Service Quality in Banking Sector

SERVQUAL ANALYSIS OF BANKING SECTOR WITH SPECIAL EMPHASIS ON AXIS AND SBI
A
PROJECT
ON
SERVICE QUALITY
ANALYSIS IN
BANKING
SECTOR
SUBMITTED BY:
VIRAL SHRIMALI
( 7093)
SUBMITTED TO:
N.R. INSTITUTE OF BUSINESS
MANAGEMENT
1
TABLE OF CONTENTS
1. RESEARCH METHODOLOGY
5
1.1 RESEARCH DESIGN
6
1.2 ANALYSIS OF DATA
7
1.3 LIMITATION OF STUDY
7
1.4 BENIFICIARIES OF PROJECT
8
1.5 THE RESEARCHER
2. INTRODUCTION TO THE BANKING

9
INDUSTRY
2.1 A SNAPSHOT OF THE BANKING INDUSTRY
10
2.2.1 REFORMS IN THE BANKING SECTOR
12
2
2.2.2 CLASSIFICATION OF BANKS

13
2.2 CURRENT BANKING SCENARIO OF INDIA
14
2.3 BANKING REVIEW
29
2.4 BANKING SECTOR
31
2.5 SWOT ANALISIS: BANKING SECTOR
32
2.5.1 PORTER’S FIVE FORCE ANALYSIS FOR
INDIAN BANKING SECTOR
33
2.5.2 PESTAL ANALYSIS
35
2.5.3 RECENT TRENDS
37
3. INRODUCTION TO SBI AND AXIS
50
3.1 STATE BANK OF INDIA
51
3.2 AXIS BANK
59
3.4 ABOUT AXIS BANK’S PROFILE
63
3
3.5 GOAL AND OBJECTIVES

64
4. SERVICE QUALITY
65
4.1 SERVICE AND ITS CHARECTERISTICS
66
4.2 GAP ANALYSIS
67
4.3 SERVICE QUALITY MEASUREMENT
68
5. ANALYSIS AND INTERPRETATION
70
6. KEY FINDINGS
93
7. CONCLUSION
96
8. RECOMMENDATION
98
9. BIBLIOGRAPHY
101
10. QUESTIONNAIRE
103
4
CHAPTER 1
RESEARCH METHODOLOGY
5
1.1 RESEARCH DESIGN:

The methodology for the research study is descriptive and is as follows:
Research Approach: Quantitative research
Objectives:
The main objective of our project is:
 To assess and compare the overall service performance of SBI and AXIS bank.
 To know in which service quality dimension the bank is performing well and in which
dimension it needs improvement.
 To know customers requirements or expectation for service.
Sampling:
Following sampling is designed in order to execute the survey.
 Sample Area: : Ahmedabad

 Sample size: 100 AXIS customers
100 SBI customers
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Sample Design: Samples selected in the survey are those who are the customers of
either AXIS or SBI or both.
Data Collection Method:
 Data Collection Tool

Secondary data: Various websites, articles from magazines and news papers, books
were used for collecting secondary data.
Primary data: The primary data has been collected by the researchers by designing
structured questionnaire with the relevant question to the project study and research.
Type of questionnaire: Structured questionnaire.
1.2 ANALYSIS OF DATA:
The collected data in the study has been presented and analyzed using the various
graphs for satisfaction level, score of various factors on the particular dimensions, and
overall dimension score and is compared with other service.
Also data is analyzed through performance matrix.
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1.3 LIMITAION OF STUDY:
 The study was restricted to two banks, so the competitive scenario could not be
studied.
 Inadequate time was the major constraint during the whole project.
 All the answers given by the respondents have been assumed true.
1.4 BENEFICIARIES OF PROJECT:

• Beneficiary of this project is to the bank, to improve the customer
satisfaction in the dimension in which they are lagging.
• Key findings and analysis will helpful to them for provide better
services to customers.
• For researchers, to know the competitive advantage of both the
banks and their services.
1.5 THE RESEARCHERS:
Viral Shrimali is final year MBA-marketing student of NRIBM, Gujarat

University. He has completed his Bachelor in Commerce from Gujarat University..
8
I have selected this topic because I am interested in banking sector. Knowledge

through this project can help me to identify more about the practices that will add value in
an organization.
CHAPTER-2
9
INTRODUCTION TO THE
BANKING INDUSTRY
2.1 A SNAPSHOT OF THE BANKING

INDUSTRY:
The Reserve Bank of India (RBI), as the central bank of the country,
closely monitors developments in the whole financial sector.
The banking sector is dominated by Scheduled Commercial Banks (SCBs). As at end-March

2002, there were 296 Commercial banks operating in India. This included 27 Public Sector
Banks (PSBs), 31 Private, 42 Foreign and 196 Regional Rural Banks. Also, there were 67
scheduled co-operative banks consisting of 51 scheduled urban co-operative banks and 16
scheduled state co-operative banks.
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Scheduled commercial banks touched, on the deposit front, a growth of 14% as against 18%
registered in the previous year. And on advances, the growth was 14.5% against 17.3% of the
earlier year.
State Bank of India is still the largest bank in India with the market share of 20% ICICI and
its two subsidiaries merged with ICICI Bank, leading creating the second largest bank in
India with a balance sheet size of Rs. 1040bn.
Higher provisioning norms, tighter asset classification norms, dispensing with the concept of
‘past due’ for recognition of NPAs, lowering of ceiling on exposure to a single borrower and
group exposure etc., are among the measures in order to improve the banking sector.
A minimum stipulated Capital Adequacy Ratio (CAR) was introduced to strengthen the
ability of banks to absorb losses and the ratio has subsequently been raised from 8% to 9%. It
is proposed to hike the CAR to 12% by 2004 based on the Basle Committee
recommendations.
Retail Banking is the new mantra in the banking sector. The home loans alone account for
nearly two-third of the total retail portfolio of the bank. According to one estimate, the retail
segment is expected to grow at 30-40% in the coming years.
Net banking, phone banking, mobile banking, ATMs and bill payments are the new buzz
words that banks are using to lure customers.
With a view to provide an institutional mechanism for sharing of information on borrowers /

potential borrowers by banks and Financial Institutions, the Credit Information Bureau
(India) Ltd. (CIBIL) was set up in August 2000. The Bureau provides a framework for
collecting, processing and sharing credit information on borrowers of credit institutions. SBI
and AXIS are the promoters of the CIBIL.
The RBI is now planning to transfer of its stakes in the SBI, NHB and National bank for
Agricultural and Rural Development to the private players. Also, the Government has sought
to lower its holding in PSBs to a minimum of 33% of total capital by allowing them to raise
capital from the market.
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Banks are free to acquire shares, convertible debentures of corporate and units of equity-
oriented mutual funds, subject to a ceiling of 5% of the total outstanding advances (including
commercial paper) as on March 31 of the previous year.
The finance ministry spelt out structure of the government-sponsored ARC called the Asset
Reconstruction Company (India) Limited (ARCIL), this pilot project of the ministry would
pave way for smoother functioning of the credit market in the country. The government will
hold 49% stake and private players will hold the rest 51%- the majority being held by ICICI
Bank (24.5%).
2.1.1 REFORMS IN THE BANKING SECTOR:
The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969
and resulted in a shift from Class banking to Mass banking. This in turn resulted in a
significant growth in the geographical coverage of banks. Every bank has to earmark a
minimum percentage of their loan portfolio to sectors identified as “priority sectors”. The
manufacturing sector also grew during the 1970s in protected environs and the banking sector
was a critical source. The next wave of reforms saw the nationalization of 6 more
commercial banks in 1980. Since then the number scheduled commercial banks increased
four-fold and the number of banks branches increased eight-fold.
After the second phase of financial sector reforms and liberalization of the sector in the early
nineties, the Public Sector Banks (PSB) s found it extremely difficult to complete with the
new private sector banks and the foreign banks. The new private sector banks first made their
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appearance after the guidelines permitting them were issued in January 1993. Eight new
private sector banks are presently in operation. These banks due to their late start have access
to state-of-the-art technology, which in turn helps them to save on manpower costs and
provide better services.
During the year 2000, the State Bank of India (SBI) and its 7 associates accounted for a 25%
share in deposits and 28.1% share in credit. The 20 nationalized banks accounted for 53.5%
of the deposits and 47.5% of credit during the same period. The share of foreign banks
( numbering 42 ), regional rural banks and other scheduled commercial banks accounted for
5.7%, 3.9% and 12.2% respectively in deposits and 8.41%, 3.14% and 12.85% respectively in
credit during the year 2000.
2.1.2 CLASSIFICATION OF BANKS:
The Indian banking industry, which is governed by the Banking Regulation Act of India,
1949 can be broadly classified into two major categories, non-scheduled banks and scheduled
banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of
ownership, commercial banks can be further grouped into nationalized banks, the State Bank
of India and its group banks, regional rural banks and private sector banks (the old / new
domestic and foreign). These banks have over 67,000 branches spread across the country.
The Indian banking industry is a mix of the public sector, private sector and foreign banks.
The private sector banks are again spilt into old banks and new banks.
Banking System in India
Reserve bank of India (Controlling Authority)
Development Financial institutions Banks
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IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank ISIDBI
Commercial Regional Rural Land Development Co-operative

