“A RESEARCH ON CUSTOMER’S PREFERENCE TOWARDS LOANS AND ADVANCES WITH

SPECIAL EMPHASIS ON COOPERATIVE BANKS IN JAMNAGAR”

Asha Solanki1, Prof. (Dr.) Ajay Shah2

MBA student, JVIMS MBA College Jamnagar1,
Director, JVIMS MBA College Jamnagar2
asha.solanki2298@gmail.com1,ajayshah0575@gmail.com2
97270465101, 98983612382
*Corresponding Author:
Email: ajayshah0575@gmail.com*
Abstract

This paper tries to analyze the customer’s preference towards loans and advances from cooperative banks in
Jamnagar. In this research descriptive research methodology is used. The primary objective of the research is
to identify the customer’s preference for availing loan from cooperative banks. The sampling method is non-
probability convenience sampling method and the sample size is 120. In this research primary data is collected
from structured questionnaire of customers of cooperative banks in Jamnagar. In this research we have used
analytical tools like table and charts and statistical tools like chi square test. From the statistical analysis it
was found that type of loan preferred is not independent of occupation of the respondents. It was found that
majority of the customer base of cooperative banks are business class so they can further approach to small
business owners, salaried class, etc. for marketing. It was found that the Personal relations with the Bank
employees, approachability of employees, comfortability in interactions with employee, hassle free paper
work, use of local language and easy availability are some of the important factors that impact the consumer
choice for loans in Banks. The co-operative bank should segment its customer base in a way that effective
targeting can be done. The local Industry, Traders and small shop owners give preference to co-operative
banks as compared to nationalized or private sector banks because of ease in interaction.

Key words: Banking, Co-operative Banks, Loans, Advances, Consumer Behavior, Customers Preference,
Financial institution,

REVIEW OF LITERATURE:

1. Mrs. Indu Santosh, Dr. Sanjay Pandey and Dr. Prabhakar Pandey, (2014) “A study on cooperative
banks in Chhattisgarh with special reference to lending practices”, published in International journal of
research in management & social science, 2014.
The main objectives of the study are to know the lending practices of cooperative banks in Chhattisgarh to
suggest the appropriate measures to improve the efficiency of the cooperative banks, to know the satisfaction
level of the customers from banks’ lending practices, to know the lending practices of cooperative banks in
Chhattisgarh. In this research they have used descriptive research methodology by collecting primary and
secondary data as well. They have taken 200 respondents as sampling size. By analyzing this research the
finding were the majority of the respondents were having housing loan from this bank, there is very simple
procedure followed by bank for loan and the customers are satisfied with the mode of repayment of
installment..
4. Jyoti gupta and Suman jain, (2012) “A study on cooperative banks in India with special reference to
lending practices”, published in Internatinal journal of scientific and research publications, 2012.
The main objective of the study is to know the lending practices of cooperative banks in India and to measure
and compare the efficiency of cooperative banks in India. They have used descriptive research methodology
by collecting data from observation method, interview method, structured questionnaire, and annual reports,
manual of instructions of loan and advances and internet. They have taken 200 respondents as sampling size.
The findings of the study are majority of the respondent were having housing loan from this bank, easy
repayment and less formalities are the main factors determining customer’s selection of loans and average
time of processing loan is less.

INTRODUCTION
The Reserve Bank of India (RBI) is India’s Central Banking Institution, which controls the issuance and
supply of the Indian rupee. RBI has the responsibility of regulating the nation’s financial system. As a
regulator and supervisor of the Indian banking system it ensures financial stability and public confidence in
the banking system. RBI also serves as a banker’s bank and it maintains banking accounts of all schedule
banks.

A bank is a financial institution that accepts public deposits and provides loans to those who need it. They are
a substantial part of the financial system, which assists in the overall economic development. These are broadly
classified under two types:

1. Scheduled banks
2. Non-Scheduled banks

Further scheduled banks are classified as schedule commercial bank and schedule cooperative banks.

OVERVIEW OF CO – OPERATIVE BANKS AND ITS FUNCTIONS

Cooperative banks are the banks whose main objective is to provide financial assistance to its shareholding
members of the society. Such banks are registered under the Cooperative Societies Act. Cooperative banks
are set up and managed by the members from various categories like traders, factory owners, farmers, etc. on
the cooperative basis. They provide products like acceptance of deposits, providing loans and advances, and
other facilities like locker facilities, etc.

