Attitude of Customers towards Public   Sector & Private Sector Banks
25 Attitude of Customers towards Public Sector & Private Sector Banks                                  Contents     ⇒ Indu...
25                                     IntroductionIndustry OverviewAlthough some form of banking, mainly of the money-len...
25regional rural banks, specially set up to increase the flow of credit to small borrowers inthe rural areas. These banks ...
25been, by and large, calibrated and regulator driven. The pace of changes gainedmomentum in the last few years.Structure ...
25Sampling DesignSince most of the country’s population is now engaged in banking transactions, it wouldbe infeasible to i...
25Type of sampleFor the purpose of this research, the probability random sampling method was adopted.With this sample desi...
25Do you trust your bank?Does the age of the bank matter when selecting them?Do you prefer to use Modern technology in ban...
25Study’s VariablesThe study was mainly focused on getting as diverse sample size, which is a healthyrepresentation of the...
25The secondary data was only used to give a brief review about the banking industry andabout the features about the 2 sec...
25The collected data is presented in the form of Bar graphs, Pie-chart   and crosstabulations.FindingsThe profile of the r...
25Gender                                         Gender                                             47%       Male        ...
25The main reasons noticed for this result are as follows:1] Customers perceive that private sector provides more facility...
254] One-to-One Correspondence is perceived to be better in private sector banks.                            One-to-One Co...
25                                       Flexibility                                           35%                        ...
25                                   Branch Coverage                                42%                             Public...
25Cross Tabulation for Gender and Preference                             Public Sector Banks           Private Sector Bank...
25ConclusionCustomers have a positive attitude for private sector banks than public sector banks butthe difference between...
25     6. Improved crisis handling system. This is the area where public sector banks        need to improve tremendously ...
25                                          Annexure1. Copy of the sample Questionnaire           Attitude of Customers (I...
25     4. How often do you perform transactions with the bank?                                       No. of transactions  ...
25Handling of Inquiries                           Good    Average         Bad        Good         Average   BadFriendlines...
252. If yes, to what extent does it affect your decision about transacting with a bank?                                 Pr...
25                                     Yes                                     No10. If yes, to what extent is the age of ...
25     25
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Research on attitude_of_customers_towards_public sector and_private sector banks

  1. 1. Attitude of Customers towards Public Sector & Private Sector Banks
  2. 2. 25 Attitude of Customers towards Public Sector & Private Sector Banks Contents ⇒ Industry Overview 03 ⇒ Industry Characteristics 04 ⇒ Research Objective 05 ⇒ Sampling Design 06 ⇒ Research Design 07 ⇒ Data Collection 09 ⇒ Time Planning 10 ⇒ Data Analysis 10 ⇒ Findings 11 ⇒ Recommendation 18 Annexure ⇒ Questionnaire 20 2
  3. 3. 25 IntroductionIndustry OverviewAlthough some form of banking, mainly of the money-lending type, has been inexistence in India since ancient times, it was only over a century ago that properbanking began. The earliest institutions which undertook banking business under theBritish regime were agency houses which carried on banking business, in addition totheir trading activities.With a view to bring commercial banks into the mainstream of economic developmentwith definite social obligations and objectives, the Government issued ordinance on 19July 1969 acquiring ownership and control of 14 major banks in the country, withdeposits exceeding Rs 50 crores each. Six more commercial banks were nationalisedfrom 15 April 1980. The objectives of public sector banking system were outlined on 21July 1969.The three decades after nationalization saw a phenomenal expansion in thegeographical coverage and financial spread of the banking system in the country. Ascertain rigidities and weaknesses were found to have developed in the system, duringthe late eighties the Government of India felt that these had to be addressed to enablethe financial system to play its role in ushering in a more efficient and competitiveeconomy.In the post-nationalization era, no new private sector banks were allowed to be set up.However, in 1993, in recognition of the need to introduce greater competition, whichcould lead to higher productivity and efficiency of the banking system, new privatesector banks were allowed to be set up in the Indian banking system.Commercial Banking System in India consisted of 302 scheduled banks (includingforeign banks) and one non-scheduled bank at the end of March 1999. Over the periodMarch 1998 to March 1999, the number of scheduled banks increased by three whilethat of non-scheduled banks remained unchanged at one. Of the scheduled banks, 223are in public sector and these account for about 83 per cent of the deposits of allscheduled commercial banks. In the public sector banking system, there are 196 3
