1.1 RETAIL BANKING

Service with a smile: Today’s finicky banking customers will settle for nothing less. The

customer has come to realize somewhat belatedly that he is the king. The customer’s choice

of one entity over another as his principal bank is determined by considerations of service

quality rather than any other factor. He wants competitive loan rates but at the same time also

wants his loan or credit card application processed in double quick time. He insists that he be

promptly informed of changes in deposit rates and service charges and he bristles with

‘customary rage’ if his bank is slow to redress any grievance he may have. He cherishes the

convenience of impersonal net banking but during his occasional visits to the branch he also

wants the comfort of personalized human interactions and facilities that make his banking

experience pleasurable. In short he wants financial house that will more than just clear his

cheque and updates his passbook: he wants a bank that cares and provides great services. So,

do banks meet these heightened expectations? Is there a gap that exists between the

management perception and the customer perception with reference to the services offered in

Retail Banking?

1.1.1What is Retail Banking?

Retail banking is, however, quite broad in nature - it refers to the dealing of

commercial banks with individual customers, both on liabilities and assets sides of the

balance sheet. Fixed, current / savings accounts on the liabilities side; and mortgages, loans

(e.g., personal, housing, auto, and educational) on the assets side, are the more important of

the products offered by banks. Related ancillary services include credit cards, or depository

services. Today’s retail banking sector is characterized by three basic characteristics:

multiple products (deposits, credit cards, insurance, investments and securities);

multiple channels of distribution ( branch, internet); and

multiple customer groups (consumer, small business, and corporate).

1.1.2 Retail Banking in India:

Retail banking in India is not a new phenomenon. It has always been prevalent in India in

various forms. For the last few years it has become synonymous with mainstream banking for

many banks.

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The typical products offered in the Indian retail banking segment are housing loans,

consumption loans for purchase of durables, auto loans, credit cards and educational loans.

The loans are marketed under attractive brand names to differentiate the products offered by

different banks. As the Report on Trend and Progress of India, 2003-04 has shown that the

loan values of these retail lending typically range between Rs.20,000 to Rs.100 lakh. The

loans are generally for duration of five to seven years with housing loans granted for a longer

duration of 15 years. Credit card is another rapidly growing sub-segment of this product

group.

In recent past retail lending has turned out to be a key profit driver for banks with retail

portfolio constituting 21.5 per cent of total outstanding advances as on March 2004. The

overall impairment of the retail loan portfolio worked out much less then the Gross NPA ratio

for the entire loan portfolio. Within the retail segment, the housing loans had the least gross

asset impairment. In fact, retailing make ample business sense in the banking sector.

While new generation private sector banks have been able to create a niche in this regard, the

public sector banks have not lagged behind. Leveraging their vast branch network and

outreach, public sector banks have aggressively forayed to garner a larger slice of the retail

pie. By international standards, however, there is still much scope for retail banking in India.

After all, retail loans constitute less than seven per cent of GDP in India vis-à-vis about 35

per cent for other Asian economies — South Korea (55 per cent), Taiwan (52 per cent),

Malaysia (33 per cent) and Thailand (18 per cent). As retail banking in India is still growing

from modest base, there is a likelihood that the growth numbers seem to get somewhat

exaggerated. One, thus, has to exercise caution in interpreting the growth of retail banking in

India.

1.1.3 Drivers of retail banking business in India

Some of the basic reasons which led to the retail banking growth are as follows:

First, economic prosperity and the consequent increase in purchasing power has given

a fillip to a consumer boom. During the 10 years after 1992, India's economy grew

at an average rate of 6.8 percent and continues to grow at almost the same rate – not many

countries in the world match this performance.

Second, changing consumer demographics indicate vast potential for growth in

consumption both qualitatively and quantitatively. India is one of the countries having

highest proportion (70%) of the population below 35 years of age (young population). The

BRIC report of the Goldman-Sachs, which predicted a bright future for Brazil, Russia, India

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and China, mentioned Indian demographic advantage as an important positive factor for

India.

Third, technological factors played a major role. Convenience banking in the form of

debit cards, internet and phone-banking, anywhere and anytime banking has attracted many

new customers into the banking field. Technological innovations relating to increasing use of

credit / debit cards, ATMs, direct debits and phone banking has contributed to the growth of

retail banking in India.

Fourth, the treasury income of the banks, which had strengthened the bottom lines of

banks for the past few years, has been on the decline during the last few years. In such a

scenario, retail business provides a good vehicle of profit maximization. Considering the fact

that retail’s share in impaired assets is far lower than the overall bank loans and advances,

retail loans have put comparatively less provisioning burden on banks apart from diversifying

their income streams.

Fifth, decline in interest rates have also contributed to the growth of retail credit by

generating the demand for such credit.

1.1.4 Opportunities and Challenges of Retail Banking in India

Retail banking has immense opportunities in a growing economy like India. As the

growth story gets unfolded in India, retail banking is going to emerge a major driver. How

does the world view us? As already referred to the BRIC Report, talking India as an

economic superpower; A. T. Kearney, a global management consulting firm, recently

identified India as the "second most attractive retail destination" of 30 emergent markets.

The rise of the Indian middle class is an important contributory factor in this regard.

The percentage of middle to high income Indian households is expected to continue rising.

The younger population not only wields increasing purchasing power, but as far as acquiring

personal debt is concerned, they are perhaps more comfortable than previous generations.

Improving consumer purchasing power, coupled with more liberal attitudes toward personal

debt, is contributing to India's retail banking segment.

Global investors are attracted to India because of the growing number of well-educated,

English-speaking workers who are comfortable working in information technology. India's IT

work force will be augmented by a booming population of engineering students. Furthermore,

India's labor pool also serves as an expanding customer base for retail bank products and

services.

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The development of India's economy is boosting overall consumer purchasing power. The

percentage of middle to high income Indian households is expected to continue rising. The

younger, more educated population not only wields increasing purchasing power, but it is

more comfortable than previous generations with acquiring personal debt

The combination of the above factors promises substantial growth in the retail sector, which

at present is in the nascent stage. Due to bundling of services and delivery channels, the areas

of potential conflicts of interest tend to increase in universal banks and financial

conglomerates. Some of the key policy issues relevant to the retail banking sector are:

financial inclusion, responsible lending, access to finance, long-term savings, financial

capability, consumer protection, regulation and financial crime prevention. The challenges

for the industry and its stakeholders are as follows:

First, retention of customers is going to be a major challenge. According to a research

by Reichheld and Sasser in the Harvard Business Review, 5 per cent increase in customer

retention can increase profitability by 35 per cent in banking business, 50 per cent in

insurance and brokerage, and 125 per cent in the consumer credit card market. Thus, banks

need to emphasise on retaining customers and increasing market share.

Second, rising indebtedness could turn out to be a cause for concern in the future.

India's position, of course, is not comparable to that of the developed world where household

debt as a proportion of disposable income is much higher. Such a scenario creates high

uncertainty. Expressing concerns about the high growth witnessed in the consumer credit

segments, the Reserve Bank has, as a temporary measure, put in place risk containment

measures and increased the risk weight from 100 per cent to 125 per cent in the case of

consumer credit including personal loans and credit cards (Mid-term Review of Annual

Policy, 2004-05).

Third, information technology poses both opportunities and challenges. Even with

ATM machines and Internet Banking, many consumers still prefer the personal touch of their

neighbourhood branch bank. Technology has made it possible to deliver services throughout

the branch bank network, providing instant updates to checking accounts and rapid

movement of money for stock transfers. However, this dependency on the network has

brought IT departments additional responsibilities and challenges in managing, maintaining

and optimizing the performance of retail banking networks. Illustratively, ensuring that all

bank products and services are available, at all times, and across the entire organization is

essential for today’s retails banks to generate revenues and remain competitive. Besides, there

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are network management challenges, whereby keeping these complex distributed networks

and applications operating properly in support of business objectives becomes essential.

Specific challenges include ensuring that account transaction applications run efficiently

between the branch offices and data centres.

Fourth, KYC Issues and money laundering risks in retail banking is yet another

important issue. Retail lending is often regarded as a low risk area for money laundering

because of the perception of the sums involved. However, competition for clients may also

lead to KYC procedures being waived in the bid for new business. Banks must also consider

seriously the type of identification documents they will accept and other processes to be

completed. The Reserve Bank has issued detailed guidelines on application of KYC norms in

November 2004.

1.1.5 But how competitive are the players?

The entry of new generation private sector banks has changed the entire scenario. Earlier the

household savings went into banks and the banks then lent out money to corporates.

Now they need to sell banking. The retail segment, which was earlier ignored, is now the

most important of the lot, with the banks jumping over one another to give out loans. The

consumer has never been so lucky with so many banks offering so many products to choose

from. With supply far exceeding demand it has been a race to the bottom, with the banks

undercutting one another. A lot of foreign banks have already burnt their fingers in the retail

game and have now decided to get out of a few retail segments completely. The nimble

footed new generation private sector banks have taken a lead on this front and the public

sector banks are trying to play catch up. The PSBs have been losing business to the private

sector banks in this segment. PSBs need to figure out the means to generate profitable

business from this segment in the days to come.

1.1.6 What about the foreign giants?

The foreign banks have identified the wide opportunity but there are certain systematic risks

involved in operating in the Retail market for them. These include regulatory restrictions that

prevent them from expanding their branch network. So these banks often take the Direct

Selling Agent (DSA) route whereby low-end jobs like sourcing or transaction processing are

outsourced to small regional layers. However, as a McKinsey study points out actual write-

offs on NPAs show a strong negative correlation with sharing of positive information. On top

of this, the spend-now-pay-later “credit culture” in India is just not picking up. A swift legal

procedure against consumers creating bad debt is virtually nonexistent. Finally, the vast

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geographical and cultural diversity of the country makes credit policy formulation a tough job

All these add up to the unattractiveness too, of the Indian retail market to the foreign players.

Yet Citibank, HSBC and Standard Chartered—all in India for more than a century, and with

relatively large retail networks—seem to have no pressing need to acquire a local bank.

Established foreign banks have preferred to take over customers or businesses from other

foreign banks that want to leave. Thus HSBC, in recent years, has acquired customers from

France's BNP, Germany's Deutsche Bank and Japan's Bank of Tokyo-Mitsubishi. ABN Amro

took over Bank of America's retail business.

1.1.7 Reasons for the change over from Corporate Banking to Retail Banking:

• The financial sector reforms undertaken by the Government since the year 1991 have

accelerated the process of disintermediation which has encouraged blue chip corporate to

access cheaper funds to meet their working capital requirements directly from investors in

India and abroad through capital market instruments and external Commercial Borrowings

route thus by-passing Banks in the process. The deregulation of markets and interest  rates

has lead to cut throat competition among Banks for corporate loans making them to lend even

at PLR or sub PLR and offer other valued services at comparatively cheaper rates to big and

high value corporates. In the process, most of the banks have experienced substantial

reduction in interest spreads and drain on their profitability.

• The introduction of stringent Asset Classification, Income Recognition and provisioning

norms has resulted in growing menace of NPAs in corporate loans which has affected the

asset quality, profitability and capital adequacy of banks adversely. The risks involved in

corporate loans are very high as corporates have to keep all their eggs in one basket. The risks

involved in retail Banking advances are comparatively less and well diversified as loan

amounts are relatively small ranging from Rs. 5000 to Rs. 100 lakh and repayable normally

in short period of  3- years except housing loans (where repayment period is long up to 15

years in some cases) and from fixed source of income like salaries.

