BANKING SERVICE IN INDIA

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)
Under the Faculty of Commerce

By
Neha Yadav
Roll No. 166

Under the Guidance of

Dr. Jitender Aherkar

B.L Amlani College of Commerce & Economics

Vile Parle West
Mumbai 400049

APRIL’2021
 BANKING SERVICE IN INDIA

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)
Under the Faculty of Commerce

By
Neha yadav

Under the Guidance of

Dr. jitendra aherkar

B.L Amlani College of Commerce & Economics

Vile Parle West
Mumbai 400049
 APRIL’2021
INDEX

Chapter Title of the chapter Page no

no
1 Introduction of banking service in India 7
1.1 Definition of a bank 7
1.2 Essential function of the bank 7
1.3 Financial intermediation 8
1.4 How banks promote economic growth 8
1.5 Types of banks in India 9
1.6 Scheduled commercial banks 9
1.7 Important facts relating to scheduled commercial banks 10
1.8 Why RRBs failed to achieve Its objective 11
1.9 Non-scheduled banks 13
1.10 Cooperative bank 13
2 Research methodology 14
2.1 Introduction 14
2.2 hypothesis 14
2.3 Scope of banking service 15
2.4 Limitations 15
2.5 Selection of problem 15
2.6 Sample size 16
2.7 Data collection 16
2.8 Tools of analysis 16
2.9 Tabulation meaning 16
2.10 Major objective of tabulation 17
2.11 Ten banking technologies that are shaping the future 18
3 Literature review 26
3.1 Introduction 26
3.2 Need and relevance of the study 31
3.3 Objective of the study 32
3.4 Literature review 32
4 Data analysis , interpretation and presentation 38
4.1 Introduction 38
4.2 A typical day at a bank 47
4.3 Analytics in the answer 47
4.4 Equipping a bank for the analytics jump analytics capabilities 49
4.5 Benefits of analytics in the selling process 50
5 Conclusion and suggestion 51
5.1 Conclusion 51
5.2 suggestion 53
6 Reference 56
 B. L Amlani College of Commerce and Economics
Vile Parle West,
Mumbai - 400049

Certificate
This is to certify that Ms/Mr Neha Yadav has worked
and duly completed her/his Project Work for the degree of Bachelor in Commerce
(Accounting & Finance) under the Faculty of Commerce in the subject of Finance
and her/his project is entitled, Banking Service in India
Under my supervision.
I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any Degree or Diploma of any
University.
It is her/ his own work and facts reported by her/his personal findings and
Investigations.

Date of submission: 5th April, 2021

DR. JITENDRA AHERKAR

 Declaration by learner

I the undersigned Miss Neha Yadav here by,

Declare that the work embodied in this project work titled
“ Banking Service in India”
forms my own contribution to the research work carried out under the guidance
of Dr. Jitendra Aherkar is a result of my own research work and has not
been previously submitted to any other University for any other Degree/
Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical conduct.

Neha Yadav
Name of the learner

Dr. Jitendra Aherkar

(Under the Guidance)
 Acknowledgment

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, Dr. Jitendra Aherkar for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Coordinator Prof. Surya Singh, for her moral
support and guidance.

I would also like to express my sincere gratitude towards my project guide

Dr. Jitendra Aherkar 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.
 Chapter No. 1: Introduction
Definition of a Bank

A bank is a financial institution which performs the deposit and lending

function. A bank allows a person with excess money (Saver) to deposit his
money in the bank and earns an interest rate. Similarly, the bank lends to a
person who needs money (investor/borrower) at an interest rate. Thus, the banks
act as an intermediary between the saver and the borrower.

The bank usually takes a deposit from the public at a much lower rate called
deposit rate and lends the money to the borrower at a higher interest rate called
lending rate.

The difference between the deposit and lending rate is called ‘net interest
spread’, and the interest spread constitutes the banks income.

Essential Features/functions of the Bank

Financial Intermediation
The process of taking funds from the depositor and then lending them out to a
borrower is known as Financial Intermediation. Through the process of
Financial Intermediation, banks transform assets into liabilities. Thus,
promoting economic growth by channelling funds from those who have surplus
money to those who do not have desired money to carry out productive
investment.

The bank also acts as a risk mitigator by allowing savers to deposit their money
safely (reducing the risk of theft, robbery) and also earns interest on the same
deposit. Bank provides services like saving account deposits and demand
deposits which allow savers to withdraw money on an immediate basis thus,
providing liquidity (which is as good as holding cash) with security.

How Banks promote economic growth?

Types/Structure of Banks in India

Scheduled Commercial Banks

 All the commercial banks in India- Scheduled and Non-Scheduled is
regulated under Banking Regulation Act 1949.
 By definition, any bank which is listed in the 2nd schedule of the Reserve
Bank of India Act, 1934 is considered a scheduled bank. The list includes
the State Bank of India and its subsidiaries (like State Bank of
Travancore), all nationalised banks (Bank of Baroda, Bank of India etc),
Private sector banks, Foreign banks, regional rural banks (RRBs), foreign
banks (HSBC Holdings Plc, Citibank NA) and some co-operative banks.
 Till 2017, Scheduled commercial banks in India comprised 26 Public
sector banks including SBI and its associates, and 19 Nationalised Bank
and IDBI. The creation of Bhartiya Mahaila Bank has increased the total
no of Public sector SCB’s to 27, but the recent merger of the Mahaila
Bank with SBI had reduced the list back to 26.
 The scheduled private sector bank includes old private sector banks and
new private sector banks. There are 13 old private sector banks and 9 new
 private sector banks including the newly formed IDFC and Bandhan
Bank.
 There are also 43 Foreign National Banks operating in India.
 The Regional Rural Banks were started in India back in the 1970s due to
the inability of the commercial banks to lend to farmers/rural
sectors/agriculture. The governance structure/shareholding of RRBs is as
follows:
 Central Government: 50%, State Government: 15% and Sponsor Bank:
35%.
 RBI has kept CRR (Cash Reserve Requirements) of RRBs at 3% and
SLR (Statutory Liquidity Requirement) at 25% of their total net
liabilities.

Important Facts Relating to Scheduled Commercial Banks

 In terms of Business, Public sector banks dominate the Indian Banking.
 PSB accounts for close to 50% of total assets, 70% of deposits and close
to 70% of the advances.
 Amongst the Public-Sector Banks, SBI and its Associates has the highest
number of Branches.
 The committee on Regional Rural Bank headed by M Narasimhan
recommended the setting up of RRBs for the purpose of providing rural
credit.
 An RRB is sponsored by a Public-Sector Bank which also provides a part
of its share capital. Example: Maharashtra Gramin Bank (sponsored by
the Bank of Maharashtra) and the Himachal Gramin Bank (Sponsored by
Punjab National Bank). RRBs were set up to eliminate other unorganized
financial institutions like money lenders and supplement the efforts of co-
operative banks.
 The Private Commercial banks account for close to 1/4th of the assets of
the total banking assets.
Why RRBs Failed to Achieve ITs Objective

The RRB Amendment Bill, 2014

 The Regional Rural Banks (Amendment) Bill, 2014 was introduced by

the Minister of Finance, Mr Arun Jaitley, in Lok Sabha on December
18, 2014. The Bill seeks to amend the Regional Rural Banks Act,
1976. It was passed by parliament in April 2015.
 The Regional Rural Banks Act, 1976 mainly provides for the
incorporation, regulation and winding up of Regional Rural Banks
(RRBs).
 Sponsor banks: The Act provides for RRBs to be sponsored by
banks. These sponsor banks are required to (i) subscribe to the share
capital of RRBs, (ii) train their personnel, and (iii) provide managerial
and financial assistance for the first five years. The Bill removes the
five-year limit, thus allowing such assistance to continue beyond this
duration.
 Authorized capital: The Act provides for the authorized capital of each
RRB to be Rs five crore. It does not permit the authorized capital to be
reduced below Rs 25 lakh. The Bill seeks to raise the amount of
 authorized capital to Rs 2,000 crore and states that it cannot be reduced
below Rs one crore.
 Issued capital: The Act allows the central government to specify the
capital issued by an RRB, between Rs 25 lakh and Rs one crore. The
Bill requires that the capital issued should be at least Rs one crore.
 Shareholding: The Act mandates that of the capital issued by an RRB,
50% shall be held by the central government, 15% by the concerned
state government and 35% by the sponsor bank. The Bill allows RRBs
to raise their capital from sources other than the central and state
governments, and sponsor banks. In such a case, the combined
shareholding of the central government and the sponsor bank cannot be
less than 51%. Additionally, if the shareholding of the state
government in the RRB is reduced below 15%, the central government
would have to consult the concerned state government.
 The Bill states that the central government may by notification raise or
reduce the limit of the shareholding of the central government, state
government or the sponsor bank in the RRB. In doing so, the central
government may consult the state government and the sponsor
bank. The central government is required to consult the concerned
state government when reducing the limit of the shareholding of the
state government in the RRB.
 Board of directors: The Act specifies the composition of the Board of
Directors of the RRB to include a Chairman and directors to be
appointed by the central government, NABARD, sponsor bank,
Reserve Bank of India, etc. The Bill states that any person who is a
director of an RRB is not eligible to be on the Board of Directors of
another RRB.
 The Bill also adds a provision for directors to be elected by
shareholders based on the total amount of equity share capital issued to
such shareholders. If the equity share capital issued to shareholders is
10% or less, one director shall be elected by such shareholders. Two
directors shall be elected by shareholders where the equity share capital
issued to them is from 10% to 25%. Three directors shall be elected in
case of equity share capital issued being 25% or above. If required, the
central government can also appoint an officer to the board of directors
to ensure the effective functioning of the RRB.
 The Act specifies the term of office of a director (excluding the
Chairman) to be not more than two years. The Bill raises this tenure to
three years. The Bill also states that no director can hold office for a
total period exceeding six years.
 Closure and balancing of books: As per the Act, the books of an RRB
should be closed and balanced as on December 31 every year. The Bill
 changes this date to March 31 to bring the Act in uniformity with the
financial year.

