ranji project
TRANSCRIPT
A STUDY ON NEW FINANCIAL PRODUCTS IN COOPERATIVE BANKS
WITH SPECIAL REFERENCE TO THE TAMILNADU STATE APEX COOPERATIVE BANK LTD.
By
S.RANJANI
Roll No.0906MBA1267
Reg. No. 68609200347
A PROJECT REPORT
Submitted to the
FACULTY OF MANAGEMENT SCIENCES
In partial fulfillment for the award of the degree
Of
MASTER OF BUSINESS ADMINISTRATION
CENTRE FOR DISTANCE EDUCATION
ANNA UNIVERSITY CHENNAI
CHENNAI 600 025
AUGUST, 2011
BONAFIDE CERTIFICATE
Certified that the project report titled A STUDY ON NEW FINANCIAL PRODUCTS IN COOPERATIVE BANKS WITH SPECIAL REFERENCE TO THE TAMILNADU STATE APEX COOPERATIVE BANK LTDis the bonafied work of Ms.RANJANI.S who carried out the work under my supervision. Certified further that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.
Signature of student Signature of Guide
RANJANI.S Mr.JAISHANKARRoll No.0906 MBA1267 Faculty Reg.No. 68609200347 Anna University,
Chennai – 600 025
Signature of Project – in – charge
Mr.
Certificate of Viva-Voce-Examination
This is to certify that Ms.S.RANJANI (Roll No.0906MBA1267; Register No.
68609200347) has been subjected to Viva-voce-Examination on …./08/2011 (Date) at
………… (Time) at the Study Centre MEENAKSHI COLLEGE OF ENGINEERING.
(Name and Address of the Study centre).
Internal Examiner External Examiner
Name: Name:(in capital letters) (in capital letters)
Designation: Designation:Address: Address:
Coordinator
Study centre
Mr.SURESH
Lecturer
Meenakshi College of Engineering
(Coordinator – Study Centre – D.E.)
Anna University Chennai
Date:
ABSTRACT
In view of rising competition in the Indian banking sector, the pressure to perform in a
highly competitive environment is high in order to retain existing customers and attract
new customers. Due to this progressive-minded banks have introduced many new
products and services that are beneficial to customers.
This project report offers a detailed study and analysis about the “New products and
Existing Products, RTGS, NEFT and CBS Services” at TNSC Bank based at Chennai.
RGTS and NEFT are the cheapest mode of transferring money through banks in India.
RTGS (Real Time Gross Settlement) is the fastest possible money transfer system
through the banking Channel. whereby financial intermediaries can settle inter-bank
transfers for their own account as well as for their customers.
National Electronic Funds Transfer (NEFT) system is an instant, secured and reliable
inter bank money transfer facility introduced by RBI across the country.
Core Banking Solutions (CBS) is the use of information technology especially Internet
banking solutions for both retail and commercial banking operations. It aims at enabling
banking services for customers 24/7, multi-location and multi-branch network.
Some of the key findings of this project report are:
1. Customers are demanding the new products and the switching costs to change
their banker are low and easy in view of high competition.
2. In new products the Customers prefer fast transaction of funds across the global
so that utilization of funds are faster and beneficial in a dynamic business
environment.
3. In new products Customers are Internet-savvy and look for cost-effective
solutions
4. Across the country the practice of anywhere-anytime-any branch transactions
have become common.
5. Competing with foreign banks and financial institutions are local banks that have
joined the fray to offer new-age solutions like RTGS, NEFT and online banking
taking the competition to a new high.
In this project report, a detailed analysis of the New financial Products is provided based
on the results arising out of using a statistical tool - chi-square.
The recommendations made in this project report are:
1. An awareness campaign must be undertaken by the bank to introduce the concept
of CBS, RTGS and NEFT to customers.
2. The awareness campaign should highlight the benefits and advantages of the new
products and explain the value-add for the customers.
3. To gain sustainable competitive advantage over rivals, the bank must focus on
offering quality and timely services to customers on CBS platform.
ACKNOWLEDGMENT
I am very grateful to the Project Committee of Management studies, Anna
University, Chennai – 600 025 for giving me an opportunity to work on this Project and
thereby enable me to showcase my research and conclusion.
I am especially indebted to my guide Mr.Jai Shankar, for his support and
encouragement at all stages of my Project to bring out this Project work successfully.
I am also thankful to all other faculty members of the Department for their
cooperation and encouragement in pursuing my project work.
I am also thankful to my colleagues and seniors who shared their valuable
thoughts with me in the preparation of the project.
(S.RANJANI)
TABLE OF CONTENTSCHAPTER TITLE PAGE No. No.
ABSTRACT IIIACKNOWLEDGEMENT IVCONTENTS VLIST OF TABLES VILIST OF FIGURES VIILIST OF SYMBOLS, ABBREVIATIONS VIII
1 INTRODUTION 1 CUSTOMER
PERCEPTION 1
NEED FOR STUDY 213. OBJECTIVE & OF THE STUDY 21.4 SCOPE OF THE STUDY 31.5 DELIVERABLES 31.6 PROFILE OF THE TNSC BANK 41.7 EXISTING PRODUCTS
AVAILABLE IN THE BANK
9
1.8 ABOUT THE NEW PRODUCTS 16
2 LITERATURE SURVEY 262.1 REVIE
W OF LIETERATURE
26
RESEARCH GAP
28
3METHODOLOGY
293.1 TYPE OF RESEARCH293.2 TARGET RESPONDENTS303.3 ASSUMPTIONS, CONSTRAINTS AND LIMITATIONS313.4 SAMPLING METHODS313.5 DATA COLLECTION323.6 TOOLS FOR ANALYSIS 33
CHAPTER No.CONTENTSPAGE No.4DATA ANALYSIS AND INTERPRETATION 345 FINDINGS, RECOMMENDATIONS AND CONCLUSIONS 515.1 SUMMARY OF FINDINGS 515.2 SUGGESTIONS & RECOMMENDATIONS 525.3 CONCLUSIONS 545.4 DIRECTIONS FOR FUTURE RESEARCH56
APPENDICES
X
REFERENCES
XI
LIST OF TABLES
TABLE No.
TITLEPAGE No.4.1Comparative Analysis of frequency visiting the bank branch per month
354.2Comparative analysis of the mainreason for visiting the bank branch
374.3Percentage Analysis of satisfaction with the existing products
394.4Percentage analysis of improvement to be made in the existing products
414.5Percentage analysis of awareness about of RTGS, NEFT and CBS
434.6
Chi Square analysis 474.7Comparative analysis about important reason for choosing the particular bank
49
LIST OF FIGURES
FIGURE No.TITLEPAGE No. 1.8RTGS – Process Flow
181.8NEFT – Process Flow
214.1Frequency of customers visiting the bank branch per month
364.2Customers main reason for visiting the bank Branch 384.3Customer satisfaction with the existing products
394.4Customer perception about Improvement to be made in the existing products
41
4.5 Customer awareness about of RTGS, NEFT and CBS
43
4.6 Chi Square analysis 48
4.7 Important reason of customers for choosing the Particular bank
49
LIST OF SYMBOLS, ABBREVIATIONS AND NOMENCLATURES
TNSC - Tamil Nadu State Apex Cooperative Bank Ltd.,
PACBS - Primary Agricultural Cooperative Bank
RBI - Reserve Bank of India
DICGC - Deposit Insurance and Credit Guarantee Corporation
DCCBS - District Central Cooperative Bank
NABARD - National Bank for Agricultural and Rural Development
NCDC - National Co.operative Development Corporation
NHFDC - National Handicapped Finance Development Corporation
SLR - Statutory Liquidity Ratio
SFMS - Structured Financial Messaging Solution
CIF - Customer Information File
CRM - Customer Relationship Management
SOA - Service Oriented Architecture
LVTS - Large Value Transfer system
DVP - Delivery Versus Payment
PVP - Payment Versus Payment
ECS - Electronic Clearing System
CHAPTER – 1
INTRODUCTION:
1.1. NEW FINANCIAL PRODUCTS
In today’s globalising economy competition is getting more and more fierce. That
means it becomes more difficult for products and services to differentiate themselves
from other offerings than ever before. Not only is the number of competitive offerings
rising due to globalisation of production, sourcing, logistics and access to information.
