STUDY OF FINANACIAL SERVICES OFFERED BY

RETAIL BANKS IN INDIA

A Major Research Project
(Submitted towards partial fulfillment of Two year MBA degree program)

(Session 2010-2012)

Submitted to

Rajasthan Technical University, Kota

Under the guidance of Submitted by

Mr Nikhil vargis Abhishek porwal

PIONEER INSTITUTE OF MANAGEMENT

(Affiliated by RTU, Kota & Approved by AICTE, New Delhi)

Pioneer Valley, Airport Road, Debari, Udaipur - 313003 (Rajasthan)

Tel.: 0294-3204755-56

E-mail: pioneer_institute@rediffmail.com

Website: www.pioneerinstitute.in
 ACKNOWLEDGEMENT

A Project report is an assessment of one’s great skill and aptitude. On needs to devote in
immense patience, time and brains for the compilation of on such rewarding outcome of true
efforts.

I am indeed thankful to honorable Mr. N.K. Gupta sir who has provided the wonderful
opportunity of getting exposed to industrial and business working know-how. This study enabled
me to analyze and understand the gaining foothold internet banking system in banking scenario.
This opportunity availed has immensely enhanced my own creativity and diversified my thought
process by taking a deep insight of various Banks in the NCR region and the growing inclination
of the Indian customer toward internet banking based on a number of parameters.

I would like to render my sincere heartfelt gratitude to my Project Mentor Mr Nikhil varghis for
her immense encouragement, guidance and invaluable lecture sessions both before and
throughout my Dissertation. She’s has been an inspirational mentor guiding me through every
step of my project, thus making the entire Dissertation a complete learning process.
Never the last I would take the opportunity to thank the concerned bank officials
for providing me with the necessary and relevant information. A word of thanks to the customers
for giving in their invaluable time and being a part of the survey.

PREFACE

Management education in India gained momentum in the early seventies. In the early stages,
faculty, concepts, materials and pedagogy were borrowed from the Western collaborators. The
need for market analysis, strategy and decision making and the need for contextual relevance of
the application of quantitative techniques to developing countries has been increasingly felt
because management principles are not only being applied to business and industry, but also to
newer areas like rural development, nonprofit making organizations and non-enterprise
management.

Theory & practical are the two aspect of the management education. In order to produce a
dynamic & promising executive, the two blended together in India, the research study in the
domain of management courses has received a pivotal importance. It exposes the potential
manager to the actual world environment and provides them a rich insight into what goes in
climate of India.

In fact, it is the implementation of theory in practice, which is a life force of the management. I
had the privilege of implementing the theory in practice during my project.

My project is based on banking industry the topic of the project report is “Study of financial
services offered by retail banks in India”.

CHAPTER PARTICULAR
CHAPTER 1 INTRODUCTION OF INDUSTRY
CHAPTER 2 INTRODUCTION OF RETAIL
BANKS
CHAPTER 3 REVIEW OF LITRATURE
CHAPTER 4 RESEARCH DESIGN
* Title of the Study

* Duration of the Project

* Objective of Study

* Type of Research

* Sample Size

selecting sample

* Scope of Study

CHAPTER 5 FACTS & FINDINGS

CHAPTER 6 ANALYSIS & INTERPRETAION
CHAPTER 7 CONCLUSION
CHAPTER 8 RECOMMENDATION &
SUGGESTION
CHAPTER 9 APPENDIX
 Bibliography
 Copy of Questionnaire

Chapter - 1
 Introduction
Of
Banking

Meaning of Bank

You know people earn money to meet their day-to-day expenses on food,
clothing, education of children, housing, etc. They also need money to
meet future expenses on marriage, higher education of children, house
building and other social functions. These are heavy expenses, which can
be met if some money is saved out of the present income. Saving of money
is also necessary for old age and ill health when it may not be possible for
people to work and earn their living.

The necessity of saving money was felt by people even in olden days.
They used to hoard money in their homes. With this practice, savings were
available for use whenever needed, but it also involved the risk of loss by
theft, robbery and other accidents. Thus, people were in need of a place
where money could be saved safely and would be available when required.
Banks are such places where people can deposit their savings with the
assurance that they will be able to withdraw money from the deposits
whenever required. People who wish to borrow money for business and
other purposes can also get loans from the banks at reasonable rate of
interest.

Bank is a lawful organization, which accepts deposits that can be

withdrawn on demand. It also lends money to individuals and business
houses that need it. Banks also render many other useful services – like
collection of bills, payment of foreign bills, safe-keeping of jewellery and
other valuable items, certifying the credit-worthiness of business, and so
on.

Banks accept deposits from the general public as well as from the
business community. Any one who saves money for future can deposit his
savings in a bank. Businessmen have income from sales out of which they
have to make payment for expenses. They can keep their earnings from
sales safely deposited in banks to meet their expenses from time to time.
Banks give two assurances to the depositors –

a. Safety of deposit, and

b. Withdrawal of deposit, whenever needed

On deposits, banks give interest, which adds to the original amount of

deposit. It is a great incentive to the depositor. It promotes saving habits
among the public. On the basis of deposits banks also grant loans and
advances to farmers, traders and businessmen for productive purposes.

Thereby banks contribute to the economic development of the country

and well being of the people in general. Banks also charge interest on
loans. The rate of interest is generally higher than the rate of interest
allowed on deposits. Banks also charge fees for the various other services,
which they render to the business community and public in general. Interest
received on loans and fees charged for services which exceed the interest
allowed on deposits are the main sources of income for banks from which
they meet their administrative expenses.

The activities carried on by banks are called banking activity. ‘Banking’

as an activity involves acceptance of deposits and lending or investment of
money. It facilitates business activities by providing money and certain
services that help in exchange of goods and services. Therefore, banking is
an important auxiliary to trade. It not only provides money for the
production of goods and services but also facilitates their exchange
between the buyer and seller.

You may be aware that there are laws which regulate the banking
activities in our country. Depositing money in banks and borrowing from
banks are legal transactions. Banks are also under the control of
government. Hence they enjoy the trust and confidence of people. Also
banks depend a great deal on public confidence. Without public confidence
banks cannot survive.

I. HISTORY OF BANKING IN INDIA

There are three different phases in the history of banking in India.

1) Pre-Nationalization Era.
2) Nationalization Stage.
3) Post Liberalization Era.
1) Pre-Nationalization Era:

In India the business of banking and credit was practices even in very early
times.The remittance of money through Hundies, an indigenous credit
instrument, was very popular.The hundies were issued by bankers known
as Shroffs, Sahukars,Shahus or Mahajans in different parts of the country.
 The modern type of banking, however, was developed by the
Agency Houses of Calcutta and Bombay after the establishment of Rule by
the East India Company in 18th and 19 th century During the early part of
the 19th Century, ht volume of foreign trade was relatively small. Later on
as the trade expanded, the need for banks of the European type was felt
andgovernment of the East India Company took interest in having its own
bank. The government of Bengal took the initiative and the first presidency
bank, the Bank of Calcutta (Bank of Bengal) was establish- -ed in 180. In
1840, the Bank of Bombay and IN 1843, the Bank of Madras was also set
up.
These three banks also known as “Presidency Bank”. The
Presidency Banks had their branches in important trading centers but
mostly lacked in uniformity in their operational policies.In 1899, the
Government proposed to amalgamate these three banks in to one so that it
could also function as a Central Bank, but the Presidency Banks did not
favor the idea. However,the conditions obta- -ining during world war period
(1914-1918) emphasized the need for a unified banking institution as a
result of which the Imperial Bank was set up in1921. The Imperial Bank of
India acted like a Central bank and as a banker for other banks.
The RBI (Reserve Bank of India) was established in 1935 as
the Central Bank of the Country. In 1949, the Banking Regulation act was
passed and the RBI was nationalized and
acquired extensive regulatory powers over the commercial banks.In 1950,
the Indian Banking system comprised of the RBI, the Imperial Bank of
India, Cooperative banks, Exchange banks and Indian Joint Stock banks.

2) Nationalization Stages:
After Independence, in 1951, the All India Rural Credit survey, committee
of Direction with Shri.A.D Gorwala as Chairman recommended
amalgamation of the Imperial Bank of India and ten others banks into a
newly established bank called the State Bank of India(SBI). The Govt. of
India accepted the recommendations of the committee and introduced the
State Bank of India bill in the Lok Sabha on 16th April 1955 and it was
passed by Parliament and got the president’assent on 8th May 1955. The
Act came into force on 1st July 1955, and the Imperial Bank of India was
nationalized in 1955 as the State Bank of India.

BANKING SERVICES IN INDIA

The main objective of establishing SBI by nationalizing the Imperial Bank of
India was “to extend banking facilities on a large scale more particularly in
the rural and semi-urban areas and
to diverse other public purposes.”In 1959, the SBI (Subsidiary Bank) act
was proposed and the following eight
state-associated banks were taken over by the SBI as its subsidiaries.

