This document provides an introduction to banking and loans. It defines banking as accepting deposits from the public that are repayable on demand and can be withdrawn by cheque. It also defines a loan as the lending of money from one entity to another at an interest rate, with the borrower obligated to repay the principal plus interest. The document then discusses various types of bank loans like personal, home, car, and business loans. It provides an overview of the Indian banking sector and lists various initiatives and developments in the industry.

1. A project on
Study of Consumer behavior towards Bank Loans.
By Nidhi Ashok Bangera
Masters in Management Studies
Section A
Roll No 04
Introduction:
What is banking?
Basic Definition: A system of trading money which:
provides a safe place to save excess cash, known as
deposits. supplies liquidity to the economy by loaning this
money out to help businesses grow and to allow
consumers to purchase consumer products, homes, cars
etc.

2. Section 5 (b) of the Banking Regulation Act 1949 defines
“Banking” as “Accepting for the purpose of lending and
investment, deposits of money from the public repayable
on demand or otherwise and withdraw able by cheque,
draft, order or otherwise” No definition of banking can be
comprehensive enough in the present context
What are banks?
Institutions which deals in money and credit. An
intermediary, which handles other people’s money both
for their advantage and to its own profits. A financial
institution that links the flow of funds from savers to the
users. Plays an important role in the economy of any
country as they hold the saving of the public.
Loan
In finance, a loan is the lending of money from one
individual, organization or entity to another individual,
organization or entity. A loan is a debt provided by an
entity (organization or individual) to another entity at
an interest rate, and evidenced by a promissory
note which specifies, among other things, the principal
amount of money borrowed, the interest rate the lender is

3. charging, and date of repayment. A loan entails the
reallocation of the subject asset(s) for a period of time,
between the lender and the borrower.
In a loan, the borrower initially receives or borrows an
amount of money, called the principal, from the lender,
and is obligated to pay back or repay an equal amount of
money to the lender at a later time.
The loan is generally provided at a cost, referred to
as interest on the debt, which provides an incentive for the
lenderto engage in the loan. In a legal loan, each of these
obligations and restrictions is enforced by contract, which
can also place the borrower under additional restrictions
known as loan covenants. Although this article focuses on
monetary loans, in practice any material object might be
lent.
Acting as a provider of loans is one of the principal tasks
for financial institutions such as banks and credit card
companies. For other institutions, issuing
of debt contracts such as bonds is a typical source of
funding.

4. Bank loans on the basis of end use
 Personal loan
 Home Loans
 Car Loans
 Education loan
 Business loan
Sector analysis of banking:
As per the Reserve Bank of India (RBI), India’s banking
sector is sufficiently capitalised and well-regulated. The
financial and economic conditions in the country are far
superior to any othercountry in the world. Credit, market
and liquidity risk studies suggest that Indian banks are
generally resilient and have withstood the global
downturn well.
Indian banking industry has recently witnessed the roll
out of innovative banking models like payments and small

5. finance banks. The central bank granted in-principle
approval to 11 payments banks and 10 small finance
banks in FY 2015-16. RBI’s new measures may go a long
way in helping the restructuring of the domestic banking
industry.
Market Size
The Indian banking system consists of 26 public sector
banks, 25 private sector banks, 43 foreign banks, 56
regional rural banks, 1,589 urban cooperative banks and
93,550rural cooperative banks, in addition to cooperative
credit institutions. Public-sector banks control nearly 80
percent of the market, thereby leaving comparatively
much smaller shares for its private peers. Banks are also
encouraging their customers to manage their finances
using mobile phones.
Standard & Poor’s estimates that credit growth in India’s
banking sector would improve to 11-13 per cent in FY17
from less than 10 per cent in the second half of CY14.
Investments/developments

