Service Quality Analysis in Banking Sector

A PROJECT ON SERVICE QUALITY ANALYSIS IN BANKING SECTOR

SUBMITTED BY: VIRAL SHRIMALI ( 7093) SUBMITTED TO: N.R. INSTITUTE OF BUSINESS MANAGEMENT

TABLE OF CONTENTS 1. RESEARCH METHODOLOGY 1.1 RESEARCH DESIGN 6 1.2 ANALYSIS OF DATA 7 1.3 LIMITATION OF STUDY 7 1.4 BENIFICIARIES OF PROJECT 1.5 THE RESEARCHER 2. INTRODUCTION TO THE BANKING

5

8 9

INDUSTRY 2.1 2.2.1 2.2.2 2.2 2.3 29 2.4 31 2.5 2.5.1

A SNAPSHOT OF THE BANKING INDUSTRY REFORMS IN THE BANKING SECTOR CLASSIFICATION OF BANKS CURRENT BANKING SCENARIO OF INDIA BANKING REVIEW

10 12 13 14

BANKING SECTOR

SWOT ANALISIS: BANKING SECTOR PORTER’S FIVE FORCE ANALYSIS FOR INDIAN BANKING SECTOR 2.5.2 PESTAL ANALYSIS 35 2.5.3 RECENT TRENDS 37 3. INRODUCTION TO SBI AND AXIS 3.1 STATE BANK OF INDIA 51 3.2 AXIS BANK 59 3.4 ABOUT AXIS BANK’S PROFILE 3.5 GOAL AND OBJECTIVES 64 4. SERVICE QUALITY 4.1 SERVICE AND ITS CHARECTERISTICS 4.2 GAP ANALYSIS 67

32 33

50

63 65 66

4.3 SERVICE QUALITY MEASUREMENT 5. ANALYSIS AND INTERPRETATION 6. 93 7. 96 8. 9. 101 10.

68 70

KEY FINDINGS CONCLUSION RECOMMENDATION BIBLIOGRAPHY

98

QUESTIONNAIRE

103

CHAPTER 1 RESEARCH METHODOLOGY

1.1 RESEARCH DESIGN: The methodology for the research study is descriptive and is as follows: Research Approach: Quantitative research Objectives: The main objective of our project is: To assess and compare the overall service performance of SBI and AXIS bank. To know in which service quality dimension the bank is performing well and in wh ich dimension it needs improvement. To know customers requirements or expectation for service. Sampling: Following sampling is designed in order to execute the survey. Sample Area: : Ahmedabad Sample size: 100 AXIS customers 100 SBI customers Sample Design: Samples selected in the survey are those who are the customers of either AXIS or SBI or both.

Data Collection Method: Data Collection Tool Secondary data: Various websites, articles from magazines and news papers, books were used for collecting secondary data. Primary data: The primary data has been collected by the researchers by designi ng structured questionnaire with the relevant question to the project study and research. Type of questionnaire: Structured questionnaire. 1.2 ANALYSIS OF DATA: The collected data in the study has been presented and analyzed using the variou s graphs for satisfaction level, score of various factors on the particular dime nsions, and overall dimension score and is compared with other service. Also data is analyzed through performance matrix.

1.3

LIMITAION OF STUDY: The study was restricted to two banks, so the competitive scenario could not be studied. Inadequate time was the major constraint during the whole project. All the answers given by the respondents have been assumed true.

1.4 BENEFICIARIES OF PROJECT: • Beneficiary of this project is to the bank, to improve the customer satisfaction in the dimension in which they are lagging. • Key findings and analysis will helpful to them for provide better services to cu stomers. • For researchers, to know the competitive advantage of both the banks and their s ervices. 1.5 THE RESEARCHERS: Viral Shrimali is final year MBA-marketing student of NRIBM, Gujarat University. He has completed his Bachelor in Commerce from Gujarat University.. I have selected this topic because I am interested in banking sector. Knowledge through this project can help me to identify more about the practices that will add value in an organization.

CHAPTER-2 INTRODUCTION TO THE BANKING INDUSTRY

2.1

A SNAPSHOT OF THE BANKING INDUSTRY:

The Reserve Bank of India (RBI), as the central bank of the country, closely mon itors developments in the whole financial sector. The banking sector is dominated by Scheduled Commercial Banks (SCBs). As at endMarch 2002, there were 296 Commercial banks operating in India. This included 27 Public Sector Banks (PSBs), 31 Private, 42 Foreign and 196 Regional Rural Banks . Also, there were 67 scheduled co-operative banks consisting of 51 scheduled ur ban co-operative banks and 16 scheduled state co-operative banks. Scheduled commercial banks touched, on the deposit front, a growth of 14% as aga inst 18% registered in the previous year. And on advances, the growth was 14.5% against 17.3% of the earlier year. State Bank of India is still the largest bank in India with the market share of 20% ICICI and its two subsidiaries merged with ICICI Bank, leading creating the second largest bank in India with a balance sheet size of Rs. 1040bn. Higher provisioning norms, tighter asset classification norms, dispensing with t he concept of ‘past due’ for recognition of NPAs, lowering of ceiling on exposure to a single borrower and group exposure etc., are among the measures in order to i mprove the banking sector. A minimum stipulated Capital Adequacy Ratio (CAR) was introduced to strengthen t he ability of banks to absorb losses and the ratio has subsequently been raised from 8% to 9%. It is proposed to hike the CAR to 12% by 2004 based on the Basle Committee recommendations. Retail Banking is the new mantra in the banking sector. The home loans alone acc ount for nearly two-third of the total retail portfolio of the bank. According t o one estimate, the retail segment is expected to grow at 30-40% in the coming y ears. Net banking, phone banking, mobile banking, ATMs and bill payments are the new b uzz words that banks are using to lure customers. With a view to provide an institutional mechanism for sharing of information on borrowers / potential borrowers by banks and Financial Institutions, the Credit Information Bureau (India) Ltd. (CIBIL) was set up in August 2000. The Bureau pr ovides a framework for collecting, processing and sharing credit information on

borrowers of credit institutions. SBI and AXIS are the promoters of the CIBIL. The RBI is now planning to transfer of its stakes in the SBI, NHB and National b ank for Agricultural and Rural Development to the private players. Also, the Gov ernment has sought to lower its holding in PSBs to a minimum of 33% of total cap ital by allowing them to raise capital from the market. Banks are free to acquire shares, convertible debentures of corporate and units of equity-oriented mutual funds, subject to a ceiling of 5% of the total outstan ding advances (including commercial paper) as on March 31 of the previous year. The finance ministry spelt out structure of the government-sponsored ARC called the Asset Reconstruction Company (India) Limited (ARCIL), this pilot project of the ministry would pave way for smoother functioning of the credit market in the country. The government will hold 49% stake and private players will hold the r est 51%- the majority being held by ICICI Bank (24.5%).

2.1.1

REFORMS IN THE BANKING SECTOR:

The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank has to earmark a minimum percentage of their loan portfolio to sector s identified as “priority sectors”. The manufacturing sector also grew during the 19 70s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980. Si nce then the number scheduled commercial banks increased four-fold and the numbe r of banks branches increased eight-fold. After the second phase of financial sector reforms and liberalization of the sec tor in the early nineties, the Public Sector Banks (PSB) s found it extremely di fficult to complete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permi tting them were issued in January 1993. Eight new private sector banks are prese ntly in operation. These banks due to their late start have access to state-of-t he-art technology, which in turn helps them to save on manpower costs and provid e better services. During the year 2000, the State Bank of India (SBI) and its 7 associates account ed for a 25% share in deposits and 28.1% share in credit. The 20 nationalized ba nks accounted for 53.5% of the deposits and 47.5% of credit during the same peri od. The share of foreign banks ( numbering 42 ), regional rural banks and other scheduled commercial banks accounted for 5.7%, 3.9% and 12.2% respectively in de posits and 8.41%, 3.14% and 12.85% respectively in credit during the year 2000.

2.1.2

CLASSIFICATION OF BANKS:

The Indian banking India, 1949 can be anks and scheduled perative banks. In

industry, which is governed by the Banking Regulation Act of broadly classified into two major categories, non-scheduled b banks. Scheduled banks comprise commercial banks and the co-o terms of ownership, commercial banks can be further grouped

into nationalized banks, the State Bank of India and its group banks, regional r ural banks and private sector banks (the old / new domestic and foreign). These banks have over 67,000 branches spread across the country. The Indian banking in dustry is a mix of the public sector, private sector and foreign banks. The priv ate sector banks are again spilt into old banks and new banks. Banking System in India Reserve bank of India (Controlling Authority) Development Financial institutions Banks

IFCI

IDBI

ICICI

NABARD

Commercial Co-operative Banks nks

NHB

IRBI

EXIM Bank

Regional Rural

ISIDBI Land Development

Banks

Ba

Banks

Public Sector Banks ivate Sector Banks SBI Groups Foreign Banks

2.2

Pr

Nationalized Banks

Indian Banks

CURRENT BANKING SCENARIO OF INDIA:

As per the Advance Estimates of GDP for 2008-09 released by the Central Statisti cal Organization on 9, February, 2009, the growth of GDP at factor cost (at cons tant 99-2000 prices) is estimated to grow at 7.1% during the year. The growth of GDP during 2007-08 (Quick estimates) was 9.0%. The International Monetary Fund (IMF) has forecast that India’s gross domestic pro duct (GDP) growth will slow dramatically to 6.25% in the fiscal year to March, a nd to 5.25% in the following year. This is well below the 9% growth in the year to March 2008 and even lower than the government’s prediction of 7.1% growth in 20 08-09. The average growth in the first three quarters of the fiscal year was 6.9%. This effectively means IMF expects the economy to grow only 4.4% in the last quarter . As per the above estimates, the growth rate for Agriculture, Industry and Servic es is estimated to be 2.6%, 4.8% and 9.6% respectively in 2008-09. In the quick estimates for 2007-08, the corresponding growth rates for these three sectors we re 4.9, 8.1 and 10.9% respectively. After growing at 5.0% in 2006 and 4.9% in 2007, IMF estimates global GDP growth to decelerate to 3.7% in 2008 in the wake of the current financial crisis. The f

