A DISSERTATION REPORT

ON
AN EMPIRICAL STUDY OF CONSUMER PREFERENCE TOWARDS TECHNOLOGY ENABLED SERVICE N BANKING SECTOR INDUSTRIES IN DEHRADUN

TABLE OF CONTENTS

i. ii. iii. iv. v.

CERTIFICATE DECLARATION ACKNOWLEDGEMENT TABLE OF CONTENTS EXECUTIVE SUMMARY

ii iii iv v vi

1. INTRODUCTION 2. LITERATURE REVIEW 3. RESEARCH METHODOLOGY 4. DATA ANALYSIS AND DATA INTERPRTATON 5. INTERPRETATION OF FINDINGS 6. RECOMMENDATIONS 7. LIMITATIONS 8. CONCLUSION vi. vii. REFERENCES APPENDICES

EXECUTIVE SUMMARY

Society is diversified in all aspects. We see this among consumer , marketers, producers and even among consumer behavior from theoretical aspects. As the study of the customer preference towards the Banking sector plays a vital role in understanding the contribution of Banking industry. I want to study the customer perception & preferences for the various facilities provided by the Banking policies. A comparison between private Banking industries will help in assessing the expectation of the customers about the services provided by them. Study of this project has been done in Dehradun .My questionnaire was designed based on the funnel approach.

INTRODUCTION

Traditionally, a bank has been defined as an institution, which deals with money and credit. It accepts deposits from the public, makes the funds available to those who need them and helps in the remittance of money from one place to another. The Banking regulation act of India, 1949, defines Banking as accepting, for the purpose of lending or investment of cheques, draft, or otherwise. deposits or otherwise and withdrawal by

Deriving this definition and viewed solely from the point of view of customers, banks essentially perform the following basic functions:

Accepting deposits: Accepting deposits is one of the major activities executed by the banks. Banks are also called custodians of public money. Basically, the money is

accepted as deposit for safekeeping . But , since the banks use this money to earn interest from the people who need money, banks are a part of this interest with the depositers.

Lending money to the public: Lending money along with accepting deposits are the two prime activities of any bank. In a way, the bank acts as an intermediary between the people who have the need for money to carry out business transactions.

Transfer of money: Apart from accepting deposits and lending money, Banks also carry out, on behalf of their customers, the act of transfer of money, both domestic and foreign one place to another. This activity is known as remittance business.

Trustee business: Banks also acts as trustees for various purposes. For example, whenever a company wishes to issue secured debentures, it has to appoint a financial

intermediary as trustee who takes charge of the security for the debenture and looks after the interests of the debenture holders. Such entity necessarily have to have expertise in financial matters and also be of sufficient standing in the market/society to generate confidence in the minds of potential subscribers to the debenture and generally, banks become the natural choice for customers.

Safe keeping: Bankers are in the business of providing security to the money and valuables of general public. While security of money is taken care through offering various types of deposits scheme, security of valuables is provided through making secured space available to general public for keeping these valuables.

Government business: Earlier Government business used to be exclusively carried out by government treasuries, where all type of transactions took place. However, now banks act on behalf of the government to accept its tax and non tax receipts. Most of the government disbursements like pension payments and taxrefunds also take place through banks.

The fundamental nature of banking in todays world has changed drastically. Needless to say, the environment within which the banks function has changed too. The regulatory framework provides more challenges, more competition, more scope for dynamism innovation. The stronghold of banks as leader and borrower of funds has been challenged. The new financial services sector that has emerged, portrays banking, where change and innovation are the key words for survival. The law of survival of the fittest applies very aptly to todays financial super markets.

CURRENT SCENARIO OF RETAIL BANKING

Retail banking in India is not a new phenomenon. It has always been prevalent in India in various forms. For the last few years it has become synonymous with mainstream banking for many banks.

Retail banking is, however, quite broad in nature-It refers to the dealing of commercial banks, with individual customers, both on liabilities and asset side of the balance sheet. Fixed, current/saving accounts on the liabilities side; and mortgages, loans [ e.g. Personal, auto, educational and housing] on the assets side, are the more important of the products offered by banks. Related ancillary services include credit cards, or depositary services. Todays retail banking sector is characterized by three basic characteristics:

multiple products[deposits, credit cards, insurance, investments and securities]; multiple channels of distribution[ call centre, branch, internet and kiosk] and multiple customer groups [ consumer, small business and corporate].

To say retail banking is changing is a massive understatement. The greatest challenge faced by todays retail banks is how to provide their customers with convenient banking-for if they do not, a new competitor will find a way doing so. The changes now taking place in the retail banking industry are the most radical in decades. Evolving customer demographics, developments in new technology and a bombardment of new competition, have led the major banks to re-examine their customer- is no longer dependent upon the services they alone offer, but has many other options from which to select the type of retail banking services required.

Retail banking is undergoing a transformation. There could be a number of reasons attached to this phenomenon. For years, retail banking was dominated by conservative savers who were content with moderate yield. However, attitudes and

needs are changing now. The new generation of savers prefers to invest, to build wealth rather than save, demands exceptionally high level of convenience, excepts better work technology, requires information and advice that can be acted on, and prefers wide range of alternative products. The level of competitive intensity in this segment is increasing steadily. Besides, the foreign banks, which bring with them there are experience of operating in the international arena, attract the nationalized banks. Similar other factors have also contributed to the marked change in retail banking.

RECENT TRENDS IN THE BANKING SECTOR

The expansion of the economy saw a massive rise in the number and size of various financial intermediaries. These led to a demand for newer types of financial services. Regulations along with technological developments have brought about fundamental changes and innovations in the banking industry.

Universal banking:

Universal banking refers to financial institutions offering all types of financial services under one roof. Thus, for example, besides borrowing and lending for the long term, the financial institutions will be able to borrow/lend for the short term as well.

RBI:

The norms stipulated by RBI treat financial institutions at par with the existing commercial banks. Thus all the financial institutions have to maintain the Cash reserve ratio [CRR] and the statutory liquidity ratio [SLR] requirements on the same lines as the commercial banks. These are the major hurdles as perceived by the applicable to the commercial banks. These are the major hurdles as perceived by the institutions, as it very difficult to fulfill such norms without hurting the bottom line.

Voluntary retirement scheme (VRS) 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,

Multiple Delivery Channels:

Today, the technology driven banks are finding various means to reduce costs and reach out as many customers as possible spread over a diverse area. This led using multiple channels of delivery of their products, for example, Automated Teller

Machine [ATM], Net banking, phone banking, and mobile banking.

Merger and Acquisition

The Indian banking sector is more overcrowded than ever .Ever since, RBI opened up the sector to private players; they are growing at a scorching pace and redefining the rules of the business. However, they are dwarfed by many large public and old private sector banks with a large network of branches spread over a diverse geographical area. Thus they are unable to make a significant market share. Also it is virtually

impossible for these banks is to grow inorganically via the Mergers &Acquisition route.The fundamental objective of this route is aimed at accessing or creating sustainable competitive advantage. Such an advantage may stem from economies of scale and scope, or market power, or access to unique strengths, which the entities before may posses. In the recent past this term has been more pronounced in corporate world, especially in the banking arena. Some of the prominent ones are as follows:

- Housing Development Financial Corporation [HDFC] has merged with Bank.

Times

Among foreign banks, Standard Chartered Bank has acquired ANZ Grind lays Banks Asian and Middle East operations. In the bigger ever reverse merger of corporate India, ICICI Ltd, the largest development financial institution, is to merge with its affiliate-ICICI Bank. The new entity would be called ICICI Bank Ltd. HDFC Ltd had merged with its affiliate-HDFC bank. The new entity would be called HDFC Bank Ltd.