6. Key investments and developments in India’s banking
industry include:
 RBL Bank Limited, an Indian private sector bank,
has raised Rs 330 crore (US$ 49.6 million) from a
UK-based development finance institution CDC
Group Plc, which will help RBL to strengthen the
capital base to meet future requirements.
 The State Bank of India (SBI) signed an agreement
with The World Bank for a Rs 4,200 crore (US$ 625
million) credit facility, aimed at financing grid
connected rooftop solar photovoltaic (GRPV)
projects in India.
 JP Morgan Chase, the largest bank in United States
by assets, plans to expand its operations in India by
opening three new branches in Delhi, Bangalore and
Chennai in addition to its existing branch in Mumbai.
 Canada Pension Plan Investment Board (CPPIB), an
investment management company, has bought a large
stake in Kotak Mahindra Bank Ltd from Japan-based
Sumitomo Mitsui Banking Corporation.
 India’s first small finance bank called the Capital
Small Finance Bank has started its operations by
launching 10 branch offices in Punjab, and aims to
increase the number of branches to 29 in the current
FY 2016-17.
 FreeCharge, the wallet company owned by online
retailer Snapdeal, has partnered with Yes Bank and

7. MasterCard to launch FreeCharge Go, a virtual card
that allows users to pay for goods and services at
online shops and offline retailers.
 Exim Bank of India and the Government of Andhra
Pradesh has signed a Memorandum of Understanding
(MoU) to promote exports in the state.
 Kotak Mahindra Bank Limited has bought 19.9 per
cent stake in Airtel M Commerce Services Limited
(AMSL) for Rs 98.38 crore (US$ 14.43 million) to
set up a payments bank. AMSL provides semi-closed
prepaid instrument and offers services under the
‘Airtel Money’ brand name.
 Ujjivan Financial Services Ltd, a microfinance
services company, has raised Rs 312.4 crore (US$
45.84 million) in a private placement from 33
domestic investors including mutual funds, insurance
firms, family offices and High Net Worth Individuals
(HNIs)).
 India's largest public sector bank, State Bank of India
(SBI), has opened its first branch dedicated to serving
start-up companies, in Bengaluru.
 Global rating agency Moody's has upgraded its
outlook for the Indian banking system to stable from
negative based on its assessment of five drivers
includingimprovement in operating environment and
stable asset risk and capital scenario.
 Lok Capital, a private equity investor backed by US-
based non-profit organisation Rockefeller

8. Foundation, plans to invest up to US$ 15 million in
two proposed small finance banks in India over the
next one year.
 The Reserve Bank of India (RBI) has granted in-
principle licences to 10 applicants to open small
finance banks, which will help expanding access to
financial services in rural and semi-urban areas.
 IDFC Bank has become the latest new bank to start
operations with 23 branches, including 15 branches
in rural areas of Madhya Pradesh.
 The RBI has given in-principle approval to 11
applicants to establish payment banks. These banks
can accept deposits and remittances, but are not
allowed to extend any loans.
 The Bank of Tokyo-Mitsubishi (BTMU), a Japanese
financial services group, aims to double its branch
count in India to 10 over the next three years and also
target a 10 per cent credit growth during FY16.
 The RBI has allowed third-party white label
automated teller machines (ATM) to accept
international cards, including international prepaid
cards, and said white label ATMs can now tie up with
any commercial bank for cash supply.
 The RBI has allowed Indian alternative investment
funds (AIFs), to invest abroad, in order to increase
the investment opportunities for these funds.
 Bandhan Financial Services raised Rs 1,600 crore
(US$ 234.8 million) from two international

