Chapter 3 Research Methodology

 
RESEARCH METHODOLOGY
Research methodology deals with the selection of systematic methods that can be
adopted to solve research problems. Systematic research methodology is a crucial step
in any research because it directly influences the whole research and its outcomes.
Therefore, a clear methodology is required in selection of study areas, respondents
and the use of appropriate tools for collection and analysis of data. This chapter
presents the research approach adopted to compare the financial performance and
financial inclusiveness of private and public sector banks in India, and also to gain an
insight into the level of customer satisfaction with regard to the services provided by
these banks.

3.1 Study Area and Sample Design

The major thrust of the present study was to analyze comparative financial
performance and inclusiveness of public and private sector banks. The study also
analyzed relative customer satisfaction levels of private and public sector banks. The
issue is of importance to address the often raised concerns of differences in working
and services provided by public and private sector banks.
As far as the performance of public and private sector banks was concerned, overall
comparison of financial performance and financial inclusiveness of these banks for
the last 10 years was done. Whereas, to study the customer satisfaction with regard to
the services provided by public and private sector banks, study was purposively
restricted to three states of Punjab, Haryana and Himachal Pradesh in northern region
of the country; for reasons of time and financial resource constraints on the part of the
researcher. In the next stage of selection of sample customers, two separate lists of
public and private sector banks operating in the selected states were prepared, using
the relevant data published by Indian Banks Association. In the third stage, the public
and private sector banks were arranged on the basis of their total assets, as on March,
2011 (appendix I). It was noted that some of the top public sector banks (State Bank
of India, Punjab National Bank, Bank of Baroda) were too large to be compared with
the private sector banks. Hence, in order to get the comparable sample of public sector
banks, the total assets of top private sector bank were considered as benchmark to
select banks from the list of public sector banks. Finally, a random sample of three
banks each was selected from the lists of public and private sector banks for

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conducting the survey for analyzing the customer satisfaction of the services provided
by the two groups of banks. The banks so selected for the detailed study are listed in
table 3.1.

Table 3.1 Banks Selected

Public sector Private sector

 Bank of India  ICICI Bank

 Union Bank of India  Axis Bank
 Punjab & Sind Bank  IndusInd Bank

3.2 Data Source

Both primary and secondary data were required and used to analyze the research
issues considered in this study. For analyzing the financial performance and the
inclusiveness issues, secondary data for the last 10 years was used because of formal
policy initiative of financial inclusiveness in 2005-06. The secondary data were
collected from various published sources, including websites, of different related
agencies. Important sources of secondary data were publications of Reserve Bank of
India (Report in Trend and Progress of Banking in India, Statistical tables related to
banks in India), Indian Banks Association, research journals (Pacific business review
and Indian journal of finance), and websites of different related agencies/organizations.
Customers’ perception and level of satisfaction towards the services provided by the
two categories of banks was analyzed by collecting primary data from the customers
of the selected banks. For this purpose, one city was purposively chosen from each
selected state. Major consideration in selecting these cities for detailed survey was
taken as the availability of all the chosen banks in the selected city. Thus, three cities
viz., Shimla in Himachal Pradesh, Panchkula in Haryana and Mohali in Punjab were
taken for the purpose of survey for customer satisfaction. Further, purposive sampling
was again used for the selection of bank branches in each selected city. Finally, a
sample of 300 customers of the selected banks (150 private + 150 public) from each
state was interviewed using convenience sampling method. In this process, total 1100
customers were interviewed. Siddiqui (2013) stated that sample size of 1000
respondents is sufficient to conduct a research successfully. To fulfill the objective of

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the study a sample of 900 customers was studied after filtering the questionnaire
which was incorrectly filled.

