CONTEXT

Page no.

1. Acknowledgement .............................................................. 3

2. Abstract….......................................................................... 4

3.Context…………………………………………………….

Chapter 1. Introduction

1.1 Background ............................................................. 8-9

1.2 What is Bank?. ......................................................... 9-11

1.3 Privatization of Indian Banking… ......................................... 12

1.4 Indian Banking System......................................................... 13

1.5 Reserve Bank of India ......................................................... 14

1.6 Classification of banks

1.6.1 On the basis of ownership… .............................................. 15

1.6.2 According to the Law… ...................................................... 16-17

1.6.3 Technological Development in Banking Sector ....................17-18

1.7 Future of Banking Technology… ................................................ 18

1.8 Reforms in the Banking Sector ..................................................... 19

1.9 Future of Banking Reforms ....................................................... 19-21

1.10 Statement of the Problem

1.10.1 Objective of the study ......................................................... 22

1.11 Nature and Scope of the Study… .............................................. 23

1.12 On the basis of the Functions ................................................. 23-25

1.13 Structure of Banking System ....................................................... 26-28

1.14 Functions of Bank

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 1.14.1 Primary Functions ............................................................. 29-32

1.14.2 Secondary Functions ........................................................ 32-34

1.15 Challenges of Public And Private Sector Banks ....................... 34-35

CHAPTER 2. LITERATURE

2.1 Review of Literature ............................................................. 36-52

CHAPTER 3. RESEARCH METHODOLOGY

3.1 Sample Design..................................................................... 53-55

3.2 Primary Data ...................................................................... 55

3.3 Secondary Data ................................................................... 56

Chapter 4. ANALYSIS AND INTERPRETATION OF DATA

4.1 Findings of the Study ......................................................... 57

4.2 Classifications .................................................................. 57

4.3 Conceptual Differences ................................................... 58

4.4 Analysis Data Collected… .............................................. 58-67

CHAPTER 5. SUGGESTIONS AND CONCLUSION

5.1 Suggestions .................................................................... 68-69

5.2 Recommendations ......................................................... 69-70

5.3 Conclusion .................................................................... 70

CHAPTER 6. BIBLIOGRAPHY

6.1 References .................................................................... 71

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Chapter 1. Introduction

1.1 Background :

The world of banking has assumed a new dimension at dawn of the 21st century with the
advent of tech banking, thereby lending the industry a stamp of university. Banking can also
be classified as retail and corporate banking. Retail banking that is designed to meet the
requirement of individual customers and their savings which includes payment of utility bills,
credit cards, consumer loans and checking bank account. Corporate banking on the other side
caters to the need of corporate customers such as opening letters, credit, managing cash, bills
discounting etc.

Banks marketing can also be defined as the part of management activity which seems to
divert the flow of profit from banking services to clients Essentially, the marketing notion
necessitates a knowledge of the customer's need to learn about the market and how it
operates. Furthermore, the industry is categorized in order for banks to better understand the
needs of their customers. Services like portfolio management, internet banking, venture
capital etc.

The services that banks provide to their customers are nearly completely focused on
managing money or finances for other individuals. Banks play a crucial role in our
economy. The basic duty of banks is to put the money in their account holders' accounts to
good use by lending it to individuals in need.

Money is a means of exchange, or a system for valuing goods and services that has been
agreed upon. Precious stones, animal products, and other valuable things were once utilised
as a means of exchange, and are still used in some places today. "Barter" is another name for
this system.
A medium of exchange could be anything with a predetermined value. Many different types
of money are used nowadays. Money is any thing or record that is widely accepted in a
specific socio-economic setting or country as payment for goods and services and debt
repayment. Money has four major functions: it is a medium of commerce, a unit of account, a
store of value, and, in the past, a standard of postponed payment. Money can be defined as
any object or secure verifiable record that performs certain functions. Money simply indicates
how much something is worth, whether it is a new gadget or two hours of your effort. When
you have money, a bank can operate as your financial institution.

The lifeblood of trade, commerce, and industry is finance. The banking industry now serves
as the backbone of modern enterprise. The financial system is crucial to any country's
development.

