A

SUMMER INTERNSHIP PROJECT

ON
“NEW TO BANK ACQUISITION:
A COMPARATIVE STUDY ON NEW CUSTOMER'S PREFERENCE
TOWARDS PHYSICAL BANKING AND DIGITAL BANKING"

Submitted to
S.R. LUTHRA INSTITUTE OF MANAGEMENT
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION

In
Gujarat Technological University
UNDER THE GUIDANCE OF

Faculty Guide: Company Guide:

Ms. Roshni Singh Mr. Maulik Shah
Asst. Professor Branch Manager
(HDFC Bank, Hirabaug, Surat.)

Submitted by
Ms. Heta Navlakha [Batch No. 2017-19, Enrolment No. 177500592066]

MBA SEMESTER III

S.R. LUTHRA INSTITUTE OF MANAGEMENT – 750

MBA PROGRAMME
Affiliated to Gujarat Technological University
Ahmedabad
July, 2018

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Students Declaration

I, Ms. Heta Navlakha, hereby declare that the report for Summer Internship
Project entitled " New to bank acquisition: A Comparative study on new
customer's preference towards physical banking and digital banking." is a result
of my own work and my indebtedness to other work publications, references, if
any, have been duly acknowledged.

Place: Surat

Date: 12 July, 2018

Heta N. Navlakha

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 ACKNOWLEDGEMENT

The contribution of a group solely leads to the successful accomplishment of any task.
And I am grateful to each of them who helped me to complete these research project.
I am thankful to Gujarat Technological University who gave me a chance to undertake
this research project as a part of my curriculum of Maters of Business Administration.

I am thankful to S. R. Luthra Institute of Management for giving me this opportunity. I

also am thankful to HDFC Bank Ltd. who gave us a chance to undergo the Summer
Internship Training.

I am grateful to my company mentor Mr. Maulik Shah and my college guide Ms. Roshni
Singh for guiding me at each step throughout the training and preparation of report.

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 EXECUTIVE SUMMARY

The development and increasing progress of an economy continuously calls for

an effective banking system. Both, the country’s progress and efficiency of the
banking system are dependent on each other. Any change in economy would
get reflected in banking system and any changes in banking system will surely
affect the country’s functioning. Advancements in communication and
information technology brought a revolutionary change in the ways the banks
were giving their services and the modes in which customer was availing the
same. There is increased proliferation of digital banking and hence it is
important to know the customers preference towards physical banking and
digital banking.

New to bank Acquisition: A Comparative study on new customers preference

towards physical banking and digital banking tries to know the preference of
new customers who are associated with the bank from last 2 months towards
physical banking and digital banking. 240 new customers were approached for
the same and a descriptive research design was used to conduct the research.
A structured questionnaire was administered to conduct the survey. The
research data was coded in SPSS and Microsoft Excel and the research results
were analysed using SPSS and many tests such as Mann Whitney test, Kruskal
Wallis test, Wilcoxon signed rank test, Spearman’s Rank correlation were used
to find and conclude the results.

The results revealed that 17% of customers are highly preferring Physical
banking as the mode of banking while 28% of customers are highly preferring
digital banking as a mode of availing banking services. It was found that 28%
of customers are unaware about investment options. Still 23% of the customers
are partially aware about Internet banking. 47% of the customers find physical
banking time consuming, while only 3% of the respondents find digital banking
being time consuming. This very well should be taken into consideration by the
bankers as it is calling for becoming more efficient and effective while
performing the tasks or giving the services.

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 TABLE OF CONTENTS

Sr. Particulars Page

No. No.
1. Introduction 7
2. Banking Industry 21
a. Global 22
b. National 24
c. PESTEL 27
d. Current trends 33
e. Major Players 34
f. Major Offerings 37

3. HDFC Bank 41

a. Company Profile 41
b. Organogram 45
c. Management 46
d. SWOT 47
e. Market Position 49
4. Review of Literature 58
5. Research Methodology 63
a. Problem Statement 63
b. Research Objective 63
c. Research Design 64
i. Type of Design
ii. Sampling
iii. Data Collection
iv. Tools for Analysis
v. Limitations of the Study

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6. Data Analysis 67
7. Findings and Conclusion 86
9. Bibliography 87
10. Annexure 89

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INTRODUCTION:

NEW TO BANK ACQUISITION:

Customer acquisition refers to gaining new consumers. Acquiring new

customers involves persuading consumers to purchase a company’s products
and/or services. Customer acquisition has been one of the major challenges
facing banks of late. Banks have very few profitable customers to source and
many banks competing. Hence, the strategy to have the best customer on their
books is making many banks to come out with innovative customer-centric
acquisition strategies targeted at improving the quality but not quantity. It
necessitates banks to have a proper acquisition strategy in place so that the
right customer is brought into the bank’s fold. This will involve in defining who
the best customer is and how to acquire them at least cost.

During acquisition of customers, it is normal practice to target the mass market

in the hope that some of them will become customers without giving a thought
that end of the day most of the customers may turn out to be non profitable
ones. The customers were easy to acquire but expensive to maintain over a
period of time. The costs associated were usually very high and a short term
view of adding quantity and not quality was the motto.

Therefore, it is important to have proper analytical models to target the right

profile of people who can turn out to be profitable.

Model Existing Profitable Customers

Characteristics similar to existing profitable customers in the bank can be one

model to target the right prospects. These customers normally tend to spend a
lot using their credit cards and also tend to keep a hefty balance in their account.

A simple example of this can be of existing customers who work for a major
MNC above a particular designation and have turned out to be profitable. The
aim is to target similar profile of people from that company and other similar
sized companies who are in the similar line of business whom the bank feels
will be profitable to have on their books. This way the bank has the option of

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acquiring customers whom they want and at a much lower marketing and other
acquisition related costs.

Referrals from Current Customers

Getting referrals from an existing profitable customer is another good way to

reach out similar profile people. Word-of-mouth promotion, whether positive or
negative, is widely recognized as a major factor in marketing banks products.
Banks would like to target referrals from their existing profitable customers and
an example of this can be targeting a referral campaign for set of customers
who have been consistently profitable and come from a similar background with
interests in game of golf. Referrals from these customers will most likely be from
the similar segment. This can also be supplemented by sponsoring certain golf
events and building awareness of the brand.

All referrals may not be converts, but getting to talk/mail to that segment of
customer which the bank wishes to target is critical. These potential customers
may turn out to be profitable ones and need to be handled in a careful way. The
acquisition costs for these customers will be low when compared to normal
acquisition. The customer who has referred can also be rewarded for referring
customers and this goes a long way in building brand/product loyalty without
affecting the total acquisition cost. While doing targeted referrals care should
be done taken to see that it does not put off their existing customers who may
not have been asked for a referral and needs to be handled tactfully.

Needs-Based Marketing

During the targeted marketing care to be taken to see that the right
product/pricing strategy is adopted. Products from different banks look almost
similar and it is important to see that the customer sees value in going for the
bank’s product. Pricing may not be the only differentiator as customers have
their own likes and dislikes. Some of them will be keen on having rewards,
others airlines miles, some membership to golf clubs, some others accounts
which do not charge overdraft fees etc. So targeted marketing based on
customer needs plays a very critical role.

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Existing bank customers also can turn out to be excellent acquisition targets for
newer products if their needs can be understood. This entails not actually
getting new customers but in a way creating value to the customer by providing
timely solutions to their requirements. Banks have a greater insight into these
customers’ needs and can deliver appealing products with lesser acquisition
costs and enhance customer loyalty as well.

So understanding the customer need and selling the right product at the right
time is critical. This will involve looking at customer not from a product silo
perspective but as a single customer with multiple products spread across the
different streams. Banks will need an integrated system to allow a common view
of customers across the base and should have relevant data to cull out the
profitability. The risks involved in this are minimal with a known customer and
will help in deepening relationship with current customer.

Staff Training

Last but not the least, acquiring a customer is a team game and the entire staff
from top to bottom plays an important role in some or other aspect of the
customer acquisition value chain. Here training plays an important role.

When a prospective customer comes into the bank or is approached by the

sales staff, it is critical that the employees who will be dealing with those
prospects are well trained. Proper training programs need to be devised to
cover the entire spectrum of the banks staff with special emphasis given to the
actual employees who will deal at the front end. Product functionality along with
pricing and what value it can add to the customer needs to form the basis of the
training plan. Added stress on soft skills along with how to handle customer
objections and competition can also be part of the training.

Multi-Channel Insight

Banks acquiring customers using multiple channels over a period of time would
have had a lot of data to see which one channel is performing better and then
better it to see that the desired results are achieved to boost their revenue and

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return. A proper acquisition strategy should be in place to see whom to target
and what product to target and how to target the same is important.

Constant interaction between teams across the bank will result in designing a
winnable product which can be of benefit and add value to the customer.
Customers need to see value in the relationship being built and it is
responsibility of banks for value creation for a profitable relationship. The
relationship with a customer is always evolving; banks need to keep in tune with
the changes in the market.

PHYSICAL / BRANCH BANKING

Bank Branch is considered as one of the most important channel of the bank
and is generally the most preferred channel from the customer's point of view.
The bank branch is referred to as the face of the bank since the customer can
visit personally and meet and interact with the bank branch officials and avail
the various services offered by the bank.

Concept of Branch Banking:

Branch Banking is still an integral part of Indian banking system as most Indians
still believe in cash transactions and prefer to visit banks in person for routine
banking operations. Bank branches are the face of the banks where customers
can visit and talk to the officials for getting better insights into new policies,
investment schemes, other banking services etc. On top of it, the personal
touch in every service leaves a great impact on the minds of customers.
However, banking in India has changed its facets and ways of doing business
over the years especially after the onslaught of technology and its
manifestations. People have started to drift towards latest modes of banking
like e-banking, mobile-banking etc. but the acceptance percentage is low as
compared to other countries. These innovations hold promising future and
branches have to continually evolve to remain relevant in coming times.

Branch Banking has been defined under the provisions of Section 23 of the
Banking Regulation Act, 1949 that banks can either open new branches or shift

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the location of existing branches. The banks have to seek a prior approval of
RBI to open a new branch in India or abroad or in the same city or village where
a branch already operates. RBI will grant such permission after it is satisfied
about the financial condition of the demanding bank, robustness of its
management, capital structure and general public interest behind such a move.

In reality, the bank branch is the sales and service channel of a bank and the
bank branch employees are generally responsible for both sales and service of
bank's products.
Sales in terms of branch banking could be of any of the bank's deposits,
products, gold, retail or other investment products of other approved
organizations, such as life insurance, general insurance, and mutual fund.

The most common examples of deposit products of a bank branch are savings
bank account, current accounts, fixed deposit accounts, and recurring deposit
accounts. The customers or the prospects desiring to open any of these
accounts have to fill an Account Opening Form (AOF) and submit the specified
documents in order to meet the Know Your Customer (KYC) guidelines issued
by the Reserve Bank of India (RBI).

The examples of a bank's asset products include personal loan, home loan, car
loan, and credit card. When a customer approaches the branch for any of the
loan products of the bank, the branch employee takes down the contact details
of the customer and the record of the lead generated are kept with the bank for
follow up action.

Sometimes, such leads are escalated to outsourced agencies, such as Direct

Sales Agent (DSA) or Direct Marketing Agent (DMA) of the bank. These
agencies, in turn, get in touch with the customers for obtaining the necessary
documents. The credit decision whether to sanction or not the various loans to
the customers is taken by the bank officials in the credit sanctioning department
of the bank.
In most of the banks, the front office activities that involve customer interaction
are handled at the branches of Banks, for instance, cash receipts and

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payments, issue of DD or lockers. The back-office activities, such as clearing
and account opening may be centralized at a different location away from the
branch.

Activities like clearing centralize payments of drafts and other instruments,

which are related to the local area, may be grouped in to one centre. Certain
other activities that are common across centres may be performed at another
place for the purpose of achieving efficiency of operation and controlling costs.
Following are several main services provided at the Bank Branches:

 Account opening
 Cash receipts
 Cash payments
 Cheque book issue
 Stop payment of cheques
 Closure of fixed deposits and premature withdrawals
 Issue of DDs and banker's cheque
 Safe deposit lockers
 Foreign exchange services
 Gold retail
 DeMat services
 Acceptance of clearing cheques
 Deliverables, such as cheque books, debit cards, PINs and passwords
 Acceptance of queries and complaints
 Investment services
 Standing instructions
 Retail loan products

Despite the emergence of several other delivery channels external to the bank,
branch banking still remains its utility. This might be due to the advantage of
the location of branches enjoyed by the customer. Also, in the current state of
development the alternate channels have limited service capabilities which
make a branch an extremely useful service and delivery outlet. A branch is
capable of handling diverse requirements of a customer in addition to projecting

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the human feeling arising out of the personal relationship with the branch
officials.

Branch banking has a lot of importance in India as it makes banking possible

for people living in rural and remote areas. This is a true source of inclusive
growth. The success of Pradhan Mantri Jan Dhan Yojana has been possible
due to extensive branch networks of various banks. Branch banking makes
management more responsive and efficient over centralised banking
operations. Also, the risk is well spread across the branches and no single office
has to suffer. This helps banks to offer more securities and investment options
to its customers. Also, due to the wide geographic spread, a broader customer
base, deposits used in one branch can be used profitably used as loans or
investments in other branches. This type of banking system can easily reach
people in backward areas. There are some negative points too which branch
system faces like delays in decision-making due to limited powers of branches,
influenced by local political leaders or administration etc.

DIGITAL / ELECTRONIC BANKING

Electronic banking refers to the automated delivery of banking products and
services directly to customers through electronic communication channels. The
delivery channels include direct dial- up connections, private networks, public
networks, etc. and the devices include telephone, personal computers including
Automated Teller Machines, etc. With the popularity of PCs, easy access to
internet and World Wide Web (WWW), Internet is increasingly used by banks
as a channel for receiving instructions and delivering products and services to
their customers. Thus, Electronic banking is also called Online banking or PC
banking or Virtual banking and more popularly it is known as E-banking. In true
Internet banking, any inquiry or transaction is processed online without any
reference to branch at any time. Providing internet banking is increasingly
becoming “need to have” than a “nice to have” service.