Undoubtedly, banks have made phenomenal progress over the years. Although the banking industry of India is suffering from the problems like growing inefficiency, alarming over dues, low profitability, political interference, etc. it is trying hard to

encounter these problems effectively.

RETAIL BANKING

Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include ATMs, credit cards, bet banking, savings and checking accounts, mortgages, personal loans, debit cards, etc. The world of retail banking is experiencing change to an extent that has never been seen before. Channel proliferation driven by new technologies, consolidation driven by the need for economies of scale and product proliferation driven by the existing customers all combine to increase the complexity of

delivering financial services profitably.

Customers are becoming more demanding and discriminating when choosing to do business with financial services organizations. In addition, non-banks are entering the competitive space, competing for business traditionally offered by the financial services industry. As competition increases, customer service is becoming a key focus for differentiation. Leading banks are adopting strategies designed to transform their organization from one with a product and channel centric models to one with a customer centric focus.

The proliferation of electronic channels presents new distribution opportunities and challenges for retail financial services. New channels offer alternative ways to reach customers, but also create additional costs, as banks are obliged to maintain existing channels. The much-heralded demise of the branch alternative channels must be developed.

RETAIL

BANKING

IN

THE

CUSTOMER

Retail banking is finding itself in dramatic change. Over the last five years the new information technologies and the new communication infrastructures have become revolutionary forces changing business models, cost relations and not least the nature of customer relationships. Retail banking is no longer what it used to be. Now the strategy is simple, make products available where the customers traffic is the highest.

The banking industry is changing fast. Mergers, acquisitions and changes to banking laws have brought about unprecedented opportunities- which open up unprecedented choices for banking customers. Even public sector banks which are trying to shed their ancient grab often associated with bureaucracy and red- tapism, are going all out in becoming technology savvy and orienting their staff to be more customers friendly. There is no other way to face the growing competition from their private sector competitors.

Consolidations within the banking industry with mergers and acquisitions between public and new private sector banks have heralded in a new age of business in the banking arena. Banks are also joining hands with its counterparts in order to promote its product. For example Dena bank ltd. entered into a strategic alliance

with the new private sector HDFC bank ltd. to launch a co- branded debit card and share of ATM facilities.

One of the day areas of focus that emerged from this alliance was ATM expansion and availing the existing ATM facilities to the mutual benefit of both the banks. ICICI Bank Ltds customer base grew three fold in the one year from 6.5lakhs in March 2000 to over 2million by March 2001, after its merger with old player Bank of Madura. Another major private sector player HDFC bank also achieved strong growth on the basis of its retail thrust. The bank which acquired Times bank ltd. in 1999-2000 is set to increase its branch network, customer base, opportunities to cross sell and leverage alternative channels. It has expanded its retail loan products to include car loans, personal loans and consumer durable loans and has extended these offerings to a large number of cities.

Among emerging trends, Bank assurance is the new buzzword for the marketing of insurance products by tapping the retail distribution of network of banks. It is felt that banks can play a key role in the marketing of insurance products as they already have the infrastructure and organizational workforce in place.

Changes in consumer behavior are evident from the significant growth in the use of plastic as against money in India; card issuers are heavily promoting debit cards in abid to discourage the need out carrying around paper money. Indias debit card base , which was three lakhs in march 2000,has shot up to 4.9 lakh during the first half of 2000-01 smart cards and credit cards are simultaneously being aggressively promoted.

Banks these days finance almost anything from homes to cars, consumer durables, education, schemes for senior citizens, schemes for children etc, and also retail mutual funds and insurance thereby converting into a one stop financial services supermarket. Banks [even the public sector ones] have taken the business of keeping pace with times very seriously. For example, Bank of Baroda, the countrys second largest public sector bank intends to expand its activities in core banking, internet banking, myriad of delivery channels, like ATMs and kiosks, reaching to customers through several touch points, using wide area networking.

Software such as CRM[customer relationship management] , which enable heaps of relevant customer information to be stored in computers and to be retrieved at the click of a button, are becoming popular among public, private and foreign banks as it enables them to know their customer better.

In an ever changing environment where loyalties are fickle and competition if fierce, banks are trying to prove their worth by wooing customers with a gamut of

value added services as now the race is to be better than the best. Retail banking requires a high quality of customer service over a very large number of small transactions.

IDBI bank offers mobile banking service through short message services [SMS].The customers can do balance enquiry, fixed deposit enquiry, check cheque payment status and request of cheque book by pressing a few keys on the mobile phone. That is not all. Banks are finding innovative ways to enlarge their networks and grab cross- selling opportunities with in and outside the group. For example, Corporation bank entered into a strategic alliance with the LIC and recently with New India Assurance Company for distributing insurance products and using their premises for setting up ATMs of the bank.

Indeed, convergence in financial sector has acquired much larger shape than in other sectors. Going forward, increasing competition, thrust to reduced costs and some amount of consolidation in the financial sector will further work in the favor of the customers.

An international study has shown that in retail financial services, 20 percent of customers generate between 140 to 170 percent of profits. The role of technology would become more evident, as banks would be required to use more and more of technology in order to become successful.

It could be aptly remarked, that the foundation of retail success will come from understanding customers and markets. Relationship management skills would prove to be very crucial for survival. The focus of future winners would be an intensive and intelligent use of available resources to sustain a durable relationship with the existing customers, apart from creating new ones

RETAIL BANKING VS WHOLESALE BANKING

In marketing language, retailing includes all the activities involved in selling goods or services directly to final consumers for personal, non business use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing.

In marketing language, retailing includes all the activities involved in selling goods or services to those who buy for resale or business use. Wholesaling excludes manufacturers and farmers because are engaged primarily in production, and it excludes retailers.

On the same line, retail banking and wholesale banking could be differentiated in a broad manner, if not in details.

Retail banking, broadly refers to the provision of services to individuals and small businesses where the financial institutions are dealing with large number of low value transactions.

In sharp contrast, wholesale banking encompasses a large customer base; often multinational companies, governments and governmental enterprises, and the financial institutions deal in small number of high value transactions. Wholesale banking as opposed to retail banking is characterized by a narrow client base but large size of individual transactions. The different services offered by the banks as part of their wholesale banking activities can be best seen from the point of view of the ultimate consumer of these services- what are the various financial relevant customer information to be stored in computers and to be retrieved at the click of a button, are becoming popular among public, private and foreign banks as it enables to know there consumer better.

In an ever changing environment where loyalties are fickle and competition if fierce, banks are trying to prove their worth by wooing customers with a gamut of value added services as now the race is to be better than the best. Retail banking requires a high quality of customer service over a very large number of small transactions.

IDBI bank offers mobile banking service through short message services[SMS]. The customers can do balance enquiry, fixed deposit enquiry, check cheque payment status and request of cheque book by pressing a few keys on the mobile phone. That is not all. Banks are finding innovative ways to enlarge their network sand grab cross selling

Opportunities with in and outside the group. For example, Corporation bank entered into a strategic alliance with the LIC and recently New India Assurance Company for distributing insurance products and using their premises for setting up ATMs of the bank.

Indeed, convergence in financial sector has acquired much larger shape than in other sectors. Going forward, increasing competition, thrust to reduced costs and some amount of consolidation in the financial sector will further work in the favor of the customers.

An international study has shown that in retail financial services, 20 percent of customers generate between 140 to 170 percent of profits. The role of technology would become more evident, as banks would be required to use more and more of technology in order to become successful.

