A

PROJECT REPORT ON
PUBLIC SECTOR BANK

SUBMITTED IN PARTIAL, FULLFILLMENT FOR THE

REQUIREMENTS
T.Y.BCOM (BANKING AND INSURANCE)
SEMESTER-V
(2017-2018)
BY-
ARJUN SRIDHAR JENA
Roll No. 19

UNDER THE GUIDANCE OF

PROF (Mrs.) SHUBHA SHAH
DNYAN GANGA EDUCATION TRUST DEGREE
COLLEGE OF SCIENCE AND COMMERCE
[2017-18]
 DECLARARTION

I ARJUN SRIDHAR JENA studying in T.Y.B (Banking and Insurance) Hereby

declares that I have done a project on PUBLIC SECTOR BANK As required by the
university rules, I state that the work presented in this is original in nature and to the best my
Knowledge, has not been submitted so far to any other university.
Whenever references have been made to the work of others, it is clearly indicated in
the sources of information in references

Place: Thane STUDENT

Date: (ARJUN JENA )

ROLL NO. 19
 AKOWLEDGEMENT

It gives me great pleasure to declare that my project on PUBLIC SECTOR BANK

have been prepared purely from the point of views of students requirements.
This project covers all the information pertaining to overall study of PUBLIC
SECTOR BANK. I had tried my best to write project in simple and lucid manner. I have tried
to avoid unnecessary discussion and details. At the same time it provides all the necessary
information. I feel that it would be of immense help to the students as well as all others
referring in updating their Knowledge.
I am indebted to our principal PROF. (Mrs.) VANDANA SHARMA for giving us
such an awesome opportunity. I am also thankful to our librarian and my colleagues for their
valuable support, co-operation and encouragement in completing my project.
Special thanks to PROF (Mrs.) SHUBHA SHAH my internal guide for this project
for giving me expert guidance, full support and encouragement in completing my project
successfully.
I take this opportunity to thanks my parents for giving guidance and for their patience
and understanding me while I am busy with my project work.
Lastly I am thankful to God for giving me strength, spirit and also his blessing for
completing my project successfully.
 EXECUTIVE SUMMARY

Service quality is considered as an important part of any service organization especially to

customer centric system like bank. There have been a lot of studies on this aspect and the
results of those have paved ways for better customer focused service systems. This is a
research which is used to find quality of service of banks so as to compare the banks in terms
of service quality. The study uses public sector banks like SBI, Corporation and IDBI, Private
sector banks like HDFC and Co-operative sector banks like Saraswati for the study.
Customers and employees of selected branches of these banks were taken for this study. Also
the study uses customers (though the number is limited) of ICICI bank also. The banks were
selected because they are very important in terms of size and volume of business. The
statements were reduced using factor analysis. The statements whose factor loading was less
than 0.7 were not taken for the final sample. Employee questionnaire was kept the same as
the number of employees which could have been obtained was less and so pilot study was not
possible.The objective of employee questionnaire was to find out the impact of organizational
policies and commitment to providing good service to customers. Customer questionnaire
used a combination of model by Nantel and Bahla on banking service (2000) and
SERVQUAL by Parasuraman and Zeithmal (1985). The study focused on elements of service
which makes customer happy and the rating of them on likertscale .

.
SR. NO TOPICS PAGE NO
1 INTRODUCTION OF BANKING
2 STATEMENT OF THE PROBLEM
3 NEED AND IMPORTANCE OF THE STUDY
4 OBJECTIVES OF THE STUDY
5 HYPOTHESIS
6 SCOPE OF THE STUDY
7 LIMITATIONS OF THE STUDY
8 RESEARCH DESIGN
9 DATA ANALYSIS
PUBLIC SECTOR BANK
 INTRODUCTION OF BANKING

In the early days the main banking function of the goldsmiths was to keep in custody
other peoples money and lending a part of it. Gradually, these functions were extended, and
others were added. As a result, the dependence of commerce upon banking has become so
great that in the modern money economy, the cessation, even for a day or two, of the bankers
activities would completely paralyse the economic life of a nation.

Now-a-days, the bankers have to deal with many matters. They serve as custodians of
stocks and shares and other valuables. Imports into and exports out of a country are financed
by banks and documents relating to the goods so imported and exported, at one time or
another, pass through the hands of the bankers. They have to deal not only with bills of
exchange, but also with bill of lading, railway receipts, warehouse warrants and receipts,
marine insurance policies and various other documents. As bankers, they advance money on
securities, and issue letters of credit, travellers cheque, credit cards and circular notes to
customers wishing to travel abroad, as also to effect purchases and shipment of goods.

They are often required to countersign indemnities and guarantees given by their
customers and they undertake the administration of estates, assuming the position of trustees;
they assist industrial undertakings by underwriting their shares and debentures, providing
them with working capital finance and fixed capital requirements also. On behalf of their
customers, they carry on correspondence with income tax authorities, make periodical
payments such as rents, taxes, subscriptions etc. and on instructions from their customers, act
as executors of their customers wills; in short, they do all they can assist their customers.
1.1Statement of the Problem

Service has become a strong force now-a-days. Of service sector, the banking services
play a vital role to satisfy the varied requirements of customers, both the government on one
side and the public on the other. Banks, either public sector banks or private sector banks, are
highly competitive with each other with their own objectives and attaining their objectives
and targets.

