RESEARCH REPORT ON INDIAN BANKING INDUSTRY: A COMPARATIVE ANALYSIS THE SERVICES PROVIDED BY GOVERNMENT SECTOR BANKS WITH PRIVATE

SECTOR BANKS
Submitted in Partial Fulfillment towards the awards of Post Graduate Diploma In Management ( PGDM: Approved by AICTE) of NIET Business School , Greater Noida Submitted by: SHALINI SRIVASTAVA DM10133DM030 (2010-2012) UNDER THE SUPERVISION OF MR HARSH AWASTHI

NOIDA INSTITUTE OF ENGINEERING AND TECHNOLOGY GREATER NOIDA

19 Institutional Area, Knowledge Park -II, Greater Noida Gautam Buddh Nagar (UP), India -201306

PREFACE

The PGDM programmed is well structured and integrated course of business studies. The main objective of practical training at PGDM level is to develop skill in student by supplement to the theoretical study of business management in general. Industrial research helps to gain real life knowledge about the industrial environment and business practices. The PGDM program me provides student with a fundamental knowledge of business and organizational functions and activities, as well as an exposure to strategic thinking of management. In every professional course, research is an important factor. Professors give us theoretical knowledge of various subjects in the college but we are practically exposed of such subjects when we get the training in the organization. It is only the training through which I come to know that what an industry is and how it works. I can learn about various departmental operations being performed in the industry, which would, in return, help me in the future when I will enter the practical field. In today globalize world, where cutthroat competition is prevailing in the market, theoretical knowledge is not sufficient. Beside this one need to have practical knowledge, which would help an individual in his/her carrier activities and it is true that Experience is the best teacher.

DECLARATION

I hereby declare that the Research Report Titled Indian Banking Industry : A Comparative Analysis The Services Provided by Government Sector Banks with Private Sector Banks . For Degree of PGDM original work and the report has not formed the basis for award of any diploma. Diploma ,associateship , fellowship or similar other titles . It has not been submitted to any other University or Institution for the award of any degree or diploma .

Place : NIET Greater Noida Date :

Name : SHALINI SRIVASTAVA Roll No. 10133DM030

ACKNOWLEDGEMENT

It is with real pleasure that , I record my indebtedness to my research guide Mr Harsh Awasthi for his counsel and guidance during the preparation of this Dissertation.

I wish to record my sincere thanks to my parents who cooperate me in accomplishing work and friends who have helped me and supported me in collecting data and in typesetting .

Place: NIET Greater Noida Date:

Name: SHALINI SRIVASTAVA Roll No. 10133DM030

INDEX
Page No.

SYNOPSIS 1. Introduction Of the Organisation

1.1 History of Banking Industry

6-7 8-15

2. Introduction of Indian Banking Industry 2.1 Structure of Banking Industry

2.2 2.3 2.4 2.5 Government Sector Comparative Position of Government Sector Banks Private Sector Comparative Position of Private Sector Banks Foreign Sector Comparative Position of Foreign Sector Banks

16-65

3.
3.1 3.2 3.3

Performance of Government Sector Banks & Private Sector Banks Comparative analysis Research methodology 66-68
Objective Data Collection Sampling Size

4. Data Analysis and Interpretation 4.1 Comparison of Services 5. Recommendations and Suggestions 6. Conclusion Bibliography Annexures Questionnaires

69-88 89-91 92-94 95 96-98

1.

LIST OF TABLES

Page No. 14 35 60-65 87-88

1. 2. 3. 4.

Key Industry Statistics of scheduled Commercial Banks Performance ( Government Sector Banks ) Comparison Chart Raw Data

2.

LIST OF CHARTS
Current Banking Sector in India Private Sector Bank Frequency of Transaction Rating of Transaction Services Provided by Different Private Sector Bank Remitting of Transaction Personal Attention Given by Private Sector Bank Government Bank Analysis Frequency of Transaction Rating of Transaction Personal Attention Given by the Government Banks Satisfaction with the Services Privided Services Provided by Government Bank Comparison Personal Opinion Regarding Security Comparison of Services 76 77 78 79 81 82 83-85 86 71 74 75 23 70 70

1. 2.

2.1 2.2 2.3 2.4 2.5 3. 3.1 3.2 3.3 4. 5. 6. 7. 8.

SYNOPSIS

Banking Industry in India has always revolved around the traditional function of deposits and credit. Their role had been defined as to assist the overall economic growth with majority of share being controlled by the Government of India in most of the banks. But with the process of liberalization, the banking industry has also undergone tremendous change in the last 5 years. The market, which was largely controlled by the public sector banks, has now been facing stiff competition not only from foreign players but also from the new generation private sector banks. The rules of the game have been changing with the RBI introducing new norms to make banks more accountable and to adopt the practices followed worldwide.

Most of the banks have now been trying to function on the concept of a Universal Bank. Apart from the traditional functions of a commercial bank, they are taking steps to build themselves into a one stop financial centre wherein all the financial products would be available. Banks have started catering to the retail segment to improve their deposit portfolio. In order to have a maximum share in this segment, most of the banks have been introducing new products. The delivery channels have also been shifted from branches to ATMs, phone banking, net banking etc.

Technology has become an important medium of not only attracting new customers but also in retaining them. The new generation private sector banks have made a strong presence in the most lucrative business areas in the country because of technology upgradation. While, their operating expenses have been falling as compared to the PSU banks, their efficiency ratios (employees productivity and profitability ratios) have also improved significantly.

Mergers and Acquisitions have also started playing their role in the banking industry where lots of players are trying to consolidate their position. The recent merger of Times Bank with HDFC Bank was an important step in this direction. In recent times, most of the new private sector banks have shown interest in inducting a foreign partner in their operations.

The government is planning to bring down its stake in the public sector banks from 51% to 33%. This move will enable these banks to raise further capital to adhere to the CAR requirements and will also help in changing their perception in the market vis--vis the private sector banks.

Most of the banks are also planning to enter the insurance business and are in the process of identifying their strategic partners. Since most of the banks already have an extensive distribution network, this new business should result in substantial revenues. But with most of the top league players planning to enter this business, the more efficient and pro active players would be able to take a lead.

CHAPTER 1 :

INTRODUCTION OF THE ORGANISATION

INTRODUCTION OF INDUSTRY
This project provides a sound coverage of all the services provided by the Private Sector Banks and the Public Sector Banks. It contains a review of what the people think of these services. What kind of accounts they hold in these banks? How often do they transact with the Government bank & private banks? How user friendly the bank and their services are? What all services are being offered to them? Their viewpoints regarding the services provided to them.

Bank has moved a long way from the safe deposit houses that they were. They have now taken the role of an agent, a Private sector investor etc . . . In simple words they have increased their scope by a wide margin. Until Private sector banks were introduced banking for Indians was an inevitable, time consuming and a complicated activity. Private sector banks brought with them personalized banking which has attracted major parts of the Indian population. Major industrial houses and a large part of the business sector do bank with these Private sector institutions. Due to the number and quality of services provided and the case with an account can be operated, even the household sector has started banking with these institutions.

10

These Private sector banks are providing new and innovative services like Tele banking Internet banking Tele Draft facility Credit cards Cash delivery at door step and ATM

Making them more and more user friendly.

11

INDIAN FINANCIAL SYSTEM

Commercial banks Financial institution Financial institutions Non-banking financial companies

Long term instruments INDIAN FINANCIAL SYSTEM Financial instruments Short term instruments

Capital market Financial markets Money market

12

HISTORY OF BANKING INDUSTRY

Banks are the most prominent and very important part of the financial economy of India. The performance of banks is completely linked to the growth of the economy while the nature and quantum of growth is in turn linked to the availability of bank credit. Banks have been used by successive governments to achieve their social, political and economic goals. The structure of the Government Banking system has undergone numerous change since independence. Two phases of nationalization, introduction of Regional Rural Banks in 1975 (to focus on rural spread on banking) and permission to new private banks to set up operations since 1993-94 are some of the major changes undergone. Banking Industry in India has always revolved around the traditional function of deposits and credit. Their role had been defined as to assist the overall economic growth with majority of share being controlled by the Government of India in most of the banks. But with the process of liberalization, and the technological revolution the banking industry has also undergone tremendous change in the last 5 years. The market, which was largely controlled by the public sector banks, has now been facing stiff competition not only from foreign players but also from the new generation private sector banks. The rules of the game have been changing with the RBI introducing new norms to make banks more accountable and to adopt the practices followed worldwide. Most of the banks have now been trying to function on the concept of a Universal Bank. Apart from the traditional functions of a commercial bank, they are taking steps
13

to build themselves into a one stop financial centre wherein all the financial products would be available. Banks have started catering to the retail segment to improve their deposit portfolio. In order to have a maximum share in this segment, most of the banks have been introducing new products. The delivery channels have also been shifted from branches to ATMs, phone banking, net banking etc. Technology has become an important medium of not only attracting new customers but also in retaining them. The new generation private sector banks have made a strong presence in the most lucrative business areas in the country because of technology upgradation. While, their operating expenses have been falling as compared to the PSU banks, their efficiency ratios (employees productivity and profitability ratios) have also improved significantly.

14

Key Industry Statistics of Scheduled Commercial Banks

(Rs bn) 2008 Total deposits Demand Time Total bank credit Food non-food Investments govt. sec other approved sec Cash in hand Balance with RBI Cash-Deposit ratio Investment-Deposit ratio Credit-Deposit ratio 7140 1174 5966 3688 168 3520 2545 2232 313 43 635 9.50% 35.70% 51.70% 2009 8132 1273 6859 4358 256 4102 3088 2784 304 53 574 7.70% 38% 53.60% 2010 8729 1266 7463 4667 320 4347 3332 3023 309 53 631 7.80% 38.20% 53.50% 2011 9928 1347 7498 4779 373 4399 3347 3038 314 57 656 7.80% 38.20% 53.50%

Banks traditionally involved in working capital financing have started offering consumer loans and housing loans. Some of the banks have started offering travel loans as well. Retail financing is the other area where the banks have started to concentrate. The loan formalities too have been relaxed to a great extent and sanctioning time has been speeded up.

