Chapter 4

Research Methodology
Chapter at Glance:

4.1 Introduction

4.2 Statement of Problem

4.3 Conceptual Framework

4.4 Scope of Study

4.5 Research Objectives

4.6 Research Hypotheses

4.7 Research Methodology

4.7.1 Universe
4.7.2 Sample
4.7.3 Type of Data
4.7.4 Deposit Generation Factors (From Customer’s Perspective)
4.7.5 Likert’s Five Point Scale
4.7.6 Data Presentation
4.7.7 Data Analysis
4.7.8 Research Report

4.8 Chapterisation

4.9 Significance of the Study

4.10 Scope for Further Research

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4.1 INTRODUCTION
Money is compressed work, stored energy, which can be exchanged for
goods and services. If exchange is delayed, money can be saved or invested so that
it will create more money in the future, i.e. a penny saved is a penny earned. What
happens in practice is that entities in need of money (such as individuals,
households, businesses or government) access available savings (from households
or other companies) through financial intermediaries (like banks, money market and
capital market). Banks provide various loans and advances to industries, corporates
and individuals. The interest received on these loans is their main source of
income. Thus, banks thrive on savings and saving comes from idle cash or from
those postpone, sacrifice or forego spending resulting into future assets or wealth.

The significance of banking has increased all over the world with the rise
in income levels and growth in the volume of financial transactions. There has
been a transition in the outlook of banking from class banking to mass banking.
The role of commercial banks in this sphere is substantial. Currently, this is a
zenith stage for Banking revolution showing economic success for the developing
countries like that of ours, i.e. India. Indian banks have introduced innovative
schemes like Differential Rate of Interest Scheme (DRI) and have come to finance
new schemes such as Integrated Rural Development Programme (IRDP), Self-
employment to Educated Unemployed Youth (SEEUY) and Prime Ministers
Rozgar Yojana (PMRY). All these schemes need money which can be generated
from mobilisation of savings of individuals and households.

As stated above, bank deposits are the main source of funds for banking
sector. Banks are the intermediaries that direct the excess cash balances of
individuals and households from unproductive to productive channels. In the post-
liberalisation and privatization era, the competition among banks has intensified
with the establishment of number of private sector banks and foreign banks in
India. Also, the Indian households are becoming more of spending-oriented rather
than saving-oriented. The direct effect of this is increasing competition for meagre
savings of households intensifying the competition among banks to mobilise more

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and more savings. In this scenario, the banks are compelled to use innovative
practices to mobilise limited household savings with a view to divert it to
productive channels.

4.2 STATEMENT OF PROBLEM

As stated above, the main source of finance for banking sector is deposits
received by them through various deposit schemes such as saving deposits, fixed
deposits and recurring deposits. Among various types of deposits, fixed or time
deposits is the main source of finance for banking sector. Various initiatives on the
part of government for financial inclusion, the prominent among them being Jan
Dhan Yojana of Modi Government, are big leaps in giving boost to deposits
mobilisation by banking sector in India. However, triangular competition among
public sector banks, private sector banks and foreign banks necessitates the
deployment of new and innovative methods of deposit mobilisations by banking
sector. Against this background, the present study aims to study the various factors
that affect the choice of banks by general public for saving their hard-earned
money and policies framed by banks to capitalise on these factors to mobilise
deposits from general public under the title:
A STUDY ON INNOVATIVE BANKING POLICIES FOR DEPOSIT
MOBILISATION AND ITS IMPACT

4.3 CONCEPTUAL FRAMEWORK

(1) Bank: The word ‘Bank’ comes from the French word ‘Banque’, meaning, a
bench. The Jews who lived in Italy in the olden days, used to sit on
‘benches’ to transact their businesses in the market places. It is interesting
to note that the word ‘Bank’ also finds its origin in the German language
and was known as ‘Banck’, meaning, funds that were held in joint custody.
The Italians used the word ‘Banco’ to represent the interpretation of the
term ‘piles of money’. Whatever the origin and connotation of the word,
banks today are seen as structures and safe houses, wherein money is
stored, deposited, borrowed or lent.