Name of the Bank Subsidiary with effect from

1. State Bank of Hyderabad 1st October 1959
2. State Bank of Bikaner 1st January 1960
3. State Bank of Jaipur 1st January 1960
4. State Bank of Saurashtra 1st May 1960
5. State Bank of Patiala 1st April 1960
6. State Bank of Mysore 1st March 1960
7. State Bank of Indore 1st January 1968
8. State Bank of Travancore 1st January 1960

With effect from 1st January 1963, the State Bank of Bikaner and State
Bank of Jaipur with head office located at Jaipur. Thus, seven subsidiary
banks State Bank of India formed the SBI Group.

The SBI Group under statutory obligations was required to open new
offices in rural and semi-urban areas and modern banking was taken to
these unbanked remote areas

On 19th July 1969, then the Prime Minister, Mrs. Indira Gandhi announced
the nationalization of 14 major scheduled Commercial Banks each having
deposits worth Rs.50crore and above. This was a turning point in the
history of commercial banking in India.
Later the Government Nationalized six more commercial private sector
banks with deposit liability of not less than Rs. 200 crores on 15th April
1980, viz.
i) Andhra Bank.
ii) Corporation Bank.
iii) New Bank if India.
iv) Oriental Bank of Commerce.
v) Punjab and Sind Bank.
vi) Vijaya Bank.
In 1969, the Lead Bank Scheme was introduced to extend banking facilities
to every corner of the country. Later in 1975, Regional Rural Banks were
set up to supplement the activities of the commercial banks and to
especially meet the credit needs of the weaker sections of the rural society.

Nationalization of banks paved way for retail banking and as a result

there has been an alt round growth in the branch network, the deposit
mobilization, credit disposals and of cours employment.

The first year after nationalization witnessed the total growth in the
agricultural loans and the loans made to SSI by 87% and 48% respectively.
The overall growth in the deposits and the advances indicates the
improvement that has taken place in the banking habits of the people in the
rural and semi-urban areas where the branch network has spread. Such
credit expansion enabled the banks to achieve the goals of nationalization,
it was however, achieved at the coast of profitability of the banks.

Consequences of Nationalization:
✔ The quality of credit assets fell because of liberal credit extension policy.
✔ Political interference has been as additional malady.
✔ Poor appraisal involved during the loan meals conducted for credit
disbursals.
✔ The credit facilities extended to the priority sector at concessional rates.
✔ The high level of low yielding SLR investments adversely affected the
profitability of the banks.
✔ The rapid branch expansion has been the squeeze on profitability of
banks emanating primarily due to the increase in the fixed costs.
✔ There was downward trend in the quality of services and efficiency of the
banks.
3 ) Post-Liberalization Era---Thrust o n Quality and Profitability:
By the beginning of 1990, the social banking goals set for the banking
industry made most of the public sector resulted in the presumption that
there was no need to look at the fundamental financial strength of this
bank.Consequently they remained undercapitalized.Revamping this
structure of the banking industry was of extreme importance, as the health
of the financial sector in particular and the economy was a whole would be
reflected by its performance.
The need for restructuring the banking industry was felt greater
with the initiation of the real sector reform process in 1992. the reforms
have enhanced the opportunities and challenges for the real sector making
them operate in a borderless global market place. However,to harness the
benefits of globalization, there should be an efficient financial sector to
support the structural reforms taking place in the real economy. Hence,
along with the reforms of the real sector, the banking sector reformation
was also addressed.The route causes for the lackluster performance of
banks, formed the elements ofthe banking sector reforms. Some of the
factors that led to the dismal performance of bankswere.
✔ Regulated interest rate structure.
✔ Lack of focus on profitability.
✔ Lack of transparency in the bank’s balance sheet.
✔ Lack of competition.
✔ Excessive regulation on organization structure and managerial resource.
✔ Excessive support from government.
Against this background, the financial sector reforms were initiated to bring
about a paradigm shift in the banking industry, by addressing the factors for
its dismal performance.In this context, the recommendations made by a
high level committee on financial sector, chaired by M. Narasimham, laid
the foundation for the banking sector reforms.These reforms tried to
enhance the viability and efficiency of the banking
sector.ThezzNarasimham Committee suggested that there should be
functional autonomy, flexibility in operations, dilution of banking
strangulations, reduction in reserve requirements and adequate financial
infrastructure in terms supervision,audit and technology. The committee
further advocated introduction of prudential forms, transparency in
operations and improvement in productivity, only aimed at liberalizing the
regulatory framework, but also to keep them in time with international
standards. The emphasis shifted to efficient and prudential banking linked
to better customer care and customer services.
Private Sector Banks

Private banking in India was practiced since the begining of banking

system in India. The first private bank in India to be set up in Private Sector
Banks in India was Indus Ind Bank. It is oneof the fastest growing Bank
Private Sector Banks in India

1. IDBI ranks the tenth largest development bank in the world as Private
Banks in India and has promoted world class institutions in India.

2. The first Private Bank in India to receive an in principle approval from

the Reserve Bank of India was Housing Development Finance
Corporation Limited, to set up a bank in the private sector banks in
India as part of the RBI's liberalization of the Indian Banking Industry.
It was incorporated in August 1994 as HDFC Bank Limited with
registered office in Mumbai and commenced operations as
Scheduled Commercial Bank in January 1995.

3. ING Vaysya, yet another Private Bank of India was incorporated in

the year 1930.Bangalore has a pride of place for having the first
branch inception in the year 1934. Withsuccessive years of patronage
and constantly setting new standards in banking, ING Vaysya Bank
has many credits to its account.

Entry of Private Sector Banks:

There has been a paradigm shift in mindsets both at the Government level
in the banking industry over the years since Nationalization of Banks in
1969, particularly during the last decade (1990-2000). Having achieved the
objectives of Nationalization, the most important issue before the industry
at present is survival and growth in the environment generated by the
economic liberalization greater competition with a view to achieving higher
productivity and efficiency in January 1993 for the entry of Private Sector
banks based on the Nationalization Committee report of 1991, which
envisaged a larger role for Private Sector Bank

The RBI prescribed a minimum paid up capital of Rs. 100 crores for the
new bank and the shares are to be listed at stock exchange. Also the new
bank after being granted license under the Banking Regulation Act shall be
registered as a public limited company under the companies Act, 1956.
Subsequently 9 new commercial banks have been granted license to start
banking operations. The new private sector banks have been very
aggressive in business expansion and is also reporting higher profile levels
taking the advantage of technology and skilled manpower. In certain areas,
these banks have even our crossed the other group of banks including
foreign banks.

Current scenario

Currently (2007), overall, banking in India is considered as fairly mature in

terms of supply, product range and reach-even though reach in rural India
still remains a challenge for the private sector and foreign banks. Even in
terms of quality of assets and capital adequacy,Indian banks other banks in
comparable economies in its region. The Reserve Bank of India is an
autonomous
body, with minimal pressure from the government. The stated policy of the
Bank on the Indian
Rupee is to manage volatility-without any stated exchange rate-and this
has mostly been true.With the growth in the Indian economy expected to be
strong for quite some time-especially inits services sector, the demand for
banking services-especially retail banking, mortgages and
investment services are expected to be strong. M&As, takeovers, asset
sales and much more action (as it is unraveling in China) will happen on
this front in India. In March 2006, the Reserve Bank of India allowed
Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private
sector bank) to 10%. This is the first time an investor has been allowed to
hold more than 5% in a private sector bank since the RBI announced
norms in 2005 that any stake exceeding 5% in the private sector banks
would need to be vetted by them. Currently, India has 88 scheduled
commercial banks (SCBs) - 28 public sector banks (that is with the
Government of India holding a stake), 29 private banks (these do not have
government stake; they may be publicly listed and traded on stock
exchanges) and 31 foreign bank.

They have a combined network of over 53,000 branches and 17,000

ATMs.According to a report by ICRA Limited, a rating agency, the public
sector banks hold over 75 percent of total assets of the banking industry,
with the private and foreign banks holding 18.2% 6.5% respectively.

BANKING IN INDIA

Overview of Banking:
Banking Regulation Act of India, 1949 defines Banking as “accepting, for
the purpose of lending or of investment of deposits of money from the
public, repayable on demand or otherwise or withdrawal by cheque, draft
order or otherwise.” The Reserve Bank of India Act, 1934 and the Banking
Regulation Act, 1949, govern the banking operations in India.

Organizational Structure of Banks in India :

In India banks are classified in various categories according to differ rent
criteria. The following charts indicate the banking structure:
Broad Classification of Banks in India:
Types of Banks

1. The RBI: The RBI is the supreme monetary and banking authority in the
country and has the responsibility to control the banking system in the
country. It keeps the reserves of all scheduled banks and hence is known
as the “Reserve Bank”.