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The word bank is derived from either the old Italian word banca or the French word banque,
both of which refer to a bench or a money exchange table. For the purpose of lending or
exchanging, European money lenders or money changers used to display (show) coins from
various countries in large heaps (quantity) on benches or tables.

A modern economy cannot function without a bank. A bank, like any other business, is one
that is heavily involved in money transactions. No one can live without money nowadays,
and without a bank, safe and secure money transactions are impossible. A bank can be found
wherever there is money. It engages in a variety of activities. A bank performs a variety of
crucial functions for the growth of society and the country. As a result, no one can deny the
significance of a bank. The bank is regarded to be the heart of the modern economy.
Commercial banks are financial entities that lend money as well as offer transactional,
savings, and money market services.

1.2 What is Bank?

According to the research, a bank is defined as,

"An establishment that keeps money in its custody and pays it out according to a customer's
request."

The Banking Companies Act of 1949 in India defines a banking company as follows:

"One who engages in the banking business, which entails collecting money from the public
for the purpose of lending or investing it to depositors, repayable on demand or otherwise,
and withdrawable by check, draught, or order." The Indian banking system is an important
part of the overall financial system. It demonstrates a significant conduit for gathering small
savings from households and lending them to businesses.

The Reserve Bank of India (RBI) is the central bank of India and is responsible for all
banking concerns.

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 History of Banks –

During the 'Swadeshi' movement, there had a significant impact in the financial sector. From
1906 through 1911, a large number of banks were created.

During this time, banks such as Bank of Baroda, Corporation Bank, Bank of India, Canara
Bank, and others were established. Many powerful political leaders and business tycoons
funded the banks at the time.
In the early years, the three presidential banks, the Bank of Bombay, the Bank of Bengal, and
the Bank of Madras, merged to become the Imperial Bank of India. The bank was private
until 1955.

The Imperial Bank of India was thereafter taken over by the government. The State Bank of
India is currently known all over the world. As a result, among all the banks that exist today,
State Bank of India is the most important.

1.3 Privatization of Indian Banking-

It entails more market force, ensures more competition, diminishes the role of the state in
the economy, and so encourages more private participation in government tasks various policies to
promote competition and market forces in the economy It is true also known as whole-of-economy
structural adjustment programmes and as a component of a more comprehensive economic policy
Privatization, on the other hand, refers to the sale of a public entity to a private entity. It is one of the
policy initiatives aimed at increasing the efficiency of state-owned companies. Privatization is a
process.The political process has significant economic and social ramifications that affect
businesses not only in terms of performance, but also in terms of social welfare and stability. Any

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impact evaluation must take into account social implications, particularly those related to

employment and social safety net initiatives.

ATM cards, Internet Banking, Phone Banking, and Mobile Banking are new creative
banking channels that are widely used since they save both time and money, which are
two key resources that everyone is short of and rushing to obtain. In addition, private
sector banks are coordinating their infrastructure, marketing quality, and technology in
order to demonstrate a strong commitment to consumer and retail banking. These banks'
main focus is on product and service innovation.

In 1969, the federal government intended to nationalise 14 major private banks. The goal
was to enlist the financial industry to help the government realise its socialist aspirations.
When the country's banks were operated by the private sector in the 1950s and 1960s,
there were massive financial inequities. The government therefore decided that taking
over the banking sector was the best way to promote financial inclusion. Following this,
other committees were established to make suggestions regarding bank privatisation. The
Narasimhan Committee recommended that the government hold a 33 percent share,
whereas the PJ Nayak Committee recommended a 50 percent stake. The gross
nonperforming assets (NPA) ratio of commercial banks is likely to rise to 13.5 percent by
September 2021, up from 7.5 percent in September 2020, according to the RBI's
Financial Stability Report. This would mean that the public sector would have to work
harder to increase equity, putting even more pressure on the government.
1.4 Indian Banking System

In India, the banking sector serves as a meeting place for savers and investors. Since
liberalization, the structure of the Indian banking sector and our country's financial markets
have undergone significant changes.

