FINAL REPORT OF MANAGEMENT THESIS-“I”

-: Berhampur:-

-: TITLE: -

“INTEREST RATE FLUCTUATION AND ITS IMPACT ON

DEMAND FOR CONSUMER DURABLE LOANS.”

Under the guidance of:-

Dr. R.K Panda (INC, Berhampur)

PRESENTED BY: - Himanshu Sekhar Sahoo.

ENROLLMENT NO.:-7NBBH072 (A)

 CONTENT
ACKNOWLEDGEMENT

CHAPTER- 1 INTRODUCTION

Objective

Limitation

Methodology

CHAPTER- 2 OVERVIEW OR ABSTRACT OF THE STUDY

BANKING Industry Profile

CHAPTER - 3 SUMMARY OF THE THESIS

Company Profile OF SBI AND ICICI BANK

Company profile of sbi and icici bank in berhampur

CHAPTER-4 EFFECT OF INTEREST RATE ON DEMAND OF

CONSUMER DURABLE AND VEHICLE LOAN (A
COMPARISON STUDY BETWEEN SBI AND ICICI
BANK)

CHAPTER-5 CONCLUDING REMARKS

SUGGESTIONS

REFERENCE
 ACKNOWLEDGEMENT
To bring out this project a successful one I have received help from various
sources. Firstly I acknowledge my wholehearted thanks to my principal Mr.
Madanmohan Sahu.

It gives us a great pleasure to express my sincere and deepest sense of

gratitude to Dr.R.K.Panda, for suggesting the topic of this project, his ready
and able guidance throughout the course of this management thesis. I am
greatly indebted to him for his constructive and helpful suggestion from time
to time during the progress of this management thesis and without which
this project would never have been completed.

I also thankful to those personal who gave their valuable time in

giving us the necessary data and we also thankful to ICFAI NATIONAL
COLLEGE ,Berhampur to make the project successful.

Mr. Himanshu Sekhar Sahoo

 Chapter-1
INtrODuction
An Interest Rate is a fee paid on borrowed assets. “The fee is compensation to the lender
for foregoing other useful investments that could have been made with the loaned money.
Instead of the lender using the assets directly, they are advanced to the borrower.

The borrower then enjoys the benefit of the use of the assets ahead of the effort required
to obtain them, while the lender enjoys the benefit of the fee paid by the borrower for the
privilege.”

Causes of interest rates

• Deferred consumption- When money is given as loan the lender defers spending
the money on consumption goods. Since according to time preference theory
people prefer goods now to goods later, in a free market there will be a positive
interest rate.

• Inflation-During inflation, the purchasing power of money gets reduced. A given

amount of money buys fewer goods in the future than what it can buy now. The
borrower therefore needs to compensate the lender for this.

• Alternative investments- The lender has a choice between using his money in
different investments. If she chooses one, she forgoes the returns from all the
others. Different investments effectively compete for funds.

• Risks of investment. There is always a risk that the borrower will go bankrupt,
abscond, or otherwise default on the loan. This means that a lender generally
charges a risk premium to ensure that, across his investments, he is compensated
for those failures.

• Liquidity preference- People prefer to have their resources available in a form

that can immediately be exchanged, rather than a form that takes time or money to
realize.

• Taxes- Because some of the gains from interest may be subject to taxes, the lender
may insist on a higher rate to make up for this loss.
 Study of consumer behavior is of utmost importance in the backdrop of a growing
economy. As Indian economy is continuously growing since last several years, people’s
income and expenditure pattern have also undergone important changes. Like any part of
urban India, the consumption behavior in Berhampur is also getting changed very fast. It
is in this background that a large number of corporate retailers have started their
operations in this small but important town in the Southern part of this state. Due to
increased purchasing power propelled by the new income sources in recent years, the
consumers are found to be extra motivated to purchase varieties of consumer Durables
which are extra expensive in nature. Proposed study would be a modest venture to
understand the role of loans provided by the banks to stimulate the demand for consumer
durables.

Objective
The purpose of the present study is to accomplish the following objectives:

 To know the reasons of fluctuation in interest rate.

 To know the effect of interest rate fluctuation on demand for
consumers durable loan provided by SBI.