• Whereas corporate loans give average return of just 0.5 to 1.5 percent only, the retail

advances offer attractive interest spread of 3to 4 percent, because retail borrowers are less

interest rate sensitive than the Corporates. Another reason for large interest spreads on retail

advances is that the retail customers are too fragmented to bargain effectively.

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• While corporate loans are subject to ups and downs in trade frequently, retail loans are

comparatively independent of recession and continue to deliver even during the sluggish

phase of economy.

• Retail Banking gives a lot of stability and public image to banks as compared to corporate

banking.

• The housing loans, which form the major chunk of retail lending and where NPAs are the

least, carry risk weight of just 50% for capital adequacy purposes. This is likely to come

down further as new Basel Capital Accord or (Basel II) norms are put in place from the year

2006. This offers added incentive to banks for lending to this retail segment as against

corporate lending where capital consumption is higher.

• The greater amount of consumerism in the country with upswing in income levels of

burgeoning middle class, which has propensity to consume to raise their standard of living, is

enlarging the retail markets. This market is growing 2 50 percent per year and boosting the

demand for credit from households. The potential is huge as present penetration level is just

over 2 percent in the country. Given the easy liquidity scenario in the country the growth rate

in this sector is likely to go up manifold in the years come. This offers great potential for

banks to enlarge their loan books.

• The Indian mindset is also changing and consumers prefer to improve their quality of life

even if it means borrowing for facilities like housing, consumer goods vehicles and

vacationing etc. Borrowing and lending is no longer considered a taboo. The peer pressure

and demonstration effect is further pushing up demand for housing loans, consumer products

and automobiles. The profiles of customers are fast changing from conservative dodos to

fashionable peacocks. All these developments give big push to Retail Banking activities.

• Retail Banking clients are generally loyal and tend not to change from one Bank to another

very often.

• Large numbers of Retail clients facilitate marketing, mass selling and ability to

categorize/select clients using scoring system and data mining. Banks can cut costs and

achieve economies of scale and improve their bottom-line by robust growth in retail business

volume.

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• Through product innovations and competitive pricing strategies Banks can foster business

relationship with customers to retain the existing clients and attract new ones.

• Innovative products like asset securitization can open new vistas in sustaining optimal

capital adequacy and asset liability management for banks.

• Retail Banking offers opportunities to banks to cross-sell other retail products like credit

card, insurance, mutual fund products and demat facilities etc. to depositors and investors.

1.1.8 Impact of Retail Banking:

The major impact of retail Banking is that, the customers have become the Emperors – the

fulcrum of all Banking activities, both on the asset side and the liabilities front. The hitherto

sellers market has transformed into buyers market the customers have multiple of choices

before them now for cherry picking products and services, which suit their lifestyles and

tastes and financial requirements as well. Banks now go to their customers more often than

the customers go to their banks.

• Retail Banking is transforming banks into one stop financial super markets.

• The share of retail loans is fast increasing in the loan books of banks.

• Banks can foster lasting business relationship with customers and retain the existing

customers and attract new ones. There is a rise in their service as well.

•  Banks can cut costs and achieve economies of scale and improve their revenues and profits

by robust growth in retail business. Reduction in costs offers a win win situation both for

banks and the customers.

• It has affected the interface of banking system through different delivery mechanism

• It is not that banks are sharing the same pie of retail business, the pie itself is growing

exponentially. Retail Banking has fuelled a considerable quantum of purchasing power

through a slew of retail products.

•  Banks can diversify risks in their credit portfolio and contain the menace of NPAs. Retail

banking allows bank to cross sell other products and services as it is far more easier to sell

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other products to the same customer rather than search for absolutely new ones. Cross selling

is one of the best avenues for relationship

• Banking and retention of customers. Banks can thus increase their business volume and

improve their bottom-line substantially.

• Re-engineering of business with sophisticated technology based products will lead to

business creation, reduction in transaction costs and enhancement in efficiency of operations.

1.1.9 Problems faced in Retail Banking:

• Retail Banking has all it’s attendant risks. It is highly sensitive .Banks got to move

cautiously. It is easy to enter, but difficult to get out. A systematic and a calculated approach

is the pre-requisite for success in the long run.

• Retail Banking is being introduced with the concept of serving customer with better and

innovative products with the latest technology and easy availability. It becomes so popular

and widely acceptable that more and more customers had started to use it. Now it becomes a

mass product. Customer database have tremendously increased and it becomes difficult to

manage them.

• To match the customer inflows and current customer requirements as well as service

standards, banks have to set up more branches, distribution channels and new trained staff as

well as improvement in back office operations also in very near future. This itself a time

bounded problem and banks have to do it as early as possible.

• Today’s competitive market customer has more than one options for his retail banking

needs. Every bank is providing more or less similar kind of products. So an unsatisfied

customer can easily switch over to another competitor’s bank. So banks need to be very

careful in handling the customers. They have to continually improve their service standards.

• Retail Banking is so wide accepted by the customer as well as very aggressively promoted

by the bankers that if the bankers do not take adequate care in distributing and recovering

advances, there are chances of increasing in NPAs in coming feature. And that would be an

alarming situation.

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1.1.10 Retail Banking Products Portfolio

A.Deposits:

There are many products in retail banking like Fixed Deposit, Savings Account, Current

Account, Recurring Account, NRI Account, Corporate Salary Account, Free Demat Account,

Kid’s Account, Senior Citizen Scheme, Cheque Facilities, Overdraft Facilities, Free Demand

Draft Facilities, Locker Facilities, Cash Credit Facilities, etc. They are listed and explained as

follows:

1. Fixed Deposit:

The deposit with the bank for a period, which is specified at the time of making the deposit is

known as fixed deposit. Such deposits are also known as FD or term deposit .A FD is

repayable on the expiry of a specified period. The rate of interest and other terms and

conditions on which the banks accepted FD were regulated by the RBI, in section 21 and 35A

of the Banking Regulation Act 1949.Each bank has prescribed their own rate of interest and

has also permitted higher rates on deposits above a specified amount. RBI has also permitted

the banks to formulate FD schemes specially meant for senior citizen with higher interest

than normal.

2. Savings Account:

Saving bank account is meant for the people who wish to save a part of their current income

to meet their future needs and they can also earn in interest on their savings. The rate of

interest payable on by the banks on deposits maintained in savings account is prescribed by

RBI.

Now-a-days the fixed deposit is also linked with saving account. Whenever there is excess of

balance in saving account it will automatically transfer into Fixed deposit and if there is

shortfall of funds in savings account , by issuing cheque the money is transferred from fixed

deposit to saving account. Different banks give different name to this product.

3. Current Account:

A current account is an active and running account, which may be operated upon any number

of times during a working day. There is no restriction on the number and the amount of

withdrawals from a current account. Current account, suit the requirements of a big

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businessmen, joint stock companies, institutions, public authorities and public corporation

etc.

4. Recurring Deposit:

A variant of the saving bank a/c is the recurring deposit or cumulative deposit a/c introduced

by banks in recent years. Here, a depositor is required to deposit an amount chosen by him.

The rate of interest on the recurring deposit account is higher than as compared to the interest

on the saving account. Banks open such accounts for periods ranging from 1 to 10 years.. The

recurring deposit account can be opened by any number of persons, more than one person

jointly or severally, by a guardian in the name of a minor and even by a minor.

5. NRI Account:

NRI accounts are maintained by banks in rupees as well as in foreign currency. Four types of

Rupee account can be open in the names of NRI:

a. Non Resident Rupee Ordinary Account (NRO)

b. Non Resident External Account (NRE)

c. Non Resident ( Non Repatriable Deposit Scheme ) ( NRNR)

d. Non Resident ( special)Rupee Account Scheme ( NRSR)

Apart from this, foreign currency account is the account in foreign currency. The account can

be open normally in US Dollar, Pound Sterling, Euro. The accounts of NRIs are Indian

millenium deposit, Resident foreign currency, housing finance scheme for NRI investment

schemes.

6. Corporate Salary Account:

Corporate Salary account is a new product by certain private sector banks, foreign banks and

recently by some public sector banks also. Under this account salary is deposited in the

account of the employees by debiting the account of employer. The only thing required is the

account number of the employees and the amount to be paid them as salary. In certain cases

the minimum balance required is zero. All other facilities available in savings a/c is also

available in corporate salary account.

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7. Demat Account:

Dematerialization is a process by which physical share certificates / securities are taken back

by the company or registrar and destroyed ultimately. An equivalent number of shares are

credited electronically to customers depository account. Just like saving/current account with

a bank one can open a securities account with the depository through a depository participant

8. Kid’s Account ( Minor Account ) :

Children are invited as customer by certain banks. Under this, Account is opened in the name

of kids by parents or guardians. The features of kid’s account are free personalized cheque

book which can be used as a gift cheque , internet banking , investment services etc.

9. Senior Citizenship Scheme:

Senior citizens can open an account and on that account they can get interest rate somewhat

more than the normal rate of interest. This is due to some social responsibilities of banks

towards aged persons whose earnings are mainly on the interest rate.

B. Loans and Advances:

The main business of the banking company is lending of funds to the constituents, mainly

traders, business and industrial enterprises. The major portion of a bank’s funds is employed

by way of loans and advances, which is the most profitable employment of its funds. There

are three main principles of bank lending that have been followed by the commercial banks

and they are safety , liquidity, and profitability.

Banks grant loans for different periods like short term, medium term, long term and also for

different purpose.

1. Personal Loans: This is one of the major loans provided by the banks to the individuals.

There the borrower can use for his/her personal purpose. This may be related to his/her

business purpose. The amount of loan is depended on the income of the borrower and his/her

capacity to repay the loan.

2. Housing Loans: NHB is the wholly own subsidiary of the RBI which control and regulate

whole industry as per the guidance and information. The purpose of loan is mainly for

purchase, extension, renovation, and land development.

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3. Education Loans: Loans are given for education in country as well as abroad.

4. Vehicle Loans: Loans are given for purchase of scooter, auto-rickshaw, car, bikes etc. Low

interest rates, increasing income levels of people are the factors for growth in this sector.

Even for second hand car finance is available.

5. Professional Loans: Loans are given to doctor, C.A, Architect, Engineer or Management

Consultant. Here the loan repayment is normally done in the form of equated monthly.

6. Consumer Durable Loans: Under this, loans are given for acquisition of T.V, Cell phones,

A.C, Washing Machines, Fridge and other items.

7. Loans against Shares and Securities: Finance against shares are given by banks for

different uses. Now-a-days finance against shares are given mostly in demat shares. A margin

of 50% is normally accepted by the bank on market value. For these loans the documents

required are normally DP notes, letter of continuing security, pledge form, power of attorney.

This loan can be used for business or personal purpose.

1.1.11 Retail Banking Services

1. CREDIT CARDS:

A credit card is an instrument, which provides immediate credit facilities to its holder to avail

a variety of goods and services at the merchant outlets. It is made of plastic and hence

popularly called as Plastic Money. Such cards are issued by bank to persons with minimum

income ranging between RS 50000 and RS 100000 per annum and are accepted by a variety

of business establishments which are notified by the card issuing bank. Some banks insist on

the cardholder being their customers while others do not. Few banks do not charge any fee

for issuing credit cards while others impose an initial enrollment fee and annual fee also. If

the amount is not paid within the time duration the bank charges a flat interest of 2.5%.

