Attitude of Customers towards Public Sector & Private Sector Banks For downloading this report and many other assignment, project and reports for marketing, management, human resource management, supply chain management, engineering and medical

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Market Research

Research Conducted by


Maitali Shah Disha Gadhiya Khyati Ambani Nasreen Ansari

213044 213016 213004 213005

L.S.Raheja College of Arts & Commerce

Attitude of Customers towards Public Sector & Private Sector Banks


⇒ Industry Overview ⇒ Industry Characteristics ⇒ Research Objective

03 04 05 2

25 ⇒ Sampling Design ⇒ Research Design ⇒ Data Collection ⇒ Time Planning ⇒ Data Analysis ⇒ Findings ⇒ Recommendation 06 07 09 10 10 11 18

⇒ Questionnaire 20


25 Introduction Industry Overview Although some form of banking, mainly of the money-lending type, has been in existence in India since ancient times, it was only over a century ago that proper banking began. The earliest institutions which undertook banking business under the British regime were agency houses which carried on banking business, in addition to their trading activities. With a view to bring commercial banks into the mainstream of economic development with definite social obligations and objectives, the Government issued ordinance on 19 July 1969 acquiring ownership and control of 14 major banks in the country, with deposits exceeding Rs 50 crores each. Six more commercial banks were nationalised from 15 April 1980. The objectives of public sector banking system were outlined on 21 July 1969. The three decades after nationalization saw a phenomenal expansion in the geographical coverage and financial spread of the banking system in the country. As certain rigidities and weaknesses were found to have developed in the system, during the late eighties the Government of India felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. In the post-nationalization era, no new private sector banks were allowed to be set up. However, in 1993, in recognition of the need to introduce greater competition, which could lead to higher productivity and efficiency of the banking system, new private sector banks were allowed to be set up in the Indian banking system. Commercial Banking System in India consisted of 302 scheduled banks (including foreign banks) and one non-scheduled bank at the end of March 1999. Over the period March 1998 to March 1999, the number of scheduled banks increased by three while that of non-scheduled banks remained unchanged at one. Of the scheduled banks, 223 are in public sector and these account for about 83 per cent of the deposits of all scheduled commercial banks. In the public sector banking system, there are 196 4

25 regional rural banks, specially set up to increase the flow of credit to small borrowers in the rural areas. These banks have specified areas of operations usually limited to two to three districts. They also undertake some other commercial banking business. The remaining 27 banks in the public sector are regular commercial banks and transact all types of commercial banking business. Some important indicators in regard to progress of commercial banking in India during the recent past are given in table 13.4. Amongst the public sector banks, as on March 1999, the State Bank of India (SBI) group (SBI and its seven associates) is the biggest unit with 13,290 offices and deposits exceeding 1,39,000 crore aggregating Rs 1,71,782.48 crore and advances of Rs 1,14,430.37 crore. In the associate banks, SBI owns either the entire or the majority of share capital. The SBI and its associate banks as a group account for around 31.9 per cent of aggregate banking business (aggregate of deposits and advances) conducted by the public sector banks and around 26.2 per cent of the aggregate business of the entire banking system. The remaining 19 banks in the public sector are more nationalised in 1969 and 1980 respectively

Industry Characteristics The banking industry has moved gradually from a regulated environment to a deregulated market economy. The market developments kindled by liberalization and globalization have resulted in changes in the intermediation role of banks. The pace of transformation has been more significant in recent times with technology acting as a catalyst. While the banking system has done fairly well in adjusting to the new market dynamics, greater challenges lie ahead. The financial system is the lifeline of the economy. The changes in the economy get mirrored in the performance of the financial system, more so of the banking industry. Liberalization and de-regulation process started in 1991-92 has made a sea change in the banking system. From a totally regulated environment, we have gradually moved into a market driven competitive system. Our move towards global benchmarks has


25 been, by and large, calibrated and regulator driven. The pace of changes gained momentum in the last few years. Structure and ownership pattern would undergo changes. There would be greater presence of international players in the Indian financial system. Similarly, some of the Indian banks would become global players. Government is taking steps to reduce its holdings in Public sector banks to 33%. However the indications are that their PSB character may still be retained. Technology as an enabler is separately discussed in the report. It would not be out of place, however, to state that most of the changes in the landscape of financial sector discussed above would be technology driven. In the ultimate analysis, successful institutions will be those, which continue to leverage the advancements in technology in re-engineering processes and delivery modes and offering state-of-the-art products and services providing complete financial solutions for different types of customers. Banks will take on competition in the front end and seek co-operation in the back end, as in the case of networking of ATMs. This type of competition will become the order of the day as Banks seek to enlarge their customer base and at the same time to realize cost reduction and greater efficiency.

