CHAPTER III

RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY

3.1 STATEMENT OF PROBLEM

Housing loan is one of the emerging portfolio of both Private and Public sector

banks. The national housing policy of the Government of India emphasize that

the incentive to be given to customers buying residential properties

.Accordingly in income tax there has been concessions / tax sops for the

individual buyer for home use. 60-65% Tax sops given by the government for

housing loans have been instrumental in driving growth in this sector. The

government allows tax benefits to both the home loan consumer and the

lender.

A home loan consumer is allowed tax deductions on the following:

• Interest paid on home loan: As per Sec 24 (b) of the Income Tax Act,

1961, annual interest payments up to Rs 1,50,000 on housing loans can

be claimed as a deduction from taxable income.

• Principal repayment of home loan: Sections 80 C read with section 80

CCE of the Income Tax Act, 1961 says from gross total income, an

Rs.1,00,000 of principal repayment on home loan is allowed as a

deduction.

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Under Section 36 (1) (viii) of the Indian Income Tax Act 1961, with

respect to any special reserve created and maintained by a financial

corporation engaged in providing long-term finance for construction or

purchase of houses in India for residential purposes, a maximum amount of

20 per cent of the profits (earlier it was 40 per cent) obtained from such

business (figured in the head ‘Profits and Gains of Business or Profession’)

and carried to such special reserve is tax deductible. This deduction is

available only up to double the total amount of the company’s paid-up share

capital and its general reserves. Since the loan is given by banks by

mortgaging the property, hence there is significant security to banker for

disbursing the loan. However the customers have different opinions about the

housing loan scheme.

The present investigator noticed from the review of the literature that

there are very few studies to examine financial performance of the banks in

housing loan sector.

“Due to availability of affordable houses on the periphery of metros and in

Tier-II and Tier-III cities, demand for housing finance has been good,”

Mr. R.V. Verma, Chairman and Managing Director, National Housing

Bank, November, 2011

So far in the financial year 2011, the repo rate of Central Bank of India

has raised from 6.75 per cent to 8.50 per cent. Banks countered this situation

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by re-aligning their Base Rate upwards from the 8.25 - 9.50 per cent band as

on April 1, 2011, to 10-10.75 per cent.

Banks determine their actual lending rates on loans and advances with

reference to the Base Rate and by including such other customer-specific

charges as considered appropriate.

The present study was undertaken with the intent to investigate after

examining the literature reviewed and noticed that their exit gap in terms of

customer satisfaction towards the home loan disbursed by schedule banks.

Accordingly, the problem of the study focus on customer satisfaction towards

the housing loan schemes of the bank .An after has also be made for

comparative study of private and public sectors banks delivery and

disbursement of loan leading to customer satisfaction. Investigatorer also

attempted to explore reason for shifting of home loan availed from one bank

to another bank.

Key problems of the study are:

1. To study difference between public sector and private sector bank on

customer satisfaction.

2. To study differences on socio-economic categories of customer on

customer satisfaction of public and private sector banks on house loan

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3. To study relationship amongst customer satisfaction towards the

bankers and availing of the loan

4. To examine factors affecting public and private sector banks on the

customer satisfaction for the home loan disbursed to their customers.

3.2 OBJECTIVES OF THE STUDY

The objectives of the study are:

1. evaluating and comparing the Home Loan portfolios of Public and

Private sector banks;

2. evaluating and comparing the Home Loan disbursement of public and

Private sector banks;

3. knowing customer’s attitude or response on the home loans schemes;

4. knowing customers’ satisfaction level while dealing with the Bank;

5. suggesting strategies to increase customer satisfaction, understand the

reasons for default.

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The section of methodology consists of a short depiction of sample of

the study and demographic composition, the population of the study, the

instruments utilized to collect data, the study design, the procedures used for

data collection, and the details of the methods and techniques used for

analyzing the data.

3.3 RESEARCH DESIGN

Methodology is a body of knowledge by that researchers enable to

explain what they did and how they analyze. All these methods indicate their

limitations and resources help to identify their assumptions relating to their

potentialities to research advances (Miller, 1983). According to him a research

design is an under-pin which help to the types of questions that can be

addressed and the nature and give of the evidence to others so they can

come to know that how it is generated (Clark et al. 1984). In other hand lots

people they have issue of research methodology as according to them it is a

important to any study or research. By this we can give appropriation between

data, research paradigm and collection methods etc. all the aspects that help

to research findings. According to Churchill (1979) research design give a

guide line to researcher for the collection and analysis. We can say that

research design plays an important role but with a significant link between the

theory and argument, which come by empirical data collected by researcher

for study (Nachmias and Nachmias 2008). An option of research design

always help to come in a decisions with given or fixed range of dimensions of

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the research process (Bryman and Bell 207, p.40), but it also come with

influences methodological procedures which can be data collection, data

sampling and statistical packages.

