A Study of Nationalized and Privatized Bank (SBI vs HDFC)

SUBMITTED BY

Sana Aslam Shaikh

Class Roll No.: 68

T.Y.B.M.S. SEMESTER – VI

PROJECT GUIDE

Parvin Shaikh

SUBMITTED TO

UNIVERSITY OF MUMBAI

Lord’s Universal College

Affiliated to University of Mumbai

Off Topiwala Marg, Goregoan (West)

Mumbai – 400104.

A.Y. 2021 – 2022

i
 CERTIFICATE

This is to certify that Ms. Sana Aslam Shaikh, Roll No.: 68 of Third Year B.M.S.,
Semester VI has successfully completed the project on “A Study of Nationalized and
Privatized Bank (SBI vs HDFC)” under the guidance of Prof. Ms. Parvin Shaikh in the
Academic Year 2021-2022.

Date:_____________

Project Guide Principal

External Examiner College Seal

ii
 DECLARATION

I, Sana Aslam Shaikh, a student of Lord’s Universal College, T.Y.B.M.S. SEMESTER

– VI hereby declare that I have completed my project on “A Study of Nationalized and
Privatized Bank (SBI vs HDFC)” in the Academic Year 2021 – 2022.This information
is true and original to the best of my knowledge.

Date:

Signature of Student

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 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is
so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.

I would like to thank my Principal for providing the necessary facilities required for
completion of this project.

I would also like to express my sincere gratitude towards my Project Guide Ms. Parvin
Shaikh, whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books
and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me
in the completion of the project especially My Parents and Peers who supported me
throughout my project.

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 INDEX

Sr. no Topic Pg. No

vi
 Abstract
1. Introduction 01

1.1 History of Banking in India 03

1.2 Banking System in India 06

1.3 Public Sector vs Private Sector Banks 19

2. Company’s Profile 23
 SBI Bank 27
 HDFC Bank 27
31
3. Research Methodology
34
4. Review of Literature
39
5. A study of Nationalized and Privatized Bank (SBI vs HDFC)
43
6. Case Study
46
7. Data Analysis & Interpretation
57
8. Discussion
58
9. Conclusion & Recommendation
60
 Bibliography
61
 Annexure

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 ABSTRACT

Indian Banking Sector is divided into many categories like Public Sector Banks, Private
Sector Banks, Foreign Banks in India and Co-operative and Regional Rural Banks. A
comparative performance analysis of the two sectors has been attempted in this study that
is SBI as public sector bank and HDFC Ltd bank as private sector bank. Personal visit to
the branches of SBI and HDFC banks was done to collect the first hand information.
Study is done with the special reference to the area, Mumbai city. State Bank of India
(SBI) and HDFC Bank are the two largest banks in India in public and private sectors
respectively. In this project study peoples are satisfied by both the banks but also want
more things like Updating of services, technological enhancement and ethics.This study
will help enhance further research on the subject by researchers and academicians.

Keywords: Banking sector, Private Bank, HDFC, Public Bank, SBI.

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 1. INTRODUCTION

“A bank is a place that will lend you money only if you can prove that you don’t
really need it”. This famous quote by Bob Hope explores the funny side of banking.
Above all, there’s one statement about banks that don’t need any validation which is-
Banks are the money pumping factories of an economy, the pillars of an economy. On
that note, we will dig deeper into the vaults of two major banks of our country: SBI Bank
and HDFC Bank .

Did you know that there are two main types of banks: public sector banks and
private sector banks? Public sector banks are controlled by the government and private
sector banks are controlled by individuals and companies. When a private sector bank is
bought by the government, it becomes a nationalized bank. This process is known as
nationalization. Similarly, when the government sells a public sector bank to a person or
company, it becomes a privatized bank. This process is known as privatization.

On July 19, 1969 Bank Nationalized Day Came into existence, where 14 banks
are nationalized by the government of India. Most of the nationalized banks in India are
also referred to ‘public sector banks’. According to the IMF (International Monetary
Fund), Nationalization is a process by which the government takes over private assets and
brings them under public ownership.

Nationalization of banks means to take the banks under government undertaking.

Banks after nationalization comes directly under Banking regulation Act 1949. RBI
(Reserve bank of India), India’s Central bank become the first nationalized banks in India
after the Indian independence.
After the independence, the government of India have adopted planned economic
development of the country. In 1951, five years plan came into existence and at that time
during the period of 1950-51 there were almost 400+ commercial banks who worked
under the private sectors. All these private banks work for their own agenda and not
helped the government in achieving its goals and objectives. In July 1955 only, SBI
(State Bank of India) became the first nationalized bank in India under the SBI Act of

1
1955. Also seven subsidiaries bank of State Bank became Nationalized on 19 th July
1960..

The first bank that was ever nationalized in India was the Imperial Bank of India.
It has been run by the government since 1955.

A major wave of nationalization took place in 1969, when 14 private sector banks
were nationalized by the government. A second round of bank nationalization took place
in 1980.

Today, India has 12 public sector banks, such as Punjab National Bank, Bank of
Baroda and Canara Bank. There are also over 20 private sector banks in India, including
ICICI Bank, Axis Bank and HDFC Bank.

Why would the government want to nationalize banks?

 State-run banks set up branches in remote areas of the country. This helps more
people get access to banking services.
 When poor people get access to banking services, they can benefit from special
saving schemes to help lift them out of poverty.
 Nationalized banks tend to focus on providing services that are good for people
rather than services that will make more money.
 They provide funding to farmers as well as small, village industries for their
expansion and development.

Why would the government consider privatizing banks?

 Some public sector banks have been losing money even with increased support
from the government.
 The government can earn some money by selling banks that aren’t doing well to
companies.
 Private companies are better able to reduce their losses and focus on making
money.

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  Private sector banks tend to focus on customer satisfaction and provide new and
better services.

1.1 History of Banking in India

The first bank in India, though conservative, was established in 1786. From 1786
till today, the journey of Indian Banking System can be segregated into three distinct
phases. They are as mentioned below:-

 Early phase from 1786 to 1969 of Indian Banks

 Nationalization of Indian Banks and up to 1991 prior to Indian banking sector
Reforms.
 New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I , Phase II and
Phase III.

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Phase I
The General Bank of India was set up in the year 1786. Next came Bank of
Hindustan and Bengal Bank. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and
called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial
Bank of India was established which started as private shareholders banks, mostly
Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians,
Punjab National Bank Ltd. Was set up in 1894 with headquarters at Lahore. Between
1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank,
Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced
periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly
small. To streamline the functioning and activities of commercial banks, the Government
of India came up with The Banking Companies Act, 1949 which was later changed to
Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
Reserve Bank of India was vested with extensive powers for the supervision of banking
in India as the Central Banking Authority.

Phase II
Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalized Imperial Bank of India with extensive banking
facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of
India to act as the principal agent of RBI and to handle banking transactions of the Union
and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960
on 19th July, 1969, major process of nationalization was carried out. It was the effort of

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the then Prime Minister of India, Mrs. Indira Gandhi.14 major commercial banks in the
country were nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in
1980 with seven more banks. This step brought 80% of the banking segment in India
under Government ownership.

The following are the steps taken by the Government of India to Regulate
Banking Institutions in the Country:-

1949: Enactment of Banking Regulation Act.

1955: Nationalization of State Bank of India.

1959: Nationalization of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalization of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India
raised to approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith
and immense confidence about the sustainability of these institutions.

Phase III
This phase has introduced many more products and facilities in the banking sector
in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee
was set up by his name which worked for the liberalization of banking practices.

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 The country is flooded with foreign banks and their ATM stations. Efforts are
being put to give a satisfactory service to customers. Phone banking and net banking is
introduced. The entire system became more convenient and swift. Time is given more
importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered
from any crisis triggered by any external macroeconomics shock as other East Asian
Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves
are high, the capital account is not yet fully convertible, and banks and their customers
have limited foreign exchange exposure.

1.2 BANKING SYSTEM IN INDIA

The Banking system of a country is an important pillar holding up the financial
system of the country’s economy. The major role of banks in a financial system is the
mobilization of deposits and disbursement of credit to various sectors of the economy.
The existing, elaborate banking structure of India has evolved over several decades.

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 The majority of banks are regulated by the Central Bank of the country (Reserve
Bank of India for India). The Indian Banks can be classified as below.

