Rough Draft

CHAPTER I

INTRODUCTION

1.5 LITERATURE REVIEW

Dei, Paschi and Siena (2007) in their study on “The Value of Relationship Lending:

Small Banks in an Era of Consolidation” speak about the importance of consolidation

in the banking industry as it has caused concern about the survival of small banks.

Empirical evidence shows that small banks are performing better than larger banks in

terms of loan growth and profitability. This paper tries to find the determinants of

such unexpected superior performance. The most important factor identified has been

the ability of smaller banks to lever on relationship lending. In fact, relationship

lending proves to be a good explanatory variable of small banks’ recent high loan

growth. Besides, being strongly local, that is being independent and cooperative,

matters whereas belonging to a large banking group does not improve small banks’

performance. This article has limitations as it focuses only on the smaller bank

established in US and Italy. There is scope to identify the importance of relationship

lending in larger banks. Also a study on banks outside US may provide different

results.

Liang, Yao, Hwang and Wei-Hsiung Wu (2008) in their study “The Impact of Non-

Performing Loans on Bank’s Operating Efficiency for Taiwan Banking Industry”, aim

to measure the influence of the rising non-performing loan ratio (NPLR) on Taiwan’s

banking industry. After taking into account the NPLR and the different classifications

of banks, the respective performances of different types of banks exhibit the following

variations and characteristics. In conclusion, the new private banks’ efficiency score

during 1996–1998 was higher than that of the old public banks and old private banks

before including the NPLR. However, after the occurrence of the Asian financial

crisis from 1997–1998 and its effect on the Taiwan economy, the new private banks

extended less credit to the enterprises, which caused the amount lent to decline

sharply and the operational efficiency to fall behind that of the old public banks. The

question of how to improve the transparency of the bank’s critical financial

information has become an important question on which further research can be

carried. Also other tools of measuring bank performance could have been inculcated

in the study.

Kalluru and Bhat (2008) in their study on “An Empirical Analysis of Profitability

Determinants in Indian Commercial Banks During Post Reform Period”, examined

the profitability determinants in Indian commercial banks by employing fixed and

random effects models for an unbalanced panel data of 87 commercial banks for the

period 1992-2006. Two alternative measures of bank profitability such as Returns on

Assets (ROA) and Returns on Capital (ROC) are used. The empirical results reveal

that the profitability of banks was affected not only by banks’ own characteristics but

also by industry structural variables and macroeconomic variables. The empirical

results, in general, reveal that inflation is negatively associated with the profitability

of Indian banks. The rate of interest is negatively associated with the profitability of

public sector banks and positively associated with private and foreign banks. The

empirical results also reveal that the growth rate of the economy is negatively

associated with the profitability of public sector banks. However, the determinants of

bank profitability vary significantly across the banks group thus the result from this

study cannot be generalized to the entire banking sector.

Lumsa, Meliciani and Sabato (2009) in their study on “Banks’ Diversifcation, Cross-

Selling and the Quality of Banks” attempt to model and empirically test the impact of

banks’ shift towards financial services on their screening activity and on the quality of

their loans. The researchers have successfully created a model where it is easier to sell

services to positively evaluated loan applicants. The article has also established a

relationship between screening efforts and size of banks where the larger the banks’

income from services, the lower their optimal screening effort. This prediction is

consistent with the empirical evidence based on a panel of European banks and

showing that the quality of banks’ loans decreases with the share of commission

income. The negative relationship between income diversification and risk suggests

that banks have not been able to exploit efficiently information synergies between

screening and cross-selling and further research in this field should be done.

Stanton (2002) in his paper on“Trends in relationship lending and factors affecting

relationship lending efficiency” investigates the efficiency of relationship managers at

the Canadian Imperial Bank of Commerce (CIBC) one of Canada's largest banks.

Data envelopment analysis (DEA) efficiency scores are analyzed using regression.

The results demonstrate that managers are less efficient when facing larger numbers

of loans or smaller loans. Tests of relationships between efficiency and

nonperforming loans are conducted positively.

Berger and Udell (2002) in their study on “Small Business Credit Availability and

Relationship Lending: The Importance of Bank Organizational structure” explore the

relevance of banking relationships and its significance impact on its profitability.

Relationship lending' is one of the most powerful technologies available to reduce

information problems in small firm finance and a main subject of this paper. Under

relationship lending, banks acquire information over time through contact with the

firm, its owner, and its local community on a variety of dimensions and use this

information in their decisions about the availability and terms of credit to the firm.

Recent empirical evidence provides support for the importance of a bank relationship

to small businesses in terms of both credit availability and credit terms such as loan

interest rates and collateral requirements. It is generally left unspecified whether the

primary relationship is between the bank and the firm or between the loan officer and

the firm's owner, who within the bank acquires and stores the relationship

information, and how this information may be disseminated within the bank. Thus

further focus can be on the meaning, value and significance of this subject matter.

Lakshmi and Murugan (2009) in their empirical study on “Bank Credit Facilities to

Small and Medium Enterprises” focus on how banks are catering to the credit needs

of the SMEs A convenience sample survey of 150 SMEs across Chennai city was

conducted to analyze the awareness level regarding business credit facilities provided

by the banks. The study also examines the credit requirements of SMEs, as well as

difficulties faced by SMEs in availing bank finance. The study findings indicate that

most of the SMEs are availing cash credit facility from banks and are aware of the

bank credit facilities through their agents. In availing bank credit facility, simple

documentation has been ranked first, followed by low interest rate, quick financing,

reputation, period of repayment and service. The study also reveals that technology of

the bank has improved tremendously when compared to other aspects like employee

relations, adequate credit facilities and helping the rural people. In can be hence

concluded that the banks can explore various avenues to approach SMEs and

familiarize them with the various working capital financing options available in order

to increase their profitability.

Bloemer, Ruyter and Peter (2011) in their study on “Investigating drivers of bank

loyalty: the complex relationship between image, service quality and satisfaction”,

investigate how image, perceived service quality and satisfaction determine loyalty in

a retail bank setting at the global construct level, as well as the level of construct

dimensions. At the global level the results of a large-scale empirical study reveal that

image is indirectly related to bank loyalty via perceived quality. In turn, service

quality is both directly and indirectly related to bank loyalty via satisfaction. The

latter has a direct effect on bank loyalty. At the level of the dimensions underlying

aforementioned constructs, it becomes clear that reliability (a quality dimension) and

position in the market (an image dimension) are relatively important drivers of retail

bank loyalty.

Johnston (1997) in his study on “Identifying the critical determinants of service

quality in retail banking: importance and effect”, carefully pinpoints various factors of

service quality that play a significant role on bank’s profitability when viewed as a

part of behavioural finance. This paper provides managers with an empirically derived

framework to help them assess the likely impact of any service quality initiative. It

categorizes quality factors in terms of their relative importance and their effect on

satisfaction and dissatisfaction. The study is based on an analysis of over 200

customers in the UK banking industry and 100 interviews. Research suggests that

certain actions, such as increasing the speed of processing information and customers,

are likely to have an important affect in terms of delighting customers, however other

activities, such as improving the reliability of equipment, will lessen dissatisfaction

rather than delight customers. It also suggests that there are two areas where banks

could achieve a distinct advantage, genuine commitment and attentiveness by front-

line staff. Thus bank resource must be diverted to such areas in order to enhance

loyalty, which contributed to profits indirectly.

Blanchard (1994) in his study on “Quality in Retail Banking”, describes how quality

assessment is significant to banks operations. Quality is increasingly being seen as a

key strategic differentiator within the financial services sector in the UK, with most

major players undertaking some form of quality initiative. The paper describes work

undertaken within TSB Bank plc. to determine both retail customer and staff

perceptions of those factors, which determine service quality. Initially identifies the

models developed by Parasuraman et al. as being the most appropriate for modeling

the data, but finds that although the service gap model provides an excellent basis for

analysis, the SERVQUAL model is of more limited value. It describes an alternative

basis for modeling service quality based on the three dimensions of process/outcome,

subjective/objective and soft/hard is described and modeled against the experimental

data. To conclude, the fast growing pace of behavioural finance includes customer

perception on service quality of banks as it indirectly influences the bank’s customer

base and thereby its profitability.

CHAPTER II

INDUSTRY AND COMPANY PROFILE

2.1 INDUSTRY PROFILE

The banking industry in India has a huge canvas of history, which covers the

traditional banking practices from the time of Britishers to the reforms period,

nationalization to privatization of banks and now increasing numbers of foreign banks

in India. Therefore, Banking in India has been through a long journey. Banking

industry in India has also achieved a new height with the changing times. The use of

technology has brought a revolution in the working style of the banks. Nevertheless,

the fundamental aspects of banking i.e. trust and the confidence of the people on the

institution remain the same. The majority of the banks are still successful in keeping

with the confidence of the shareholders as well as other stakeholders. However, with

the changing dynamics of banking business brings new kind of risk exposure.

2.1.1 Historical Background

Bank of Hindustan was set up in 1870; it was the earliest Indian Bank. Later, three

presidency banks under Presidency Bank's act 1876 i.e. Bank of Calcutta, Bank of

Bombay and Bank of Madras were set up, which laid foundation for modern banking

in India. In 1921, all presidency banks were amalgamated to form the Imperial Bank

of India. Imperial bank carried out limited number of central banking functions prior

to establishment of RBI. It engaged in all types of commercial banking business

except dealing in foreign exchange.

Reserve Bank of India Act was passed in 1934 & Reserve Bank of India (RBI) was

constituted as an apex body without major government ownership. The RBI was

nationalized on January 1, 1949 under the terms of the RBI (Transfer to Public

Ownership) Act, 1948. In 1949, the Banking Regulation Act was enacted which

empowered the 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.

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

the speed of development of the Indian economy. The Government of India issued an

ordinance and nationalised the 14 largest commercial banks with effect from the

midnight of July 19, 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 Government of India 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 nationalised banks from 20 to 19. In the early 1990s, the

then Narasimha Rao government embarked on a policy of liberalization. The next

stage for the Indian banking has been set up 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

74% 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.

2.1.2 Structure of Indian Banking Industry

Reserve bank of India (Controlling Authority)

Development Financial institutions Banks

IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank ISIDBI

Commercial Regional Rural Land Development Co-operative

Banks Banks Banks Banks

Public Sector Banks Private Sector Banks

SBI Groups Nationalized Banks Indian Banks Foreign Banks

Organized banking was active in India since the establishment of the

General Bank of India in 1786. After independence, the Reserve Bank of

India (RBI) was established as the central bank and in 1955, the Imperial

Bank of India, the biggest bank at the t ime, was taken over by the

government to form state-owned State Bank of India (SBI). RBI had

undertaken an exercise to merge weak banks to strong banks and the total number of

banks Thus reduced from 566 in 1951 to 85 in 1969.With the objective of reaching

out to masses and meeting t he credit needs of all sections of people, the government

nationalized 14 large banks in 1969 followed by another 6 banks in 1980. This period

saw enormous growth in the number of branches and the banks’ branch network

became wide enough to reach the weakest sections of the society in a vast country

like India.

Sib’s network of 9033 domestic branches and 48 overseas offices is considered to be

one of the largest for any bank in the world. The economic reforms unleashed by the

government in early nineties included banking sector too, to a significant extent. Entry

of new private sector banks was permitted under specific guidelines issued by RBI. A

number of liberalisation and de-regulation measures aimed at consolidation,

efficiency, productivity, asset quality, capital adequacy and profitability have been

introduced by the RBI to bring Indian banks in line with International best practices.

With a view to giving the state-owned banks operational flexibility and functional

autonomy, partial privatisation has been authorised as a first step, enabling them to

dilute the stake of the government to 51 per cent. The government further proposed, in

the Union Budget for the financial year 2000-01, to reduce its holding in nationalised

banks to a minimum of 33 per cent on a case by case basis. The banking system can

be broadly classified as organized and unorganized banking system. The unorganised

banking system comprises of moneylenders, indigenous bankers, lending

pawnbrokers, landlords, traders, etc. Whereas the organised banking system

comprises of Scheduled Banks and Non- Scheduled Banks that are permitted by RBI

to undertake banking business

2.1.3 Current Scenario

The industry is currently in a transition phase. On the one hand, the PSBs, which are

the mainstay of the Indian Banking system are in the process of shedding their flab in

terms of excessive manpower, excessive non Performing Assets (Npas) and excessive

governmental equity, while on the other hand the private sector banks are

consolidating themselves through mergers and acquisitions.

PSBs, which currently account for more than 78 percent of total banking industry

assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling

revenues from traditional sources, lack of modern technology and a massive

workforce while the new private sector banks are forging ahead and rewriting the

traditional banking business model by way of their sheer innovation and service. The

PSBs are of course currently working out challenging strategies even as 20 percent of

their massive employee strength has dwindled in the wake of the successful Voluntary

Retirement Schemes (VRS) schemes.

The private players however cannot match the PSB’s great reach, great size and

access to low cost deposits. Therefore one of the means for them to combat the PSBs

has been through the merger and acquisition (M& A) route. Over the last two years,

the industry has witnessed several such instances. For instance, Hdfc Bank’s merger

with Times Bank Icici Bank’s acquisition of ITC Classic, Anagram Finance and Bank

of Madura. Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to

be on the lookout. The UTI bank- Global Trust Bank merger however opened a

pandora’s box and brought about the realization that all was not well in the

functioning of many of the private sector banks.

Private sector Banks have pioneered internet banking, phone banking, anywhere

banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and

combined various other services and integrated them into the mainstream banking

arena, while the PSBs are still grappling with disgruntled employees in the aftermath

of successful VRS schemes. Also, following India’s commitment to the W To

agreement in respect of the services sector, foreign banks, including both new and the

existing ones, have been permitted to open up to 12 branches a year with effect from

1998-99 as against the earlier stipulation of 8 branches.