inancial market turbulence in developed economies following the US sub-prime mor tgage crisis has reduced financial leverage, lowered credit availability and neg ative wealth effects have emerged as risks to consumption and growth in advanced economies, especially in the US. Continuing inflationary pressures from food an d commodity prices as well as high and volatile crude oil prices are other risks being faced by the global economy. India continued to be one of the fastest growing economies of the world. During 2007-08, the Indian economy grew at a robust pace for the fifth consecutive year. Real GDP gr owth, estimated at 8.7% in 2007-08, is in tune with the average annual GDP growt h of 8.7% in the five year period 2003-04 to 2007-08. Agriculture and allied act ivities are estimated to grow by 2.6% in 2007-08, which is in line with the aver age growth of 2.6% per annum during 2000- 01 to 2007-08. Food grains production touched a record high in FY08, with total food grains production placed at 227.3 million tones, surpassing the target of 221.5 million tones and recording an in crease of 4.6% over the previous year. Industrial growth at 8.6% during 2007-08 has moderated somewhat against 10.6% in the previous year. The services sector maintained its double-digit growth at 10.6% during 2007-08, higher than the long term average of 8.9% (2000-01 to 2007-08). Within services, transport and communications and financial services recorded double-digit growt h for the last two years and are expected to maintain the growth momentum. Trade and hotels showed higher growth of 12.1% in 2007-08 against 11.8% growth in 200 6-07. Another positive feature underpinning growth is the sharp rise in the rate of savings and investment in recent years, which rose to 34.8% and 35.9% respec tively in 2006-07. Towards the close of the fiscal year, higher inflation rate was noticed due to r ise in global prices of food, metals and crude oil. Inflation based on WPI decli ned from 6.4% at the beginning of the fiscal year to a low of 3.1% by mid-Octobe r 2007, partly reflecting moderation in the prices of some primary food articles and manufactured products. After hovering around 3% during November 2007, inflation began to edge up from e arly December 2007 to touch 7.4% by 29 March 2008, mainly reflecting hardening i n prices of primary articles such as fruits and vegetables, oilseeds, raw cotton and iron ore, as well as fuel and manufactured products such as edible oil/oil cakes and basic metals, partly due to international commodity price pressures. H owever, fiscal and monetary measures are being taken to contain inflation and ma intain high growth. Despite Rupee appreciation, exports continued to show a healthy growth, rising b y 23% in dollar terms during 2007-08 against 22.6% in the previous year. Overall exports growth was driven by petroleum and crude products, gems and jewellery, iron ore, non-basmati rice, cotton, transport equipment, etc. While India’s export s to USA, its single largest trading partner, showed deceleration, exports to UA E and China remained robust. In the same period, imports increased by 27.0% agai nst 24.5%, mainly due to higher oil imports; non-oil imports were led by capital goods, chemicals and related products, edible oils, gold, silver and pearls, pr ecious and semiprecious stones. Due to higher growth in imports than exports, th e trade deficit widened by 35.5% to US$ 80.4 bn during 2007-08 from US$ 59.3 bn in the previous year. The overall stance of RBI’s monetary and credit policy during the year was to ensu re price stability and financial system stability along with continuation of the growth momentum, emphasis on credit quality and credit delivery including finan cial inclusion. During 2007-08, the Bank Rate, Repo and Reverse Repo rates were kept unchanged. To manage the liquidity in the economy, RBI raised the Cash Rese

rve Ratio four times: in April, August and November 2007 from 6% to 7.50%. In li ne with liquidity tightening, PLRs and deposit rates of major banks were hiked d uring the year. While lending rates rose to 12.25-12.75% from 12.25- 12.50%, dep osit rates (for more than one year maturity) rose to 8.25-9.0% from 7.5-9.0% in the previous financial year. However, in the month of February 2008, to keep up the growth momentum in the economy, some banks announced cuts in their PLR and i nterest rate on housing loans below Rs.20 lakh. The tight monetary policy followed by RBI to control inflation and money supply had a Moderating impact on credit growth, which increased by 21.6% in 2007-08 against 28.1% in 2006-07. Deposit growth also moderated to 22.2% in 2007-08 from 23.8% in 2006-07 . For the current year, despite slowdown in the major economies of the world, the Indian economy will continue to grow at 8-8.5% driven by investment. Due to a nu mber of fiscal and monetary measures taken by the Government and RBI to put a ch eck on prices, inflation is expected to come down to 5-5.5% by March 2009. Need for a revolutionary approach towards privatization Nationalized banks such as State Bank Of India (SBI), though pygmies in the inte rnational banking market, are banking behemoths of India. They have branches spr ead over the entire length and breadth of the country. SBI in particular is allpervasive enjoying a sprawling network of 9000 branches. Its blue and white shin gle is visible to the smallest hamlet. It has assets understood to be worth abou t Rs2,22,500 crore ($52 billion). SBI has a very conservative approach to accoun ting particularly when it comes to declaration of its assets. Probably modesty d oes not permit the bank to exhibit its strengths. In particular, it has real est ate properties some of which are heritage sites all over the country. These are estimated to collectively command a value of Rs.30,000 crores. This, it is belie ved, does not get reflected in its book of accounts. SBI enjoys a monopoly of the government business. The Reserve Bank of India owns about 60% of the bank’s equity. To its credit, SBI mobilized $4.2 billion through the Resurgent India Bonds (RIB) issue in just 3 months down the post-Pokhran sa nction period. This was the difficult time when the international credit rating agencies had downgraded the country. SBI, time and again, does a rescue act in t he forex market to contain any volatility of the rupee. SBI was formed under the SBI Act in 1955 with the takeover of Imperial Bank and amalgamation of Bank of Bengal, Bank of Bombay, and Bank of Madras. The governme nt mopped up around 93% of the equity, leaving 7% to private ownership. By this act the equity of RBI cannot be diluted below 55%. SBI enjoys a pool of best managerial talent, assured government business, a coun trywide network of branches and strong brand credibility in the Indian market. But, that numero uno position is sliding with the entry of sleeker private and f oreign banks into the Indian Banking scene. The bank is continuously restructuri ng itself and for this, they even hire the services of foreign consultants but t he pace has to be hastened. With the government offering an assured business, nationalized banks and State B ank of India in particular should not take a complacent view. They should evolve service-intensive products and make their employees customer-friendly. With com petition from private and foreign banks knocking at the door, the banks should r ealize, size is no more an insurance against the onslaught of competition from s leek private and foreign banks. A revolutionary approach to privatize ownership is the need of the hour.

Virtual Banking: SBI has yet to computerize its operations and network all its branches. The comp uters currently available serve only to relieve the burden of the clerical staff of maintaining manual ledgers and not to penetrate into areas of customer servi ce. ATMs, Anytime-Anywhere, round the clock and telephone banking is still a far cry. These computers at the best remain only as desk ornaments. With the New Te lecom Policy (NTP) almost in place, telecom sector will soon be revolutionized. E-commerce, telephone banking, consumer banking, Internet banking, insurance et al are waiting just around the corner. At least in major metros, virtual banking will soon take-over from the brick-mortar banks. Privatization and Credit disbursement: Talks about privatization of the bank’s ownership have been initiated but the SBI act of 1955 does not permit RBI’s ownership to be diluted to below 55%. This act i s outdated and needs to be re-addressed. However, efforts have been initiated by SBI to privatize its non – banking subsidiaries like SBI Caps, SBI Gilts, SBI Fun ds Management, where SBI’s holding is about 85% of the equity. But the pace has to be hastened so that investments thus released can migrate to more important are as like development of new technologies and products in customer service and ser vice intensive areas. Privatization also helps to professionalize the banks’ day-t o-day operation, which will allow the management more freedom in decision making during credit disbursement. To aid privatization and effect a better price realization, the bank is attempti ng to change – over its accounting and reporting procedures to comply with US – GAAP norms. This is a prerequisite for trying out the ADR route, as it is known that US market is by far the undisputed biggest market and can offer the best price. At the moment, the SBI stock is undervalued at Rs.240 whereas experts expect Rs .300 would be a more realistic value. Action on this front at blitzkrieg pace is the need of the hour. Manpower Retraining and not Retrenchment: As a hangover of the past socialistic mindset, all the nationalized banks have e xcess workforce. This is indeed a hot potato for the management of many enterpri ses and is therefore being handled with kid gloves. In India, it is everyone’s wor ry to look at business as a source of employment, while making money is secondar y. In this ocean of manpower, every institution does have its share of highly sk illed and talented manpower, which contribute to asset building. It is the semi skilled manpower having outdated skills, which form the excess baggage. All bank s must invest in re-training the manpower so that they can migrate from the area s that will be vacated by computerization. The level of Non-Performing-Assets (N PAs) is still at very high levels and to start with, some of this excess manpowe r can cover areas of debt recovery. At the same time, one should also take note of the flight of talent from these n ationalized banks to newly set-up private and foreign banks. And, it is these ne w banks’ top officials after migrating from the government banks are targeting at the top corporate clients and thus poaching into the corporate business, which h as been the mainstay of the nationalized banks. This will soon become a problem of serious proportion unless the banks initiate steps to stem the flow. It is di fficult, to exclusively address the problem of excess manpower by schemes such a s voluntary retrenchment scheme (VRS) because while attempting to remove dead wo od, talent also takes an exit. Many industries have faced this problem. Also it will be over simplicity to state that the salaries should be raised because that will only start a wage war. Instead, the banks should involve the services of i

nternational consultants specialized in this field and take a holistic view of t he problem. Retraining and Rationalization of manpower commands higher priority over Retrenchment of manpower. New Products and New technologies: Nationalized banks have generally been preoccupied with treasury business. The n ew product areas that require greater penetration are personal banking, housing finance, consumer durable finance, auto-finance, internet banking, insurance, te lephone banking et al. Development of these new areas call for heavy investments and this cash - flow can only generated by privatization. In addition, surplus manpower once retrained can be absorbed in the new ventures. All nationalized banks and SBI in particular has the advantage of vast network o f branches and can therefore carry the new business to the remotest corner, but to make this presence felt the banks have to move at blitzkrieg pace. 2.2.1

BANKING IN THE NEW MILLENIUM

The banking environment has suddenly become quite challenging after the sub prim e crisis that surfaced last year and which has resulted in an unprecedented glob al liquidity crunch. The flattening of the world has dramatically impacted both the dynamics and the pace of global banking business. Mergers, acquisitions, consolidation, expansion , diversification of lines of business, shifting customer orientation and the ch anging regulatory environment are building up the pressure for banks to explore new possibilities by abandoning the familiar and embracing the unconventional. C ompetition is compelling banks to be agile and innovate everyday. In this milieu , what really enables banks to build a lasting competitive advantage is the abil ity to continuously innovate, achieve differentiation and respond quickly to dyn amic business challenges. The banking sector has witnessed wide ranging changes under the influence of the financial Sector reforms initiated during 2008. The approach to such reforms in India has been one of gradual and non-disruptive progress through a consultativ e process. The emphasis has been on deregulation and opening up the banking sect or to market forces. The Reserve Bank has been consistently working towards the establishment of an enabling regulatory framework with prompt and effective supe rvision as well as the development of technological and institutional infrastruc ture. Persistent efforts have been made towards adoption of international benchm arks as appropriate to Indian conditions. While certain changes in the legal inf rastructure are yet to be effected, the developments so far have brought the Ind ian financial system closer to global standards.