9. institutional investors to help convert its
microfinance business into a full service bank.
Bandhan, one of the two entities to get a banking
licence along with IDFC, launched its banking
operations in August 2015.
Government Initiatives
The government and the regulator have undertaken
several measures to strengthen the Indian banking sector.
 In July 2016, the government allocated Rs 22,915
crore (US$ 3.41 billion) as capital infusion in 13
public sector banks, which is expected to improve
their liquidity and lending operations, and shore up
economic growth in the country.
 The Reserve Bank of India (RBI) has released the
Vision 2018 document, aimed at encouraging greater
use of electronic payments by all sections of society
by bringing down paper-based transactions,
increasing the usage of digital channels, and boosting
the customer base for mobile banking.
 The Reserve Bank of India (RBI) has issued
guidelines for priority sector lending certificates
(PSLCs), according to which banks can issue four
different kinds of PSLCs—those for the shortfall in
agriculture lending, lending to small and marginal

10. farmers, lending to micro enterprises and for overall
lending targets – to meet their priority sector lending
targets.
 The Reserve Bank of India (RBI) has allowed
additional reserves to be part of tier-1 or core capital
of banks, such as revaluation reserves linked to
property holdings, foreign currency translation
reserves and deferred tax assets, which is expected to
shore up the capital of state-run banks and privately
owned banks by up to Rs 35,000 crore (US$ 5.14
billion) and Rs 5,000 crore (US$ 734 million)
respectively.
 Scheduled commercial banks can grant non-fund
based facilities including partial credit enhancement
(PEC), to those customers, who do not avail any fund
based facility from any bank in India.
 To reduce the burden of loan repayment on farmers, a
provision of Rs 15,000 crore (US$ 2.2 billion) has
been made in the Union Budget 2016-17 towards
interest subvention.
 Under Pradhan Mantri Jan Dhan Yojna (PMJDY),
250.5 million accounts! have been opened and 192.2
million RuPay debit cards have been issued as of
October 12, 2016. These new accountshave mustered
deposits worth almost Rs 44,480 crore (US$ 6.67
billion).
 The Government of India is looking to set up a
special fund, as a part of National Investment and

11. Infrastructure Fund (NIIF), to deal with stressed
assets of banks. The special fund will potentially take
over assets which are viable but don’t have additional
fresh equity from promoters coming in to complete
the project.
 The Reserve Bank of India (RBI) plans to soon come
out with guidelines, such as common risk-based
know-your-customer (KYC) norms, to reinforce
protection for consumers, especially since a large
number of Indians have now been financially
included post the government’s massive drive to open
a bank account for each household.
 To provide relief to the state electricity distribution
companies, Government of India has proposed to
their lenders that 75 per cent of their loans be
converted to state government bonds in two phases
by March 2017. This will help several banks,
especially public sector banks, to offload credit to
state electricity distribution companies from their
loan book, thereby improving their asset quality.
 Government of India aims to extend insurance,
pension and credit facilities to those excluded from
these benefits under the PradhanMantri Jan
DhanYojana (PMJDY).
 To facilitate an easy access to finance by Micro and
Small Enterprises (MSEs), the Government/RBI has
launched Credit Guarantee Fund Scheme to provide
guarantee cover for collateral free credit facilities

12. extended to MSEs upto Rs 1 Crore (US$ 0.15
million). Moreover, Micro Units Development &
Refinance Agency (MUDRA) Ltd. was also
established to refinance all Micro-finance Institutions
(MFIs), which are in the business of lending to micro
/ small business entities engaged in manufacturing,
trading and services activities up to Rs 10 lakh (US$
0.015 million).
Road Ahead
The Indian economy is on the brink of a major
transformation, with several policy initiatives set to be
implemented shortly. Positive business sentiments,
improved consumer confidence and more controlled
inflation are likely to prop-up the country’s the economic
growth. Enhanced spending on infrastructure, speedy
implementation of projects and continuation of reforms
are expected to provide further impetus to growth. All
these factors suggest that India’s banking sector is also
poised for robust growth as the rapidly growing business
would turn to banks for their credit needs.
Also, the advancements in technology have brought the
mobile and internet banking services to the fore. The
banking sector is laying greater emphasis on providing
improved services to their clients and also upgrading their
technology infrastructure, in order to enhance the
customer’s overall experience as well as give banks a
competitive edge.

