Annals of R.S.C.B., ISSN:1583-6258, Vol. 25, Issue 4, 2021, Pages.

20572 - 20582
Received 05 March 2021; Accepted 01 April 2021.

FACTORS INFLUENCING THE INVESTMENT DECISION OF THE

CUSTOMERS IN BANKING SECTOR
1S.Chandrasekaran, 2Durgadevi. PK, 3Dharani Kamatchi. S, 4Gajalakshmi. A
1
Assistant Professor, Department of Management Studies, SRM Easwari Engineering College,
Ramapuram, Chennai – 600089
2,3,4
Final year Students, Department of Management Studies, SRM Easwari Engineering College,
Ramapuram, Chennai – 600089

Abstract
Deposits are not only a part of the money supply, they also affect it in important ways. Government
create and spread money throughout the economy in response to key movers like investment.
Investment is largely possible because people can move large sums of money by saving, transferring
and withdrawing funds from bank accounts.
Bank deposits are a primary tool for investment, and without them businesses would not be able to
access funds from individuals at all. This study aim at determining the basic driving force of investment
of customer in banking sector and their perception towards their investment in banking sector.
The study is to know the customers perception toward the investments in banks and how the customers
are aware of the other form of investments like equity, gold, real estate etc. secondly how frequently the
customers are investing and their satisfaction towards their investments. The main aim of this study is to
determine the factor that influence the investors to invest in banking sector.
Descriptive research is adopted in the study. Convenient method has been used as sampling design with
110 respondents. Structured Questionnaire used for the survey. Primary data has been used. Appropriate
statistical will be used such as Correlation, Chi square, Friedmen’s test, ANOVA and Regression
analysis.
This study aims to gain knowledge about key factors that influence investment behaviour in banking
sector and ways these factors impact investment risk tolerance and decision making process among the
customers. The individuals may be equal in all aspects, may even be living next door, but their financial
planning needs are very different. Hence keeping this in mind, the present study is an attempt to find out
the factors which affects individual investment decision in banking sector and differences in the
perception of Investors in the decision of investing in banks.
Keywords: Bank, Investment decision, Factors influencing investment

INTRODUCTION:

Investment means spending of money in different financial assets or institution for uncertain future
rewards and considers risk as well in this process. There are three types of investors like conservative,
moderate and aggressive. Traditional financial theory discuss people take decisions rationally , but in
the same time some people also do irrational decisions as well that affect their future. Investors are
supposed to be rational creature, who studies the technical and fundamental analysis of the investment
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market avenues prior to invest their hard earned money. The important purpose of investors making
investment is to both maximize their income and minimize their expenses. In finance literature,
individuals are considered to behave judiciously while pursuing their own benefits. In this context,
individuals spare some of their hard earned income for expenditure and some amount for saving. Within
this framework, individuals route their savings into investment.
Many individuals find investments to be fascinating because they can participate in
the decision making process and see the results of their choices. Not all investments will be profitable,
as investor wills not always make the correct investment decisions over the period of years; However,
you should earn a positive return on a diversified portfolio. Investing is not a game but a serious subject
that can have a major impact on investor's future wellbeing. Virtually everyone makes investments.
Even if the individual does not select specific assets such as stock, investments are still made through
participation in pension plan, and employee saving programme or through purchase of life insurance
or a home or by some other mode of investment like investing in Real Estate (Property) or in Banks
or in saving schemes of post offices. Each of this investment has common characteristics such as
potential return and the risk you must bear. The future is uncertain, and you must
determine how much risk you are willing to bear since higher return is associated with
accepting more risk. The individual should start by specifying investment goals. Once these goals
are established, the individual should be aware of the mechanics of investing and the environment
in which investment decisions are made. These include the process by which securities are
issued and subsequently bought and sold, the regulations and tax laws that have been enacted by
various levels of government, and the sources of information concerning investment
that are available to the individual.
Today the field of investment is even more dynamic than it was only a decade ago. World event rapidly
events that alter the values of specific assets the individual has so many assets to choose from,
and the amount of information available to the investors is staggering and continually growing.
The key to a successful financial plan is to keep apart a larger amount of savings and invest it
intelligently, by using a longer period of time. Savings accounts, money at low interest rates and market
accounts do not contribute significantly to future rate accumulation. While the highest
rate come from stocks, bonds and other types of investments in assets such as real estate.
Nevertheless, these investments are not totally safe from risks, so one should try to understand what
kind of risks are related to them before taking action.
Individuals allocate their income towards expenditure and savings. Within this boundary,
individuals have to transform their savings into investments. Most of the individuals find investments to
be enthralling because they can involve in the decision making process and appreciate the results of
their choices. The main purpose of investors engaged in investment is to both maximize their income
and minimize their expenses. Not all investments will be profitable, as investor will not always make the
correct investment decisions. However, he should earn a positive return on a diversified portfolio.
Financial planning needs are different. Investors have many social oriented needs, which can have
significant implications for their decision making process. Each of his investment has special
characteristics such as potential return and the risk that he must bear. The future is uncertain, and he
must determine how much risk he is willing to bear since higher return is associated with accepting
more risk. This study was designed at identifying the variables that have most and the least influence
factors on the investment behaviour of the investor.