  4. 4. 25regional rural banks, specially set up to increase the flow of credit to small borrowers inthe rural areas. These banks have specified areas of operations usually limited to two tothree districts. They also undertake some other commercial banking business. Theremaining 27 banks in the public sector are regular commercial banks and transact alltypes of commercial banking business. Some important indicators in regard to progressof commercial banking in India during the recent past are given in table 13.4.Amongst the public sector banks, as on March 1999, the State Bank of India (SBI)group (SBI and its seven associates) is the biggest unit with 13,290 offices and depositsexceeding 1,39,000 crore aggregating Rs 1,71,782.48 crore and advances of Rs1,14,430.37 crore. In the associate banks, SBI owns either the entire or the majority ofshare capital. The SBI and its associate banks as a group account for around 31.9 percent of aggregate banking business (aggregate of deposits and advances) conductedby the public sector banks and around 26.2 per cent of the aggregate business of theentire banking system. The remaining 19 banks in the public sector are morenationalised in 1969 and 1980 respectivelyIndustry CharacteristicsThe banking industry has moved gradually from a regulated environment to aderegulated market economy. The market developments kindled by liberalization andglobalization have resulted in changes in the intermediation role of banks. The pace oftransformation has been more significant in recent times with technology acting as acatalyst. While the banking system has done fairly well in adjusting to the new marketdynamics, greater challenges lie ahead.The financial system is the lifeline of the economy. The changes in the economy getmirrored in the performance of the financial system, more so of the banking industry.Liberalization and de-regulation process started in 1991-92 has made a sea change inthe banking system. From a totally regulated environment, we have gradually movedinto a market driven competitive system. Our move towards global benchmarks has 4
  5. 5. 25been, by and large, calibrated and regulator driven. The pace of changes gainedmomentum in the last few years.Structure and ownership pattern would undergo changes. There would be greaterpresence of international players in the Indian financial system. Similarly, some of theIndian banks would become global players. Government is taking steps to reduce itsholdings in Public sector banks to 33%. However the indications are that their PSBcharacter may still be retained.Technology as an enabler is separately discussed in the report. It would not be out ofplace, however, to state that most of the changes in the landscape of financial sectordiscussed above would be technology driven. In the ultimate analysis, successfulinstitutions will be those, which continue to leverage the advancements in technology inre-engineering processes and delivery modes and offering state-of-the-art products andservices providing complete financial solutions for different types of customers.Banks will take on competition in the front end and seek co-operation in the back end,as in the case of networking of ATMs. This type of competition will become the order ofthe day as Banks seek to enlarge their customer base and at the same time to realizecost reduction and greater efficiency.Problem StatementTo determine the Attitude of Customers towards Public sector & private Sector banksResearch ObjectiveTo profile the customers in terms of: ⇒ Their savings pattern ⇒ Their banking pattern (frequency of transactions) ⇒ Preferences while selecting a bank for transacting for the first time 5
