Specialization Project

On

Service Quality Management in the Banking Industry: A Customer

Perspective

Submitted in partial fulfillment for the award of the degree of

Master of Management Studies (MMS)

(Under University of Mumbai)

Submitted by

Dnyanada Musale

(20171038)

Under the guidance of

Prof. Apurva Mehta

2017-19

Durgadevi Saraf Institute of Management Studies

 CERTIFICATE

This is to certify that project titled “Service Quality Management in the Banking
Industry: A Customer Perspective”

is successfully completed by Ms. Dnyanada Musale during the IV Semester, in partial

fulfillment of Master’s Degree in Management Studies recognized by the University of
Mumbai for the academic year 2017-19 through Durgadevi Saraf Institute of
Management Studies.

This project work is original and not submitted earlier for the award of any degree/
diploma/ associateship of any other University/ Institution

Name: Prof. Apurva Mehta

Date:

(Signature of the Guide)

 DECLARATION

I hereby declare that this Project Report submitted by me to the Durgadevi Institute of
Management Studies is a bonafide work undertaken by me and it is not submitted to any
other University or Institution for the award of any degree/diploma/certificate or
published any time before.

Name:

Roll no:

Signature of the Student

 TABLE OF CONTENTS

Chapter No Title Page No

1 Introduction 1-6
1.1 Challenges for banking industry in India 7
1.2 Road Ahead for banking industry in India 8-10
1.3 Purpose of the Study 11
1.4 Banking Service Process 12-14
1.5 Importance of Service Quality Management 15-17
1.6 Dimensions of Service Quality Management 18
1.7 SERVQUAL Model 19-20
2 Scope of Study 21
3 Objectives of Study 21
4 Hypothesis 21
5 Literature Review 22-28
6 Research Methodology 29
7 Data Analysis 30-35
8 Conclusion 36-37
9 References 38
10 Annexure 39-41
 EXECUTIVE SUMMARY

The research paper aims to study the service quality management in the banking industry
in India. Service Quality is very vital for service industries to retain old customers and
gain new customers. SERVQUAL Model is used to evaluate the scores for each of the
variables of this model for Public Sector Banks and Private Sector Banks. The survey
also aimed at studying if the perception of the customers for service quality was
independent of the type of bank in which they operate. The survey was conducted using a
questionnaire method and primary data was collected for the same.
 SERVICE QUALITY MANAGEMENT IN THE BANKING
INDUSTRY: A CUSTOMER PERSPECTIVE

INTRODUCTION

The banking system plays an important role in the modern economic world. Banks collect
the savings of the individuals and lend them out to business- people and manufacturers.
Bank loans facilitate commerce. The banks play an important role in the creation of new
capital (or capital formation) in a country and thus help the growth process. Banks
arrange for the sale of shares and debentures. Thus, business houses and manufacturers
can get fixed capital with the aid of banks. There are banks known as industrial banks,
which assist the formation of new companies and new industrial enterprises and give
long-term loans to manufacturers.

When business expands, more money is needed for exchange transactions. The legal
tender money of a country cannot usually be expanded quickly. Bank money can be
increased quickly and used when there is need of more money. In a developing economy
(like that of India) banks play an important part as supplier of money. The banking
system facilitates internal and international trade. A large part of trade is done on credit.
Banks provide references and guarantees, on behalf of their customers, on the basis of
which sellers can supply goods on credit. This is particularly important in international
trade when the parties reside in different countries and are very often unknown to one
another. Trade is also assisted by the grant of loans by discounting bills of exchange and
in other ways. Foreign exchange transactions (the exchange of one currency for another)
are also done through banks. The banks act as advisers, counsellors and agents of
business and industrial organizations. They help the development of trade and industry.

1
Indian banking industry despite of its well-regulated nature, experienced a lot of frauds
and scams over the years and this showcases the weakness in the banking system and this
article highlights the steps that the Government proposes to undertake to strengthen the
banking system in India so as to avoid such defaults in the future.

Banking in India 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 1832 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. Today, our banking system is
divided into commercial banks, regional rural banks and cooperative banks. Commercial
banks play an important role in the financial system and the economy. As a key
component of the financial system, banks allocate funds from savers to borrowers in an
efficient manner, thereby making the overall economy more efficient. India requires
stability, efficient service delivery, inclusion and a monetary policy transmission from
our banking system. Recognizing this need, the Government has, over the years,
introduced various reforms to strengthen the banking system and make it more robust.

The Reserve Bank has adopted Basel III norms for implementation in a phased manner.
Basel III is an international regulatory accord that introduced a set of reforms designed to
improve the regulation, supervision and risk management within the banking sector.
Largely in response to the credit crisis, banks are required to maintain proper leverage
ratios and meet certain minimum capital requirements. Apart from an improved capital
framework and liquidity ratios like the liquidity coverage ratio (LCR) and the upcoming
net stable funding ratio (NSFR), the Reserve Bank has also been aligning the regulatory
and supervisory frameworks for Non-Banking Financial Company’s (NBFCs), all India
financial institutions (AIFIs) and co-operative banks with that of commercial banks with
the objective to avoid regulatory arbitrage. Moreover, the Indian Accounting Standards
(Indian-AS) standards prescribed for commercial banks will be made mandatory for both

2
AIFIs and NBFCs. A formal Prompt Corrective Action (PCA) framework has been
introduced for NBFCs from March 30, 2017 and a comprehensive Information
Technology (IT) framework from June 8, 2017. Multiple categories of NBFCs are being
rationalized into fewer categories. Along with strengthening co-operative banks through
consolidation, the tiers in the cooperative structure are also being reduced.

Addressing asset quality concerns and strengthening banks' balance sheets to reinvigorate
credit growth are clearly the highest priority. Improving accounting standards and
nurturing competitive efficiency alongside niche competencies in the banking space are
other elements that are gaining importance. Strengthening and harmonizing regulations
across financial intermediaries and in adherence to global standards have been other
focus areas. Simultaneously, promoting digitization, managing technology-enabled
financial innovations and dealing with cyber-security risks will entail strategic policy
responses. Impairment in the asset quality of the banking sector remains unconscionably
high, necessitating sizeable provisioning and deleveraging, thereby constraining banks'
capacity to lend. Consequently, profitability and capital positions of banks have faced
some erosion, especially in the case of public sector banks (PSB). In the process,
businesses have increasingly switched to alternate and more cost effective sources of
funds to meet their financing needs, be investing directly in the securities market, rather
than through a bank.

The situation is unlikely to improve fast. Going by Reserve Bank of India’s (RBI)
December Financial Stability Report, Non-Performing Assets (NPA) of Indian banks will
rise further even though the financial system as a whole remains stable. Under the RBI's
base case scenario, gross NPAs in the banking sector may rise to 10.8% in March 2018
and to 11.1% by September 2018.The size of the hole in today's banking crisis appears to
be roughly 10% of the Gross domestic product (GDP). The enactment of the Insolvency
and Bankruptcy Code (IBC), 2016 and promulgation of the Banking Regulation
(Amendment) Act, 2017 has significantly altered the financial landscape with optimism

3
to resolve the concerted efforts that are underway for resolution of stress in balance
sheets of banks and corporations in a time-bound and effective manner. The Reserve
Bank's pre-emptive approach to recognition and resolution of emerging financial distress
and the revised system of prompt corrective action triggered in April 2017 are intended to
instill confidence in the system that accumulation of excessive financial imbalances in the
future will be prevented. The Government's in-principle approval in August 2017 for
consolidation of PSBs through an 'Alternative Mechanism' and the massive
recapitalization plan for PSBs announced in October 2017 as part of a comprehensive
strategy to address banking sector challenges should make them strong and competitive
as they gear up to meet the credit needs of a growing economy.

Subsequently, the RBI has also advised banks to set aside 50% provisioning against
secured exposure and 100% against unsecured exposure in all cases referred for
bankruptcy. In a blow to defaulting promoters seeking to reclaim their companies under
insolvency proceedings, the Government barred wilful bank loan defaulters as well as
those with NPA accounts from bidding in auctions to acquire their companies. The
Government is likely to push ahead with banking sector reforms alongside infusion of
fresh capital as it looks to lift banks out of NPA crisis and revive lending growth from a
25 year low. In October 2017, the Government announced infusion of an unprecedented
Rs.2.11 trillion capital over two years in PSBs that are reeling under high NPAs. The
capital infusion in banks is not going to be an easy affair as it has to be backed by string
of reforms including strengthening of bank boards and resolution of non-performing
assets so that the banks can undertake responsive and responsible banking.

The finance ministry has also released a road map for consolidation of the overseas
operations of state-run banks. The rationalization of overseas branches is aimed towards
"cost efficiencies and synergies in overseas markets". The rationalization in foreign
operations will be through a mixture of closure of overseas branches, subsidiaries,
representative offices and remittance centers and through consolidation of joint ventures

4
where more than one bank is a shareholder. There is a constant debate about privatization
of the public sector banks. Privatization may address the issue of moral hazard of the
Government; however, as long as the Government remains a majority owner of these
banks, it will not be easy to have a law that the Financial Resolution and Deposit
Insurance Bill 2017 (FRDI Bill) proposes, asking depositors to sacrifice in case of a bank
failure.

In addition to the IBC and the Banking Regulation (Amendment) Act, 2017, the
Government notified the Fugitive Economic Offenders Bill, which is aimed at punishing
those who are accused of committing financial crimes in India and then fleeing the
country, as in the cases Nirav Modi and Vijay Mallya, setting up of the independent
regulator National Financial Reporting Authority (NFRA) that will have sweeping
powers to act against erring auditors and auditing firms. The Government has also
proposed the Financial Resolution and Deposit Insurance Bill (FRDI), which purportedly
allows failing banks to use depositors money to cut losses. The recent RBI Circular on
Resolution of Stressed Assets dated February 12, 2018 calls upon banks to report default
as low as Rs 50 million. The RBI Circular also calls upon the banks to put in place
Board-approved policies for resolution of stressed assets under this framework, including
timelines for resolution and also sets out timelines for large accounts to be referred to
IBC.

India needs a safe and efficient banking system to service the needs of a growing
economy. The RBI would do well to use the current opportunity to strengthen the
banking system. In the fast changing financial landscape, banks will need to rework their
business strategies, innovate on products tailored to customers' needs and improve
efficiency in the delivery of customer-centric financial services to regain their role as
principal financial intermediaries.

5
Given India's relatively low credit penetration, this may even be a desirable outcome so
as to enhance credit flow and revive the investment cycle. In regard to the stress in the
banking system, banks can take advantage of the IBC and the various other steps
undertaken by the Government to clean up their balance sheets and improve performance
on a sustained basis to remain competitive. Instead of waiting for regulatory directions,
banks can file for insolvency proceedings on their own to realize promptly the best value
for their assets.

6
Challenges for the banking industry in India:

Public-sector banks are more exposed to industry sectors with a higher share of
nonperforming loans than their private-sector counterparts are. These state-owned
institutions have deep networks and control 70 percent of banking’s asset base. From
2009 to 2016, the government made capital infusions of $15 billion into them. But over
the years, value has steadily shifted toward private-sector institutions, whose share of the
sector’s assets has grown to 25 percent, from 21 percent, in the past decade. (Foreign
banks account for the remaining 5 percent.) The division is more apparent in the value
banks created from 2006 to 2016: private banks have grown faster and generated far more
value for their shareholders, with their share of market cap increasing from about 40
percent to nearly 70 percent in the same period.

Loan growth in fiscal year 2017 has remained anemic—the banks’ credit books shrank by
4 percent in the past quarter. With the balance sheets of major Indian companies
continuing to be under stress, the volume of corporate loans fell by 3 percent from April
to December 2016. Roughly 40 percent of the outstanding debt is to companies, whose
interest-coverage ratio is less than one, making debt repayment difficult. Overall, the
recovery of wholesale-banking loans seems difficult in the medium term.

The Indian government’s decision to demonetize the currency—about 85 percent of it

ceased to be legal tender on November 8, 2016—led to a surge in the current and
savings-account (CASA) deposits of the country’s banks. Slow loan growth, combined
with the higher CASA, has pushed down the banks’ credit-deposit ratios, a standard
measure of loans to deposits. If credit offtake fails to pick up, these factors could affect
the banks’ net interest income.

7
Road Ahead for Banking Industry in India:

Notwithstanding the sectoral doom and gloom, India’s macroeconomic fundamentals

continue to be strong. GDP has increased at 6.6 to 7.0 percent over the past four years,
and International Monetary Fund projections show an upward trend—growth could reach
7.7 percent by 2020. Wholesale and retail inflation have been trending downward over
the past three years.

The expansion and upward mobility of the middle class have transformed retail banking
in India over the past decade. We expect these changes to continue as about 89 million
households join this social segment by 2025. Upwardly mobile customers are more
discerning, which is reflected in loyalty levels. Compared with their predecessors a
decade ago, such consumers are half as likely to recommend a financial institution to an
acquaintance and 15 percent more likely to shop around. They also have nearly 20
percent more banking relationships, on average.