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To understand the characteristics of each one of the different types of investment you must
have enough financial knowledge. Furthermore, inflation has served to increased awareness of
the importance of financial planning and wise investing. More Inflation is a worry for each
and every individual. Due to Inflation value of your money in future will decrease. To Cope up this,
Investors wants to invest their money and earn certain rate of return which is more then rate of Inflation.
Having clear reasons or purposes for investing is critical to investing successfully. Like training in
a gym, investing can become difficult, tedious and even dangerous if you are not working toward a
goal and monitoring your progress. In traditional way investors prefer to invest in bank accounts, in
gold, silver, mutual funds, post office, insurance companies, and in alternative way in stock market,
derivatives, portfolio etc, an investor who does not want to take risk of their capital they prefer to invest
in banking sector because baking offering reasonable rate of return with less risk.
PROBLEM IDENTIFICATION:
Bank deposits are a primary tool for investment, and without them businesses would not be able
to access funds from individuals at all. Thus, bank deposits is important for every point of view i.e.
business, banks, customers etc. The aim of the study is to determine the factor that influence the
investment decision of customers in banks. This study will straightforwardly influence the planning and
decision making of Banks. It will give a structure to banks, so they can configuration such investment or
speculation plans for their clients that can fulfill or draw in their clients towards their venture designs
that will expand their business.
NEED FOR THE STUDY:
The study is to know the customers perception toward the investments in banks and how the
customers are aware of the other form of investments like equity, gold, real estate etc. secondly how
frequently the customers are investing and their satisfaction towards their investments. The main aim of
this study is to determine the factors that influence the investors to invest in banking sector.
OBJECTIVES OF THE STUDY:

• To determine the basic driving force of investment in banking sector.

• To determine the factors that effect on an individual for making an investment and what the
individual requires.
• To measure the perception of customers regarding their choice of investment in banking sector.
• To study the significance of demographic factors influencing the basis of investment preference.
SCOPE OF THE STUDY:
This study aims to gain knowledge about key factors that influence investment behaviour in
banking sector and ways these factors impact investment risk tolerance and decision
making process among the customers. The individuals may be equal in all aspects, may even
be living next door, but their financial planning needs are very different. Hence keeping this in mind,
the present study is an attempt to find out Factors which affects individual investment decision in
banking sector and Differences in the perception of Investors in the decision of investing in banks.
LITERATURE REVIEW:

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Jansirani & Shanmugasundaram (2012) has carried out a study titled “Influential factors in
Investment decision making” with an objective to study the various factors that influence investors’
decision making process and to analyse the impact of the technological factors with 21 structured
questions from 515 investors who have invested in equity market. The study revealed that Investors
decisions are influenced by psychological factors and behavioural dimensions. The research presents the
dependence of small investors on the advice of leading companies. It also shows lack of confidence in
their knowledge to decide. It also revealed that a prudent investor who can control his emotions can use
his money for hedging against inflation by identifying sources of right analytical presentation and by
sparing sufficient time for investment decisions. It also suggested that Securities and Exchange Board of
India must include the role of behavioural dimensions in its awareness campaign due to the critical
nature of these factors in investment decisions. It also recommended that the investment analyst must
incorporate behaviour factors in their analytical model though they are qualitative in nature.
Viswanadham N, Edward N, Dorika&Mwakapala D (2014), undertook a study of perceptual factors
influencing investors buying behaviour in Tanzanian equity Market with an objective to determine the
factors influencing investors buying behaviour in Tanzanian equity market and to identify importance of
sociological, psychological and economic factors that affect investor’s decision. This study was
carried with a sample of 50 investors, which includes 40 customers who had defaulted and 10 Dar ee
Salaam Exchange staff. The study has revealed that economic condition and GDP impact, government
policies significantly have impact on the equity market, i.e., strong performance of economy results into
behavioural finance issues. The results show that concentration of trading activities is negatively
associated with insider trading activities. The findings also include listed companies should pay
attention to several factors like building brand, quality management decisions, transparency in
settlement issues. It also suggested that investors should also take into consideration economic condition
and GDP when taking investment decisions and also the investors are investing in a very systematic
manner for a future need.
Rajkumar S &Venkatramaraju D (2014) carried out a study on factors influencing individual
investors towards IPOs Performance with an objective to find out the investors perception towards the
equity and tax saving mutual funds and to analyse the performance of IPOs in the market during the
financial year 2014 and to ascertain the factors contributing to the underpricing or over pricing of IPO in
India considering 24 factors. The study concluded that IPOs based on rumor and hearsay must be
avoided. The investors must be choosy while investing in IPOs. Investor should only few IPOs and
should not invest in all the IPOs. The researcher also identified that liquidity, rate of return and market
share the elite performance of the equity / tax saving mutual fund. It also suggested that the
organisations should be cautious in making investment towards various financial instruments which
safeguard the interest of the investors.
Preeti Singh &Harpreet Singh Bedi (2011) studied the Investors Behaviour in secondary market with
an objective to study the difference in behaviour of investors, investment style of investors belonging to
different segments of society and to study the factors which impact the individual behaviour of investor.
The study was conducted with a sample of 150 investors in 3 different districts of Punjab.The study has
revealed that there was significant difference between the behaviour of the investor of different
segments while investing in the secondary market. The style of investment is different for different kind
of investors such as traders are active investors while long term investors are passive investors.
Investors generally invest in stock market either for growth, while traders invest with the objective to
earn short term profit. It also revealed that majority of the respondents are investing in the stock market