Central Banks

Every country has a Central Bank of its own generally regulated by a special act.
Central banks are bankers’ banks, and these banks trace their history from the Bank of
England. It is called a Central Bank because it occupies a central position in the banking
system and acts as the highest financial authority. The main function of this bank is to
regulate and supervise the whole banking system in the country. It is a banker’s bank and
controller of credit in the country. They guarantee stable monetary and financial policy
from country to country and play an important role in the economy of the country.
Typical functions include implementing monetary policy, managing foreign exchange
and gold reserves, making decisions regarding official interest rates, acting as banker to
the government and other banks, and regulating and supervising the banking industry.
These banks buy government debt, have a monopoly on the issuance of paper money, and
often act as a lender of last resort to commercial banks.

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 The Central bank of any country supervises controls and regulates the activities
of all the commercial banks of that country. It also acts as a government banker. It
controls and coordinates the currency and credit policies of any country. In India, the
Reserve Bank of India is the central bank. It is the apex bank and the statutory institution
in the money market of the country.

Scheduled & Non-Scheduled Banks

Scheduled Banks in India are those banks which have been included in the
Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only
those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of
the Act. As of 30 June 1999, there were 300 scheduled banks in India having a total
network of 64,918 branches. Scheduled commercial banks in India include State Bank of
India and its associates (5), nationalized banks (20), foreign banks (45), private sector
banks (32), co-operative banks and regional rural banks. “Scheduled banks in India”
means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of
1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act,
1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under
section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act,
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1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the
Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank”.
Scheduled banks have paid-up capital and reserves of the value of not less than Rs 5
lakhs and are eligible for loans and other privileges from the central bank like
membership to the clearinghouse.

RBI has no specific control over non-scheduled banks as they are not included in
the second schedule of RBI Act, 1934.

Scheduled banks can be further classified as:

1. Public Sector
2. Private Sector
3. Foreign Banks
4. Regional Rural Banks
5. Co-operative Banks

Commercial Banks

Banking means accepting deposits of money from the public for the purpose of
lending or investment. Deposit-taking institutions take the form of commercial banks
when they use the deposits for making commercial, real estate, and other loans.
Commercial banks in modern capitalist societies act as financial intermediaries, raising

9
funds from depositors and lending the same funds to borrowers. The commercial bank
serves the interests of its depositors by utilizing the funds collected in profitable ventures
and in-return offers a variety of services to its customers. Services provided by
commercial banks include credit and debit cards, bank accounts, deposits and loans, and
deposit mobilization. They also provide secured and unsecured loans. These commercial
banks are the oldest institutions in banking history and generally have a wide network of
branches spread throughout the area of their operations.

Commercial banks may either be owned by the government or maybe run in the
private sector.

Based on their ownership structure they can be classified as:

1. Public Sector
2. Private Sector
3. Foreign Banks
4. Regional Rural Banks

Public Sector Banks

Banking Public Sector Banks Map teaserPublic sector banks are those in which
the government has a major stake and they usually need to emphasize social objectives
than on profitability. The main objectives of public sector banks is to ensure there is no
monopoly and control of banking and financial services by few individuals or business

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houses and to ensure compliance with regulations and promote the needs of the
underprivileged and weaker sections of society, cater to the needs of agriculture and other
priority sectors and prevent the concentration of wealth and economic power.

These banks play a revolutionary role in lending, particularly to the priority

sector, constituting of agriculture, small scale industries, and small businesses. In India,
there are 27 public sector banks that have been nationalized by the government to protect
the interests of the majority of the citizens.

Some examples are State Bank of India, Union Bank of India, etc.
Public Sector banks can be further classified as:

1. SBI & Associates:

2. Other Nationalized Banks:
3. Other Public Sector Banks

SBI & Associates

State Bank of India is the oldest and the largest bank of India. State Bank of India
(SBI) is a multinational banking and financial services company based in India. It is a
government-owned bank with its headquarters in Mumbai, Maharashtra. As of December
2012, it had 15,003 branches, including 157 foreign offices, making it the largest banking
and financial services company in India by assets.

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Associates of State Bank of India:

SBI has five associate banks, which all use State Bank of India logo and “State
Bank of” name, followed by the regional headquarters’ name. There has been a proposal
to merge all the associate banks into SBI to create a “megabank” and streamline the
group’s operations which have not taken shape to date.

The current five associates are:

1. State Bank of Bikaner & Jaipur

2. State Bank of Hyderabad
3. State Bank of Mysore
4. State Bank of Patiala
5. State Bank of Travancore
Nationalized Banks

Even after Independence, there were many banks that were held privately. At that
point in time, these private banks mostly concentrated on providing financial services. By
the 1960s, the Indian banking industry has become an important tool to facilitate the
development of the Indian economy. At the same time, it has emerged as a large
employer, and a debate has ensued about the possibility to nationalize the banking
industry. The government of India issued an ordinance and nationalized the 14 largest
commercial banks with effect from the midnight of July 19, 1969. Within two weeks of
the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition

12
and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August
1969. The second step of the nationalization of 6 more commercial banks followed in
1980. The stated reason for the nationalization was to give the government more control
of credit delivery. With the second step of nationalization, the GOI controlled around
91% of the banking business in India. Later on, in the year 1993, the government merged
the New Bank of India with Punjab National Bank. It was the only merger between
nationalized banks and resulted in the reduction of the number of nationalized banks from
20 to 19.

Other Public Sector Banks

There are a total of 27 Public Sector Banks in India. They can be further classified
as nationalized banks(19) + SBI(1) & SBI Associates(5)+ Other Public Sector Banks (2).
The rest two are IDBI Bank and Bharatiya Mahila Bank, which are categorized as other
public sector banks.

Private Sector Banks

The private-sector banks are banks where the majority of their ownership is held
by private shareholders and not by the government. Private sector banks are owned,
managed, and controlled by private promoters and they are free to operate as per market

13
forces. To ensure their safety and smooth functioning there are generally entry barriers
and regulatory criteria set like the minimum net worth etc. This ensures the safety of
public deposits entrusted with such institutions and they are also regulated by guidelines
issued by Central Banks from time to time. Some examples of private sector banks in
India are ICICI Bank, Yes Bank, and Axis Bank. Private sector banks in India can be
classified as Private Indian Banks & Private Foreign Banks. Private Indian banks can be
further classified as old and new private sector banks. They are defined below:

Old Private Sector Banks:

Not all private sector banks were nationalized in 1969, and 1980. The private
banks which were not nationalized are collectively known as the old private sector banks
and include banks such as The Jammu and Kashmir Bank Ltd., Lord Krishna Bank Ltd
etc.

New Private Sector Banks:

The entry of private sector banks was however prohibited during the post-
nationalization period. In July 1993, as part of the banking reform process and as a
measure to induce competition in the banking sector, RBI permitted the private sector to
enter into the banking system. This resulted in the creation of a new set of private sector
banks, which are collectively known as the new private sector banks. As at end-March,
2009 there were 7 new private sector banks and 15 old private sector banks operating in
India.

Foreign Banks

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 Foreign banks have their registered and head offices in a foreign country but
operate their branches in India. The RBI permits these banks to operate either through
branches; or through wholly-owned subsidiaries. The primary activity of most foreign
banks in India has been in the corporate segment. However, some of the larger foreign
banks have also made consumer financing a significant part of their portfolios. These
banks offer products such as automobile finance, home loans, credit cards, household
consumer finance, etc. Foreign banks in India are required to adhere to all banking
regulations, including priority-sector lending norms as applicable to domestic banks. In
addition to the entry of the new private banks in the mid-90s, the increased presence of
foreign banks in India has also contributed to boosting competition in the banking sector.

Regional Rural Banks

The government of India set up Regional Rural Banks (RRBs) on October 2,

1975. These are the banking organizations being operated in different states of India.
They have been created to serve rural areas with banking and financial services. These
banks support small and marginal farmers by extending credit to them in rural areas.
They cater to the credit needs of small and marginal farmers, agricultural laborers,
artisans, and small entrepreneurs. The RRB’s are sponsored by scheduled banks, usually
a nationalized commercial bank. Each RRB is owned jointly by the Central Government,

15
concerned State Government, and a sponsoring public sector commercial bank. However,
RRB’s may have branches set up for urban operations and their area of operation may
include urban areas too. They are also referred to as Grameen Banks/ Gramin Banks.
Over the years, the Government has introduced a number of measures of improving the
viability and profitability of RRBs, one of them being the amalgamation of the RRBs of
the same sponsored bank within a State. This process of consolidation has resulted in a
steep decline in the total number of RRBs to 56, as compared to 196 at the end of March
2005.

