RETAIL BANKING

What is Retail Banking?

Retail banking is, however, quite broad in nature - it refers to the dealing of
commercial banks with individual customers, both on liabilities and assets sides of the
balance sheet. Fixed, current / savings accounts on the liabilities side; and mortgages, loans
(e.g., personal, housing, auto, and educational) on the assets side, are the more important of
the products offered by banks. Related ancillary services include credit cards, or depository
services. Today’s retail banking sector is characterized by three basic characteristics:

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

 multiple channels of distribution ( branch, internet); and

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

Retail Banking in India:

Retail banking in India is not a new phenomenon. It has always been prevalent in India in
various forms. For the last few years it has become synonymous with mainstream banking for
many banks.

The typical products offered in the Indian retail banking segment are housing loans,
consumption loans for purchase of durables, auto loans, credit cards and educational loans.
The loans are marketed under attractive brand names to differentiate the products offered by
different banks. As the Report on Trend and Progress of India, 2003-04 has shown that the
loan values of these retail lending typically range between Rs.20,000 to Rs.100 lakh. The
loans are generally for duration of five to seven years with housing loans granted for a longer
duration of 15 years. Credit card is another rapidly growing sub-segment of this product
group.

In recent past retail lending has turned out to be a key profit driver for banks with retail
portfolio constituting 21.5 per cent of total outstanding advances as on March 2004. The
overall impairment of the retail loan portfolio worked out much less then the Gross NPA ratio
for the entire loan portfolio. Within the retail segment, the housing loans had the least gross
asset impairment. In fact, retailing make ample business sense in the banking sector.

While new generation private sector banks have been able to create a niche in this regard, the
public sector banks have not lagged behind. Leveraging their vast branch network and

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outreach, public sector banks have aggressively forayed to garner a larger slice of the retail
pie. By international standards, however, there is still much scope for retail banking in India.
After all, retail loans constitute less than seven per cent of GDP in India vis-à-vis about 35
per cent for other Asian economies — South Korea (55 per cent), Taiwan (52 per cent),
Malaysia (33 per cent) and Thailand (18 per cent). As retail banking in India is still growing
from modest base, there is a likelihood that the growth numbers seem to get somewhat
exaggerated. One, thus, has to exercise caution in interpreting the growth of retail banking in
India.

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OBJECTIVE OF THE STUDY

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

 To assess the management perception related to customers’ expectations on the bank’s
service- quality specifications and delivery.
 To examine the gaps between customers and bank management’s perceptions and give
remedies so as to minimize them and increase the customer base of the bank.
 Today’s banking sector play a dominant role regarding investment decision. It

basically tells about how these funds are effectively and efficiently utilized in order to
maximize profits.
 To study the growth and performance of banking company.
 To find out what are the policies that we have to be adopted to increase the goodwill
of the company.
 To provide suggestions for better functioning of business.
 To know about the various loan schemes of these two banking companies i.e. IDBI.

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METHODOLOGY

• Research Method : Descriptive Research

• Sampling Tool : Questionnaire

• Sampling Design : Non – probability sampling.

• Sampling Method : Convenience Sampling

• Sample Size : 150

• Sampling Universe: Customers of South Indian Bank.

• Data Collected : Primary and Secondary Data

• Statistical Package : SPSS

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

Sampling Design

The study has used Non- Probability sampling design.

Non- Probability sampling involves deliberate selection of a particular unit of the population
for constituting a sample.

Data Collection Method

Primary Data: The primary data was collected by means of a survey. Questionnaire was
prepared and customers of the bank were approached to fill up the questionnaire. The filled
up information was later analyzed to obtain the required information.

Secondary Data: In order to have a proper understanding of the sector of Retail Banking, an
in depth study was done from the various books, magazines, journals and articles written on
the subject. Information was also taken from the internet related to industry, company,
competitors, etc.

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Statistical Tool

The study has used various statistical tools for the analysis of data. They are, percentage
analysis, Garette method and Cross tabulation:

Percentage Analysis: To have a general idea on the opinion given by the respondents a
simple percentage analysis was carried out.

Test Statistics:

Percentage = Number of Responses * 100

Number of Respondents

Garette Ranking Technique: It is a technique used to find out how various items under
considerations are ranked by the respondents. In this technique the rate given by respondents
will be converted into percentile position using:

P = 100 ( R – 0.5)
N
Where, N= No: of items

R= Rank

P= Percentile position

From these percentile position scores will be taken from Garatte’s table. This score will be
used to evaluate the ranks.

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Limitation of the Study

 The data from the sample may not reflect the universe; since it is restricted only 150
customers.
 There were also time limitations. As the topic is wide, all matters regarding the study
could not be analyzed.
 The scope of the study will be restricted to selected Banks.
 Many of the respondents did not think hard enough while choosing the specific point.
This could have led to a biased view and thus affected the analysis.
 There may be other events during the Clean and Window Period which may distort
the results.
 Time is limited to 45 days only
 survey is limited to particular area.

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 CHAPTER-2

REVIEW OF LITERATURE

Anil Dutta and Kirti Dutta in their paper reveal the expectations and perceptions of the
consumers across the three banking sectors in India. The study revealed that gap varies across
the banking sector with public sector banks showing the widest gap and foreign banks
showing a narrow gap. It is important for the service providers to know the level of customer
expectations so that they can meet and even exceed them to gain maximum customer
satisfaction 1.
In the study of Mark Durkin et al., customer satisfaction questionnaire was issued to over
2,000 retail customers. Twenty-five senior branch bank managers were then asked to rank the
same set of issues to ascertain what they felt to be the key influencers to customer registration
for internet banking. The three factors that the managers failed to identify, fell into two broad
categories: relationship management status and comfort with new technology
Financial institutions are actively developing new electronic banking products for their retail
customers. To date, the market leaders have drawn a disproportionably higher share of e-
retail banking customers. In response, smaller institutions have become quite active in
exploring ways to participate profitably in online banking. A major influence is from a
customer relationship management (CRM) perspective, where institutions try to limit the
outflow of current customers and direct high-value customers to potential products from a
multi-product service offering array. These efforts can succeed only if retail bank marketers
focus the promotion of the new products and services that can utilise this channel toward
those customers who are most likely to find them attractive (Don Sciglimpagli). The first aim
of this study was to examine the role that online and electronic banking play in defining the
customer's primary financial relationship. The analysis of 701 retail customers of a financial
institution presented in this study suggests that banks and other institutions are highly
vulnerable to loss of customers to rivals with extensive online services. A second aim was to
examine to what extent information on banking relationships is able to extend CRM analysis
beyond that offered by typical demographic and income data. Current customer account
relationships are found to be highly predictive of use of electronic services use in general.
And, interest in the use of specific online services is related to differing customer
relationships in addition to ordinary demographic and balance information. These findings

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can be useful for retail banking in identifying potential high-value users from a customer
relationship management perspective
The purpose of the paper by Aurto Molina is to investigate the impact of relational benefits
on customer satisfaction in retail banking. This paper presents a causal model that identifies a
connection between the relational benefits achieved through a stable and long-term
relationship with a given bank and customer satisfaction with retail banking. Based on a
theoretical framework regarding the relationship between relational benefits and customer
satisfaction, an empirical study using a sample of 204 bank customers was conducted, and the
theoretical model is tested. Multi-item indicators from prior studies were employed to
measure the constructs of interest, and the proposed relationships were tested using structural
equations modeling methods. The results show that confidence benefits have a direct, positive
effect on the satisfaction of customers with their bank. However, special treatment benefits
and social benefits did not have any significant effects on satisfaction in a retail banking
environment. The findings suggest that banks can create customer satisfaction through
relational strategies that focus on building customer confidence. Therefore, frontline
employees should be committed to establishing and maintaining confidence benefits for
customers. Thus the study provides useful information on the relationship between customer
satisfaction and specific relational benefits in retail banking .

The important change drivers in most European retail banking systems are found to be
competition and IT developments. Two broad strategic themes are explored. The first is the
evolution of retail banking in a strategic marketing context from a supply focus towards a
much greater demand orientation. The second theme explored is the intensifying strategic
imperative towards a shareholder value culture. The key features and strategic challenges of
the `new' retail banking revolution are finally summarized in the study of Gardener Edwar
and How croft Barry .