Talks of government diluting their equity from 51 percent to 33 percent in November

2000 has also opened up a new opportunity for the takeover of even the PSBs. The

FDI rules being more rationalized in Q1FY02 may also pave the way for foreign

banks taking the M& A route to acquire willing Indian partners.

Meanwhile the economic and corporate sector slowdown has led to an increasing

number of banks focusing on the retail segment. Many of them are also entering the

new vistas of Insurance. Banks with their phenomenal reach and a regular interface

with the retail investor are the best placed to enter into the insurance sector. Banks in

India have been allowed to provide fee-based insurance services without risk

participation, invest in an insurance company for providing infrastructure and services

support and set up of a separate joint-venture insurance company with risk

participation.

Headwinds from international and domestic economic developments posed challenges

to the banking sector during the year 2011-12. While banks maintained their

profitability, their asset quality was impaired. As things stand, several initiatives are

under way to strengthen the regulatory and accounting frameworks aimed at

increasing the resilience of the institutions. However, higher capital standards, stricter

liquidity and leverage ratios and a more cautious approach to risk is likely to raise the

funding costs of banks. Compliance with Basel III stipulations along with the credit

needs of a growing economy will require banks to tap various avenues to raise capital.

Broad estimates suggest that for public sector banks, the incremental equity

requirement due to implementation of Basel III norms by March 2018 is expected to

be approximately `750-800 billion. Meeting these capital requirements will entail the

use of innovative and attractive market based funding channels by the banks. The

convergence with the International Financial Reporting Standards (IFRS) may also

place additional demands on the banks’ technical as well as human resources.

Considering the granularity of data required for effective supervisory review, efforts

should be to automate data flow from reporting entities through the adoption of

straight-through processing systems. With regard to financial inclusion, quantitative

coverage has improved, but meaningful financial inclusion through the evolution of

sustainable business and delivery models needs to be achieved. Notwithstanding the

multitude of challenges, the regulatory responses and the inherent strengths

underlying the Indian economy should ensure that the banking system continues to

play a positive role in supporting the financing needs of our growing economy.

2.1.4 Aggregate Performance of the Banking Industry

Performance of the Indian banking sector during 2011-12 was influenced by the

slowdown in the domestic economy. Consequently, balance sheet expansion of banks

was lower than the previous year. Major profitability indicators, i.e., return on assets

(RoA) and return on equity (RoE) dipped marginally. However, cost to income ratio

of banks improved during 2011-12, reflecting marginal gains in efficiency. Though

Indian banks remained well-capitalised, concerns about the growing non-performing

assets (NPAs) loomed large. Banks’ exposure to the stressed power and airline sectors

particularly added to deterioration in their asset quality. Though progress has been

made in expanding banking coverage, more efforts are needed to achieve meaningful

financial inclusion.

The empirical studies have found a strong relationship between economic growth and

financial development. Finance plays an important role in the economic growth. The

charts depict the performance of Bankex in last 10 year and Relative performance of

BSE Bankex & BSE Sensex in 2010-11. The performance of Bankex accelerated

during the period March 2002 to March 2008. The performance of bankex decelerated

during March 2008 – March 2009 but thereafter it has shown increasing trend till

March 2011. The four-month period (November 2010-February 2011) was marked by

a consistent decline in all the indices caused by a number of global and domestic

developments. The Sensex declined by 12.4%, while the Bankex Index declined by

18.3%. Some of the global factors, such as increase in crude oil prices and high

commodity prices contributed to inflation in the domestic economy. High inflation

coupled with low growth rate in the Index of Industrial Production (IIP) and

tightening interest rates has caused some concerns.

2.1.5 Technological Developments

Technology has brought about strategic transformation in the working of banks. With

years, banks are also adding services to their customers. The Indian banking industry

is passing through a phase of customers market. The customers have more choices in

choosing their banks. With stiff competition and advancement of technology, the

service provided by banks has become more easy and convenient.

Internet Banking (E-Banking)

Internet banking (or E-banking) means any user with a personal computer and a

browser can get connected to his banks website to perform any of the virtual banking

functions. In internet banking system the bank has a centralized database that is web-

enabled. All the services that the bank has permitted on the internet are displayed in

menu. Any service can be selected and further interaction is dictated by the nature of

service. The traditional branch model of bank is now giving place to an alternative

delivery channels with ATM network. Once the branch offices of bank are

interconnected through terrestrial or satellite links, there would be no physical identity

for any branch.

Internet banking in India

The Reserve Bank of India constituted a working group on Internet Banking. The

group divided the internet banking products in India into 3 types based on the levels

of access granted. They are:

Information Only System: General purpose information like interest rates,

branch location, bank products and their features, loan and deposit calculations

are provided in the banks website.

Electronic Information Transfer System: The system provides customer-

specific information in the form of account balances, transaction details, and

statement of accounts.

Fully Electronic Transactional System: This system allows bi-directional

capabilities. Transactions can be submitted by the customer for online update.

This system requires high degree of security and control

Automated Teller Machine (ATM): ATM is designed to perform the most

important function of bank. It is operated by plastic card with its special

features. The plastic card is replacing cheque, personal attendance of the

customer, banking hour’s restrictions and paper based verification.

Credit Cards/Debit Cards: The Credit Card holder is empowered to spend

wherever and whenever he wants with his Credit Card within the limits fixed

by his bank. Credit Card is a post paid card. Debit Card, on the other hand, is

a prepaid card with some stored value.

Smart Card: Banks are adding chips to their current magnetic stripe cards to

enhance security and offer new service, called Smart Cards. Smart Cards

allow thousands of times of information storable on magnetic stripe cards.

Core Banking Solutions

Core Banking Solutions is new jargon frequently used in banking circles. The

advancement in technology especially internet and information technology has led to

new way of doing business in banking. The technologies have cut down time,

working simultaneously on different issues and increased efficiency. The platform

where communication technology and information technology are merged to suit core

needs of banking is known as Core Banking Solutions. Here computer software is

developed to perform core operations of banking like recording of transactions,

passbook maintenance, interest calculations on loans and deposits, customer records,

balance of payments and withdrawal are done.

Real Time Gross Settlement (RTGS)

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

involvement of papers. To facilitate an Efficient, Secure, Economical, Reliable and

Expeditious System of Fund transfer and clearing in the Banking sector throughout

India. Real time gross settlement systems (RTGS) are a funds transfer mechanism

where transfer of money takes place from one bank to another on a "real time" and on

"gross" basis.

Electronic Clearing Service

Electronic Clearing Service is another technology enhancement happened in the

banking industry. The customer willing to use this facility is required to fill in the

mandate form from the corporate/any utility service institution for ECS mode of credit

and debit. The customer needs to prepare the payment date and submit it to the

“sponsor Bank” and after that everything happened electronically. So customers can

there by make payments as well as receive all incomes electronically.

Mobile banking

Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term

used for performing balance checks, account transactions, payments etc. via a mobile

device such as a mobile phone.

2.1.6 Governmental Policy

After the first phase and second phase of financial reforms, in the 1980s commercial

banks began to function in a highly regulated environment, with administered interest

rate structure, quantitative restrictions on credit flows, high reserve requirements and

reservation of a significant proportion of lendable resources for the priority and the

government sectors. The restrictive regulatory norms led to the credit rationing for the

private sector and the interest rate controls led to the unproductive use of credit and

low levels of investment and growth. The resultant ‘financial repression’ led to

decline in productivity and efficiency and erosion of profitability of the banking

sector in general.

This was when the need to develop a sound commercial banking system was felt. This

was worked out mainly with the help of the recommendations of the Committee on

the Financial System (Chairman: Shri M. Narasimham), 1991. The resultant financial

sector reforms called for interest rate flexibility for banks, reduction in reserve

requirements, and a number of structural measures. Interest rates have thus been

steadily deregulated in the past few years with banks being free to fix their Prime

Lending Rates(PLRs) and deposit rates for most banking products. Credit market

reforms included introduction of new instruments of credit, changes in the credit

delivery system and integration of functional roles of diverse players, such as, banks,

financial institutions and non-banking financial companies (Nbfcs). Domestic Private

Sector Banks were allowed to be set up, PSBs were allowed to access the markets to

shore up their Cars.

2.1.7 Challenges faced by the Indian Banking Industry

Developing countries like India, still has a huge number of people who do not have

access to banking services due to scattered and fragmented locations. But if we talk

about those people who are availing banking services, their expectations are raising as

the level of services are increasing due to the emergence of Information Technology

and competition. Since, foreign banks are playing in Indian market, the number of

services offered has increased and banks have laid emphasis on meeting the customer

expectations.

Now, the existing situation has created various challenges and opportunity for Indian

Commercial Banks. In order to encounter the general scenario of banking industry we

need to understand the challenges and opportunities lying with banking industry of

India.

Rural Market

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 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.

Consequently, we have seen some examples of inorganic growth strategy adopted by

some nationalized and private sector banks to face upcoming challenges in banking

industry of India. For example recently, ICICI Bank Ltd. merged the Bank of

Rajasthan Ltd. in order to increase its reach in rural market and market share

significantly. State Bank of India (SBI), the largest public sector bank in India has

also adopted the same strategy to retain its position. It is in the process of acquiring its

associates. Recently, SBI has merged State Bank of Indore in 2010.

Management of Risks

The growing competition increases the competitiveness among banks. But, existing

global banking scenario is seriously posing threats for Indian banking industry. We

have already witnessed the bankruptcy of some foreign banks.

According to Shrieves (1992), there is a positive association between changes in risk

and capital. Research studied the large sample of banks and results reveal that

regulation was partially effective during the period covered. Moreover, it was

concluded that changes in bank capital over the period studied was risk-based.

Wolgast, (2001) studied the Merger and acquisition activity among financial firms.

The author focused bank supervisors in context with success of mergers, risk

management, financial system stability and market liquidity. The study concluded that

large institutions are able to maintain a superior level of risk management .

Al-Tamimi and Al-Mazrooei (2007) examined the risk management practices and

techniques in dealing with different types of risk. Moreover, they compared risk

management practices between the two sets of banks. The study found the three most

important types of risk i.e. commercial banks foreign exchange risk, followed by

credit risk, and operating risk .

Sensarma and Jayadev (2009) used selected accounting ratios as risk management

variables and attempted to gauge the overall risk management capability of banks.

They used multivariate statistical techniques to summarize these accounting ratios.

Moreover, the paper also analyzed the impact of these risk management scores on

stock returns through regression analysis. Researchers found that Indian banks' risk

management capabilities have been improving over time. Returns on the banks' stocks

appeared to be sensitive to risk management capability of banks. The study suggest

that banks want to enhance shareholder wealth will have to focus on successfully

managing various risks .

Growth of Banking

Zhao, Casu and Ferrari (2008) used a balanced panel data set covering the period of

1992-2004 and employing a Data Envelopment Analysis (DEA)-based Malmquist

Total Factor Productivity (TFP) index. The empirical study indicated that, after an

initial adjustment phase, the Indian banking industry experienced sustained

productivity growth, which was driven mainly by technological progress. Banks'

ownership structure does not seem to matter as much as increased competition in TFP

growth. Foreign banks appear to have acted as technological innovators when

competition increased, which added to the competitive pressure in the banking

market. Finally, our results also indicate an increase in risk-taking behaviour, along

with the whole deregulation process.

It was found in the study of Goyal and Joshi (2011) that small and local banks face

difficulty in bearing the impact of global economy therefore, they need support and it

is one of the reasons for merger. Some private banks used mergers as a strategic tool

for expanding their horizons. There is huge potential in rural markets of India, which

is not yet explored by the major banks. Therefore ICICI Bank Ltd. has used mergers

as their expansion strategy in rural market. They are successful in making their

presence in rural India. It strengthens their network across geographical boundary,

improves customer base and market share .

Market Discipline and Transparency

According to Fernando (2011) transparency and disclosure norms as part of

internationally accepted corporate governance practices are assuming greater

importance in the emerging environment. Banks are expected to be more responsive

and accountable to the investors. Banks have to disclose in their balance sheets a

plethora of information on the maturity profiles of assets and liabilities, lending to

sensitive sectors, movements in NPAs, capital, provisions, shareholdings of the

government, value of investment in India and abroad, operating and profitability

indicators, the total investments made in the equity share, units of mutual funds,

bonds, debentures, aggregate advances against shares and so on .

Human Resource Management

Gelade and Ivery (2003) examined relationships between human resource

management (HRM), work climate, and organizational performance in the branch

network of a retail bank. Significant correlations were found between work climate,

human resource practices, and business performance. The results showed that the

correlations between climate and performance cannot be explained by their common

dependence on HRM factors, and that the data are consistent with a mediation model

in which the effects of HRM practices on business performance are partially mediated

by work climate .

Bartel (2004) studied the relationship between human resource management and

establishment performance of employees on the manufacturing sector. Using a unique

longitudinal dataset collected through site visits to branch operations of a large bank,

the author extends his research to the service sector. Because branch managers had

considerable discretion in managing their operations and employees, the HRM

environment could vary across branches. Site visits provided specific examples of

managerial practices that affected branch performance. An analysis of responses to

the bank’s employee attitude survey that controls for unobserved branch and manager

characteristics shows a positive relationship between branch performance and

employees’ satisfaction with the quality of performance evaluation, feedback, and

recognition at the branch—the “incentives” dimension of a high-performance work

system. In some fixed effects specifications, satisfaction with the quality of

communications at the branch was also important.

Global Banking

It is practically and fundamentally impossible for any nation to exclude itself from

world economy. Therefore, for sustainable development, one has to adopt integration

process in the form of liberalization and globalization as India spread the red carpet

for foreign firms in 1991. The impact of globalization becomes challenges for the

domestic enterprises as they are bound to compete with global players.

If we look at the Indian Banking Industry, then we find that there are 36 foreign banks

operating in India, which becomes a major challenge for Nationalized and private

sector banks. These foreign banks are large in size, technically advanced and having

presence in global market, which gives more and better options and services to Indian

traders.

