A

Dissertation report
Year 2010

“COMPARATIVE STUDY OF RETAIL LOAN SCHEMES OF

BANK OF BARODA
VIS-S-VIS
COMPETITORS”
 Structure of the talk :-
Objective
Introduction
About Bank of Baroda
 Heritage
 Services offered

Typical loan granting process

Current scenario
Future prospects
Comparison of retail loan products of different banks
Findings
Recommendations
Conclusion
Objective of the summer training :
To analyze the entire retail loan service scenario in
order to find out the shortcomings and advantages over
other competing banks.
To give executable suggestions in order to make Bank
of Baroda a market leader in the existing segment of
retail loans.
Introduction:
Retail lending is the practice of loaning money to
individuals rather than institutions.
Retail lending is done by banks, credit unions, and
savings and loan associations.
Retail lending has taken a prominent role in the lending
activities of banks, as the availability of credit and the
number of products offered for retail lending has
grown.
One of the most lucrative options available to the bank
today expand its business to expand its business as the
income level as well as the consumption pattern of
Indian customer is changing
Bank of Baroda
 Heritage and Ethics of Bank of Baroda
 Started on 20th July 1908 under the Companies Act of 1887.
The initial capital invested was Rs. 10 Lakhs.
 The Maharaja was none other than Sayajirao Gaekwad who,
with his visionary insight, planned the beginning of a reputed
journey which over the years, came to be known as the Bank
of Baroda.
 In the present scenario, Bank of Baroda's public
shareholding is 46.19 percent with a total equity capital of
365.53 crore. This is held by Retail Investors, Banks and
Financial Institutions, Employees, FIIs and OCBs, Mutual
Funds, Insurance Companies and Others.
 
Services offered by the Bank of Baroda
 Retail Banking
 Rural/Agri Banking
 Wholesale Banking
 SME Banking
 Wealth Management
 Demat
 Product Enquiry
 Internet Banking
 NRI Remittances
 Baroda e-Trading
 Interest Rates
 Deposit Products
 Loan Products
 ATM / Debit Cards
A typical loan granting process :
 THE CURRENT SCENARIO
The robust credit pick-up in the fourth quarter of 2009-10, which
helped the banking system to top central bank’s credit growth
projections for the financial year, was primarily driven by retail
loans, but credit flow to the commercial real estate sector fell
drastically following an increase in provisioning norms last year.
The share of personal loans,(education, home, consumer durable
loans, among others, was 6.5 per cent in incremental non-food
credit as on February from -0.2 per cent in October of 2009.
 Within the retail segment, education loans logged an impressive
growth of 30 per cent, while housing loans grew by 8 per cent.
Contraction in sub-sectors of retail loans such as consumer
durables and loan against shares were also moderated.
The future prospects:
India is the next big market for retail financial services.
India is set to become the world’s third-largest
economy by 2050
The market for banking products is growing at an even
faster rate.
Over the next 20 years, the number of
people in their prime working years will continue to
grow in India. Unlike in some of the other BRIC
nations, where the population is ageing, this again will
grow the market for all retail finance products.
Mortgage market is currently under-penetrated,
The credit card market in India will see a rapid boom.
The financial cards market will increase threefold within the
next five years.
Just 59% of the Indian population reported to have a deposit
account (compared to an average of over 85% in Western
Europe), there is a lot of territory yet to be staked out for both
banks and their suppliers
Changing Attitudes to Debt and Consumer Finance Rising
affluence has altered consumer attitudes and the approach of
the urban consumer has shifted from ‘debt averse’ to ‘spend
now, worries later’
 Comparison of various Retail loan products:
 Criteria of comparison
 Interest rates
 Various charges on the Services provided
Total cost of any loan to a customer = Loan amount + Total interest charged
throughout loan tenure + Processing fees & related taxes.
 Time taken to disburse a loan
 Customer satisfaction level of each bank
 Names of the banks under consideration :-
 Bank of Baroda
 State Bank of India
 IDBI Bank
 Punjab National Bank
 Allahabad Bank
 HDFC Bank
 ICICI Bank
 Axis Bank
 Findings of the survey :-
1. Level of satisfaction installment amount
The number of customer who are satisfied with the installment
amount as specified by the bank is highest for SBI and Bank
of Baroda whereas this is very lesser for the private banks
namely HDFC Bank and ICICI Bank and somewhat moderate
for PNB. This is the result of customer orientation of the
Public service banks.

2. Best Feature of the loan

The major concern of people while choosing a loan is still low
rate of interest and low processing fees. This is shown by the
performance of SBI in the survey. The other most preferred
inputs being less processing time followed by cordial nature of
staff and availability of necessary information.
Most preferred bank for the next loan requirement
SBI is the most preferred bank for loan requirements as
represented by this survey follwed by PNB, Bank of
Baroda. ICICI and Union Bank enjoy the same preference
level.