(2) Deposits: Bank deposits are the main source of finance for any banking

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 institution. Bank deposits are the surplus money at the disposal of
individuals, households and business organisations which they keep in bank
for safety and to earn returns in the form of interests. There are different
types of banks deposits such as saving deposits, time deposits, term
deposits, etc. The accountholder can withdraw these money from bank at a
short notice as per their requirements. There are certain restrictions on the
withdrawal of certain types of deposits.

(3) Deposit Mobilisation: Deposit mobilisation are the drives undertaken by

banks to encourage people to save their money. As stated above, there is a
triangular competition between public sector banks, private sector banks
and foreign banks in the Indian banking sector. In addition to that there is a
large network of cooperative banks. All these banks compete for the
meagre savings of the individuals and households. Therefore, banks have
started conducting special drives for deposit mobilisations.

(4) Deposit Policies: Deposit policies of the banks are influenced greatly by
the guidelines issued by the Reserve Bank of India (RBI). The Reserve
Bank of India declares base interest rates which provide guidelines to banks
to decide their interest rates. Some interest rates such as interest rates on
senior citizen bank deposits are regulated by the Reserve Bank of India.
However, each bank is free to decide its own interest rate over and above
base rate declared by the Reserve Bank of India. Banks are also free to
formulate their own policies regarding mobilisation of deposits under their
various schemes.

4.4 SCOPE OF STUDY

Geographically, the study is restricted to the city of Mumbai. The present
research study is limited to the four types of banks, viz., public sector banks,
private sector banks, foreign banks and co-operative banks which are mainly based
in urban areas. The data for the present study have been collected during a period
from 2013 to 2018. The research study is constrained by the physical and financial
limitations of the researcher.

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4.5 RESEARCH OBJECTIVES
Various research objectives which the present research seeks to achieve are
as under:
(1) To trace the origin, development, growth and role of banks in general and
with respect to India in particular.
(2) To understand the various factors and/or policies of banks that affect the
deposit mobilisation initiatives of banks.
(3) To analyse the relation between various factors and/or policies affecting
deposit mobilisation by different categories of banks.
(4) To evaluate the impact of these factors on the deposit mobilisation by
different categories of banks.
(5) To suggest measures and methods to bring about grater alignment between
deposit mobilisation factors and bank policies for deposit mobilisation.

4.6 RESEARCH HYPOTHESES

Hypothesis - 1
H0 There is no significant relation between the factors that affect deposit
mobilisation policies of different categories of banks.
H1 There is a significant relation between the factors that affect deposit
mobilisation policies of different categories of banks.

Hypothesis - 2
H0 There is no significant relation between the factors affecting Deposit
Mobilisation Policies of Banks and their Impact on Deposit Mobilisation by
Banks.
H1 There is a significant relation between the factors affecting Deposit
Mobilisation Policies of Banks and their Impact on Deposit Mobilisation by
Banks.

4.7 RESEARCH METHODOLOGY

The present research study is exploratory and descriptive in nature. An
exploratory study is a valuable means of finding out ‘what is happening; to seek

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new insights; to ask questions and to assess phenomena in a new light’ (Robson
2002:59). The present study is an attempt to explore the factors that affect the
deposit mobilisation capacity of various types of banks with reference to the city
of Mumbai. The object of descriptive research is ‘to portray an accurate profile of
persons, events or situations’ (Robson 2002:59). This may be an extension of, or a
forerunner to, a piece of exploratory research or, more often, a piece of
explanatory research. The present research tries to describe the factors that directly
or indirectly impact the deposit mobilisation capacity of banks.
4.7.1 UNIVERSE
The study is confined to the four categories of banks, viz., Public Sector
Banks, Private Sector Banks, Foreign Banks and Co-operative Banks.
Geographically, the study has been undertaken in the city of Mumbai, the financial
and commercial capital of India and state capital of Maharashtra. Thus, all the
branches of Public Sector Banks, Private Sector Banks, Foreign Banks and Co-
operative Bank situated in the city of Mumbai and their customers and employees
constitute the sample for the purpose of the present study. Thus, the population
under consideration is large and heterogeneous and cannot be defined precisely.