  6. 6. 25Sampling DesignSince most of the country’s population is now engaged in banking transactions, it wouldbe infeasible to interview all of them. Hence the method of sampling was used.The basic idea of sampling is that by selecting a representative sample, it’ll prove usefulin drawing valid conclusions and help in achieving a reliable result for this research.This method is used mainly because of the large and the widely spread nature of theBanker’s market.To give reliable results by the sampling procedures 2 important factors should be takencare of:Accuracy: The degree to which bias is absent from the sample.Precision: It should fully represent its population in all respects.Relevant PopulationThe relevant population in our case is all those transact with banks (Public or Private)on a rather frequent basis and hold accounts in alteast one bank. The method of simplerandom sampling is used.Parameters of InterestIn our survey of estimating the attitudes of the bankers, the entire population is dividedinto various parameters to enable us to diagnosis the perception the various categoriesof users. These parameters are:The income levelThe occupationArea of residenceSampling FrameSince only people who hold bank accounts and are engaged in frequent bankingtransactions applicable for this research, there was a list prepared of selected peopledoing so. However, it was prepared on random basis. 6
  7. 7. 25Type of sampleFor the purpose of this research, the probability random sampling method was adopted.With this sample design, care has been taken to avoid arbitrary or biased selection ofsample element. Also, it will help in predicting the behaviour of the total population.Sample sizeWe intended to follow Normal Distribution curve while testing Hypothesis, a sample of60 respondents was selected.We have seen to it that our survey has equal participation from people of both sexes. Inaddition, we have taken care that the survey has cut across various occupation barriers,so that the results are not job or occupation specific.Data sourceThe background information about public and private sector banks was collected byvisiting various sites and scanning various magazines.However, the research analysis was based mainly on the primary data input receivedfrom the customers themselves while conducting the fieldwork.Research DesignExplorationPurpose of the study:The research design is of Descriptive type which aims to find out the Attitude ofcustomers towards public and private sector banks while selecting of transactions. Itaims to find answers to question like….Is your bank at a convenient location for you? 7
  8. 8. 25Do you trust your bank?Does the age of the bank matter when selecting them?Do you prefer to use Modern technology in banking?To what extent does the physical environment affect your decision about transactingwith a bank?Does your bank’s commitment towards social causes have any bearing your selectiondecision?InstrumentThe instrument used for the research is the questionnaire, which was prepared after athorough knowledge of various aspects of factors that influence a particular consumer inthe bank-selection procedure.Questionnaire DesignThere were two main objectives while framing the questionnaire.First it aimed to find out generally to find out the selecting pattern of a person for a bank.For instance, ⇒ Is the bank at a convenient location? ⇒ To what extent does their friends’ opinion matter? ⇒ To what extent does the physical environment affect your decision? ⇒ Is the age of the bank important?And secondly, it aimed at the intricate details, which a customer takes into considerationwhile selecting a bank like, ⇒ Transaction tracking system availability ⇒ Staff-friendliness with the customers ⇒ ATM coverage by the banks ⇒ Net Banking facility ⇒ 24-customer service 8
  9. 9. 25Study’s VariablesThe study was mainly focused on getting as diverse sample size, which is a healthyrepresentation of the population. So the incomes, area of residence, occupation werethe study’s variables.Data CollectionTeamThe preparation of the questionnaire and the administration of the survey were carriedout by the same research team.LocationAll places of Mumbai were covered in the survey.Data collection timeThe instruments were administered from first week of February to fourth week ofFebruary 2004 to collect the response. The team took around 4 weeks of time to gatherall the relevant information.Efforts to remove bias:The survey was conducted in public locations like bus stops, educational institutions,corporate offices etc .to gather the primary data.Field instructionsSince the questionnaire was designed to be administered only on those consumers whotransacted with banks and held alteast one account in any bank, the field staffs weretold to ask the consumers before they filled the questionnaire.Relevance of secondary data 9
  10. 10. 25The secondary data was only used to give a brief review about the banking industry andabout the features about the 2 sectors in it, namely the Private and the Public thatseparate them, to the respondents while filling up the questionnaire.Time PlanningThe complete schedule is given below. Jan Jan Feb Mar Mar Mar Steps 12-19 20-25 1-28 1-2 16-20 25-26 Planning Check Survey Design Check Survey Conduct Check Secondary Data Check Analysis Check Project Finalization CheckData AnalysisData handlingThe collected data was handled carefully in the form of filled-up questionnaires. Theresponse was then transferred manually to an Excel spreadsheet.Preliminary analysisPreliminary analysis of the pilot survey was done to find out the sample proportion. Thiswas done with the help of Ms Excel software and all the aspects of the research wereanalyzed.For each variable the functions used were “Count If” and “Mode” as questionnaireconsisted of nominal scale questions.Data presentation 10