15

Mergers and Acquisitions have also started playing their role in the banking industry where lots of players are trying to consolidate their position. The recent merger of HDFC Bank with Times Bank and ICICI Bank with Bank of Madura are important steps in this direction. In recent times, most of the new private sector banks have shown interest in inducting a foreign partner in their operations. Most of the banks are also planning to enter the insurance business and are in the process of identifying their strategic partners. Since most of the banks already have an extensive distribution network, this new business should result in substantial revenues. But with most of the top league players planning to enter this business, the more efficient and pro active players would be able to take a lead.

16

CHAPTER 2 :

INTRODUCTION OF THE TOPIC

17

NEED FOR THE STUDY

The banks now need to find out what to sell, whom to sell, when to sell, how to sell and how to be different to increase profitability. Banks need to differentiate themselves by adding value-added service, offerings and building long-term relationships with their customers through more customized products, enhanced value offerings, personalized services and increased accessibility. Banks also need to identify customers and products that would be most profitable and target customers with products that are most appropriate to their needs and serve the customers with greater cost efficiency. Banks also need to find out the avenues for increased customer satisfaction, which leads to increased customer loyalty. This may be explained better from two initiatives bank took in the past: 1. Earlier what drove many bankers to invest in ATMs was the promise of reduced branch cost, since customers would use them instead of a branch to transact business. But what was discovered is that the financial impact of ATMs is a marginal increase in fee income substantially offset by the cost of significant increases in the number of customer transactions. The value proposition, however, was a significant increase in that intangible called customer satisfaction. The increase in customer satisfaction has translated to loyalty that resulted in higher customer retention and growing franchise value.

18

2. Bankers invested in Internet banking, believing that the Internet was a lower-cost delivery channel and a way to increase sales. Studies have now shown, however, that the primary value of offering Internet banking services lies in the increased retention of highly valued customer segments. Again customer satisfaction drives the value proposition. Thus, banks need to retain existing customers with enhanced personalized services and products, which best suits their needs and satisfies them the most.

19

STRUCTURE OF GOVERNMENT BANKING INDUSTRY

The Government Banking Industry can be broadly classified into:

Government Sector Banks

The Government Banking industry is largely dominated by the public sector banks. These banks till the early 90s were involved in the traditional banking business of deposits and credit lending. They performed a supportive role in the overall growth of the economy. While most of these banks used to focus on the growth of balance sheet, profitability was not a significant factor in the competition. In most of the banks, the government has a holding of 100% whereas in the few banks, the stake has fallen because of a public issue in the post liberalization period. The government is proposing to bring out a bill wherein its share in all these banks would stand reduced to 33% from the current levels. The public sector banks have a strong distribution network all over the country. But the strength of the earlier periods has now become a concern for these banks. As compared to the tech-equipped distribution network of the new private sector banks and the foreign banks, these banks have found it difficult to upgrade them on the technology front. These banks are also facing the problem of surplus manpower. Most of these banks are now coming out with a VRS to bring down their number of employees and improve the efficiency ratios.

20

The public sector banks still control a major share in the banking operations of the country. Their inefficiencies have been exposed only when the market was throw open for competition and new players started eating up their share. But given their size and the strong network, most of these banks can change their perception. The recent thrust on reduction of government stake, VRS, NPA settlement schemes etc have been some of the steps in this direction. Since the growth of the economy is largely dependent on the performance of these banks, even with the growth of new private and foreign players, these banks will have an important role to play.

Private Sector Banks

The Banking Regulation Act was amended in 1993 permitting the entry of new private sector banks. With emphasis on service and technology, it is for the first time that Government Banks are challenging the foreign banks. These banks are making heavy use of technology to give good service on par with foreign banks but to a much wider audience e.g. branch size has been reduced considerably by using technology and having less manpower. In addition the ATM etc helps drawing large customers to one branch.

21

The new private banks are on an expansion phase and are now moving into semiurban areas and satellite towns to fulfill their branch expansion norms. Their technological edge and product innovation has seen them gaining market share from the slower, less efficient older banks. The new private banks have been consistently gaining market share from the public sector banks. The major beneficiary of this has been corporate clients who are most sought after now. The private sector banks have been able to make significant inroads in the retail market of the public sector banks. During the year, the two leading banks in this sector had set a new trend in the Government Banking sector. HDFC Bank, as a part of its expansion plans had taken over Times Bank. ICICI Bank became the first bank in the country to list its shares on NYSE. The old private sector banks have performed reasonably well during the FY2000. As these banks were facing stiff competition from the new private banks and the foreign players who were making inroads in their markets, these banks have been able to increase their net profits by over 50%. As a result of the increasing competition in the sector, these banks have been trying to improve upon their margins and asset quality. Most of these banks have a high CAR and as such they do not face any capital constraint in their growth plans. Even their return on net worth has been at par in most of the cases with the other new players in the market. But the coming years would be more challenging for these banks as the public sector banks are also trying to adapt to the new environment and the new banks have already equipped themselves to have a major share in any opportunity that would accrue.

22

Foreign Banks
Foreign banks have been doing the normal banking business in the country. During the period of nationalization, the entry of new foreign banks and expansion by existing foreign banks were prohibited. Even, when the norms were relaxed later on, RBI was very slow in granting any further approvals to these banks. But most of these banks have concentrated on the metropolitan cities of the country and have been able to do reasonably well. These banks have used the latest technology to compensate for the limited number of branches they have. In the post liberalization period, a number of new players have entered and the existing players have consolidated their position in the market. In the last couple of years, some of the foreign banks have entered the retail segment and introduced a number of new products in the market. This has intensified the competition in the banking sector and has made most of the old players rethink their strategy.

23

TH E CURRENT BANKING SECTOR IN INDIA

MARKET SHARE
6% National Banks Corporation Banks Private Banks Multinational Banks 80% Money Lenders & Others

5% 3%

6%

Interpretation The above pie chart shows that major banks in the market are national banks followed by various other banks .like corporation bank private banks multinational banks etc

24

INDUSTRY PROFILE
Government Sector Banks
The financial sector reforms covered deregulation of policies, prescription of prudential norms based on internationally accepted practices in respect of capital adequacy, income recognition, asset classification and provisioning for impaired assets and introduction of competition in the banking sector. Several measures towards strengthening of supervision over banks were also introduced simultaneously. The prudential norms were adopted in a phased manner from 1992- 93 to make the transition less painful. Till adoption of the prudential norms, twenty-six out of twenty-seven public sector banks were reporting profits. In the first post-reform year, i.e., 2002-03, the profitability of PSBs as a group turned negative with as many as twelve nationalized banks reporting net losses. The remaining seven nationalized banks could show only marginal profits between Rs. 4 crore. As on 31 March 2000, only one public sector bank had capital adequacy ration of above 8 per cent. By March 2003, the outer time limit prescribed for attaining capital adequacy of 8 per cent, eight public sector banks were still short of the prescribed level. The NPAs of the banks aggregating Rs. 39,253 crore as on 31 March 2002 brought the latent weaknesses in their asset portfolio out in the open.

25

The emphasis on maintenance of capital adequacy and compliance with the requirement of asset classification and provisioning norms has put severe pressure on the profitability of PSBs. Deregulation of interest rates on deposits and advances ahs intensified completion and PSBs. Deregulation of interest rates on deposits and advances has intensified competition and PSBs have to now contend with competition not only from other public sector banks but also from old/new private sector banks, foreign banks and financial institutions. Above all, with the growth of the capital markets, sound corporate clients now have the option of raising funds at lower cost by accessing capital markets for their equity as well as debt requirements. The response of the public sector banks to the above changes has been varied. While some have withstood all these pressures, for most, the shocks have been severe, at least, initially. The profitability of the public sector banks as a group remained negative in 1993-94. Despite improvement in 1994-95, there was a slippage again

when loss incurred by Government Bank affected the profitability of the entire public sector bank group. However, there have been noticeable improvements since then and public sector banks, as a group, are now reporting profits. Although as per the table only two banks recorded net loss as at the close of the year 1998-99 there is significant variation in the level of financial efficiency among the banks. It is also to be noted that good performance of some of the strong banks is neutralized by persistent under performance of a handful of banks which are not improving enough and are, therefore, taking the shine away from the aggregate picture of Public Sector banks (PSB's) performance. There are some experts who would even like to debate whether performance of PSB's should be judged in terms of
26

profitability alone. To them, fulfillment of social objectives of spreading banking services and spurring economic growth could well be taken as additional if not sufficient payback from PSB's. However, attainment of such social objectives as these banks were expected to follow, does not really stand in the way of their operating on profitable lines. Profitable performance recorded by most of them and more so the turn around in profitability achieved by quite a few PSB's, goes to show that fulfillment of social objectives and profitability can and, in fact, need to go hand in hand.

27

PRIVATE SECTOR BANKS

The Banking Regulation Act was amended in 1993 permitting the entry of new private sector banks. The act also specified certain criteria for establishing new private sector banks. The criteria are

The banks should have a minimum net worth of Rs1bn. The promoters holding should be minimum 25% of the paid up capital. The banks should offer shares to the public within three years of their operations. (This condition was relaxed in case of many banks due to poor state of capital markets).