This research design is exploratory and comparative to determine the

customer satisfaction towards house loan scheme offered by public sector

and private banks.

3.4 SOURCES OF DATA

A- Primary Source:- Approaching the home loan customers of public

sector banks and private sector banks and obtaining relevant details by

questionnaires, personally.

• Interviews (Tool: Questionnaire): An interview is a technique of data

collection that involves respondents’ oral questioning. Interviews can be

conducted with varying degree of flexibility.

• Structured Interview: Structures Interviews are conducted with a fixed

list of questions in a standard sequence that have mainly fixed or pre-

categorized answers. So as to make the questions always answered in

the same circumstances, a structured interview was standardizes with

regard to questions for respondents’ survey. This significantly minimized

the impact of context, where the answers to a survey question can depend

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on the type of foregoing questions. Although effects of context cannot be

averted, it is often desirable that all respondents are held across

constantly. This technique to gather information is very limited. To follow

the structured method, mostly the surveys are carried out either

telephonically or even the person is leaned.

The questionnaire was intricately designed to tap the factors which affect

the performance of bank and try to analysis the customers’ satisfaction level.

The first part gathered information about the personal profile of the

respondents which included their age, education, marital status, and their

working profile. Part II was about their loan reasons, amount and loan before

after Part III to know level of satisfaction, level of motivation, level of

involvement and work compatibility.

B- Secondary Source:- Data has been collected from statistical bulletin

published by varies organizations journals, periodicals, newspapers, annual

reports of the respective nationalized banks, annual report of Reserve Bank of

India (RBI), RBI Bulletin, trend and progress of banking (annual publication of

RBI), SBI,ICICI,HDFC,PNB etc. ( bulletin, annual report) and all publications

and reports published by respective nationalized banks annually. Personally

approaching the SBI & ICICI banks and obtaining relevant details.

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3.5 DATA COLLECTION TOOLS

As already pointed out, while collecting data multi-methods were used

in the present study using both quantitative and qualitative techniques, with

more emphasize on quantitative method. To examine and explain constructs

relationship, questionnaire survey method was applied as the main instrument

in data collection.

A- Sample Size:-

Sample size is 300 customers from leading banks, availing home loan.

ICICI, HDFC, LIC and SBI, PNB officers and staff also shall be interviewed to

seek their response on house loan schemes.

B- Sampling Technique:-

The survey was conducted using cluster or a convenient sampling

technique.

3.6 STATISTICAL TOOLS UTILIZED

Reliability was assessed by using Cronbach’s alpha technique. The

factor structure of all the involved concepts was analyzed by conducting

Principal Component Analysis (PCA). To examine the coorelation of variables

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with each other as hypothesized, correlation coefficient (r) analysis was

conducted

Line graphs, Pie charts, Bar graph etc. have been used to present the

data. For analyzing descriptive and inferential statistics as well, SPSS’s

Version 20 has been used. The tests to be used shall be X2, correlation and

factor analysis.

A- Plan of Analysis:-

For the analysis of the data collected, tables have been used. For

producing data clearly we have used pie-charts and graphs as statistical tools.

For representing data neatly and efficiently, percentages and averages have

also been used.

B- Development of Data Collection Instrument:-

Survey Method and Field Activity is the mode for collecting data.

Personal interview is the basis of Primary data collection. The questionnaire

has been prepared by the Researcher according to the requirement of the

collected data.

C- Population targeted for this study is defined as follows:-

Elements : Home loan bank customers

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Extent : New Delhi

Period : 2008-2010

3.7 HYPOTHESIS TESTING

Researcher had hypothesis for the topic

H0. There is similarity in customer’s satisfaction between private sector banks

and public sector banks.

To know customer’s satisfaction amongst the private sector banks and public

sector banks. The hypothesis was tested by using F test.