Problem Statement To determine the Attitude of Customers towards Public sector & private Sector banks Research Objective To profile the customers in terms of: ⇒ Their savings pattern ⇒ Their banking pattern (frequency of transactions) ⇒ Preferences while selecting a bank for transacting for the first time


25 Sampling Design Since most of the country’s population is now engaged in banking transactions, it would be infeasible to interview all of them. Hence the method of sampling was used. The basic idea of sampling is that by selecting a representative sample, it’ll prove useful in drawing valid conclusions and help in achieving a reliable result for this research. This method is used mainly because of the large and the widely spread nature of the Banker’s market. To give reliable results by the sampling procedures 2 important factors should be taken care of: Accuracy: The degree to which bias is absent from the sample. Precision: It should fully represent its population in all respects. Relevant Population The relevant population in our case is all those transact with banks (Public or Private) on a rather frequent basis and hold accounts in alteast one bank. The method of simple random sampling is used. Parameters of Interest In our survey of estimating the attitudes of the bankers, the entire population is divided into various parameters to enable us to diagnosis the perception the various categories of users. These parameters are: The income level The occupation Area of residence Sampling Frame Since only people who hold bank accounts and are engaged in frequent banking transactions applicable for this research, there was a list prepared of selected people doing so. However, it was prepared on random basis. 7


Type of sample For the purpose of this research, the probability random sampling method was adopted. With this sample design, care has been taken to avoid arbitrary or biased selection of sample element. Also, it will help in predicting the behaviour of the total population. Sample size We intended to follow Normal Distribution curve while testing Hypothesis, a sample of 60 respondents was selected. We have seen to it that our survey has equal participation from people of both sexes. In addition, we have taken care that the survey has cut across various occupation barriers, so that the results are not job or occupation specific.

Data source The background information about public and private sector banks was collected by visiting various sites and scanning various magazines. However, the research analysis was based mainly on the primary data input received from the customers themselves while conducting the fieldwork.

Research Design Exploration Purpose of the study: The research design is of Descriptive type which aims to find out the Attitude of customers towards public and private sector banks while selecting of transactions. It aims to find answers to question like…. Is your bank at a convenient location for you? 8

25 Do you trust your bank? Does the age of the bank matter when selecting them? Do you prefer to use Modern technology in banking? To what extent does the physical environment affect your decision about transacting with a bank? Does your bank’s commitment towards social causes have any bearing your selection decision? Instrument The instrument used for the research is the questionnaire, which was prepared after a thorough knowledge of various aspects of factors that influence a particular consumer in the bank-selection procedure.

Questionnaire Design There were two main objectives while framing the questionnaire. First it aimed to find out generally to find out the selecting pattern of a person for a bank. For instance, ⇒ Is the bank at a convenient location? ⇒ To what extent does their friends’ opinion matter? ⇒ To what extent does the physical environment affect your decision? ⇒ Is the age of the bank important? And secondly, it aimed at the intricate details, which a customer takes into consideration while selecting a bank like, ⇒ Transaction tracking system availability ⇒ Staff-friendliness with the customers ⇒ ATM coverage by the banks ⇒ Net Banking facility ⇒ 24-customer service 9


Study’s Variables The study was mainly focused on getting as diverse sample size, which is a healthy representation of the population. So the incomes, area of residence, occupation were the study’s variables. Data Collection Team The preparation of the questionnaire and the administration of the survey were carried out by the same research team. Location All places of Mumbai were covered in the survey. Data collection time The instruments were administered from first week of February to fourth week of February 2004 to collect the response. The team took around 4 weeks of time to gather all the relevant information. Efforts to remove bias: The survey was conducted in public locations like bus stops, educational institutions, corporate offices etc .to gather the primary data.