Financial Inclusion

Financial inclusion has become a necessity in today’s business environment.

Whatever is produced by business houses, that has to be under the check from various

perspectives like environmental concerns, corporate governance, social and ethical

issues. Apart from it to bridge the gap between rich and poor, the poor people of the

country should be given proper attention to improve their economic condition.

Dev (2006) stated that financial inclusion is significant from the point of view of

living conditions of poor people, farmers, rural non-farm enterprises and other

vulnerable groups. Financial inclusion, in terms of access to credit from formal

institutions to various social groups. Apart from formal banking institutions, which

should look at inclusion both as a business opportunity and social responsibility, the

author conclude that role of the self-help group movement and microfinance

institutions is important to improve financial inclusion. The study study suggested that

this requires new regulatory procedures and de-politicisation of the financial system.

Customer Retention

Levesque and McDougall (1996) investigated the major determinants of customer

satisfaction and future intentions in the retail bank sector. They identified the

determinants which include service quality dimensions (e.g. getting it right the first

time), service features (e.g. competitive interest rates), service problems, service

recovery and products used. It was found, in particular, that service problems and the

bank’s service recovery ability have a major impact on customer satisfaction and

intentions to switch.

Clark (1997) studied the impact of customer-employee relationships on customer

retention rates in a major UK retail bank. He revealed that employee and customer

perceptions of service quality are related to customer retention rates and that

employee and customer perceptions of service quality are related to each other.

Clark (2002) examined the relationship between employees’ perceptions of

organizational climate and customer retention in a specific service setting, viz. a

major UK retail bank. Employees’ perceptions of the practices and procedures in

relation to customer care at their branch were investigated using a case study

approach. The findings revealed that there is a relationship between employees’

perceptions of organizational climate and customer retention at a micro-

organizational level. He suggested that organizational climate can be subdivided into

five climate themes and that, within each climate theme, there are several dimensions

that are critical to customer retention

2.1.8 Porters 5 force analysis of the Banking Industry

Banking is mainly a client oriented business. A high-quality of services to the client is

crucial for the growth and stability of any bank. A wider distribution and access of

financial services helps both consumers and producers to raise their welfare and

productivity. Such access is especially powerful for the poor as it provides them

opportunities to build savings, make investments, avail credit, and more important,

insure themselves against income shocks and emergencies. To survive in an

increasingly competitive environment, bank need to come up with various facilities

like Internet banking, mobile banking etc. With the onset of mobile banking, the

industry finds itself at the threshold of the next major technological leap.

Buyer Power - High bargaining power of customer’s on account of banks renders

uniform services to the clients. Now a day’s almost all banks would like to provide

requisite information very easily by way to Internet, Mobile banking to the clients

Supplier Power- Low bargaining power of supplier’s on account of RBI regulatory

benchmarks. Banks have to meet numerous regulatory standards created by RBI

Competitive Rivalry- High competition of account of number of prominent public,

private, foreign along with cooperative banks

Availability of Substitutes - High menace from substitutes like NBFC’s, Mutual

funds, Government securities and T-bills

Threat of new entrants - Low threat of new entrants on account of banking

regulations. Before setting up of a new bank, it is essential to take the consent of RBI.

2.1.9 SWOT Analysis of the Banking Industry

STRENGTH

Indian banks have compared favourably on growth, asset quality and profitability

with other emerging economies banks over the last few years.

Policy makers have made some notable changes in policy and regulation to help

strengthen the sector. These changes include strengthening prudential norms,

enhancing the payments system and integrating regulations between commercial and

co-operative banks.

Bank lending has been a significant driver of GDP growth and employment.

Extensive reach: the vast networking & growing number of branches & ATMs.

Indian banking system has reached even to the remote corners of the country.

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.

Foreign banks will have the opportunity to own up to 74 per cent of Indian private

sector banks and 20 per cent of government owned banks.

WEAKNESS

PSUs need to fundamentally strengthen institutional skill levels especially in sales

and marketing, service operations, risk management and the overall organisational

performance ethic & strengthen human capital.

Old private sector banks also have the need to fundamentally strengthen skill levels.

The cost of intermediation remains high and bank penetration is limited to only a

few customer segments and geographies.

Structural weaknesses such as a fragmented industry structure, restrictions on

capital availability and deployment, lack of institutional support infrastructure,

restrictive labour laws, weak corporate governance and ineffective regulations

Yogendra Sisodia (SMP 1033)beyond Scheduled Commercial Banks (SCBs), unless

industry utilities and service bureaus. Refusal to dilute stake in PSU banks: The

government has refused to dilute its

stake in PSU banks below 51% thus choking the headroom available to these banks

for raining equity capital.

OPPORTUNITY

The market is seeing discontinuous growth driven by new products and services that

include opportunities in credit cards, consumer finance and wealth management on

the retail side, and in fee-based income and investment banking on the wholesale

banking side. These require new skills in sales & marketing, credit and operations.

With increased interest in India, competition from foreign banks will only intensify.

Given the demographic shifts resulting from changes in age profile and household

income, consumers will increasingly demand enhanced institutional capabilities and

service levels from banks.

New private banks could reach the next level of their growth in the Indian banking

sector by continuing to innovate and develop differentiated business models to

profitably serve segments like the rural/low income and affluent/HNI segments;

actively adopting acquisitions as a means to grow and reaching the next level of

performance in their service platforms. Attracting, developing and retaining more

leadership capacity

Foreign banks committed to making a play in India will need to adopt alternative

approaches to win the “race for the customer” and build a value-creating customer

franchise in advance of regulations potentially opening up post 2009. At the same

time, they should stay in the game for potential acquisition opportunities as and when

they appear in the near term. Maintaining a fundamentally long-term value-creation

mindset.

Reach in rural India for the private sector and foreign banks.

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.

Reserve Bank of India (RBI) has approved a proposal from the government to

amend the Banking Regulation Act to permit banks to trade in commodities and

commodity derivatives.

THREATS

Threat of stability of the system: failure of some weak banks has often threatened the

stability of the system. Rise in inflation figures, which would lead to increase in

interest rates. Increase in the number of foreign players would pose a threat to the

PSB as well as the private player

2.2 COMPANY PROFILE

2.2.1 STATE BANK OF INDIA

2.2.1.1 A brief history of the company

State Bank of India is the largest banking and financial services company in India by

revenue, assets and market capitalisation. It is a state-owned corporation with its

headquarters in Mumbai, Maharashtra.

The bank traces its ancestry to British India, through the Imperial Bank of India, to

the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in

the Indian Subcontinent. Bank of Madras merged into the other two presidency banks

—Bank of Calcutta and Bank of Bombay—to form the Imperial Bank of India, which

in turn became the State Bank of India. The Government of India nationalised the

Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake,

and renamed it the State Bank of India. In 2008, the government took over the stake

held by the Reserve Bank of India.

The business of the banks was initially confined to discounting of bills of exchange or

other negotiable private securities, keeping cash accounts and receiving deposits and

issuing and circulating cash notes. Loans were restricted to Rs.one lakh and the period

of accommodation confined to three months only. All commodities, including tea,

sugar and jute, which began to be financed later, were either pledged or hypothecated

to the bank. Indians were the principal borrowers against deposit of Company's paper,

while the business of discounts on private as well as salary bills was almost the

exclusive monopoly of individuals Europeans and their partnership firms. But the

main function of the three banks, as far as the government was concerned, was to help

the latter raise loans from time to time and also provide a degree of stability to the

prices of government securities.

2.2.1.2 Year of establishment and initial investment

The origin of the State Bank of India goes back to the first decade of the nineteenth

century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806.

Three years later the bank received its charter and was re-designed as the Bank of

Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of

British India sponsored by the Government of Bengal. The Bank of Bombay (15 April

1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These

three banks remained at the apex of modern banking in India till their amalgamation

as the Imperial Bank of India on 27 January 1921.

2.2.1.3 Places of business

As of March 2012, it had assets of US$360 billion and 14,119 branches, including

173 foreign offices in 37 countries across the globe. Including the branches that

belong to its associate banks, SBI has 21,500 branches. SBI has 14 local head offices

situated at Chandigarh (Punjab & Haryana), Delhi, Lucknow (Uttar Pradesh), Patna

(Bihar), Kolkata (West Bengal), Guwahati (North East Circle), Bhubaneswar (Orissa),

Hyderabad (Andhra Pradesh), Chennai (Tamil Nadu), Trivandrum (Kerala),

Bengaluru (Karnataka), Mumbai (Maharashtra), Bhopal (Madhya Pradesh) &

Ahmedabad (Gujarat) and 57 Zonal Offices that are located at important cities

throughout the country.

SBI is a regional banking behemoth and is one of the largest financial institutions in

the world. It has a market share among Indian commercial banks of about 20% in

deposits and loans.

2.2.1.4 Present Management

Table 2.2.1.1 SBI’s Management

Sr.

No.

Name Designation Under Section of SBI

Act 1955

1 Shri Pratip Chaudhuri Chairman 19 (a)

2 Shri Hemant G.

Contractor

Managing Director 19 (b)

3 Shri Diwakar Gupta Managing Director 19 (b)

4 Shri A. Krishna Kumar Managing Director 19 (b)

5 Shri. S.Visvanathan Managing Director 19 (b)

6 Shri Dileep C. Choksi Director 19 (c)

7 Shri S. Venkatachalam Director 19 (c)

8 Shri D. Sundaram Director 19 (c)

9 Shri Parthasarathy

Iyengar

Director 19 (c)

10 Shri Jyoti Bhushan

Mohapatra

Workmen Employee

Director

19 (ca)

11 Shri S. K. Mukherji Director 19 (cb)

12 Dr. Rajiv Kumar Director 19 (d)

13 Shri Deepak Ishwarbhai

Amin

Director 19 (d)

14 Shri D. K. Mittal Director 19 (e)

15 Dr. Subir V. Gokarn Director 19 (f)

2.2.1.5 Competitor profile

The major competitors of SBI in the public sector are as follows

Table 2.2.1.1 SBI’s Competitor profile

Name Market Cap.

(Rs. cr.)

Net

Interest

Income

Net Profit Total Assets

Bank of Baroda 35,046.74 29,673.72 5,006.96 447,321.46

PNB 28,635.16 36,428.03 4,884.20 458,194.01

Canara Bank 20,916.25 30,850.62 3,282.72 374,160.20

Bank of India 18,476.56 28,480.67 2,677.52 384,535.47

Union Bank 15,131.84 21,144.28 1,787.13 235,984.44

IDBI Bank 14,190.46 23,369.93 2,031.61 290,837.23

Oriental Bank 10,325.43 15,814.88 1,141.56 178,130.17

Allahabad Bank 8,402.94 15,523.28 1,866.79 182,934.57

Indian Bank 8,260.18 12,231.32 1,746.97 141,419.20

Syndicate Bank 8,045.06 15,268.35 1,313.39 182,468.06

IOB 6,870.12 17,897.08 1,050.13 219,648.17

Corporation

Ban

6,640.63 13,017.78 1,506.04 163,560.42

2.2.1.6 Product profile

The Bank operates in four segments: Treasury, Corporate / Wholesale Banking, Retail

Banking and Other Banking Operations. The Treasury segment includes investments,

all financial markets activities undertaken on behalf of the Bank's customers, trading,

maintenance of reserve requirements and resource mobilization from other Banks and

financial institutions. The Corporate / Wholesale Banking segment includes lending,

deposit taking and other services offered to corporate customers. The Retail Banking

segment includes lending, deposit taking and other services offered to retail

customers. The Other Banking Operations segment includes para banking activities,

such as third-party product distribution and merchant banking.

2.2.1.7 Subsidiary companies under the same management

SBI has five associate banks; all use the same logo of a blue circle and all the

associates use the "State Bank of" name, followed by the regional headquarters' name:

▪ State Bank of Bikaner & Jaipur

▪ State Bank of Hyderabad

▪ State Bank of Mysore

▪ State Bank of Patiala

▪ State Bank of Travancore

Apart from its five associate banks, SBI also has the following non-banking

subsidiaries:

▪ SBI Capital Markets Ltd

▪ SBI Funds Management Pvt Ltd

▪ SBI Factors & Commercial Services Pvt Ltd

▪ SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)

▪ SBI DFHI Ltd

▪ SBI Life Insurance Co. Ltd.

▪ SBI General Insurance

2.2.1.8 Collaboration/joint ventures

1. SBI Life Insurance is a joint venture between the State Bank of India and BNP

Paribas Cardif of France.

2. SBI owns 74% of the total capital and BNP Paribas Cardif the remaining 26%.

State Bank of India enjoys the largest banking franchise in India. Along with

its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,500

branches across the country, arguably the largest in the world. BNP Paribas

Cardif is a wholly owned subsidiary of BNP Paribas.

3. BNP Paribas Cardif is ranked 2nd worldwide in creditor's insurance offering

protection to over 35 million policyholders and net income in excess of Euro 1

billion. BNP Paribas Cardif has also been a pioneer in the art of selling

insurance products through commercial banks in France and in 35 more

countries.

4. BI Macquarie Infrastructure Trust (“SMIT” or the “Fund”) is an unlisted fund

with INR 11,871 million of committed capital. SMIT is an unlisted private

equity style infrastructure fund and provides its investors (located in India)

with access to the growing number of investment opportunities available to the

private sector in India’s infrastructure and infrastructure-like assets.

5. SMIT is managed by a joint venture established in 2008 between State Bank

of India (SBI), Macquarie Capital Group Limited (Macquarie) and

International Finance Corporation (IFC). The manager of SMIT is SBI

Macquarie Infrastructure Management Private Limited (“SMIMPL” or “the

Manager”).

6. SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank

of India' one of India's largest banking enterprises, and AMUNDI, one of the

world's leading fund management companies.