13. Many banks, including HDFC, ICICI and AXIS are
exploring the option to launch contact-less credit and
debit cards in the market shortly. The cards, which use
near field communication (NFC) mechanism, will allow
customers to transact without having to insert or swipe.

14. Major players in industry:-
• Public sector banks – SBI, PNB, Bank of Baroda,
Bank of India etc.

15. • Private sector banks- HDFC, ICICI Bank, AXIS
Bank, Yes Bank etc.

16. • Foreign Banks – Standard Chartered Bank, HSBC,
City Bank etc.

17. • Regional Rural Banks – Andhra Pradesh gramin bank
, Uttranchal Gramin Bank etc.

18. SWOT analysis of Banking industry
Strengths in the SWOT analysis of Banking
 Banking is as old as Human race : Banking industry
is the driving force to any nation. It helps in shaping
the life of human race may be some time merely by
Exchange (which was called barter system), or by
transaction or by facilitating advances.
 Source of employment & GDP growth : There is a
consensus among economists that development of the
financial system contributes to economic growth.
Financial development creates enabling conditions
for growth through either a supply-leading (financial
development spurs growth) or a demand-following. It
is this industry which continuously works to secure
financial stability, facilitate international trade,
promote employment, & reduce poverty around the
world.
 Hedge from risk : Whether it is natural calamity or
man-made calamity banks mitigate the after effect of
the destruction by providing financial support to the
victims to stand –up & lead a peaceful life again.

19.  Diversified services: Banking industry offer services
from CASA to insurance, to loan, to investment.
 Connecting People: With the advent of new age
technological advancement Banks have made the life
of the common man easier. People can transact on
real time basis inmany places.
 Changing from mere savings & loan facilitator
role: Top priorities of banks now days include
regulatory compliance, improving asset quality,
enhancing customer centricity, focusing on
digital convergence, and tackling competition from
non-banks. Banks are therefore making business and
technology investments to change their business
models.

20. Weaknesses in the SWOT analysis of Banking
1.Lack Of coordination: The global banking industry
faces short-term uncertainty due to the debt crises
that challenge several major economies. Industry
assets stand at $143 trillion (2013)&the EU is the
largest regional market, with over 57% of the global
market. Volatility in different market/Currencies has
created problems for the banks in order to work
properly across the borders.
2.Vulnerable to risk: Since this sector deals with
finances, it is the most risky sector which can change
the fate of any business/Industry.
3.High NPA’s: Rise in Retail & corporate NPA’s
(Non-performing assets) is the single major issue this
sector is going through worldwide.
4.Can’t reach to Under-penetrated market: Due to
several conflicting objectives of government& banks
which goes hand in hand, rural areas of developing
nations are still not in the shadow of banks. Although
PMJDY (PradhanMantri Jan DhanYojna)

21. implemented by the Indian banks got acknowledged
by World Bank for financial inclusion but the Idea is
not fully capitalized even in the home country.
5.Structural weaknesses such as a fragmented industry
structure, restrictions on capital availability and
deployment, lack of institutional support
infrastructure, restrictive labor laws, weak corporate
governance, Political pressure and ineffective
regulations.
Opportunities in the SWOT analysis of Banking
a)Expansion: Penetrating to the rural markets &
bringing the rural masses under the purview of
organized banking will be the objective of the Banks
in decades to come.
b) Changing Socio-cultural & demographic
factors: 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.

22. c)Rise in private sector banking: Banking Industry
across the world is highly regulated &lead by PSU’s
with their respective central banks. With the advent
of private sector banks this sector is going through
structural & functional changes mainly due to the
adaptation of the advanced technologies & increased
competition thereby benefiting to the end customers.
Threats in the SWOT analysis of Banking
1.Recession: It is one of the major threats to the
financial system of the nation. Traumatic shock of
Economic crises & collapse of the several businesses
can affect the banks and vice-versa.
2.Stability of the system: Failure of some weak banks
has often threatened the stability of the system.
3.Competition: Competition from NBFC’s (Non-
banking financial companies) like insurance
companies & mutual fund companies can affect the
business of Banks.