Banks Banks Banks Banks
Public Sector Banks Private Sector Banks
SBI Groups Nationalized Banks Indian Banks Foreign Banks
2.2 CURRENT BANKING SCENARIO OF INDIA:
As per the Advance Estimates of GDP for 2008-09 released by the Central Statistical
Organization on 9, February, 2009, the growth of GDP at factor cost (at constant 99-2000
prices) is estimated to grow at 7.1% during the year. The growth of GDP during 2007-08
(Quick estimates) was 9.0%.
The International Monetary Fund (IMF) has forecast that India’s gross domestic product
(GDP) growth will slow dramatically to 6.25% in the fiscal year to March, and to 5.25% in
the following year. This is well below the 9% growth in the year to March 2008 and even
lower than the government’s prediction of 7.1% growth in 2008-09.
The average growth in the first three quarters of the fiscal year was 6.9%. This effectively
means IMF expects the economy to grow only 4.4% in the last quarter.
As per the above estimates, the growth rate for Agriculture, Industry and Services is
estimated to be 2.6%, 4.8% and 9.6% respectively in 2008-09. In the quick estimates for
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2007-08, the corresponding growth rates for these three sectors were 4.9, 8.1 and 10.9%
respectively.
After growing at 5.0% in 2006 and 4.9% in 2007, IMF estimates global GDP growth to
decelerate to 3.7% in 2008 in the wake of the current financial crisis. The financial market
turbulence in developed economies following the US sub-prime mortgage crisis has reduced
financial leverage, lowered credit availability and negative wealth effects have emerged as
risks to consumption and growth in advanced economies, especially in the US. Continuing
inflationary pressures from food and commodity prices as well as high and volatile crude oil
prices are other risks being faced by the global economy.
India continued to be one of the fastest growing economies of the world. During 2007-08, the
Indian economy grew at a robust pace for the fifth consecutive year. Real GDP growth,
estimated at 8.7% in 2007-08, is in tune with the average annual GDP growth of 8.7% in the
five year period 2003-04 to 2007-08. Agriculture and allied activities are estimated to grow
by 2.6% in 2007-08, which is in line with the average growth of 2.6% per annum during
2000- 01 to 2007-08. Food grains production touched a record high in FY08, with total food
grains production placed at 227.3 million tones, surpassing the target of 221.5 million tones
and recording an increase of 4.6% over the previous year. Industrial growth at 8.6% during
2007-08 has moderated somewhat against 10.6% in the previous year.
The services sector maintained its double-digit growth at 10.6% during 2007-08, higher than
the long term average of 8.9% (2000-01 to 2007-08). Within services, transport and
communications and financial services recorded double-digit growth for the last two years
and are expected to maintain the growth momentum. Trade and hotels showed higher growth
of 12.1% in 2007-08 against 11.8% growth in 2006-07. Another positive feature
underpinning growth is the sharp rise in the rate of savings and investment in recent years,
which rose to 34.8% and 35.9% respectively in 2006-07.
Towards the close of the fiscal year, higher inflation rate was noticed due to rise in global
prices of food, metals and crude oil. Inflation based on WPI declined from 6.4% at the
beginning of the fiscal year to a low of 3.1% by mid-October 2007, partly reflecting
moderation in the prices of some primary food articles and manufactured products.
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After hovering around 3% during November 2007, inflation began to edge up from early
December 2007 to touch 7.4% by 29 March 2008, mainly reflecting hardening in prices of
primary articles such as fruits and vegetables, oilseeds, raw cotton and iron ore, as well as
fuel and manufactured products such as edible oil/oil cakes and basic metals, partly due to
international commodity price pressures. However, fiscal and monetary measures are being
taken to contain inflation and maintain high growth.
Despite Rupee appreciation, exports continued to show a healthy growth, rising by 23% in
dollar terms during 2007-08 against 22.6% in the previous year. Overall exports growth was
driven by petroleum and crude products, gems and jewellery, iron ore, non-basmati rice,
cotton, transport equipment, etc. While India’s exports to USA, its single largest trading
partner, showed deceleration, exports to UAE and China remained robust. In the same period,
imports increased by 27.0% against 24.5%, mainly due to higher oil imports; non-oil imports
were led by capital goods, chemicals and related products, edible oils, gold, silver and pearls,
precious and semiprecious stones. Due to higher growth in imports than exports, the trade
deficit widened by 35.5% to US$ 80.4 bn during 2007-08 from US$ 59.3 bn in the previous
year.
The overall stance of RBI’s monetary and credit policy during the year was to ensure price
stability and financial system stability along with continuation of the growth momentum,
emphasis on credit quality and credit delivery including financial inclusion. During 2007-08,
the Bank Rate, Repo and Reverse Repo rates were kept unchanged. To manage the liquidity
in the economy, RBI raised the Cash Reserve Ratio four times: in April, August and
November 2007 from 6% to 7.50%. In line with liquidity tightening, PLRs and deposit rates
of major banks were hiked during the year. While lending rates rose to 12.25-12.75% from
12.25- 12.50%, deposit rates (for more than one year maturity) rose to 8.25-9.0% from 7.5-
9.0% in the previous financial year. However, in the month of February 2008, to keep up the
growth momentum in the economy, some banks announced cuts in their PLR and interest rate
on housing loans below Rs.20 lakh.
The tight monetary policy followed by RBI to control inflation and money supply had a
Moderating impact on credit growth, which increased by 21.6% in 2007-08 against 28.1% in
2006-07. Deposit growth also moderated to 22.2% in 2007-08 from 23.8% in 2006-07.
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For the current year, despite slowdown in the major economies of the world, the Indian
economy will continue to grow at 8-8.5% driven by investment. Due to a number of fiscal
and monetary measures taken by the Government and RBI to put a check on prices, inflation
is expected to come down to 5-5.5% by March 2009.
Need for a revolutionary approach towards privatization
Nationalized banks such as State Bank Of India (SBI), though pygmies in the international
banking market, are banking behemoths of India. They have branches spread over the entire
length and breadth of the country. SBI in particular is all-pervasive enjoying a sprawling
network of 9000 branches. Its blue and white shingle is visible to the smallest hamlet. It has
assets understood to be worth about Rs2,22,500 crore ($52 billion). SBI has a very
conservative approach to accounting particularly when it comes to declaration of its assets.
Probably modesty does not permit the bank to exhibit its strengths. In particular, it has real
estate properties some of which are heritage sites all over the country. These are estimated to
collectively command a value of Rs.30,000 crores. This, it is believed, does not get reflected
in its book of accounts.
SBI enjoys a monopoly of the government business. The Reserve Bank of India owns about
60% of the bank’s equity. To its credit, SBI mobilized $4.2 billion through the Resurgent
India Bonds (RIB) issue in just 3 months down the post-Pokhran sanction period. This was
the difficult time when the international credit rating agencies had downgraded the country.
SBI, time and again, does a rescue act in the forex market to contain any volatility of the
rupee.
SBI was formed under the SBI Act in 1955 with the takeover of Imperial Bank and
amalgamation of Bank of Bengal, Bank of Bombay, and Bank of Madras. The government
mopped up around 93% of the equity, leaving 7% to private ownership. By this act the
equity of RBI cannot be diluted below 55%.
SBI enjoys a pool of best managerial talent, assured government business, a countrywide
network of branches and strong brand credibility in the Indian market.
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But, that numero uno position is sliding with the entry of sleeker private and foreign banks
into the Indian Banking scene. The bank is continuously restructuring itself and for this, they
even hire the services of foreign consultants but the pace has to be hastened.
With the government offering an assured business, nationalized banks and State Bank of
India in particular should not take a complacent view. They should evolve service-intensive
products and make their employees customer-friendly. With competition from private and
foreign banks knocking at the door, the banks should realize, size is no more an insurance
against the onslaught of competition from sleek private and foreign banks. A revolutionary
approach to privatize ownership is the need of the hour.
Virtual Banking:
SBI has yet to computerize its operations and network all its branches. The computers
currently available serve only to relieve the burden of the clerical staff of maintaining
manual ledgers and not to penetrate into areas of customer service. ATMs, Anytime-
Anywhere, round the clock and telephone banking is still a far cry. These computers at the
best remain only as desk ornaments. With the New Telecom Policy (NTP) almost in place,
telecom sector will soon be revolutionized. E-commerce, telephone banking, consumer
banking, Internet banking, insurance et al are waiting just around the corner. At least in
major metros, virtual banking will soon take-over from the brick-mortar banks.
Privatization and Credit disbursement:
Talks about privatization of the bank’s ownership have been initiated but the SBI act of
1955 does not permit RBI’s ownership to be diluted to below 55%. This act is outdated and
needs to be re-addressed. However, efforts have been initiated by SBI to privatize its non –
banking subsidiaries like SBI Caps, SBI Gilts, SBI Funds Management, where SBI’s
holding is about 85% of the equity. But the pace has to be hastened so that investments thus
released can migrate to more important areas like development of new technologies and
products in customer service and service intensive areas. Privatization also helps to
professionalize the banks’ day-to-day operation, which will allow the management more
freedom in decision making during credit disbursement.
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To aid privatization and effect a better price realization, the bank is attempting to change –
over its accounting and reporting procedures to comply with US – GAAP norms. This is a
prerequisite for trying out the ADR route, as it is known that US market is by far the
undisputed biggest market and can offer the best price. At the moment, the SBI stock is
undervalued at Rs.240 whereas experts expect Rs.300 would be a more realistic value.
Action on this front at blitzkrieg pace is the need of the hour.
Manpower Retraining and not Retrenchment:
As a hangover of the past socialistic mindset, all the nationalized banks have excess
workforce. This is indeed a hot potato for the management of many enterprises and is
therefore being handled with kid gloves. In India, it is everyone’s worry to look at business
as a source of employment, while making money is secondary. In this ocean of manpower,
every institution does have its share of highly skilled and talented manpower, which
contribute to asset building. It is the semi skilled manpower having outdated skills, which
form the excess baggage. All banks must invest in re-training the manpower so that they can
migrate from the areas that will be vacated by computerization. The level of Non-
Performing-Assets (NPAs) is still at very high levels and to start with, some of this excess
manpower can cover areas of debt recovery.
At the same time, one should also take note of the flight of talent from these nationalized
banks to newly set-up private and foreign banks. And, it is these new banks’ top officials
after migrating from the government banks are targeting at the top corporate clients and thus
poaching into the corporate business, which has been the mainstay of the nationalized banks.
This will soon become a problem of serious proportion unless the banks initiate steps to
stem the flow. It is difficult, to exclusively address the problem of excess manpower by
schemes such as voluntary retrenchment scheme (VRS) because while attempting to remove
dead wood, talent also takes an exit. Many industries have faced this problem. Also it will be
over simplicity to state that the salaries should be raised because that will only start a wage
war. Instead, the banks should involve the services of international consultants specialized in
this field and take a holistic view of the problem. Retraining and Rationalization of
manpower commands higher priority over Retrenchment of manpower.
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New Products and New technologies:
Nationalized banks have generally been preoccupied with treasury business. The new
product areas that require greater penetration are personal banking, housing finance,
consumer durable finance, auto-finance, internet banking, insurance, telephone banking et
al. Development of these new areas call for heavy investments and this cash - flow can only
generated by privatization. In addition, surplus manpower once retrained can be absorbed in
the new ventures.
All nationalized banks and SBI in particular has the advantage of vast network of branches
and can therefore carry the new business to the remotest corner, but to make this presence
felt the banks have to move at blitzkrieg pace.
2.2.1 BANKING IN THE NEW MILLENIUM
The banking environment has suddenly become quite challenging after the sub prime crisis
that surfaced last year and which has resulted in an unprecedented global liquidity crunch.
The flattening of the world has dramatically impacted both the dynamics and the pace of
global banking business. Mergers, acquisitions, consolidation, expansion, diversification of
lines of business, shifting customer orientation and the changing regulatory environment are
building up the pressure for banks to explore new possibilities by abandoning the familiar and
embracing the unconventional. Competition is compelling banks to be agile and innovate
everyday. In this milieu, what really enables banks to build a lasting competitive advantage is
the ability to continuously innovate, achieve differentiation and respond quickly to dynamic
business challenges.
The banking sector has witnessed wide ranging changes under the influence of the financial
Sector reforms initiated during 2008. The approach to such reforms in India has been one of
gradual and non-disruptive progress through a consultative process. The emphasis has been
on deregulation and opening up the banking sector to market forces. The Reserve Bank has
been consistently working towards the establishment of an enabling regulatory framework
with prompt and effective supervision as well as the development of technological and
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institutional infrastructure. Persistent efforts have been made towards adoption of

international benchmarks as appropriate to Indian conditions. While certain changes in the
legal infrastructure are yet to be effected, the developments so far have brought the Indian
financial system closer to global standards.
2.2.2 BANKING ACTIVITIES:
Banks' activities can be divided into retail banking, dealing directly with individuals; business
banking, providing services to mid-size business; corporate banking dealing with large
business entities; private banking, providing wealth management services to High Net Worth
Individuals; and investment banking, relates to helping customers raise funds in the Capital
Markets and advising on mergers and acquisitions. Banks are now moving towards Universal
Banking, which is a combination of commercial banking, investment banking and various
other activities including insurance.
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2.2.3 TECHNOLOGICAL DEVELOPMENTS:
Technology has brought about strategic transformation in the working of banks. With years,
banks are also adding services to their customers. The Indian banking industry is passing
through a phase of customers market. The customers have more choices in choosing their
banks. With stiff competition and advancement of technology, the service provided by banks
has become more easy and convenient.
Internet Banking (E-Banking)
Internet banking (or E-banking) means any user with a personal computer and a browser can
get connected to his banks website to perform any of the virtual banking functions. In internet
banking system the bank has a centralized database that is web-enabled. All the services that
the bank has permitted on the internet are displayed in menu. Any service can be selected and
further interaction is dictated by the nature of service. The traditional branch model of bank is
now giving place to an alternative delivery channels with ATM network. Once the branch
offices of bank are interconnected through terrestrial or satellite links, there would be no
physical identity for any branch.
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Internet banking in India
The Reserve Bank of India constituted a working group on Internet Banking. The group
divided the internet banking products in India into 3 types based on the levels of access
granted. They are:
 Information Only System: General purpose information like interest rates, branch
location, bank products and their features, loan and deposit calculations are provided in
the banks website.
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 Electronic Information Transfer System: The system provides customer- specific