These new customers, who represent the opening up of the banking marketplace, are
more likely than yesterday’s to be attracted by one or another emerging value
proposition. Most of them are rapid technology adopters, whose use of the Internet and
mobile phones is growing. The falling cost of Internet access has facilitated the adoption
of digital technologies. By December 2016, mobile data rates in India had fallen to
almost 50 percent of their 2013 levels. Digital demand has shot up in consequence—
exponential growth in the number of users and Internet use. More consumers rely on the
Internet and mobile phones to meet their banking needs. The Indian Banks’ Association’s
2016 survey shows that almost 80 percent of transactions in the newer banks are made
through digital channels.

At the same time, a regulatory push by the government and the RBI over the past few
years is encouraging more competition and the emergence of digital business models.
New categories of banking licenses have been launched—such as payments banks and
small-finance banks. It’s also become easier for foreign players to enter the market, since

8
they can now set up wholly owned subsidiaries in the country. This means that they can
operate much as Indian-owned banks do, without restrictions on their branch footprints or
their efforts to raise domestic capital.

Meanwhile, the government has launched what it calls the Jan Dhan (People’s Money)
program, opening bank accounts for millions of previously unbanked customers to
promote financial inclusion. About 280 million such accounts have been set up as of
March 2017, allowing users to receive government subsidies and to access remittances,
credit, insurance, and so on. Low-cost Indian platforms have been launched to promote
digital payments—for example, RuPay, a cheaper, domestic alternative to international
credit- or debit-card gateways such as MasterCard and Visa; the Unified Payment
Interface (UPI), a system to facilitate the transfer of funds between bank accounts on the
mobile platform; and the Bharat Interface for Money (BHIM), a mobile app based on
UPI.

The availability of data in India has become more democratic, and with IndiaStack and
open application programming interfaces (APIs) banks can now access customer
information from a single source. Many of these digital-finance initiatives use the
national unique identification number (Aadhaar) to authenticate customers. The recently
launched DigiLocker, for example, is a cloud-based document-repository system that
enables the sharing of digitized identity documents and certificates. These developments
give financial players opportunities to build innovative business models serving millions
of new consumers. Both new entrants, free of legacy issues and with much lower
infrastructure costs and innovative incumbents have an advantage in reaching and serving
customers. Since many existing banks have balance-sheet limitations, relatively
unconstrained ones also have an opportunity to take over some wholesale loans on their
own terms. In addition, disruptions, both in technology and policy, could help new banks
create value and increase their efficiency.

9
Reliable, diverse data sources are emerging in India, and these could be used to make
smarter and faster decisions in financial services. In addition to the traditional sources,
such as financial-transaction records and credit bureaus, banks can now tap into
information from e-commerce purchases, utility payments, and social media. Some of the
most significant opportunities in Indian banking over the next three to five years will
accrue to partnerships, a strategy that will require banks to embed themselves in the daily
lives of customers to meet their financing needs. A payments bank, for example, can
allow customers to cash in or cash out through local retailer outlets, bypassing the need
for traditional (and more expensive) branches and ATMs. This approach will require
banks to build close relationships with partners, creating integrated digital infrastructures
that span their individual platforms. This mechanism of being able to embed into another
ecosystem and build an entirely digital model relies on the physical networks of the
partners to access customers. It has the potential to change the economics and the ability
to serve underserved segments. With corporate loan books continuing to shrink, the next
growth opportunity will be serving India’s vast number of small and medium enterprises
(SMEs). Currently, most of them look to the informal sector and nonbanking financial
companies for their financing needs. With the push from the informal to the formal
economy, an estimated 50 million SMEs could enter the formal banking space by 2020.

Traditional banks will face challenges to serve these customers in the face of stiff
competition from nonbanking financial companies and fintechs. Small businesses that
turn to informal financing channels do so because they cannot raise the collateral banks
require. High interest rates, indebtedness, and processing demands are frequently cited
reasons for bypassing formal lenders. To address these issues, banks will need to review
their traditional lending mechanisms, which are not suitable for SMEs or micro, small,
and medium enterprises. To assess the creditworthiness of SMEs, price risk, and set
appropriate loan limits, banks will need to use unstructured data—such as prior
transaction details and data from the Goods and Services Tax (GST) platform and even
from social media.

10
Purpose of the Study:

Banking industry has always been the backbone of any economy. It plays a very vital role
of mobilizing the deposits and channelizing the investments to the priority sectors of the
economy. At the same time, in order to stay relevant banks also have to focus on
productivity and profitability. The most important element of maintaining and gaining
profitability is retention of customers and acquiring new customers and this can be
achieved by Service Quality Management. It has become important in all service
industries.

Service Quality Management encompasses a variety of processes used to access the

quality of service according to customer expectations. It also includes maintenance and
monitoring of the services offered to customers. By measuring the gap between
expectations and reality of the service quality, banks can take actionable steps to ensure
better productivity and profitability. It also helps in knowing the target audience in a
better way and provides them with the service they expect from the organization. The
quality of service can only be determined by analyzing a substantial amount of customer
feedbacks. This will also help in establishment of correlations and overlapping trends.

This paper aims to study and understand the service quality management techniques used
by various banks. It also aims to identify possible gaps between the customer
expectations and reality about the service quality in both public and private sector banks.

11
Banking Process System:

12
Banking must respond with agility and flexibility to customer demands; operations and
technology must be responsive to rapid changes. Today, the banking industry is faced with
greater challenges than ever. Outside interlopers such as automobile companies or retail
chains are setting up bank-like companies and services. There is an onslaught of regulatory
requirements in an increasingly risk-aware environment. Both markets and customer
requirements are changing rapidly. To face these types of challenges, banks must be flexible
and agile in both strategy and operations. Meanwhile, the IT departments of banks have their
own challenges, such as enabling consistent information and customer experiences across
channels, ensuring seamless straight-through payments processing, and providing a single
view of customers and their transactions and exposures across all entities. Managements are
closely scrutinizing returns on technology investments, the time to market, and the success in
addressing business requirements. All technology teams now feel the pressure to deliver
successfully, which means within budget and to schedule. To respond adequately to their
collective challenges, business and technology teams must collaborate more closely.

Process maps, duly enriched, can capture both business-critical dimensions and the key
technical metadata that systems need to execute on the overall vision. The secret of
successful collaboration is being able to communicate effectively within and across teams. Is
there one language that both technology and business can use to talk to each other? This
language especially needs to address a few concept pairs that encapsulate the key challenges
that banks are grappling with as they seek to establish themselves in this new
world: - manual, automated; risk, control; global, local; standardized, customized; and,
technology and operations. The goal is to develop a common area to address these concepts
and perhaps link them together, in terms that all participants can clearly understand. This is a
new world, where there is transparency; where both the intent and requirements of all the
stakeholders are clear; where business and technical information is captured and depicted on
the same drawing board; and, where the chances of missing/mis-communicating
requirements are eliminated or significantly reduced.

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Next-generation banking means interconnected applications and flexible orchestration,
driven by business needs, and without a long intermediation cycle. This new banking world
calls for seamless connectivity across systems and operating units. It asks for the ability to
reconfigure technology and operations quickly and flexibly, to meet the changing demands
of customers and the environment. It demands that all this be achieved with costs absolutely
under control. The technology that will support this new world must be able to incorporate
all these features and more. An end-to-end process is one way to leap the boundaries set up
by different operating units, application systems, and entities. A typical process may need to
move from the operations and technology of customer service units, through risk teams, to
operational units, before going into accounting and reporting. In this context,
Service-Oriented Architecture (SOA) truly begins to make sense. Process orientation and
decomposition help fit services clearly into a business context, and to unleash the power of
such an approach. The challenge for next-generation banking technology is to be
business-user friendly, seamless, and able to integrate. The responses to these separate issues
converge into a single answer - a process-centric, Service-Oriented Architecture.

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Importance of Service Quality Management:

The main attraction of the term lies in the fact that it is basically a positive concept. No one
is against quality and everyone wants to have it. In the same time, since it is difficult to
precisely define its meaning (some say it is impossible), the term of quality leads to
confusion and misinterpretation. In order to establish mutual understanding in the field of
quality, the basic terms in use are defined. Standardization of terminology in the field of
quality and quality management facilitates mutual understanding and is aimed at
strengthening the international cooperation between manufacturers and users, i.e. customers.
Quality - definition according to ISO 8402:1994: The "totality of characteristics of an entity
that bears on its ability to satisfy stated and implied needs." An entity may be: - an activity or
a process, - a product, - a company, a system or a person or - any combination of the notions
mentioned above. Quality - definition according to ISO 9000:20002: "An integration of the
features and characteristics which determine the extent to which output satisfies the
customer's needs" We distinguish the following characteristics that build quality.

1. Functional characteristics (of primary concern for the users), that define the product or
service by describing the functions they have to meet in order to satisfy the customer
needs.
2. Characteristics of conformity, with defined specifications that manufacturers or service
providers has to comply with in order to provide the product or service the desired
functional characteristics, that are not of direct concern for the users. Therefore, from the
user or buyer's viewpoint, quality means appropriateness for utilization, but from
executives or manufacturers' viewpoint it means compatibility with the predefined
specifications.

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 Quality management represents an integral part of enterprise management; it is an
important qualitative management of product and service flows. Managing quality means
adopting the features of which the product's quality consists of. It means defining and
applying procedures indispensable for product manufacturing and service maintenance
with desired features - characteristics. Thus, quality management means managing
activities that enable product manufacturing and managing the results. Quality
management is both a technique and a methodology in the same time. It’s not an isolated
activity added to manufacturing and other activities of a factory, but it represent an
effective means for realizing such activities. As a set of features, quality determines a
product or a service. It is not a superstructure, something that can be added later. People
in the factory are not divided into those who manufacture the product and the others who
"provide" quality. Therefore, in manufacturing procedure the product is given its required
features starting from the design and ending with realization, i.e. its desired quality. This
is the fact from which the term of quality management is derived. Quality is "built into"
the product or service and therefore it is defined and "designed" along with it. Creation of
quality as an aspect of product manufacture has the following stages.

1. Expected quality: as required or desired by the user.

2. Prescribed quality: need specification establishes desired features describing the function
of the product, i.e. its appropriateness for utilization, the specification of requirements
defining the features to be realized.
3. Designed or defined quality: after the designing stage, the product is defined by a
descriptive specification that contains procedures necessary for its realization. The
projected quality represents the resultant of prescribed quality and the designing quality.
4. Achieved quality: the product is created and its features are measured. The achieved
quality is the result of the projected quality and the quality of realization.
5. Quality maintained during the product's lifetime.
6. Quality perceived by the user: In an ideal case, the perceived quality is equal to expected
quality.

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In reality, however, this ideal may be disturbed by larger or smaller influence of a
subjective and irrational factor, disregarding the awareness of expected quality or the
perception of achieved quality. Quality management is the responsibility of all levels of
management, but it should be led by the highest level of management - the top
management. Implementation of quality has to include all the members of the
organization. Quality management in the industrialized world is viewed as a total quality
management that starts and completes with education of all the members of the
organization.

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 Dimensions of Quality Management:

David. A Garvin defined eight dimensions of Quality Management:

1. Performance indicates the primary working characteristics. If focus on product, i.e. a car,
it considers brakes, power steering and its speed. In service sector, i.e. banking, the
performance includes keeping accurate deposit account and mailing account statement
promptly.
2. Features are the additional or supplementary characteristics of a product. When speaking
about products, i.e. the color of the car, or in the service area i.e. air transport, it includes
providing efficient service, booking, etc.
3. Reliability comprises impossibility of malfunctioning or failure of the product in a
certain period of time.
4. Conformance is the level of product adaptability with existing standards and
specifications.
5. Durability is the measure of the product lifetime and benefit level achieved by its
utilization up to the common need for its substitution.
6. Serviceability indicates the promptness, politeness, professionalism and rapid change in
providing services. Offering service in manufacturing procedure refers to a prompt,
professional repair. When speaking about service sector, it refers to prompt error
correction in a kind and polite way.
7. Aesthetics refers to the appearance, sound, smell, taste, i.e. to the complete experience of
a product.
8. Perceived quality refers to the user's subjective judgment about the quality of a certain
product or service.

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SERVQUAL Model:

SERVQUAL as the most often used approach for measuring service quality has been to
compare customers’ expectations before a service encounter and their perceptions of the
actual service delivered (Gronroos, 1982; Lewis and Booms, 1983; Parasuraman et al.,
1985). The SERVQUAL Model is derived from the study of Parasuraman, ZeithamI, and
Berry in 1985 and originally 10 dimensions of service quality were reliability,
responsiveness, competence, access, courtesy, communication, credibility, security,
understanding/knowing the customer, tangibles.

Later, ZeithamI, Berry and Parasuraman, 1988 tested the variables and reduced them to
five factors including tangibles, reliability, responsiveness, assurance (combining
communication, credibility, security, competence and courtesy) and empathy (combining
understanding and knowing the customer with accessibility.

The factors under SERVQUAL model are:

1. Assurance: This element creates credibility and trust for customers, which is
considered through professional services, excellent technical knowledge, attitude
courtesy, and good communication skills, so that customers can believe in the
quality of firm’s services.
2. Reliability: Reliability shows the ability to provide services accurately, on time,
and credibly. This requires consistency in the implementation of services and
respects commitments as well as keeps promises to customers.
3. Empathy: Empathy is the caring, consideration, and the best preparation for
customers, so that they can feel as ‘guests’ of the firm and are always welcome at
any times, anywhere. Human factors are the core of this success and the more
caring the bank gives to customers, the more customer understanding increases.

