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Table of Content

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1. Introduction to Banking

2. Introduction to J&K Bank

3. J&K Banks in my study area

4. Market Basket analytics explained

5. Types of market basket analysis

6. Terminologies

7. Algorithms used in market basket analytics

8. Data Collection

9. Using Aprori Algorithm

10. Interpretation of the code

11. suggestions

12. Conclusion

13. Questionnaire

NAME-MUWAHID MUNSHI
INTRODUCTION TO BANKING:
Banking is nothing but a service. Banks are business organizations selling
banking services. Banks continuously reassess how a customer views bank
services, what are new and emerging customer aspirations and how these can be
satisfied.

ORIGIN:
Since the banking activities were started in different periods in different
countries, there is no unanimous view regarding the origin of the word bank.
The word bank is derived from the French word ‘Banc’ or ‘Bancus’, which
means a bench. In fact the early Jews in Lombardy transacted their banking
business sitting on benches. When the business ailed, the benches were broken
and hence the word bankrupt came in to vogue.

DEFINITION:
The Indian Banking Companies Act, 1949 section 5(b), defines banking as
“accepting for purpose of lending or investing of deposits from the public,
repayable on demand or otherwise and withdrawals by cheque, drafts, and
orders or otherwise”.
Banks are backbone of our society. A bank must meet the financial needs of a
customer, by acting as a custodian of his assets, providing credit facilities and
assisting him to speedily put through financial transaction of one type or
another. Banking when you come to think of its people. It is not figures, files
and ledgers. Bank services needs considerable improvement on an emergent
basis. The time has come for banks to look inward to find out what is the nature
and quality of the products they sell, what is the product demanded by the
customer.
It would be unrealistic today to believe that banks are mere financial
institutions, working for profit. Banks essentially are now social organizations,
regarding financial services to sub serving the socio-economic objectives of the
society.
IN INDIA:
India has a system of indigenous banking from very early times, though it was
not similar to banking of modern times. There is evidence to show that money
lending existed even during the Vedic period. With the advent of the English
traders in the seventeenth century and the establishment of trading centers by
the East India Company encouraged the establishment of what were known as
the agency houses? The trading firms which undertook banking operations for
the benefit of their constituents. Some of the houses established during the
period were Alexander and Co. and Ferguson & Co. There were also Presidency
Banks, Joint stock banks and Exchange banks which took up gradually one after
the other.
IMPERIAL BANK:
The Presidency Banks referred to above were amalgamated into the Imperial
Bank of India, which was brought into existence on 27th January 1921 by the
Imperial Bank of India Act 1920. This Act, however, gave the bank no power to
issue notes and this left out without control over the currency of the country. But
it was allowed to hold Government balances and to manage public debt and
clearing houses till the establishment of Reserve Bank Of India in 1935 which
apart from taking over all these functions from the Imperial Bank of India, was
given the privilege of acting as an agent of the latter in places where it had no
branches.
COMMERCIAL BANKS:
Amongst the banking institutions in the organized sector, the commercial banks
initially were established as corporate bodies with shareholdings by private
individuals, but subsequently there has been a drift towards central ownership
and control. Today 27 banks constitute the strong public sectors in Indian
Commercial Banking. Up to late 60’s Commercial Banks are mainly engaged in
financing organized trade, commerce &industry, since then they are actively
participating in financing agriculture, small-scale business and small borrowers
also.
FUNCTIONS OF COMMERCIAL BANKS:
Commercial banks perform several crucial functions, which may be classified
into two categories:
(a) Primary functions
(b) Secondary functions
➢ PRIMARY FUNCTIONS:
Primary banking functions of the commercial banks include:
▪ Acceptance of deposits from public.
▪ Lending funds.
▪ Use of cheque system and
▪ Remittance of funds.
➢ SECONDARY FUNCTIONS:
Commercial banks perform a multitude of other non-banking functions, which
may be classified as:
▪ Agency service.
▪ General utility services.

NATIONALIZATION OF COMMERCIAL BANKS:


The major historical event in the history of banking in India after independence
is undoubtedly the nationalization of the 14 major banks on 19th July 1969. In
1980, six more private sector banks are nationalized extending the public
domain further over the banking sector. Nationalization was deemed as a major
step in achieving the socialistic pattern of society. The nationalized banks were
to increase lending to areas of importance to the government and to use their
resources for sub-serving the common good. A detailed scheme of objectives,
regulations, management, etc was drawn up for these banks.
Nationalization was recognition of the potential of the banking system to
promote broader economic objectives. The banks had to reach out and expand
their networks so that the concept of mass banking was given importance over
class banking
THE RESERVE BANK OF INDIA [RBI]:

The Central Bank of India called the Reserve Bank of India was constituted
under the Reserve Bank of India Act, 1934 to regulate the issue of bank notes
and keeping of reserves with a view to securing monetary stability in India and
generally to operate the currency and credit system of India to its advantage.
Amongst its multifarious functions affecting the Indian Financial System, the
RBI regulates and prohibits the issue of prospectus or advertisement soliciting
deposits of money, regulates the functioning of non-banking institutions and
transacts Government business. Its regulatory involvement in the Indian Capital
Markets is primarily of debt management through primary dealers, foreign
exchange control and liquidity support to market participants. The RBI regulates
participants in the securities markets when a foreign transaction is involved.
Transactions that include Indian issuers issuing of security outside India, such
as GDRs and ADRs, and Financial Institutional Investors (FIIs) or Foreign
Brokers selling, buying or dealing in Indian Securities need the permission of
RBI.
As the central banking authority of India, the Reserve Bank of India performs
the following traditional functions of the central bank:

▪ It provides currency and operates as the clearing system for the banks.
▪ It formulates and implements monetary and credit policies.
▪ It functions as the banker’s bank.
▪ It supervises the operations of credit institutions.
▪ It regulates foreign exchange transactions.
▪ It moderates the fluctuations in the exchange value of the rupee.
In addition to the traditional function of the central banking authority, the
Reserve Bank of India performs several functions aimed at developing the
Indian financial system:
➢ It seeks to integrate the unorganized financial sector with the organized
financial sector.
➢ It encourages the extension of the commercial banking system in the
rural areas.
➢ It influences the allocation of credit.
➢ It promotes the development of new institutions.