2.2.2

BANKING ACTIVITIES:

Banks activities can be divided into retail banking, dealing directly with indi viduals; business banking, providing services to mid-size business; corporate ba nking dealing with large business entities; private banking, providing wealth ma nagement services to High Net Worth Individuals; and investment banking, relates to helping customers raise funds in the Capital Markets and advising on mergers and acquisitions. Banks are now moving towards Universal Banking, which is a co

mbination of commercial banking, investment banking and various other activities including insurance. 2.2.3

TECHNOLOGICAL DEVELOPMENTS:

Technology has brought about strategic transformation in the working of banks. W ith years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have mor e choices in choosing their banks. With stiff competition and advancement of tec hnology, the service provided by banks has become more easy and convenient.

Internet Banking (E-Banking) Internet banking (or E-banking) means any user with a personal computer and a br owser can get connected to his banks website to perform any of the virtual banki ng functions. In internet banking system the bank has a centralized database tha t is web-enabled. All the services that the bank has permitted on the internet a re displayed in menu. Any service can be selected and further interaction is dic tated by the nature of service. The traditional branch model of bank is now givi ng place to an alternative delivery channels with ATM network. Once the branch o ffices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch.

Internet banking in India The Reserve Bank of India constituted a working group on Internet Banking. The g roup divided the internet banking products in India into 3 types based on the le vels of access granted. They are: Information Only System: General purpose information like interest rates, branc h location, bank products and their features, loan and deposit calculations are provided in the banks website. Electronic Information Transfer System: The system provides customer- specific information in the form of account balances, transaction details, and statement of accounts. Fully Electronic Transactional System: This system allows bi-directional capabi lities. Transactions can be submitted by the customer for online update. This sy

stem requires high degree of security and control Automated Teller Machine (ATM): ATM is designed to perform the most important fu nction of bank. It is operated by plastic card with its special features. The pl astic card is replacing cheque, personal attendance of the customer, banking hou r’s restrictions and paper based verification. Credit Cards/Debit Cards: The Credit Card holder is empowered to spend wherever and whenever he wants with his Credit Card within the limits fixed by his bank. Credit Card is a post paid card. Debit Card, on the other hand, is a prepaid c ard with some stored value. Smart Card: Banks are adding chips to their current magnetic stripe cards to enh ance security and offer new service, called Smart Cards. Smart Cards allow thous ands of times of information storable on magnetic stripe cards.

Core Banking Solutions Core Banking Solutions is new jargon frequently used in banking circles. The adv ancement in technology especially internet and information technology has led to new way of doing business in banking. The technologies have cut down time, work ing simultaneously on different issues and increased efficiency. The platform wh ere communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions. Here computer software is d eveloped to perform core operations of banking like recording of transactions, p assbook maintenance, interest calculations on loans and deposits, customer recor ds, balance of payments and withdrawal are done. Real Time Gross Settlement (RTGS) RTGS is an electronic settlement system of Reserve Bank of India without involve ment of papers. To facilitate an Efficient, Secure, Economical, Reliable and Exp editious System of Fund transfer and clearing in the Banking sector throughout I ndia. Real time gross settlement systems (RTGS) are a funds transfer mechanism w here transfer of money takes place from one bank to another on a "real time" and on "gross" basis. Electronic Clearing Service Electronic Clearing Service is another technology enhancement happened in the ba nking industry. The customer willing to use this facility is required to fill in the mandate form from the corporate/any utility service institution for ECS mod e of credit and debit. The customer needs to prepare the payment date and submit it to the “sponsor Bank” and after that everything happened electronically. So cust omers can there by make payments as well as receive all incomes electronically. Mobile banking Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term u sed for performing balance checks, account transactions, payments etc. via a mob ile device such as a mobile phone. 2.2.4

BASEL II: HOW GEARED ARE BANKS??

BASEL II is a new capital adequacy frame work applicable to scheduled commercial banks in India, as mandated by the RBI. The Basel capital accord (BASEL II) gui deline promulgated by the BIS to establish Capital adequacy requirements and sup ervisory standards for banks and structured by three pillars. In a nut-shell, BASEL II – Provide effective assessment method Incorporates Sensitivity to banks. Makes better business standards Reduce losses to the banks

The 3-Pillar Approach of BASEL II

The BASELII is designed to facilitate a more comprehensive, sophisticated and ri sk sensitive approach for banks to calculate regulatory capital. The basic objec tive of BASEL II is to create an international standard

2.2.5

CAMEL: TOOL FOR MEASURING THE

PERFORMANCE OF BANKS

An international bank-rating system where bank supervisory authorities rate inst itutions according to six factors. The six factors are represented by the acrony m "CAMELS." The six factors examined are as follows: C - Capital adequacy : of a bank & also the t to meet the need for additional capital.

Reflects the overall financial condition ability of the managemen

A - Asset quality ming assets as a he total asset

To ascertain the component of non perfor percentage of t

M - Management quality

:

:

To measure the efficiency of the management

E - Earnings ed by core activity

:

To assess the quality of income generat

L - Liquidity the demand from in a particular year

:

To measure the ability of a bank to meet demand deposits

On the Basis of CAMEL rating Top Ten Banks in Performance During 2008-2009 Public sector Banks Private sector Banks Foreign Banks Bank of India Karur vysya bank Shinhan bank Corporation Bank Yes bank Abu Dhabi commercial bank Union Bank of India City Union Bank Mashreqbank P S C Andhra bank Tamil Nadu Mercantile Bank Antwerp Diamond bank N V State bank of Patiala South Indian bank Bank of Tokyo-Mitsubishi U F J Bank of Baroda Federal Bank Calyon Bank Indian Overseas Bank Jammu & Kashmir Bank Krung Thai Bank Public Co. State Bank of Hyderabad Dhanalakshmi Bank State Bank of Mauritius Punjab & Sind Bank Karnataka Bank Bank of America National Trust Indian Bank Kotak Mahindra Bank Mizutto Corporate Bank

2.3 Banking Review-2009 NPAs rise for Private Banks, stable for PSBs

Gross NPAs movement of banks in Q1 has shown an interesting trend Gross NPAs of all Private Banks that we have covered have seen a sequential rise However, asset quality of most PSBs remained stable, with flat to lower Gross NP As NIMs of most banks saw a sequential decline Decline was largely due to PLR cuts by banks towards the end of Q4FY08 Most banks have, however, raised their PLRs and deposit rates by 100-150bps in J une’08 and Q1FY09 NIMs should see a marginal improvement in Q2 on account of PLR hikes However, as deposit re-pricing kicks in with a lag effect, NIMs may again come u nder pressure.

Credit spreads saw a decline after a long time

After a long time, the sector saw a decline in credit spreads (Yield on advances – Cost of deposits) Decline in credit spreads was largely due to inability of most banks to raise PL R in Q1 even as interest rates were rising BOB, IOB, Corpbank and BOI saw substantial fall in yields on credit book, result ing in compression of credit spreads Canbank, PNB, Union Bank saw sequential improvement in credit spreads in Q1 CASA saw a mixed trend Among Public Sector Banks (PSBs), SBI, Canara and Union saw marginal improvement in CASA on YoY basis Others like BOB, BOI, OBC saw a decline on YoY basis Among private banks, AXIS bank lost out due to CBOP merger, ICICI Bank saw impro vement both on YoY and sequential basis Overall credit growth was robust Among PSBs BOI, BOB, SBI and IOB saw above 30% growth. Canbank, Union and PNB we re more moderate at 16-20% Among Private banks, except for ICICI, most showed above 40+% growth Even for ICICI, consolidated book (including overseas book) grew 20% YoY Credit growth has been very robust at 26% in Q1 against 24.6% last year Banks which witnessed high credit growth Axis, AXIS Bank and Yes Bank among private BOB, BOI and SBI among PSBs

SBI showed a robust growth across all segments, except for mortgages International credit grew 46% YoY SME credit grew 23% YoY Mid Corporate credit grew 31% YoY Home Loans grew 17% YoY Axis among the private banks and BoI amongst PSBs continues to deliver high NII growth Credit growth of ICICI, Canara, Union, PNB, OBC was lower than the avera ge 2.4 • • • • • • • • • • •

IN BANKING SECTOR Non Performing Assets Capital Adequacy Ratio Q Ratio Z Score Shareholding Pattern of the Banks EPS Growth Rate Reserves with RBI to Total Assets Ratio Business per Employee & Profit Per Employee Total Liability to Net Worth Ratio Dividend Payout Ratio Return on Assets

2.5 SWOT ANALYSIS: Banking Sector Strength Weakness Aggression towards development the existing standards by banks. Strong regulatory impact by central Bank to all the banks. Presence of intellectual capital to face the change in implementation with good quality. Poor Technology infrastructure. Ineffective risk measures. Presence of more number of smaller banks that would likely to be Impacted adversely. Opportunities Threats Increasing Risk management Expertise. Need significant Connection among, business Credit & risk management and Informa tion Technology. Advancement of technologies. Strong Asset Base would help in bigger growth. Inability to meet the additional Capital Requirements. Loss of Capital to the entire

banking system due to merger and acquisitions.

Huge investment in technology.

2.5.1 Porter’s FIVE-FORCE analysis for Indian banking industry

Key Points: Supply Liquidity is controlled by the Reserve Bank of India (RBI). Demand India is a growing economy and demand for credit is high though it could be cycl ical. Barriers to entry Licensing requirement, investment in technology and branch network. Bargaining power of suppliers High during periods of tight liquidity. Trade unions in public sector banks can be anti reforms. Depositors may invest elsewhere if interest rates fall. Bargaining power of customers For good creditworthy borrowers bargaining power is high due to the availability of large number of banks Competition - High There are public sector banks, private sector and foreign banks along with non banking finance companies competing in similar business lines.

2.5.2

PESTAL ANALYSIS:

PEST Analysis for Banking Services Political/ Legal Influences which have an impact on banking services and consumer confidence incl ude the following: • State provision of pensions • Government encouragement of savings and investment (for e.g. via tax benefits) • Regulatory control and protection (to prevent the collapse of financial institut ions and protect investors money) Economic Economic factors are key variables which have an impact on the activity in the b anking services sector. The level of consumer activity is governed by income lev els and personal wealth. As income levels grow, more discretionary income is ava ilable to spend on banking services. Consumer confidence in the economy and in j ob security also has a major impact; if lean times are foreseen ahead, savings w ill take priority over loans and other forms of expenditure. Consumers may also

seek easy access savings and be willing to tie up their money for longer periods with potentially more attractive investments. The main economic factors that should be monitored with regard to banking servic es marketing are as follows: • Personal and household disposable income • Discretionary income levels • Employment levels • The rate of inflation • Income tax levels and taxation structures • Savings and investment levels and trends • Stock market performance • Consumer spending & Consumer credit Socio-cultural Many demographic factors have an important bearing on banking services markets. • Changing attitude towards consumer credit and debt • Changing employment patterns • Numbers of working women • The ageing population • Marriage/divorce/birth rates • Consumption trends Technological Technology has a major impact on many industries including financial services an d banking in particular. ATM services which not only provide cash but also allow for bill payments, deposits and instant statements are widely used. From the cu stomers’ viewpoint, technology has played a major role in the development of the p rocess whereby the service is delivered. Automated queuing systems have made vis its to the bank easier and more convenient. Telephone Banking and insurance serv ices are now being used in place of the traditional branch-based service process . Technology has also played a major role within organizations, bringing about f ar greater efficiency through computerized records and transaction systems and a lso in business development, through the setting up of detailed customer databas es for effective segmentation and targeting. The main technological developments fall within these categories; • Process developments • Information storage and handling • Database system 2.5.3 RECENT TRENDS I. Universal Banking Universal banking refers to Financial Institution offering all types of financia l services under one roof. Thus, for example, besides borrowing and lending for the long term, the Development Financial Institutions will be able to borrow/len d for the short-term as well.