The first new private sector bank started operations in 1995. The minimum networth requirement of Rs1bn and difficulty in getting the banking license has kept the option open for very few players. Many of these banks have been promoted by the financial institutions. After the CRB fiasco (the group was granted a license for banking which was revoked after the exposure of the group in a scam), RBI has not granted any further licenses.

With emphasis on service and technology, it is for the first time that Indian banks are challenging the foreign banks. These banks are making heavy use of technology to give good service on par with foreign banks but to a much wider audience e.g. branch size has been

28

reduced considerably by using technology and having less manpower.

This saves the cost of the branch. In addition the ATM etc helps drawing large customers to one branch.

The new private banks are on an expansion phase and are now moving into semi-urban areas and satellite towns to fulfill their branch expansion norms. Their technological edge and product innovation has seen them gaining market share from the slower, less efficient older banks. These banks have targeted non-fund-based income as major source of revenue, with their level of contingent liabilities being much higher then their other counterparts viz. PSU and old private sector banks.

The new private banks have been consistently gaining market share from the public sector banks. The major beneficiary of this has been corporate clients who are most sought after now.

IndusInd Bank, BoP-Bank of Punjab, CENK-Centurion Bank The new private sector banks have performed very well in the FY2000. Most of these banks have registered an increase in net profits of over 50%. They have been able to make significant inroads in the retail market of the public sector and the old private sector banks. During the year, the two leading banks in this sector had set a new trend in the Indian banking sector. HDFC Bank, as a part of its expansion plans had taken
29

over Times Bank. ICICI Bank became the first bank in the country to list its shares on NYSE.

The Reserve Bank of India had advised the promoters of these banks to bring their stake to 40% over a time period. As a result, most of these banks had a foreign capital infusion and some of the other banks have already initiated talks about a strategic alliance with a foreign partner.

30

FOREIGN BANKS
Foreign banks have been doing the normal banking business in the country. During the period of nationalization, the entry of new foreign banks and expansion by existing foreign banks were prohibited. Even, when the norms were relaxed later on, RBI was very slow in granting any further approvals to these banks. But most of these banks have concentrated on the metropolitan cities of the country and have been able to do reasonably well. These banks have used the latest technology to compensate for the limited number of branches they have. In the post liberalization period, there has been a sharp increase in the total business done by the foreign banks. A number of new players have entered and the existing players have consolidated their position in the market. In the last couple of years, some of the foreign banks have entered the retail segment and introduced a number of new products in the market. This has intensified the competition in the banking sector and has made most of the old players rethink their strategy. Looking at the potential of the Indian markets, some of the foreign banks in recent times have expressed their plans of acquiring few Indian banks for further expansion. The current RBI norm does not allow an Indian Bank to place equity with a foreign bank carrying branch transaction in the country. These banks expect the norms to be

31

eased and subsequently the Indian banking sector could witness an increased activity on the mergers and acquisitions front.

PERFORMA NCE
Profitability
The operating profits of scheduled commercial banks increased by Rs46bn in 20052006 (33.4 per cent) to Rs184bn as against a decline of Rs8.3bn (5.7 per cent) in 2004-2005. Net profits increased by Rs28.1bn (62.7 per cent) to Rs73bn during 20052006 as against a decline of Rs20bn (30.9 per cent) during 2004-2005. As a share of total assets, operating and net profits increased by 21 and 19 basis points to 1.66 per cent and 0.66 per cent, respectively, during 2005-2006 as against a decline of 39 and 35 basis points, respectively, during 2004-2005. The improvement in financial performance reflected (i) higher rate of growth in interest income than interest expenditure during 2005-2006, ii) a lower rate of growth in operating expenses during 2005-2006 as compared with that in the preceding year, and iii) a higher rate of growth in other income than that in 2004-2005. Operating and net profits across all bank groups exhibited a substantial increase during 2005-2006 as against a decline across all bank groups (barring nationalized banks in operating profits) during 2004-2005. In particular, new and old private sector banks registered operating profit growth of 81.8 and 80.4 per cent respectively, during 2005-2006, as against a decline of 7.5 and 26.8 per cent, respectively, in the
32

preceding year. The rise in operating profits of foreign banks too turned out to be high at around 51.5 per cent as against a decline of 30.3 per cent during 2004-2005. PSBs exhibited an operating profit growth of 23.7 per cent during 2005-2006 as compared with a marginal increase of 2.8 per cent during 2004-2005. Even more spectacular was the increase in net profits (57.2 per cent) as against a decline of 35.3 per cent in 2004-2005. The improved financial performance of PSBs, despite a sharper increase in interest expenditure (15.8 per cent) than that in interest income (14.5 per cent), was attributable to the spurt in other income and deceleration in operating expenses. As a proportion of total assets, provisions and contingencies of scheduled commercial banks increased by 2 basis points to 1.00 per cent during 2005-2006. The aggregate figure, however, hides the vast differences in bank-group-wise position in respect of provisions. On the one hand, provisions by both foreign and new private sector banks increased sharply by 44 basis points and 40 basis points, respectively, to 2.07 per cent and 1.15 per cent, respectively, during 2005-2006 while provision of old private sector banks increased by 27 basis points to 1.00 per cent. On the other hand, provisions by PSBs declined by 6 basis points to 0.89 per cent, mainly due to the sharp decline in the provisions of 17 basis points by the SBI Group. Provisions by nationalized banks increased marginally by one basis point.

33

Spread
The movements in the interest income and interest expenditure were influenced by liquidity conditions and the varying response of major bank groups to the monetary policy signals of the Reserve Bank. The spread of PSBs declined by 10 basis points to 2.70 per cent during 2005-2006, due to a 9 basis points fall in interest income. The spread of SBI and nationalized banks group declined by 9 and 10 basis points, respectively. The spread of foreign banks improved sharply by 38 basis points owing to a sharper fall in interest expenditure compared with that of interest income. While the spread of old private sector banks improved by 18 basis points, that of new private banks declined by 11 basis points. The interest rate spread varied markedly across major bank groups from 1.87 per cent for new private sector banks to 3.85 per cent for foreign banks. For the SCBs, the spread continued to exhibit a declining trend and was at 2.72 per cent during 2005-2011 as against 2.78 per cent during 2004-2005.

Leading indicators of banking sector

Source: RBI WSS Most of the developments in the last couple of years have been in favor of the new generation private sector banks that have equipped themselves with latest technology
34

and have also focussed more on fee-based revenues. As always, they were expected to outperform the PSU banks during the second quarter of the FY2004. But the figures released by most of the banks indicate a slightly different story. . While on an aggregate, the net profit of 15 banks has increased by 43% during the quarter on yoy basis, the growth figures is equally divided between the PSU and the Private sector banks. The net interest income of the new banks has increased by 85% while those of the PSU banks have gone up by 30%. This could be attributed mainly to a lower base of these new banks where growth rates in the initial years tends to be on the higher side. But the most significant part of the results has been the difference in the other income. While it has gone down by 15% for the private sector banks, the PSU Banks has managed to increase it by 4%. Now the possible reason for this decline could be because of the higher interest rates prevailing in the economy which didnt allowed most of the private sector banks to book higher profits on sale of investments as what they have been doing earlier. One notable feature in the table above is the dominance of State Bank of India in the banking sector. It controls more then one fifth of the total deposits and advances in the industry and is responsible for the competitive performance of the PSU Banks. If we remove the figures for SBI in the table above, the total growth rates for the PSU Banks would be 11%(Net profit), 32% (NII) and a decline of 13% in the other income. This shows that if it would not have been a spectacular performance from SBI, the results could have tilted heavily in favor of the private sector banks.

35

Performance (Government Sector Banks)

The position in regard to profitability of PSBs from 2005 to 2011 given in the table below: Net Profit / Loss Total Profit (State Bank Group) Total Profit (Nation alized banks) Total Net Profit Total Loss (State Bank Group) Total Loss (Nation alized banks) Total Net Loss Net Position 2005 2006 2007 2008 2009 2010 2011

280 (8)

356 (8)

846 (8)

1,023 (7)

1,650 (8)

2,460 (8)

1,465 (8)

115 (7)

375 (7)

895 (11)

1,196 (12)

2,124 (16)

2,965 (17)

2,639 (17)

395

731

1,741

2,219

3,774

5,425

4,104

Nil (0)

Nil (0)

(-)230 (1)

Nil (1)

Nil (1)

Nil (1)

Nil (1)

(-)3,688 (12)

(-)5,080 (12)

(-)625 (8)

(-)2,360 (7)

(-)679 (3)

(-)398 (2)

(-)846 (2)

(-)3,688

(-)5,080

(-)625

(-)2,590

(-)679

(-)398

(-)846

(-)3,293

(-)4,349

1,116

(-)371

3,095

5,027

3,258

36

PRIVATE SECTOR BANKS

Private sector banks have changed the scenario in Banking sector giving tough competition to even the foreign banks. The performance of Indian Private Sector Banks can be best described by the term "high performance banking". They have shown the change in today's customers preference. Today's customers are looking for banks, which are efficient and provide wide number of services. Gone are the times when banks used to deal only in monetary transactions and the customers had to stand in long queues for deposits and withdrawal. Now these can be done through ATM countries. Moreover new functions like D-mat an anywhere banking has really given new face to the banking sector. Technology and customer service are 2 main factors which have lead to success of private banks while public sector are today Private banks thriving due to their superior service delivery they have made the banks are today in a dominant thanks to the penetration in the markets. The recent performance of the Private banks shows remarkable growth rate. Spreads have widened, income from non-fund based activities have shot up, non - performing assets are down, retail customers bases have almost double. Net -profit margins of the new banks have improved substantially from 9.18 to 10.26percent. Barring HDFC bank, all the new banks recorded a growth in their net profit margins. HDFC bank's net profit margin has slipped to 14.9% from 18.55%, but it still continues to enjoy the highest net profit margins among the new banks.