19
4. Responsiveness: This criterion measures the ability to solve the problem fast, deal
with customers’ complaint effectively and the willing to help customers as well as
meet the customers’ requirements. In other words, responsiveness is the feedback
from banks to what customers want.
5. Tangibles: Tangibles are the images of the facilities, equipment, machines, attitude
of staffs, materials, manuals, and information systems of the bank. In others
words, the tangibles refer to the effect of physical facility, equipment, personnel
and communication materials on. The atmosphere also called services capes that
influences directly both employees and customers in physiological, psychological,
sociological, cognitive and emotional ways.

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 SCOPE OF THE STUDY

The scope of the study is limited to the Indian Banking Industry. The study draws a
comparison between the service quality of public and private banks. The data is collected
using primary questionnaire method on a sample of people that regularly use banking
facilities. The SERVQUAL Model will be used to assess the scores in determining the
level of service quality.

OBJECTIVES OF THE STUDY

1. To study customer expectations from the banks.

2. To study whether the perception of the customers dependent upon the type of
bank.

HYPOTHESIS

 H0: The perception of service independent of the type of the bank.

 H1: The perception of service depends upon the type of the bank.

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 LITERATURE REVIEW

Antreas D. Athanassopoulos (16 April 1997) in the paper: Service quality and
operating efficiency synergies for management control in the provision of financial
services: Evidence from Greek bank branches

In this paper they have concentrated on the assessment of the productive efficiency of
bank branches. Bank branch operations are characterized by the effort made by
management to pursue the banks' corporate objectives. Such efforts are assessed on two
parameters operational efficiency and the quality of service offered to the clients. The
assessment of branch efficiency is pursued using data envelopment analysis methods
enhanced by the value judgments of individual branch managers. These two parameters
are two sides of the same coin; efficiency helps reducing the outflow of funds and good
service quality helps in retaining existing clients and attracting new clients.

Kazi Omar Siddiqi (3 March 2011) in the paper: Interrelations between Service
Quality Attributes, Customer Satisfaction and Customer Loyalty in the Retail
Banking Sector in Bangladesh

The main objective of this study was to find the interrelationships between service quality
attributes, customer satisfaction and customer loyalty in the retail banking sector in
Bangladesh. In Bangladesh, no study has yet investigated the above mentioned
interrelationship. The purpose of this study was to fill this gap. A survey was conducted
to collect data. The sample size of 100 retail banking customers was drawn from different
banks in Bangladesh. The result shows that all the service quality attributes are positively
related to customer satisfaction and customer satisfaction is positively related to customer
loyalty in the retail banking settings in Bangladesh. Empathy demonstrates the highest
positive correlation with customer satisfaction and tangibility shows the least positive
correlation with customer satisfaction. This study suggests that SERVQUAL [service
quality model] is a suitable instrument for measuring the bank service quality which also
helps in capturing the gap between expectations and perceptions of the customers and it

22
also helps in building a conceptual framework for building a development scale for the
organization in the Bangladeshi context. Therefore, bank managers can use this
instrument to assess the bank service quality in Bangladesh.

Chien‐Ta Bruce Ho, Wen‐Chuan Lin (2 Jan 2013) in the paper: Measuring the
service quality of internet banking: scale development and validation

The purpose of this paper was to develop a multiple item scale for measuring internet
banking service quality. This research adopts the dimensions of electronic service quality
(e‐service quality) and customer‐perceived service quality to develop a framework that
can be used to measure internet banking service. Also, this research uses Taiwan's
internet banking users as survey targets for its empirical studies. Through the process of
factor analysis, the refined scale was identified. There were five dimensions and 17 items
in the measurement scale for measuring the service quality of internet banking. The five
dimensions were named customer service, web design, assurance, preferential treatment,
and information provision.
Monica Bedi (April-September 2010) in the paper: An integrated framework for
service quality, customer satisfaction and behavioral responses in Indian banking
industry-- a comparison of public and private sector banks

This study attempts to investigate the relationship between service quality, overall
customer satisfaction and behavioral intentions across public and private banks in India.
This study was conducted across 17 banks of which 10 were public sector banks and 7
were private sector banks. The study was conducted on 600 respondents across both
sectors of banks. The findings indicated that service quality is a significant determinant of
customer satisfaction in Indian banking industry irrespective of public and private sector
banks. However, different dimensions of service quality were found to be statistically
significant across public and private banks. Customer satisfaction was found to be
strongly associated with propensity to recommend. The study will help banks to redefine
their corporate image to one that is customer-focused and driven by service quality.

23
Norizan Kassim and Nor Asiah Abdullah (1 March 2010) in the paper of: The effect
of perceived service quality dimensions on customer satisfaction, trust, and loyalty
in ecommerce settings: A cross cultural analysis

The paper aims to empirically investigate the relationship between perceived service
quality, satisfaction, trust, and loyalty in e‐commerce settings in two cultures – Malaysian
and Qatari – at the level of construct dimensions. A survey method approach was used in
this study. To test the dimensionality of the perceived service quality, all 20 items were
analyzed using oblique rotation and varimax rotation. The hypotheses were tested using
the structural equations modeling and general linear model of univariate analysis of
variance. Perceived service quality was found to have a significant impact on customer
satisfaction. In turn customer satisfaction was found to have a significant effect on trust.
Both customer satisfaction and trust have significant effects on loyalty through word of
mouth (WOM) while WOM is an antecedent of repeat visits or repurchase intentions.
Interestingly, trust does not directly influence the latter. With the exception of the effect
of satisfaction on trust, we found no significant difference between the effects of
perceived service quality on satisfaction, satisfaction on loyalty, and trust on loyalty
among the Qatari and Malaysian customers indicating that the relationships in the model
did not hold across the two cultural groups because the respondents have similar cultural
background. In an e‐commerce setting companies can increase customer loyalty directly
by improving the ease of use, the attractiveness, and the security of their website. Thus,
marketers should tailor their marketing strategies to fit each marketing environment
because overseas success of their business is very much a function of cultural
adaptability.

24
Muhammad Ali and Syed Ali Raza (5th November 2015) in the paper: Service
quality perception and customer satisfaction in Islamic banks of Pakistan: the
modified SERVQUAL model

The aim of this study was to measure the relationship between service quality and
customer satisfaction among the customers of Pakistani Islamic banks. This study
employed a modified SERVQUAL model by introducing a unique dimension of
compliance in the context of service industry. A self-administered questionnaire-based
field survey was conducted with the help of modified SERVQUAL dimensions. Data
were gathered from 450 walk-in customers of Islamic bank. The sample data were
statistically analyzed through exploratory factor analysis followed by confirmatory factor
analysis (CFA) and structural equation modeling (SEM) analysis to determine the service
quality perception and customer satisfaction. Namely, CFA is used in order to test the
model validity, while SEM is used for testing the impact of different service quality
dimensions on customer satisfaction. Results revealed that the multidimensional service
quality scale is positively and significantly associated with the one-dimensional scale of
customer satisfaction. In addition, the compliance dimension of the SERVQUAL model
proved its importance by showing the highest contributing factor in the overall model.
Furthermore, this study has practical implications for the policy-makers of Islamic banks
to better understand the behavioral intentions of Islamic bank customers.

Justin Paul, Arun Mittal, Garima Srivastav (2016) in the paper: Impact of Service
Quality on customer satisfaction in private and public sector banks

In today’s world, with increased competition, service quality has become one of the most
popular areas of academic investigation. The purpose of this paper is to examine the
impact of various service quality variables on the overall satisfaction of customers and
compare the private and public sector banks using a sample from India. With the help of
forward stepwise regression, the authors explain how a variety of variables are both
negatively and positively influencing customer satisfactions. The authors collected data

25
from 500 respondents in India; 250 of which were customers of private sector banks, and
250 of which were customers of public sector banks. The authors had a response rate of
65 percent. In the case of private sector banks, knowledge of products, response to need,
solving questions, fast service, quick connection to the right person, and efforts to reduce
queuing time were found to be the factors that are positively associated with overall
satisfaction. Assistance to the customer, appearance, and follow up are negatively
associated with customer satisfaction. On the other hand, in the case of public sector
banks, knowledge of the product and fast service are the factors which are associated
positively and appearance is the only factor that is negatively associated.

Nastaran Taherparvar, Reza Esmaeilpour, Mohammad Dostar (2014) in the paper:

Customer Knowledge Management, Innovation Capability and Business
Performance in the banking industry

This paper examined the effect of customer knowledge management (CKM) on

continuous innovation and firm performance in 35 private banks in Guilan (Iran). CKM
emerges as an important and effective system for innovation capability and firm
performance. However, the role of CKM in innovation and performance is not well
understood. Data was collected via questionnaires from managers of private banks in
Guilan. Feedback was received from 265 managers in 350 distributed questionnaires, and
hypotheses were tested using the structural equation modeling. The results of this paper
indicate that knowledge from customers has a positive impact on innovation speed and
innovation quality as well as operational and financial performances. Also, the results
demonstrate a different effect of knowledge about customer and knowledge for customers
on various dimensions of innovation and firm performance. By using customer’s
knowledge flows, firms will be aware of external environment and new changes in
customers’ needs and so will be more innovative and perform better. CKM is known as
an important system to connecting internal environment to external environment to create
novel ideas. The results of this paper shed light on the consequences of CKM on firms

26
and provide support for the importance of CKM to enhance innovation capacity and firm
performance.

Vu Minh, Nguyen, Huan Huu (8th February 2016) in the paper: The relationship
between service quality, customer satisfaction, and customer loyalty in the
Vietnamese Retail Banking Sector

This study develops and empirically tests the interrelationships between service quality,
customer satisfaction, and customer loyalty in a retail banking context. Increasingly
intense competitiveness and fundamental changes in the business environment nowadays
are forcing firms to implement a customer-focused strategy which raises the importance
of customer-related constructs such as customer satisfaction, service quality, and
customer loyalty in explaining a firm’s performance. In particular, they are essential for
competitiveness in industries where the exchanges are complex and customers are closely
involved in the decision-making process, such as the banking industry. In this study, first,
a research model about the interrelationships between service quality, customer
satisfaction, and customer loyalty was suggested. Then a survey was conducted with
retail banking customers about these constructs, which results in 261 valid respondents.
The hypotheses are then proposed and tested using confirmatory factor analysis (CFA)
and the structural equation modeling technique (SME). The analysis reveals that service
quality and customer satisfaction are important antecedents of customer loyalty and
customer satisfaction mediates the effects of service quality on customer loyalty. These
findings suggest that there are non-linear relationships between three constructs and
emphasize the need to treat customer loyalty management as a process which includes
plenty of factors interacting with each other.

27
Halil Nadiri, Jay Kandampully, Kashif Hussain (28th October 2009) in the paper:
Zone of Tolerance for banks: A diagnostic model for banks

Service quality has become an increasingly important factor for success and survival in
the banking sector. Provision of high-quality service aids in meeting several requirements
such as customer satisfaction and its consequent loyalty and market share, soliciting new
customers, financial performance, and profitability. This paper presents the bank service
quality measurement in its extended form. It deals with the concept of ‘zone of tolerance’
in judgments of service. The ‘zone of tolerance’ is recognized in the service quality
literature as representing a range of expectations and an area of acceptable outcomes in
service interactions. The present study describes the zone of tolerance for young
customers’ service expectations and determines the customer satisfaction level for banks.
The study focuses only on the youth market to formulate long-term strategies because
young customers tend to keep themselves up to date with latest technological
developments. A conceptual model BANKZOT is presented in this study, and the results
demonstrate that evaluation of services can be scaled according to different types of
expectations – ‘desired' and ‘adequate’ – and that customers use these two types of
expectations as a comparison standard in evaluating bank services. The findings reveal
that young customers have a narrow zone of tolerance with regard to the services
provided by the banks. The results with respect to gap analysis reveal that there was a
shortfall in the service quality provided by the banks in the sample, with the largest gap
being found in tangibles and empathy of service quality dimensions. The results of
exploratory factor analysis reveal that the SERVQUAL model is found to be
unidimensional in this study. The results, managerial implications, and future research
implications are discussed in detail.

28
 RESEARCH METHODOLOGY

Population: People above the age of 18 years of age who regularly use banking facilities.

Sample Size: A sample of 52 respondents was shortlisted for the study

Sampling Technique: Random sampling technique was used to derive sample for this
study

Research Instrument: The research would be conducted by using questionnaire method.

Type of Data Collected: The data collected via questionnaire is a Primary data.

29
 DATA ANALYSIS

To understand the demographics of the respondents, age was a very important factor as
the population of the study had to above 18 years of age.

Age

14%

8% 18-25
26-35
36-45
15%
63% 46 and Above

The majority of the respondents were in the bracket of 18-25 which is the younger
population and it is important for the organizations to understand their needs and
expectations as they would constitute to be a major customer base.

30
The respondents were also asked about the frequency of banking transactions to
understand the need and importance of banking services to an individual.

More than 51% of the respondents transacted through banks on a weekly basis. This
proves that banking industry is a vital part of an individual’s decisions. The frequency of
banking transactions does not determine the expectation of service quality.