For many people, electronic banking means 24-hour access to cash through an
automated teller machine (ATM) or Direct Deposit of paychecks into checking

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or savings accounts. But electronic banking involves many different types of
transactions, rights, responsibilities and sometimes, fees.
E-banking means conduct of banking operations through electronic means or
devices, such as computers, telephones, mobile phones, ATMs, etc. E-banking
means conduct of banking operations (i.e., the provision of banking products
and services) by bankers through electronic tools or devices. Thus, electronic
banking not only includes internet banking or online banking. It is conducting
banking transactions over an electronic medium be it an ATM, Telephone,
Personal Computer or Mobile Phone.

The usage of electronic banking came into existence in greater numbers

because of its low operating costs. First it came in the form of ATM’s and phone
transactions but in recent years internet has emerged as a new channel
between customers and banks. The main aim of e-banking services is to
provide the customers much faster services with low costs. From last 20 years,
banking sector has chosen a new method of banking based on the progress of
information technology. In addition to these, customers, transaction and
communication abilities are fastened based on information technology. The
progress of electronic banking started with the use of automatic teller machines
and afterwards it developed to online banking. And now it is a way away and
transactions are taking place on one’s cell phone. In India especially, electronic
banking has gained much importance because of demonetization and stressed
need to go digital.

FEATURES OF ELECTRONIC BANKING

 E-banking is essentially performance of banking operations through
electronic means or tools
 E-banking is provision of banking products and services by banks through
the extensive use of information technology without direct recourse to the
bank by customers.
 Provision of round the clock (i.e., twenty-four hour) access to banking
facilities is an essential feature of e-banking.
 E-banking is a conduct of banking operations globally. In other words, e
banking is anywhere banking.

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VARIOUS FORMS OF ELECTRONIC BANKING:
Various forms of e- banking include Internet banking, Automated Teller
Machines (ATM), Tele Banking, Smart cards, Debit cards, E-cheque, etc.

INTERNET BANKING - It helps you manage many banking transactions online

or via PC.

AUTOMATED TELLER MACHINE - An ATM is an electronic computerized

telecommunications device that allows a financial institution’s customers to
directly use a secure method of communication to access their bank accounts,
order or make cash withdrawals and check their account balances without the
need for a human bank teller.

TELEPHONE BANKING -
By dialing the given Telebanking number through a landline or a mobile from
anywhere, the customer can access his account and by following the user
friendly menu, entire banking can be done through Interactive Voice Response
(IVR) system.
Telephone banking is a service provided by a bank or other financial institution
that enables customers to perform a range of financial transactions over the
telephone, without the need to visit a bank branch or automated teller machine.
Telephone banking times are usually longer than branch opening times, and
some financial institutions offer the service on a 24-hour basis. Most financial
institutions have restrictions on which accounts may be accessed through
telephone banking, as well as a limit on the amount that can be transacted.

The types of financial transactions which a customer may transact through

telephone banking include obtaining account balances and list of latest
transactions, electronic bill payments, and funds transfers between a
customer's or another's accounts.

From the bank's point of view, telephone banking minimizes the cost of handling
transactions by reducing the need for customers to visit a bank branch for non-
cash withdrawal and deposit transactions. Transactions involving cash or

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documents (such as cheques) are not able to be handled using telephone
banking, and a customer needs to visit an ATM or bank branch for cash
withdrawals and cash or cheque deposits.

MOBILE BANKING-
Mobile banking is a service provided by a bank or other financial institution that
allows its customers to conduct financial transactions remotely using a mobile
device such as a mobile phone or tablet. It uses software, usually called an app,
provided by the financial institution for the purpose. Mobile banking is usually
available on a 24-hour basis. Some financial institutions have restrictions on
which accounts may be accessed through mobile banking, as well as a limit on
the amount that can be transacted.

Transactions through mobile banking may include obtaining account balances

and lists of latest transactions, electronic bill payments, and funds transfers
between a customer's or another's accounts. Some apps also enable copies of
statements to be downloaded and sometimes printed at the customer's
premises; and some banks charge a fee for mailing hardcopies of bank
statements.
From the bank's point of view, mobile banking reduces the cost of handling
transactions by reducing the need for customers to visit a bank branch for non-
cash withdrawal and deposit transactions. Mobile banking does not handle
transactions involving cash, and a customer needs to visit an ATM or bank
branch for cash withdrawals or deposits. Many apps now have a remote deposit
option; using the device's camera to digitally transmit cheques to their financial
institution.

Mobile banking differs from mobile payments, which involves the use of a
mobile device to pay for goods or services either at the point of sale or remotely,
analogously to the use of a debit or credit card to effect an EFTPOS payment.

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MERITS AND DEMERITS:
There are some advantages on using e-banking both for banks and customers:
Permanent access to the bank, Lower transaction costs, Access anywhere,
Less time consuming, Very safe and secure method, Helps transfer money
immediately and accurately, Security of account, etc. are merits of various
forms of electronic banking.

While it has some of the advantages, electronic banking is not free from its
serious attacks. The disadvantages of e-banking include understanding the
usage of internet banking which might be difficult for a beginner at the first go.
Also you cannot have access to online banking if you don’t have an internet
connection. Security of transactions is a big issue. Your account information
might get hacked by unauthorized people over the internet. Password security
is must. Also, you cannot use it, in case, the bank’s server is down.

Not withstanding the limitations of electronic banking, electronic banking has

definitely made the life easy for users by providing online access to various
banking services.

CONSUMER PREFERENCE
Marketing is a process of creating or reorganizing an organization to be
successful in selling a product or service that people not only desire but are
willing to buy. Therefore, good marketing must be able to create a “proposition”
or set of benefits for the end consumer, that delivers value through products or
services. This value can be made up of benefit/cost.

Consumer preference means a consumer liking of one thing over another.

Consumer preferences are defined as the subjective tastes, as measured by
utility, of various bundles of goods. It is defines as a set of assumptions that
focus on consumer choices that result in different alternatives such as
happiness, satisfaction or utility. Consumer preferences are not dependent
upon consumer income or prices. Ability to purchase goods does not determine
a consumers likes or dislikes. It explains how a consumer ranks a collection of
goods or services or prefers one collection over others. For instance; a trend

17
may indicate that consumers prefer debit cards over credit cards to pay for the
goods. Or one can have a preference for Porches over Fords but only have the
financial means to drive a Ford.

Consumer preference is defined as the subjective tastes of individual

consumers, measured by their satisfaction with those items after they’ve
purchased them. This satisfaction is often referred to as utility. Consumer value
can be determined by how consumer utility compares between different items.

Consumer preferences can be measured by their satisfaction with a specific

item, compared to the opportunity cost of that item since whenever you buy one
item, you forfeit the opportunity to buy a competing item.

It is not just about reacting to what customer wants. Anticipating a customers

needs is as important as reacting to what customer needs or what he or she
wants. Knowing and understanding your customers preferences before they
buy allows you to create an even stronger experience.
Consumer preference is the way in which consumers in a free market choose
to divide their expenditure in purchasing goods and services. Using number of
assumptions, an individual’s preference can be built up into a utility. The idea
that consumers prefer one product or one service over another is not new. The
ability to identify and measure the elements of such preference decisions with
accuracy and reliability has only recently become available. The theory of
consumer preference relates preferences to consumption expenditure. This
relationship between preferences and consumption expenditure is used to
relate preferences to consumer demand curves. Thus, the underlying
foundation of demand is a model of how consumers behave. Preference has
demonstrated the ability to be effectively measured and to provide meaningful
insight into the choices consumers make when selecting one provider over
another and to determine continued relationship over the period of time.

One should explore and examine some important elements that help in
understanding consumer preference towards physical banking and digital
banking. Banker should understand the need of consumer so that they can
improve the insufficiency of the services. They should find out the way to attract

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more customers to utilize their services. In line with global trends, most
customers are not focusing on the internet application. A comparative study will
help finding preference of new customers' acquired by bank towards branch
banking and E-banking.

FACTORS AFFECTING CONSUMER PREFERENCES

Consumer preferences describe the reasons for the choices people make when
selecting products or services. Analysing the factors that determine consumer
preferences helps business target their products towards specific consumer
groups, develop new products and identify why some products are more
successful than others.

ADVERTISING- It plays an important role in consumer preference and informs

consumers of available goods and services and also shapes their impressions
of these products. Advertising can also create demand; for example, a
consumer may not have wanted a new cell phone until he saw flashy new
phones on TV.

SOCIAL INSTITUTIONS- It includes parents, friends, schools, religion and

television shows also influence one’s preferences. For instance; kids might
want to have the same toys their schoolmates have, while young adults may
purchase the same products their parents used to buy.

COST- Consumers usually choose to purchase more of a good if the price falls.
An increase in price may reduce consumption and on the other hand decrease
in price may increase consumption. For example, if a bank customer finds
balance inquiry over an electronic medium costly than a person will visit the
bank outlet for the same.

CONSUMER INCOME- Consumers often desire more expensive goods and

services when their income increases. If they suffer a decrease in income, they
are more likely to choose less expensive goods and services. A bank customer
will ask for specialized e-banking services only when his or her income is high.

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AVAILABLE SUBSTITUTES- If a product or service has several substitutes; a
consumer will be more sensitive to changes in price. However, if he or she do
not perceive similar products or services to be effective substitutes are less
likely to switch their decisions. For example, one can visit banks to withdraw
cash and at the same time one can use ATMs for withdrawal.

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 INDUSTRY PROFILE

The Indian economy is emerging as a one of the strongest economy of the

world with the GDP growth of more than 8 % every year. A strongest banking
industry is important in every country and can have a significant affect in
supporting economic development through efficient financial services. Banking
sector play a vital role in growth and development of Indian economy. After
liberalization the banking industry in India under gone major changes. The
process of liberalization and globalization has strongly influenced the Indian
banking sector. A stable and efficient banking sector is an essential
precondition to increase the economic level of a country. Liberalization policy
introduced in the banking sector in India led to consolidated competition,
efficient allocation of resources and introducing innovative methods for
mobilizing of saving. The ability of banks to analyze its financial position for
improving its competitive position in the market place. Most banks in India are
currently focusing an expanding their service network. Indian banking industry
has transformed into a customer oriented market. It now consists of multiple
products and customer groups and various channels of distribution. It is well
known fact that an effective and efficient banking system is important for the
long-run growth and development of the economy.

Banking industry is one of the most vital industry of the economy driving
economic growth. The banking sector is the section of the economy devoted to
the holding of financial assets for others, investing those financial assets as
leverage to create more wealth and the regulation of those activities by
government agencies. So, the following two functions assumes much
importance in functioning of banking industry in the economy:

Holding of Financial Assets

This is the core of all banking, and where it began—though it has expanded far
beyond the days of holding gold coins for Holy Land pilgrims in exchange for
promissory notes. A bank holds assets for its clients, with a promise the money
may be withdrawn if the individual or business needs said assets back. Avoiding
devastating bank runs that could destroy the sector as a whole is why banks
are required to maintain at least 8% of their book values as actual money.

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Using Assets as Leverage

Traditionally, banks leverage the money in their vaults as loans, earning money
from the interest rates charged on those loans. The great contradiction of
banking is that almost all of a bank's actual money is nowhere near its vaults,
meaning that its true value is only paper, yet that paper value is what grows the
economy.

The banking sector has always attempted to diversify its risks by investing as
widely as possible; this prevents an unexpected loan default from sinking the
entire bank. However, this can cause other problems. If a bank had invested in
the aluminum futures market and had a vested interest in increasing its value,
it could simply prevent the aluminum from being sold to industry and drive up
that value. This could have a knock-back effect on industry and disrupt the
economy, which the banking sector should avoid at all costs.

GLOBAL BANKING SCENARIO

There is growing optimism that both the world economy and the banking
industry are recovering from the impact of the financial crisis. But the financial
world has changed permanently, both in terms of the balance of power within
the industry and how banks will be allowed to operate in future.

Banks in emerging markets are now well capitalised and well funded and big
enough to compete directly against their western counterparts in the global
marketplace. They have greater potential for growth because of the relatively
immature development of their domestic financial markets and their rapidly
growing economies.

But regulation will become an issue in the emerging markets just as it is in the
more established western markets and may result in a return to more
traditional business models. However, the regulatory environment is going to
differ greatly from one country to the next. The stronger role of national
governments within banking means the future model for banking and

22
corporate governance is likely to be a hybrid of a regulated free market
approach and so-called ‘state capitalism’.

A key challenge lies in the dichotomy that financial markets are increasingly
global while regulators are predominantly national. Greater international co-
operation is therefore needed to improve the stability of the global financial
system. Also, the dominant role of the US dollar and of the US banks is set to
give way to a world where other countries, their currencies, their capital markets
and banks, all play a greatly enhanced role. This structural shift will offer both
opportunities and threats.
The financial crisis has demonstrated the need for banks to understand their
business models together with the associated risks and to have confidence that
performance indicators and executive incentives reinforce desired behaviours.
Through their skills in providing high quality business information, management
accountants should be at the forefront of meeting this need and thus
contributing to the long-term sustainable success of their organisations.

China, the United Kingdom, France and the United States represent the
largest portions of the global banking sector. China's two largest banks, the
ICBC and CCB, control nearly $6 trillion worth of the global banking sector.
In fact, all four of China's major banks appear in a list of the top 10 largest
banks in the world as of 2015.

Over in Europe, France and the U.K, control sizable portions of the banking
sector; in particular, the U.K.'s HSBC firm enjoys power over global banking
sectors. Both countries exhibited roughly $5 trillion worth of influence each.
Furthermore, each country predicts its financial sectors will continue
experiencing growth during the next decade.

Though several banks in the U.S. have gotten quite large in North America,
notably JP Morgan, for the most part, American banks have been unsuccessful
in gaining control over the global banking sector. While the U.S. certainly enjoys
more influence than the vast majority of nations, its control internationally pales
in comparison to that of China, the U.K. or France.

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Though typically not considered a major player in the global market, Japan has
been a growing financial power during the last decade and reaps the benefits
of a vibrant banking industry. The Mitsubishi UFJ Financial Group is Japan's
largest bank, and it deals with nearly $2.5 trillion worth of revenue per year.