Many products and services face new competition from substitutes and from completely
new offerings or bundles from industry outsiders. Since product differences are closed at
an increasing speed and many Banks try to win the battle for customers by attractive, new
financial products and services tend to become commodities.
Customer perceptions are dynamic. First of all, with the developing relationship
between bank, the perceptions of the bank and its new and existing financial products or
services will change.
The more experience the customer accumulates, the more his perceptions will
shift from fact-based judgements to a more general meaning the whole relationship gains
for him. Over time, he puts a stronger focus on the consequence of the product or service
consumption.
Moreover, if the customers’ circumstances change, their needs and preferences
often change too. In the external environment, the offerings of the competitors, with
which a customer compares a product or service will change, thus altering his perception
of the best offer around. Another point is that the public opinion towards certain issues
can change.
1.2 NEED FOR STUDY
Banks may have to move on to behavior analysis approach for fine – tuning
their products.
Instead of merely providing what the bank concerned could offer from its fold,
banking may encompass extension of all the services that are required and
dictated by customers.
The time spent by the bank with customers would be reduced, thereby
improving profitability through low operational cost that would ensure time
saving for the customers, as a by-product.
Banks may not survive in the new millennium because they are relying on the
late 1990’s surveys to plan the third-millennium products ,perhaps designed for
consumers who no longer exist. Most people see the future as more of the same.
Unless one can visualize tomorrow as history so as to perceive what may
happen day after tomorrow, perhaps one decade or so later.
3.1 PRIMARY OBJECTIVE
A study on new financial products in cooperative banks with special reference to TNSC Bank Ltd.
3.2 SECONDARY OBJECTIVES
In view of the emerging growth of new products in the Banking Sector in
India in the recent past, and those products occupying the pivotal role in the Indian
Financial System, the study is focused on achieving the goals, financial performance
and satisfaction of the customers by the financial products.
To study the old financial products and new existing products served by TNSC Bank.
To increase the profits of the Bank through various new products.To study customer perception about the new productsTo suggest the bank for effective launching of these new products to satisfy the
customers.
1.4 SCOPE:
Banks has to find out how it and its offerings are perceived by the customers. It is essential to identify what the customer is actually buying and what features
are most important to him. To align the internal focus and resources to the customers expectation. The
information is of greater value if it can be compared to the customer’s perception of competitive offerings.
It reveals relative strengths and weakness; It is also a valuable source of ideas for improvement.
1.5 DELIVERABLES
RTGS and NEFT are two new products that enable nation-wide fund transfer
system. They facilitate transfer of funds from any bank branch to any other bank.
Core Banking system is another way of saying the core functions of a bank. These
functions represent the essential (core) business of banking.
Hence, the project deliverables are:
To study whether e-banking would benefit TNSC Bank
To make TNSC Bank to offer services for the benefit of customers
To estimate the impact on customers by the introduction of
1.6 TAMIL NADU STATE APEX COOPERATIVE (TNSC) BANK PROFILE
The Tamil Nadu State Apex Co-operative Bank Ltd., commenced its business
during November 1905 as an Urban Coop. Bank. It was subsequently changed into a
District Central Coop. Bank during July 1920. The initial authorized Share Capital was
Rs.25000/- divided into 50 shares of Rs.500/- each. The 17 pioneers held one share each,
10 other new members held 11 more shares. The first call of Rs.50/- per share, was made
on 26.11.1905. With the addition of 2 more such calls, the paid-up Share Capital @
Rs.150/- per share, aggregated Rs.4200/- as on 31.3.1906. At present, the Bank is
functioning at Chennai with 44 branches, an Extension Counter and H.O. TNSC Bank is
guiding the Dist. Central Coop. Banks / Primary Agricultural Coop. Banks in their
functioning and it is playing a major role in the coop. movement of Tamil Nadu. TNSC
Bank was formed in the year in which the coop. movement of Tamil Nadu was formed.
As such, the Bank has been serving the people of Tamil Nadu for a centenary for their
economic development. As far as Indian coop. movement is concerned, the Bank has
commenced its business from the very next year of the formation of coop. movement in
India. TNSC Bank is the first ever State Coop. Bank having the credit of celebrating the
centenary year. TNSC Bank has got the licence of Reserve Bank of India to carry on
the banking business. TNSC Bank is a Scheduled Coop. Bank and has been listed under
the Second Schedule of RBI Act. TNSC Bank is a member of the Deposit Insurance and
Credit Guarantee Corporation (DICGC) and is an insured coop. bank as per DICGC Act.
TNSC Bank, the Apex Co-operative Bank and the main purveyor of agricultural credit in
Tamil Nadu, has completed 99 years of useful and purposeful existence TNSC Bank is
old in tradition but young and dynamic in outlook and action.
The ambition of the TNSC Bank is to feed the people and the Nation with
prosperity, by extending its areas of operation and activities to cover all facets of
economic spheres and integrated rural development.
TNSC Bank is the Leader of the Co-operative Credit Movement in Tamil Nadu
for over a century.
TNSC Bank was the 18th Co-operative Society to be registered in the erstwhile
Madras Presidency as "The Madras Central Urban Bank" and this Bank was the first
"Central Co-operative Bank" to be established in India.
The first loan was disbursed to No.21 Big Kancheepuram Urban Weavers' Union
on 14.2.1906. The first fixed deposit was received on 14.3.1906. The Bank's first
accounting year ended on 31.3.1906 with a net profit of Rs.20-9-0.
The financial growth of the Bank is in a commendable position. They are as
follows.
SHARE CAPTIAL
The authorized share capital of the Bank is Rs.125.00 Crores. The Share Capital
of the Bank as on 31.03.2011 is Rs.95.82 Crores. The Government of Tamil Nadu has
contributed a sum of Rs.0.26 Crores to the Share Capital of the Bank and the rest have
been subscribed by 23 DCCBs.
RESERVES
The Bank has total reserves of Rs.710.40 crores as on 31.3.2011. The statutory
reserve constitutes Rs.682.31 crores.
DEPOSITS
On deposit mobilization front, the Bank has achieved much. The Apex Bank has
mobilised a sum of Rs.5453.34 crores as on 31.03.2011. The growth of deposits is shown
in the following table:
As on Amount (Rs. in crores)
30.06.1980 130.30 30.06.1990 387.24 31.03.2000 760.29 31.03.2004 3062.58 31.03.2008 3126.78 31.03.2009 4465.2331.03.2010 5152.3531.03.2011 5453.34
The Bank has been extending the facility of NRO/NRE accounts at 7 of its branches.
BORROWINGS
The Apex Bank is getting refinance assistance by way of borrowings from
National Bank for Agriculture and Rural Development (NABARD) for extending credit
facilities to the farmers for short-term agricultural operations, and medium-term loans
through DCCBs, weavers finance through the DCCBs / Co-optex, from Small Industries
Development Bank of India (SIDBI) for extending credit facilities for small scale
industries, National Coop. Development Corporation (NCDC) and from National
Handicapped Finance Development Corporation (NHFDC) for financing for the
development of physically challenged persons through DCCBs. The total borrowings of
the Bank as on 31.3.2010 was Rs.889.86 crores and as on 31.3.2011 was Rs. 2160.27
crores.
INVESTMENTS
The Bank has to make investments in Government approved securities for the
statutory liquidity ratio (SLR) purposes. The Bank has been investing its funds in the
Central Government / State Government's approved securities. As on 31.3.2011, the Bank
has total investments of Rs.1953.04 crores. The Bank has a separate Treasury Section to
deal with treasury operations on its behalf as well as its affiliates, viz. , DCCBs and
Urban Co-op. Banks.
WORKING FUNDS:
The working funds of the Bank have been increasing year after year. As on
31.3.2011, the working funds of the Bank was Rs.9486.99 crores. The growth of working
funds of the Bank can be seen from the following table:
As on Amount (Rs. in crores)
30.06.1980 194.51
30.06.1990 789.33
31.03.1995 1726.33
31.03.2005 4788.75
31.03.2008 5068.43
31.03.2010 7714.67
31.03.2011 9486.99
PROFIT:
The Bank has been making profit continuously since its inception and for the
year 2005-2006 the Bank has earned a profit of Rs.28.02 crores. This is 10.40% higher
than the profit reported for 2004-2005.