Due to increasing competition in retail banking, understanding the customer perception about
service quality is becoming indispensable. The private sector banks are posing a very stiff
competition to the public sector banks through their initiatives for meeting customer
expectations and gaining a cutting edge. This is reflected by the increasing market share and
better profitability of private banks in comparison to that of public sector banks. At the same
time, public sector banks have also responded to the challenges posed by the private sector
banks through conscious efforts to enhance their service quality. This study (R.A.Ravi)
compares public sector banks and private sector banks in terms of user perception of their
retail banking service.

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In his article in Business Line T. B. Kapali, explains the perceived stability of the income
stream from the retail business is probably the most important driver of the push into retail.
Cross-country studies clearly point - increasing urbanisation, rising income levels; all
indicating that the demand for retail finance will continue to be very strong well into the
future. ICICI or HDFC over the past few years does show the stability which has been
imparted to the overall revenue stream by the retail business

Drivers of retail banking business in India

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

First, economic prosperity and the consequent increase in purchasing power has given
a fillip to a consumer boom. During the 10 years after 1992, India's economy grew

at an average rate of 6.8 percent and continues to grow at almost the same rate – not many
countries in the world match this performance.

Second, changing consumer demographics indicate vast potential for growth in

consumption both qualitatively and quantitatively. India is one of the countries having highest
proportion (70%) of the population below 35 years of age (young population). The BRIC
report of the Goldman-Sachs, which predicted a bright future for Brazil, Russia, India and
China, mentioned Indian demographic advantage as an important positive factor for India.

Third, technological factors played a major role. Convenience banking in the form of
debit cards, internet and phone-banking, anywhere and anytime banking has attracted many
new customers into the banking field. Technological innovations relating to increasing use of
credit / debit cards, ATMs, direct debits and phone banking has contributed to the growth of
retail banking in India.

Fourth, the treasury income of the banks, which had strengthened the bottom lines of
banks for the past few years, has been on the decline during the last few years. In such a
scenario, retail business provides a good vehicle of profit maximization. Considering the fact
that retail’s share in impaired assets is far lower than the overall bank loans and advances,
retail loans have put comparatively less provisioning burden on banks apart from diversifying
their income streams.

Fifth, decline in interest rates have also contributed to the growth of retail credit by
generating the demand for such credit.

Opportunities and Challenges of Retail Banking in India

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 Retail banking has immense opportunities in a growing economy like India. As the
growth story gets unfolded in India, retail banking is going to emerge a major driver. How
does the world view us? As already referred to the BRIC Report, talking India as an
economic superpower; A. T. Kearney, a global management consulting firm, recently
identified India as the "second most attractive retail destination" of 30 emergent markets.

The rise of the Indian middle class is an important contributory factor in this regard.
The percentage of middle to high income Indian households is expected to continue rising.
The younger population not only wields increasing purchasing power, but as far as acquiring
personal debt is concerned, they are perhaps more comfortable than previous generations.
Improving consumer purchasing power, coupled with more liberal attitudes toward personal
debt, is contributing to India's retail banking segment.

Global investors are attracted to India because of the growing number of well-educated,
English-speaking workers who are comfortable working in information technology. India's IT
work force will be augmented by a booming population of engineering students. Furthermore,
India's labor pool also serves as an expanding customer base for retail bank products and
services.

The development of India's economy is boosting overall consumer purchasing power. The
percentage of middle to high income Indian households is expected to continue rising. The
younger, more educated population not only wields increasing purchasing power, but it is
more comfortable than previous generations with acquiring personal debt

The combination of the above factors promises substantial growth in the retail sector, which
at present is in the nascent stage. Due to bundling of services and delivery channels, the areas
of potential conflicts of interest tend to increase in universal banks and financial
conglomerates. Some of the key policy issues relevant to the retail banking sector are:
financial inclusion, respon IDBI le lending, access to finance, long-term savings, financial
capability, consumer protection, regulation and financial crime prevention. The challenges for
the industry and its stakeholders are as follows:

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

by Reichheld and Sasser in the Harvard Business Review, 5 per cent increase in customer
retention can increase profitability by 35 per cent in banking business, 50 per cent in
insurance and brokerage, and 125 per cent in the consumer credit card market. Thus, banks
need to emphasise on retaining customers and increasing market share.

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 Second, rising indebtedness could turn out to be a cause for concern in the future.
India's position, of course, is not comparable to that of the developed world where household
debt as a proportion of disposable income is much higher. Such a scenario creates high
uncertainty. Expressing concerns about the high growth witnessed in the consumer credit
segments, the Reserve Bank has, as a temporary measure, put in place risk containment
measures and increased the risk weight from 100 per cent to 125 per cent in the case of
consumer credit including personal loans and credit cards (Mid-term Review of Annual
Policy, 2004-05).

Third, information technology poses both opportunities and challenges. Even with
ATM machines and Internet Banking, many consumers still prefer the personal touch of their
neighbourhood branch bank. Technology has made it pos IDBI le to deliver services
throughout the branch bank network, providing instant updates to checking accounts and
rapid movement of money for stock transfers. However, this dependency on the network has
brought IT departments additional respon IDBI ilities and challenges in managing,
maintaining and optimizing the performance of retail banking networks. Illustratively,
ensuring that all bank products and services are available, at all times, and across the entire
organization is essential for today’s retails banks to generate revenues and remain
competitive. Besides, there are network management challenges, whereby keeping these
complex distributed networks and applications operating properly in support of business
objectives becomes essential. Specific challenges include ensuring that account transaction
applications run efficiently between the branch offices and data centres.

Fourth, KYC Issues and money laundering risks in retail banking is yet another
important issue. Retail lending is often regarded as a low risk area for money laundering
because of the perception of the sums involved. However, competition for clients may also
lead to KYC procedures being waived in the bid for new business. Banks must also consider
seriously the type of identification documents they will accept and other processes to be
completed. The Reserve Bank has issued detailed guidelines on application of KYC norms in
November 2004.

But how competitive are the players?

The entry of new generation private sector banks has changed the entire scenario. Earlier the
household savings went into banks and the banks then lent out money to corporates.

Now they need to sell banking. The retail segment, which was earlier ignored, is now the
most important of the lot, with the banks jumping over one another to give out loans. The

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consumer has never been so lucky with so many banks offering so many products to choose
from. With supply far exceeding demand it has been a race to the bottom, with the banks
undercutting one another. A lot of foreign banks have already burnt their fingers in the retail
game and have now decided to get out of a few retail segments completely. The nimble
footed new generation private sector banks have taken a lead on this front and the public
sector banks are trying to play catch up. The PSBs have been losing business to the private
sector banks in this segment. PSBs need to figure out the means to generate profitable
business from this segment in the days to come.

What about the foreign giants?

The foreign banks have identified the wide opportunity but there are certain systematic risks
involved in operating in the Retail market for them. These include regulatory restrictions that
prevent them from expanding their branch network. So these banks often take the Direct
Selling Agent (DSA) route whereby low-end jobs like sourcing or transaction processing are
outsourced to small regional layers. However, as a McKinsey study points out actual write-
offs on NPAs show a strong negative correlation with sharing of positive information. On top
of this, the spend-now-pay-later “credit culture” in India is just not picking up. A swift legal
procedure against consumers creating bad debt is virtually nonexistent. Finally, the vast
geographical and cultural diversity of the country makes credit policy formulation a tough job
All these add up to the unattractiveness too, of the Indian retail market to the foreign players.
Yet Citibank, HSBC and Standard Chartered—all in India for more than a century, and with
relatively large retail networks—seem to have no pressing need to acquire a local bank.
Established foreign banks have preferred to take over customers or businesses from other
foreign banks that want to leave. Thus HSBC, in recent years, has acquired customers from
France's BNP, Germany's Deutsche Bank and Japan's Bank of Tokyo-Mitsubishi. ABN Amro
took over Bank of America's retail business.