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The spreads increased thanks to the falling interest rates. Moreover these banks have realized that the cheapest source of funds are saving and current accounts. Earlier some of the new banks fancied themselves as corporate banks have come to terms that their way of raising money through certificates of deposits at interest rates of 12 to 13 percent was squeezing margins. Indusland is a prime example of this phenomenon. One of the top new banks is now trying to run down its high cost certificates of deposit. Today they constitute just 2.3 percent of aggregate deposits as against 12 percent of previous year. Interest rates that contributed to the good results this year since banks were able to prune their liabilities. The falling interest rates also helped the banks to make a killing in the securities market. E.g. Global Trust whose non-fund based income increased by 60% to Rs. 232.70 crore from previous year. In the six years that new private banks have been around, thebosy have been finally been separated from the men. HDFC and ICICI Bank are seen as long-term winners, at the expense of other private banks are state-run banks. Even the old private sector banks, which are largely regional, did well for themselves, Vysa Bank posted a 45% growth over the previous years level. Federal banks turned around after a bad year to recording a net profit of 46.4 crore against just 2.5 crore the previous year. Rs.146.32crore the

Government vs. Private Sector Banks

According to a recent B & F - BRIS survey of the most outstanding Government Banks, HDFC emerges as the best.

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Top Ten Banks 1. HDFC Bank 2. ICICI Banking Corporation 3. Global Trust Bank 4. Corporation Bank 5. Oriental Bank of Commerce 6. Jammu and Kashmir Bank 7. Karur Vysya Bank 8. Indusland Bank 9. Bank of Baroda 10. State bank of Hyderabad As seen from the table, we can see that Public Sector banks not find their place in the top ten banks in India. In fact it is the professional approach towards their work which as kept Corporation Bank on top of the Public Sector banks. The message is very clear, it is the aggressive and efficient banks with high operating profit per employee and state of the art technology, which will continue to grow while the weaker banks wit excess staff, huge and sometimes unviable branch network and a low level of computerization of operations will get sidelined or even shut down in coming times.

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OPPORTUNITY SPECTRUM FOR INDIAN BANKS

Indian banks have the highest compounded annual growth rate of profits in the world. They reported a CAGR of 39 per cent between 1996 and 2001, compared with the global average of 18 per cent. The CAGR of Asian banks fell 1 per cent during the same period. However, Indian banks failed to score on profitability per customer. The profitability of Indian banks in terms of the return on capital and the profitability of core banking operations are not adequate. There is a need for clear customer segmentation and product offerings focus on cost efficiencies and entrepreneurial ability to face stiff competition. India is a target market for global players because it offers significant growth opportunities. Citibank and Standard Chartered Bank account for more than half of the outstanding credit card receivables and personal loans in the Indian banking sector. This possibly translates into an annual profit of about $30-50 million each. Consolidation has not taken off in India, but will be triggered by capital scarcity. This is unlike the Asian scenario where 51 per cent of the top 500 banks disappeared in four years after the financial crisis in East Asia. The majority of these banks went off the scene after they were merged or acquired by others. The return on capital of Indian banks is low because they have failed to attract profitable businesses. Seventy to 80 per cent of the corporate accounts and retail customers do not make money for banks. Banks tend to concentrate on just the spreads without identifying the cost on a risk-adjusted basis as far as the corporate customer is concerned. At the same time, they fail to see the cost of servicing retail clients as they try to push banking-related products to all segments of customers. Leading global banks are pushing financial services to individuals in Asia, but most are struggling to earn sustainable profits. Multinational institutions have grabbed small market shares, which are yet to contribute significant profits to their global parents.
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Banks have found attractive retail banking opportunities in India, but a huge portion of their operations are unprofitable for want of a cutting edge over competition. This puts a strain on the capital base. Banks should guard against adopting the universal banking model because they may lose out on per customer profitability in trying to be everything for every customer. Banks should focus on their core competence rather than opting for the universal banking model. The opportunities for Indian banks can be studied under two heads. They are (i) Domestic Opportunities & (ii) Global Opportunities.

Domestic Opportunities:

Consumer Finance
o o o

Low Penetration Rising Income Levels Growing Consumer Class

Robust Industrial Investment Outlook Large Infrastructure Development Plans Rural Banking
o

Untapped Market for Financial Products & Services

Growing Transaction Sizes Leading to Higher Profitability Sustained Economic Growth

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Global Opportunities:

Vast Indian Diaspora (About 20 million people of Indian origin)

o o o

Permanent Residents Overseas Both India Linked and Local Personal Banking Needs Small and Medium Businesses

Global Orientation of Indian Businesses

o o o

Growth in Foreign Trade Increase Export Revenues Emergence of Indian Multinationals

CHALLENGES IN INDIAN BANKING INDUSTRY

It is by now well recognized that India is one of the fastest growing economies in the world. Evidence from across the world suggests that a sound and evolved banking system is required for sustained economic development. India has a better banking system in place vis a vis other developing countries, but there are several issues that need to be ironed out. The challenges that the banking sector in India faces are: -

Interest Rate Risk: Interest rate risk can be defined as exposure of bank's net interest income to adverse movements in interest rates. A bank's balance sheet consists mainly of rupee assets and liabilities. Any movement in domestic interest rate is the main source of interest rate risk. Over the last few years the treasury departments of banks have been responsible for a substantial part of profits made by banks. Between July 1997 and Oct 2003, as interest

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rates fell, the yield on 10-year government bonds (a barometer for domestic interest rates) fell, from 13 per cent to 4.9 per cent. With yields fell the banks made huge profits on their bond portfolios. Now as yields go up (with the rise in inflation, bond yields go up and bond prices fall as the debt market starts factoring a possible interest rate hike), the banks will have to set aside funds to mark to market their investment. This will make it difficult to show huge profits from treasury operations. This concern becomes much stronger because a substantial percentage of bank deposits remain invested in government bonds. Banking in the recent years had been reduced to a trading operation in government securities. Recent months have shown a rise in the bond yields has led to the profit from treasury operations falling. The latest quarterly reports of banks clearly show several banks making losses on their treasury operations. If the rise in yields continues the banks might end up posting huge losses on their trading books. Given these facts, banks will have to look at alternative sources of investment.

Non-Performing Assets: The best indicator of the health of the banking industry in a country is its level of NPAs. Given this fact, Indian banks seem to be better placed than they were in the past. A few banks have even managed to reduce their net NPAs to less than one percent (before the merger of Global Trust Bank into Oriental Bank of Commerce, OBC was a zero NPA bank). But as the bond yields start to rise the chances are the net NPAs will also start to go up. This will happen because the banks have been making huge provisions against the money they made on their bond portfolios in a scenario where bond yields were falling. Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years. This does not seem to be the case. With increasing bond yields, treasury income will come down and if the banks wish to make large
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provisions, the money will have to come from their interest income, and this in turn, shall bring down the profitability of banks.

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The Urge to Merge: -

In the recent past there has been a lot of talk about Indian Banks lacking in scale and size. The State Bank of India is the only bank from India to make it to the list of Top 100 banks, globally. Most of the PSBs are either looking to pick up a smaller bank or waiting to be picked up by a larger bank. The central government also seems to be game about the issue and is seen to be encouraging PSBs to merge or acquire other banks. Global evidence seems to suggest that even though there is great enthusiasm when companies merge or get acquired, majority of the mergers/acquisitions do not really work. So in the zeal to merge with or acquire another bank the PSBs should not let their common sense take a back seat. Before a merger is carried out cultural issues should be looked into. A bank based primarily out of North India might want to acquire a bank based primarily out of South India to increase its geographical presence but their cultures might be very different. So the integration process might become very difficult. Technological compatibility is another issue that needs to be looked into in details before any merger or acquisition is carried out. The banks must not just merge because everybody around them is merging. As Keynes wrote, "Worldly wisdom teaches us that it's better for reputation to fail conventionally than succeed unconventionally". Banks should avoid falling into this trap.

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Impact of BASEL-II Norms: Banking is a commodity business. The margins on the products that banks offer to its customers are extremely thin vis a vis other businesses. As a result, for banks to earn an adequate return of equity and compete for capital along with other industries, they need to be highly leveraged. The primary function of the bank's capital is to absorb any losses a bank suffers (which can be written off against bank's capital). Norms set in the Swiss town of Basel determine the ground rules for the way banks around the world account for loans they give out. These rules were formulated by the Bank for International Settlements in 1988. Essentially, these rules tell the banks how much capital the banks should have to cover up for the risk that their loans might go bad. The rules set in 1988 led the banks to differentiate among the customers it lent out money to. Different weightage was given to various forms of assets, with zero percentage weightings being given to cash, deposits with the central bank/govt etc, and 100 per cent weighting to claims on private sector, fixed assets, real estate etc. The summation of these assets gave us the risk-weighted assets. Against these risk weighted assets the banks had to maintain a (Tier I + Tier II) capital of 9 per cent i.e. every Rs100 of risk assets had to be backed by Rs 9 of Tier I + Tier II capital. To put it simply the banks had to maintain a capital adequacy ratio of 9 per cent. The problem with these rules is that they do not distinguish within a category i.e. all lending to private sector is assigned a 100 per cent risk weighting, be it a company with the best credit rating or company which is in the doldrums and has a very low credit rating. This is not an efficient use of capital. The company with the best credit rating is more likely to repay the loan vis a vis the company with a low credit rating. So the bank should be setting aside a far lesser amount of capital against the risk of a company with the best credit rating defaulting vis a vis the company with a low credit rating. With the BASEL-II norms the bank can decide on the amount of capital to set aside depending on the credit rating of the company
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. Credit risk is not the only type of risk that banks face. These days the operational risks that banks face are huge. The various risks that come under operational risk are competition risk, technology risk, casualty risk, crime risk etc. The original BASEL rules did not take into account the operational risks. As per the BASEL-II norms, banks will have to set aside 15 per cent of net income to protect themselves against operational risks. So to be ready for the new BASEL rules the banks will have to set aside more capital because the new rules could lead to capital adequacy ratios of the banks falling. How the banks plan to go about meeting these requirements is something that remains to be seen.