information in the form of account balances, transaction details, and statement of
accounts.
 Fully Electronic Transactional System: This system allows bi-directional capabilities.
Transactions can be submitted by the customer for online update. This system
requires high degree of security and control
 Automated Teller Machine (ATM): ATM is designed to perform the most important
function of bank. It is operated by plastic card with its special features. The plastic
card is replacing cheque, personal attendance of the customer, banking hour’s
restrictions and paper based verification.
 Credit Cards/Debit Cards: The Credit Card holder is empowered to spend wherever
and whenever he wants with his Credit Card within the limits fixed by his bank. Credit
Card is a post paid card. Debit Card, on the other hand, is a prepaid card with some
stored value.
 Smart Card: Banks are adding chips to their current magnetic stripe cards to
enhance security and offer new service, called Smart Cards. Smart Cards
allow thousands of times of information storable on magnetic stripe cards.
Core Banking Solutions
Core Banking Solutions is new jargon frequently used in banking circles. The advancement
in technology especially internet and information technology has led to new way of doing
business in banking. The technologies have cut down time, working simultaneously on
different issues and increased efficiency. The platform where communication technology and
information technology are merged to suit core needs of banking is known as Core Banking
Solutions. Here computer software is developed to perform core operations of banking like
recording of transactions, passbook maintenance, interest calculations on loans and deposits,
customer records, balance of payments and withdrawal are done.
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Real Time Gross Settlement (RTGS)
RTGS is an electronic settlement system of Reserve Bank of India without involvement of

papers. To facilitate an Efficient, Secure, Economical, Reliable and Expeditious System of
Fund transfer and clearing in the Banking sector throughout India. Real time gross settlement
systems (RTGS) are a funds transfer mechanism where transfer of money takes place from
one bank to another on a "real time" and on "gross" basis.
Electronic Clearing Service
Electronic Clearing Service is another technology enhancement happened in the banking

industry. The customer willing to use this facility is required to fill in the mandate form from
the corporate/any utility service institution for ECS mode of credit and debit. The customer
needs to prepare the payment date and submit it to the “sponsor Bank” and after that
everything happened electronically. So customers can there by make payments as well as
receive all incomes electronically.
Mobile banking
Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for
performing balance checks, account transactions, payments etc. via a mobile device such as a
mobile phone.
2.2.4 BASEL II: HOW GEARED ARE BANKS??
BASEL II is a new capital adequacy frame work applicable to scheduled commercial banks in
India, as mandated by the RBI. The Basel capital accord (BASEL II) guideline promulgated by
the BIS to establish Capital adequacy requirements and supervisory standards for banks and
structured by three pillars.
In a nut-shell, BASEL II –
 Provide effective assessment method

25
 Incorporates Sensitivity to banks.

 Makes better business standards
 Reduce losses to the banks
The 3-Pillar Approach of BASEL II
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The BASELII is designed to facilitate a more comprehensive, sophisticated and risk sensitive
approach for banks to calculate regulatory capital. The basic objective of BASEL II is to
create an international standard
2.2.5 CAMEL: TOOL FOR MEASURING THE

PERFORMANCE OF BANKS
An international bank-rating system where bank supervisory authorities rate

institutions according to six factors. The six factors are represented by the acronym
"CAMELS." The six factors examined are as follows:
C - Capital adequacy : Reflects the overall financial condition of a bank & also
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the ability of the management to meet the need for

additional capital.
A - Asset quality : To ascertain the component of non performing assets as

a percentage of the total asset
M - Management quality : To measure the efficiency of the management
E - Earnings : To assess the quality of income generated by core

activity
L - Liquidity : To measure the ability of a bank to meet the demand

from demand deposits in a particular year
On the Basis of CAMEL rating Top Ten Banks in Performance

During 2008-2009
Public sector Banks Private sector Banks Foreign Banks
Bank of India Karur vysya bank Shinhan bank
Corporation Bank Yes bank Abu Dhabi commercial

bank
Union Bank of India City Union Bank Mashreqbank P S C
Andhra bank Tamil Nadu Mercantile Antwerp Diamond bank N
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Bank V
State bank of Patiala South Indian bank Bank of Tokyo-Mitsubishi
UFJ
Bank of Baroda Federal Bank Calyon Bank
Indian Overseas Bank Jammu & Kashmir Bank Krung Thai Bank Public Co.
State Bank of Hyderabad Dhanalakshmi Bank State Bank of Mauritius
Punjab & Sind Bank Karnataka Bank Bank of America National

Trust
Indian Bank Kotak Mahindra Bank Mizutto Corporate Bank
2.3 BankingReview -2009

NPAs rise for Private Banks, stable for PSBs
29
Gross NPAs movement of banks in Q1 has shown an interesting trend
Gross NPAs of all Private Banks that we have covered have seen a sequential rise
However, asset quality of most PSBs remained stable, with flat to lower Gross NPAs
NIMs of most banks saw a sequential decline

Decline was largely due to PLR cuts by banks towards the end of Q4FY08
Most banks have, however, raised their PLRs and deposit rates by 100-150bps in
June’08 and Q1FY09
NIMs should see a marginal improvement in Q2 on account of PLR hikes
However, as deposit re-pricing kicks in with a lag effect, NIMs may again come under
pressure.
Credit spreads saw a decline after a long time
After a long time, the sector saw a decline in credit spreads (Yield on advances – Cost
of deposits)
30
Decline in credit spreads was largely due to inability of most banks to raise PLR in Q1
even as interest rates were rising
BOB, IOB, Corpbank and BOI saw substantial fall in yields on credit book, resulting
in compression of credit spreads
Canbank, PNB, Union Bank saw sequential improvement in credit spreads in Q1
CASA saw a mixed trend

Among Public Sector Banks (PSBs), SBI, Canara and Union saw marginal
improvement in CASA on YoY basis
Others like BOB, BOI, OBC saw a decline on YoY basis
Among private banks, AXIS bank lost out due to CBOP merger, ICICI Bank saw
improvement both on YoY and sequential basis
Overall credit growth was robust

Among PSBs BOI, BOB, SBI and IOB saw above 30% growth. Canbank, Union and
PNB were more moderate at 16-20%
Among Private banks, except for ICICI, most showed above 40+% growth
Even for ICICI, consolidated book (including overseas book) grew 20% YoY
Credit growth has been very robust at 26% in Q1 against 24.6% last year
Banks which witnessed high credit growth
Axis, AXIS Bank and Yes Bank among private

BOB, BOI and SBI among PSBs
SBI showed a robust growth across all segments, except for mortgages
International credit grew 46% YoY
SME credit grew 23% YoY
Mid Corporate credit grew 31% YoY
Home Loans grew 17% YoY
31
Axis among the private banks and BoI amongst

PSBs continues to deliver high NII growth
Credit growth of ICICI, Canara, Union, PNB, OBC was lower than the average
2.4 IN BANKING SECTOR

• Non Performing Assets
• Capital Adequacy Ratio
• Q Ratio
• Z Score
• Shareholding Pattern of the Banks
• EPS Growth Rate
• Reserves with RBI to Total Assets Ratio
• Business per Employee & Profit Per Employee
• Total Liability to Net Worth Ratio
• Dividend Payout Ratio
• Return on Assets
32
2.5 SWOT ANALYSIS: Banking Sector
Strength Weakness
Poor Technology infrastructure.

Aggression towards development
Ineffective risk measures.

the existing standards by banks.
Presence of more number of smaller

Strong regulatory impact by central
banks that would likely to be

Bank to all the banks.
Impacted adversely.
Presence of intellectual capital to face
the change in implementation with

good quality.
Opportunities Threats
Increasing Risk management Expertise. Inability to meet the additional Capital

Requirements.
Need significant Connection among,

business Credit & risk management
and Information Technology. Loss of Capital to the entire
banking system due to merger
and acquisitions.
Advancement of technologies. Strong
Asset Base would help in bigger
growth.
Huge investment in technology.
33
2.5.1 Porter’s FIVE-FORCE analysis for

Indian
banking industry
BARGAINING POWER
OF SUPPLIERS
-Low supplier bargaining power
-Few alternatives available
-Subject to RBI Rules and

Regulations
THREAT OF NEW INDUSTRY RIVARLY THREAT OF

ENTRANT SUBSTITU
Intense competition
TES
-Low barriers to
entry Many private, public, High threat from
substitutes
-Government policies
are supportive
BARGAINING POWER OF
CUSTOMERS
-High bargaining power
-Low switching cost
-Large no. of alternatives
34
Key Points:
Supply
Liquidity is controlled by the Reserve Bank of India (RBI).
Demand
India is a growing economy and demand for credit is high though it could be cyclical.
Barriers to entry
Licensing requirement, investment in technology and branch network.
Bargaining power of suppliers

High during periods of tight liquidity. Trade unions in public sector banks can be anti
reforms. Depositors may invest elsewhere if interest rates fall.
Bargaining power of customers
For good creditworthy borrowers bargaining power is high due to the availability of large
number of banks
Competition - High
There are public sector banks, private sector and foreign banks along with non banking
finance companies competing in similar business lines.
35
2.5.2 PESTAL ANALYSIS:
PEST Analysis for Banking Services
Political/ Legal
Influences which have an impact on banking services and consumer confidence include
the following:
• State provision of pensions
• Government encouragement of savings and investment (for e.g. via tax benefits)
• Regulatory control and protection (to prevent the collapse of financial institutions and
protect investors money)
Economic
Economic factors are key variables which have an impact on the activity in the
banking services sector. The level of consumer activity is governed by income levels and
personal wealth. As income levels grow, more discretionary income is available to spend
on banking services. Consumer confidence in the economy and in job security also has a
major impact; if lean times are foreseen ahead, savings will take priority over loans and
other forms of expenditure. Consumers may also seek easy access savings and be willing
to tie up their money for longer periods with potentially more attractive investments.
The main economic factors that should be monitored with regard to banking services
marketing are as follows:
36
• Personal and household disposable income
• Discretionary income levels
• Employment levels
• The rate of inflation
• Income tax levels and taxation structures
• Savings and investment levels and trends
• Stock market performance
• Consumer spending & Consumer credit
Socio-cultural
Many demographic factors have an important bearing on banking services markets.
• Changing attitude towards consumer credit and debt
• Changing employment patterns
• Numbers of working women
• The ageing population
• Marriage/divorce/birth rates
• Consumption trends
Technological
Technology has a major impact on many industries including financial

services and banking in particular. ATM services which not only provide cash but
also allow for bill payments, deposits and instant statements are widely used. From
the customers’ viewpoint, technology has played a major role in the development of
37
the process whereby the service is delivered. Automated queuing systems have made
visits to the bank easier and more convenient. Telephone Banking and insurance
services are now being used in place of the traditional branch-based service process.
Technology has also played a major role within organizations, bringing about far
greater efficiency through computerized records and transaction systems and also in
business development, through the setting up of detailed customer databases for
effective segmentation and targeting.
The main technological developments fall within these categories;
• Process developments
• Information storage and handling
• Database system
2.5.3 RECENT TRENDS

I. Universal Banking
Universal banking refers to Financial Institution offering all types of financial

services under one roof. Thus, for example, besides borrowing and lending for
the long term, the Development Financial Institutions will be able to
borrow/lend for the short-term as well.
38
Impact on FDI:
Two key aspects of the business are affected. The institution can have access
to cheap retail deposits and the breadth of its advances increase to include
short-term working capital loans to corporates. The Institution has greater
operational flexibility. Also they can now effectively compete with the
commercial banks.
IndianScenario:
In India the five FDIs that are frontrunners in the race to
convert to Universal Bank are:
1. Industrial Credit and Investment Corporation of