AWARDS FROM NABARD / NAFSCOB:
The Bank has been bagging the awards of NAFSCOB and NABARD every year
on account of its exemplary performance among the State Coop. Banks in the country.
NAFSCOB Awards
Year Performance Prize
1989-90 Social Goals Development Special Award
1990-91 Overall Best Performance Second
1991-92 Overall Best Performance First
1992-93 Social Goals Development Special Award
1993-94 Operational Efficiency Special Award
1995-96 Overall Best Performance First
1996-97 Overall Best Performance First
1996-97 All India Mutual Arrangement Scheme First
1997-98 All India Mutual Arrangement Scheme First
1999-2000 All India Mutual Arrangement Scheme First
2000-2001 Overall Best Performance First
2001-2002 Overall Best Performance Second
2001-2002 All India Mutual Arrangement Scheme Special
2003-2004 All India Mutual Arrangement Scheme Best Performance
2004 -2005 All India Mutual Arrangement Scheme Second
2006-07 FIRST PRIZE for “ AIMAS”2007-08 Best performance Award for “AIMAS”2007-08 Group I Resource Development
The NABARD has also honoured the Bank by giving a Special Award for Self-Help
Group Linkage Programme through Coop. Banks in Tamil Nadu during 2002-2003.
1.7 EXISTING PRODUCTS:
SAVINGS BANK ACCOUNT:
An ideal deposit account for individuals for small savings along with earning of
interest.2A/c can be opened by depositing Rs 100/* (Rs.1000/- for cheque book facility).
Single or Joint Account can be opened.4Interest is paid half yearly in October &
February every year on the minimum balance in the account between 10th and last day of
the month. Presently Interest rate – 3.50% p.a.5Nomination facility is available. Internet
Banking facility available at free of cost.The facility of standing instructions for payment
of insurance premium etc. is available.7Accounts can be opened with or without cheque
book facility. ass book/computer statements are issued. Free ATM-cum-Debit Card is
available which is acceptable at about 8000 ATMs of State Bank Group without any
charge.( First year no charges, from second year onward Rs.50/- per annum.)
CURRENT ACCOUNT
An account for business/ institutional operations and can be opened by
Individuals, Firms, Societies, Companies, and Govt. departments etc. No limit on number
of transactions. Minimum balance of Rs 2500/ at rural centres and Rs 5000/ at urban
centres is required to maintained. Service charges for non maintenance of minimum
balance
TERM DEPOSIT SCHEME:
Amount is deposited for a pre-decided period ranging between 7 days to 10 years.
( For 7 days to 14 days – minimum deposit Rs.1 lacs.)
Minimum deposit is Rs.1000/- Account can be opened by Individuals, Firms, Societies,
Companies, and Govt. departments etc.Earns attractive rate of interest. Interest is payable
at quarterly intervals but can be paid monthly at discounted value. Interest Rates- Refer to
interest display Board at our Branches and also available on our web site
The facility of loan on deposit, premature payment, nomination facility and
transfer of A/c to other branches is available. Loan can be availed maximum upto 95% of
principal and interest accrued thereon. Interest to be charged on premature withdrawal of
term deposits at 0.50% below the rate applicable for the period deposit has remained with
the Bank.
Fixed Deposit
A fixed deposit is meant for those investors who want to deposit a lump sum of
money for a fixed period; say for a minimum period of 15 days to five years and above,
thereby earning a higher rate of interest in return. Investor gets a lump sum (principal +
interest) at the maturity of the deposit.
Bank fixed deposits are one of the most common savings scheme open to an
average investor. Fixed deposits also give a higher rate of interest than a savings bank
account. The facilities vary from bank to bank. Some of the facilities offered by banks
are overdraft facility on the amount deposited, premature withdrawal before maturity
period (which involves a loss of interest) etc. Bank deposits are fairly safer because banks
are subject to control of the Reserve Bank of India.
Bank deposits are fairly safe because banks are subject to control of the Reserve
Bank of India (RBI) with regard to several policy and operational parameters. The banks
are free to offer varying interests in fixed deposits of different maturities. Interest is
compounded once a quarter, leading to a somewhat higher effective rate.
The minimum deposit amount varies with each bank. It can range from as low as
Rs. 100 to an unlimited amount with some banks. Deposits can be made in multiples of
Rs. 100/-.
Before opening a FD account, try to check the rates of interest for different banks
for different periods. It is advisable to keep the amount in five or ten small deposits
instead of making one big deposit. In case of any premature withdrawal of partial
amount, then only one or two deposit need be prematurely encashed. The loss sustained
in interest will, thus, be less than if one big deposit were to be encashed. Check deposit
receipts carefully to see that all particulars have been properly and accurately filled in.
The thing to consider before investing in an FD is the rate of interest and the inflation
rate. A high inflation rate can simply chip away your real returns.
REINVESTMENT DEPOSIT (SPECIAL TERM DEPOSIT)
A term deposit scheme with benefit of reinvestment of interest. Earns interest
with quarterly compounding resulting into handsome maturity amount. Maximum
return. Interest Rates- Refer to interest display Board at our Branches. The facility of loan
on deposit, premature payment, nomination facility and transfer of A/c to other branches
is available. Loan can be availed maximum upto 90% of principal and interest accrued
thereon. Interest to be charged on premature withdrawal of term deposits at 0.50% below
the rate applicable for the period deposit has remained with the Bank.
RECURRING DEPOSIT:
Regular small savings grows big regularly and steadily to meet large expenses
like education, marriages etc. Individual (single or joint) minors, firms, clubs,
associations etc. can open the account. A/c can be opened by depositing minimum Rs
100/- or more in multiple of Rs 5/- per month. The installment can be deposited on any
working day of current month. The facility of loan on deposit, premature payment,
nomination facility and transfer of A/c to other branches is available.
SENIOR CITIZENS DEPOSIT SCHEME:
A special deposit scheme for senior citizens i.e. persons of 60 years and above.
Higher interest (0.50%) than normal interest rates. Period ranging from 1 year to 10
years.
AMORTIZATION
Amortization is the paying back of the money borrowed plus interest. The actual
term, or length of the mortgage along with the amortization is what determines what the
payments will be and when the loan will be paid off. It is a means of paying out a
predetermined sum (the principal) plus interest over a fixed period of time, so that the
principal is completely eliminated by the end of the term. This would be easy if interest
weren't involved, since one could simply divide the principal amount into a certain
number of payments and be done with it. The trick is to find the right payment amount,
which includes some principal and some interest. The formula of amortization uses only
12 days a year to compute the interest. The interest payment on a mortgage is calculated
by multiplying 1/12th (one-twelfth) of the interest rate times the loan balance of the
previous month.
GRADUATED PAYMENT MORTGAGE (GPM)
This loan is a good idea for buyers who expect their income to rise in the future.
A GPM will start these borrowers off at a much lower than market interest rate. This
allows them to qualify for a larger loan than they would otherwise. The risk is that they
assume they will have enough income to pay increased payments in the future. This is
similar to an ARM but the rate increases at a set rate, not like the ARM where the rate is
based on the market. For example, a GPM for 30 years might start out with an interest
rate of 5% for the first 6 months, adjust to 7% for the next year, and adjust upwards .5%
every 6 months thereafter.
REVERSE MORTGAGES
While a reverse mortgage is not exactly a fixed rate mortgage (it is more of an
annuity), I have included it here because the payments made to the home buyers are
fixed. Reverse mortgages are designed especially for elderly people with equity in their
homes but limited cash. They allow individuals to retain home ownership while
providing needed cash flow. In a traditional mortgage, the homeowners repay the amount
borrowed over a specified period of time. With a reverse mortgage the homeowner
receives a specified amount every month.
ADJUSTABLE RATE MORTGAGES
An ARM is a type of loan amortization where the most prevalent feature is that
the interest rate adjusts during the course of the loan. Thanks to the adjustable rate
feature, banks and lenders are better protected in case interest rates fluctuate wildly like
in the 1970s when banks were lending at 8% fixed and then rates went as high as 18%.