23. Research Methodology:
Type of research: Primary and secondary
Primary:- Questionnare method
Secondary- Internet (references are given)
Sample Size: 50
Research design: Conclusive and Quantitative method
Objective :
To study consumer behaviour about loans from Bank
Nature and Scope of study :
 The study was done students at large and very few
working population.
 There can be errors in the response.
 Due to time constraintsthe sample size is restricted to
50.
 Due to some barriers the population could not be
extended to working people.

24. Data Analysis And Interpretation:
Q1. Gender
The respondentswere 46% Females and 54% Males.
Q2. Age
87% of the respondentsbelongto the age group of 21-25.
9% of them belongto 16-20 and 2% each to 31-35 and
Above 35.
54%
46%
Male Female
9%
87%
2%
2%
16-20
21-25
26-30
31-35
Above 35

25. Q3. Qualification
70% of the respondentsare graduates, 22% are post
graduates, 7% are undergraduatesand 1% are others.
Q4. Occupation
84% of the respondentsare students, 9% are Employees
and 7% are self employed.
7%
70%
22%
1%
Under graduate Graduate Post Graduate Other
7%
0%
9%
0%
84%
0%
Self Employed Partner Employee
Retired Student Others

26. Q5. Income level
56% of respondentsbelongto income level of below
5000, 15% belong to 10000-20000, 15% belongto over
20000 and 14% belongto 5000-10000 of income level.
Q6. Do you own a bank account
95% of the respondents own a bank account and 5% do
not own bank account.
56%
14%
15%
15%
Below 5000 5000-10000
10000-20000 Over 20000
95%
5%
Yes No

27. Q7. What kind of account do you maintain in the bank
98% of respondentsmaintain savings accunt in the bank
and 2% own current account.
Q8. Which of the following facilitiesis more important to
you
87% respondentssay that ATM facility is more important
for them, 12% say that loan facility is important and 1%
say other facility.
2%
98%
0%0%
Current
Savings
Loan A/c
Demat
0%
12%
87%
1%
O/D facility Loan Facility ATM facility Other

28. Q9. Do you think that your bank caters all your banking
needs
98% respondentsthink that their bank cateres all their
banking needs and 2% think maybe.
Q10. How convinient are you with your banking
39% respondentstheir banking is convenient, 32% find it
neutral, 27% find it very convenient and 2% find it
somewhat inconvenient.
98%
0%
2%
Yes No Maybe
27%
39%
32%
2%
Very Convinient Convinient
Neutral Somewhat inconvinient
very inconvinient

29. Q11. Did you use the online banking service provided by
bank
96% respondentshave used the onlinebanking service
provided by their banks and 4% did not.
Q12. How do you deal with your financialproblem
37% of respondentsapply for bank loan, 35% opt for
others, 14% borrow from relatives, 12% use credit card
overdraft and 2% borrow from financial company.
96%
4%
Yes No
14% 2%
37%
12%
35%
Borrow money from relatives Borrow from financial company
Apply loan from bank Credit card overdraft
Others

30. Q13. Have you taken any loan from bank
71% of respondentshave not taken any loan, 2% say
maybe and 27% have taken loan from the bank.
Q14. Where do you have taken loan from
The above chart gives details of the respondentstaking
loan from their respective banks.
27%
71%
2%
Yes No Maybe
0
1
2
3
4
5
6
7
8
9
Axis Bank Bank of
Baroda
CSB Education
loan
Not Taken
any loan
Indian
overseas
bank
SBI Saraswat
Bank
Bank of
India