Reasons for the above

Low interest rate being the most favored reason. The second
being the helping nature of the staff. This shows that people
want those loans which come without hassels and with
coordination from the banking staff. People prefer low
processing time, lesser paper works and a small number of
people also prefer to have an efficient handling mechanism and
good ambience inside the bank.
 Loan margin satisfaction

Punjab National Bank has the highest satisfied customers in

terms of loan margins offered followed by SBI, ICICI, Bank of
Baroda and then HDFC bank.

Adequate feedback facility available

ICICI bank leads the chart in terms of customer grievance
handling and adequate feedback facility. All the Public service
bank enjoy the same postion as the policies used by these PSB’s
are almost similar. This shows that there is a scope of
improvement in terms of customer grievance handling by Bank
of Baroda in order to take a winning edge over the other
competiting PSBs.
 Satisfaction level of cost of service

SBI enjoys the top position in offering the loans at the lowest
cost while PNB and BOB share the same position. Private
players are way behind in offering products at a lower rate.

Availability of sufficient information

Bank of Baroda is present with ease of information while opting
for a loan. The credit goes to the loan executive that deal with
customer in most efficient manner.
 Loan processing time
Loan processing time is the third most important criterion after
interest rate and processing fee and PNB in leading the chart
followed by Bank of Baroda and the ICICI. SBI lags in loan
processing time and is hence is more annoying for the
customers.

Repeating same bank for future loans

The customers of private bank don’t want to repeat their bank
for future loans. This shows gross dissatisfaction among loan
customers of private banks. SBI and BOB both enjoy their equal
status of being the favorite of customers for future loan needs.
Reason for not using Bank of Baroda services

This is a survey done among the non-customers of Bank of

Baroda. The major reason that people cited for not using Bank
of Baroda product is that they were not aware about its various
schemes and facilities in the sub-urban areas. Also towards
the rural and semi-urban areas there are very few branches
available hence people don’t get a opportunity to come across
to the Bank of Baroda products.

A few other reasons include non –availability of an introducer

or a guarrantor for getting the loan or an account registered.
 Service satisfaction level

The service satisfaction level of Bank of Baroda is more than

any other bank followed by PNB and SBI.

Consumers prefer SBI because of its Teaser Rate policies but

often report unhelping staff, lack of customer friendliness, too
hectic procedure for getting the loan and often corruption and
hence the service satisfaction level of SBI is lower than other
2 major players namely PNB and BOB.

Private banks lag because of their profit centric approach.

 Recommendations (based on the
findings)
Relaxing the lending norms for young working class.
The process of loan recovery and default settlement should
be made as per the laws and no stringent measures should
be adopted which lead to loss of goodwill of the bank.
Reason for State Bank of India being a market leader is
that it offers loans at the least possible rates also known as
“Teaser rates”. Adopt a follower’s strategy for this.
The other reason for SBI being a market leader is its
availability and market presence.
If the customer is providing sufficient collateral than this
necessity must be waved off as is done by HDFC bank which
is doing a good business in retail loan segment.
In UCO bank if a person is providing the bank with many a
times than required collateral, say 300% instead of 100% as
required, then the bank is offering them loan at a
comparatively lower rates
Step up facility should be promoted as a USP of Bank of
Baroda as many people who are a worthy party often prefer
bank with flexible step up policy.
 Customization of services is a strict need of the hour. This is
an art mastered by the private banks such as HDFC, ICICI and
Axis and also by populist bank SBI. This flexibility in policies
helps to get more and more customer retention for the bank.
 Ambience of the bank is a major concern these days.
Emphasis should be on enhancing the overall banking
experience.
 Aggressive promotions in the car loan category, development
of a site exclusively for car loan customers.
 Regarding the GOLD FUNDS, many banks are offering retail
loans against Gold deposits as mortgages since the valuation
of gold is increasing day by day, such practises whould be
promoted by Bank of Baroda.
 Conclusion
The Indian customer has come a long way from purchasing
to fulfilling their needs to buying a house on loan .
Customers now grab everything that comes their way but
they do their own survey of optimum loans; same is the case
with banks, and retail loans.
With innumerable choices before him, the customer is indeed
the king.
If a bank has to succeed in the competitive world, it should
be technological savvy, customer centric progressive driven
by highest standards of corporate governance and guided by
sound ethical values and above all should be cordial and
should have personalize customer services.
Bibliography
 Philip Kotler, Marketing Management, 9th edition
 Akkar; Marketing Research
 http://www.bloombergutv.com/industry-news/banking-
industry-news/51016/retail-loans-back-in-demand.html
 www.investorglossary.com/retail-lending.htm -
 http://www.oracle.com/us/industries/financial-
services/045390.pdf
 http://www.smsfi.com/blog-details/1096/personal-loans:-
advice-to-help-you-choose-smartly
 www.business-standard.com
 www.indiaproperties.com
 www.apnaloan.com