Germany also exhibits influence over a portion of the banking industry. The
country's largest player by far is Deutsche Bank, which operates near $2.5
trillion in revenue per year as of 2014. German financial influence is limited
outside of Europe, though it can be felt in some parts of North America and
Asia. Within Europe, however, the German banking industry is one of the most
powerful in the entire continent.

Determining the exact percentage of influence a country holds over the global
banking sector is a nearly impossible task. Changing exchange rates and
political situations constantly shift the country holding the most power.
However, most financiers agree that China's influence over the global banking
sector is greater than the majority of countries. This is partially due to the
country's massive population. Furthermore, much of the country's financial
sector is based around the profits from manufacturing and export.

As a whole, developing countries have very little influence over the state of the
global financial sector. In fact, one World Bank study estimates that all the
developing nations together only control 30% of the world's cash flow. This
disparity is one of the biggest challenges faced by developing nations in their
quests to grow and industrialize.

INDIAN BANKING INDUSTRY

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently
capitalised and well-regulated. The financial and economic conditions in the
country are far superior to any other country in the world. Credit, market and
liquidity risk studies suggest that Indian banks are generally resilient and have
withstood the global downturn well.

Indian banking industry recently witnessed the roll out of innovative banking
models like payments and small finance banks. RBI’s new measures will go a
long way in helping the restructuring of the domestic banking industry. Also, the

24
digital payments system in India has evolved the most among 25 countries with
India’s Immediate Payment Service (IMPS) being the only system at level 5 in
the Faster Payments Innovation Index (FPII).

In August 2017, Global rating agency Moody's announced that its outlook for
the Indian banking system was stable.

MARKET SIZE

The Indian banking system consists of 27 public sector banks, 26 private sector
banks, 46 foreign banks, 56 regional rural banks, 1,574 urban cooperative
banks and 93,913 rural cooperative banks, in addition to cooperative credit
institutions. Public-sector banks control more than 70 per cent of the banking
system assets, thereby leaving a comparatively smaller share for its private
peers. Banks are also encouraging their customers to manage their finances
using mobile phones.

The unorganised retail sector in India has huge untapped potential for adopting
digital mode of payments, as 63 per cent of the retailers are interested in using
digital payments like mobile and card payments, as per a report by Centre for
Digital Financial Inclusion (CDFI). ICRA estimates that credit growth in India’s
banking sector would be at 7-8 per cent in FY 2017-18.

INVESTMENT AND DEVELOPMENTS

The bank recapitalisation plan by Government of India is expected to push
credit growth in the country to 15 per cent and as a result help the GDP grow
by 7 per cent in FY19.

Public sector banks are lining up to raise funds via qualified institutional
placements (QIP), backed by better investor sentiment after the Government of
India's bank recapitalisation plan and an upgrade in India's sovereign rating by
Moody's Investor Service.

The RBI amends statutes thereby allowing lenders to invest in real estate
investment trusts (REITs) and infrastructure investment trusts (InvITs) not
exceeding 10 per cent of the unit capital of such instruments.

25
GOVERNMENT INITIATIVES

The Government of India is planning to introduce a two percentage point discount in

the Goods and Services Tax (GST) on business-to-consumer (B2C) transactions
made via digital payments.

A new portal named 'Udyami Mitra' has been launched by the Small Industries
Development Bank of India (SIDBI) with the aim of improving credit availability to Micro,
Small and Medium Enterprises' (MSMEs) in the country.

Mr Arun Jaitley, Minister of Finance, Government of India, introduced 'The Banking

Regulation (Amendment) Bill,2017', which will replace the Banking Regulation
(Amendment) Ordinance, 2017, to allow the Reserve Bank of India (RBI) to guide
banks for resolving the problems of stressed assets.

Under the Union Budget 2018-19, the government has allocated Rs 3 trillion (US$
46.34 billion) towards the Mudra Scheme and Rs 3,794 crore (US$ 586.04 million)
towards credit support, capital and interest subsidy to MSMEs.

The government and the regulator have undertaken several measures to strengthen
the Indian banking sector.

A two-year plan to strengthen the public sector banks through reforms and capital
infusion of Rs 2.11 lakh crore (US$ 32.5 billion), has been unveiled by the Government
of India that will enable these banks to play a much larger role in the financial system
and give a boost to the MSME sector. In this regard, the Lok Sabha has approved
recapitalisation bonds worth Rs 80,000 crore (US$ 12.62 billion) for public sector
banks, which will be accompanied by a series of reforms, according to Mr Arun Jaitley,
Minister of Finance, Government of India.

The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 Bill has also
been passed by Rajya Sabha and is expected to strengthen the banking sector.

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The following is a snapshot of various aspects of Indian Banking Industry:

Source : https://www.ibef.org/uploads/industry/Infrographics/large/Banking-December-2017.pdf

PESTLE ANALYSIS FOR THE BANKING INDUSTRY

The banking industry affects all countries. But it’s subservient to many factors,
particularly to the government and the economy. Banks are unable to behave
independently and must provide services based on specific laws that affect their
growth and offerings. The banking industry is a highly fragmented one made up
of various segments including retail banking, corporate and investment banking
as well as asset and wealth management. During the period from 2006 to 2011,
the retail banking segment had seen significant growth and is expected to grow
even faster in 2017. In this global banking industry the largest market share is

27
held by Europe – 43%. However, during 2006-11 banking in the Asia Pacific
region has seen much faster growth. Compared to both the European and North
American region, this region continued to grow at a faster rate.

Opportunities for growth in this region are also huge. India and China both
present major opportunities for the banking sector. Apart from these trends
there are several other forces and factors too that also influence the growth and
business of the banking sector. Growing middle class income, increased
technology usage, legal and regulatory factors and in this way several forces
impact the banking sector. Here is a PESTEL analysis of the Banking industry
that analyses the impact of these forces on the industry and its growth.

POLITICAL FACTORS

Political factors acquire a very important role in the context of the banking and
financial services sector. Traditionally, these financial institutions have held
immense power and influence. Due to this the level of government scrutiny and
regulation they have to deal with is also very high. However, because of being
the leading repositories of the public’s savings, the banks must be regulated
and still strict regulation has often been criticised for hindering growth. Apart
from it the level of involvement between the banks and eh government has also
been high since always. There has always been a high level of involvement
between banks and the federal, state and local governments.

A dual banking system has regulated the banks in US where both Federal and
State authorities hold significant regulatory authority. While everyone knows the
reasons why governments have regulated the banking system, whether this
regulation must remain strict or be made lenient has remained a topic of debate.
In 2017, it is expected that the American government will reduce the regulatory
pressures on the banking system. It is expected that the regulatory system will
be less zealous in terms of reinforcement as well as more measured when
levelling fines. Such changes will encourage the banks to increase their focus
on the customer facing activities. The banks have been forced to bear massive
costs related to compliance which also might be reduced owing to these
changes.

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The banking sector looks all powerful — but it’s susceptible to a bigger giant:
the government.

Government laws affect the state of the banking sector. The government can
intervene in the matters of banking whenever, leaving the industry susceptible
to political influence. This includes corruption amongst political parties, or
specific legislative laws such as labor laws, trade restrictions, tariffs, and
political stability.

ECONOMIC FACTORS

The banking industry and the economy are tied. Banks and economic growth
are interrelated. A growing economy is good for banking sector and a healthy
banking sector can be good for the regional economy. Investment banks play
important roles in the regional economies How income flows, whether the
economy is prospering or barely surviving during times of recession, affects
how much capital banks can access. Spending habits, and the reasons behind
them, affect when customers borrow or spend funds at banks.

Additionally, when inflation skyrockets, the bank experiences the backlash.

Inflation affects currency and its value and causes instability. Foreign investors
think twice before providing their funds when a particular country’s currency
value is high.

Exchange rates also affect banks globally — stable currencies such as the US
dollar impact other currencies, spending habits, and inflation rates in other
countries. In case of the mixed economies, large corporations and governments
depend upon the investment banks when they have to raise funds. In the 21st
century, the banks have emerged as important players facilitating business
growth. They have emerged as critical partners for small and large businesses
helping them with loans, consumer transactions and several other things.
These banks are important partners for the individual economies. While on the
one hand their health depends upon the state of the economy, on the other the
economy’s health depends upon the operations of the banking sector. Both are
complementary. In today’s globalized world, a lot of business takes place
online. Even the individual consumers make online payments using their credit

29
cards and bank accounts. These trends have grown fast in the last 5 to ten
years because of increased activity in the banking sector.

SOCIOCULTURAL FACTORS

Sociocultural forces too can have a deep impact on the banking industry.
Changing social trends and people’s preferences can affect the business and
growth of the banking brands. Consumer demographics and people’s attitudes
towards the financial services have also changed a lot. Cultural influences, such
as buying behaviors and necessities, affect how people see and use banking
options. People turn to banks for advice and assistance for loans related to
business, home, and academics. Consumers seek knowledge from bank tellers
regarding saving accounts, bank related credit cards, investments, and more.

Consumers desire a seamless banking experience. And technology is

developing to allow consumers to buy products easier, without requiring
assistance directly from banks.

The millenials whether students or professionals make use of credit cards for
small and big transactions. Businesses whether small or big are more open to
taking financial assistance from the banks. Consumer confidence has surged
owing to economic factors but socially to the acceptance of bans and banking
services has risen.

So, several things have changed in the twenty first century. The millenials wants
great customer service and convenience and this is why the banks have
focused in providing a whole range of services online combined with round the
clock customer assistance. In this way, banking industry has taken an entire
new direction in the 21st century and customer satisfaction as well as customer
orientation has become important for them just like other big businesses.
Socially other small and big changes to affect the banks like growing use of
banking services in the rural sector, among the women and the growing income
of the middle class consumers.

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TECHNOLOGICAL FACTORS

Technology is virtually everywhere in the 21st century. A large part of the tasks
carried out by the banks are carried out online. Information technology has
taken centre stage and from customer accounts to loans and insurance, several
services can be availed of online. Technology has added convenience to
banking. However, some issues have also arisen amid all this technological
development and innovation. Privacy and security concerns have also grown
bigger with the rising use of technology. Banks have to spend significantly large
sums on the maintenance of a large technological infrastructure. Apps are
common and customers use them any time from their smartphones to shop and
pay online. These apps are full of features and make it easy to pay bills online.

Once, it was expected to visit the local bank to make changes to financial
accounts. But not anymore. Technology is changing how consumers handle
their funds. Many banks offer a mobile app to witness accounts, transfer funds,
and pay bills on smartphones.

Smartphones can scan cheques, and the bank can process it from their end, at
their location. This change helps to save paper and the need to drive directly to
the branch to handle these affairs.

Debit cards are also changing. Chips have been implemented, requiring users
to insert their card into debit machines rather than swiping them. Other
countries, such as Canada, have implemented a “tap” option — tapping the
debit card onto the device, requiring no pin, for a transaction to complete. These
changes make it easier on the user to make purchases without required
intrusion from banks.

Even banks themselves are utilizing technology within the workplace.

Telecommunicating through virtual meetings is being embraced. It replaces the
need for in-person meetings.

and for international users.

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ENVIRONMENTAL FACTORS

Sustainability and environment friendliness has become important for the

banking sector too just like other businesses. Energy management and other
environmental concerns are being addressed by banks globally. Banks like
HDFC are investing in energy management. Many have already taken
important steps towards paperless transactions. In order to control its
environmental footprint, HDFC has also introduced solar ATMs. “These use
rechargeable Lithium Ion batteries which use solar energy for their functioning,
thereby reducing the consumption of conventional energy”. Banks also publish
their yearly environmental reports highlighting their critical achievements over
the year in this area. It creates a positive image and also reduces costs in
several operational areas

With the use of technology — particularly with mobile banking apps — the use
for paper is being reduced. Additionally, the need to drive directly to a branch
to handle affairs is minimized as well.

Many issues are taken care of through mobile apps and online banking
services. Consumers can apply for credit cards online, buy cheques online, and
have many of their banking questions answered online or by phone. Thus,
reducing individual environmental footprints.

LEGAL FACTORS

The banking industry globally is impacted by several laws. It is also a large

employer and is affected by the labor laws. Legal risks are immense because
oversight and regulation are very high in this sector. . Customer concerns and
social responsibility have also made the government introduce several laws.
Banking is a heavily regulated area where compliance requires a lot of focus
and also spending.

The banking industry follows strict laws regarding privacy, consumer laws, and
trade structures to confirm frameworks within the industry. Such structures are
required for customers in the allocated country.

And hence to conclude, the banking industry is held accountable by the

government. What and how they offer services is determined by politics and

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current governmental laws. Additionally, banks are at the whim of the economy
— inflation rates can devastate banking prospects as it affects the value of
currency.

Technology is helping consumers spend and save money with readily available
apps and online services. For many daily transactions, it isn’t required for users
to visit their branch anymore. This, in turn, saves the use of paper and gas
spent from driving to and from banking locations.

Legally, banks regard consumer laws, trade agreements, and privacy laws.
They also must have top-notch cyber security with the growing use of
technology with banking transactions.

CURRENT SCENARIO AND ROAD AHEAD

For 2018 and beyond, banks must contend with multiple challenges tied to
regulations, legacy systems, disruptive models and technologies, new
competitors, and a restive customer base while pursuing new strategies for
sustainable growth. 2018 Banking Industry Outlook examines the six macro
themes—from customer centricity to cyber risk—facing each of the industry’s
five primary business segments in the coming 12-to-18 months. Firms that can
address these emerging challenges and opportunities to effectively balance
long-term goals with short-term performance pressures could be amply
rewarded.

Credit off-take has been surging ahead over the past decade, aided by strong
economic growth, rising disposable incomes, increasing consumerism & easier
access to credit. As of Q3 FY18, total credit extended surged to US$ 1,288.1
billion. Credit to non-food industries increased by 9.53 per cent reaching US$
1,120.42 billion in January 2018 from US$ 1,022.98 billion during the previous
financial year. Demand has grown for both corporate & retail loans; particularly
the services, real estate, consumer durables & agriculture allied sectors have
led the growth in credit.

The digital payments revolution will trigger massive changes in the way credit
is disbursed in India. Also, total banking assets in India is expected to cross
US$ 28.5 trillion in FY25.