It could be aptly remarked, that the foundation of retail success will come from understanding customers and markets. Relationship management skills would needs of the corporate sector and how these needs are being met by services offered by the banks.

While a few institutions continue to specialize in wholesale banking or in retail banking in an isolated manner, there is no longer a complete separate retail system.

Although, the skill and knowledge required to carry out these businesses are different; there are some common critical success factors such as customer orientation, investment technology, etc.

The various multiple delivery channels used by banks to cater its customers are as follows:-

- Automatic Teller Machines [ATMs]

An ATM is basically a machine that can deliver cash to the consumers on demand after authentication. An ATM downs the basic function of a bank branch ,i.e, delivering, money on demand. Hence, setting of newer branches is not required, thereby, significantly lowering infrastructure costs. Banks are typing up with other enterprises to promote its ATM expansion. For example, Corporation bank has signed an agreement with Delhi Metro Rail Corporation [DMRC], for the installation of ATMs at its stations.

Phone banking:

This means carrying out of banking transactions through the telephone. A customer can call up the banks help line or phone banking number to conduct transactions like transfer of funds, making payments ,checking of account balance, ordering cheques, etc. this also eliminates the need of the customer to visit the banks branch.

E-broking:

Net broking is finally coming of age, and thousands of small investors are excitedly logging on to e- broking sites. Taking the example of ICICI, every day, about 1,500 of the10, 000 registered customers of ICICI direct log on to trade. They dont move a bit of paper. They just enter the details of the trade they want to execute and hit the mouse. The site does the rest. It moves funds from their bank account and transfers shares to their depository account. All within a minute or so.

Credit cards:

A credit card is an instrument, which provides instantaneous credit facilities to its holder to avail a variety of goods and services at the merchant outlets. It is also termed as Plastic money, as it is made of plastic.

Housing finance: Buying a house is never an easy proposition. It requires meticulous planning and a lot of leg-work. Even identifying the house that fulfils your dreams is difficult. Given our hyper- busy schedules, it is impossible to take time out for visiting innumerable project sites in search of a suitable dwelling.

Even if you manage to locate a house that is to your liking, you can never be too sure about which developer is offering the best deal. As they are located at long distances from one another, it is not easy to bargain and cross bargain with them for extracting the best deal.

These entire factors end up giving only one conclusion, i.e. now; more than ever before, buying a home and that too by talking a home loan make sense. And banks are taking this opportunity with both banks to make their retail banking strategy a success story. - Net Banking: In the past parents visited the banks branch to conduct their transaction. Now one if, is a fast learner, one can log on to his/her banks website, and conduct most of the transactions over the internet. So internet banking is one channel that your bank has launched to offer you better service. Thus, the need for a branch is completely eliminated by technology. Also, this helps in serving the customers better and tailoring products better suited for the customer. A customer can view his account details, transaction history, order drafts, electronic make payments transfer funds, check his account position and electronically

communicate with the bank through the internet for which he\she may have wanted to visit the bank branch.Net banking helps a bank spread its reach to the entire would at a fraction of the cost.

The mechanics is very simple and is not anything from the heaven: if one needs to check the balance of his account, instead of rushing to the nearest ATM or branch, he could visit his banks internet site. He only needs to enter his personal banking number followed by his Personal Identification Number [PIN] and internet banking password, and he is logged in. He shown his different accounts [current, savings, fixed, etc]. After that, he needs to click on saving and is shown the balance in this account. Another click of the button and he is able to view a record of his past transactions. How, if one wants to move his money, which is lying idle in his savings account, to a instructions about what to do when the fixed deposit matures[transfer principal and interest to savings account, or reinvest in an FD, or reinvest only principal in FD, etc].He is also able to view details of Tax Deducted at Source[TDS]. Besides, if one deposits a cheque in one of his drop boxes, he uses the internet to see whether the cheque has been credited to his account. Also, for example, if someone issues a cheque in favour of a vendor, but suddenly realizes that the goods are shoddy. He could issue a stop-cheque order over the internet. But the order should reach the bank in the nick of time before it makes the payment to the concerned vendor. Mobile banking: Banks can now help a customer conduct certain transactions through the mobile phone with the help of technologies like WAP,SMS etc. This helps a bank to combine the internet and telephone and thereby leverage it to cut costs and at the same time provide its customer the convenience.

It could be very well seen, that tech savvy banks are tapping all the above alternative channels to cut costs, besides improve customer satisfaction. In the case of banking customers, convenience is defined as 100 percent availability, faster response times and enhanced transaction experience in every single interaction. Banks are vying for opening new channels for public.

SNAPSHOT

OF

THE

STRATEGIES

ADOPTED

BY

MARKET

PLAYERS TO ENHANCE

BANKING OPERATIONS.

Private players:

The liberalization policy of the government of India permitted entry to private sector in banking; the industry has witnessed the entry of nine new generation private banks. The major differentiating parameter that distinguishes these banks from all other banks in the Indian banking is the level of service that is offered to the customer.

The focus of private sector banks has always been centered around understanding the customers needs, preempting him and consequently delighting him with various configuration of benefits and a wide portfolio of products and services. These banks have generally been established by promoters of reputed high value domestic financial institution. The fact that in a short span of time, these banks have leveraged on their strengths and competencies, viz, management, operational efficiency and flexibility, superior product positioning and higher employee productivity skills can gauge the popularity of these banks.

The private banks with their focused business and service portfolio have a reputation of being niche players in the industry. A strategy that has allowed these banks to concentrate on little reliable high net worth companies and individuals. These well chalked out integrated strategy plans have allowed most of these banks to deliver superlative levels of personalized services.

Industrial Credit & Investment Corporation of India (ICICI) Bank

The Industrial Credit & Investment Corporation of India was formed in 1955 to cater to private sector needs of long term financing. ICICI bank was established on 5th January 1994, as a 75% subsidiary of ICICI.

On the eve of the new millennium, a leading fund manager forecasted ICICI bank as steady growth but not enough retail focus, and not many indicators of change. As things turned out, he was wrong from all counts. ICICI bank has achieved a compounded annual growth rate (CAGR) of 65.86% over the last few years. Its growth is a story of a tremendous makeover from corporate to retail banking in less than a year. While the institution is at the front end of the business, handling the more lucrative retail products (loans, e- broking) the bank functions are the catchments area for lower cost retail deposits. Over the previous three years, ICICI (The Industrial Credit & Investment Corporation of India) has been trying to move beyond the traditional, air conditioned and ultimately more conservative confines of corporate banking into the aggressive and IT heavy world of retail trade.

ICICI bank has transformed itself at a fast pace, making constant efforts to take the first mover advantage in the technology related business. The bank has been in the forefront in the rapid expansion of its ATM network, setting up of call centers, credit card business and consolidating technology infrastructure including data centers. Telephone banking has been made available from the customer base of internet banking has seen a phenomenal rise to more than 0.5mn customer, up from a mere 0.1mn ..ICICI bank has transformed itself at a fast pace, making constant efforts to take the first mover advantage in the technology related businesses. The bank has been into the forefront in the rapid expansion of its ATM network, setting up for call centers, credit card business and consolidating technology infrastructure including data centers. Telephone banking has been made available from the customer base of internet banking has seen a phenomenal rise to more than 0.5mn customers, up from a mere 0.1mn. The equity of the ICICI brand and the diversification of business portfolio have enabled the bank to emerge as the leading player in retail as well as corporate banking products.