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with the objective to have higher returns and the second preference is given to Growth and least number
of investors invest with the purpose to meet their contingencies. It also suggested that investors should
make the investment with proper planning keeping in mind their investment objectives.
Umamaheswari S & Ashok Kumar M (2014) undertook a study of the investment perspectives of the
salaried strata at Coimbatore District with an objective of to ascertain the investment priority of a person
based on the level of exposure, intensions, beliefs, responsibilities etc. The study was carried out with a
sample of 1000 investors. The study revealed that that awareness on investment is the need of the hour
for the investors through number of institutions part with investor’s education as they are not sufficient.
It also suggested for developing both the behaviour and investment models of a specific group of the
society.
Manoj sharma, Sai Vijay T, Pateria L P &Sheetal Sharma (2012) has done an empirical study on
the impact of demographic factors on the satisfaction of investors towards insurance policies with a
sample of 358 respondents in Chattisgarh state. The study reported that demographic factors like age,
employment, education level and monthly income were found to have significant association with the
satisfaction of the investors whereas gender, marital status do not have an association with the
satisfaction of the investors. It also suggested that insurance companies in the state should attempt to
target the investors by focusing on these two insignificant demographic factors.
Mehmet Islamoglu, Mehmet Apan, AdemAyvali (2015) had undertaken a study titled
“Determinations of factors affecting individual investor behaviours: A study on Bankers”, with a
sample of 277 bank employers in 24 branches of 14 banks in Turkey. The objectives of the study is to
ascertain the correlation between the income effect on investment decision, investment information
tracking and payment behaviour, impact of religion and society on investment decision. The study has
revealed that individual investors are affected by several factors while they direct their savings at
investments. It was revealed that there was a significant relation between investment information and
traditional investment behaviour. It was also uncovered that there was not positively a significant
relation between religion and society during investment decisions. Investors also had alternative plans to
reduce the risks and gave importance to innovation financially. It also revealed that they showed interest
in financial information presented by means of communication instruments such as media and the
internet and kept pace with progress of their investment instruments.
SmitaMazumdar (2014), has carried out a study on Individual investment behaviour with respect to
financial knowledge and investment risk preference with an objective to find the significant relationship
between financial knowledge and investment risk preference with individual investment behaviour. The
sample of was taken in Mumbai through mails. Mails were sent to 55 persons and responses were
received from 30 persons and these were considered as samples. The study revealed that there was no
significant relationship between knowledge and individual investment behaviour and also no significant
relationship between investor risk preference and individual investment behaviour. It was also
concluded that significant correlation between knowledge and risk preference.
Statman (1988) observed that people trade for both cognitive and emotional reasons. They trade
because they think they have information, when in reality they make nothing but noise and trade only
because trading brings them joy and pride. Trading brings pride when decisions made are profitable, but
it brings regrets when they are not. Investors try to avoid the pain of regret by avoiding realization of
losses, employing investment advisors as scapegoats and avoiding stocks of companies with
low reputations.
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Harlow and Brown (1990) observes that psychologists tend to believe that an individual’s choice is
primarily determined by factors unique to the particular decision setting, whereas economists
assume that there is some individual specific mechanism playing a common role in all
economic decisions.
Warren et al. (1990) and Rajarajan (2000) predict individual investment choices (e.g., stocks, bonds,
real estate) based on lifestyle and demographic attributes. These investors see rewards as contingent
upon their own behavior.
(Rajarajan, 2002). Gupta (1991) argues that designing a portfolio for a client is much more than
merely picking up securities for investment. The portfolio manager needs to understand the psyche of
his client while designing his portfolio. Risk tolerant investors behave as though they can control risk.
This suggests that risk tolerance serves as a proxy for an ‘illusion of control’ and thus overconfidence
[Madhusoodanan(1997); Odean (1998);Barber and Odean (2001) ;Benartzi and Thaler (2001) ; Gervais
and Odean(2001) ; And Daniel and Huberman (2003)].
Barber and Odean (2000) explored the impact of intuitive thinking on investment
preference to study the experience of actual investors. The ET Retail Equity Investor Survey (2004) in
the secondary market identified different categories of investors based on their characteristics
and attitude towards secondary market investments. A study by on 245 Kuala Lumpur Stock
Exchange individual investors from Kula Lumpur and Petaling Jaya, reveal that there are some
differences between active and passive investors in terms of demographic and psychographics,
investment characteristics as well as investment behavior.
Karthikeyan (2001) has conducted research on Small Investors Perception on Post office Saving
Schemes and found that there was significant difference among the four age groups, in the level of
awareness for kisan vikas patra (KVP), National Savings Scheme (NSS), and deposit Scheme for
Retired Employees (DSRE),and the Overall Score Confirmed that the level of awareness among
investors in the old age group was higher than in those of young age group. NO differences
were observed among male and female investors except for NSS and KVP.
National Council of Applied Economic Research (NCEA) (1961) ‘Urban Saving survey’
noticed that irrespective of occupation followed and educational level and age attained, households
in each group thought saving for the future was desirable. It was found that desire to make
provision for emergencies were a very important motive for saving for old age. Securities
and Exchange Board of India (SEBI) and NCEA (2000) ‘Survey of Indian Investors’ had been report
that Safety and Liquidity were the primary considerations which determined the choice of an
asset. In this paper we are trying to find out the Factors which influence individual investment decision,
the difference in the perception of Investors in the investing process on the basis of
Age and the difference in perception of the Investors on the basis of Gender.
RESEARCH METHODOLOGY:
The research methodology depicts the flow of the research process and serves as guidance for the
research to carry out the research study. It comprises of data source, sample size, sampling techniques
and tools of analysis. In this research study, the researcher has used the primary data obtained from 110
respondents of customers in banking sector.