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Enhanced spending on infrastructure, speedy implementation of projects and
continuation of reforms are expected to provide further impetus to growth. Also,
the advancements in technology have brought the mobile and internet banking
services to the fore. The banking sector is laying greater emphasis on providing
improved services to their clients and also upgrading their technology
infrastructure, in order to enhance the customer’s overall experience as well as
give banks a competitive edge.

Many banks, including HDFC, ICICI and AXIS are exploring the option to launch
contact-less credit and debit cards in the market shortly. The cards, which use
near field communication (NFC) mechanism, will allow customers to transact
without having to insert or swipe.

POPULAR COMPANIES IN THE BANKING SECTOR

Wells Fargo (WFC), the largest U.S. financial services and bank holding
company by market capitalization, operates in more than 30 countries
worldwide and is one of the 100 largest companies in the United States. The
company provides consumer and commercial financing, as well as banking,
insurance and investment services.

JP Morgan Chase (JPM), like Wells Fargo, is a true American banking

institution and one of the largest investment banks in the world. In addition to
regular consumer and commercial banking, JP Morgan offers a wide variety of
investment banking services, including raising capital in debt and equity
markets, advising on corporate strategies, market making in derivatives, and
brokerage and investment research services.

HSBC Holdings (HSBC), headquartered in the United Kingdom, is a global

banking and financial services firm that particularly appeals to income investors.
The company is segmented into four divisions through which it offers a wide
range of consumer and commercial banking services—retail banking and
wealth management, global banking and markets, commercial banking, and
private banking.

The Indian banking space is an exciting and dynamic one. Following is a list of
the top 10 banking companies in our country going by market capitalization.

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1. HDFC Bank

HDFC is the largest private bank in India. This bank was incorporated in August
1994. As of December 2012, HDFC Bank had 3,251 branches and 11,177
ATMs across 2,022 cities in the country.

2. State Bank of India

This is one of the old banks initiated in the year 1955 and servings ever since
then. State Bank of India was established in July 1955 with the intention to
provide top-notch banking services to people living in India. With more than
16,000 branches in the country and 8500+ ATMs, the SBI is serving the Indians
very well.

Since this is a Government bank, so it works on the ways to provide maximum

facility and benefits to its customers. Six Associate Banks merged with SBI
recently. Customer service is not so good in comparing to other banks.

3. ICICI Bank

This bank is an international bank and is considered as one of the best banks
in India. With its first-class service and proper care for every single customer,
this private bank has been following the up curve in customers count.

The ICICI bank is known for providing speedy service and good friendly staff. It
has more than 1400 branches and 4600 ATMs. The bank is known for best
internet facilities.

4. Axis Bank

This bank was founded initially in the year 1993 and is currently headquartered
in Mumbai, India. It is a private sector bank and its major stakeholders are some
prominent international companies. Axis bank was established in the year 1994.
It has 729 branches and 3171 ATMs in the country. It is one of the most popular
banks in India. The bank is popular due to the quality of service and customer
support is amazing.

35
5. Bank of Baroda

This Indian state-owned bank was established in the year 1908. It has around
4261 branches and 2000 ATMs across the country. After SBI, it is 2nd biggest
public sector bank in India. The bank is also known for good customer and atm
service.

6. Punjab National Bank

Punjab national bank was founded in the year 1895 and is now based in New
Delhi. It has more than 5000 branches across 764 cities. The bank serves more
than 37 million customers which is more than enough to speak about the
popularity of bank.

7. IDBI Bank

This bank has been categorized by RBI as “other public sector bank“. It was
established in the year 1964. It has more than 1594 ATMs and 1000 branches
which include some overseas branches as well.

8. Canara Bank

This bank was founded by Late A Subba Rao Pai on Jul 1, 1906, in Mangalore.
As of December 2011, this bank had 3564 branches across different cities of
India, and 4000 ATMs.

9. Bank of India

Bank of India is an Indian state-owned bank which was founded in the year
1906. As of 21 April 2012, 4187 branches which include the 52 branches that
are outside India. It had 1679 ATMs at that time. Of course, the count is more
now.

10. Union Bank of India

This bank was established on 11 November 1919. The bank has around 3,200
ATMs in the country.

There are many more banks in the country even local and foreign ones but
these are the ones with the highest amount of revenue and transactions and
the ones offering great services to their customers.

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MAJOR OFFERINGS OF BANKING INDUSTRY

The different products in a bank can be broadly classified into:

 Retail Banking.
 Trade Finance.
 Treasury Operations.

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

Retail Banking:

Retail banking, also known as consumer banking, is the typical mass-market

banking in which individual customers use local branches of larger commercial
banks. Services offered include savings and checking accounts, mortgages,
personal loans, debit/credit cards, negotiating for Loans and advances,
remittances, Book-Keeping (maintaining all accounting records)and certificates
of deposit (CDs). In retail banking, the focus is on the individual consumer.

Trade Finance:

This is the term used for the department in a commercial or investment bank
where trade transactions (cross border and domestic) are financed. Financing
is usually between a supplier and end buyer; with the occasional involvement
of a trader. Banks issue and confirm letter of credit. Drawing, accepting,
discounting, buying, selling, collecting of bills of exchange, promissory notes,
drafts, bill of lading and other securities is also done by banks.

Treasury Operations:

This involves activities such as

 Buying and selling of bullion, Foreign exchange.

 Acquiring, holding, underwriting and dealing in shares, debentures, etc.
 Purchasing and selling of bonds and securities on behalf of constituents.
 The banks can also act as an agent of the Government or local authority.
They insure, guarantee, underwrite, participate in managing and carrying
out issue of shares, debentures, etc.

37
Apart from the above-mentioned functions of the bank, the bank provides a
whole lot of other services like investment counseling for individuals, short-term
funds management and portfolio management for individuals and companies.
It undertakes the inward and outward remittances with reference to foreign
exchange and collection of varied types for the Government.

Common Banking Products Available

Some of common available banking products are explained below:

1) Credit Card: Credit Card is “post paid” or “pay later” card that draws from a
credit line-money made available by the card issuer (bank) and gives one a
grace period to pay. If the amount is not paid full by the end of the period, one
is charged interest. A credit card is nothing but a very small card containing a
means of identification, such as a signature and a small photo. It authorizes the
holder to change goods or services to his account, on which he is billed. The
bank receives the bills from the merchants and pays on behalf of the card
holder. These bills are assembled in the bank and the amount is paid to the
bank by the card holder totally or by installments. The bank charges the
customer a small amount for these services. The card holder need not have to
carry money/cash with him when he travels or goes for purchasing. Credit cards
have found wide spread acceptance in the ‘metros’ and big cities. Credit cards
are joining popularity for online payments. The major players in the Credit Card
market are the foreign banks and some big public sector banks like SBI and
Bank of Baroda. India at present has about 10 million credit cards in circulation.

2) Debit Cards: Debit Card is a “prepaid” or “pay now” card with some stored
value. Debit Cards quickly debit or subtract money from one’s savings account,
or if one were taking out cash. Every time a person uses the card, the merchant
who in turn can get the money transferred to his account from the bank of the
buyers, by debiting an exact amount of purchase from the card. To get a debit
card along with a Personal Identification Number (PIN). When he makes a
purchase, he enters this number on the shop’s PIN pad. When the card is
swiped through the electronic terminal, it dials the acquiring bank system –
either Master Card or Visa that validates the PIN and finds out from the issuing
bank whether to accept or decline the transaction. The customer never

38
overspread because the amount spent is debited immediately from the
customers account. So, for the debit card to work, one must already have the
money in the account to cover the transaction. The major limitation of Debit
Card is that currently only some shops in urban areas accepts it. Also, a person
can’t operate it in case the telephone lines are down.

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

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

4) E-Cheques: The e-cheques consists five primary facts. They are the
consumers, the merchant, consumer’s bank the merchant’s bank and the e-
mint and the clearing process. This chequing system uses the network services
to issue and process payment that emulates real world chequing. The payer
issue a digital cheques to the payee ant the entire transactions are done
through internet. Electronic version of cheques are issued, received and
processed.

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

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

6) Telebanking: Telebanking refers to banking on phone services. A customer

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

39
5) Mobile Banking: A new revolution in the realm of e-banking is the emergence
of mobile banking. On-line banking is now moving to the mobile world, giving
everybody with a mobile phone access to real-time banking services,
regardless of their location. But there is much more to mobile banking from just
on-lie banking. It provides a new way to pick up information and interact with
the banks to carry out the relevant banking business. According to this system,
customer can access account details on mobile using the Short Messaging
System (SMS) technology where select data is pushed to the mobile device.
The wireless application protocol (WAP) technology, which will allow user to
surf the net on their mobiles to access anything and everything. This is a very
flexible way of transacting banking business. Already ICICI and HDFC banks
have tied up cellular service provides such as Airtel, Orange, Sky Cell, etc. in
Delhi and Mumbai to offer these mobile banking services to their customers.

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

banking products and services. With internet banking is now no longer
confirmed to the branches where one has to approach the branch in person, to
withdraw cash or deposits a cheque or request a statement of accounts. In
internet banking, any inquiry or transaction is processed online without any
reference to the branch (anywhere banking) at any time. The Internet Banking
now is more of a normal rather than an exception due to the fact that it is the
cheapest way of providing banking services.

7) Demat: Demat is short for de-materialisation of shares. In short, Demat is a

process where at the customer’s request the physical stock is converted into
electronic entries in the depository system. In January 1998 SEBI (Securities
and Exchange Board of India) initiated DEMAT ACCOUNT System to regulate
and to improve stock investing. As on date, to trade on shares it has become
compulsory to have a share demat account and all trades take place through
demat.

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 COMPANY PROFILE

HDFC BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst

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

The Bank transacts both traditional commercial banking as well as investment

banking. The various divisions of the bank include retail banking, wholesale
banking and treasury operations. HDFC Bank currently has nationwide network
of 3,251 Branches and 11,177 ATM's in 2,022 Indian towns and cities and all
branches of the bank are linked on an online real-time basis. The bank
commenced operations as a Scheduled Commercial Bank in January 1995.

PROMOTER

Since its inception in 1977, the Corporation has maintained a consistent and
healthy growth in its operations to remain the market leader in mortgages. Its
outstanding loan portfolio covers well over a million dwelling units. HDFC has
developed significant expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its housing related
credit facilities. With its experience in the financial markets, strong market
reputation, large shareholder base and unique consumer franchise, HDFC was
ideally positioned to promote a bank in the Indian environment

BUSINESS FOCUS

HDFC Bank's mission is to be a World Class Indian Bank. The objective is to

build sound customer franchises across distinct businesses so as to be the
preferred provider of banking services for target retail and wholesale customer
segments, and to achieve healthy growth in profitability, consistent with the
bank's risk appetite. The bank is committed to maintain the highest level of
ethical standards, professional integrity, corporate governance and regulatory
41
compliance. HDFC Bank’s business philosophy is based on five core values:
Operational Excellence, Customer Focus, Product Leadership, People and
Sustainability

CAPITAL STRUCTURE

As on 31 March 2018 the authorized share capital of the Bank is Rs. 650 crore.
The paid-up share capital of the Bank as on the said date is Rs 519,01,80,534
/- which is comprising of 259,50,90,267 equity shares of the face value of Rs
2/- each. The HDFC Group holds 20.93 % of the Bank's equity and about 18.23
% of the equity is held by the ADS / GDR Depositories (in respect of the bank's
American Depository Shares (ADS) and Global Depository Receipts (GDR)
Issues). 33.06 % of the equity is held by Foreign Institutional Investors (FIIs)
and the Bank has 5,32,368 shareholders.

The shares are listed on the BSE Limited and The National Stock Exchange of
India Limited. The Bank's American Depository Shares (ADS) are listed on the
New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's
Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange
under ISIN No US40415F2002.

DISTRIBUTION NETWORK

HDFC Bank is headquartered in Mumbai. As of March 31, 2018, the Bank's

distribution network was at 4,787 branches across 2,691 cities. All branches
are linked online on a real-time basis. Customers across India are also serviced
through multiple delivery channels such as Phone Banking, Net Banking,
Mobile Banking, and SMS based banking. The Bank's expansion plans take
into account the need to have a presence in all major industrial and commercial
centers, where its corporate customers are located, as well as the need to build
a strong retail customer base for both deposits and loan products. Being a
clearing / settlement bank to various leading stock exchanges, the Bank has
branches in centres where the NSE / BSE have a strong and active member
base. The Bank also has a network of 12,635 ATMs across India. HDFC Bank's
ATM network can be accessed by all domestic and international Visa /
MasterCard, Visa Electron / Maestro, Plus / Cirrus and American Express
Credit / Charge cardholders.network.

42
TECHNOLOGY

HDFC Bank operates in a highly automated environment in terms of information

technology and communication systems. All the bank’s branches have online
connectivity, which enables the bank to offer speedy funds transfer facilities to
its customers. Multi-branch access is also provided to retail customers through
the branch network and Automated Teller Machines (ATMs).

In terms of core banking software, the Corporate Banking business is

supported by Flexcube, while the Retail Banking business by Finware, both
from i-flex Solutions Ltd. The systems are open, scaleable and web-enabled.

BUSINESSES

HDFC Bank caters to a wide range of banking services covering commercial

and investment banking on the wholesale side and transactional / branch
banking on the retail side. The bank has three key business segments:

 Wholesale Banking

The Bank's target market is primarily large, blue-chip manufacturing companies

in the Indian corporate sector and to a lesser extent, small & mid-sized
corporates and agri-based businesses. For these customers, the Bank provides
a wide range of commercial and transactional banking services, including
working capital finance, trade services, transactional services, cash
management, etc. The bank is also a leading provider of structured solutions,
which combine cash management services with vendor and distributor finance
for facilitating superior supply chain management for its corporate customers.
Based on its superior product delivery / service levels and strong customer
orientation, the Bank has made significant inroads into the banking consortia of
a number of leading Indian corporates including multinationals, companies from
the domestic business houses and prime public sector companies. It is
recognised as a leading provider of cash management and transactional
banking solutions to corporate customers, mutual funds, stock exchange
members and banks.

