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A COMPARATIVE STUDY OF
CUSTOMERS SATISFACTION
TOWARDS PRIVATE AND PUBLICBANKS
(A CASE OF HDFC BANK AND
STATE BANK OF INDIA)
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DECLARATION
Hereby I declare that the project report entitled A
Comparative study of customers satisfaction towards
private and public banks (A Case of HDFC Bank and State
Bank of ndia!"submitted for the degree of Master of Business
Administration, our original work and the project report has not
formed the basis for the award of any diploma, degree,
associate ship, fellowship or similar other titles. It has not been
submitted to any other university or institution for the award of
any degree or diploma.
B!"#$I%"& ' $H" &$()*+. $o know preference of customers regarding public sectorbanks and private sector banks.. to analy-e which facility inuences the customer most whileselecting Bank,/. to compare the various services provided by these banks and0. to make aware about the various services provided by the
bank.
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BANKING INDUSTRY
Histor o! B"#$i#% i# I#&i"
Without a sound and effective banking system in India it cannot have a healthy
economy. The banking system of India should not only be hassle free but it should be
able to meet new challenges posed by the technology and any other external and
internal factors. For the past three decades India's banking system has several
outstanding achievements to its credit. The most striking is its extensive reach. It is no
longer confined to only metropolitans or cosmopolitans in India. In fact, Indian
banking system has reached even to the remote corners of the country. This is one of
the main reasons of India's growth process.
The government's regular policy for Indian bank since !"! has paid rich dividends
with the nationali#ation of $ ma%or private banks of India &ot long ago, an accountholder had to wait for hours at the bank counters for getting a draft or for withdrawing
his own money. Today, he has a choice. one are days when the most efficient bank
transferred money from one branch to other in two days. &ow it is simple as instant
messaging or dials a pi##a. (oney has become the order of the day. The first bank in
India, though conservative, was established in )*". From )*" till today, the %ourney
of Indian +anking ystem can be segregated into three distinct phases.
They are as mentioned below-
arly phase from )*" to !"! of Indian +anks
&ationali#ation of Indian +anks and up to !! prior to Indian banking sector/eforms.
&ew phase of Indian +anking ystem with the advent of Indian Financial 0
+anking ector /eforms after !!
1hase I
The eneral +ank of India was set up in the year )*". &ext came +ank of 2industan
and +engal +ank. The ast India 3ompany established +ank of +engal 4*5!6, +ank of
+ombay 4*$56 and +ank of (adras 4*$76 as independent units and called it
1residency +anks. These three banks were amalgamated in !85 and Imperial +ank of
India was established which started as private shareholders banks, mostly uropeansshareholders. In *"9 :llahabad +ank was established and first time exclusively by
Indians, 1un%ab &ational +ank ;td. was set up in *!$ with head
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banking in India as the 3entral +anking :uthority. =uring those day>s public has lesser
confidence in the banks. :s an aftermath deposit mobili#ation was slow. :breast of it
the savings bank facility provided by the 1ostal department was comparatively safer.
(oreover, funds were largely given to traders.
1hase II
overnment took ma%or steps in this Indian +anking ector /eform after independence.
In !99, it nationali#ed Imperial +ank of India with extensive banking facilities on a
large scale especially in rural and semi?urban areas. It formed tate +ank of India to act
as the principal agent of /+I and to handle banking transactions of the @nion and tate
overnments all over the country. even banks forming subsidiary of tate +ank of
India was nationali#ed in !"5 on ! thAuly, !"!, ma%or process of nationali#ation was
carried out. It was the effort of the then 1rime (inister of India, (rs. Indira andhi. $
ma%or commercial banks in the country were nationali#ed. econd phase of
nationali#ation Indian +anking ector /eform was carried out in !*5 with seven more
banks. This step brought *5B of the banking segment in India under overnment
ownership. The following are the steps taken by the overnment of India to /egulate
+anking Institutions in the 3ountry- !$!- nactment of +anking /egulation :ct.
!99- &ationali#ation of tate +ank of India.
!9!- &ationali#ation of +I subsidiaries.
!"- Insurance cover extended to deposits.
!"!- &ationali#ation of $ ma%or banks.
!)- 3reation of credit guarantee corporation.
!)9- 3reation of regional rural banks.
