“ANALYTICAL AND COMPARATIVE STUDY ON CONSUMER

SATISFACTION IN PUBLIC AND PRIVATE SECTOR BANKS”

DONE AT

SOLAN
PROJECT REPORT
SUBMITTED TO BBA DEPARTMENT IN THE PARTIAL FULFILLMENT OF
THE REQUIREMENTS FOR THE DEGREE OF
BACHELORS OF “BUSINESS ADMINISTRATION”
(2016-2019)

VENKATESHWAR VIDYAPEETH
Supervised by: Submitted by:
Mr. Hemant negi Kushal verma

Himachal Pradesh University, Shimla-5

VENKATESHWAR VIDYAPEETH
Vill: Dillon, Sultanpur Road, P.O. Kumarhatti, Distt: Solan (H.P.) 173229

CERTIFICATE

This is to certify that this on the job training report Titled Analytical and comparative study on
customer satisfaction in public and private sector banks in solan town” is submitted in partial
fulfillment of the requirement for the degree of Bachelors of Business Administration of Himachal
Pradesh University, Shimla-5, by Kushal Verma, Roll No. 5161780006 has been executed under
my supervision and guidance.

To the best of my knowledge data reported is original. The assistance and help received during the
course of this project has been duly acknowledged.

Date – Guide
Place -
 AKNOWLEDGEMENT

This project is a golden opportunity for learning and self-development . I consider myself very
lucky and honoured to have so many wonderful people lead me through in completion of this
project.
This project has been made possible through direction and co-operation of various persons for
whom I wish to express my sincere appreciation and gratitude.
First, I would like to thank my parents as their blessing gave me strength to complete my task.
My grateful thanks to Mr. Hemant negi who inspire of being extraordinarily busy with his
duties, took time out to hear, Guide and keep me on the correct path. I do not know where I
would have been without him. A humble “Thank You” “ Sir”.

Last but not the least I thank my parents for their invaluable co-operation and blessings.