Non-scheduled Banks
 Non-scheduled banks by definition are those which are not listed in the
2nd schedule of the RBI Act, 1934.
 Banks with a reserve capital of less than 5 lakh rupees qualify as non-
scheduled banks.
 Unlike scheduled banks, they are not entitled to borrow from the RBI for
normal banking purposes, except, in emergency or “abnormal
circumstances.”
 Jammu & Kashmir Bank is an example of a non-scheduled commercial
bank.

Cooperative Banks
 Co-operative banks operate in both urban and non-urban areas. All banks
registered under the Cooperative Societies Act, 1912 are considered co-
operative banks.
 In the urban centres, they mainly finance entrepreneurs, small businesses,
industries, self-employment and cater to home buying and educational
loans.
 Likewise, co-operative banks in the rural areas primarily cater to
agricultural-based activities, which include farming, livestock’s, diaries
and hatcheries etc.
 They also extend loans to small scale units, cottage industries, and self-
employment activities like artisanship.
 Unlike commercial banks, who are driven by profit, cooperative banks
work on a “no profit, no loss” basis.
 Co-operative Banks are regulated by the Reserve Bank of India under the
Banking Regulation Act, 1949 and Banking Laws (Application to Co-
operative Societies) Act, 1965.
 Chapter No. 2: Research Methodology

Safeguard Deposits
Bank serves the main purpose of accepting deposits from public and
safeguarding it. It guarantees the safety of funds to customers for depositing
their money in their accounts.

Provide Loans
It advances loan to customers at both short-term and long-term basis as per their
needs. Bank provides loans out of the deposit that they receive and charges
interest on the amount from customers.

Encourage Savings
Banking institutions have an efficient role in encouraging saving habits among
people. It motivates people for saving and depositing their earnings in bank
accounts by paying them a fixed rate of interest on their deposited amount
regularly.

Capital Formation
Banking accelerates the capital formation rate within the country. It extends
credit to various sectors of the economy from time to time which helps in
uninterrupted continuation of all growth and development activities. Different
industries and businesses approach banks for fulfilling their financial needs.

Currency Issue
Banking organizations does the purpose of issuing currency which is served as a
legal tender in country. Central bank of our country (i.e. RBI) prints and issues
all currency notes for the public.

Enhances Living Standards

It assists the people in improving their quality of life by providing them credit.
Bank enables customers in purchasing high quality and costly goods on credit
basis or hire purchase system.

Generates Employment
Banking organizations also helps in generating large employment opportunities
within the country. It helps companies in extending their activities by providing
them credit as per their needs. This will result in increase in human resource
requirement for various positions. In addition to this, a large section of economy
is working within the banking sector.
Hypothesis I Marketing strategies of Indian banking sector appear to be
changing due to changing business environment. This hypothesis can be divided
into two parts; a) The business environment of banking sector is changing:
There is a vast difference in the business environment banks before 1990 and
after 1990 271 (Parameters used- Government policy, competition, customers'
expectations use of technology.
Scope of banking service
The banking sector is considered to as the backbone of the Indian economy and
offers various career opportunities to students from all fields: science, commerce
humanities. You need to good in analyzing numbers with strong mathematics so
that you can interpret and analyze numerical data. It is one of the lucrative
careers especially for the people who are looking job in government sector.
The sector is in the huge need for manpower as Government of India is taking
banking to remote areas also by opening new branches. It is also considered one
of the socially respectable and secure job. In India, there are multiple
examinations for bank jobs conducted by IBPS, State Bank of India and Reserve
Bank of India (twice in a year). To clear these bank xaminations you need to be
proficient in Reasoning, Aptitude, General knowledge, General English and
Arithmetic topics. Communication and interaction with customers is most
important in this field and hence gives you an exposure to different types of
people with varied needs and lifestyles and enhances your confidence level as
well in the long run.
Limitations

The present study is not free from limitations. Same of the important limitations
of this study are pointed out as follows. 1) Lack of proper co-ordination from the
respondents. 2) Lack of proper communication with the respondents. 3) Lack of
time. 4) Biased response from the respondents. Many of the respondents felt that
the information they gave, would be circulated and did not feel easy. But the
researcher after convincing them, was able to get the information.
Selection of Problem

The position of banking industry is not excellent in India. In 2011, 65% of

India’s population did not have access to a bank account. The lots of Indian
population till date do not have their personal bank accounts. RBI also requested
to the members of the country, each person has minimum one saving account in
any bank of India. But still there is lack of awareness in the people. So mobile
banking is a good option for the banking industry to increase their customers.
With the
help of mobile telecommunication technology customers make numerous
transactions in the bank at any time. There are many researchers which show that
India is moving fast towards mobile users as well as mobile internet users which
is also bigger strength to the banking industry to promote Mobile Banking. But
this Mobile Banking system has certain drawbacks., such as lack of awareness,
transaction cost, security issue, difficulty to understand, sometimes the
information available is not accurate. Because of this, many customers are not
using it. So a detail information about the benefits they receive are considered
and a small attempt has been made to understand the benefits of the mobile
banking and also the limitation of mobile banking with reference to ICICI Bank.
Finally, it makes an attempt to offer suggestions to the bank to educate much
more about mobile banking to its customer.
Sample Size
A total number of 50 respondents are selected for the purpose of collecting
information on the study and convenience sampling method has been selected.
DATA COLLECTION

Primary Data
Primary data is collected by distributing questioners to the respondents and by
conducting personnel interview. The questioners were distributed to the students
and graduates, but personal interview was conducted for some who did not fill
the questionnaire.
Secondary Data
Secondary data is collected from various articles, newspapers, magazines, and
websites.
Tools of Analysis
The collected data has been analyzed with the help of percentage and
interpreted through various figures.

Tabulation Meaning:
Tabulation is a systematic & logical presentation of numeric data in rows and
columns to facilitate comparison and statistical analysis. It facilitates
comparison by bringing related information close to each other and helps in
further statistical analysis and interpretation.
In other words, the method of placing organised data into a tabular form is
called as tabulation. It may be complex, double or simple depending upon the
nature of categorisation.
Also Check: Tabular Presentation of Data

5 Major Objectives Of Tabulation:

(1) To Simplify the Complex Data

 It reduces the bulk of information, i.e. raw data in a simplified and

meaningful form so that it could be easily by a common man in less time.
(2) To Bring Out Essential Features of the Data

 It brings out the chief/main characteristics of data.

 It presents facts clearly and precisely without textual explanation.

(3) To Facilitate Comparison

 Presentation of data in row & column is helpful in simultaneous detailed

comparison on the basis of several parameters.
(4) To Facilitate Statistical Analysis

 Tables serve as the best source of organised data for further statistical
analysis.
 The task of computing average, dispersion, correlation, etc. becomes
easier if data is presented in the form of a table.
(5) Saving of Space

 A table presents facts in a better way than the textual form.

 It saves space without sacrificing the quality and quantity of data.
Ten Banking Technologies
That Are Shaping The Future
1. Augmented Reality

Immersive technologies such as Augmented, virtual, and mixed reality are

enhancing customer experience across the board. So why can’t they do the same
for banking customers?
The possibilities of the implementation of augmented reality technology in
banking sector are only limited by imagination, though these are still in a very
early stage of lopment. The end-state is to give customers complete autonomy
in actions and transactions they could perform at home. Hybrid branches are
envisioned by technology experts who believe that bank branches as we know
them today are a thing of past.

Source: PWC
Also See: 11 Banks That Have Successfully Adopted Augmented Reality
One of the implementations of augmented reality technology in banking sector,
that is already live, has been made by the Commonwealth Bank of Australia.
They have created a rich date augmented reality application for their customers
who were looking to buy or sell a home. It provides them with information like
current listings, recent sales, and price tendencies to help the customer make
better decisions.

2. Blockchain
Blockchain is a catchall phrase used to describe distributed ledger technologies.
You could think of it as a distributed database with no DBA involved.

It allows multiple parties to access the same data simultaneously, and at the
same time ensures the integrity and immutability of the records entered in the
database. At present, leading banks around the world are exploring proof of
concept projects across various aspects of banking and financial services.