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

• The financial sector reforms undertaken by the Government since the year 1991 have
accelerated the process of disintermediation which has encouraged blue chip corporate to
access cheaper funds to meet their working capital requirements directly from investors in
India and abroad through capital market instruments and external Commercial Borrowings
route thus by-passing Banks in the process. The deregulation of markets and interest rates
has lead to cut throat competition among Banks for corporate loans making them to lend even
at PLR or sub PLR and offer other valued services at comparatively cheaper rates to big and

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high value corporates. In the process, most of the banks have experienced substantial
reduction in interest spreads and drain on their profitability.

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

norms has resulted in growing menace of NPAs in corporate loans which has affected the
asset quality, profitability and capital adequacy of banks adversely. The risks involved in
corporate loans are very high as corporates have to keep all their eggs in one basket. The risks
involved in retail Banking advances are comparatively less and well diversified as loan
amounts are relatively small ranging from Rs. 5000 to Rs. 100 lakh and repayable normally
in short period of 3- years except housing loans (where repayment period is long up to 15
years in some cases) and from fixed source of income like salaries.

• Whereas corporate loans give average return of just 0.5 to 1.5 percent only, the retail
advances offer attractive interest spread of 3to 4 percent, because retail borrowers are less
interest rate sensitive than the Corporates. Another reason for large interest spreads on retail
advances is that the retail customers are too fragmented to bargain effectively.

• While corporate loans are subject to ups and downs in trade frequently, retail loans are
comparatively independent of recession and continue to deliver even during the sluggish
phase of economy.

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

• The housing loans, which form the major chunk of retail lending and where NPAs are the
least, carry risk weight of just 50% for capital adequacy purposes. This is likely to come
down further as new Basel Capital Accord or (Basel II) norms are put in place from the year
2006. This offers added incentive to banks for lending to this retail segment as against
corporate lending where capital consumption is higher.

• The greater amount of consumerism in the country with upswing in income levels of
burgeoning middle class, which has propensity to consume to raise their standard of living, is
enlarging the retail markets. This market is growing 2 50 percent per year and boosting the
demand for credit from households. The potential is huge as present penetration level is just
over 2 percent in the country. Given the easy liquidity scenario in the country the growth rate
in this sector is likely to go up manifold in the years come. This offers great potential for
banks to enlarge their loan books.

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• The Indian mindset is also changing and consumers prefer to improve their quality of life
even if it means borrowing for facilities like housing, consumer goods vehicles and
vacationing etc. Borrowing and lending is no longer considered a taboo. The peer pressure
and demonstration effect is further pushing up demand for housing loans, consumer products
and automobiles. The profiles of customers are fast changing from conservative dodos to
fashionable peacocks. All these developments give big push to Retail Banking activities.

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

• Large numbers of Retail clients facilitate marketing, mass selling and ability to
categorize/select clients using scoring system and data mining. Banks can cut costs and
achieve economies of scale and improve their bottom-line by robust growth in retail business
volume.

• Through product innovations and competitive pricing strategies Banks can foster business
relationship with customers to retain the existing clients and attract new ones.

• Innovative products like asset securitization can open new vistas in sustaining optimal
capital adequacy and asset liability management for banks.

• Retail Banking offers opportunities to banks to cross-sell other retail products like credit
card, insurance, mutual fund products and demat facilities etc. to depositors and investors.
Impact of Retail Banking:

The major impact of retail Banking is that, the customers have become the Emperors – the
fulcrum of all Banking activities, both on the asset side and the liabilities front. The hitherto
sellers market has transformed into buyers market the customers have multiple of choices
before them now for cherry picking products and services, which suit their lifestyles and
tastes and financial requirements as well. Banks now go to their customers more often than
the customers go to their banks.

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

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

• Banks can foster lasting business relationship with customers and retain the existing
customers and attract new ones. There is a rise in their service as well.

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• Banks can cut costs and achieve economies of scale and improve their revenues and profits
by robust growth in retail business. Reduction in costs offers a win win situation both for
banks and the customers.

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

• It is not that banks are sharing the same pie of retail business, the pie itself is growing
exponentially. Retail Banking has fuelled a considerable quantum of purchasing power
through a slew of retail products.

• Banks can diversify risks in their credit portfolio and contain the menace of NPAs. Retail
banking allows bank to cross sell other products and services as it is far more easier to sell
other products to the same customer rather than search for absolutely new ones. Cross selling
is one of the best avenues for relationship

• Banking and retention of customers. Banks can thus increase their business volume and
improve their bottom-line substantially.

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

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

Problems faced in Retail Banking:

• Retail Banking has all it’s attendant risks. It is highly sensitive .Banks got to move
cautiously. It is easy to enter, but difficult to get out. A systematic and a calculated approach
is the pre-requisite for success in the long run.

• Retail Banking is being introduced with the concept of serving customer with better and
innovative products with the latest technology and easy availability. It becomes so popular
and widely acceptable that more and more customers had started to use it. Now it becomes a
mass product. Customer database have tremendously increased and it becomes difficult to
manage them.

• To match the customer inflows and current customer requirements as well as service
standards, banks have to set up more branches, distribution channels and new trained staff as
well as improvement in back office operations also in very near future. This itself a time
bounded problem and banks have to do it as early as pos IDBI le.

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• Today’s competitive market customer has more than one options for his retail banking
needs. Every bank is providing more or less similar kind of products. So an unsatisfied
customer can easily switch over to another competitor’s bank. So banks need to be very
careful in handling the customers. They have to continually improve their service standards.

• Retail Banking is so wide accepted by the customer as well as very aggressively promoted
by the bankers that if the bankers do not take adequate care in distributing and recovering
advances, there are chances of increasing in NPAs in coming feature. And that would be an
alarming situation.

Retail Banking Products Portfolio

A.Deposits:

There are many products in retail banking like Fixed Deposit, Savings Account, Current
Account, Recurring Account, NRI Account, Corporate Salary Account, Free Demat Account,
Kid’s Account, Senior Citizen Scheme, Cheque Facilities, Overdraft Facilities, Free Demand
Draft Facilities, Locker Facilities, Cash Credit Facilities, etc. They are listed and explained as
follows:

1. Fixed Deposit:

The deposit with the bank for a period, which is specified at the time of making the deposit is
known as fixed deposit. Such deposits are also known as FD or term deposit .A FD is
repayable on the expiry of a specified period. The rate of interest and other terms and
conditions on which the banks accepted FD were regulated by the RBI, in section 21 and 35A
of the Banking Regulation Act 1949.Each bank has prescribed their own rate of interest and
has also permitted higher rates on deposits above a specified amount. RBI has also permitted
the banks to formulate FD schemes specially meant for senior citizen with higher interest
than normal.

2. Savings Account:

Saving bank account is meant for the people who wish to save a part of their current income
to meet their future needs and they can also earn in interest on their savings. The rate of
interest payable on by the banks on deposits maintained in savings account is prescribed by
RBI.

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Now-a-days the fixed deposit is also linked with saving account. Whenever there is excess of
balance in saving account it will automatically transfer into Fixed deposit and if there is
shortfall of funds in savings account , by issuing cheque the money is transferred from fixed
deposit to saving account. Different banks give different name to this product.

3. Current Account:

A current account is an active and running account, which may be operated upon any number
of times during a working day. There is no restriction on the number and the amount of
withdrawals from a current account. Current account, suit the requirements of a big
businessmen, joint stock companies, institutions, public authorities and public corporation
etc.

4. Recurring Deposit:

A variant of the saving bank a/c is the recurring deposit or cumulative deposit a/c introduced
by banks in recent years. Here, a depositor is required to deposit an amount chosen by him.
The rate of interest on the recurring deposit account is higher than as compared to the interest
on the saving account. Banks open such accounts for periods ranging from 1 to 10 years.. The
recurring deposit account can be opened by any number of persons, more than one person
jointly or severally, by a guardian in the name of a minor and even by a minor.

5. NRI Account:

NRI accounts are maintained by banks in rupees as well as in foreign currency. Four types of
Rupee account can be open in the names of NRI:

a. Non Resident Rupee Ordinary Account (NRO)

b. Non Resident External Account (NRE)

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

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

Apart from this, foreign currency account is the account in foreign currency. The account can
be open normally in US Dollar, Pound Sterling, Euro. The accounts of NRIs are Indian
millenium deposit, Resident foreign currency, housing finance scheme for NRI investment
schemes.