7. SBI-SG Global Securities Services Pvt. Ltd (SBISGGSS), is a joint venture

between State Bank of India (SBI) and Societe Generale Securities Services

(SGSS). This Joint venture has been set up to offer high quality Custody

Services, Fund Accounting & Fund Administration, Risk Analysis &

Performance Measurement and Registrar & Transfer Agency Services to

domestic investors like Financial Institutions, Mutual Funds, Insurance

Companies, Pension Funds, Portfolio Management Services, Private Banks,

Corporates, Brokers and overseas investors like Global Custodians or Foreign

Institutional Investors in the Indian Securities Market.

8. C-Edge, a venture between State Bank of India and TCS is making the same

technology available to rural banks and small cooperative banks at a fraction

of the cost. It is using the application service mode to make available to small

lenders Once the banks transfer all their customer information to the central

database their customers can withdraw money from ATMs and send money

instantly to other branches.

9. In March 2001, SBI (with 74% of the total capital), joined with BNP Paribas

(with 26% of the remaining capital), to form a joint venture life insurance

company named SBI Life Insurance company Ltd. Now-a days SBI Life

Insurance Co. Ltd ranks among the top and most trusted Life Insurance

Companys in India and also abroad. In 2004 SBI DFHI Ltd(DISCOUNT AND

FINANCE HOUSE OF INDIA) was founded with its headquarter in

MUMBAI, MAHARASHTRA.SBI DFHI Ltd is primary dealer that trades in

Fixed income securities(treasury bills, state development loans, government

securities, non SLR bonds, corporate bonds) and Short Term Money Market

instruments(certificates of deposits, commercial paper, inter-corporate

deposits, call and money notice deposits).IT is an institution formed by RBI to

support the book building process in primary auctions of Government

securities and provide necessary depth and liquidity to the Secondary market

in Government securities.

2.2.1.9 Certifications/achievements/awards won

▪ Best Online Banking Award, Best Customer Initiative Award & Best Risk

Management Award (Runner Up) by IBA Banking Technology Awards 2010

▪ The Bank of the year 2009, India (won the second year in a row) by The Banker

Magazine

▪ Best Bank – Large and Most Socially Responsible Bank by the Business Bank

Awards 2009

▪ Best Bank 2009 by Business India

▪ The Most Trusted Brand 2009 by The Economic Times

▪ Most Preferred Bank & Most preferred Home loan provider by CNBC

▪ Visionaries of Financial Inclusion By FINO

▪ Technology Bank of the Year by IBA Banking Technology Awards

▪ SKOCH Award 2010 for Virtual corporation Category for its e-payment solution

▪ The Brand Trust Report: 11th most trusted brand in India.

2.2.1.10 SWOT analysis OF SBI

Strengths

1. SBI is the largest bank in India in terms of market share, revenue and assets

2. As per recent data the bank has more than 13,000 outlets and 25,000 ATMs

3. The bank has its presence in 32 countries engaging currency trade

4. The bank has a merged with State Bank of Saurashtra, State bank of Indore and

the bank is planning to go further acquisition in the current FY2012

5. SBI has the first mover advantage in commercial banking service

6. SBI has recently changed its vision and mission statements showing a sign of

inclination towards new age banking services

Weakness

7. Lack of proper technology driven services when compared to private banks

8. Employees show reluctance to solve issues quickly due to higher job security

and customers’ waiting period is long when compared to private banks

9. The banks spends a huge amount on its rented buildings

10. SBI has the largest number of employees in banking sector, hence the bank

spends a considerable amount of its income in employee’s salary

compensation

11. In spite of modernization, the bank still carries the perception of traditional bank

to new age customers

12. SBI fails to attract salary accounts of corporate and many government sector

employees salary accounts are also shifted to private bank for ease of

operations unlike before

Opportunities

13. SBI’s merger with five more banks namely State Bank of Hyderebad, State

bank of Patiala, State bank of Bikaber and Jaipur, State of bank of Travancore

and State bank of Mysore are in approval stage

14. Mergers will result in expansion of market share to defend its number one

position

15. SBI is planning to expand and invest in international operations due to good

inflow of money from Asian Market

16. Since the bank is yet to modernize few of its banking operations, there is a

better scope of using advanced technologies and software to improve customer

relations

17. Young and talented pool of graduates and B schools are in rise to open new

horizon to so called “old government bank”

Threats

18. Net profit of the year has decline from 9166.05 in the year FY 2010 to 7,370.35

in the year FY2011. This shows the reduce in market share to its close

competitor ICICI

19. Other private banks like HDFC, AXIS bank etc

20. Other government banks like PNB, Andhra, Allahabad bank and Indian bank

are showing.Customer prefer to switch to private banks and financial service

providers for loans and mortgages, as SBI involves stringent verification

procedures and take long time for processing.

2.2.1.11 FUTURE

Yes Bank also has ambitious diversification plans, including a foray into retail

broking, the setting up of a mutual fund, and also an insurance venture — the last

probably with an international partner. "We also have aspirations of setting up a

technology outsourcing subsidiary, and a micro-finance institution," notes Kapoor.

Though the bank's key team helps other companies to acquire firms abroad, Kapoor

says it has no plans to acquire banks or merge itself with other institutions. He sees

organic growth ahead, and does not want to dilute the bank's quality systems by

acquiring other banks. As with many new generation banks, Yes Bank has significant

fee-based activity. The bank also has the ability to effectively manage its capital, and

follows prudent risk management systems. The bank's mantra is to say 'yes' to

offering innovative financial solutions, to adopting international best practices, to

providing high standards of service, and to transparency in its operations.

2.2.2 YES BANK

2.2.2.1 A brief history of the company/business group

YES BANK, India’s new age private sector Bank, is a state-of-the-art high quality,

customer-centric, service-driven Bank catering to the “Future Businesses of India”.

An outcome of the professional & entrepreneurial commitment of its Promoter &

Founder, Dr. Rana Kapoor and his top management team, YES BANK is India’s

fourth largest private sector bank (by balance sheet dated March 31, 2012).Since its

inception in 2004, YES BANK has fructified into a ‘“Full Service Commercial Bank”

that has steadily built Corporate and Institutional Banking, Financial Markets,

Investment Banking, Corporate Finance, Branch Banking, Business and Transaction

Banking, and Wealth Management business lines across the country, and is well

equipped to offer a range of products and services to corporate and retail customers.

YES BANK has adopted international best practices, the highest standards of service

quality and operational excellence, and offers comprehensive banking and financial

solutions to all its valued customers.

YES BANK has a widespread branch network of over 380 branches across 275 cities,

with 650+ ATMs and 2 National Operating Centres in Mumbai and Gurgaon.YES

BANK has been recognized amongst the Top and Fastest Growing Banks in various

Indian Banking League Tables by prestigious media houses and Global Advisory

Firms, and has received several national and international honours for our various

Businesses including Corporate Finance, Investment Banking, Treasury, Transaction

Banking, and Sustainable practices through Responsible Banking. The Bank has

received numerous recognitions for its world-class IT infrastructure, and payments

solutions, as well as excellence in Human Capital.The sustained growth of YES

BANK is based on the key pillars of Growth, Trust, Technology, Human Capital,

Transparency & Responsible Banking. YES BANK has a knowledge driven approach

to banking, and a superior customer experience for its retail, corporate and emerging

corporate banking clients. As the Professionals’ Bank of India, YES BANK has

exemplified ‘creating and sharing value’ for all its stakeholders, and has created a

differentiated Banking Paradigm with the vision of ‘Building the Best Quality Bank

of the World in India’by 2015

2.2.2.2 Year of establishment and initial investment

Yes Bank was incorporated as a Public Limited Company on November 21,

2003.Yes Bank obtained its certificate of Commencement of Business on January 21,

2004. Subsequently, in March 2004, the Bank achieved the mobilization of the initial

minimum paid up capital of Rs. 2,000 million. Further, the Promoters by their letter

dated March 29, 2004 made a final application for a banking licence under Section 22

(1) of the Banking Regulation Act, 1949 providing complete details of the capital

structure, the composition of Board of Directors, the proposed human resources,

information technology, premises and legal-policies and the business and financial

plan of the Bank. Yes Bank was promoted by Rana Kapoor and Ashok Kapur the non-

executive chairman of the bank with the financial support of Rabobank Nederland,

and global private equity institutional investors including CVC Citigroup, AIF Capital

and ChrysCapital The Indian promoters have a 39 per cent stake in the bank,

Rabobank has 20 per cent, and foreign institutional investors about 18 per cent.

Kapoor says that there could be a further dilution in the promoters' equity stake, to

meet the growing capital requirements.

2.2.2.3 Brand Vision & Strategy

YES BANK is pursuing a Brand strategy to build one of the finest financial services

brands in India. YES BANK believes that differentiation begins with its service and

trust mark embedded in ‘YES’, which represents the Bank’s fundamental goal of

being a highly service-oriented Financial Institution. The endeavor at YES BANK is

to deliver an unprecedented Delightful Banking Experience to all its customers.The

name YES signifies :

• The essence of the brand by conveying all the values and characteristics -

Attractive, Smart, Simple, Serious, Reliable, Trustworthy, Optimistic, Positive,

Efficient, Universal

• Clutter breaking in the banking environment, and affirmative with target clients

across business and market segments

Brand Vision and Commitment

• To be recognised as the ‘Best Quality Bank of the World”

• To provide a Superior and Consistent Banking Experience to all its customers

• To be a long term partner with all stakeholders particularly customers by creating &

sharing value

• To be a solid and trusted financial trust mark backed by two professional promoters

and an exceptional management team

Brand Pillars The YES BANK brand is built around 5 Key Brand Pillars, which

epitomize the growing strengths of the Bank. All communication and advertising has

been created around these key brand pillars.

2.2.2.4 Founder’s profile

Dr. Rana Kapoor (born 9 September 1957) is the Founder, Managing Director & CEO

of YES BANK, which is the 4th largest private sector bank in India [2] , with its

registered office in Mumbai. He has been a professional entrepreneur, since 2003.

Dr. Rana Kapoor was born and was brought up in New Delhi. He completed his

schooling from Frank Anthony Public School in 1973 and went on to earn a

Bachelor’s degree (in Economics Honours) from Shri Ram College of Commerce,

University of Delhi (1977). He then obtained his MBA degree from Rutgers’

University in New Jersey, U.S.A. (1980). Dr. Rana Kapoor received an Honorary

Fellowship from All India Management Association (AIMA), the President’s Medal

from Rutgers University, a Doctorate in Science (Honoris Causa) from G.B. Pant

University of Agriculture & Technology, India’s foremost and oldest Agricultural

University, for his contribution to the Food & Agribusiness sector in INDIA. Rana

Kapoor currently resides in Mumbai, and is married to Bindu Kapoor. He has three

daughters, Radha, Raakhe and Roshini.

In 1980, Rana Kapoor joined Bank of America (BoA) as a Management Trainee. In

1990 he was presented the Eagle Pin by the Chairman of Bank of America. He

eventually went on to head the Bank’s Wholesale Banking business which included

several assignments in Asian countries.

In 1996, Rana Kapoor joined ANZ Grindlays Investment Bank (ANZIB) as General

Manager & Country Head. In 1998, Rana Kapoor was appointed CEO & Managing

Director, and main Managing Partner of Rabo India Finance (RIF) Pvt. Ltd. (a

corporate finance and investment banking organisation). He headed RIF as a foreign

joint venture financial services organization in partnership with Rabobank (AAA

rated) in India. [4] Rana Kapoor, his brother-in-law Late Ashok Kapur [5] and

Harkirat Singh made a proposal to the visiting team for two joint ventures: a non-

banking financial company and a bank. During the next year, Kapoor held secret

meetings with the Rabobank executives in India, Singapore and Holland. The NBFC

was set up 1997, with the three Indian partners chipping in with an equity capital of

Rs 9 crore each. In 2003, the three sold their stake for $10 million each, generating

the seed fund for the bank. In 2003, Rana Kapoor along with the Late Mr. Ashok

Kapur (brother-in-law) were granted a banking license by the Reserve Bank of India

(RBI) and set up YES BANK. He and Late Ashok Kapur [5] established Yes Bank

with the vision of "Building the Best Quality Bank of the world in India" by 2015.

Rana Kapoor and Late Ashok Kapoor [5] held 26% stake in Yes bank, while

Rabobank International held 20% stake.

Positions held

▪ Member of the Government of India's Board of Trade

▪ Member of the Managing Committee of the Indian Banks' Association (IBA)

▪ Chairman of Banking Committee, Confederation of Indian Industry (CII), 2005–06

▪ Honorary Consul for Cyprus in Mumbai/ Maharashtra state since 2002,

Government of Cyprus

▪ Deputy Chairman, Indian Banks’ Association

Member, Managing Committee

2.2.2.5 Places of business

YES BANK has a widespread branch network of over 380 branches across 275 cities,

with 650+ ATMs and 2 National Operating Centres in Mumbai and Gurgaon.

2.2.2.6 Type/nature of businesses

Yes Bank Ltd is engaged in providing a range of banking and financial services. The

Bank operates in four segments: Treasury, Corporate / Wholesale Banking, Retail









2.2.2.7 Total number of employees

As an entrepreneurial start-up venture, YES BANK is a congruence of diverse

cultures and individual work-styles. Our Diversity data is intended to provide a

snapshot of the key activities happening across the organization in the HCM space. In

addition to providing information, it ensures a focus on the areas being indexed and

measured. In April 2012, YES Bank had 325 branches, 378 ATMs and 4875

employees.

2.2.2.8 Product profile

The Bank operates in four segments: Treasury, Corporate / Wholesale Banking, Retail









2.2.2.9 Competitor profile

Table 2.2.2.1 Competitor profile

Company Market Cap

(Rs. in Cr.)