The respondents were asked preferred public sector and private sector banks and the
majority votes that is 43% votes were for HDFC Bank, followed by ICICI Bank. The
customer preference is more for HDFC bank in terms of their customer satisfaction
levels.

31
Respondents were asked to list their preferred banks on the basis of the service quality
experienced by them.

Preference
25

20

15

10
Preference
5

0
HDFC ICICI Axis Bank Kotak Other
Bank Bank Mahindra Banks
Bank

The above graph represents the choices of banks of the respondents with respect to the
service quality experienced by them. The X-axis represents various banks and Y-axis
represents the number of respondents opting for a particular bank.

HDFC received highest preference in terms of service quality provided to the customers.
Other banks include SBI, Citi Bank, Bank of Baroda, etc. which received significantly
lesser preference.

32
SERVQUAL Score: The SERVQUAL for Private Sector Banks is listed below:

Dimension Expectation Perception Gap

Assurance 260 212.3 -47.7
Reliability 260 198.3 -61.8
Empathy 260 150.8 -109.3
Responsiveness 260 197.0 -63.0
Tangibility 260 205.3 -54.7

The above table represents the SERVQUAL scores for each of the variable for private
sector banks in India. It is observed that largest gap was observed in Empathy variable.

On studying the variable in detail, it was observed that customers complained about
employees not patient to understand the issues of the customers. This was a little
surprising as private sector banks in India have customer redressal cells or a team
assigned to accept and work on the customer feedbacks.

This also impacts the Responsiveness variable in which customers complained that they
have to wait longer hours in the branch to get their problems solved. This situation arises
because the staff is not clear with the customer’s problem and hence helping the customer
with their problems takes longer period of time.

33
SERVQUAL Score: The SERVQUAL for Public Sector Banks is listed below:

Dimension Expectation Perception Gap

Assurance 260 189.7 -70.3
Reliability 260 180.3 -79.8
Empathy 260 177.0 -83.0
Responsiveness 260 170.0 -90.0
Tangibility 260 193.0 -67.0

The above table represents the SERVQUAL scores for public sector banks. It is observed
that the maximum gap is in the Responsiveness variable.

On further studying this variable in detail, it was observed that the customers had
complaints for waiting for longer hours in the branch to get the work done. This also led
to dissatisfaction as the work doesn’t get complete before the assured time.

The second gap was observed in the Empathy variable. Here the customers complained
about not getting personal attention in the bank to get their problems resolved.

34
Hypothesis Testing

Chi-Square Statistic:

Particulars Chi Square value P value

Private Banks 20 0.2
Public Banks 20 0.2

Chi Square Test of Independence evaluates whether two categorical variables depend
upon each other. Hence the null hypothesis stated that the SERVQUAL scores of five
variables (Reliability, Assurance, Tangibility, Responsiveness and Empathy) based on
customer perception is dependent on the type of bank in which the customers operate.

The results of the test are mentioned in the table above where, the chi square value for
private banks is 20 and chi square value for public banks is 20.

The P value for both for both the banks is 0.2 which is more than the significance level
taken for the test that is 0.05 and hence we accept the null hypothesis. There is enough
evidence that there is no association between the perceptions of service quality by
customers and the type of banks in which they operate.

35
 CONCLUSIONS

 Customer Satisfaction is one of the key elements every organizations needs to

focus on as it helps in gaining and retaining customers and have a sustainable
growth in the long term.
 Customer Satisfaction can be classified in 5 variables for service organizations.
Those five variables are:

Assurance

Reliability

Responsiveness

Empathy

Tangibility

 The above factors are very crucial for an optimal service quality provided to the
customer. The bank must be capable in assuring that all the processes are duly
completed for the customers and that they can rely on the bank with its personal
financial data.
 The customer satisfaction levels are affected by the way portals of banks work and
the time taken by the banks to process their documents for any issue as this
decides the responsiveness of the bank.
 The layouts of the bank, the technology used by the bank are all the tangible
aspects of the banking service. The attitude of the bank personnel, courtesy,
patience to hear out the customer complaints also plays a vital role in customer
satisfaction levels.

36
 According the SERVQUAL scores taken for the public sector and private sector
banks, the maximum gap was observed in the Empathy and Responsiveness
variable.
 The survey reflected that the private bank employees were not empathetic towards
the concerns of the customers, which was a surprising outcome as private banks
have customer redressal units to look after customer grievances.
 Banks can demonstrate empathy by thoughtfully shaping the customer experience.
Customers should be treated like individuals, rather than sources of revenue, on
every step of their journey.
 The public sector bank reflected a huge gap in the responsiveness variable. The
customers complained about having to wait for long hours in the branch to get the
problem solved and the issues are not solved before assured time.
 Banks can improve this by adaptation of better technology, efficient IT team and
well informed and well trained staff which can guide the customers through their
issues without customers wandering at several service centers.
 Chi Square Test of Independence was also conducted to verify if the perceptions
of the customers are independent of the type of the bank they operate. The test
declared that the perception was independent of the type of bank. Customers
expect similar service quality from every bank and have experienced gaps in the
service quality in both public and private sector banks.

37
 REFERENCES

 http://www.forbesindia.com/blog/economy-policy/what-is-being-done-to-
strengthen-indias-banking-system/
 https://www.mckinsey.com/featured-insights/india/mastering-the-new-realities-of-
indias-banking-sector
 http://www.oracle.com/us/industries/financial-services/045816.pdf
 http://www.sjm06.com/SJM%20ISSN1452-4864/2_2_2007_November_101-
280/2_2_217-226.pdf
 https://www.ukessays.com/dissertation/examples/marketing/origins-of-servqual-
model.php

 https://www.moneycontrol.com/stocks/marketinfo/marketcap/bse/banks-public-
sector.html
 https://www.moneycontrol.com/stocks/marketinfo/netsales/bse/banks-private-
sector.html

38
 ANNEXURE

ANNEXURE

1. Name

2. Age group
 18-25
 26-35
 36-45
 46 and above
3. Frequency of banking transactions
 Daily
 Weekly
 Monthly
 Quarterly
 Semi Annually
 Annually
4. Preferred Private Sector Bank
 HDFC Bank
 ICICI Bank
 Kotak Mahindra Bank
 Axis Bank
 Yes Bank
Other
5. Score the following factors from 1 to 5 for your preferred private sector bank
where,
 1 being lowest score and 5 being the highest score.

39
 1. The Account Login is very fast on the available portals of the bank.
2. All the procedural statements are clear and easy to understand
3. Bank staff has good knowledge to resolve queries
4. Customer gets a feeling of security about the transactions with the bank
5. The Bank portal runs smoothly
6. Staff always shows keen interest in solving customer needs
7. The Service provided and the transactions conducted are error free.
8. Customer gets individual attention
9. The bank staff is courteous while interacting with the staff
10. The staff is patient to understand the customer needs.
11. The policies and services are offered in line with the customers requirement
12. Customers receive prompt service
13. The service is completed before the assured time
14. Customers don’t have to wait for long hours in the branch
15. Bank shows care in collecting and maintaining personal information
16. The branch layout is easy to navigate
17. Bank has incorporated technology in providing hassle free service.

6. Preferred Public Sector Bank

 State Bank of India
 Punjab National Bank
 Bank of Baroda
 IDBI Bank
 Canara Bank
 Other

40
7. Score the following factors from 1 to 5 for your preferred private sector bank
where,
 1 being lowest score and 5 being the highest score.
1. The Account Login is very fast on the available portals of the bank.
2. All the procedural statements are clear and easy to understand
3. Bank staff has good knowledge to resolve queries
4. Customer gets a feeling of security about the transactions with the bank
5. The Bank portal runs smoothly
6. Staff always shows keen interest in solving customer needs
7. The Service provided and the transactions conducted are error free.
8. Customer gets individual attention
9. The bank staff is courteous while interacting with the staff
10. The staff is patient to understand the customer needs.
11. The policies and services are offered in line with the customers requirement
12. Customers receive prompt service
13. The service is completed before the assured time
14. Customers don’t have to wait for long hours in the branch
15. Bank shows care in collecting and maintaining personal information
16. The branch layout is easy to navigate
17. Bank has incorporated technology in providing hassle free service.

41
 General Management project

On

EIC Framework of Banking Industry in India

Submitted in partial fulfillment for the award of the degree of

Master of Management Studies (MMS)

(Under University of Mumbai)

Submitted By

Dnyanada Musale

(20171038)

Under the guidance of

Prof. Apurva Mehta

2017-19

Durgadevi Saraf Institute of Management Studies

 CERTIFICATE

This is to certify that project titled “EIC Framework of Banking Industry in India ”

is successfully completed by Ms. Dnyanada Musale during the IV Semester, in partial

fulfillment of Master’s Degree in Management Studies recognized by the University of
Mumbai for the academic year 2017-19 through Durgadevi Saraf Institute of
Management Studies.

This project work is original and not submitted earlier for the award of any degree/
diploma/ associateship of any other University/ Institution

Name: Prof. Apurva Mehta

Date:

(Signature of the Guide)

 DECLARATION

I hereby declare that this Project Report submitted by me to the Durgadevi Institute of
Management Studies is a bonafide work undertaken by me and it is not submitted to any
other University or Institution for the award of any degree/diploma/certificate or
published any time before.

Name:

Roll no:

Signature of the Student

 TABLE OF CONTENTS

Chapter No Title Page No

1 Introduction 1-2
1.1 Indian Banking Industry 3-6
1.2 Advantages for Banking Industry in India 7
1.3 PESTLE Analysis 8-9
1.4 Porters Five Forces Analysis 10-12
2 HDFC Bank 13-17
2.1 SWOT Analysis of HDFC Bank 18-21
2.2 Financial Summary of HDFC Bank 22
3 SBI 23-24
3.1 SWOT Analysis of SBI Bank 25-28
3.2 Financial Summary of SBI Bank 29
4 Findings and Conclusions 30
5 References 31
 EXECUTIVE SUMMARY

The paper aims at understanding the EIC framework for industry and company analysis.
It is a study on the banking industry and how the macro economic factors affect the
functioning of this industry. It also studies the micro aspects of the industry which can
help in understanding the nature of the industry. The paper also studies HDFC Bank,
largest private sector bank in India and SBI, the largest public sector bank in India.
 EIC FRAMEWORK OF BANKING INDUSTRY IN INDIA

INTRODUCTION

Fundamental Analysis is a method of evaluating a security in an attempt to assess its

intrinsic value, by examining related economic, financial, and other qualitative and
quantitative factors. The end goal of fundamental analysis is to produce a quantitative
value that an investor can compare with a security's current price, thus indicating whether
the security is undervalued or overvalued. Fundamental analysis determines the health
and performance of an underlying company by looking at key numbers and economic
indicators. The purpose is to identify fundamentally strong companies or industries and
fundamentally weak companies or industries.

EIC Analysis is the abbreviation for Economy, Industry and Company Analysis which is
undertaken to sturdy a company. It helps in studying the Micro and macro-economic
factors which affect the functioning of the company. EIC Analysis also studies the entire
economy and helps in identifying attractive industries and attractive companies within
such industries for investment purposes. The analysis is conducted because company
depends on the performance of the industry and economy as a whole. In the era of the
globalization we may add one more layer to the diagram to represent the international
economy.

EIC Framework has three basic components:

1. Economy Analysis
2. Industry Analysis
3. Company Analysis

1
Economic Analysis:

This refers to the study of economic factors that impacts the functioning and the
performance of the company. The factors like industrial growth rate of the economy, the
inflation rate will impact the buying behavior of the customers and eventually decide the
sales growth and profitability of the company. The financial conditions of the economy,
interest rates, capital structures will affect the funding policy of the company. Hence
economic analysis is of utmost importance to understand the macro external factors of the
company.

Industry Analysis:

Every industry operates in a particular pattern. Every company in the same industry will
have similar business cycles and hence the industrial factors do affect the functioning of
the company. Demand and supply conditions in the industry will affect the bargaining
power of the company. Existence of substitutes will affect the sales growth of the
company’s products. The unique offering provided by the company can only help it
sustain in the industry for a long period of time. Government policy affect the tax
structure, operational structure of the company and accordingly the company will be able
to retain more profits in the company.

Company Analysis:

Management undertakes company analysis to understand the strengths and weaknesses

within the company. Financial Structures, operating structures, capital structures and
competitive advantage are some of the important factors to be considered while analyzing
a particular company. The strength in these factors matters the most when the question is
of growth and sustainability of the company.