Money is an essential element for any business, because it fulfills the short term and long term requirement of
funds. It is not possible for the owner to bring all the money himself, so he/she take recourse to loans and
advances. Loans refer to a debt provided by a financial institution for a particular period while Advances are
the funds provided by the banks to the business to fulfill working capital requirement which are to be payable
within one year. The loan is a kind of debt while Advances are credit facility granted to customers by banks.

Cooperative banks provide loans and advances like hypothecation loan, hire purchase, vehicle loan, consumer
durable loan, housing loan, gold loan, education loan, overdraft, cash credit, etc. Customers prefer to take loan
from cooperative banks due to many reasons like easy availability of loan, easy processing as compared to
private banks and nationalized banks.
 RESEARCH METHODOLOGY:
RATIONALE OF RESEARCH PROBLEM

 This research has been conducted in order to examine customer`s preference for availing loan from
co-operative banks in Jamnagar
 To analyze customer`s taste and preferences context to types of loans offered by co –operative banks
in Jamnagar
RESEARCH OBJECTIVES
 To identify the customer’s preference for availing loan from cooperative banks in Jamnagar.
 To know the type of loan taken by customer’s from cooperative banks.
 To identify the factors considered by customers for taking a loan.
 To know the customers preference for taking loan from cooperative banks as compared to nationalized
and private sector banks.

RESEARCH DESIGN:
Descriptive research is used in this study in order to know customer’s preference while taking loan from
cooperative banks.

DATA COLLECTION METHOD

The primary data is collected from the structured questionnaire of customers of the Commercial cooperative
bank ltd., Nawanagar Co-operative bank ltd, the Jamnagar Mahila Sahkari bank and Rajkot Nagrik Sahkari
bank.

Secondary Data Sources:-

The secondary data is collected from annual reports, books, websites and literature.

SAMPLING PLAN

SAMPLING METHOD: For this study is Non Probability Convenience Sampling method.
SAMPLE SIZE: We have taken 120 respondents as sampling size for research from all cooperative banks of
Jamnagar.

STATISTICAL TOOLS AND TECHNIQUES

In this research Chi square test is taken into consideration for analyzing customer`s preference towards loans
and advances towards co- operative banks in Jamnagar.
 DATA ANALYSIS AND INTERPRETATION
Demographic (Table no. 1: demographics of the customers)

Particulars Categories Percentage

Male 66
1.Gender
Female 34
Below 25 5.8
25 to 35 35
2.Age
36 to 45 37.5
46 and above 21.7
Below ssc 15
Ssc 36.7
3.Qualification
Graduate 42.5
Post graduate 5.8
Labour work 12.5
Salaried 25.8
Business 45
4.occupation
Profession 3.33
Retired 0
Housewife 13.3
Below 300000 64.2
300000 to 500000 25
5.Yearly income
500000 to 1000000 8.3
1000000 and above 2.5

6. What type of loan you have taken? (Table no.2: Type of Loan taken)
Particulars Percentage
Personal loan 4.2
Housing loan 36.7
Educational loan 1.7
Gold loan 19.1
Machinery loan 3.3
Cash credit 14.2
OD 5.8
Other 15

Type of loan taken

36.7

19.1
14.2 15
4.2 3.3 5.8
1.7
 (Chart no. 1: Type of loan taken)
Interpretation:-
36.7% of the respondents prefer to take housing loan, 19.1% of the respondents prefer to take gold loan, and
14.2% of the respondents prefer to take cash credit from cooperative bank.

7. How much amount of loan is taken from the bank? (Table no. 3: Amount of loan taken)

Particulars Percentage
Below 1 lakh 37.5
1 to 5 lakh 25
5 to 10 lakh 20.8
10 to 20 lakh 3.3
20 lakh and above 13.4

Amount of loan taken

Below 1 lakh (%) 1 to 5 lakh (%) 5 to 10 lakh (%)
10 to 20 lakh (%) 20 lakh and above (%)

3% 13%
38%

21%

25%

(Chart no. 2: Amount of loan taken)

Interpretation:-
Majority i.e.38% of the respondents prefer loan which is below 1 lakh, 25% of the respondents prefer to take
loan which is between 1 lakh to 5 lakh and 21% of the respondents prefer to take loan which is between 5 lakh
to 10 lakh from cooperative bank.
 8. For what time duration you have taken loan? (Table no.4: Duration of loan taken)

Particulars Percentage
1 to 2 years 25
3 to 5 years 20.8
5 to 10 years 7.5
10 years and above 46.7

Duration of loan taken

1 to 2 years (%) 3 to 5 years (%) 5 to 10 years (%) 10 years and above (%)

25%
47%

21%

7%

(Chart no. 3: Duration of loan taken)

Interpretation:-
47% of the respondents have taken loan for 10 years and above, 25% of the respondents have taken loan for
1 to 2 years and 20.8% of the respondents have taken loan for 3 to 5 years from the cooperative banks in
Jamnagar.

