SYNOPSIS OF MAJOR PROJECT

For MBA (3rd and 4th Semester)

CUSTOMERS PERCEPTION ON RETAIL BANKS A STUDY OF HDFC IN BANGALORE CITY

SUBMITTED TO:
PROF VINAY S
Faculty, RIMS,
Bangalore

SUBMITTED BY:
SHWETHA P
PG1529
Section F1

CUSTOMER PERCEPTION ON RETAIL BANKSA STUDY OF HDFC IN BANGALORE CITY

HISTORICAL BACKGROUND:
Banks are among the main participants of the financial system in India. Banking offers
several facilities and opportunities. Banks in India was started on the British pattern in the
beginning of the 19th century. The East India Company established 3 banks the Bank of
Bengal, The Bank of Bombay, The Bank of Madras. These three banks were known as
Presidency Banks. In 1920 these 3 banks were amalgamated and The Imperial Bank of India
was formed. In those days all the banks were joint stock banks and a large number of them
were small and weak. At the time of 2 nd world war about 1500 joint stock banks were
operating in India out of which 1400 were non-scheduled banks. Bad and dishonest
management managed quiet a quiet of few of them and there were a number of bank failures.
Hence the government had to step in and the Banking Companys Act (subsequently named
as the Banking Regulation Act) was enacted which led to the elimination of the weak banks
that were not in a position to fulfil the various requirements of the Act. In order to strengthen
their weak units and review public confidence in the banking system, a new section 45 was
enacted in the Banking Regulation Act in the year 1960, empowering the Government of
India to compulsory amalgamate weak units with the stronger ones on the recommendation of
the RBI. Today banks are broadly classified into 2 groups namely:(a) Scheduled banks
(b) Non Scheduled banks

INTRODUCTION:
Retail banking in India has fast emerged as one of the major drivers of the overall banking
industry and has witnessed enormous growth in the recent past. The Retail Banking Report
encompasses extensive study & analysis of this rapidly growing sector. It primarily covers
analysis of the present status, current trends, major issues & challenges in the growth of the
retail banking sector. This report helps in Banks, financial institutions, MNC Banks,
academicians, consultants and researchers to have a better understanding of the booming
opportunities in retail banking in India.
Retail banking refers to provision of banking services to individuals and small business
where the financial institutions are dealing with large number of low value transactions. This
is in contrast to wholesale banking where the customers are large, often multinational
companies, governments and government enterprise, and the financial institution deal in
small numbers of high value transactions.
The concept is not new to banks but is now viewed as an important and attractive market
segment that offers opportunities for growth and profits. Todays retail banking sector is
characterized by three basic characteristics:
Multiple products (deposits, credit cards, insurance, investments and securities)
Multiple channels of distribution (call center, branch, and internet)
Multiple customer groups (consumer, small business, and corporate).

DEFINITION:
Retail banking is typical mass-market banking where individual customers use local
branches of larger commercial banks. Services offered include: savings and checking
accounts, mortgages, personal loans, debit cards, credit cards, and so.

PROBLEMS OF RETAIL BANKING:

1) Management of Risks:
The growing competition increases the competitiveness among banks. But, existing global
banking scenario is seriously posing threats for Retail Banking Industry.
2) Human resource Management:
Gelade and Lvery (2003) examined relationships between human resource management
(HRM), work climate, and organizational performance in the branch network of a retail bank.
Significant correlations were found between work climate, human resource practices, and
business performance. The results showed that the correlations between climate and
performance cannot be explained by their common dependence on HRM practices on
Business performance are partially mediated by work climate.
3) Global Banking:
It is practically and fundamentally impossible for any nation to exclude itself from world
economy. Therefore, for sustainable development, one has to adopt integration process in the
form of liberalisation and globalisation as India spread the red carpet for foreign firms in
1991. The impact of globalisation becomes challenges for the domestic enterprises as they are
bound to compete with global players.These foreign banks are large in size, technically
advanced and having presence in global market, which gives more and better options and
services to Indian traders.
4) Employees Retention:
The banking industry has transformed rapidly in the last ten years, shifting from transactional
and customer service-oriented to an increasingly aggressive environment, where competition
for revenue is on top priority. Long-time banking employees are becoming disenchanted with
the industry and are often resistant to perform up to new expectations. The diminishing
employee morale results in decrease revenue. Due to the intrinsically close ties between staff
and clients, losing those employees completely can mean the loss of valuable customer
relationships. The global banking industry is concerned about employee retention