2
 INDIAN BANKING INDUSTRY

Banking Industry is the backbone of any economy. Reserve Bank of India is the Central
bank of India and has maintained the banking industry well-regulated and capitalized.
Credit, Market and Risk studies suggest that Indian banks are resilient and have
withstood the global downturn well. The composition of the economy and its population
also creates pressure on the banking system of India. Indian Banking faced major
setbacks in 1980’s when OPEC countries quadrupled the oil prices and there was a
drought in the country. So the banking industry had to consolidate itself and set standard
banking practices in the country. The key elements adopted by the banking system was
to slow down branch expansions and focus on covering spatial gaps in the rural areas,
developing action plan for training, customer service, credit management, productivity
and profitability. The banks always have a strategic role to play in increasing the savings
rate and channelize them to finance high-priority investments. In this process the major
activity was the Deposit Mobilization. RBI exerted a lot of pressure on all banks to strive
hard to get citizens to adopt banking habits. The results were gratifying; deposits
increased more than two and half times up to 264.6% times till 1990. The New Economic
Policy created a big way for the Indian Banks to flourish more in the area of corporate
banking. The 1991 revolution opened up the economy to the global market and helped in
generating more employment, improving standard of living of people and sophisticating
the systems and procedures in the economy to meet the global standards. Thus the
banking industry strengthened its grip to facilitate this change in the economy. Ever since
the population, industrial spread is growing bringing in newer challenges. Over the last
two years, the Government has taken some key policy decisions including a
recapitalization plan of ` 2,10,000 crore for public sector banks and introduction of the
GST. As mentioned earlier, the growth pangs are only short-term and in the long run,
GST is expected to give a fillip to the economy as a whole. The slowdown in growth
witnessed during 2016-17 (compared with 2015-16) intensified in the first quarter of

3
2017-18; GDP growth slowed to a 13-quarter low of 5.7 per cent, sharply lower than 7.9
per cent expansion in the same quarter of the preceding year. But, as the transitory impact
of both GST and the demonetization shock is on the wane, the economy appears to be
gradually regaining momentum. GDP growth rebounded to 6.5 per cent in the second
quarter of 2017-18, and further to 7.2 per cent in the third quarter of 2017-18 after
slowing down in the past five quarters. Going by the 2018 Union Budget, the focus of
fiscal policy in the coming year will be on revival of the rural economy and infrastructure
expenditure. Notwithstanding some positive uptake in private investment growth in the
second quarter, we believe incremental pick-up in private capital expenditure is likely to
be sector and sub-sector specific and gradual. We expect a more formidable recovery in
private capital expenditure cycle by the first half of the year ending March 31, 2019.
Overall, on the back of the assumption of a pick-up in private consumption, gradual
recovery in private capital expenditure and continued support from Government-led
capital spending we expect the real GDP growth for 2018-19 to rise to 7.3 per cent from
6.6 per cent in 2017-18. The moderation in inflation which was seen in 2016-17
continued in the early part of 2017-18 as well, with the CPI falling to a series low of 1.5
per cent in June 2017 driven by both lower food and core inflation. Having averaged 2.6
per cent in the first half of 2017-18, inflation inched up slightly in the second half
(average close to 4.4 per cent in second half of 2017-18). Going ahead in FY’19, CPI
Inflation could inch up to 5.1% on an average in the first half. While the base effect could
be favorable and lead to some moderation in inflation, a lot would depend on how other
risks like rising oil prices, higher minimum support prices impact of housing rent
allowance increase by several state governments pan out. Given the recent softer inflation
prints while the RBI can afford to wait longer and maintain status quo, eventually, we
believe, that elevation of some of the upside risks along with the revival in rural demand
could lead to a rate hike by the last quarter of 2018-19. Going forward a major risk to the
economy could be a sharp increase in oil prices, which could adversely affect inflation,
fiscal deficit and the current account deficit. Risks on the external front continue to loom
on account of monetary policy uncertainty in the developed nations.

4
Evolution of the Indian Banking Industry:

5
Classification of Indian Banking System can be shown as below:

INDIAN BANKING SYSTEM

Cooperative Commercial Regional Rural

Banks Banks Banks

Public Sector Private Sector Foreign Banks

Banks Banks

6
Advantages for the Banking Industry in India:

1. Robust Demand: The increase in working population and growing disposable

incomes will raise the demand for the baking services in India. Rural banking
along with home finance is expected to be the key drivers.
2. Innovation in Services: Mobile banking and Internet Banking will bring significant
difference if the banks improve operational efficiency. Vast un-banked population
generates a scope for innovation in the delivery of services.
3. Policy Support: Government also supporting by private capital infusion and
liquidity infusion in the banking industry. Various Yojanas introduced also
encourage the citizens to use banking services to avail the benefits of such
programs.
4. Business Fundamentals: There is a rise in the fees charged by the banks which
help in improving the revenue mix of the banks. High interest margins and efforts
to reduce NPA’s will ensure stronger fundamentals for the growth and
sustainability of the Indian Banking Industry.

5. Improved Risk Management Practices: Indian banks are increasingly focusing on

adopting integrated approach to risk management. Banks have already embraced
the international banking supervision accord of Basel II.; interestingly, according
to RBI, majority of the banks already meet capital requirements of Basel III,
which has a deadline of March 31, 2019. Most of the banks have put in place the
framework for asset-liability match, credit & derivatives risk management.
6. Technological Innovations: The digital payments system has evolved the most
among 25 countries including UK, China and Japan, with the IMPS being the
only system at level 5 in the Faster Payments Innovation Index. India has
stepped up to 28th position on the government’s adoption of e-payments rankings
in 2018.

7
 PESTLE ANALYSIS
The banking industry affects all countries. But it’s subservient to many factors,
particularly to the government and the economy. Banks are unable to behave
independently and must provide services based on specific laws that affect their growth
and offerings.
Political Factors:
Government laws affect the state of the banking sector. The government can intervene in
the matters of banking whenever, leaving the industry susceptible to political influence.
This includes corruption amongst political parties, or specific legislative laws such as
labor laws, trade restrictions, tariffs, and political stability.
1. Economic Factors:
The banking industry and the economy are tied. How income flows, whether the
economy is prospering or barely surviving during times of recession, affects how
much capital banks can access. Spending habits, and the reasons behind them,
affect when customers borrow or spend funds at banks. Additionally, when
inflation skyrockets, the bank experiences the backlash. Inflation affects currency
and its value and causes instability. Foreign investors think twice before providing
their funds when a particular country’s currency value is high. Exchange rates also
affect banks globally - stable currencies such as the US dollar impact
other currencies, spending habits, and inflation rates in other countries.
2. Socio-Cultural Factors:

Cultural influences, such as buying behaviors and necessities, affect how people
see and use banking options. People turn to banks for advice and assistance for
loans related to business, home, and academics. Consumers seek knowledge from
bank tellers regarding saving accounts, bank related credit cards, investments, and
more. Consumers desire a seamless banking experience. And technology is
developing to allow consumers to buy products easier, without requiring
assistance directly from banks.

8
3. Technological Factors:

Technology is changing how consumers handle their funds. Many banks offer a
mobile app to witness accounts, transfer funds, and pay bills on smartphones.
Smartphones can scan cheques, and the bank can process it from their end, at their
location. This change helps to save paper and the need to drive directly to the
branch to handle these affairs. Debit cards are also changing. Chips have been
implemented, requiring users to insert their card into debit machines rather than
swiping them. Other countries, such as Canada, have implemented a “tap” option
— tapping the debit card onto the device, requiring no pin, for a transaction to
complete. These changes make it easier on the user to make purchases without
required intrusion from banks. Even banks themselves are utilizing technology
within the workplace. Telecommunicating through virtual meetings is being
embraced. It replaces the need for in-person meetings.

4. Legal Factors:
The banking industry follows strict laws regarding privacy, consumer laws, and
trade structures to confirm frameworks within the industry. Such structures are
required for customers in the allocated country and for international users.

5. Environmental Factors:
With the use of technology — particularly with mobile banking apps — the use
for paper is being reduced. Additionally, the need to drive directly to a branch to
handle affairs is minimized as well. Many issues are taken care of through mobile
apps and online banking services. Consumers can apply for credit cards online,
buy cheques online, and have many of their banking questions answered online or
by phone. Thus, this has helped in reducing individual environmental footprints.

9
 PORTERS FIVE FORCES ANALYSIS

Threat of
New
Entrants

Bargaining
Threat of Industry
Power of
Substitutes Rivalry
Buyers

Bargaining
power of
Suppliers

Threat of New Entrants:

The threat of entry of new firms into an industry depends on extent of barrier to entry like
economies of scale, capital requirement, government policies, switching cost for buyers,
etc. To open a new bank, huge capital investment is required. Moreover, there are lots of
regulatory issues like government regulations for licensing, etc. Despite of these
obstacles, a large number of banks are entering the market so the threat of new entrants
should be high. Trust is one of the biggest hurdles for entry of a new bank. It is difficult
for new banks to start up due to involvement of money & financial information of other
people. People tend to trust big brand names that are well known big banks, which,
according to them are trustworthy. This centralization further makes it difficult for new
banks to enter. As a result, the threat of new entrants is relatively low in banking
industry.

10
Bargaining Power of Suppliers:
The power of suppliers is dependent on number of suppliers, brand power, possibility of
forward integration and dependence of customers, etc. In banking industry, capital is the
major resource and primarily there are 4 suppliers of capital i.e. Deposits of the customer,
loans & mortgages, mortgaged securities and loans taken from other financial
institutions. Through these major suppliers, the bank can meet its requirements like
borrowing needs of the customers and at the same time keeping enough money to fulfill
withdrawal requirements. The power of the suppliers is widely based on the market and
impact of this power is between medium to high.

Bargaining Power of Buyers:

Buyer’s power depends on concentration of buyers, alternative sources of purchase,

possibility of backward integrations. As far as an individual is concerned, it is not a major
threat. But, if the cost of switching is higher, then this can affect the power of the buyers.
If a single bank looks after all the banking requirements of the customer like savings,
mortgages and other financial needs, then it will be a big botheration for the customer to
move to some other bank. In order to persuade customers to move to their bank, the
entrepreneurs may use different tactics like lowering the switching costs, but most of the
customer may still choose to stay with their current bank. The internet has played a vital
role in increasing the power of the customer in this industry. Customer can very easily
and conveniently compare various banks at almost no cost at all. The cost of opening and
maintaining an account as well as the rates offered by different banks can be checked by
the customer anytime, anywhere.

Threat of Substitutes:

The more substitutes a product has, the demand for the product becomes more elastic.
Elastic demand means increased consumer price sensitivity which equates to less
11
certainty of profits. Availability of substitutes of products places limits on the prices
market leaders can charge. The banking industry is not as much affected by rival banks
but the non-financial organizations pose bigger threat of substitution. Although these
organizations do not provide deposits, withdrawals, etc, but services such as mutual
funds, insurance and fixed earning securities are offered by these companies in much
convenient way. Method of payment and loans pose a threat of substitutes, which is
relatively higher. For example, dealer who sell costly items like automobiles, ornaments,
electronics, etc. usually prefer financing expensive items. Usually, these companies give
lower rate of interest on bill payment as compared to loan taken from any bank.

Industry Rivalry:

Rivalry among existing firms may manifest itself in a number of ways- price competition,
new products, increased levels of customer service, warranties and guarantees,
advertising, better networks of wholesale distributors, and so on. There is very high
competition is banking industry. This industry is into existence since hundreds of years
and is servicing people since then. Due to this reason, banks need to try to inveigle
customers from their rival banks. This is done through lower rates of interest on loans,
higher rates on deposits, better convenient after sale services and other investment related
services. The basic competition is this industry is to give best services within minimum
time period. But due to this completion banks are suffering from lower Returns on Assets
(ROA). Due to this nature of the banking industry, there is possibility of more
consolidation of the industry. Bigger banks go for acquiring or merging with smaller
banks instead of spending valuable money on advertising and marketing.

12
 HDFC BANK LIMITED

The Housing Development Finance Corporation Limited (HDFC) was amongst the first
to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of RBI's liberalization of the Indian Banking Industry in
1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited',
with its registered office in Mumbai, India. HDFC Bank commenced operations as a
Scheduled Commercial Bank in January 1995. HDFC is India's premier housing finance
company and enjoys an impeccable track record in India as well as in international
markets. Since its inception in 1977, the Corporation has maintained a consistent and
healthy growth in its operations to remain the market leader in mortgages. Its outstanding
loan portfolio covers well over a million dwelling units. HDFC has developed significant
expertise in retail mortgage loans to different market segments and also has a large
corporate client base for its housing related credit facilities. With its experience in the
financial markets, strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
HDFC Bank's mission is to be a World Class Indian Bank. The objective is to build
sound customer franchises across distinct businesses so as to be the preferred provider of
banking services for target retail and wholesale customer segments, and to achieve
healthy growth in profitability, consistent with the bank's risk appetite. The bank is
committed to maintain the highest level of ethical standards, professional integrity,
corporate governance and regulatory compliance. HDFC Bank’s business philosophy is
based on five core values: Operational Excellence, Customer Focus, Product Leadership,
People and Sustainability. As on 30 June 2018 the authorized share capital of the Bank is
Rs. 650 crore. The paid-up share capital of the Bank as on the said date is Rs.
520,83,15,734 /- which is comprising of 260,41,57,867 equity shares of the face value of

13
Rs 2/- each. The HDFC Group holds 20.86 % of the Bank's equity and about 18.16 % of
the equity is held by the ADS / GDR Depositories (in respect of the bank's American
Depository Shares (ADS) and Global Depository Receipts (GDR) Issues). 33.44 % of the
equity is held by Foreign Institutional Investors (FIIs) and the Bank has 5, 48,942
shareholders. The shares are listed on the BSE Limited and The National Stock Exchange
of India Limited. On May 23, 2008, the amalgamation of Centurion Bank of Punjab with
HDFC Bank was formally approved by Reserve Bank of India to complete the statutory
and regulatory approval process. As per the scheme of amalgamation, shareholders of
CBoP received 1 share of HDFC Bank for every 29 shares of CBoP.