Field instructions Since the questionnaire was designed to be administered only on those consumers who transacted with banks and held alteast one account in any bank, the field staffs were told to ask the consumers before they filled the questionnaire. Relevance of secondary data


25 The secondary data was only used to give a brief review about the banking industry and about the features about the 2 sectors in it, namely the Private and the Public that separate them, to the respondents while filling up the questionnaire. Time Planning The complete schedule is given below. Jan
Check Check Check Check Check Check

Steps Planning Survey Design Survey Conduct Secondary Data Analysis Project Finalization






Data Analysis Data handling The collected data was handled carefully in the form of filled-up questionnaires. The response was then transferred manually to an Excel spreadsheet. Preliminary analysis Preliminary analysis of the pilot survey was done to find out the sample proportion. This was done with the help of Ms Excel software and all the aspects of the research were analyzed. For each variable the functions used were “Count If” and “Mode” as questionnaire consisted of nominal scale questions. Data presentation 11

25 The collected data is presented in the form of Bar graphs, Pie-chart tabulations. Findings The profile of the respondents are as follows : Income Levels
Income Levels
No. of Respondents 30 20 10 0 1 2 Income Level Category 3

and cross

Income Level Category 1 = Below 2 Lakhs 2 = 2-5 Lakhs 3 = Above 5 Lakhs


25 Gender



Male Female

Results of Survey Private Sector Banks are preferred over Public Sector Banks and thus a positive attitude towards the private sector banks.

Overall Preference



Public Private


25 The main reasons noticed for this result are as follows: 1] Customers perceive that private sector provides more facility than public sector banks.
No. Of. Facilities

38% 62%

Public Private

2] Inquiries is more efficiently handled by private sector banks than public sector.
Handling Of Inquiries

28% Public Private 72%

3] Private sector are perceived to be friendlier than public sector.

33% 67%

Public Private


25 4] One-to-One Correspondence is perceived to be better in private sector banks.

One-to-One Correspondence

33% 67%

Public Private

5] Private sector banks are perceived to have better ATM Coverage.
ATM Coverage

35% 65%

Public Private

6] Private Sector Banks are perceived to have a better Crisis Handling System.
Crisis Handling System

30% Public Private 70%

7] Private Sector are perceived to be more operationally flexible.




35% 65%

Public Private

8] Response Time is perceived to be better in private sector banks.

Response Time

38% 62%

Public Private

9] Private sector are perceived be more user friendly than public sector bank.
Ease of Language

44% 56%

Public Private

But along with this, there are some factors on which public sector banks gain and they are as follows: 1] Public Sector banks have Better Branch coverage



Branch Coverage

42% 58%

Public Private

2] Public sector banks are situated at locations convenient to customers.

Travelling Convenience

44% 56%

Public Private

3] Charges levied for different transaction are lower in case of public sector banks than private.
Extent of Charge

32% 68%

Public Private


25 Cross Tabulation for Gender and Preference Public Sector Banks 8 19 Private Sector Banks 22 13

Male Female

The above tabulation shows that male prefer private sector banks whereas females prefer public sector banks. The reason for this attitude is that females prefer security. For them the age of the bank as well as the good will achieved by it is important. This is proved by the following cross tabulation between Gender and Importance of bank age: Bank Age - Important 8 25 Bank Age – Not Important 20 7

Male Female


25 Conclusion Customers have a positive attitude for private sector banks than public sector banks but the difference between the 2 categories is only of 6% (Overall Performance graph). Thus this minimal difference is due to various factors enumerated above. There are certain aspects on which public sector performance is better but there are couple of others where private banks are far ahead. If public sector banks improve on these factors than it is possible for them to compete with private sector banks effectively. Thus the recommendations for public sector banks to build a better image and develop goodwill and positive attitude amongst customers are as follows : 1. Provide more facilities (products\services). If they are already available create awareness amongst customers. 2. Better one to one correspondence. Give time to individual customer and need. Project the image that the bank cares for them.

3. Flexibility in operations is desired. Ex: Providing customers with the notes of denomination they demand. This type of flexibility though does not break the rules of the bank but creates a friendly image in customers mind. 4. Reduced response time. Efficiency in operations is to be obtained. Technological improvements have to be made and response time should be reduced through highly computerized and technological oriented processes. 5. Be more user-friendly (language). Customers (especially rural area) prefer to interact in their local language and thus would like to visit banks where his queries are better understood and thus efficiently solved.


25 6. Improved crisis handling system. This is the area where public sector banks need to improve tremendously because private sector banks have setup a highly technological systems to handle crisis situation like losing of cheques, ATM card, credit card, etc. the system responds as quick as 1 minute in case of lost ATM cards (Ex: Standard Chartered Bank). This time is of tremendous importance to customer. Thus all care should be taken to reduce the time. 7. Better ATM coverage. If it already exist than creation of awareness about the same amongst customers.