Limitation
Though the present study aims to achieve the objectives that cited above in full
earnestness and accuracy, it hampered due to certain limitations. Some of the limitations
of this study summarized as follows.

 Sample size is limited due to the limited period allocated for the survey.

Methodology
The present study is developed on the basis of secondary data. Secondary data obtained
from a selected no. of bank branches functioning in Berhampur. According to plan two
banks under public sector and two banks in private sector were covered. Again as per the
requirement of the study, time series monthly data on the amount of loan sanctioned, no
of loans and the rate of interest on these loans were obtained from the selected bank
branches.

List of bank branches studied are

 i) ICICI Bank, Dharma Nagar Branch, Berhampur

ii) State Bank Of India, Main Branch, Berhampur

ANALYSIS: By regressing the amount of loan on rate of interest rate the true causal
behavior between the variable were studied. By calculating the Karl Pearson coefficient
the rate of correlation were obtained. The disaggregated picture of correlation coefficient
bank wise tested with paired T test. The seasonality behavior of rate of interest and
demand for consumer durable loans were studied on the basis of time series statistical
tool.

CHAPTER-2
BANKING INDUSTRY PROFILE
Banking in India originated in the last decades of the 18th century. The first banks
were The General Bank of India, which started in 1786, and Bank of Hindustan, both of
which are now defunct. The oldest bank in existence in India is the State Bank of India,
which originated in the Bank of Calcutta in June 1806, which almost immediately became
the Bank of Bengal. This was one of the three presidency banks, the other two being the
Bank of Bombay and the Bank of Madras, all three of which were established under
charters from the British East India Company. For many years the Presidency banks acted
as quasi-central banks, as did their successors. The three banks merged in 1925 to form
the Imperial Bank of India, which, upon India's independence, became the State Bank of
India. The first fully Indian owned bank was the Allahabad Bank, established in 1865.
When the American Civil War stopped the supply of cotton to Lancashire from the
Confederate States, promoters opened banks to finance trading in Indian cotton. With
large exposure to speculative ventures, most of the banks opened in India during that
period failed. The depositors lost money and lost interest in keeping deposits with banks.
Subsequently, banking in India remained the exclusive domain of Europeans for next
several decades until the beginning of the 20th century. Foreign banks too started to
arrive, particularly in Calcutta, in the 1860s. Calcutta was the most active trading port in
India, mainly due to the trade of the British Empire, and so became a banking center. The
Bank of Bengal, which later became the State Bank of India. By the 1900s, the market
expanded with the establishment of banks such as Punjab National Bank, in 1895 in
Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under
private ownership.

CHAPTER -3
 Company profile of sbi and icici bank

SBI :-

State Bank of India (SBI) (LSE: SBID) is a Public Sector Banking Organisation (PSB), in
which the Government of India is the biggest shareholder. It is the largest bank in India
and is ranked at 380 in 2008 Fortune Global 500 list, and ranked 219 in 2008 Forbes
Global 2000. Measured by the number of branch offices, SBI is the second largest bank
in the world. SBI traces its ancestry back to the Bank of Calcutta, which was established
in 1806; this makes SBI the oldest commercial bank in the Indian subcontinent. SBI
provides various domestic, international and NRI products and services, through its vast
network in India and overseas. With an asset base of $126 billion and its reach, it is a
regional banking behemoth.

In recent years the bank has focused on four priorities, first, reducing its huge staff
through the Golden handshake scheme known as the Voluntary Retirement Scheme,
second, computerizing its operations, third, implementation of Business Process Re-
Engineering(BPR), and fourth, trying to change the rude attitude of its staff through a
program aptly named 'Parivartan' or 'change'. On the whole, the Bank has been successful
in the first three initiatives but has failed in Parivartan.

Type Public (BSE, NSE:SBI) & (LSE: SBID)

Founded Calcutta, 1806 (as Bank of Calcutta)
Corporate Centre,
Headquarters
Madame Cama Road,
Mumbai 400 021 India
Key people Chairman Om Prakash Bhatt
Banking
Industry Insurance
Capital Markets and allied industries
Loans, Credit Cards, Savings, Investment vehicles, SBI Life (Insurance)
Products
etc.
Revenue USD 22.4 billion (2008)

ICICI Bank:-
 ICICI Bank is India's second-largest bank. The Bank has a network of about 573
branches and extension counters and over 2,000 ATMs. ICICI Bank was originally
promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-
owned subsidiary.