Leading Indian Banks such as : SBI, BOB, Canara Bank, ICICI, HDFC and a few foreign

banks like CITIBANK, Standard Chartered etc are the important issuers of credit card in

India.

2. DEBIT CARDS:

It is a new product introduced in India by Citibank a few years ago in association with

MasterCard. A debit card facilitates purchases or payments by the cardholder .It debits

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money from the account of the cardholder during a transaction. This implies that the

cardholder can spend only if his account permits.

3. NET BANKING: This facilitates the customers to do all their banking operations from

their home by using the internet facility. With Net Banking one can carry out all banking and

shopping transactions safely and with total confidentiality. With Net Banking one can easily

perform various functions:

a. Check Account Balance

b. Download Account Statement

c. Request for a stop payment of a cheque.

d. Request for a new cheque book.

e. Access demat account

f. Transfer funds.

g. Facilitate bill Payments.

h. Pay Credit Card dues instantly.

4. MOBILE BANKING:

Using mobile banking facility one can –

a. Check Balance

b. Check last three transactions.

c. Request for a statement

d. Request for a cheque book.

e. Enquire on a cheque status.

f. Instruct stock cheque payment.

g. View FD details.

h. Transfer funds.

i. Pay Utility Bills.

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5. PHONE BANKING:

It helps to conduct a wide range of banking transactions from the comfort of one’s home or

office. Using phone banking facility one can:

a. Check Balance

b. Check last three transactions.

c. Request for a cheque book.

d. Transfer funds.

e. Enquire on a cheque status, and much more.

6. ANYWHERE BANKING: One can deposit or withdraw cash from any branch of a

particular bank all over the country up to a prescribed limit. One can also transfer funds.

7. AUTOMATED TELLER MACHINES (ATM):

ATMs features user-friendly graphic screens with easy to follow instructions. The ATMs

interact with customers in their local language for increased convenience.

ICICI Bank’s ATM network is one of the largest and most widespread ATM network in

India.  Following are the features available on ATMs which can be accessed from anywhere

at anytime:

a. Cash Withdrawal

b. Cash Deposit

c. Balance Enquiry

d. Cheque Book Request

e. Transaction at various merchant establishments.

8. SMART CARD:

The smart card, a latest additional to the world of banking and information technology has

emerged as the largest volume driven end-product in the world due to its data portability,

security and convenience. Smart Card is similar in size to today’s plastic payment card, it has

a memory chip embedded in it. The chip stores electronic data and programmes that are

protected by advanced security features. When coupled with a reader, the smart card has the

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processing power to serve many different applications. As an access-control device, smart

cards make personal and business data available only to appropriate users.

To ensure the confidentiality of all banking service, smart cards have mechanisms offering a

high degree of security. These mechanisms are based on private and public key cryptography

combined with a digital certificate, one of the most advanced security techniques currently

available. Infact, it is possible to connect to the web banking service without a smart card.

1.2 WHAT IS CUSTOMER PERCEPTION?

Customer Perception is an important component of an organization’s relationship with their

customers. Customer satisfaction is a mental state which results from the customers

comparison of expectations prior to a purchase with performance perception after a purchase.

Strong customer service helps an organization to reach upto customers expectations.

Customer Perception on Service: Customer Service is the service provided in support of a

company’s core products. Customer Service most often includes answering questions, taking

orders, dealing with billing issues, handling complaints, and perhaps scheduling maintenance

or repairs. Customer Service can occur on site, or it can occur over the phone or via the

internet. Many companies operate customer service call centers, often staffed around the

clock. Typically there is no charge for customer service. Quality customer service is essential

to building customer relationships. It should not, however, be confused with the services

provided for sale by a company. Services tend to be more intangible than manufactured

products. There is a growing market for services and increasing dominance of services in

economies worldwide. There are generally two types of customer expectations. The highest

can be termed as desired service:  the level of service the customer hopes to receive. The

threshold level of acceptable service which the customers will accept is adequate service. Yet

there is hard evidence that consumers perceive lower quality of service overall and are less

satisfied. Possible reasons may be:

 • With more companies offering tiered service based on the calculated profitability of

different market segments, many customers are in fact getting less service than they have in

past.

• Increasing use by companies of self-service and technology-based service is perceived as

less service because no human interaction or human personalization is provided.

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• Technology-based services (Automated Voice Systems, Internet-Based Services,

Technology Kiosks) are hard to implement, and there are many failures and poorly designed

systems in place.

• Customer expectations are higher because of the excellent service they receive from some

companies. Thus they expect the same from all and are frequently disappointed.

• Organizations have cut costs to the extent that they are too lean and are too understaffed to

provide quality service.

• The intensely competitive job market results in less skilled people working in frontline

service jobs; talented workers soon get promoted or leave for better opportunities.

• Many companies give lip service to customer focus and service quality; but they fail to

provide the training , compensation, and support needed to actually deliver quality service.

• Delivering consistent, high-quality service is not easy, yet many companies promise it.

The gaps model positions the key concepts, strategies, and decisions in services marketing in

a manner that begins with the customer and builds the organization’s tasks around what is

needed to close the gap between customer expectations and perceptions.

The central focus of the gaps model is the customer gap, the difference between customer

expectations and perceptions. Firms need to close this gap- between what customers expect

and receive – in order to satisfy their customers and build long term relationships with them.

To close this all important customer gap, the model suggests that four gaps- the provider

gaps- need to be closed.

The following four provider gaps, shown below are the underlying causes behind the

customer gap:

Gap 1: Not knowing what customers expect.

Gap 2: Not selecting the right service designs and standards.

Gap 3: Not delivering to service standards.

Gap 4: Not matching performance to promises.

17

1.3 INDUSTRY PROFILE

The Banking Regulation Act 1949 defines banking as accepting the purpose of lending or

investment, of deposits of money from the public, repayable on demand or otherwise and

wthdrawable by cheque, draft, order otherwise. The essential function of a bank is to provide

services related to the storing of value and the extending credit. The evolution of banking

dates back to the earliest writing, and continues in the present where a bank is a financial

institution that provides banking and other financial services. Currently the term bank is

generally understood an institution that holds a banking license. Banking licenses are granted

by financial supervision authorities and provide rights to conduct the most fundamental

banking services such as accepting deposits and making loans. There are also financial

institutions that provide certain banking services without meeting the legal definition of a

bank, a so called non-bank. Banks are a subset of the financial services industry. The word

“Bank” is derived from the Italian word ‘banco’ signifying a bench, which was erected in the

market place, where it was customary to exchange money; the first bench having been

established in Italy a.d. 808. The basic functions of banks are to accept deposits, lend money

and act as collecting and paying agents. The Bank of Barcelona in Spain (1401) was perhaps

the first institution that could be called a bank in this sense. The terms bankrupt and "broke"

are similarly derived from banca rotta , which refers to an out of business bank, having its

bench physically broken. Money lenders in Northern Italy originally did business in open

areas, or big open rooms, with each lender working from his own bench or table. Typically, a

bank generates profits from transaction fees on financial services or the interest spread on

resources it holds in trust for clients while paying them interest on the asset.

1.3.1 HISTORY OF THE INDIAN BANKING SECTOR

Banking in India has its origin as early as the Vedic period. It is believed that the transition

from money lending to banking must have occurred even before Manu, the great Hindu

Jurist, who has devoted a section of his work to deposits and advances and laid down rules

relating to rates of interest. During the Mogul period, the indigenous bankers played a very

important role in lending money and financing foreign trade and commerce. During the days

of the East India Company, it was the turn of the agency houses to carry on the banking

business. The General Bank of India was the first Joint Stock Bank to be established in the

year 1786. The others which followed were the Bank of Hindustan and the Bengal Bank.

18

The Bank of Hindustan is reported to have continued till 1906 while the other two failed in

the meantime. In the first half of the 19th  century the East India Company established three

banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in

1843. These three banks also known as Presidency Banks, were independent units and

functioned well. These three banks were amalgamated in 1920 and a new bank, the Imperial

Bank of India was established on 27th  January 1921.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire

d’Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;

branches in Madras and Pondicherry, then a French colony, followed. Calcutta was the most

active trading port in India, mainly due to the trade of the British Empire, and so became a

banking center.

The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina

Kannada and Udupi district which were unified earlier and known by the name South Canara

( South Kanara ) district. Four nationalised banks started in this district and also a leading

private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of

Indian Banking".

With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank

of India was taken over by the newly constituted State Bank of India.

The Reserve Bank which is the Central Bank was created in 1935 by passing Reserve Bank

of India Act 1934. In the wake of the Swadeshi Movement, a number of banks with Indian

management were established in the country namely, Punjab National Bank Ltd, Bank of

India Ltd, Canara Bank Ltd, Indian Bank Ltd, the Bank of Baroda Ltd, The Central Bank of

India Ltd. On July 19, 1969, 14 major banks of the country were nationalized and in 15th 

April 1980, six more commercial private sector banks were also taken over by the

government.

Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is

with the Government of India holding a stake), 29 private banks (these do not have

government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign

banks. They have a combined network of over 53,000 branches and 17,000 ATMs.

According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75

19

percent of total assets of the banking industry, with the private and foreign banks holding

18.2% and 6.5% respectively.

From World War I to Independence:

The period during the First World War (1914-1918) through the end of the Second World

War (1939-1945), and two years thereafter until the independence of India were challenging

for Indian banking. The years of the First World War were turbulent, and it took its toll with

banks simply collapsing despite the Indian economy gaining indirect boost due to war-related

economic activities. At least 94 banks in India failed between 1913 and 1918.

Post-independence:

The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal,

paralyzing banking activities for months. India's independence marked the end of a regime of

the Laissez-faire for the Indian banking. The Government of India initiated measures to play

an active role in the economic life of the nation, and the Industrial Policy Resolution adopted

by the government in 1948 envisaged a mixed economy. This resulted into greater

involvement of the state in different segments of the economy including banking and finance.

The major steps to regulate banking included:

In 1948, the Reserve Bank of India, India's central banking authority, was

nationalized, and it became an institution owned by the Government of India.

In 1949, the Banking Regulation Act was enacted which empowered the Reserve

Bank of India (RBI) "to regulate, control, and inspect the banks in India."

The Banking Regulation Act also provided that no new bank or branch of an existing

bank could be opened without a license from the RBI, and no two banks could have

common directors.

However, despite these provisions, control and regulations, banks in India except the State

Bank o India, continued to be owned and operated by private persons. This changed with the

nationalization of major banks in India on 19 July, 1969.

Nationalization:

By the 1960s, the Indian banking industry has become an important tool to facilitate the

development of the Indian economy. At the same time, it has emerged as a large employer,

and a debate has ensued about the possibility to nationalize the banking industry. Indira

Gandhi, the-then Prime Minister of India expressed the intention of the Government of India

in the annual conference of the All India Congress Meeting in a paper entitled "Stray

thoughts on Bank Nationalization." The paper was received with positive enthusiasm.

Thereafter, her move was swift and sudden, and the GOI issued an ordinance and

20

nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969.

Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of

political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the

Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the

presidential approval on 9 August, 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated

reason for the nationalization was to give the government more control of credit delivery.