P/E P/B EV/EBIDT ROE

(%)

HDFC Bank 141,074.66 25.65 4.71 16.13 18.7

ICICI Bank 110,535.23 15.91 1.83 14.37 11.2

Kotak Mah. Bank 43,283.97 38.80 5.45 17.21 14.7

Axis Bank 39,361.44 8.84 1.73 13.96 20.3

IndusInd Bank 14,529.97 16.92 3.22 12.29 19.2

Yes Bank 12,059.67 11.48 2.58 11.76 23.1

Federal Bank 6,948.05 8.46 1.22 11.78 14.4

ING Vysya Bank 5,598.87 11.37 1.44 12.83 14.3

J & K Bank 4,330.96 4.99 1.06 12.87 21.2

Karur Vysya Bank 4,246.19 8.00 1.57 11.92 20.8

South Ind.Bank 2,891.36 6.54 1.17 11.76 21.6

City Union Bank 2,090.49 7.07 1.68 11.35 24.9

Karnataka Bank 1,502.79 5.37 0.58 12.20 9.8

Dev.Credit Bank 979.53 15.02 1.22 14.54 5.4

2.2.2.10 Collaboration/joint ventures

2008

The UAE-based private bank, Mashreq, has entered into an alliance with YES Bank

to launch global Indian banking services across UAE. YES Bank ties up with Cisco

for voice-enabled phone banking -YES BANK received the ‘Best Corporate Social

Responsibility Practice’ award at the Social & Corporate Governance Awards 2007.

These awards were instituted to recognize the need for new innovative strategies to

implement the CSR practice within the business focus of the Indian Corporate sector.

2009

SKS Microfinance seems to have signed a securitisation deal worth Rs 100 crore with

YES Bank. This deal would allow the bank to purchase 1,48,950 micro loans

extended to unbanked SC as well as ST and minorities' families identified by the

Reserve Bank of India as weaker sections. The transaction has been rated as `Very

Strong Safety' by CRISIL.

Yes Bank has signed a loan agreement with development finance institution DEG,

under which it will borrow a 5-year loan of euros 20-million. DEG (Deutsche

Investitions-und Entwicklungsgesellschaft mbH), is one of Europe's largest

development finance institutions.In 2010, YES Bank joined hands with handset maker

Nokia to offer mobile payment services that will enable consumers pay for goods and

services using their mobile devices.

2.2.2.11 Performance of Yes Bank stocks

Yes Bank has been consistenly showing a sharp increase in their stock prices. It has

grown over 89.4% in the past year itself.

2.2.2.12 Certifications/achievements/awards won

IN 2007 YES BANK received the Euromoney - Trade Finance ‘Deal of The Year’

award for a structured & innovative Rural Financing solution in providing loans to

over 2000 nomadic honey bee farmers in Jammu & Kashmir. The only Indian private

sector Bank to have won this award as the lead arranger out of a total of 367 deals

presented across 30 countries.

YES BANK was awarded the “Most Innovative Bank in India” at the New Economy

First Annual Banking and Finance Awards 2008 held in London and were announced

in the December 2008 issue of the International Magazine, New Economy. YES

BANK is the only Indian Bank to have won this award

2.2.2.13 SWOT analysis

STRENGHTS

The capital adequacy ratio of YBL at 17.9% is well above minimum requirements of

9% which supports the long term soundness and sustainability of its business.

YBL's annualised RoA has been at or above 1.5% over last 4 years and its annualised

RoE has been at or above 20% over last 4 years. This stands in testimony to the

bank’s lucrative business model. Over the years, YBL has brought down the cost to

income ratios to 36%-38%,, which is far below the industry average Cost to income

ratio of approx 45% and retains high profitability per employee as compared to peers.

WEAKNESSES

Although YBL has made significant strides over the last few years, it is still a very

small player in the banking space. It suffers from low market share as its network of

branches (~360) is still relatively smaller than its peers in both the public and private

sector.Being a new Bank in the industry, YBL’s brand awareness among retail

customers is lower than its peers who have been in the business for a significantly

longer time. YBL also has a relatively lower Current and Saving Account (CASA)

base against its peers due to higher exposure to corporate banking.

OPPORTUNITIES

Savings rate deregulation by the RBI has offered YBL an opportunity to gain

significant savings account market share by offering better rates and services to

customers.

YBL’s entry into new product or segments like retail assets offers significant potential

for the Bank to build on its expanding custom base. The ability to cross sell product to

retail customers would enhance profitability of the Bank over the long run.

The large middle class population of India, with increasing incomes and banking

needs along with a huge unbanked population below the age of 25 offers an enormous

retail opportunity for banks in India. Smaller towns and rural India still provide a

huge untapped potential for expansion

THREATS

The tight monetary policy adopted by the RBI with a view to tame inflation could

dampen corporate credit off take. Overall business could also be impacted due to

reduction in asset quality and rise in NPAs.

Expansion may lead to increase in costs and overall reduction in operating profit

accompanied by a decrease in quality of assets with exposure to retail in the future.

Recent regulatory changes including revised priority sector norms, adoption of

BASEL III norms could result in lower profitability for the banking system in general,

thereby also impacting YBL.

2.2.2.14 FUTURE

Yes Bank also has ambitious diversification plans, including a foray into retail

broking, the setting up of a mutual fund, and also an insurance venture — the last

probably with an international partner. "We also have aspirations of setting up a tech-

nology outsourcing subsidiary, and a micro-finance institution," notes Kapoor.

Though the bank's key team helps other companies to acquire firms abroad, Kapoor

says it has no plans to acquire banks or merge itself with other institutions. He sees

organic growth ahead, and does not want to dilute the bank's quality systems by

acquiring other banks.

As with many new generation banks, Yes Bank has significant fee-based activity. The

bank also has the ability to effectively manage its capital, and follows prudent risk

management systems.

The bank's mantra is to say 'yes' to offering innovative financial solutions, to adopting

international best practices, to providing high standards of service, and to

transparency in its operations. It needs all that for a minnow to make its mark.

CHAPTER III

RESEARCH DESIGN

3.1 Title of the Study

“A study on the customer perception of credit facilities and service quality of banks

with special reference to Yes Bank and SBI in Bangalore.”

3.2 Statement of the problem

This project deals with the service quality analysis of the Yes Bank and SBI. With the

increasing competition in the market it has become essential for banks to not only

concentrate on their products but also on their service. This is a part of Behavioural

Finance where the customer behaviour indirectly affects profitability. Along with this

various factors influencing loans have been identified and their desirability must be

measured as extending loans forms a major part of the banks income.

3.3 Objectives of the study

1) To identify the various types of loans provided by the SBI and Yes Bank.

2) To identify the factors that influence the customers’ loan taking decisions and

measure their influence.

3) To understand the customer perception towards service quality of the two banks.

4) To know which service quality dimensions of the bank are performing well and

what needs to be improved.

5) To measure the desirability of the various service dimensions on the customer

perception of service quality for each bank.

6) To recommend measures that the bank can take to improve its service quality.

3.4 Scope of the study

This study falls under the subject of Behavioural Finance and therby has its

implications from it. Since the sample size of the study is only 200 and is limited to

Bangalore, the study can only be extended to the branch locations of the two banks-

Yes Bank and SBI, in the city. Also customer perception may vary in different

geographical regions and communities.

3.5 Population and Sample

The population comprises of all customers who use the facilities of SBI and Yes Bank

But due to the time and cost constraint the following sampling is designed in order to

execute the survey.

Sample Area: Bangalore

Sample size: 100 Yes Bank customers

100 SBI customers

3.6 Sampling techniques

Convenience sampling method was used for data collection. It is a type of non-

probability sampling which involves sample being drawn from that part of the

population which is close to hand. Sometimes called grab or opportunity sampling,

this is the method of choosing items arbitrarily and in an unstructured manner from

the frame. The reasons for using this sampling type are twofold. First, it offers an easy

way to obtain the raw data for further analysis and secondly it saves time and costs

since the respondents can be randomly selected.

3.7 Data collection methods

Secondary data: Various websites, articles from magazines and news papers, books

were used for collecting secondary data.

Primary data: The primary data has been collected by the researchers by designing

structured questionnaire with the relevant question to the project study and

research.The data is collected from 200 bank customers of Yes Bank and SBI across

Bangalore city under convenience sampling method through mailed questionnaires.

Customers were self administered. Instructions were given to fill up the responses to

the items in the tools. The filled questionnaires were collected back. The

confidentiality of the responses was assured. After collection of the questionnaires,

scores were assigned and systematically pooled for further analysis.

3.8 Statistical tools for analysis

Based on the objectives of the research a survey instrument in the form of

questionnaire was prepared. Seven point Likert scale was used in order to identify the

respondent’s perceptions towards service quality and loan facilities. In order to

analyze the data Kolmogorav Smirnov Test (KS Test) is used. In statistics, the

Kolmogorov–Smirnov test (K–S test) is a nonparametric test for the equality of

continuous, one-dimensional probability distributions that can be used to compare a

sample with a reference probability distribution (one-sample K–S test), or to compare

two samples (two-sample K–S test). The Kolmogorov–Smirnov statistic quantifies a

distance between the empirical distribution function of the sample and the cumulative

distribution function of the reference distribution, or between the empirical

distribution functions of two samples. The null distribution of this statistic is

calculated under the null hypothesis that the samples are drawn from the same

distribution (in the two-sample case).

3.9 Hypothesis

With respect to Loans

Null Hypothesis- The factors such as interest rates, collateral security requirement,

speed of execution, documentation requirements, attitude of employees, loan renewal

procedures and advertisements do not influence the customers loan taking decisions.

Alternate Hypothesis- The factors such as interest rates, collateral security

requirement, speed of execution, documentation requirements, attitude of employees,

loan renewal procedures and advertisements do influence the customers loan taking

decisions.

With respect to service quality

Null Hypothesis- Factors such as tangibility, reliability, responsiveness, assurance and

empathy do not influence the desirability of service quality of the two banks.

Alternate Hypothesis- Factors such as tangibility, reliability, responsiveness,

assurance and empathy do influence the desirability of service quality of the two

banks.

3.10 Limitations of the study

The study has the following limitations

22) Since the study is restricted to Bangalore, the findings cannot be generalised.

23) The sample size was a limiting factor.

24) Time and cost constraints.

25) The study was restricted to two banks, so the competitive scenario could not be

studied

26) All the answers given by the respondents have been assumed true.

CHAPTER IV

DATA ANALYSIS

4.1 SECTION I YES BANK Loan Products

1) Commercial Vehicle Loans

Minimum Eligibility Criteria

• Individuals/Partnership ffirms with more than 2 years experience.

• Existing owner of at least two commercial vehicles

• Captive customers and transporters

Loan Amount

• The loan amount depends on the applicant’s requirements and the Bank’s credit

policy

• Funding can be extended up to 90% of the chassis value. Body funding can

be extended as a special requirement

• Time required for loan sanctioning from submission of completed application

for and other documents, is 3–4 days. This may vary depending on the nature of loan

applied for, the loan amount, etc

2) Personal Loans - Car Loans

Minimum Eligibility Criteria

For Salaried Individuals

▪ Minimum age of the applicant at the time of loan application : 21 years

▪ Maximum age of the applicant at the time of loan maturity : 58 years

▪ Minimum Annual Income : Rs 5 Lakhs, eligibility will be based on Latest 3

months salary slip / Form 16

▪ Minimum working experience of 2 years

For Self Employed Individuals

▪ Minimum age of the applicant at the time of loan application : 21 years

▪ Maximum age of the applicant at the time of loan maturity : 65 years

▪ Minimum Annual Income : Rs 5 Lakhs, eligibility will be based on Last 2 yrs ITR

OR One previous year ITR and Adv. Tax Challan of current year showing

higher tax paid than previous year

▪ Minimum 3 years in same business

For Partnership Firms

▪ Minimum Annual Income- Rs5 Lakhs, eligibility will be based on

Audited Financials for the last 2 years OR

▪ Last 2 years ITR if Audited Financials are not available

▪ Total 3 years in same business

For Pvt. Ltd. Co. / Ltd. Co.

▪ Minimum Annual Income : Rs 5 Lakhs, eligibility will be based on Last 2 years

ITR & Audited financial statement

▪ Total 3 years in same business

Product Features

1. LTV of upto 90% on select models

2. Min and max loan amount of Rs 1 Lac and Rs 100 Lakhs respectively

3. Min and max tenor 1 to 5 years

3) Personal Loans & Home Loan Services

Home Loans start from Rs. 5 Lakhs and are offered for a period upto 20 yrs.

Features & Benefits offered are:

• Purchase of Plot

• Self Construction on owned plot

• Purchase of under construction flat

• Purchase of built up house/ flat

• Composite loan for purchase of plot and construction on the plot

• Extension/Renovation of owned house/flat

• Refinance within 6 months of purchasing a house

• Balance Transfer from other banks

4) Personal Loans - Loans Against Property

▪ Eligibility

▪ • Salaried

▪ - Min Age : 25 years

▪ - Max Age : 58 years (As on the date of maturity of loan)

▪ - Min Net Income : INR 3.00 Lakhs per annum

▪ - No. of Years in Employment : Min 3 years in employment with minimum 1

year in current organization

▪ • Self Employed Professionals



▪ - Min Cash Profit : INR 4.00 Lakhs per annum for the last 2 fiscal years

▪ - No. of Years in Profession : Min 4 years for Doctors and CAs / Min 5 years

for others

▪ • Self Employed Businessmen / Retail SME Enterprises



▪ - Min Cash Profit : INR 4.00 Lakhs per annum for the last 2 fiscal years

▪ - No. of Years in Business : Min 5 years in same line of business

Product Features

▪ Loans up to INR 500 lakhs

▪ Flexible repayment options, ranging from 12 months to 144 months

4.2 SECTION II SBI Loan Products

1) SBI Home Loans:

Purpose

Purchase/ Construction of House/ Flat

Purchase of a plot of land for construction of House

Extension/ repair/ renovation/ alteration of an existing House/ Flat

Purchase of Furnishings and Consumer Durables as a part of the project cost.