ICICI was formed in 1955 at the initiative of the World Bank, the Government of India
and representatives of Indian industry. The objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses.
In the 1990s, ICICI transformed its business from a development financial institution
offering only project finance to a diversified financial services group offering a wide
variety of products and services, both directly and through a number of subsidiaries and
affiliates like ICICI Bank.

In 1999, ICICI become the first Indian company and the first bank or financial institution
from non-Japan Asia to be listed on the NYSE. In 2001, ICICI bank acquired Bank of
Madura Limited.

ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross
border needs of clients and leverage on its domestic banking strengths to offer products
internationally. ICICI Bank currently has subsidiaries in the United Kingdom, Canada
and Russia, branches in Singapore and Bahrain and representative offices in the United
States, China, United Arab Emirates, Bangladesh and South Africa.

Today, ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its
specialised subsidiaries and affiliates in the areas of investment banking, life and non-life
insurance, venture capital and asset management. ICICI Bank Limited, together with its
subsidiaries, offers various banking products and financial services in the areas of
commercial banking, investment banking, and insurance to retail and corporate customers
primarily in India. The company offers various deposit products, which include time
deposits, savings accounts, current accounts, and certificates of deposits. Its loan portfolio
includes home loans, automobile loans, commercial business loans, two wheeler loans,
personal loans, agricultural loans, working capital loans, and credit cards, as well as
offers dealer funding, and technology and developer financing products and services.
ICICI Bank also offers various agricultural and rural banking products, including loans
for crop production, micro-finance, and purchase of farm equipment, as well as offers
commodity based finance, and various savings, investment, and insurance products. In
addition, it offers foreign exchange and derivatives, escrow, investment banking, demat,
equity underwriting and brokerage, venture capital and private equity, and life and
general insurance products and services. Further, the company provides custodial, tax
collection, cash management, mobile banking, Internet banking, online banking, ATM,
and treasury banking services. As of March 31, 2008, ICICI Bank had a network of 1,308
branches and operated 3,950 automated teller machines. It also has operations in the
United Kingdom, Canada, Russia, Singapore, Bahrain, Dubai, Sri Lanka, Hong Kong,
Qatar, Bahrain, the United States, China, the United Arab Emirates, Bangladesh, South
Africa, Thailand, Indonesia.

Name of the branches of SBI and Associate branches in Berhampur:-

1-SBI Main Branch
City Hospital road, Gate bazar
Berhampur.
2- SBI Gandhi Nagar branch
Gandhi Nagar Berhampur
3- SBI Gosaninuagan Branch
Gosaninuagan main road Berhampur
4- SBI medical branch
MKCG medical road, Berhampur
5- SBI regional branch
Brahma Nagar Berhampur
6 -SBI industrial branch
Court peta square, Berhampur

Associate Branches of SBI in Berhampur

State Bank Of Hyderabad,
Station Road, Berhampur
ICICI Bank
Dharma Nagar, Berhampur.
 CHAPTER -4
Effect of interest rate on demand of consumer durable and
vehicle loan (a comparison study between sbi and icici bank)

TABLE 1 : NO OF CONSUMER DURABLE LOANS AND AMOUNT

TAKEN THROUGH OUT THE YEAR IN SBI

MONTH NO. OF AMOUNT OF AMOUNT OF

60
CONSUMER LOAN TAKEN IN LOAN PER
50
DURABLE LOANS LACS. PERSON IN SBI
40 given by SBI BANK
30
(PERSONAL AND NOOFCONSUMERDURABLELOANS

VEHICAL LOAN)
20

10
JAN 2008 49 59.520 1.214

0
FEB 2008 32 36.00 1.125
Jan-08 Feb-08 Mar- Apr-08 May- Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08

MARCH 200808 08
04 06.00 1.5
APRIL 2008 37 42.40 1.146
MAY 2008 32 37.00 1.156
JUNE 2008 42 51.60 1.228
JULY 2008 31.2 37.618 1.205
AUGUST 2008 31.2 37.618 1.205
SEPTEMBER 2008 31.2 37.618 1.205
OCTOBER 2008 31.2 37.618 1.205
NOVEMBER 2008 31.2 37.618 1.205
DECEMBER 2008 29 40.37 1.392
CHART 1: NO. OF CONSUMER DURABLE AND VEHICLE LOAN TAKEN
IN SBI BANK
CHART 2: AMOUNT OF LOANS TAKEN IN LACS IN SBI BANK