This left the banks holding loans that were losing money every month since the banks
had to pay money to depositors at higher rates then they were making on their
investments.
CONVENTIONAL MORTGAGE
A conventional mortgage is a non-government loan financed with a value less
than or equal to a specific amount established each year by major secondary lenders. As
of 2008, financing for less than $417,000 was regarded as conventional financing. A
conventional loan is the most popular loan today, as so it has become the benchmark
against all the other mortgages.
A conventional loan is one that is secured by government sponsored entities such
as Fannie Mae and Freddie Mac. Since they are secured, the lender is assured that they
can easily sell the loan on the secondary market.
And because of that assurance, these loans have the lowest rates.In order to
qualify as a conventional loan, the home and borrowers must fall into the guidelines set
by the secondary lenders.
HOME EQUITY LOANS
Real estate has traditionally been considered a non-liquid asset. Property can be
converted to cash only by either selling or refinancing. Both are very expensive and time-
consuming ways to raise money. Today's borrowers can convert their house to cash
immediately by using the equity in their home.
These loans take much less time to approve and fund then regular home loans.
And the fees are generally less than a normal loan as well. But home equity loans are
usually placed in a second lien position after the original mortgage, at a higher interest
rate. If the borrower does not pay, the house could be foreclosed upon.
The Equity Loan is an open ended mortgage similar to a credit card. Borrowers
can take the money out, use it, and pay back the money when they choose. Recently,
home equity loans have brought about new government regulations in some states since
people were getting these loans without really understanding the consequences and thus
being taken advantage of by less than honest lenders.
JEWEL OVERDRAFT
Credit Limit sanctioned against security of gold jewels
JEWEL LOAN
Instant loan on all working days against Gold jewels Electronic WeighingReturn of Jewels without delayInterest on daily product basis
Withdrawal and remittance permissible based on requirementsInterest charged only on outstanding debit balanceOperated as a running account.
DEVELOPMENT LOAN
Loan for development of small trade, Business, Industry within the jurisdiction of BranchApplicant should be Daily Deposit Contributor
Quantum of loan will be decided on the basis of Daily Deposit outstanding and requirement
Collateral security for higher limits
Repayment can be made on daily basis
HIRE PURCHASE FINANCE
For purchase of vehicle, machinery, equipment
Margin 15% to 25%
Period - maximum of 3 years, Collateral security for higher limit.
Flat or Diminishing rate of interest
PURE MORTGAGE LOAN
Amount of Loan restricted to Rs 15.00 Lakhs for non commercial purpose.
OVERDRAFT LOAN
On the security of NSC, KVP, LIC Policy, Bonds.
PERSONAL LOAN
Meant mainly for commercial bank Employees.
SPECIAL LOAN
For Top Executives/Officials.
SALARY LOANEmployees of reputed Private/Public organization based on undertaking for recovery & remittance of the loan by the Employer.
1.8 NEW PRODUCTS TO BE INTRODUCED:
Every aspect of banking will be transformed by new technology. New financial
products- Customer friendly products, dependency on IT systems and competitive pricing
would be the driving forces but a pressure – cooker atmosphere cannot be avoided. The
most successful institutions will be those that combine visionary technology and very
competitive new products with strong relationships and brands built on trust with
previous in depth knowledge of the customer perception. RTGS and NEFT are two new-
age customer-enabling services that depends on technology to serve customers.
Real Time Gross Settlement System (RTGS)
The acronym “RTGS ” stands for Real Time Gross Settlement. It was
introduced in India on 26th March 2004 by RBI. RTGS system is a funds transfer
mechanism settling the obligations continuously through out the processing day. It
is a funds transfer mechanism where transfer of money takes place from one bank
to another on a “real time” and on “gross” basis. This is the fastest possible money
transfer system through the banking channel.
The RTGS system is primarily for large value transactions.
The minimum amount to be remitted through RTGS is Rs.1 lakh.
There is no upper ceiling for RTGS transactions
The beneficiary bank credits the beneficiary's account within two hours of
receiving the funds transfer message.
The essential information required for RTGS remittance. The remitting customer has to
furnish the following information to a bank for effecting a RTGS remittance:
1. Amount to be remitted
2. His/Her account number which is to be debited
3. Name of the beneficiary bank
4. Name of the beneficiary customer
5. Account number of the beneficiary customer
6. Sender to receiver information, if any
7. The IFSC code of the receiving branch
(To know the IFSC code, our branches will help).
The customers of our Bank, who are receiving inward remittance through RTGS
have to inform the 9 digit CBS account number (without hyphen or space between digits)
to the remitter for instant credit.
Through RTGS one can send / receive payments across the country to / from any
bank / any branch provided sending bank as well as receiving bank are members of
RTGS and their branches are RTGS enabled with IFSC Code. RTGS facilitates quick
fund transfer and settlements among the banks for inter bank and customer transactions.
It reduces the settlement risk, as payments are made online basis. This system is very
much useful not only among banks but also for customers as payment / receipt is made on
the same day on real time basis and without any risk, i.e., within two hours at cheaper
cost.
The RTGS system is primarily for large value transactions. The minimum
amount to be remitted through RTGS is Rs.1 lakh. There is no upper ceiling for
RTGS transactions. RTGS will eliminate settlement risk in the case of interbank
and high value transactions.
The system has also stabilised over the years and has been witnessing
increased coverage in terms of bank branches and transaction volume. The
volume of RTGS (Real Time Gross Settlement System ) transactions is increasing
rapidly. RTGS settled 1.94 million transactions in the month of March 2009 as
against 0.72 million transactions in March 2008. Customer transactions settling in
RTGS presently constitute 89 percent of total RTGS transactions and are growing.
REAL TIME GROSS SETTLEMENT – PROCESS FLOW:
Paying Bank / Member Message Creation
IFTP Processing the message & transmission to RTGS
RTGS Checks A/C & Debits/Credits take place
Ack. To sending bank & Credit Advice to Receiving Bank
FIGURE 1.1
Customer submits the request for RTGS funds transfer Paying Bank creates a message in the RTGS system and sends the message RBI, Mumbai, debits the account of the paying bank and credits the amount to the
Receiving bank.
BENEFITS OF REAL TIME GROSS SETTLEMENT: (RTGS)
Fastest Means of Funds transfer Larger value funds transfer system (Any amount above Rs.1 Lakh) Funds credited within 2 Hours Efficient Funds Management Very low service charges Wide Coverage Customer delight Privacy & Security ensured
ADVANTAGES OF RTGS:
Real time gross settlement (RTGS) system is a transparent method for
settlement of inter-bank transaction.
An ideal RTGS means that a cheque issued by a customer drawn on any branch
of a bank deposited in any branch of another bank gets instantly cleared.
Simultaneously, the funds position between the two banks gets settled in the
central hub of the central banking institution. It involves, intricate communication and
networking for transfer of data.
In broad terms, it involves two steps of networking: Intra-bank (networking of
branches within the bank) and inter-bank (networking of banks and other participants
through a central hub).
RTGS implies one-to-one settlement of transaction between parties in which
each party makes a separate payment on each transaction.
The settlement is immediate, final and irrevocable. Universally, RTGS
implementation is driven by central bank's initiative to reduce systemic risk in high-value
payments.
Since transactions are settled on continuous gross basis, sufficient funds must
be available in the participants' settlement account at the time of each settlement.
Trading in intra-day liquidity offers opportunity to earn revenue. So, RTGS will
offer exciting business opportunities to the banks. But it will require business process re-
engineering in the banks' to bring about procedural changes.
PRECAUTIONS
However, the introduction of RTGS and NEFT is not without its share of disadvantages.
Our research finds state that the following precautions need to be taken:
Transfer for the account holders of the bank only
For sending RTGS, customer’s account to be debited by obtaining
cheque/withdrawal
All RTGS receipts are to be credited only to concerned A/C.