Eligibility

Minimum age 18 years as on the date of sanction

Maximum age limit for a Home Loan borrower is fixed at 70 years, i.e. the age by

which the loan should be fully repaid.

Availability of sufficient, regular and continuous source of income for servicing the

loan repayment.

Loan Amount

Table 4.2.1 SBI HOME LOAN AMOUNT

Loan Amount Linkage with Base Rate over the tenor of

the loan

Upto Rs. 30.00 lacs 0.25% above Base Rate

Above Rs. 30.00 lacs 0.40% above Base Rate

No fixed rate option in any limit

bracket.

Base Rate= 9.70% p.a.

2) CAR LOAN:

Purpose

A new car, jeep or Multi Utility Vehicles (MUVs)

A used car / jeep (not more than 5 years old). (Any make or model).

Eligibility

To avail an SBI Car Loan, you should be :

Individual between the age of 21-65 years of age.

A Permanent employee of State / Central Government, Public Sector

Undertaking, Private company or a reputed establishment or

A Professionals or self-employed individual who is an income tax assessee or

A Person engaged in agriculture and allied activities.

Net Annual Income Rs. 100,000/- and above.

Loan Amount

Table 4.2.2 SBI CAR LOAN SCHEME

Tenure Rate of Interest

For all tenures For Term Loan and Overdraft:

0.75% above Base Rate, i.e. 10.45% p.a.

Table 4.2.3 SBI Two - Wheeler Loan SCHEME


Up to 3 years 8.25% above Base Rate i.e. 17.95% p.a.

Table 4.2.4 SBI Used vehicle Loan SCHEME



Above 3 yrs 7.50% above Base Rate i.e. 17.20% p.a.

Table 4.2.5 SBI Certified Pre-owned Car Loan scheme



Above 3 yrs 6.50% above Base Rate i.e. 16.20% p.a.

3) EDUCATION LOAN:

A term loan granted to Indian Nationals for pursuing higher education in India or

abroad where admission has been secured.

Eligible Courses

All courses having employment prospects are eligible.

Graduation courses/ Post graduation courses/ Professional courses

Other courses approved by UGC/Government/AICTE etc.

Expenses considered for loan

Fees payable to college/school/hostel

Examination/Library/Laboratory fees

Purchase of Books/Equipment/Instruments/Uniforms

Caution Deposit/Building Fund/Refundable Deposit (maximum 10% tution

fees for the entire course)

Travel Expenses/Passage money for studies abroad

Purchase of computers considered necessary for completion of course

Cost of a Two-wheeler upto Rs. 50,000/-

Any other expenses required to complete the course like study tours, project work etc.

Loan Amount

Table 4.2.6 SBI Student Loan Scheme

Loan Amount Rate of Interest*

For loans upto Rs.4 lacs 3.50% above Base Rate,

currently 13.20% p.a.

Above Rs.4 lacs and upto

Rs.7.50 lacs

3.75% above Base Rate,


Above Rs.7.50 lacs 1.75% above Base Rate,


*(0.50% concession in interest for girl student)

4) PROPERTY LOAN:

Purpose

This is an all purpose loan, i.e., the loan can be obtained for any purpose whatsoever.

If amount of loan is Rs.25.00 lacs and above then purpose of loan will have to be

specified along with an undertaking that loan will not be used for any speculative

purpose whatever including speculation on real estate and equity shares.

Eligibility

You are eligible if you are:

-An individual who is An Employee or A Professional, self-employed or an income

tax assesse or Engaged in agricultural and allied activities.

-Your Net Monthly Income (salaried) is in excess of Rs.12,000/- or Net Annual

Income (others) is in excess of Rs.1,50,000/-.

-The income of the spouse may be added if he/she is a co-borrower or a guarantor.

Maximum age limit: 60 years.

Loan Amount

Minimum: Rs.25, 000/-

Maximum: Rs.1 crore. The amount is decided by the following calculation: 24 times

the net monthly income of salaried persons (Net of all deductions including TDS) OR

2 times the net annual income of others (income as per latest IT return less taxes

payable)

5) LOAN AGAINST SHARES \ DEBENTURES:

Eligibility

This facility is available to our existing individual customers enjoying a strong

relationship with SBI. This loan could be availed either singly or as a joint account

with spouse in 'Either or Survivor'/ 'Former or Survivor' mode. It is offered as an

Overdraft or Demand Loan. The facility is available at 50 select centers.

Purpose

For meeting contingencies and needs of personal nature. Loan will be permitted for

subscribing to rights or new issue of shares / debentures against the security of

existing shares / debentures. Loan will not be sanctioned for

(i) speculative purposes

(ii) inter-corporate investments or

(iii) acquiring controlling interest in company / companies.

Loan Amount

You can avail of loans up to Rs 20.00 lacs against your shares/debentures.

Documents Required

You will be required to submit a declaration indicating:

Details of loans availed from other banks/ branches for acquiring shares/

debentures.

Deails of loans availed from other banks/ branches against security of shares/

debentures

4.3 SECTION III K –S TEST WITH RESPECT TO LOANS

To understand the influence of various factors on customer’s while taking loans.

FACTOR 1- Interest Rates

Hypothesis

H1= There is a significant impact of interest rates on customers loan taking decisions.

Ho= There is no significant impact of interest rates on customers loan taking

decisions.

Table 4.3.1 K-S TEST Interest Rates’ Analysis.

Observatio

n

Observation

Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

14 0.07 0.07 0.2 0.2 -0.13

24 0.12 0.19 0.2 0.4 -0.21

25 0.125 0.315 0.2 0.6 -0.285

67 0.335 0.65 0.2 0.8 -0.15

70 0.35 1 0.2 1 0

INTERPRETATION

The table value at 2% level of significance is = 0.075. Since the Table value is greater

than the maximum absolute Deviation (0) the null hypothesis is rejected. Thus there is

a significant impact of interest rates on customers loan taking decisions.

FACTOR 2- Collateral security requirement

Hypothesis

H1= There is a significant impact of collateral security requirement on customers loan

taking decisions.

Ho= There is no significant impact of collateral security requirement on customers

loan taking decisions.

Table 4.3.2 K-S TEST Collateral security requirement Analysis.

Observation Observation

Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

21 0.105 0.105 0.2 0.2 -0.095

35 0.175 0.28 0.2 0.4 -0.12

44 0.22 0.5 0.2 0.6 -0.1

43 0.215 0.715 0.2 0.8 -0.085

57 0.285 1 0.2 1 0

INTERPRETATION



a significant impact of collateral security requirement on customers loan taking

decision.

FACTOR 3- Attitude of bank employees

Hypothesis

H1= There is a significant impact of Attitude of bank employees on customers loan

taking decisions.

Ho= There is no significant impact of Attitude of bank employees on customers loan

taking decisions.

Table 4.3.3 K-S TEST Attitude of bank employees Analysis.


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

32 0.16 0.16 0.2 0.2 -0.04

49 0.245 0.405 0.2 0.4 0.005

70 0.35 0.755 0.2 0.6 0.155

31 0.155 0.91 0.2 0.8 0.11

18 0.09 1 0.2 1 0

INTERPRETATION

The table value at 2% level of significance is = 0.075. Since the Table value is lesser

than the maximum absolute Deviation (0.15) the null hypothesis is accepted. Thus

there is no significant impact of Attitude of bank employees on customers loan taking

decisions.

FACTOR 4- Documents Requirements

Hypothesis

H1= There is a significant impact of Documents Requirements on customers loan

taking decisions.

Ho= There is no significant impact of Documents Requirements on customers loan

taking decisions.

Table 4.3.4 K-S TEST Documents Requirements Analysis.


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

30 0.15 0.15 0.2 0.2 -0.05

45 0.225 0.375 0.2 0.4 -0.025

68 0.34 0.715 0.2 0.6 0.115

33 0.165 0.88 0.2 0.8 0.08

24 0.12 1 0.2 1 0

INTERPRETATION

The table value at 2% level of significance is = 0.075. Since the Table value is lesser

than the maximum absolute Deviation (0.115) the null hypothesis is accepted. Thus

there is a significant impact of Documents Requirements on customers loan taking

decisions.

FACTOR 5- Loan renewal procedure

Hypothesis

H1= There is a significant impact of Loan renewal procedure on customers loan

taking decisions.

Ho= There is no significant impact of Loan renewal procedure on customers loan

taking decisions.

Table 4.3.5 K-S TEST Loan renewal procedure Analysis.


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

26 0.13 0.13 0.2 0.2 -0.07

38 0.19 0.32 0.2 0.4 -0.08

54 0.27 0.59 0.2 0.6 -0.01

46 0.23 0.82 0.2 0.8 0.02

36 0.18 1 0.2 1 0

INTERPRETATION


than the maximum absolute Deviation (0.02) the null hypothesis is rejected. Thus

there is a significant impact of Loan renewal procedure on customers loan taking

decisions.

FACTOR 6- Speed of Processing Loans

Hypothesis

H1= There is a significant impact of Speed of Processing Loans on customers loan

taking decisions.

Ho= There is no significant impact of Speed of Processing Loans on customers loan

taking decisions.

Table 4.3.5 K-S TEST Speed of Processing Loans Analysis.


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

21 0.105 0.105 0.2 0.2 -0.095

33 0.165 0.27 0.2 0.4 -0.13

43 0.215 0.485 0.2 0.6 -0.115

66 0.33 0.815 0.2 0.8 0.015

37 0.185 1 0.2 1 0

INTERPRETATION



there is a significant impact of Speed of Processing Loans on customers loan taking

decisions.

FACTOR 7-Advertisements

Hypothesis

H1= There is a significant impact of Advertisements on customers loan taking

decisions.

Ho= There is no significant impact of Advertisements on customers loan taking

decisions.

Table 4.3.5 K-S TEST Advertisements Analysis.


Proportion

Observed

Cumulative

Proportion

Null

Hypothesi

s

Proportio

n

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

32 0.16 0.16 0.2 0.2 -0.04

40 0.2 0.36 0.2 0.4 -0.04

38 0.19 0.55 0.2 0.6 -0.05

48 0.24 0.79 0.2 0.8 -0.01

42 0.21 1 0.2 1 0

INTERPRETATION



a significant impact of Advertisements on customers loan taking decisions.

4.4 SECTION IV K-S TEST FOR SERVICE QUALITY OF YES BANK

To understand the influence of various factors on service quality of Yes Bank

Factor 1-TANGIBILITY

Hypothesis

H1=There is a significant desirability or influence of the tangibility aspect on the

service quality of Yes Bank.

HO= There is no significant desirability or influence of the tangibility aspect on the


Table 4.4.1 K-S Test Tangibility Analysis


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

2 0.02 0.02 1/7 1/7 -0.122857143

4.5 0.045 0.065 1/7 2/7 -0.220714286

14.5 0.145 0.21 1/7 3/7 -0.218571429

27.75 0.2775 0.4875 1/7 4/7 -0.083928571

30.75 0.3075 0.795 1/7 5/7 0.080714286

12.25 0.1225 0.9175 1/7 6/7 0.060357143

8.25 0.0825 1 1/7 7/7 0

INTERPRETATION

Table Value at 2% level of significance is = 0.107. Since the Table value is greater

than the maximum absolute Deviation (.080) the null hypothesis is rejected. Thus

there is a significant desirability or influence of the tangibility aspect on the service

quality of Yes Bank.

FACTOR 2- RELIABILITY

Hypothesis

H1=There is a significant desirability or influence of the reliability aspect on the


HO= There is no significant desirability or influence of the reliability aspect on the


Table 4.4.2 K-S Test Reliability Analysis


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

1.4 0.014 0.014 1/7 1/7 -0.128857143

4.4 0.044 0.058 1/7 2/7 -0.227714286

14.4 0.144 0.202 1/7 3/7 -0.226571429

33.8 0.338 0.54 1/7 4/7 -0.031428571

29.6 0.296 0.836 1/7 5/7 0.121714286

9.8 0.098 0.934 1/7 6/7 0.076857143

6.6 0.066 1 1/7 7/7 0

INTERPRETATION



there is a significant desirability or influence of the reliability aspect on the service


FACTOR 3- RESPONSIVENESS

Hypothesis

H1=There is a significant desirability or influence of the responsiveness aspect on the


HO= There is no significant desirability or influence of the responsiveness aspect on

the service quality of Yes Bank.

Table 4.4.3 K-S Test Responsiveness Analysis


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

1 0.01 0.01 1/7 1/7 -0.132857143

4.5 0.045 0.055 1/7 2/7 -0.230714286

14.5 0.145 0.2 1/7 3/7 -0.228571429

34.5 0.345 0.545 1/7 4/7 -0.026428571

26.75 0.2675 0.8125 1/7 5/7 0.098214286

10.5 0.105 0.9175 1/7 6/7 0.060357143

8.25 0.0825 1 1/7 7/7 0

INTERPRETATION


than the maximum absolute Deviation(0.098) the null hypothesis is rejected. Thus

there is a significant desirability or influence of the responsiveness aspect on the


FACTOR 4- ASSURANCE

Hypothesis

H1=There is a significant desirability or influence of the assurance aspect on the


HO= There is no significant desirability or influence of the assurance aspect on the


Table 4.4.4 K-S Test Assurance Analysis


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

1 0.01 0.01 1/7 1/7 -0.132857143

6.75 0.0675 0.0775 1/7 2/7 -0.208214286

12.75 0.1275 0.205 1/7 3/7 -0.223571429

23 0.23 0.435 1/7 4/7 -0.136428571

23.5 0.235 0.67 1/7 5/7 -0.044285714

17.5 0.175 0.845 1/7 6/7 -0.012142857

15.5 0.155 1 1/7 7/7 0

INTERPRETATION

Table Value at 2% level of significance is =0.107. Since the Table value is greater

than the maximum absolute Deviation(-0.012) the null hypothesis is rejected. Thus

there is a significant desirability or influence of the assurance aspect on the service


FACTOR 5- EMPATHY

Hypothesis

H1=There is a significant desirability or influence of the empathy aspect on the


HO= There is no significant desirability or influence of the empathy aspect on the


Table 4.4.5 K-S Test Empathy Analysis

Observatio

n

Observation

Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

5 0.05 0.05 1/7 1/7 -0.092857143

12.8 0.128 0.178 1/7 2/7 -0.107714286

18.8 0.188 0.366 1/7 3/7 -0.062571429

24.4 0.244 0.61 1/7 4/7 0.038571429

18.6 0.186 0.796 1/7 5/7 0.081714286

10.6 0.106 0.902 1/7 6/7 0.044857143

9.8 0.098 1 1/7 7/7 0

INTERPRETATION


than the maximum absolute Deviation(0.081) the null hypothesis is rejected. Thus

there is a significant desirability or influence of the empathy aspect on the service


4.5 SECTION V K-S TEST FOR SERVICE QUALITY OF SBI

To understand the influence of various factors on service quality of SBI

FACTOR 1- TANGIBILITY

Hypothesis

H1=There is a significant desirability or influence of the tangibility aspect on the

service quality of SBI.