With the second dose of nationalization, the GOI controlled around 91% of the banking

business of India. Later on, in the year 1993, the government merged New Bank of India with

Punjab National Bank. It was the only merger between nationalized banks and resulted in the

reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the

nationalized banks grew at a pace of around 4%, closer to the average growth rate of the

Indian economy.

The nationalized banks were credited by some, including Home minister P. Chidambaram, to

have helped the Indian economy withstand the global financial crisis of 2007-2009.

Liberalization:

In the early 1990s, the then Narsimha Rao government embarked on a policy of

liberalization, licensing a small number of private banks. These came to be known as New

Generation tech-savvy banks, and included Global Trust Bank (the first of such new

generation banks to be set up), which later amalgamated with Oriental Bank of Commerce,

UTI Bank(now re-named as Axis Bank), ICICI Bank and HDFC Bank. This move, along

with the rapid growth in the economy of India, revitalized the banking sector in India, which

has seen rapid growth with strong contribution from all the three sectors of banks, namely,

government banks, private banks and foreign banks.

The next stage for the Indian banking has been setup with the proposed relaxation in the

norms for Foreign Direct Investment, where all Foreign Investors in banks may be given

voting rights which could exceed the present cap of 10%,at present it has gone up to 49%

with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time, were

used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new

wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.

All this led to the retail boom in India. People not just demanded more from their banks but

also received more.

Currently, banking in India is generally fairly mature in terms of supply, product range and

reach-even though reach in rural India still remains a challenge for the private sector and

21

foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered

to have clean, strong and transparent balance sheets relative to other banks in comparable

economies in its region. The Reserve Bank of India is an autonomous body, with minimal

pressure from the government. The stated policy of the Bank on the Indian Rupee is to

manage volatility but without any fixed exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially

in its services sector-the demand for banking services, especially retail banking, mortgages

and investment services are expected to be strong. One may also expect M&As, takeovers,

and asset sales.

1.3.2 INDIAN BANKING SYSTEM

Introduction

The Reserve Bank of India (RBI) is India's central bank. It is the sole authority for issuing

bank notes and the supervisory body for banking operations in India. It supervises and

administers exchange control and banking regulations, and administers the government's

monetary policy. It is also responsible for granting licenses for new bank branches. Though

the banking industry is currently dominated by public sector banks, numerous private and

foreign banks exist. India's government-owned banks dominate the market. Their

performance has been mixed, with a few being consistently profitable. Several public sector

banks are being restructured, and in some the government either already has or will reduce its

ownership.

Private and foreign banks

The RBI has granted operating approval to a few privately owned domestic banks; of these

many commenced banking business. Foreign banks operate more than 150 branches in India.

The entry of foreign banks is based on reciprocity, economic and political bilateral relations.

An inter-departmental committee approves applications for entry and expansion.

Capital adequacy norm

Foreign banks were required to achieve an 8 percent capital adequacy norm by March 1993,

while Indian banks with overseas branches had until March 1995 to meet that target. All other

banks had to do so by March 1996. The banking sector is to be used as a model for opening

22

up of India's insurance sector to private domestic and foreign participants, while keeping the

national insurance companies in operation.

The banking system has three tiers. These are the scheduled commercial banks; the regional

rural banks which operate in rural areas not covered by the scheduled banks; and the 

cooperative and special purpose rural banks.

Scheduled and non scheduled banks

There are approximately 80 scheduled commercial banks, Indian and foreign; almost 200

regional rural banks; more than 350 central cooperative banks, 20 land development banks;

and a number of primary agricultural credit societies. In terms of business, the public sector

banks, namely the State Bank of India and the nationalized banks, dominate the banking

sector.

Local financing

All sources of local financing are available to foreign-participation companies incorporated in

India, regardless of the extent of foreign participation. Under foreign exchange regulations,

foreigners and non-residents, including foreign companies, require the permission of the

Reserve Bank of India to borrow from a person or company resident in India

Regulations on foreign banks

Foreign banks in India are subject to the same regulations as scheduled banks. They are

permitted to accept deposits and provide credit in accordance with the banking laws and RBI

regulations. Currently about 25 foreign banks are licensed to operate in India. Foreign bank

branches in India finance trade through their global networks.

RBI restrictions

The Reserve Bank of India lays down restrictions on bank lending and other activities with

large companies. These restrictions, popularly known as "consortium guidelines" seem to

have outlived their usefulness, because they hinder the availability of credit to the non-food

sector and at the same time do not foster competition between banks.

23

Indian vs. foreign banks

Most Indian banks are well behind foreign banks in the areas of customer funds transfer and

clearing systems. They are hugely over-staffed and are unlikely to be able to compete with

the new private banks that are now entering the market. While these new banks and foreign

banks still face restrictions in their activities, they are well-capitalized, use modern equipment

and attract high-caliber employees.

Government and RBI regulations

All commercial banks face stiff restrictions on the use of both their assets and liabilities Forty

percent of loans must be directed to "priority sectors" and the high liquidity ratio and cash

reserve requirements severely limit the availability of deposits for lending. The RBI requires

that domestic Indian banks make 40 percent of their loans at confessional rates to priority

sectors' selected by the government. These sectors consist largely of agriculture, exporters,

and small businesses. Since July 1993, foreign banks have been required to make 32 percent

of their loans to these priority sector. Within the target of 32 percent, two sub- targets for

loans to the small scale sector (minimum of 10 percent) and exports (minimum of 12 percent)

have been fixed. Foreign banks, however, are not required to open branches in rural areas, or

to make loans to the agricultural sector.

The urge to merge:

In the recent past there has been a lot of talk about Indian Banks lacking in scale and size.

The State Bank of India is the only bank from India to make it to the list of Top 100 banks,

globally. Most of the PSBs are either looking to pick up a smaller bank or waiting to be

picked up by a larger bank. The central government also seems to be game about the issue

and is seen to be encouraging PSBs to merge or acquire other banks. Global evidence seems

to suggest that even though there is great enthusiasm when companies merge or get acquired,

majority of the mergers/acquisitions do not really work. So in the zeal to merge with or

acquire another bank the PSBs should not let their common sense take a back seat. Before a

merger is carried out cultural issues should be looked into. A bank based primarily out of

North India might want to acquire a bank based primarily out of South India to increase its

geographical presence but their cultures might be very different. So the integration process

might become very difficult. Technological compatibility is another issue that needs to be

looked into in details before any merger or acquisition is carried out.

24

1.4 COMPANY PROFILE

One of the earliest banks in South India, “South Indian Bank" came into being since 1929,

during the Swadeshi movement. The establishment of the bank was the fulfillment of the

dreams of a group of enterprising men who joined together at Thrissur. The objective behind

establishment of the Bank was to provide for the people a safe, efficient and service oriented

repository of savings of the community on one hand and to free the business community from

the clutches of greedy moneylenders on the other by providing need based credit at

reasonable rates of interest.

Translating the vision of the founding fathers as its corporate mission, the bank has during its

long sojourn been able to project itself as a vibrant, fast growing, service oriented and trend

setting financial intermediary.

The major product and services offered by the South Indian Bank are classified into three

major heads:

Personal banking

NRI banking

Business banking

Under these heads bank provide various schemes for deposits, loans and value- added

services to its customers.

1.4.1 Vision

To build a strong brand image to make the South Indian Bank technology driven, customer

oriented and the most preferred bank, where passion for excellence is a way of life,

innovation is a tradition, commitment to values is unshaken and customer loyalty is abiding,

enabling the Bank to achieve an impressive all round, (but better than the peer group)

business growth, build a healthy, qualitative and strong asset base and earn commensurate

profits

1.4.2 Mission

To become the most preferred and fastest growing among the Kerala based banks, with a

strong brand image as customer focused, technology driven and an innovative bank with core

competence in fostering relationship banking, garnering core deposits with accent on cost,

25

creating and maintaining high yielding quality assets through focused marketing, qualitative

appraisal and effective monitoring, ensuring a high level of internal efficiency through

impeccable housekeeping and enhancing shareholder value by achieving the highest net

profits amongst the peer group banks of Kerala.

The Bank’s shares are listed on

The Cochin Stock Exchange Ltd (CSE)

The Stock Exchange Mumbai (BSE)

The National Stock Exchange of India Ltd Mumbai (NSE)

1.4.3 Objectives of SIB

1) To establish and carry on the business of banking at registered office of the company

and at such branches.

2) Carrying on the business of accepting deposits of money on current account and to

carry on the business of banking.

3) Contracting for public and private loans and negotiating and issuing it.

4) Act as an agent of the government or local authorities or any other persons. Carrying

on agency business of any discipline other than the business of managing it.

5) The borrowing, raising or taking up money, the lending or advancing of money either

upon or without security, the drawing, making, accepting , discounting , buying ,

selling , collecting and dealing bill of exchange , promissory notes , coupons and

other instruments and securities, dealing in instruments like share ,bond etc.

6) To undertake and carry on all other forms of business as may be permissible for

banking company.

Presently, South Indian Bank has 545 branches, 9 extension counters and 295 ATM.

1.4.4 Milestones

The FIRST among the private sector banks in Kerala to become a scheduled bank in

1946 under the RBI Act.

The FIRST bank in the private sector in India to open a Currency Chest on behalf of

the RBI in April 1992.

The FIRST private sector bank to open a NRI branch in November 1992.

26

The FIRST bank in the private sector to start an Industrial Finance Branch in March

1993.

The FIRST among the private sector banks in Kerala to open an "Overseas Branch" to

cater exclusively to the export and import business in June 1993.

The FIRST bank in Kerala to develop in-house, fully integrated branch automation

software in addition to the in-house partial automation solution operational since

1992.

The bank has setup the SIB students economic forum designed to enkindle interest in

economic affairs in the minds of our young generation. The forum highlights one

theme every month to be discussed in their monthly meeting. These theme papers

have been receiving by economists, bankers , teachers and students.

The FIRST Kerala based private scheduled commercial bank to implement Core

Banking System.

The THIRD largest branch network among Private Sector banks, in India, with all its

branches under Core banking System.

South Indian Bank has won a special award for excellence in Banking Technology from

IDRBT (Institute for Development and Research in Banking Technology) – the technical arm

of the Reserve Bank of India. This award was presented to the Bank as a national level

recognition to the excellent contribution made in the area of Information Systems Security

Policies and Procedures. Competing against top level banks in India across all categories such

as Public Sector Banks, Private Sector Banks, Foreign Banks and Co-operative Banks, the

recognition from IDRBT is really a feather in the cap for SIB.

1.4.5 Few services offered by the bank

Savings Accounts:

The different type of Savings Accounts of the South Indian Bank to suit the customers exact

need are:

Regular Savings- With normal cheque book facility

Privilege Savings- With complete anywhere banking facility

Group Salary Savings Account- for every employee to meet the expectations

Junior Savings- For the students above age 12

SARAL Savings- No Frills Account – low minimum balance

Youth Plus Savings- An exclusive SB Account for Youth

27

MAHILA Savings- An attractive Savings Bank account exclusively for women

NRE Rupee Account- Non Resident External Rupee Account (Savings/ Deposits)

NRO Rupee Account- Non Resident Ordinary Rupee Account (Savings/ Deposits)

Foreign Currency Deposits- In USD, GBP and Euro- (FCNR / RFC )

Term Deposits:

Kalpakanidhi- Interest is compounded quarterly

SIB Flexi Deposit- Automatic part closure to cover Savings Account deficit

SIB Tax Gain 2006- Eligible for tax exemption under Sec 80 C

Fast Cash Deposit- Short term deposits with part closure option

Fixed Deposits- Interest is paid out quarterly/monthly

Recurring Deposit- Fixed Monthly installment deposit scheme

Loans:

Since loans are an integral part of personal finance SIB provides the following kind of

special packages as given:

Personal Loan- Easy general purpose loans

Vehicle Loans- for private, commercial or agricultural purposes

Home Loans- for residents, NRIs and Senior Citizens

Gold Loans- Easy Loans against Gold

Educational Loans- for higher studies

Agriculture Loans- for various agricultural needs

Flexi Loans- Loan against property

Other Loans- For certain specific purposes

Pravasi Swagat- For NRIs returning for ever to India.