For a little than two years, ICICI has played out its move and taken on established rivals such as Citibank and Kotak Mahindra , and all at one go, through a variety of product offerings: deposits, loans, e- broking ,automatic teller machines (ATMs) and

credit cafes. And this move has actually paid off. Since then , the company has the highest number of credit card holders, a feat unrivalled by any other player till date. Of around 2000ATMs in India ,ICICI has the single largest network, about 400 in all. It has ramped up retail depositor numbers for group company ICICI bank, from 6 lakh in March 2000 to 16 lakh in January 2001. Intact the acquisition of Bank of Madura; ICICI has over three million retail customers. The e- broking company, ICICI web trade, is by far the number one broking portal in the country today, with an estimated 50% market share in the rs. 30-40 crore daily turnovers. Three years ago, ICICI bank used to complete all its transactions physically, within the confines of its branches. Now a whooping 55% of these are online and ICICI bank hopes to take that figure up to 95% in five years. Put differently, it expects only five people out of 100 to issue cheques and fill out forms physically to operate their accounts.

ICICI bank has also launched the ICICI bank e cheque for its internet banking customers. This facility will enable online payment of money from an ICICI bank account anywhere in the country to an account in any bank in eight cities in India, namely Ahmadabad, Bangalore, Chennai , Hyderabad, Kolkata, Mumbai, Nagpur and New Delhi. This facility will soon be extended to seven more cities. ICICI banks e cheque facility will greatly enhance its already existing facility of enabling transfer of funds online between any two ICICI bank accounts. The process of payment involves a one time online registration of the payee. Once the customer places his online request for transfer of money to the registered payee, the money is debited from his account. It is then transferred to RBI along with the payees details as provided by the customer. The National Clearing Cell (NCC), RBI, transfers the money to the payee bank, which then credits that to the payees account. The ICICI bank e cheque thus eliminates the time and inconvenience involved in making a demand draft or a physical cheque and then mailing/countering the same to outstation locations.

Industrial Development Bank of India (IDBI) Rapid pace of industrialization under Indias five year plans underlined the need for a new institution with wider functions and much larger resources at its command than the existing ones. The IDBI was established in 1964 to meet this requirement.

The countrys youngest private sector banks are trying hard to increase its top line in the coming years. But growing up in the Indian market is hard work. IDBI is in the midst of changing from a corporate bank into a large retail bank, although continuing to expand its corporate business.

As part of its strategy to focus on retail banking, the IDBI bank targeting 25 percent of its total assets from the retail banking segment. IDBI bank, which has entered in retail banking over the better half on the last two year, has now embarked on an aggressive strategy for growing its retail assets. At present, their retail assets portfolio is just 5% and they are going to increase it up to 25% in the next two years by giving more thrust on housing finance and personal loans. In an attempt to achieve this target in the retail segment, the bank is also implementing a well defined network extension strategy to increase its customer base from 4, 00,000 customers to one million customers in the next two years. The ATM network is also being beefed up, with the number of ATMs increasing from 100 to 400 by the end of current fiscal year.

For, expansion, the bank is investing an additional Rs 25 crore in technology and is recruiting more people at a time when other corporate are downsizing. To attract the retail customer, IDBI bank has recently launches SMS and WAP based mobile banking in 10 cities. It is also setting up a retail brokerage business for which the bank has received approvals from the National Stock Exchange (NSE) as a clearing house. Besides, bank has also launched its total time internet banking service, I- net banking, which covers all the accounts as well as de- mat accounts.

Unit Trust of India (UTI) Bank

The Unit Trust of India (UTI), the largest Indian mutual fund was established in 1964 with the objective of drawing widely scattered small savings into the investment market with a view to fostering industrial growth in the country. UTI promoted the UTI bank in 1994.

In the past few years, UTI has made significant changes in terms of its operations and technology.

Apart from offering different services in corporate banking, retail banking, investment management, treasury etc, the bank has moved swiftly to make changes in the information technology infrastructure in order to upgrade its level of IT enabled services and thereby maintain its competitive edge in the changing market.

As on 31st march 2000, the bank had 49 branches all over the country, which is an increase of 14 against the previous year. It has also established around 100 ATMs to serve its customers. In the year 2003-04, the bank plans to double its branch and ATM network over the previous years numbers.

UTI bank spreads on corporate clients- its largest revenue stream had been declining because of its focus on clients with high credit rating. In the new millennium, UTI bank has zeroed in on retail banking and expanded its ATM network from 50 to 250. With the customer acquisition rate at 35,000 per month, is one sixth to one seventh that of one in a branch.

UTI bank has managed a 40.55% CAGR under its own steam. Thanks, in large part, to the retrial push in the last couple of years. The major causes of its growth has been its fierce expansion of ATM network over the last couple of year, besides entry into retail lending business and focusing on corporate business as well.

IndusInd Bank Limited (IBL)

IndusInd bank Limited (IBL) was the first private sector bank to start operations in the era after liberalization of banking sector. It started its operations in April 1994.The bank started with the traditional functions of a commercial bank. Later on, it realized the changing scenario in the banking industry and soon it came out with number of innovative products. Also the deterioration in the loan portfolio forced it to focus more on retail and other fee based avenues. In the last fiscal year, the bank has taken some major initiatives to move in this direction. It has been approved as a clearing house for stock exchanges, launched a co-branded credit card, initiated net banking and is in the process of launching.

During the past few years, IndusInd bank has systematically plunged into retail activities and the number of retail accounts grew from 83,372 to 1, 02,449 as on 31st march 2000, a

growth of 63.16% over the previous year. All IndusInd ATMs grew to 22 in 17 cities covering 20 locations. With a view to widening the scope of anywhere/anytime banking facility. During the current year, it is proposed to set up 10 off- site ATMs and also on site ATMs in all branches, which currently do not have this facility.

In order to facilitate its clients, with a comprehensive range of products and services, the bank is entering into an arrangement with HSBC and master card for the issue of co- branded credit cards to their customers. Certain new products like IndusComfort, Indus senior citizens scheme, Millennium deposit scheme in addition to refinements in interest rate on products like Indus home etc. have been launched during the year. The bank aims to launch more such products in the niche areas. The bank has also implemented quested or a retail branch delivery system, which will enable the branches to offer better products and services.

Public Sector Banks

Economic reforms and entry of private players saw nationalized banks revamp their service and product portfolio to incorporate new, innovative customer centric schemes. The public sector banking finally woke up to the surfing demands of everdiscerning Indian consumer. The need to become highly customer focused forced the slow moving public sector banks to adopt a fast track approach. Taking a leaf out of the private sector banks, the public sector banks too went for major image change (including corporate brand building exercises and customer friendly programs included revamping of the product and service portfolio by introducing new product and service schemes ( like credit cards, hassle free housing loan schemes , educational loan schemes), integration of the branch network by using advance networking technology and customer personalization programs(through ATMs and any time banking , etc) the objective of all these strategies was very clear-to bridge the service and product gap inherent in banking system.

But the public sector banks have a long way to go before it could be rest. This could be attributed to many aspects encompassing retail banking. Even, the concept of an ATM, which is an ideal platform to provide anywhere, anytime banking to the customer is still to be realized. For example, Indian Overseas bank, with a branch network of 1,425 branches has an ATM network of just 41, whereas, HDFC bank, on the other hand, has a branch network of only 140, but an ATM network of 340.According to industry insiders, 50 % of the 4,500 ATMs in the country belong to new private sector banks. Public sector banks including SBI account for 30%, while foreign banks the balance 20%.

The bosses of PSU banks are not taking things lying down. In times of cost cutting, tech spends are on a sustained rise. PSBs have already realized that having a mere personal interface with their customers is not enough to retain their business. Customers are now demanding value- added services. But they will need to speed up implementation of their information technology before they lose their profitable customers.