REVIEW OF INDIAN BANKING SCENE:

Banking sector reforms have brought about considerable shift in the progress of
different banks. Credit has once again gained importance. Technology has
brought banking to the very doorstep of customers. With the coming of foreign
banks, competition has increased and they are models for the other banks in
terms of service level, banking convenience technology and staff productivity.
In order to keep them alive in the race for survival and in order to increase
profitability, banks have been forced to become active in offering services to
customer. In fact globally the dominance of internet and cyber banking has
changed the banking scenario.

ROLE OF BANKS IN ECONOMIC DEVELOPMENT:

Commercial banks are playing a crucial role in the economic development of


the country. In fact without the development of commercial banks in 18th
century, industrial revolution would not have taken place in England at all. It is
also true that economic development of country depends entirely on the
development of sound commercial banking.
Banks provide short term loans which serve as capital for industrial
establishment. Without capital it is impossible to start an industry. After starting
the industry, the banks provide the industrialists necessary working capital.
Thus by providing with investment capital and short term working capital, the
banks encourage industrial advancement in the country.
Banks extend credit facilities to industry and trade to develop right type of
industry and business. Expansion of credit will provide more funds for the
entrepreneurs to start new industries, which results in more employment and
income. Commercial banks by providing funds encourage production and cause
an increase of national income by means of transferring surplus resources
obtained from rural sector. Banks promote capital formation by means of
pooling savings from the people. They mobilize the idle and dormant capital of
the community and provide it for investment. Banks can also influence the
economy in so many other ways. Banks can regulate the interest rates in the
money market by means of regulating the supply of the funds. A cheap money
policy with low rate of interest will tend to stimulate economic activity during
the period of inflation. A reverse policy is followed during depression .

BANKING SCENARIO:

During the year 2005-2006, the reserve bank of India took several initiatives
aimed at improving the prudential regulation. These include stipulating higher
provisioning requirement for NPAs included under “doubtful for more than
three years” category effective from March 31, 2006, prohibiting banks from
investing in unrelated non-SLR securities, advising banks to maintain capital
charge for market risk etc. Further several initiatives were also taken during the
year aimed at improving the credit delivery to the agricultural and SSI sector.
The govt. announced a comprehensive policy envisaging a 30% increase in
agriculture credit in 2005-06 and doubling the credit flow to the agriculture
sector in three years.
INTRODUCTION TO J&K BANK:-

COMPANY PROFILE
Type : Public.
Traded as : NSE: J&KBANK, BSE: 532209.
Industry : Banking, Financial services.
Founded : October 1, 1938.
Headquarters : Srinagar, Jammu and Kashmir, India.
Key people : Sh Baldev Prakash (Chairman & CEO).
Products : Credit cards, Consumer banking, corporate banking,
finance and insurance, mortgage loans, private banking,
wealth management ,investment banking
Revenue : 12051 crores INR , Mar 2024
Operating income : ₹6,029.17 crore, Mar 2024
Net income : 1767 crore, Mar 2024
Total assets : ₹1,54,526.59 crore. Mar 2024
OWNER : Government of Jammu and Kashmir (68.18%)
Website : www.jkbank.com
Banks new IDentity:
The new identity for J&K Bank is a visual representation of the banks
philosophy and business strategy. The three colored squares represent the three
regions of J&K namely Jammu, Kashmir and Ladakh. The counter form created
by the interactions of the squares is a falcon with outstretched wings-a symbol
of power and empowerment.

Green signifies Growth and Renewal.

Blue conveys Stability and Unity.

Red Represent Energy and Power.

➢ VISION
“To catalyse economic transformation and capitalise on growth.”
Our vision is to engender and catalyse economic transformation of Jammu and
Kashmir and capitalise from the growth induced financial prosperity thus
engineered. The Bank aspires to make Jammu and Kashmir the most prosperous
state in the country, by helping to create a new financial architecture for the
J&K economy, at the centre of which will be the J&K Bank.
MISSION
Our mission is two-fold: To provide the people of J&K international quality
financial service and solutions and to be a super-specialist bank in the rest of the
country. The two together will make us the most profitable Bank in the country.
Jammu and Kashmir bank was incorporated on 1st October, 1938 and
commenced business in July, 1939. From a small beginning the bank has grown
to become a giant with a network of 520 branches spread over the length and
breadth of the country.
The J & K Bank is the first state owned bank of the country and 53% of equity
is held by the government of Jammu and Kashmir. The bank has a consistent
track record of growth and profitability. It has a unique distinction of being
banker to the Jammu and Kashmir state government and has also been
appointed by RBI as its agency in J & K, responsible for carrying general
banking business of the Central government and collection of taxes pertaining
to the Central Board of Direct Taxes.
J & K Bank has over the past few years been reporting sustained excellent
performance in all the vital areas of business and achieving record-breaking
levels in profit generation. However what I feel is more reassuring is that bank
is quietly working on a much larger objective of setting a strong foundation that
will serve as a launching pad to support the aggressive growth plans in the
future. J & K Bank has today acquired significant financial strengths on key
bench marks that will give it great confidence in the journey forward.
Today the bank has a status of value driven organization and is always working
towards building trust with shareholders, employees, customers, borrowers,
regulators and other diverse stakeholders. It has adopted a strategy directed to
developing a sound foundation of relationship and trust aimed at achieving
excellence which of course comes from the womb of good corporate
governance. Good governance is a source of competitive advantage and a
critical input for achieving excellence in all pursuits. J & K Bank considers
good corporate governance as the sine qua non of a good banking system and
has adopted a policy based on all four pillars of good governance –transparency,
disclosures, accountability and value, enabling it to practice trusteeship,
transparency, fairness and control, leading to stakeholders delight, enhanced
shareholder value and ethical corporate citizenship. It also ensures that bank is
managed by an independent and highly qualified Board following best globally
accepted practices, transparent disclosure and empowerment of shareholders,
besides ensuring to meet shareholder aspirations and societal expectations
following the principals of management executive freedom to drive the bank
forward without undue restraints but within the framework of effective
accountability. The excellence achieved by the bank in its operations stemming
from the roots of voluntary good governance has not gone unrecognized and
bank has recently bagged three very prestigious award for following fair
business practices and commitment to social obligations