India (ICICI)
2. Industrial Development Bank of India (IDBI)
3. Export Import Bank (EXIM Bank)
4. Industrial Finance Corporation of India (IFCI)
5. Industrial Investment Bank of India (IIBI)
ICICI is already a virtual bank with subsidiaries like ICICI

Bank engaged in banking business. Thus with clearing of legal
hurdles it just has to work out the modalities to formally call
itself a universal bank.
Similarly other FDIs are charting out aggressive plans to stay

ahead in this race.
Also recently Bank of Baroda, a commercial bank has indicated

its intention to convert to a Universal Bank.
39
II. RBI Norms:
The norms stipulated by RBI treat FDIs at par with the existing commercial
banks. Thus all Universal banks have to maintain the CRR and the SLR requirement
on the same lines as the commercial banks. Also they have to fulfill the priority sector
lending norms applicable to the commercial banks. These are the major hurdles as
perceived by the institutions, as it is very difficult to fulfill such norms without
hurting the bottomline
Effect on the Banking Sector:
However, with large Term lenders converting into Commercial banks, the
existing players in the industry are likely to face stiff competition, lower bottom line
ultimately leading to a shakeout in the industry with only the operationally efficient
banks will stay into the business, irrespective to the size.
III. Mergers & Acquisition
The Indian Banking Sector is more overcrowded then ever. There are 96
commercial banks reporting to the RBI. Ever since the RBI opened up the sector to
private players, there have been nine new entrants. All of them are growing at a
scorching pace and redefining the rules of the business. However they are dwarfed by
many large public and old private sector banks with a large network of branches
spread over a diverse geographical area. Thus they are unable to make a significant
dent in the market share of the old players. Also it is impossible to exponentially
increase the number of branches. The only route available for these banks is to grow
inorganically via the M & A route. Hence the new banks are under a tremendous
pressure to acquire older banks and thus increase their business.
40
Currently most of the institutionally promoted banks have already gobbled smaller
banks. ICICI Bank has acquired ITC Classic, Anagram Finance and Bank of Madura
within a period of two years. AXIS Bank has merged Times Bank with itself. UTI
bank had almost completed its merger with Global Trust Bank before it ran into rough
weather. Also Nationalised Banks like Bank of Punjab, Vyasa Bank are wooing IDBI
Bank for a merger. Among foreign banks, Standard & Chartered Bank has acquired
ANZ Grindlays Bank’s Asian and Middle East operations
The above happenings clearly indicate that the M & A scenario in the Indian banking
sector is far from over. Strong banks will continue to takeover weak and inefficient
banks to increase their size.
41
IV. Multiple Delivery Channels
Today the technology driven banks are finding various means to

reduce costs and reach out to as many customers as possible spread over a
diverse area. This has led to using multiple channels of delivery of their
products.
1. ATM (Automatic Teller Machine):
An ATM is basically a machine that can deliver cash to the customers

on demand after authentication. However, nowadays we have ATMs
that are used to vend different FMCG products also. An ATM does the
basic function of a bank’s branch, i.e., delivering money on demand.
Hence setting of newer branches is not required thereby significantly
lowering infrastructure costs.
Cost reduction is however possible only when these machines are used.
In India, the average cash withdrawal per ATM per day has fallen from
100 last year to 70 this year. Though the number of ATMs has
increased since last year, it is not in sync with the number of cards
issued. Also, there are many dormant cardholders who do not use the
ATMs and prefer the teller counters. Inspite of these odds, Indian
banks are increasing the number of ATMs at a feverish pace. These
machines also hold the keys to future operational efficiency.
2. Net Banking:
Net banking means carrying out banking transactions via the Internet.
Thus the need for a branch is completely eliminated by technology.
42
Also this helps in serving the customer better and tailoring products
better suited for the customer
A customer can view his account details, transaction history, order

drafts, electronically make payments, transfer funds, check his account
position and electronically communicate with the bank through the
Internet for which he may have wanted to visit the bank branch.
Net banking helps a bank spread its reach to the entire world at a
fraction of the cost.
3. Phone Banking:
This means carrying out of banking transaction through the telephone.

A customer can call up the banks helpline or phone banking number to
conduct transactions like transfer of funds, making payments, checking
of account balance, ordering cheques, etc,. This also eliminates the
customer of the need to visit the bank’s branch.
4. Mobile Banking:
Banks can now help a customer conduct certain transactions

through the Mobile Phone with the help of technologies like
WAP, SMS, etc,. This helps a bank to combine the Internet and
telephone and leverage it to cut costs and at the same time
provide its customer the convenience.
Thus it can be seen that tech savvy banks are tapping all the
above alternative channels to cut costs improve customer
satisfaction.
V. VRS (Voluntary Retirement Scheme):
VRS or the ‘Golden Handshake’ is picking up very fast in the

recent times due to the serious attention of the government towards
overstaffing in the banks, especially among the public sector banks.
43
The government had also cleared a uniform VRS framework for the
sector giving the banks a seven months time frame to cut flab. The
scheme was open till 31st march, 2001.
Though many banks had announced different VRS schemes it

involved an outflow of huge sums of money. This could have had an
adverse impact on the Capital Adequacy Ratio (CAR). Hence the RBI
allowed the banks to write off the VRS expenses over a period of 5
years.
CHALLNGES:
Liberalisation process has increasingly exposed Indian Industry to

international competition and banking being a service industry is also not an
exception. Banking Sector in India too faces same challenges at local,
national and international level.
Indian Banks, functionally diverse and geographically widespread,

have played a crucial role in the socio-economic progress of the country after
independence. However, the growth led to strains in the operational efficiency
of banks and the accumulation of non-performing assets (NPA’s) in their loan
portfolios.
Banks face increasing pressure to stand out from the crowd. On the Internet,
this means offering your target customers an increasingly broader range of services
than your competitors and that too in unique way.
All this has resulted in a challenge to managers of banks to develop the right
mix of acquired and internally grown IT applications which suits customer’s
expectations.
44
Banking sector reforms and liberalisation process raised many challenges

before Indian Banks and for sustainable development it has become necessary to face
these challenges effectively:
 Intense Competition: The RBI and Government of India kept banking industry open
for the participants of private sector banks and foreign banks. The foreign banks were
also permitted to set up shop on India either as branches or as subsidiaries. Due to this
lowered entry barriers many new players have entered the market such as private
banks, foreign banks, non-banking finance companies, etc. The foreign banks and
new private sector banks have spearheaded the hi-tech revolution. Heavy weight
foreign banks with huge base, latest technology innovative and globally tested
products are spreading their wings and wooing away customers form other banks. For
survival and growth in highly competitive environment banks have to follow the new
“Guru Mantra” of prompt and efficient customer service, which calls for appropriate
customer centric policies and customer friendly procedures.
 Technological Up gradation: Already electronic transfers, clearings, settlements

have reduced translation times. To face competition it is necessary for banks to absorb
the technology and upgrade their services.
However use of High-Tech sophisticated technology leaves the predominantly rural,

poor and even illiterate mans in the lurch to which the level of automation and
efficiency of services are immaterial.
 Privacy and Safety: Among the most important aspects, of savings, i.e., safety
liquidity and profitability, safety has to be accorded top most priority. The safety
aspect assumes more significance in the emerging scenario as the economic loss
caused internationally by these types of crimes might risk area and any lacunae is
safety would result in erosion of confidence and the same might possibly paralyse the
45
entire network. The areas among other things, which might endanger security in e-
banking can be:
 Changes in input data such as changing the amount in ledges, increasing the
limits in accounts or face value of cheaques. Though these trends could be
detected consequently, prevention is a major problem with these types of
crimes.
 Use of stolen or falsified cards in ATM machines.
 Computer forgery could be committed by way of gaining access to

other account, deliberate damage through viruses on data stored in computers.
In this case, same criminals might gain entry into the computers and cause
damage to the system. This apart, another through which security and privacy
are maintained. If a hacker has found out the password, he can cause havoc to
the entire network. Also, if the password is stolen money could be transferred
from one account to another.
 Software privacy is another area of potential danger faced by the
banking industry. In this the entire software could be stolen. If this is done, the
hackers could operate a parallel network.
 Human Resources Management: In the recent past the human

resource Policies in banks were mainly guided by the comcept of permanent
employment and its necessary concomitants of creating career paths, terminal benfits,
etc. for the employees. In today’s fast-changing world of employee mobility both
horizontally and vertically and value systems, the public sector banks need to hire the
right talent at market related compensation and to shed surplus manpower/staff. Thus
many banks are going for URS schemes to reduce the burden of excessive staff.
Schemes like VRS are going to change the nature of workforce with many senior and
experienced persons opting for it.
The key elements that shall provide a competitive edge to banking sector will not be
physical assets but knowledge assets and information. Therefore, banks must
understand how to retain knowledge based employees and prevent them to migrating
to some other organisation. Banks must believe in people, customer orientation, and
46
continuous improvement of excellence. Therefore it becomes necessary for banks to

encourage all employees to take risks and work towards continuous improvements
and breakthroughs.
Successful banks overcoming the challenges will be those that harness technology in a
customer friendly yet cost effective way. This requires enormous internal and external
management and the crux of the solution lies in blending human resources with
information technology.
3 Emerg ing Issues in International Scenario:

Banking and Financial Sector Reform
With the evolving global scenario at the background, let us now discuss
the challenges and opportunities facing the financial sector around the globe.
The present trend towards financial sector liberalization and globalisation,
especially with respect to the EMEs has resulted in a overall trend
towards conglomeration, internationalisation and dollarisation in the financial
systems
of many of the countries notably the EMEs. Such trends have important
implications for financial sector regulation. I would like to highlight the
main issues in this respect:
It also needs to be recognised that in recent times, there has been
growing concern worldwide about the need for preserving financial
stability. This is true in the Indian context as well where the erstwhile
Government- dom inated financial system was, so to speak, imparting
stability under rigid regulation, possibly at the cost of efficiency. In this
context, the pursuit of financial stability in India, viewed from the standpoint
of banking system, has sought to (a) ensure uninterrupted financial
transactions and (b) maintain confidence in the financial system amongst
all stakeholders.
47
When we talk of the major features of international banking

scenario, the following observations come immediately to mind.
First, the structure of the industry. In the world’s top 1000 banks,
there are many more large and medium-sized domestic banks
from the developed countries than from the emerging
economies. Illustratively, according to The Banker 2004, out of the
top 1000 banks globally, over 200 are located in USA, just above 100
in Japan, over 80 in Germany, over 40 in Spain and around 40 in the
UK. Even China has as many as 16 banks within the top 1000, out of
which, as many as 14 are in the top 500. India, on the other hand,
had 20 banks within the top 1000 out of which only 6 were within the
top 500 banks. This is perhaps reflective of differences in size
of economies and of the financial sectors.
Second, the share of bank asset in total financial sector
assets. In most emerging markets, banking sector assets comprise well
over 80 per cent of total financial sector assets, whereas these figures
are much lower in developed economies. Thus, Banking Sector
reforms are of paramount importance in many emerging markets.
Third, industry concentration, measured by the percentage
of a country’s banking sector assets controlled by the largest
banks. In most emerging market economies, the five largest
banks (usually domestic) accou nt for over two-thirds of bank assets.
These figures tend to be much lower in developed economies.
The f o u r t h factor is the growing internationalization of
banking operations. Internationalization, defined as the share of foreign-
owned banks in total bank assets, is increasing fast in emerging economies
from very low levels not too long ago.
The phenomenon of internationalisation has primarily been
polarized on medium- to high-income countries, likely owing to
attractive risk-return investment opportunities for foreign banks in
such countries. However, foreign banks are often viewed to be
‘cherry-picking’ host country corporations, leaving domestic banks
with less creditworthy customers, increasing the overall risk of
48
domestic bank portfolios. Additionally, increased competition arising