Impact on FDI: Two key aspects of the business are affected. The institution can have access to cheap retail deposits and the breadth of its advances increase to include short -term working capital loans to corporates. The Institution has greater operation al flexibility. Also they can now effectively compete with the commercial banks.

IndianScenario: In India the five FDIs that are frontrunners in the race to convert to Universal Bank are: 1. Industrial Credit and Investment Corporation of India (ICICI) 2. Industrial Development Bank of India (IDBI) 3. Export Import Bank (EXIM Bank) 4. Industrial Finance Corporation of India (IFCI) 5. Industrial Investment Bank of India (IIBI) ICICI is already a virtual bank with subsidiaries like ICICI Bank engaged in ban king business. Thus with clearing of legal hurdles it just has to work out the m odalities to formally call itself a universal bank. Similarly other FDIs are charting out aggressive plans to stay ahead in this rac e. Also recently Bank of Baroda, a commercial bank has indicated its intention to c onvert to a Universal Bank.

II. RBI Norms: The norms stipulated by RBI treat FDIs at par with the existing commercial banks . Thus all Universal banks have to maintain the CRR and the SLR requirement on t he same lines as the commercial banks. Also they have to fulfill the priority se ctor lending norms applicable to the commercial banks. These are the major hurdl es as perceived by the institutions, as it is very difficult to fulfill such nor ms without hurting the bottomline Effect on the Banking Sector: However, with large Term lenders converting into Commercial banks, the existing players in the industry are likely to face stiff competition, lower bottom line ultimately leading to a shakeout in the industry with only the operationally eff icient banks will stay into the business, irrespective to the size. III. Mergers & Acquisition The Indian Banking Sector is more overcrowded then ever. There are 96 commercial banks reporting to the RBI. Ever since the RBI opened up the sector to private players, there have been nine new entrants. All of them are growing at a scorchi ng pace and redefining the rules of the business. However they are dwarfed by ma ny large public and old private sector banks with a large network of branches sp read over a diverse geographical area. Thus they are unable to make a significan t dent in the market share of the old players. Also it is impossible to exponent ially increase the number of branches. The only route available for these banks is to grow inorganically via the M & A route. Hence the new banks are under a tr emendous pressure to acquire older banks and thus increase their business. Currently most of the institutionally promoted banks have already gobbled smalle r banks. ICICI Bank has acquired ITC Classic, Anagram Finance and Bank of Madura within a period of two years. AXIS Bank has merged Times Bank with itself. UTI bank had almost completed its merger with Global Trust Bank before it ran into r ough weather. Also Nationalised Banks like Bank of Punjab, Vyasa Bank are wooing IDBI Bank for a merger. Among foreign banks, Standard & Chartered Bank has acqu ired ANZ Grindlays Bank’s Asian and Middle East operations The above happenings clearly indicate that the M & A scenario in the Indian bank ing sector is far from over. Strong banks will continue to takeover weak and ine fficient banks to increase their size.

IV. Multiple Delivery Channels Today the technology driven banks are finding various means to reduce costs and reach out to as many customers as possible spread over a diverse area. This has led to using multiple channels of delivery of their products. 1. ATM (Automatic Teller Machine): An ATM is basically a machine that can deliver cash to the customers on demand a fter authentication. However, nowadays we have ATMs that are used to vend differ ent FMCG products also. An ATM does the basic function of a bank’s branch, i.e., d elivering money on demand. Hence setting of newer branches is not required there by significantly lowering infrastructure costs. Cost reduction is however possible only when these machines are used. In India, the average cash withdrawal per ATM per day has fallen from 100 last year to 70 this year. Though the number of ATMs has increased since last year, it is not in sync with the number of cards issued. Also, there are many dormant cardholders who do not use the ATMs and prefer the teller counters. Inspite of these odds, I ndian banks are increasing the number of ATMs at a feverish pace. These machines also hold the keys to future operational efficiency. 2. Net Banking: Net banking means carrying out banking transactions via the Internet. Thus the n eed for a branch is completely eliminated by technology. Also this helps in serv ing the customer better and tailoring products better suited for the customer A customer can view his account details, transaction history, order drafts, elec tronically make payments, transfer funds, check his account position and electro nically communicate with the bank through the Internet for which he may have wan ted to visit the bank branch. Net banking helps a bank spread its reach to the entire world at a fraction of t he cost. 3. Phone Banking: This means carrying out of banking transaction through the telephone. A customer can call up the banks helpline or phone banking number to conduct transactions like transfer of funds, making payments, checking of account balance, ordering c heques, etc,. This also eliminates the customer of the need to visit the bank’s br anch. 4. Mobile Banking: Banks can now help a customer conduct certain transactions through the Mobile Ph one with the help of technologies like WAP, SMS, etc,. This helps a bank to comb ine the Internet and telephone and leverage it to cut costs and at the same time provide its customer the convenience. Thus it can be seen that tech savvy banks are tapping all the above alternative channels to cut costs improve customer satisfaction. V. VRS (Voluntary Retirement Scheme): VRS or the ‘Golden Handshake’ is picking up very fast in the recent times due to the serious attention of the government towards overstaffing in the banks, especial ly among the public sector banks. The government had also cleared a uniform VRS framework for the sector giving the banks a seven months time frame to cut flab. The scheme was open till 31st march, 2001. Though many banks had announced different VRS schemes it involved an outflow of huge sums of money. This could have had an adverse impact on the Capital Adequac y Ratio (CAR). Hence the RBI allowed the banks to write off the VRS expenses ove r a period of 5 years.

CHALLNGES: Liberalisation process has increasingly exposed Indian Industry to international competition and banking being a service industry is also not an exception. Bank ing Sector in India too faces same challenges at local, national and internatio nal level. Indian Banks, functionally diverse and geographically widespread, have played a crucial role in the socio-economic progress of the country after independence. H owever, the growth led to strains in the operational efficiency of banks and the accumulation of non-performing assets (NPA’s) in their loan portfolios. Banks face increasing pressure to stand out from the crowd. On the Internet, thi s means offering your target customers an increasingly broader range of services than your competitors and that too in unique way. All this has resulted in a challenge to managers of banks to develop the right m ix of acquired and internally grown IT applications which suits customer’s expecta tions. Banking sector reforms and liberalisation process raised many challenges before Indian Banks and for sustainable development it has become necessary to face the se challenges effectively: Intense Competition: The RBI and Government of India kept banking industry open for the participants of private sector banks and foreign banks. The foreign bank s were also permitted to set up shop on India either as branches or as subsidiar ies. Due to this lowered entry barriers many new players have entered the market such as private banks, foreign banks, non-banking finance companies, etc. The f oreign banks and new private sector banks have spearheaded the hi-tech revolutio n. Heavy weight foreign banks with huge base, latest technology innovative and g lobally tested products are spreading their wings and wooing away customers form other banks. For survival and growth in highly competitive environment banks ha ve to follow the new “Guru Mantra” of prompt and efficient customer service, which c alls for appropriate customer centric policies and customer friendly procedures. Technological Up gradation: Already electronic transfers, clearings, settlements have reduced translation times. To face competition it is necessary for banks t o absorb the technology and upgrade their services. However use of High-Tech sophisticated technology leaves the predominantly rural , poor and even illiterate mans in the lurch to which the level of automation an d efficiency of services are immaterial. Privacy and Safety: Among the most important aspects, of savings, i.e., safety l iquidity and profitability, safety has to be accorded top most priority. The saf ety aspect assumes more significance in the emerging scenario as the economic lo ss caused internationally by these types of crimes might risk area and any lacun ae is safety would result in erosion of confidence and the same might possibly paralyse the entire network. The areas among other things, which might endanger security in e-banking can be: Changes in input data such as changing the amount in ledges, increasing the limi ts in accounts or face value of cheaques. Though these trends could be detected consequently, prevention is a major problem with these types of crimes. Use of stolen or falsified cards in ATM machines. Computer forgery could be committed by way of gaining access to other account, d eliberate damage through viruses on data stored in computers. In this case, same criminals might gain entry into the computers and cause damage to the system. T his apart, another through which security and privacy are maintained. If a hacke r has found out the password, he can cause havoc to the entire network. Also, if the password is stolen money could be transferred from one account to another. Software privacy is another area of potential danger faced by the banking indust ry. In this the entire software could be stolen. If this is done, the hackers co uld operate a parallel network. Human Resources Management: In the recent past the human resource Policies in ba

nks were mainly guided by the comcept of permanent employment and its necessary concomitants of creating career paths, terminal benfits, etc. for the employees. In today’s fast-changing world of employee mobility both horizontally and vertica lly and value systems, the public sector banks need to hire the right talent at market related compensation and to shed surplus manpower/staff. Thus many banks are going for URS schemes to reduce the burden of excessive staff. Schemes like VRS are going to change the nature of workforce with many senior and experienced persons opting for it. The key elements that shall provide a competitive edge to banking sector will no t be physical assets but knowledge assets and information. Therefore, banks must understand how to retain knowledge based employees and prevent them to migratin g to some other organisation. Banks must believe in people, customer orientation , and continuous improvement of excellence. Therefore it becomes necessary for b anks to encourage all employees to take risks and work towards continuous improv ements and breakthroughs. Successful banks overcoming the challenges will be those that harness technology in a customer friendly yet cost effective way. This requires enormous internal and external management and the crux of the solution lies in blending human reso urces with information technology. 3 Emerging Issues in International Scenario: Banking and Financial Sector Reform With the evolving global scenario at the background, let us now discuss the chal lenges and opportunities facing the financial sector around the globe. The pr esent trend towards financial sector liberalization and globalisation, es pecially with respect to the EMEs has resulted in a overall trend to wards conglomeration, internationalisation and dollarisation in the financial sy stems of many of the countries notably the EMEs. Such trends have important i mplications for financial sector regulation. I would like to highlight the main issues in this respect: It also needs to be recognised that in recent times, there has been growing concern worldwide about the need for preserving financial stabi lity. This is true in the Indian context as well where the erstwhile Government- dominated financial system was, so to speak, imparting stab ility under rigid regulation, possibly at the cost of efficiency. In t his context, the pursuit of financial stability in India, viewed from the st andpoint of banking system, has sought to (a) ensure uninterrupted financia l transactions and (b) maintain confidence in the financial system amon gst all stakeholders. When we talk of the major features of international enario, the following observations come immediately to mind.