4.7.2 SAMPLE
Where the population is unknown, the sample size can be derived by
computing the minimum sample size required for accuracy in estimating
proportions by considering the standard normal deviation set at 95% confidence
level (1.96), percentage picking a choice or response (50% = 0.5) and the
confidence interval (0.05 = ±5). The formula is:

z 2 pq
n 
e2
Where, n is the sample size, z is the selected critical value of desired
confidence level, p is the estimated proportion of an attribute that is present in the
population and q = 1− p and e is the desired level of precision or tolerable error.

Assuming the maximum variability, which is equal to 50% (p = 0.5) and

taking 95% confidence level with ±5% precision, the calculation for required
sample size will be as follows:

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 p = 0.5 and hence, q =1 – 0.5 = 0.5; e = 0.05; z =1.96

(1.96)2  0.5  0.5

n  = 384.16
(0.05)2

Accordingly, the ideal sample size has been found to be 384.16. Therefore,
the sample size has been selected as 475 in order to include some more elements
of the population.
Table No. 4.1
Distribution of Sample
Questionnaire
Type of Bank Distributed Received Valid Selected for
Analysis
Public Sector Bank 250 214 207 200
Private Sector Bank 250 226 211 200
Foreign Bank 50 32 26 25
Co-op Bank 100 58 52 50
Total 650 520 496 475
Source: Field Survey

4.7.3 TYPE OF DATA

The research study is based on both primary as well as secondary data. The
main source of secondary data has been the reports of Reserve Bank of India (RBI)
and Annual Reports of selected commercial banks. Secondary data has also been
sought from other published sources such as journals, magazines, newspaper
articles, dissertations and theses. Primary data has been collected directly from
bank customers through personal visits to various bank branches with the help of
closed ended questionnaire.

4.7.4 DEPOSIT GENERATION FACTORS (FROM CUSTOMER’S

PERSPECTIVE
On the basis of available research studies and pilot studies, the researcher
has identified the following factors that have direct or indirect bearing on deposit
mobilisation capacity of banks:
Parameter 1 - Rate of Interest
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Parameter 2 - Location of Branch

Parameter 3 - Easy Documentation Facility

Parameter 4 - Online Deposit Services

Parameter 5 - Deposit Mobilisation Drives

Parameter 6 - Target Group Schemes

Parameter 7 - Customer Relationship Management (CRM)

Parameter 8 - Shot Liquidity Option

Parameter 9 - Priority/Preferred Customer Status

Parameter 10 - Varieties of Services Offered

Parameter 11 - Quality of Services Rendered

Parameter 12 - Employees Competence

Parameter 13 - Marketing Strategies of Bank

Parameter 14 - Bank Charges

Parameter 15 - Bank Image

The banks have been found to be using combination of these factors to

devise innovative methods for deposit mobilisation.

4.7.5 LIKERT’S FIVE POINT SCALE

The researcher has made use of Likert’s Five Point Scale to rank above
mentioned deposit mobilisation policies of banks. In Likert-style rating scale
respondent is asked how strongly she or he agrees or disagrees with a statement or
series of statements, usually on a four-, five-, six- or seven-point rating scale
(Dillman 2007). This is one of the best methods of converting qualitative data like
opinions or views into quantitative ones. The researcher has made use of the
following five point scale to seek the opinion of respondents about various factors
that influence deposit mobilisation capacity of commercial banks:
(1) Most Significant (MS)

(2) Significant (S)

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 (3) Neutral (N)

(4) Insignificant (I)

(5) Most Insignificant (MI)

4.7.6 DATA PRESENTATION

The data so collected has been tabulated with the help of bivariate and
multivariate tables. Simple bar diagrams, pie diagrams and multiple bar diagrams
have been used for data presentation.