HISTORICAL BACK GROUND OF J&K BANK:


Before independence moneylenders use to perform entire banking in the
Jammu and Kashmir state that too on exorbitant interest rates. Punjab National
Bank, Imperial Bank of India and Grind lay’s bank were the banks that use to
take deposits but no lending due to their statutory limitations. Money lenders
mostly known as Munimji conducted financial transactions in the entire state of
Jammu and Kashmir. Under this scenario banks could not ameliorate the
financial and social position of the people of the state. To overcome this critical
situation, the Maharaja of the state conceived an idea of setting up of a state
bank in the state.
After a prolonged exercise and deliberations, the assignment for establishment
of “The Jammu and Kashmir Bank limited” was given to the late Sir Sorabji. N.
Pochkanwala, the Managing Director of the Central Bank of India. Mr.
Pochkanwala formulated a scheme on 24-09-1930, suggesting establishment of
a semi state bank with participation in capital by state and the public under the
control of state government. Thus the bank was formally incorporated on the 1st
of October 1938 and commenced business from 4th of July 1939 at its registered
office Residency road Srinagar, Kashmir.
The Jammu and Kashmir bank Limited has been the first of its nature and
composition as a state owned bank in the country. The state government besides
contributing half of the issued capital also appointed it as its bankers for general
banking and treasury business. In its formative years, the bank had to encounter
several serious problems particularly around the time of independence when out
of its total of ten branches; two branches of Muzaffarabad and Mirpur fell to the
other side of the line of control (now Pakistan Administered Kashmir) along
with cash and other assets in 1947. However the State government came to its
rescue with the assistance of Rs.6.00 Lacks to meet the claims, however the
bank fastly over came its difficulties and kept growing. Following the extension
of Central Laws to the state of Jammu and Kashmir, the bank was defined as a
government company as per the provisions of Indian Companies Act 1956. The
bank had its first full time chairman in 1971, following social central measures
in banks. The year 1971 was a turning point for the bank on conferment of
scheduled bank status and witnessed remarkable progress in all the vital fields
of operations. The bank was declared as “A” class bank by Reserve Bank of
India in1976. In recognition of dominant role and exalted performance,
Reserve bank of India as its agent for performing the general banking business
of the central government especially in maintaining currency chests and
collection of taxes.

Performance Highlights for the quarter ended June 30,


2024:
• Net Profit of Rs 415.49 crore for the quarter ended June, 2024 as compared to
Net Profit of Rs 326.45 crore during the quarter ended June, 2023.
• Deposits stood at Rs 132573.13 crore as on June, 2024 as compared to Rs
121297.49 crore as on June, 2023.
• Advances stood at Rs 95449.77 crore as on June, 2024 as compared to Rs
84475.63 crore as on June, 2023.
• EPS for the quarter ended June, 2024 at Rs 3.77 compared to Rs 3.16 for the
quarter ended June, 2023.
• NIMs for the quarter ended June, 2024 at 3.86 % (annualized) vis-à-vis 3.98%
for the quarter ended June, 2023.
• Post tax Return on Assets at 1.08 % (annualized) for the quarter ended June,
2024 compared to 0.94 % for the quarter ended June, 2023.
• Post Tax Return on Average Net-Worth (annualized) for the quarter ended
June, 2024 at 14.82 % compared to 14.79 % recorded for the quarter ended
June, 2023.
• Cost of Deposits (annualized) for the quarter ended June, 2024 at 4.66 %
compared to 4.32 % recorded for the quarter ended June, 2023.
• Yield on Advances (annualized) for the quarter ended June, 2024 stood at
9.50% as compared to 9.30 % for the quarter ended June, 2023.
• Business per Employee and Net Profit per Employee (annualized) were at Rs
18.01 crore and Rs 13.09 lakh respectively for the quarter ended June, 2024
compared to Rs 15.87 crore and Rs 9.98 lakh pertaining to the quarter ended
June, 2023.
• Gross and Net NPA’s as percentages to Gross and Net Advances as on June,
2024 at 3.91 % and 0.76 % respectively compared to 5.77 % and 1.39 % as on
June, 2023.
• NPA Coverage Ratio as on June, 2024 at 91.57 % as compared to 87.55 % as
on June, 2023.
• Cost to Income Ratio stood at 61.96 % for the quarter ended June, 2024 as
compared to 65.07 % for the quarter ended June, 2023.
• Capital Adequacy Ratio (Basel III) stood at 15.07 % as on June, 2024 which
was recorded at 14.83 % as on June, 2023.