The first major implementation that we are likely to see is in the areas for
clearing and settlement. Accenture estimates that investment banks would be
able to save $10 billion by deploying blockchain technology to improve the
efficiency of clearing and settlement systems.
Another major area in which banks will see a huge saving by using blockchain
technology is KYC (Know Your Customer) operations. Business models being
developed at the moment would turn KYC from a cost centre into a profit centre
for banks – as they would come to rely on a shared blockchain for this activity.
Syndicated loans, trade finance and payments are other areas where the smart
contracts on blockchain could be highly effective.
3. Robotic Process Automation

The volume of unstructured data that the bank has to process is increasing
exponentially with the rise of the digital economy. This is not just banking
transaction data, but also other behavioral data that could potentially allow the
banks to improve and innovate customer experience.
This has made bankers realize that they need to find technologies that can
mimic human action and judgment but at a higher speed, scale, and quality. The
answer that has emerged is a combination of various technologies that enable
cognitive and robotic process automation in banking.

These technologies consist of machine learning, natural language processing,

chatbots, robotic process automation, and intelligent analytics in banking that
allow the bots to learn and improve.

It is no surprise that Deloitte’s 2017 State of Cognitive survey found that 88%
of financial service professionals believe that such technologies are a strategic
priority. That said, the current state of the art in robotic automation is still quite
weak at the cognitive and analytical aspects of the processes.
In the years to come, we would see the current cognitive capabilities being
bundled with the robotic process automation to achieve even better results. This
is already being implemented in point-of-sale solutions that automatically
suggest marketing promotions that would be most effective for an individual
customer.

4. Quantum Computing

Quantum computing is a way of using quantum mechanics to work out complex

data operations. As is common knowledge today, computers use bits that can
have two values – 1 or 0. Quantum computing uses “quantum bits” that can
instead have three states – 1 or 0 or both. This unlocks exponential computing
power over traditional computing – when the right algorithm is used.
This represents a huge leap in computing power, but any commercial
implementations are still decades away. Nevertheless, firms like JPMorgan
Chase and Barclays are investing in quantum computing research in partnership
with IBM.
5. Artificial Intelligence

The explosive growth that the last decade has seen in the amount of structured
and unstructured data available with the banks, combined with the growth of
cloud computing and machine learning technologies has created a perfect storm
for Artificial Intelligence to be used across the spectrum of banking and
financial services landscape.
Business needs and capabilities of AI implementations have grown hand-in-
hand and banks are looking at Artificial Intelligence as a differentiator to beat
down the emerging competition. Artificial Intelligence allows banks to use the
large histories of data that they capture to make much better decisions across
various functions including back-office operations, customer experience,
marketing, product delivery risk management, and compliance.
WEF report “the New Physics of Financial Services” has identified the
following sector-specific opportunities that will be opened thanks to AI
deployment in banking and financial services. These opportunities are spread
across deposits, lending, payments, investment management, capital markets,
and market infrastructure.

Artificial intelligence would revolutionize banks by shifting the focus from the
scale of assets to scale of data. The banks would now aim to deliver tailored
experiences to their customers rather than build mass products for large
markets.

Instead of retaining customers through high switching costs, banks would now
be able to become more customer-focused and retain them by providing high
retention benefits. Most importantly, banks would no more just depend on
human ingenuity for improving their services. Instead, performance would be a
product of the interplay between technology and talent.
6. API Platforms

Source: CA Technologies
The time when banks could control the whole customer experience through a
monolithic system that controlled everything from keeping records to every
customer interaction is long gone. Both the regulatory requirements and the
revolving customer needs have turned this humongous system into dinosaurs.

Today banks need to instead build “banking stacks” that allow them to be a
platform to which customers and third-party service providers can connect to
deliver a flexible and personalized experience to the end user. To do so, they
can use API platforms for banking.

API Banking Platform is designed to work through APIs that sit between the
banks' backend execution and front-end experiences provided by either the bank
itself or third party partners.

This allows the banks to adopt completely new business models and use cases
(for example, enabling salary advances) and experiment with new technologies
like blockchain at low cost. APIs also help banks to future-proof their systems
as the front-end is no more tightly coupled with the backend.
7. Prescriptive Security

The nature of cyber risk changes at a great speed. This makes the traditional
approaches to risk management obsolete. It is now clear that it is impossible for
organizations to eliminate all possible sources of cyber threats and limiting the
attack footprint at the earliest is the best way to deal with these. The banks will
have to be nimble in the way they approach cybersecurity.
Increasingly banks are deploying advanced analytic, real-time monitoring and
AI to detect threats and stop them from disrupting the systems. The use of big
data analysis techniques to get an earlier visibility of threats and acting to stop
them before they happen is called prescriptive security.

While the disruption brought by implementing the new technique may lead to
an increase in vulnerability at the start, this is the way forward to stop the ever
increasing data breaches that various organizations are reporting.

8. Hybrid Cloud

One of the biggest challenges that the digital age has brought to banking is the
need to respond quickly. The constantly evolving market that banks operate in
requires them to be as agile as possible. They need to be able to provide
resources across the enterprise in a timely manner to address business problems
faster.
High performing banks have discovered that the most cost-effective way of
achieving this is through an enterprise-wide hybrid cloud. This allows them to
pick benefits of both public and private while addressing issues like data
security, governance, and compliance along with the ability to mobilize large
resources in a matter of minutes.
Hybrid cloud also allows banks to offer innovative new offerings to its
customers. For example, ICICI Bank has partnered with Zoho to allow
businesses to automate the basic reconciliation process through Zoho Books, a
cloud accounting software. The partnership does away with the need for data
entry and also makes it easier to offer multiple payment options to the
customers.
9. Instant Payments

As the world moves towards a less-cash economy, the customer expectations

around payments have changed dramatically. Both customers and business
expect payments to happen instantaneously, and this is where instant payment
systems step in.
Instantaneous payment is a must if online payments need to replace cash
transactions. Therefore, banks around the world are finding ways of providing
their customers options for instant payment, even when the infrastructure
required for the service is lacking.
For example, banks in Kenya are partnering together to provide P2P payment
experience to their customer base. You would soon see banks combining their
instant payment capabilities with third-party e- and m-commerce solutions to
develop a new portfolio of services.
10. Smart Machines

You must have already seen assistants like Amazon’s Alexa and Google Home
in action. Can you imagine the impact these could have on banking
applications?
In fact, Bank of America has already developed Erica as a virtual assistant
specifically for banking operations. These smart machines are beginning to act
as digital concierges for the customer in interacting with banks as well.
 Chapter No. 3: Literature Review
Literature reviews that Indian banking system consist of a larger structure on of
financial institutions, Commercial banks, foreign financial institutions. These
structural transformations of Indian finance system can be divided into three
parts. First, the post independence period (1947-1968). The Reserve bank of
India, performed role as a supervisor and controller of finance system. RBI,
dominated over all the forms of finance controls in India. In this time RBI,
worked on financial stability, credit control, and regulation of interest rates and
formation banking structure. The second financial repression, period <1969 to
1990> the movement commenced with the nationalization of banks. This
nationalization of commercial banks derives the base for changes in finance and
banking system. The result into interest rate regulation and credit programmers
deposit and banking working methods etc. The third period known as financial
reform and liberalization period. Started in early 90’s. In that period
government of India was more likely to more liberalized. The three committee
in 1985, vagual in 1987 and the Narasimham committee 1991. The most
influential recommendations made by the committee of Narasimham regarding
liberalization, consolidation and privatization in banking system. And the
government of India started a financial reform era with the financial sector
liberalization program. The main aims of financial liberalization program is to
regulate the rates of interest, cash reserves and performance financial system
consist of financial institute stocks exchanges and banks. It makes liberalization
program enhance the importance of banking sector and make it more efficient
and competitive.

The globalization, deregularisation and privatization system emphasized on

Washington consensus. These leads country to simplistic way of transforming
system by functioning of market and state owned institution’s restructuring. The
liberalization program made changes internal economy. It restated more
competitive and productive in shorter period. The liberal interest rates and
reserve limits of banks resulted into stable and sound borrowing and lending
market and monetary policy of government. The bank requires to keep certain
amount of reserves to avoid too uncertainty an future due to competitive market
another element of banking reforms is stabilization, non performing loan, which
burdensome for banks are recapitalized and require standard working
environment one of the most effective part is alteration of state owned banks
into private sector banks. Under the government controls state owned banks
recommends to sell out its public portion to private sector and consume the
public property in other economic project which needs more funds and these
funds are taken from the privatization of state owned banks.
Under the Nationalization act 1969, the largest banks were nationalized with the
aim of increase in public deposits. The reason behind the nationalization of
banks to grow the economy and bank network expansion. The government of
India requires enhancing the economy and serving to prior areas. In 1980, more
six banks were nationalized added into public share in banks to keep landing to
priories’ areas. It was material to control on banking system and resulted into
increase in priority area landing and five year plans of Indian Government.
Moreover, these turned into inefficiency in banking system instead of providing
equal distribution of funds. Addition banking system faced problems in 1980s
these are the period of unprofitability and inefficiency and in mid 80s creates
more limitations on returns and capital and reserves. These leads banks to the
unrealistic performance standards. As mention above the 1991 Narasimham
committee caters a influencing idea on banking sector reforms which idealized
on interest rate deregulation, credit services and entry of new banks on Indian
market private as well as foreign banks.