HDFC BANK- AN OVERVIEW

INTRODUCTION

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an in principle approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBIs s liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of HDFC Bank ltd, with its registered office in Mumbai. India HDFC bank commenced operations as a scheduled commercial bank in January 1995. Incorporated in August 1994 as HDFC bank ltd, the bank now has a wide network of over 531 branches across 228 cities in India, and over a thousand networked ATMs.

Promoters HDFC is Indias premier housing finance company and enjoys a good track record in India as well as in international markets. Since its inception in 1977, the corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, Large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

Business focusHDFC banks mission is to be a world class Indian bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with banks risk appetite. The bank is committed to maintain the high level of ethical standards, professional

integrity, corporate governance and regulatory compliance. HDFC banks business philosophy is based on four core values- operational excellence, customer focus, product leadership and people.

1. Capital structure- The authorized capital of HDFC bank is rs 450 crore (rs 4.5 billion). The paid up capital is rs 311.9 crore (rs3.1 billion). The HDFC group holds 22.1% of the banks equity and about 19.4% of the equity is held by the ADS depository (in respect of banks American Depository Shares issue). Roughly 31.3% of the equity is held by Foreign Institutional Investors and the bank has about 190,000 shareholders. The shares are listed on The stock exchange, Mumbai and the National stock exchange. The banks American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol HDB.

Time bank amalgamation-

In a milestone transaction in the Indian banking industry, Times bank ltd (another new private sector bank promoted by Bennet, Coleman & Co/ Times group) was merged with HDFC bank ltd. effective February 26, 2000. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of TIMES bank received 1 share of HDFC bank for every share of Times bank. The acquisition added significant value to HDFC bank in terms of increased branch network, expanded geographic reach enhanced customer base, and skilled manpower and the opportunity to cross- sell and leverage alternative delivery channels. \ Distribution network-

HDFC bank is headquartered in Mumbai. The bank at present an enviable network of over531 branches spread over 228 cities across India. All branches are linked on an online real time basis. Customers in over 120 locations also serviced through telephone banking. The

banks expansion plans take into account the need to have a presence in all major industrial and commercial centers where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/ settlement bank to various leading stock exchanges, the bank has branches in the centers where the NSE/ BSE have a strong and active member base. The bank also has a network of about over 1054- networked ATMs across these cities. Moreover, all domestic and international Visa/Master card, Visa Electron/Maestro, Plus/Cirrus and American express credit/charge cardholders can access HDFC Banks ATM network.

2.

Management-

Mr. Jag dish Kapoor took over as the banks chairman in july 2001.Prior to this Mr. capoor was a deputy governor of Reserve bank of India. The managing director, Mr. Aditya puri, has been a professional banker for over 25 years, and before joining HDFC bank in1994 was heading Citibanks operations in Malaysia. The banks board of directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the board.

Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in industry, the bank believes that its people are a significant competitive strength.

Technology-

HDFC bank operates in a highly automated environment in terms of information technology and communication systems. All the banks branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi branch is also provided to retail customers through the branch network and Automated Teller Machines (ATM). The bank has made substantial efforts and investments in acquiring the best technology .available internationally, to build the infrastructure for a world class bank. In, terms of software, the corporate banking business is supported by flex cube, while the retail banking business by fin ware, both from i- flex solutions ltd. The systems are open, scaleable and web enabled. The bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web enabling its core business. In each of its businesses, the bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.

HDFC bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments.

Business profit

REVIEW OF LITERATURE

1. Market potential for Banking in Rural Areas

The country has benefited enormously from the reforms process. The average annual growth of GDP has been steadily rising and the 8% plus growth rate that is the present norm speaks volumes of how India has been progressing. In spite of the inflation threat, the foreign exchange reserves present a very healthy picture and foreign debt is being paid ahead of schedule. India has become a production base and an export hub for diverse goods for agricultural products to automobile components to high end services. Indian firms are now a part of global product chains. Large international corporations have established R&D centers in India. With such a constant support and development, it is quite feasible to tap the existing market potential of the Banking sector in the rural and the weaker sections of the society.

2. Information Technology in Banking The use and application of information technology in wide variety of insurers operations has now become strategic in the sense that it has direct impact on the productivity of resources, and a sweepening impact on reducing cost of various activities. The greatest impact in online technology has been achieved by ecommerce. E-commerce is attractive both to buyers and sellers as it reduces search cost for the buyers and inventory cost for seller. The recent growth of Internet infrastructure and introduction of economic reforms in the Banking sector have opened up the monopolistic Indian Banking market to competition from foreign alliances.

3. Banking Industry Opportunities, Challenges and Strategies

Over the past three years, around 40 companies have expressed interest in entering the sector and many foreign and Indian companies have arranged anticipatory alliances. The threat of new players taking over the market has been overplayed. As is witnessed in other countries where liberalization took place in recent years, we can safely conclude that nationalized players will continue to hold strong market share positions, but there will be enough business for entry to be profitable. Competition will surely cause the market to grow beyond current rates, create a bigger pie, and offer additional consumer choices through the introduction of new products, services and price options. Yet, at the same time, public and private sector companies will be working together to ensure healthy growth and development of the sector. Challenges such as developing a common industry code of conduct, contributing agreements between insurers to settle claims to the benefits of the consumers will require concentrated effort from both the sectors. However, everyone is quite excited about the opportunities, growth and development of the Banking industry in India. This market has the potential to grow into one of the largest markets in the world in the foreseeable future. However, if appropriate steps are not taken now to get the structural aspects right, this industry will face many challenges that might adversely affect its growth.

RESEARCH METHODOLOGY

OBJECTIVES

1. To know the Investors awareness about the Banking products. 2. To study the customer preference among various Banking companies.

Research Design I carried out the research using a combination of primary and secondary data. Thus the research is designed with a combination of: Exploratory Research design Descriptive Research design

EXPLORATORY RESEARCH

As I was unaware of the Banking market, exploratory research helped me to gather information from the secondary resources. I referred to various magazines, Internet, and industry association reports etc. and was able to gather information on Banking market.

DESCRIPTIVE RESEARCH DESIGN

After conducting the exploratory research, for further concrete details regarding various Banking players, I resorted to the Descriptive Design of market research. Under this I have analyzed the consumer behavior on different parameters. The Descriptive design has given me a better insight of scope of Banking by bringing to the fore many minute details regarding the consumer preferences. It has further helped me in a careful analysis of the secondary data and also refining the desired data by making the objective clearer.

Descriptive Design using the following methods:

QUALITATIVE METHODS: Questionnaire Survey Talking to the customers

QUANTITATIVE METHODS: Data Collection The whole research is based on primary data as well as secondary data.

Primary Data: Primary data collected through the questionnaire from the various Banking investors.

Secondary Data: Secondary data collected through the magazines, newspapers, shopkeepers catalogue and the advertisement.

Sample Size

Appox. 100 customers/respondents These 100 respondents are selected randomly. The Age of respondents is approximately between 18-45 yrs. It is based on the random sampling

Limitations Of Research The results through the questionnaire not always correct. Random sampling some time leads to the distortion in results. The sample size of 100 consumers not sufficient for exact results

Regional limitations In conducting the market survey I found regional limitations as our research was limited to Dehradun region.

Sample size The sample size taken for this market research was 100. But this sample size is too small to be a true representative for population size. The data collected from this sample size cannot be generalized for the population.