out of foreign bank entry could prompt domestic state-owned banks
to venture into high-risk areas in an attempt to maintain their
franchise value.
Fifthly, financial sectors across the globe has witnessed

increased conglomeration to survive in a milieu of financial
liberalization and technological improvements. Globalization of clients
of major financial instruments who, in turn, demand global access to
services and a wide product mix has also been a contributory factor.
The growth of such conglomeration has raised the possibility of
vulnerabilities including systemic risk due to contagion and the possibility
of opportunities for regulatory and supervisory arbitrage.
Further, the growing dollarisation, especially in Latin America

and transition economies raises several vulnerabilities in the financial
system, salient among them being (a) diminished role of central banks to
act as lenders of last resort, (b) possibility of dollar deposits being subject to
‘runs’ since such deposits are usually close substitutes for deposits
abroad or dollars cash and (c) limited ability of central banks to raise the
interest rate on dollar deposits to act as ‘interest rate defenses’ against deposit
withdrawals.
The global banking scenario is going to be influenced by

implementation of the Basel II Accord. It seems at this point that Basel II may be
beneficial to many of the EMEs including India. While the Pillar I of the New
Accord signifies a refinement of existing capital charge by making it more
correlated with the credit risk of the banks’ assets and an extension of the
capital charges for risks not considered in the current Accord, such as interest rate
risk in the banking book, and operational risk, Pillar II, which focuses on the
supervisory review process, aims to ensure that a bank’s capital position is
consistent with its overall risk profile. Finally, Pillar III aims at encouraging
49
banks to disclose information in order to enhance the role of market

participants in monitoring banks
The recent survey by the IMF on the implementation of financial
sector regulation in 36 Fund member countries3 based on the Financial

Sector Assessment Programmes (FSAPs) completed over the period
2000-03 reveals the following interesting points about the global financial
system. On the positive side, there has been relatively high level of
implementation with respect to legal foundations , rationalisation of the
licensing process and minimum entry standards in most countries.
In terms of regulatory weaknesses, recent evidences point out to a
number of deficiencies including;
(i) The problems associated with regulatory forbearance.
(ii) Deficiencies have been observed in the oversight of country risk4, issues
of connected lending and corporate governance practices.
(iii) deficiencies have been observed in respect of the design/implementation
of consolidated supervision.
(iv) With regard to financial integrity and development of safety net, the
observed deficiencies mainly relate to timeliness of disclosure, protection
of minority shareholders, accounting and auditing procedures and
procedures for orderly winding up of failed insurers and securities firms.
50
CHAPTER 3
INTRODUCTION TO SBI AND
AXIS
51
3.1 STATE BANK OF INDIA

State Bank of India’s operating profit and net profit for Q2’09 surged
54.5% and 40.2% yoy, respectively, exhibiting a strong performance.
Advances growth to slow down: SBI recorded a handsome 37% yoy growth in
advances, translating into an 18% sequential growth in the first half. However, this
momentum is likely to decelerate considerably in the second half of 2008-09.
Robust rise in deposits: State Bank of India’s deposit base surged
28% yoy and its CASA ratio improved from 39.45% to 39.71% over the same period.
On a quarterly basis, the bank’s deposits grew by 10.3%.
Improvement in the credit-deposit ratio: The Bank’s credit-deposit ratio

increased from 68.9% in Q2’08 to 73.8% this quarter. This was following a
robust 37% yoy increase in advances, which exceeded the 28% growth in deposits
over the same period.
Increase in the NII and NIM: SBI’s net interest income (NII) increased by 45% yoy
to reach Rs. 54.6 bn.
Profitability: The Bank’s ROE declined from 17.38% for H1’08 to 14.63% for
H1’09. The return on assets (annualized), however, increased from 0.99% in
Q2’08 to 1.13% in Q2’09.
52
The State Bank of India, the country’s oldest Bank and a premier in terms of balance
sheet size, number of branches, market capitalization and profits is today going through a
momentous phase of Change and Transformation – the two hundred year old Public
sector behemoth is today stirring out of its Public Sector legacy and moving with an
agility to give the Private and Foreign Banks a run for their money.
The bank is entering into many new businesses with strategic tie ups – Pension Funds,
General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale
Merchant Acquisition, Advisory Services, structured products etc – each one of these
initiatives having a huge potential for growth.
The Bank is forging ahead with cutting edge technology and innovative new banking
models, to expand its Rural Banking base, looking at the vast untapped potential in the
hinterland and proposes to cover 100,000 villages in the next two years.
It is also focusing at the top end of the market, on whole sale banking capabilities to
provide India’s growing mid / large Corporate with a complete array of products and
services. It is consolidating its global treasury operations and entering into structured
products and derivative instruments. Today, the Bank is the largest provider of
infrastructure debt and the largest arranger of external commercial borrowings in the
country. It is the only Indian bank to feature in the Fortune 500 list.
The Bank is changing outdated front and back end processes to modern customer
friendly processes to help improve the total customer experience. With about 8500 of its
own 10000 branches and another 5100 branches of its Associate Banks already
networked, today it offers the largest banking network to the Indian customer. The Bank
is also in the process of providing complete payment solution to its clientele with its over
8500 ATMs, and other electronic channels such as Internet banking, debit cards, mobile
banking, etc.
53
With four national level Apex Training Colleges and 54 learning Centres spread all over
the country the Bank is continuously engaged in skill enhancement of its employees.
Some of the training programs are attended by bankers from banks in other countries.
The bank is also looking at opportunities to grow in size in India as well as

internationally. It presently has 82 foreign offices in 32 countries across the globe. It has
also 7 Subsidiaries in India – SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI
Factors, SBI Life and SBI Cards - forming a formidable group in the Indian Banking
scenario. It is in the process of raising capital for its growth and also consolidating its
various holdings.
Throughout all this change, the Bank is also attempting to change old mindsets, attitudes
and take all employees together on this exciting road to Transformation. In a recently
concluded mass internal communication programme termed ‘Parivartan’ the Bank rolled
out over 3300 two day workshops across the country and covered over 130,000
employees in a period of 100 days using about 400 Trainers, to drive home the message
of Change and inclusiveness. The workshops fired the imagination of the employees with
some other banks in India as well as other Public Sector Organizations seeking to emulate
the programme.
3.1.1 ABOUT SBI:
The State Bank of India, the country’s oldest Bank and a premier in terms of balance
sheet size, number of branches, market capitalization and profits is today going
through a momentous phase of Change and Transformation – the two hundred year
54
old Public sector behemoth is today stirring out of its Public Sector legacy and
moving with an agility to give the Private and Foreign Banks a run for their money.
The Bank is forging ahead with cutting edge technology and innovative new banking
models, to expand its Rural Banking base, looking at the vast untapped potential in
the hinterland and proposes to cover 100,000 villages in the next two years.
It is also focusing at the top end of the market, on whole sale banking capabilities to
provide India’s growing mid / large Corporate with a complete array of products and
services. It is consolidating its global treasury operations and entering into structured
products and derivative instruments. Today, the Bank is the largest provider of
infrastructure debt and the largest arranger of external commercial borrowings in the
country. It is the only Indian bank to feature in the Fortune 500 list.
The Bank is changing outdated front and back end processes to modern customer
friendly processes to help improve the total customer experience. With about 8500 of
its own 10000 branches and another 5100 branches of its Associate Banks already
networked, today it offers the largest banking network to the Indian customer. The
Bank is also in the process of providing complete payment solution to its clientele
with its over 8500 ATMs, and other electronic channels such as Internet banking,
debit cards, mobile banking, etc.
With four national level Apex Training Colleges and 54 learning Centres spread all
over the country the Bank is continuously engaged in skill enhancement of its
employees. Some of the training programes are attended by bankers from banks in
other countries.
The bank is also looking at opportunities to grow in size in India as well as

internationally. It presently has 82 foreign offices in 32 countries across the globe. It
has also 7 Subsidiaries in India – SBI Capital Markets, SBICAP Securities, SBI
55
DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the
Indian Banking scenario. It is in the process of raising capital for its growth and also
consolidating its various holdings.
3.1.2 KEY AREAS OF OPERATION:
The business operations of SBI can be broadly classified into the key income generating
areas such as National Banking, International Banking, Corporate Banking, & Treasury
operations. The functioning of some of the key divisions is enumerated below:
a) CORPORATE BANKING
The corporate banking segment of the bank has total business of around Rs1,193bn.
SBI has created various Strategic Business Units (SBU) in order to streamline its
operations.
These SBUs are as follows:
Corporate Accounts
Leasing
Project Finance
Mid Corporate Group
Stressed Assets Management
56
b) NATIONAL BANKING
The national banking group has 14 administrative circles encompassing a vast

network of 9,177 branches, 4 sub-offices, 12 exchange bureaus, 104 satellite offices
and 679 extension counters, to reach out to customers, even in the remotest corners of
the country. Out of the total branches, 809 are specialized branches.
This group consists of four business group which are enumerated below:
Personal Banking SBU
Small & Medium Enterprises
Agricultural Banking
Government Banking
c) INTERNATIONAL BANKING
SBI has a network of 73 overseas offices in 30 countries in all time zones and
correspondent relationship with 520 international banks in 123 countries. The bank is
keen to implement core banking solution to its international branches also. During
FY06, 25 foreign offices were successfully switched over to Finacle software. SBI has
installed ATMs at Male, Muscat and Colombo Offices. In recent years, SBI acquired
76% shareholding in Giro Commercial Bank Limited in Kenya and PT Indomonex
Bank Ltd. in Indonesia. The bank incorporated a company SBI Botswana Ltd. at
Gaborone.
57
d) TREASURY
The bank manages an integrated treasury covering both domestic and foreign
exchange markets. In recent years, the treasury operation of the bank has become
more active amidst rising interest rate scenario, robust credit growth and liquidity
constraints. The bank diversified its operations more actively into alternative assets
classes with a view to diversify the portfolio and build alternative revenue streams in
order to offset the losses in fixed income portfolio. Reorganization of the treasury
processes at domestic and global levels is also being undertaken to leverage on the
operational synergy between business units and network. The reorganization seeks to
enhance the efficiencies in use of manpower resources and increase maneuverability
of banks operations in the markets both domestic as well as international.
e) ASSOCIATES & SUBSIDIARIES
The State Bank Group with a network of 14,061 branches including 4,755 branches of
its seven Associate Banks dominates the banking industry in India. In addition to
banking, the Group, through its various subsidiaries, provides a whole range of
financial services which includes Life Insurance, Merchant Banking, Mutual Funds,
Credit Card, Factoring, Security trading and primary dealership in the Money Market.
e.1) Associates Banks:
SBI has seven associate banks namely
• State Bank of Indore
• State Bank of Travancore
• State Bank of Bikaner and Jaipur
• State Bank of Mysore
58
• State Bank of Patiala
• State Bank of Hyderabad
• State Bank of Saurashtra
All associate banks have migrated to Core Banking (CBS) platform. Single window
delivery system has been introduced in all associate banks. SBI’s seven associate
banks are the first amongst the public sector banks in India to get fully networked
through CBS, providing anytime-anywhere banking to its customers to facilitate a
bouquet of innovative customer offerings.
e.2) Non-Banking Subsidiaries/Joint Ventures
i) SBI Life:
ii) SBI Capital Markets Limited (SBICAP)
iii) SBI DFHI LTD
iv) SBI Cards & Payments Services Pvt. Ltd. (SBICSPL)
v) SBI Funds Management (P) Ltd. (SBIFMPL)
f) Human Resources
59
NON BANKING SUBSIDIARIES:
The Bank has the following Non-Banking Subsidiaries in India :
SBI Capital Markets Ltd
SBI Funds Management Pvt Ltd
SBI Factors & Commercial Services Pvt Ltd
3.2 A X IS B A N K
A X IS
Bank-2009:
Axis Bank was the first of the new private banks to have begun
operations in 1994, after the Government of India allowed new private banks to be
established. The Bank was promoted jointly by the Administrator of the specified
undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India
(LIC) and General Insurance Corporation of India (GIC) and other four PSU
insurance companies, i.e. National Insurance Company Ltd., The New India
Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India
Insurance Company Ltd.
60
The Bank today is capitalized to the extent of Rs. 403.63 crores with the
public holding (other than promoters and GDRs) at 53.72%.
The Bank's Registered Office is at Ahmedabad and its Central Office is