  11. 11. 25The collected data is presented in the form of Bar graphs, Pie-chart and crosstabulations.FindingsThe profile of the respondents are as follows :Income Levels Income Levels Respondents 30 No. of 20 10 0 1 2 3 Income Level CategoryIncome Level Category1 = Below 2 Lakhs2 = 2-5 Lakhs3 = Above 5 Lakhs 11
  12. 12. 25Gender Gender 47% Male 53% FemaleResults of SurveyPrivate Sector Banks are preferred over Public Sector Banks and thus a positiveattitude towards the private sector banks. Overall Preference 47% Public 53% Private 12
  13. 13. 25The main reasons noticed for this result are as follows:1] Customers perceive that private sector provides more facility than publicsector banks. No. Of. Facilities 38% Public 62% Private2] Inquiries is more efficiently handled by private sector banks than public sector. Handling Of Inquiries 28% Public Private 72%3] Private sector are perceived to be friendlier than public sector. Friendliness 33% Public Private 67% 13
  14. 14. 254] One-to-One Correspondence is perceived to be better in private sector banks. One-to-One Correspondence 33% Public Private 67%5] Private sector banks are perceived to have better ATM Coverage. ATM Coverage 35% Public 65% Private6] Private Sector Banks are perceived to have a better Crisis Handling System. Crisis Handling System 30% Public Private 70%7] Private Sector are perceived to be more operationally flexible. 14
  15. 15. 25 Flexibility 35% Public 65% Private8] Response Time is perceived to be better in private sector banks. Response Time 38% Public 62% Private9] Private sector are perceived be more user friendly than public sector bank. Ease of Language 44% Public 56% PrivateBut along with this, there are some factors on which public sector banks gain and theyare as follows:1] Public Sector banks have Better Branch coverage 15
  16. 16. 25 Branch Coverage 42% Public 58% Private2] Public sector banks are situated at locations convenient to customers. Travelling Convenience 44% Public 56% Private3] Charges levied for different transaction are lower in case of public sector banks thanprivate. Extent of Charge 32% Public Private 68% 16
  17. 17. 25Cross Tabulation for Gender and Preference Public Sector Banks Private Sector BanksMale 8 22Female 19 13The above tabulation shows that male prefer private sector banks whereas femalesprefer public sector banks. The reason for this attitude is that females prefer security.For them the age of the bank as well as the good will achieved by it is important. This isproved by the following cross tabulation between Gender and Importance of bank age: Bank Age - Important Bank Age – Not ImportantMale 8 20Female 25 7 17
  18. 18. 25ConclusionCustomers have a positive attitude for private sector banks than public sector banks butthe difference between the 2 categories is only of 6% (Overall Performance graph).Thus this minimal difference is due to various factors enumerated above. There arecertain aspects on which public sector performance is better but there are couple ofothers where private banks are far ahead. If public sector banks improve on thesefactors than it is possible for them to compete with private sector banks effectively. Thusthe recommendations for public sector banks to build a better image and developgoodwill and positive attitude amongst customers are as follows : 1. Provide more facilities (productsservices). If they are already available create awareness amongst customers. 2. Better one to one correspondence. Give time to individual customer and need. Project the image that the bank cares for them. 3. Flexibility in operations is desired. Ex: Providing customers with the notes of denomination they demand. This type of flexibility though does not break the rules of the bank but creates a friendly image in customers mind. 4. Reduced response time. Efficiency in operations is to be obtained. Technological improvements have to be made and response time should be reduced through highly computerized and technological oriented processes. 5. Be more user-friendly (language). Customers (especially rural area) prefer to interact in their local language and thus would like to visit banks where his queries are better understood and thus efficiently solved. 18
  19. 19. 25 6. Improved crisis handling system. This is the area where public sector banks need to improve tremendously because private sector banks have setup a highly technological systems to handle crisis situation like losing of cheques, ATM card, credit card, etc. the system responds as quick as 1 minute in case of lost ATM cards (Ex: Standard Chartered Bank). This time is of tremendous importance to customer. Thus all care should be taken to reduce the time. 7. Better ATM coverage. If it already exist than creation of awareness about the same amongst customers. 19