FUTURE
The future of Indian Banking represents a unique mixture of unlimited opportunities amidst insurmountable challenges. On the one hand we see the scenario represented by the rapid process of globalization presently taking shape bringing the community of nations in the world together, transcending geographical boundaries, in the sphere of trade and commerce, and even employment opportunities of individuals. All these indicate newly emerging opportunities for Indian Banking. But on the darker side we see the accumulated morass, brought out by three decades of controlled and regimented management of the banks in the past. It has siphoned profitability of the Government owned banks, accumulated bloated NPA and threatens Capital Adequacy of the Banks and their continued stability. Nationalized banks are heavily over-staffed. The recruitment, training, placement and promotion policies of the banks leave much to be desired. In the nutshell the problem is how to shed the legacies of the past and adapt to the demands of the new age. On the brighter side are the opportunities on account of:

The advent of economic reforms, the deregulation and opening of the Indian economy to the global market, brings opportunities over a vast and unlimited market to business and industry in our country, which directly brings added opportunities to the banks.

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The advent of Reforms in the Financial & Banking Sectors (the first phase in the year 1992 to 1995) and the second phase in 1998 heralds a new welcome development to reshape and reorganize banking institutions to look forward to the future with competence and confidence. The complete freeing of Nationalized Banks (the major segment) from administered policies and Government regulation in matters of day to day functioning heralds a new era of selfgovernance and a scope for exercise of self initiative for these banks. There will be no more directed lending, pre-ordered interest rates, or investment guidelines as per dictates of the Government or RBI. Banks are to be managed by themselves, as independent corporate organizations, and not as extensions of government departments.

Acceptance of prudential norms with regards to Capital Adequacy, Income Recognition and Provisioning are welcome measures of self regulation intended to fine-tune growth and development of the banks. It introduces a new transparency, and the balance sheets of banks now convey both their strength and weakness. Capital Adequacy and provisioning norms are intended to provide stability to the Banks and protect them in times of crisis. These equally induce a measure of corporate accountability and responsibility for good management on the part of the banks

Large scale switching to hi-tech banking by Indian Scheduled Commercial Banks(SCBs) through the application of Information Technology and

computerisation of banking operations, will revolutionalise customer service. The age-old method of 'pen and ink' systems are over. Banks now will have more employees available for business development and customer service freed from the needs of book-keeping and for casting or tallying balances, as it was earlier.

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All these welcome changes towards competitive and constructive banking could not however, deliver quick benefits on account insurmountable carried over problems of the past three decades. Since the 70s the SCBs of India functioned totally as captive capsule units cut off from international banking and unable to participate in the structural transformations, the sweeping changes, and the new type of lending products emerging in the global banking Institutions. Our banks are over-staffed. The personnel lack training and knowledge resources required to compete with international players. The prevalence of corruption in public services of which PSBs are an integral part and the chaotic conditions in parts of the Indian Industry have resulted in the accumulation of nonproductive assets in an unprecedented level. The future of Indian Banking is dependent on the success of its efforts as to how it shakes off these accumulated past legacies and carried forward ailments and how it regenerates itself to avail the new vistas of opportunities to be able to turn Indian Banking to International Standards. PSBs in India can solve their problems only if they assert a spirit of self-initiative and self-reliance through developing their in-house expertise. They have to imbibe the banking philosophy inherent in de-regulation. They are free to choose their respective paths and set their independent goals and corporate mission. The first need is management up gradation. We have learnt prudential norms of asset classification and provisioning. More important now, we must learn prudential norms of asset creation, of credit assessment and credit delivery, of risk forecasting and de-risking strategies. The habit of looking to RBI and Government of India to step in and remove the barriers in the way of the Banks should be given a go-bye. NPA is a problem created by the Banks and they have to find the cause and the solution - how it was created and how the Banks are to overcome it. Powerful Institutions can be nurtured by strong and dynamic management and not by corrupt and weak bureaucrats.

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These issues are discussed with frankness and candor in these pages, under titles listed in the Table of Contents (see Menu Bar at the top), which provide you a direct access to any or all the topics of your choice. Public sector ownership need not result in inefficiency and poor customer service. These are not due to the ills of ownership, but due to failure to accept the correct "Mission" and "Goals" of management. On the other hand unlike several private sector units, Public sector units have specific plus points. They do not evade taxes, and do not accumulate unassessed wealth or unaccounted money. They do not bribe controlling persons to get their way through. They do not indulge in predatory "take over" of weaker rival units. In fact a public unit never competes unethically with its rival-units.

RETAIL BANKING:
In recent years, the banking industry around the world has been undergoing a rapid transformation. In India also, the wave of deregulation of early 1990s has created heightened competition and greater risk for banks and other financial intermediaries. The cross-border flows and entry of new players and products have forced banks to adjust the product-mix and undertake rapid changes in their processes and operations to remain competitive. The deepening of technology has facilitated better tracking and fulfillment of commitments, multiple delivery channels for customers and faster resolution of miscoordinations. Unlike in the past, the banks today are market driven and market responsive. The top concern in the mind of every bank's CEO is increasing or at least maintaining the market share in every line of business against the backdrop of heightened competition.
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With the entry of new players and multiple channels, customers (both corporate and retail) have become more discerning and less "loyal" to banks. This makes it imperative that banks provide best possible products and services to ensure customer satisfaction. To address the challenge of retention of customers, there have been active efforts in the banking circles to switch over to customer-centric business model. The success of such a model depends upon the approach adopted by banks with respect to customer data management and customer relationship management. over the last 20 years from the days when most customers opened a bank account for life at their local branch, through automation, deregulation and increasing competition to a new set of challenges. Traditionally, the current account was viewed as the key banking relationship with the banker as the natural provider of additional products and services. Delivery was substantially branch based and additional services were typically only for those with big balances. The Big Four UK banks enjoyed dominance through a combination of powerful brands and Over the years, Indian banks have expanded to cover a large geographic & functional area to meet the developmental needs. They have been managing a world of information about customers - their profiles, location, etc. They have a close relationship with their customers and a good knowledge of their needs, requirements and cash positions. Though this offers them a unique advantage, they face a fundamental problem. During the period of planned economic development, the bank products were bought in India and not sold. What our banks, especially those in the public sector lack is the marketing attitude. Marketing is a customer-oriented operation. What is needed is the effort on their part to improve their service image and exploit their large customer information base effectively to communicate product availability.
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Achieving customer focus requires leveraging existing customer information to gain a deeper insight into the relationship a customer has with the institution, and improving customer service-related processes so that the services are quick, error free and convenient for the customersFurthermore, banks need to have very strong in-house research and market intelligence units in order to face the future challenges of competition, especially customer retention. Marketing is a question of demand (customers) and supply (financial products & services, customer services through various delivery channels). Both demand and supply have to be understood in the context of geographic locations and competitor analysis to undertake focused marketing (advertising) efforts. Focusing on region-specific campaigns rather than national media campaigns would be a better strategy for a diverse country like India. Customer-centricity also implies increasing investment in technology. Throughout much of the last decade, banks world-over have re-engineered their organizations to improve efficiency and move customers to lower cost, automated channels, such as ATMs . As is proved by the experience, banks are now realizing that one of their best assets for building profitable customer relationships especially in a developing country like India is the branch-branches are in fact a key channel for customer retention and profit growth in rural and semi-urban set up. However, to maximize the value of this resource, our banks need to transform their branches from transaction processing centres into customercentric service centres. This transformation would help them achieve bottom line business benefits by retaining the most profitable customers. Branches could also be used to inform and educate customers about other, more efficient channels, to advise on and sell new financial instruments like consumer loans, insurance products, mutual fund products.

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There is a growing realization among Indian banks that it no longer pays to have a "transaction-based" operating model. There are active efforts to develop a relationshiporiented model of operations focusing on customer-centric services. The biggest challenge our banks face today is to establish customer intimacy without which all other efforts towards operational excellence are meaningless. The banks need to ensure through their services that the customers come back to them. This is because a major chunk of income for most of the banks comes from existing customers, rather than from new customers. Customer relationship management (CRM) solutions, if implemented and integrated correctly, can help significantly in improving customer satisfaction levels. Data warehousing can help in providing better transaction experiences for customers over different transaction channels. This is because data warehousing helps bring all the transactions coming from different channels under the same roof. Data mining helps banks analyse and measure customer transaction patterns and behaviour. This can help a lot in improving service levels and finding new business opportunities. It must be noted, however, that customer-centric banking also involves many risks. The banking industry world over is being thrust into a wild new world of privacy controversy. The banks need to set up serious governance systems for privacy risk management. It must be remembered that customer privacy issues threaten to compromise the use of information technology which is at the very center of e-commerce and customer relationship management - two areas which are crucial for banks' future.

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The critical issue for banks is that they will not be able to safeguard customer privacy completely without undermining the most exciting innovations in banking. These innovations promise huge benefits, both for customers and providers. But to capture them, financial services companies and their customers will have to make some critical tradeoffs. When the stakes are so high, nothing can be left to chance, which is why banks must immediately begin developing comprehensive approaches to the privacy issue. The customer centric business models based on the applications of information technology are sustainable only if the banks protect client confidentiality in the process which is the basic foundation of banking business.