Before the committee, interest rates were medium of subsidiary between

different sectors of economy. Deregulation of interest rates was major part of
making reforms that gave growth to financial savings and improve
organizational finance system. On the other hands committee recommended
total liberalization on deposits rates. In 2004 RBI set only rates for the savings
and NRI deposits rates rest of the other deposits banks are free to levy their
rates. The last major recommendation of committee was on entry of new banks
in Indian market. Before it was a limited authority to the banks to do with
interest rates and deposits, there were totally restrictions for new banks entry.
Due to liberal view of new banks entry in Indian market seven private and
twenty foreign banks started their operations in India after 1990. As per RBI
(2004), the liberal aspect of new banks entry improved the quality of operation,
risk management, technological changes and competition.

In addition, before 1990 public sector bank distorted market system by its non
profitability and inefficient management. To recover the stability in market
Government inject more funds in 1993 and 1999 to liquidate the government
and depositors bear loses through public sector banks. In 1995 SBI act framed
partial privatization of public sector banks and SBI was the first bank to get
funds in form of equity and become private sector bank. Despite of partial
privatization Government decide to increase the private holding up to 49
percentage and to control banking system appointment was made for a public
agent to control administrative strategies after all the changes have been made
the Indian banking sector covers several changes and explore the improvement
effect.
In case of privatization of Indian banks there are only interest rates, credit
control and deposits rates to know the changes in economy are increase in
savings. It predicts the removal of deposit policy in baking will lead to increase
in capital availability these can make changes in private sector capital
formation. The interest rates make vary forms the fixed deposit rates, lending
rates are increased and steadily decline in 1990 which effect on today’s market.
The Repressioninst policy reduction improves the risk management of banks it
is an indication of liquidity. The liberalization treated as an instrument of
financial policy reformation of credit rates and statutory lending rates the
division of two rates in minimum and maximum can gradually effect the
repressive of monetary policy. As the liberalization program aimed to make
banks more efficient and productive to compose the efficiency of banking sector
based on technical efficiency, scale and scope efficiency called parametric and
non parametric efficiency. The parametric methods considered banking returns
and input like production and profit, cost, revenue to know how effective bank
is performing.

In Indian traditional economy needed to lift the banking sector through

technological changes, global market, economic pressure and bank crisis forced
to change in way of doing business in traditional way. It helps in increase in
competition at local market by removal of interest rates on current account,
deposit rates. More competition enhanced the service of banks in free services,
capital formation and mergers. The Indian economy faces various challenges
due to privatization. First, the government unable to consider the running of
nationalized banks during 1997-1998 crises. In this period government cannot
pressure the security holders to disclose their holding and these creates
problems in negotiation of foreign bank partners and for debt forgiveness issues.
Though state owned banks serves qualitative and respectable task in banking
sector. In India, state owned banks only work on remote areas like rural and
urban banking. Alternatively some credit unions and financial institution also
seems, in remote areas state owned banks encourage small and medium
enterprises by lending programmers, in crisis time state owned banks has quick
time to deal. The cycle time is quicker than private banks some time lack of
local infrastructure for finance, government organization only is the way to get
hands. These are the way state owned serves public and make quality service
against less return against service.

Privatization Experience and Issues

The privatization in recent years, the way to sell out some states to some
financial institutions foreign organization. Other way government directly sell
its parts to public in form of equity in stock market. These method might be
useful to countries state owned banks because lack of supervision of bank
management, another thing is to transparent operations before it privatized,
because of they need to know the what they are buying. The bad factor during
privatization was bank commercialization and collection of loans. Globalization
suggest the more effective completion partially nationalize banks therefore
moved to fully privatized in short period for operational efficiency later on the
issue arise on reserving some share for state. The share of state in private banks
derives the powers to influence the decision making and strategies of banks.
The way accepting a state ownership becomes a better option.

Mergers and consolidation and efficiency

The banking system consists of various institutions in size, ownership,

competitive profitability, structure and technology. The relationship between
profitability and size of bank is relative, smaller number in having loss making
institution and lager organization has very advantage over small organization
like return on capital. But smaller banks have good efficiency in work while
large organization. Above state bank consolidation is new phenomenon for
competition due to entry of foreign banks, privatization and deregulisation.

Now a days banking has changed because banking services are no more based
on Brick and
mortar structure. Due to Continues growth of technology, increasing customer
base, evolution of
alternate banking channels, has changed the way of banking services, so hence
the customer
satisfaction. Banking is a customer oriented service industry and customer
satisfaction has
become the most important aspect of any banking business due to immense
competition. Banks
are more determined to retain their existing customers by providing quality
services leading to
Customer satisfaction. The concepts and determinants of customer
satisfaction has changed
significantly as transition has taken place from traditional to modern banking.
This could be
witnessed by exploring the literature regarding customer satisfaction in banking
industry. This
paper is based on extensive literature review and attempts to investigate how the
concepts and
determinants of customer satisfaction has changed significantly during the
transition from traditional to modern banking. The findings of the study will
provide an important insight into
the past trends of customer satisfaction and will provide a base for the bank
managers to devise
customer satisfaction strategies in near future.
Keywords: Customer satisfaction; Traditional and Modern banking

Introduction
Psychology describes that satisfaction as “a state of mind that normally is
derived out of a
comparison between the expected and the perceived.” Satisfaction is a mindset
which comes
from Past experiences and knowledge. Now in a competitive world customer
satisfaction is the
area where all organizations are focusing on. Ultimately it’s the customer
satisfaction which will
decide whether the organizations will remain in the business or not.
The literature of satisfaction advocates satisfaction as an result as well as a
process (Yi, 1990;
and Parker and Mathews, 2001). Howard and Sheth (1969, p. 145) had given
the definition of
customer satisfaction: “the buyer’s cognitive state of being adequately or
inadequately rewarded
for the sacrifices he has undergone.” Customer satisfaction factors in service
industry are
different from any other industries.
Our research aims is to find out the relevant factors which contributes to
customer satisfaction in
banking industry. Because of the immense competition, entry of foreign and
private banks in
India, the Indian Banking industry has been changing in terms of services,
customer satisfaction,
product offering etc. No doubt increasing competition sometimes confuses the
customer for
making the right decision. Every bank is using the customer satisfaction
methods, tools,
techniques and even softwares because customer satisfaction is the only way to
survive in the
today’s cut-throat competition. On the other hand we are entering into modern
banking from
traditional banking where customers are more aware and knowledgeable then
the past. In the
competitive and dynamic environment it becomes mandatory to find out the
customer
satisfaction factors.

Need and relevance of the study

Banking industry has changed drastically. From traditional banking where

customers use to walk
to bank, take and fill the form and after that standing in the line for depositing
and withdrawing
the money. Like other service industries, banking is also a customer focused
service industry,
where the attention or we can say that focused attention is
differentiate customer services as
compare to the competitors. The main challenges for the banking industry is
increasing
satisfaction of customer through advance quality services, lesser cost of
documentation. Now the
attention has shifted to look up the service quality, when customer come in to
the bank and
having personal contact with the bank employee. (Chakravarty, 1996). But
today banking has a
new face. Customers prefer to do the online transactions then branch banking.
For this banks
need to know whether their customers are satisfied with the services they are
providing or not.
The main concern of this literature review based study is to find out the factors
which really
contribute to customer satisfaction which will further help to the bank
management to assess the
strategies in order to satisfy the customers.
"If you cannot measure it, you cannot improve it." - Lord William Thomson
Kelvin 1824-1907.

Objective of the study

From last two decade Banking has taken shape into modern banking form
traditional banking.
Customers have more options in choosing the banks than the past. Every bank is
trying to retain
and maintain their valuable customers at any cost. Banks are adopting different
softwares and
technological aspects to make their customers satisfied. Here the question arises
that “how they
make their customer satisfied”. Our objective is to find the customer
satisfaction trends in
banking industry with extensive literature review.

Literature Review

Ameme, B., & Wireko, J. (2016) claimed in his research that in today’s
competitive world
where technology plays a very important role and if we talk about banking
sector or industry
there is a positive relationship between technology and customer satisfaction.
They also stated
that satisfaction of customers is not merely introducing innovative products and
services rather it
is much more than that. They also found that if the bank wants to become the
market leader in
the competitive environment it must use the innovation approach in all the
aspects like products
and services. Also there is a significant relationship between technological
innovation and cost.
As the innovation increase the cost is also increase.