Banks play an important role in amassing public savings and making them available for
investment in the modern era. They also increase capital mobility by generating demand
deposits while granting loans and purchasing investment assets.

As a result, we may infer that the overall effects of the banking system in India have been
favorable, resulting in a win-win situation for all enterprises and investors.

The history of India's banking sector is important to understand. As a result, we've compiled a
list of key elements about India's banking system's history.

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Did you know that India's first bank, the 'Bank of Hindustan,' was founded in 1770? Yes, you
read that correctly. In the year 1770. Calcutta was the location of the bank, which ceased
operations in 1832.

More than 500 banks were established during that time period, but only a few of them
survived, including the Bank of Bengal (1809), Bank of Bombay (1840), and Bank of Madras
(1843).

Note: The Bank of Calcutta (India's oldest commercial bank) was founded in 1806. The bank
was given a royal status and renamed the Bank of Bengal after three years.

The three banks mentioned above were created during the British Empire's reign in India. All
of these financial institutions were combined into one.
1.5 Reserve Bank of India

The Reserve Bank of India (RBI) is the apex body in the Indian banking sector for all matters
connected to the banking system. It serves as India's "Central Bank" and acts as a banker to
all other banks.

Functions:-

1. The Reserve Bank of India (RBI) is the financial system's regulator and supervisor. It
establishes the rules and regulations under which Indian banks and financial institutions
must function. The goal is to run the banks and financial system as efficiently as
possible while maintaining public trust in the system. It's a success for RBI when people
have faith in the banking system. How does the RBI maintain public trust? By
guaranteeing that depositors' money is safe with banks and that all banking and
financial services run smoothly and according to the rules.
2. Manager of Foreign Exchange: In India, all foreign currency flow must be done as per
0FEMA (Foreign Exchange Management Act). It is the RBI who ensures that
transactions happens as per FEMA. The bigger role of RBI is in ensuring that external
trade happens in a seamless manner. Whether, the trader is a resident Indian or a foreign
national, they must be able to deal in foreign exchange in an easy and transparent
manner.

3. The Reserve Bank of India (RBI) is in charge of printing and issuing new currency
notes in India. The RBI is also in charge of exchanging outdated or damaged notes for

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 new ones. In this approach, the RBI can keep track of how much "excellent quality
currency" is needed in the market at any one time. "Cash" refers to both notes and coins
in this context.

4. Banker to Banks: The Reserve Bank of India (RBI) has an account with all Indian
banks. This is where they maintain their statutory reserves and other deposits. As a
result, RBI also serves as a banker to the banks. The RBI is in charge of ensuring
interbank transactions. As an exceptional case, the RBI can lend money to banks.
1.6 Classification of Banks

1.6.1 On the basis of ownership

PUBLIC SECTOR BANKS:

Public sector banks are ones in which the government owns more than half of the company.
Most depositors assume that their money is safer in public sector banks since they are owned
by the government. As a result, the majority of public sector banks have a sizable clientele.

PRIVATE SECTOR BANKS:

The bank is the public's most trusted financial institution. This institution meets all of our
financial requirements. Anyone can open a bank account and conduct all of their financial
transactions there. This organization assists everyone in saving money, doing financial
transactions, and obtaining a loan for a variety of financial needs. However, not all banks are
created equal. A bank can be divided into two groups based on its stakeholders. Private sector
banks are one of them. These banks work in a different way. Let's look at how private sector
banks operate and the benefits and drawbacks that come with them.

Co-OPERATIVE BANKS:

A cooperative bank is a financial institution that offers its customers retail and
commercial banking solutions and services. The twist is that, unlike other banks that are
owned by the government or a private entity, customers own the bank.

Assume you have a group of people in your neighbourhood that have the same goal and
share a common interest. Everyone in the group is willing to put money aside 'as a collective.'

In this instance, a cooperative bank will be of assistance. The group might put money aside
and invest it in a common cause. The interest will be shared equally. A member of the
organization can also apply for loans and other forms of financial support from the group.
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 1.6.2 According to the Law

Scheduled Bank:

Scheduled Banks, as the name implies, are banks that are listed in the Reserve Bank of
India (RBI) Act, 1934's Second Schedule. To be considered a scheduled bank, a bank must
meet the following requirements:

1.A total of Rs. 5 lacs in paid-up capital and reserves is required.