43
 Treasury

Within this business, the bank has three main product areas - Foreign
Exchange and Derivatives, Local Currency Money Market & Debt Securities,
and Equities. With the liberalisation of the financial markets in India, corporates
need more sophisticated risk management information, advice and product
structures. These and fine pricing on various treasury products are provided
through the bank's Treasury team. To comply with statutory reserve
requirements, the bank is required to hold 25% of its deposits in government
securities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio.

 Retail Banking

The objective of the Retail Bank is to provide its target market customers a full
range of financial products and banking services, giving the customer a one-
stop window for all his/her banking requirements. The products are backed by
world-class service and delivered to customers through the growing branch
network, as well as through alternative delivery channels like ATMs, Phone
Banking, NetBanking and Mobile Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC
Bank Plus and the Investment Advisory Services programs have been designed
keeping in mind needs of customers who seek distinct financial solutions,
information and advice on various investment avenues. The Bank also has a
wide array of retail loan products including Auto Loans, Loans against
marketable securities, Personal Loans and Loans for Two-wheelers. It is also
a leading provider of Depository Participant (DP) services for retail customers,
providing customers the facility to hold their investments in electronic form.

HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the MasterCard Maestro
debit card as well. The Bank launched its credit card business in late 2001.

44
CREDIT RATING

HDFC Bank has its deposit programmes rated by two rating agencies - Credit
Analysis & Research Limited. (CARE) and Fitch Ratings India Private Limited.
The bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple
A] by CARE, which represents instruments considered to be "of the best quality,
carrying negligible investment risk".

CORPORATE GOVERNANCE RATING

The bank was one of the first four companies, which subjected itself to a
Corporate Governance and Value Creation (GVC) rating by the rating agency,
The Credit Rating Information Services of India Limited (CRISIL). The rating
provides an independent assessment of an entity's current performance and an
expectation on its "balanced value creation and corporate governance
practices" in future. The bank was assigned a 'CRISIL GVC Level 1' rating in
January 2007 which indicates that the bank's capability with respect to wealth
creation for all its stakeholders while adopting sound corporate governance
practices is the highest

AWARDS AND ACCOLADES

Over the years, the Bank has received recognition and awards from several
leading organizations and publications, both domestic and international.

Some important awards that the Bank won:

NABARD Award forBest Bank in JLG-Bank Linkage programme in Assam,

Business Today - KPMG India's Best Bank, Best CEO Award - Mr. Aditya Puri,
National Payments Excellence Awards 2015, IDC Insights Award 2015, IDRBT
Banking Technology Excellence Awards 2014-15, Best Bank Award for Cyber
Security Risk Management among Large Banks and many more.

MANAGEMENT

The Bank's Board of Directors is composed of eminent individuals with a wealth

of experience in public policy, administration, industry and commercial banking.
Senior executives representing HDFC are also on the Board. Senior banking
professionals with substantial experience in India and abroad head various

45
businesses and functions and report to the Managing Director. The following
being organogram of HDFC Bank, Hirabaug Branch, Surat.

Managing Director
Mr. Aditya Puri

Country Head Retail Banking

Mr. Navin Puri

Branch Banking Head

Mr. Thompson Josh

Circle Head
Mr. Manoj Mistry

Cluster Head
Mr. Manhar Karanjiya

Branch Manager
Mr. Maulik Shah

Personal Banker Authoriser Relationship Manager

Mr. Piyush Gandhi Mr. Sudhir

Teller Authoriser Assistant Branch Manager

Ms. Rajvi Tilara
Mr. Praful Panda

Current Account Relationship Manager Personal Banker

Mr. Abhishekh Shukla Mr.

46
SWOT ANALYSIS OF HDFC BANK
SWOT analysis is a vital strategic planning tool that is used by company's
managers to do a situational analysis of the firm .

 STRENGTHS

HDFC Bank has franchise strength and market recognition in India and abroad.
HDFC bank is the second largest private banking sector in India having 2,201
branches and 7,110 ATM’s. It is located in 1,174 cities in India and has more
than 800 locations to serve customers through Telephone banking.

The bank’s ATM card is compatible with all domestic and international
Visa/Master card, Visa Electron/ Maestro, Plus/cirus and American Express.
This is one reason for HDFC cards to be the most preferred card for shopping
and online transactions

HDFC bank has the high degree of customer satisfaction when compared to
other private banks. The attrition rate in HDFC is low and it is one of the best
places to work in private banking sector.

HDFC has lots of awards and recognition, it has received ‘Best Bank’ award
from various financial rating institutions like Dun and Bradstreet, Financial
express, Euromoney awards for excellence, Finance Asia country awards etc

HDFC has good financial advisors in terms of guiding customers towards right
investments. It has diversified revenue streams checking financial performance
volatility. Its increasing capital strength provides higher risk tolerance to the
company.

 WEAKNESSES

HDFC bank doesn’t have strong presence in Rural areas, where as ICICI bank
its direct competitor is expanding in rural market. HDFC cannot enjoy first
mover advantage in rural areas. Rural people are hard core loyals in terms of
banking services.

HDFC lacks in aggressive marketing strategies like ICICI. The bank focuses
mostly on high end clients and some of the bank’s product categories lack in
performance and doesn’t have reach in the market.

47
The share prices of HDFC are often fluctuating causing uncertainty for the
investors. A relative lack of scale hampers competitive strengths of the
company. HDFC Bank lacks scale to compete with certain domestic peers.
Although, it has nation-wide presence in India, however, the number of its
branches is far less than that of State Bank of India and ICICI Bank Limited.

 OPPORTUNITIES

HDFC bank has better asset quality parameters over government banks, hence
the profit growth is likely to increase.

The companies in large and SME are growing at very fast pace. HDFC has
good reputation in terms of maintaining corporate salary accounts. HDFC bank
has improved it’s bad debts portfolio and the recovery of bad debts are high
when compared to government banks.

HDFC has very good opportunities abroad. There is a greater scope for
acquisitions and strategic alliances due to strong financial position. Linking
government subsidies to Unique Identification Authority of India or Aadhar
project likely to expand customer base. There are increasing government
initiatives and support for Indian banking industry with the growing Indian
financial services sector.

 THREATS

HDFC’s nonperforming assets (NPA) increased from 0.18 % to 0.20%. Though

it is a slight variation it’s not a good sign for the financial health of the bank. The
non banking financial companies and new age banks are increasing in India.

The HDFC is not able to expand its market share as ICICI imposes major threat
to it.

The government banks are trying to modernize to compete with private banks.
RBI has opened up to 74% for foreign banks to invest in Indian market which
again will pose a serious threat. There are weakening economic prospects in
India.Competition in Indian banking sector is becoming intense as new players
with greater financial muscle are entering. For instance, National Australia Bank
by opening its branch in Mumbai, India. The bank would not only support

48
existing institutional corporate and business banking customers operating or
trading with India but would also act as a mediator for Indian clients who want
to expand or invest in Australia or New Zealand.

Also, deregulation of savings accounts interest rates could affect deposit growth
and margins.

HUMAN RESOURCE POLICIES AND PRACTICES AT HDFC BANK

HDFC Bank believes that their employees are their most valuable asset. They
make an effort to develop the abilities and productivity of our staff. They
encourage a work culture, foster relationship with them at every level in the
organization. and make them to express their views and share their ideas to
bring about improvements in the organization towards the achievement of the
common goal described in their vision and mission statements.

Their employees take pride in their work as they are given due respect, and by
being empathetic and sensitive to each others needs. They could make every
endeavor to foster a productive culture through out the Bank.
The Bank is a team –focused organization that is characterized by

 Collaborative relationships;
 Approachable and open communications;
 Courteous ,efficient and effective services; and
 Flexibility and fairness

The purpose of their HR policy is to ensure that the human resources values
framework incorporates four key principles, which are;

1. Communication
 Bank’s management and staff will promote an environment where the
principles of open communication will be upheld. For the purpose of this
policy ,open communication encapsulates the idea of;
 Mutual recognition an respect at all levels;
 Freedom to express one’s views and a commitment to resolving any
interpersonal conflict;

49
 Promotion and development of two way communication
incorporating constructive feedback;
 Appropriate dissemination of dissemination of information.
2. Opportunity
Bank’s management and staff will promote a work environment that provides
opportunity for;
 Improved work practices;
 Support of individuals in pursuit of personal and career growth and
 Encouragement of self development by recognizing and using individual
strengths.
3. Innovation
Bank’s management and staff will promote an environment to encourage
initiative leading to flexibility and growth. This philosophy will facilitate
improved work practices, which meet organizational needs through the
challenging of preconceived ideas.
4. Individual
Bank’s management and staff acknowledge the importance of each
individual’s contribution to the work of the Bank by recognizing their qualities ,
strengths and abilities and sharing these across the Bank.
Following are the roles and responsibilities of employees at various levels in
HDFC Bank with respect to management of Human Resources in the
organisation.

Board of Directors
The Board will endeavor to provide;
 direction and support to management and staff to attract, retain,
motivate and develop quality staff in order to achieve the Bank’s
goals;
 assistance to management and staff to focus on the performance
and productivity of individuals, teams and workgroups whilst
meeting the Bank’s objectives;
 remuneration under the current contract of employment and other
employment conditions consistent with legislative requirements.

50
 HR Department
HR Department is responsible for;
 regular review and development of human resource management practices;
 periodic review of the work priorities to determine skill requirements
needed to meet the Bank’s strategic plan;
 determination of an organizational structure that will facilitate and improve
teamwork; and
 appointment and promotion of staff on merit and to ensure that treatment of
all employees is fair and equitable.
Managers
Managers are responsible for;
 providing development opportunities for staff that relate to performance in
order to achieve organizational and individual needs;
 agreed performance standards for staff and assistance with the
achievement of identified goals;
 regular review and improve where necessary human resource structures and
processes in line with Board directions. This will facilitate best practice, work
flexibility and the ability to adapt quickly to changing needs;
 constructive feedback with an aim to improve work practices and relationships;
and
 establishment and encouragement of team development

Corporate Management
Corporate Management is responsible for:
 Counselling for career path development to the respective employees.
 provide necessary guidelines and directions to review and
improve the skills of the employees to the respective Managers.
 providing coaching to the Managers to enable them to understand the
hidden talents of the employees.

51
MARKETING FUNCTIONS AT HDFC BANK

The Bank has build core banking infrastructure which is supported by Flexcube
for corporate banking business and i-flex solutions Ltd. for Retail Banking
business. For catering to the needs of High net worth Individuals, the Bank has
preferred program as HDFC Bank Plus. Wealth management investment
advisory services cater to the distinct financial needs and investment avenues
along with advisory services. The marketing strategy of bank includes following
aspects:

 Segmentation, targeting, positioning in the Marketing strategy of HDFC

Bank

HDFC has segmented the customers on the basis of income group like
formulating the structure of Classic, preferred and imperial and also using
customer financial needs to segment the market like those of in need of general
banking services (Retail & corporate banking) and those customers who are
HNI’s and are in need of investment advisory services.

Bank has the majority of its customer base who are tech-savvy, Young and are
more inclined to products coupled with technology. Product & services offered
by the company are targeted to salaried class, entrepreneurs, and High net
worth Individuals (HNI’s).

Bank has positioned itself as a preferred provider of financial services by

incorporating technological advancement in its core businesses.

 Competitive advantage in the Marketing strategy of HDFC Bank

Brand visibility:

Reaching out to nook & corner of the country has helped the brand in increasing
its visibility in the market is not only metro or urban but also in the suburban
centers.

Subsidiaries:

The bank leverage on its other subsidiaries like Housing & Development
Finance Corporation Ltd. which is known for extending housing loans, HDFC
Mutual Fund for Mutual fund schemes, HDFC ERGO General Insurance for

52
selling general insurance products, HDFC Life for Life insurance, HDFC Credila
for education loan. Bank earns commission/ fees on selling/distributing these
products through its network of branches.

 BCG Matrix in the Marketing strategy of HDFC Bank

It’s Retail Banking Vertical stood with Retail Advances at 5, 06,843 Crores and
Retail Deposit 2, 95,161 crores and commands high market share in the
Banking industry. The wholesale banking vertical of the Bank is equally
performing with the activities such as Investment banking, cash management,
and Foreign Exchange. The other segments in which HDFC deals are
International Banking and treasury.

Out of these strategic businesses Retail Banking and Wholesale banking

command a handsome market share and is, therefore, are Stars while other
two are question marks in the BCG matrix.

 Distribution strategy in the Marketing strategy of HDFC Bank

Being a Tech Savvy commercial banking company, HDFC bank has

decentralized it is most of the business operations by making it accessible and
user-friendly online interface.

The bank have a physical distribution network of 4750+ branches in more than
2600 cities with around 12500 ATM’s located on onshore and offshore
locations. Bank has recently introduced “EVA” an artificial intelligence based
Chatbot assistant which helps the customers in providing product information
and respond to queries of the customers on the real-time basis.

In addition, bank facilitates its services through various alternate delivery

channels such as like mobile banking, net-banking, SMS banking, phone
banking, ATMs etc.

 Brand equity in the Marketing strategy of HDFC Bank

HDFC Bank has been ranked 258th in the list of Global 2000 companies and
234th in the Forbes magazine list of Growth companies. The Bank has Market
Capitalization of $ 57.4 billion as of May 2017.

53
It has won several awards & accolades for the astounding technological
advancement & innovation, such as Dun & Bradstreet BFSI Awards 2018,
Asia’s 13th Fab Company in list of 50 companies (by Forbes), HDFC Bank
bagged place in top 5 Companies That Have Shaped Asia & the World as per
Forbes in 2017, IBA Banking Technology Awards 2017, Leading BFSI company
award by Dun & Bradstreet in 2017 and many others.

 Competitive analysis in the Marketing strategy of HDFC Bank

HDFC Bank has been offering entire spectrum of financial products like
personal banking, SME loans, Agri Loans, NRI services, Wholesale banking
through technology driven mediums supported by smartphones and tablets
which is not only helping the customers in conveniently consuming the services
but it is also reducing the cost of distribution of the products & services by the
Bank.

To reach out to the millennial customer’s bank has forayed into social media
banking through HDFC Bank OnChat through which customers and non-
customers can complete e-commerce transactions through FB messenger
which is supported by Techbins solutions Pvt. Ltd.