banking sc

First, the structure of the industry. In the world’s top 1000 banks, the re are many more large and medium-sized domestic banks from the develo ped countries than from the emerging economies. Illustratively, ac cording to The Banker 2004, out of the top 1000 banks globally, over 200 are loc ated in USA, just above 100 in Japan, over 80 in Germany, over 40 in Spain and a round 40 in the UK. Even China has as many as 16 banks within the top 1000, out of which, as many as 14 are in the top 500. India, on the other hand, had 20 ban ks within the top 1000 out of which only 6 were within the top 500 banks. Th is is perhaps reflective of differences in size of economies and of the financial sectors. Second, the share of bank asset in total financial sector assets. In most emerging markets, banking sector assets comprise well over 80 per cent of total financial sector assets, whereas these figures are much lower in

developed economies. Thus, Banking Sector reforms are of paramount impor tance in many emerging markets. Third, industry concentration, measured by the percentage of a country’s banking sector assets controlled by the largest banks. In most emerging market economies, the five largest banks (usually domestic) acco unt for over two-thirds of bank assets. These figures tend to be much lower in developed economies. The fourth factor is the growing internationalization of banking operatio ns. Internationalization, defined as the share of foreign-owned banks in total b ank assets, is increasing fast in emerging economies from very low levels not too long ago. The phenomenon of internationalisation has primarily been polarized o n medium- to high-income countries, likely owing to attractive risk-retu rn investment opportunities for foreign banks in such countries. However, for eign banks are often viewed to be ‘cherry-picking’ host country corporations, l eaving domestic banks with less creditworthy customers, increasing the o verall risk of domestic bank portfolios. Additionally, increased competition arising out of foreign bank entry could prompt domestic state-owned banks to venture into high-risk areas in an attempt to maintain their fra nchise value.

Fifthly, financial sectors across the globe has witnessed increased cong lomeration to survive in a milieu of financial liberalization and technological improvements. Globalization of clients of major financial instruments who, in turn, demand global access to services an d a wide product mix has also been a contributory factor. The growth of such conglomeration has raised the possibility of vulnerabilitie s including systemic risk due to contagion and the possibility of opport unities for regulatory and supervisory arbitrage. Further, the growing dollarisation, especially in Latin America and tran sition economies raises several vulnerabilities in the financial system, salient among them being (a) diminished role of central banks to act as lenders of last resort, (b) possibility of dollar deposits being subject to ‘runs’ since such deposits are usually close substitutes for deposits abro ad or dollars cash and (c) limited ability of central banks to raise the inter est rate on dollar deposits to act as ‘interest rate defenses’ against deposit withd rawals. The global banking scenario is going to be influenced by impleme ntation of the Basel II Accord. It seems at this point that Basel II may be ben eficial to many of the EMEs including India. While the Pillar I of the N ew Accord signifies a refinement of existing capital charge by making it more co rrelated with the credit risk of the banks’ assets and an extension of the capital charges for risks not considered in the current Accord, such as in terest rate risk in the banking book, and operational risk, Pillar II, which foc uses on the supervisory review process, aims to ensure that a bank’s capital posit ion is consistent with its overall risk profile. Finally, Pillar III aims at enc ouraging banks to disclose information in order to enhance the role of market participants in monitoring banks

The recent survey by the IMF on the implementation of financial secto r regulation in 36 Fund member countries3 based on the Financial Sect or Assessment Programmes (FSAPs) completed over the period 2000-03

reveals the following interesting points about the global financial system. On the positive side, there has been relatively high level of implementation with r espect to legal foundations , rationalisation of the licensing process and minimum entry standards in most countries. In terms of regulatory weaknesses, recent evidences point out to a nu mber of deficiencies including; (i) The problems associated with regulatory forbearance. (ii) Deficiencies have been observed in the oversight of country risk4, issues of connected lending and corporate governance practices. (iii) deficiencies have been observed in respect of the design/implementation of consolidated supervision. (iv) With regard to financial integrity and development of safety net, the observed deficiencies mainly relate to timeliness of disclosure, protection of minority shareholders, accounting and auditing procedures and p rocedures for orderly winding up of failed insurers and securities firms.

CHAPTER 3 INTRODUCTION TO SBI AND AXIS

3.1 STATE BANK OF INDIA State Bank of India’s operating profit and net profit for Q2’09 surged 54.5% and 40.2% yoy, respectively, exhibiting a strong performance.

Advances growth to slow down: SBI recorded a handsome 37% yoy growth i n advances, translating into an 18% sequential growth in the first half. However , this momentum is likely to decelerate considerably in the second half of 20 08-09. Robust rise in deposits: State Bank of India’s deposit base surged 28% yoy and its CASA ratio improved from 39.45% to 39.71% over the same period. On a quarterly basis, the bank’s deposits grew by 10.3%. Improvement in the credit-deposit ratio: The Bank’s credit-deposit ratio i ncreased from 68.9% in Q2’08 to 73.8% this quarter. This was following a robust 37% yoy increase in advances, which exceeded the 28% growth in deposits over the same period. Increase in the NII and NIM: SBI’s net interest income (NII) increased by 45% yoy to reach Rs. 54.6 bn. Profitability: The Bank’s ROE declined from 17.38% for H1’08 to 14.63% for H1’09. The return on assets (annualized), however, increased from 0.99% in Q2’08 to 1.13% in Q2’09. The State Bank of India, the country’s oldest Bank and a premier in terms of balan ce sheet size, number of branches, market capitalization and profits is today go ing through a momentous phase of Change and Transformation – the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an agility to give the Private and Foreign Banks a run for their mo ney. The bank is entering into many new businesses with strategic tie ups – Pension Fun ds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc – each o ne of these initiatives having a huge potential for growth. The Bank is forging ahead with cutting edge technology and innovative new bankin g models, to expand its Rural Banking base, looking at the vast untapped potenti al in the hinterland and proposes to cover 100,000 villages in the next two year s. It is also focusing at the top end of the market, on whole sale banking capabili ties to provide India’s growing mid / large Corporate with a complete array of pro ducts and services. It is consolidating its global treasury operations and enter ing into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external com mercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list. The Bank is changing outdated front and back end processes to modern customer fr iendly processes to help improve the total customer experience. With about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks alrea dy networked, today it offers the largest banking network to the Indian customer . The Bank is also in the process of providing complete payment solution to its clientele with its over 8500 ATMs, and other electronic channels such as Interne t banking, debit cards, mobile banking, etc. With four national level Apex Training Colleges and 54 learning Centres spread a ll over the country the Bank is continuously engaged in skill enhancement of its employees. Some of the training programs are attended by bankers from banks in other countries. The bank is also looking at opportunities to grow in size in India as well as in ternationally. It presently has 82 foreign offices in 32 countries across the gl obe. It has also 7 Subsidiaries in India – SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in t

he Indian Banking scenario. It is in the process of raising capital for its grow th and also consolidating its various holdings. Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and take all employees together on this exciting road to Transformatio n. In a recently concluded mass internal communication programme termed ‘Parivarta n’ the Bank rolled out over 3300 two day workshops across the country and covered over 130,000 employees in a period of 100 days using about 400 Trainers, to driv e home the message of Change and inclusiveness. The workshops fired the imaginat ion of the employees with some other banks in India as well as other Public Sect or Organizations seeking to emulate the programme. 3.1.1

ABOUT SBI:

The State Bank of India, the country’s oldest Bank and a premier in terms of balan ce sheet size, number of branches, market capitalization and profits is today go ing through a momentous phase of Change and Transformation – the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an agility to give the Private and Foreign Banks a run for their mo ney. The Bank is forging ahead with cutting edge technology and innovative new bankin g models, to expand its Rural Banking base, looking at the vast untapped potenti al in the hinterland and proposes to cover 100,000 villages in the next two year s. It is also focusing at the top end of the market, on whole sale banking capabili ties to provide India’s growing mid / large Corporate with a complete array of pro ducts and services. It is consolidating its global treasury operations and enter ing into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external com mercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list. The Bank is changing outdated front and back end processes to modern customer fr iendly processes to help improve the total customer experience. With about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks alrea dy networked, today it offers the largest banking network to the Indian customer . The Bank is also in the process of providing complete payment solution to its clientele with its over 8500 ATMs, and other electronic channels such as Interne t banking, debit cards, mobile banking, etc. With four national level Apex Training Colleges and 54 learning Centres spread a ll over the country the Bank is continuously engaged in skill enhancement of its employees. Some of the training programes are attended by bankers from banks in other countries. The bank is also looking at opportunities to grow in size in India as well as in ternationally. It presently has 82 foreign offices in 32 countries across the gl obe. It has also 7 Subsidiaries in India – SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in t he Indian Banking scenario. It is in the process of raising capital for its grow th and also consolidating its various holdings.

3.1.2

KEY AREAS OF OPERATION:

The business operations of SBI can be broadly classified into the key income gen erating areas such as National Banking, International Banking, Corporate Banking , & Treasury operations. The functioning of some of the key divisions is enumera ted below: a) CORPORATE BANKING The corporate banking segment of the bank has total business of around Rs1,193bn . SBI has created various Strategic Business Units (SBU) in order to streamline its operations. These SBUs are as follows: Corporate Accounts Leasing Project Finance Mid Corporate Group Stressed Assets Management b) NATIONAL BANKING The national banking group has 14 administrative circles encompassing a vast net work of 9,177 branches, 4 sub-offices, 12 exchange bureaus, 104 satellite office s and 679 extension counters, to reach out to customers, even in the remotest co rners of the country. Out of the total branches, 809 are specialized branches.