1hase IIIThis phase has introduced many more products and facilities in the banking sector in
Its reforms measure. In !!, under the chairmanship of ( &arasimham, a committee
was set up by his name which worked for the liberali#ations of banking practices. The
country is flooded with foreign banks and their :T( stations. fforts are being put
to give a satisfactory service to customers. 1hone banking and net banking is
introduced. The entire system became more convenient and swift. Time is given more
importance than money. The financial system of India has shown a great deal of
resilience. It is sheltered from any crisis triggered by any external macroeconomics
shock as other ast :sian 3ountries
+anking system in India
The Indian banking can be broadly categori#ed into nationali#ed 4government owned6,
private banks and speciali#ed banking institutions. The /eserve +ank of India acts a
centrali#ed body monitoring any discrepancies and shortcoming in the system. ince
the nationali#ation of banks in !"!, the public sector banks or the nationali#ed banks
have ac
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practices allowed Indian banks to be insulated partially from the :sian currency
crisis.Indian banks are now niche retail segments. The Indian
banking has finally worked up to the competitive dynamics of the Dnew> Indian market
and is addressing the relevant issues to take on the multifarious challenges of
globali#ation. +anks that employ IT solutions are perceived to be Dfuturistic> and
proactive players capable of meeting the multifarious re
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7. 1rivate ector +anks
2=F3 +ank
I3I3I +ank
Federal +ank
I& Hysya +ank
:xis +ank 4formerly @TI +ank6
Ees +ank +ank of /a%asthan
+harat verseas +ank
3atholic yrian +ank
3enturion +ank of 1un%ab
3ity @nion +ank
=evelopment 3redit +ank
=hanalakshmi +ank
anesh +ank of Curundwad
IndusInd +ank
Aammu 0 Cashmir +ank
Carnataka +ank ;imited
Carur Hysya +ank
Cotak (ahindra +ank
;akshmi Hilas +ank
&ainital +ank
/atnakar +ank
+I 3ommercial and International +ank outh Indian +ank
:ma#ing (ercantile +ank
1un%ab &ational +ank
/upee +ank
araswat +ank
Tamilnad (ercantile +ank
Thane Aanata ahakari +ank
+assein 3atholic +ank
:fter nationali#ation of $ commercial banks in !"!, no new private banks were
licensed by /+I in the country, though there was no legal bank on entry of private
sector banks. The &arsimha committee report of !!, has envisaged a larger role for
private sector banks. In recognition of need to introduce greater competition with a
view to achieving higher productivity and efficiency of banking system. /+I issued
few guidelines in Aan !!7 for entry of private sector banks. It prescribed of minimum
paid up capital of /s.55 crores for new bank and shares to be listed at stock
exchanges new bank after being granted license under +anking /egulation :ct, shall
be registered as 1ublic ltd. 3ompany under companies :ct !9". ubse
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new commercial banks have been granted license to start banking operations. The new
private sector banks have been very aggressive in business expansion and are also
reporting higher profit levels taking advantage of technical and skilled manpower. In
certain areas, these banks have been out crossed the other group of banks including
foreign banks.