9. Why do you prefer to take loan from cooperative bank? (Table no. 5: Preference for taking loan)

Particulars Percentage
Reasonable interest rate 33.8
Relation with bank employees 19.1
Preference from other 5.9
Less charges 10.3
Easy repayment 13.7
Easy availability 16.7
Others 0.5
 Preference for taking loan
33.8

19.1
16.7
13.7
10.3
5.9
0.5

(Chart no. 4: Preference for taking loan)

Interpretation:-
33.8% of the respondents taken loan from cooperative banks because of reasonable interest rate while 19.1%
of the respondents take loan from cooperative bank because of relation with bank employees. And 16.7% of
the respondents take loan from cooperative banks due to easy availability.

10. Tick mark the importance of following factors that you consider while taking a loan.
(Table no. 6: Important factors while taking loan)
Extremely Very Somewhat Less Not at all
important important important important important
(%) (%) (%) (%) (%)

(1)Interest on loan 75.8 18.3 5 0 0.9

(2)Time for
processing loan 41.7 36.7 17.5 1.6 2.5

(3)Fee/commission
charged 25.8 32.5 30 6.7 5

(4)Time of
repayment 31.7 34.2 20.8 11.7 1.6

(5)Documents
required 40.8 39.2 12.5 4.2 3.3

Interpretation:-
Interest on loan factor is an extremely important factor for 75.8% of the respondents while documents required
is extremely important factor for 40.8% of the respondents. For 41.7% of the respondents time for processing
loan is extremely important factor while for 2.5% it is not at all important factor.
 11. Rank the facility provided by cooperative banks for loan. (Table no. 7: Facilities provided by bank)

Particulars Percentage
Below average 5

Average 50
Above average 45

Facilities provided by bank

Below average (%) Average (%) Above average (%)

5%
45%

50%

(Chart no. 5: Facilities provided by bank)

Interpretation:-
50% of the respondents say that facility provided by cooperative bank is average, 45% of the respondents say
it is above average while 5% of the respondents say that facility provided by cooperative bank is below
average.

12. Do you like to refer cooperative banks to your friends and relatives?
(Table no. 8: Reference for cooperative bank)

Particulars Percentage
Always 69.2
Sometimes 30
Never 0.8
 Reference for cooperative bank
Always (%) Sometimes (%) Never (%)

1%

30%

69%

(Chart no. 6: Reference for cooperative bank)

Interpretation:-
69% of the respondents always like to refer cooperative banks to their friends and relative while 30% of the
respondents sometime like to refer cooperative banks to their friends and relatives and only 1% of the
respondents never like to refer cooperative bank to others.

13. Kindly rate the cooperative banks in terms of documents required for processing loan.

(Table no. 9: Documents required for processing loan)

Particulars Percentage
Less documents 39.2
Normal/equal documents 53.3
More documents 7.5

Documents required for processing loan

Less documents (%) Normal/equal documents (%) More documents (%)

8%
39%

53%

(Chart no. 7: Documents required for processing loan)

Interpretation:-
53% of the respondents say that documents required by cooperative bank is normal/equal as compared to
private bank while 39% of the respondents say that it is less as compared to private banks and 8% of the
respondents say that documents required by the cooperative bank is more as compared to private banks.
 HYPOTHESIS TESTING
Ho: Preference for taking loan is independent of occupation of the respondents.

H1: Preference for taking loan is not independent of occupation of the respondents.