The bank competes with banking & NBFC financial institutions such as ICICI
Bank, Axis Banks, PSU Banks like PNB, SBI, Canara Bank, NBFC’s like
Indiabulls, Murugappa Group etc.

 Market analysis in the Marketing strategy of HDFC Bank

Banking industry has been going through the NPA (Non performing assets)
turmoil and to overcome the challenges various automation of processes such
as loan syndication, Customer loan life cycle, automation of trade finances,
Chatbot for customer queries, HDFC interactive humanoid “IRA” technology
demonstrator with artificial intelligence & robotics are some of the initiatives
taken by HDFC Bank which are helping it in emerging as a pioneer in the
Banking Industry.

54
 Customer analysis in the Marketing strategy of HDFC Bank

HDFC bank has segregated it customers based on MAB (Monthly average

balance)/QAB (Quarterly average balance). It has categorized it as General,
Classic, Preferred and Imperia.

General customers are those who do day to day banking activities and have to
maintain minimum required balance as prescribed by the Bank time to time.
Classic is the customers maintaining min MAB of 1 Lakh in the savings account
or 5 Lakh in the combination of Savings Accounts and Fixed Deposit. Preferred
customers are those maintaining (MAB) of 1 Lakh in savings account or 5 Lakh
QAB in current or 15 lakh in combination of Savings Accounts, Fixed Deposit
and current account while Imperia are those maintaining (MAB) of 10 Lakh in
savings account or 15 Lakh QAB in current or 15 lakh in combination of Savings
Accounts, Fixed Deposit.

 Marketing mix of HDFC

Thoughtful marketing, introduction of good financial products, aggressive

expansion and most importantly, excellent service is the reason that HDFC is
amongst the topmost banks of India.

The marketing mix is very much responsible for the growth of the company and
this marketing mix has made it one of the most coveted banks in India.

 Product in the marketing mix of HDFC

HDFC offers mainly banking services, but there are many financial products
which it offers along with banking. HDFC ergo, HDFC life and HDFC home
loans are some of the products. In total, the financial product portfolio of HDFC
is huge. The USP of HDFC is that it designs competitive products which
guarantees great response from the market and an almost unlimited longevity
for business life. In terms of a banking, its product are its services, like
netbanking and ATM, and being a major bank, HDFC has planned its products
in proportion with the ever increasing customer’s needs, demands and
expectations.

55
Apart from offering accounts, it has carried forward its namesake of being a
housing finance corporation, and offers large variety of loans for purchasing
houses, construction, re-construction, buying housing land, apartments etc.
with maximum loan cover of up to 85%, and maximum repayment period of up
to 20 years which is a major propulsion factor for it as a bank. Being into the
services business, the major support for the product lies in its distribution. Thus,
after the product, the place and distribution of HDFC bank services is most
important for the success of HDFC.

 Place in the marketing mix of HDFC

The bank has an amazing 3488 branches in 2231 cities across the world. It is
headquartered in Mumbai, India. HDFC bank has 11,426 ATM’s across India.
Furthermore, the banks services are delivered not only through ATMs or
branches, but also through an excellent netbanking service, phone banking,
mobile banking and SMS banking. HDFC ensures that it has a presence so that
it can concentrate on its huge commercial clientele along with being present for
its retail clients. Banking is an intricate function as it includes certain confidential
and security invoking processes that are to be carried on a regular basis, and
they are done with minimal margin of errors, that cannot function in an unsafe
environment. To make sure that all the daily confidential processes are duly
met, placing these facilities becomes a very thoughtful function in itself, and
HDFC has overcome these challenges by placing its operational premises at
some of the most easily accessible locations across cities and towns, that are
made available to its large number of account holders at strategically planned
branches.

 Price in the marketing mix of HDFC

HDFC is known to hold major market share in the banking sector of India, and
this is because of reasonable yet profit invoking price structure for its services,
which is justified to an extent, as every corporation has to sustain inflation and
overcome market hurdles. HDFC bank has premium competitive pricing. When
compared with national and PSU bank, the pricing is premium, because the
minimum amount required to open an account is high. But at the same time,
there are many rules, like home load interest, which are as per RBI guidelines

56
and are competitive in nature. Thus, prices for these products are in control by
the market and not by the corporation. It provides reasonable loans at maximum
repayment tenure and at par interest rates to both old and new customers.
Apart from regular charges, it does not charge anything for miscellaneous and
associated functions such as cheque replacement, advance loan repayment,
take over etc. that justifies a lot. Thus, in some places HDFC is premium priced,
whereas in others it is evenly priced as per competition.

 Promotion in the marketing mix of HDFC

From the very beginning, HDFC has planned and executed its promotional
activities in a manner that has suited its service catalogue, and has maintained
a 360 degree approach in planning its commercials, campaigns and marketing
activities in general. These promotional activities include variety of subtle
television commercials with a message, a recent and innovative method of
promotion by placing signboards and milestones in the rural portions of country
in local/native language, and placing “No Parking” boards outside residential
and commercial buildings, that has promoted its connection with the masses
and making prospective client base associated with the name i.e. HDFC. HDFC
uses undifferentiated marketing techniques, it mainly focuses on introducing its
financial products to everyone. Because banking in general, is a mass market
product. However, for the HNI customers, well trained relationship managers,
wealth managers are used to retain the HNI clients with HDFC. Thus, this
service too is a promotional product for HDFC. At the end, the promotions are
focused on one thing only – to spread the name of HDFC far and wide.

57
 LITERATURE REVIEW
Sonia Sharma made a detailed comparative study on E-banking v/s traditional
banking and the paper was published in International Journal of Applied
Research (2016). The paper discusses the e-banking products and facilities
with its benefits and drawbacks and its comparison with traditional banking.
Suggestions like traditional model should be combined with online banking,
banks should attempt to serve a mass, etc. were provided to formulate
operating atmosphere for e-banks.

International Journal of Advanced Research in Management and Social

Sciences presented a study on customer preference towards E-banking service
with special reference to Tiruchirappalli district (Vol.3, No. 6, June 2014) by A.
Meharaj Banu and Dr. N. Shaik Mohamed concluded that education and
awareness campaigns are key focus areas which financial institutions should
continuously invest in. information should be easily retrievable and
communicated in a manner that makes sense to a wide customer base. Banks
would do well to realize their central role in enabling this transformation and
should take conscious recourse to relentless adoption of technology. And the
goal should be not just to satisfy but to engage with customers and enrich their
experience.

In Sai Om Journal of Commerce & Management (Volume 2, Issue 3, March

2015), Dr. Jaideo Lanjewar found that e-banking is one of the major
technologies currently being used in all the banking industry and the customer
satisfaction which leads to customer retention is an important element in
banking strategy. His study focused on E-banking and customer satisfaction.
The study aimed at assessing e-banking strategies on customer’s satisfaction
in banking industry. The electronic banking has improved the bank customer
relationship by rendering effective service and customer can now have access
to their accounts outside working hours to make withdrawal at the click of a
button. The study recommended that much need to be done in the area of
creating awareness about E-banking products and services.

58
Burr describes electronic banking as an electronic connection between the
bank and the customer in order to prepare, manage and control financial
transaction. Lustik described it as a variety of the following platforms: internet
banking, telephone banking, TV-based banking, mobile banking and PC
banking. Its introduction has increased the potential of business to attain
greater productivity and profitability, as trading and transaction, which would be
carried out via communication network, would be a lot faster and distance would
no longer be barrier to effective communication.

International Journal Of Innovative Research in Science, Engineering and

Technology (Volume 4, Issue 10, October 2015) Dr. Hitesh Kapoor observed
that there is a remarkable potential internet banking in India. Although India
possesses competitive advantage in IT-enabled services in banking industry,
yet these services need to be marketed in a systematic manner. The study is
an attempt to identify the factors that contribute to customer satisfaction with
internet banking services. Dimensions of service quality have shown more or
less a great impact on customer satisfaction. It has been reported in study that
customers were satisfied with internet banking services rendered by their
respective banks.

Dr. Pooja Tiwari and Dr. Shobhika Tyagi conducted study on consumer
preference towards e-banking in Ghaziabad and the paper was presented in
International Journal of Engineering and Technology, Management and Applied
Sciences (2017). Primary and secondary data was collected and analysed
using many statistical tools and it was concluded that majority of customers are
aware about various services provided by bank but some new initiatives needs
to be taken to further educate customers.

Dr. S. Anthony Rahul Golden studied user’s preference towards traditional

banking v/s e-banking and the paper was published in International Journal of
Computational Research and Development (2016). The study explored
reasons behind user’s preference. It was found that people are very close to
technology and prefer online banking. A significant difference between age,

59
occupation and educational qualification and one's preference for choosing
mode of banking was found through this study.

A comparative study on e-banking was conducted by Jiaqin Yang et all to

enlighten the issues in e-banking services among young consumers. It was
suggested to improve and promote e-banking services more aggressively to
increase general awareness of the same. Also, state owned banks should be
encouraged for providing better services to the customers was suggested at
the end of the study.

Shilpan Vyas studied the impact of e-banking on traditional banking services. It

was found that e-banking are much cheaper than branch banking. E-banks
being easy to set-up, calls lot of new entrants. Traditional banks will find difficult
to evolve. Though, physical banks are starting to fight back and e-banks need
interface to interface communicate with the customers and hence, there is a
need for physical banking and bank branches also.

A paper by Chandana R Unnithan and Paula MC Swatman studied Online

banking v/s Bricks and mortar or a hybrid model with preliminary investigation
of Australian and Indian banks. With deregulation, an increasing number of
online banks are threatening the market share of bricks and mortar banks.
Hence, with the broad review, the most suitable model for long term
sustainability called click and mortar model for banks was suggested.
Nilesh V and Mane Baban studied Indian banking sector and its performance
(2014). The banking system is dominated by nationalised banks and the
performance is closely linked to economy. It was found that India requires right
blend of risk capital and long term resources for corporate to choose
appropriate mix of debt and equity. Also, it was found that different problems
are increasing because of downfall of money market.

Usha Rani and V. Vasudha studied customer perception towards E-banking

services- Post demonetization. It studied that convenience, 24*7 services, low
cost, perceived ease of use, trust, effective services plays an important role in
usage of E-banking services. At the same time, many initiatives need to be

60
taken for educating illiterate people, since they face problem in using E-
banking.

Manish kumar Dubey and Pratibha Deshmukh studied E-banking: Customer

perception in India. The paper here explored how perceived risk can be reduced
so that customer willingness to adopt E-banking can be enhanced. It was also
found that customers does not accept the changes in day or month but once
the option is available to them, they start using E-banking. Hence, Indian banks
should offer E-banking services so that the customers get opportunity to use E-
banking system.

Divya Singhal and V. Padhmanabham studied customer perception towards

Internet banking and identified the major contributing factors. Factor analysis
revealed that utility request, security, utility transactions, ticket booking and fund
transfers are the major factors. 50% of the respondents agreed that E-banking
is convenient and flexible and is increasingly becoming nice to have service
than need to have service.

L. A. Razia and R. Kavitha did factor analysis to find customer preference

towards E-banking in Coimbatore city. Many factors including trust, user
friendly, greivance handling, easy login, reputation, prompt services, etc. has
been top priority of the customers. Many other factors over and above these
factors encourage the customers to prefer electronic banking.

A study of digital banking facilities was conducted by Sahadeb Sukla Das

(2018) where it was found that banking is facing unprecedented competition
from non-traditional banking institutions. It was also found that many face
problem of network failure, some error in operation, security and authentication.
It was suggested to install system supported software and firewalls for highest
security by banks according to customers needs. Many other preventive
measures were also suggested.

A study on customer preference towards retail credit and preferred channels of

banking was conducted by Dr. M. Sudha and M. Jyothsana. Through survey

61
method data was gathered from 160 respondents and were analyzed. The
major outcomes were low cost of loans and low fees, satisfactory customer
service and internet banking facility. It was concluded that banks should provide
competitive interest rates, it should have many new channels for customers
ease and plan promotional activities for increasing awareness about the same
to the customers.

Dr. C. Yuvasubramaniyan studied customer perception of e-banking services

towards selected public and private sector banks. The study evaluated the
factors influencing customer satisfaction, preference, problems of e-banking
and the future of e-banking. It was found that delivery of financial services,
availability of banking, customers feedback and continuous improvement
should be the areas of concern for the banking industry. And it was suggested
that there is a need for total satisfaction with regard to all qualities of nature of
e-banking and other mode of services. Security, should be given special
emphasis to promote e-banking services among customers.

Mark Durkin studied retail bank customer preferences: personal and remote
interaction. The study by using questionnaire examined perception of retail
bank customers regarding use of remote delivery channels and extent to which
they still value traditional branch based face to face interaction. It was found
that, they still place a greater emphasis on face to face contact. Also, the study
found that banks should understand the customer attitude towards alternative
delivery channels and educate them about the same.

Jim Maurus studied that consumers prefer digital banking capabilities over
branch proximity in U. S. The research found that segments that placed the
highest importance on branches shrunk in the past year and those with lowest
branch attachement grew. It was found that traditional definition of convenience
which meant branch proximity has changed with acceptance of online and
mobile banking. The study proclaims that consumers want branch access and
dont want their favourite branch closed. Though, importance of branch banking
in relation to digital capabilities has seen a continuous decline.

62
 RESEARCH METHODOLOGY

Research methodology is the specific procedure or technique used to identify,

select, process, and analyse information about a topic. In a research paper, the
methodology section allows the reader to critically evaluate a study’s overall
validity and reliability. The methodology section answers two main questions of
how was the data collected or generated and how was it analysed.

It is a systematic way to solve the research problem. It is the process used to

collect information and data for the purpose of making business decisions. The
methodology may include publication research, interviews, surveys and other
research techniques, and could include both present and historical information.