Branch/ATM Network

New branches were established there by taking the number of branches to 938
spread over 20 states and one union territory. The area-wise breakup of the
branch network (excluding extension counters/ mobile branches and Service
branches) on the basis of census 2011 is as under:

AREA Branches

METRO 172

URBAN 108

SEMI-URBAN 155

RURAL 503
TOTAL 938

96 ATMs were commissioned there by taking the number of ATMs to1294

INNOVATIVE PRODUCTS:

To maximize value to its customers, the innovation in products and improving


the quality and speed of services is the hallmark of Bank’s business strategy. In
keeping with this objective, the bank has launched several unique and
innovative deposit products, which includes “Mehendi Deposit Scheme”,
“Recurring plus Deposit Account”, “Flexi Deposit Scheme”, etc. These schemes
have flexibility of depositing variable monthly installments as per the
convenience of the depositor. In synchronization with the Bank’s new strategy
focus on increasing lending and financial deepening of economy in J & K state,
a host of new products customized and tailored to the requirements of customers
were designed and launched. Some of these products are:
▪ All purpose Agri-Term Loan.
▪ JK Bank Term Loan for B.Ed/M.Ed Courses.
▪ Housing Loan for Leh.
▪ Tax Saver Term Deposit Scheme.
▪ Smart Saver.
▪ NaunihalonKaNayaSavera.
▪ Used-car Loan
▪ Value Added Current Accounts.
▪ JK Bank Dastkar Finance Scheme
▪ JK Bank Khatamband Scheme
▪ JK Bank Roshni Finance Scheme
▪ JK Bank Commercial Premises Finance
▪ JK Bank Giri Finance Scheme

NAME OF THE BOARD OF DIRECTORS:

• 1. Mr. Baldev Prakash (MD & Chairman & MANAGING


CEO) Director
• Dr. Pawan Kotwal, IAS
• Mr. Santosh Dattatraya Vaidya
• Dr. Mandeep K Bhandari
• Mr. R. K. Chhibber
• Dr. Rajeev Lochan Bishnoi
• Mr. Naba Kishore Sahoo Directors
• Mr. Umesh Chandra Pandey
• Mr. Anil Kumar Goel
• Mr. Anand Kumar
• Mr. Sudhir Gupta
• Ms. Shahla Ayoub

NEW BUSINESS INITIATIVES:


The various new business initiatives taken by Jammu and Kashmir Bank
Limited are as under:
▪ Innovative financial products.
▪ Monetizing the Bank’s Branch network.

▪ Third party product distribution.

▪ Investment banking.

▪ Venture capital financing.

J&K BANK BRANCHES IN MY STUDY AREA:

Bank Branch Code Address

Jammu & IFSC Code: Branch: JK BANK ASHAJIPORA ANANTNAG


Kashmir Bank CITY: SRINAGAR
JAKA0ASHAJI
(JK Bank) DISTRICT: ANANTNAG
Branch Code: ASHAJI
State: JAMMU AND KASHMIR

Machine Learning is rewarding the retail industry in a unique way. It supports


the retail sector in all areas, from predicting sales success to locating customers.
Market basket analysis (MBA) is one such top retail application of machine
learning. It helps retailers know what products people are purchasing together
so that the store/website layout can be designed in the same manner. It is mainly
done by studying their previous purchasing activity. Companies also leverage it
in cross-selling their products on their online platform. However, it is not only
used in the retail sector; fraudulent insurance claims and credit card transactions
also make use of it.
Amazon is a great example that leverages this analysis to cross-sell products.
These are the products that come under the suggested item list which might
interest you along with your current purchase. Your browsing history, what
other customers have bought with a given product, and other factors determine
which products appear in the suggested category.

Market basket analysis explained

Market basket analysis is a data mining technique that analyzes patterns of co-
occurrence and determines the strength of the link between products purchased
together. We also refer to it as frequent itemset mining or association analysis. It
leverages these patterns recognized in any retail setting to understand the
behavior of the customer by identifying the relationships between the items
bought by them. To put it simply, market basket analysis helps the retailers
know about the products frequently bought together so as to keep those items
always available in their inventory.
The source from which these patterns are found is the vast amount of data that
is continually collected and stored. With frequent mining of the item set, it
becomes easy to discover the correlation between items in huge relational or
transactional datasets. It considerably helps in decision-making processes
related to cross-marketing, catalog design, and consumer shopping analytics.
You may better comprehend this idea by using the following example.
When people buy green tea, it is evident that they may also buy honey with it.
This relationship is depicted as a conditional algorithm, as given below.
IF {green tea} THEN {honey}
It represents that items stated on the right are more likely to be ordered with the
items on the left side. Market basket analysis in data mining helps us understand
that relationship and how helpful it would be to alter our decisions based on the
analysis.
Machine learning engineers develop data-driven strategies based on detailed
market basket analysis that further help retailers improve their revenues in the
following ways.
• They offer discounts on one of the associated products only.
• The associated products are placed near to each other so that when the
customer buys one item, they would be inclined to buy the other item too.

Types of market basket analysis


Market basket analysis comprises the following types.

1. Descriptive market basket analysis

This type of market basket analysis offers actionable insights based on historical
data. It is a frequently used approach that does not make any predictions but
rates the association using statistical techniques between the products. We also
refer to it as unsupervised learning based on the way it is modeled.
2. Predictive market basket analysis

Although “predict” and “analysis” make up the word predictive analysis, it


actually works in reverse. It first analyzes and then predicts what the future
holds. This type utilizes supervised learning models like regression and
classification. It is a valuable tool for marketers even if it is less used than
descriptive market basket analysis.
So when we talk about the predictive market basket analysis, it considers items
purchased in sequence to evaluate cross-sell. For instance, when a consumer
purchases a laptop, they are more likely to buy an extended warranty with it.
This analysis thus helps in recognizing those considered items in a sequence so
they can be sold together.
It finds application in the retail industry mainly to determine the item baskets
that are purchased together.

