A project study report

Importance of Banking Industry In the analytical and empirical literature on the subject of finance and growth, there is a consensus among economists that development of the financial system contributes to economic growth .Financial development creates enabling conditions for growth through either a supply-leading (financial development spurs growth) or a demand-following (growth generates demand for financial products) channel.

Banking industry depends on the overall growth of economy. Other sectors like cement, steel and consumer durables are dependent on banking sector and move in tandem. Although the Indian economy has done relatively better in 2010-11compared to other countries in the emerging markets peer group, the slowdown in fiscal 2010 was deeper than anticipated. Accordingly, the estimates of GDP growth have been lowered to between 6.50% and 7.00% in fiscal 2011, lower than the average growth rate of 8.50% of the previous four years. Over the last few years, India has become increasingly integrated with the global economy, both through trade and through exposure to financial markets. The loss of export markets has consequently hit domestic demand quite hard, particularly as many export segments are also employment intensive. The performance of the Banks in 2010-11 should be viewed in the backdrop of the global financial crisis that had its beginnings in the US subprime sector and broader financial markets but spread throughout the world, turning into a full-blown global economic crisis. Unlike developed economies, the slowdown in India has not been led by the financial sector but affected by mainly the following:

(a) The sharp slowdown in global import demand resulted in an export slowdown,

(b) A contraction in the availability of global finance, particularly export finance, and an increase in the costs of foreign currency funds

(c) Slowdown in investment plans of many corporate in anticipation of a demand slowdown. YogendraSisodia (SMP 1033)

Some Major areas of Banking are:

 RETAIL BANKING

 CORPORATE BANKING

 CORPORATE CREDIT

 TREASURY

 CAPITAL MARKETS

 LENDING TO MICRO, SMALL AND MEDIUM ENTERPRISES, AGRICULTURE AND

MICRO FINANCE

 INTERNATIONAL BANKING

STRENGTH

 Indian banks have compared favourably on growth, asset quality and profitability with other emerging economies banks over the last few years.

 Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks.

 Bank lending has been a significant driver of GDP growth and employment.

 Extensive reach: the vast networking & growing number of branches & ATMs. Indian banking system has reached even to the remote corners of the country.

 In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region.

 Foreign banks will have the opportunity to own up to 74 per cent of Indian private sector banks and 20 per cent of government owned banks.

WEAKNESS
 PSUs need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall

Organisational performance ethic & strengthen human capital.

 Old private sector banks also have the need to fundamentally strengthen skill levels.

 The cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies.

 Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations YogendraSisodia (SMP 1033) beyond Scheduled Commercial Banks (SCBs), unless industry utilities and service bureaus.

OPPORTUNITY

 The market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations.

 With increased interest in India, competition from foreign banks will only

intensify.

 Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks.

 New private banks could reach the next level of their growth in the Indian

banking sector by continuing to innovate and develop differentiated business

models to profitably serve segments like the rural/low income and affluent/HNI

segments; actively adopting acquisitions as a means to grow and reaching the

next level of performance in their service platforms. Attracting, developing and

 Foreign banks committed to making a play in India will need to adopt alternative approaches to win the “race for the customer” and build a value-creating customer franchise in advance of regulations potentially opening up post 2009. At the same time, they should stay in the game for potential acquisition opportunities as and when they appear in the near term. Maintaining a fundamentally long-term value-creation mind-set.

 Reach in rural India for the private sector and foreign banks.

 With the growth in the Indian economy expected to be strong for quite some

time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong.

 Reserve Bank of India (RBI) has approved a proposal from the government to amend the Banking Regulation Act to permit banks to trade in commodities and commodity derivatives.

 Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has allowed them to raise perpetual bonds and other hybrid capital securities to shore YogendraSisodia (SMP 1033) up their capital. If the new instruments find takers, it would help PSU banks, left with little headroom for raising equity.