Machogu, A. M., & Okiko, L. (2015) research brought to light that with e-
banking complexities
on customer satisfaction. Results shows that there are factors which
leads to customer
satisfaction particularly in e-banking, which is one of the very important and
fast growing way of
doing banking. Factors are accessibility, convenience, security, privacy, content,
design, speed,
fees and charges have influence on customer satisfaction where the other factors
notified have no
significant influence.
Chochol'áková, A., Gabcová, L., Belás, J., & Sipko, J. (2015) research stated
that in
comparison with dissatisfied customers, satisfied customers were significantly
more like by to
recommend their bank to their friends and to consider using their current bank
in the future, and
they are more resistant to offers from other banks. Loyal customers are more
interested in the
services of their own banks when considering investments in all the aspects
such as in the
financial market, deposit their own savings to their own bank, take out a
mortgage from their
own bank and use other banking products and services from their current bank.
According to a
research by Ernst & Young (2012), the financial literacy of ordinary bank
customers is still
relatively low, but personalized recommendations still work well here.
According to the results
of our research, loyalty of customers with different intensities transforms into a
potential
purchase of additional banking products. The biggest potential interest of the
bank customers
was in depositing savings in the bank and in mortgage loans. The intensity of
interest in the
purchase of investments and other products was relatively low. Findings of
Deloitte research
(2012a), only 17% of respondents in the Czech Republic have changed their
bank in the past or
have accounts in two different banks, in comparison with Slovakia where 52%
of respondents
changed their account to another bank (12% in Poland, 28% in Hungary and
42% in Romania)
Kaur, N., & Kiran, R. (2015) founded in their research which was on
public, private and
foreign shows that customer are more satisfied with the services quality of the
foreign banks then
the private and public banks.
Kundu, S., & Datta, S. K. (2015) research found regarding e-service
quality, customer
satisfaction and trust they found that there is a significant relationship among e-
service quality,
trust and customer satisfaction. Internet banking service quality has huge impact
on trust. They
also researched that in case of internet banking privacy and fulfillment are the
main factors of
service quality which have influence on trust. Also banks should be more
concerned about the
privacy of individual transaction of the customers. According to Ernest and
young 2012 survey
showed that price factor was the main concern for 50 percent customers.
Zeinalizadeh, N., Shojaie, A. A., & Shariatmadari, M. (2015) opined that
out of the nine
customer satisfaction factors fees and loan, prompt service and appearance are
the major factors
which have more significant impact on customer satisfaction followed
by interest rate and
accessibility of bank and availability of service which have less impact on the
satisfaction on the
banking customers.
Rahi, S. (2015) research findings show customers are more loyal towards those
banks who are
facilitating internet banking services. Also good brand image build relationship
between banks
and customer and enhance the customer loyalty toward bank. He also concluded
that those banks
that are giving the internet banking services to their customers, loyalty of those
customers are
more towards the banks. He also suggested that if the brand image also plays a
significant role
between loyalty of the customers and internet banking. The role of brand image
is positive in
making a positive relationship between customers and internet banking.
Pareek, V. (2014) research opined with a remark that out of several
factors few causal
fundamental factors like product attributes, employee characteristics, customer
convenience,
bank tangibles, cost of transactions and customer communication
contributes in customer
satisfaction in Indian banks. Interestingly convenience one of the 4 P.s i.e.
marketing mix was
found to be an unimportant in deciding customer satisfaction in Indian banks
(studied banks).
Vyas, V., & Raitani, S. (2014) opined that there are many drivers of switching
behavior in the
banks. Particularly they found nine critical factors which contribute in switching
the banks. One
very interesting driver is customer satisfaction in all the drivers which
contribute in the switching
behavior of customers. So again we can’t ignore that customer satisfaction of
the major factors
among. Banks should come out with the strategies that increase the customers
satisfaction.
Suriyamurthi, S., Mahalakshmi, V., & Arivazhagan, M. (2013) stated that in
the cutthroat
competition where every bank is focusing on retaining and attracting new
customer, relationship
marketing is the key element which should be adopted by the banks.
They also found that
banking sector is one of the major service sector and the business of banks is
more or less
dependent on the customer services and satisfaction. Banks should increase
their services and
make good relationship with the customer.
Gupta, A., & Dev, S. (2012).opined satisfaction of customer is dependent on
variable then
independent variable. These dependent variables largely depend on service
quality, ambience,
involvement, accessibility and financial factors of the bank. According to the
findings of the
research. The impact of nearness of bank and financial factors on customer
satisfaction is not up
to the mark.
Sharma, N. (2012) research study used the 17 variables related to the
quantitative aspects of e-
banking. Study on rural customers satisfaction from e-banking was found
to be significant.
Research suggests that satisfactions in rural customers are quite satisfied in e-
banking services.
So, in order to improve the tendency to use e-banking channels in rural areas the
use of local
languages during dealings should be promoted as well as publicized. Her
research also suggest
that ATM is one of the important channel out of all alternate banking
channels for securing
patronage of rural customers.
Ganguli, S., & Roy, S. K. (2011) Research opined that in fast driven technology
world banks
should adopt the technology which can lead to customer satisfaction and
loyalty. Keeping this in
mind they researched on four dimensions like customer service,
technology security and
information quality, technology convenience, and technology usage
easiness and reliability.
Results states that there is significant relation between customer
service, technology usage
easiness and reliability and customer satisfaction. On the other hand they
found the positive
relation between technology convenience and customer satisfaction. So it
was found that
technology play an important role in satisfying the customer specifically in the
case of banking.
Singh, J., & Kaur, G. (2011) research suggested that customer satisfaction is
the outcome of
seven determinants namely social responsibility, employee responsiveness,
appearance of
tangibles, competence, and reliability. services innovation, , positive word-of-
mouth. According
to their study customer satisfaction if influenced by social responsibility,
positive word-of-
mouth, and reliability. they also founded that relationship marketing is the
important tool which
can significantly increase the customer satisfaction. Other factors like employee
behavior, their
friendliness, politeness, cooperation, promptness, efficiency, knowledge level,
trustworthiness,
and appearance also play an important role in satisfying the customer.
Munusamy, J., Chelliah, S., & Mun, H. W. (2010) claimed of their research
shows that service
quality is a very important dimension of customer satisfaction in
banking industry. All the
determinants of service quality like reliability, assurance, tangibility, empathy
and responsiveness
shows significant relationship with customers. They also state that intangibility
intension is very
difficult to measure then tangibility particularly in case of service quality.
Customer needs,
wants, preferences change any point of time without giving some hints to
industry.
Mishra A, (2009) stated that customer satisfaction majorly depends on the
provision of an
approach for the manager so that higher customer satisfaction for the future
could be obtained by
the bank. Also in his research he used the demographical characteristics of the
customers to
know about the satisfaction level of the customers.
Rod, M., Ashill, N. J., Shao, J., & Carruthers, J. (2009) research findings
suggests that online
banking positively influences customer perception. So bank management
focus should be on
good customer service quality in terms of reliability, responsibility,
tangibility and empathic.
This study was also found to be significant that online information
system quality is very
important predictor of overall banking service quality.
Lopez, J., Kozloski Hart, L., & Rampersad, A. (2007) Research claimed that by
using the one
of the service quality tool in which customer satisfaction was measured on
the basis of ten
dimensions. Results significantly show that out of ten six dimensions
namely reliability,
responsiveness, tangibles, access, communication, and credibility shows the
positive impact on
customer satisfaction.
Molina, A., Martín-Consuegra, D., & Esteban, Á. (2007) brought to light
that it is very
important to have good relations with the customers which leads to increase in
business. Also in
there research they stated that satisfaction of customers is depends on service
policy satisfaction,
on accessibility and on the front line employee satisfaction. So positive
relationships with the
customers always lead to financial success to the bank for long run.
Pont, M., & McQuilken, L. (2005) Research study was to find out the
whether satisfied
customers are loyal towards the banks. In the research they concluded that there
is no significant
relation between customer satisfaction and customer loyalty. They founded that
even satisfied
customers are not all the time loyal. If banks want to achieve high customer
satisfaction they
need to adopt the good approach because with the less costly approach
banks could not get
moderate customer satisfaction. They also stated that banks should exercise
and examine the
customer perceptions’ towards the service quality. So if the bank want to keep
their existing ones
and want to attract new ones then they should continually supervise customer
satisfaction and its
impact on loyalty.
Aaltonen, P. G. (2004) brings an awareness of the importance of the impacts of
demographic
variables and of technology on satisfaction of customers and loyalty in the
financial service
industry. In past studies they have verified that extremely satisfied customers
are, indeed, more
loyal customers.
Mols, N. P. (2000) stated internet banking with the help of customer feedback
that is in no time
helps banks to construct and keep secure relationships with their
customers and diminish
operating and fixed costs makes it is easy for them to utilize electronic fund
transfer and foreign
exchange transactions
Chapter no.4: Data analysis, interpretation and
presentation
Introduction
Psychology describes that satisfaction as “a state of mind that normally is
derived out of a
comparison between the expected and the perceived.” Satisfaction is a mindset
which comes
from Past experiences and knowledge. Now in a competitive world customer
satisfaction is the
area where all organizations are focusing on. Ultimately it’s the customer
satisfaction which will
decide whether the organizations will remain in the business or not.
The literature of satisfaction advocates satisfaction as an result as well as a
process (Yi, 1990;
and Parker and Mathews, 2001). Howard and Sheth (1969, p. 145) had given
the definition of
customer satisfaction: “the buyer’s cognitive state of being adequately or
inadequately rewarded
for the sacrifices he has undergone.” Customer satisfaction factors in service
industry are
different from any other industries.
Our research aims is to find out the relevant factors which contributes to
customer satisfaction in
banking industry. Because of the immense competition, entry of foreign and
private banks in
India, the Indian Banking industry has been changing in terms of services,
customer satisfaction,
product offering etc. No doubt increasing competition sometimes confuses the
customer for
making the right decision. Every bank is using the customer satisfaction
methods, tools,
techniques and even softwares because customer satisfaction is the only way to
survive in the
today’s cut-throat competition. On the other hand we are entering into modern
banking from
traditional banking where customers are more aware and knowledgeable then
the past. In the
competitive and dynamic environment it becomes mandatory to find out the
customer
satisfaction factors.
Need and relevance of the study
Banking industry has changed drastically. From traditional banking where
customers use to walk
to bank, take and fill the form and after that standing in the line for depositing
and withdrawing
the money. Like other service industries, banking is also a customer focused
service industry,
where the attention or we can say that focused attention is on differentiate
customer services as
compare to the competitors. The main challenges for the banking industry is
increasing
satisfaction of customer through advance quality services, lesser cost of
documentation. Now the
attention has shifted to look up the service quality, when customer come in to
the bank and
having personal contact with the bank employee. (Chakravarty, 1996). But
today banking has a
new face. Customers prefer to do the online transactions then branch banking.
For this banks
need to know whether their customers are satisfied with the services they are
providing or not.
The main concern of this literature review based study is to find out the factors
which really
contribute to customer satisfaction which will further help to the bank
management to assess the
strategies in order to satisfy the customers.
"If you cannot measure it, you cannot improve it." - Lord William Thomson
Kelvin 1824-1907.
Objective of the study
From last two decade Banking has taken shape into modern banking form
traditional banking.
Customers have more options in choosing the banks than the past. Every bank is
trying to retain
and maintain their valuable customers at any cost. Banks are adopting different
softwares and
technological aspects to make their customers satisfied. Here the question arises