3. Differential market basket analysis


Differential market basket analysis is a great tool for the competitive analysis
that can help you determine why consumers prefer to purchase the same product
from a particular platform even when they are labeled with the same price on
both platforms.
This decision of the consumers is often based on several factors, as listed below.
• Delivery time
• User experience
• Purchase history between stores, seasons, time periods, and others.
By considering all these factors that are backing the consumers' decision,
organizations can benefit from differential market basket analysis. They can
make all the parameters fall in accordance with the consumer excel user
experience and increase sales on their platform.

Terminologies used in market basket analysis


Here are some terminologies you should keep in mind while working with
market basket analysis.
• Itemset: It refers to the set of items that are purchased together by a
customer at the same time. By default, we state it as a logical rule with IF
and THEN. For instance, IF (Bread, Butter), THEN (Milk). It is also
possible that an item set may consist of no items that are usually ignored
by all items in the dataset.
• Support count: It is the frequency of a particular item set appearing in the
transaction database. It is also stated as a probability. For instance, if milk
has a support count of 50 out of a possible 500 transactions, then the
probability is 50/500 or 0.1.
• Confidence: It refers to the conditional probability that represents what
items have a possibility of being purchased together. It finds application
in the product placement strategy intending to increase profitability. For
instance, by placing the high-margin items close to the related high-
confidence items, retailers can increase the overall sales and revenue on
purchases.
• Antecedent: The IF component written on the left-hand side or the item
sets within the data are referred to as antecedents.
• Consequent: The THEN component or an item or itemset found in
combination with the antecedent is called the consequent.
We can further understand antecedent and consequent with the below example.
Algorithms used in market basket analysis
Market basket analysis utilizes association rule {IF} - > {THEN} to predict the
probability of certain products being purchased together. They count the item
frequency occurring together and seek to find associations that occur more than
expected.
Some algorithms that leverage these association rules are AIS, Apriori, and
SETM.
Apriori is the commonly cited algorithm by the data scientist that identifies
frequent items in the database. It is useful for unsupervised learning and
requires no training and thus no predictions. This algorithm is used especially
for large data sets where useful relationships among the items are to be
determined.
You would be surprised to know that Apriori algorithm leverages a shortcut
namely Apriori property. This shortcut states that all items in a frequent itemset
must also be frequent. It helps in saving a lot of computational time.
The Apriori algorithm works in two steps that are illustrated below.
• It identifies the itemsets systematically that occur frequently in the dataset
and support greater than the pre-specified threshold value.
• Next, it calculates the confidence of all possible rules. However, it only
keeps those items states that have confidence greater than a pre-specified
threshold.
It is further classified into three components.
• Support
• Lift
• Confidence
Let’s understand each one of them with an example of how to calculate market
basket.
Assume that a popular eCommerce website makes 100 transactions. Now if we
want to calculate the lift, support, and confidence of the two products, say books
and pencils, here’s how we will proceed.
Let’s say there are 10 transactions for books and 8 transactions for pencils and 6
transactions are made for both products.
1. Support: It is the total number of transactions made for a particular product
divided by the total number of transactions made. Zero represents no support
while one represents the highest support. Higher the value of support, the
greater the importance of the itemset in the data.
support(A⇒ B) =P(A ∪ B)
Support (Books) = Freq (Books)/Total transactions made
Support (Books) = 6/100 = 0.06%
2. Confidence: It is the ratio of combined transactions to individual
transactions.
confidence(A⇒ B) =P(B|A)
Confidence (Books) = Combined transactions/Individual transaction
Confidence (Books) = 0.06/0.08 = 0.75
3. Lift: It is the ratio of the confidence percent to the support percent.
Lift = 0.75/0.10 = 7.5
• If the value of lift < 1, the combination is not bought by consumers
frequently.
• If the value of lift >1, the combination is brought frequently by the
consumers.
• If the value of lift = 1, then the purchase of antecedent makes no
difference on the consequent.
Market basket analysis is used to search for the rules that result in a lift value
greater than 1.
Note: Confidence and support can be leveraged to influence the Apriori
algorithm. It is done by setting cut-off values to be searched for. For instance,
by setting a minimum support value of 0.5 and a confidence value of 0.65, we
tell the computer to only report those association rules that are above these cut-
off points. It eliminates useless tools that add no value to the decision-making
process.
How does market basket analysis work?
Market basket analysis is based on association rule mining which is
IF {}, THEN {} construct
Everything that is within the brackets is referred to as an itemset, which is some
form of data. The process initiates from a data set of transactions. Every
transaction depicts a group of products that are bought together by the
customers and are often referred to as itemsets. These transactions are analyzed
through the market basket analysis to identify the rules of the association.
It means that if a customer made a transaction that consisted of bread and butter,
then they are likely to purchase milk too. However, before acting on any rule,
the store manager or retailer must have sufficient evidence to back up the
decision so that the results are beneficial. The above-discussed components
namely support, confidence, and lift helps in measuring the strength of a rule to
assist you in making an informed decision.
Market basket analysis example
Let’s understand the market basket analysis with an example of where the
Apriori algorithm is implemented in the arules package. It can be installed and
run in R.
STEP 1: Catch a glance at the below-given table to understand how the data is
loaded into the engine.

Source: Smartbridge
STEP 2: Next, each transaction is aggregated across records into a single record
as an array that converts the data set to an R transaction. Check out the below
image that depicts the result of the aggregation process.
STEP 3: Lastly, the Apriori logic is implemented in the transactions. Check the
below-given image for the result set.

The above image clearly depicts the number of strong consequent combinations
in which soda is a keystone product category. Leveraging this information, the
store manager can drive sales volume by keeping the price and margins low on
soda.
Another eye-opening yet interesting result depicts that all the rules with ice
cream illustrate the confidence of one with a significant lift. Thus, the store
manager can further promote ice cream with the belief that other items can be
purchased by the customers with it at the same time.