Kushal Verma
 CHAPTER-1
INTRODUCTION
 CHAPTER-1
Introduction
Banks play a very important role in the economic development of every modern state. Banks
operate at the heart of the modern economy. Traditionally, banking had been restricted from
private participation in India and public sector banks had been enjoying complete protection.
This scenario has changed since 1990. The decade of 90s witnessed a sea change in the working
of banking in India. Technology made tremendous impact by introducing „anywhere banking‟
and „anytime banking‟. The financial sector now operates in a more competitive environment
than before and involves relatively large volume of international financial flows. In the wake of
greater financial deregulation and global financial integration, the biggest challenge before the
public sector banks is to match the market requirement rather than being promoted by
Government or regulator. Foreign banks and the new private banks have embraced technology
right from the inception of their operations and therefore, they have adapted themselves to the
changes in the technology easily. Deregulation, liberalization and globalization have produced
intense competition in banking industry resulting into declining margins in traditional businesses,
increased cost pressures and greater risks. Market positioning, cost of intermediation and service
delivery are likely to be determinants of the efficiency of banks with respect to their
competitiveness. In the changed environment creating new customers and retaining the existing
ones have become difficult tasks for banks. To meet the competition, creating satisfaction of
customers has become primary objective of each bank.
The satisfaction of the customers is very important factor in all service industries to enhance and
improve the profitability and financial performance of the concern. Banking sector is purely
financial service industry and the customer’s satisfaction is much more important to run banking
business successfully. The satisfaction level of the customers is varying due to different kinds of
banking services and their benefit to the customers. There are so many factors that are
responsible in the discrimination of the services for different types of banking customers and
lead to uneven satisfaction level. In India, Private and Public sector banks are providing the
financial services to the different types of customers in rural and urban areas. The offices of the
Private and Public sector banks are increasing rapidly.
Businesses need to attract and establish a customer market and would need to retain it through
satisfaction. That is the key to its business performance. In order to attain this goal, a company
should have a high satisfaction rate from its clients. The increasing competition, whether for
profit and non-profit purposes, is forcing the business sectors to pay much and more attention to
satisfying customers. Measurement of the rate of customer satisfaction is also a measurement of
how products and services supplied by a company meet or surpass customer expectation. It is
seen as a key performance indicator. This is due to the fact that one of the factors needed in order
to attain high competency and also high competitiveness is a high market share through an
increased, established and well-sustained customer or client population. Industries are beginning
to understand the concept that their customers, the ones who purchase their products and use
their services, are the primary drivers of their position on the profitability ladder. Satisfaction is a
multidimensional construct which has been conceptualized as a prerequisite for building
relationships and is generally described as the full meeting of one's expectations , and is a feeling
or attitude of a customer towards a product or service after it has been used . Customers are the
backbone of the society. As it is said that customer is the king so it's the prime duty of the banks
to satisfy and retain its customers by providing them with best of its services and products.
Companies then need to align their activities and efforts to satisfy and retain customers, agreeing
on the importance of customers in driving performance .
As markets shrink, companies are scrambling to boost customer satisfaction and keep their
current customers rather than devoting additional resources to ., chase potential new customers.
This is because it costs five to eight times as much to get new customers than to hold on to old
ones is key to understanding the drive toward benchmarking and tracking customer satisfaction.
Many experts have began to focus more directly on increasing customer satisfaction as an
explicit goal. Satisfying · and keeping customers is simply less expensive than constantly
replacing them. Researchers have also argued that increasing customer loyalty helps to create
future revenues, decrease price elasticity and reduce cost of future interactions . Because of this,
organizations are increasingly interested in retaining existing customers instead of targeting non-
customers. measuring customer satisfaction provides an indication of how successful the
organization is at providing products and/or services to the marketplace. The tireless pursuit of
improvement would not only increase efficiency but also increase customer satisfaction in the
process, saving enough on costs and bringing in enough new and repeat business to more than
cover any expenditures quality Banking is a key industry in the service sector and it will not be
an exaggeration to call it the financial nerve centre of the economy.
The Indian banking system has the largest branch network spread over a vast area. In the era of
cut throat competition, the survival of any bank depends upon the satisfied customers. Customer
satisfaction is the state of mind that customers have about a bank when their expectations have
been met or exceeded over lifetime of the service. Clearly defining and understanding, customer
satisfaction can help any bank to identify opportunities for services innovation and serve as the
basis for performance appraisal and reward system. In order to retain customers banks have to
provide better quality services. The banking sector is facing enormous challenges of attracting
the new customers and retaining the existing ones. The problems commonly encountered by the
bankers are shifting of customer loyalty, difficulty in synchronizing demand and supply,
controlling the performance quality of human interaction, etc. - need to be articulated and tackled
by managers. The attraction, retention, and building strong customer relationships through
quality services are at the heart of the modem marketing. A sound marketing strategy is required
to be adopted by the banker to build customer trust and retain them in the business and for
competitive advantage across the industry. The strategy should focus on service quality rather
than existing marketing mix, understanding of the customer expectations and perceptions and
what they imply for the marketer, use of technology, planning for service recovery, customer-
defined service standards, value pricing, etc. The commercial Banks in India comprise both
public sector as well as private sector banks. In an initiative towards bringing about reforms in
the financial sector, overall development in the economy along with reforms in industry, trade,
taxation, external sector, banking and financial markets have been carried out since mid 1991. It
took almost 10 years for the Indian economy to strengthen its footing and bring about a sea
change in the way financial institutions in the country work today. It is because of the sustained
and gradual pace of reforms that has helped us in avoiding any crisis and has actually fuelled
growth.

1.1 What Satisfies a Customer?

According to Juran, Deming and Crosby it‟s the quality of the product or service, that satisfies a
customer. Quality is especially important in the banking sector because duplication of products
and services is relatively easy. Further, differentiation of products is difficult in case of the
banking sector. Thus, quality becomes the only differentiator and the key to continuing success.
With increasing competition, banks that survive and succeed will be the one that provide quality
service. Research studies have repeatedly proved that customers are willing to pay for quality
service. Banks that wish to succeed and stay ahead must, therefore, systematically build a
structure that aims at providing Total Quality Service. As with the bank's financial goals, success
can be achieved only with proper analysis and suitable goals.