This group consists of four business group which are enumerated below: Personal Banking SBU Small & Medium Enterprises Agricultural Banking Government Banking

c) INTERNATIONAL BANKING SBI has a network of 73 overseas offices in 30 countries in all time zones and c orrespondent relationship with 520 international banks in 123 countries. The ban k is keen to implement core banking solution to its international branches also. During FY06, 25 foreign offices were successfully switched over to Finacle soft ware. SBI has installed ATMs at Male, Muscat and Colombo Offices. In recent year s, SBI acquired 76% shareholding in Giro Commercial Bank Limited in Kenya and PT Indomonex Bank Ltd. in Indonesia. The bank incorporated a company SBI Botswana Ltd. at Gaborone. d) TREASURY The bank manages an integrated treasury covering both domestic and foreign excha nge markets. In recent years, the treasury operation of the bank has become more active amidst rising interest rate scenario, robust credit growth and liquidity constraints. The bank diversified its operations more actively into alternative assets classes with a view to diversify the portfolio and build alternative rev enue streams in order to offset the losses in fixed income portfolio. Reorganiza tion of the treasury processes at domestic and global levels is also being under taken to leverage on the operational synergy between business units and network. The reorganization seeks to enhance the efficiencies in use of manpower resourc es and increase maneuverability of banks operations in the markets both domestic

as well as international. e) ASSOCIATES & SUBSIDIARIES The State Bank Group with a network of 14,061 branches including 4,755 branches of its seven Associate Banks dominates the banking industry in India. In additio n to banking, the Group, through its various subsidiaries, provides a whole rang e of financial services which includes Life Insurance, Merchant Banking, Mutual Funds, Credit Card, Factoring, Security trading and primary dealership in the Mo ney Market. e.1) Associates Banks: SBI has seven associate banks namely • State Bank of Indore • State Bank of Travancore • State Bank of Bikaner and Jaipur • State Bank of Mysore • State Bank of Patiala • State Bank of Hyderabad • State Bank of Saurashtra All associate banks have migrated to Core Banking (CBS) platform. Single window delivery system has been introduced in all associate banks. SBI’s seven associate banks are the first amongst the public sector banks in India to get fully networ ked through CBS, providing anytime-anywhere banking to its customers to facilita te a bouquet of innovative customer offerings. e.2) Non-Banking Subsidiaries/Joint Ventures i) SBI Life: ii) SBI Capital Markets Limited (SBICAP) iii) SBI DFHI LTD iv) SBI Cards & Payments Services Pvt. Ltd. (SBICSPL) v) SBI Funds Management (P) Ltd. (SBIFMPL) f) Human Resources

NON BANKING SUBSIDIARIES: The SBI SBI SBI

3.2

Bank has the following Non-Banking Subsidiaries in India : Capital Markets Ltd Funds Management Pvt Ltd Factors & Commercial Services Pvt Ltd

AXIS BANK

AXIS Bank-2009: Axis Bank was the first of the new private banks to have b

egun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the sp ecified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corpora tion of India (LIC) and General Insurance Corporation of India (GIC) and other f our PSU insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India In surance Company Ltd.

The Bank today is capitalized to the extent of Rs. 403.63 crores with the public holding (other than promoters and GDRs) at 53.72%. The Bank s Registered Office is at Ahmedabad and its Central Office is located a t Mumbai. The Bank has a very wide network of more than 896 branches and Extensi on Counters (as on 31st December 2009). The Bank has a network of over 4055 ATMs (as on 31st December 2009) providing 24 hrs a day banking convenience to its cu stomers. This is one of the largest ATM networks in the country. The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve excelle nce. Promoters Axis Bank Ltd. has been promoted by the largest and the best Financial Instituti on of the country, UTI. The Bank was set up with a capital of Rs. 115 crore, wit h UTI contributing Rs. 100 crore, LIC - Rs. 7.5 crore and GIC and its four subsi diaries contributing Rs. 1.5 crore each. Shareholding 24.09% Erstwhile Unit Trust of India was set up as a body corporate under the UTI Act, 1963, with a view to encourage savings and investment. In December 2002, the UTI Act, 1963 was repealed with the passage of Unit Trust of India (Transfer of Und ertaking and Repeal) Act, 2002 by the Parliament, paving the way for the bifurca tion of UTI into 2 entities, UTI-I and UTI-II with effect from 1st February 2003 . In accordance with the Act, the Undertaking specified as UTI I has been transf erred and vested in the Administrator of the Specified Undertaking of the Unit T rust of India (SUUTI), who manages assured return schemes along with 6.75% US-64 Bonds, 6.60% ARS Bonds with a Unit Capital of over Rs. 14167.59 crores. The Government of India has currently appointed Shri K. N. Prithviraj as the Adm inistrator of the Specified undertaking of UTI, to look after and administer the schemes under UTI - I, where Government has continuing obligations and commitme nts to the investors, which it will uphold.

Banking Privileges Priority Banking Lounge: As a Priority banking customer you will have access to an exclusive Priority Ba nking Lounge at branches. This will allow you to conduct your financial transac tions in utmost comfort and confidentiality through an exclusive Relationship Ma nager. Dedicated Relationship Manager: You will enjoy access to a dedicated Relationship Manager who will be your one p oint contact at branch for all your banking transactions thus ensuring that you would neither have to move from one counter to the other nor stand in queues to await your turn. Home Banking: Experience the convenience of our home banking facilities. Avail of free cash an d cheque pick-up and delivery at your office or residence.

Exclusive Priority Banking International Debit card: This card allows you free access to all VISA ATMs in India. The card also comes with higher ATM withdrawal limits, higher POS transaction limits at merchant est ablishments, enhanced insurance cover and a host of special discounts and offers . You also get Preferential Interest Rates and lowered Processing Fees on select R etail Loans. Other Banking Privileges: Enjoy a host of banking privileges like free at-par cheques, demand drafts and p ay orders, free passbook updates and monthly statements. You would also be entitled to two free minor accounts, one free outward remittan ce per quarter and free Mobile banking. As a Priority Banking customer, there would be no issuance charges on Axis Bank s Travel Currency Card.

Investment Privileges Avail of assistance in financial planning. Investment advice, market information reports, and invitations to investor meets are offered complimentary to you. Lifestyle Privileges However, it s not all about just financial services. We aim to provide a differe nt Lifestyle experience through special offers on premium brands, movie privileg es, special events and lots more - especially for our Priority Banking customers Gold Credit Card As an added privilege, Priority Banking customers may also apply for a Gold Stan dard Credit Card and Gold Standard Secured Credit Card without any additional fe e, subject to the applicable terms and conditions. Priority Banking customers would also be eligible for a 50% reduction on the Iss uance Fee of Gold Plus Credit Card and Gold Plus Secured Credit Card. Rs. 500 wi ll be charged as the annual maintenance charge for Priority Banking customers, s ubject to the applicable terms and conditions.

3.2.1

ABOUT AXIS BANK’S PROFILE

About AXIS Bank The Unit Trust Of India (UTI) is a statutory public sector investment institutio n set up in 1964. It mobilizes the savings of the community through the sale of its units under it s various unit schemes..The.resources thus mobilized are invested by the UTI mai nly in the shares and debentures of the companies. Income received from this inv estment, after meeting the expenses of the Trust, is distributed to unit holders annually as dividend. The Unit Trust Of India has introduced a number of Unit schemes so far, the Unit scheme,1964,the Unit Linked Insurance Plan, 1971, Unit Scheme for Charitable an d Religious Trusts and Registered Societies, 1981, the Income Unit Scheme, 1982, Monthly Income Unit Scheme, 1983 and Growth and Income Unit Scheme, 1983.

3.2.2

GOAL AND OBJECTIVES

Business Objectives The primary objective of AXIS is to enhance residential housing stock in the cou ntry through the provision of housing finance in a systematic and professional m anner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector wit h the overall domestic financial markets.

Organizational Goals AXIS’s Ø Ø Ø Ø Ø

main goals are as follows: Develop close relationships with individual households, Maintain its position as the premier housing finance institution in the country, Transform ideas into viable and creative solutions, Provide consistently high returns to shareholders, and To grow through diversification by leveraging off the existing client base.

CHAPTER 4 SERVICE QUALITY

4.1 SERVICE AND ITS CHARACTERISTICS Banks are investing a lot of money on web technologies and are therefore expecti ng numerous benefits on their investments. The intensifying competition on today’s market has forced banks to seek profitable ways to differentiate themselves. Companies have moved their focus from products and services toward a customer-centered focus as a too l to gain competitive advantages and a great return on already made investments. The success in these customer- centered businesses is to deliver high service quality. Already in the end of the 1980’s researchers were determined that if the companies wanted to succeed they needed to give the development of service qual ity the highest priority. The delivery of high service is a challenging task an d to provide their customers with high service quality companies must know what their customers want and need. Because of factors that are unique to s ervices, companies face difficulties while delivering service quality: intangibi lity, heterogeneity, inseparability and perishability. Because services are int angible they can not be felt, smelled or tasted which makes it hard for customers to evaluate the service quality. Fur thermore, services are not possible to store for later use, they are consumed im mediately. Therefore companies need to offer other visible indicators where customers could evaluate the delivered service quality. Services heterogeneity means that services are no t produced by single unit and then distributed to customers. This means that the quality of services varies depending on who provides them as well as when, wher e and how services are provided. Here the focus is on the employee and the way in which the service is delivered and perceived by the customer will depend on the employee. Services are perishab le which means that they are consumed when they are provided and can not be stor ed. Service has many definitions, one definition has been chosen that describe i t in summary: “A service is something that can be bought and sold, but which you c annot drop on your foot.” Both managers and academic researchers have in recent y ears given a great deal of interest in measurement of customer satisfaction and perceived service quality. Spreng et al (1996) discuss the difference between c ustomer satisfaction and perceived service quality and suggest that these are no t the same and that companies need to take both into consideration. This because companies need to know whether they should focus on having satisfied customers or to deliver the maximum service quality. Perceived service quality is accordi ng to Parasuraman et al “a global judgment of, or, attitude relating to the superi ority of the service” and this definition can be found in other service literatur e. The definition of the customer satisfaction has not the same clear definitio n but Spreng et al use the definition “an evaluative, affective or emotional respo nse.” 4.2 GAPS ANALYSIS The knowledge of how to measure service quality is of great importance for the c ompanies if they want to succeed on the today’s competitive market. The measuremen t of perceived service quality derives from the Gap analysis, which was original ly conducted during the end of the 1980’s. The Gap analysis was developed to help managers analyze the sources for quality problems but also to help them in under standing how to improve the service quality. The first gap in the analyses is du e to the lack of managers understandings about the perceived service quality. It states that managers have incorrect understanding of what their customers want and need, e.g. because of wrong information from customers surveys. The second g ap is about service characteristics not complying with management understanding and customers’ expectations. This may arise due to lacking communication inside th e organization and lack of clear organizational goals. It is due to the fact tha t the specific quality is not fulfilled during the production and deliverance of

the service. This gap usually occurs when the employee and customer interact. I t occurs because employees are not ready to deliver the good service quality or that the quality characteristics are not agreed upon within the organizational c ulture. The fourth gap deals with problems within the marketing communication. T herefore it is important to always give customers appropriate and correct inform ation. The analysis simply describes how the gap between expected and perceived service quality arise from these four gaps while the difference between the del ivered and perceived service by customers is the fifth gap. The goal for compan ies should be to minimize all the gaps as much as possible. The bigger the first four gaps are, the bigger the fifth gap will be. This means that the perceived service quality will be low and companies could fail in delivering high service quality. Because of the Gap analyses Parasuraman et al designed SERVQUAL, a mult iple-item scale for measuring service quality. The instrument has been used a l ot within the service literature and as a basic tool for companies in measuring the perceived service quality.