Cooperative Banks
Cooperative banks are private sector banks. Co-operative banks are also mutual
savings banks meant essentially for providing cheap credit to their members. A
cooperative bank is a voluntary association of members for self-help and caters to their
financial needs on a mutual basis. They accept deposits and make mortgages and other
types of loans to their members. These banks are also subject to control and inspection by
the Reserve Bank of India but they are generally governed by a different statue, which is
more flexible and easy to comply with compared to central bank acts.

In India, they are governed by the provisions of the State Cooperative Societies
Act. Another type is credit unions, which are cooperative organizations that issue share
certificates and make member (consumer) and other loans. These institutions are an

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important source of rural credit i.e., agricultural financing in India. Co-operative banks
get their resources from the issuance of their shares, accepting public deposits, and also
taking loans from the state cooperative banks. They also get short and medium-term loans
from the Reserve Bank of India. To enhance safety and public confidence in cooperative
banks, the Reserve Bank of India has extended the Credit Guarantee Scheme to
cooperative banks.
Cooperative banks can be further classified as:
1. State Co-operative Banks
2. Central Co-operative Banks
3. Primary Agricultural Credit Societies

State Co-operative Banks

At present, there are 31 state co-operative banks in India. State co-operative banks
are part of the short-term cooperative credit structure. These are registered and governed
by state governments under the respective co-operative societies’ acts of the concerned
states. Since they are also covered by the provisions of the Banking Regulation Act,
1949, they come under the control of the RBI as well. These banks are also included in
the Second Schedule of the RBI Act 1934.

Central Co-operative Banks

These banks are located at district headquarters or prominent towns. They accept
deposits from the public, have a share capital, and can take loans and advances from state
co-operative banks. They perform banking functions and fulfill the credit requirements of
member societies.

Primary Agricultural Credit Societies

This is the smallest unit in the entire co-operative credit structure prevalent in
India. It works at the village level and depends on central co-operative and state co-
operative banks for its funding requirements. We currently have more than 90000 credit
societies operative in India.

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Specialized Banks:

Specialized banks are dedicated banks that excel in a particular product, service or
sector and provide mission-based services to a section of society. Some examples of
specialized banks are industrial banks, land development banks, regional rural banks,
foreign exchange banks, and export-import banks etc. addressing specific needs of these
unique areas. These banks provide distinctive services or products like financial aid to
industries, heavy turnkey projects, and foreign trade. Some specialized banks are
discussed below:

Investment Banks:

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 An investment bank is a financial institution that assists individuals, corporations,
and governments in raising capital by underwriting and/or acting as the client’s agent in
the issuance of securities. An investment bank may also assist companies involved in
mergers and acquisitions, and provide ancillary services such as market making, trading
of derivatives, fixed income instruments, foreign exchange, commodities, and equity
securities. Investment banks aid companies in acquiring funds and they provide advice
for a wide range of transactions. These banks also offer financial consulting services to
companies and give advice on mergers and acquisitions and management of public assets.

Industrial Banks:

Industrial banks target to promote rapid industrial development. They provide

specialized medium and long term loans to the industrial sector backed by consultancy,
supervision, and expertise. They support industrial growth by rendering other services
like project identification, preparation of project reports, providing technical advice and
managerial services, etc. They also do underwriting of public issues by the corporate
sector or help industrial units get finance through a consortium or provide a guarantee to
other financial institutions.

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 We have a number of such banks in India like the Industrial Development Bank of
India (IDB), Industrial Finance Corporation of India (IFCI), Industrial Credit and
Investment Corporation of India Ltd. (ICICI), Industrial Reconstruction Bank of India
(IRBI), etc.

Development Banks:-

These were set up to give long term finance for the development of the country.
These are the Industrial Finance Corporation of India and the Industrial Development
Bank of India, The Industrial Reconstruction Bank of India and the National Bank for
Agriculture and Rural Development. A former development bank, the Industrial Credit
and Investment Corporation of India Ltd. By a reverse merger in 2002,became a normal
commercial bank. It is expected that the other development banks, having outlived their
utility would also be either converted to commercial banks or merged with commercial
banks.

1.3 Public Sector vs Private Sector Banks

There are many banks in India, and in today’s era, every individual has an account
in a bank. Moreover, through Dhan Yojana, even poor people can open their main bank
account. There are different types of banks; some are privately owned banks, whereas
some are public.

What are Public Sector Banks?

Public sector banks refer to the financial institutions which have over 50% of their
shareholdings held by the state government. Usually, the banks appear in the stock
exchange.

They are the financial backbone of a country, such that they contribute to the
nation’s financial security.

Despite slightly higher interest rates, once you keep your money in the
governmental banks’ fixed accounts, you are sure of funds security.

20
 There is almost zero chance of such institutions to default on customer’s finances.
In cases where the banks experience financial constraints, the government tends to cover
them up.

Some of the public and government sector banks in the country include State
Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank,
Andhra Bank, Syndicate Bank, Allahabad Bank, State Bank of Mysore, Bank of
Maharashtra etc

What are Private Sector Banks?

The banks in this category have a larger part of their equity contained by private
shareholders, rather than the government. These banks have individuals or private
institutions, holding more than 50% of the shares.

Some private banks may default on customer finances. It happens mainly on fixed
deposits. Others may shut down their entire operations abruptly, and lose track with their
customers. In such instances, customers may lose their savings.

These institutions typically adopt aggressive customer strategies, targeted towards

ultimate customer satisfaction. They mostly aim at quality service delivery, within the
shortest possible time.

Employees will always market high-end products and services to a broader

geographic and a larger target audience.

Some of the larger private sector banks in the country include ICICI Bank, HDFC
Bank, Yes Yank, IndusInd Bank, Kotak Mahindra Bank, Axis Bank and a host of others.
There are also smaller private sector banks like Karnataka Bank, Karur Vysya Bank,
IDFC First Bank etc.

Difference B/W Public & Private Banks

Public sector banks exist for a long time now. They have a great public image
which creates trustworthiness. In return, these institutions receive customer loyalty,

21
which contributes to their broader customer base. Contrary, the private sector banks now
exist for a shorter period. Thus, they have a lower customer base.

With regards to interest rates policies, there is transparency in public sector banks.
However, the interest rates on savings for customers are quite higher. For the private
sector banks, there may be more hidden charges on various operating systems. It explains
why most people opt for government banks. However, the banks in this category usually
give lower customer interests on savings.

Public sector banks usually have job security for its employees. When individuals
start working in such institutions, they do not have to worry about being fired from a job
due to specific issues. For private sector banks, there is usually constant performance
evaluation, which adds on to the constant worries regarding job security. In the case
where an individual fails to meet certain performance levels, they may easily undergo
retrenchment.

The government banks normally take time to implement new technologies that
usually make work easier for both the employees and customers. However, the private
sectors stay up-to-date for the latest technological trends that make operations easier.
Sometimes when you visit the public banks, you have to go through various departments
to attain the needed information.

However, in most private banks, you can receive all the assistance that you need
at only one desk. You henceforth achieve satisfaction and save time as well.

Table showing comparison of Public Sector Banks and Private Sector Banks

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Criteria Public Sector Banks Private Sector Banks
Controlling PSBs are owned and controlled Private Banks are owned and controlled
by the GOI. by the private personals.
Shareholding The GOI holds 50% or more In private banks majority of
shares in these banks. shareholdings are with private personals
and corporations.
Registration These banks are established by These banks are formed by registered
passing acts in the parliament. under the Indian Companies Act
Regulatory Reserve Bank of India issue Reserve Bank of India issue guidelines,
Control guidelines, regulations, regulations, instructions, and rules
instructions, and rules.
Foreign Direct Maximum 20% Foreign Maximum 74 %, Investment are
Investment Investment are permitted. permitted. Single corporation or
individuals are not permitted to invest
more than 10 %.
Management Bank Board Bureau (BBB) is the These banks have their own selection
official body for the selection of process by keeping the RBI rules and
Management personals. regulations in mind.
Customer The process is little bit long and These banks provide the good customer
Services not a perfect Customer Services services to their customers.
experience.
Services Banking, and financial services Banking, and financial services are
are provided by the banks. provided by the banks.
Loan Process Loan process is done through Loan process is done easily and there is
lengthy ways and there is very less paper work as compare to private
high paper work. banks.
Customer The customers with public banks These banks have less customers as it is
is very high as there is a trust of managed by the private individuals and
government. there is trust issues.
Employee The promotion is done as per the The promotion is done on the basis of
Promotion rules and regulations stated by the individuals worth and skills.
government time to time.