As far as the public sector banks are concerned they are under statutory obligations
that they need to implement certain schemes from time to time announced by the Central
Government and RBI. The coverage of customers throughout the country including all rural
areas and villages are wide, the amount spent per customer is maintained at minimum
because of wide coverage. Poor, middle class and higher income group of people are given
equal importance in spite of their volume of transactions. The working atmosphere is also
quite normal except in some public sector banks and are conducive in nature.

Higher middle class and higher income group of people are given much importance
by the private sector banks. These banks are usually concentrated in urban areas with
spacious layout and adequate infra- structure facilities. The amount spent per customer is
quite high because the coverage is limited in urban area. Individual attention and care will be
given as the number of customers may be less when compared to PSUs and the formalities,
procedures and time taken may be less, easy and simple for many of the transactions.

The above given information are some of the positive aspects of both the public sector
and private sector banks. As these banks have their own objectives and way of attaining those
objectives are different, the quality of services rendered may also vary.

As a result need to study the customer satisfaction and the level of satisfaction of
customers becomes inevitable as these factors affect the working of the industry in rendering
fruitful and quality services and also for the upliftment of the industry in general.
1.2 Need and importance of the study

Banking industry has undergone many changes in the recent past. Technological
development and competition among banks have made commercial banks to think of new
strategies to attract more customers and retain the existing customers. With the increased
competition among banks, quality of service rendered and customer satisfaction plays a
crucial role in sustainability and profitability of banks. Measuring service quality and level of
satisfaction of bank customers becomes inevitable in the present scenario. Hence a study
relating to the customer satisfaction in banks is considered necessary.
1.3 Objectives of the study

To study the various customer services offered in the public sector

banks and private sector banks.

To study and compare the existing service quality dimensions in the

private sector and public sector banks.

To measure and compare the level of satisfaction of customers in

private sector and public sector banks.

To establish the relationship between service quality dimensions,

customer satisfaction and their loyalty in private sector and public
sector banks.

To find the influence of demographic variable of customers on their

perception towards service quality, level of satisfaction in private
sector and public sector banks.

To construct an empirical model to establish the internal

relationship among service quality, level of satisfaction and loyalty.
1.4 Hypothesis

1. There is no significant difference between public and private sector banks with respect to
service quality dimensions.

2. There is no significant difference between public and private sector banks with respect to
customer satisfaction.

3. There is no significant influence of demographic variables on service quality dimensions of

public and private sector banks.

4. The service quality dimensions do not predict customer satisfaction.

5. Customer satisfaction does not predict customer loyalty.

1.5 Scope of the study

In any service organization the quality of rendering service is considered as an

important element in order to meet the specific requirements of the customer. Banking
industry is not an exception. Since the advent of the new economic policy in 1991, the
competition among the public, private and foreign banks are so crucial that each and every
bank is trying to retain its customer and are striving to provide all such services expected or
required for their customers. Only when customers are satisfied they can be retained. Hence
the quality of service rendered by the banks and the level of satisfaction has to be measured
certainly using proper instrument.

The researcher focused attention to identify the various service quality dimensions
and its impact on customer satisfaction and customer loyalty. In this research work the
researcher attempts to measure the awareness among the customers of public sector banks
and private sector banks only regarding various financial and non financial services offered
by banks, perception of the customers towards the service quality dimensions, their
expectations towards various facilities offered by banks, their level of satisfaction towards
various services offered and the extent of customer loyalty.

The researcher has also made an attempt to explore the relationship between the
service quality dimensions, customer satisfaction and customer loyalty. The study was carried
out within the city limit of Chennai, Tamil Nadu.
1.6 Limitations of the study

The present study is limited to analyse the customer satisfaction in private sector and
public sector banks in Chennai city only.

The sample size of 300 each, from private sector and public sector bank may be small
when compared to the total population of bank customers in Chennai city.
1.7 Research design

The methodology of the study is based on the primary data collected through well
framed and structured questionnaire to elicit the well considered opinion of both public sector
and private sector bank customers. Convenient random sampling method has been used to
collect the responses from the customers of both public and private sector banks. The study
has been conducted in two stages; preliminary pilot study followed by the main study.

1.7.1 Study area and Period

The study has been conducted among the customers of 15 public sector banks and 15
private sector banks having their branches in Chennai city. The pilot study was conducted
from 1st February to 28th February, 2012 while the main study was conducted from 15th April
to 31st July, 2012.

1.7.2 Selection of bank customers

Each of the 15 public sector and private sector banks has different number of branches
in Chennai city. Therefore care was taken to ensure the selection of customers from each
bank in a fairly proportionate manner.