4.3 SERVQUAL- SERVICE QUALITY MEASUREMENT As mentioned earlier the main difficulty with service quality is that it is hard to measure. According to the Finnish author Christian Grönroos, many of these stu dies derive from the same point that service quality is experienced from a compa rison between anticipation and experience with consideration to a couple of qual ity attributes. SERVQUAL is conducted from Gaps analysis and a study of five di fferent business and four dimensions form this instrument: Tangibles, Reliabilit y, Responsibility, Assurance and Empathy Tangibles are about the physical facili ties that companies have, including the appearance of the employees. Reliability shows that the employees show that they can dependably perform their service and customer attain and sustain their trusts in the company. Responsibi lity is when the company is willing to help customers and provide them with the best service. Assurance is when company’s employees are containing knowledge and w ith their ability inspire trust and confidence to customers. The last dimension is Empathy and this shows that the company is giving the customer attention and caring. The SERVQUAL measurement can be accepted as a traditional way of measuring the perceived service quality and is a basic skel eton of underlying service quality; therefore it needs to be used in its entiret y as much as possible. Parasuraman et al concur that SERVQUAL is universal and can be used across all s ervices. This has received a lot of critics and many researches within the servi ce quality field have concluded that the instrument can not directly be applied to studies of the online service quality. When considering the last dimension Em pathy and then studying the interaction between the customer and the computer th ere is no Empathy and therefore companies’ can´t really take this dimension into acc ount when measuring the perceived service quality online. SERVQUAL is a good ser vice quality instrument when measuring and studying an organization which is not providing services online. In this study e-banking is merely about online servi ces and therefore this instrument is not an appropriate instrument of measuremen t. It is important to note that much of the research that has been performed about service quality is deriving from SERVQUAL. Many of the dimensions that construct the instrument are adapted to the other instruments of measurements. Technology , which is the major force in shaping the buyer-seller interaction, is having an impact on the service quality. Within the e- banking, banks need to focus their attention on customers and to understand customer’s attributes which they are usi ng to judge service quality.

CHAPTER 5 ANALYSIS AND INTERPRETATION

1)

Modern looking equipment

From the graph it is clearly seen that for AXIS and SBI most of the respondents are fall in satisfaction range. For AXIS highest frequency is observed in satisfactory level, whereas for SBI hi ghest frequency is observed in neither satisfied nor dissatisfied range. So, for modern looking equipment AXIS bank has more number of satisfied response s as compared to SBI.

2)

Visually appealing physical facilities

For both the banks highest frequency is observed in neither satisfied nor dissat isfied range. And most of the respondents for both the banks are less satisfied as far as visu ally appealing physical facilities concerned, as in level 3 i.e. dissatisfied mo re numbers of respondents are there for both the banks. AXIS bank has more satisfied customers, so for visually appealing physical facil ities AXIS bank has good response as compared to SBI.

3)

Neat appearing employees

From the graph, SBI respondents are showing more positive response then that of AXIS respondents, and also respondents fall in satisfied range is more in case o f SBI then that of AXIS. Also there are more numbers of respondents in moderate and strongly agreed zone for SBI as compared to AXIS. And for AXIS most of the respondents are present in 3,4 and 5 level of satisfaction, so respondents are not satisfied for AXIS. So for neat appearing employees SBI respondents has more satisfaction level.

4)

Visually appealing materials associated with the services

Here, for AXIS bank there are slightly more numbers of respondents which are fal l in satisfied range then from SBI. Also most of the respondents fall in neither dissatisfied nor satisfied and satisfied area for both the banks. Here it is difficult to say that which bank is performing better in visually app ealing materials associated with the services.

5)

Keeping promise to do something by certain time

Here from the graph it is clearly seen that respondents of SBI are having more s atisfaction than that of AXIS, as more numbers of respondents are fall in satisf action level. For both the banks most of the respondents are fall in neither satisfied nor dis satisfied level and satisfied level. So for this factor both the banks are relat ively not performing well as per resondents. Overall for this question SBI respondents are showing more satisfaction than tha t of AXIS. 6)

Showing sincere interest in solving a customer’s problem

Here from the graph, SBI and AXIS have nearly the same kind of responses, but AX IS has slightly more numbers of satisfied repondents as compared to SBI for show ing sincere interest in solving a customer’s problem, so for this factor AXIS is p erforming slightly well over SBI. Here both the banks have more numbers of respondents who are fall in level 4 i.e . neither satisfied nor dissatisfied so both the banks can improve the level of satisfaction by improving on this variable.

7)

Performing the service correctly the first time

Here for SBI highest frequency is observed in satisfied level, whereas for AXIS it is in neither dissatisfied nor satisfied level. Total number of respondents for SBI are more in satisfaction level, whereas for AXIS most of the respondents are fall in dissatisfied and neither dissatisfied n or satisfied level. So for performing the service correctly the first time SBI respondents are agre

ed compared to AXIS respondents. Also for this factor AXIS is underperforming compared to SBI.

8)

Providing the service at the time the service was promised

From the graph, the responses are nearly similar for both AXIS as well as SBI. So for providing the service at the time the service was performed both the bank has similar kind of responses. Hence there is not so much difference in providi ng the service at the time the service was performed. Also there are very few respondents for both the banks which are highly or moder atley satisfied, so both the banks need to improve satisfaction level on this fa ctor, so satisfaction level of their customers will improve.

9)

Insisting on error free records

There is quite large difference among the respondents for insisting on error fre e records, SBI respondents are showing more positive response as compared to A XIS respondents. Also AXIS respondents are more on dissatisfaction level than SBI respondents. So respondents of SBI are agree with the statement as compared to AXIS responden ts. For this factor AXIS need improvement so satisfaction level of their customer wi ll improve, whereas for SBI they are performing well.

10) Employees telling customers exactly what services will be performed

Here from the graph it is clearly seen that almost all the respondents for both the banks are falling in satisfied and neither dissatisfied nor satisfied level. But number of respondents for SBI are more satisfied for employees telling custo mers exactly what services will be performed. Also there are very few respondents which are moderately and highly agreed with the statements for both the banks. So for both the banks there is a scope of improvement on this factor so satisfac tion level of customers can be improved.

11)

Employees giving prompt service to customers

Here for SBI highest frequency is observed in satisfaction level, whereas for AX IS it is in neither dissatisfied nor satisfied level. So for employees giving prompt service to customers SBI respondents are more agr eed over AXIS respondents. Here AXIS need improvement as there are less numbers of satisfied respondents.

12)

Employees always being willing to help customers

Here, more number of the respondents of AXIS is falling in satisfaction level as compared to SBI respondents. SBI respondents are mainly falling in lower side of satisfaction level. So, for the statement employees always being willing to help customers AXIS resp ondents are more agreed than of SBI respondents.

13) Employees are never too busy to respond to customers’ requests

From the graph, SBI respondents are more in number in satisfaction level as comp ared to AXIS respondents. Highest frequency of respondents for both AXIS and SBI is fall in neither dissat isfied nor satisfied level. Also there are quite more numbers of respondents for both the banks which are di ssatisfied. So, for the statement that employees are never too busy to respond to customer’s r equest SBI respondents are more agreed as compared to AXIS respondents, the sati sfaction level is slightly low for both the banks.

14) The behavior of employees instilling confidence in their customers From the graph it is seen that, there are more number of respondents for SBI who are satisfied as compared to AXIS respondents. Also most of the respondents for both the banks are falling in neither dissatisf ied nor satisfied and satisfied level. So for the statement that the behavior of employees instilling confidence in the ir customers, SBI respondents are more agreed as compared to AXIS respondents.

15) Customers feeling safe in their transactions Here, for SBI highest frequency of respondents is observed in satisfied level, w hereas for AXIS it is in moderately satisfied level. But for AXIS respondents they are nearly equally distributed in neither dissatis fied nor satisfied to highly satisfied level, whereas for SBI in satisfied level there is quite large peak of respondents. So for the staement customer feeling safe in there transactions AXIS has more nu mber of respondents which are moderate to highly satisfied level and for SBI res pondents in satisfied zone are more. Also here for AXIS numbers of respondents in moderate and highly satisfied are m ore compared to SBI, but due to large number of respondents in satisfied level f or SBI lead them to more stronger position.

16) Employees being consistently courteous with their customers Here from the graph, respondents of both the banks have nearly the same type of responses, except in level 5 i.e. satisfied where more noumber of AXIS responden ts are fall. For both the banks, there are more numbers of satisfied respondents so both the banks are performing well on this criteria. So here for the statement employees being consistently courteous with their cust omers, AXIS has slightly more number of satisfied respondents.

17) Employees having the knowledge to answer customers’ questions For this question the respondents are distributed all over the satisfaction scal e for both the banks. So here there are more number of dissatisfied respondents as well as more number of satisfied respondents for both the banks. Highest frequency is observed in level 5 i.e. satisfied respondents. But there are more number of respondents for SBI who are agreed with statement h ence for employees having the knowledge to answer customers’ question SBI is ahead of AXIS.

18)

Giving customers indivdual attention

Here for tion as compared But here banks. So level is question. Both the rs by improving

19)

AXIS there are more numbers of respondents who are agreed with the ques to SBI respondents. there is minor difference in the responses of respondents for both the of satisfaction of respondents for both the banks is almost same for th banks need to convert low satisfied customers to more satisfied custome the performance of this factor.

Operating hours convenient to all their customer

There are more numbers of satisfied respondents for AXIS as compared to SBI. Highest frequency of respondents for both the banks is at level 4 i.e. neither d issatisfied nor satisfied. Also there are slightly more numbers of respondents on dissatisfied level for bo th the banks, so they have to improve in this factor.

20)

Employees giving customers personal attention

Here from the graph, we can say that SBI has more number of respondents who are dissatisfied as compared to AXIS respondents. Also highest frequency of respondents for AXIS is at level 4 i.e. neither dissat isfied nor satisfied, whereas for SBI it is at level 3 i.e. dissatisfied. So for employees giving customers personal attention AXIS has better response as compared to SBI. Also for both the banks there are quite large numbers of repon dents who are not agreed with statement.

21)

Having the customers’ best interest at heart

Here most of the respondents for both the banks are fall in dissatisfaction zone . Also highest frequency is observed in level 3 i.e. dissatisfied for both the ban ks. So as far as for this question both the banks have negative response and they n eed to improve it.

22) The employees understanding the specific needs of customers From the graph, there are more numbers of respondents who are disagree with this statement for both the banks. But for SBI there are more numbers of repondents which are falling in level 4 an d for AXIS more numbers of respondents are falling in level 5. So for this question AXIS has comparatively good response. But both the banks ha ve below average response.