  20. 20. 25 Annexure1. Copy of the sample Questionnaire Attitude of Customers (Individuals) towards Private & Public Sector banksDear Respondent,• The following questionnaire is prepared with a view to evaluate the attitudes of individuals towards the various Public and Private sector banks.• The Questionnaire is to be filled keeping in mind the saving’s A/c.• Please tick in the appropriate blanks and boxes.Questionnaire Bank / Account Details 1. Mention the Banks (that you are aware of) in your area. Public Private 2. Do you hold accounts in more than one bank? (ie. Public as well as Private) Answer Tick Yes No3. Which Banks do you deal in? What are the accounts that you hold? Bank Accounts 20
  21. 21. 25 4. How often do you perform transactions with the bank? No. of transactions Public Private 0-10 10-20 20-30 Technical Details1. Is your bank at a convenient location? Public Private Branch Coverage Yes No Yes No Travelling Convenience Yes No Yes No2. Do your banks have a ‘transactions tracking system’? Answer Tick Yes No3. If yes, to what extent is it important for you? Preference Tick Important Not important4. How does the bank levy the charges for different transactions? (E.g. issue of Demand Draft)(Tick in the applicable box) Public Private Higher Standard Lower Higher Standard Lower5. How would you rate the overall efficiency of your bank in the following?(Tick in the applicable box) Servies/Products Public PrivateNo. of facilities/products (E.g. bill Good Average Bad Good Average Badpayment, Credit cards, Debit cards, etc.) 21
  22. 22. 25Handling of Inquiries Good Average Bad Good Average BadFriendliness (behaviour) Good Average Bad Good Average BadOne-to-one Correspondence Good Average Bad Good Average BadEase of Language Good Average Bad Good Average BadResponse Time Good Average Bad Good Average BadFlexibility (E.g. your bank provides notes in Good Average Bad Good Average Badthe denominations you demand)ATM coverage by bank Good Average Bad Good Average BadSystem to deal with crisis situation Good Average Bad Good Average Bad6. Do you prefer the use of modern technology in Banking? Answer Tick Yes No7. To what extent are the following facilities important in your decision about transacting with a bank? Facilities Important Not important Net Banking Telephone Banking 24 hour Customer Service8. If preferred, do you think the technologically advanced Private Sector banks tend to gain by this? Answer Tick Yes No9. To what extent are the following important while availing a Loan facility of a bank? Facilities Important Not important Interest Rate Penalty Rate Default Rate Repayment Period General Details1. Are you aware of the Surveys conducted on Banks? Answer Tick Yes No 22
  23. 23. 252. If yes, to what extent does it affect your decision about transacting with a bank? Preference Tick Important Not important3. To what extent does your friends’ opinion matter while transacting with a bank for the first time? Preference Tick Important Not important4. To what extent does the physical environment affect your decision about transacting with a bank? Preference Tick Important Not important5. Is your bank committed towards social causes? E.g. Gujarat Earthquake. Answer Tick Yes No Don’t know6. If yes, to what extent is it important in your decision about transacting with a bank? Preference Tick Important Not important7. How long is your relationship with the bank?______________________________________________________________________8. Is your bank favourably inclined towards the interviewee if he/she has long standing relationship with the bank? (E.g. usually securities are required while granting loans, but in certain cases, banks grant the loan to the customers on the basis of past experience with the customer) Answer Tick Yes No9. Do you trust your Bank? Answer Tick 23
  24. 24. 25 Yes No10. If yes, to what extent is the age of the bank important? Preference Tick Important Not important11. Overall, which bank do you prefer more (Public/Private) and on what basis?__________________________________________________________________________________________________________________________________________________________________________________________________________________ Personal Details1. Name: _______________________2. Gender: _______________________3. Age: Age group Tick 18-35 35-50 50-65 Above 654. City/Town of Residence: ___________________5. Marital Status: ___________________6. Education Background: Qualification Tick Under- Graduate Graduate Post-Graduate Professional7. Income level (per annum): Income Level (in Rs.) Tick Below Rs. 2 Lakhs Rs. 2 – 5 Lakhs Above Rs. 5 Lakhs Thank you for your Valuable Time! 24
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