located at Mumbai. The Bank has a very wide network of more than 896 branches and
Extension Counters (as on 31st December 2009). The Bank has a network of over
4055 ATMs (as on 31st December 2009) providing 24 hrs a day banking convenience
to its customers. This is one of the largest ATM networks in the country.
The Bank has strengths in both retail and corporate banking and is committed
to adopting the best industry practices internationally in order to achieve excellence.
Promoters
Axis Bank Ltd. has been promoted by the largest and the best Financial
Institution of the country, UTI. The Bank was set up with a capital of Rs. 115
crore, with UTI contributing Rs. 100 crore, LIC - Rs. 7.5 crore and GIC and
its four subsidiaries contributing Rs. 1.5 crore each.
Shareholding 24.09%
Erstwhile Unit Trust of India was set up as a body corporate under the UTI
Act, 1963, with a view to encourage savings and investment. In December 2002, the
UTI Act, 1963 was repealed with the passage of Unit Trust of India (Transfer of
Undertaking and Repeal) Act, 2002 by the Parliament, paving the way for the
bifurcation of UTI into 2 entities, UTI-I and UTI-II with effect from 1st February
2003. In accordance with the Act, the Undertaking specified as UTI I has been
transferred and vested in the Administrator of the Specified Undertaking of the Unit
Trust of India (SUUTI), who manages assured return schemes along with 6.75% US-
64 Bonds, 6.60% ARS Bonds with a Unit Capital of over Rs. 14167.59 crores.
The Government of India has currently appointed Shri K. N. Prithviraj as the

Administrator of the Specified undertaking of UTI, to look after and administer the
schemes under UTI - I, where Government has continuing obligations and
commitments to the investors, which it will uphold.
61
Banking Privileges
Priority Banking Lounge:
As a Priority banking customer you will have access to an exclusive 'Priority Banking
Lounge' at branches. This will allow you to conduct your financial transactions in
utmost comfort and confidentiality through an exclusive Relationship Manager.
Dedicated Relationship Manager:
You will enjoy access to a dedicated Relationship Manager who will be your
one point contact at branch for all your banking transactions thus ensuring that you
would neither have to move from one counter to the other nor stand in queues to await
your turn.
Home Banking:
Experience the convenience of our home banking facilities. Avail of free cash and
cheque pick-up and delivery at your office or residence.
Exclusive Priority Banking International Debit card:

This card allows you free access to all VISA ATMs in India. The card also comes
with higher ATM withdrawal limits, higher POS transaction limits at merchant
establishments, enhanced insurance cover and a host of special discounts and offers.
You also get Preferential Interest Rates and lowered Processing Fees on select Retail
Loans.
Other Banking Privileges:
Enjoy a host of banking privileges like free at-par cheques, demand drafts and pay
orders, free passbook updates and monthly statements.
You would also be entitled to two free minor accounts, one free outward remittance
per quarter and free Mobile banking.
As a Priority Banking customer, there would be no issuance charges on Axis Bank's
Travel Currency Card.
62
Investment Privileges
Avail of assistance in financial planning. Investment advice, market
information reports, and invitations to investor meets are offered complimentary to
you.
Lifestyle Privileges
However, it's not all about just financial services. We aim to provide a different
Lifestyle experience through special offers on premium brands, movie privileges,
special events and lots more - especially for our Priority Banking customers
Gold Credit Card

As an added privilege, Priority Banking customers may also apply for a Gold
Standard Credit Card and Gold Standard Secured Credit Card without any additional
fee, subject to the applicable terms and conditions.
Priority Banking customers would also be eligible for a 50% reduction on the
Issuance Fee of Gold Plus Credit Card and Gold Plus Secured Credit Card. Rs. 500
will be charged as the annual maintenance charge for Priority Banking customers,
subject to the applicable terms and conditions.
63
ABOUT AXIS BANK’S PROFILE
About AXIS Bank
The Unit Trust Of India (UTI) is a statutory public sector investment institution set up in
1964.
It mobilizes the savings of the community through the sale of its units under its various unit
schemes..The.resources thus mobilized are invested by the UTI mainly in the shares and
debentures of the companies. Income received from this investment, after meeting the
expenses of the Trust, is distributed to unit holders annually as dividend.
The Unit Trust Of India has introduced a number of Unit schemes so far, the Unit
scheme,1964,the Unit Linked Insurance Plan, 1971, Unit Scheme for Charitable and
Religious Trusts and Registered Societies, 1981, the Income Unit Scheme, 1982, Monthly
Income Unit Scheme, 1983 and Growth and Income Unit Scheme, 1983.
64
3.2.1 GOAL AND OBJECTIVES
Business Objectives
The primary objective of AXIS is to enhance residential housing stock in the country
through the provision of housing finance in a systematic and professional manner, and to
promote home ownership. Another objective is to increase the flow of resources to the
housing sector by integrating the housing finance sector with the overall domestic
financial markets.
Organizational Goals
AXIS’s main goals are as follows:
65
 Develop close relationships with individual households,

 Maintain its position as the premier housing finance institution in the country,
 Transform ideas into viable and creative solutions,
 Provide consistently high returns to shareholders, and
 To grow through diversification by leveraging off the existing client base.
CHAPTER 4
66
SERVICE QUALITY
4.1 SERVICE AND ITS CHARACTERISTICS

Banks are investing a lot of money on web technologies and are therefore expecting
numerous benefits on their investments. The intensifying competition on today’s market
has forced
banks to seek profitable ways to differentiate themselves. Companies have moved their
focus from products and services toward a customer-centered focus as a tool to gain
competitive advantages and a great return on already made investments. The success in
these customer- centered businesses is to deliver high service quality. Already in the
end of the 1980’s researchers were determined that if the companies wanted to succeed
they needed to give the development of service quality the highest priority. The
delivery of high service is a challenging task and to provide their customers with high
service quality companies must
know what their customers want and need. Because of factors that are unique to
services, companies face difficulties while delivering service quality: intangibility,
heterogeneity, inseparability and perishability. Because services are intangible they can
not be felt, smelled
or tasted which makes it hard for customers to evaluate the service quality.
67
Furthermore, services are not possible to store for later use, they are consumed
immediately. Therefore
companies need to offer other visible indicators where customers could evaluate the
delivered service quality. Services heterogeneity means that services are not produced
by single unit and then distributed to customers. This means that the quality of services
varies depending on who provides them as well as when, where and how services are
provided.
Here the focus is on the employee and the way in which the service is delivered and
perceived by the customer will depend on the employee. Services are perishable which
means that they are consumed when they are provided and can not be stored. Service
has many definitions, one definition has been chosen that describe it in summary: “A
service is something that can be bought and sold, but which you cannot drop on your
foot.” Both managers and academic researchers have in recent years given a great deal
of interest in measurement of customer satisfaction and perceived service quality.
Spreng et al (1996) discuss the difference between customer satisfaction and perceived
service quality and suggest that these are not the same and that companies need to take
both into consideration. This because companies need to know whether they should
focus on having satisfied customers or to deliver the maximum service quality.
Perceived service quality is according to Parasuraman et al “a global judgment of, or,
attitude relating to the superiority of the service” and this definition can be found in
other service literature. The definition of the customer satisfaction has not the same
clear definition but Spreng et al use the definition “an evaluative, affective or emotional
response.”
4.2 GAPS ANALYSIS

The knowledge of how to measure service quality is of great importance for the
companies if they want to succeed on the today’s competitive market. The
measurement of perceived service quality derives from the Gap analysis, which was
originally conducted during the end of the 1980’s. The Gap analysis was developed to
help managers analyze the sources for quality problems but also to help them in
understanding how to improve the service quality. The first gap in the analyses is due
to the lack of managers understandings about the perceived service quality. It states
that managers have incorrect understanding of what their customers want and need, e.g.
68
because of wrong information from customers surveys. The second gap is about service
characteristics not complying with management understanding and customers’
expectations. This may arise due to lacking communication inside the organization and
lack of clear organizational goals. It is due to the fact that the specific quality is not
fulfilled during the production and deliverance of the service. This gap usually occurs
when the employee and customer interact. It occurs because employees are not ready to
deliver the good service quality or that the quality characteristics are not agreed upon
within the organizational culture. The fourth gap deals with problems within the
marketing communication. Therefore it is important to always give customers
appropriate and correct information. The analysis simply describes how the gap
between expected and perceived service quality arise from these four gaps while the
difference between the delivered and perceived service by customers is the fifth gap.
The goal for companies should be to minimize all the gaps as much as possible. The
bigger the first four gaps are, the bigger the fifth gap will be. This means that the
perceived service quality will be low and companies could fail in delivering high
service quality. Because of the Gap analyses Parasuraman et al designed SERVQUAL,
a multiple-item scale for measuring service quality. The instrument has been used a lot
within the service literature and as a basic tool for companies in measuring the
perceived service quality.
4.3 SERVQUAL- SERVICE QUALITY

MEASUREMENT
As mentioned earlier the main difficulty with service quality is that it is hard to
measure. According to the Finnish author Christian Grönroos, many of these studies
derive from the same point that service quality is experienced from a comparison
between anticipation and experience with consideration to a couple of quality
attributes. SERVQUAL is conducted from Gaps analysis and a study of five different
business and four dimensions form this instrument: Tangibles, Reliability,
Responsibility, Assurance and Empathy Tangibles are about the physical facilities
that companies have, including the appearance of the employees.
69
Reliability shows that the employees show that they can dependably perform their
service and customer attain and sustain their trusts in the company. Responsibility is
when the company is willing to help customers and provide them with the best
service. Assurance is when company’s employees are containing knowledge and
with their ability inspire trust and confidence to customers. The last dimension is
Empathy and this shows that the company is giving the customer attention and
caring. The SERVQUAL measurement can be accepted as
a traditional way of measuring the perceived service quality and is a basic skeleton of
underlying service quality; therefore it needs to be used in its entirety as much as
possible.
Parasuraman et al concur that SERVQUAL is universal and can be used across all
services. This has received a lot of critics and many researches within the service
quality field have concluded that the instrument can not directly be applied to studies
of the online service quality. When considering the last dimension Empathy and then
studying the interaction between the customer and the computer there is no Empathy
and therefore companies’ can´t really take this dimension into account when
measuring the perceived service quality online. SERVQUAL is a good service quality
instrument when measuring and studying an organization which is not providing
services online. In this study e-banking is merely about online services and therefore
this instrument is not an appropriate instrument of measurement.
It is important to note that much of the research that has been performed about service
quality is deriving from SERVQUAL. Many of the dimensions that construct the
instrument are adapted to the other instruments of measurements. Technology, which is
the major force in shaping the buyer-seller interaction, is having an impact on the
service quality. Within the e- banking, banks need to focus their attention on customers
and to understand customer’s attributes which they are using to judge service quality.
70
71
CHAPTER 5
ANALYSIS AND INTERPRETATION
1) Modern looking equipment
72
 From the graph it is clearly seen that for AXIS and SBI most of the
respondents are fall in satisfaction range.
 For AXIS highest frequency is observed in satisfactory level, whereas for SBI
highest frequency is observed in neither satisfied nor dissatisfied range.
 So, for modern looking equipment AXIS bank has more number of satisfied
responses as compared to SBI.
2) Visually appealing physical facilities
73
 For both the banks highest frequency is observed in neither satisfied nor
dissatisfied range.
 And most of the respondents for both the banks are less satisfied as far as
visually appealing physical facilities concerned, as in level 3 i.e. dissatisfied
more numbers of respondents are there for both the banks.
 AXIS bank has more satisfied customers, so for visually appealing physical
facilities AXIS bank has good response as compared to SBI.
3) Neat appearing employees
74
 From the graph, SBI respondents are showing more positive response then that of
AXIS respondents, and also respondents fall in satisfied range is more in case of
SBI then that of AXIS.
 Also there are more numbers of respondents in moderate and strongly agreed zone
for SBI as compared to AXIS. And for AXIS most of the respondents are present
in 3,4 and 5 level of satisfaction, so respondents are not satisfied for AXIS.
 So for neat appearing employees SBI respondents has more satisfaction level.
4) Visually appealing materials associated