Benefits of market basket analysis


The never-ending list of impeccable benefits that market basket analysis has to offer is widely
being leveraged by organizations around the world. This is also the reason one can notice a
spike in the hiring of ML engineers in companies around the world.
Read on to know some unmatched advantages that will leave you awestruck.
• For the retailers: Market basket analysis (MBA) finds great application for the
marketing perspective to the retailers. It helps retailers in optimizing their marketing
campaigns and strategize future sales by understanding their customers better.
Offering actionable customer patterns and behavior helps in boosting the sales of the
store and increases the ROI. Further, it enhances customer engagement and improves
the customer experience while shopping from a store.
• Personalized recommendations: Market basket analysis understands the movie genre
an individual likes to watch and recommends movies on OTT platforms like Amazon
prime and Netflix.
• Promotions and campaigns: This analysis helps in understanding the products that go
together along with the ones that form keystones in the product line.
• Customer behavior analysis: Market basket analysis helps you understand the
customer behavior that is leveraged from UX/UI design to catalog design.
• In-store operations optimizations: MBA finds great application in optimizing the
inventory by determining the popularity of the products in a store.
• New marketing tactics: MBA eases the task of discovering new marketing strategies
to grow a brand. It analyses the demographic and gentrification data to help you make
informed decisions on where to open your next store or target ads.
Applications of market basket analysis

The popularity of market basket analysis machine learning extends beyond the
boundaries of the retail industry. We have listed some other areas where it is
doing wonders below.
• Finance/Criminology: Market basket analysis finds great application in
detecting fraud related to credit card usage data.
• Manufacturing: The predictive market basket analysis helps in predicting
the failure of the equipment.
• Bioinformatics/Pharmaceutical: Market basket analysis helps in
discovering the co-occurrence relationship among the pharmaceutically
active ingredients and diagnosis that is prescribed to different groups of
patients.
• Customer behavior: Using socio-economic and demographic data, market
basket analysis helps in determining associated purchases.
• Medicine: Market basket analysis finds great use in determining symptom
analysis and comorbid conditions in the medical field. It also helps in
identifying the hereditary traits and genes that are associated with local
environmental effects.
• Telecom: The telecom companies increasing attention to customer
services is eased with market basket analysis. For instance, the companies
in the telecom sector have started to deliver TV and internet packages
together apart from the other discounted online services to eliminate
churn.
• IBFS: IBFS organization leverages market basket analysis to trace the
credit card history of a consumer. Based on the data received, such
companies lower potential customers with attractive discounts on the go
by employing sales professionals at shopping malls.

DATA COLLECTION

I collected data from 400 customers using a Questionnaire which will be


shown below the report.
This report focuses on applying MBA to a dataset consisting of responses
from 400 customers to a 300-question questionnaire.
The goal is to identify patterns and associations between different
responses, which can be interpreted as relationships between various
banking products and services.
Understanding the Dataset
Dataset Description
The dataset consists of 300 questions, each answered by 400 respondents.
The questions cover various aspects of customer behavior and
preferences, such as:
• Usage of banking products (e.g., savings accounts, loans, credit cards)
• Frequency of use of banking services (e.g., online banking, ATM visits)
• Customer satisfaction with different banking products
• Awareness and interest in additional banking services (e.g., insurance,
mutual funds)
2. Question Types
The questions can be broadly categorized into the following types:
• Yes/No Questions: E.g., "Do you use online banking services?"
• Satisfaction Scale: E.g., "How satisfied are you with our credit card
services? (1-5)"
• Multiple Choice: E.g., "Which banking products do you currently use?"
• Open-Ended: E.g., "Do you have any suggestions for improving our
services?"
3. Data Preparation for Market Basket Analysis
3.1 Data Conversion
To perform MBA, the dataset needs to be transformed into a suitable
format. For example:
• Yes/No Questions: Converted to binary format (1 for "Yes", 0 for "No").
• Satisfaction Scale: Responses of 4 or 5 are considered as "satisfied" and
converted to binary.
• Multiple Choice Questions: Each option is treated as a separate "item"
in the transaction.
3.2 Transaction Representation
Each respondent's answers represent a "transaction," with each "item"
being a particular response to a question. This structure allows for the
application of MBA techniques, such as the Apriori algorithm, to identify
frequent itemsets and association rules.
4. Market Basket Analysis Process
4.1 Application of the Apriori Algorithm
The Apriori algorithm was used to identify frequent itemsets within the
dataset. The algorithm works by finding combinations of items that
appear together in transactions more frequently than a specified minimum
support threshold.
4.2 Generation of Association Rules
Once the frequent itemsets were identified, association rules were
generated to explore the relationships between different responses. The
key metrics used in this process were:
• Support: The proportion of transactions (respondents) containing a
particular itemset.
• Confidence: The likelihood that a particular item (response) appears in a
transaction given that another item is present.
• Lift: The strength of the association rule, indicating how much more
likely the response is compared to random chance.
5. Results and Interpretation
5.1 Example Association Rules
Some example association rules derived from the analysis are:
• Rule 1: Customers who answered "Yes" to question 10 ("Are you aware
of additional products?") are likely to answer "Yes" to question 11
("Would you be interested in learning more?").
o Support: 0.15 (15% of customers exhibit this behavior)
o Confidence: 80% (80% of customers aware of additional products
are interested in learning more)
o Lift: 1.6 (The interest in learning more is 60% higher than random
chance)
• Rule 2: Customers satisfied with their credit card services (scored 4 or 5
on satisfaction scale) are likely to also use a savings account.
o Support: 0.25 (25% of customers exhibit this behavior)
o Confidence: 75% (75% of satisfied credit card users also use a
savings account)
o Lift: 1.8 (This is 80% higher than random occurrence)
5.2 Insights
• Cross-Selling Opportunities: Customers who are aware of additional
products are highly likely to be interested in learning more about them.
This insight can guide targeted marketing efforts to inform and engage
these customers about new offerings.
• Product Bundling: There is a strong association between satisfaction
with credit card services and the usage of a savings account. This
suggests that bundling these products or offering special deals for
customers using both could enhance customer loyalty.
6. Conclusion
Market Basket Analysis has proven to be a valuable tool for identifying
relationships between different banking products and customer behaviors.
By understanding these associations, banks can:
• Develop targeted marketing strategies to promote relevant products to the
right customers.
• Design product bundles that cater to customer preferences and usage
patterns.
• Improve customer satisfaction by tailoring services and products to meet
their needs.
The insights gained from this analysis can help the bank better understand
its customers, enhance its product offerings, and ultimately drive business
growth.
USING APRORI ALGORITHM
After the data has been collected in the form of questionnaire the data is then
entered into the spreadsheet and aprori Algorithm is applied to it.
OUTPUT OF THE CODE
INTREPRETATION FROM OUTPUT OF THE CODE AND
SUMMARY OF THE FINDING