PROBLEM STATEMENT
Increased development and advancement has also led the banks to think of
much better services given to their customers than previous one. As today we
are in the technological world, the technology also plays a vital role in the
banking sector. With the advancement pf technology, now the banking sector
has very modern and advanced services, i.e. ATM banking, Mobile banking,
Telebanking, Mobile wallet, Online banking and E-banking. Technology has
both advantages and disadvantages. Thus, it is a huge need to know the
preference of banking customers towards online banking and traditional or
physical or say branch banking. As todays banking sector are focusing profit
margins, they have to provide better service to each and every customer. Thus,
for the purpose of survival, banks have to make much concern and care for
better services to their customers.

RESEARCH OBJECTIVES
This research study is being conducted for the following objectives
- to study consumers preference towards physical or branch banking
- to study consumers preference towards electronic or digital banking
- to compare the consumers preferences towards physical and digital banking
- to study awareness and frequency of usage of physical and digital banking

63
RESEARCH DESIGN:
The research design refers to the overall strategy that you choose to integrate
the different components of the study in a coherent and logical way, thereby,
ensuring you will effectively address the research problem. It constitutes the
blueprint for the collection, measurement, and analysis of data.

We use descriptive, exploratory and causal research design in our studies. This
study used a descriptive research design. Descriptive research design is also
called statistical research design which is a process of collecting data in order
to answer the questions of the current status of the subject under study and
hence works consider propriety for this study. The main goal of this type of
research is to describe the data and characteristics about what is being studied.
It is extensively used describe behavior, attitude, characteristics and values.
The idea behind this type if research is to study frequencies, averages and
other statistical calculations. Although this research is highly accurate, it does
not gather the causes behind a situation. It is used to obtain information
concerning the current status of the phenomena to describe “what exists” with
respect to variables or conditions in a situation. Thus, this being a suitable
design for this research.

SOURCE OF DATA
Primary data is a term for data collected at source. This type of information is
obtained directly from first hand sources by means of surveys, observations
and experimentations and is not subjected to any processing or manipulation.
While secondary data refers to data collected by someone other than the user.
Common sources of secondary data include various published or unpublished
data, books, magazines, newspapers, trade journalsetc. Here, in this study
primary data was collected through a structured questionnaire. Structured
questionnaire was used to collect the responses because they are quantitative
method of research. Secondary data was collected from various research
papers, articles, case studies and websites.

64
POPULATION
A research population is generally a large collection of individuals or objects
that is the main focus of a scientific query. It is for the benefit of population that
researches are done. Here our research population includes all the new
customers of HDFC bank in Surat who are connected with HDFC bank since
last two months. However, due to the large size of populations, one often
cannot test every individual in the population because it is too expensive and
time consuming. This is why researchers rely on sampling techniques.

SAMPLING
This study has a sample of 240 respondents as customers of HDFC bank and
the study is based on non-random sampling. The researcher must decide way
of selecting a sample or what is popularly known as sample design. In other
words a sample design is a definite plan determined before any data are
actually collected for obtaining a sample from a given population. Sampling
can either be probability or non-probability sampling. Here, in this study non-
probability sampling is used. Conveninent sampling being the method of
selecting a sample. 240 respondents were conveniently selected for the
research purpose.

DATA COLLECTION
It is the process of gathering and measuring information on targeted variables
in an established systematic fashion, which then enables one to answer
relevant questions and evaluate outcomes. There are 3 types of data collection
types namely surveys, interviews and focus groups. Among these types, survey
as a data collection type has been employed to collect the data. And structured
questionnaire is an instrument used to collect the data.

DATA ANALYSIS
Data analysis is the collection and organization of data so that a researcher can
come to a conclusion. It allows one to answer questions, solve problems and
derive important information. It helps us in arriving at effective conclusions and
suggestions for the stated research problem. Analysis of data is a process of

65
inspecting, cleaning, transforming and modeling data with goal of discovering
useful information, suggesting conclusions and supporting decision making.
The data collected was analyzed using various tools and techniques including
Microsoft Excel and SPSS.
Various hypothesis were tested and many tests such as Mann Whitney test,
Kruskal Wallis test, Wilcoxon signed rank test, Spearman’s Rank correlation
were used to find and conclude the results.

LIMITATIONS
In order to get more grounded data and better view of the customers knowledge
and awareness and preference towards banking services of HDFC bank, the
sample size selected during the present survey could have been increased.
Also, another limitation of this study is that the data was collected only within 1
month time period, which limits the scope of study.
The inferences apply only to the customers of HDFC Bank, Surat and not to all
the branches of HDFC bank. Hence, the inferences cannot be generalized for
all the branches across each and every city of the nation.

SCOPE OF FUTURE STUDY

The same study can be extended to all the branches of HDFC bank across the
nation and one can find out the preference of the customers of HDFC bank
among all the cities and state.
The perception and expectation of the customers have undergone a vast
change with the availability of retail banking services at their doorstep with the
help of technology and expects to complete all their banking transactions from
a single place. Hence, one can also extend the research on finding the
customer's perception, customer's attitude and satisfaction towards digital and
physical banking.

The study can be carried out to find customers awareness towards digital
banking in all the different banks across the nation. Simiarly, one can study
customers attitude, preference and satisfaction towards branch and electronic
banking across different banks in the city, state and nation.

66
 DATA ANALYSIS

1. Duration of holding account by the customers of HDFC Bank

Since how long customers

are having an account with
HDFC bank Frequency Percentage
Less than a week 50 20.8
1-2 weeks 73 30.4
2-4 weeks 41 17.1
1-2 months 76 31.7
Total 240 100.0

Following is the chart representing the duration of holding an account by the

new customers of the HDFC Bank, Surat :

35.0 31.7
30.4
30.0

25.0 20.8
17.1
20.0

15.0

10.0

5.0

0.0
Less than a week 1-2 weeks 2-4 weeks 1-2 months

INTERPRETATION:

The above table and graph is depicting that 20.8% of the new customers who
were approached are having an account with HDFC Bank from a week, which
means from the last week of June month. Similarly, almost 31.7% of the
respondents are having an account with HDFC Bank from last 1 to 2 months,
i.e. from the month of May and June. The table above also depicts the same in
terms of frequency.

67
 2. Preference of the new customers towards Mode of banking

Mode of banking 5 4 3 2 1

Physical Banking 41 102 58 27 12

Digital Banking 14 34 60 64 68

102

68
64
58 60

41
34
27
12 14

PHYSICAL BANKING DIGITAL BANKING

Highly prefered Series2 Series3 Series4 Not at all prefered

INTERPRETATION:

The above chart and the table depicts new customers preference
towards their willingness and preference for the mode of banking.
The data labels depicts the frequency of respondents and their level
of preference to use the physical and digital mode of banking. 102
respondents prefer to use physical banking out of 240 respondents.
In the similar manner it can also be found that 14 respondents very
strongly and highly prefer digital banking to avail the banking
services. And 34 new customers prefer digital banking.

68
 Mann – Whitney test

This test evaluates whether two groups of cases have equal means
on some outcome variable. Here, we are trying to evaluate
preference for the mode of banking on the basis of gender.

H0: There is no significant difference between males’ and females’

preference for the mode of banking.

H1: There is significant difference between males’ and females’

preference for the mode of banking.

Test Statistics
Mann- Wilcoxon Asymp. Sig.
Z
Whitney U W (2-tailed)
Preference for the
4104.000 23805.000 -0.139 0.889
physical banking
Preference for the
3951.000 4854.000 -0.523 0.601
digital banking

Mean Sum of
Gender N
Rank Ranks
Male 198 120.23 23805.00
Preference for the physical
Female 42 121.79 5115.00
banking
Total 240
Male 198 121.55 24066.00
Preference for the digital
Female 42 115.57 4854.00
banking
Total 240

69
 INTERPRETATION:

The above test shows that the significant value for preference towards physical
banking is 0.889 which is greater than 0.05 and hence the H0 gets accepted
which means that there is no significant difference between preference for
physical banking on the basis of gender. Similarly, the preference for digital
banking do not vary significantly on the basis of gender. There is no wider
variation between mean ranks too.

2. Awareness of respondents about Physical banking and

Digital banking

Services 5 4 3 2 1
Cash deposits 109 69 48 10 4
Cash withdrawal 96 77 51 11 5
Cheque deposits 89 77 49 19 5
Investment options 40 79 51 45 25
ATM services 71 82 49 30 8
Mobile banking services 59 74 59 33 15
Telephone banking services 32 66 50 53 39
Internet banking services 61 71 57 36 15

70
 50

45

40

35

30

25

20

15

10

0
Cash Cash Cheque Investment ATM services Mobile Telephone Internet
deposits withdrawal deposits options banking banking banking
services services services

Highly aware Series2 Series3 Series4 Not at all aware

INTERPRETATION:

The above table is showing the frequency of the respondents or say the new
customers who were approached towards their awareness on various physical
banking services and digital banking services. The graph below the table is
depicting the percentage of the new customers’ level of awareness about cash
deposits and withdrawals, Mobile banking and Internet banking, etc. It can be
generalised that most of the respondents are aware about the services, yet
those who are not aware about the same needs to catered by the banks.

4. Customers preference for various physical and digital

banking services

The following is a graph indicating the percentage of new customers’

preference level of availing various banking services through
physical banking:

71
 45 42.50 42.50
39.17 40.00
40
35 32.08 30.00
29.17 28.75
30 25.42 25.00 25.83
25
20 16.67
15
10
5
0

5 4 3 2 1

INTERPRETATION:

The above graph indicates that customers are preferring physical

banking for cash deposits and withdrawal, for checking of the
accounts, to transfer the funds and to get the bank statements.
People are preferring to visit a branch to avail each of the services.
Also, customers do not want to switch to digital banking for reporting
of losses and stopping of payments on cheque because the graph
above is indicating their preference to avail all such type of services
through physical banking.

72
  Similarly, following is a table clearly depicting the percentage of
respondents’ level of preference for various banking services to
be availed through digital banking:

Services Percentage Percentage Percentage Percentage Percentage

5 4 3 2 1
Checking accounts 27.5 24.58 29.17 10.83 7.92
and transferring funds
Purchase and sale of 12.5 12.92 21.67 19.17 12.92
foreign exchange
Cash deposits and 6.25 12.92 22.50 25.42 32.92
withdrawal
Investments 14.17 15.83 34.58 20.42 15.00
Reporting of losses 18.34 18.33 29.17 22.08 12.08
Bank statements 32.5 28.33 18.33 17.50 3.33
Third party transfers 32.92 27.92 17.50 16.25 5.42
Ordering of cheque 32.5 29.17 16.25 14.17 7.92
books
Loan applications and 16.25 20.00 36.25 18.75 8.75
transfers
Stopping of payments 11.67 15.42 34.17 25.83 12.92
on cheque
Credit card 30 30.83 17.50 12.50 9.17
application and
transactions
Debit card application 29.58 28.33 21.25 12.92 7.92
and transactions

73
Kruskal – Wallis Test:

The hypothesis that needs to be tested is as follows:

H0: There is no significant difference between customers

preference to avail following banking services through digital
medium on the basis of their educational status.

H1: There is significant difference between customers preference to

avail following banking services through digital medium on the basis
of their educational status.

Test Statisticsa,b

Kruskal- Asymp.
Wallis H df Sig.

DB-Checking accounts and transferring 28.574 4 0.000

funds
DB-Investments 13.033 4 0.011
DB-Reporting of losses 5.248 4 0.263
DB-Bank statements 17.403 4 0.002
DB-Third party transfers 21.459 4 0.000
DB-Ordering of cheque books 9.627 4 0.047
DB-Loan applications and transfers 23.965 4 0.000
DB-Credit card application and 14.501 4 0.006
transactions
DB-Debit card application and 15.286 4 0.004
transactions

74
Ranks
EDUCATIONAL STATUS N Mean Rank

Primary or less 33 90.56

DB-Checking accounts and transferring Secondary 42 101.94
funds Higher secondary 75 110.13
Graduate 74 145.28
Primary or less 33 112.71
Secondary 42 105.54
Higher secondary 75 112.89
DB-Investments
Graduate 74 129.79
Post graduate 16 168.53
Total 240
Primary or less 33 98.26
Secondary 42 132.5
Higher secondary 75 119.41
DB-Reporting of losses
Graduate 74 122.88
Post graduate 16 129
Total 240
Primary or less 33 88.14
Secondary 42 121.67
Higher secondary 75 112.81
DB-Bank statements
Graduate 74 133.15
Post graduate 16 161.75
Total 240
Primary or less 33 90.11
Secondary 42 108.48
Higher secondary 75 111.94
DB-Third party transfers
Graduate 74 141.68
Post graduate 16 156.94
Total 240
Primary or less 33 99.39
DB-Ordering of cheque books Secondary 42 112.81
Higher secondary 75 115.81

75
 Graduate 74 132.81
Post graduate 16 149.28
Total 240
Primary or less 33 103.73
Secondary 42 112.25
Higher secondary 75 105.08
DB-Loan applications and transfers
Graduate 74 134.75
Post graduate 16 183.13
Total 240
Primary or less 33 111.26
Secondary 42 96.52
Higher secondary 75 114.19
DB-Credit card application and transactions
Graduate 74 140
Post graduate 16 141.88
Total 240
Primary or less 33 112.82
Secondary 42 94.67
Higher secondary 75 114.45
DB-Debit card application and transactions
Graduate 74 141.78
Post graduate 16 134.13
Total 240

INTERPRETATION:

The above table can be interpreted on the basis of the significant value. One
can make up a different table for different services that are visible in the above
table, but as such each value is below the level of significance of 0.05, H0 fails
to get accepted. This means that H1 is accepted and there is significant
difference between customers preference for availing the digital banking
services among people belonging to various educational groups. One can find
out the difference by visualising the following table.

It can be inferred from the another table that there is difference between the
customers preference for digital banking according to their educational status.

76
If we check out the table it is visible from the mean ranks that more of graduates
and post graduates surely who might be having knowledge of digital banking,
they also will be those who know to use digital banking services via mobile or
internet banking, is more. This indicates that they have a higher preference
towards these services. Although, in case of credit and debit card applications
these is not the case.