2. The bank must demonstrate to the central bank that its operations do not jeopardise
interest.
3. Instead of being a single proprietorship or a partnership, the bank must be a
corporation.

Scheduled Banks are subdivided as:

a) State co-operative banks.
b) Commercial banks.

PUBLIC SECTOR PRIVATE SECTOR

Allahabad Bank Axis Bank Ltd
Bank of Baroda Bank of Punjab Ltd
Bank of India HDFC Bank Ltd
Bank of Maharashtra ICIC Bank Ltd
Canara Bank IDBI Bank Ltd
Central Bank of India IndusInd Bank Ltd
Dena Bank South Indian Bank

Non-Scheduled Banks:

9
They don't meet all of the conditions in clause 42, but they do adhere to the RBI's specific
instructions.

Non-scheduled banks are those having a reserve capital of less than 5 lakh rupees.

They are not permitted to borrow from the RBI for conventional banking purposes, unlike
scheduled banks, except in an emergency or unusual circumstances.

A few examples include Bangalore City Co-operative Bank Ltd. and Baroda City Co-
operative Bank Limited.

They are further classified as follows:

a) Central Co-operative Banks & Primary Credit Societies.

b) Commercial Banks.

1.6.3 Technological Development In Banking Sector:-

Information technology advancements have a significant impact on the banking sector's

growth and inclusion through supporting inclusive economic growth. IT integrates front-end
and back-end processes and aids in cost reduction.

Appropriate application of information technologies and modern conveniences, such as:

1. Automated Teller Machines (ATMs), Mobile Banking (SMS), and Telephone Banking

2. Internet banking, email, Datanet, RBI Net, Nicnet, I-Net, and so forth...

3. Cash Dispensers, Electronic Payments, and Home Banking

4. Gross settlement systems that are updated in real time (RTGS)

5. Electronic Fund Transfer (NEFT) (NEFT)

6. Electronic Clearing System, No. 6 (ECS),

7. EFT (Electronic Fund Transfer) (EFT)

8. E Cheques are an example of electronic payment services.

9. Electronic Data Exchange (EDI) (EDI)

10.SPNS - Shared Payment Network System

11. POS (Point of Sale)

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SPNS - Shared Payment Network System

11. POS (Point of Sale) 10

12. Transactions based on a pin number for:

Smart Cards, Credit Cards, and Debit Cards are examples of magnetic cards.

b. Teller Machines, etc., at Bank Counters

13. Overseas Banking Services / Offshore Banking

1.7 Future Of Banking Technology:-

Banks and FinTech companies all over the world are working to develop new technology that
will revolutionize the banking and financial industries. All transactions will be automated as
technology focuses on removing manual processes. Automatic technologies like as
biometrics, speech recognition, and gesture recognition will be used to replace current ways
of login, typing, and keying transactions. Banking workers and agents will be replaced by
robotics, kiosks, smart interactive gadgets, and interfaces. Let's take a look at a few
technologies that have recently been deployed or are now being developed in various parts of
the world, and how they will affect the future of banking. Mobile wallets are devices that
allow you to make and receive payments using your phone. Mobile wallets are exploding in
popularity. The ease with which Payments made with mobile phones are increasingly
replacing cash and credit card payment.
1.8 REFORMS IN THE BANKING SECTOR:-

The banking sector, which is efficient, dynamic, and successful, plays a critical role in
accelerating the rate of economic growth in any economy. In the aftermath of current events,
Changes in the global economy and other internal difficulties, such as an
unbalanced budget,rising budget deficits, and a balance-of-payments concern. Our
country, too, has gone on an economic journey reforms
In the year 2000, the Indian government implemented economic and financial reforms.
Financial sector changes began in 1991, and banking reforms were a big component of that.

These were started in 1991 to improve the efficiency, strength, and stability of the Indian
banking system.
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 In 1991, the Narasimham Commission-I made recommendations that led to the creation of
the Narasimham Commission-II.
From 1992 to 1997, a blueprint for the first generation of financial sector changes was
development.