The key business drivers within retail banking are relatively simple and enduring:

Building market share and maintaining profitable relationships; Improving delivery and reducing costs.

The challenge is how to deliver in a competitive landscape that is complex and rapidly evolving (see table below). Retail banking has seen much barriers to switching accounts. However for many years now, most current accounts at best have been loss leaders. In other markets there are substantial charges for cards, fees for ATM withdrawals and account charges. The UK market is tougher. Cards and most payments are free. Average balances are declining and an increasingly competitive market dictates that banks pay interest.

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Challenges to Building Share, Revenue and Relationships

From an historic position of strength the traditional banks now must fight hard to sell new products. Consumers no longer automatically turn to their primary bank for additional services and most current accounts are loss-making. In addition, the core banking relationship itself is being challenged by product specialists and non-financial services players exploiting the power of retail brands. A new generation of confident consumers is driving a fundamental change in consumer behaviour. Far more demanding, younger consumers are more likely to consider switching to a new offer. If they lose out they will expect the regulator, the consumer watchdog or the law to put it right. They will look on a case-by-case basis for the best product and the best price. There remains a group of more conservative customers with a natural tendency to turn to their bank when looking for new services. There is still considerable inertia to switching current accounts which has had implications for new entrant Competition remains strong right across retail financial services; in credit and debit cards, mortgages, loans and insurance. Good margins, deregulation and lower entry costs have attracted new competitors. Players from the US card market have tried to exploit expertise in customer segmentation and operations. Retailers and others have tried to exploit a strong existing brand and CRM capabilities. Start-ups have gambled on electronic delivery to deliver superior customer service with low unit costs.

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Most start-ups have struggled to build sufficient critical mass for profitability. Initial market share can be built by aggressive pricing or by product innovation, but neither pricing nor product differentiation appears to give sustainable advantage. Even Egg, with the financial resources of Prudential behind it, has had to move away from leading on price. Virgin, despite its brand appeal, has had limited success with its new combined account and competitors are already launching copycat products. There are increasingly separate markets for each product marking a breakdown of the traditional connection between relationship and product. While every player wants to own the customer relationship, customers are taking control and shopping by product. A trusted brand is still the key to building sustainable market share. Financial services are different from retailing; buying a bad washing machine is a problem, but buying a pension from Equitable Life was a disaster. Building trust in the integrity and competence of a brand takes time and sustained effort. Only those new competitors with very deep pockets and a willingness to build for the longer term can hope to succeed. As financial service providers seek innovative distribution channels the interest in partnership marketing grows. For example, partnerships between financial services providers and employers in worksite marketing are gaining momentum in the UK. There are two key trends behind this. Firstly, many employers are moving to "cafeteria" benefits. They allocate a cash value to each employee who can choose a mix of benefits, whether a company car, extra holiday, on site catering or dry cleaning. This gives employees greater choice, control and responsibility.

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Secondly, the introduction of stakeholder pensions and the growth of defined contribution pension schemes require financial service companies to have a more direct relationship with employees. Overall, the difficulty of achieving profitable critical mass will cause a shake out amongst the smaller players and there will have to be continued consolidation of brands and infrastructure among the larger players. Competition policy is likely to limit further mega-mergers, but single product providers, whether in mortgages or insurance, will continue to be targets for major players looking to strengthen their presence in higher margin products. Partnerships will begin to provide some of the benefits of mergers, for example between insurers and banks. Difficult choices will have to be made on whether to consolidate brands and phase out current accounts. However, building and maintaining a strong brand, based on trust, excellent execution and value for money will remain the single most important factor in maintaining sustainable market share.

Improving Delivery & Reducing Costs

ATMs rapidly became popular because of a service that was quicker, less error prone and available 24/7. However, ATMs now look second-best for everything except cash, when compared with individual access via the telephone, PC, TV or mobile phone; all of which are private, flexible and dont have queues.

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While multiple automated access channels are good for the consumer, they create complexity and cost for the bank. Banks often successfully add a low-cost channel such as internet access, but must continue to support a customer base committed to other channels. Supporting multiple new channels requires massive IT investment, especially for incumbents integrating with ageing legacy back-office systems. The cost reduction that has taken place in the last decade has in some cases been simplistic. Some banks with a relatively high cost-income ratio have tended to react by cutting new business development and essential strategic investment. Often there were organisation-wide squeezes, rather than a prioritisation of certain products or activities and cutting of others. Dropping product types could be unpopular with Boards, which often saw the range of businesses and services as a measure of the importance of the bank.

STRATEGIC CHALLENGES
Credo is currently investigating a number of strategic issues that banks are grappling with: 1. Does it still make sense to have a transactional/current account as the core of the customer relationship? 2. Can you develop and maintain a major financial services brand without a big current account base? 3. Is it time to reduce costs by sharing or outsourcing "commoditised" traditional delivery infrastructure (i.e. branches, ATMs, bill paying, call centres and card payments)?
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4. How can you manage the transition to new, largely electronic delivery channels while minimising the substantial transitional increases in costs? In practice this will translate into three key challenges. Firstly, matching cost programmes to customer value, not only at a product level but targeting customer segments with a tailored service to reflect their channel requirements and value to the bank. Secondly, actively migrating customers onto low cost, self-service channels. Thirdly, getting IT systems to deliver whether driving value from expensive CRM investments, or pursuing alternative models such as shared infrastructure or outsourcing. Retail banking refers to mass-market banking where individual customers typically use banks for services such as savings and current accounts, mortgages, loans (e.g. personal, housing, auto, and educational), debit cards, credit cards, depository services, fixed deposits, investment advisory services (for high net worth individuals) etc. Before Internet era, consumers largely selected their banks based on how convenient the location of banks branches was to their homes or offices. With the Advent of new technologies in the business of bank, such as Internet banking and ATMs, now customers can freely chose any bank for their transactions. Thus the customer base of banks has increased, and so has the choices of customers for selecting the banks. This is just the beginning of the story. Due to globalization a new generation of private sector banks and many foreign banks have also entered the market and they have brought with them several useful and innovative products. Due to forced competition, public sector banks are also becoming more technology savvy and customer oriented.

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Thus, Non-traditional competition, market consolidation, new technology, and the proliferation of the Internet are changing the competitive landscape of the retail banking industry. Today retail banking sector is characterized by following: Multiple products (deposits, credit cards, insurance, investments and securities) Multiple channels of distribution (call center, branch, Internet and kiosk) Multiple customer groups (consumer, small business, and corporate) Today, the customers have many expectations from bank such as (i) Service at reduced cost (ii) Service Anytime Anywhere (iii) Personalized Service

With increased number of banks, products and services and practically nil switching costs, customers are easily switching banks whenever they find better services and products. Banks are finding it tough to get new customers and more importantly retain existing customers. According to a research by Reichheld and Sasser in the Harvard Business Review, 5% increase in customer retention can increase profitability by 35% in banking business, 50% in insurance and brokerage, and 125% in the consumer credit card market. Therefore banks are now stressing on retaining customers and increasing market share.

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COMPARATIVE ANALYSIS
There were various shortcomings in services of public sector banks that lead to growth of Foreign and Private sector banks in India. Today India can boast of its own banks, which are at par with international stands of service provided by banks world over. HDFC bank and ICICI bank are two top-notch banks in India, which are providing giving tough competition to the foreign banks. Its not long when they will come in the same category as Bank of America or Citybank. The objective of this analysis was to find out the reasons for the success of the India's two top private sector banks ICICI and HDFC as compared its other Indian counterparts. Although the recent figures of the top banks shows that HDFC bank is in top but it will change as ICICI will take over HDFC to become the top bank. The main reason for this change is that HDFC is the concentrating on the recent merger. Once is able to bring a uniform policy at place it will come backing a big way in Government Banking Arena. The Cutting Edge To become a top you need to know your competition and hve to deliver quicker and better than your competitor. But product superiority is not the only reason why the banks stay at to but it has to be combined with sound marketing strategy, operational efficiency, better customer management and motivation in the organization.

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COMPARISON CHART
(Of Saving Account) Services 1. BRANCHES 2. ATMS(DEL/IND) 3. ATM/DEBIT CARDS 4. CHARGES FOR DEBIT CARD STANDARD CHARTERED 13(DEL)57(IND) 35(DEL)246(IND) ATM/DEBIT CARD RS.100/- p.a. ABN-AMRO 3(DEL)-9(IND) 13(DEL)40(IND) ATM/DEBIT CARD 1ST YEAR FREE RS.200/- P.A. 5. ATM CARD ACCESS TO OTHER NO BANK 6. DEBIT CARD OTHER BANK ACCESS TO YES 4TRANS FREE (RS.50 PER TRANS) 8. LOCKER FACILITY 9. CHQ DEPOSITS BOXES 10. GLOBAL DEBIT CARD 11. GLOBAL CREDIT CARD 12. AVERAGE BANKING HOURS 13. SUNDAY BANKING 14. MINIMUM BAL-SAVING YES (UTI NO BANK FREE) YES 2TRANS FREE (RS.40 PER TRANS) YES RS.50/TRANS NO YES YES YES 10AM-2PM YES RS.10000/RS.250/- PM RS.50000/YES FREE NO PER CITIBANK 9(DEL)-126(IND) 22(DEL)160(IND) ATM/DEBIT CARD RS.100/- P.A.