that “how they
make their customer satisfied”. Our objective is to find the customer
satisfaction trends in
banking industry with extensive literature review.
Literature Review
Ameme, B., & Wireko, J. (2016) claimed in his research that in today’s
competitive world
where technology plays a very important role and if we talk about banking
sector or industry
there is a positive relationship between technology and customer satisfaction.
They also stated
that satisfaction of customers is not merely introducing innovative products and
services rather it
is much more than that. They also found that if the bank wants to become the
market leader in
the competitive environment it must use the innovation approach in all the
aspects like products
and services. Also there is a significant relationship between technological
innovation and cost.
As the innovation increase the cost is also increase.
Machogu, A. M., & Okiko, L. (2015) research brought to light that with e-
banking complexities
on customer satisfaction. Results shows that there are factors which
leads to customer
satisfaction particularly in e-banking, which is one of the very important and
fast growing way of
doing banking. Factors are accessibility, convenience, security, privacy, content,
design, speed,
fees and charges have influence on customer satisfaction where the other factors
notified have no
significant influence.
Chochol'áková, A., Gabcová, L., Belás, J., & Sipko, J. (2015) research stated
that in
comparison with dissatisfied customers, satisfied customers were significantly
more like by to
recommend their bank to their friends and to consider using their current bank
in the future, and
they are more resistant to offers from other banks. Loyal customers are more
interested in the
services of their own banks when considering investments in all the aspects
such as in the
financial market, deposit their own savings to their own bank, take out a
mortgage from their
own bank and use other banking products and services from their current bank.
According to a
research by Ernst & Young (2012), the financial literacy of ordinary bank
customers is still
relatively low, but personalized recommendations still work well here.
According to the results
of our research, loyalty of customers with different intensities transforms into a
potential
purchase of additional banking products. The biggest potential interest of the
bank customers
was in depositing savings in the bank and in mortgage loans. The intensity of
interest in the
purchase of investments and other products was relatively low. Findings of
Deloitte research
(2012a), only 17% of respondents in the Czech Republic have changed their
bank in the past or
have accounts in two different banks, in comparison with Slovakia where 52%
of respondents
changed their account to another bank (12% in Poland, 28% in Hungary and
42% in Romania)
Kaur, N., & Kiran, R. (2015) founded in their research which was on
public, private and
foreign shows that customer are more satisfied with the services quality of the
foreign banks then
the private and public banks.
Kundu, S., & Datta, S. K. (2015) research found regarding e-service
quality, customer
satisfaction and trust they found that there is a significant relationship among e-
service quality,
trust and customer satisfaction. Internet banking service quality has huge impact
on trust. They
also researched that in case of internet banking privacy and fulfillment are the
main factors of
service quality which have influence on trust. Also banks should be more
concerned about the
privacy of individual transaction of the customers. According to Ernest and
young 2012 survey
showed that price factor was the main concern for 50 percent customers.
Zeinalizadeh, N., Shojaie, A. A., & Shariatmadari, M. (2015) opined that
out of the nine
customer satisfaction factors fees and loan, prompt service and appearance are
the major factors
which have more significant impact on customer satisfaction followed
by interest rate and
accessibility of bank and availability of service which have less impact on the
satisfaction on the
banking customers.
Rahi, S. (2015) research findings show customers are more loyal towards those
banks who are
facilitating internet banking services. Also good brand image build relationship
between banks
and customer and enhance the customer loyalty toward bank. He also concluded
that those banks
that are giving the internet banking services to their customers, loyalty of those
customers are
more towards the banks. He also suggested that if the brand image also plays a
significant role
between loyalty of the customers and internet banking. The role of brand image
is positive in
making a positive relationship between customers and internet banking.
Pareek, V. (2014) research opined with a remark that out of several
factors few causal
fundamental factors like product attributes, employee characteristics, customer
convenience,
bank tangibles, cost of transactions and customer communication
contributes in customer
satisfaction in Indian banks. Interestingly convenience one of the 4 P.s i.e.
marketing mix was
found to be an unimportant in deciding customer satisfaction in Indian banks
(studied banks).
Vyas, V., & Raitani, S. (2014) opined that there are many drivers of switching
behavior in the
banks. Particularly they found nine critical factors which contribute in switching
the banks. One
very interesting driver is customer satisfaction in all the drivers which
contribute in the switching
behavior of customers. So again we can’t ignore that customer satisfaction of
the major factors
among. Banks should come out with the strategies that increase the customers
satisfaction.
Suriyamurthi, S., Mahalakshmi, V., & Arivazhagan, M. (2013) stated that in
the cutthroat
competition where every bank is focusing on retaining and attracting new
customer, relationship
marketing is the key element which should be adopted by the banks.
They also found that
banking sector is one of the major service sector and the business of banks is
more or less
dependent on the customer services and satisfaction. Banks should increase
their services and
make good relationship with the customer.
Gupta, A., & Dev, S. (2012).opined satisfaction of customer is dependent on
variable then
independent variable. These dependent variables largely depend on service
quality, ambience,
involvement, accessibility and financial factors of the bank. According to the
findings of the
research. The impact of nearness of bank and financial factors on customer
satisfaction is not up
to the mark.
Sharma, N. (2012) research study used the 17 variables related to the
quantitative aspects of e-
banking. Study on rural customers satisfaction from e-banking was found
to be significant.
Research suggests that satisfactions in rural customers are quite satisfied in e-
banking services.
So, in order to improve the tendency to use e-banking channels in rural areas the
use of local
languages during dealings should be promoted as well as publicized. Her
research also suggest
that ATM is one of the important channel out of all alternate banking
channels for securing
patronage of rural customers.
Ganguli, S., & Roy, S. K. (2011) Research opined that in fast driven technology
world banks
should adopt the technology which can lead to customer satisfaction and
loyalty. Keeping this in
mind they researched on four dimensions like customer service,
technology security and
information quality, technology convenience, and technology usage
easiness and reliability.
Results states that there is significant relation between customer
service, technology usage
easiness and reliability and customer satisfaction. On the other hand they
found the positive
relation between technology convenience and customer satisfaction. So it
was found that
technology play an important role in satisfying the customer specifically in the
case of banking.
Singh, J., & Kaur, G. (2011) research suggested that customer satisfaction is
the outcome of
seven determinants namely social responsibility, employee responsiveness,
appearance of
tangibles, competence, and reliability. services innovation, , positive word-of-
mouth. According
to their study customer satisfaction if influenced by social responsibility,
positive word-of-
mouth, and reliability. they also founded that relationship marketing is the
important tool which
can significantly increase the customer satisfaction. Other factors like employee
behavior, their
friendliness, politeness, cooperation, promptness, efficiency, knowledge level,
trustworthiness,
and appearance also play an important role in satisfying the customer.
Munusamy, J., Chelliah, S., & Mun, H. W. (2010) claimed of their research
shows that service
quality is a very important dimension of customer satisfaction in
banking industry. All the
determinants of service quality like reliability, assurance, tangibility, empathy
and responsiveness
shows significant relationship with customers. They also state that intangibility
intension is very
difficult to measure then tangibility particularly in case of service quality.
Customer needs,
wants, preferences change any point of time without giving some hints to
industry.
Mishra A, (2009) stated that customer satisfaction majorly depends on the
provision of an
approach for the manager so that higher customer satisfaction for the future
could be obtained by
the bank. Also in his research he used the demographical characteristics of the
customers to
know about the satisfaction level of the customers.
Rod, M., Ashill, N. J., Shao, J., & Carruthers, J. (2009) research findings
suggests that online
banking positively influences customer perception. So bank management
focus should be on
good customer service quality in terms of reliability, responsibility,
tangibility and empathic.
This study was also found to be significant that online information
system quality is very
important predictor of overall banking service quality.
Lopez, J., Kozloski Hart, L., & Rampersad, A. (2007) Research claimed that by
using the one
of the service quality tool in which customer satisfaction was measured on
the basis of ten
dimensions. Results significantly show that out of ten six dimensions
namely reliability,
responsiveness, tangibles, access, communication, and credibility shows the
positive impact on
customer satisfaction.
Molina, A., Martín-Consuegra, D., & Esteban, Á. (2007) brought to light
that it is very
important to have good relations with the customers which leads to increase in
business. Also in
there research they stated that satisfaction of customers is depends on service
policy satisfaction,
on accessibility and on the front line employee satisfaction. So positive
relationships with the
customers always lead to financial success to the bank for long run.
Pont, M., & McQuilken, L. (2005) Research study was to find out the
whether satisfied
customers are loyal towards the banks. In the research they concluded that there
is no significant
relation between customer satisfaction and customer loyalty. They founded that
even satisfied
customers are not all the time loyal. If banks want to achieve high customer
satisfaction they
need to adopt the good approach because with the less costly approach
banks could not get
moderate customer satisfaction. They also stated that banks should exercise
and examine the
customer perceptions’ towards the service quality. So if the bank want to keep
their existing ones
and want to attract new ones then they should continually supervise customer
satisfaction and its
impact on loyalty.
Aaltonen, P. G. (2004) brings an awareness of the importance of the impacts of
demographic
variables and of technology on satisfaction of customers and loyalty in the
financial service
industry. In past studies they have verified that extremely satisfied customers
are, indeed, more
loyal customers.
Mols, N. P. (2000) stated internet banking with the help of customer feedback
that is in no time
helps banks to construct and keep secure relationships with their
customers and diminish
operating and fixed costs makes it is easy for them to utilize electronic fund
transfer and foreign
exchange transactions (Kam & Riquelme, 2007). .
Conclusion and Managerial implication
After going through the various literatures related to customer satisfaction in
banking industry it
has been reviewed that there are so many factors which leads to customer
satisfaction in banking
industry. Customer satisfaction is very crucial aspect for banking industry also
a very wide area
to be studied. Researches and academician are continuously doing
research on this topic.
Because of the rapid changes in technology, perception of consumer, services,
etc it is mandatory
for the banking industry to cope up with the change. Traditional banking has
been taken shape
into modern banking. Customers expectations are increasing in terms of
services quality,
attention etc. banks are more concerned about satisfaction of customer rather
than any others
aspect. Result of my study significantly shows that modern banking leads to
moderate customer
satisfaction with the help of recent customer satisfaction trends. Results of the
this study produce
the trends which contribute in customer satisfaction in banking industry are
Service quality, E
want their customer satisfaction.
Managerial implication
Every bank wants to retain and maintain their valuable customers for long term.
Fact is that they
due to too much competition in the banking industry (public, private and
foreign banks) it
becomes difficult for the bank managers to frame out the customer satisfaction
strategies. My
research regarding customer satisfaction trends in banking industry will give an
insight to the
bank managers about the customer satisfaction trends. I am sure after applying
these trends in
their respective bank; they will work with more focused approach for customer
satisfaction. It is
time to understand for the bank managers that customer is not merely a
customer, they are more
then what a banking industry thinks. So they need to understand the factors like
service quality,
customer services, employee behavior, prompt services, customer
relationship management
which significantly contribute in customer satisfaction. So I hope this
paper will definitely
provide important information to the bank managers regarding customer
satisfaction in banking
industry
With banking products becoming increasingly commoditized, Analytics can
help banks differentiate themselves and gain a competitive edge. This paper
delineates the various ways that banks can use Analytics at every stage of the
customer lifecycle. In addition, it talks about how banks can prepare themselves
to embark on this journey.