28

Value added services:

The various value added services provided by SIB is as follows:

Any Branch Banking

Global ATM cum Debit Card

Internet Banking

Mobile Banking

Credit Card

SIB Collect

Demat Services

NRI Branches

NRI Cell

NRI FAQ’s

29

1.5 OBJECTIVE OF THE STUDY

• To understand the customers perception on the service delivery of the bank.

• To assess the management perception related to customers expectations on the bank’s

service- quality specifications and delivery.

• To examine the gaps between customers and bank management’s perceptions and

give remedies so as to minimize them and increase the customer base of the bank.

30

2.1 Concept of Retail Banking

The retail banking encompasses deposit and assets linked products as well as other financial

services offered to individual for personal consumption. Generally, the pure retail banking is

conceived to be the provision of mass banking products and services to private individuals as

opposed to wholesale banking which focuses on corporate clients. Over the years, the concept

of retail banking has been expanded to include in many cases the services provided to small

and medium sized businesses. Some banks in Europe even include their private banking

business i.e. services to high net worth net worth individuals in their retail banking portfolio.

The concept of Retail banking is not new to banks. It is only from past few years that it is

being viewed as an attractive market segment, which offers opportunities for growth with

profits. The diversified portfolio characteristic of retail banking gives better comfort and

spreads the essence of retail banking in individual customers. Though the term retail banking

and retail lending are often used synonymously, yet the later is lust one side of retail banking.

In retail banking, all the banking needs of individual customers are taken care of in an

integrated manner.

2.2 Review of Literature

Anil Dutta and Kirti Dutta in their paper reveal the expectations and perceptions of the

consumers across the three banking sectors in India. The study revealed that gap varies across

the banking sector with public sector banks showing the widest gap and foreign banks

showing a narrow gap. It is important for the service providers to know the level of customer

expectations so that they can meet and even exceed them to gain maximum customer

satisfaction 1.

In the study of Mark Durkin et al., customer satisfaction questionnaire was issued to over

2,000 retail customers. Twenty-five senior branch bank managers were then asked to rank the

same set of issues to ascertain what they felt to be the key influencers to customer registration

for internet banking. The three factors that the managers failed to identify, fell into two broad

categories: relationship management status and comfort with new technology 2.

Financial institutions are actively developing new electronic banking products for their retail

customers. To date, the market leaders have drawn a disproportionably higher share of e-

retail banking customers. In response, smaller institutions have become quite active in

exploring ways to participate profitably in online banking. A major influence is from a

customer relationship management (CRM) perspective, where institutions try to limit the

31

outflow of current customers and direct high-value customers to potential products from a

multi-product service offering array. These efforts can succeed only if retail bank marketers

focus the promotion of the new products and services that can utilise this channel toward

those customers who are most likely to find them attractive (Don Sciglimpagli). The first aim

of this study was to examine the role that online and electronic banking play in defining the

customer's primary financial relationship. The analysis of 701 retail customers of a financial

institution presented in this study suggests that banks and other institutions are highly

vulnerable to loss of customers to rivals with extensive online services. A second aim was to

examine to what extent information on banking relationships is able to extend CRM analysis

beyond that offered by typical demographic and income data. Current customer account

relationships are found to be highly predictive of use of electronic services use in general.

And, interest in the use of specific online services is related to differing customer

relationships in addition to ordinary demographic and balance information. These findings

can be useful for retail banking in identifying potential high-value users from a customer

relationship management perspective 3.

The purpose of the paper by Aurto Molina is to investigate the impact of relational benefits

on customer satisfaction in retail banking. This paper presents a causal model that identifies a

connection between the relational benefits achieved through a stable and long-term

relationship with a given bank and customer satisfaction with retail banking. Based on a

theoretical framework regarding the relationship between relational benefits and customer

satisfaction, an empirical study using a sample of 204 bank customers was conducted, and the

theoretical model is tested. Multi-item indicators from prior studies were employed to

measure the constructs of interest, and the proposed relationships were tested using structural

equations modeling methods. The results show that confidence benefits have a direct, positive

effect on the satisfaction of customers with their bank. However, special treatment benefits

and social benefits did not have any significant effects on satisfaction in a retail banking

environment. The findings suggest that banks can create customer satisfaction through

relational strategies that focus on building customer confidence. Therefore, frontline

employees should be committed to establishing and maintaining confidence benefits for

customers. Thus the study provides useful information on the relationship between customer

satisfaction and specific relational benefits in retail banking 4.

The important change drivers in most European retail banking systems are found to be

competition and IT developments. Two broad strategic themes are explored. The first is the

evolution of retail banking in a strategic marketing context from a supply focus towards a

much greater demand orientation. The second theme explored is the intensifying strategic

32

imperative towards a shareholder value culture. The key features and strategic challenges of

the `new' retail banking revolution are finally summarized in the study of Gardener Edwar

and Howcroft Barry 5.

Due to increasing competition in retail banking, understanding the customer perception about

service quality is becoming indispensable. The private sector banks are posing a very stiff

competition to the public sector banks through their initiatives for meeting customer

expectations and gaining a cutting edge. This is reflected by the increasing market share and

better profitability of private banks in comparison to that of public sector banks. At the same

time, public sector banks have also responded to the challenges posed by the private sector

banks through conscious efforts to enhance their service quality. This study (R.A.Ravi)

compares public sector banks and private sector banks in terms of user perception of their

retail banking services 6.

In his article in Business Line T. B. Kapali, explains the perceived stability of the income

stream from the retail business is probably the most important driver of the push into retail.

Cross-country studies clearly point - increasing urbanisation, rising income levels; all

indicating that the demand for retail finance will continue to be very strong well into the

future. ICICI or HDFC over the past few years does show the stability which has been

imparted to the overall revenue stream by the retail business 7.

With the growth of the Indian economy over the past few years, the retail banking sector in

India has also witnessed phenomenal growth. It has faced up to the need of the hour and

introduced anytime, anywhere banking, for its customers through ATMs, mobile and internet

banking. It has also offered services like D-MAT, plastic money (credit and debit cards),

online transfers, etc. The concept of CBS (Core Banking Solution), which allows a customer

to fulfill a wide range of banking operation online, has come alive during the past few years.

This has not only helped in reducing operational costs but facilitated greater conveniences to

its customers and so the customer preferences have to be taken care of constantly in the retail

banking business 8.

In the age of consumerism, the customer is king. And the banking sector is latching on to this

mantra of sales and marketing. Although the sector is part of the service industry, only

recently have individual banks woken up to the fact that offering products and services

tailored to meet the customers' specific needs can actually bring in more business. Banks

today do much more than lend and borrow money. The new-age private sector banks can be

said to be the forerunners in offering such customer-oriented service. Banks are even taking

loans to the customers. Banks have also become a one-stop shop for selling products such as

33

mutual funds, insurance and RBI bonds and offer service such as payment of utility bills and

equity trading. Cross-selling also helps banks personalise products for their customers. For

instance, banks give loans against insurance, or link deposit schemes to insurance, depending

on customer needs. The banks are converting to the age of commoditised business i.e., Give

the consumer a product and a reason to use it 9.

The rapid and provocative changes facing the retail sector seems to vary somewhat from

country to country, retail banks everywhere are working vigorously to address new

technological, regulatory and competitive realities. Collectively, they are trying to determine

strategies and tactics needed to secure their franchises and their futures. The bank of the

future will not win by creating a single strategy. Rather, each of its activities within products,

customer channels, and support services will be the subject of a discreet "business unit"

strategy, which will be benchmarked against market-segmented customer demand and

profitability, and competitors' businesses in this area 10.

The above studies show that retail banking business will continue to be very strong, well into

the future. The increasing competition is compelling the service providers to know the level

of customer expectations and meet them. The studies also suggest that the bank of the future

will not win by creating a single strategy but focus on building customer confidence and

extensive online services.

The present study looks into understanding the customers’ perception towards the retail

banking and also their awareness regarding the various retail banking services.

34

METHODOLOGY

• Research Method : Descriptive Research

• Sampling Tool : Questionnaire

• Sampling Design : Non – probability sampling.

• Sampling Method : Convenience Sampling

• Sample Size : 150

• Sampling Universe: Customers of South Indian Bank.

• Data Collected : Primary and Secondary Data

• Statistical Package : SPSS

• Statistical Tools Used : Percentage Analysis, Garrett Method and Cross Tabulation.

3.1 Sampling Design

The study has used Non- Probability sampling design.

Non- Probability sampling involves deliberate selection of a particular unit of the population

for constituting a sample.

3.2 Data Collection Method

Primary Data: The primary data was collected by means of a survey. Questionnaire was

prepared and customers of the bank were approached to fill up the questionnaire. The filled

up information was later analyzed to obtain the required information.

Secondary Data: In order to have a proper understanding of the sector of Retail Banking, an

in depth study was done from the various books, magazines, journals and articles written on

the subject. Information was also taken from the internet related to industry, company,

competitors, etc.

3.3 Statistical Tool

The study has used various statistical tools for the analysis of data. They are, percentage

analysis, Garette method and Cross tabulation:

35

Percentage Analysis: To have a general idea on the opinion given by the respondents a

simple percentage analysis was carried out.

Test Statistics:

Percentage = Number of Responses * 100

Number of Respondents

Garette Ranking Technique: It is a technique used to find out how various items under

considerations are ranked by the respondents. In this technique the rate given by respondents

will be converted into percentile position using:

P = 100 ( R – 0.5)

N

Where, N= No: of items

R= Rank

P= Percentile position

From these percentile position scores will be taken from Garatte’s table. This score will be

used to evaluate the ranks.

3.4 Limitation of the Study

The data from the sample may not reflect the universe; since it is restricted only to the area

Vennikulam, Kerala and only 150 customers. There were also time limitations. As the topic is

wide, all matters regarding the study could not be analyzed.

36

ANALYSIS AND INTERPRETATION

The following information contains the data interpretation of the questionnaire. The

respondent’s responses for the questions have been interpreted and a finding has been made

based on the respondents responses.

TABLE 4.1: Demographic details of the SIB respondent’s

CHART 4.1:

Demographic details of the respondents

21

22

23

24

25

26

27

28

25-35 36-45 46-55 Above 55

Age in yrs.

Per

cen

tag

e

Percent

Interpretation: From the above data, it is observed that 27.33% of the respondents are

belonging to the age category of 36-45yrs. So it is concluded that the majority of the

respondents fall under this category.

TABLE 4.2 : Gender details of the SIB respondents

GenderFrequency Percent

Male 108 72Female 42 28Total 150 100

37

AgeFrequency Percent

25-35 35 23.3336-45 41 27.3346-55 39 26Above 55 35 23.33Total 150 100

CHART 4.2 :

Gender Ratio of the respondents

72%

28%

Male

Female

Interpretation: From the data it is observed that 72% of the respondents are males. So, it is

concluded that the majority of the respondents are males.