7. CHARGES PER TRANSACTION

YES (RS.2000/- NO P.A.) YES YES YES 10A.M.-7P.M. YES RS.10000/YES YES YES 10AM-7PM YES RS.10000/RS.200 RS.1800 PM RS.25000RS.1 LAC YES FREE NO
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15. CHARGES FOR NON RS.750 PER MAINTAINING MIN. BALANCE QUARTER 16. WITHDRAWL/DAY/ATM CASH RS.25000/-

17. CASH TRANS FROM NON YES BRANCH 18. STATEMENT CHARGES 19. 24 HRS BRANCH FREE YES

20. 365 DAYS BRANCH 21. AUTOMATED REORDER CHQ

YES BOOK YES YES YES YES YES NO YES YES YES (20 LAC)

YES NO YES YES YES YES YES YES

NO NO YES YES YES YES YES YES

22. MULTI CITY BANKING 23. NATIONAL CLEARING 24. SPEED CLEARING 25. NET BANKING 26. MOBILE BANKING 27. PHONE BANKING 28. DMAT 29. PRIORITY BANKING

YES (3-5 DAYS) YES (7-14 DAYS)

YES (VAN YES (30 LAC) GOUCH) NO YES NO YES

30. FLEXIBILITY OF INTEREST YES RATES 31. DOOR STEP BANKING 32. CHASH DELIVERY YES YES (CHARGED) YES (CHARGED) YES YES

UP TO 1LAC YES (CHARGED) FREE & ABOVE CHR. YES YES YES YES YES YES

33. CASH PICK UP 34. CHQ PICK UP 35. PAY ORDER

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Services 1. BRANCHES 2. ATMS(DEL/IND) 3. ATM/DEBIT CARDS 4. CHARGES FOR DEBIT CARD

ICICI 33(DEL)400(IND) 112(DEL)560(IND) ATM/DEBIT CARD RS.99/- p.a.

HDFC 19(DEL)210(IND) 66(DEL)125(IND) ATM/DEBIT CARD RS.100/- P.A. NO YES

HSBC 3(DEL)-28(IND) 21(DEL)103(IND) ATM/DEBIT CARD RS.150/- P.A. NO YES PER

5. ATM CARD ACCESS TO OTHER NO BANK 6. DEBIT CARD OTHER BANK ACCESS TO YES (RS.50 PER TRANS) YES (RS.750/-) ALL BRANCHES ATM YES YES 9AM-4PM NO RS.5000/&

7. CHARGES PER TRANSACTION 8. LOCKER FACILITY 9. CHQ DEPOSITS BOXES

(RS.55-100 PER RS.50/TRANS) TRANS YES YES YES YES

10. GLOBAL DEBIT CARD 11. GLOBAL CREDIT CARD 12. AVERAGE BANKING HOURS 13. SUNDAY BANKING 14. MINIMUM BAL-SAVING

YES YES 10AM-4PM NO RS.5000/RS.150 RS.500 PM RS.15000 NO FREE NO NO NO

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YES YES 9AM-4PM NO RS.10000/RS.300 PER QUARTER RS.25000/YES FREE NO NO NO

15. CHARGES FOR NON RS.300 PER MAINTAINING MIN. BALANCE QUARTER 16. WITHDRAWL/DAY/ATM CASH RS15000/-

17. CASH TRANS FROM NON YES BRANCH 18. STATEMENT CHARGES 19. 24 HRS BRANCH 20. 365 DAYS BRANCH 21. AUTOMATED CHQ FREE NO NO BOOK NO

REORDER 22. MULTI CITY BANKING 23. NATIONAL CLEARING 24. SPEED CLEARING 25. NET BANKING 26. MOBILE BANKING 27. PHONE BANKING 28. DMAT 29. PRIORITY BANKING YES YES YES YES YES YES YES YES (10 LAC) NO YES YES YES YES YES YES YES (10 LAC) YES NO NO NO NO YES YES YES YES YES YES YES YES YES YES YES YES (CHARGED) YES (CHARGED) YES YES

30. FLEXIBILITY OF INTEREST YES RATES 31. DOOR STEP BANKING 32. CHASH DELIVERY 33. CASH PICK UP 34. CHQ PICK UP 35. PAY ORDER YES YES (CHARGED) YES FREE ONCE A DAY YES

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Services 1. BRANCHES 2. ATMS(DEL/IND) 3. ATM/DEBIT CARDS 4. CHARGES FOR DEBIT CARD 5. ATM CARD ACCESS TO OTHER BANK 6. DEBIT CARD ACCESS TO OTHER BANK 7. CHARGES PER TRANSACTION 8. LOCKER FACILITY 9. CHQ DEPOSITS BOXES 10. GLOBAL DEBIT CARD 11. GLOBAL CREDIT CARD 13. SUNDAY BANKING 14. MINIMUM BAL-SAVING 15. CHARGES FOR NON MAINTAINING MIN. BALANCE 16. CASH WITHDRAWL/DAY/ATM 17. CASH TRANS FROM NON BRANCH 18. STATEMENT CHARGES 19. 24 HRS BRANCH 20. 365 DAYS BRANCH 21. AUTOMATED CHQ BOOK REORDER 22. MULTI CITY BANKING

GTB 5(DEL)-91(IND) 20(DEL)250(IND) ATM/DEBIT CARD RS.150/- p.a. NO YES (RS.50 PER TRANS) YES YES NO NO NO RS.5000/RS.150 PER QUARTER RS15000/- 20000/NO FREE NO NO NO

UTI 70 (IND) 507(IND) ATM/DEBIT CARD RS.150/- P.A. NO YES (RS.50 PER TRANS) YES YES NO NO 10AM-4PM NO RS.5000/RS.200 RS.500 PM RS.20000 YES (UPTO RS.15000) FREE NO NO NO

IDBI 9(DEL)-65(IND) 43(DEL)350(IND) ATM/DEBIT CARD RS.100/- P.A. NO YES RS.50/- PER TRANS YES YES NO NO 10AM-4PM NO RS.5000/RS100 PER QUARTER RS.25000/YES (UPTO RS.50000) FREE NO NO NO YES

12. AVERAGE BANKING HOURS 9AM-5PM

YES (SELECTED YES CITIES) (SELECTED CITIES)

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23. NATIONAL CLEARING 24. SPEED CLEARING 25. NET BANKING 26. MOBILE BANKING 27. PHONE BANKING 28. DMAT 29. PRIORITY BANKING 30. FLEXIBILITY OF INTEREST RATES 31. DOOR STEP BANKING 32. CHASH DELIVERY 33. CASH PICK UP 34. CHQ PICK UP 35. PAY ORDER

YES YES YES YES YES NO NO YES NO NO NO NO YES

YES NO YES NO YES YES NO YES NO NO NO YES (CHARGED) YES

YES NO YES YES YES NO NO YES YES YES (CHARGED) YES (CHARGED) YES YES

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CHAPTER 3 RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY
OBJECTIVE
The main objective of this research is to find out whether Private sector banks which have made their presence felt in India are providing good services or not, and if they are then, how are they providing a better service. Because of our objective we to compare the services of the Private sector banks with that of the Indian nationalized banks so as to know how are they providing good services and in what ways. For this we have got questionnaires filled from people who are holding accounts in both the banks i.e. Private sector banks as well as Government Banks. As they are the best one's to judge and tell. The aim of the study is not only to find out whether the Private sector banks are giving good service or not, but can also be stretched to the extent that why are the Government Banks not being able to do what the others are doing so successfully, if they are successful.

METHODOLOGY Sampling procedure: The sampling plan calls for three decisions Sampling size - 100 respondents The sample size taken was of 100 people who held bank accounts in both Private Sector Banks and Government Sector Banks

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DATA COLLECTIONData source: The source of data was primary and secondary. Research instruments: The research instruments used were personal interviews and response sheets.

Primary Data:
We interviewed salaried class, Proffesionals, Self-employed and Businessmen. We also gave customers to fill up the response sheets.

Secondary Data:
In our case secondary data were collected from: News paper (Economic Times) Information Brochures. On the job training Pamphlets

The information collected from the questionnaire was then tabulated and discriptive analysis was derived from the same. After tabulation of data their analysis was done by which we could come down to the conclusion and write what the people think about the services of the Private sector banks and government sector banks. Are they really good or not.

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CHAPTER 4 DATA ANALYSIS AND INTERPRETATION

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ANALYSIS OF THE DATA

PRIVATE SECTOR BANKS
77% of the people transact with the bank once twice in a week 23% transact fortnightly with the bank. FREQUENCY OF TRANSACTION

77% 80% 70% 60% 60% 50% 50% 40% 40% 30% 20% 30% 10% 20% 0% 15% 31% 54%

23%

Once / twice in a week

10% 0%

Fortnightly

Excellent

Good

Average

RATING OF TRANSACTION

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54% of the people find their transaction with the banks as excellent. 31% of the sample size rate their transactions with the bank as good 15% of the sample size rate their transactions as average.

SERVICES PROVIDED BY DIFFERENT PRIVATE SECTOR BANKS

77% people holding accounts in their respective banks enjoy the tele banking facility. 62% people holding account in their respective banks enjoy internet banking. 70% people holding accounts in their respective banks enjoy the tele draft facility. 92%of the people holding account in their respective banks enjoy the credit card facility.

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 46% of the people holding accounts in their respective banks enjoy the service of delivery of cash at their door step. 100% of the people holding account in their respective accounts enjoy the ATM services. 54% of the sample size said that the above services come for a cost but all of them are

ATM Services Delivery of cash at doorstep Credit card facility 70%

100%

46% 92%

Teledraft facility

Internet banking

62%

Telebanking 0% 20% 40% 60% 80%

77% 100% 120%

happy with these services even though they have to pay for it. For the rest 46% of the sample size the above mentioned services do not come for a cost as they fall in bracket of premium segment clients in their respective banks and therefore they too are very happy with the services. 77% of the sample size finds the service for remitting cash at their respective banks very fast.
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Whereas 23% find the service of remitting cash at their respective banks average. No respondent has rated the service of remitting cash in these Private sector banks as slow.