CHAPTER 6 KEY FINDINGS

AXIS has more satisfaction level of respondents for dimensions tangibility and e mpathy; whereas SBI has more satisfaction level of respondents for remaining thr ee dimensions i.e. reliability, responsiveness, and assurance. Most of the respondents for both the banks are less satisfied as far as visually appealing physical facilities concerned and neat appearing employees are concer ned. The difference in score was more for SBI, so AXIS was lagging more on reliabili ty dimension. Insisting on error-free records the difference in score was huge for SBI in comp arison to AXIS. Also there is moderate difference in score for performing the se rvice correctly the first time for SBI over AXIS. Hence AXIS needs to improve on

these two factors as far as reliability dimension is concerned. For these three factors keeping promise to do something by certain time, providi ng the service at the time the service was promised and, performing the service correctly the first time both the banks can improve the level of satisfaction as there were less number of respondents who were satisfied. For employees telling customers exactly what services will be performed differen ce is so large for SBI over AXIS so AXIS has to focus on this factor to improve score on responsiveness dimension. Whereas for SBI they are almost performing well on responsiveness dimension, but they need improvement on employees always being willing to help customers. Employees telling customers exactly what services will be performed and employee s are never to busy to respond to customers’ request for these two questions both the banks had less satisfaction of customers so by focusing on this to factors t hey can improve satisfaction level. Both the banks are performing nearly same on dimension assurance, as there was s light difference in the score. Customers feeling safe in their transaction for this question, AXIS has more num ber of respondents which were moderate to highly satisfied level and for SBI res pondents in satisfied zone were more but there were less number of respondents i n moderate to highly satisfied level so due to more numbers of respondents in sa tisfied level, score of SBI is more. Employees having enough knowledge to answer customers’ questions, here both the ba nks need to improve on this factor as there were more numbers of respondents in level 3 and level 4 for both the banks, so by focusing on this they can improve satisfaction level of their customers. SBI has to improve in all the aspects for the dimension empathy as AXIS is perfo rming well on this dimension. Mainly they have to focus on giving customers indi vidual attention and employees giving customers personal attention as they were more lagging behind in these factors in comparison of AXIS. Both the banks need to improve its service for employees giving customers person al attention, operating hours convenient to all their customers, having the cust omers’ best interest at heart and the employees understanding the specific needs o f customers as there were more numbers of respondents who were either not satisf ied or less satisfied.

CHAPTER 7 CONCLUSION

AXIS is doing well on the tangibility and empathy dimension, whereas SBI perform ing well on reliability, responsiveness and assurance dimensions. Mainly SBI is doing well on insisting on error free record, employees telling cu stomers exactly what service will be performed and employees are never too busy to respond to customers’. Whereas AXIS is performing well on giving customers individual customers and emp loyees always being willing to help customers. Both the banks need to improve on empathy dimension.

CHAPTER 8 RECOMMENDATIONS

AXIS: AXIS needs to improve on mainly these three factors i.e. Promise, Doing it right and Competency as these factors are more important for banking industry and the y are lagging on these factors as compared to SBI. AXIS should maintain these four factors i.e. Promptness, Willingness, Competency and Understanding as in these factors either AXIS is performing well or doing u p to the mark and these four factors are important for banking industry. AXIS should deemphasize on factor Appearance and Approachable as in these factor s they are performing well, but these factors have less importance as compared t o other factors. AXIS should concentrate on insisting on error free records, on performing the se rvice correctly the first time and employees telling customers exactly what serv ices will be performed. SBI: SBI should improve its performance on Understanding and Credibility as these fac tors are important for banking industry and they are lagging in these two factor s. SBI should concentrate on employees always being willing to help customers, on g iving customers individual attention, on employees giving customers personal att ention. As SBI is performing poorly in all the aspect of empathy dimension, so SBI shoul d concentrate on this dimension more. SBI should maintain these five factors i.e. Appearance, Promises, Doing it right , Competency, and Approachable in these factors either SBI is performing well or doing up to the mark and these four factors are important for banking industry. SBI should deemphasize on factor Promptness as in this factor they are performin g well, but these factors have less importance as compared to other factors. BOTH AXIS AND SBI: Both the banks should increase satisfaction level of their customers by mainly f ocusing on following factors: Keeping promise to do something by certain time. Providing services at the time the service was promised. Performing the services correctly the first time. As on above factor, most of the respondents shows neither satisfied nor dissatis fied, so by improving this factors satisfaction level can be improve.

CHAPTER 9 BIBLIOGRAPHY

REFERENCE BOOKS: 1) Zeithamal V. A., Gremler D.D., Bitner M.J., and Pandit A.: “Service Market ing Integrated Customer Focus Across The Firm”, Fourth Edition, pp. 156-172. 2) Zillur Rahman, “Service Quality: Gap in the Indian Bank Industry” The ICFAI Journal of Marketing Management, Feb. 2005, pp 37-50. WEBSITES: 1) ideas.repec.org/a/ipf/finteo/v31y2007i2p185-201 2) marketing.byu.edu/download/measurementanalysis/servqual 3) http://areas.kenan-flagler.unc.edu/Marketing/FacultyStaff/zeithaml/Selec ted%20Publications/SERVQUAL-%20A%20Multiple-Item%20Scale%20for%20Measuring%20Con sumer%20Perceptions%20of%20Service%20Quality.pdf 4) business.mapsofindia.com/banks-in-india 5) rbidocs.rbi.org.in/rdocs/Speeches/PDFs/86160.pdf 6) www.researchandmarkets.com/reports/4020/indian_banking_industry 7) www.mckinsey.com/locations/india/mckinseyonindia/pdf/india_banking_ 2010 .pdf 8) media.wiley.com/product_data/excerpt/34/04713931/0471393134.pdf 9) www.marketresearch.com/product/display.asp?productid=2156584&g=1 10) www.sbi.co.in/ 11) www.AXISbank.com/

12) 13)

www.experiencefestival.com/banking_in_india_-_current_scenario http://pmindia.nic.in/eac_report_09.pdf

CHAPTER 10 QUESTIONNAIRE

Sr. no.____ Questionnaire The data/information gathered through this questionnaire would be strictly used for academic purpose only. All the responses and data will be kept CONFIDENTIAL. Dear Sir/Madam, I am the student of GLS-MBA conducting a study on SERVQUAL analysis of banking s ector with emphasis on State Bank of India and AXIS Bank. SERVQUAL for AXIS Please rate the following 22 SERVQUAL instruments by circling the number from “s trongly disagree=1” to “strongly agree=7” accordingly to your perception. 1 2 3 4 3 5 5 6

4 6

Modern looking equipment 1 2 3 4 5 6 7 Visually appealing physical facilities 1 2 3 4 5 Neat-appearing employees 1 2 3 4 5 6 7 Visually appealing materials associated with the service 5 6 7 Keeping promise to do something by a certain time 1 7 Showing sincere interest in solving a customer’s problems

6

2

7 1

2

3

4

1

2

3

4

5 7 7 8 3 9 10 1 11 7 12 5 13 3 14 1 15 7 16 3 17 3 18 19 5 20 7 21 7 22 3

6

4 2

6 4 2

4 4 6

4

7 Performing the service correctly the first time 1 Providing 5 6 7 Insisting Employees 3 4 5 Employees

2

3

4

the service at the time the service was promised

5

6

1

2

on error-free records 1 2 3 4 5 6 7 telling customers exactly what services will be performed 6 7 giving prompt service to customers 1 2 3 4 5 6

Employees always being willing to help customers 1 2 3 4 7 Employees are never too busy to respond to customers’ requests 1 2 5 6 7 The behavior of employees instilling confidence in their customers 3 4 5 6 7 Customers feeling safe in their transactions 1 2 3 4 5 6 Employees being consistently courteous with their customers 5 6 7 Employee having the knowledge to answer customers’ questions 5 6 7 Giving customers individual attention 1 2 3 4 5 6 Operating hours convenient to all their customers 1 2 7 Employees giving customers personal attention 1 2 3 4

1

2

1

2

7 3

4

5

6

Having the customers’ best interests at heart

5

6

1

2

1

2

3

The employees understanding the specific needs of customers 5 6 7

Personal Information 1. Gender Male

4

Female

2. Age 25 years and below 36-45 years

26-35 years Above 45 years

3. Education Below H.Sc. Graduate

Completed school education Post Graduate

4. Occupation Own business Professional Housewife

Government employee Student Other

5. Income Less than 1 lakh p.a. 3-5 lakh p.a.

1-3 lakh p.a. More than 5 lakh p.a.

Sr. no.____ Questionnaire The data/information gathered through this questionnaire would be strictly used for academic purpose only. All the responses and data will be kept CONFIDENTIAL. Dear Sir/Madam, I am the student of GLS-MBA conducting a study on SERVQUAL analysis of banking s

ector with emphasis on State Bank of India and AXIS Bank. SERVQUAL for SBI Please rate the following 22 SERVQUAL instruments by circling the number from “s trongly disagree=1” to “strongly agree=7” accordingly to your perception. 1 2 3 4 3 5 5 6 5 7 7 8 3 9 10 1 11 7 12 5 13 3 14 1 15 7 16 3 17 3 18 19 5 20 7 21 7 22 3

4 6 6

4 2

6 4 2

4 4 6

4

Modern looking equipment 1 2 3 4 5 6 7 Visually appealing physical facilities 1 2 3 4 5 Neat-appearing employees 1 2 3 4 5 6 7 Visually appealing materials associated with the service 5 6 7 Keeping promise to do something by a certain time 1 7 Showing sincere interest in solving a customer’s problems 7 Performing the service correctly the first time 1 2 3 Providing 5 6 7 Insisting Employees 3 4 5 Employees

6

2

4

the service at the time the service was promised

7 1

2

3

4

1

2

5

6

1

2

on error-free records 1 2 3 4 5 6 7 telling customers exactly what services will be performed 6 7 giving prompt service to customers 1 2 3 4 5 6

Employees always being willing to help customers 1 2 3 4 7 Employees are never too busy to respond to customers’ requests 1 2 5 6 7 The behavior of employees instilling confidence in their customers 3 4 5 6 7 Customers feeling safe in their transactions 1 2 3 4 5 6 Employees being consistently courteous with their customers 5 6 7 Employee having the knowledge to answer customers’ questions 5 6 7 Giving customers individual attention 1 2 3 4 5 6 Operating hours convenient to all their customers 1 2 7 Employees giving customers personal attention 1 2 3 4

1

2

1

2

7 3

4

5

6

Having the customers’ best interests at heart

5

6

1

2

1

2

3

The employees understanding the specific needs of customers 5 6 7

Personal Information 1. Gender Male

Female

2. Age 25 years and below 36-45 years

26-35 years Above 45 years

3. Education Below H.Sc. Graduate

Completed school education Post Graduate

4. Occupation Own business

Government employee

4

3

4

Professional Housewife

Student Other

5. Income Less than 1 lakh p.a. 3-5 lakh p.a.

1-3 lakh p.a. More than 5 lakh p.a.