1.9 Future Of Banking Reform:-

Prior to the economic reforms, India's financial industry was at a fork in the road.

The first phase of banking sector reforms were implemented in 1991 to improve the
performance of Indian commercial banks, and after its success, the government
invested heavily in the sector.

In 1998, the second phase of the changes was critical. The productive, dynamic, and

The banking sector's effectiveness is critical in accelerating the rate of economic growth in
every economic situation as a result of recent economic shifts in the global economy and
other domestic difficulties such as a negative balance of payments situation, rising fiscal
deficits, and so on.Our country, too, embarked on economic reforms due to deficits and other
factors. India's government. In 1991, he implemented economic and financial sector changes,
as well as banking reforms.
1.10 Statement Of The Problem:-

The Indian economy, which had previously been sheltered, witnessed the forces of
liberalisation, privatisation, and globalisation unleashed in the business environment in the
early 1990s. Previously, until the 1990s, the insulated economy gave comforts to the general
public.

While in an administered interest regime, sector banks in areas of liquidity management

Because management's discretion was limited, the risk parameters in these sectors were
lowered.

Unquantifiable and fuzzy Regrettably, public sector banks, which played an important role,
have been shut down to play earlier, but their performance deteriorated at that time. The truth
is that the utility of the nationalised sector has passed. Banks in the public sector have been
overburdened with debt unwanted heirlooms; customer service suffers a setback; the demand
for computerization grows. The need for networking among the enormous branch network
was felt urgently.
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In the midst of all of this, a new generation of banks — private sector banks – emerged in the
Indian banking system. In that setting, private banking was seen as a novel option because
these banks were able to avoid the regulatory framework. The public sector has structural and
other flaws. Several of the new ones that were introduced The IDBI and ICICI, which were
pushed by institutions like as the IDBI and ICICI, were successful in establishing themselves
(despite the fact that their size and scope of business activities differed) and made it through
the market the 1990s upheavals Aside from other considerations, some of the professionals'
approach. They were able to avoid the difficulties associated with new generation private
sector banks.

After discussing the banking sector's performance metric, which represents an organization's
efficient use of all resources, Banks are currently dealing with a number of issues, including
regular technological upgrades required for modern banking, as well as a lack of capital.

Increasing competitiveness, strict prudential standards, and an alarming proportion of

nonperforming assets. Customer demands are rising, profit margins are tightening, and asset-
liability management is becoming more important management, liquidity and credit risk
management, and increasing operating expenditures are just a few of the issues that need to
be addressed. The size of the spread is reducing, and so on. As a result, the research looked at
how people's attitudes have changed through time.

Different types of financial indicators were used, and their impact on the performance of
chosen institutions was investigated. As a result, it aids the banking sector in resolving
issues with banking liquidity and profitability. The findings of this investigation were:

India's commercial and public sector banks have had a poor performance.

The Indian banking system has faced some problems and challenges in the post-reform
period as a result of liberalisation, privatisation, and globalisation. The following are
the major concerns and challenges that the Indian banking sector is now facing:

1. What role does banking play in our everyday lives?

2. Has India's banking system improved in terms of performance?

3. To what extent are banking sectors responsible for the safety of public deposits?

4. Which banking sectors are lowering public operating expenses?

5. Which of the financial sectors provides the best service to the public customer?
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6. What is the public and private sector's significant financial position banks?

7. Which of the sectors is showing signs of improvement?

8. What is the significance of the CAMEL rating system in banking supervision?

9. What are the key roadblocks to the banking sector's expansion in India?
1.10.1 Objective Of The Study:-

The following are the precise goals of this research.

1. Research into the Banking Sector's Concept and Emerging Innovations in India.

2. To examine and compare the financial performance of a number of public-sector

organisations. Banks in the Public and Private Sector.

3. Analyze and Compare the Operational Performance of Selected Public Sector

Organizations Banks in both the public and private sectors.