2 .Public Sector Banks:

 State Bank of India and its Associates (8)
 Nationalized Banks (19)
 Regional Rural Banks Sponsored by Public Sector Banks (196

3. Private Sector Banks:

 Old Generation Private Banks (22)
 Foreign New Generation Private Banks (8)
 Banks in India (40)
4. Co-operative Sector Banks:
State Co-operative Banks
 Central Co-operative Banks
 Primary Agricultural Credit Societies
 Land Development Banks
 State Land Development Banks

5. Development Banks: Development Banks mostly provide long term

finance for setting up industries. They also provide short-term finance (for
export and import activities)
 Industrial Finance Co-operation of India (IFCI)
 Industrial Development of India (IDBI)
 Industrial Investment Bank of India (IIBI)
 Small Industries Development Bank of India (SIDBI)
 National Bank for Agriculture and Rural Development (NABARD)
 Export-Import Bank of India

Role of Banks:
Banks play a positive role in economic development of a country as repositories of
community’s savings and as purveyors of credit. Indian Banking has aided the
economic development during the last fifty years in an effective way. The banking sector
has shown remarkable responsiveness to the needs of planned economy. It has
brought about a considerable progress in its efforts at deposit mobilization and has
taken a number of measures in the recent past for accelerating the rate of growth of
deposits. As recourse to this, the commercial banks opened branches in urban, semi-
urban and rural areas and have introduced a number of attractive schemes to foster
economic development.
The activities of commercial banking have growth in multi-directional ways as well
as multi-dimensional manner. Banks have been playing a catalytic role in area
development, backward area development, extended assistance to rural development
all along helping agriculture, industry, international trade in a significant manner. In a
way, commercial banks have emerged as key financial agencies for rapid economic
development.
By pooling the savings together, banks can make available funds to specialized
institutions which finance different sectors of the economy, needing capital for various
purposes, risks and durations. By contributing to government securities, bonds and
debentures of term lending
institutions in the fields of agriculture, industries and now housing, banks are also
providing these institutions with an access to the common pool of savings mobilized by
them, to that extent relieving them of the responsibility of directly approaching the saver.
This intermediation role of banks is particularly important in the early stages of
economic development and financial specification. A country like India, with different
regions at different stages of development, presents an interesting spectrum of the
evolving role of banks, in the matter of inter-mediation and beyond.
Mobilization of resources forms an integral part of the development process in
India. In this process of mobilization, banks are at a great advantage, chiefly because of
their network of branches in the country. And banks have to place considerable reliance
on the mobilization of deposits from the public to finance development programmers.
Further, deposit mobilization by banks in India acquired greater significance in their new
role in economic development.
Commercial banks provide short-term and medium-term financial assistance.
The short-term credit facilities are granted for working capital requirements. The
medium-term loans are for the acquisition of land, construction of factory premises and
purchase of machinery and equipment. These loans are generally granted for periods
ranging from five to seven years. They also establish letters of credit on behalf of their
clients favouring suppliers of raw materials/machinery (both Indian and foreign) which
extend the banker’s assurance for payment and thus help their delivery. Certain
transaction, particularly those in contracts of sale of govt Government Departments,
may require guarantees being issued in lieu of security earnest money deposits for
release of advance money, supply of raw materials for processing, full payment of bill
on the assurance of the performance etc. Commercial banks issue such guarantees
also.

The Role of Reserve Bank of India (RBI) – Banker’s Bank

The Reserve Bank of India (RBI) is the central bank of India, and was
established on April 1, 1935 in accordance with the provisions of the
Reserve Bank of India Act, 1934. Since its inception, it has been
headquartered in Mumbai. Though originally privately owned, RBI has been
fully owned by the Government of India since nationalization in 1949.
RBI is governed by a central board (headed by a Governor)
appointed by the Central Government. The current governor of RBI is
Dr.Y.Venugopal Reddy (who succeeded Dr. Bimal Jalan on September
6, 2003). RBI has 22 regional offices across India.The Reserve Bank of
India was set up on the recommendations of the Hilton Young Commission.
The commission submitted its report in the year 1926, though the bank was
not set up for nine year.

Main Objective:

Monetary Authority
 Formulates, implements and monitors the monetary policy.
 Objective: maintaining price stability and ensuring adequate flow of
credit to productive sectors.

Regulator and supervisor of the financial system

 Prescribes broad parameters of banking operations within which the
country’s banking and financial system functions.
 Objective: maintain public confidence in the system, protect
depositors’ interest and provide cost-effective banking services to the
public. The Banking Ombudsman Scheme has been formulated by
the Reserve Bank of India (RBI) for effective redressal of complaints
by bank customers

Manager of Exchange Control

 Manages the Foreign Exchange Management Act, 1999.
 Objective: to facilitate external trade and payment and promote
orderly development and maintenance of foreign exchange market in
India.

Issuer of currency
 Issues and exchanges or destroys currency and coins not fit for
circulation.
 Objective: to give the public adequate quantity of supplies of currency
notes and coins and in good quality.
Developmental role
 Performs a wide range of promotional functions to support national
objectives.

Related Functions
 Banker to the Government: performs merchant banking function for
the central and the state governments; also acts as their banker.
 Banker to banks: maintains banking accounts of all scheduled banks.
  Owner and operator of the depository (SGL) and exchange (NDS) for
government bonds.
There is now an international consensus about the need to focus the tasks
of a central bank upon central banking. RBI is far out of touch with such a
principle, owing to the sprawling mandate described above.

Supervisory Functions:

In addition to its traditional central functions, the Reserve bank has certain
nonmonetary functions of the nature of supervision of banks and promotion
of sound banking in India. The Reserve Bank Act, 1934, and the Banking
Regulation Act, 1949 have given the RBI wide powers of supervision and
control over commercial and cooperative banks, relating to licensing and
establishments, branch expansion, liquidity of their assets, management
and methods of working, amalgamation, reconstruction and liquidation. The
RBI is authorized to carry out periodical inspections of the banks and to call
for returns and necessary information from them. The nationalization of 14
major Indian scheduled banks in July 1969 has imposed new
responsibilities on the RBI for directing the growth of banking and credit
policies towards more rapid development of the economy and realization of
certain desired social objectives. The supervisory functions of the RBI have
helped a great deal in improving the standard of banking in India to develop
on sound lines and to improve the methods of their operation.

Promotional Functions:

With economic growth assuming a new urgency since Independence, the

range of the Reserve Bank’s functions have steadily widened. The Bank
now performs a variety of developmental and promotional functions, which,
at one time, were regarded as outside the normal scope of central banking.
The Reserve Bank was asked to promote banking habit, extend banking
facilities to rural and semi-urban areas, and establish and promote new
specialized financing agencies. Accordingly, the Reserve bank has helped
in the setting up of the IFCI and the SFC: it set up the Deposit Insurance
Corporation of India in 1963 and the Industrial Reconstruction Corporation
of India in 1972. These institutions were set up directly or indirectly by the
Reserve Bank to promote saving habit and to mobilize savings, and to
provide industrial finance as well as agricultural finance. As far back as
1935, the RBI set up the Agricultural Credit Department to provide
agricultural credit. But only since 1951 the Bank’s role in this field has
become extremely important. The Bank has developed the co-operative
credit movement to encourage saving, to eliminate money-lenders from the
villages and to route its short term credit to agriculture. The RBI has set up
the Agricultural Refinance and Development Corporation to provide long-
term finance to farmers.

Co-operative Banks:

The Co-operative bank has a history of almost 100 years. The Co-operative
banks are an important constituent of the Indian Financial System, judging
by the role assigned to them, the expectations they are supposed to fulfill,
their number, and the number of offices they operate. The co-operative
movement originated in the West, but the importance that such banks have
assumed in India is rarely paralleled anywhere else in the world. Their role
in rural financing continues to be important even today, and their business
in the urban areas also has increased phenomenally in recent years mainly
due to the sharp increase in the number of cooperative banks.
 While the co-operative banks in rural areas mainly finance
agricultural based activities including farming, cattle, milk, hatchery,
personal finance etc. along with some small scale industries and self-
employment driven activities, the co-operative banks in urban areas mainly
finance various categories of people for self-employment, industries, small
scale units, home finance, consumer finance, personal finance, etc. Some
of the co-operative banks are quite forward looking and have developed
sufficient core competencies to challenge state and private sector banks.

According to NAFCUB the total deposits & landings of Co-

operative Banks is much more than Old Private Sector Banks & also the
New Private Sector Banks. This exponential growth of Co-operative Banks
is attributed mainly to their much better local reach, personal interaction
with customers, their ability to catch the nerve of the local clientele. Though
registered under the Co-operative Societies Act of the Respective States
(where formed originally) the banking related activities of the co-operative
banks are also regulated by the Reserve Bank of India. They are governed
by the Banking Regulations Act 1949 and Banking Laws (Co-operative
Societies) Act, 1965.

There are two main categories of the co-operative banks.

(a) Short term lending oriented co-operative Banks – within this category there are
three sub categories of banks viz state co-operative banks, District co-operative banks
and Primary Agricultural co-operative societies.

(b) Long term lending oriented co-operative Banks – within the second category
there areland development banks at three levels state level, district level and village
level.
Features of Cooperative Banks
Co-operative Banks are organized and managed on the principal of co-operation, self-
help, and mutual help. They function with the rule of “one member, one vote”. Function
on “no profit, no loss” basis. Co-operative banks, as a principle, do not pursue the goal
of profit maximization. Co-operative bank performs all the main banking functions of
deposit mobilization, supply of credit and provision of remittance facilities. Co-operative
Banks provide limited banking products and are functionally specialists in agriculture
related products. However, co-operative banks now provide housing loans also.

UCBs provide working capital loans and term loan as well.

