimum Annual Income: Rs 100000 net annual income

Telephone: Must at residence.

Self Employed

Eligibility Criteria:

Minimum age of Applicant: 21 years

Maximum age of Applicant at loan maturity: 65 years

Minimum employment: At least 3 years in business

42

Minimum Annual Income: Net profit Rs. 60000 p.a for standard cars and

Rs.100000 p.a. for mid-sized and premium cars

Telephone: Must at residence

Interest Rates:11.5%

Tenure : Up to 7 years

Margin: 10%

F)

Axis bank

Features:

Eligibility:

Salaried Individuals

Minimum age of applicant: 21 years

Maximum age of applicant at loan maturity: 58 years

Income: Minimum income of Rs. 1 Lac p.a. for selected models and Rs. 2 Lac p.a.
for others Income eligibility: As per latest salary slip or Form 16

Employment: Minimum 2 yrs cumulative experience.

Self-employed Individuals

Minimum age of applicant: 21 years

Maximum age of applicant at loan maturity: 65 years

Income: Minimum income of Rs. 1 Lac p.a. to Rs 2 Lac p.a.

Income eligibility - As per latest ITR and computation of income

Employment: Minimum 3 yrs cumulative experience in business.

43

Interest Rates:11%

Tenure: Up to 7 years

Margin : 15%

Processing Fees : 2%

Personal loan

1.

Public Sector Bank

State bank of India:

FEATURES

Eligibility:

Salaried individual of good quality corporate, self employed engineer, doctor, architect,
chartered accountant, MBA with minimum 2 years standing.

Loan Amount:

The personal loan limit would be determined by persons income and repayment
capacity.

Minimum : Rs.24,000/- in metro and urban centres

Rs.10,000/- in rural/semi-urban centres

Maximum : 12 times Net Monthly Income for salaried individuals and pensioners
subject to a ceiling of Rs.10 lacs in all centres.

Margin:

The bank do not insist on any margin amount.

44

Repayment:

The loan is repayable in 48 EMI.

Security:

NIL

Processing Fee:

Processing charges are 2-3% of the loan amount.

Interest Rates:

Personal Loans Scheme

8. 50% above Base

(SBI Saral)

Rate floating, currently

16.75% p.a.

2.

Bank of Baroda:

Eligibility:

Permanent confirmed employees (minimum 1 year service)

Self Employed Professional.
Insurance agents subject to
a.

The agent is doing insurance business for the last -5- years

b. The agent has regular and stable income and maintaining SB a/c with the bank for
crediting commission cheques received from their principals.

Loan Amount :

Minimum : Rs. 20000 and

Maximum of Rs. 2,00,000 (Subject to condition)

45

Repayment :

Up to 36 months (maximum) in Equated Monthly Installments.

Interest Rate:

6.50% above Base Rate i.e. 16.00%

Processing fee:

2% (Minimum Rs.500/, No Maximum limit)

C) Bank of India

Eligibility:

Salaried employees, Professionals and individuals with high net worth, regular
pensioners etc.

Loan Amount :

Minimum : Rs. 20000 and

Maximum of Rs. 200000 (Subject to condition)

Repayment :

Up to 36 months (maximum) in Equated Monthly Installments.

Interest Rate:

6.50% above Base Rate i.e. 16.00%

Processing fee:

2% (Minimum Rs.500/, No Maximum limit)

Security:

Equitable/Legal Mortgage of commercial/Legal/residential properties

46

 Private Sector Bank

D) ICICI Bank
Features:

Eligibility:

Salaried employees subjected to salary of Rs.8000/- per month & Self Employed
subjected to
salary of Rs.60000/-p.a.

Loan Amount:

Min. - Rs 50000

Min. - Rs 50000

Max. - Rs 1000000

Max. - Rs 1000000

Margin:

The bank do not insist on any margin amount.

Repayment:

48 months.

Security:

NIL

Processing Fees:

Salaried

Self Employed

2.5%

2.5%

Interest Rates:

Salaried

Self Employed

Min. - 14 %

Min. - 14 %

Max. - 17 %

Max. - 17 %

47

E) HDFC Bank
Features

Eligibility:

Salaried individuals include salaried Doctors, CA and Employees of Public/Private Ltd.

Companies and Government Sector Employees.

Loan Amount :

Minimum : Rs. 20000

Maximum of Rs. 200000 (Subject to condition)

Repayment :

60 months

Interest Rate:
Salaried
Self Employed

15% - 22%
17.50% - 22%

Businessmen
Self Employed

14.50% - 15%

Profession
Processing fee:
2.50% of Loan Subject to Rs. 1000/- Minimum

F)

AXIS Bank

Features:

Eligibility:

Salaried individuals include salaried Doctors, CAs, and Employees of Public/Private

Ltd.
Companies and Government Sector Employees

48

Loan Amount :

Up to Rs.2000000/

Repayment :
60 months

Interest Rate:
14 to 21%

Processing fee:

2% + Service tax applicable

49

Chapter-4 Introduction of study

4.1 Literature Review
Several previous research studies have examined the choice criteria in bank selection,
but

most

have

focused

on

the

choice

of

retail

banking

service

provider(devlin,2002a:devlin and Ennew,2005). A review of relevant literature reveals

that majority of researchers tried to identify the factors influencing the choice of bank.
In as early as 1985, Martenson examined the choice criteria for bank selection in
Sweden and found that bank location, availability of loans are among the most
important factors that formed bank choice. Moreover according to her findings,
customers tend to select the bank where their salary is paid through, while a great
number of customers choose their bank at random. Similarly, Aroraet al (1985) tried to
identify the factors influencing the choice of banks and found that customers choice is
based on reputation of the institutions, convenience of non-person banking, ease o
transaction, variety of services and interest competitiveness. One year later, Larocheet
al (1986) showed that location, convenience, speed of service, competence and
friendliness of bank personnel are critical factors in determining customers choice of
banks.
Following this, McKechnie(1992) refers to the dependability and size of institution,
location, convenience and ease of transaction, professionalism of bank personnel and
availability of loans, as some of the common bank choice criteria.
Khazeh and Decker (1992) investigated the consumers decision making criteria in the
USA, considering also the degree of dissimilarity among banks with respect to this
criteria and found that service charge policy, reputation, competitiveness of interest
rates, time required for approval are the most important factors in explaining how
customers choose banks. On the contrary, availability of financial advice was among the
lowest ranking determinant attributes.
Boyd et al (1994) also studied selection criteria of banks and how this differ according to
customers behavioral and demographic characteristics such as marital status, size and

50

income of household, occupation of household head. The researchers managed to

identify five most important factors in explaining how customers choose banks :
reputation, interest charged on loans, quick service, easy availability of loan and
locations.
Kenningtonet al. (1996) examined the variables influencing customer choice of banks in
Poland. According to research findings reputation, price and service were the key
variables that customers look for when evaluating a bank.The researcher showed that
the area of service with respect to time, efficiency and pleasant treatment is critical for
Poles and this is where the banks should be focusing their strategies.

Erol and El Bdour (1989) carried out their research in Jordenand showed that internal
personal contact and individual efforts influences bank customers, while Kaynaket al
(1991) studied bank selection in a Turkish context and found that customers prefer
friendly employees, close branch locations to their homes, fast and efficient services
and financial counseling. Moreover, they showed that choice criteria differs according to
customers age, in that older bank customers preferred bank locations close to their
home, while the younger ones were interested in the variety of loans.
Denton and Chan (1991)and Kaynak and Kucukemiroglu (1992) investigated bank
selection in Hong Kong. Denton and Chan (1991) analyzed the number of banks per
customer, the type of services used at each bank and the factors that influence this type
of customer behavior and they indicated that the selection of bank is influenced by
factors such as risk reduction, convenience in terms of number of branches and
prestige. Kaynak and Kucukemiroglu (1992) found that fast and efficient services and
the friendliness of bank personnel is particularly important criteria.

4.2

Background of banks

State Bank of India

The State Bank of India the countrys oldest Bank and a premier in terms of balance
sheet size, number of branches, market capitalization and profits is today going through

51

a momentous phase of Change and Transformation the two hundred year old Public
sector behemoth is today stirring out of its Public Sector legacy and moving with agility to
give the Private and Foreign Banks a run for their money.
The bank is entering into many new businesses with strategic tie ups Pension Funds,
General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale
Merchant Acquisition, Advisory Services, structured products etc each one of these
initiatives having a huge potential for growth.

Bank of Baroda

Bank of Baroda, a leading banking institution in India, has a wide range of products for
almost every user segment. The Bank has classified its range of products into six
lines of business (Personal, Business, Corporate, International, Treasury and Rural).

The bank has had a web presence for some time however to tap the potential of the
online medium remained a daunting task. The Bank also faced several issues regarding
management of database that was being generated through use of the website.
Moreover the ability of the online medium to be used as a marketing vehicle was a
territory never visited. The look & feel lacked human touch and the six lines of business
were lost between excessive irrelevant information. The website failed to educate the
users about the Banks impressive international presence and new age products such as
credit cards, debit cards, fund transfers, etc.

Bank of India

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen
from Mumbai. The Bank was under private ownership and control till July 1969 when it
was nationalized along with 13 other banks.

Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50

52

employees, the Bank has made a rapid growth over the years and blossomed into a
mighty institution with a strong national presence and sizable international operations. In
business volume, the Bank occupies a premier position among the nationalized banks.

ICICI Bank
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition
of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses.

HDFC Bank

Housing Development Finance Corporation Limited, more popularly known as HDFC

Bank Ltd, was established in the year 1994, as a part of the liberalization of the Indian
Banking Industry by Reserve Bank of India (RBI). It was one of the first banks to receive
an 'in principle' approval from RBI, for setting up a bank in the private sector. The bank
was incorporated with the name 'HDFC Bank Limited', with its registered office in
Mumbai. The following year, it started its operations as a Scheduled Commercial Bank.
Today, the bank boasts of as many as 1412 branches and over 3275 ATMs across
India.