31. Q15. Reason for choosing Your own Bank
22% of respondentschoosetheir banks because of the
customers of the bank, 19% choose for the quick
approval, 17% choose for easy application, 15% for
greater flexibility, 15% for others and 7% for brand name.
Q16. Which loan service do you look for
34% of the respondentshave taken Educationloan, 26%
have taken personal loan, 24% have taken Others, 11%
have taken housing loan and 5% have taken business loan.
5%
19%
15%
7%
17%
22%
15%
Low interest rate Quick approval
Greater Flexibility Brand name
Easy to apply Customer of the bank
Others
26%
11%
34%
5%
24%
Personal Loan Housing loan Education loan
Business loan Others

32. Q17. While taking home loan, which things attract you the most
71% of respondentsare attracted by Interest rates, 17% by
schemes, 9% by pay back period and 3% by service
provided by the bank.
Q18. What kind of installment services do you prefer
64% prefer installment set on monthlybasis, 22% prefer
to repay in a series of payment and 14% prefer payment
period from 6 months to 6 years.
71%
3%
9%
17%
Inetrest rate Service Provided Pay back period Scheme
22%
14%
0%
64%
Repaid in a series payments Payment period form 6 months to 6 years
Repaid in a lump sum Set on monthly basis

33. Q19. What expectations do you have from banks for providing loans
45% of respondentshave expectationsfor easy payment
of EMI, 29% for lower interest rate, 13% for less
document verification and 13% for others.
Findings:
 The respondentswere 46% Females and 54% Males.
 87% of the respondents belongto the age group of
21-25, 9% of them belongto 16-20 and 2% each to
31-35 and Above 35.
 70% of the respondentsare graduates, 22% are post
graduates, 7% are undergraduatesand 1% are others.
 84% of the respondents are students, 9% are
Employees and 7% are self employed.
45%
13%
29%
13%
Easy payment of EMI Less document verification
Lower interest rates Others

34.  56% of respondentsbelongto income level of below
5000, 15% belong to 10000-20000, 15% belongto
over 20000 and 14% belongto 5000-10000of
income level.
 95% of the respondents own a bank account and 5%
do not own bank account.
 98% of respondentsmaintain savings accunt in the
bank and 2% own current account.
 98% respondentsthink that their bank cateres all their
banking needs and 2% think maybe.
 39% respondentstheir banking is convenient, 32%
find it neutral, 27% find it very convenient and 2%
find it somewhat inconvenient.
 96% respondentshave used the onlinebanking
service provided by their banks and 4% did not.
 37% of respondentsapply for bank loan, 35% opt for
others, 14% borrow from relatives, 12% use credit
card overdraft and 2% borrow from financial
company.
 71% of respondentshave not taken any loan, 2% say
maybe and 27% have taken loan from the bank.
 22% of respondentschoosetheir banks because of
the customers of the bank, 19% choose for the quick
approval, 17% choose for easy application, 15% for

35. greater flexibility, 15% for others and 7% for brand
name.
 34% of the respondentshave taken Educationloan,
26% have taken personal loan, 24% have taken
Others, 11% have taken housing loan and 5% have
taken business loan.
 71% of respondentsare attracted by Interest rates,
17% by schemes, 9% by pay back period and 3% by
service provided by the bank.
 64% prefer installment set on monthlybasis, 22%
prefer to repay in a series of payment and 14% prefer
payment period from 6 months to 6 years.
 45% of respondentshave expectationsfor easy
payment of EMI, 29% for lower interest rate, 13% for
less document verification and 13% for others.
Conclusion:
The Consumer behavior towards bank loans seems to be
positive. It is also one of the most used facility of the
banks.

36. References:
 https://en.wikipedia.org/wiki/Loan
 https://www.slideshare.net/AnilTinku/fundamential-
technical-analysis-of-banking-sector-ppt-42093449
 http://www.marketing91.com/swot-analysis-of-
banking-industry/
 http://www.ibef.org/industry/banking-india.aspx