23
 2. COMPANY’S PROFILE

State Bank of India (SBI)

State Bank of India (SBI), state-owned commercial bank and financial services
company, nationalized by the Indian government in 1955. SBI maintains thousands of
branches throughout India and offices in dozens of countries throughout the world. The
bank’s headquarters are in Mumbai.

The oldest commercial bank in India, SBI originated in 1806 as the Bank of
Calcutta. Three years later the bank was issued a royal charter and renamed the Bank of
Bengal. Along with the Bank of Bombay (founded 1840) and the Bank of Madras
(founded 1843), it was one of three so-called presidency banks, each of which was jointly
owned by the provincial government and private subscribers. In 1921 the presidency
banks were merged to form the Imperial Bank of India (IBI), which then became the
largest commercial enterprise in the country. In 1955 the government of India and the
country’s central bank, the Reserve Bank of India (founded 1935), assumed joint
24
ownership of IBI, which was renamed the State Bank of India. Four years later, by the
State Bank of India (Subsidiary Banks) Act, banks earlier operated by individual princely
states became subsidiaries of SBI. The Reserve Bank’s share of SBI was transferred to
the government in 2007. Since nationalization, SBI has served the needs of Indian
economic development through rural-development initiatives and microcredit programs
and by financing major agricultural and industrial projects and raising loans for the
government.

SBI is governed by a board of directors headed by a chairman. The chairman and

managing directors of the bank are appointed by the government.

SWOT ANALYSIS OF SBI BANK

STRENGTH

 BRAND NAME
 MARKET LEADER
 GOVERNMENT OWNED.
 DIVERSIFIED PORTFOLIO

WEAKNESSES

 LESS MODERNISATION
 HIGHER NPA
 CUSTOMER HAVE NOT FULL INFORMATION ABOUT GETTING
FACILITIES

OPPORTUNITIES

 HIGH APPROCH OF ATM

 2000 BRANCHES COMING ON VARIOUS LOCATION
 MERGED WITH ASSOCITED BANK

THREAT

25
  EMPLOYEE STRIKE
 OTHER NATIONALIZED BANK AND PRIVATE BANKS
 ADVENT OF MNC BANK

Functions of State Bank of India

The State Bank of India enjoys the status of being the largest bank in India.
Recently due to the merger, it became the largest banks in terms of asset size in the world.
Thus, there are a lot of functions being handled by SBI daily. So, below are the functions
of State Bank of India.

The functions of the State Bank of India is largely divided into two main
categories. These are ordinary banking functions and central banking functions. Both
these categories are broadly divided into many subcategories.

Central Banking Functions

SBI acts as an agent to the RBI, where there are no branches RBI available.
Accordingly, there are many functions which are rendered by the SBI. These are

i. Maintaining the currency

ii. Government’s bank
iii. Bank’s banker
iv. Acts as a clearinghouse

Maintaining the currency

RBI is reporting for maintaining its own currency. But the offices of RBI are only
available in big cities. But the branches of SBI are available everywhere in the country.
The network of SBI works in rural as well as urban areas.

26
 In such places, RBI maintains its currency with SBI. The currency is withdrawn
from these branches whenever required by RBI.

Government’s Bank

SBI caters to the needs of both the government, central as well as the state. On
behalf of the government, it receives the money and deposits it. It collects the charges on
behalf of government like tax collection and other payments. It also grants advances and
loans to the government.

Bank’s Bankers

Many commercial banks have their accounts with SBI. These banks resort to help
SBI whenever they face the financial shortage. It also discounts the bills for these
commercial banks. Due to this function, SBI is also considered as the banker’s bank but
only in a limited sense.

Acts as a Clearinghouse

In places where RBI has no branches, SBI acts as a clearinghouse for them. There,
it facilitates the services of interbank settlements and many other services. All the banks
have accounts with SBI, so the process of clearing becomes easier for SBI.

General Banking Functions

There are many functions that SBI beyond the above-mentioned services. These
services are rendered by SBI under section 33A. These are:
 It accepts the deposits from the people in the form of savings, fixed, current, and
recurring deposit accounts.
 Based on the security of stocks, securities, SBI gives advances and loans to the
public.
 SBI gives the facility of drawings, accepting, and buying and selling the bills of
exchange.

27
  It also issues and circulates the letters of credit.
 SBI also invests in funds or any special kind of security.
 The bank also acts as a trustee, executor, or otherwise, based on the circumstances.
 It is also entrusted with selling and purchasing of either movable or immovable
properties that come in the bank.
 SBI also functions for selling and buying of gold and silver.
 For the general public, it helps in the opening of public provident fund accounts.
 It underwrites any issue related to the securities or the debentures that are
authorized.
 It provides the facility of shipping finance as well as various factoring services.
 There are many leading bank schemes in which SBI participates.

Housing Development Finance Corporation (HDFC )

28
 The HDFC bank is the most famous private bank in India due to its large banking
network. It is undoubtedly the largest private bank in the country in terms of the assets it
holds.

The HDFC Bank was incorporated on August 1994 by the name of ‘HDFC Bank
Limited’, with its registered office in Mumbai, India. HDFC Bank commenced operations
as a Scheduled Commercial Bank in January 1995. The Housing Development Finance
Corporation (HDFC) was amongst the first to receive an ‘in principle’ approval from the
Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI’s
liberalization of the Indian Banking Industry in 1994.

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable

network of over 1416 branches spread over 550 cities across India. All branches are
linked on an online real–time basis. Customers in over 500 locations are also serviced
through Telephone Banking. The Bank also has a network of about over 3382 networked
ATMs across these cities.

The promoter of the company HDFC was incepted in 1977 is India’s premier
housing finance company and enjoys an impeccable track record in India as well as in
international markets. HDFC has developed significant expertise in retail mortgage loans
to different market segments and also has a large corporate client base for its housing
related credit facilities. With its experience in the financial markets, a strong market
reputation, large shareholder base and unique consumer franchise, HDFC was ideally
positioned to promote a bank in the Indian environment.

SWOT ANALYSIS OF HDFC BANK

STRENGTH

 SEGMENTATION
 PRODUCT FEATURES
 WORK ENVIRONMENT
 LOW DOCUMENTATION

29
WEAKNESSES

 TIMING SHORT
 MAINTENANCE CHARGES HIGH
 HIGH INTEREST RATE
 CUSTOMER HAVE NOT FULL INFORMATION ABOUT GETTING
FACILITIES

OPPORTUNITIES

 MERGED WITH CENTURIAN BANK

 1300 BRANCHES COMING ON VARIOUS LOCATION
 NAME AND LOGO WILL BE NEW

THREAT

 SBI BANK
 OTHER PRIVATE BANK (ICICI,AXSIS etc)

Functions of Housing Development Finance Corporation

HDFC Bank offers a wide range of commercial and transactional banking

services and treasury products to wholesale and retail customers. The bank has three key
business segments:

 Wholesale Banking Services – The Bank’s target market ranges from large,
blue–chip manufacturing companies in the Indian corporate to small & mid–sized
corporates and agro–based businesses.
 Retail Banking Services – The objective of the Retail Bank is to provide its
target market customers a full range of financial products and banking services,
giving the customer a one–stop window for all his/her banking requirements.
 Treasury – Within this business, the bank has three main product areas – Foreign
Exchange and Derivatives, Local Currency Money Market & Debt Securities, and

30
 Equities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio.

Services offered by the company:

 Personal Banking

Accounts & Deposits

Loans

Cards

Forex

Investments & Insurance

 NRI Banking

Accounts & Deposits

Remittances

Investments & Insurance Loans Payment Services

 Wholesale Banking

Corporate

Small & Medium Enterprises

Financial Institutions & Trusts

Government Sector

31
 3. RESEARCH METHODOLOGY

Research as a mean of getting knowledge can be carried out either arbitrarily or in

a systematic fashion. It is a purposive investigation.

Research may be a mean to know the small change and time forced upon us as
individual or as a society. Research as process involves defining the problem, formulating
the hypothesis, organizing and evaluating the data, deriving inference and conclusion
after careful testing.

Research Design

A research design is purely and simply the framework or plan for a study that
guides the collection and analysis of data. The survey research was used in this project,
because consumer’s feedback was necessary for obtaining the data.

Research Instrument

For doing the survey research, structured questionnaire for dealers with both
open-ended and closed-ended questions was used.