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Research Design Descriptive research

Study Area Chennai
Sampling Unit Customers of various banks
Sampling Method Convenient sampling
Sample Size 110 Investors
Nature of Data Primary data
Sources of Primary Survey method through Questionnaire
Data
Tool used for Data Structured Questionnaire
collection
Type of Questions Close ended, open ended
Statistical Tools Used Chi square, Anova, Correlation and regression and
Friedman’s test

SAMPLE SIZE:
Sample size denotes the number of elements selected for the study. For the present study, 110
respondents were selected at random. All the 110 respondents were the customers of different banks.
The study will be based on questionnaire with convenience sampling method and the data
analysis from the survey to arrive at the conclusions.
INFERENTIAL ANALYSIS:
ONE WAY ANOVA TEST
Null Hypothesis (H0): There is no significant differences between respondents who are ready to
invest and their satisfaction level.
Alternate Hypothesis (H1): There is a significant differences between respondents who are ready
to invest and their satisfaction level.
Descriptive of ANOVA Table:

Ready_to_invest
95% Confidence
Std. Interval for Mean
Deviati Std. Lower Upper Minim Maxim
N Mean on Error Bound Bound um um
Highly 1 1.00 . . . . 1 1
Unsatisfied
Unsatisfied 6 1.00 .000 .000 1.00 1.00 1 1
Neutral 32 1.41 .499 .088 1.23 1.59 1 2
Satisfied 63 1.05 .215 .027 .99 1.10 1 2
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Highly 8 1.38 .518 .183 .94 1.81 1 2

Satisfied
Total 110 1.17 .380 .036 1.10 1.24 1 2

TESTS OF HOMOGENEITY OF VARIANCES:

Levene
Statistic df1 df2 Sig.
Ready_to_inves Based on Mean 51.774 3 105 .000
t Based on Median 9.100 3 105 .000
Based on Median and 9.100 3 60.656 .000
with adjusted df
Based on trimmed mean 50.161 3 105 .000

Table: Tests Of Homogeneity Of Variances4

ANOVA:

Ready_to_invest
Sum of
Squares df Mean Square F Sig.
Between 3.267 4 .817 6.888 .000
Groups
Within Groups 12.451 105 .119
Total 15.718 109

RESULT:
Since the calculated p value is 0.001<0.05. Null Hypothesis is Rejected and Alternate Hypothesis is
accepted. Therefore, there is a significant difference between respondents ready to invest and their
satisfaction level.

FINDINGS:
➢ The distribution of sample says that majority of people which is 55.5% are at the age of 18 to 30.
People at the age of 18 to 30 prefer to make investments in banking sector.
➢ The distribution of sample says that majority of people which is 64.5% are male. This clearly
shows that males are more interested in investing in banking sector.
➢ The distribution of sample says that majority of people which is 66.4% are graduates. Graduates
are constantly looking for creating multiple sources of income and are interested in investing in
banking sector.