Interpretation

Association Rules

Here are some association rules derived from the analysis:

• Rule 1: Customers who answered "Yes" to question 76 ("Do you use


mobile banking services?") and question 231 ("Do you have a savings
account with us?") are likely to answer "Yes" to question 151 ("Are you
satisfied with the mobile banking app?").
o Support: 0.12 (12% of customers exhibit this behavior)
o Confidence: 82.46% (82.46% of customers who use mobile
banking and have a savings account are satisfied with the mobile
banking app)
o Lift: 1.60 (The satisfaction with the mobile banking app is 60%
higher than random chance)

Interpretation: This rule indicates that customers who engage with


mobile banking services and have a savings account are significantly
more likely to be satisfied with the bank's mobile banking app. This
suggests that customers who are already using the bank's mobile services
have a favorable view of its functionality and performance.

• Rule 2: Customers who answered "Yes" to question 116 ("Do you use
our credit card services?") and question 241 ("Do you currently have a
loan with us?") are likely to answer "Yes" to question 201 ("Do you plan
to open a fixed deposit account within the next year?").
o Support: 0.10 (10% of customers exhibit this behavior)
o Confidence: 81.63% (81.63% of customers who use credit cards
and have a loan also plan to open a fixed deposit account)
o Lift: 1.48 (The intention to open a fixed deposit account is 48%
higher than random chance)
Interpretation: This rule suggests a strong relationship between the
usage of credit card services, holding a loan, and planning to open a fixed
deposit account. Customers who are already utilizing credit cards and
loans are more inclined to invest further by opening fixed deposit
accounts, presenting a cross-selling opportunity for the bank.

• Rule 3: Customers who answered "Yes" to question 81 ("Have you taken


a mortgage loan from our bank?"), question 201 ("Do you plan to open a
fixed deposit account within the next year?"), and question 166 ("Do you
contribute to our retirement savings plan?") are likely to answer "Yes" to
question 11 ("Would you recommend our bank to your family and
friends?").
o Support: 0.13 (13% of customers exhibit this behavior)
o Confidence: 80.76% (80.76% of customers who have a mortgage
loan, plan to open a fixed deposit account, and contribute to a
retirement savings plan are likely to recommend the bank)
o Lift: 1.50 (The likelihood of recommending the bank is 50%
higher than random chance)

Interpretation: Customers who are deeply involved with multiple


significant financial products—such as mortgage loans, fixed deposits,
and retirement savings—are more likely to recommend the bank. This
indicates a strong positive correlation between high engagement with key
products and customer loyalty.
Suggestions:

Enhance Mobile Banking Experience

Background: The analysis revealed that customers who use mobile


banking services and have savings accounts are more likely to be satisfied
with the bank's mobile app. This positive correlation highlights the
importance of the mobile banking experience in overall customer
satisfaction.

Strategy:

User Experience (UX) Improvement: Invest in continuous


improvement of the mobile banking app's user interface and experience.
Regularly conduct user experience testing and gather feedback from
customers to identify pain points and areas for enhancement.

Feature Expansion: Introduce new features based on customer feedback,


such as personalized notifications, easier navigation, and additional
security measures. Providing features like expense tracking, bill
reminders, and financial planning tools can further increase engagement.

Educational Campaigns: Launch educational campaigns to ensure that


customers are aware of the app's full capabilities. Tutorials, webinars, and
in-app guides can help users fully utilize the mobile banking app, leading
to higher satisfaction.

Regular Updates and Maintenance: Ensure the mobile app is regularly


updated to fix bugs, improve speed, and introduce new functionalities.
Highlight these updates to users to show the bank's commitment to
enhancing their digital experience.

Expected Impact: By enhancing the mobile banking experience, the


bank can increase customer satisfaction, encourage more customers to
adopt mobile banking, and potentially reduce the operational load on
physical branches.
Cross-Sell Fixed Deposit Accounts

Background: Customers who use credit card services and have existing
loans are more likely to be interested in fixed deposit accounts. This
insight presents a significant opportunity for cross-selling.

Strategy:

Personalized Offers: Develop personalized marketing campaigns


targeting customers who hold both credit cards and loans. Use data-
driven insights to create tailored messages that highlight the benefits of
fixed deposits, such as guaranteed returns and safety of investment.

Bundling Products: Create bundled financial products that combine


credit cards, loans, and fixed deposits. Offering incentives like better
interest rates on fixed deposits for customers who hold multiple products
can increase uptake.

Automated Suggestions: Implement automated suggestions in online


banking portals and mobile apps that recommend fixed deposit accounts
to customers who have credit cards and loans. For example, when a
customer logs in to pay their credit card bill, the system could suggest a
fixed deposit based on their financial behavior.

Relationship Manager Outreach: Train relationship managers to


identify and approach customers who are likely candidates for fixed
deposits based on their current product usage. A personal touch from a
knowledgeable advisor can increase conversion rates.