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6. Corporate Salary Account:

Corporate Salary account is a new product by certain private sector banks, foreign banks and
recently by some public sector banks also. Under this account salary is deposited in the
account of the employees by debiting the account of employer. The only thing required is the
account number of the employees and the amount to be paid them as salary. In certain cases
the minimum balance required is zero. All other facilities available in savings a/c is also
available in corporate salary account.

7. Demat Account:

Dematerialization is a process by which physical share certificates / securities are taken back
by the company or registrar and destroyed ultimately. An equivalent number of shares are
credited electronically to customers depository account. Just like saving/current account with
a bank one can open a securities account with the depository through a depository participant

8. Kid’s Account ( Minor Account ) :

Children are invited as customer by certain banks. Under this, Account is opened in the name
of kids by parents or guardians. The features of kid’s account are free personalized cheque
book which can be used as a gift cheque , internet banking , investment services etc.

9. Senior Citizenship Scheme:

Senior citizens can open an account and on that account they can get interest rate somewhat
more than the normal rate of interest. This is due to some social respon IDBI ilities of banks
towards aged persons whose earnings are mainly on the interest rate.

B. Loans and Advances:

The main business of the banking company is lending of funds to the constituents, mainly
traders, business and industrial enterprises. The major portion of a bank’s funds is employed
by way of loans and advances, which is the most profitable employment of its funds. There
are three main principles of bank lending that have been followed by the commercial banks
and they are safety , liquidity, and profitability.

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

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1. Personal Loans: This is one of the major loans provided by the banks to the individuals.
There the borrower can use for his/her personal purpose. This may be related to his/her
business purpose. The amount of loan is depended on the income of the borrower and his/her
capacity to repay the loan.

2. Housing Loans: NHB is the wholly own subsidiary of the RBI which control and regulate
whole industry as per the guidance and information. The purpose of loan is mainly for
purchase, extension, renovation, and land development.

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

4. Vehicle Loans: Loans are given for purchase of scooter, auto-rickshaw, car, bikes etc. Low
interest rates, increasing income levels of people are the factors for growth in this sector.
Even for second hand car finance is available.

5. Professional Loans: Loans are given to doctor, C.A, Architect, Engineer or Management
Consultant. Here the loan repayment is normally done in the form of equated monthly.

6. Consumer Durable Loans: Under this, loans are given for acquisition of T.V, Cell phones,
A.C, Washing Machines, Fridge and other items.

7. Loans against Shares and Securities: Finance against shares are given by banks for
different uses. Now-a-days finance against shares are given mostly in demat shares. A margin
of 50% is normally accepted by the bank on market value. For these loans the documents
required are normally DP notes, letter of continuing security, pledge form, power of attorney.
This loan can be used for business or personal purpose.

Retail Banking Services

1. CREDIT CARDS:

A credit card is an instrument, which provides immediate credit facilities to its holder to avail
a variety of goods and services at the merchant outlets. It is made of plastic and hence
popularly called as Plastic Money. Such cards are issued by bank to persons with minimum
income ranging between RS 50000 and RS 100000 per annum and are accepted by a variety
of business establishments which are notified by the card issuing bank. Some banks insist on
the cardholder being their customers while others do not. Few banks do not charge any fee for
issuing credit cards while others impose an initial enrollment fee and annual fee also. If the

18
amount is not paid within the time duration the bank charges a flat interest of 2.5%. Leading
Indian Banks such as : SBI, BOB, Canara Bank, ICICI, HDFC and a few foreign banks like
CITIBANK, Standard Chartered etc are the important issuers of credit card in India.

2. DEBIT CARDS:

It is a new product introduced in India by Citibank a few years ago in association with
MasterCard. A debit card facilitates purchases or payments by the cardholder .It debits money
from the account of the cardholder during a transaction. This implies that the cardholder can
spend only if his account permits.

3. NET BANKING: This facilitates the customers to do all their banking operations from
their home by using the internet facility. With Net Banking one can carry out all banking and
shopping transactions safely and with total confidentiality. With Net Banking one can easily
perform various functions:

a. Check Account Balance

b. Download Account Statement

c. Request for a stop payment of a cheque.

d. Request for a new cheque book.

e. Access demat account

f. Transfer funds.

g. Facilitate bill Payments.

h. Pay Credit Card dues instantly.

4. MOBILE BANKING:

Using mobile banking facility one can –

a. Check Balance

b. Check last three transactions.

c. Request for a statement

d. Request for a cheque book.

e. Enquire on a cheque status.

19
f. Instruct stock cheque payment.

g. View FD details.

h. Transfer funds.

i. Pay Utility Bills.

5. PHONE BANKING:

It helps to conduct a wide range of banking transactions from the comfort of one’s home or
office. Using phone banking facility one can:

a. Check Balance

b. Check last three transactions.

c. Request for a cheque book.

d. Transfer funds.

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

6. ANYWHERE BANKING: One can deposit or withdraw cash from any branch of a
particular bank all over the country up to a prescribed limit. One can also transfer funds.

7. AUTOMATED TELLER MACHINES (ATM):

ATMs features user-friendly graphic screens with easy to follow instructions. The ATMs
interact with customers in their local language for increased convenience.

ICICI Bank’s ATM network is one of the largest and most widespread ATM network in
India. Following are the features available on ATMs which can be accessed from anywhere
at anytime:

a. Cash Withdrawal

b. Cash Deposit

c. Balance Enquiry

d. Cheque Book Request

e. Transaction at various merchant establishments.

20
8. SMART CARD:

The smart card, a latest additional to the world of banking and information technology has
emerged as the largest volume driven end-product in the world due to its data portability,
security and convenience. Smart Card is similar in size to today’s plastic payment card, it has
a memory chip embedded in it. The chip stores electronic data and programmes that are
protected by advanced security features. When coupled with a reader, the smart card has the

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

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

To ensure the confidentiality of all banking service, smart cards have mechanisms offering a
high degree of security. These mechanisms are based on private and public key cryptography
combined with a digital certificate, one of the most advanced security techniques currently
available. Infact, it is pos IDBI le to connect to the web banking service without a smart card.

1.2 WHAT IS CUSTOMER PERCEPTION?

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

company’s core products. Customer Service most often includes answering questions, taking
orders, dealing with billing issues, handling complaints, and perhaps scheduling maintenance
or repairs. Customer Service can occur on site, or it can occur over the phone or via the
internet. Many companies operate customer service call centers, often staffed around the
clock. Typically there is no charge for customer service. Quality customer service is essential
to building customer relationships. It should not, however, be confused with the services
provided for sale by a company. Services tend to be more intangible than manufactured
products. There is a growing market for services and increasing dominance of services in
economies worldwide. There are generally two types of customer expectations. The highest
can be termed as desired service: the level of service the customer hopes to receive. The
threshold level of acceptable service which the customers will accept is adequate service. Yet
there is hard evidence that consumers perceive lower quality of service overall and are less
satisfied. Pos IDBI le reasons may be:

• With more companies offering tiered service based on the calculated profitability of
different market segments, many customers are in fact getting less service than they have in
past.

21
• Increasing use by companies of self-service and technology-based service is perceived as
less service because no human interaction or human personalization is provided.

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

Technology Kiosks) are hard to implement, and there are many failures and poorly designed
systems in place.

• Customer expectations are higher because of the excellent service they receive from some
companies. Thus they expect the same from all and are frequently disappointed.

• Organizations have cut costs to the extent that they are too lean and are too understaffed to
provide quality service.

• The intensely competitive job market results in less skilled people working in frontline
service jobs; talented workers soon get promoted or leave for better opportunities.

• Many companies give lip service to customer focus and service quality; but they fail to
provide the training , compensation, and support needed to actually deliver quality service.

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

The gaps model positions the key concepts, strategies, and decisions in services marketing in
a manner that begins with the customer and builds the organization’s tasks around what is
needed to close the gap between customer expectations and perceptions.

The central focus of the gaps model is the customer gap, the difference between customer
expectations and perceptions. Firms need to close this gap- between what customers expect
and receive – in order to satisfy their customers and build long term relationships with them.
To close this all important customer gap, the model suggests that four gaps- the provider
gaps- need to be closed.

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

CHAPTER-2.