Target population The target population for this market group was 18 and above. But while conducting the research I found that the respondents were in the age category of 1825, which limited the boundaries of our research.

PROCESS ADOPTED Gaining knowledge about the Banking Market: Reading about the Banking market was the first step undertaken. This gave not only in depth knowledge about what is been offered by the Banking developing the questionnaire. companies but also proved useful while

Steps in the Development of the Survey Instruments: The main instruments required for survey was a well-developed questionnaire. The questionnaire development took place in a series of steps as described below:

Step 1

Research objectives are being transformed into information objectives.

Step 2

The Appropriate data collection methods have been determined

Step 3

The information required by each objective is being determined.

Step 4

Specific Questions/Scale Measurement format is developed.

Question/Scale Measurements is being evaluated.

Step 5
The number of information needed is being determined.

Step 6
The questionnaire and layout is being evaluated.

Step 7
Revise the questionnaire layout if needed.

Step 8
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The Questionnaire format is being finalized.

Step 9

Step 10

The selected customers have filled the questionnaires.

Filled questionnaire are being analyzed .

Step 11
Conclusion and Recommendations are drawn after the analysis.

Step 12

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DATA ANALYSIS & INTERPRETATION

Response Timing Fast Service Facilities Brand 10 12 49 9

Percentage 13 15 61 11

Preference of Customer

Brand Name 11% Timing 13% Fast Service 15%

Facilities 61%

Analysis: According to the graph 13 percent people go to the HDFC Bank because of Good Timing, 15 percent attracted towards fast service facility, maximum 61 percent customers show their interest in variety of Fin. Products/Facilities to choose from and rest 11 percent are impressed by the good Brand name of the bank.

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Response Monthly Fortnightly Daily Weekly Cant say 38 21 3 16 2

Percentage 47 26 4 20 3

Frequency of Visiting

Weekly 20%

Can't say 3%

Daily 4%

Monthly 47%

Fortnightly 26%

Analysis: Looking to the graph we can infer that frequency of the people to visit is as 47 percent go to Bank on monthly basis, 26 percent visit fortnightly, 4% goes there bi weekly, 20 percent customers on weekly basis and only 3% are daily goers.

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Response Yes No Cant Say 72 6 2

Percentage 89 8 3

Conveniences

Can't Say No 3% 8%

yes 89%

Analysis: 89 percent of the total customers say that HDFC Bank is more convenient than other banks, and they are fully satisfied with HDFC Bank, 8 percent dont agree to this statement and 3 percent respondents cant say which is convenient.
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Response Saving Account Current Account Loans Insurance Investment Plan 36 17 18 6 3

Percentage 44 21 23 8 4

Product preferences

Investment Plan Insurance 4% 8%

Loans 23%

Saving Account 44%

Current Account 21%

Analysis: As the graph clearly shows that the maximum number of people that is 44 percent people prefer HDFC bank for Saving Accounts, 21 percent for current Accounts, 23 percent for different loans, 8 percent people are for Insurance and 3 percent people prefer investment plans.
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Difficulties Lack Branches/ATMs Maintaining Rules Conditional Offers Others of

Response 18

Percentage 35

32

39

10

13

10

13

Difficulties

Other 14%

Lack of branches/ATMs 26%

Conditional Offer 14%

Maintaining Rules 46%

Analysis:

The difficulties faced by the customers about HDFC bank 35 percent lack of Branches/ATMs in DEHRADUN, difficult maintaining Rules with maximum Response of 39 percent, conditional offers with 13 percent, and 13 percent customers responded
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for others problems faced.

Scope Excellent Very good Good Fair Poor

Response 24 27 27 1 1

Percentage 30 34 34 1 1

Good 34% Fair 1% Very good 34% Excellent 30% Poor 1%

Analysis: About the scope of the HDFC bank in future 30 percent says its excellent, 34 percent respond for very good, another 34 percent says good, 1 percent people
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says its scope is fair and another 1 percent says poor scope.

Analysis & Finding

On the basis of study done and data collected, the analysis has been made. It was found that public sector banks still enjoy the hold over masses. Despite the excellent performance by private sector bank , most of the respondent still feel safe with public sector bank, but the private sector banks are also gaining pace. Especially in the case of HDFC bank it is amazing. Most of the 80 respondent were enthusiastic about HDFC bank and 60% of them were planning to open a new account with HDFC bank. The reason behind this enthusiasm could be as per the respondent:

HDFC bank is Most customer friendly. Technologically most advanced. Most innovative and efficient. Fastest growing.

Most of the respondent felt that HDFC bank is expanding its operation and network rapidly. Accordingly to the study done in DEHRADUN. I found that two years back there was only 1 ATM but now in July 2006, the number of ATM in DEHRADUN are two. According to branch manager HDFC bank is planning few more ATM in DEHRADUN this year. They are really upbeat with this growth, particularly he was very optimistic about growth in retail banking because he feels that it is associated with mass banking and with the help of help of world class services and product they can pull the customer of public sector bank. Overall bank is exploring new market and coming up with new branches and ATM.

On the basis of data collected from different areas of DEHRADUN it was found that most of the customer of HDFC bank are well educated and equipped with internet services either in home, office or at cyber caf. 40% of respondent frequently use net for different purpose of banking but most of them around 70% of the net users for banking still feel insecure with the security problem arising in net banking despite the assurance from
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banking this regard an employee of HDFC bank says that it is due to the old mind set, we people in India cant shed this mindset easily, but he was optimistic too that in the near most of the HDFC bank customer will be using net banking for all the purpose rather checking balance and ordering cheque book only.

Data from DEHRADUN shows it is fast turning into credit based society from cash based society. 90% of the respondents were planning a loan from a bank. When asked from which bank they are likely to avail the loan . 80% of them were not sure of that they had some predictions in their mind e.g. interest rate should be low, terms and conditions should be easy, banks must be cooperative, there should not be any hidden cost, approval of loan should not take longer period of time etc. in this regard I think banks need to work hard to educate loan seeker about all the question they have in their mind. In fact bank should conduct time- totime survey know the mind set of loan seeker so that the product can be designed

accordingly. In this regard HDFC bank in Delhi has done a tremendous job. When visiting around the city I found people from different banks including HDFC bank campaigning at different places and dealing with people regarding the loan provided by their banks, their terms and conditions and other related things. In fact HDFC bank has made loan facility very easy for loan seeker and range of loans provided is wide. For example home loan, housing loan vehicle loan, education loan and even loan for foreign trip.

Overall HDFC bank is a real world class banking organization that is clear from study and performance of the bank in Indian market. From the responses made by bank employees and the data from other sources like magazines, websites. It is found that HDFC bank has done very good job in field of technological infrastructure setup. It is using world class software for its back office banking operation, net banking, phone banking and mobile banking. You have access to your account virtually from everywhere even from moving train or while you are flying. It uses software from iflex solution, Intel corp.and others to help its operation. In fact HDFC bank is the enthusiast in the banking sector in India. real technology

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PRODUCT AND SERVICES OFFERED

HDFC bank has a wide range of product and services to offer from its portfolio that serves the interest of retail banking operation as well as wholesale banking, corporate banking and other operations. The most common and widely used products and services includes:Personal banking A) Saving accounts (regular a/c, plus a/c, max a/c) B) Current account (plus a/c, trade a/c, premium a/c, regular a/c reimbursement a/c)

C) Fixed deposit (regular, supersaver, sweep in)

D) HDFC bank preferred

E) HDFC bank plus

Investment choice -Fixed deposit -Mutual fund -Insurance -Bonds Equity and derivatives -

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To complement its real time services available via branch, ATM, phone at banking and call center, HDFC bank decided to Internet- enable its services. At that point, HDFC bank decided to internet enable its services. At that point, HDFC bank executives gathered and reviewed information from multiple sources about platforms and software solutions, and took into consideration the advice of i- flex and other trusted solution providers. In evaluating the possible choices,

HDFC bank first looked to the applications and system software that were available on Intel architecture. In the retail space, for instance ,I- flex proposed the ITPS internet banking application that runs on Intel architecture, and from that point the basic due diligence began.