1.2 Service Quality and Customer Satisfaction:

There is a great deal of discussion and disagreement in the literature about the distinction
between service quality and satisfaction. The service quality school view satisfaction as an
antecedent of service quality - satisfaction with a number of individual transactions "decay" into
an overall attitude towards service quality. The satisfaction school holds the opposite view that
assessments of service quality lead to an overall attitude towards the service that they call
satisfaction. There is obviously a strong link between customer satisfaction and customer
retention. Customer's perception of Service and Quality of product will determine the success of
the product or service in the market. If experience of the service greatly exceeds the expectations
clients had of the service then satisfaction will be high, and vice versa. In the service quality
literature, perceptions of service delivery are measured separately from customer expectations,
and the gap between the two provides a measure of service quality.

1.3 Factors affecting customer satisfaction are:

 1.A friendly and comforting atmosphere is a must so that customer can easily put his point
and can get solution of any query, or problem related to the bank.
2. Polite and humble behaviour of employees, towards the complaints and queries of
customers will build up trust and satisfaction of customers for the bank.
3. An employee must have in depth knowledge of all the products and services provided by
the bank and should be well trained through HRD programs so that they can resolve the quires
of the customers satisfactorily and can present themselves effectively through their working
and communication skills to impress the customers.
4. As it is said, time is money so it is necessary that customers are served timely.
5.If the bank gives good returns on funds and better interest on deposits to its customers in
comparison to other banks
6. Implementation of HRM and HRD practices tries to satisfy the employees regarding all
the aspect of their job.
7. If bank employees will be helpful and they will help the customers whenever they need,
then the customers will feel satisfied on getting associated with the bank
8. Bank keeps complete safety of funds of their customers which enhances the goodwill of
the bank by which more and more of person become account holders in the bank. This
increases the business, deposits, profits, advances etc. of the bank.

9. Good infrastructure facility facilitates customer satisfaction.

1.4 Banking in India

In the modern sense, originated in the last decade of the 18th century. Among the first banks
were the Bank of Hindustan, which was established in 1770 and liquidated in 1829–32; and the
General Bank of India, established in 1786 but failed in 1791.
The largest bank, and the oldest still in existence, is the State Bank of India (S.B.I). It originated
and started working as the Bank of Calcutta in mid-June 1806. In 1809, it was renamed as the
Bank of Bengal. This was one of the three banks founded by a presidency government, the other
two were the Bank of Bombay in 1840 and the Bank of Madras in 1843. The three banks were
merged in 1921 to form the Imperial Bank of India, which upon India's independence, became
the State Bank of India in 1955. For many years the presidency banks had acted as quasi-central
banks, as did their successors, until the Reserve Bank of India was established in 1935, under the
Reserve Bank of India Act, 1934.
In 1960, the State Banks of India was given control of eight state-associated banks under the
State Bank of India (Subsidiary Banks) Act, 1959. These are now called its associate banks. In
1969 the Indian government nationalised 14 major private banks, one of the big bank was Bank
of India. In 1980, 6 more private banks were nationalised. These nationalised banks are the
majority of lenders in the Indian economy. They dominate the banking sector because of their
large size and widespread networks.
The Indian banking sector is broadly classified into scheduled and non-scheduled banks. The
scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India Act,
1934. The scheduled banks are further classified into: nationalised banks; State Bank of India
and its associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector
banks. The term commercial banks refers to both scheduled and non-scheduled commercial
banks regulated under the Banking Regulation Act, 1949.

1.5 RBI – Reserve Bank of India

The reserve bank of India is a central bank and was established in April 1, 1935 in accordance
with the provisions of reserve bank of India act 1934. The central office of RBI is located at
Mumbai since inception. Though originally the reserve bank of India was privately owned, since
nationalization in 1949, RBI is fully owned by the Government of India. It was inaugurated with
share capital of Rs. 5 Crores divided into shares of Rs. 100 each fully paid up.
RBI is governed by a central board (headed by a governor) appointed by the central government
of India. RBI has 22 regional offices across India. The reserve bank of India was nationalized in
the year 1949. The general superintendence and direction of the bank is entrusted to central
board of directors of 20 members, the Governor and four deputy Governors, one Governmental
official from the ministry of Finance, ten nominated directors by the government to give
representation to important elements in the economic life of the country, and the four nominated
director by the Central Government to represent the four local boards with the headquarters at
Mumbai, Kolkata, Chennai and New Delhi. Local Board consists of five members each central
government appointed for a term of four years to represent territorial and economic interests and
the interests of cooperative and indigenous banks.