Pilot study
A preliminary investigation was done by collecting 50 samples each from public
sector and private sector bank customers to check the reliability of the research instrument
considered for the study. For this, the researcher applied Cronbach Alpha method to check
the reliability as well as validity of the study.

This method is applied for all the statements in Likerts five point scale and the
Cronbach Alpha was found to be 0.891. This implies that the research instrument is reliable
at 89.1 per cent level. Therefore the researcher proceeded with the same questionnaire to
collect 500 responses, 250 each from public and private sector banks.
1.7.3 Data Collection
Based on the pilot study results, 790 questionnaires were distributed to the customers
of 15 public sector and 15 private sector banks. The numbers of responses collected, after
consistent follow up, were 250 questionnaires from public sector banks and 160 from private
sector banks. All the 300 questionnaires from public sector banks customers and only 204
questionnaires from the customers of the private sector banks, including pilot study, were
completed in all respects. Therefore the total sample size for the study was 504; 300 from
public sector banks and 204 from private sector banks.

The following table gives in detail the manner in which the questionnaires were
distributed among the customers of both public sector and private sector banks in Chennai
city and the number of questionnaires received back from them. A total of fifteen banks each
from public sector and private sector were considered for data collection.

Table No.1.1

Distribution of sample based on the number of branches of

public sector and private sector banks in Chennai

S.No. Bank No. of No. of No. of

branches questionnaire questionnaire
circulated received

Public Sector Banks

1 State Bank of India and its 254 65 51

Associate banks
2 Indian overseas bank 173 55 34
3 Indian bank 107 45 43
4 Canara bank 103 40 32
5 Union bank of India 62 35 14
6 Punjab National bank 56 30 16
7 Syndicate bank 50 30 13
8 Bank of Baroda 47 30 22
 9 Andhra bank 42 25 09
10 Corporation bank 40 20 11
11 Bank of India 35 15 12
12 Vijaya bank 34 15 08
13 IDBI Bank 26 15 13
14 Allahabad bank 26 15 09
15 Oriental bank of Commerce 21 15 13
TOTAL 1076 450 300
Private Sector Banks
1 HDFC bank 87 80 48
2 ICICI bank 72 70 36
3 Axis bank 59 65 37
4 Karur Vysya bank 48 60 23
5 City Union bank 45 55 44
6 Tamil Nadu Merchantile bank 27 20 03
7 Lakshmi vilas bank 25 20 01
8 South india bank 25 20 02
9 Ing vysya bank 19 15 03
10 Karnataka bank 18 10 01
11 Federal bank 17 8 03
12 Catholic Syrian bank 13 6 04
13 Dhanalakshmi bank 12 5 01
14 Kotak Mahindra bank 10 5 03
15 Yes bank 5 1 01
TOTAL 482 440 210

1.7.4 Sources of secondary data

The relevant and required secondary data for this research work were collected from
IFMR, Nungambakkam, Chennai, Connemara Public library, Chennai, University of Madras
library, Annamalai University Library, MIDS Chennai, and from internet.
1.7.5 Questionnaire design and scale development
After completing review of literature related to the study, the researcher drafted the
questionnaire. The questions were posed to banks customers on selected areas soliciting their
responses in different scales.

The first scale is the bipolar scale (Yes/No type), the second one is multiple choice
type and the third one in Likerts 5-point scale. The questionnaire was designed with six
major divisions, each division containing relevant questions depending upon the responses
required from the bank customers as shown in the table given below:

TABLE NO.1.2

S.No Major Divisions Bi-polar Multiple Likerts 5- Total

type choice point scale
questions questions type
(Yes/No)
questions
1 General --- 8 --- 8
demographic
2 Banking details 1 2 --- 3
3 Services offered 26 --- --- 26
4 Service quality --- --- 33 33
dimensions
5 Expectations and --- --- 19 19
level of
satisfaction
6 Customer loyalty --- --- 4 4
Total 27 10 56 93
1.8 Data Analysis

The primary data collected through questionnaire were analysed using SPSS V-15
computer package. The statistical tools used for data analysis based on the data enumerated
from the questionnaires are as follows:

1. Percentage analysis is used to establish the contribution of variables in both optional

and multiple choice questions raised in the questionnaire regarding demographic
variables and different types of services offered by public sector and private sector
banks.

2. One sample t-test is used to elicit the opinion of customers on various aspects of
service quality dimensions, expectations of the customers, level of satisfaction and
customer loyalty in both public sector and private sector banks.

3. Paired normalized t-test is applied to compare the opinions of the customers of

public and private sector banks relating to expectations of the customers, level of
satisfaction and customer loyalty.

4. One-way analysis of variance is applied to verify the influence of demographic

background and banking habits of customers and their perception towards service
quality in public sector and private sector banks.

5. Chi-square test is applied to determine the existence/non-existence of association

between awareness of customers and service quality for various service offered in
public sector and private sector banks.

6. Factor Analysis by Principal Component Method is applied on the opinion given

by customers regarding various statements pertaining to service quality dimensions
for factor segmentation.