In Indian Currency
Within the Country
National Electronic Funds Transfer (NEFT)
NEFT is a nation-wide electronic funds transfer system, which facilitates transfer
of funds from any bank branch to any other bank branch. The NEFT is the product of
IDRBT (Institute for Development and Research in Banking Technology), which is
running on the backbone of SFMS. This is a simple, secure, safe and fastest mode of
funds transfer. This is an ideal mode of funds transfer for Retail remittances. Presently,
Over 45000 bank branches are enabled for sending and receiving NEFT messages in
India. There is no amount ceiling under this scheme and as such the customers can remit
any amount.
The customer intending to remit money through NEFT has to furnish particulars
of IFSC (Indian Financial System Code) of the beneficiary Bank/Branch, full account
number and name of the beneficiary. There are six settlement windows for NEFT at 9.30,
10.30, 12.00, 13.00, 15.00 and 16.00 hours on weekdays and 9.30, 10.30, and 12.00 hours
on Saturdays. The money will be credited to the beneficiary’s account on the same day or
at the most next day in case the message is sent during the last batch of settlement.
NEFT – PROCESS:
Sending Branch Sending Service Center
NEFT Clearing Center
Receiving Service Center
Beneficiary Branch
FIGURE 1.2
The Process Flow
Data entry at the sending bank Branch Processing/Data upload at sending NEFT Service Centre Transmission/Submission of NEFT message to the NEFT Centre Processing and transmission of NEFT message to the Beneficiary Banks Data Validation at Receiving NEFT service CentrePayment to Beneficiary
NEFT SYSTEM OPERATIONS:
STEP 1: The remitter fills in the NEFT Application form giving the particulars of the beneficiary
(bank – branch, beneficiary’s name. account type and account number) and authorizes the
branch to remit the specified amount to the beneficiary by raising a debit to the remitter’s
account.
STEP 2: The remitting branch prepares a Structured Financial Messaging solution (SFMS)
messages and sends it to its Service Centre for NEFT.
STEP 3:
The service centre forwards the same to the local RBI (National Clearing Cell, Mumbai)
to be included for the next available settlement. Presently, NEFT is settled in six batches
at 0930, 1030, 1200, 1300, 1500 and 1600 hours on week days and 0930, 1030 and 1200
hours on Saturdays.
STEP 4:
The RBI at the clearing centre sorts the transactions bank-wise and prepares accounting
entires of net debit or credit for passing on to the banks participating in the system.
Thereafter, bank-wise remittance message are transmitted to banks.
STEP 5:
The receiving banks process the remittance messages received from RBI and effect the
credit to the beneficiaries accounts.
Core Banking Systems
Core banking is another way of saying the core functions of a bank. These
functions represent the essential (core) business of banking. Because of the plethora of
services banks now provide, it is easy to forget that the root of banking is accepting
deposits and lending money. The definition of core banking may have been muddied by
the emergence of packaged computer solutions which combine core banking functions
with other elements of a bank’s operations but at the most basic level core banking
manages financial transactions and their impact on the accounts of its customers.
To achieve this it is obviously necessary to hold details of the bank’s customers (often
called customer static data - their names and addresses, for example) or to link into
another database that holds that data. Therefore a core banking system will often offer a
basic customer database function, often referred to as a Customer Information File(CIF).
Often, a core banking system will maintain linkages between accounts and customers. A
banking system that holds a single instance of a customer’s record and then relates all of
that customer’s accounts to that record is said to be ‘customer centric’. By looking at the
customer a banker will then be able to see all of that customer’s accounts – which enables
the bank to manage across the entire customer relationship (CRM or customer
relationship management). A core system that holds a list of accounts without linking
them back to a single instance of a customer is said to be ‘account centric’. In this day of
integrated banking services and cross-selling there is little scope for account centric
systems, although these may exist in other, more specialised areas of the bank.
Another essential function for a bank, as for any business, is to maintain its own set of
accounts. The bank’s own books, or general ledger, represent the bank as a business
concern and should show the normal business activities (premises, staff costs, etc.) as
well as the balances it holds on behalf of customers, interest and charges that have
accrued and other assets, liabilities, income and expense items. A core banking system
will usually provide some of these basic accounting services.
Core Banking Components
A core banking systems will often provided other routine maintenance activities.
Such essential activities as opening and closing accounts, calculating interest (both due to
the customer and due from the customer), processing customers’ standing orders,
providing account statements and interfacing to outside systems for making and receiving
payments are all considered to be part of the core business of banking and therefore the
legitimate functions of a core banking system. Thus core banking components include:
Interest calculations
Processing of cash deposits and withdrawals
Processing of incoming and outgoing remittances, cheques, etc.
Customer management
Customer account management
Definition of the bank’s products (product management) including such things as
minimum balances, interest rates, number of withdrawals, etc.
Interest rate definition
Customer’s standing instructions
Maintaining records of all financial transactions
A packaged retail core banking system might include functions that are closely related to
core banking activities. So a package may include such functions as:
Processing of applications for loans received from branches, etc. (called loan
origination)
Branch management, often including facilities for maintaining teller cash drawers,
etc.
Cheque book ordering
Internet banking
Banks can have differences in the type of business that they conduct. They may for
example be in retail banking (the type of banking that is seen in the high street), or be in
wholesale banking (the bank-to-bank market often referred to as the inter-bank market) or
securities trading (the buying and selling of stock, shares or government debt
instruments). As a result their ‘core’ businesses can be considerably different. Their core
banking system will therefore reflect the type of business of the bank and be either:
Retail banking
Commercial banking
Wholesale banking
Treasury banking
Private banking
An advantage of using a universal system is that data can be transferred easily between
the different modules so a bank can identify customer trends or selling opportunities for
example if a customer has high levels of cash balances and also performs securities
trading then they may be a sales opportunity for private banking services. A disadvantage
is that it is unlikely that a single vendor is able to offer modules that are ‘best of breed’ in
each function. The alternative approach is to use a core banking system and augment its
functionality by using ‘best of breed’ packages for the specific functionality needed such
as foreign exchange trading or portfolio management for example.
More recently, the arrival of Service Oriented Architecture (SOA) has caused package
vendors to redesign their core banking systems. SOA enables broad packages to be de-
constructed into their constituent parts with each part or function then offered as a
service. So for example a core banking activity of opening a new account could be split
into multiple services – one for establishing a customer name and address (and checking
if one already exists for that customer), one for performing a credit check, one for
opening the actual account type needed, one for ordering a ‘new customer’ pack, one for
ordering a plastic card for the account and so on. This allows a return to the pure core
banking system component of transaction and account management
CHAPTER – 2
2.1 REVIEW OF LITERATURE:
For the purpose of this project, a number of books, magazines and journals have
been referred to gather data and analyse results.
An Article published on 29.04.2007 by Management and Information Team,
Directorate of Accounting and Payment System Indonesia about customer
perception on RTGS
“There are three important reasons to process settlement using the RTGS. First,
empirical studies indicate an emerging awareness among central banks all over the world
on managing the risks of Large Value Transfer Systems (LVTS). The RTGS system has
the capacity to reduce systemic risk. Systemic risk is the risk of default by one member in
settling liabilities when due and payable that could also place other member banks in
jeopardy. Under extreme conditions, the default could potentially trigger financial
difficulties on a wide scale threatening payment system stability.
The second reason is that the RTGS system can reduce the incidence of float, and
thus improve bank supervision effectiveness. Similarly, sound liquidity management in
the banking sector will also support monetary policy effectiveness.
Third, the RTGS system offers opportunity for integration with various payment
system applications. Just one example involves money market and capital market trading
under the Delivery versus Payment (DVP) rule. Alternatively, cross border payments can
be processed with the Payment versus Payment (PVP) application.”
MONETARY AND CREDIT INFORMATION REVIEW – VOLUME – V – ISSUE
8th February 2009: Reserve Bank of India
In order to bring RTGS usage to the desired customer perception level, RTGS member
banks have been advised by RBI to :
Extend their customer windows commensurate with the Reserve Bank’s business
sessions.
Popularise the products by educating customers/advertisements, etc.
Create a user friendly atmosphere at the branch level.
Identify branches which have the potential but are not using the system.
Incentivise the branches for extensive use of RTGS
Make their entire branch network RTGS enabled.
Expedite providing RTGS facility to the customers of RRBS sponsored by
respective banks.