H1. There is similarity in socio-economic categories of customer on their

satisfaction of private sector banks and public sector banks on home loan

By factor analysis test

H2: There is similarity amongst customer satisfaction towards the bankers

and availing of the loan

By correlation test that customer satisfaction there exist relationship between

and amongst customer satisfaction towards the banks and availing of the loan

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3.7.1 Sampling

The investigator collected the list of person who had availed home loan

for the last three years from the following two public sector banks ( PNB and

UB) and from the private sector banks(ICICI and HDFC), the questionnaire

after doing a pilot study on 60 customers After do validation of questionnaire

the investigator contacted through them personally to the customers living in

South Delhi. Personal interviews were carried out with 310 customers out of

whom 10 customers’ data was discarded on account of non-responsive

behavior and at the end only 300 respondents were left for the study. From

the interview and data collected, 4 respondents did not gave any response to

some of the items hence for final analysis a sample size of 296 has been

taken for the present study.

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Demographic profile of the Respondents (customers)

a. Age Age Frequenc

y % Valid

% Cumulative

%

Valid

18yrs-25 78 26.0 26.0 26.0 26-35YRS 85 28.3 28.3 54.3 36-49YRS 66 22.0 22.0 76.3 50-65YRS 48 16.0 16.0 92.3 66+YRS 23 7.7 7.7 100.0 Total 300 100.0 100.0

b. Marital status Mart_Stat Frequency % Valid

% Cumulative

%

Valid

Married 266 88.7 88.7 88.7 Unmarried 34 11.3 11.3 100.0

Total 300 100.0 100.0

c. Educational qualification EdU_qualt Frequency % Valid

% Cumulative

%

Valid

Under graduate 73 24.3 24.3 24.3

Graduate 135 45.0 45.0 69.3 Post graduate 92 30.7 30.7 100.0

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d .Years in Delhi Yrs_Del Frequency % Valid

% Cumulative

%

Valid

Less than 5 yrs. 102 34.0 34.0 34.0

More than 5 yrs. 198 66.0 66.0 100.0

Total 300 100.0 100.0

e. Customer Profile Cust_Profile Frequency % Valid

% Cumulative

%

Valid

Student 2 .7 .7 .7 Housewife 5 1.7 1.7 2.3 Working Professional 83 27.7 27.7 30.0

Business 94 31.3 31.3 61.3 Self Employed 40 13.3 13.3 74.7

Govt. service Employee 76 25.3 25.3 100.0

Total 300 100.0 100.0

f. Reason for Loan Reson_loan Frequenc

y % Valid

% Cumulative

%

Valid

Non-availability of funds

129 43.0 43.0 43.0

Reluctant to pay cash in one go

101 33.7 33.7 76.7

Tax benefit 34 11.3 11.3 88.0 Other 36 12.0 12.0 100.0 Total 300 100.0 100.0

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g. Source of Information Source_Information Frequency % Valid

% Cumulative

%

Valid

Newspapers 90 30.0 30.0 30.0 Magazines 61 20.3 20.3 50.3 Banners/ Hoardings/ Pamphlets

110 36.7 36.7 87.0

Word of mouth 25 8.3 8.3 95.3 Any other source 14 4.7 4.7 100.0 Total 300 100.0 100.0

h. Loan Before Loan_Before Frequency % Valid % Cumulative %

Valid Yes 93 31.0 31.0 31.0 No 207 69.0 69.0 100.0 Total 300 100.0 100.0

i. Loan Future Loan_Fut Frequency % Valid % Cumulative %

Valid Yes 188 62.7 62.9 62.9 No 111 37.0 37.1 100.0 Total 299 99.7 100.0

Missing System 1 .3 Total 300 100.0

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j. Awareness of Scheme Aware_Scheme Frequency % Valid % Cumulative %

Valid Yes 93 31.0 31.0 31.0 No 207 69.0 69.0 100.0 Total 300 100.0 100.0

k. Reason of Bank Reson_Bank Frequency % Valid

% Cumulative

%

Valid

Near to home 40 13.3 13.3 13.3 attractive loan schemes 75 25.0 25.0 38.3

Amount of loan 48 16.0 16.0 54.3

Fine Customer services

25 8.3 8.3 62.7

Rate of Interest 72 24.0 24.0 86.7

Personal Relation 24 8.0 8.0 94.7

Other 16 5.3 5.3 100.0 Total 300 100.0 100.0

l. Need for Loan Need_Loan Frequenc

y % Valid

% Cumulative

%

Valid

Construction for new house

129 43.0 43.0 43.0

Purchase of new house 110 36.7 36.7 79.7

Renovation of old House

61 20.3 20.3 100.0

Total 300 100.0 100.0

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m. Loan Amount Amount Frequenc

y % Valid

% Cumulative

%

Valid

< 1 Lakh 44 14.7 14.7 14.7 1 lakh to 5 lakh 100 33.3 33.3 48.0 5 lakh to 10 lakh 115 38.3 38.3 86.3