with the services
75
 Here, for AXIS bank there are slightly more numbers of respondents which are fall in
satisfied range then from SBI. Also most of the respondents fall in neither dissatisfied
nor satisfied and satisfied area for both the banks.
 Here it is difficult to say that which bank is performing better in visually appealing
materials associated with the services.
5) Keeping promise to do something by

certain time
76
 Here from the graph it is clearly seen that respondents of SBI are having more
satisfaction than that of AXIS, as more numbers of respondents are fall in satisfaction
level.
 For both the banks most of the respondents are fall in neither satisfied nor dissatisfied
level and satisfied level. So for this factor both the banks are relatively not performing
well as per resondents.
 Overall for this question SBI respondents are showing more satisfaction
than that of AXIS.
6) Showing sincere interest in solving a

customer’s problem
77
 Here from the graph, SBI and AXIS have nearly the same kind of responses, but
AXIS has slightly more numbers of satisfied repondents as compared to SBI for
showing sincere interest in solving a customer’s problem, so for this factor AXIS is
performing slightly well over SBI.
 Here both the banks have more numbers of respondents who are fall in level 4 i.e.
neither satisfied nor dissatisfied so both the banks can improve the level of
satisfaction by improving on this variable.
7) Performing the service correctly the first

time
78
 Here for SBI highest frequency is observed in satisfied level, whereas for AXIS it is
in neither dissatisfied nor satisfied level.
 Total number of respondents for SBI are more in satisfaction level, whereas for AXIS
most of the respondents are fall in dissatisfied and neither dissatisfied nor satisfied
level.
 So for performing the service correctly the first time SBI respondents are agreed
compared to AXIS respondents.
 Also for this factor AXIS is underperforming compared to SBI.
79
8) Providing the service at the time the

service was promised
 From the graph, the responses are nearly similar for both AXIS as well as SBI.
 So for providing the service at the time the service was performed both the bank has
similar kind of responses. Hence there is not so much difference in providing the
service at the time the service was performed.
 Also there are very few respondents for both the banks which are highly or
moderatley satisfied, so both the banks need to improve satisfaction level on this
factor, so satisfaction level of their customers will improve.
80
9) Insisting on error free records
 There is quite large difference among the respondents for insisting on error free
records, SBI respondents are showing more positive response as compared to AXIS
respondents.
 Also AXIS respondents are more on dissatisfaction level than SBI respondents.
 So respondents of SBI are agree with the statement as compared to AXIS respondents.
 For this factor AXIS need improvement so satisfaction level of their customer will
improve, whereas for SBI they are performing well.
81
10) Employees telling customers exactly

what services
will be performed
 Here from the graph it is clearly seen that almost all the respondents for both the
banks are falling in satisfied and neither dissatisfied nor satisfied level.
 But number of respondents for SBI are more satisfied for employees telling customers
exactly what services will be performed.
82
 Also there are very few respondents which are moderately and highly agreed with the
statements for both the banks.
 So for both the banks there is a scope of improvement on this factor so satisfaction
level of customers can be improved.
11) Employees giving prompt service to

customers
 Here for SBI highest frequency is observed in satisfaction level, whereas for AXIS it
is in neither dissatisfied nor satisfied level.
 So for employees giving prompt service to customers SBI respondents are

more agreed over AXIS respondents.
83
 Here AXIS need improvement as there are less numbers of satisfied

respondents.
12) Employees always being willing to help

customers
 Here, more number of the respondents of AXIS is falling in satisfaction level as

compared to SBI respondents.
84
 SBI respondents are mainly falling in lower side of satisfaction level.
 So, for the statement employees always being willing to help customers AXIS
respondents are more agreed than of SBI respondents.
13) Employees are never too busy to respond

to
customers’ requests
85
 From the graph, SBI respondents are more in number in satisfaction level as
compared to AXIS respondents.
 Highest frequency of respondents for both AXIS and SBI is fall in neither dissatisfied
nor satisfied level.
 Also there are quite more numbers of respondents for both the banks which are
dissatisfied.
 So, for the statement that employees are never too busy to respond to customer’s
request SBI respondents are more agreed as compared to AXIS respondents, the
satisfaction level is slightly low for both the banks.
14) The behavior of employees instilling

confidence in
their customers
86
 From the graph it is seen that, there are more number of respondents for SBI who are
satisfied as compared to AXIS respondents.
 Also most of the respondents for both the banks are falling in neither dissatisfied nor
satisfied and satisfied level.
 So for the statement that the behavior of employees instilling confidence in their
customers, SBI respondents are more agreed as compared to AXIS respondents.
15) Customers feeling safe in their

transactions
87
 Here, for SBI highest frequency of respondents is observed in satisfied level, whereas
for AXIS it is in moderately satisfied level.
 But for AXIS respondents they are nearly equally distributed in neither dissatisfied
nor satisfied to highly satisfied level, whereas for SBI in satisfied level there is quite
large peak of respondents.
 So for the staement customer feeling safe in there transactions AXIS has more
number of respondents which are moderate to highly satisfied level and for SBI
respondents in satisfied zone are more.
 Also here for AXIS numbers of respondents in moderate and highly satisfied are more
compared to SBI, but due to large number of respondents in satisfied level for SBI
lead them to more stronger position.
88
16) Employees being consistently courteous

with their
customers
 Here from the graph, respondents of both the banks have nearly the same type of
responses, except in level 5 i.e. satisfied where more noumber of AXIS respondents
are fall.
 For both the banks, there are more numbers of satisfied respondents so both the banks
are performing well on this criteria.
 So here for the statement employees being consistently courteous with their
customers, AXIS has slightly more number of satisfied respondents.
89
17) Employees having the knowledge to

answer
customers’ questions
 For this question the respondents are distributed all over the satisfaction scale for both
the banks.
 So here there are more number of dissatisfied respondents as well as more number of
satisfied respondents for both the banks.
 Highest frequency is observed in level 5 i.e. satisfied respondents.
 But there are more number of respondents for SBI who are agreed with statement
hence for employees having the knowledge to answer customers’ question SBI is
ahead of AXIS.
90
18) Giving customers indivdual attention
 Here for AXIS there are more numbers of respondents who are agreed with the
question as compared to SBI respondents.
 But here there is minor difference in the responses of respondents for both the banks.
 So level of satisfaction of respondents for both the banks is almost same for this
question.
 Both the banks need to convert low satisfied customers to more satisfied customers by
improving the performance of this factor.
91
19) Operating hours convenient to all their

customer
 There are more numbers of satisfied respondents for AXIS as compared to SBI.
 Highest frequency of respondents for both the banks is at level 4 i.e. neither
dissatisfied nor satisfied.
 Also there are slightly more numbers of respondents on dissatisfied level for both the
banks, so they have to improve in this factor.
92
20) Employees giving customers personal

attention
 Here from the graph, we can say that SBI has more number of respondents who are
dissatisfied as compared to AXIS respondents.
 Also highest frequency of respondents for AXIS is at level 4 i.e. neither dissatisfied
nor satisfied, whereas for SBI it is at level 3 i.e. dissatisfied.
 So for employees giving customers personal attention AXIS has better response as
compared to SBI. Also for both the banks there are quite large numbers of repondents
who are not agreed with statement.
93
21) Having the customers’ best interest at

heart
 Here most of the respondents for both the banks are fall in dissatisfaction zone.
 Also highest frequency is observed in level 3 i.e. dissatisfied for both the banks.
94
 So as far as for this question both the banks have negative response and they need to
improve it.
22) The employees understanding the

specific needs of
customers
95
 From the graph, there are more numbers of respondents who are disagree with this
statement for both the banks.
 But for SBI there are more numbers of repondents which are falling in level 4 and for
AXIS more numbers of respondents are falling in level 5.
 So for this question AXIS has comparatively good response. But both the
banks have below average response.
CHAPTER 6
96
KEY FINDINGS
 AXIS has more satisfaction level of respondents for dimensions tangibility and
empathy; whereas SBI has more satisfaction level of respondents for remaining three
dimensions i.e. reliability, responsiveness, and assurance.
 Most of the respondents for both the banks are less satisfied as far as visually
appealing physical facilities concerned and neat appearing employees are concerned.
 The difference in score was more for SBI, so AXIS was lagging more on reliability
dimension.
 Insisting on error-free records the difference in score was huge for SBI in comparison
to AXIS. Also there is moderate difference in score for performing the service
97
correctly the first time for SBI over AXIS. Hence AXIS needs to improve on these
two factors as far as reliability dimension is concerned.
 For these three factors keeping promise to do something by certain time, providing the
service at the time the service was promised and, performing the service correctly the
first time both the banks can improve the level of satisfaction as there were less
number of respondents who were satisfied.
 For employees telling customers exactly what services will be performed difference is
so large for SBI over AXIS so AXIS has to focus on this factor to improve score on
responsiveness dimension.
 Whereas for SBI they are almost performing well on responsiveness dimension, but
they need improvement on employees always being willing to help customers.
 Employees telling customers exactly what services will be performed and employees
are never to busy to respond to customers’ request for these two questions both the
banks had less satisfaction of customers so by focusing on this to factors they can
improve satisfaction level.
 Both the banks are performing nearly same on dimension assurance, as there was
slight difference in the score.
 Customers feeling safe in their transaction for this question, AXIS has more number
of respondents which were moderate to highly satisfied level and for SBI respondents
in satisfied zone were more but there were less number of respondents in moderate to
highly satisfied level so due to more numbers of respondents in satisfied level, score
of SBI is more.
 Employees having enough knowledge to answer customers’ questions, here both the
banks need to improve on this factor as there were more numbers of respondents in
level 3 and level 4 for both the banks, so by focusing on this they can improve
satisfaction level of their customers.
 SBI has to improve in all the aspects for the dimension empathy as AXIS is
performing well on this dimension. Mainly they have to focus on giving customers
98
individual attention and employees giving customers personal attention as they were
more lagging behind in these factors in comparison of AXIS.
 Both the banks need to improve its service for employees giving customers personal
attention, operating hours convenient to all their customers, having the customers’
best interest at heart and the employees understanding the specific needs of customers
as there were more numbers of respondents who were either not satisfied or less
satisfied.
99
CHAPTER 7
CONCLUSION
 AXIS is doing well on the tangibility and empathy dimension, whereas SBI
performing well on reliability, responsiveness and assurance dimensions.
 Mainly SBI is doing well on insisting on error free record, employees telling
customers exactly what service will be performed and employees are never too
busy to respond to customers’.
 Whereas AXIS is performing well on giving customers individual customers

and employees always being willing to help customers.
100
 Both the banks need to improve on empathy dimension.
101
CHAPTER 8
RECOMMENDATIONS
AXIS:
 AXIS needs to improve on mainly these three factors i.e. Promise, Doing it right and
Competency as these factors are more important for banking industry and they are
lagging on these factors as compared to SBI.
 AXIS should maintain these four factors i.e. Promptness, Willingness, Competency
and Understanding as in these factors either AXIS is performing well or doing up to
the mark and these four factors are important for banking industry.
102
 AXIS should deemphasize on factor Appearance and Approachable as in these factors

they are performing well, but these factors have less importance as compared to other
factors.
 AXIS should concentrate on insisting on error free records, on performing the service
correctly the first time and employees telling customers exactly what services will be
performed.
SBI:
 SBI should improve its performance on Understanding and Credibility as these factors
are important for banking industry and they are lagging in these two factors.
 SBI should concentrate on employees always being willing to help customers, on

giving customers individual attention, on employees giving customers personal
attention.
 As SBI is performing poorly in all the aspect of empathy dimension, so SBI should
concentrate on this dimension more.
 SBI should maintain these five factors i.e. Appearance, Promises, Doing it right,
Competency, and Approachable in these factors either SBI is performing well or
doing up to the mark and these four factors are important for banking industry.
 SBI should deemphasize on factor Promptness as in this factor they are performing
well, but these factors have less importance as compared to other factors.
BOTH AXIS AND SBI:

 Both the banks should increase satisfaction level of their customers by mainly
focusing on following factors:
 Keeping promise to do something by certain time.
103
 Providing services at the time the service was promised.
 Performing the services correctly the first time.
 As on above factor, most of the respondents shows neither satisfied nor dissatisfied,
so by improving this factors satisfaction level can be improve.
104
CHAPTER 9
BIBLIOGRAPHY
REFERENCE BOOKS:
105
1) Zeithamal V. A., Gremler D.D., Bitner M.J., and Pandit A.: “Service Marketing
Integrated Customer Focus Across The Firm”, Fourth Edition, pp. 156-172.
2) Zillur Rahman, “Service Quality: Gap in the Indian Bank Industry” The ICFAI
Journal of Marketing Management, Feb. 2005, pp 37-50.
WEBSITES:
1) ideas.repec.org/a/ipf/finteo/v31y2007i2p185-201
2) marketing.byu.edu/download/measurementanalysis/servqual
3) http://areas.kenan-flagler.unc.edu/Marketing/FacultyStaff/zeithaml/Selected
%20Publications/SERVQUAL-%20A%20Multiple-Item%20Scale%20for
%20Measuring%20Consumer%20Perceptions%20of%20Service%20Quality.pdf
4) business.mapsofindia.com/banks-in-india
5) rbidocs.rbi.org.in/rdocs/Speeches/PDFs/86160.pdf
6) www.researchandmarkets.com/reports/4020/indian_banking_industry
7) www.mckinsey.com/locations/india/mckinseyonindia/pdf/india_banking_ 2010.pdf
8) media.wiley.com/product_data/excerpt/34/04713931/0471393134.pdf
9) www.marketresearch.com/product/display.asp?productid=2156584&g=1
10) www.sbi.co.in/
11) www.AXISbank.com/
12) www.experiencefestival.com/banking_in_india_-_current_scenario
13) http://pmindia.nic.in/eac_report_09.pdf
106
CHAPTER 10
QUESTIONNAIRE
107
Sr. no.____
Questionnaire
The data/information gathered through this questionnaire would be strictly used for
academic purpose only. All the responses and data will be kept CONFIDENTIAL.
Dear Sir/Madam,
I am the student of GLS-MBA conducting a study on SERVQUAL analysis of banking sector

with emphasis on State Bank of India and AXIS Bank.
SERVQUAL for AXIS
Please rate the following 22 SERVQUAL instruments by circling the number from “strongly
disagree=1” to “strongly agree=7” accordingly to your perception.
1 Modern looking equipment 1 2 3 4 5 6 7

2 Visually appealing physical facilities 1 2 3 4 5 6 7
3 Neat-appearing employees 1 2 3 4 5 6 7
4 Visually appealing materials associated with the service 1 2 3 4 5 6 7
5 Keeping promise to do something by a certain time 1 2 3 4 5 6 7
108
6 Showing sincere interest in solving a customer’s problems 1 2 3 4 5 6 7

7 Performing the service correctly the first time 1 2 3 4 5 6 7
8 Providing the service at the time the service was promised 1 2 3 4 5 6 7
9 Insisting on error-free records 1 2 3 4 5 6 7
10 Employees telling customers exactly what services will be performed 1 2 3 4 5 6 7
11 Employees giving prompt service to customers 1 2 3 4 5 6 7
12 Employees always being willing to help customers 1 2 3 4 5 6 7
13 Employees are never too busy to respond to customers’ requests 1 2 3 4 5 6 7
14 The behavior of employees instilling confidence in their customers 1 2 3 4 5 6 7
15 Customers feeling safe in their transactions 1 2 3 4 5 6 7
16 Employees being consistently courteous with their customers 1 2 3 4 5 6 7
17 Employee having the knowledge to answer customers’ questions 1 2 3 4 5 6 7
18 Giving customers individual attention 1 2 3 4 5 6 7
19 Operating hours convenient to all their customers 1 2 3 4 5 6 7
20 Employees giving customers personal attention 1 2 3 4 5 6 7
21 Having the customers’ best interests at heart 1 2 3 4 5 6 7
22 The employees understanding the specific needs of customers 1 2 3 4 5 6 7
Personal Information
1. Gender
Male Female
2. Age
25 years and below 26-35 years
36-45 years Above 45 years
3. Education
Below H.Sc. Completed school education
109
Graduate Post Graduate
4. Occupation
Own business Government employee
Professional Student
Housewife Other
5. Income
Less than 1 lakh p.a. 1-3 lakh p.a.
3-5 lakh p.a. More than 5 lakh p.a.
Sr. no.____
Questionnaire
The data/information gathered through this questionnaire would be strictly used for
academic purpose only. All the responses and data will be kept CONFIDENTIAL.
Dear Sir/Madam,
I am the student of GLS-MBA conducting a study on SERVQUAL analysis of banking sector

with emphasis on State Bank of India and AXIS Bank.
SERVQUAL for SBI
Please rate the following 22 SERVQUAL instruments by circling the number from “strongly
disagree=1” to “strongly agree=7” accordingly to your perception.
1 Modern looking equipment 1 2 3 4 5 6 7
110
2 Visually appealing physical facilities 1 2 3 4 5 6 7

3 Neat-appearing employees 1 2 3 4 5 6 7
4 Visually appealing materials associated with the service 1 2 3 4 5 6 7
5 Keeping promise to do something by a certain time 1 2 3 4 5 6 7
6 Showing sincere interest in solving a customer’s problems 1 2 3 4 5 6 7
7 Performing the service correctly the first time 1 2 3 4 5 6 7
8 Providing the service at the time the service was promised 1 2 3 4 5 6 7
9 Insisting on error-free records 1 2 3 4 5 6 7
10 Employees telling customers exactly what services will be performed 1 2 3 4 5 6 7
11 Employees giving prompt service to customers 1 2 3 4 5 6 7
12 Employees always being willing to help customers 1 2 3 4 5 6 7
13 Employees are never too busy to respond to customers’ requests 1 2 3 4 5 6 7
14 The behavior of employees instilling confidence in their customers 1 2 3 4 5 6 7
15 Customers feeling safe in their transactions 1 2 3 4 5 6 7
16 Employees being consistently courteous with their customers 1 2 3 4 5 6 7
17 Employee having the knowledge to answer customers’ questions 1 2 3 4 5 6 7
18 Giving customers individual attention 1 2 3 4 5 6 7
19 Operating hours convenient to all their customers 1 2 3 4 5 6 7
20 Employees giving customers personal attention 1 2 3 4 5 6 7
21 Having the customers’ best interests at heart 1 2 3 4 5 6 7
22 The employees understanding the specific needs of customers 1 2 3 4 5 6 7
Personal Information
1. Gender
Male Female
2. Age
25 years and below 26-35 years
36-45 years Above 45 years
111
3. Education
Below H.Sc. Completed school education
Graduate Post Graduate
4. Occupation
Own business Government employee
Professional Student
Housewife Other
5. Income
Less than 1 lakh p.a. 1-3 lakh p.a.
3-5 lakh p.a. More than 5 lakh p.a.
112

Service Quality in Banking Sector

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SERVQUAL ANALYSIS OF BANKING SECTOR WITH SPECIAL EMPHASIS ON AXIS AND SBI

2. INTRODUCTION TO THE BANKING

2.2.2 CLASSIFICATION OF BANKS

3.5 GOAL AND OBJECTIVES

1.1 RESEARCH DESIGN:

Research Approach: Quantitative research

The main objective of our project is:

 To know customers requirements or expectation for service.

Following sampling is designed in order to execute the survey.

 Sample Area: : Ahmedabad

100 SBI customers

Data Collection Method:

 Data Collection Tool

Type of questionnaire: Structured questionnaire.

1.2 ANALYSIS OF DATA:

1.3 LIMITAION OF STUDY:

1.4 BENEFICIARIES OF PROJECT:

1.5 THE RESEARCHERS:

Viral Shrimali is final year MBA-marketing student of NRIBM, Gujarat

I have selected this topic because I am interested in banking sector. Knowledge

2.1 A SNAPSHOT OF THE BANKING

The banking sector is dominated by Scheduled Commercial Banks (SCBs). As at end-March

With a view to provide an institutional mechanism for sharing of information on borrowers /

2.1.1 REFORMS IN THE BANKING SECTOR:

2.1.2 CLASSIFICATION OF BANKS:

Banking System in India

Reserve bank of India (Controlling Authority)

Development Financial institutions Banks

IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank ISIDBI

Commercial Regional Rural Land Development Co-operative

Public Sector Banks Private Sector Banks

SBI Groups Nationalized Banks Indian Banks Foreign Banks

2.2 CURRENT BANKING SCENARIO OF INDIA:

Need for a revolutionary approach towards privatization

Privatization and Credit disbursement:

Manpower Retraining and not Retrenchment:

New Products and New technologies:

2.2.1 BANKING IN THE NEW MILLENIUM

institutional infrastructure. Persistent efforts have been made towards adoption of

2.2.2 BANKING ACTIVITIES:

2.2.3 TECHNOLOGICAL DEVELOPMENTS:

Internet Banking (E-Banking)

Internet banking in India

 Electronic Information Transfer System: The system provides customer- specific

Core Banking Solutions

Real Time Gross Settlement (RTGS)

RTGS is an electronic settlement system of Reserve Bank of India without involvement of

Electronic Clearing Service

Electronic Clearing Service is another technology enhancement happened in the banking

2.2.4 BASEL II: HOW GEARED ARE BANKS??

 Provide effective assessment method

 Incorporates Sensitivity to banks.

The 3-Pillar Approach of BASEL II

2.2.5 CAMEL: TOOL FOR MEASURING THE

An international bank-rating system where bank supervisory authorities rate

the ability of the management to meet the need for

A - Asset quality : To ascertain the component of non performing assets as

M - Management quality : To measure the efficiency of the management

E - Earnings : To assess the quality of income generated by core

L - Liquidity : To measure the ability of a bank to meet the demand

On the Basis of CAMEL rating Top Ten Banks in Performance

Public sector Banks Private sector Banks Foreign Banks

Bank of India Karur vysya bank Shinhan bank

Corporation Bank Yes bank Abu Dhabi commercial