Objectives

The objectives of the study are as follows :-

32
  To know about SBI and HDFC bank Ltd.
 To know preference of customers regarding public sector banks and private sector
banks.
 To analyze which facility influences the customer most while selecting Bank.
 To review the growth of both the type of banks.
 To compare the contribution of both type of banks in the banking sector.
 To compare the various services provided by these banks.
 To give suggestions and conclusions about the study

SAMPLE DESIGN

While developing a sample design, following points should be kept in mind:

 Sampling unit: A decision has to be taken concerning a sampling unit before

selecting sample. Sampling unit may be a geographical one such as state, district,
village etc or a construction unit such as house, flat etc. or it ,may be as social unit
such as family, club, school etc or it may be an individual . the researcher will
have to decide one or more of such units that he has to select for his study
 Size of the sample: This refers to the number of items to be selected from the
universe to constitute a sample. This is a major problem before a researcher. The
size of the sample should be neither is excessively large, nor too small. It should
be optimum

An optimum sample is one which fulfills the requirements of efficiency, representatives,

reliability and flexibility

Sample element and sample unit

70 people have been interviewed to know their opinion on SBI Bank & HDFC Bank.

Mumbai (sample unit)

Sampling technique: Random Sampling Techniques

Sampling frame: 70 People.

33
Data Collection
As data is required for any research activity, it is collected (for those both the Primary
and Secondary) as follows:

Primary Data:
I have collected this data through questionnaire.

Secondary Data:
This data is collected from different sources available consolidated from book publication
reports, websites where used as a source of secondary data in order to do this project and
to collect necessary data. I have used the manuals and leaflets of the HDFC & SBI bank.

DATA ANALYSIS

 Primary data is being analyses with the help of graph , chart and diagram.

LIMITATIONS OF STUDY

Due to the following unavoidable and uncontrollable factors the results might not be
accurate. Some of the problems might face while conducting the survey are as follows:

 Certain open-ended questions have been put in the questionnaire to give

respondents freedom to express their perception.
 Time and cost constraints were also there
 Chances of some biasness couldn’t be eliminated.
 A sample size of 70 has been used due to time limitations.
 The data has been collected from Mumbai and there the perception of the people
from the smaller towns could not be judged
 All the data has been collected at random but it is always liable from biasness.
 The primary data has been collected from the middle and upper section of the

society

34
 4. REVIEW OF LITERATURE

This part of the chapter talks about past research studies that were conducted on
consumer behavior towards banking services , their attitudes towards different features
services and other studies public sector banks and private sector banks. These studies
show how consumer attitudes have slowly turned positive with regard to banking and its
varied variety of services, be it online banking, ATM, or basic services like deposit, loan,
interest. The research studies covered here are national as well as internationally
conducted researches and results obtained from the analysis of such research.

 Denise K. Conroy in his study titled (Customer satisfaction measures in the

public sector: what do they tell us?) attempts to devise customer satisfaction
measures, according to him there are a number of factors which can affect the
interpretation of results – the nature of the customer, service provision, service
quality and, for the public sector, the extent to which consumer sovereignty exists.
Resources may be better directed towards setting and maintaining high levels of
standard of service. This study addresses the difficulties and highlights the
complex nature of a customer or service beneficiary who can be, at the same time,
a taxpayer, voter, recipient of financial benefits, with expectations of the public
sector and its delivery agent, yet cannot choose another provider.

35
 Harry Nowka, Southwestern Oklahoma State University, Nancy Buddy,
Southwestern Oklahoma State University, Robert Reeder, Southwestern
Oklahoma State University and Daniel Hart, Southwestern Oklahoma State
University in their study titled (Customer responses: A COMPARATIVE
STUDY) wants to determine various variables which influence customers of a bar
and grill. This comparative analysis includes customer responses with
comparisons made to the major competitor’s customer responses, student
customer responses, and responses of a panel of non customers assembled to
assess potential customer responses. This study indicates that location can be a
significant deterrent to expansion of the customer base. The personality of the
owner can have a positive impact on customer flow. Analysis of spending patterns
indicates that food and pool were underutilized. The male/female ratio was a
determinate of customer flow.
 Dawn Iacobucci, Amy Ostrom, Kent Grayson in their study
titled(Distinguishing Service Quality and Customer Satisfaction: The Voice of the
Consumer) presents two studies that rely on divergent methodologies to examine
whether or not quality and satisfaction have distinct antecedent causes,
consequential effects, or both (i.e., whether or not they should be considered a
single construct, or distinct, separable constructs). They focus on consumers’
understanding and use of the words quality and satisfaction; in both studies,
respondents report whether or not they think quality and satisfaction differ, and if
so, on what dimensions or under what circumstances. In the first study, they use
the qualitative “critical incident” technique to elicit service attributes that are
salient to respondents when prompted to consider quality and satisfaction as
distinct. They code the responses to these open-ended survey questions to
examine whether quality can be teased apart from satisfaction, from the
respondents’ (consumers’) perspective. In the second study, to triangulate on the
qualitative data, they experimentally manipulated a number of service attributes
drawn from both the first study and from the literature to see whether or not they
have differential impacts on judgments of quality and satisfaction. They did not
presuppose that quality and satisfaction differ—rather, they asked respondents to

36
 make a judgment either of quality or of satisfaction, defining the term as they saw
fit.
 Antreas D. Athanassopoulos in his study titled (Customer Satisfaction Cues To
Support Market Segmentation and Explain Switching Behavior) examined the
customer satisfaction cues in retail banking services in Greece. The study
proposes an instrument of customer satisfaction that contains service quality and
such other attributes as price, convenience, and innovation. The proposed
framework of customer satisfaction was verified empirically yielding four distinct
facets for business customers and five for individual customers. The performance
implications of the customer satisfaction instrument are also explored. What is
shown is that customer segments, in fact, yield statistically different satisfaction
scores, which verifies the managerial value of customer segmentation practices.
Finally, the facets of customer satisfaction as explanatory cues for the switching
behavior of individual and business customers were tested successfully.
 Rengasamy Elango and Vijaya Kumar Gudep in their study titled(A
Comparative Study on the Service Quality and Customer Satisfaction among
Private, Public and Foreign Banks) focuses on the service quality and customer
satisfaction among the private, public and foreign banks in India. An analysis is
carried out to examine the level of awareness among customers and to identify the
best sector which provides qualitative customer service. This becomes relevant in
the context of recommendations of various committees constituted by the
Government of India and the RBI, from time to time, to suggest measures to
improve customer service systems of the public sector commercial banks of India.
A well-structured questionnaire is used to collect the views of respondents across
the three banking sectors. The survey instrument includes various dimensions,
pertaining to the quality of customer services in terms of banking personnel,
convenient working hours, Web-based services, error free value-added services
and efficient grievance redressal mechanism etc. Apart from the basic statistical
tools such as measures of central tendency, The authors also use `factor analysis’
and the `One-way Anova’ classification. The idea behind this is to extract the
relevant factors and analyze whether there is any significant difference with

37
 respect to service quality within the three banking sectors. The results indicate
that the level of awareness among the customers improved significantly during
the study period. It is interesting to note that the results are consistent with the
previous studies conducted on customer service aspects, and it has been observed
that the foreign and the new generation private sector banks are serving the
customers better. This has larger implications on the public sector commercial
banks in India with respect to customer service delivery aspects. It is high time
the public sector commercial banks made efforts to revamp their approach
towards customers, so as to perform better and derive competitive advantage in
the long run.
 Nirmaljeet Virk and Prabhjot Kaur Mahal (2012) : This paper attempts to
make a comparative analysis of level of customer pride in the direction of services
offered by private and public region banks. The study has been carried out in
Chandigarh city. A sample of 160 customers has been selected through
questionnaire method. The statistical test are carried out at 5% and 1% degree of
large the main statistical equipment are used. This study shows that the manager
of public bank maintaining a relationship for winning their client’s satisfaction.
 Keyur M. Nayak and Poonam P. Yadav (2014): Researchers want to explain
about customer satisfaction in HDFC bank with ATM. In this paper both sources
(primary and secondary) used and data were collected through questionnaire from
200 respondents at Vapi region. This study is based on descriptive research. The
purpose of study is to analysed satisfaction level of customers using ATM in
HDFC bank. The paper concluded the few clients are satisfied with service
quality and dissatisfied with location of ATM.
 Rajgopal Subashini and Velmurugan Gopalasamy(2016): The study
explained the concept of customer satisfaction in banking sector. These days all
non-public and public banks are play critical role in banking and offering lot of
middle banking services to all their rural and urban customers to carry on their
loyalty, retention. But few banks were observed that not providing importance to
their clients. This paper is descriptive in nature and data were collected from
websites, journal and magazines.