INDUSTRY PROFILE

22
The Banking Regulation Act 1949 defines banking as accepting the purpose of lending or
investment, of deposits of money from the public, repayable on demand or otherwise and
withdrawal by cheque, draft, order otherwise. The essential function of a bank is to provide
services related to the storing of value and the extending credit. The evolution of banking
dates back to the earliest writing, and continues in the present where a bank is a financial
institution that provides banking and other financial services. Currently the term bank is
generally understood an institution that holds a banking license. Banking licenses are granted
by financial supervision authorities and provide rights to conduct the most fundamental
banking services such as accepting deposits and making loans. There are also financial
institutions that provide certain banking services without meeting the legal definition of a
bank, a so called non-bank. Banks are a subset of the financial services industry. The word
“Bank” is derived from the Italian word ‘banco’ signifying a bench, which was erected in the
market place, where it was customary to exchange money; the first bench having been
established in Italy a.d. 808. The basic functions of banks are to accept deposits, lend money
and act as collecting and paying agents. The Bank of Barcelona in Spain (1401) was perhaps
the first institution that could be called a bank in this sense. The terms bankrupt and "broke"
are similarly derived from banca rotta , which refers to an out of business bank, having its
bench physically broken. Money lenders in Northern Italy originally did business in open
areas, or big open rooms, with each lender working from his own bench or table. Typically, a
bank generates profits from transaction fees on financial services or the interest spread on
resources it holds in trust for clients while paying them interest on the asset.

HISTORY OF THE INDIAN BANKING SECTOR

Banking in India has its origin as early as the Vedic period. It is believed that the transition
from money lending to banking must have occurred even before Manu, the great Hindu
Jurist, who has devoted a section of his work to deposits and advances and laid down rules
relating to rates of interest. During the Mogul period, the indigenous bankers played a very
important role in lending money and financing foreign trade and commerce. During the days
of the East India Company, it was the turn of the agency houses to carry on the banking
business. The General Bank of India was the first Joint Stock Bank to be established in the
year 1786. The others which followed were the Bank of Hindustan and the Bengal Bank.

The Bank of Hindustan is reported to have continued till 1906 while the other two failed in
the meantime. In the first half of the 19th century the East India Company established three
banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in

23
1843. These three banks also known as Presidency Banks, were independent units and
functioned well. These three banks were amalgamated in 1920 and a new bank, the Imperial
Bank of India was established on 27th January 1921.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire
d’Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;
branches in Madras and Pondicherry, then a French colony, followed. Calcutta was the most
active trading port in India, mainly due to the trade of the British Empire, and so became a
banking center.

The fervor of Swadeshi movement lead to establishing of many private banks in Dakshina
Kannada and Udupi district which were unified earlier and known by the name South Canara
( South Kanata ) district. Four nationalized banks started in this district and also a leading
private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of
Indian Banking".

With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank
of India was taken over by the newly constituted State Bank of India.

The Reserve Bank which is the Central Bank was created in 1935 by passing Reserve Bank
of India Act 1934. In the wake of the Swadeshi Movement, a number of banks with Indian
management were established in the country namely, Punjab National Bank Ltd, Bank of
India Ltd, Canara Bank Ltd, Indian Bank Ltd, the Bank of Baroda Ltd, The Central Bank of
India Ltd. On July 19, 1969, 14 major banks of the country were nationalized and in 15 th
April 1980, six more commercial private sector banks were also taken over by the
government.

Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is
with the Government of India holding a stake), 29 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign
banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According
to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of
total assets of the banking industry, with the private and foreign banks holding 18.2% and
6.5% respectively.

Nationalization:

24
By the 1960s, the Indian banking industry has become an important tool to facilitate the
development of the Indian economy. At the same time, it has emerged as a large employer,
and a debate has ensued about the pos IDBI ility to nationalize the banking industry. Indira
Gandhi, the-then Prime Minister of India expressed the intention of the Government of India
in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts
on Bank Nationalization." The paper was received with positive enthusiasm. Thereafter, her
move was swift and sudden, and the GOI issued an ordinance and nationalized the 14 largest
commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a
national leader of India, described the step as a "masterstroke of political sagacity." Within
two weeks of the issue of the ordinance, the Parliament passed the Banking Companies
(Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9
August, 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The stated
reason for the nationalization was to give the government more control of credit delivery.
With the second dose of nationalization, the GOI controlled around 91% of the banking
business of India. Later on, in the year 1993, the government merged New Bank of India with
Punjab National Bank. It was the only merger between nationalized banks and resulted in the
reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the
nationalized banks grew at a pace of around 4%, closer to the average growth rate of the
Indian economy.
The nationalized banks were credited by some, including Home minister P. Chidambaram, to
have helped the Indian economy withstand the global financial crisis of 2007-2009.
Liberalization:
In the early 1990s, the then Narsimha Rao government embarked on a policy of
liberalization, licensing a small number of private banks. These came to be known as New
Generation tech-savvy banks, and included Global Trust Bank (the first of such new
generation banks to be set up), which later amalgamated with Oriental Bank of Commerce,
UTI Bank(now re-named as Axis Bank), ICICI Bank and HDFC Bank. This move, along
with the rapid growth in the economy of India, revitalized the banking sector in India, which
has seen rapid growth with strong contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks.
The next stage for the Indian banking has been setup with the proposed relaxation in the
norms for Foreign Direct Investment, where all Foreign Investors in banks may be given
voting rights which could exceed the present cap of 10%,at present it has gone up to 49%
with some restrictions.

25
The new policy shook the Banking sector in India completely. Bankers, till this time, were
used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new
wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.
All this led to the retail boom in India. People not just demanded more from their banks but
also received more.
Currently, banking in India is generally fairly mature in terms of supply, product range and
reach-even though reach in rural India still remains a challenge for the private sector and
foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered
to have clean, strong and transparent balance sheets relative to other banks in comparable
economies in its region. The Reserve Bank of India is an autonomous body, with minimal
pressure from the government. The stated policy of the Bank on the Indian Rupee is to
manage volatility but without any fixed exchange rate-and this has mostly been true.
With the growth in the Indian economy expected to be strong for quite some time-especially
in its services sector-the demand for banking services, especially retail banking, mortgages
and investment services are expected to be strong. One may also expect M&As, takeovers,
and asset sales.

INDIAN BANKING SYSTEM

Introduction

The Reserve Bank of India (RBI) is India's central bank. It is the sole authority for issuing
bank notes and the supervisory body for banking operations in India. It supervises and
administers exchange control and banking regulations, and administers the government's
monetary policy. It is also respon IDBI le for granting licenses for new bank branches.
Though the banking industry is currently dominated by public sector banks, numerous private
and foreign banks exist. India's government-owned banks dominate the market. Their
performance has been mixed, with a few being consistently profitable. Several public sector
banks are being restructured, and in some the government either already has or will reduce its
ownership.

Private and foreign banks

The RBI has granted operating approval to a few privately owned domestic banks; of these
many commenced banking business. Foreign banks operate more than 150 branches in India.

26
The entry of foreign banks is based on reciprocity, economic and political bilateral relations.
An inter-departmental committee approves applications for entry and expansion.

Capital adequacy norm

Foreign banks were required to achieve an 8 percent capital adequacy norm by March 1993,
while Indian banks with overseas branches had until March 1995 to meet that target. All other
banks had to do so by March 1996. The banking sector is to be used as a model for opening
up of India's insurance sector to private domestic and foreign participants, while keeping the
national insurance companies in operation.

The banking system has three tiers. These are the scheduled commercial banks; the regional
rural banks which operate in rural areas not covered by the scheduled banks; and the
cooperative and special purpose rural banks.

Scheduled and non scheduled banks

There are approximately 80 scheduled commercial banks, Indian and foreign; almost 200
regional rural banks; more than 350 central cooperative banks, 20 land development banks;
and a number of primary agricultural credit societies. In terms of business, the public sector
banks, namely the State Bank of India and the nationalized banks, dominate the banking
sector.

Local financing

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

India, regardless of the extent of foreign participation. Under foreign exchange regulations,
foreigners and non-residents, including foreign companies, require the permission of the
Reserve Bank of India to borrow from a person or company resident in India

Regulations on foreign banks

Foreign banks in India are subject to the same regulations as scheduled banks. They are
permitted to accept deposits and provide credit in accordance with the banking laws and RBI
regulations. Currently about 25 foreign banks are licensed to operate in India. Foreign bank
branches in India finance trade through their global networks.