The State Co-operative Banks (SCBs), Central Co-operative Banks (CCBs)

and Urban Cooperative Banks (UCBs) can normally extend housing loans upto Rs 1
lakh to an individual. The scheduled UCBs, however, can lend upto Rs 3 lakh for
housing purposes.

The UCBs can provide advances against shares and debentures also. Co-
operative bank do banking business mainly in the agriculture and rural sector. However,
UCBs, SCBs, and CCBs operate in semi urban, urban, and metropolitan areas also.

The urban and non-agricultural business of these banks has grown over the
years. The co-operative banks demonstrate a shift from rural to urban, while the
commercial banks, from urban to rural. Co-operative banks are perhaps the first
government sponsored, government-supported, and government-subsidized financial
agency in India. They get financial and other help from the Reserve Bank of India
NABARD, central government and state governments. They constitute the “most
favoured” banking sector with risk of nationalization. For commercial banks, the
Reserve Bank of India is lender of last resort, but co-operative banks it is the lender of
first resort which provides financial resources in the form of contribution to the initial
capital (through state government), working capital, refinance.

Co-operative Banks belong to the money market as well as to the capital

market. Primary agricultural credit societies provide short term and medium term loans.
Land Development Banks (LDBs) provide long-term loans. SCBs and CCBs also
provide both short term and term loans. Co-operative banks are financial intermediaries
only partially. The sources of their funds (resources) are (a) central and state
government, (b) the Reserve Bank of India and NABARD, (c) other co-operative
institutions, (d) ownership funds and, (e) deposits or debenture issues. It is interesting to
note that intra-sectoral flows of funds are much greater in co-operative banking than in
commercial banking. Inter-bank deposits, borrowings, and credit from a significant part
of assets and liabilities of co-operative banks. This means that intra-sectoral competition
is absent and intra-sectoral integration is high for co-operative bank.

Some co-operative banks are scheduled banks, while others are non-
scheduled banks. For instance, SCBs and some UCBs are scheduled banks but other
co-operative banks are non-scheduled banks. At present, 28 SCBs and 11 UCBs with
Demand and Time Liabilities over Rs 50 crore each included in the Second Schedule of
the Reserve Bank of India Act.

Co-operative Banks are subject to CRR and liquidity requirements as other scheduled
and nonscheduled banks are. However, their requirements are less than commercial
banks. Since 1966 the lending and deposit rate of commercial banks have been directly
regulated by the Reserve Bank of India. Although the Reserve Bank of India had power
to regulate the rate co-operative bank but this have been exercised only after 1979 in
respect of non-agricultural advances they were free to charge any rates at their
discretion. Although the main aim of the co-operative bank is to provide cheaper credit
to their members and not to maximize profits, they may access the money market to
improve their income so as to remain viable

III. PRODUCTS AND SERVICES OFFERED BY BANKS

Broad Classification of Products in a bank:
The different products in a bank can be broadly classified into:
 Retail Banking.
 Trade Finance.
 Treasury Operations.

Retail Banking and Trade finance operations are conducted at the branch
level while the wholesale banking operations, which cover treasury
operations, are at the hand office or a designated branch.

Retail Banking:
  Deposits
 Loans, Cash Credit and Overdraft
 Negotiating for Loans and advances
 Remittances
 Book-Keeping (maintaining all accounting records)
 Receiving all kinds of bonds valuable for safe keeping

Trade Finance:
 Issuing and confirming of letter of credit.
 Drawing, accepting, discounting, buying, selling, collecting of bills of
exchange,
promissory notes, drafts, bill of lading and other securities.
Treasury Operations:
 Buying and selling of bullion. Foreign exchange
 Acquiring, holding, underwriting and dealing in shares, debentures,
etc.
 Purchasing and selling of bonds and securities on behalf of
constituents.

The banks can also act as an agent of the Government or local authority.
They insure, guarantee, underwrite, participate in managing and carrying
out issue of shares, debentures, etc. Apart from the above-mentioned
functions of the bank, the bank provides a whole lot of other services like
investment counseling for individuals, short-term funds management and
portfolio management for individuals and companies. It undertakes the
inward and outward remittances with reference to foreign exchange and
collection of varied types for the Government.
Common Banking Products Available:
Some of common available banking products are explained below:

1) Credit Card: Credit Card is “post paid” or “pay later” card that draws
from a credit
line-money made available by the card issuer (bank) and gives one a
grace period to pay. If the amount is not paid full by the end of the period,
one is charged interest.

A credit card is nothing but a very small card containing a means of

identification, such as a signature and a small photo. It authorizes the
holder to change goods or services to his account, on which he is billed.
The bank receives the bills from the merchants and pays on behalf of the
card holder.

These bills are assembled in the bank and the amount is paid to
the bank by the card holder totally or by installments. The bank charges the
customer a small amount for these services. The card holder need not
have to carry money/cash with him when he travels or goes for purchasing.

Credit cards have found wide spread acceptance in the ‘metros’

and big cities. Credit cards are joining popularity for online payments. The
major players in the Credit Card market are the foreign banks and some big
public sector banks like SBI and Bank of Baroda. India at present has
about 3 million credit cards in circulation.

2) Debit Cards: Debit Card is a “prepaid” or “pay now” card with some
stored value.
Debit Cards quickly debit or subtract money from one’s savings account, or
if one were taking out cash.

Every time a person uses the card, the merchant who in turn can
get the money transferred to his account from the bank of the buyers, by
debiting an exact amount of purchase from the card. To get a debit card
along with a Personal Identification Number (PIN).

When he makes a purchase, he enters this number on the shop’s

PIN pad. When the card is swiped through the electronic terminal, it dials
the acquiring bank system – either Master Card or Visa that validates the
PIN and finds out from the issuing bank whether to accept or decline the
transaction. The customer never overspread because the amount spent is
debited immediately from the customer’s account. So, for the debit card to
work, one must already have the money in the account to cover the
transaction. There is no grace period for a debit card purchase. Some debit
cards have monthly or per transaction fees.

Debit Card holder need not carry a bulky checkbook or large sums
of cash when he/she goes at for shopping. This is a fast and easy way of
payment one can get debit card facility as debit cards use one’s own
money at the time of sale, so they are often easier than credit cards to
obtain.
 The major limitation of Debit Card is that currently only some 3000-
4000 shops, country wide accepts it. Also, a person can’t operate it in case
the telephone lines are down.

3) Automatic Teller Machine: The introduction of ATM’s has given the

customers the facility of round the clock banking. The ATM’s are used by
banks for making the customers dealing easier. ATM card is a device that
allows customer who has an ATM card to perform routine banking
transaction at any time without interacting with human teller. It provides
exchange services. This service helps the customer to withdraw money
even when the banks ate closed. This can be done by inserting the card in
the ATM and entering the Personal Identification Number and secret
Password.

ATM’s are currently becoming popular in India that enables the

customer to
withdraw their money 24 hours a day and 365 days. It provides the
customers with the ability to withdraw or deposit funds, check account
balances, transfer funds and check statement information. The advantages
of ATM’s are many. It increases existing business and generates new
business. It allows the customers.

 To transfer money to and from accounts.

 To view account information.
 To order cash.
 To receive cash.

Advantages of ATM’s:
To the Customers

 ATM’s provide 24 hrs., 7 days and 365 days a year service.

 Service is quick and efficient
 Privacy in transaction
 Wider flexibility in place and time of withdrawals.
 The transaction is completely secure – you need to key in Personal
Identification Number (Unique number for every customer).

To Banks
  Alternative to extend banking hours.
 Crowding at bank counters considerably reduced.
 Alternative to new branches and to reduce operating expenses.
 Relieves bank employees to focus an more analytical and innovative
work.
 Increased market penetration.

ATM’s can be installed anywhere like Airports, Railway Stations,

Petrol Pumps, Big Business arcades, markets, etc. Hence, it gives easy
access to the customers, for obtaining cash.

The ATM services provided first by the foreign banks like

Citibank, Grind lays
bank and now by many private and public sector banks in India like ICICI
Bank, HDFC Bank, SBI, UTI Bank etc. The ICICI has launched ATM
Services to its customers in all the Metropolitan Cities in India. By the end
of 1990 Indian Private Banks and public sector banks have come up with
their own ATM Network in the form of “SWADHAN”. Over the past year
upto 44 banks in Mumbai, Vashi and Thane, have became a part of
“SWADHAN” a system of shared payments networks, introduced by the
Indian Bank Association (IBA).

4) E-Cheaques: The e-cheaques consists five primary facts. They are the
consumers, the merchant, consumer’s bank the merchant’s bank and the
e-mint and the clearing process. This cheaquring system uses the network
services to issue and process payment that emulates realworld chaquing.
The payer issue a digital cheaques to the payee ant the entire transactions
are done through internet. Electronic version of cheaques are issued,
received and processed. A typical electronic cheque transaction takes
place in the following manner:
The customer accesses the merchant server and the merchant server
presents its goods to the customer.
 The consumer selects the goods and purchases them by sending an
e-cheque to the merchant.
  The merchant validates the e-cheque with its bank for payment
authorization.
 The merchant electronically forwards the e-cheque to its bank.
 The merchant’s bank forwards the e-cheque to the clearing house for
cashing.
 The clearing house jointly works with the consumer’s bank clears the
cheque and
transfers the money to the merchant’s banks.
 The merchant’s bank updates the merchant’s account.
 The consumer’s bank updates the consumer’s account with the
withdrawal information.