from all levels: from tellers to executives to customer service representatives because
competition is always moving in to hire them away. The competition to retain key employees
is intense. Top-level executives and HR departments spend large amounts of time, effort, and
money trying to figure out how to keep their people from leaving.
5) Customer Retention:
Levesque and McDougal (1996) invested the major determinants of customer satisfaction and
future intentions in the retail bank sector. They identified the determinants which include
service quality dimensions (e.g. Getting it right the first time), service features
(e.g. Competitive interest rates), service problems, service recovery and products used. It was
found, in particular, that service problems and the banks service recovery ability have a
major impact on customer satisfaction and intentions to switch.
7) Social and Ethical Aspects:
There are some banks, which proactively undertake the responsibility to bear the social
and ethical aspects of banking. This is a challenge for retail banks to consider these
aspects in their working. Apart from profit maximization, retail banks are supposed to
support those organizations, which have some social concerns.

SCOPE OF THE STUDY:

Increase in purchase power. The rural areas have the large purchasing power at their disposal
and this is an opportunity to market Retail Banking. India has 200 million households and
400 million middleclass population more than 90% of the savings come from the house hold
sector. Falling interest rates have resulted in shift. Now people want to save less, and spend
more.
All round increase in economic activity and Tax benefits are available. For example in case of
housing loans the borrower can avail tax benefits for the loan repayment and the interest
charged for the loan.

VARIABLES TAKEN FOR STUDY:

1) Determinants of customer satisfaction.
2) Determinants to manage customer loyalty.

LITERATURE REVIEW:
1) Dr.Chaisomphol Chaoprasert in his article LITERATURE REVIEW OF SERVICE
QUALITY IMPROVEMENT IN THE RETAIL BANKING INDUSTRY talks about the
importance of Service Quality Improvement. The paper analyzes past studies regarding
service quality improvement in the retail banking industry. The continuing trend to a model of
service quality improvement, from personnel counter services to electronic services, is
demonstrated. Improved service quality should be adopted to maintain the core competence
and this paper contributes knowledge and background for banks to apply these findings to
better shape and focus their positions in the market and also to provide service quality to
customers.

2) Innovation in Retail Banking by

Frances X. Frei,Patrick T. Harker, Larry W. Hunter Reviews about, how does a retail bank
innovate? Traditional innovation literature would suggest that organizations innovate by
getting new and/or improved products to market. However, in a service, the product is the
process. Thus, innovation in banking lies more in process and organizational changes than in
new product development in a traditional sense. This reviews a multi-year research effort on
innovation and efficiency in retail banking, and discusses both the means by which
innovation occurs along with the factors that make one institution better than another in
innovation. Implications of these results to the study of the broader service sector will be
drawn as well.
3) Keynote address by Ms Shyamala Gopinath, Deputy Governor of the Reserve Bank of
India, at the IBA - Banking Frontiers International Conference on Retail Banking
Directions: Opportunities & Challenges, Mumbai, 28 May 2005.
The issue of retail banking is extremely important and topical. Across the globe, retail lending
has been a spectacular innovation in the commercial banking sector in recent years. The
growth of retail lending, especially, in emerging economies, is attributable to the rapid
advances in information technology, the evolving macroeconomic environment, financial
market reform, and several micro-level demand and supply side factors. India too

experienced a surge in retail banking. There are various pointers towards this. Retail loan is
estimated to have accounted for nearly one-fifth of all bank credit. Housing sector is
experiencing a boom in its credit. The retail loan market has decisively got transformed from
a sellers market to a buyers market. Gone are the days where getting a retail loan was
somewhat cumbersome. All these emphasize the momentum that retail banking is
experiencing in the Indian economy in recent years.
There is a need of constant innovation in retail banking. In bracing for tomorrow, a paradigm
shift in bank financing through innovative products and mechanisms involving constant
upgradation and revalidation of the banks internal systems and processes is called for. Banks
now need to use retail as a growth trigger. This requires product development and
differentiation, innovation and business process reengineering, micro-planning, marketing,
prudent pricing, customisation, technological upgradation, home / electronic / mobile
banking, cost reduction and cross-selling. While retail banking offers phenomenal
opportunities for growth, the challenges are equally daunting. How far the retail banking is
able to lead growth of the banking industry in future would depend upon the capacity
building of the banks to meet the challenges and make use of the opportunities profitably.
However, the kind of technology used and the efficiency of operations would provide the
much needed competitive edge for success in retail banking business. Furthermore, in all
these customers interest is of paramount importance. The banking sector in India is
demonstrating this and I do hope they would continue to chart in this traded path.

4.) Customer relationship management in retail banking

Pat Russ in his article Retail banks are facing greater challenges than ever before in
executing their customer management strategies. Intensifying competition, proliferating
customer contact channels, escalating attacks on customer information, rising customer
expectations and capitalizing on new market opportunities are at the top of every bank
executives agenda.
In looking for ways to drive growth, banks need to evaluate their customer management
strategy.
Do they currently have a CRM solution that is capable of delivering?