HO= There is no significant desirability or influence of the tangibility aspect on the


Table 4.5.1 K-S Test Tangibility Analysis

Observatio

n

Observation

Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

0.75 0.0075 0.0075 1/7 1/7 -0.135357143

4 0.04 0.0475 1/7 2/7 -0.238214286

17 0.17 0.2175 1/7 3/7 -0.211071429

32.75 0.3275 0.545 1/7 4/7 -0.026428571

25.25 0.2525 0.7975 1/7 5/7 0.083214286

13 0.13 0.9275 1/7 6/7 0.070357143

7.25 0.0725 1 1/7 7/7 0

INTERPRETATION



there is a significant desirability or influence of the tangibility aspect on the service

quality of SBI.

FACTOR 2- RELIABILITY

Hypothesis

H1=There is a significant desirability or influence of the reliability aspect on the


HO= There is no significant desirability or influence of the reliability aspect on the


Table 4.5.2 K-S Test Reliability Analysis


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

1.4 0.014 0.014 1/7 1/7 -0.128857143

3.8 0.038 0.052 1/7 2/7 -0.233714286

11.2 0.112 0.164 1/7 3/7 -0.264571429

30.4 0.304 0.468 1/7 4/7 -0.103428571

36.2 0.362 0.83 1/7 5/7 0.115714286

10.8 0.108 0.938 1/7 6/7 0.080857143

6.2 0.062 1 1/7 7/7 0

INTERPRETATION



there is a significant desirability or influence of the reliability aspect on the service

quality of SBI.

FACTOR 3- RESPONSIVENESS

Hypothesis

H1=There is a significant desirability or influence of the responsiveness aspect on the


HO= There is no significant desirability or influence of the responsiveness aspect on

the service quality of SBI.

Table 4.5.3 K-S Test Responsiveness Analysis


Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

2.25 0.0225 0.0225 1/7 1/7 -0.120357143

4 0.04 0.0625 1/7 2/7 -0.223214286

15.5 0.155 0.2175 1/7 3/7 -0.211071429

33.5 0.335 0.5525 1/7 4/7 -0.018928571

28.5 0.285 0.8375 1/7 5/7 0.123214286

9.5 0.095 0.9325 1/7 6/7 0.075357143

6.75 0.0675 1 1/7 7/7 0

INTERPRETATION

Table Value at 2% level of significance is = 0.107. Since the Table value is lesser than

the maximum absolute Deviation (0.123) the null hypothesis is accepted. Thus there is

no significant desirability or influence of the responsiveness aspect on the service

quality of SBI.

FACTOR 4- ASSURANCE

Hypothesis

H1=There is a significant desirability or influence of the assurance aspect on the


HO= There is no significant desirability or influence of the assurance aspect on the


Table 4.5.4 K-S Test Assurance Analysis

Observatio

n

Observatio

n

Proportion

Observed

Cumulative

Proportion

Null

Hypothesi

s

Proportio

n

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

2.75 0.0275 0.0275 1/7 1/7 -0.115357143

5.5 0.055 0.0825 1/7 2/7 -0.203214286

14.5 0.145 0.2275 1/7 3/7 -0.201071429

23.75 0.2375 0.465 1/7 4/7 -0.106428571

23 0.23 0.695 1/7 5/7 -0.019285714

17.5 0.175 0.87 1/7 6/7 0.012857143

13 0.13 1 1/7 7/7 0

INTERPRETATION



there is a significant desirability or influence of the assurance aspect on the service

quality of SBI.

FACTOR 5- EMPATHY

Hypothesis

H1=There is a significant desirability or influence of the empathy aspect on the


HO= There is no significant desirability or influence of the empathy aspect on the


Table 4.5.5 K-S Test Empathy Analysis

Observatio

n

Observation

Proportion

Observed

Cumulative

Proportion

Null

Hypothesis

Proportion

Null

Hypothesis

Cumulative

Proportion

Absolute

Deviation

6.2 0.062 0.062 1/7 1/7 -0.080857143

14.8 0.148 0.21 1/7 2/7 -0.075714286

20.8 0.208 0.418 1/7 3/7 -0.010571429

22 0.22 0.638 1/7 4/7 0.066571429

16.4 0.164 0.802 1/7 5/7 0.087714286

10 0.1 0.902 1/7 6/7 0.044857143

9.8 0.098 1 1/7 7/7 0

INTERPRETATION



there is a significant desirability or influence of the empathy aspect on the service

quality of SBI.

4.6 COMPARATIVE ANALYSIS OF SERVICE QUALITY

Modern looking equipment

Table 4.6.1 Response to Modern looking equipment

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 0 6 12 23 34 20 5

SBI 0 3 16 33 27 18 3

Graph 4.6.1 Modern looking equipment

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

From the graph it is clearly seen that for Yes Bank and SBI most of the respondents

fall in satisfaction range. For Yes Bank highest frequency is observed in satisfactory

level, whereas for SBI highest frequency is observed in neither satisfied nor

dissatisfied range. Only 15% of the Yes Bank customers are dissatisfied compared to

19% of the SBI customers. So, for modern looking equipment Yes bank has more

number of satisfied responses as compared to SBI.

Visually appealing physical facilities

Table 4.6.2 Response to Visually appealing physical facilities

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 2 2 17 35 31 6 7

SBI 1 3 25 36 23 7 5

Graph 4.6.2 Visually appealing physical facilities

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

Yes Bank SBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

For both the banks highest frequency of 35% is observed in neither satisfied nor

dissatisfied range i.e. level 4. 25% respondents for SBI are dissatisfied as far as

visually appealing physical facilities concerned, as seen in level 3. Yes bank has

more satisfied customers (31%), so for visually appealing physical facilities Yes bank

has good response as compared to SBI. Lastly, both SBI and Yes Bank have an equal

percentage of highly satisfied customers. Thus SBI must improve their physical

facilities in order to improve their service quality.

Neat-appearing employees

Table 4.6.3 Response to Neat-appearing employees

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 3 5 22 27 26 6 11

SBI 1 6 16 31 25 11 10

Graph 4.6.3 Neat-appearing employees

1 2 3 4 5 6 70

5

10

15

20

25

30

35

Yes Bank SBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

From the graph, SBI respondents are showing more positive response then that of Yes

Bank respondents, as respondents falling in satisfied range is more in case of SBI then

that of Yes Bank. Also there are more numbers of respondents in moderate and

strongly agreed zone for SBI as compared to Yes Bank. And for Yes Bank there is

almost similar distribution of respondents in 3,4 and 5 level of satisfaction being 22%,

27% and 26% respectively. So for neat appearing employees SBI respondents has

more satisfaction level.

Visually appealing materials associated with the service

Table 4.6.4 Response to Visually appealing materials associated with the service

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 3 5 7 26 32 17 10

SBI 1 4 11 31 26 16 11

Graph 4.6.4 Visually appealing materials associated with the service

1 2 3 4 5 6 70

5

10

15

20

25

30

35

Yes Bank SBI

Satisfction Level

Re

spo

nd

ents

INTERPRETATION:

Here, for Yes Bank bank there are slightly more numbers of respondents i.e 32% as

compared to 26% of SBI which fall in satisfied range (level 5). Also most of the

respondents fall in neither dissatisfied nor satisfied and satisfied area for both the

banks. Here it is difficult to say that which bank is performing better in visually

appealing materials associated with the services as both banks have a positive

feedback. Only around 16% of the respondents fall in the dissatisfied range for both

the banks. Hence it can be concluded that the customers are well satisfied with the

visually appeal of the materials associated with the service.

Keeping promise to do something by a certain time

Table 4.6.5 Response to Keeping promise to do something by a certain time

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 0 3 14 32 35 9 7

SBI 1 1 12 28 38 14 6

Graph 4.6.5 Keeping promise to do something by a certain time

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

Yes Bank SBI

Satisfaction

Re

spo

nd

ents

INTERPRETATION:

Here from the graph it is clearly seen that respondents of SBI are having more

satisfaction than that of Yes Bank, as more numbers of respondents fall in satisfaction

level of 5, 6 and 7. For both the banks almost 30% of the respondents fall in neither

satisfied nor dissatisfied level and satisfied level. So for this factor both the banks are

relatively not performing well as per resondents. Thus both the banks need to work on

their promise delivery in time.

Showing sincere interest in solving a customer’s problems

Table 4.6.6 Response to showing sincere interest in solving customers’ problems

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 1 3 10 27 35 14 10

SBI 3 5 9 33 34 9 7

Graph 4.6.6 Showing sincere interest in solving a customer’s problems

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

Yes Bank

SBI

Satisfaction

Re

spo

nd

ents

INTERPRETATION:

From the graph in can be clearly seen that Yes Bank is performing much better than

SBI. They have an equal response of around 34% in the leve 5 satisfaction range. But

24 % of Yes Bank respondents are highly satisfied comapared to 16% of SBI

respondents. 27% and 33% of Yes Bank and SBI respondents fall in the neither

satisfied nor dissatisfied range so both the banks can improve the level of satisfaction

by improving on this variable. There are lesser number of Yes Bank customers

dissatisfied than SBI. Thus SBI need more work on the employees concern and

genuine interst in customers.

Performing the service correctly the first time

Table 4.6.7 Response to Performing the service correctly the first time

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 2 5 12 34 26 13 8

SBI 0 4 8 27 36 17 8

Graph 4.6.7 Performing the service correctly the first time

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

Yes Bank SBI

Satisfaction

Re

spo

nd

ents

INTERPRETATION:

Here for SBI highest frequency of 36% is observed in satisfied level, whereas for Yes

Bank 34% are in neither dissatisfied nor satisfied level. So for performing the service

correctly the first time SBI respondents are agreed compared to Yes Bank

respondents. 19% of Yes Bank respondents are dissatisfied compared to only a 12%

IN SBI. Also for this factor Yes Bank is underperforming compared to SBI.

Providing the service at the time the service was promised

Table 4.6.8 Response to providing the service at the time as promised

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 1 3 20 37 30 7 2

SBI 2 5 16 33 35 6 3

Graph 4.6.8 Providing the service at the time the service was promised

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

Yes BankSBI

Satisfaction Level

Res

po

nd

ents

INTERPRETATION:

From the graph, the responses are nearly similar for both Yes Bank as well as SBI. So

for providing the service at the time the service was performed both the bank has

similar kind of responses. Hence there is not so much difference in providing the

service at the time the service was performed. Also there are very few respondents for

both the banks which are highly or moderatley satisfied, so both the banks need to

improve satisfaction level on this factor, so satisfaction level of their customers will

improve.

Insisting on error-free records

Table 4.6.9 Response to Insisting on error-free records

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 3 8 16 39 22 6 6

SBI 1 4 11 31 38 8 7

Graph 4.6.9 Insisting on error-free records

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

45

Yes BankSBI

Satisfaction Level

Res

po

nd

ents

INTERPRETATION:

There is quite large difference among the respondents for insisting on error free

records, 38% SBI respondents are showing more positive response as compared to

22% of Yes Bank respondents. Also 27% of Yes Bank respondents are on

dissatisfaction level compared to 14% of SBI respondents. So respondents of SBI are

agreed with the statement as compared to AXIS respondents. Most Yes Bank

respondednts i.e. 39% fall in the neither satisfied nor dissatisfied range. For this factor

Yes Bank need improvement so satisfaction level of their customer will improve,

whereas for SBI they are performing well.

Employees telling customers exactly what services will be performed

Table 4.6.10 Response to Employees telling customers exactly what services will

be performed

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 1 2 12 39 31 5 10

SBI 1 3 10 44 33 6 3

Graph 4.6.10 Employees telling customers exactly what services will be

performed

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

45

50

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

Here from the graph it is clearly seen that over 40% of the respondents for both the

banks are falling in satisfied and neither dissatisfied nor satisfied level. 31% of Yes

Bank respondents and 33 % of SBI respondents fall in the satisfied range showing an

equal repersentation. Also there are very few respondents which are moderately and

highly agreed with the statements for both the banks. But Yes Bank has considerably

a high number of highly satisfied customers, 10%. So for both the banks there is a

scope of improvement on this factor so satisfaction level of customers can be

improved.

Employees giving the prompt services to customers.

Table 4.6.11 Response to Employees giving the prompt services to customers.

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 0 4 15 35 26 12 8

SBI 3 5 16 27 35 8 6

Graph 4.6.11 Employees giving the prompt services to customers.

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

Yes BankSBI

Satisfaction Level

Re

sp

on

de

nts

INTERPRETATION:

Here for SBI highest frequency of 35% is observed in satisfaction level, whereas for

Yes Bank 35% is in neither dissatisfied nor satisfied level. So for employees giving

prompt service to customers SBI respondents are more agreed over Yes Bank

respondents. Here Yes Bank need improvement as there are less numbers of satisfied

respondents even though the number of highly satisfied customers are high(16%).