Article published by RBI in April 2009
The RBI stated that ensuring the safety and security of the payment systems, it
has put in place three modes of electronic payments, that is, Real time Gross Settlement
(RTGS) System, National Electronic Fund Transfer (NEFT) System and Electronic
Clearing Service (ECS). Payments through these modes have been steadily growing in
the last few years.
Internet And Mobile Association Of India on Core Banking 2008
43 % of online banking user haven’t started online financial transaction because
of security reasons, 39% haven’t started because they prefer face to face, 22% haven’t
started because they don’t know how to use, for 10% sites are not user friendly and for
2% banks are not providing the facility of internet banking. According to research, 68%
of the customers can not say that when they will be starting the financial transactions
through internet.
Maximum numbers of online banking users are both male and and maximum of
them are in age the group of 25 – 35. More than 60% of the people who are having
account with, have account in 3 – 4 banks.
Customers perceive the quality of services of Internet banking based on the
performance of online delivery systems – not on the processes in which the delivered
service is developed and produced. Because customers perceive Internet banking service
quality based on relatively standardized outcomes determined by online system, customer
attitudes toward that outcome reflect overall quality of services delivered.
Customers usually perceive risks in conducting transactions electronically and
particularly if the transactions involve money. Risk perception can be of six different
types: time risk, financial risk, performance risk, psychological risk and
safety/confidentially risk. It is generally considered that risk perception could be higher
for electronic banking services. This study aims to understand extent to which whether
this consideration is valid as well as to determine the levels of perception differences
among the customers of various age groups.
2.2 RESEARCH GAP
I do not see any gap in the research I have undertaken. I was able to access and
retrieve research material as planned to cover all aspects of this project.
CHAPTER – 3
RESEARCH METHODOLOGY:
3.1 TYPE OF RESEARCH:
For the purpose of this project, I have used descriptive research design in my
study.
Descriptive research is also called Statistical Research. The main goal of this
type of research is to describe the data and characteristics about what is being studied.
Although this research is accurate, it does not gather the causes behind a situation. It is
used to obtain information concerning the current status of the phenomena to describe
“what exists” with respect to variables or conditions in a situation.
The research cannot describe what caused a situation. Thus, descriptive research
cannot be used to create a causal relationship, where one variable affects another. In
other words, descriptive research can be said to have a low requirement for internal
validity.
The description is used for frequencies, averages and other statistical calculations.
Often the best approach, prior to writing descriptive research, is to conduct a survey
investigation. This can be done with the help of survey questionnaires exclusively
developed to know preferences of the customers. Qualitative research often has the aim
of description and researchers may follow-up with examinations of why the observations
exist and what the implications of the findings are.
In short, descriptive research deals with everything that can be counted and
studied. But there are always restrictions to that. My research has an impact to the
customer perception about the new products of Tamil Nadu State Apex Cooperative Bank
Ltd.
The project on introducing RTGS and NEFT is highly research-oriented and as
such requires real-time data from multiple sources.
3.2 TARGET RESPONDENTS
The target respondents of the research are primarily the bank’s existing customers
and potential customers. The following categories of customers are targeted:
(1) Existing Customers
(2) Non-Resident Indians (NRIs)
(3) High Net worth Individuals (HNIs)
(4) Potential Customers
Banks in India are on fast-track growth in size, technology and deliverables to customers.
Every aspect of banking has been transformed by new technology. Customer – friendly
products, delivery channels, relationship banking, dependency on IT systems and
competitive pricing would be the driving forces.
Banks have to adopt strategies to move to high-tech banking as a necessity of e-
commerce, e-banking etc., In the scenario of severe competition and escalating
expectation of the customers for newer products and improved as well as alternative
delivery channels, the nerve centre of banking activities will have to be redefined to
satisfy the customer perception.
3.3 ASSUMPTIONS, CONSTRAINTS AND LIMITATIONS
ASSUMPTIONS
The key assumptions of this project are:
(1) Customers are demanding and require better, faster and convenient
services.
(2) Customers are Internet-savvy and can use IT for banking transactions and
operations.
(3) The bank is willing to extend its services to cater to the changing needs of
the customers and will provide adequate budget and manpower in its
endeavor to serve the customers.
CONSTRAINTS & LIMITATIONS
Some of the constraints of this project for the bank are:
The bank’s branch network is confined to the
city of Chennai
The bank is dependant on tie-ups and
arrangements with other banks for offering inter-city services across India
The long-time customer profile of the bank
appears to be comfortable doing business the traditional way
3.4 SAMPLING METHODS & DATA PROCESSING
Sampling is that part of statistical practice concerned with the selection of
individual observations intended to yield some knowledge about a population of concern,
especially for the purposes of statistical inference. Each observation measures one or
more properties (weight, location, etc.) of an observable entity enumerated to distinguish
objects or individuals. Survey weights often need to be applied to the data to adjust for
the sample design. Results from probability theory and statistical theory are employed to
guide practice. In business, sampling is widely used for gathering information about a
population.
CONVENIENCE SAMPLING:
I have used Convenience sampling technique. (sometimes known as grab or
opportunity sampling). It is a type of nonprobability sampling which involves the sample
being drawn from that part of the population which is close to hand. That is, a sample
population selected because it is readily available and convenient. The researcher using
such a sample cannot scientifically make generalizations about the total population from
this sample because it would not be representative enough. This type of sampling is most
useful for pilot testing.
Sample unit : Bank account holders
Sample Technique : Convenient Sampling
Sample Area : Chennai City, Tamilnadu
Sample Size : 100 of each age group
3.5 DATA COLLECTION:
The following are the two sources of data which have been collected for this project:
PRIMARY DATA:
In primary data collection, you collect the data yourself using methods such as
interviews and questionnaires. The key point here is that the data you collect is unique to
you and your research and, until you publish, no one else has access to it.
There are many methods of collecting primary data and the main methods include:
Questionnaires interviews focus group interviews observation7 case-studies
From the above I have used questionnaire for my primary data collection.
SECONDARY DATA:
Secondary data is data collected by someone other than the user. Common
sources of secondary data for social science include censuses, surveys, and organizational
records.
Online Database, Journals, Research Studies and surveys have been used as sources
for our secondary data.
3.6 TOOLS FOR ANALYSIS
STATISTICAL TOOLS:
Comparative Analysis Percentage Analysis Chi Square Distribution
CHAPTER – 4
DATA ANALYSIS AND INTERPRETATION:
Data analysis is a process of gathering, modeling, and transforming data with the
goal of highlighting useful information, suggesting conclusions, and supporting decision
making. Data analysis has multiple facets and approaches, encompassing diverse
techniques under a variety of names, in different business, science, and social science
domains.
This survey is designed to understand bank account holders perceptions on New
products like Real Time Gross Settlement, NEFT National Electronic Fund Transfer and
Core banking System, their experience with existing products and their expectations on
new products.
An analysis of the study show a mixture of views about the new products which
is spread over the customer of different age groups.
Q1) Frequency of visiting your bank branch per month?
A) 1 to 3 times
B) 3 to 8 times
C) 8 to 12 times
D) Over 12 times
Solution: comparative analysis
Age 1 to 3 times 3 to 8 times 8 to 12 times Over 12
18 – 25 24 20 13 12
25 – 35 11 13 18 36
35 – 45 13 12 14 15
45 – 55 18 12 12 11
Table 4.1
0
5
10
15
20
25
30
35
40
1 to 3times
3 to 8times
8 to 12times
Over 12
18 – 25
25 – 35
35 – 45
45 – 55
Figure 4.1
INTERPRETATION:
From the above interpretation we can say that in comparison to
all the above age groups maximum number of time that is being
visited to the bank is of age group between 25 – 35 that’s is around 12
times in a month. So these new products will reach these age group
people quickly and this has to be spread to customer belonging to all
age groups.