70

60

50

40 AMOUNTOFLOANSTAKENINLACS.

30

20

10

0
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec-
08 08 08 08 08 08 08 08 08 08 08 08

TABLE 2: AMOUNT OF LOANS TAKEN IN A YEAR IN SBI BANK

 MONTH AMOUNT OF LOAN TAKEN IN
LACS.

JAN 2008 59.520

FEB 2008 36.00

MARCH 2008 06.00

APRIL 2008 42.40

MAY 2008 37.00

JUNE 2008 51.60

JULY 2008 37.618

AUGUST 2008 37.618

SEPTEMBER 2008 37.618

OCTOBER 2008 37.618

NOVEMBER 2008 37.618

DECEMBER 2008 40.37

OBSERVATION:-
It is clear from the table that the highest amount of loan taken is 59.52 lacs in
the month of January, and lowest loan taken is 6 lacs in the month of March. The
lowest amount of loan taken in this month is due to the reason that this is the end of
the financial year and people are busy with their paper works, auditing and tax
related works that’s why the amount of loan taken gone down this month.

TABLE 3: INTEREST RATE FLUCTUATION THROUGH OUT

THE YEAR IN SBI BANK
 MONTH INTEREST RATE

JAN 2008 12.75

FEB 2008 12.75

MARCH 2008 12.25

APRIL 2008 12.25

MAY 2008 12.25

JUNE 2008 12.25

JULY 2008 12.75

AUGUST 2008 13.75

SEPTEMBER 2008 13.75

OCTOBER 2008 13.75

NOVEMBER 2008 13.75

DECEMBER 2008 13.00

OBSERVATION:-
In table 3 the minimum interest rate charged by SBI bank is only 12.25% which is
much lower than the interest rate of other private level banks. SBI bank is always
concentrating to give much benefit to the customer in lowest cost and that’s why
the popularity is never diminishing despite of presence of world class competitors.

CHART 3: INTEREST RATE THROUGH OUT THE YEAR IN SBI BANK

14
13.5
13
12.5 INTEREST RATE
12
11.5
11
10.5
10
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec-
08 08 08 08 08 08 08 08 08 08 08 08

TABLE 4: NO OF CONSUMER DURABLE LOANS AND AMOUNT

TAKEN THROUGH OUT THE YEAR IN ICICI BANK
MONTH NO. OF CONSUMER AMOUNT OF AMOUNT OF
DURABLE LOANS LOAN TAKEN IN LOAN PER
 GIVEN BY ICICI BANK LACS. PERSON IN ICICI
(PERSONAL AND BANK
VEHICAL LOAN)

JAN 2008 10 5.50 0.55

FEB 2008 12 6.24 0.52

MARCH 2008 14 5.46 0.39

APRIL 2008 28 10.40 0.357

MAY 2008 30 14.40 0.48

JUNE 2008 27 75.60 2.8

JULY 2008 28 12.60 0.45

AUGUST 2008 20 8.40 0.42

SEPTEMBER 2008 19 8.55 0.45

OCTOBER 2008 18 10.80 0.6

NOVEMBER 2008 22 9.90 0.45

DECEMBER 2008 13 5.20 0.4

 TABLE 5: INTEREST RATE OF ICICI BANK

MONTH INTEREST RATE OF ICICI BANK

JAN 2008 14.5%

FEB 2008 15%

MARCH 2008 15%

APRIL 2008 13%

MAY 2008 13%

JUNE 2008 13%

JULY 2008 13%

AUGUST 2008 13.5%

SEPTEMBER 2008 13.5%

OCTOBER 2008 13.5%

NOVEMBER 2008 14.5%

DECEMBER 2008 14.5%

OBSERVATION:-
table 5 shows that interest rate of ICICI bank is nowhere less than 13% i.e.
the minimum interest rate charged by ICICI bank is 13%.