A typical day at a bank

Picture this: It is a typical start of the day at a bank that has a daily heavy foot
fall. Shutters open to let in the stream of customers waiting outside the branch.
Branch officers are neatly seated at their respective counters such as the
‘Demand Draft,’ or the ‘May I Help You’ desk. A peek inside the back office
shows the branch manager conducting his daily sales huddle with his
relationship managers, sales officers and field staff. The mood is highly
charged, almost aggressive and abrasive. They are being asked about the
numbers planned for the day, and those not keeping up with the daily run rate
are being reprimanded.
The mood is somber and tense; the meeting ends with a strict warning to the
sales team and a reminder to meet the numbers, else face severe consequences.
Does this sound familiar to bankers or sales personnel?
If the answer is yes, then it is time to take stock of the traditional way of doing
business. Banking products are getting commoditized, and the features of all
banks’ products — be they current account, savings account, fixed deposits,
personal loans, or credit cards — are very similar. How, then, can banks
differentiate and grow their business? No matter how much strategizing happens
at the top level, it is these sales officers at the bottom of the pyramid who are
going to bring in the business. If they are not given direction, and not shown the
way, the business model will not be sustainable. As an old proverb says, “If you
don’t know where you are, you won’t know where to go.” Brute force and
threats to bring in business may bear results in the short run, but not in the long
run. It could also lead to malpractices by the sales officers due to the immense
pressure being put on them by their managers, and can also lead to talent
attrition.
Analytics is the answer
So how do we provide the sales force with enough ammunition that they can go
to the market with confidence and conviction rather than fear and despair? How
do we ensure that the leadership and senior management guide their teams
rather than whip them endlessly?
The answer to this is: Analytics
The sales process cycle in a bank comprises the following steps:

1. Knowing your target audience

2. Ascertaining whether they fit into your criteria(eligibility, profiling)
3. Conducting a sales call
4. Following up
5. Ensuring closure

And from the perspective of senior management, another final step —

monitoring and tracking numbers.
Sales personnel know that the following information can greatly help them at
various stages in the sales process:

1. A list of probable customers obtained by doing a basic check of products

purchased and the ones not yet purchased by them\ (from existing data)
2. A list of products most likely to be purchased by them, based on his/her
behavioral trends and buying habits
3. The likes and dislikes of the customers and their preferences

However, solutions like Next Best Offer (the use of predictive analytics to
identify the products or services that customers are most likely to be interested
in for their next purchase) and Locational Intelligence already provide the above
data. The question then arises — are there any other, smarter ways to provide
this information?
Credit risk and Collection

 Lend to right type of customers.

 Monitor collections.
 Predict and reduce delinquencies.
 Reduce NPA and increase profitability.

HR and performance management.

 Track performance V/s business objectives.

 Get the best out of people.
 Reduce attrition.
Finance and treasury

 Determine interest rates and forecast NII .

 Monitor and control interest rate risk.
 Establish risk tolerance levels and submit Intelligence to ALCO.
 Manage overall funds situation and FTP.

Marketing and sales

 Design products and make customers aware through various marketing

channels.
 Maximize sales at minimum cost through optimizing revenue.
 Increase customer loyalty and reduce attrition.

The officer who monitors credit risk will need to understand the types of
customers, monitor collections, predict and reduce delinquencies and reduce
non-performing assets. Analytics is essential if a high level of KPIs is to be
achieved. Similarly, departmental heads managing functions like marketing and
sales, HR, finance and treasury must rely on Analytics to enhance their
performance and work.
While the Management Information System (MIS) can provide numbers to the
functional head, it cannot bestow decisionmaking powers; the latter requires
that some more processes/ algorithms are run on the MIS to provide deeper
insights. For example, MIS can provide the Asset Liability Management (ALM)
function with information on the various types of deposits and the amount held
in each, or loans coupled with repayment cash flows etc. However, to conduct a
‘What If’ analysis and play around with the numbers to develop various
scenarios, Analytics is required.
Equipping a bank for the analytics jump/Building analytics capabilities
The first step towards building capabilities is recognizing the fact that it is
imperative to business and growth. As simple as it may sound, many banks are
yet to recognize Analytics as an important and strategic pillar. Having once
recognized the same, the bank needs to have buy-in from senior management.
We believe that any medium or large sized bank should necessarily have an
Analytics department. This department would cut across different verticals or
Line of businesses like Retail Banking, Corporate Banking, Investment
Banking, subgroups like trade finance, Home Loans, Personal Loans and so on.
The analytics team should be a healthy mix of statisticians, resources who have
experience on analytical tools and software, thought leaders, and leaders from
line of businesses. The next step is to arrive at a high level problem statement
and a probable solution around it. For example, reducing NPA on retail loans or
increasing customer stickiness is a high level problem statement. The next level
would be on arriving at a solution and how one can use analytics to overcome
the problem.
This would involve finding the right set of tools, finding a right partner OEM
and/or SI, articulating the business problems which the solution partner would
translate into processes and the end state architecture. It may involve building
propensity models and statistical models. This would need active participation
from the core team as established by the bank.
There would be challenges at each step, right from identifying the problem
statement to articulating business imperatives, identifying right set of tools and
solutions etc. But once all of it falls in place the results that it would yield
would be worth every effort put in.
Benefits of Analytics in the selling process
Analytics can provide the senior management with valuable inputs at each stage
in the customer lifecycle. Figure 2 below gives a detailed perspective on the
typical life cycle of the banking customer and its various stages from
onboarding onwards. It also provides the type of information and insights that
analytics can provide at each stage.
 Chapter 5: Conclusion and Suggestions

After presentation of the findings emerged from the analysis of the data of
selected banks in Chapter six, an attempt to make conclusion and prescribe
some suggestions for ease the problems, difficulties faced by selected credit
institutions are made in the present chapter. The suggestions are presented in
three heads: (a) Kolhapur District Central Cooperative Bank, (b) Bank of
Maharashtra and (c) Marathwada Gramin Bank.
1) Conclusions: Conclusions emerged from the analaysis of data from selected
banks are presented as below:
1) The study revealed that the total number of branches in BoM in both periods
1 and II were more than other two banks selected under the study.