25 Annexure 1. Copy of the sample Questionnaire Attitude of Customers (Individuals) towards Private & Public Sector banks Dear Respondent, • The following questionnaire is prepared with a view to evaluate the attitudes of individuals towards the various Public and Private sector banks. • • The Questionnaire is to be filled keeping in mind the saving’s A/c. Please tick in the appropriate blanks and boxes.

Bank / Account Details 1. Mention the Banks (that you are aware of) in your area.
Public Private

2. Do you hold accounts in more than one bank? (ie. Public as well as Private)

Answer Yes No


3. Which Banks do you deal in? What are the accounts that you hold? 21

Bank Accounts

4. How often do you perform transactions with the bank?
No. of transactions 0-10 10-20 20-30 Public Private

Technical Details

1. Is your bank at a convenient location?
Public Branch Coverage Travelling Convenience Yes Yes No No Yes Yes Private No No

2. Do your banks have a ‘transactions tracking system’?
Answer Yes No Tick

3. If yes, to what extent is it important for you?
Preference Important Not important Tick

4. How does the bank levy the charges for different transactions? (E.g. issue of Demand Draft)
(Tick in the applicable box)

Higher Standard Lower Higher

Standard Lower

5. How would you rate the overall efficiency of your bank in the following?
(Tick in the applicable box)
Servies/Products Public Private


No. of facilities/products (E.g. bill
payment, Credit cards, Debit cards, etc.)

Good Good Good Good Good Good Good Good Good

Average Average Average Average Average Average Average Average Average

Bad Bad Bad Bad Bad Bad Bad Bad Bad

Good Good Good Good Good Good Good Good Good

Average Average Average Average Average Average Average Average Average

Bad Bad Bad Bad Bad Bad Bad Bad Bad

Handling of Inquiries Friendliness (behaviour) One-to-one Correspondence Ease of Language Response Time Flexibility (E.g. your bank provides notes in
the denominations you demand)

ATM coverage by bank System to deal with crisis situation

6. Do you prefer the use of modern technology in Banking?
Answer Yes No Tick

7. To what extent are the following facilities important in your decision about transacting with a bank?
Facilities Net Banking Telephone Banking 24 hour Customer Service Important Not important

8. If preferred, do you think the technologically advanced Private Sector banks tend to gain by this?
Answer Yes No Tick

9. To what extent are the following important while availing a Loan facility of a bank?
Facilities Interest Rate Penalty Rate Default Rate Repayment Period Important Not important

General Details 1. Are you aware of the Surveys conducted on Banks? 23

Answer Yes No Tick

2. If yes, to what extent does it affect your decision about transacting with a bank?
Preference Important Not important Tick

3. To what extent does your friends’ opinion matter while transacting with a bank for the first time?
Preference Important Not important Tick

4. To what extent does the physical environment affect your decision about transacting with a bank?
Preference Important Not important Tick

5. Is your bank committed towards social causes? E.g. Gujarat Earthquake.
Answer Yes No Don’t know Tick

6. If yes, to what extent is it important in your decision about transacting with a bank?
Preference Important Not important Tick

7. How long is your relationship with the bank? ______________________________________________________________________ 8. Is your bank favourably inclined towards the interviewee if he/she has long standing relationship with the bank? (E.g. usually securities are required while granting loans, but in certain cases, banks grant the loan to the customers on the basis of past experience with the customer) 24

Answer Yes No Tick

9. Do you trust your Bank?
Answer Yes No Tick

10. If yes, to what extent is the age of the bank important?
Preference Important Not important Tick

11. Overall, which bank do you prefer more (Public/Private) and on what basis? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Personal Details 1. Name: 2. Gender: 3. Age:
Age group 18-35 35-50 50-65 Above 65 Tick

_______________________ _______________________

4. City/Town of Residence: 5. Marital Status: 6. Education Background:

___________________ ___________________
Qualification Under- Graduate Graduate Post-Graduate Professional Tick

7. Income level (per annum):
Income Level (in Rs.) Below Rs. 2 Lakhs Rs. 2 – 5 Lakhs Above Rs. 5 Lakhs Tick


25 Thank you for your Valuable Time! For downloading this report and many other assignment, project and reports for marketing, management, human resource management, supply chain management, engineering and medical

available absolutely free online please visit


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