The e-chequing is a great boon to big corporate as well as small

retailers. Most major banks accept e-cheques. Thus this system offers
secure means of collecting payments, transferring value and managing
cash flows.

5) Electronic Funds Transfer (EFT): Many modern banks have

computerized their cheque handling process with computer networks and
other electronic equipments. These banks are dispensing with the use of
paper cheques. The system called electronic fund transfer (EFT)
automatically transfers money from one account to another. This system
facilitates speedier transfer of funds electronically from any branch to any
other branch. In this system the sender and the receiver of funds may be
located in different cities and may even bank with different banks. Funds
transfer within the same city is also permitted. The scheme has been in
operation since February 7, 1996, in India.

The other important type of facility in the EFT system is

automated clearing houses. These are the computer centers that handle
the bills meant for deposits and the bills meant for payment. In big
companies pay is not disbursed by issued cheques or issuing cash. The
payment office directs the computer to credit an employee’s account with
the person’s pay.

6) Telebanking: Telebanking refers to banking on phone services.. a

customer can access information about his/her account through a
telephone call and by giving the coded Personal Identification Number
(PIN) to the bank. Telebanking is extensively user friendly and effective in
nature.

 To get a particular work done through the bank, the users may leave
his instructions in the form of message with bank.
 Facility to stop payment on request. One can easily know about the
cheque status.
 Information on the current interest rates.
 Information with regard to foreign exchange rates.
 Request for a DD or pay order.
 D-Mat Account related services.
 And other similar services.

5) Mobile Banking: A new revolution in the realm of e-banking is the

emergence of mobile banking. On-line banking is now moving to the mobile
world, giving everybody with a mobile phone access to real-time banking
services, regardless of their location. But there is much more to mobile
banking from just on-lie banking. It provides a new way to pick up
information and interact with the banks to carry out the relevant banking
business. The potential of mobile banking is limitless and is expected to be
a big success. Booking and paying for travel and even tickets is also
expected to be a growth area.

According to this system, customer can access account details on

mobile using the Short Messaging System (SMS) technology6 where select
data is pushed to the mobile device.The wireless application protocol
(WAP) technology, which will allow user to surf the net on their mobiles to
access anything and everything. This is a very flexible way of transacting
banking business. Already ICICI and HDFC banks have tied up cellular
service provides such as Airtel, Orange, Sky Cell, etc. in Delhi and Mumbai
to offer these mobile banking services to their customers.

6) Internet Banking: Internet banking involves use of internet for delivery

of banking products and services. With internet banking is now no longer
confirmed to the branches where one has to approach the branch in
person, to withdraw cash or deposits a cheque or request a statement of
accounts. In internet banking, any inquiry or transaction is processed online
without any reference to the branch (anywhere banking) at any time.

The Internet Banking now is more of a normal rather than an

exception due to the fact that it is the cheapest way of providing banking
services. As indicated by McKinsey Quarterly research, presently traditional
banking costs the banks, more than a dollar per person, ATM banking
costs 27 cents and internet banking costs below 4 cents approximately.
ICICI bank was the first one to offer Internet Banking in India.

Benefits of Internet Banking:

 Reduce the transaction costs of offering several banking services and
diminishes the need for longer numbers of expensive brick and
mortar branches and staff.
 Increase convenience for customers, since they can conduct many
banking transaction 24 hours a day.
 Increase customer loyalty.
 Improve customer access.
 Attract new customers.
 Easy online application for all accounts, including personal loans and
mortgages

Financial Transaction on the Internet:

Electronic Cash: Companies are developing electronic replicas of all
existing payment system: cash, cheque, credit cards and coins.

Automatic Payments: Utility companies, loans payments, and other

businesses use on
automatic payment system with bills paid through direct withdrawal from a
bank account.

Direct Deposits: Earnings (or Government payments) automatically

deposited into bank accounts, saving time, effort and money.

Stored Value Cards: Prepaid cards for telephone service, transit fares,
highway tolls, laundry service, library fees and school lunches.

Point of Sale transactions: Acceptance of ATM/Cheque at retail stores

and restaurants for payment of goods and services. This system has made
functioning of the stock Market very smooth and efficient.

Cyber Banking: It refers to banking through online services. Banks with

web site “Cyber” branches allowed customers to check balances, pay bills,
transfer funds, and apply for loans on the Internet.

9) Demat: Demat is short for de-materialization of shares. In short, Demat

is a process
where at the customer’s request the physical stock is converted into
electronic entries in the depository system.

In January 1998 SEBI (Securities and Exchange Board of India)

initiated DEMAT ACCOUNTANCY System to regulate and to improve stock
investing. As on date, to trade on shares it has become compulsory to have
a share demat account and all trades take place through demat.

How to Operate DEMAT ACCOUNT?

One needs to open a Demat Account with any of the branches of the bank. After
opening an account with any bank, by filling the demat request form one can handover
the securities. The rest will be taken care by the bank and the customer will receive
credit of shares as soon as it is confirmed by the Company/Register and Transfer
Agent. There is no physical movement of share certification any more. Any buying or
selling of shares is done via electronic transfers.

1) If the investor wants to sell his shares, he has to place an order with his broker and
give a “Delivery Instruction” to his DP (Depository Participant). The DP will debit hi s
account with the number of shares sold by him.

2) If one wants to buy shares, he has to inform his broker about his Depository Account
Number so that the shares bought by him are credited in to his account.
3) Payment for the electronic shares bought or sold is to be made in the same way as in
the case of physical securities.

IV. BANKING SERVICES

Banking covers so many services that it is difficult to define it. However,

these basic services have always been recognized as the hallmark of the
genuine banker. These are…
 The receipt of the customer’s deposits
 The collection of his cheques drawn on other banks
 The payment of the customer’s cheques drawn on himself

There are other various types of banking services like:

1) Advances – Overdraft, Cash Credit, etc.
2) Deposits – Saving Account, Current Account, etc.
3) Financial Services – Bill discounting etc.
4) Foreign Services – Providing foreign currency, travelers cheques, etc.
5) Money Transmission – Funds transfer etc.
6) Savings – Fixed deposits, etc.
7) Services of place or time – ATM Services.
8) Status – Debit Cards, Credit Cards, etc.

Customer Services in Commercial Banks:

Customer service is the service provided in support of a bank’s core
products. Customer service often includes answering questions; handling
complaints. Customer service can occur on site (as when an onstage
employee helps a customer or answers a question) or it can occur over the
phone or the Internet. Quality customer service is essential to building
cordial customer relationship.
Banking being a service industry, a lot depends on efficient and
prompt customer service. Customer service is the most important duty of
the banking operations. Prompt and efficient service with smile will develop
good public relations reduce complaints and increase business.

Why is Customer Service Important?

➢ Changing customer expectations: Today the customer is more

demanding and more sophisticated than he or she was thirty years ago.

➢ The increased importance of customer service: With changing

customer expectations, competitors are seeing customer service as a
competitive weapon with which they differentiate their products and
services.

➢ The need for a relationship strategy: To ensure that a customer

service strategy that will create a value preposition for customers should be
formulated implemented and
Controlled. It is necessary to give it a central role and not one that is
subsumed in the various elements of the marketing mix.
 The customer is the kingpim in growth organizations like commercial
banks. Only
those institutions which work according to his dictates will flourish. Quality,
Consistency and Durability at low price are the final expectations of a
customer. Quality will have to be unambiguous, of world class quality.
Quality cannot be of minimum acceptable standards. Customer
responsiveness must be quick and also competent. Speed, performance
and cost will be the new values “mantra” for success. he ten key areas of
customer’s services to be attended timely and regularly are:
i. Submission of statement of A/Cs to customers
ii. Updating of savings pass books.
iii. Teller system efficiency.
iv. Cleanliness and Upkeep of premises.
v. Intermediate Credit for institution cheques/land bills.
vi. Advance intimation to customers for rewards of Term Deposits Receipts
on maturity.
vii. Advance for Debit/credit to accounts.
viii.Punctuality of staff.

Chapter-2
 Review of Literature

REVIEW OF LITERATURE
Review of literature is the most useful and simple method of formulating the
research problem.
The researches done by previous researchers are reviewed and their
usefulness is evaluated to
serve as basis for further research. Thus researcher reviews and builds
upon the work of others.
The reviews that are collected by the researcher should give an insight into
the field under study.The reviews must explain the need and scope of the
study under consideration.

Sasser et al. (1978) has defined services as commodities that cannot be

stored or disappear in
use, or as activities that require personal contact. The distinct
characteristics of services are
intangibility, perish ability, heterogeneity of the product, and simultaneity of
production and consumption Two economic units are required for a service
to be produced – the consumer and
the producer. While the consumer cannot retain the actual service after it is
produced, the effect
of the service can be retained. Managing a service operation requires the
manager to understand the service concept, service delivery system, and
service levels. As the consumer has a key role in the definition and
evaluation of all three elements, it is imperative that service managers have
a clear understanding of consumer expectations and perceptions. Services
may be provided by private or public agencies. These characteristics
enhance the importance of certain marketing strategies that are unique to
services marketing, such as service customization, managing evidence,
making the service tangible, and synchronizing supply and demand
patterns.