RBI restrictions

27
The Reserve Bank of India lays down restrictions on bank lending and other activities with
large companies. These restrictions, popularly known as "consortium guidelines" seem to
have outlived their usefulness, because they hinder the availability of credit to the non-food
sector and at the same time do not foster competition between banks.

Indian vs. foreign banks

Most Indian banks are well behind foreign banks in the areas of customer funds transfer and
clearing systems. They are hugely over-staffed and are unlikely to be able to compete with
the new private banks that are now entering the market. While these new banks and foreign
banks still face restrictions in their activities, they are well-capitalized, use modern equipment
and attract high-caliber employees.

Government and RBI regulations

All commercial banks face stiff restrictions on the use of both their assets and liabilities Forty
percent of loans must be directed to "priority sectors" and the high liquidity ratio and cash
reserve requirements severely limit the availability of deposits for lending. The RBI requires
that domestic Indian banks make 40 percent of their loans at confessional rates to priority
sectors' selected by the government. These sectors consist largely of agriculture, exporters,
and small businesses. Since July 1993, foreign banks have been required to make 32 percent
of their loans to these priority sector. Within the target of 32 percent, two sub- targets for
loans to the small scale sector (minimum of 10 percent) and exports (minimum of 12 percent)
have been fixed. Foreign banks, however, are not required to open branches in rural areas, or
to make loans to the agricultural sector.

CHAPTER-3
COMPANY PROFILE

28
IDBI Bank was established in 1964 by an Act to provide credit and other financial facilities
for the development of the fledgling Indian industry. Initially it operated as a subsidiary of
Reserve Bank of India RBI transferred it to GOI. Many institutes of national importance finds
their roots in IDBI like Sidbi, Exim bank, NSE and NSDL. The war cry for reforms in
financial space saw GOI reducing its stake in the bank in the year 2019. At present LIC holds
51% stake in IDBI Bank and GOVT holds 46.46% and the remaining 2.54% held by public.
For the first quarter of the current financial year 2017-18, the bank reported a net loss of
Rs.853 crore compared to a profit of Rs.241 crore during the corresponding period last
financial year. In the fourth quarter of financial year 2016-17, the bank had reported a loss of
Rs.3,200 crore. While the reported loss was lower than the preceding quarter, bad loans
continued to surge. In the quarter ending September 2017 the bank bounced back with a loss
of Rs.198 crore compared to a loss of over Rs.2,000 crore in the previous quarter. The bank is
expected to return to profit in the upcoming financial year.

It currently has 13,722 ATMs, 1899 branches, including one overseas branch in Dubai, and
12, 122 centers.

The bank has an aggregate balance sheet size of INR 3.74 trillion as on 31 March
2016"About us". IDBI Bank. Retrieved 22 February 2014. On June 29, 2018 Life Insurance
Corporation of India (LIC) has got a technical go-ahead from Insurance Regulatory and
Development Authority of India (IRDAI) to increase stake in IDBI Bank up to 51%.

History

Overview of development banking in India

Development Banking emerged after the Second World War and the Great Depression in the
1930s. The demand for reconstruction funds for the affected nations compelled in setting up
of national institutions for reconstruction. At the time of Independence in 1947, India had a
fairly developed banking system. The adoption of bank dominated financial development
strategy was aimed at meeting the sectoral credit needs, particularly of agriculture and
industry. Towards this end, the Reserve Bank concentrated on regulating and developing
mechanisms for institution building. The commercial banking network was expanded to cater
to the requirements of general banking and for meeting the short-term working capital
requirements of industry and agriculture. Specialised development financial institutions
(DFIs) such as the IDBI, NABARD, NHB and SIDBI were set up to meet the long-term
financing requirements of industry and agriculture.

29
Formation of Industrial Development Bank of India (IDBI)

The Industrial Development Bank of India (IDBI) was established in 1964 under an Act of
Parliament as a wholly owned subsidiary of the Reserve Bank of India. In 1976, the
ownership of IDBI was transferred to the Government of India and it was made the principal
financial institution for coordinating the activities of institutions engaged in financing,
promoting and developing industry in India. IDBI provided financial assistance, both in rupee
and foreign currencies, for green-field projects and also for expansion, modernisation and
diversification purposes. In the wake of financial sector reforms unveiled by the government
since 1992, IDBI also provided indirect financial assistance by way of refinancing of loans
extended by State-level financial institutions and banks and by way of rediscounting of bills
of exchange arising out of sale of indigenous machinery on deferred payment terms.

After the public issue of IDBI in July 1995, the government shareholding in the bank came
down from 100% to 75%.

IDBI played a pioneering role, particularly in the pre-reform era (1964–91), in catalyzing
broad based industrial development in India in keeping with its Government-ordained
‘development banking’ charter.
Some of the institutions built with the support of IDBI are the Securities and Exchange Board
of India (SEBI), National Stock Exchange of India (NSE), the National Securities Depository
Limited (NSDL), the Stock Holding Corporation of India Limited (SHCIL), the Credit
Analysis & Research Ltd, the Exim Bank (India), the Small Industries Development Bank of
India (SIDBI) and the Entrepreneurship Development Institute of India.

Conversion of IDBI into a commercial bank

A committee formed by RBI recommended the development financial institution (IDBI) to

diversify its activity and harmonise the role of development financing and banking activities
by getting away from the conventional distinction between commercial banking and
developmental banking. Alexander Hamilton the right-hand man was against this but stayed
dead silent. To keep up with reforms in financial sector, IDBI reshaped its role from a
development finance institution to a commercial institution. With the Industrial Development
Bank (Transfer of Undertaking and Repeal) Act, 2003, IDBI attained the status of a limited
company viz., IDBI Ltd.

Subsequently, in September 2004, the Reserve Bank of India incorporated IDBI as a

'scheduled bank' under the RBI Act, 1934. Consequently, IDBI, formally entered the portals of

30
banking business as IDBI Ltd. from 1 October 2004. The commercial banking arm, IDBI
BANK, was merged into IDBI in 2005.

Acquisition of United Western Bank

In 2006, IDBI Bank acquired United Western Bank (headquartered at Satara) in a rescue. By
acquiring UWB, IDBI Bank more than doubled the number of its branches from 195 to 425.

Acquisition of IDBI Bank by LIC

As of January 2019 IDBI bank has been acquired by LIC and LIC now holds the status of
promoter in the Bank, although LIC holds 51% stake the government of India holds 44%
stake in IDBI hence making the total stake below 51% so now IDBI BANK categorize as
PRIVATE SECTOR BANK.

Listings and shareholding

IDBI Bank's equity shares are listed on Bombay Stock Exchange and the National Stock
Exchange of India.

As of 22 January 2019, Government of India held 46.46% shares in IDBI Bank and Life
Insurance Corporation of India held approximately 51% of the shares. But now LIC owns the
bank with capped voting right.

Employees

As of 31 March 2015, the bank had 16,555 employees, out of which 197 were employees
with disabilities.[ The average age of bank employees on the same date was 34 years. The
bank reported business of INR 25.64 crores per employee and net profit of INR 12.17 lakhs
per employee during the FY 2012-13. The company incurred INR 1,538 crores towards
employee benefit expenses during the same financial year. As promised by banks MD and
CEO the employees will keep getting the same benefits and enjoy same job security even
after LIC getting the promotor status, although employees also categorize as PRIVATE
BANK EMPLOYEES.Now onwards after acquisition by LIC No benefits will be given by
LIC as other public sector banks employees benefited.