Consistent and cost-effective customer service?

Customer-aligned products and services?
Enhanced customer loyalty and long-term value?

5.)Banking on Growth by Rajeshwari Adappa Thakur

With the Indian economy growing at a brisk clip of nine-plus percent per annum, there is
growing global and domestic interest in the nations banking industry. Experts have also
projected that India would emerge as the third largest banking hub in the world by 2040.
He also has a highlight on the Retail Banking sector as a new buzzword in the Indian
banking sector. He says If retail banking is a buzzword in India today, the reason is not far to
see. After all, margins in retail banking are higher than corporate banking and the growth too
is faster. Several banks that were not very active in retail banking are now eyeing this sector.
Looking at the above mentioned reviews, there is a clear understanding on the main aspects
of retail banking and also the importance of this sector.

OBJECTIVES OF THE STUDY:

The main objective of this project is to study the awareness of the satisfaction of customers
regarding the Retail Banking. During this partial completion of MBA program period I have
to achieve something, which is helpful for my career, and some value addition to the Banking
Company. It gives me good opportunity to expose and creating good impression of corporate
mind.
1. To study on the Customer Satisfaction level in new generation banks on retail
banking.
2. To find out what type of problem customer are facing related to service delivered by
retail Banking.
3. To understand the operations and modalities of Retail banking.
4. To know the technical advancement benefits for customers.

FORMULATION OF WORKING HYPOTHESIS:

H0: There is no significant difference in customers expectations and observations regarding

the new generation banks.
H1: There is significant difference in customers expectations and observations regarding the
new generation banks.

LIMITATIONS OF THE STUDY:

1. The survey was limited to Bangalore city in the area Hebbal only.
2. Target customers and respondents were too busy persons, so it was difficult to get
their time and view for specific questions.
3. Area covered for the project while doing job also was very large and it was very
difficult to correlate two different customers / respondents views in a one.
4. Every financial customer has his / her own need and according to the requirements of
the customer product customization was not possible.

RESEARCH METHODOLOGY:
The Research and Methodology adopted for the present study has been systematic and was
done in accordance to the objectives set which has been detailed as below.

RESEARCH DEFINITION:
Research is a process in which the researcher wishes to find out the end result for a given
problem and thus the solution helps in future course of action.
According to Redman & Mory, research is defined as a Systemized effort to gain new
knowledge

RESEARCH DESIGN:
A research design is the arrangement of condition and analysis of data in manner that aims to
combine relevance to the research purpose with economy in procedure.

Nature of Research:

Research is basically of two types.

1. Descriptive research

Descriptive Research:
Describe the characteristics of certain groups/ samples / populations.
Estimate proportions in specified populations.
Make specific predictions.

Determining sources of Data:

There are two main sources of data:
1. Primary data
2. Secondary data

1) Primary Data: are those which are collected afresh and for the first time, and thus
happened to be original in character. Methods of primary collection are as follows:

Questionnaire

2) Secondary Data: It consists of information that already exists somewhere and has been
collected for some specific purpose in the study. The secondary data for this study is collected
from various sources like,

Books.

Website.

Newspaper(Economic times)

Financial Magazine. ( Financial express , business world etc)

Sampling:
Sampling is that part of statistical practice concerned with the selection of individual
observations intended to yield some knowledge about a population of concern, especially for
the purposes of statistical inference.
In my survey, I have taken convenience sampling. My sampling is probability sampling as
probability sampling that has been selected using simple random selection each unit in the
population has a known chance of being selected.
Moreover, my sampling technique is simple random technique as in simple Random
sampling; each unit of the population has an equal probability of inclusion in the sample. In
my survey, each respondent have equal opportunity to be selected and the data, which I
collected, was from customers of HDFC who is engaged in retail banking.

SAMPLE SIZE:
Total sample size is 100

SAMPLE UNIT:
Commercial customers situated in Bangalore and having a bank account in HDFC.

REFERENCES:
1) Dr.Chaisomphol Chaoprasert , Profile and Perception of Retail Consumers An
Empirical study in Palakkad District, Indian Journal of Marketing, February
2008
2) Frances X. Frei,Patrick T. Harker, Larry W. Hunter, Customer satisfaction in retail

services: A comparative study of public and private sector banks, The Journal of Indian
Management & Strategy 8M, Volume: 12, Issue: 2, Year: 2007
3) Pat Russ User Perception of Retail Banking Services: A Comparative Study of Public and
Private sector banks.