TABLE :-6
 MONTH AMOUNT OF LOAN PER AMOUNT OF LOAN PER
PERSON IN SBI BANK PERSON IN ICICI BANK

JAN 2008 1.214 0.55

FEB 2008 1.125 0.52

MARCH 2008 1.5 0.39

APRIL 2008 1.146 0.357

MAY 2008 1.156 0.48

JUNE 2008 1.228 2.8

JULY 2008 1.205 0.45

AUGUST 2008 1.205 0.42

SEPTEMBER 2008 1.205 0.45

OCTOBER 2008 1.205 0.6

NOVEMBER 2008 1.205 0.45

DECEMBER 2008 1.392 0.4

OBSERVATION:-
Table 6 is a comparison of amount of loans taken per person between SBI
bank and ICICI bank. This table shows that the most of the customers are
interested to take loans from SBI bank, the reason behind that is the trust and
customer satisfaction towards SBI bank is higher than any other private bank.
That’s why most of the customers are interested to take loan from SBI rather than
any other bank.
CHART 4: COMPARISON OF AMOUNT OF LOAN PER PERSON BETWEEN SBI BANK
AND ICICI BANK

3
2.5 AMOUNTOFLOANPERPERSON
2 INSBI BANK
AMOUNTOFLOANPERPERSON
1.5
INICICI BANK
1
0.5
0
Jan- Feb- M Apr- M Jun- Jul- Aug- Sep- Oct- Nov- Dec-
08 08 ar- 08 ay- 08 08 08 08 08 08 08
TABLE 7 :- 08 08

MONTH NO. OF CONSUMER NO. OF CONSUMER DURABLE

DURABLE LOANS LOANS GIVEN BY ICICI BANK
GIVEN BY SBI (PERSONAL AND VEHICAL
(PERSONAL AND LOAN)
VEHICAL LOAN)

JAN 2008 49 10

FEB 2008 32 12

MARCH 2008 04 14

APRIL 2008 37 28

MAY 2008 32 30

JUNE 2008 42 27

JULY 2008 31.2 28

AUGUST 2008 31.2 20

SEPTEMBER 2008 31.2 19

OCTOBER 2008 31.2 18

NOVEMBER 2008 31.2 22

DECEMBER 2008 29 13

OBSERVATION:-
Table 7 shows that more no of customers are taking loans from SBI bank than
ICICI bank. As we all know that ICICI bank is the no. 1 bank giving the top
facilities and having the less formalities to take a loan from bank than SBI bank but
people taking loans in a great no from SBI bank.

TABLE :-8

MONTH AMOUNT OF AMOUNT OF

LOAN TAKEN IN LOAN TAKEN IN
LACS.(SBI) LACS.(ICICI)
JAN 2008 59.520 5.50

FEB 2008 36.00 6.24

MARCH 2008 06.00 5.46
APRIL 2008 42.40 10.40

MAY 2008 37.00 14.40

JUNE 2008 51.60 75.60

JULY 2008 37.618 12.60

AUGUST 2008 37.618 8.40

SEPTEMBER 2008 37.618 8.55

OCTOBER 2008 37.618 10.80

NOVEMBER 2008 37.618 9.90

DECEMBER 2008 40.37 5.20

OBSERVATION:-
This table shows that the amount of loan taken in SBI bank is higher than the loans
taken from ICICI bank. Despite of high formalities, mandatory security submission
and long procedure in SBI bank customers are taking high amount of loans from
SBI because they realized the conduct of ethical behavior in SBI bank which is
highly lacking in ICICI bank, that’s why people have more faith on SBI bank than
any other private sector bank.

TABLE 9:-
MONTH INTEREST RATE INTEREST RATE
OF ICICI BANK
OF SBI BANK
JAN 2008 12.75 14.5%
FEB 2008 12.75 15%
MARCH 2008 12.25 15%
APRIL 2008 12.25 13%
 MAY 2008 12.25 13%
JUNE 2008 12.25 13%
JULY 2008 12.75 13%
AUGUST 2008 13.75 13.5%
SEPTEMBER 2008 13.75 13.5%
OCTOBER 2008 13.75 13.5%
NOVEMBER 2008 13.75 14.5%
DECEMBER 2008 13.00 14.5%

OBSERVATION:-
This table shows clearly another reason of popularity of SBI bank that is its interest
rate. It’s clearly proved from this data that SBI bank offers minimum interest rate
which will encourage the customers to take more loan. Other private bank offers
more features apart from core features and they charge this expenditure on
customer through interest rate. That’s why we find higher interest rate in private
sector banks than public sector banks.