Q 2) The main reason that you typically visit your bank branch (please choose the single most important reason) ?
to make a deposit to get advice for investment options to inquire about a balance to withdraw cash other
Age Deposit Advice Balance Withdrawal Others
18 – 25 20 18 23 17 12
25 – 35 20 14 17 27 14
35 – 45 13 14 14 17 12
45 – 50 14 14 15 14 0
Table 4.2
0
5
10
15
20
25
30
18 – 25
25 – 35
35 – 45
45 – 50
Figure 4.2
INTERPRETATION:
From the above interpretation we can say that the reason for visiting bank branch
maximum number of time is basically is for the cash withdrawal that to is done by the
age group between 25 - 35 that is of 27. From this we can infer that withdrawal is done
mainly for making payments and this can be easily done on introduction of new products
such as RTGS and NEFT through net banking with in seconds and steps should be taken
to familiarize the services among the other age group of customers.
0
10
20
30
40
50
60
70
80
18-25 25-35 35-45 45-55
AGE GROUP
C U S T O M E R S
Yes
No
Q3) Are you satisfied with the existing products?
Age Group Yes No
18-25 35 65
25-35 45 55
35-45 65 35
45-55 70 30
Table 4.3
Figure 4.3
INTERPRETATION:
From the above interpretation I can say that 35% of customers belonging to 18 - 25 age
groups are satisfied with the existing products but 65% of them are not satisfied, similarly
45% of customers belonging to 25 - 35 age groups are satisfied and 55% of them are not
satisfied, like 65% of customers belonging to 35 - 45 age groups are satisfied and 35% of
customers are not satisfied and from the age group of 45 - 55, 70% of customers are
satisfied and 30% of them are not satisfied.
Finally I can interpret that customers belonging to the age group of 45 - 55 are
satisfied with the existing products and they have more affinity towards traditional
banking practices due to lack of innovated technical knowledge.
Q4) Do you want any improvement to be made in the existing products?
Age GroupYes No
18-25 65 35
25-35 55 45
35-45 35 65
45-55 30 70
Table 4.4
Figure 4.4
INTERPRETATION
From the above interpretation I can say that 65% of customers belonging to 18 -
25 age groups need improvements from the existing products but 35% of them do not
need any improvements, similarly 55% of customers belonging to 25 - 35 age groups
need improvements and 45% of them do not need, like 35% of customers belonging to 35
- 45 age groups need improvements and 65% of them do not need and from the age group
of 45 - 55, 30% of customers need improvements and 70% of them do not need any
improvements in the existing products.
Finally I can interpret that customers belonging to the age group of 18 - 25 and 25
- 35 need improvements in the existing products. Since they are techsavy and they aware
of the innovative products in the banking services.
Q5) Do you know about RTGS, NEFT and CBS?
Age Group RTGS NEFT CBS
18-25 40 50 70
25-35 45 55 65
35-45 35 40 40
45-55 25 30 35
Table 4.5
Figure 4.5
INTERPRETATION
Among the customers belonging to 18 - 25 age group 40% of customers know
about RTGS, 50% of customers know about NEFT and 70% of customers know about
CBS, similarly among 25-35 age groups know 45%, 55% and 65% respectively and from
35-45 age group customers have come to know the new products recently but 45 - 55 age
group less percentage are aware of the new products.
Finally we can say that age group between 18-25, 25-35 are aware of the new
products.
Q 6) Do you welcome the new products?
A) Yes B) No.
The above question is interpreted by using statistical tool i.e., Chi Square
distribution. It has only one parameter called the degrees of freedom (df). The shape of
the particular Chi Square distribution depends on the number of degrees of freedom. The
chi square is non negative in value. It is either Zero or Positively valued. It is not
symmetrical and it is skewed to the right. By knowing the degrees of freedom and area
in the right tail of Chi Square distribution we will find the value of Chi Square from the
table.
This test is a test of agreement between a hypothetical and a sample distribution.
A number of times we find that the results obtained in samples are consistent with the
theoretical results expected according to the rules of probability
The following is the data obtained from a survey conducted for the product launch
in TNSC Bank by taking age group as a variable. We found out how many value
customers accept the new products. A Random sampling of 100 Customers in each age
groups was surveyed with the following results.
AGE GROUPS20 – 25 25 – 35 35 – 45 45 – 55 Total
Customers welcome the new products
55 60 55 45 215
Customers do not welcome the products
45 40 45 55 185
Total 100 100 100 100 400
The two hypotheses are as follows
STEP 1:
Ho : There is no association between age groups and acceptance of new products
H1 : There is an association between age groups and acceptance of new products
STEP 2:
Degree of Freedom : (R-1) (C-1) = (2 – 1) (4 – 1) = 3
STEP 3:Calculation of Sample – Chi Square
O E (O – E) (O – E)² (O – E)²/E
ROW 1 20 – 25 55 53.75 1.5 2.25 0.04
25 – 35 60 53.75 6.25 39.06 0.72
35 – 45
55 53.75 1.25 1.56 0.02
45 – 55 45 53.75 -8.75 76.56 1.42
ROW 2 20 – 25
45 46.25 1.25 1.56 0.03
25 – 35 40 46.25 6.25 39.06 0.84
35 – 45 45 46.25 1.25 1.56 0.03
45 – 55 55 46.25 8.75 76.56 1.6
TOTAL 4.7
TABLE 4.6
STEP 4:
Compare the table value and the critical value
Table Value is : 7.815
Critical Value is : 4.7
Table value > Critical value
STEP 5:
Critical Value of Chi Square at α = 0.05 level for 3 degrees of freedom from the
table is 7.815. Since the critical value is less than the critical value of 7.815 the null
hypothesis is accepted. In other words the Ho is accepted.
Finally we can say that there is no association between age groups and acceptance
of new products. The number of customers belonging to younger age group accepts the
new products is more than the acceptance among the other age group customers, since
they are more tech-savy. The older age groups are not aware of the latest technologies in
banking services and they follow traditional banking methods.
-50 0 50 100 150 200
18 – 25 25 – 35 35 – 45 45 – 55 18 – 25 25 – 35 35 – 45 45 – 55
RO
W 1
RO
W 2
TO
TA
L
Figure 4
Q7. What was the single most important reason that you chose this particular bank ?
I have a traditional bank account with the same bank The brand name of the bank The excellent service offered by this bank Others
18 – 25 25 – 35 35 – 45 45 – 55I have a traditional bank account with the same bank
10 12 15 16
The brand name of the bank
20 25 30 32
The excellent service offered by this bank
30 35 37 40
Others 5 4 5 6TABLE 4.7
INTERPRETATION:
From the above interpretation we can say that the reason for choosing particular
bank is because of the excellent services offered by the bank and second most reason is
that of the brand name of the bank since the customers of all the age group prefer the
bank for brand name and excellent service, the new products will reach them easily.
0
10
20
30
40
50
18 – 25 25 – 35 35 – 45 45 – 55
I have a traditionalbank account w ith thesame bank
The brand name of thebank
The excellent serviceoffered by this bank
OthersFIGURE 4.7
CHAPTER 5
5.1 Summary of Findings
The project provided lots of findings and insights into the New Financial products
according to customer mindset, preferences and needs. Some of the key findings of this
project report are:
Customers are demanding and the switching costs to change their banker are low
and easy in view of high competition.
Customers prefer fast transaction of funds across the global so that utilization of
funds are faster and beneficial in a dynamic business environment.
Customers are Internet-savy and look for cost-effective solutions
Across the country the practice of anywhere-anytime-any branch transactions
have become common.
Competing with foreign banks and financial institutions are local banks that have
joined the fray to offer new-age solutions like RTGS, NEFT and online banking taking
the competition to a new high.
5.2 SUGGESTIONS & RECOMMENDATIONS
AWARENESS CAMPAIGN
An awareness campaign must be undertaken by the bank to introduce the concept of
CBS, RTGS and NEFT to customers. The various modes of awareness are:
ADVERTISEMENTS
Various medial like print and electronic media - television, radio, newspapers &
magazines must be used extensively for the advertising about the new services.
The thrust should be on effectively conveying the message to customers – existing
and new.
INTERNET ADVERTISEMENTS
RTGS and NEFT being technology-enabled products, the Internet must be used as
a medium to target potential customers who are Internet-savvy. Banner
advertisement in bank’s website and related websites should be used.
ROAD SHOWS
The bank’s top management must undertake road shows at various cities to
popularize the new services. This would lend high visibility to the whole effort.