2) But the rate of growth of branches (CAGR) of MGB in Period-I and CAGR
of the same in BoM in Period-II were highest respectively.

3) But in the case of overall growth from 1980-81 to 2009-10, the CAGR of
branches in KDCCB was highest (3.26%) followed by BoM (2.39%) and MGB
(1.84%,). In the case of growth of membership, the CAGR of MGB was highest
(9.25%) and KDCCB was 4.97%.

4) The study also revealed that the total owned funds of BoM was more than
KDCCB and MGB in both periods.

5) But in the case of growth (CAGR) of total owned funds in Period-I and
Period-II, the KDCCB was ahead in three selected banks under the study.
6) But on the other hand, the growth rate of total owned funds of BoM was
(23.93%) highest among selected banks under the study during overall period
from 1980-81 to 2009-10.

7) Further, the study also revealed that the total amount of borrowed funds of
BoM in both periods was higher than other two banks' borrowed funds

8) In the study it was also observed that in Period-I the CAGR of total borrowed
funds in BoM was highest and Period-11 the KDCCB had reported highest
growth rate (CAGR) of total borrowed funds.

9) During overall period from 1980-81 to 2009-10 (Period-Ill), again the BoM
had reported more amount of total borrowed funds a s well as highest growth
rate (CAGR) of the same among selected banks under the study.
10) The CAGR of total funds of MGB was (24.93%) highest among selected
banks in Period-I, but in Period-II, the BoM had resorted highest CAGR of the
same.

11) During the overall period (Period-Ill), the CAGR of total resources in MGB
was (17.99%) highest among selected banks.

12) Similarly, the MGB was (2.88%) also reported highest growth of share of
deposits in total resources in selected banks during Period-Ill.

13) In the case of CAGR of share of borrowings from apex level and other
banks, the KDCCB had reported Highest CAGR of 2.26% followed by BoM (-)
6.15% and MGB (-) 10.28% during PeriodIll. 402 14) In the same fashion, the
CAGR of share of own funds in total funds was (6.93%) highest in BoM
followed by MGB (0.27%) and it was negative in KDCCB (-) 0.50 during
Period-Ill.

15) In both periods (Period-I and Period-II), total investments made by BoM
was highest among selected banks. But in the case of CAGR of the investments,
the MGB had reported highest CAGR of 31.10% in Period-I and 39.19% in
Period-II.

16) CAGR of total investments of MGB was also high (52.63%) during Overall
period (Period-Ill).

17) Total amount of loans disbursed by BoM was highest among selected
banks during both periods.

18) But, the MGB reported highest CAGR (33.09%) of total loans disbursed in
Period-I, similarly, in Period-II, the BoM had reported highest CAGR (20.2) of
total loans disbursed.

19) MGB had reported highest share of priority sector lending in total loans as
well as highest CGAR (32.16%) of the same during Period-I.

20) The study observed that during the Period-II, the BoM had reported highest
share of priority lending in total lending and the CAGR (18.90%) of the same in
selected banks in Period-II.

21) The share of agricultural credit in total credit in MGB was highest (30.56%)
amog selected banks in Period-I, similarly, the CAGR of the same was highest
in MGB (30.56%) during the same period.
22) The share of agricultural credit in total credit in BoM was highest (16.41%)
in Period-II. But, the CAGR of share of agricultural credit in total credit was
highest in MGB (0.58%), other selected banks reported negative growth of the
same during Period-II.

23) During period from I to II, the CAGR of agricultural credit in KDCCB
increased from 11.17% to 12.54%. 403

24) The share of agricultural credit in total priority sector credit in KDCCB was
highest (94.53%), during Period-I. Similarly, in Period-ll also, the KDCCB
reported highest share of agricultural credit in total priority sector credit
(81.14%) among selected banks.

25) Overall the estimated CAGR of total loans and loans to priority sector were
highest in BoM (15.01% 8& 14.71%), during 1980-81 to 2009-10.

26) Demand for collection of total loans disbursed and loans disbursed to
agricultural sector in KDCCB was highest among selected banks during both
Periods-I and II respectively.

27) CAGR of demand for total loans disbursed and loans disbursed to
agriculture sector was highest MGB in both Periods (Period-I37.58% and
46.07% and in Period-ll- 15.13% and 11.50%).

28) The CAGR of collection of (recovery) total loans and loans disbursed to
agricultural sector were highest in MGB during both periods I and II.

29) During Period-1, the CAGR of total balance (overdues) in MGB was
highest (52.28%), but during Period-ll, CAGR of total balance was highest
(23.76%) in KDCCB among selected banks.

30) The percentage of recovery of loans to total demand in the case of total
loans and agricultural loans was highest in KDCCB in both periods.

2) Suggestions:
Central Cooperative Bank:

1. There is need to increase the base of individual membership of KDCCB as it

will help in increase of share capital and further it will strengthen the owned
resources.
 2. As compared to public sector banks, the growth rate of branches of KDCCB
is less, thus still there is scope to increase the branch net work in remote villages
under the financial inclusion to cover more number of farmers, artisans and
landless labourers etc. under banking services.

3.As compared to other selected banks under the study, the growth rate of
disbursement of credit is low. Thus, there is also need to increase the growth
rate of credit disbursement.

4. There is a need to increase the percentage of borrowing members to total

members of the bank.
5. No doubt, the share of agricultural credit in total priority sector lending is
higher than other credit institutions covered under the study. But KDCCB base
is in rural area, therefore there is need to still improve the level of agricultural
credit in total priority sector lending.

6. As per the government of India's direction, banks have to lend at least

40% of its total credit to priority sectors viz., agriculture, fisheries. Rural
and cottage industries, agriculture service societies, irrigation, marketing,
processing units based on local raw material etc. Still KDCCB short fall
to achieve the target. Therefore, there is a need to take steps to increase
the level of priority sector lending.

7. The bank should also concentrate more on to increase the total resource
base.

8. Over years, the share of deposits of KDCCB in total sources of funds

increased substantially. Side by side, the KDCCB should 408 also
consider the portion of interest cost of deposits. Therefore, there is need
to increase the contribution of owned funds in total sources of the bank.

9. As share of savings and current deposits was less as compared to share of

Fixed Deposits in total deposits. It is also advisable to KDCCB to raise
the low cost funds viz., Savings Deposits and Current Deposits.

10.The KDCCB may concentrate on collecting the low cost deposits.

11.The percentage of recovery of total loans of KDCCB was decreased over

a period of time. Thus, there is need to improve the level of recovery of
total loans.
 12. Similarly, there is also need to improve the recovery of agricultural loans,
but more priority should be given to increase the recovery level of loans
disbursed to non-farm sector

13. The KDCCB is spending more on CoM (specifically to operation costs)

i.e. expenditure on rent, stationery, lawyer fees, repair works, printing etc.
as compared to other costs, therefore, there is need to cut the expenditure
made on operating costs.

14. Due to increase in CoM, and decrease in income from interest, the
KDCCB had faced loss during 2009-10. Thus, there is a need to take
steps to decrease cost and increase income.

15. The NPA of KDCCB is mounting over a period of time. Thus, there is an
urgent need to decrease the level of NPA

16. The KDCCB ha s to introduce more professionalism or professional

approach in its banking operations.

17. Need to avoid disbursement of huge amount of loans to a particular sector

only viz.. Sugar Cooperatives.

18. Need to stop making influence by management in lending of credit by

banks to avoid directed credit. 409

19. On the basis of the recommendations of the Working Group on Human

Resource Policy for Short Term Cooperative Credit Structure-2009", the
bank should initiate steps towards training of its employees.

20. There is also need to strict follow of 'Asset-Liability Management' system

in the bank.

21 . Similarly, system of credit rating, system risk management should be

implemented in the bank.

23. The election of Board of Directors and representation of different section of

the society should be as per guidelines of 'Fit and Proper Criteria" suggested by
Revival Package ST Cooperative Credit Structure (Prof. Vaidyanathan
Committee).
24. Selection and appointment of Chief Executive Officer or Managing Director
of the bank should be on the basis of 'Fit and Proper Criteria'.

25. There is also need to diversify the portfolio of lending to make profit and to
assure recovery position.

26. During the analysis of the data of SHGs in selected banks under the study
observed that the number of SHGs formed and amount of disbursement of loans
to SHGs were less than BoM and MGB. But, most of the KDCCB's branches
are in taluka (block) places and rural areas, therefore, the KDCCB should have
achieved formation of more number SHGs and disbursement of credit as
compared to BoM and MGB.

27. There is also need to increase the issuance of KCCs and disbursement of
loans under this scheme in the bank.

28. There is also need to increase the net worth of the capital of the bank as to
compliance to the Section 11(1) of the BR Act, 1949 (AACS). 410

29. The bank should also take initiatives in the area of 'Financial Inclusion'
drive launched by Government of India. For this purpose a separate fund under
the heads of FIF and FITF are set u p in NABARD, thus the bank should make
appropriate use of available funds for 'Financial Inclusion'.

30. There is also a need to use the 'FIF and FITF' funds for all activities in
villages.
 REFERENCE

1) https://www.flexiprep.com/NIOS-Notes/Secondary/Business-Studies/NIOS-
Business-Studies-Ch-9-Banking-Services-Part-1.html

2) https://acadpubl.eu/jsi/2018-119-7/articles/7b/10.pdf

3) http://technoarete.org