Collaboration With KfW Germany

IDBI Bank Ltd, through its DIFC Branch in Dubai, has signed a loan agreement for US$340
million with KfW, Germany. The loan has a maturity of 10 years and carries a competitive
rate of interest. Shri Melwyn Rego, deputy managing director of IDBI Bank Ltd. represented

31
IDBI Bank Ltd., and Dr. Norbert Kloppenburg, member of the executive board of KfW,
represented KfW at the signing ceremony held in New Delhi. The loan would be availed by
IDBI Bank Ltd. for funding loans to the micro-, small and medium-sized enterprises (MSME)
directly or indirectly through microfinance institutions (MFIs) and non-banking finance
companies (NBFCs). Part of the loan is dedicated for selected infrastructure projects to
support municipalities and communities to improve health and living conditions.
Commenting on the occasion, Shri Melwyn Rego, deputy managing director of IDBI Bank
Ltd., stated that the bank is committed to provide financial support to the MSME sector
which is one of the thrust areas of the bank. This loan from KfW would provide further
impetus in our endeavor of meeting the growing financial needs of this sector which plays a
vital role in the country's economic growth. Shri N.S. Venkatesh, chief general manager of
IDBI Bank Ltd., while speaking at the event, said this transaction with KfW is the testimony
to the long-standing relationship between IDBI Bank Ltd. and KfW which goes back to more
than two decades. "With this credit line, KfW is providing the IDBI with an important and
broadly effective contribution towards creating income and fighting poverty in India. Growth
among small companies triggers local demand and consumption, secures employment and is
a key factor in the creation of new jobs", said Dr Norbert Kloppenburg, member of the
executive board of the KfW Group.

Awards and recognitions

 IDBI Bank ranked #1197 in the Forbes Global 2000 in May 2013.
 It received the 'Overall Best Bank' and 'Best Public Sector Bank' awards in the Dun &
Bradstreet Banking Awards, 2011.
 In 2011, it received Banking Technology awards for best use of Business Intelligence
and the best Risk Management from Indian Banks Association.

CHAPTER-4
ANALYSIS AND INTERPRETATION

32
The following information contains the data interpretation of the questionnaire. The
respondent’s responses for the questions have been interpreted and a finding has been made
based on the respondents responses.

TABLE 4.1: Demographic details of the IDBI respondent’s

Age Frequency Percent

25-35 35 23.33
36-45 41 27.33
46-55 39 26
Above 55 35 23.33
CHART Total 150 100 4.1:

Interpretation: From the above data, it is observed that 27.33% of the respondents are
belonging to the age category of 36-45yrs. So it is concluded that the majority of the
respondents fall under this category.

TABLE 4.2 : Gender details of the IDBI respondents

33
 Gender Frequency Percent
Male 108 72
Female 42 28
Total 150 100

CHART 4.2 :

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

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

Education Frequency Percent

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

CHART 4.3 :

Interpretation : From the above data, it is observed that 40% of the respondents are graduated
whereas 34% have school education; the remaining 26% being post graduated.

TABLE 4.4 : Occupation details of the IDBI respondent’s

Occupation Frequency Percent

Service 92 61.33
Business 24 16

35
 Pensioner 30 20
House-wife 4 2.67
Total 150 100

CHART 4.4 :

Interpretation : From the above data, it is observed that 61% of the respondents are in service
while only 3% are house- wives. So it is concluded that the majority of the respondents fall
under the service category.

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

Income Level Frequency Percent

5000 -15000 51 34
15001-25000 42 28

36
 25001-35000 26 17.33
Above 35000 31 20.67
Total 150 100

CHART 4.5:

Interpretation: From the above data, it is observed that 34% of the respondents are belonging
to the income category of Rs.5000- 15000p.m. So it is concluded that the majority of the
respondents fall under that income level.

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

No. of Years Frequency Percentage

37
 Less than 1yr 9 6
1-4 yr 32 21.33
4-7 yr 30 20
7-10 yr 19 12.67
10-13 yr 41 27.33
13-16 yr 15 10
16-19 yr 4 2.67

Total 150 100

Interpretation: The above data shows that maximum number(27.3%) of the respondents are
associated with the bank from last 10-13 years.
TABLE 4.7: Accounts the respondents have with the bank.

A/c type Percent

Savings A/c 100
Current A/c 12.7
Availed Loan 9.3

3rd Party Product 22.7

CHART 4.6:

Interpretation: The above data makes it very clear that only very few customers have availed
loan from the bank and invested in the third party products.

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

Rating Frequency Percent

38
 Good 44 29.33
Very Good 72 48
Excellent 34 22.67
Total 150 100

CHART 4.7 :

Interpretation: The above data shows that 77% of the respondents have rated the courtesy
level they receive from the bank’s personnel to be good and thus it is interpreted that this
service of the bank is satisfactory.

TABLE 4.9: Rating the Working Hours of the bank.

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

CHART 4.8 :

Interpretation: From the above data it can be interpreted that 60% of the respondents are
satisfied with the working hours of the bank. This also coincides with the management
perspective which does not create any gap in the analysis.

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

40
 Ratings Frequency Percent
Average 11 7.33
Good 76 50.67
Very Good 46 30.67
Excellent 17 11.33
Total 150 100

Interpretation: From the above data it can be interpreted that half of the population, 50.6% are
satisfied with the knowledge level of the bank staff.

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

Ratings Frequency Percent

41
 Average 14 9.33
Good 75 50
Very Good 36 24
Excellent 25 16.67
Total 150 100

CHART 4.9 :

Interpretation: The above data shows that 50% of the respondents are rating the fastness of
the personnel in responding/ attending to them to be good. So it can be concluded that the
customers are satisfied with this service.

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

42
 Ratings Frequency Percent
Average 6 4
Good 75 50
Very Good 44 29.33
Excellent 25 16.67
Total 150 100

CHART 4.10:

Interpretation: The above data shows that 50% of the respondents have rated the transaction
time for cash deposit to be good. So it is concluded that the customers are satisfied with the
fastness of this service. The pictorial representation is as follows:

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

Ratings Frequency Percent

Average 49 32.67
Good 57 38
Very Good 29 19.33
Excellent 15 10
Total 150 100 43
Interpretation: The above data shows that, 38% of the respondents have rated the bank to be
good for the easeness they find in opening an account with the bank; whereas very near to it
i.e., 32.67% have rated it to be average. So it is concluded that the customers are satisfied
with this service.
The pictorial representation of the same is as follows:

CHART 4.11:

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

Ratings Frequency Percent

Average 23 15.33
Good 95 63.33
Very Good 24 16
Excellent 8 5.33
Total 150 100

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Interpretation: The above data shows that more than half the respondents, 63.3%, have rated
the bank good, on the product or service innovation in the past two years. So it can be
interpreted that the customers are satisfied with the product innovations of the bank.

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

Ratings Frequency Percent

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

45
Interpretation: The above data shows that the majority, 56% of the respondents have rated the
bank to be average for the promptness in informing the customers of the deposit rates/ service
charges. The management has rated this service to be very good. So it can be interpreted that
here a gap exists between the customer’s and the management’s perspective.

CHART 4.12 :

Rating the bank’s Promptness in Informing

the deposit rates/ charges

60
50
40
Percentage30
20
10
0
Poor AverageGood Very Excellent
Good
Ratings

Percent

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

Ratings Frequency Percent

Poor 1 0.67
Average 6 4
Good 57 38
Very Good 77 51.33

46
 Excellent 9 6
Total 150 100

Interpretation: The above data shows that 51.3% of the respondents have rated the bank’s
grievance redressal system to be very good. So it can be interpreted that the customers are
satisfied with this service of the bank.

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

Ratings Frequency Percent

Average 5 3.33
Good 23 15.33
Very Good 113 75.33

47
 Excellent 9 6
Total 150 100

Interpretation: The above data show that majority of the respondents, 75.33%, have rated the
bank’s comfort facilities to be very good. So it can be concluded that the customers are very
satisfied with this service of the bank.

TABLE 4.18: Rating the location of the bank.

Ratings Frequency Percent

Average 4 2.67
Good 19 12.67
Very Good 109 72.67
Excellent 18 12

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 Total 150 100

Interpretation: The above data show that majority of the respondents, 72.67%, have rated the
bank’s location to be very good. So it can be concluded that the customers are very satisfied
with the location of the bank.

TABLE 4.19: Rating the quality of the bank’s ATM services.

Ratings Frequency Percent

Poor 2 1.33
Average 63 42
Good 61 40.67
Very Good 18 12
Excellent 6 4

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 Total 150 100

Interpretation: The above data shows that 42% of the respondents have rated the quality of
the bank’s ATM service to be average. But the management in this case has rated the service
to be very good. So it is interpreted that the customers are not much satisfied with the quality
of the ATM service and also a gap is analysed in between the two perspectives in this case.