The key question , of course, was would an Intel based solution offer the performance, reliability, availability, scalability and manageability required of any business critical solution. Availability of consistent support was also a key consideration in choosing the Intel platform. Says Mittal, We generally do not have the luxury to reinvent the wheel. With these elements in mind, HDFC bank chose Intel architecture for retail, corporate and mobile internet banking.

The lower cost of entry and faster time to market played a key role in our decision, says Mittal. In fact, HDFC bank started with database and application software on the same machine, and has since split these into separate servers. HDFC bank is currently scaling its solution to a Microsoft based high availability cluster. Mittal says, To keep up with growing demand, we have been scaling both up and out. Intel architecture also enabled HDFC bank to take advantage of the latest technology enhancements in Microsoft product suit, and in the web application server areas, java deployment and J2EE- based application servers.

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In summary, HDFC bank has been well pleased with its choice of internet banking using Intel architecture- based solutions. The quality of the solutions is impechable and the attitude of Intel [e-Business Network] members has been very helpful, Mittal says. We are highly satisfied with our e- Business solutions running on Intel architecture.

HDFC BANK: MOST INNOVATIVE AND EFFICIENT BANK (WHY HDFC ON TOP)

If one were to the largest bank in India, State bank of India would come out on top easily. Among the most efficient banking companies in India HDFC bank would probably make it to the top. But how does this private sector major compare on a global scale? Are the current premium valuations justified? Here is the comparison with Citi group, one of the largest universal bank in the world.

Particula rs (US$m) Total assets Advance s Total revenues Total profits

Citi bank

HDFC bank

1,097,190

6,473

436,304

2,501

92,556

537

13,448

82

While HDFC bank and citi group are not strictly comparable, we have undertaken this exercise to give the viewer an understanding of how Indias best banking major compares with the worlds best .In term of size, Citi group is a behemoth with an advance size of US$436bn. In comparison , SBI S advances stands at US$2.5 bn (FY03). Apart from size, citi group

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differs significantly from its Indian counterpart , ie HDFC bank in terms of the terms of services portfolio. Citi group is essentially a universal bank that has a presence in over 100 countries across the globe. HDFC bank , on the other hand, is essentially a retail bank with a local presence, ie in India. Citi groups business divisions are segregated mainly into four units, namely, Global consumer, Global corporate and Investment bank, private client services and global investment management . Global consumer division essentially is a retail- banking outfit, which caters to retail clients by offering services like cards (both credit and debit), consumer finance finance and other retail banking services.

Global corporate and investment bank deals with the requirements of corporate clients. Private client services, primarily functions under the entity Smith Barney, which deals with the investment related needs of clients, especially in relation to equity markets. This division provides investment advice, financial planning and brokerage services to its clients. And finally, the global investment management division provides services related to life insurance, pensions and private banking services to HNIs and other retail clients. However, HDFC banks services portfolio is not as diverse as Citi group. What is commendable about Citi groups performance over the years is the fact that it that it has managed to register a consistent growth rate in both revenues as well as bottomline in the last 3-4 years . Citi groups inorganic initiatives have helped it to a large extent in maintaining its growth momentum . HDFC bank, on the other hand, has also managed to perform well, albeit on a significantly lower base.

In term of loan exposure, we observe that Citi group is heavily tilted towards the retail segment. Of the total loan portfolio of us$436bn, retail sector accounts for nearly 69%.HDFC bank too has been growing aggressively on the retail front(29% of total loans in FY03 as compared to 21% last year). On the asset quality front , HDFC bank seems to have an edge .HDFC banks net NPAs to advances ratio stands at

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Particulars Revenue growth (3yr CAGR) PAT growth(3yr CAGR) Operating margin Profits per employee Revenues per employees NIM(%) Net NPAs to advances ratio (%)

Citi bank 5.9% 6.3% 22.2% 2.56 17.6 7.6 2.1

HDFC bank 31.4% 35.8% 11.80% 0.9 16.9 3.3 0.5

a low 0.5% (FY02), while for Citi group, it stands at 2.1%(FY03). Having said that , we must keep in mind the fact that considering the size of Citi groups loan assets, its NPAs seem well under control.

In terms of efficiency, despite being one of the most profitable banks in the country , HDFC bank still languishes compared to Citi Group. HDFC banks lower operating margins may be because it is an expansionary phase, during which operating expenses are on the higher side. As far as the other parameters are concerned, Citi group enjoys higher profit per employee, HDFC bank however, compares favorably on the revenue per employee front. Though NIM ( Net Interest Margin) of Citi group is significantly higher, it is not strictly comparable . Unlike HDFC bank, Citi group derives a significant part of its revenues from fee based on interest income; hence these figures are not strictly comparable.

Particulars( FY03) P/ E(X) P/BVPS ROA(%) RONW (%)

Citi bank 17.4 2.8 1.2 15.5

HDFC bank 18.2 3.1 1.4 18.5

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MVA COMPARISON MVA(Market value added). It is the value added in excess of Economic capital employed. MVA=Market value of the firm- Economic capital. We calculate the value addition only on the equity capital and hence its MVA= Market value of the equity Economic capital . Market value of the firm has been taken as the sum of book value of

debts and jaunary 2003 average market capitalization.

7000 6000 5000 4000 3000 2000 1000 0 Amount(in Crores) HDFC ICICI UTI IDBI

What does this comparison mean for Indian investors? That the Indian banking sector is still evolving and retail credit penetration is still poor. Though retail assets have grown at an impressive rate due to the fall in retail interest rate in the last five years, we still have a long way to go. Keeping the long term potential in mind HDFC bank is well placed to capitalize on the retail front. The bank focus on offering a wide range of services without losing focus of asset quality is commendable.

To conclude, consider the table below that highlights the potential of the banking sector in India.

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Yet to make a mark

Particulars GDP(US$bn) No. of cars sold (m) Mortgage to GDP ratio(%) No. of equity

India 474 0.1

US 9,437 16.0

2%

60 %

2.5

50% households

of

all

investors(m)

PREDICAMENT FOR RETAIL BANKING: THE OTHER SIDE OF THE STORY

Retail banking is now a focus area for most banks , with the supposedly high margins available in the segment But the margins figures speak a different story. Bankers chase retail buzz, but it doesnot add to profits. The excitement generated by the retail sector is still not being translated into larger profits . To under how things are shaping up, ET Intelligence group studied the segmental data available for four private sector banks for the first nine months of the current financial year.

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Corporate Banks Reve nue UTI 641 Prof it 69 8 HDFC 1172 155 2 ICICI 1110 143 8 IDBI 423 41

Retail (%) Revenue P rofit 10. 110 30 27.3 (%)

13.

1073

61

5.7

12.

1001

48

4.8

9.6

125 20

- 6.1

THE ROLE OF ATM ATM CULTURE BOLSTERING BANKS BOTTOMLINES In the last 2-3 years , technological changes coupled with increased customer expectations have literally forced banks to offer services like Anytime, Anywhere, Anyhow banking. This has perhaps led to the rapid growth of a kiosk termed ATM, indigenously as well as globally. The mantra is simple-automate or perish. On an International scale, ATM installations are set to rise by 45% over the six years from 1998 to 2004, according to a new report by retail banking research. At the end of 1998 there were over 800,000 machines operating worldwide and this figure will rise to over 1,152,000 by 2004. Looking forward into the future Indias thrust has been on ATM binge.