38
 Aayasha Nawaz(2017): The researcher analysed about the customer satisfaction
towards services offering by SBI bank. The data were gathered through
interview .There are 105 respondents (105 male and 45 male). The study is
focused on which factors affecting the client’s satisfaction like employee’s
behaviour, Infrastructure facility, quality of services offering by bank etc. The
interview method used for data collection. The conclusion shows that customers
have satisfied with services of SBI Bank.
 Anis Ali and L.S. Bisht (2018): The researchers tries to find out the level of
satisfaction of clients of private and public sector banks. The objective of the
study is to identify the factors affecting the customer satisfaction and reason of
dissatisfaction in both banks. The primary data were collected from the clients of
both banks. It is observed by researchers that clients are happy with the services
are offering by banks but some reason of dissatisfaction like employee’s
behaviour and service quality provided by public banks. It is concluded that
public banks should need to focus upgrade the level of satisfaction.
 Manisha raj & Shruti Bansal (2019): The paper reported that Banks are not
based on brick and mortar structure due to development of technologies. The way
of satisfaction and increasing the number of customers has been changed through
the various banking channel. This research tries to identify several issues or
satisfaction through services is offering by bank. SERVQUAL Dimensions plays
a crucial role to ensure customer satisfaction
 SURESHCHANDRA et al (2002)- the study examined relationship between
service quality and customer satisfaction banking sector. These were found to be
independent closely related. Both constructs vary significantly in core services,
human element, systematization of service delivery, tangibles and social
responsibility. Though the numbers of studies have been conducted on various
aspects of banking services but so far no study has been under taken to analyze
the banking services in Public and Private sector banks in Rohtak. Hence it is
proposed to undertake an in-depth of “ A Comparative study of banking services
in Public and Private sector banks of Rohtak District”. The present study wishes
to fill this research gap.

39
 5. A STUDY OF NATIONALIZED AND PRIVATIZED BANK

(SBI VS HDFC)

 State Bank of India

State bank of India is a nationalized bank owned by the government of India.

Since its merger in 2017, SBI has become the largest bank in India. The evolution of SBI
in recent years has been noticeable. It is one of the oldest banks operating in India.

The State Bank of India began it’s functioning with the establishment of Bank of
Calcutta in 1806. Three years later in 1809, it was redesigned as the Bank of Bengal.

This was later on followed in the form of Bank of Bombay and Bank of Madras.
These all banks were later unified to form the Imperial Bank of India.

One of the important points in the history of SBI is the formation of the 1 st five-
year plan in 1951.

To serve the economy and the rural sector as a whole, an all India rural credit
survey committee was formed. This was done with the help of states.

Subsequently, SBI was formed four years later in 1955. The objective of both
these committees was the same. Later in 1959, an act was passed which enabled SBI to
form eight subsidiaries into one.

Associate Banks of State Bank of India

40
 On 1st April 2017, SBI merged with 5 of its associate banks and one other bank.
This brought into SBI the 50 largest banks in the world.

These associate banks included State Bank of Jaipur, Bikaner, Mysore,

Travancore, Hyderabad, and Patiala. The sixth bank was the Bharatiya Mahila Bank.
Although the banks were merged, the shares of this associate were termed as individual
entities.

There are many reasons that were cited for the merger. Some of these are: this
merger will decrease the unhealthy competition in the PSBs.

Further, it was difficult for smaller banks to sustain competition and various risk
norms. Also, due to the changes in regulations in the form of Basel III, risk norms there
was a requirement of compliance and technology.

41
 With the merger, the asset size of SBI became the largest in the world. Banks are
now able to focus more on defaulters. Because of the merger, the multiple recoveries can
be made easier.

Status and Criticism of SBI after the Merger

SBI under its entity has now more than 23000 branches and employs more than
270,000 people. The deposit of the SBI has also increased up to 26 lakh crores.

There are now more than 35 crores of the customer base for SBI and almost
60000 ATMs for SBI. Also, in terms of its asset size, SBI was ranked 52 in the world by
Bloomberg in 2015. This merger helped it become the bank with the largest asset size in
the world.

This merger has also caused a lot of criticism for SBI. Some of them are as
follows. All the associate banks were once ruled by its owners. For example, State Bank
of Hyderabad. Now, due to the merger, this bank has lost its glory. Due to merger news,
the employees of State Bank of Travancore observed a strike against it. It was to oppose
the move for the merger. This was done because the State Bank of Travancore was the
only bank with its headquarters in Kerala.

 Housing Development Finance Corporation

It is India’s largest private sector bank by assets and world’s 10 th largest bank by
market capitalisation as of April 2021. It is the third largest company by market
capitalisation of $122.50 billion on the Indian stock exchanges. It is also the fifteenth
largest employer in India with nearly 120,000 employees.

HDFC Bank is one of India’s leading private banks and was among the first to
receive approval from the Reserve Bank of India (RBI) to set up a private sector bank in
1994. Today, HDFC Bank has a banking network of 5,779 branches and 17,238 ATM’s
in 2,956 cities/towns.

42
Associate Banks of Housing Development Finance Corporation

HDFC Bank merged with Times Bank in February 2000. This was the first
merger of two private banks in the New Generation private sector banks category. Times
Bank was established by Bennett, Coleman and Co. Ltd., commonly known as The Times
Group, India’s largest media conglomerate.

In 2008, Centurion Bank of Punjab (CBoP) was acquired by HDFC Bank. HDFC
Bank’s board approved the acquisition of CBoP for ₹95.1 billion in one of the largest
mergers in the financial sector in India.

In 2021, the bank acquired a 9.99% stake in FERBINE, an entity promoted by

Tata Group, to operate a Pan-India umbrella entity for retail payment systems, similar to
National Payments Corporation of India.

In September 2021, the bank partnered with Paytm to launch a range of credit
cards powered by the global card network Visa.

Status and Criticism of HDFC after the Merger

HDFC Bank has nearly 250 branches in the north and nearly150 branches in
southern India. As of 30 June 2019, the bank’s distribution network was at 5,500
branches across 2,764 cities. It has installed 430,000 POS terminals and issued
23,570,000 debit cards and 12 million credit cards in FY 2017. It has a base of 1,16,971
permanent employees as of 21 March 2020. With an amazing market capitalization, it has
a decent reach of more than 5500 bank branches all over the country.

This merger has also caused a lot of criticism for HDFC. Some of them are as
follows. All the associate banks were once ruled by its owners. Now, due to the merger,
this bank has lost its glory.

43
 6. CASE STUDY

Case Study 1:- ‘Too big to fail’ list: SBI, ICICI Bank, HDFC Bank
remains
According to analysts, too big to fail is a phrase used to describe a bank or company
that’s so entwined in the economy that its failure would be catastrophic

By: ENS Economic Bureau | Mumbai |

Updated: January 20, 2021 6:08:24 am

44
 The Reserve Bank of India (RBI) has retained State Bank of India, ICICI Bank
and HDFC Bank as domestic systemically important banks (D-SIBs) or banks that are
considered as “too big to fail”.

The D-SIB framework requires the Reserve Bank to disclose the names of banks
designated as D-SIBs starting from 2015 and place these banks in appropriate buckets
depending upon their systemic importance scores (SISs). “Based on the bucket in which a
D-SIB is placed, an additional common equity requirement has to be applied to it,” the
RBI said.

According to analysts, too big to fail is a phrase used to describe a bank or

company that’s so entwined in the economy that its failure would be catastrophic.

In case a foreign bank having branch presence in India is a global systemically

important bank (G-SIB), it has to maintain additional CET1 capital surcharge in India as
applicable to it as a G-SIB, proportionate to its risk weighted assets (RWAs) in India —
additional CET1 buffer prescribed by the home regulator multiplied by India RWA as per
consolidated global group books divided by total consolidated global group RWA, it said.

Based on the methodology provided in the D-SIB framework and data collected
from banks as of March 31, 2015 and March 31, 2016, the Reserve Bank had announced
State Bank of India and ICICI Bank as D-SIBs on August 31, 2015 and August 25, 2016,
respectively, the RBI said.