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➢ The distribution of sample says that majority of people which is 62.7% are working in private
sector. The report clearly shows that people who are working at private sector are more into
investing in banking sectors.
➢ The distribution of sample says that 40.9% of people who are investing in banking sector are
having their monthly salary range between Rs 40,000 and Rs 70,000 and 40% of the people are
having their monthly salary range between Rs 10,000 and Rs 40,000. This shows that people
having their monthly salary range between 10,000 and 70,000 are majorly investing in banking
sectors.
➢ The distribution of sample says that majority of people which is 73.6% are investing in fixed
deposit and 26.4% of people are interested to invest in recurring deposit.
➢ The distribution of sample says that majority of people which is 69.1% are investing 5% to 10%
of their income in banking sector.
➢ The distribution of sample says that majority of people which is 56.4% are investing yearly in
banking sector. 22.7% of people are investing quarterly and 20.9% of people are investing
monthly.
➢ The distribution of sample says that majority of people which is 52.7% prefer to invest for the
time period of 1 to 3 years.
➢ The distribution of sample says that 56% of people are slightly aware of bonds, 56% of people
are slightly aware of debentures, 59% of people are moderately aware of equity shares, 55% of
people are moderately aware of government securities. 60% of people are very aware of mutual
funds. 58% of people are very aware of real estate, 60% of people are very aware of gold. So
majority of people are very aware of mutual funds , real estate and gold.
➢ The distribution of sample says that majority of people which is 78.2% have already invested in
any of the following investments :
▪ Bonds
▪ Debentures
▪ Equity shares
▪ Government securities
▪ Mutual funds
▪ Real estate
▪ Gold
➢ The distribution of sample says that majority of people which is 82.7% are ready to invest in
these kinds of investments.
➢ The distribution of sample says that majority of people which is 37.3% have invested mostly in
mutual funds, 25.5% have invested mostly in bank deposits, and 16.4% have invested mostly in
gold in the past few years.
➢ The distribution of sample says that majority of people which is 65% agree that investment in
banking helps to meet their family needs in future, 67% of people agree that investment in
banking helps to meet emergency needs, 63% agree that investment in banking helps to live a
safe and secure life, 69% agree that it helps to increase steady capital growth, 63% agree that it
helps to avoid loss and expenses. So majority of people invest in banks to meet family needs,
emergency needs, secure life, capital growth and loss & expenses.
➢ The distribution of sample says that 49% of people agree that investment in banks was
influenced by relatives, 45% agree that it was influenced by peer, 46% agree that it was
influenced by social media, 48% agree that it was influenced by advertisements, 64% of people
strongly agree that it was influenced by self. So majority of people 64% strongly agree that
investment in bank was influenced by self.
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➢ The distribution of sample says that 57% of people agree that they prefer to invest in banks
because they like to invest for less than one year, 46% of people agree that they like to invest for
5 years or more, 50% of people disagree to take investment amount before the due date. So
majority of people which is 57% agree to invest in banks because they like to invest for less than
one year.
➢ The distribution of sample says that 59% of people agree that they prefer to invest in bank
because they like to have a risk free investment, 60% agree that they like to have a high rate of
return, 49% of people agree that they like to have a fixed amount of return in future. So majority
of 59% of people agree that they prefer to invest in banks because they like to have a risk free
investment.
➢ The distribution of sample says that majority of people which is 57.3% are satisfied with
banking investments. 29.1% are neither satisfied nor dissatisfied with banking investments.
➢ The distribution of sample says that majority of people which is 56.4% think that investment in
other avenues is riskier than bank investments.
➢ From this survey, most of the people suggest mutual funds as the best form of investment in
banking.
SUGGESTIONS AND RECOMMENDATIONS:
▪ The basic driving force to invest in banks is security and benefit reasons. So banks can provide
various future investment plans and high rate of return other than any other avenues.
▪ People prefer to invest in banks due to various factors like security, awareness, opinion, benefit
and duration. Individual require mainly security factor to invest in banks.
▪ In the past few years, people have invested mostly in mutual funds. So people choose to invest in
fixed deposit and mutual funds.
▪ People in young age prefer to invest more, than the elder one. So elder people can avoid taking
risky investments while young people can take risk.
▪ They can design a new savings or investment plans for their customers that can satisfy or attract
their customers towards their investment plans that will increase their business. This can provide
investors all the available information and they can make rational investment decision.
▪ The investors should be given adequate knowledge about the various forms of investments
through advertisements, social media and pamphlets.
CONCLUSION:
The study was conducted on 110 customers of banks that constituted the sample size. To collect data the
researcher used a structured questionnaire that was personally administered to the respondents. The
questionnaire constituted 20 items. In this study, data was analyzed using Chi square, Anova,
Correlation and regression, Friedman’s test. The objective of the study was to identify the factors
influencing investment decisions in banking sector. Results of the analysis revealed that the most
important factors were: security, awareness, benefit, duration and opinion. Another important thing that
was observed during this research study was that the banks have offered a variety of investment
products for the customers that create hype in the individuals in their selection.

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