> 10 Lakh 41 13.7 13.7 100.0 Total 300 100.0 100.0

n. Type of Bank Type_Bank Frequency % Valid

% Cumulative

%

Valid

Private bank 152 50.7 50.7 50.7

Public Bank 148 49.3 49.3 100.0 Total 300 100.0 100.0

o. Rate of Interest of Private Bank ROI_Pvtbank Frequency % Valid

% Cumulative

%

Valid Yes 134 44.7 44.7 44.7 No 166 55.3 55.3 100.0 Total 300 100.0 100.0

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p. Rate of Interest of Public Bank ROI_Pubbank Frequency % Valid

% Cumulative

%

Valid Yes 202 67.3 67.3 67.3 No 98 32.7 32.7 100.0 Total 300 100.0 100.0

q. Security Deposit Security_Deposit Frequency % Valid

% Cumulative

%

Valid

Bank security (F.D)

63 21.0 21.0 21.0

Gold 39 13.0 13.0 34.0 Land Papers 148 49.3 49.3 83.3 Third person security 37 12.3 12.3 95.7

Other 13 4.3 4.3 100.0 Total 300 100.0 100.0

r. Margin of Private Bank Margin_Pvtbank Frequency % Valid

% Cumulative

%

Valid

Yes 152 50.7 50.7 50.7 No 141 47.0 47.0 97.7 3 7 2.3 2.3 100.0 Total 300 100.0 100.0

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s. Margin of Public Bank Margin_Pubbank Frequency % Valid

% Cumulative

%

Valid

Yes 158 52.7 52.7 52.7 No 135 45.0 45.0 97.7 3 7 2.3 2.3 100.0 Total 300 100.0 100.0

t. Language Language Frequency % Valid

% Cumulative

%

Valid

Hindi 88 29.3 29.3 29.3 English 162 54.0 54.0 83.3 Punjabi 25 8.3 8.3 91.7 Others 25 8.3 8.3 100.0 Total 300 100.0 100.0

3.7.2 ANOVA test

Collection of statistical models along with their associated procedures,

in which the observed variance in a particular variable is partitioned into

components attributable to different sources of variation, is called analysis of

variance (ANOVA). ANOVA provides a statistical test of check the parity of

the means of several groups, and generates t-test to more than two groups.

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For this reason, ANOVAs are useful when two, three or more means are

compared.

This test has been used for comparison of respondents having

relationships with different age groups, qualifications, nature of work, income

groups, overall work experience and customer satisfaction of customers

availing home loan from public sector and private sector bank

3.7.3 FACTOR ANALYSIS

Statistical method used to represent variation between given variables

by the researcher is called Factor Analysis. Lower number of unobserved

variables is always called factors. In particular, researcher can explain what

he or she want to prove by the help of many tests but factor analysis is one of

the main test which is very well known and trustworthy, for example, that

variations in any number observed ,variables mainly reflect the variations in a

single unobserved variable. It can be joint variations in response for the

unobserved in latent variables.

Principal component analysis (PCA): It is most significant part of factor

analysis. PCA play a linear combination of variables which can be the

maximum variance from the variables. PCA clarifies the maximum proportion

among all of the remaining variance. That is why it called principal axis

method and it has always resulted in orthogonal factors.

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Factor loadings: As a part of loadings in PCA, the factor loadings play role

between the variable (rows), factor (columns) and correlation coefficients.

Alike Pearson’s, the squared factor loading is the percent of variance in all the

variables account for by each factor. After percent of variance in all the

variables by each factor, add the sum of the squared factor loadings (column)

and divide by the number of variables. (Note the variance of a standardized

variable is 1).

Interpreting factor loadings: By confirmation factor analysis, it gives

conformation that independent variables are signified by a particular factor

loadings should be 7 or higher, on the rationale.7 levels indicate half of the

variance by the factor. But.7 standard is a higher cannot meet in real life data.

That is the reason the researchers should use them only for exploratory

purposes, but if it is use a lower level.4 for the central factor that can meet in

real life. We have understood that interpretation of every factor loadings must

be done in theory and there is no need to focus on cutoff levels.

In rotation pattern, we will have both structure matrix and pattern matrix. The

structure matrix is - orthogonal rotation, which represents the variance is

measured by a factor, which can be either a unique or common contributions

basis, unique contributions or both-the pattern matrix, while representing the

lower the pattern of coefficients with common contributions to variance. For

oblique pattern the researcher has to looks both terms the structure and

pattern coefficients on the time giving attributing a label to a factor.