The proliferation of plastic payment card in the last year has made the ATM business a profit center for banks in the country. Now as the ATM business has gathered enough volume to become a viable proposition, it is likely to witness even stronger growth in the next couple of years.

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The total number of ATMs has more than doubled to around 3,000 in 2001 from 1,280 in 1999. By march 2003, the figure is likely to touch 5,500. In fact, as per the available plan of the banks, the number is likely to cross the 7,500 mark by 2004.

Banks have started investing aggressively since end-2001 to expand their ATM networks as the average number of transactions on an ATM went up from around 20 per day in early 1999 to 200 a day at present. In fact some busy ATMs conduct over 600 transactions a day . Earlier an ATM was considered an added advantage for customers, to

provide them with 24-hour banking and luring them into opening accounts. But now the ball game has changed. Even PSU banks like SBI, BOI, OBC and many others have started setting up ATM networks. In fact, SBI, which has around 150 ATMs, is planning to set up another 800 ATMs in the next 3 months.

Taking a volume of 200 transactions a day, the average volume generated by an ATM is in the range of rs 8,000 to rs 10,000 which is lucrative, as the cost of installing a machine is only around 15 lakh. Till a year back, this was around rs 30 lakh.

The popularity of ATMs is also increasing as banks are finding it cheap to cheap to service their offsite, most of the private banks have given the ATM facility even on zero balance. This means that the ATM facility comes without any cost. Besides, it enables customer to bank from a large number points all over the country. This has made the service popular, with the number of ATM cardholders growing to over 6 million.

The recent regulations Imposed by RBI w.r.t. ATMs as the financial market place evolves so too must financial regulation and financial regulators. Regulations change with changing with times. And with them new compulsions take hold. Bankers got a jolt two year, when, much like Rip Van Winkle, the Reserve Bank of India ( RBI) suddenly stirred up and issued a directive to banks that they should henceforth inform the apex bank,or after, installing the ATMs. It has suddenly dawned on RBI in february2001, that section 23 of the banking regulation act
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does not provide for post facto approval. According to The RBI circular The bank may install ATMs without prior approval (of RBI), but they should obtain a license conceded by the regional DBOD(department of banking operations and development) before operationalizing the ATM to keep in conformity of the banking regulation act.

Banks across the board have been on an ATM installation spree as part of their retail strategy. Till 1997, there were just 400 ATMs across India. Two years thereafter, largely driven by new generation private banks storming the bastion of nationalized banks, the number of ATMs soared to over 1,100,280 of them installed by foreign banks,350 December 2000, the number of ATMs galloped to 2,175 and by May 2000, it touched 3,165. Banks went on the installation binge because, besides saving on infrastructure and employee costs, ATMs do not require permission as is necessary for opening a branch. The question arises, whether RBI is now seeking to curb this trend or no? well, RBIs rationale is that the directive does not prevent a bank from installing standalone off- site ATMs with functions of deposits and withdrawals, but only ensures that these are not used for front or bank office functions. But experts are still mystified with the unprecedented decision of RBI.

Even with the regulation imposed by RBI, ATMs, though operational in the country for quite sometime, are expected to make a big headway in India. The growth of the past few years is just the tip of iceberg and the number of ATMs is likely to cross all the limits, considering the current growth that banks are driven by technology and retail thrust.

This means that the number of ATMs can move only one way and that is up. The Indian ATM landscape is going to look a lot different. If RBI is serious about pushing Indian banking to global standard, It may be time it did away regulations like these.

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LIMITATIONS OF THE STUDY

The study has few limitations:

Since the study is based on the responses of various account holder in various banks, the out come of the study might be not too perfect because the limitations in answering the questionnaire by respondents or even due to the not answering particular questions.

Again the sample size is not too big to come at a particular conclusion.

The information provided by the official of different banks might not be meticulously correct on account of confidential and secret information leakage.

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CONCLUSION

HDFC bank is a private leading bank in India. The growth of HDFC bank is clearly defined from its increasing popularity & financial improvements. Bank is growing rapidly in all areas as deposits, advances and other private banking services like ATMs, Point of sale terminals, net banking , mobile banking etc.

Bank cover all individuals and corporate, as bank have special accounts for everyone. Now bank also provide bank assurance (Banking+ Insurance). Bank is corporate agent of HDFC standered life.

The potential of private sector banks with reference to HDFC bank is that as DEHRADUN is a fast developing city therefore the future of private sector banks is very bright and it will take a year or two for them to lay their foundation well here. All that is needed to be done by the private sector banks is to introduce new schemes prevailing to the market trends of Dehradun. Banking as a service sector growing day by day and make Indian Economy more strong. .

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RECOMMENDATIONS

Based on the data analysis, the following are some suggestions that can be helpful in enhancing the market share of the HDFC bank in DEHRADUN.

As a private sector bank, HDFC bank has to be more alert and provide some more unique features. Because of the other major private sector banks the market is tough for HDFC bank and they have to compete with them for their standing in Indian market.

Bank should maintain its product quality and customer for long business. Bank should promote itself by aggressive marketing through all the media.

More ATMs should be installed in DEHRADUN and the surrounding areas. DEHRADUN is a city, where a majority of the population belongs to the service class, thus the bank should introduce schemes for this section of the society.

DEHRADUN also is a home for many retired personnel mostly from the armed forces, thus the bank should introduce pension scheme for them.

The bank should open new branches not only in DEHRADUN and the surrounding areas of the city like HARIWAR and MUSSORIE etc. By doing so, the people who need to travel in and out of these areas will open their account in the bank.

The bank should minimize its minimum balance in order to penetrate larger section of society.

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BIBILIOGRAPHY

Annual general reports of HDFC bank

Business Today

www. Hdfc. com

www.goggle. Com

Www. hdfc bank. Com

www. yahoo.com

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QUESTIONNAIRE

Name___________________________________________________________ Address_________________________________________________________ ______________________________________________________ Age______________________ Contact no.___________________________ E-mail_________________________________________________________

1. Which Bank you are banking with?

a. ICICI Bank b. IDBI Bank c UTI bank d. Others/ Nationalized bank

2. Are you satisfied with your bank? a.Yes b. No c.Cant say

3. What is your occupation? a Business b. Service c. Import d. others 4.How much your monthly transactions?

a. 0-50,000 b.50,000 2,00,000 c.2,00,000 10,00,000 d. 10,00,000 above

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5. Which kind of account/investment you preferred?

a. Saving account b. Current account c. Fixed deposit d. Stocks

6. Do you have any relationship with HDFC bank? a. yes b. no

7. If yes, are you satisfied? a. Yes b. No c.Cant say 8. Why you have chosen HDFC bank?

a. Timing b. Fast service c. Facilities d. Brand name 9. Which services of bank you prefer mostly? a. Credit cards b. Net banking c. Phone/ mobile banking d. None of these(by visit in branch)

10.Your financial position is best described as follows: a. You have complete financial freedom b. You can afford to take some risk c. You cannot afford to lose any money

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11. Your main investment goal is:

a. To watch your money grow fast b. You can afford to take some risk c. You cannot afford to lose money

12 Your comments about BANKING SERVICES ___________________________________________ ____________________________________________ ____________________________________________ _____________________________________________

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