5.1 Customers level of agreement for various benefits and

challenges of physical banking

Services Physical banking

5 4 3 2 1
It provides more options at one place. 20.8 34.2 24.2 15.4 5.4
It is easier to do banking transactions. 21.7 37.9 27.5 12.5 0.4
It is easily accessible. 21.7 40 25.8 10 2.5
It gives you quick services 19.2 32.9 25 15.4 7.5
It is less costly. 13.3 26.3 32.9 22.1 5
It offers more safety and security. 33.8 35 23.3 5.8 2.1
It allows face to face interaction. 41.3 33.3 15.8 5.8 3.8
It allows cash deposits and withdrawals. 45.4 30 14.2 7.1 3.3
It captures best of both electronic and branch 17.5 20 35.8 19.6 6.7
banking.
It is time consuming. 19.6 38.8 25.8 12.9 2.9
It does not offer better rates and terms. 10.8 18.3 34.6 32.5 3.8
It is more costlier. 7.1 14.2 40.8 30.8 7.1
It is prone to poor customer service. 5.4 19.2 28.7 40 6.7
It is more trustworthy. 12.9 47.5 29.6 6.3 3.8
It is more convenient. 14.2 48.3 27.5 5.8 4.2

77
 120
100
80
60
40
20
0

Strongly agree 4 3 2 strongly disagree

INTERPRETATION:

The above table and graph is depicting the level of the customers agreement
towards various benefits and challenges of physical banking. 41% of the
respondents strongly agree that physical banking allows face to face
interaction. Hence, one of the reason why customers still agree and prefer
physical banking can be because it allows face to face interaction which is not
the case with digital banking. 33% and 35% of the customers strongly agree
and agree respectively that physical banking offers more safety and security.
48% of the respondents find physical banking more trustworthy and convenient.

78
5.2 Customers level of agreement for various benefits and
challenges of digital banking

It allows cash deposits and withdrawals.

It allows face to face interaction.

It offers more safety and security.

It is less costly.

It gives you quick services

It is easily accessible.

It is easier to do banking transactions.

It provides more options at one place.

0 10 20 30 40 50 60 70 80 90 100

Strongly disagree 2 3 4 Strongly agree

INTERPRETATION:

It can be inferred from the above chart which is depicting the customers level
of agreement towards various benefits and challenges of digital banking that
most of the customers strongly agree that digital banking provides them quick
services. Digital banking is easily accessible is also strongly agreed by 85% of
the customers. 87% of the respondents, i.e. customers partially agree about
digital banking being less costly than physical banking.

79
 It is more convenient. 24 55 102 48 11

It is more trustworthy. 9 31 100 74 26

It is prone to poor customer service. 10 74 76 60 20

It is more costlier. 7 61 94 56 22

It does not offer better rates and terms. 9 24 89 92 26

It is time consuming. 9 12 97 89 33

It captures best of both electronic and branch

26 44 86 45 39
banking.

0 50 100 150 200 250 300

Strongly agree Series2 Series3 Series4 Strongly Disagree

INTERPRETATION:
The above chart also is a depiction of various benefits and challenges of digital
banking. 100 customers, i.e 41.7% of customers partially agree that digital
banking is trustworthy. While 10.8% and 30.8% of the customers still strongly
disagree and disagree about digital banking being trustworthy. Similarly, 30%
of respondents agree of digital banking being prone to poor customer services.
35% of customers still do not consider digital banking being an option of both
branch and electronic banking.

6. Customers’ frequency of using various physical and digital

banking services in a month

Once in a Once in a Once in a

Everyday Never
week fortnight month

Physical banking
34.2 45.8 12.5 7.1 4
services
ATM services 25 51.2 14.2 7.5 2.1
Mobile banking
20.8 30.4 26.3 15.4 7.1
services
Telephone banking
7.5 23.8 22.5 25.4 20.8
services
Internet banking
17.5 36.3 18.3 19.2 8.8
services

80
 51.2
45.8
36.3

34.2
30.4 22.5
25 26.3 25.4
23.8
20.8 19.2
14.2 15.4 20.8
12.5 17.5 18.3
7.1 7.5
7.5 8.8
4 2.1 7.1

PHYSICAL BANKING ATM SERVICES MOBILE BANKING TELEPHONE INTERNET BANKING

SERVICES SERVICES BANKING SERVICES SERVICES

Everyday Once in a week Once in a fortnight Once in a month Never

INTERPRETATION:

The graph and the table above clearly depict the frequency of usage of physical
banking and other digital banking services. 34% of customers visits a branch
on a daily basis, while most of them once in a week. Similarly, 52% of customers
is availing the ATM services once in a week, implying a wider usage. 20%
customers are never using telephone banking services. While, 8.8% of the
customers are not prone to use mobile banking. Such, customers can be
pitched by the bank so that they turn towards digital banking. One needs to
scrutinize the reason for not using various services because some services may
be such that customers are not aware some services might not be useful.

7. Customers opinion towards physical and digital banking

5 4 3 2 1
Physical banking will gain importance in
9.6 16.7 29.6 24.6 19.6
near future.

Digital banking will gain importance in near

2.1 3.8 14.6 34.6 45
future.
I will opt for physical banking in near future. 12.1 18.3 32.5 22.9 14.2
I will opt for digital banking in near future. 1.3 7.5 21.3 30.8 39.2

81
 100% 14.2
19.6
90% 45
39.2
80% 22.9
70% 24.6
60%
50% 32.5 30.8
29.6 34.6
40%
30% 21.3
16.7 18.3
20% 14.6
10% 9.6 3.8 12.1 7.5
0% 2.1 1.3
Physical banking Digital banking I will opt for I will opt for
will gain will gain physical banking digital banking in
importance in importance in in near future. near future.
near future. near future.

Strongly agree 4 3 2 Strongly disagree

INTERPRETATION:

The above table and graph is showing that 45% of the customers strongly agree
and believe that digital banking will gain importance in near future. While, 20%
of the customers still do not agree towards increasing importance of digital
banking in future. Also, with increasing importance the opinion of customers to
opt for physical and digital banking was taken. It can be noticed that 14% of the
customers strongly agree to use physical banking in near future while 39% of
the customers will opt for digital banking.

82
 SPEARMAN’S RANK CORRELATION

1. Correlation between customer agreement towards increasing importance of

physical banking and choosing the same as an option in future.

H0: There is no significant association between customer agreement towards

increasing importance of physical banking and choosing the same as an option
in future.

H1: There is significant association between customer agreement towards

increasing importance of physical banking and choosing the same as an option
in future.

Correlations
Physical I will opt for
banking will gain physical
importance banking
Correlation
Physical 1.000 .738**
Coefficient
banking will gain
Sig. (2-tailed) 0.000
importance
Spearman's N 240 240
rho Correlation
.738** 1.000
I will opt for Coefficient
physical banking Sig. (2-tailed) 0.000
N 240 240

INTERPRETATION:

The above table of Spearman’s rank correlation shows the correlation between
customers agreement towards increasing importance of physical banking and
there agreement towards choosing physical banking in near future to avail
banking services. The correlation coefficient is 0.738 which shows a positive
correlation between customers opinion on increasing importance of the
physical banking and there willingness to avail the banking services through
physical medium or going to the branch. Also, the significant value is less than
0.05 which means the H0 fails to be accepted and H1 gets accepted. This
shows that there is significant association.

83
2. Correlation between customer agreement towards increasing importance of
digital banking and choosing the same as an option in future.

H0: There is no significant association between customer agreement towards

increasing importance of digital banking and choosing the same as an option in
future.

H1: There is significant association between customer agreement towards

increasing importance of digital banking and choosing the same as an option in
future.

Correlations
Digital banking I will opt for
will gain physical
importance banking
Correlation
Digital banking 1.000 .685**
Coefficient
will gain
Sig. (2-tailed) 0.000
importance
Spearman's N 240 240
rho Correlation
.685** 1.000
I will opt for Coefficient
digital banking Sig. (2-tailed) 0.000
N 240 240

INTERPRETATION:

The above table of Spearman’s rank correlation shows the correlation between
customers agreement towards increasing importance of digital banking and
there agreement towards choosing digital banking in near future to avail
banking services. The correlation coefficient is 0.738 which shows a positive
correlation between customers opinion on increasing importance of the digital
banking and there willingness to avail the banking services through digital
medium. Also, the significant value is less than 0.05 which means the H0 fails
to be accepted and H1 gets accepted. This shows that there is significant
association.

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 RELIABILITY TEST

Reliability Statistics
Cronbach's Cronbach's Alpha Based on Standardized N of
Alpha Items Items
0.870 0.870 73

INTERPTRETATION:

Cronbach’s Alpha is the most common measure of internal consistency or say

reliability. It is most commonly used when there are multiple Likert scale
questions in a questionnaire that for a scale and one wishes to determine if the
scale is reliable. And, hence a reliability test was run. Cronbach’s Alpha is 0.870
which is indicating a high level of internal consistency of the scale used.

DEMOGRAPHIC DETAILS

Age
60 and
18-29 30-45 45-60
above
Count Count Count Count
Male 25 41 10 0
Gender
Female 6 9 0 1
Primary or less 0 9 3 0
Secondary 4 13 2 1
Educational Higher
6 12 2 0
status secondary
Graduate 16 13 3 0
Post graduate 5 3 0 0
Service 11 15 2 0
Business 4 21 7 0
Occupation Housewife 0 7 0 1
Student 13 0 0 0
Professional 3 7 1 0

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FINDINGS AND CONCLUSION

This study titled as “New customer Acquisition: A comparative study on new

customers preference towards physical and digital banking” was aimed to know
the preference of those customers who are associated with HDFC Bank from
last two months. It tried to capture preference level of these customers towards
physical banking and digital banking. Following are the important findings of the
study:

 It was found that 17% of customers are highly preferring Physical banking
as the mode of banking while 28% of customers are highly preferring digital
banking as a mode of availing banking services.
 It was found that 28% of customers are unaware about investment options
and hence this should be taken into consideration by banks. Because, they
can our prospects to increase our sales of best investment plans.
 Still 23% of the customers are partially aware about Internet banking and
hence should be assisted by the banks.
 47% of the customers find physical banking time consuming, while only 3%
of the respondents find digital banking being time consuming. This very well
should be taken into consideration by the bankers as it is calling for
becoming more efficient and effective while performing the tasks or giving
the services.
 Only 1.3% of customers strongly disagree to select digital banking as an
option and hence bank should try and persuade the internal as well as
external customers to use digital banking.
 Mann Whitney U test revealed a significant difference between males and
females in terms of their awareness towards physical and digital banking
services.
 Kruskal Wallis test also revealed a significant difference between
preference for physical and digital banking across various age groups,
across various educational status and occupational status.
 Spearman’s rank correlation revealed an association between one’s
agreement towards physical banking and to select it as an option in future.
Same was the case with digital banking.

86
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 https://www.ibef.org/industry/banking-india.aspx#
 http://www.hdfcbank.com/
 https://www.investopedia.com/ask/answers/032315/what-banking-
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AB&usg=AOvVaw1ikBPkApJYgNdCGTJVrYN6
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88
Dear Sir / Madam,
I Navlakha Heta, student of S. R. Luthra Institute of Management is conducting
a study on “New to bank acquisition: A comparative study on new customer’s
preference towards physical banking and digital banking”. It is part of my
curriculum in pursuing the degree of Masters of Business Administration. Your
response will be valuable and appreciable. I assure you that all the information
provided by you will remain confidential and will be used for this research
purpose only.

Q-1 Since, how long you are having an account with HDFC bank?
(A) Less than a week (B) 1 – 2 weeks (C) 2 – 4 weeks (D) 1-2 months
Q-2 Rate your level of preference for the following mode of banking on the scale
of 1 to 5 from 5 being Highly Preferred to 1 being Not at all Preferred.
Mode of banking 5 4 3 2 1
Physical Banking
Digital Banking

Q-3 Rate your level of awareness towards following physical and digital banking
services from 5 being Highly aware to 1 being Not at all Aware.
Services 5 4 3 2 1
Cash deposits
Cash withdrawal
Cheque deposits
Investment options
ATM services
Mobile banking services
Telephone banking services
Internet banking services

Q-4 Rate your level of preference for following physical and digital banking
services from 5 being Highly preferred to 1 being Not at all preferred.
Services Physical Banking Digital Banking
5 4 3 2 1 5 4 3 2 1
Checking accounts and transferring funds
Purchase and sale of foreign exchange
Cash deposits and withdrawal
Investments
Reporting of losses
Bank statements
Third party transfers
Ordering of cheque books
Loan applications and transfers
Stopping of payments on cheque
Credit card application and transactions

Debit card application and transactions

89
Q-5 Rate your level of agreement for the following statements on the scale of 1
to 5 from 5 being strongly agree to 1 being strongly disagree.

Services Physical Digital

Banking Banking
5 4 3 2 1 5 4 3 2 1
It provides more options at one place.
It is easier to do banking transactions.
It is easily accessible.
It gives you quick services
It is less costly.
It offers more safety and security.
It allows face to face interaction.
It allows cash deposits and withdrawals.
It captures best of both electronic and branch
banking.
It is time consuming.
It does not offer better rates and terms.
It is more costlier.
It is prone to poor customer service.
It is more trustworthy.
It is more convenient.

Q-6 How frequently do you avail the following services per month?
Services Everyday Once in a Once in a Once in a Never
week fortnight month
Physical banking
services
ATM services
Mobile banking
services
Telephone
banking services
Internet banking
services

Q-7 Rate your level of agreement on the following statements on the scale of 1
to 5 from 5 being strongly agree to 1 being strongly disagree.
5 4 3 2 1
Physical banking will gain importance in near future.
Digital banking will gain importance in near future.
I will opt for physical banking in near future.
I will opt for digital banking in near future.

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Personal information:

1. Name (optional):
_____________________________________________________

2. Gender: (A) Male (B) Female

3. Age: (A) 18- 29 (C) 45-60

(B) 30- 45 (D) 60 and above

4. Educational Status: (A) Primary or less (D) Graduate

(B) Secondary (E) Post Graduate
(C) Higher Secondary (F) Others (Please
specify) ___________

5. Occupation: (A) Service (D) Student

(B) Business (E) Professional
(C) Housewife

6. Annual family income: (A) Less than 2.5 lakhs (C) 5 lakhs to 10 lakhs
(B) 2.5 lakhs to 5 lakhs (D) More than 10 lakhs

7. Contact No.(optional): _________________________________

8. E-Mail Id: ___________________________________________

91