Service quality is more difficult for the consumer to evaluate than

goods quality. Perceptions of service quality result from a comparison of
consumer expectations with actual service Performance. Quality
evaluations are not made solely on the outcome of a service; they also
involve an evaluation of the process of service delivery.

Parasuraman, Zeithaml and Berry (1985) emphatically pointed out that

the concept of quality
prevalent in the goods sector is not extendable to the services sector.
Being inherently and essentially intangible, heterogeneous, perishable, and
entailing simultaneity and inseparability of production and consumption,
services require a distinct framework for quality explication and
measurement.

As against the goods sector where tangible cues exist to enable

consumers to evaluate product quality, quality in the service context is
explicated in terms of parameters that largely come under the domain of
‘experience’ and ‘credence’ properties and are as such difficult to measure
and evaluate (Parasuraman, Zeithaml and Berry, 1985; Zeithaml and
Bitner, 2001). One major contribution of Parasuraman, Zeithaml and Berry
(1988) was to provide a terse definition of service quality. They defined
service quality as ‘a global judgment, or attitude, relating to the superiority
of the service’, and explicated it as involving evaluations of the outcome
(i.e., what the customer actually receives from service) and process of
service act (i.e.,
the manner in which service is delivered). In line with the propositions put
forward by Gronroos (1982) and Smith and Houston (1982), Parasuraman,
Zeithaml and Berry (1985, 1988) posited
and operationalized service quality as a difference between consumer
expectations of ‘what they want’ and their perceptions of ‘what they get.’
Based on this conceptualization and operationalization, they proposed a
service quality measurement scale called ‘SERVQUAL.’ The SERVQUAL
scale constitutes an important landmark in the service quality literature and
has been extensively applied in different service settings.

Boulding et al. (1993) perceived the dimensions of service quality as a

function of a customer's
prior expectations of what will and what should transpire during a service
encounter, as well as the customer's most recent contact with the service
delivery system. These perceptions of quality dimensions form the basis for
a person's intended behavior. Their findings suggest that the two different
types of expectations have opposing effects on perceptions of service
quality and that service quality perceptions positively affect intended
behaviors.

Zeithaml et al. (1993) explored the gap between expectations and

perceptions to better understand expectations as they pertain to customer
assessment of service quality and to extend the theoretical work that exists
in the customer satisfaction literature. Based on their study, the gap
between customer expectations and perceptions as proposed by
Parasuraman et al. (1985) can be conceptualized to reflect two comparison
standards: desired service which reflects what customers want, and
adequate service which indicates the standard that customers are willing to
accept.
The comparison between desired service and perceived service or
the level of service customers believe is likely to occur, called perceived
service quality (PSQ) is the perceived service superiority gap. The
comparison between adequate service and perceived service, called PSQ
Gap 5 is the perceived service quality adequacy gap. The smaller the gap
between desired service and perceived service, the higher the perceived
superiority of the firm. The smaller the gap between adequate service and
perceived service, the higher the perceived adequacy of the service.
Lowndes and Dawes (2001) have found that Service quality is commonly
thought to comprise of five generic dimensions - responsiveness,
assurance, tangibles, empathy and reliability.These dimensions form the
basis for service measurement tool SERVQUAL. This tool predominantly
focused on customer perceptions and expectations of quality and helps the
organizations to improve upon their service quality resulting in greater
customer retention.

Jain and Gupta (2004) have done a comparative analysis of two major
service quality measurement scales: SERVQUAL and SERVPERF. An
ideal service quality scale is one that is not only psychometrically sound but
is also diagnostically robust enough to provide insights to the managers for
corrective actions in the event of quality shortfalls. This study assesses the
diagnostic power of the two service quality scales. Using data collected
through a survey of consumers of fast food restaurants in Delhi, the study
finds the SERVPERF scale to be providing a more convergent and
discriminant valid explanation of service quality construct. However, the
scale is found deficient in its diagnostic power. It is the SERVQUAL scale
which outperforms the SERVPERF scale by virtue of possessing higher
diagnostic power to pinpoint areas for managerial interventions in the event
of service quality shortfalls. SERVPERF scale should be used for
assessing overall service quality of a firm because of its psychometric
soundness and greater instrument parsimoniousness. One should employ
the The SERVPERF scale should also be the preferred research
instrument when one is interested in undertaking service quality
comparisons across service industries.

Arasli et al (2005) has analyzed and compared service quality in the

commercial banking sector of a small island economy – Cyprus. The author
with others investigated the relationship between overall bank customer
satisfaction in the Turkish- and Greek-speaking areas of Cyprus
and positive word-of-mouth about their banks. There is disparity in the
banking sector of a divided Cyprus, where banks in the South have
undergone significant restructuring before EU accession and banks in the
North are affected by the economic crisis and need to restructure ifthey
want to join the EU. After descriptive and factor analysis, multivariate
regression was used to estimate the impact of service quality dimensions
on overall customer satisfaction and word of mouth.
It was found that the responsiveness dimension failed to load
and thus the SERVQUAL scale proved to be of a four-dimensional
structure in this study. Research results revealed that the expectations of
bank customers in both areas were not met and that the largest gap was
found in the empathy dimension. The assurance dimension had the largest
influence on customer satisfaction and overall satisfaction of bank
customers in both areas of Cyprus had a positive effect on their word-of-
mouth. The study helped the banks in both areas of Cyprus to redefine
their corporate image to one that is customer-focused and driven by service
quality.

Prajapati and Kachwala (2006) in their study have found out that the
delivery of information i.e. knowledge transmission in the case of
Management Education Institutes (MEI) is intangible in nature. Therefore,
the inputs in terms of delivery of this knowledge - faculty, equipment and
the entire environment and infrastructure are very important for quality.

A gap was found between the quality rendered by faculty and

service provider, and quality required by students. It is essential to
understand the exact quality required by the students to develop a course
and curriculum that suit their requirements. Service quality needs to be
quantified and thus it can be described in terms of objective and
perceptualcharacteristics:

Objective characteristics include things like, lecture time, wait time,

etc., and can be easily quantified. Perceptual characteristics on the other
hand, depend on the students' perceptions, which include dimensions of
service quality based on the SERVQUAL and other service quality
instruments. The study encompassed Business Schools in Mumbai as
perceived by students are evaluated.

The questionnaire is on the basis of a hypothesized model for

service quality. Factor analysis of the responses helped to develop a
working model for the perceived service quality factors in Management
Education Institutes. This helped in identifying the improvements in Service
Quality in Management Education Institutes.

Cauchick Miguel et al (2007) have highlighted the fact that

competitiveness and search for profits have called for more attention
towards customer’s satisfaction and increased organizations interest in
service quality. SERVQUAL technique is applied on a multinational
company service chain including one hundred shops located throughout
the country, to assess quality service dimensions that are delivered through
the perspectives of managers and customers. It was found that the certain
quality dimensions and characteristics call for managerial attention.
Responsiveness and assurance were found to be the most relevant to shop
managers and customers, respectively. Quality improvement initiatives
were proposed to enhance the service rendered by the car repair
shops.The paper concludes that there are differences among the
perspectives of shop owners and customers with regard to quality
dimensions.

Hii Geng Hing (2007) has examined Service Quality (SERVQUAL)

variables from the perspective of hotel guests in Sibu. Since Sibu is an
emerging market for tourism industry so the
information obtained from hotel guests can be utilized to attract more
guests. Stanley has used
Gap 5 (Gap between expected service and perceived service) and factor
analysis to analyze the
data obtained in order to determine satisfaction and perception of the
guests. Data obtained from
189 respondents revealed a negative Gap 5 perception and a rich
expectation and perception
factors. Recommendations for managers and future studies are presented.

Saravan and Rao (2007) have highlighted that in service firms the
practitioners are interested to
know the customer perceptions of service quality for identifying shortfalls
and improving service
delivery. This study has analyzed the discrimination among the three
groups (customer oriented,
employee oriented and technology oriented) of overall service quality from
the customers’
perspective.
The results indicate that both the technological factors and the people-
oriented factors appear to
contribute more in discriminating the three groups of overall service quality.
Further, the service
quality indices in the Indian automobile service sector as a whole indicate a
satisfactory
performance.
Swaid and Wigand (2007) in their study have found that to satisfy and
retain customers the
organization has to offer a superior service quality. The study indicates that
the key dimensions
of ecommerce service quality are website usability, information quality,
reliability,
responsiveness, assurance and personalization.
Secondly customer satisfaction is influenced mostly with the perception of
reliability, while
customer loyalty is affected by the perception of assurance and customer
retention is predicted
by the customer satisfaction index.