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REMITTING CASH

65% 70% 60% 50% 40% 30% 20% 10% 0% 35%

Very fast

Average

65% of the sample size believe that these Private sector banks give them personal attention with which they make their customer feel special.

Whereas 35% of the sample size believes these Private sector banks do not give any personal attention.

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PERSONAL ATTENTION GIVEN BY PRIVATE SECTOR BANKS

No 18%

Yes 82%

82% of the sample size believe that these Private sector banks give them personal attention with which they make their customer feel special.

Whereas 18% of the sample size believes these Private sector banks do not give any personal attention.

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GOVERNMENT BANK ANALYSIS

23% of the sample size transacts with their respective banks once or twice in a week. Whereas 77% of the sample transact with their respective Government Banks fortnightly. FREQUENCY OF TRANSACTION

77% 80% 70% 60% 50% 40% 30% 20% 10% 0% 23%

Once/twice in a week

Fortnightly

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RATING OF TRANSACTION
15% of the sample size finds the time taken in remitting cash as very fast. 46% of the sample size finds the time taken in remitting cash as average. Whereas 39% of the sample find the time takes in remitting cash as slow.

46% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 15% 39%

Very fast

Average

Slow

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PERSONAL ATTENTION GIVEN BY THE GOVERNMENT BANKS

31% of the sample size feels that these Government Banks do give them personal attention. Whereas on the contrary, 69% of the remaining sample believes that their banks lack the skills of giving personal attention.

69% 70% 60% 50% 40% 30% 20% 10% 0%

31%

Yes

No

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SATISFACTION WITH THE SERVICES PROVIDED

38% of the sample size is happy with the services with what their respective banks are offering. Whereas 62% of the sample is not satisfied with the services and is not happy with the services of what is being offered to them.

Yes 38%

No 62%

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SERVICES PROVIDED BY GOVERNMENT BANKS

23% of the sample size enjoys the facility of telebanking facility provided by their respective banks. 15% of the sample size enjoys the facility of doing banking through the net. 15% of the sample size enjoys the teledraft facility. 15% of the sample size enjoys the credit card facility provided by their respective banks. 54% of the sample size enjoys the facility of an ATM provided by their respective banks. Whereas No respondent enjoys the facility of providing cash at their doorstep by their respective banks.

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ATM Services Delivery of cash at doorstep Credit card facility

54%

0% 15% 15%

Teledraft facility

Internet banking

15%

Telebanking 0% 10% 20%

23% 30% 40% 50% 60%

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COMPARISON
85% of the sample having both Indian as well as Private sector bank accounts have said that Private sector banks are providing better and good services than the Government banks. Whereas 15% feel that both of them i.e. the Private sector and Indian banks are providing them with good services. No respondent has said that Government Banks alone are providing better services than the Private sector banks.

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

85%

15%

0% Good services provided by private sector banks Good services provided by both the banks Government sector banks alone providing good service

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PERSONAL OPINION REGARDING SECURITY

15% of the sample size believe that the Government Banks are more safer and their money is more secure in these banks than in Private sector banks. But majority of the sample size i.e. 77% of the respondents feel that the their money is more secure in the Private sector banks. Only 8% believe that their money is more safe in both the banks. PERSONAL OPINION REGARDING CONVENIENCE

Both banks 8%

Government Banks 15%

Private banks 77%

85

60% of the sample size

believe that the Private sector banks are more

convenient as compared to the Government Banks.

60% 60% 50% 40% 30% 20% 10% 0% 40%

Private banks

Government banks

40% respondents are of the view that Government Banks are more convenient

than the Private sector banks.

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67% of the sample size believe that the Private sector banks are more convenient as compared to the Government sector banks.

67% 70% 60% 50% 40% 30% 20% 10% 0%

33%

Private banks

Government banks

33% respondents are of the view that Government Banks are more convenient than the Private sector banks

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COMPARISON OF SERVICES
100% of the respondents agree unanimously that the Private sector banks are providing better services than the Government Banks.

Inspite of Private sector banks having an edge over the Government Banks as in the
97% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 3%

Private banks

Government banks

services provided by them, still only 3% respondent is ready to transfer its existing Government Bank account to the existing Private sector bank account.

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RAW DATA
(in percentage) Particulars Transactions with the banks Once /twice in a week Fortnightly Rating of the transaction Excellent Good Average Services provided by the bank Telebanking Internet banking Teledraft facility Credit card Delivery of cash at doorstep ATMs Are services coming for a cost Yes No 54 46 77 62 70 92 46 100 23 15 15 15 0 54 54 31 15 15 40 55 77 23 23 77 Private sector Bank Government Bank

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Particulars Happy with the services Yes No Time taken to remit/withdraw cash Very fast Average Slow Do these banks give personal attention Yes No

Private sector Bank

Government Bank

100 0

38 62

77 23 0

15 46 39

77 23

31 69

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CHAPTER 5 RECOMMENDATIONS AND SUGGESTATIONS

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RECOMMENDATIONS AND SUGGESTIONS

Because of the stiff competition of various banks in the market, focus of Indian

Bank should be immense on advertisement and promotion. ATM facility should be given to the students with "Zero balance of debit" so that

the students can easily get money at any time and at anywhere they want. Sunday should be made as a full working day for both the branches so that people

will easily transact at any time. News papers mainly, Times of India, Hindustan Times and Economic Times and

different magazines should be kept for the customers by which they feel relaxation until their transactions are over. Proper feedback system should be there and feed back forms should be kept for

the customers. These forms should be filled up by the customers coming into the bank and it should be collected on daily basis. By analysing these bank will easily come across its feedback and accordingly modify them. So that the customers will feel proud of themselves as well as their bank. The head office should appoint smart and handsome/beautiful employees in the

metro cities so that customer will feel proud over themselves. One person should be appointed at every branch of Delhi for the collection of

outstanding payments. In case of Sundays pamphlets of various schemes should be

distributed along with newspapers mainly Times of India, Hindustan Times and Economic Times. So that people will easily come across our bank and its schemes.

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Interior space should be extended so that people will freely move

during business/rush hours. One signboard of "Government sector banks" should be placed towards the West

side so that the trespassers will easily come across the bank. Information regarding the bounced cheques should be immediate informed to the

concerned person so that he/she can arrange some alternatives. installments. In case of vehicle loan, some percentage of discount should be given to the Variable recurring deposit scheme should be more flexible our customers

suggested that variable RD scheme should include daily/weekly/fortnightly submission of

customers on purchase of new vehicle either 2-wheeler or 4-wheeler from the company side on the reference of the bank. Proper water and toilet system should be provided in both the branches for

customers and bank employees and that should be well noticed to everybody.

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CHAPTER 6 CONCLUSION

94

CONCLUSION
From the analysis we can conclude the following : (i) Respondent who are holding accounts both in the Government Banks as well as the Private sector banks agree to the fact that they are being offered more variety of services by the Private sector banks. Although these services for 54% of the respondents come for a cost even after that they are happy with the services provided to them. For the rest of 46% the services are free as they fall in the premium segment clients for their respective banks. This shows that these Private sector banks are providing good services to all of its account holders. (ii) 54% of the Private sector bank account holders have rated the transaction with their banks as excellent and 77% of them have rated the time taken for remitting cash as very fast. Whereas on the other hand 15% of the account holders holding Government Bank accounts have rated the time taken for remitting cash as very fast. 39% of the respondents have rated the time taken for remitting cash as slow. Whereas no respondent has rated Private sector banks as slow. Therefore from this we can conclude that these Private sector banks are providing good services by knowing and understanding that every minute is important for every human being. Therefore they do not make their customers wait.

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Since 100% of the respondents agree to the fact that Private sector banks are providing better services than the Government Banks. Hence we can say that Private sector banks in India are providing quality services to their customer

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BIBLIOGRAPHY
Banking Industry Data Base Asian CERC Information Technology Ltd., 2004 G.Opah (eds) Emerging Perspectives on Services Marketing, pp 25-2 The future is in e-banking by Mr. K.V. Kamath (Managing Director, ICICI), April 14, 2005, Business Line. RBI road map for banking, The Indian Express, July 21,2006. Banking in India, by Dr A. K. Mishra (Professor & Chairman of Finance Group at IIM Lucknow). http://www.business2011.ie/cases/cases_8th/case11.htm http://www.indiainfoline.com http://www.thebharat.com http://www.icicibank.com http://www.hdfcbank.com

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APPENDIX

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QUESTIONNAIRE

Name : Occupation: Location: Q.1. How many times you visit the Banks? a) b) c) d) Once in a week twice in a week Fortnightly Monthly

Q.2. Yours views on banks overall performance? a) b) c) d) Excellent Good Satisfactory Poor

Q.3. What kind of different services provided by Banks? a) b) c) d) e) f) ATM services Delivery of cash at doorstep Credit card facility Tele draft facility Internet banking Tele banking

Q.4. Are services coming for a cost ? a) Yes

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b)

No

100

Q.5. Are you satisfied with services provided by banks? a) b) Yes No

Q.6. How much time taken to remit / withdraw the cash? a) very fast b) average c) slow Q.7. Do these banks give personal attention? a) b) Yes No

Q.8. Which sector banks provide better services? a) b) c) Private sector banks Government sector banks Both

Q.9. Which facility provided by the bank, you like the most?

Q.10. Can you suggest some ways by which it is possible to attract customers? a) b) c) d) e) Staff Efficient Staffs pleasing personality Transaction Accessibility of location Any other ( please specify _______________________)

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