THREATS

 Threat of stability of the system: failure of some weak banks has often

Threatened the stability of the system.

 Rise in inflation figures which would lead to increase in interest rates.

 Increase in the number of foreign players would pose a threat to the PSB as well as the private players. BUDGET 2010 2011PROPOSAL

 IIFCL (Indian Infrastructure Financial Corporation Limited) to refinance 60% of bank loans to critical sectors.

 Debt Waiver and Debt Relief scheme to allow farmers to repay 75% of their loans extended by six months thus higher NPA.

 Banks and Insurance companies to remain under government ownership.

IMMEDIATE IMPACT AFTER BUDGET The UPA was likely to announce disinvestment plans for sick public sector companies but nothing was said about it other than the dampener, that Banks and Insurance sector will

be left out of disinvestment. The banking stocks, especially the public sector banking stocks are expected to be negatively impacted by this but hopefully, the infrastructure companies will gain following key infrastructural announcements like, the 31% increase in allocation for National Highway, evolving financing mechanism through Indian Infrastructure Financial Corporation Limited (IIFCL), for giving increased support to infrastructure projects or the Gram SadakYojana whose allocation has been hiked up 59% to Rs 12000 crore.

 ICICI Bank

 HDFC Bank

 Kotak Mahindra

 Yes Bank

 Federal Bank

 IndusInd Bank

 JK Bank

 ING Vysya Bank

 KarurVysya

OUTLOOK FOR 2010-11

While the economic condition of major developed economies is unlikely to improve in 2010, further deterioration is not expected and the general view is that the worst is over. The residual effects on job losses and credit delinquencies, however, will keep YogendraSisodia (SMP 1033) demand conditions weak, despite the significant stimulus packages offered by both

governments and central banks. In the short term, export-driven activity is

likely to remain depressed and capital expenditure is likely to remain muted. Increased sales in certain sectors like cement and steel, and price discounts resulting in higher sales in certain consumer durables segments are already visible.

The stimulus package of the government and the implementation of the Sixth Pay Commission, which will increase the purchasing power of public sector employees, should also boost demand. The fiscal situation is expected to remain weak, however, and increased government expenditure commitments may not be matched by buoyancy in tax revenues Despite a difficult funding and credit environment, the extension of credit by banks in India has been reasonably satisfactory and accelerating its delivery will be a key factor in sustaining the positive effects of the fiscal and monetary stimulus measures. In particular, bank credit will play a large role as other avenues for raising

funds are likely to remain tight. While concerns about credit quality have impeded a larger increase in credit flows, the financial sector remains sound and will, in our view, be able to absorb the anticipated increase in non-performing assets without deleterious capital erosion. Given the fact that cost of funds for banks is steadily diminishing and will translate into lower lending rates, the demand for bank credit should pick up in course of time. However, foreign currency funds are expected to still remain relatively scarce.

• 
  ATM is the preferred service.
  
• 
  SBI is the most secure bank.
  
• 
  There is a dependency relationship between age group and preference towards public/private sector banks.
  
• 
  For ICICI bank tangibility is best amongst all other dimensions, which shows that customers are satisfied with visually appealing facilities, online banking facilities, time saving technology facilities and facilities for senior citizens of the bank.
  
• 
  For HDFC bank Reliability is best amongst all other dimensions, which shows that customers are satisfied with timely services, error free records and sincerity of solving customers problems of the bank.
  
• 
  For SBI and BOB bank assurance is best amongst all other dimensions, which shows that customers are satisfied about the safety of their truncations with the bank.
  
• 
  BOB and HDFC have comparative lower unweight average gap score.
  
• 
  SBI and ICICI have comparative higher unweight average gap score.
  
• 
  HDFC bank has the highest weighted score amongst all the banks, which shows that customers are more satisfied with HDFC bank for the services provided by them.
  

• 
  ICICI and HDFC bank should emphasize on improving their services on responsiveness and Assurance.
  