The amalgamation added significant value to HDFC Bank in terms of increased branch
network, geographic reach, and customer base, and a bigger pool of skilled manpower. In
a milestone transaction in the Indian banking industry, Times Bank Limited (another new
private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged
with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two
private banks in the New Generation Private Sector Banks. As per the scheme of
amalgamation approved by the shareholders of both banks and the Reserve Bank of India,
shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of
Times Bank. HDFC Bank is headquartered in Mumbai. As of December 31, 2018, the
Bank's distribution network was at 4,963 branches across 2,727 cities. All branches are
linked online on a real-time basis. Customers across India are also serviced through
multiple delivery channels such as Phone Banking, Net Banking, Mobile Banking, and
SMS based banking. The Bank's expansion plans take into account the need to have a
presence in all major industrial and commercial centers, where its corporate customers
are located, as well as the need to build a strong retail customer base for both deposits
and loan products. Being a clearing / settlement bank to various leading stock exchanges,
the Bank has branches in centers where the NSE / BSE have a strong and active member
base. The Bank also has a network of 13,160 ATMs across India. HDFC Bank's ATM

14
network can be accessed by all domestic and international Visa / MasterCard, Visa
Electron / Maestro, Plus / Cirrus and American Express Credit / Charge cardholders.
HDFC Bank operates in a highly automated environment in terms of information
technology and communication systems. All the bank’s branches have online
connectivity, which enables the bank to offer speedy funds transfer facilities to its
customers. Multi-branch access is also provided to retail customers through the branch
network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. In terms of
core banking software, the Corporate Banking business is supported by Flexcube, while
the Retail Banking business by Finware, both from i-flex Solutions Ltd. The systems are
open, scalable and web-enabled. The Bank has prioritized its engagement in technology
and the internet as one of its key goals and has already made significant progress in web-
enabling its core businesses. In each of its businesses, the Bank has succeeded in
leveraging its market position, expertise and technology to create a competitive
advantage and build market share.

HDFC Bank caters to a wide range of banking services covering commercial and
investment banking on the wholesale side and transactional / branch banking on the retail
side. The bank has three key business segments:

Wholesale-Banking
The Bank's target market is primarily large, blue-chip manufacturing companies in
the Indian corporate sector and to a lesser extent, small & mid-sized corporates and
agri-based businesses. For these customers, the Bank provides a wide range of
commercial and transactional banking services, including working capital finance,
trade services, transactional services, cash management, etc. The bank is also a
leading provider of structured solutions, which combine cash management services

15
with vendor and distributor finance for facilitating superior supply chain
management for its corporate customers. Based on its superior product delivery /
service levels and strong customer orientation, the Bank has made significant inroads
into the banking consortia of a number of leading Indian corporates including
multinationals, companies from the domestic business houses and prime public
sector companies. It is recognized as a leading provider of cash management and
transactional banking solutions to corporate customers, mutual funds, stock
exchange members and banks.

Treasury
Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With
the liberalization of the financial markets in India, corporates need more
sophisticated risk management information, advice and product structures. These and
fine pricing on various treasury products are provided through the bank's Treasury
team. To comply with statutory reserve requirements, the bank is required to hold
25% of its deposits in government securities. The Treasury business is responsible
for managing the returns and market risk on this investment portfolio.

Retail-Banking
The objective of the Retail Bank is to provide its target market customers a full range
of financial products and banking services, giving the customer a one-stop window
for all his/her banking requirements. The products are backed by world-class service
and delivered to customers through the growing branch network, as well as through
alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile
Banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank
Plus and the Investment Advisory Services programs have been designed keeping in
mind needs of customers who seek distinct financial solutions, information and
advice on various investment avenues. The Bank also has a wide array of retail loan

16
products including Auto Loans, Loans against marketable securities, Personal Loans
and Loans for Two-wheelers. It is also a leading provider of Depository Participant
(DP) services for retail customers, providing customers the facility to hold their
investments in electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the MasterCard Maestro debit
card as well. The Bank launched its credit card business in late 2001. By March
2015, the bank had a total card base (debit and credit cards) of over 25 million. The
Bank is also one of the leading players in the "merchant acquiring" business with
over 235,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at
merchant establishments. The Bank is well positioned as a leader in various net
based B2C opportunities including a wide range of internet banking services for
Fixed Deposits, Loans, Bill Payments, etc.

17
 SWOT ANALYSIS OF HDFC BANK
Strengths:
 Superb Performance in New Markets – HDFC Bank Limited has built expertise at
entering new markets and making success of them. The expansion has helped the
organization to build new revenue stream and diversify the economic cycle risk in the
markets it operates in.
 Strong distribution network – Over the years HDFC Bank Limited has built a reliable
distribution network that can reach majority of its potential market.
 Strong Free Cash Flow – HDFC Bank Limited has strong free cash flows that provide
resources in the hand of the company to expand into new projects.
 Strong dealer community – It has built a culture among distributor & dealers where
the dealers not only promote company’s products but also invest in training the sales
team to explain to the customer how he/she can extract the maximum benefits out of
the products.
 Automation of activities brought consistency of quality to HDFC Bank Limited
products and has enabled the company to scale up and scale down based on the
demand conditions in the market.
 Highly skilled workforce through successful training and learning programs. HDFC
Bank Limited is investing huge resources in training and development of its
employees resulting in a workforce that is not only highly skilled but also motivated
to achieve more.
 Highly successful at Go to Market strategies for its products.
 Reliable suppliers – It has a strong base of reliable supplier of raw material thus
enabling the company to overcome any supply chain bottlenecks.

18
Weaknesses:
 Limited success outside core business – Even though HDFC Bank Limited is one of
the leading organizations in its industry it has faced challenges in moving to other
product segments with its present culture.
 Investment in Research and Development is below the fastest growing players in the
industry. Even though HDFC Bank Limited is spending above the industry average on
Research and Development, it has not been able to compete with the leading players
in the industry in terms of innovation. It has come across as a mature firm looking
forward to bring out products based on tested features in the market.
 Days inventory is high compare to the competitors – making the company raise more
capital to invest in the channel. This can impact the long term growth of HDFC Bank
Limited
 The profitability ratio and Net Contribution % of HDFC Bank Limited are below the
industry average.
 Not very good at product demand forecasting leading to higher rate of missed
opportunities compare to its competitors. One of the reason why the days inventory is
high compare to its competitors is that HDFC Bank Limited is not very good at
demand forecasting thus end up keeping higher inventory both in-house and in
channel.
 The marketing of the products left a lot to be desired. Even though the product is a
success in terms of sale but its positioning and unique selling proposition is not
clearly defined which can lead to the attacks in this segment from the competitors.

19
Opportunities:
 Organization’s core competencies can be a success in similar other products field. A
comparative example could be - GE healthcare research helped it in developing better
Oil drilling machines.
 The new taxation policy can significantly impact the way of doing business and can
open new opportunity for established players such as HDFC Bank Limited to increase
its profitability.
 New trends in the consumer behavior can open up new market for the HDFC Bank
Limited. It provides a great opportunity for the organization to build new revenue
streams and diversify into new product categories too.
 New environmental policies – The new opportunities will create a level playing field
for all the players in the industry. It represent a great opportunity for HDFC Bank
Limited to drive home its advantage in new technology and gain market share in the
new product category.
 New customers from online channel – Over the past few years the company has
invested vast sum of money into the online platform. This investment has opened new
sales channel for HDFC Bank Limited. In the next few years the company can
leverage this opportunity by knowing its customer better and serving their needs using
big data analytics.
 The new technology provides an opportunity to HDFC Bank Limited to practices
differentiated pricing strategy in the new market. It will enable the firm to maintain its
loyal customers with great service and lure new customers through other value
oriented propositions.
 Opening up of new markets because of government agreement – the adoption of new
technology standard and government free trade agreement has provided HDFC Bank
Limited an opportunity to enter a new emerging market.

20
Threats:
 The demand of the highly profitable products is seasonal in nature and any unlikely
event during the peak season may impact the profitability of the company in short to
medium term.
 New technologies developed by the competitor or market disruptor could be a serious
threat to the industry in medium to long term future.
 No regular supply of innovative products – Over the years the company has
developed numerous products but those are often response to the development by
other players. Secondly the supply of new products is not regular thus leading to high
and low swings in the sales number over period of time.
 Rising raw material can pose a threat to the HDFC Bank Limited profitability.
 Imitation of the counterfeit and low quality product is also a threat to HDFC Bank
Limited’s product especially in the emerging markets and low income markets.
 Intense competition – Stable profitability has increased the number of players in the
industry over last two years which has put downward pressure on not only
profitability but also on overall sales.

21
Financial Summary of HDFC Bank:

Financial Summary (Rs. In crores)

Particulars March 2018 March 2017 March 2016
Total Income 55,315.17 45,435.71 38,343.24
Total Profit / Loss 17,486.75 14,549.66 12,296.23
EPS 67.76 57.18 48.84
Retail Assets 376167 295161 248319
Return on Capital 18.20% 18% 18%

The total income of the bank increased in the year 2018 by 21.74% as compared to the
financial year 2017. The Net profit in 2018 also grew by 20.20% as compared to the
previous year. The NPA’s for HDFC Bank stand at 0.4% which is the lowest in the
industry. The EPS also grew by 18.50% in the financial year 2018.
Other Information:
The bank caters to 4.36 crore of customers as on March 2018. It has 4787 branches in the
country. In 2018, 85% of the total transactions were through digital channels.

22
 STATE BANK OF INDIA (SBI)

The origin of the State Bank of India goes back to the first decade of the nineteenth
century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806. Three
years later the bank received its charter and it was re-designed as the Bank of Bengal (2
January 1809). A unique institution, it was the first joint-stock bank of British India
sponsored by the Government of Bengal. The Bank of Bombay (15 April 1840) and the
Bank of Madras (1 July 1843) followed the Bank of Bengal. These three banks remained
at the apex of modern banking in India till their amalgamation as the Imperial Bank of
India on 27 January 1921. The three banks were governed by royal charters, which were
revised from time to time. Each charter provided for a share capital, four-fifth of which
were privately subscribed and the rest owned by the provincial government. The
members of the board of directors, which managed the affairs of each bank, were mostly
proprietary directors representing the large European managing agency houses in India.
The rest were government nominees, invariably civil servants, one of whom was elected
as the president of the board. The business of the banks was initially confined to
discounting of bills of exchange or other negotiable private securities, keeping cash
accounts and receiving deposits and issuing and circulating cash notes. Loans were
restricted to Rs.one lakh and the period of accommodation confined to three months only.
The security for such loans was public securities, commonly called Company's Paper,
bullion, treasure, plate, jewels, or goods 'not of a perishable nature' and no interest could
be charged beyond a rate of twelve per cent. Loans against goods like opium, indigo, salt
woolens, cotton, cotton piece goods, mule twist and silk goods were also granted but such
finance by way of cash credits gained momentum only from the third decade of the
nineteenth century. All commodities, including tea, sugar and jute, which began to be
financed later, were either pledged or hypothecated to the bank. Demand promissory
notes were signed by the borrower in favor of the guarantor, which was in turn endorsed
23
to the bank. Lending against shares of the banks or on the mortgage of houses, land or
other real property was, however, forbidden.
Indians were the principal borrowers against deposit of Company's paper, while the
business of discounts on private as well as salary bills was almost the exclusive
monopoly of individuals Europeans and their partnership firms. But the main function of
the three banks, as far as the government was concerned, was to help the latter raise loans
from time to time and also provide a degree of stability to the prices of government
securities. When India attained freedom, the Imperial Bank had a capital base (including
reserves) of Rs.11.85 crores, deposits and advances of Rs.275.14 crores and Rs.72.94
crores respectively and a network of 172 branches and more than 200 sub offices
extending all over the country. The presidency Banks of Bengal, Bombay and Madras
with their 70 branches were merged in 1921 to form the Imperial Bank of India. The triad
had been transformed into a monolith and a giant among Indian commercial banks had
emerged. The new bank took on the triple role of a commercial bank, a banker's bank and
a banker to the government. But this creation was preceded by years of deliberations on
the need for a 'State Bank of India'. What eventually emerged was a 'half-way house'
combining the functions of a commercial bank and a quasi-central bank.
The establishment of the Reserve Bank of India as the central bank of the country in 1935
ended the quasi-central banking role of the Imperial Bank. The latter ceased to be bankers
to the Government of India and instead became agent of the Reserve Bank for the
transaction of government business at centers at which the central bank was not
established. But it continued to maintain currency chests and small coin depots and
operate the remittance facilities scheme for other banks and the public on terms stipulated
by the Reserve Bank. It also acted as a bankers' bank by holding their surplus cash and
granting them advances against authorized securities. The management of the bank
clearing houses also continued with it at many places where the Reserve Bank did not
have offices. The bank was also the biggest tenderer at the Treasury bill auctions
conducted by the Reserve Bank on behalf of the Government. The establishment of the

24
Reserve Bank simultaneously saw important amendments being made to the constitution
of the Imperial Bank converting it into a purely commercial bank.