3.3 Data Collection and Analysis

Primary data were collected to evaluate the customer satisfaction with respect to
services provided by the public and private sector banks though personal survey
method. A well-structured questionnaire was used during the surveys to collect data
from the selected customers. As per the extensive literature review, various studies
such as Parasuraman et.al. (1985), Mengi (2009), Patra (2011), Rao & Lakew (2011)
and Gupta et.al. (2013) etc. highlighted effectiveness, accessibility, cost, tangibility,
reliability and empathy as the major parameters of customer satisfaction and hence,
the study was carried out with these parameters. These parameters were further
evaluated on the basis of different indicators and the association between customer
satisfaction indicators and socio-economic variables was studied to get a better picture
of the customer satisfaction towards selected services provided by the banks. The
questionnaire consisted of the questions related to each selected parameters of
different indicators of satisfaction towards banking services used by the customers
and about the suggestions of the customers for possible improvement in these
services.
To test the reliability of the questionnaire, a pilot survey was conducted with 20
respondents (10 public and 10 Private) of both the bank groups in Shimla city of
Himachal Pradesh. To calculate the reliability of questionnaire, coefficient called
“Cronbach’s Alpha” was used. The reliability values from 0.60 to 0.70 are considered
acceptable by many researchers (Cooper and Schindler, 2006; Malhotra and Birks,
2006). In the present survey, perception of the customers with respect to the services
provided by private and public sector banks was measured on a 5 point likert scale.
Questionnaire based on six parameters i.e. effectiveness, accessibility, cost, tangibles,
reliability and empathy. The alpha values derived using Croanbach Alpha were found
to be above 0.60 in case of all the parameters as shown in table 3.2 below:

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Table 3.2 Reliability Analysis
Parameters Alpha Value
Effectiveness 0.615
Access 0.805
Cost 0.727
Tangibles 0.638
Reliability 0.611
Empathy 0.714
Overall Reliability: 0.703

The overall alpha value was .703, which exceeds the minimum requirements and
hence the questionnaire was accepted for the primary survey. However, the difference
in responses towards the scales viz strongly agree and agree; and strongly disagree
and disagree was found to be negligible and hence, the further analysis was conducted
on three point likert scales. Three scales used included agree, neutral and disagree.

3.3.1 Data Analysis: The data were analyzed using the following statistical tools and
techniques.
 Likert Scale
A five point likert scale (strongly disagree, disagree, neutral, agree and strongly
agree) was used to evaluate customers’ satisfaction level with respect to the services
provided by the public and private sector banks. However, the responses did not show
much variation in first and the last two scales and hence, the analysis was carried out
with three points likert scale viz. agree, neutral and disagree.
 Percentage Method
The relative share of each individual indicator to total score was calculated using the
percentage method.
 Mean and Standard Deviation
Mean scores of all indicators were calculated to identify the level of customer
satisfaction with respect to services of the banks on Likert scale. Similarly, Standard
deviation was measured to identify the extent of dispersion in the opinion of
customers from mean score.
 Chi Square Test

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The chi square test was applied to determine the significant relationship between the
selected socio-economic variables and the level of satisfaction towards the services
provided by the banks. The value of chi square (denoted by X2) is calculated by using
the given observed frequency and expected frequency.
²
X² = ∑
Where,
O = Observed Frequency
E = Expected Frequency
∑ = Summation
Secondary data of 10 years (2006 to 2015) collected to measure the financial
performance and financial inclusiveness of public and private sector banks in India
was analyzed using the following statistical tools and techniques.
 Ratio Analysis
An insight into the existing literature highlighted Ratio Analysis as an important tool
to measure the financial performance of the banks. Jain (2006), Singh & Tandon
(2012), Singh (2012) studied financial performance of the banks through Ratio
Analysis and highlighted the importance of different ratios. Hence, Ratio analysis was
performed to measure the financial performance of public and private sector banks
during the period 2006-2015. The ratios mentioned below were used to measure the
financial performance.

Credit-Deposit Ratio Total Advances/Total Deposits

Investment-Deposit Ratio Investments (Govt. Securities and other
approved securities)/ Total Deposits
Net NPA to Net Advances Ratio Net NPA / Net Advances
Return on Assets Net Profit (after taxes) / Total Assets
Return on Equity Net Income / Average Return on Equity
Capital Adequacy Ratio Tier One Capital + Tier Two Capital/
Risk Weighted Assets
Net Interest Margin Interest Income – Interest Expenses
Cost of Deposits Actual Interest paid on various Deposits /
Average Deposits

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 Percentage Change
Technique of percentage change was used for comparing the previous year’s value
with current year value. The formula used to calculate the percentage has been
highlighted below:
New Value - Old Value
Percentage Change = X 100
Old Value

 Compounded Annual Growth Rate (CAGR)

CAGR method was applied on the data collected to measure the growth rate of
ATMs, bank branches, deposits and savings accounts of public and private sector
banks. CAGR was calculated using the following formula:

.
CAGR = 1

Results of the selected aspects of banking were presented in the form of tables and
charts.

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