4. To assess and compare the overall performance of the public sector in question.

CAMEL Ratings of the Banks Under Study and Public and Private Sector Banks

5. To Make Recommendations for Improving the Performance of the Selected Banks in both
the public and private sectors.

6.Educating the general public on the need of saving.

7. Supporting the country's economic growth by providing funds to the private sector.

8. Growth of primary industries, consumer goods industries, and large and small businesses
and the service sector.

9. Making a decent profit.

10. A comparison of public and private sector banks in terms of ATM, Internet Banking,
Telephone Banking, and Mobile Banking services.

11. A comparison between public and private sector banks in terms of technology usage
issues such as ATMs, Internet banking, telephone banking, and mobile banking.

12. To compare public and private sector banks' expectations and levels of satisfaction with
several service quality aspects.

13. To identify the banking sector that is largely availed by the customers.

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1.11 Nature And Scope Of The Study:-

In the modern era, the world has become a global market, and globalisation has had an impact
on the financial sector as well. The Indian banking sector tries to improve the efficiency and
profitability of financial institutions that must deal with global challenges competition. As a
result, not only has there been a rapid increase in the number of banking institutions in the
country, although the country's banking vision has also expanded.With the arrival of the new
private sector and international banks, things have changed dramatically.

The study's scope is broader and includes India's banking sector. In India, there is a major
problem with the banking sector's financial situation. However, the study will only compare
the financial and operational performance of the two companies.In India, we chose ten public
sector banks and ten private sector banks. Banks from other countries have been left out of
the research. Foreign banks' policies and laws are constantly changing. They are not included,
unlike other commercial banks. The time limit has been set from 2007 to 2016, as it will
provide a precise picture of the bank's impact performance.

The research could be useful for future descriptive studies on the concepts being
investigated. Furthermore, learning how to sustain the banking sector's healthy financial
performance through numerous elements would be advantageous.

The research looks at 31 financial and 11 operational ratios. In addition, the research covers
the 18 characteristics that can be used to evaluate and compare a company's overall
performance based on the world's ten public sector banks and ten private sector banks.

The well-known CAMEL Model is used. CAMEL evaluates and compares the performance
of several factors for the study's selected sample banks for the time period.
1.12 On The Basis Of The Function :-

Commercial Banks –

A commercial bank is a type of financial institution that conducts all public deposit and
withdrawal operations, as well as offering investment loans and other services. These
are profit-driven businesses that operate exclusively for the aim of making money.

The two most significant aspects of a commercial bank are lending and borrowing. To earn
interest, the bank collects deposits and distributes the proceeds to various programmes
(profit). The lending rate is the rate at which a bank lends money, whereas the borrowing rate
is the rate at which a bank pays depositors interest.

15
Foreign Banks –

Any firm that participates in the business of banking and is incorporated under the laws of a
foreign country, a US territory, Puerto Rico, Guam, American Samoa, or the Virgin Islands, or
any subsidiary or affiliate of such a company, is referred to as a foreign bank.

Industrial Banks-

An industrial bank is a state-chartered financial organisation that is not regulated by a federal

banking regulator and is usually owned by a commercial enterprise. Consumer and small
business loans are available via industrial banks, which take customer deposits.

Industrial banks and industrial loan businesses are two terms for the same thing (ILCs).
Industrial banks are only established by a few states; Utah supplies the bulk of industrial bank
charters in the United States.
Agricultural Banks –

Agricultural banks are largely responsible for lending money to farmers and rural
development organisations. It also performs many of the commercial banks' activities
in addition to their typical specialised financial activity.

An Agricultural Bank (Land Bank) is a financial institution dedicated to assisting agricultural

development, particularly through the provision of longer-term loans than are typically
available from commercial banks.

Savings Banks –

A savings bank is a type of financial institution that specialises in receiving and paying
interest on savings deposits.

They began in Europe in the 18th century with the goal of providing savings products to
people of all income levels. These early banks, which were frequently connected with social
good, were often created to help low-income people to save money and have access to
banking services. Governments or socially committed groups or organisations, such as credit
unions, established them. Over the course of the twentieth century, the organisation and
legislation of various countries assumed many distinct forms.