Regression analysis:-
Regression analysis is based on the relationship between two or more variables.
The known variable is the independent variable and the variable we are trying to
predict is the dependent variable. An inverse relationship exists between the
variables.

If X represents the cause and Y, the effect we are searching for

Y= a +b X

In this analysis I have taken

X= Rate of interest for different month

Y= Amount of loan of bank

REGRESSION ANALYSIS OF SBI BANK:-

Y= Amount of loan taken from SBI

MONTH AMOUNT OF INTEREST RATE X2 XY
LOAN TAKEN IN
LACS.(Y) (X)

JAN 2008 59.520 12.75 162.5625 758.88

FEB 2008 36.00 12.75 162.5625 459

MARCH 2008 06.00 12.25 150.0625 73.5

APRIL 2008 42.40 12.25 150.0625 519.4

MAY 2008 37.00 12.25 150.0625 453.25

JUNE 2008 51.60 12.25 150.0625 632.1

JULY 2008 37.618 12.75 162.5625 479.6295

AUGUST 2008 37.618 13.75 189.0625 517.2475

SEPTEMBER 37.618 13.75

2008 189.0625 517.2475

OCTOBER 2008 37.618 13.75 189.0625 517.2475

NOVEMBER 2008 37.618 13.75 189.0625 517.2475

DECEMBER 2008 40.37 13.00 169 524.81

TOTAL 498.598 155.25 2013.188 5969.56

X= Rate of interest rate for different months

SCATTERED DIAGRAM FOR SBI BANK

X-axis: interest rate
Y- axis; amount of loan
This is the regression line of two variables.
The regression line should be drawn on the scatter diagram in such a way that
when the squared values of the vertical distance from each plotted point to the line
are added, the total amount will be the smallest possible amount.

We obtain the following formulae to calculate the coefficient a and b in the

regression line

Y=a+bX

 b = n∑XY – (∑X)( ∑Y)

n∑X2 – (∑X)2

 a= Y–bX

 For SBI bank the value of ‘b’ is

 12( 5969.56) - (155.25) (498.598)

12 *(2013.188) – (155.25)2

= -103.6497

Here the value of b= -103.6497

From this we came to the analysis that in the increase in the value of X by 100 pts
the value of Y decreases by103.6497 pts, in other words with the increase in
interest rate by 100 pts the value of amount of loan taken decreases by 103.6497
pts. Here we can conclude that with the increase in interest rate the demand for
loan decreases that’s why the demand of loan for consumer durables is price
elastic.

REGRESSION ANALYSIS OF ICICI BANK:-

Y= Amount of loan taken from ICICI bank

X= Rate of interest rate for different months

 MONTH AMOUNT OF LOAN INTEREST RATE X2 XY
TAKEN IN LACS. (Y) OF ICICI BANK (X)

JAN 2008 5.50 14.5 210.25 79.75

FEB 2008 6.24 15 225 93.6

MARCH 2008 5.46 15 225 81.9

APRIL 2008 10.40 13 169 135.2

MAY 2008 14.40 13 169 187.2

JUNE 2008 75.60 13 169 982.8

JULY 2008 12.60 13 169 163.8

AUGUST 2008 8.40 13.5 182.25 113.4

SEPTEMBER 2008 8.55 13.5 182.25 115.425

OCTOBER 2008 10.80 13.5 182.25 145.8

NOVEMBER 2008 9.90 14.5 210.25 143.55

DECEMBER 2008 5.20 14.5 210.25 75.4

TOTAL 173.05 2303.5 2317.825

166.00
SCATTERED DIAGRAM FOR ICICI BANK

X-axis: interest rate, Y- axis; amount of loan

We obtain the following formulae to calculate the coefficient a and b in the
regression line