• 
  SBI and BOB should emphasize on improving their services on responsiveness and empathy.
  
• 
  In general responsiveness is the dimension for which the weighted score of all the four banks is less comparative to other dimension so every bank whether public sector or private sector should consider their responsibility towards their customers and should provide proper training to their employees so that they can satisfy their customer.
  
• 
  If we look at both the public sector banks, empathy is common dimension for which both the banks have got less weighted score which shows that customers are not getting individual attention so SBI and BOB should improve their services on empathy dimension.
  
• 
  In private sector banks, assurance is common dimension which have got less weighted score . ICICI and HDFC should build confidence and trust in their customers regarding the safety of their transactions and other services provided by the banks.
  
• 
  Though internet banking is convenient and user friendly, respondents don t prefer it more because of safety issues so all the banks should make their customers aware about the benefits of internet banking and should provide accurate services .
  

I am students of apex institute of management and science Jaipur, Presently working on a project on SERVQUAL Analysis of Banking services and comparative analysis of customer satisfaction of various banks.

I request you to kindly fill the questionnaire below. I assure you that data provided by you shall be kept confidential.

Personal details:

Name:

Contact no:

1) 18 – 25

2) 26 -35

3) 36-45

5) 55 and above Ans:( )

Occupation:

1) Student

2) Government employee

3) Private employee

4) Professional/ self employed

5) HousewifeAns:( )

1) Less than 10,000

2) 10,001 to 20,000

3) 20,001 to 30,000

4) 30,001 to 40,000

5) 40,001 and above Ans:( )

1) Which type of service do you prefer the most from the banks?
(a) ATM services ( b) Internet banking (c) Mobile banking (d )Retail banking

2) Your account decisions are influenced by

(c ) Broker ( d ) friends/relatives

3) Which factors do you consider before opening account or in purchasing new plan in a particular bank?

(A) Financial position

(B) Current Market Position

(C) Goodwill

(D) Future prospects

(E) Services provided

4. 
   Which bank do you prefer the most from the following?
   

1. 
   Public sector bank
   
2. 
   Private sector bank
   

5. 
   Which bank is more secure according to you?
   

The following statements relate to your feelings about the particular bank you have chosen. Please show the extent to which you believe this bank has the feature described in the statement. Here, we are interested in a number from 1 to 7 that shows your Expectations and perceptions about the bank.

You should rank each statement as follows:

Strongly Disagree Strongly Agree

1. 
   www.statebankofindia.com
   
2. 
   www.onlinesbi.com
   
3. 
   www.icicibank.com
   
4. 
   www.hdfcbank.com
   
5. 
   www.hdfcindia.com
   
6. 
   www.bankofbaroda.com
   
7. 
   www.bobibanking.com
   
8. 
   www.business.mapsofindia.com
   
9. 
   www.rbi.org.in
   
10. 
    www.indiamart.com
    
11. 
    www.outsource2india.com
    
12. 
    www.indbankonline.com
    
13. 
    www.iibf.org.in
    
14. 
    www.banknetindia.com
    
15. 
    www.wisegeek.com
    
16. 
    www.about.com
    
17. 
    www.americanexpress.com
    
18. 
    www.efta.org
    
19. 
    www.12manage.com
    
20. 
    www.istheory.com
    
21. 
    www.emeraldinsight.com
    
22. 
    www.wikipedia.org
    
23. 
    www.marketresearch.com
    

• 
  Zeithmal V. A., GremblerD.D., BitnerM.j., and PanditA.:Service Marketing Integrated customer Focus Across The Firm” , Fourth Edition
  
• 
  ZillurRahman, “Service Quality: Gap in the Indian Bank Industry” The ICFAI Journal of Marketing Management.
  
• 
  NareshK.Malhotra : Marketing Research – An applied orientation, Fifth Edition
  
• 
  Richard I.Levin,DavidS.Rubin –Statistics For Management, Seventh Edition