TABLE 4.3 : Education details of the SIB respondent’s.

Education

Frequency

Percent

School 51 34UG 60 40PG 39 26Total 150 100

CHART 4.3 :

Educational details of the respondents

34%

40%

26%

School UG Pg

38

Interpretation : From the above data, it is observed that 40% of the respondents are graduated

whereas 34% have school education; the remaining 26% being post graduated.

TABLE 4.4 : Occupation details of the SIB respondent’s

Occupation Frequency PercentService 92 61.33Business 24 16Pensioner 30 20House-wife 4 2.67Total 150 100

CHART 4.4 :

Occupation details of the respondents

61%16%

20%3%

Service Business Pensioner House-wife

Interpretation : From the above data, it is observed that 61% of the respondents are in service

while only 3% are house- wives. So it is concluded that the majority of the respondents fall

under the service category.

TABLE 4.5: Income details of the SIB respondent’s.

Income Level Frequency Percent5000 -15000 51 3415001-25000 42 2825001-35000 26 17.33Above 35000 31 20.67Total 150 100

39

CHART 4.5:

Income details of the respondents

34%

28%

17%

21%

5000-15000 15001-25000 25001-35000 Above 35000

Interpretation: From the above data, it is observed that 34% of the respondents are belonging

to the income category of Rs.5000- 15000p.m. So it is concluded that the majority of the

respondents fall under that income level.

TABLE 4.6 : Number of years the respondent’s have been associated with SIB.

No. of YearsFrequency Percentage

Less than 1yr 9 61-4 yr 32 21.334-7 yr 30 207-10 yr 19 12.6710-13 yr 41 27.3313-16 yr 15 1016-19 yr 4 2.67

Total 150 100

Interpretation: The above data shows that maximum number(27.3%) of the respondents are

associated with the bank from last 10-13 years.

TABLE 4.7: Accounts the respondents have with the bank.

A/c typePercent

Savings A/c 100Current A/c 12.7

Availed Loan 9.3

3rd Party Product 22.7

40

CHART 4.6:

0

20

40

60

80

100

Percentage

Percent

Accounts

Accounts the Respondents have with the bank

Savings A/c Current A/c Availed Loan 3rd Party Pdt

Interpretation: The above data makes it very clear that only very few customers have availed

loan from the bank and invested in the third party products.

TABLE 4.8: Rating the courtesy level shown by the SIB staff.

RatingFrequency Percent

Good 44 29.33Very Good 72 48Excellent 34 22.67Total 150 100

CHART 4.7 :

Rating the Courtesy Level shown by the SIB Staff

0

10

20

30

40

50

60

Good Very Good Excellent

Rating

Per

cen

tag

e

Percent

41

Interpretation: The above data shows that 77% of the respondents have rated the courtesy

level they receive from the bank’s personnel to be good and thus it is interpreted that this

service of the bank is satisfactory.

TABLE 4.9: Rating the Working Hours of the bank.

RatingsFrequency Percent

Average 17 11.33Good 60 40Very Good 55 36.67Excellent 18 12Total 150 100

CHART 4.8 :

05

10152025303540

Percentage

Average Good Very Good Excellent

Ratings

Rating the Working Hours of the bank

Percent

Interpretation: From the above data it can be interpreted that 60% of the respondents are

satisfied with the working hours of the bank. This also coincides with the management

perspective which does not create any gap in the analysis.

TABLE 4.10: Rating the Knowledge of Bank Staff in answering the queries.

RatingsFrequency Percent

Average 11 7.33Good 76 50.67Very Good 46 30.67Excellent 17 11.33Total 150 100

42

Interpretation: From the above data it can be interpreted that half of the population, 50.6% are

satisfied with the knowledge level of the bank staff.

TABLE 4.11 : Rating the fastness of the personnel in responding/ attending to the customers.

RatingsFrequency Percent

Average 14 9.33Good 75 50Very Good 36 24Excellent 25 16.67Total 150 100

CHART 4.9 :

0

10

20

30

40

50

Percentage

Average Good Very Good Excellent

Ratings

Rating the fastness of the personal in responding/ attending to the customers.

Percent

Interpretation: The above data shows that 50% of the respondents are rating the fastness of

the personnel in responding/ attending to them to be good. So it can be concluded that the

customers are satisfied with this service.

TABLE 4.12 : Rating the “Transaction Time” taken for Cash deposit.

RatingsFrequency Percent

Average 6 4Good 75 50Very Good 44 29.33

43

Excellent 25 16.67Total 150 100

Interpretation: The above data shows that 50% of the respondents have rated the transaction

time for cash deposit to be good. So it is concluded that the customers are satisfied with the

fastness of this service. The pictorial representation is as follows:

CHART 4.10:

0

10

20

30

40

50

Percentage

Average Good Very Good Excellent

Ratings

Rating the Transaction Time taken for Cash deposit

Percent

TABLE 4.13: Rating the easiness to open an account with the bank.

Interpretation: The above data shows that, 38% of the respondents have rated the bank to be

good for the easeness they find in opening an account with the bank; whereas very near to it

i.e., 32.67% have rated it to be average. So it is concluded that the customers are satisfied

with this service.

The pictorial representation of the same is as follows:

44

RatingsFrequency Percent

Average 49 32.67Good 57 38Very Good 29 19.33Excellent 15 10Total 150 100

CHART 4.11:

0

10

20

30

40

Percentage

Average Good Very Good Excellent

Ratings

Rating the Easeness to Open an Account with the bank

Percent

TABLE 4.14: Rating the product/ service innovation in the past two years.

Interpretation: The above data shows that more than half the respondents, 63.3%, have rated

the bank good, on the product or service innovation in the past two years. So it can be

interpreted that the customers are satisfied with the product innovations of the bank.

TABLE 4.15: Rating the bank’s promptness in informing the deposit rates/ charges.

45

Ratings Frequency PercentAverage 23 15.33Good 95 63.33Very Good 24 16Excellent 8 5.33Total 150 100

RatingsFrequency Percent

Poor 2 1.33Average 84 56Good 36 24Very Good 22 14.67Excellent 6 4Total 150 100

0102030405060

Percentage

Poor AverageGood VeryGood

Excellent

Ratings

Rating the bank’s Promptness in Informing the deposit rates/ charges

Percent

Interpretation: The above data shows that the majority, 56% of the respondents have rated the

bank to be average for the promptness in informing the customers of the deposit rates/ service

charges. The management has rated this service to be very good. So it can be interpreted that

here a gap exists between the customer’s and the management’s perspective.

CHART 4.12 :

TABLE 4.16: Rating the bank’s grievance redressal system.

RatingsFrequency Percent

Poor 1 0.67Average 6 4Good 57 38Very Good 77 51.33Excellent 9 6Total 150 100

Interpretation: The above data shows that 51.3% of the respondents have rated the bank’s

grievance redressal system to be very good. So it can be interpreted that the customers are

satisfied with this service of the bank.

TABLE 4.17: Rating the bank’s facility in terms of the comfort facilities it offers.

RatingsFrequency Percent

Average 5 3.33Good 23 15.33Very Good 113 75.33Excellent 9 6

46

Total 150 100

Interpretation: The above data show that majority of the respondents, 75.33%, have rated the

bank’s comfort facilities to be very good. So it can be concluded that the customers are very

satisfied with this service of the bank.

TABLE 4.18: Rating the location of the bank.

RatingsFrequency Percent

Average 4 2.67Good 19 12.67Very Good 109 72.67Excellent 18 12Total 150 100

Interpretation: The above data show that majority of the respondents, 72.67%, have rated the

bank’s location to be very good. So it can be concluded that the customers are very satisfied

with the location of the bank.

TABLE 4.19: Rating the quality of the bank’s ATM services.

RatingsFrequency Percent

Poor 2 1.33Average 63 42Good 61 40.67Very Good 18 12Excellent 6 4Total 150 100

Interpretation: The above data shows that 42% of the respondents have rated the quality of

the bank’s ATM service to be average. But the management in this case has rated the service

to be very good. So it is interpreted that the customers are not much satisfied with the quality

of the ATM service and also a gap is analysed in between the two perspectives in this case.

TABLE 4.20: Rating the bank’s fastness in processing and disbursement of loans.

Rating Frequency PercentAverage 9 22.5Good 17 42.5Very Good 7 17.5Excellent 7 17.5Total 40 100

47

CHART 4.13:

0

10

20

30

40

50

Percentage

Average Good Very Good Excellent

Rating

Rating the bank's Fastness in Processing and Disbursing Loans

Percent

Interpretation: The above data shows that the fastness of the bank in processing and

disbursement of loans is rated good by 42.5% of the respondents, out of the 40, who has

availed loan from any banks. So it is interpreted that the customers are satisfied with this

service of the bank.

TABLE 4.21: Rating the interest rates currently being offered by the bank.

RatingsFrequency Percent

Average 69 46Good 62 41.33Very Good 16 10.67Excellent 3 2Total 150 100

Interpretation: The above data shows that 46% of the respondents have rated the interest rate

currently being offered by the bank to be average which is very near to the 42% who has

rated it to be good. The management has rated this as good. So it can be interpreted that the

48

interest rate offered by the bank is not much satisfactory to the customers and also slight gap

analysed.

CHART 4.14:

0

10

20

30

40

50

Percentages

Average Good Very Good Excellent

Ratings

Rating the Interest Rates currently being offered by the bank

Percent

TABLE 4.22:Rating the internet/ mobile banking facility offered by the bank.

RatingsFrequency Percent

Average 24 38.09Good 20 31.75Very Good 10 15.87Excellent 9 14.29Total 63 100

CHART 4.15:

49

0

10

20

30

40

Percentage

Average Good Very Good Excellent

Ratings

Rating the Internet/ Mobile Banking Facility offered by the bank

Percent

Interpretation: The above data shows that the quality of the internet/ mobile banking facility

is rated average by 38.1% of the respondents, out of the 63, who uses this facility of the bank.

The management has rated the same as very good. So it is interpreted that the customers are

not much satisfied with this service of the bank and also a gap is analyzed between the

customer and management perspective.

TABLE 4.23: Mean score showing the awareness of the respondents towards few services of the Retail Banking, in general.

Services Mean ScoreATM ServicesWithdrawing 4.63Deposit 3.47Cheque Book 2.65Enquiry Statement 2.47Total 13.22Internet BankingFund transfer 2.18Status of Cheque 2.09Bill Payment 1.97Interest Details 2.02Alerts 2.13Total 10.39Mobile BankingBalance 2.57Status of Cheque 2.14Locate ATM 1.96Alerts 2.37Time preference 2.26Total 11.3

50

Interpretation: The data above shows that the respondents are more aware of the ATM

services whose mean score is 13.22 than compared to the internet and the mobile banking

services.

TABLE 4.24:Awareness of the respondents on the ATM services provided by SIB.

ServicesFrequency

Percentage

Withdrawal of Cash 147 98Deposit Cash/ Cheques 110 73.3Balance Verification 147 98Requirement for Cheque Book 69 46

CHART 4.16:

0

20

40

60

80

100

Percentage

Withdrawalof Cash

BalanceVerification

Services

Awareness of the respondents on the ATM services provided by SIB

Interpretation: The above data shows that 98% of the respondents are aware of cash

withdrawal and balance verification through ATM service of the bank whereas 73% and only

46% are aware about depositing cash/ cheque and requirement for cheque book/ statement

respectively.