Employees always being willing to help customers.

Employees always being willing to help customers

Table 4.6.12 Response to Employees always being willing to help customers

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 1 6 13 30 30 13 7

SBI 3 4 20 33 22 11 7

Graph 4.6.12 Employees always being willing to help customers

1 2 3 4 5 6 70

5

10

15

20

25

30

35

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

Here, an equal percentage of Yes Bank respondents 30% fall in the satisfied and

neither satisfied nor dissatisfied range. Also there are 20% of them who are highly

satisfied. SBI respondents are mainly falling in lower side of satisfaction level. Over

25% of the respondents are dissatisfied with this aspect of service quality. So, for the

statement employees always being willing to help customers Yes Bank respondents

are more agreed than of SBI respondents.

Employees are never too busy to respond to customers’ requests

Table 4.6.13 Response to Employees business to respond to customers’ requests

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 2 6 18 34 20 12 8

SBI 2 4 16 30 24 13 11

Graph 4.6.13 Employees are never too busy to respond to customers’ requests

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

Yes BankSBI

Satisfaction Level

Re

sp

on

de

nts

INTERPRETATION:

From the graph, SBI respondents are more in number in satisfaction level as

compared to Yes Bank respondents. Highest frequency of respondents for both Yes

Bank(34%) and SBI (30%) is fall in neither dissatisfied nor satisfied level. Also there

are quite more numbers of respondents for both the banks which are dissatisfied,

around 20%. So, for the statement that employees are never too busy to respond to

customer’s request SBI respondents are more agreed as compared to AXIS

respondents, the satisfaction level is well distributed for both the banks.

The behavior of employees instilling confidence in their customers

The behavior of employees instilling confidence in their customers

Table 4.6.14 Response to The behavior of employees instilling confidence in their

customers

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 1 6 13 28 30 13 9

SBI 3 4 20 33 21 10 9

Graph 4.6.14 The behavior of employees instilling confidence in their customers

1 2 3 4 5 6 70

5

10

15

20

25

30

35

Yes BankSBI

Satisfaction Level

Re

sp

on

de

nts

INTERPRETATION:

From the graph it is seen that, there are more number of respondents for SBI who are

satisfied as compared to Yes Bank respondents. Also most of the respondents for both

the banks are falling in neither dissatisfied nor satisfied and satisfied level. So for the

statement that the behavior of employees instilling confidence in their customers, SBI

respondents are more agreed as compared to Yes Bank respondents.

Customers feeling safe in their transactions

Table 4.6.15 Response to Customers feeling safe in their transactions

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 0 3 10 22 20 24 21

SBI 0 1 11 18 35 19 16

Graph 4.6.15 Customers feeling safe in their transactions

1 2 3 4 5 6 70

5

10

15

20

25

30

35

40

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

Here, for SBI highest frequency of 35% respondents is observed in satisfied level,

whereas for Yes Bank 20% respondents are moderately satisfied level. But for Yes

Bank respondents they are nearly equally distributed in neither dissatisfied nor

satisfied to highly satisfied level, whereas for SBI in satisfied level there is quite large

peak of respondents. So for the statement customer feeling safe in there transactions

Yes Bank has more number of respondents which are moderate to highly satisfied

level and for SBI respondents in satisfied zone are more. Also here for Yes Bank

numbers of respondents in moderate and highly satisfied are more compared to SBI,

but due to large number of respondents in satisfied level for SBI lead them to more

stronger position.

Employees being consistently courteous with their customers

Table 4.6.16 Response to Employees being consistently courteous with their

customers

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 0 7 11 30 21 18 13

SBI 2 8 14 31 15 18 12

Graph 4.6.16 Employees being consistently courteous with their customers

1 2 3 4 5 6 70

5

10

15

20

25

30

35

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

Here from the graph, respondents of both the banks have nearly the same type of

responses, except in level 5 i.e. satisfied where more number of Yes Bank respondents

are fall i.e 21%. For both the banks, there are more numbers of satisfied respondents

so both the banks are performing well on this criteria. 30% of the respondents are

highly satisfied with the service.So here for the statement employees being

consistently courteous with their customers, Yes Bank has slightly more number of

satisfied respondents.

Employee having the knowledge to answer customers’ questions

Table 4.6.17 Response to Employee having the knowledge to answer customers’

questions

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 3 11 17 12 23 15 19

SBI 6 9 13 13 21 23 15

Graph 4.6.17 Employee having the knowledge to answer customers’ questions

1 2 3 4 5 6 70

5

10

15

20

25

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

For this question the respondents are distributed all over the satisfaction scale for both

the banks. So here there are more number of dissatisfied respondents as well as more

number of satisfied respondents for both the banks. Highest frequency is observed in

level 5 i.e. satisfied respondents. But there are more number of respondents for SBI

who are agreed with statement hence for employees having the knowledge to answer

customers’ question SBI is ahead of Yes Bank.

Giving customers individual attention

Table 4.6.18 Response to Giving customers individual attention

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 2 6 16 31 24 12 9

SBI 4 9 19 29 21 12 6

Graph 4.6.18 Giving customers individual attention

1 2 3 4 5 6 70

5

10

15

20

25

30

35

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

Graph 4.6.18 Giving customers individual attention

INTERPRETATION:

Here for Yes Bank there are only a slightly more numbers of respondents who are

agreed with the question as compared to SBI respondents. But here there is minor

difference in the responses of respondents for both the banks. The difference is only

of 3%. So level of satisfaction of respondents for both the banks is almost same for

this question. Both the banks need to convert low satisfied customers to more satisfied

customers by improving the performance of this factor.

Operating hours convenient to all their customers

Table 4.6.19 Response to Operating hours convenient to all their customers

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 7 13 18 23 16 11 12

SBI 5 16 17 27 15 9 11

Graph 4.6.19 Operating hours convenient to all their customers

1 2 3 4 5 6 70

5

10

15

20

25

30

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

There are more numbers of satisfied respondents for Yes Bank as compared to SBI.

But the difference is less than 3%. Highest frequency of respondents for both the

banks is at level 4 i.e. neither dissatisfied nor satisfied, being approximately 25%.

Also there are around 35% respondents on dissatisfied level for both the banks

compared to other factors, so they have to improve in this factor.

Employees giving customers personal attention

Table 4.6.20 Response to Employees giving customers personal attention

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 8 15 17 23 19 11 7

SBI 13 18 19 14 15 11 10

Graph 4.6.20 Employees giving customers personal attention

1 2 3 4 5 6 70

5

10

15

20

25

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

For this question the respondents are distributed all over the satisfaction scale for

both the banks. So here there are more number of dissatisfied respondents as well as

more number of satisfied respondents for both the banks. Here from the graph, we can

say that SBI has more number of respondents who are dissatisfied as compared to Yes

Bank respondents. Also highest frequency of respondents for Yes Bank is at level 4

i.e. neither dissatisfied nor satisfied, whereas for SBI it is at level 3 i.e. dissatisfied. So

for employees giving customers personal attention Yes Bank has better response as

compared to SBI. Also for both the banks there are quite large numbers of repondents

who are not agreed with statement.

Having the customers’ best interests at heart

Table 4.6.21 Response to Having the customers’ best interests at heart

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 3 15 23 22 17 8 12

SBI 4 17 24 20 14 9 12

Graph 4.6.21 Having the customers’ best interests at heart

1 2 3 4 5 6 70

5

10

15

20

25

30

Yes BankSBI

Satisfaction Level

Res

po

nd

ents

INTERPRETATION:

Here almost 50% the respondents for both the banks are fall in dissatisfaction zone.

Also highest frequency is observed in level 3 i.e. dissatisfied being 23% for Yes Bank

and 24% for SBI. This is in condradiction to the fact that 12% of the customers are

hifhly satisfied. So as far as for this question both the banks have negative response

and they need to improve it tremendously.

The employees understanding the specific needs of customers

Table 4.6.22 Response to The employees understanding the specific needs of

customers

NUMBER OF

RESONDENTS

RATE

1

RATE

2

RATE

3

RATE

4

RATE

5

RATE

6

RATE

7

YES BANK 5 15 20 23 17 11 9

SBI 5 14 25 20 17 9 10

Graph 4.6.22 The employees understanding the specific needs of customers

1 2 3 4 5 6 70

5

10

15

20

25

30

Yes BankSBI

Satisfaction Level

Re

spo

nd

en

ts

INTERPRETATION:

For this question the respondents are distributed all over the satisfaction scale for both

the banks. So here there are more number of dissatisfied respondents as well as more

number of satisfied respondents for both the banks. But for SBI there are 25% of

repondents which are falling in level 3 i.e. dissatisfied and for Yes Bank 23% of

respondents are falling in level 4. 17% of respondents who are satisfied with the

performance of both the banks. Over 20% of the respondents are highly satisfied also.

So for this question Yes Bank has comparatively good response. But both the banks

have below average response and need a lot of imrovement for this aspect.

CHAPTER V

FINDINGS AND CONCLUSION

5.1 MAJOR FINDINGS OF THE STUDY

From the analysis presented it can be concluded that all the aspects of service quality-

tangibility, reliability assurance, empathy and responsiveness have a significant

desirability or influence on the service quality of Yes Bank and SBI.

Yes Bank has more satisfaction level of respondents for dimensions tangibility and

empathy; whereas SBI has more satisfaction level of respondents for remaining

three dimensions i.e. reliability, responsiveness, and assurance.

Most of the respondents for both the banks are less satisfied as far as visually

appealing physical facilities concerned and neat appearing employees are

concerned. The difference in score was more for SBI, so Yes Bank was lagging

more on reliability dimension.

Insisting on error-free records the difference in score was huge for SBI in

comparison to Yes Bank. Also there is moderate difference in score for performing

the service correctly the first time for SBI over Yes Bank. Hence Yes Bank needs

to improve on these two factors as far as reliability dimension is concerned. For

these three factors keeping promise to do something by certain time, providing the

service at the time the service was promised and, performing the service correctly

the first time both the banks can improve the level of satisfaction as there were less

number of respondents who were satisfied.

For employees telling customers exactly what services will be performed

difference is so large for SBI over Yes Bank so Yes Bank has to focus on this

factor to improve score on responsiveness dimension.

Whereas for SBI they are almost performing well on responsiveness dimension, but

they need improvement on employees always being willing to help customers.

Employees telling customers exactly what services will be performed and employees

are never to busy to respond to customers’ request for these two questions both the

banks had less satisfaction of customers so by focusing on this to factors they can

improve satisfaction level.

Both the banks are performing nearly same on dimension assurance, as there was

slight difference in the score. Customers feeling safe in their transaction for this

question, Yes Bank has more number of respondents which were moderate to highly

satisfied level and for SBI respondents in satisfied zone were more but there were

less number of respondents in moderate to highly satisfied level so due to more

numbers of respondents in satisfied level, score of SBI is more.

SBI has to improve in all the aspects for the dimension empathy as Yes Bank is

performing well on this dimension. Mainly they have to focus on giving customers

individual attention and employees giving customers personal attention as they were

more lagging behind in these factors in comparison of Yes Bank.

The results of the Konglomorov Smirov test to understand the influence of various

factors on customer’s while taking loans indicate that factors such as interest rates,

collateral security requirement, speed of execution, documentation requirements

loan renewal procedures and advertisements have a significant influence on

customer choice. While factors like attitude of bank employees do not have any

significant impact on choice.

5.2 RECOMMENDATIONS

Yes Bank:

Yes Bank needs to improve on mainly these three factors i.e. Promise, Doing it

right and Competency as these factors are more important for banking industry and

they are lagging on these factors as compared to SBI.

Yes Bank should maintain these four factors i.e. Promptness, Willingness,

Competency and Understanding as in these factors either Yes Bank is performing

well or doing up to the mark and these four factors are important for banking

industry.

Yes Bank should deemphasize on factor Appearance and Approachable as in these

factors they are performing well, but these factors have less importance as

compared to other factors.

Yes Bank should concentrate on insisting on error free records, on performing the

service correctly the first time and employees telling customers exactly what

services will be performed.

SBI:

SBI should improve its performance on Understanding and Credibility as these

factors are important for banking industry and they are lagging in these two

factors.

SBI should concentrate on employees always being willing to help customers, on

giving customers individual attention, on employees giving customers personal

attention.

As SBI is performing poorly in all the aspect of empathy dimension, so SBI

should concentrate on this dimension more.

SBI should maintain these five factors i.e. Appearance, Promises, Doing it right,

Competency, and Approachable in these factors either SBI is performing well or

doing up to the mark and these four factors are important for banking industry.

SBI should deemphasize on factor Promptness as in this factor they are performing

well, but these factors have less importance as compared to other factors.

Yes Bank and SBI:

Both the banks should increase satisfaction level of their customers by mainly

focusing on following factors:

Keeping promise to do something by certain time.

Providing services at the time the service was promised.

Performing the services correctly the first time.

As on above factor, most of the respondents show neither satisfied nor dissatisfied,

so by improving this factors satisfaction level can be improve.

Also both the companies must improve their loan renewal methods and speed of

execution in order to sell their loan products.

5.3 CONCLUSION

This research explored the customer perception toward the credit facilities’ and

service qualities of banks. It can be seen that factors such as interest rates, collateral

security requirement, speed of execution, documentation requirements loan renewal

procedures and advertisements have a significant influence on customer perception

while procuring loans. It is important to note that all factors are relevant though one

may be more influential than the other. Since the study attempted to quantify

qualitative data there is scope for further research in this area using quantitave

financial techniques.

Also, the research conducted proves the growing relevance and impact of the service

quality dimensions on the customers choices and that Banks need to maintain these in

order to retain and attract more customers who in turn effect their profitability. There

is more scope to conduct research in this area of Behavioral Finance, specifically by

relating the service quality with loan taking decisions by customers.

Rough Draft

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