Rajagopal (2008) has analyzed the impact of market orientation strategies

and performance of
customer services on customer acquisition, retention and sales of
automobiles which reveals
overall performance of automobile dealers in Mexico. The study
comprehends understanding on
customer-dealer relationship in the automobile market segment referring to
key factors which
establishes service quality encompassing tangibility, responsiveness, trust,
accuracy and
empathy. It was found that the customers perceive better quality of
relationship in a given frame
of functions that are performed effectively by the dealer lowering the extent
of conflicts thereof.
High conformance quality services of dealers and value added customer
relationship to offer
high customer satisfaction develop life time customer value and strengthen
the customer-dealer
relationship.
Chapter - 3
 INTRODUCTION OF
RETAIL BANKS

Retail Banks:- Retail banking is a banking service that primarily focuses toward
individual consumers and consumer markets.
Retail banking entities provide a wide range of personal banking services which
include:-
1) Offering Savings and Checking Accounts.
2) Bills Paying Services.
3) Debit and Credit cards.etc.

Retail banking aims to be the one-stop shop for as many financial services as
possible on behalf of retail clients. Some retail banks have even made a push into
investment services such as wealth management, brokerage accounts, private
banking and retirement planning. While some of these ancillary services are
outsourced to third parties (often for regulatory reasons), they often intertwine with
core retail banking accounts like checking and savings to allow for easier transfers
and maintenance.  

Retail Banking:
 Deposits
 Loans, Cash Credit and Overdraft
 Negotiating for Loans and advances
 Remittances
 Book-Keeping (maintaining all accounting records)
 Receiving all kinds of bonds valuable for safe keeping
 Chapter-4

Research Methodology
Research Methodology

Research design
A research design is the arrangement of conditions for collection and
analysis of data in a manner that aims to combine relevance to the
research purpose with economy in procedure. It is the conceptual structure
within which research is conducted. It constitutes the blueprint for the
collection, measurement and analysis of data. My research design is
descriptive in nature as it involves studying the perceptions and
expectations of customers in order to measure the service quality provided
by the service provider. The study thus finds out the major areas of
improvement so that company services to the customers can be improved.
.

Method of Data Collection

The primary data was collected with the help of a structured, non disguised
questionnaire. Secondary data was collected from journals, magazines,
newspapers, books & internet with a view to supplement the primary data.
The study of secondary sources made the structuring of questionnaire
easy.
Sampling Plan

1. Universe of the study: This involves all the people using the product or
the service. For this project all the people who are availing banking
services from authorized bank service stations in the world, forms the
universe.
2. Population of the study: This involves all those people using the
product/service residing in a particular area. So here the population will be
all those people who are availing the service from all banks service stations
in Udaipur.
3. Sampling frame: The sampling frame is the list of respondents from
where the researcher draws the sample. In this research study, sampling
frame is the database provided by the banks which are located in Udaipur.
4. Sampling technique: The sampling technique applied is judgmental
sampling technique.

Sample Sizes
The sample size undertaken in this research study is 80.

Sampling Unit
Every single individual undertaken in the research study is called the
sampling unit. In this research study sampling unit is every single individual
who gets his or her bank account serviced at any bank
 Chapter-5

Data interpretation
 Questionnaire
Questionnaire for the customer

1) Do you think that your bank caters all your banking needs through its
services?

Chart Title

30%

Yes No

70%

The sample size consist of 80 peoples out of whom30%thought that their bank is not catering
their banking needs properly and 70% are in favor of their bank and satisfied with it’s services.
2) Which of the following channels do you use to access your bank?

3%

branch
telephone
45%
ATM
50% online
other means

3%

The sample size out of 80 respondents 45% peoples are access their a/c from the branch, 2.50%
peoples are access by telephone, 50% are access by ATM, and 2.50% access online.
3) Since how long you are transacting with your bank?

3%
7%
20%
daily week

30% month year

more than one year

40%

The sample size out of 80 respondents 20% peoples are transacting money daily, 40% peoples
are transacting weekly, 30% are transacting monthly, 7% are transacting yearly and 3% are
transacting more than one year.
4) How many times are you visiting your bank?

10%

20% 40%
daily weekly

monthly rarely

30%

The sample size out of 80 respondents 40% peoples are visiting their bank daily, 30% peoples
are visiting their bank weekly, 20% are visiting their bank monthly, and 10% are visiting rarely.
5) Out of the listed options tick-mark the financial services that your
bank provides you?

0% 4%
16% current a/c saving a/c
16%
loan a/c demat a/c

16% credit card debit card

16%
ATM wealth manag

16%
FES any other
16%

The sample size out of 80 respondents 100% peoples are said that their banks provides all
financial services.
6) Out of the listed options tick-mark the financial services that you
use?

5% current a/c
16%
saving a/c
loan a/c
26% demat a/c
credit card
21% debit card
ATM
wealth mang

5% FES
21%
5% any other

The sample size out of 80 respondents 5% are used current a/c, 25%used saving a/c, 20% are
used loan a/c, 5% are used demat a/c, 0% are used credit card, 5% are used debit card, 20% used
ATM, 0% are used wealth management, 0% are used Fes, and 15% are used any other services.
7) According to you, does your bank charge unnecessarily for not
maintain minimum balance in your account?

15%

Yes No

55% Unaware
30%

The sample size out of 80 respondents 15% peoples agreed that their bank charges unnecessarily
and not maintain mini. balance, 30% peoples are disagreed , and 55% are not aware to it.
8) According to you, does your bank offer competitive interest rate?

3%

35%
Yes No

Unaware

62%

The sample size out of 80 respondents 62% peoples are agreed, 35% peoples are disagreed, 3%
are unaware.
9) According to you, do you use the services of more than one bank?

30%

Yes
No

70%

The sample size out of 80 respondents 70% peoples are said yes, 30% peoples are said no.
10) How many different banks have you had a/c with over your life?

1%
9% 10%

0 1 2 3

35%
more than 3

45%

The sample size out of 80 respondents 1% peoples are said they have no a/c in any bank, 10%
peoples are said they have an a/c in 1 bank, 45% are said they have an a/c in 2 banks, 35% are
said they have an a/c in 3 banks, and 9% said they have more than 3 a/c.
11) Are you still the customer of the bank that you opened your first
account with?

40%

Yes NO

60%

The sample size out of 80 respondents 60% peoples ae said yes, 40% peoples are said no.
12) What do you fell about overall service quality of your bank?

4%
20%
22%
Excellent
very good
9% good
average
poor

45%

The sample size out of 80 respondents 20% peoples are said excellent, 9% peoples are said very
good, 45% are said good, 22% are said average, and 0% are said poor.
13) Would you recommend your bank to your bank to your friends,
relatives, associates?

24%

Yes No Can't say

56%

20%

The sample size out of 80 respondents 56% peoples are said yes, 20% peoples are said no, 24%
are said can’t say.
14) Have you ever closed an account with a bank & opened into
another?

35%

Yes No

65%

The sample size out of 80 respondents 35% peoples are said yes, 65% peoples are said no.
15) What is your frequency of using internet banking?

2%
8%

20% daily weekly

monthly rarely

never

70%

The sample size out of 80 respondents 0% peoples are using daily, 2% peoples said they used
internet banking services at weekly, 8% are using monthly, 20% are using rarely, and 70% said
they never used internet banking services .
16) What is the purpose for which you are using internet banking
services?

10%

Check a/c balance

20% 40%
transfer money

online bill payment

any other

30%

The sample size out of 80 respondents 40% peoples said they used internet services for check a/c
balance, 30% peoples used for transfer money, 20% used for online bill payment, 10% used for
any other services.

17) According to you, does your bank have core banking facility for the
customer?
 40%

Yes No

60%

The sample size out of 80 respondents 60% peoples said yes, 40% peoples said no.

18) According to you, when you think of the services provided by your
bank what comes first in your mind?
 10%
personalized services

wide branch network

customer oriented service

50% 30% approach

core banking

can't relate
10%

The sample size out of 80 respondents 10% peoples have given their preferences for personalized
services,30%for wide branch network ,10% have given their votes for customer oriented service
approach ,50% like core banking services and remaining can’t relate.
 Questionnaire
Questionnaire for the bankers:-

1) What is the frequency of customer walk in per day?

5%
20%

30% 1-15 perday

15-30perday
30-60perday
more than 60

45%

The sample size out of 80 respondents 5% peoples give their preference for 1-15 foot falls per
day, 30% for 15-30 per day , 45% for 30-60 per day, 20% for more than 60.

2) Do you provide plans like a free demat a/c, when customer open a
new saving a/c in your bank?
 45%
Yes No
55%

The sample size out of 80 respondents 45% peoples said yes, 55% peoples said no.

3) Does your bank provide ATM card to the customers, when they open
a new a/c in your bank?
 10%

Yes No

90%

The sample size out of 80 respondents 90% peoples said yes, 10% peoples said no.

4) Does your bank follow KYC (Know Your Customer) norms before
providing any financial services to your potential client?
 5%

Yes No

95%

The sample size out of 80 respondents 95% peoples said yes, 5% peoples are said no.

5) Do you provide credit card to your potential customer?

 35%

Yes No

65%

The sample size out of 80 respondents 35% peoples said yes, 65% peoples are said no.

6) What kind of financial services, your bank is providing to your

customer, tick mark on the following options?
 current a/c
15%
savings a/c
27%
loan a/c

demate a/c
15%
credit card
3% debit card

ATM
10%
Fes
20%
5% other services
3%
2%

The sample size out of 80 respondents they said that their bank provides all kind of services
which is need by their customers.