The RBI Act 1934 was commenced on April 1, 1935. The Act, 1934 provides the statutory basis
of the functioning of the bank. The bank was constituted for the need of following:
- To regulate the issues of banknotes.
- To maintain reserves with a view to securing monetary stability
- To operate the credit and currency system of the country to its advantage.
1.6 Public sector banks:
Public Sector Banks are the banks whose more than 50% shareholding lies with the central or
state government. These banks are listed on stock exchange. In the Indian Banking System,
PSB’s are the largest category of banks and emanated before independence. Over 70% of the
market share in the Indian Banking sector is dominated by the public sector banks. These are the
nationalised banks and account for more than 75 per cent of the total banking business in the
country. Majority of stakes in these banks are held by the government. In terms of volume, SBI
is the largest public sector bank in India and after its merger with its 5 associate banks (as on 1st
April 2017) it has got a position among the top 50 banks of the world.
The banking sector in India is probably the most prosperous sector. It is also referred to as the
leading and most powerful industry of the Indian economic system. In this system, more than
75% of market share is enjoyed by the public sector banks. There are 22 public sector banks in
India, as of 2019.

Public Sector Banks in India –

1) Andhra Bank – Andhra Bank was established on 20 November 1923 in Hyderabad,
Telangana. Genius and freedom fighter, Pattabhi Sitaramayya, founded this bank.
2) Allahabad Bank– Allahabad Bank was established on 24 April 1865 in Kolkata, West
Bengal.
3) Bank of India– Established on 7 September 1906 in Mumbai, Maharashtra. The
government has a stake of 64.4% in this bank.
4) Bank of Baroda– This bank was established on 20 July 1908 in Vadodara Gujarat. The
Maharaja of Baroda, Maharaja H.H. Sir Sayajirao Gaekwad III, founded this bank.
5) Bank of Maharashtra– The Bank of Maharashtra was started on 16 September 1935 in
Pune, Maharashtra.
6) Corporation Bank– Corporation Bank was set up on 12 March 1906, in Mangalore,
Karnataka. The government of India has a 100% stake in this bank.
7) Central Bank of India– Established on 21 December 1911 in Mumbai, Maharashtra.
8) Canara Bank– Canara Bank was set up on 1 July 1906 in Mangalore, Karnataka.
9) Dena Bank– This bank was established on 26 May 1938 in Mumbai, Maharashtra.
10) Indian Overseas Bank– Indian Overseas Bank was set up on 10 February 1937 in
Chennai, Tamil Nadu.
11) Indian Bank– Established on 15 August 1907 in Chennai Tamil Nadu, the government
has a share of 81.51% in this bank.
 12) IDBI Bank– Set up on 1 July 1964 in Mumbai, Maharashtra, IDBI Bank is one of the
most popular banks out there currently.
13) Oriental Bank of Commerce– Oriental Bank of Commerce was established on 19
February 1943 in Gurgaon, Haryana.
14) Punjab National Bank– Punjab National Bank or PNB as popularly known amongst
people was set up on 19 May 1894 in New Delhi. Lala Lajpat Rai and Dyal Singh
Majhithia founded Punjab National Bank.
15) Punjab & Sind Bank- This respective bank was established on 24 June 1908 in New
Delhi.
16) Syndicate Bank- Established in 1925 in Bengaluru, Karnataka, the Syndicate Bank is
considered as one of the most trustworthy banks in this country.
17) State Bank of India- State Bank of India is the oldest bank in this country and the name
says it all. Almost every Indian citizen has an account is this bank which was established
on 2 June 1806 in Mumbai, Maharashtra. Rajnish Kumar is currently serving as the
chairperson.
18) United Bank of India- Set up on 1950 in Kolkata, West Bengal.
19) Union Bank of India– Union Bank of India was set up on 11 November 1919 in
Mumbai, Maharashtra.
20) UCO Bank– This bank was established on 6 January 1943 in Kolkata, West Bengal. It
was founded by Ghanshyam Das Birla.
21) Vijaya Bank– Established on 23 October 1931 in Bengaluru, Karnataka.
22) India Post Payments Bank– This bank was set up on 1 September 2018 in New Delhi,
and the government has a 100% stake in it.