51

TABLE 4.25:Awareness of the respondents on the internet banking services provided by SIB.

Services Frequency PercentageTransfer funds 50 33.3Bill/ Loan Payment 38 25.3DD/ Term Deposit Request 34 22.7Getting Reminders 44 29.3None 99 66

Interpretation: The above data shows that 33.3% of the respondents are aware of transferring

funds through internet banking services whereas only 29.3% and 25.3% are aware about

getting reminders and payment of bill/ loan respectively. It is also shown that 66% of the

respondents are not aware of any services provided by the internet banking of SIB.

TABLE 4.26:Awareness of the respondents on the mobile banking services provided by SIB.

Services Frequency PercentA/c Balance 64 42.7Cheque Details 35 23.3Reminders/ alerts 63 42None 85 56.7

Interpretation: The above data shows that 42.7% of the respondents are aware of checking

account balance through mobile banking services whereas 42% and only 23.3% are aware

about receiving reminders and knowing the cheque details respectively through this service.

It is also shown that 56.7% of the respondents are not aware of any services provided by the

mobile banking of SIB.

TABLE 4.27: Ranking of, the attributes considered, to choose a bank before going for a

bank loan

GARATTE METHOD : Formula:: P = 100 (R – 0.5)N

TotalPercent 10 30 50 70 90Score (x) 75 60 50 40 24Interest Rate (Freq, f) 98 42 9 1 0fx 7350 2520 450 40 0 10360Security Demanded (f) 18 38 59 32 3fx 1350 2280 2950 1280 72 7932Efficient Customer Service(f) 30 41 35 22 22fx 2250 2460 1750 880 528 7868Repayment Period (f) 0 22 39 77 12fx 0 1320 1950 3080 288 6638Eligibility (f) 4 7 8 18 113fx 300 420 400 720 2712 4552

52

Interpretation: The ranks analysed, using garatte ranking method, shows that the respondents

give their first preference to the interest rate offered by a bank when they go for availing a

loan; followed by the other attributes as shown in the table above.

TABLE 4.28:The various banks preferred for availing the loan.

Name of Banks Frequency PercentageFederal Bank 6 14.29ICICI 4 9.52SBI 3 7.14SBT 5 11.90SIB 19 45.24Tiruvalla East Co-opt Bank 3 7.14HDFC 2 4.76Total 42 100

CHART 4.17:

The various banks preferred for availing the loan

0 10 20 30 40 50

Federal Bank

ICICI

SBI

SBT

SIB

Tiruvalla East Co-opt Bank

HDFC

Pe

rce

nta

ge

Banks

Percent

Interpretation: The above data shows that out of the 42 respondents who has availed loan

45.2% has availed it from SIB, followed by 14.3% from Federal Bank, 11.9% from SBT and

the rest from other few banks as shown in the bank.

53

TABLE 4.29: Reasons which influenced the customers choose a bank for the loan.

ReasonsFrequency Percent

Good customer service 9 21.43Low interest rate 10 23.81Quick processing 7 16.67Customer Satisfaction 2 4.76Simple Formalities 5 11.90Near to home/business/work place 6 14.28Promptness and knowledge of Staff 3 7.14Total 42 100

CHART 4.18:

Reasons which influenced the customers to choose a bank for the Loan

0

5

10

15

20

25

Percent

Reasons

Per

cen

tag

e

Good customer service Low interest rate

Quick processing Customer Satisfaction

Simple Formalities Near to home/business/work place

Promptness and knowledge of Staff

z

Interpretation: The above data shows that the attribute which the respondents give the first

preference for to choose a bank for availing a loan is lowest interest rate, followed by good

customer service, quick processing and so on.

54

TABLE 4.30: Preferences of the respondents (ranks provided) towards the various loans from SIB.

GARETTE RANKING METHOD:

TotalPercent 8.34 25.01 41.68 58.35 75.02 91.69Score (x) 77 63 54 46 37 23Gold Loan (f) 10 6 8 2 0 4fx 770 378 432 92 0 92 1764Personal Loan (f) 11 12 2 2 2 1fx 847 756 108 92 74 23 1900Vehicle Loan (f) 2 6 11 5 5 1fx 154 378 594 230 185 23 1564Educational Loan (f) 1 4 5 12 5 3fx 77 252 270 552 185 69 1405House Loan (f) 2 0 4 4 7 13fx 154 0 216 184 259 299 1112Agricultural Loan (f) 4 2 0 5 11 8fx 308 126 0 230 407 184 1255

Interpretation: : The ranks analyzed, using garatte ranking method, shows that the

respondents give their first preference to the personal loan offered by the bank, followed by

the gold loan and so on as shown in the table above.

TABLE 4.31: The other banks where the respondents have account with

Banks FrequencySBT 91Federal Bank 45ICICI 37SBI 31Axis Bank 23Others 85

Interpretation: The above data shows that the major competitor for the bank is State Bank of

Travancore, followed by Federal Bank, ICICI and others as shown in the table.

TABLE 4.32: Rating given to SIB’s customer service when compared to the other

bank’s the respondents have account with.

Ratings PercentAverage 15.28Good 40.28Very Good 25Excellent 19.44

CHART 4.19:

55

0

10

20

30

40

50

Percentage

Average Good Very Good Excellent

Ratings

Rating given toSIB's Customer Service when compared to the other bank's.

Percent

Interpretation: The data above shows that 40.28% of the respondents have rated this attribute

to be good. So it is interpreted that the customer service of SIB is in par with other banks, the

respondents have account with.

TABLE 4.33: Rating given to SIB’s transaction speed when compared to the other

banks, the respondents have account with.

Ratings PercentageAverage 9.03Good 57.64Very Good 27.78Excellent 5.56

Interpretation: The data above shows that 57.64% of the respondents have rated this attribute

to be good. So it is interpreted that the transaction time of SIB is in par with other banks, the

respondents have account with.

TABLE 4.34: Rating given to SIB’s transaction cost when compared to the other banks,

the respondents have account with.

Ratings PercentagePoor 0.69Average 32.64Good 58.33Very Good 7.64Excellent 0.69

56

Interpretation: The data above shows that 58.33% of the respondents have rated this attribute

to be good. So it is interpreted that the transaction cost of SIB is in par with other banks, the

respondents have account with.

TABLE 4.35: Rating given to SIB’s technology & innovation when compared to the

other banks, the respondents have account with.

Ratings PercentageAverage 26.39Good 54.86Very Good 15.97Excellent 2.78

Interpretation: The data above shows that 54.86% of the respondents have rated this attribute

to be good. So it is interpreted that the technology & innovation of SIB is in par with other

banks, the respondents have account with.

CROSS TABULATION

TABLE 4.36: Relationship between awareness of the internet services and the no: of

NRI customers .

Internet ServicesAwareness(No: of Respondents) NRI's

Transfer funds 50 29Bill/ Loan Payment 38 20DD/ Term Depo Request 34 21Getting Reminders 44 29None 99 2

Interpretation: The above data reveals that more than half of the respondents, aware of the

internet banking services, are NRIs. So, it can be interpreted that NRIs can be attracted more

by providing more innovative and technological user- friendly products.

TABLE 4.37 : Relationship between the income level of the respondents and the no: of

third party investors.

Income Level3rd Party Investors

5000-15000 315001-25000 925001-35000 7

57

> 35000 15Total 34

Interpretation: The above data shows that the majority of the customers who have invested in

third party products are with income level of more than Rs.35000 per month. So it can be

interpreted that high income level customers, especially NRIs can be attracted more to

increase such investments.

TABLE 4.38 : Relationship between the no: of year the respondents are associated with

the bank and the privilege received.

No: of Years Privilege TotalYes No

15 years 1 7 813 years 1 4 510 Years 5 16 21Others 4 123 127Total 11 150

Interpretation: The data above clearly reveals that the bank has not given due care to provide

any privilege/ benefit for its regular/ long- term customers.

5.1 FINDINGS

27.3% of the respondents fall under the age category of 36- 45 years.

72% of the respondents are males.

40% of the respondents are graduates (UG).

61% of the respondents are with service as their occupation, followed by 20% of

pensioners.

34% of the respondents have Rs. 5000- 15000 as their income level per month.

27.33% of the respondents are associated with the bank from the past 10- 13 years.

Only 22.7% of the respondents have invested in third party products, whereas only

9.3% have availed loan from the bank.

48% of the respondents have rated the bank good with regard to the courtesy level of

the bank’s personnel/ staff.

40% of the respondents have rated the bank good with regard to the working hours of

the bank.

50.67% of the respondents have rated the bank good with regard to the bank staff’s

knowledge in answering/ solving the customers’ queries.

58

50% of the respondents have rated the bank good with regard to the fastness, the

personnel show in responding/ attending to the customer.

50% of the respondents have rated the bank good with regard to the transaction time

taken for cash deposit.

38% of the respondents have rated the bank good with regard to the easiness the

customers found to open an account with the bank.

63.3% of the respondents have rated the bank good with regard to the product/ service

innovation in the past two years.

56% of the respondents have rated the bank, average, with regard to the promptness in

keeping the customers informed of deposit rates/ service charges ; whereas the

management rates it to be very good which reveals a gap existing in this service

between the two perspectives.

51.3% of the respondents have rated the bank very good with regard to the grievance

redressal system.

75.3% of the respondents have rated the bank very good with regard to the comfort

facilities it offers.

72.67% of the respondents have rated the bank very good with regard to the location

of the bank.

42% of the respondents have rated the bank average with regard to the quality of the

ATM services provided by the bank; whereas management rates it to be very good

which again reveals a gap existing in between the two perspectives.

42% out of the few who have availed loan from any of the bank have rated the bank’s

fastness in processing and disbursing loans to be good.

46% of the respondents have rated the bank average with regard to the interest rate

currently being offered. The management has rated this as good which shows a slight

gap existing and also that the interest rate offered by the bank is not much satisfactory

to the customers.

38.1% out of the 63 respondents who use the internet and mobile facilities have rated

bank’s this facility to be average. The management has rated this as very good which

shows a slight gap existing and also the dissatisfaction of the customers regarding this

service.

Only 46% of the respondents are aware of the facility such as requirement for cheque

book/ statement through the ATM.

59

Only 30% and 23.3% of the respondents use the mobile and internet banking facility

of the bank respectively.

Interest rate offered by a bank is rated as the first attribute which a customer considers

to choose a bank before going for a bank loan.

The next preferred bank for availing loan after SIB is found to be State Bank of

Travancore and Federal Bank, the main reasons being lower interest rate and good

customer service.

Since 91 respondents out of the 150 has account with SBT; the main competitor for

the bank turn out to be SBT followed by Federal Bank and ICICI.

52.78% of the respondents rate SIB to be good w.r.t., attributes like customer service,

transaction cost, etc., when compared to the other competitor banks they have account

with; which shows that SIB is in par with those banks.

Majority of the respondents have found to have not received any privileges/ benefits

for being a regular/ long term customer of SIB.

5.2 SUGGESTIONS

46% of the respondents felt that the interest rates on loan were high and hence the

interest rates may be reduced to attract more customers.

Only 28% of the respondents being female, the bank can look forward to design few

more schemes to attract the female customers.