AXIS Bank

Axis Bank was the first of the new private banks to have begun operations in 1994, after
the Government of India allowed new private banks to be established. The Bank was

53

promoted jointly by the Administrator of the specified undertaking of the Unit Trust of
India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC) and other four PSU insurance companies, i.e. National
Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental
Insurance Company Ltd. and United India Insurance Company Ltd.

4.3 Problem Statement: To compare which sector bank is more preferable for the
retail loans.

4.4 Research Objective:

The objective of the study is to find out the most preferable public and private sector
banks, for retail loans, from consumers point of view.
This study has been conducted with a variety of important objectives in mind.
The Chief Objectives of this study are:
1.

To study regarding the loan schemes offered by the bank.

2.

To find that which sector bank that is largely availed by the customer for

the retail loans.

3.

To study the factors influencing the choice of a bank for availing the loans.

4.

To compare the cost effectiveness of the loans of the targeted banks.

4.5 Hypothesis:
A hypothesis is an idea which is suggested as a possible explanation for a particular
situation or condition, but which has not yet been proved to be correct.
Two types of tail: one tail hypothesis
Two tail hypothesis (change, differ, different, difference, same size,
level of significant, some other value)
Ho: Null Hypothesis is accepted or rejected

54

Two types of error:

Because the information provided from a sample is always not sufficient, a decision that
we made may have error such as
Decision

True State of Nature

Ho

H1

Reject Ho

Type-I Error

Correct decision

Accepted H1

Correct decision

Type-II Error

55

Chapter-5 Research Methodology

5.1 Research Design:
The design of the research shall be descriptive in nature. Descriptive research designs
produce accurate description of variables relevant to the decision being faced.
5.2 Sample Design:
In sampling survey-selected sample are determine and surveyed for collection of
relevant data for that it has employed sampling method.

Sampling Unit:

The sampling units were mainly customers who have taken a retail loan and live in
Ahmedabad city.

Sample Size: 400 respondents.

Sampling Procedure:
We have used non probability convenience sampling procedure. We have taken our
respondents as only those people who have taken retail loans.
5.3 Methods of Data Collection:
Generally we have obtained data from two sources:
1.

Secondary Data,

2.

Primary Data

Secondary Data:

Secondary Data are statistic not gather for immediate study but for some other purpose.
We have taken help of various articles, periodic journal and website of banks regarding
retail banking industry.

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Primary Data:

Primary Data may be described as those data that have been observed and recorded
by the researcher for the first time to their knowledge.
We have collected primary data by:
Questionnaires filled by consumers who have taken retail loans.
5.4 Analysis Tool:
We have used Microsoft Excel to analyze and interpret the data collected via the tool for
study.
5.5 Future Scope of the research:
As sample size is very small, future researchers are advised to take large diversify
sample to arrive at generalization. As current study is Ahmedabad focused, future
researchers can take India as base and compare our research as a base.

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Questionnaire
Dear Respondent,
We are the students of Shayona Institute of Business Management (SIBM) Gujarat
Technological University, conducting a market research on A Comparative study of
public and private sector bank with respect to retail loan. The information hereby
provided by you, is strictly confidential and for the academic purpose only.
Personal Details:

Name : - __________________________________________________________

Gender: - Male

Female

Age Group:
< 25

25-44

45-64

Occupation: Student

Businessman

Homemaker

Salary Employed

Professionals

Others

What is your salary/income structure slab (Per year)?

<1,60,000

1,60,000-3,00,000

3,00,000-8,00,000

>8,00,000

1. Have you ever taken any loan?

Yes

58

No

65 and above

2. Which recent loan have you taken? (Tick any one.)

Home Loan

Car Loan

Personal Loan

Others

3. From which bank have you taken loan?

Public Sector Bank (Name it)

Private Sector Bank (Name it)

4. How did you come to know about the financial institution offering the loan?
Phone

Friends / Relative

Internet

Brochures

Television

Press

5. What is your opinion regarding the loan procedure?

Opinion

Complex

Difficult(own safety)

Simple

Cant Say

6. What is your criteria for selecting loans? (rank the following)

Criteria

Rank Them

59

Lower Rate
Of Interest

Easy
Availability

Flexible
Repayment
Period

Quality Of
Service

Lower
Processing
Fees

7. Which type of interest rate have you preferred?

Fixed
Floating
Adjustable
8. Mark your Agreement/ Dis-agreement on the following statements.
Totally

Opinion

Disagree

Disagree

Neutral

Agree

Totally
Agree

Easy availability is an important

factor for the loans
Reputation of banking institution is
to be taken into consideration while
selecting loan.
Prepayment penalty is to be
considered while analyzing a loan
scheme.
Processing fee is to be considered
while analyzing a loan scheme.

9. Which tenure is preferred by you?

1-5 years

5-10 years

10-15 years

Above20
10. What margin is preferable to you, charged by the bank?

60

Below 15 %

15 to 20%

Above 20

15-20 years