1.7 Private Sector Banks:

The "private-sector banks" are banks where greater parts of stake or equity are held by the
private shareholders and not by government. Banking in India has been dominated by public
sector banks since the 1969 when all major banks were nationalised by the Indian government.
However since liberalisation in government banking policy in 1990s, old and new private sector
banks have re-emerged. They have grown faster and bigger over the two decades since
liberalisation using the latest technology, providing contemporary innovations and monetary
tools and techniques. The private sector banks are split into two groups by financial regulators in
India, old and new. The old private sector banks existed prior to the nationalisation in 1969 and
kept their independence because they were either too small or specialist to be included in
nationalisation. The new private sector banks are those that have gained their banking license
since the liberalisation in the 1990s.
Old Private Banks -
At present, there are 12 old private sector banks in India as follows:
1) Catholic Syrian Bank
 2) City Union Bank
3) Dhanlaxmi Bank
4) Federal Bank
5) Jammu and Kashmir Bank
6) Karnataka Bank
7) Karur Vysya Bank
8) Lakshmi Vilas Bank
9) Nainital Bank
10) Ratnakar Bank
11) South Indian Bank
12) Tamilnad Mercantile Bank
Among the above, Nainital Bank is a subsidiary of the Bank of Baroda, which has 98.57% stake
in it.

Defunct Private Banks

Some other old generation private sector banks in India have merged with other banks. For
example, Lord Krishna Bank merged with Centurion Bank of Punjab in 2007; Sangli Bank
merged with ICICI Bank in 2006; Centurion Bank of Punjab merged with HDFC in 2008.More
recently, in 2016, the ING Vysya Bank merged with Kotak Mahindra Bank, creating the fourth
largest private sector bank in India.

New Private Sector Banks in India -

The new private sector banks were incorporated as per the revised guidelines issued by the RBI
regarding the entry of private sector banks in 1993. At present, there are nine new private sector
banks as follows:
1) Axis Bank
2) Development Credit Bank (DCB Bank Ltd)
3) HDFC Bank
4) ICICI Bank
5) IndusInd Bank
6) Kotak Mahindra Bank
7) Yes Bank
8) IDFC
9) Bandhan Bank of Bandhan Financial Services.
1.8 Differences Between Public Sector and Private Sector Bank:

The points given below explain the differences between public sector and private sector banks:

1) Public Sector Banks are the banks, whose maximum shareholding is with the
government. On the other hand, Private Sector Banks are the one whose maximum
shareholding is with individuals and institutions.
2) At present, there are 27 public sector banks in India, whereas there are 22 private
sector banks and four local area private banks.
3) Public Sector banks dominate the Indian banking system, by the total market share of
72.9%, which is followed by Private sector banks, by 19.7%.
4) Public sector banks are established since long, while private sector banks emerged a
few decades ago, and so the customer base of public sector banks is greater than the
private ones.
5) Transparency in terms of interest rate policies can be seen in the public sector. The
interest rate on deposits offered by the public sector banks to its customers is slightly
higher than the private sector banks.
6) When it comes to promotion of employees, public sector banks consider seniority as a
base. Conversely, merit is the basis of private sector banks, to promote employees.
7) If we talk about growth opportunities in a public sector banks is quite slow in
comparison to a private sector bank.
8) Job security is always present in a public sector bank, but private sector bank job is
secure only when the performance is good because performance is everything in a
private sector.
9) Along with job security, one more pro, of a public sector bank is the after retirement
benefit, i.e. pension. On the contrary, pension scheme is not provided by private
sector banks to its employees. However, other retirement benefits like gratuity, etc.
are offered by the bank.

CHAPTER-2
RESEARCH METHODOLOGY
 CHAPTER-2
RESEARCH DESIGN
Research design deal with how the work is done to fulfill the desired objectives, present chapter
has been divided into four part; first part includes review of literature, second part deal with
objective of the study, third part deal with scope of the study and fourth part deal with research
methodology.