7) According to you, are your customers satisfied from your service

quality which you offer to them?
 2%

Yes No

98%

The sample size out of 80 respondents 1% peoples said yes, 39% peoples said no.
8) According to you, which financial service is mostly used and least
used by your customers? (Mention M for most and L for least)?

20 20.4
1 current a/c saving a/c

loan a/c demat a/c

30
credit card debit card
45
ATM Fes

25 other services
5
10.4
1

The sample size out of 80 respondents they said that the mostly service used by their customers
which is ATM, and lowest service which used by their customer is credit card and fes.
9) What do you feel about overall service quality of given by your bank?

20.4 20.4

Excellent

27.4 Very good

Good
Average
Poor

90

The sample size out of 80 respondents 20.4% excellent, 27.4% very good, 90% good, 20.4%
average, and remaining is poor.
10) Does your bank provide online services?

11%

Yes No

89%

The sample size out of 80 respondents 35.5% said yes, 4.50% peoples said no.
11) What percentage of your customers, who using the internet
banking mostly?

2% 2%

24%

1-10% 10-30%

30-50% 50-70%

above 70%

71%

The sample size out of 80 respondents 30% people said 30-50% are used mostly.
12) Does your bank provide financial services for NRI clients too?

13%

Yes No

88%

The sample size out of 80 respondents 5% peoples said yes, 35% peoples said no.
13) According to your experience, what was the degree of effect of
recent financial crises (2007-2009), on the overall demand of the
financial services?

7%
13%

High moderate

40%
low nil

40%

The sample size out of 80 respondents 10% peoples said high, 30% peoples said moderate, 30%
said low, 5% said ni.
14) According to you demand of which services were being affected the
most and least by recent financial crises (2007- 2009)? Mention M for
most and L for least

1% 4%
3%
15%

current a/c
saving a/c
loan a/c
demat a/c
credit card
debit card
ATM
44% 33% wealth management
Fes
other services

The sample size out of 80 respondents most affected service were demat a/c, and lowest were
20% peoples are said no, 24% are said can’t say. Debit card.etc.
15) According to you, do you feel the competition among the peer
banks is having an impact on an individual bank?

25%

Yes No

75%

The sample size out of 80 respondents 10% peoples said yes, 30% peoples said no.
16) According to you, when you provide a credit card, so how do you
decide the credit limit? On the basis of:-

5%

41% Monthly salary

Yearly salary
Other
54%

The sample size out of 80 respondents 15% based on monthly salary , 20% based on yearly
salary, remaining based on other.
17) How much do you charge for an ATM card?

19%

40%
50 100 more than 100

42%

The sample size out of 80 respondents 22.5% peoples said 50 , 23.5% peoples said 100, 10.5%
said more than 100.
18) According to you, what do you think that your bank gives best
service to your competitors?

13%

Yes No

88%

The sample size out of 80 respondents 35% peoples said yes, 5% peoples said no.
Chapter – 6

Fact

Findings
The study conducted on the satisfaction level of banking users reveals
following findings.

 It is found that the number of respondents constituting 86% males

and 14% females who are using banking.
 It was found in the study that majority of respondents using banking
from more than years and they constitute 50% of sample

 It was found that how many people know about banking transaction.
And how many use exactly.
 In survey I was found that the people which are using banking but
they not avers about rating scale and their rights which are provided
by govt. to all consumers
 I also find that customers are not satisfied by service provide by
banks specially private banks their employees are very rood to their
customers.
 In cooperative banks there is no availability of modern looking
equipment and well groomed employees.
 Suggestion

Improving financial services is certainly not a simple, straight forward

exercise.
Financial Services can be improved if the following areas are given due
attention:
• Identifying primary quality determinants,
• Managing customer expectations,
• Managing evidence,
• Educating customers about the service
• Giving a good environment,
• Following up the rules given by RBI,

I study in my survey that service of nationalized banks is good all

customers are believe in govt.banks.so there is no need for higher
level of improvement. But private banks need improvement in their
behavior and working style.
Improvement is needed from cooperative banks because they are in
there introductory stage.
 Bibliography

Bibliography

www.wikiepedia.com

www.scribd.com

www.yahoo.com
www.google.com

www.rediff.com

www.businessstandard.com

www.ebooks.com

www. Indian journals.com

Service marketing, 2e book

www. rbi.com

www.private banks in india.com

Book:- Banking services operations (Jaipur publication New delhi)

International .Journal of Bank Marketing

Arasli, Huseyin; Katircioglu

 ANNEXURE

Questionnaire
Questionnaire for the customers
1. NAME:-
 2. ADDRESS:-
3. OCCUPATION:-
4. ANNUAL INCOME:-
5. NAME OF YOUR BANK:-

1) Do you think that your bank caters all your banking needs through its
services?

Yes
No, then why _________________________________________

2) Which of the following channels do you use to access your bank?

Branch
Telephone
ATM
Online
Other means_______________________________________

3) Since how long you are transacting with your bank?

Daily
1 Week
1 Month
 1Year
More than one year

4) How many times are you visiting your bank?

Daily
Weekly
Monthly
Rarely

5) Out of the listed options tick-mark the financial services that your
bank provides you?

Current a\c
Savings a\c
Loan a\c
Demat a\c
 Credit Card
Debit Card
ATM
Wealth Management
Foreign Exchange Services
Any Other_________________________________________
6) Out of the listed options tick-mark the financial services that you
use?

Current a\c
Savings a\c
Loan a\c
Demat a\c
Credit Card
Debit Card
ATM
Wealth Management
Foreign Exchange Services
Any Other_________________________________________

7) According to you, does your bank charge unnecessarily for not

maintain minimum balance in your account?

Yes
No
Unaware
8) According to you, does your bank offer competitive interest rate?

Yes
No
Unaware

9) According to you, do you use the services of more than one bank?

Yes_____________________________________________
No

10) How many different banks have you had a/c with over your life?

0
1
2
3
More than 3

11) Are you still the customer of the bank that you opened your first
account with?

Yes
No
12) What do you fell about overall service quality of your bank?
 Excellent
Very good
Good
Average
Poor

13) Would you recommend your bank to your bank to your friends,
relatives, associates?

Yes
No____________________________________________
Can’t say

14) Have you ever closed an account with a bank & opened into
another?

Yes____________________________________________
No

15) What is your frequency of using internet banking?

Daily
Weekly
Monthly
Rarely
Never
16) What is the purpose for which you are using internet banking
services?

Check account balance

Transfer money
Online bill payment
Any other________________________________________

17) According to you, does your bank have core banking facility for the
customer?

Yes
No

18) According to you, when you think of the services provided by your
bank what comes first in your mind?

Personalized service
Wide branch network
Customer oriented service approach
Core banking
Can’t relate

Questionnaire
Questionnaire for the bankers:-
1. Name:-
2. Bank’s name:-
 3. Branch address:-
4. Designation:-
5. Contact no.:-

1) What is the frequency of customer walk in per day?

1-15
15-30
30-60
More than 60
2) Do you provide plans like a free demat a/c, when customer open a
new saving a/c in your bank?

Yes
No
3) Does your bank provide ATM card to the customers, when they open
a new a/c in your bank?

Yes
No

4) Does your bank follow KYC (Know Your Customer) norms before
providing any financial services to your potential client?

Yes
5) Do you provide credit card to your potential customer?

Yes
No

6) What kind of financial services, your bank is providing to your

customer, tick mark on the following options?

Current a/c
Saving a/c
Loan a/c
Demat a/c
Credit card
Debit card
ATM
Foreign exchange service
Other services________________________________

7) According to you, are your customers satisfied from your service

quality which you offer to them?

Yes
No

8) According to you, which financial service is mostly used and least

used by your customers? (Mention M for most and L for least)

Current a/c
Saving a/c
Loan a/c
 Demat a/c
Credit card
Debit card
ATM
Foreign exchange services
Other services_________________________________

9) What do you feel about overall service quality of given by your bank?

Excellent
Very good
Good
Average
Poor

10) Does your bank provide online services?

Yes
No

11) What percentage of your customers, who using the internet

banking mostly?

1-10%
10-30%
 30-50%
50-70%
Above 70%

12) Does your bank provide financial services for NRI clients too?

Yes
No

13) According to your experience, what was the degree of effect of

recent financial crises (2007-2009), on the overall demand of the
financial services?

High
Moderate
Low
Nil

14) According to you demand of which services were being affected the
most and least by recent financial crises (2007- 2009)? Mention M for
most and L for least

Current a/c
 Saving a/c
Loan a/c
Demat a/c
Credit card
Debit card
ATM
Wealth management
Foreign exchange services
Other services_________________________________

15) According to you, do you feel the competition among the peer
banks is having an impact on an individual bank?

Yes

If yes, then what terms:-

No

16) According to you, when you provide a credit card, so how do you
decide the credit limit? On the basis of:

Monthly salary
Yearly salary
 Other____________________________________________-
________________________________________

17) How much do you charge for an ATM card?

50
100
More than 100

18) According to you, what do you think that your bank gives best
service to your competitors?

Yes
No