4.7.7 DATA ANALYSIS

The data so tabulated has been analysed using simple statistical tools like
mean and percentage. The researcher has made use of Spearman’s Rank
Correlation for the establishment of various research hypotheses. Rank Correlation
studies the degree of correlation between ranks assigned to the same variables by
two different rankers or respondents. It is one of the most frequently used tool for
assessing the nature of relation and its degree between ranking of various
parameters by two different entities.
6  d i2
Spearman’s Rank Correlation (R) =1–
n( n 2  1)

Where,
d = different between ranks.
n = number of elements under consideration.

The results of the rank correlation always lie between +1 and –1, which can
be interpreted as under:

4.7.8 RESEARCH REPORT

The researcher report has been presented in popular format.

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4.8 CHAPTERISATION
The study consists of the following chapters:
CHAPTER 1 INTRODUCTION
The first chapter mainly deals with theoritisation of the issue under
consideration. It traces the evolution of banking in the Western countries and India
over a period of time and changes that have occurred in banking roles during the
same period. The chapter also highlights the role and importance of banks, types
of deposits and factors affecting deposit mobilisation functions of a bank.

CHAPTER 2 REVIEW OF LITERATURE

Review of literature is an integral aspect of any research endeavour. It
analyses the available research work directly or indirectly related to the problem
under consideration. This helps the researcher to get in-depth knowledge about the
research problem and helps to identify research gaps, if any, and lay down
concrete research objectives.

CHAPTER 3 PROFILE OF RESEARCH AREA

Profiling a research area is equally important as the various economic,
geographical, social and cultural factors have bearing on the outcome of the
researcher. At the same time, profile of research study also helps to determine the
suitability of the geographical area selected for the research purpose. The chapter
also discusses the profile of Indian banking sector.

CHAPTER 4 RESEARCH METHODOLOGY

Research methodology is the blue print of the research activity conducted
by a researcher. It explains the various components of research methodology such
as research objectives, research hypotheses, data need and data source. It justifies
the universe under consideration and sampling methods and technique. It
highlights the needs and scope of the research study.

CHAPTER 5 DATA ANALYSIS AND PRESENTATION

This chapter is the soul of the research endeavour. It analyses the
secondary data related to the research problem using suitable research techniques.

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The responses of the respondents collected through field survey are tabulated and
analysed and interpreted in this chapter. The chapter also establishes the various
research hypotheses using the appropriate statistical tools.

CHAPTER 6 CONCLUSIONS AND SUGGESTIONS

This chapter summarises the various findings of the research study and
outlines the conclusion derived thereof. The chapter also gives suggestions to
various stakeholders like Banks, Depositors, Regulators, the Government and
society at large for effective mobilisation of various types of deposits by banks so
as to accelerate the pace of economic development.

4.9 SIGNIFICANCE OF THE STUDY

The present study has been undertaken with a view to assess the role and
significance of various factors that affect the deposit mobilization policies of the
commercial banks with reference to the city of Mumbai. There are a number of
factors that have implications on the deposit mobilization by commercial banks.
These factors together constitute deposit mobilization policies of commercial
banks. Different banks have different approach to these factors which are put
together to form a unique deposit mobilization policy by the banks. The present
study tries to study the relative importance of these factors in the deposit
mobilization policies of commercial banks and if there exists any similarity or
dissimilarity between the inter-bank deposit mobilization policies. The study also
assesses the extent of the impact of these policies on deposit mobilization by
different categories of the banks. The study is of immense importance for banks to
blend various deposit mobilization factors together to devise a unique deposit
mobilization policy.

4.10 SCOPE FOR FURTHER RESEARCH

The present research study undertakes comparative evaluation of deposit
mobilization policies of different categories of banks in India, viz., public sector
banks, private sector banks, foreign banks and co-operative banks. The study can
be extended to regional rural banks. A research can also be undertaken to
understand the difference in deposit mobilization policies in rural areas and urban

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areas. The researcher can also evaluate the relative importance of various factors
that affect deposit mobilization policies of commercial banks. At international
level, the study can be used to compare and contrast the deposit mobilization
strategies of banks in different countries and their impact on their deposit
mobilization capacities.

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