2.1 Review Of Literature:

Customer satisfaction is a marketing term that measures how products or services supplied by a
company meet a customer’s expectation. It is the best indicator of how likely a customer will make a
relation with a company. A customer can be defined as an individual or business that purchases the
services produced by the business organizations. The efficiency of a banking sector depends upon how
best it can deliver services to its target customers. Customer satisfaction of a bank is a measure how
services supplied by a bank meet a customer’s expectation. Every rationale customer compares the
cost and benefit of any product or service. Customer satisfaction is a relative term and therefore it is
difficult to determine. The level of satisfaction varies from person to person, product to product and
service to service. Customer satisfaction aids to repurchase product that ultimately leads to increase
the brand loyalty of business organization. Kotler and Armstrong (2012) stated that customer
satisfaction is the degree to which a product’s perceived performance matches a buyer’s expectations.
Kumar (2006) he studied the bank nationalization in India marked a paradigm shift in the focus of
banking as it was deliberated to shift the focus from class banking to mass banking. Internationally also
efforts are being to study causes of financial inclusion of low-income group treating it both a business
opportunity as well as a corporate social responsibility.
Singla(2008) examines that how financial management plays an important role industrialist growth of
public and private banking. It is concerning and examined the profitability position of selected sixteen
banks of banker index for a period of six years (2001-2006) the study reveals that the profitability
situation was reasonable during the period of study when compared and the previous year. Banks in a
better position to deal and absorb the economic constant over a period of time.

Prashanta Athma (2000), in his Ph.D. research submitted at Osmania University Hyderabad,
“Performance of Public Sector Banks – A Case Study of State Bank of Hyderabad, made an attempt to
evaluate the performance Finance and of Public Sector Commercial Banks with special emphasis on
State Bank of Hyderabad. The period of the study for assessment of performance is from 1980 to 1993-
94, a little more than a decade.

Gupta and Verma (2008), have Studied the improve paradigm in Indian banking and revealed that
banking sector has been serving the crucial needs of the society even after undergoing various changes.
With the passage of time, the wonderful resilience and adaptability of the banking sector to the changing
needs of the society seem to have reached the threshold of the revolutionary era. „Anywhere and anytime
banking”, “Telebanking‟, „Internet Banking‟, „Web Banking,‟ E-Banking‟, ‟E-Commerce‟, „E-
business‟ are all innovative offerings to their customers.

Nirmaljeet Virk and Prabhjot Kaur Mahal (2012) carried out a study on customer satisfaction in public
and private banks of India. Private Bank managers maintain better personal relationship with customers
than the public bank managers and this factor determines the customers’ satisfaction to a large extent.

2.2 Objective of the study

1) To compare the performance of public sector banks and private sector banks.
2) To know the satisfaction level of customers from Private and Public sector
banks.
3) To know the factors responsible for the low satisfaction level among the
banking customers.
4) To provide suggestions to improve satisfaction level of the customers.

2.3 Scope of the study

The scope of the study is confined in comparing the Public sector and private sector
banks in terms of customer satisfaction. The study will be undertaken on the basis
of sample survey.
2.4 Research Methodology
Every project work is based on certain methodology, which is a way to systematically solve the
problem or attain objectives. It is a very important guideline and lead to completion of any project
work through observation, data collection and data analysis.
According to Clifford Woody, “Research Methodology comprises of defining & redefining
problems, collecting, organising and evaluating data, making deductions & researching to
conclusions.”

2.4.1 Selection of the study area

The stuttering was conducted in solan town of Himachal Pradesh.

2.4.2 Data collection

To determine the appropriate data for research mainly two kinds of data was used
namely primary and secondary data.

Primary Data
Primary data are those which are collected a fresh and for the first time and thus
happen to be original in character. However, there are many methods of collecting
the primary data, all have not been used for this project. The one that will be used
is:
 Survey tool- questionnaire

Secondary data
Secondary data is research data that has previously been gathered and can be
accessed researchers.
Secondary data is used to increase the sampling size of research studies and is also
chosen for the efficiency and speed that comes with using an already existing
resource. The secondary data was collected through:
 Textbooks
 Internet sources