Only 22.7% of the respondents having been invested in the third party products the

bank can look for promoting the same. The bank also has a huge scope for this, with

high income group NRI customers, in the area.

Since a large number of the respondents are unaware of the services provided through

internet(66%)/ mobile(56.7%) banking; initiatives, such as posting a list of services

that are rendered to the customers inside the bank premises, demo of the services in

the bank website; can be done to make the customers aware, and use the services

provided through ATM, internet and mobile banking of the bank.

As the cross tabulation reveal, except one out of the few customers who have been

associated with the bank for the past 15-13 years have not been receiving any

60

privilege. It is therefore suggested to give privilege to its long term customers so as to

retain them.

5.3 CONCLUSION

Customers always look for more user- friendly products and better interest rates when

compared to other banks they have account with, so, through product innovation and

competitive pricing strategy the bank can foster business relationship with its customers.

The gap analyzed can be minimized by better technology, customer service and also by

creating awareness about the various services; thereby increasing the customer base. So

as to retain the existing customers and to build up customer loyalty, Customer

Relationship Management should be given more importance.

61

5.4 SCOPE FOR FURTHER RESEARCH

There is a wide scope to extend this study in the future. Future researchers may continue the

study by taking number of private or public sector banks, to bring about the potential of retail

banking industry.

62

1. QUESTIONNAIRE ( For Customers).

I will be thankful to the respondents, if you will spare 4-5 minutes from your valuable time to answer this questionnaire, which will help, The South Indian Bank to reach upto your expectations in Retail Banking and also finish my project towards the partial fulfillment of MBA Degree.

1. Age: 25-35 yrs 36-45 yrs 46-55 yrs Above 55yrs

2. Gender: Male Female

3. Educational Qualification: School UG PG

4. Occupation: Student Service Business Pensioner House-wife

5. Income Level: Rs. 5000 – Rs.15000 Rs. 15001- Rs 25000 Rs. 25001- Rs. 35000 Above Rs. 35000

6. For how long are you associated with the SIB? ( in mth/ yrs) _____________ .

63

7. In South Indian Bank, you have: Savings A/c Current A/c Has availed any loan Invested in any third party pdt like LIC, Mutual funds, etc.

Please use a tick mark against any one option to give your responses/ ratings, for the following questions:

E = Excellent VG = Very Good G = Good A = Average P = Poor

8. How do you rate the South Indian Bank :

E VG G A P(a) With regard to the courtesy level of the bank’s personnel/ staff.(b) With regard to the working hours of the bank.(c) With regard to; how well informed/ knowledgeable you feel the bank staff is in answering/ solving your questions/ queries.(d) With regard to; how fast the personnel are in responding/ attending to you.(e) With regards to the “Transaction time” taken forCash deposit.(f)With regards to the “Transaction time” taken forCash withdrawal.(g) With regards to the “Transaction time” taken to issue DD/Cheque/statements.(h) With regard to; how hassle free it was for you to open an account with the bank.(i) With regard to the product or service innovation in the past two years.(j) With regard to its promptness in keeping you informed of deposit rates/ service charges.(k) With regard to the bank’s grievance redressal system.(l) With regard to the bank’s facility in terms of the comfort facilities it offers.(m) With regard to the location of the bank.(n) With regard to the quality of the ATM services provided by the bank.(o)With regard to the debit & credit card services offered by the bank

(p) With regard to the fastness you feel it is in processing and disbursing loans.(q) With regard to the interest rates currently being offered.(r) With regard to the internet/mobile banking facility offered by the bank

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9. Please use a tick mark in the appropriate column to give your responses for the following statements:

1=Strongly Disagree, 2= Disagree, 3= Neutral, 4= Agree, 5= Strongly Agree

S.No: 1 2 3 4 5ATM Service

a. I don’t face any problem in withdrawing cash from ATM.b. ATM services are useful for me to deposit cash & cheques.c. ATM services are useful for me to require my Cheque book.d. ATM services are useful for me to get the enquiry statement of my

account.Internet Banking

e. It helps me to make an instant fund transfer or schedule a transfer for the future date.

f. It helps me know the status of my Cheque.g. It helps me in bill payment.h. It helps me to get the interest details on deposit accounts.i. It helps me get alerts like Deposit maturing soon, loan repayment

alert, minimum balance alert...Mobile Banking

j. It is useful for me to get the balance in any of my accounts instantaneously.

k. It is useful for to inquire on the Status of a cheque issued by me.l. It helps me to locate the nearest SIB ATMs based on  PIN Codem. It helps me get alerts like Deposit maturing soon, loan repayment

alert, minimum balance alert...n. I will be able to set my own time preferences for receiving

messages.

10. How many facilities out of the following are you aware of being provided through the ATM services of SIB? Withdrawal of Cash Deposit Cash/ Cheques Balance verification Requirement for Cheque Book/ Statement

11. How many facilities out of the following are you aware of being provided through the internet banking of SIB? To transfer funds from the bank to personalized transaction. Bill/Loan Payment DD/ Term Deposit Request Getting reminders/alerts. None of the above.

12. How many facilities out of the following are you aware of being provided through the mobile banking of SIB? A/c balance any time To know the cheque details Receiving reminders/ alerts. None of the above

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13. What are all the attributes you consider to choose a bank before going for a bank loan? (Rank them from 1= most preferred to 5= least preferred). Interest rates offered Security demanded Efficient Customer Service Repayment Period Eligibility for loan (like your age, income,etc.)

14. Which were the all the banks in your consideration set when you planned for availing a loan?__________________________________________________________________________________________________________________________________

15. Which bank did you finally prefer and what influenced you for that?Bank: _______________Reason: _____________________________________________

16. Which loan will you prefer the most to take from SIB?( Pls rank these from 1- most preferred to 6- least preferred) Gold Loan Educational Loan Personal Loan House Loan Vehicle Loan Agricultural Loan

17. Which are all the other banks you have account in, other than SIB?______________________________________________________________________________________________________________________________________

18. How do you rate SIB when compared to those banks, in the following attributes?E = Excellent VG = Very Good G = Good A = Average P = Poor

Attributes E VG G A PEfficient Customer ServiceTime SavingTransaction CostTechnology & Innovation

19. Did you receive any privileges/ benefits for being a regular/long-term customer of SIB?If Yes, what ___________________________________________________________

20. Did you find any drawbacks in the services of SIB?

Yes No

21. If Yes, please give some suggestions to serve you better.____________________________________________________________________________________________________________________________________________________________________________________________________

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22. Are you a Non Residential Indian?

Yes No

2. QUESTIONNAIRE (For Management).

Sir/Madam,I will be very much thankful to you if you will spare your 3-4 minutes from your valuable time to answer this questionnaire; which will help me to better perform the comparative study and to analyze the gap between the management and customers.

Please use a tick mark against any one option to give your response/ rating, for the following questions:

E = Excellent VG = Very Good G = Good A = Average P = Poor

1. How do you rate your South Indian Bank :

E VG G A P(a) With regard to the courtesy level of the bank’s personnel/ staff.(b) With regard to the working hours of the bank.(c) With regard to; how well informed/ knowledgeable you feel the bank staff is in answering/ solving the customer’s questions/

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queries.(d) With regard to; how fast the personnel are in responding/ attending to the customers.(e) With regard to the “Transaction time” taken forCash deposit.(f)With regard to the “Transaction time” taken forCash withdrawal.(g) With regard to the “Transaction time” taken to issue DD/Cheque/statements.(h) With regard to; how hassle free it is for your customers to open an account with the bank.(i) With regard to the product or service innovation in the past two years.(j) With regard to its promptness in keeping the customers informed of deposit rates/ service charges.(k) With regard to the bank’s grievance redressal system.(l) With regard to the bank’s facility in terms of the comfort facilities it offers.(m) With regard to the location of the bank.(n) With regard to the quality of the ATM services provided by the bank.(o)With regard to the debit & credit card services offered by the bank

(p) With regard to the fastness you feel it is in processing and disbursing loans.(q) With regard to the interest rates currently being offered.

(r) With regard to the internet/mobile banking facility offered by the bank.

2. How many percent of your customers do you feel are aware of all the facilities available through your retail banking services like:ATM Services: _____________Mobile Services: ____________Internet Services: ____________

3. How many percent do you feel are aware but are not using these facilities?Percent: _____________Reason: __________________________________________________________________________________________________________________

4. What are all the privileges/ benefits you provide for a regular/long-term customer of SIB?__________________________________________________________________

5. Which are all the banks according to you turning out to be your tough competitors?_____________________________________________________________________________________________________________________________________

6. What are all the measures you are taking to be ahead of your competitors?

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________________________________________________________________________________________________________________________________________________________________________________________________

BIBLIOGRAPHY

1. Dutta Kirti, Dutta Anil; CUSTOMER EXPECTATIONS AND PERCEPTIONS

ACROSS THE INDIAN BANKING INDUSTRY AND THE RESULTANT

FINANCIAL IMPLICATIONS; Journal of Services Research, Volume 9, Number 1

(April-September 2009), p31-49.

2. Durkin Mark, O'Donnell Aodheen Mullholland Gwyneth, Crowe Joseph; E-

BANKING ADOPTION: FROM BANKER PERCEPTION TO CUSTOMER

REALITY; Journal of Strategic Marketing, May2007, Vol. 15 Issue 2/3, p237.

3. Sciglimpagli, Don, CUSTOMER ACCOUNT RELATIONSHIPS AND E-RETAIL

BANKING USAGE; Journal of Financial Services Marketing; May 2006, Vol.10

Issue 04, p109-122.

4. Molina, Aurto; RELATIONAL BENEFITS AND CUSTOMER SATISFACTION IN

RETAIL BANKING; International Journal of Bank Marketing.

5. Gardener Edwar, Howcroft Barry; THE NEW RETAIL BANKING REVOLUTION

SOURCE; Service Industries Journal; Apr99, Vol. 19 Issue 2, p83-100.

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6. R.A.Ravi; USER PERCEPTION OF RETAIL BANKING SERVICES: A

COMPARATIVE STUDY OF PUBLIC AND PRIVATE SECTOR BANKS; ICFAI

Journal of Bank Management, May2008, Vol. 7 Issue 2, p32-46.

7. T. B. Kapali; HOW RETAIL BANKING HAS GONE INTO OVERDRIVE; Business

Line, July 18, 2007.

8. Gautam Chakrabarty; CAPTURING THE BOOM IN RETAIL BANKING; Economic

Times, Aug 21, 2008.

9. Priya Nair; BANKING ON TECHNOLOGY, Frontline; Vol. 22 Issue 23, Nov. 05 -

18, 2005.

10. Dewan Anwarul Latif, THE FUTURE OF RETAIL BANKING: A GLOBAL

PERSPECTIVE; Financial Express, June 3, 2007.

Websites:

11. www.southindianbank.com

12. www.bls.gov

13. http://search.ebscohost.com

14. www.researchandmarkets.com

15. www.google.co.in

Books :

16. Katuri Nageswara Rao, IT IN BANKS- STRATEGIC ISSUES, Pg No: 34-42, 53-62.

17. A.N. Sarkar, STRATEGIC BUSINESS MANAGEMENT & BANKING, Pg No:301-

311.

18. Jyotsana Sethi and Nishwan Bhatia, ELEMENTS OF BANKING AND

INSURANCE, Pg No: 56-66.

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