@I=;I& F/ 1/IH:T 3T/ +:&C
The /+I issued guidelines regarding the formation and functioning of private sector
banks in Aanuary !!7. These guidelines are as follows-
6 The banks shall be governed by the provisions of The /eserve +ank of India
:ct, !7$ The +anking /egulations :ct, !$! other relevant statuaries 1rivate
sector banks are re
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Company ProfileOverview of SBIThe origin of the State Bank of India goes back to the first decade of thenineteenth century with the establishment of the Bank of Calcutta inCalcutta on 2 une !"#$% Three years later the bank received its charter
and was re&designed as the Bank of Bengal '2 anuary !"#()% * uni+ueinstitution, it was the first -oint&stock bank of British India sponsored bythe .overnment of Bengal% The Bank of Bombay '!/ *pril !"0#) and theBank of 1adras '! uly !"0) followed the Bank of Bengal% These threebanks remained at the ape3 of modern banking in India till theiramalgamation as the Imperial Bank of India on 24 anuary !(2!%Primarily *nglo&Indian creations, the three presidency banks came intoe3istence either as a result of the compulsions of imperial finance or bythe felt needs of local 5uropean commerce and were not imposed fromoutside in an arbitrary manner to modernise India6s economy% Their
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evolution was, however, shaped by ideas culled from similardevelopments in 5urope and 5ngland, and was influenced by changesoccurring in the structure of both the local trading environment and thosein the relations of the Indian economy to the economy of 5urope and theglobal economic framework%5stablishment
The establishment of the Bank of Bengal marked the advent of limitedliability, -oint& stock banking in India% So was the associated innovation inbanking, vi7% the decision to allow the Bank of Bengal to issue notes,which would be accepted for payment of public revenues within arestricted geographical area% This right of note issue was very valuablenot only for the Bank of Bengal but also its two siblings, the Banks ofBombay and 1adras% It meant an accretion to the capital of the banks, acapital on which the proprietors did not have to pay any interest% Theconcept of deposit banking was also an innovation because the practiceof accepting money for safekeeping 'and in some cases, even investmenton behalf of the clients) by the indigenous bankers had not spread as ageneral habit in most parts of India% But, for a long time, and especiallyupto the time that the three presidency banks had a right of note issue,bank notes and government balances made up the bulk of the investibleresources of the banks%The three banks were governed by royal charters, which were revisedfrom time to time% 5ach charter provided for a share capital, four&fifth of
which were privately subscribed and the rest owned by the provincialgovernment% The members of the board of directors, which managed theaffairs of each bank, were mostly proprietary directors representingthe large 5uropean managing agency houses in India% The rest weregovernment nominees, invariably civil servants, one of whom was electedas the president of the board%
Major change in the conditions* ma-or change in the conditions of operation of the Banks of Bengal,
Bombay and 1adras occurred after !"$#% 8ith the passing of the PaperCurrency *ct of !"$!, the right of note issue of the presidency banks wasabolished and the .overnment of India assumed from ! 1arch !"$2 thesole power of issuing paper currency within British India% The task ofmanagement and circulation of the new currency notes was conferred onthe presidency banks and the .overnment undertook to transfer theTreasury balances to the banks at places where the banks would openbranches% 9one of the three banks had till then any branches 'e3cept thesole attempt and that too a short&lived one by the Bank of Bengal at1ir7apore in !"() although the charters had given them such authority%
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But as soon as the three presidency bands were assured of the free useof government Treasury balances at places where they would openbranches, they embarked on branch e3pansion at a rapid pace% By !"4$,the branches, agencies and sub agencies of the three presidency bankscovered most of the ma-or parts and many of the inland trade centres inIndia% 8hile the Bank of Bengal had eighteen branches including its head
office, seasonal branches and sub agencies, the Banks of Bombay and1adras had fifteen each%The eight banking subsidiaries are:!&State Bank of Bikaner and aipur 'SBB)2&State Bank of ;yderabad 'SB;)&State Bank of India 'SBI)0&State Bank of Indore 'SBI
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.old oan
5ducational oan
oan *gainst Securities
oan *gainst Property
oans *gainst
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%8ide =istribution 9etwork: 53cellent penetration in the country with morethan !#### core branches and more than /!## branches of associatebanks'subsidiaries)%0% =iversified Portfolio
: SBI Bank has all the products under its belt, which helpit to e3tend the relationship with e3isting customer% SBI Bank hasumbrella ofproducts to offer their customers, if once customer has relationship withthe bank%Some Products, which SBI Bank is offering are:
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2% Planning to add 2### branches and ### *T1s in 2##"&2##(% This willfurtherincrease its reach%% Increasing trade and business relations and a large number ofe3patriatepopulations offers a great opportunity to e3pand on foreign soil%
Threats:!% *dvent of 19C banks: arge numbers of 19C banks are mushrooming inthe Indian market due to the friendly policies adopted by the government%Thiscan increase the level of competition and prove a potential threat for themarketshare of SBI bank%2% Consumer e3pectations have increased many folds in last few yearsand thebank has not been responsive enough to meet them on time%% Private banks have started venturing into the rural and semi&urbansector, whichused to be the bastion of the State Bank and other PS> banks0%5mployee Strike: There was an employee strike in the year 2##$ which
disrupted SBIGs activities% This can be repeated in the future
Overview of ;=C B*9H;=C Bank began operations in !((/ with a simple mission: to be a8orld&class IndianBank% They reali7ed that only a single&minded focus on product +uality and
servicee3cellence would help them to get there%