“Based on data collected from banks as on March 31, 2017 and March 31, 2018,
the Reserve Bank had announced State Bank of India, ICICI Bank and HDFC Bank as D-
SIBs on September 04, 2017 and March 14, 2019 respectively. Current update is based
on the data collected from banks as on March 31, 2020,” the central bank said. The
Reserve Bank had issued the framework for dealing with domestic systemically
important banks on July 22, 2014.

45
Case Study 2:- HDFC Bank adjudged `Best Private Bank in India` at
the Global Private Banking Awards 2021

Jan 12, 2022, 11:16 AM IST

For the Global Private Banking Awards 2021, PWM received over 120 submissions
which were reviewed by a panel of 16 judged from four continents.

New Delhi: HDFC Bank has been adjudged Best Private Bank in India at the
Global Private Banking Awards 2021, organized by Professional Wealth Management
(PWM).

For the Global Private Banking Awards 2021, PWM received over 120
submissions which were reviewed by a panel of 16 judged from four continents.

HDFC Bank Private Banking, part of India’s largest privately-owned bank,

provides customers with a product suite across all asset classes for “optimal asset
allocation” depending on clients’ risk profiles and goals. The bank has been on a drive to
increase market share through geographic expansion by employing more relationship
managers and adding new products and services, says Rakesh Singh, group head,
investment and private banking, marketing and retail liability products, at HDFC Bank.

46
 “Open architecture, optimal asset allocation and regular portfolio rebalancing with
markets will drive our future growth,” he says. “We are on a journey to digitalise as many
processes as possible. The account opening process is now digital. Client reports are
completely digitalised now and will be available to clients at the click of a button by Q4
of the financial year 2022. Our endeavour is to have a completely digital journey for all
our wealth customers, from Q4 onwards,” Singh added.

These innovations and a determination to constantly improve on existing

standards has resulted in the bank gaining market share in the last six months, he
explains. Although outages at HDFC Bank that affected internet banking and mobile
banking at the end of 2020 did not receive too many complaints, “we do acknowledge
that it may have caused some concern to our clients”, admits Mr Singh. “We are sorry for
the inconvenience caused to our customers. We believe that the steps taken by us towards
enhancing our technology setup will suitably address such concerns,” he adds.

7. DATA ANALYSIS & INTERPRETATION

This chapter deals with analysis and discussions of the study . For the purpose of
analyzing, raw data was summarized in a master table and from this table the results have
been carried out. The questions having multiple/ alternative choices were analyzed by
taking percentages. In the case of questions on likert scale, the mean scores were
calculated.

In case of ranking questions the total score has been added. In case of checklist
questions the average of total no. of responses was calculated. In case of explanatory
questions, the general suggestions were summarized

This chapter analyses the study of HDFC bank And State bank of India

PRIMARY DATA ANALYSIS:

47
The figures below show the data collected and the interpretation of all such data.

Table 7.1: Showing the age group of respondents who utilize the services of HDFC
bank & SBI bank (SOURCE: Questionnaire)

AGE SBI HDFC

LESS THAN 25 10 8
25-35 16 24
35-45 12 14
45-55 24 18
55 & ABOVE 8 6
Total 70 70

25

20

15
SBI
10 HDFC

0
LESS THAN 25-35 35-45 45-55 55 &
25 ABOVE

Fig 7.1: Showing the age group of respondents who utilize the services of HDFC
bank & SBI bank (SOURCE: Questionnaire)

Table 7.2: Showing the gender of respondents who utilize the services of HDFC
bank & SBI bank (SOURCE: Questionnaire)

GENDER SBI HDFC

MALE 56 54
FEMALE 14 16
Total 70 70
48
 HDFC

FEMALE
MALE

SBI

0 10 20 30 40 50 60

Fig: 7.2: Showing the gender of respondents who utilize the services of HDFC bank
& SBI bank (SOURCE: Questionnaire)

Table & fig 7.3: Comparative study of the customers of SBI and HDFC bank
regarding their occupation (SOURCE: Questionnaire)

49
 Occupation

HOUSEWIFE

STUDENT

PROFESSIONAL

BUSINESMAN

SERVICE

2.5 7.5 12.5 17.5 22.5 27.5 32.5 37.5 42.5 47.5
SERVICE BUSINESMAN PROFESSIONAL STUDENT HOUSEWIFE
SBI 30 12 6 16 6
HDFC 24 46 10 6 4

From the above data it can be clearly understood from table 7.3 that the customers that
utilize the services from HDFC bank and SBH bank are from occupations like service,
business, professions, student, and housewives.

Table: 7.4: Comparative study of the customers of SBI and HDFC bank regarding
their income (SOURCE: Questionnaire)

INCOME SBI HDFC

NIL 0 4
LESS THAN 50000 16 8
50000-150000 14 18
150000-300000 20 16
300000-500000 12 18

50
500000-ABOVE 8 6
Total 70 70

emocnI
IBS CFDH

02
81 81
61 61
41
21

8 8
6
4

0
LINNAHT SSEL -00005 -000051 -000003 -000005
00005 000051 000003 000005 EVOBA

Fig 7.4: Comparative study of the customers of SBI and HDFC bank regarding
their income (SOURCE: Questionnaire)
From the above data (fig: 7.4) it can be interpreted that the customers income group
consisting nil income is zero in SBH nil income group are those customers who are
students by occupation.

Table and Fig 7.5: Comparative study of most important reason choosing the
particular bank (SOURCE: Questionnaire)

51
 Reason of choosing a particular bank
Location advantage
Net banking facility
ATM service
The excellent service offered by this bank
The brand name of the bank
I have a traditional bank account with the same bank
FACTORS
2.5 7.5 12.5 17.5 22.5 27.5
FAC- I have a The The ex- ATM Net Loca-
TORS tradi- brand cellent service bank- tion
tional name service ing fa- advan-
bank of the offered cility tage
ac- bank by this
count bank
with
the
same
bank

Se- 0 24 8 10 14 6 8
ries
1
Se- 0 6 12 24 10 4 14
ries
2

From the below data analysis in fig:7.5 the factors affecting in choosing a particular bank
for HDFC bank the most important factor is “the excellent service offered by the bank” and the
most important factor for SBI bank is “I have a traditional bank account with the same bank”

Table 7.6: Comparative study of the customers of SBI and HDFC bank regarding the
account facilities provided to them (SOURCE: Questionnaire)

FACILITY SBI HDFC

Savings account 36 42
Current account 10 14
Fixed deposit 24 13
NRI account 52 0 1
Total 70 70
ht ni gniliava yitlica f tnuocc A

eht ni gniliava yitlicaf tnuoccA

CFDH IBS

1
tnuocca IRN 0

itsoped dexiF 31
42

tnuocca tnerruC 41
01

tnuocca sgnivaS
24
63

Fig: 7.6: Comparative study of the customers of SBI and HDFC bank regarding the
account facilities provided (SOURCE: Questionnaire)

From the above fig:7.6 we can interpret that the number of savings account is more with
HDFC than with SBI and the number of fixed deposits are more with SBI bank than HDF

Table 7.7: Comparative study of the time period of customers dealing with SBI And
HDFC bank (SOURCE: Questionnaire)

YEARS SBI HDFC

Less than 1 year 14 14
1 to 2 years 24 18
3 to 5 years 14 26
More than 5 years 18 12
Total 70 70

53
Fig 7.7: Comparative study of the time period of customers dealing with SBI And
HDFC bank (SOURCE: Questionnaire)

From the above data analysis we can interpret that most accounts held by HDFC bank is
for 3-5 years and the most number of accounts held by SBI bank is for 1-2 years.

Table 7.8: Comparative study of reason that make customer to typically visit bank
branch (SOURCE: Questionnaire)

REASONS SBI HDFC

To make a deposit 28 34
To get advice for investment options 4 6
To inquire about a balance 14 10
To withdraw cash 24 20
Total 70 70

Visit To The Bank

SBI HDFC
34
28 24 20
14 10
4 6

sit ns ce sh
epo p tio alan ca
ad o b aw
e ent ta hdr
k u t
m
a
es
tm ab
o wi
To v e To
in ir
for n qu
e i
dvic To
t a
ge
To

Fig 7.8: Comparative study of reason that make customer to typically visit bank
branch (SOURCE: Questionnaire)

54
From the above data interoperated in figure 7.8 it is clearly observed that most of the
customers visiting HDFC bank are to make a deposit. whereas, the reason for visit for
most of the SBI customers is to withdraw cash.