SWOT ANALYSIS OF SBI

Strengths:
 SBI is the largest bank in India in terms of market share, revenue and assets.

 As per recent data the bank has more than 22000 branches and 40,000 ATM
centers.
The bank has a merged with State Bank of Saurashtra, State bank of Indore and
the bank is planning to go further acquisition in the upcoming years.

 SBI has the first mover advantage in commercial banking service

SBI has recently changed its vision and mission statements showing a sign of
inclination towards new age banking services.

 SBI has a separate act that governs its functioning and hence gets the status of
being a privileged bank.

 It employs over 300000 employees all over the country which gives them a strong
human resource to execute growth plans.

 It is the first public sector bank to move to CBS. It has its presence in 35 countries
with more than 200 branches.

25
Weaknesses:

 Lack of proper technology driven services when compared to private banks.

 Employees show reluctance to solve issues quickly due to higher job security and
customers’ waiting period is long when compared to private banks.

 The banks spends a huge amount on its rented buildings

SBI has the largest number of employees in banking sector; hence the bank spends
a considerable amount of its income in employee’s salary compensation.

 In spite of modernization, the bank still carries the perception of traditional bank
to new age customers.
SBI fails to attract salary accounts of corporate and many government sector
employees salary accounts are also shifted to private bank for ease of operations
unlike before.

26
Opportunities:

 SBI’s merger with five more banks namely State Bank of Hyderabad, State bank
of Patiala, State bank of Bikaner and Jaipur, State of bank of Travancore and
State bank of Mysore are in approval stage
Mergers will result in expansion of market share to defend its number one
position.

 SBI is planning to expand and invest in international operations due to good

inflow of money from Asian Market.

 Since the bank is yet to modernize few of its banking operations, there is a better
scope of using advanced technologies and software to improve customer relations.

 Young and talented pool of graduates and B schools are in rise to open new
horizon to so called “old government bank”.

27
Threats:

 There is a reduction in market share to its close competitor ICICI

other private banks like HDFC, AXIS bank etc.

 FDIs allowed in banking sector is increased to 49%, this is a major threat to SBI as
people tend to switch to foreign banks for better facilities and technologies in
banking service.

 Customer prefer to switch to private banks and financial service providers for
loans and mortgages, as SBI involves stringent verification procedures and take
long time for processing.

28
Financial Summary of SBI:

Financial Summary (Rs. In crores)

Particulars March 2018 March 2017 March 2016
Total Income 459408.13 370159.55 334078.66
Total Profit / Loss -6547.45 10484.10 9950.65

EPS -7.67 13.43 12.98

Retail Assets 3454752 2705966.30 2357617.54

The total income of SBI went up 19.42% in the year 2018 as compared to the previous
year. However due to poor management of the operations, the bank incurred a loss of Rs.
6547.45 crores. This also led to a loss in the EPS by 157% in the year 2018.

Other Information:
SBI is the largest bank in India with a customer base of 42.2 crores and total of more than
22000 branches all over the country. SBI saw a growth of 13.26% in case of home loans
in 2018 and 15.19% growth in auto loans in 2018. SBI also has a share of 30.40% in the
market share of Debit Spends in the country.

29
 FINDINGS AND CONCLUSIONS
The banking industry becomes the backbone of every economy and economy can grow
well only if it’s banking industry is efficient and properly regulated. Banking industry is
also one such industry which is greatly affected by technological advancements. The
banking companies can survive by constantly providing good service to their customers.
The two biggest players in the banking industry are HDFC Bank (Private Sector Bank)
and SBI (Public Sector Bank) in terms of the income earned in the previous financial
years. The classification of banking industry is on the basis of capital structure of the
company. This industry handles a major responsibility of mobilizing economic resources
from the society and channelizing them to the industries that require these funds and
generate returns for the owner of these assets. This ensures a smooth transfer of funds
from one constituent of the economic circle to the other. Thus a well-regulated, string
banking industry can help the economy to grow and develop faster.

30
 References

1. https://www.sbi.co.in/AR1718/assets/PDF/English/SBI-AR_2017-18.pdf
2. https://www.sbi.co.in/AR1617/PDF/English/Director%20Report.pdf
3. https://economictimes.indiatimes.com/state-bank-of-india/stocks/companyid-
11984.cms
4. https://www.business-standard.com/company/st-bk-of-india-1375/financials-
overview/1
5. https://www.moneycontrol.com/annual-report/hdfcbank/directors-
report/HDF01#HDF01
6. https://www.hdfcbank.com/htdocs/common/pdf/corporate/Annual_Report_2017_1
8.pdf
7. https://economictimes.indiatimes.com/hdfc-bank-ltd/stocks/companyid-9195.cms
8. https://www.hdfcbank.com/aboutus/default.htm
9. https://www.business-standard.com/company/hdfc-bank-
4987/information/company-history
10. https://www.ibef.org/industry/banking-india.aspx

31
 Social Relevance project

On

A study on reasons for students to dropout from schools or colleges in India

Submitted in partial fulfillment for the award of the degree of

Master of Management Studies (MMS)

(Under University of Mumbai)

Submitted By

Dnyanada Musale

(20171038)

Under the guidance of

Prof. Apurva Mehta

2017-19

Durgadevi Saraf Institute of Management Studies

 CERTIFICATE

This is to certify that project titled “A study on reasons for students to dropout from
schools or colleges in India” is successfully completed by Ms. Dnyanada Musale during
the IV Semester, in partial fulfillment of Master’s Degree in Management Studies
recognized by the University of Mumbai for the academic year 2017-19 through
Durgadevi Saraf Institute of Management Studies.

This project work is original and not submitted earlier for the award of any degree/
diploma/ associateship of any other University/ Institution

Name: Prof. Apurva Mehta

Date:

(Signature of the Guide)

 DECLARATION

I hereby declare that this Project Report submitted by me to the Durgadevi Institute of
Management Studies is a bonafide work undertaken by me and it is not submitted to any
other University or Institution for the award of any degree/diploma/certificate or
published any time before.

Name:

Roll no:

Signature of the Student

 TABLE OF CONTENTS

Chapter No Title Page No

1 Introduction 1-2
1.1 Dropping out of Students in India 3
1.2 Need for Mobilization 4-5
2 Scope of the Study 6
3 Objectives of the Study 6
4 Literature Review 7-11
5 Research Methodology 12
6 Data Analysis 13-14
7 Conclusions and Recommendations 15-16
8 References 17
9 Annexures 18-21
 EXECUTIVE SUMMARY

Education is a basic right of every child in the country. There are many students who
dropout from schools and colleges in India. This paper aims at studying the reasons for
students to dropout of schools or colleges. It also aims at studying the mobilization of
these students and the positive effects of the same for the society at large. The study was
conducted using Questionnaire method as well as a secondary research from government
portals.
A STUDY ON REASONS FOR STUDENTS TO DROPOUT FROM
SCHOOLS OR COLLEGES IN INDIA

INTRODUCTION

School Education or Primary education plays a very vital role in the nurturing of every
child in the world. Primary education is the basic and foremost right of every child. Its
availability and provision is not only the responsibility of state but parents and
households. Primary education brings awareness among the masses, opens avenues for
opportunities as well self-advancement and improvement and reduces chronic and inter-
generational poverty. As a first step in the creation of welfare and just society, universal
primary education is an absolute pre-requisite for sustainable development.

Our past President Dr. A.P.J. Abdul Kalam additionally forced the importance of
primary education he says “India's future depends on quality of primary
education” and he says at the seminar titled as "Evolution of the distinctive."
Education is that the principal instrument of developing human capabilities that has the
instrument to face the each scenario. It’s each the cause and impact of development.
Education sector is one amongst the necessary social sectors within the developing
countries. If the standard can maintain in primary education, then mechanically all the
issues in primary education i.e. enrollment, drop-out, out of college, retention,
completion so on are robotic and step by step resolved. It permits the kid to reveal his
inner skills in order that the kid develops his temperament.
Every single child that means girls as well as boys should be able to complete full course
of primary education. In order to compete with the surrounding world, children are
prepared from very early childhood. As early as four or five years, the children grew up
in the home, where they seek advice about how family life, and how to interact with
people in general pretense. But life and the competition and the whole world, life and
excel in the upcoming one in later life.

1
General education in various disciplines is essential to provide each of which is primary
education for children. Primary education is compulsory for students on life, where all
the related disciplines the basic knowledge and necessary, which may include counting,
word formation and understanding of general ethics, norms and standards of knowledge
around.

Primary education is usually started before, in some countries, such as nursery classes in
other counties is the first step the main nursery. All children to education, the use of this
very crude and professional life around the world, they have to deal with in later life
information. This is in all countries, all of the programs and courses to take mandatory
status and children with language, art, science, mathematics and other aspects of life,
especially the basic knowledge of religion, introduced compulsory education.

Primary education usually ends at ten years old as fifth grade students through their
exams. Started within this period of time, so that all students in the community to work as
a class and how to deal with and obey the general understanding in society. Other than
this discipline is the most important aspect is secondary in these initial experiences to
strengthen vocational education in the former stream. There are so many reasons for
children to miss school, but poverty is the main one. Parents cannot afford school fees,
uniforms and books amount. Most of communities may not have enough resources to run
a school. In most of rural areas, schools are at long distances which make children to
avoid them and especially it makes impossible for girls. The explanation for girls’
exclusion isn’t simple. In different cultural values boys get priority when it comes to
education. Girls are kept home to help with childcare and household working. They do
not enjoy the same freedom of movement as boys.

2
Dropping Out of Students in India:

The problem of dropout has been continually troubling the primary education system not
only in India but in other developing countries also. Dropout does not mean mere
rejection of school by children. It leads to wastage of the funds invested in school
buildings, teachers’ salaries, equipment, textbooks and so on. It also means the existence
of some deficiencies in the organization of the primary education system. The subject of
‘dropout’ or ‘wastage’ has been studied in India and other countries over the past 65
years and many of the reasons for this educational malady are now known. The intentions
may be beyond reproach but the major lacuna in their designs has been the absence of a
comprehensive dialogue with the people to understand their perception of education and
of the place of the child in the family. This is the reason why several developing
countries are now reorganizing the primary education system so as to make it people-
oriented, instead of official-oriented. It is the administrator’s views on ‘control’ of the
system and the teacher’s view of the child as raw material to be controlled and shaped
that has resulted in the linear nature and illogical uniformity of primary schooling.
Recently, however, alternatives have been successfully tried out in countries like China,
Indonesia, and some Latin American countries with considerable benefit. To adjust the
system of education to the social, economic and cultural circumstances of the children
and their community requires a people-oriented administration. Also, teaching-learning
techniques need cultural adjustments so as to be more pupil-oriented than teacher-
oriented as they happen to be at present in our country. India is one of the countries
which have maximum population in the working age group of 18-40; this proves to be a
great strength of the country. However, these students and youths must be well trained in
order to gain maximum productivity in the country, as skilled labor helps in the optimum
utilization of the country’s resources. This study will help in studying the causes for
dropping out of schools. It will also help in suggesting possible solutions to mobilize
such drop out students and upgrade them to a better future.

3
Why is Mobilization of Dropout Students Needed?

Mobilization is a process of ensuring that the project, program or portfolio has

appropriate organizational and technical infrastructures and mechanisms for putting
resources in place. In simple words, Mobilization is the step to organize people to support
something or to make a part of an organization ready for a special purpose.

Community mobilization is a process through which action is stimulated by a community

itself, or by others, that is planned, carried out, and evaluated by a community’s
individuals, groups, and organizations on a participatory and sustained basis to improve
the health, hygiene and education levels so as to enhance the overall standard of living in
the community.

A group of people have transcended their differences to meet on equal terms in order to
facilitate a participatory decision-making process. In other words, it can be viewed as a
process which begins a dialogue among members of the community to determine who,
what, and how issues are decided, and also to provide an avenue for everyone to
participate in decisions that affect their lives.

Community mobilization needs many analytical and supportive resources which are
internal (inside the community) and external (outside the community) as well. Resources
include:

 Leadership
 Organizational capacity
 Communications channels
 Assessments
 Problem solving
 Resource mobilization
 Administrative and operational management

4
Such Mobilization activity is important to be able to bring the drop out students under
one roof and provide them with the basic training so that they can be brought into main
stream working force of the country. India requires more and more working population to
be a part of the development of this country and for such growth India needs technically
skilled population. There are still places where elementary education is available only to
the fortunate ones and in such conditions; technical knowledge is a far goal for such
students. A survey by Salam India; an organization working for the mobilization of
dropout students; have conducted a survey and found the following facts:

3 out of 20 children from low income group drop out of

school

40% students will not complete thier primary education

3 out of 5 Indians are unemployable due to poor skills

5500 children try tobacco everyday for the first time

10130000 children between age 5-14 are negaged in

underage labour in India

68% of Municipal school children want to learn

conversational English

5
 SCOPE OF THE STUDY

The scope of the study is limited to Mumbai Suburb area of India. The data for the study
would be collected using secondary sources like the planning commission of India,
NCBI, etc. A primary research would also be involved in identifying the dropout students
in the Suburb areas of Mumbai by using the questionnaire method.