OBSERVERED FREQUENCY (Table no. 10: Observed frequency)

Reasonable Relation
interest with bank Preference Less Easy Easy
Options rate employees from other charges repayment availability Others Total
Labour
work 7 2 2 4 2 5 0 22
Salaried 16 8 4 4 9 10 0 51
Business 35 26 6 6 10 9 0 92
Profession 2 2 0 2 0 0 0 6
Retired 0 0 0 0 0 0 0 0
Housewife 9 1 5 8 9 1 33
Total 69 39 12 21 29 33 1 204

EXPECTED FREQUENCY (Table no. 11: Expected frequency)

Reasonable Relation
interest with bank Preference Less Easy Easy
Options rate employees from other charges repayment availability Others Total
Labour
work 7.44 4.2 1.3 2.26 3.13 3.56 0.11 22
Salaried 17.25 9.75 3 5.25 7.25 8.25 0.25 51
Business 31.12 17.59 5.41 9.47 13.08 14.88 0.45 92
Profession 2.03 1.15 0.35 0.62 0.85 0.97 0.03 6
Retired 0 0 0 0 0 0 0 0
Housewife 11.16 6.31 1.94 3.4 4.69 5.34 0.16 33
Total 69 39 12 21 29 33 1 204

Table value:
Chi Square: 36.415
Calculated value:
Chi Square: 38.126
Significance level: 5%
Using Chi-square test at 5 % significance level, calculated value is 38.126 while table value is 36.415. So
H0 is rejected and H1 is accepted. It indicates that Preference for taking loan is not independent of
occupation of the respondents.
 FINDINGS
 Majority (66%) of the respondents are male who take loan from cooperative bank.
 37% of the respondents belong to age group of 36 to 45 years who takes loan from cooperative
banks.
 Majority (42%) of the respondents are graduate who prefer to take loan from cooperative bank.
 Majority (45%) of the respondents are having business as their occupation who takes loan from
cooperative bank.
 Majority (64%) of the respondents has yearly income of 1000000 and above who take loan from
cooperative bank.
 36.7% of the respondents have taken housing loan from cooperative banks in Jamnagar.
 Majority (38%) of the respondents have taken loan of which is below 1 lakh.
 Almost half (47%) of the respondents have taken for the duration of 10 years and above.
 33.8% of the respondents taken loan from cooperative bank because of reasonable interest rates.
 Majority (75.8%) of the respondents consider interest on loan factor extremely important factor
while taking loan.
 Majority (41.7%) of the respondents consider time for processing loan as an extremely important
factor while taking loan.
 32.5% of the respondents consider fee/commission charged as a very important factor while taking
loan.
 34.2% of the respondents consider time of repayment as a very important factor while taking loan.
 Majority (40.8%) of the respondents says documents required are extremely important factor while
taking loan.
 Half (50%) of the respondents says facilities provided by cooperative bank is average.
 Majority (69%) of the respondents always refer cooperative banks to their friends and relatives.
 Majority of the respondents prefer to take loan from cooperative banks due to less interest rate, good
services and easy processing of loan as compared nationalized banks.
 Majority of the respondents prefer to take loan from cooperative bank due to less interest rate and
less charges as compared to private banks.
 Majority of the respondents prefer to take loan from cooperative bank due to very supportive staff of
the bank as compared to private banks.
 53.3% of the respondents say documents required by cooperative banks are normal as compared to
private banks.
 SUGGESTIONS:
 The cooperative banks has large portfolio of gold loans, housing loan, cash credit and OD and other
loan like loan on F.D. This being USP for the bank and bank should maintain this USP.
 Majority of the customer base of cooperative banks are business class, entrepreneurs and medium
scale business owners.
 Cooperative banks should try and target salaried class, defense personnel and big corporates.
 Cooperative banks should try and expand branches out of Jamnagar.
 As of now cooperative banks portfolio for customer durables, educational loan and personal loan is
very small they should tie up with consumer durable company for providing more loan for consumer
durables.
 Cooperative bank should try and maintain relation with customers by customer’s meet and customer
involvement activities for better customer relationship management.

LIMITATIONS OF THE STUDY

 The data for study mainly based on Jamnagar region only.
 As majority of the customers are having relation with bank employees, they might be biased in
giving the information.
 The time period of the research was limited.
 Sample size of research was small so general conclusion cannot be drawn.
 The limitation of questionnaire method of collecting data.
 Researcher’s inexperience of conducting a survey.
RESEARCH UTILITY & MANAGERIAL IMPLICATIONS
This research will be helpful for co – operative banks in order to understand the factors that impact the
customer decision making in availing the loans & advances. It will help them to make improvements in their
loans and advances by understanding preferences of customers. It was found that the Personal relations with
the Bank employees, hassle free paper work, use of local language and easy availability are some of the
important factors that impact the consumer choice of Banks. The co-operative bank should segment its
customer base in a way that effective targeting can be done. The local Industry, Traders and small shop owners
give preference to co-operative banks as compared to nationalized or private sector banks because of ease in
interaction. This will enable co –operative banks of Jamnagar in order to create a strong core value and high
credible financial institution.
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