Y=a+bX

 b = n∑XY – (∑X)( ∑Y)

n∑X2 – (∑X)2

 a= Y–bX

 For ICICI bank the value of ‘b’ is

 b = 12 (2317.825) – (166.00)( 173.05)

12(2303.5) – (166.00)2

= -10.609

Here the value of b=-10.609

From this we came to the analysis that in the increase in the value of X by 100 pts
the value of Y decreases by10.609 pts, in other words with the increase in interest
rate by 100 pts the demand of loan decreases by 10.609 pts. Here we can conclude
that with the increase in interest rate the demand for loan decreases that’s why the
demand of loan for consumer durables is price elastic.
 Concluding remarks
1-
It is clear from the table that the highest amount of loan taken is 59.52 lacs in the
month of January, and lowest loan taken is 6 lacs in the month of March. The
lowest amount of loan taken in this month is due to the reason that this is the end of
the financial year and people are busy with their paper works, auditing and tax
related works that’s why the amount of loan taken gone down this month.

2-
The minimum interest rate charged by SBI bank is only 12.25% which is much
lower than the interest rate of other private level banks. SBI bank is always
concentrating to give much benefit to the customer in lowest cost and that’s why
the popularity is never diminishing despite of presence of world class competitors.

3-
Table 5 shows that interest rate of ICICI bank is nowhere less than 13% i.e. the
minimum interest rate charged by ICICI bank is 13%.

4-
This table is a comparison of amount of loans taken per person between SBI
bank and ICICI bank. This table shows that the most of the customers are
interested to take loans from SBI bank, the reason behind that is the trust and
customer satisfaction towards SBI bank is higher than any other private bank.
That’s why most of the customers are interested to take loan from SBI rather than
any other bank.

5-
This table shows that more no of customers are taking loans from SBI bank than
ICICI bank. As we all know that ICICI bank is the no. 1 bank giving the top
facilities and having the less formalities to take a loan from bank than SBI bank,
but people taking loans in a great no from SBI bank.
6-
This table shows that the amount of loan taken in SBI bank is higher than the loans
taken from ICICI bank. Despite of high formalities, mandatory security submission
and long procedure in SBI bank customers are taking high amount of loans from
SBI because they realized the conduct of ethical behavior in SBI bank which is
highly lacking in ICICI bank, that’s why people have more faith on SBI bank than
any other private sector bank.

7-
This table shows clearly another reason of popularity of SBI bank that is its interest
rate. It’s clearly proved from this data that SBI bank offers minimum interest rate
which will encourage the customers to take more loan. Other private bank offers
more features apart from core features and they charge this expenditure on
customer through interest rate. That’s why we find higher interest rate in private
sector banks than public sector banks.

Suggestions
1-

ICICI bank does not verify the securities and creditworthiness of customer and
sanctions loan in a few days, this shows that they are not conducting the ethical
behavior properly that’s why people perceive it as a non ethical institution. But SBI
bank takes more time to verify the credit worthiness of customer and obeys all
formalities before sanctioning the loan.

2-

Private Banks is more concentrating on the value added services and extra features,
which they think that it, will attract the customers but they are neglecting the core
features of a bank. This is the main reason despite heavy expenditure private banks
are not able to compete with public sector banks and SBI being the pioneer of all
the public banks.
 Reference
To make my project a successful one I have taken help from various
sources, such as direct interaction journals and web sites. The books I
have referred are

 Financial management (ICFAI).

Some of the journals I have referred are

 Author Mr. Raghu Mohan, Falling Interest?, Magazine

BUSINESS WORLD 2008, 29 Sep 2008 in page no. 30.

 Author Mr. Katuri Nageswar Rao(Associate Dean,The Icfai school

of Financial studies and consulting Editor), Indian Banking The
March Forward, Journal:- The Icfai University Press, (Professional
Banker) 2008, VOL-VIII, Issue-2 February 2008, Page No 13.

 Author Mr.Narayan Sethi, Financial Globalization Integration

and crisis, journal:The Icfai University Press, (Professional
Banker) 2008, Vol-VI, Issue 9,September 2006, Page No. 45.

The web sites I have referred for different information are

www.iupindia.org

www.indianeconomy.com
WWW.SBIBANK.COM

WWW.ICICIBANK.COM