OBJECTIVES OF THE STUDY

1. To study the reasons for dropouts of school and college students

2. To check for possible solutions to mobilize the identified dropout students

6
 LITERATURE REVIEW

Michalis Xenos, Christos Pierrakeas, Panagiotis Pintelas (10th October 2015) in the
paper: A survey on student dropout rates and dropout causes concerning the
students in the Course of Informatics of the Hellenic Open University

This paper focuses on university-level education offered by methods of distance learning

in the field of computers and aims at the investigation of the main causes for student
dropouts. The presented study is based on the students of the Course of “Informatics”,
Faculty of Science and Technology of the Hellenic Open University and investigates the
particularities of education provided through the use of computers and technology in
general. This paper presents information about the students' profile, the use of computer
technology, the percentage of dropouts, as well as a classification of the reasons for
dropouts based on interviews with the students. The study shows that dropouts are
correlated with the use of technological means and, based on this fact, the Hellenic Open
University implemented interventions in the use of such means. It also proves that a
correlation exists between dropouts and students' age, but not gender, although female
students are more reluctant to start following a course. However, it is also shown that
female students' commitment to a course is stronger and thus, they do not drop out as
easily as male students do. Furthermore, the results of this study strongly correlate
dropouts to the existence of previous education in the field of Informatics or to working
with computers, but not to the degree of specialisation in computers. Finally, the paper
presents the reasons provided by the students for drooping out, with the main reasons
being the inability to estimate the time required for university-level studies and the
perceived difficulty of the computers course.

7
Russell Rumberger (1st June 1990) in the paper: High School Dropouts-A review of
issues and Evidence

The problem of high school dropouts has generated increased interest among researchers,
policymakers, and educators in recent years. This paper examines the many issues
involved in trying to understand and solve this complex social and educational problem.
The issues are grouped into four areas covering the incidence, causes, consequences, and
solutions to the problem. Within each area, the discussion identifies the important issues
involved, the current state of research on the issues, and considerations for future
research.

John M, Karen Burke, Jr Morison (1st March 2001) in the paper The Silent
Epidemic- Perspectives of High School Dropouts

The central message of this report is that while some students drop out because of
significant academic challenges, most dropouts are students who could have, and believe
they could have, succeeded in school. This survey of young people who left high school
without graduating suggests that, despite career aspirations that require education beyond
high school and a majority having grades of a C or better, circumstances in students' lives
and an inadequate response to those circumstances from the schools led to dropping out.
While reasons vary, the general categories remain the same, whether in inner city Los
Angeles or suburban Nebraska. Educators, policymakers and leaders from various sectors
should make addressing the high school dropout epidemic a top national priority. All
avenues to invest leaders in a better understanding of the problem and common solutions
should be undertaken--including congressional hearings, White House conferences,
summits of state and local officials, and public forums in schools and communities. In all
cases, the voices of young people who dropped out of high school should be heard.

8
Katherine A Larson, Russell Rumberger (1st March 2000) in the paper: Student
Mobility and the increased rates of school dropouts

A variety of evidence suggests that students in the United States change schools
frequently. But there has been relatively little research that examines the educational
consequences of student mobility. This study examined the incidence of student mobility
between the eighth and twelfth grades and its effect on high school completion using the
National Educational Longitudinal Survey third follow-up data. Three models were tested
on two groups of students. For eighth-grade students in 1988, we predicted (1) whether
students changed schools or dropped out between the eighth and twelfth grades and (2)
high school completion status two years after twelfth grade. For twelfth-grade students in
1992 we predicted high school completion status two years after twelfth grade. The
models were developed from a conceptual framework based on theories of dropping out,
postsecondary institutional departure, and student transfer adjustment that suggest school
mobility may represent a less severe form of educational disengagement similar to
dropping out. The results generally support this idea. That is, measures of social and
academic engagement, such as low grades, misbehavior, and high absenteeism, predicted
both whether students changed schools or dropped out. The results further indicate that,
controlling for other predictors, students who made even one non-promotional school
change between the eighth and twelfth grades were twice as likely to not complete high
school as students who did not change schools. Together, the findings suggest that
student mobility is both a symptom of disengagement and an important risk factor for
high school dropout.

9
Patricia A, Aloise Young, Ernest Chavez (5th August 2002) in the paper: Not all
school dropouts are the same: Ethnic differences in the relation between reason for
leaving school and adolescent substance use

Several national studies have revealed that students choose to drop out of school for a
variety of reasons. Moreover, there are ethnic differences in the reasons dropouts give for
leaving school. In the present study, the relation between reason for dropping out and
substance use was explored in Mexican American and non-Hispanic White adolescents.
The results revealed that for Mexican American adolescents, substance use was highest
among those who left school to be with their friends and lowest among those who left for
family‐related reasons, there were no significant differences in substance use as a
function of reason for leaving school among non‐Hispanic White adolescents. For both
ethnicities, nearly one‐third of the dropouts reported that their substance use was an
important contributor to their decision to leave school early. The theoretical and practical
implications of these findings are discussed. Recommendations are made for ways in
which the reasons that dropouts give for leaving school can be used to inform school
programs.

10
Ana Soledade, Graeff-Martins, Sylvia Oswald, Júlia Obst Comassetto,
Christian Kieling, Renata Rocha Goncalves, Luis Augusto Rohde (2nd December
2006) in the paper: interventions to reduce school dropout in public schools in a
developing country

School dropout rates are staggeringly high in developing countries, even for elementary
school children. This study aims to assess the feasibility and initial efficacy of a package
of interventions tailored to reduce school dropout in public schools in an urban city in
Brazil. Two public schools with similar high rates of dropout in elementary grades were
selected. In one of them, a package of universal preventive interventions was
implemented during a school year, including two workshops with teachers, five
informative letters to parents, three meetings with parents at school, a telephone helpline
at school, and a 1-day cognitive intervention. For children who stayed ten consecutive
days out of school without reason, mental health assessment and referral to mental health
services in the community were offered. In the second school, no intervention was
implemented.

11
 RESEARCH METHODOLOGY

Population: People from the Suburbs of Mumbai were considered for the paper, which
has dropped out from the school.

Sample Size: Sample size considered for this research paper consists of 30 dropout
students.

Sampling Technique: The sample was derived using convenient sampling. The sample
was chosen on the basis of the willingness of the respondents for the interaction on the
subject of the paper.

Research Instrument: Secondary data collection tools were used to collect data from
various government studies. The study was also conducted using Questionnaire Method
and interview Method to facilitate the conversation with the dropout students.

Type of data collected: The data collected for the research is secondary data and primary
data.

12
 DATA ANALYSIS

The population considered for the paper was consisting of 60 dropout students from the
suburbs of Mumbai. Out of these 60 students only 30 students were shortlisted on the
basis of their willingness to share the information about the subject of the paper.

Following were the reasons identified for the dropping out of students:

School Related Reasons:

All the respondents studied in municipal schools as they cannot afford going to bigger
private schools. The schools had very basic infrastructure and did not have any
motivational impact for students to attend school. They were indifferent about the
infrastructural facilities provided by the school. None of the students experienced any ill
treatment from the teachers or the administration staff of the school. However some
students did experience difficulties in learning and grasping the knowledge imparted by
teachers which ended up making students disinterested in going to school.

Economic Reasons:

Poverty was the major cause of students dropping out of the schools. All the respondents
belong to lower income group families and struggle to fulfill daily requirements for the
family and hence cannot afford studies. It was also observed that 25 of the 30 respondents
have more than one sibling which adds pressure on the family income and the students
end up dropping out of the school and start doing odd jobs to meet family needs.

13
Reasons Related to Family Environment:

5 out of 30 respondents were disinterested to go to school as they had started earning

money and wanted to continue the same. Five girls that hit puberty were refrained from
going to school as the family believed that it was inappropriate for them to go out of the
house. The family of these girls expected them to be at home and do the regular
household work so that they can be married as soon as possible. Few of the student’s
fathers were addicted to gambling which forced the mothers to run the houses alone. This
resulted in the financial crunch to meet daily expenses and hence the students were
dropped out from the school.

Reasons related to Transportation:

There only 3 respondents who stayed away from their school but the transport facilities
were appropriate for them in terms of frequency of buses and scheduled stops; to reach
school on time. However students did complain about the buses being congested as the
peak hours for office going population also starts at the same time. The crowd in the bus
also made it difficult for the students to carry heavy bags impossible in the buses.

Reasons Related to the Parental Attitude:

Around 20-25 respondents belonged to lower income groups and have uneducated
parents. As a result of this, parents are unaware about the levels of education and the
importance of the same. Most of the families have single earning parent which exerts
pressure on the earnings of that person which leads to worsening of economic conditions
of the family

14
 CONCLUSIONS AND RECOMMENDATIONS

Mobilization of Drop out Students:

 The possible way out of this chronic problem is to mobilize these students and
train them to be able to join the mainstream working force.
 There is a need to create awareness about the importance of education and how the
youth can be engaged for the betterment and development of the economy.
 Mobilization of dropouts as a process would involve steps like identifying
dropouts from schools, community centers, finding out the reasons for the drop
out, create a motivating factor for each student to undertake the training and then
training them effectively to make them employable.
 This process has several beneficiaries, first, the youth themselves can find better
employment opportunities and earn regular income and this helps in experiencing
self-worth and self confidence in the real world.
 Second beneficiaries can be the industries like hospitality, retail and customer
service as they get trained and skilled workforce and this helps in bridging the gap
between demand and supply.
 Third beneficiaries are the families from where these students come. The families
are supported economically and they have a great sense of satisfaction as the
students work with good organizations and better positions.
 Most importantly the country is benefitted as the workforce gets channelized in the
right direction. Education and employment keeps the youth away from the life of
crime, drugs, or violence. They are transformed into responsible citizens and can
become role models for the communities.

15
 There are many organizations that work for mobilization of drop out students and
one such organization is Kotak Education Foundation which is associated with the
Kotak Mahindra Bank and group. Their vision is to “Empower through
Education.”
 It established a program named Unnati to train drop out students within the age
group of 18-25 and make them employable and rise above the poverty line.
 They provide training for hospitality, sales, computers, retail segment, customer
service and English communication skills.
 KEF has partnered with numerous corporate partners to give employment for such
students. These partners include, Starbucks, HyperCity, Lifestyle Stores, Reliance
Digital, etc.
 It has successfully trained nearly 8000 students and help them to rise above the
poverty line in last 5-6 years.

16
 REFERENCES

 http://planningcommission.gov.in/reports/sereport/ser/stdy_ecdo.pdf
 https://www.salaambombay.org/
 https://www.yuvaparivartan.org/
 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2920949/

17
 ANNEXURE

Reasons for dropout of students from schools and junior colleges

1. Do you have Liabilities
Yes
No
If "Yes", from whom
(a) Nationalized Banks
(b) Private Banks
(c) Money Lenders
(d) Friends
(e) Relatives
(f) Others

2. State the Extent of your Liabilities

Less than Rs.1, 000
Rs.1, 000 - 5000
Above 5,000

3. Place of Living : Village / Town

A. SCHOOL RELATED REASONS

1. Up to which classes have you studied? : 1/2/3/4/5/6/7/8/9/10/11/12

2. In which school you studied? : a) Government

b) Private - Aided

18
3.
Yes / No

State if the facilities available in your School were good:

(a) Adequate teaching staff
(b) Proper class room
(c) Presence of basic amenities including drinking water
(d) Mid - Day meals
(e) Play ground
(f) Play things
(g) Good Library
(h) Scholarship Facilities
(i) Good lab facilities
(j) Extra-curricular activities
(k) Strict discipline
(i) Good school environment
(m) Easily accessible place of school location

Other School Related Reasons

(a) Differential treatment by teachers

(b) Lack of understanding among students
(c) Lack of understanding of subjects taught
(d) Misuse of students by teachers
(e) Sexual harassment by teaching and non – teaching staff
(f) Any other

19
4. Other Reasons:

(1) Economic and Health Reasons for Being A Drop - Out

(a) Poverty
(b) More number of children
(c) Ill Health
(d) To Supplement family income
(e) Any Other

(2) Reasons Related to Society and Family Environment

(a) Drunkard Parents

(b) Lack of Motivation to continue schooling
(c) Personal Interest to earn Income
(d) Disinterested in education
(e) Failed number of times in the class last studied
(f) Personal Indiscipline
(g) Family circumstances
(h) Attitude of the society not to encourage female education
(i) Parents separated
(j) Sickness of parents
(k) Immorality of parents
(l) Parents not supportive
(m) Mass media
(n) Any Other

20
(3) Transport Reasons:

(a) Lack of money

(b) Lack of proper road and approach road facilities
(c) Lack of frequency of buses
(d) Unscheduled stoppages
(e) Improper time schedule of buses
(f) Congestion in buses
(g) Buses not stopped at school - point
(h) Ill health due to lack of good and cheap transport.
(i) Travelling in buses found difficult since the present
day students have to shoulder heavy load of books,
notebooks, and other accessories
(j) Very high rates of accidents and breakdowns of buses in School zones.
(k) Any other

(4) Parental Attitude

(a) Not having desire to educate wards (children)

(b) Parents from affluent families do not care for education of their children
(c) Lack of parental awareness in regard to the level of education
(d) Economic conditions of the family
(e) Discourage education of women children
(f) Any Other

21
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