Table and Fig 7.9: Comparative study of most satisfying facility Offered by them
(SOURCE: Questionnaire)

55
 Most Satisfying Facility
13

11

9
Number of customers

ATM Loan Early Preparation Interest Net banking Phone

cheque of drafts package banking
clearance
SBI 13 7 2 3 3 3 4
HDFC 10 4 8 2 3 5 3

Table 7.10: Customers want to shift to another bank if they are provided with better
service (SOURCE: Questionnaire)

CHANGE SBI HDFC

YES 6 9
56
NO 29 26

Total 35 35
 Shift To Another Bank If Provided Better
Service
YES NO

29
26

9
6

SBI HDFC

Fig: 7.10: Customers want to shift to another bank if they are provided with better
service (SOURCE: Questionnaire)

Table 7.11: Comparison regarding the overall satisfaction of the customers

(SOURCE: Questionnaire)

SATISFCTION SBI HDFC

EXCELLENT 8 7
GOOD 6 12
SATISFACTORY 18 8
AVERAGE 3 5
BELOW AVERAGE 0 3
Total 35 35

57
Fig 7.11: Comparison regarding the overall satisfaction of the customers (SOURCE:
Questionnaire)

8. DISCUSSION

 Majority of males prefer HDFC bank and SBI bank.

 SBI is preferred most by the age group of 45 to 55 and HDFC is preferred most
by the age group of 25-35.
 Customers that utilize the services from HDFC bank and SBI bank are from
occupations like service, business, professions, student, and housewives.
 Customers income group consisting nil income is zero in SBI. Nil income group
are those customers who are students by occupation.
 Factors affecting in choosing a particular bank for HDFC bank the most important
factor is “the excellent service offered by the bank” and the most important factor
for SBI bank is “I have a traditional bank account with the same bank”
 Number of savings account is more with HDFC than with SBI and the number of
fixed deposits are more with SBI bank than HDF
 Most accounts held by HDFC bank is for 3-5 years and the most number of
accounts held by SBI bank is for 1-2 years.

58
  Most of the customers visiting HDFC bank are to make a deposit. Whereas, the
reason for visit for most of the SBI customers is to withdraw cash.

9. CONCLUSION & RECOMMENDATION

Conclusion

In the long run, the process of nationalization resulted in economic stability and
strengthened India’s economy. However, it was heavily criticized because it came at a
time when India was at war with China and Pakistan, which fueled political resentment.
Many argued that nationalizing banks was a political ploy to undermine the business
interests that backed her opponents.
Due to the nationalization of banks, the efficiency of the banking system in India
improved. This also boosted the confidence of the public in banks.
The sectors that were lagging behind like small-scale industries and agriculture
got a boost. This led to an increase in funds and thus increase in the economic growth of
India. The nationalization of banks also increased the penetration of banks.

59
 HDFC Bank briefly over took the State Bank of India (SBI) and become India's
most valuable bank when SBI's balance sheet is five times bigger than HDFC banks even
without counting the former & five major subsidiaries.
However, it is worth underlining how HDFC bank made it to the top and why it is
likely to remain India's most valuable bank.
First, It's had made a steady focused leadership. Since the bank was set up in
1994, it had only one boss – Adityapuri who remains its manager director. The SBI, in
the same period has had around 10 bosses.
Second, a scrooge–like respect for earning and shareholders funds.Throughout its
history, HDFC bank has been ploughing back earnings to boost capital and grow it
business.
SBI needs more capital from the government for growth, HDFC bank does not. It
is coasting along without nicking shareholders for funds. Third, HDFC bank has
converted a handicap into an advantage.
The bank’s handicap is that its parent is in housing loans. This means it cannot
directly compete with is parent in this business which has been the biggest growth
segment in banking during the last decade. But the bank did a smart thing. It now
originates loans for its parent HDFC and collects a fee for the same. The net result is it
get to earn unencumbered income, and doesn’t have to carry all the loans on its book or
account for non performing loans on its balance sheet.
Fourth, HDFC bank’s sheer consistency in performance. SBI may report huge
profits in one quarter and barely scrape tough in the next but not HDFC Bank. In the last
26 quarters net profit growth has never fallen below 30 percent that is why we have
called it the best annuity scheme in the share markets.
The banking sector in India is one of the largest contributors to the growth of the
economy and is evolving at a steady pace. However, the banking sector, especially the
PSBs has had a huge impact on a decline in the economy due to the ongoing pandemic.
To amplify the growth of the economy and the sector, the decision of the government to
privatise the PSBs will prove to be a structural change in the banking sector by opening it
to private players, increasing capital inflow and foreign investment which may become a
boon to the emergence of the new age for banking sector eventually resulting in

60
economic resilience of the country. Privatising the PSBs will pump the competition in the
market and lead the debt-ridden PSBs towards a steady path of growth.

Recommendations

 Both the customers from SBI and HDFC bank have suggested that the bank
should open one of its branch in industrial area like focal point.
 One of the most common suggestion was to lower down the minimum balance
required in the saving s account.
 Staff should be more co-operative to the customers.
 Customers were not fully aware of the services and the various charges which
they have to pay. Therefore Banks should try to give some more information to its
existing customers

BIBLIOGRAPHY

 https://www.britannica.com/topic/State-Bank-of-India
 https://jupiter.money/resources/evolution-of-banking-in-india/
 https://www.tinkle.in/what-is-a-nationalized-bank/
 https://www.oneindia.com/feature/full-list-of-nationalised-banks-in-india-
2718000.html
 https://zeenews.india.com/companies/hdfc-bank-adjudged-best-private-bank-in-
india-at-the-global-private-banking-awards-2021-2427295.html
 https://www.toppr.com/guides/general-awareness/banking/state-bank-of-india-
and-its-associate-banks/

61
  https://pdfslide.net/documents/comparative-analysis-of-sbi-hdfc-bank.html
 https://www.gyanvihar.org/journals/index.php/2020/06/24/a-review-on-factors-
affecting-the-satisfaction-of-customer-of-hdfc-and-sbi-banks-in-jaipur/
 www.hdfcindia.com
 www.statebankofindia.com
 http://www.banknetindia.com/banking/index_1.htm
 http://www.asiatradehub.com/india/banking/finance.html
 http://www.en.wikipedia.org/wiki/Standard_Chartered_Bank
 http://www.finance.indiamart.com/investment_in_india/standard_chartered_bank.
 http://www.essays.se/about/literature+review+of+customer+satisfaction/
 https://www.gyanvihar.org/journals/index.php/2020/06/24/a-review-on-factors-
affecting-the-satisfaction-of-customer-of-hdfc-and-sbi-banks-in-jaipur/
 https://www.technofunc.com/index.php/domain-knowledge/banking-domain/
item/type-of-banks

APPENDIX

Questionnaire

1. Name____________________

2. Gender
 Male
 Female

62
3. Age
 Less than 25
 25-35
 35-45
 45-55
 55-above

4. Occupation
 Service
 Business
 Professional
 Student
 Housewife

5. Income
 Nil
 Less than 50,000
 50,000 to 1,50,000
 1,50,000 to 3,00,000
 3,00,000 to 5,00,000
 5,00,000 and above

6. Bank you are dealing with

 HDFC
 SBI

63
7. What was the single most important reason that you chose this
particular Bank
 I have a traditional bank account with the same bank
 The brand name of the bank
 The excellent service offered by this bank
 ATM service
 Net banking facility
 Location advantage
 Any other please specify_______________________________________

8. Which account facility you are availing in the Bank

 Savings account
 Current account
 Fixed deposit
 NRI account

9. Since how many years you are dealing with this Bank
 Less than 1 year
 1 to 2 years
 3 to 5 years
 More than 5 years

10.What is the main reason that you typically visit your bank branch
(please choose the single most important reason)
 To make a deposit
 To get advice for investment options
 To inquire about a balance

64
 To withdraw cash
 Any other please specify______________________________________________

11.How would you rate the following banking service quality on scale
of 1-5 provided by bank where 1-excellent, 2-good, 3 above-
average, 4-average, 5-below average
 Access
 Communication
 Confidentiality
 Courtesy
 Reliability
 Security
 Responsiveness
 Waiting time

12.Which facility satisfies you most

 ATM
 Interest package
 Loan
 Net banking
 Early cheque clearance
 Phone banking
 Preparation of drafts

13. If you are provided with better services by optional bank. Would
you like to move to other bank.
 Yes

65
 No

14. How would you rank the overall service

 Excellent
 Good
 Satisfactory
 Average
 Below Average

 Suggestions

If any______________________________________________

66