PRESENTATIONS
Presentations must be made by bank’s operations personnel at periodic Customer
Meets followed by a question and answer session for the benefit of the customers.
This forum shall be used by customers to clarify any doubts that they may have in
their minds about the new services.
PROACTIVELY CANVASSING TO HNIS
High net worth individuals (HNIs) customers must be targeted via email and post.
HNIs are perhaps the biggest group of potential customers who would utilize
RTGS and NEFT to the maximum.
TARGETTING NRIS
Reaching out to NRI customers through in-flight advertisements, regional ethnic
associations and leveraging on bank’s internal database is a great way to add new
customers who are cash-rich and Internet-savvy.
PAMPHLETS
This is one of the traditional ways to run an awareness campaign. Distribution of
pamphlets to visiting customers to the branch will have a direct effect on
customers.
USING BRANCHES
Display in branch notice boards is a way to gain attention of the customers to
offer information about the new products. Attractively designed posters can help
in garnering attention.
The success of the awareness campaign is heavily dependant on the level of support and
visibility that the top management of the bank lends to the campaign. High visibility will
reveal the tone at the top and facilitates other bank employees to stay committed to the
campaign and help garner new customers and retain existing ones as well.
2. HIGHLIGHT BENEFITS & ADVANTAGES
The awareness campaign should highlight the benefits and advantages of the new
products and explain the value-add for the customers. Specifically, the following points
needs to be emphasized:
a. Fast service
b. Convenience
c. Cost-effective
d. Confidentiality of transactions
e. Across the counter assistance
f. Available to all types of customers
g. Wide coverage of bank branches through tie-ups
3. SUSTAINABLE COMPETITIVE ADVANTAGE
To gain sustainable competitive advantage over rivals, the bank must focus on
offering quality and timely services to customers on CBS platform. In this connection,
the bank must take up training for all employees involved in offering these services.
The training should be imparted by professionals in the field and frequent
refresher training must be introduced. The bank’s training department must spearhead
this initiative and draw up a training calendar.
5.3 CONCLUSIONS
The New financial products and Customer perception were influenced by a
variety of factors. Besides the actual outcome – i.e., did the product or service deliver
the expected function and did it fulfill the customer need. When the customer avails a
facility, he evaluates the benefits, he perceive from a particular product and compare
them with the costs. The value a customer perceives when buying and using a product or
service go beyond usability. There is a set of emotional values as well, such as social
status, etc. Based on this, customer loyalty can be understood as to how customers feel
about a new financial products, service or band and whether their perceived total
investments with it live up to their experience.
The concept of new financial products does not only relate to individual
customers. Only if a bank knows which features of its products and service or which
other points of contact with the customer are considered most important by the
customers, it can develop appropriate strategies.
Banks should try to make sure that their customers are fully aware of all the ways
their offering can provide value to them. They have to explain the customer how this
particular product can deliver more value than those from competitors. Bank should
widen the customer perception and to extent their awareness and appreciation to more
features or aspects of the offering. The perceived value of the new product could be
increased by highlighting the utility of the new functions.
It is advisable to contact customers who indicate low results for loyalty or
perception of the new products in the surveys.
There is still a lot needed for the banking system to make reforms and train
customers for using new products for their banking operation. Going through the survey
the customers for the main problem lies that still customer have a fear of hacking of
accounts and thus do not go on for net banking. Banks are trying their level best by
providing the best security options to the customers but then to there is lot of factors
which betrays a customer from using new products through net.
Banks are providing other free internet banking services also so that the customers
can be attracted. By asking the bank employees we came to know that maximum
numbers of internet bank account holders are youth, business man and HNI’s.
If proper training is given to customers by the bank employees to open an account
it will be beneficial. Secondly, the website should be made friendlier from where the first
time customers can directly make and access their accounts.
We can see the times are changing and with passage of time people are accepting
technology there is still a lot of perceptual blocking which hampers the growth it’s the
normal tendency of a human not to have changes work on the old track, that’s also one of
the reasons for the slow acceptance of banking products.
Give proper training to customers for using new products
Create a trust in mind of customers toward security of their accounts
Provided a platform from where the customers can access different accounts at
single time without extra charge.
Make there sites more users friendly.
Customers should be motivated to use new products.
5.4 Directions for Future Research
Future research needs to be conducted in the following areas in order to fully
realize the potential of technology-enabled services like RTGS and NEFT:
Percentage of old-time customers patronizing technology for conducting bank
transactions
New customer response to adopting Internet banking
Study on customers belonging to similar banks in abroad
Impact of IT use in bank employee productivity
Consequences on organizational efficiency and effectiveness
APPENDICES
QUESTIONNAIRE:
1. NAME OF THE ACCOUNT HOLDER :
2. AGE :(a) 18 – 25 (b) 25 – 35 (c) 35 – 45 (d) 45 - 55
3. TYPE OF ACCOUNT
(A) SAVINGS A/C (B) CURRENT A/C (C) FIXED DEPOSIT (D) RECURRING DEPOSIT
4. FREQUENCY OF VISITING YOUR BANK BRANCH PER MONTH?
E) 1 TO 3 TIMES F) 3 TO 8 TIMES G) 8 TO 12 TIMES H) OVER 12 TIMES
5. THE MAIN REASON THAT YOU TYPICALLY VISIT YOUR BANK BRANCH (PLEASE CHOOSE THE SINGLE MOST IMPORTANT REASON)?
TO MAKE A DEPOSIT TO GET ADVICE FOR INVESTMENT OPTIONS TO INQUIRE ABOUT A BALANCE TO WITHDRAW CASH OTHER
6. INDICATE SOME OF THE NEW PRODUCTS AVAILABLE IN YOUR BANK:
1. ____________ 6._________________
2. ____________ 7._________________3. ____________ 8._________________4. ____________ 9._________________5. ____________ 10._________________
7. ARE YOU SATISFIED WITH THE NEW PRODUCTS ?
(A) YES (B) NO
8. DO YOU WANT ANY IMPROVEMENT TO BE MADE IN THE NEW PRODUCTS?
(A) YES (B) NO
9. ARE YOU AWARE OF ANY OTHER NEW PRODUCTS? IF YES WHAT ARE THEY?
(A) YES (B) NO 1.____________________2.____________________3.____________________4.____________________5.____________________
10. DO YOU KNOW ABOUT RTGS i.e., REAL TIME GROSS SETTLEMENT?
(A) YES (B) NO
11. DO YOU KNOW ABOUT NATIONAL ELECTRICAL FUND TRANSFER?
(A) YES (B) NO
12. DO YOU KNOW ABOUT CORE BANKING SYSTEM?
(A) YES (B) NO
13. DO YOU INTEND TO USE THE PAYMENT OPERATION THROUGH THE NEW PRODUCTS ?
A) YES B) NO
14. INDICATE THE IMPORTANT FACTORS ON INTRODUCTION OF NEW PRODUCTS?
1. LOWER SERVICE CHARGE 2. BANK FAMILIARITY 3. BANK LOCALITY 4. SECURITY OF TRANSACTION 5. CONVENIENCE 6. 24’ HOURS SERVICE (FROM ANYWHERE)7. QUICK SERVICE (TRANSACTIONS COMPLETED IN SECONDS
INSTEAD OF MINUTES
15. DO YOU WELCOME THE NEW PRODUCTS?
(A) YES (B) NO
16. WHAT WAS THE SINGLE MOST IMPORTANT REASON THAT YOU CHOSE THIS PARTICULAR BANK ?
I HAVE A TRADITIONAL BANK ACCOUNT WITH THE SAME BANK THE BRAND NAME OF THE BANK THE EXCELLENT SERVICE OFFERED BY THIS BANK OTHERS
BIBLOGRAPHY
BOOKS
P.R.Vittal, Business statistics and Operations Research, Margham Publications, Third Revised Edition, Sundaram and Varshney, Banking Theory, Law and Practice, Forth Edition,
Santhanam, Banking and financial system, Forth Edition
WEBSITES:
www.rbi.org
www.tnsc.com
www.google.com
www.banks.com
JOURNALS AND REVIEWS: Reserve Bank Journals
TNSC Bank Journals
Annual Report of TNSC Bank