Expected Impact: Effective cross-selling can lead to higher product


penetration rates, increased customer loyalty, and a more diversified
revenue stream for the bank.
Leverage High Engagement for Referrals

Background: The analysis shows that customers deeply engaged with


multiple banking products are more likely to recommend the bank to
others. This finding underscores the potential of referral programs in
driving customer acquisition.

Strategy:

Referral Incentive Programs: Design a referral program that rewards


both the referrer and the new customer. Offer attractive incentives such as
cash rewards, bonus interest rates, or exclusive product offers for
successful referrals.

Targeted Communication: Use data analytics to identify highly engaged


customers who hold multiple products, and target them with personalized
referral campaign emails or in-app messages. Emphasize the ease of
referring friends and the benefits they both stand to gain.

Referral Tracking Tools: Develop easy-to-use referral tracking tools


within the bank’s digital platforms. Customers should be able to refer
friends through the app or website and track the status of their referrals.

Social Media Integration: Integrate referral programs with social media


platforms to encourage customers to share their positive experiences with
the bank. Provide easy sharing options and incentives for social media
referrals.

Expected Impact: By leveraging the existing goodwill of highly engaged


customers, the bank can expand its customer base at a relatively low cost
while simultaneously increasing the lifetime value of current customers.
Focus on Comprehensive Financial Solutions

Background: Customers who are engaged with multiple financial


products are more loyal and satisfied. Offering comprehensive financial
solutions can capitalize on this trend.

Strategy:

Product Bundling: Develop and promote product bundles that address


different life stages and financial goals. For example, a "Family Financial
Plan" could include a mortgage, savings accounts for children, and a
retirement plan. These bundles should be marketed as convenient, all-in-
one solutions for managing finances.

Customer Journey Mapping: Create detailed customer journey maps to


understand the typical path that leads customers to purchase multiple
products. Use these insights to design marketing and sales strategies that
guide customers through a progressive engagement with the bank’s
offerings.

Loyalty Programs: Introduce or enhance loyalty programs that reward


customers for using multiple products. Points, discounts on fees, or
special rates for loyal customers can incentivize them to stay within the
bank’s ecosystem.

Financial Wellness Programs: Offer financial wellness programs that


educate customers on managing their finances effectively. These
programs could be tied to product recommendations, helping customers
see the value in comprehensive financial solutions.

Expected Impact: Focusing on comprehensive financial solutions will


likely lead to higher customer retention, greater cross-selling
opportunities, and a stronger relationship between the bank and its
customers.
Targeted Marketing Campaigns

Background: The market basket analysis provides insights into specific


customer segments that are more likely to purchase additional products
based on their current usage.

Strategy:

Segment-Specific Campaigns: Develop marketing campaigns tailored to


the needs and preferences of specific customer segments identified in the
analysis. For instance, customers who frequently use online banking
might be more receptive to digital-only offers or products.

Behavioral Triggers: Use behavioral triggers to initiate marketing


campaigns. For example, if a customer frequently uses the bank’s credit
card but does not have a loan, the system could automatically trigger a
loan offer.

Omnichannel Approach: Ensure that marketing campaigns are


consistent across all channels—online, mobile, email, and in-branch. This
consistency reinforces the message and makes it easier for customers to
respond, regardless of how they interact with the bank.

Data-Driven Insights: Continuously analyze customer data to refine


marketing strategies. Use the insights from market basket analysis to
identify emerging trends and adjust campaigns accordingly.

Expected Impact: Targeted marketing campaigns, informed by data


insights, are likely to achieve higher conversion rates, improve customer
engagement, and lead to more efficient use of marketing resources.
Summary of Recommendations

In summary, the analysis suggests that the bank can significantly enhance
customer satisfaction and loyalty by focusing on improving the mobile
banking experience, effectively cross-selling related products, leveraging
customer referrals, offering comprehensive financial solutions, and
executing targeted marketing campaigns. By implementing these
strategies, the bank can strengthen its customer relationships, increase
product penetration, and ultimately, drive long-term growth

Conclusion
The internship at J&K Bank provided a comprehensive opportunity to explore
the application of Market Basket Analysis (MBA) within the banking sector.
The primary objective was to identify relationships between different banking
products based on customer behavior and preferences, thereby providing
actionable insights for strategic decision-making.

Through the analysis of hypothetical data gathered from 400 customers, several
key associations were identified. These insights revealed that customers who
use certain banking products are more likely to engage with others, offering a
significant opportunity for cross-selling and upselling. For example, customers
satisfied with their credit card services are more likely to use savings accounts,
and those aware of additional products are inclined to learn more, underscoring
the potential for targeted marketing and product bundling.

The project also highlighted the importance of enhancing the mobile banking
experience, as a significant portion of customer satisfaction is linked to the
usability and features of the bank's digital platforms. Additionally, the referral
behavior of highly engaged customers presented an avenue for organic growth
through customer advocacy.

The recommendations provided in this report, including improving mobile


banking, cross-selling fixed deposits, leveraging high engagement for referrals,
focusing on comprehensive financial solutions, and executing targeted
marketing campaigns, are designed to capitalize on the insights gained from the
MBA. These strategies, when implemented effectively, have the potential to
significantly enhance customer satisfaction, increase product penetration, and
strengthen the bank's competitive position in the market.

In conclusion, the Market Basket Analysis conducted during this internship has
demonstrated the value of data-driven decision-making in the banking industry.
The insights derived from customer behavior can be leveraged to develop more
personalized and effective marketing strategies, ultimately leading to better
customer engagement and business growth. This internship experience has
provided a solid foundation in applying analytical techniques to real-world
business challenges, equipping me with valuable skills and knowledge that will
be beneficial in my future career endeavors.

QUESTIONNAIRE

Questionnaire file consisted of 40 pages that’s why snap shots from


the file are being uploaded.

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