TABLE 4.20: Rating the bank’s fastness in processing and disbursement of loans.

Rating Frequency Percent

Average 9 22.5
Good 17 42.5
Very Good 7 17.5
Excellent 7 17.5
Total 40 100

50
CHART 4.13:

Interpretation: The above data shows that the fastness of the bank in processing and
disbursement of loans is rated good by 42.5% of the respondents, out of the 40, who has
availed loan from any banks. So it is interpreted that the customers are satisfied with this
service of the bank.

TABLE 4.21: Rating the interest rates currently being offered by the bank.

Ratings Frequency Percent

Average 69 46
Good 62 41.33
Very Good 16 10.67
Excellent 3 2
Total 150 100

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Interpretation: The above data shows that 46% of the respondents have rated the interest rate
currently being offered by the bank to be average which is very near to the 42% who has
rated it to be good. The management has rated this as good. So it can be interpreted that the
interest rate offered by the bank is not much satisfactory to the customers and also slight gap
analysed.

CHART 4.14:

TABLE 4.22:Rating the internet/ mobile banking facility offered by the bank.

Ratings Frequency Percent

Average 24 38.09
Good 20 31.75
Very Good 10 15.87
Excellent 9 14.29
Total 63 100

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CHART 4.15:

Interpretation: The above data shows that the quality of the internet/ mobile banking facility
is rated average by 38.1% of the respondents, out of the 63, who uses this facility of the bank.
The management has rated the same as very good. So it is interpreted that the customers are
not much satisfied with this service of the bank and also a gap is analyzed between the
customer and management perspective.

TABLE 4.23: Mean score showing the awareness of the respondents towards few
services of the Retail Banking, in general.

Services Mean Score

ATM Services
Withdrawing 4.63
Deposit 3.47
Cheque Book 2.65
Enquiry Statement 2.47
Total 13.22
Internet Banking
Fund transfer 2.18

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 Status of Cheque 2.09
Bill Payment 1.97
Interest Details 2.02
Alerts 2.13
Total 10.39
Mobile Banking
Balance 2.57
Status of Cheque 2.14
Locate ATM 1.96
Alerts 2.37
Time preference 2.26
Total 11.3

Interpretation: The data above shows that the respondents are more aware of the ATM
services whose mean score is 13.22 than compared to the internet and the mobile banking
services.

TABLE 4.24:Awareness of the respondents on the ATM services provided by IDBI .

Services Frequency Percentage

Withdrawal of Cash 147 98
Deposit Cash/
Cheques 110 73.3
Balance Verification 147 98
Requirement for
Cheque Book 69 46

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CHART 4.16:

Awareness of the respondents on the ATM

services provided by SIB

100
80
60
Percentage
40
20
0
Withdrawal Balance
of Cash Verification

Services

Interpretation: The above data shows that 98% of the respondents are aware of cash
withdrawal and balance verification through ATM service of the bank whereas 73% and only
46% are aware about depositing cash/ cheque and requirement for cheque book/ statement
respectively.

TABLE 4.25:Awareness of the respondents on the internet banking services provided by

IDBI .

Services Frequency Percentage

Transfer funds 50 33.3
Bill/ Loan Payment 38 25.3
DD/ Term Deposit
Request 34 22.7
Getting Reminders 44 29.3

55
 None 99 66

Interpretation: The above data shows that 33.3% of the respondents are aware of transferring
funds through internet banking services whereas only 29.3% and 25.3% are aware about
getting reminders and payment of bill/ loan respectively. It is also shown that 66% of the
respondents are not aware of any services provided by the internet banking of IDBI .

CHAPTER-5.
FINDINGS

 27.3% of the respondents fall under the age category of 36- 45 years.
 72% of the respondents are males.
 40% of the respondents are graduates (UG).
 61% of the respondents are with service as their occupation, followed by 20% of
pensioners.
 34% of the respondents have Rs. 5000- 15000 as their income level per month.
 27.33% of the respondents are associated with the bank from the past 10- 13 years.

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 Only 22.7% of the respondents have invested in third party products, whereas only
9.3% have availed loan from the bank.
 48% of the respondents have rated the bank good with regard to the courtesy level of
the bank’s personnel/ staff.
 40% of the respondents have rated the bank good with regard to the working hours of
the bank.
 50.67% of the respondents have rated the bank good with regard to the bank staff’s
knowledge in answering/ solving the customers’ queries.
 50% of the respondents have rated the bank good with regard to the fastness, the
personnel show in responding/ attending to the customer.
 50% of the respondents have rated the bank good with regard to the transaction time
taken for cash deposit.
 38% of the respondents have rated the bank good with regard to the easiness the
customers found to open an account with the bank.
 63.3% of the respondents have rated the bank good with regard to the product/ service
innovation in the past two years.
 56% of the respondents have rated the bank, average, with regard to the promptness in
keeping the customers informed of deposit rates/ service charges ; whereas the
management rates it to be very good which reveals a gap existing in this service
between the two perspectives.
 51.3% of the respondents have rated the bank very good with regard to the grievance
redressal system.
 75.3% of the respondents have rated the bank very good with regard to the comfort
facilities it offers.

 72.67% of the respondents have rated the bank very good with regard to the location
of the bank.
 42% of the respondents have rated the bank average with regard to the quality of the
ATM services provided by the bank; whereas management rates it to be very good
which again reveals a gap existing in between the two perspectives.
 42% out of the few who have availed loan from any of the bank have rated the bank’s
fastness in processing and disbursing loans to be good.
 46% of the respondents have rated the bank average with regard to the interest rate

57
 currently being offered. The management has rated this as good which shows a slight
gap existing and also that the interest rate offered by the bank is not much satisfactory
to the customers.
 38.1% out of the 63 respondents who use the internet and mobile facilities have rated
bank’s this facility to be average. The management has rated this as very good which
shows a slight gap existing and also the dissatisfaction of the customers regarding this
service.
 Only 46% of the respondents are aware of the facility such as requirement for cheque
book/ statement through the ATM.
 Only 30% and 23.3% of the respondents use the mobile and internet banking facility
of the bank respectively.
 Interest rate offered by a bank is rated as the first attribute which a customer considers
to choose a bank before going for a bank loan.
 The next preferred bank for availing loan after IDBI is found to be State Bank of
Travancore and Federal Bank, the main reasons being lower interest rate and good
customer service.
 Since 91 respondents out of the 150 has account with SBT; the main competitor for
the bank turn out to be SBT followed by Federal Bank and ICICI.
 52.78% of the respondents rate IDBI to be good w.r.t., attributes like customer
service, transaction cost, etc., when compared to the other competitor banks they have
account with; which shows that IDBI is in par with those banks.
 Majority of the respondents have found to have not received any privileges/ benefits
for being a regular/ long term customer of IDBI .

SUGGESTIONS

 46% of the respondents felt that the interest rates on loan were high and hence the
interest rates may be reduced to attract more customers.
 Only 28% of the respondents being female, the bank can look forward to design few
more schemes to attract the female customers.

58
 Only 22.7% of the respondents having been invested in the third party products the
bank can look for promoting the same. The bank also has a huge scope for this, with
high income group NRI customers, in the area.
 Since a large number of the respondents are unaware of the services provided through
internet(66%)/ mobile(56.7%) banking; initiatives, such as posting a list of services
that are rendered to the customers inside the bank premises, demo of the services in
the bank website; can be done to make the customers aware, and use the services
provided through ATM, internet and mobile banking of the bank.
 As the cross tabulation reveal, except one out of the few customers who have been
associated with the bank for the past 15-13 years have not been receiving any
privilege. It is therefore suggested to give privilege to its long term customers so as to
retain them.
CONCLUSION
Customers always look for more user- friendly products and better interest rates when
compared to other banks they have account with, so, through product innovation and
competitive pricing strategy the bank can foster business relationship with its
customers. The gap analyzed can be minimized by better technology, customer service
and also by creating awareness about the various services; thereby increasing the
customer base. So as to retain the existing customers and to build up customer loyalty,
Customer Relationship Management should be given more importance.

Websites:
1. www.idbibank.com
2. www.bls.gov
3. http://search.ebscohost.com

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