Central Banks –

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The Central Bank is the central bank of the country's banking system. It functions as a
banker's bank and issues currency notes. This bank's primary mission is to maintain economic
stability. In a nutshell, it oversees and governs the country's banking system. The Reserve
Bank of India (RBI) is the country's central bank.
1.13 Structure of Banking System :-

Different banking systems exist in different parts of the world. Commercial banking, on the
other hand, had grown under all of these banking regimes. Let's take a look at the different
sorts of banking systems one by one to have a better understanding of how they
work.These types are:

UNIT BANKING:

Banking operations are carried out through a single office rather than a network of branches
controlled by a single bank in unit banking. The single office serves as both the command and
control center. Each banking unit is a stand-alone business with its own capital, shareholders,
and board of directors.In comparison to the branch banking system, the unit banking system
has a smaller operational area and bank size. However, a few unit banks may operate in a
small geographic area, resulting in a localised banking system.

Unit banking is a banking system in which a bank works in a small geographic area, does not
create branches elsewhere, and is more sensitive to local requirements. These self-contained
and segregated entities are responsible for all banking activities as well as maintaining good
health. As a result, they must raise cash and deposits locally. They are more efficient since
their scale is smaller and there is no gap between decision-makers and executives.

Unlike branch banking, where policies are established with a larger context in mind, choices
in online banking are made faster and more tailored to the needs of the clients. These bankers

17
are concerned with the growth of the local community and providing greater community
service. These baks have their own stockholders and board of directors.

BRANCH BANKING:

The operating of storefront sites apart from the institution's home office for the convenience
of customers is known as branch banking. One of the most notable changes is that banks have
been allowed to provide investment and insurance products, as well as banking services,
under one roof since 1999. In response to a more competitive and integrated financial
services industry, branch banking in the United States has seen substantial changes since the
1980s. One of the most notable changes is that banks have been allowed to provide
investment and insurance products, as well as banking services, under one roof since 1999.
Branch banking enables a financial institution to extend its services beyond its main office
and into smaller stores that serve as extensions of its larger activities. This can be a cost-
cutting strategy for some organisations, since it allows smaller offices to provide critical
services while larger sites can provide additional services.

CHAIN BANKING:

Following the 1929 stock market crash, chain banks rose to prominence. They were popular
because they distributed risk among multiple banks rather of focusing it on a single
organisation. According to a Federal Reserve committee study from 1931, chain banking
began in North Dakota, where David H. Beecher bought a bank in 1884 and another in 1887.
This type of bank ownership gained widespread in the south as a result. The Witham group
began purchasing banks in 1896 and by 1930 had control of approximately 200 banks in New
York, New Jersey, Georgia, and Florida. Chain banking differs from branch banking, which is
executing banking operations (such as accepting deposits or making loans) at locations other
than a bank's headquarters. Since the 1980s, branch banking has undergone substantial
transformations. It's also not the same as group banking.Several affiliate banks exist under a
single bank holding company in group banking. Three or more banks operate independently
without the typical barriers of a controlling company in chain banking.
GROUP BANKING:

Group banking is a phrase that refers to a sort of banking plan that is offered to groups of
people rather than individuals, such as employees in a firm. Participants in these schemes
receive bonuses and other benefits that are not available to the bank's other customers. A
company's influence over two or more financial institutions is referred to as group banking.
Group banking functions similarly to the group health insurance policies that insurance firms
18
provide to their employees. A bank will partner with a company to offer a group banking plan
to its employees. Employees are usually not forced to join up for an employer's group
banking benefits.

The benefits of signing up for group banking are usually compelling enough to persuade
many employees to participate. Banks can use group banking to access a pool of consumers
that they don't have to actively recruit. It also lowers the expenses of transactions such as
direct deposit. Banks can also access more capital through group banking because of the
money placed by group members.

CORRESPONDENT BANKING:

A correspondent bank is a financial institution that acts on behalf of another bank or financial
institution, usually in another nation, to provide services to a customer. Accepting deposits,
collecting paperwork, and other services are provided by the correspondent bank to the other
banks. Correspondent banking is a network of banks that serves a critical role in enabling
international trade. It's essentially a bilateral arrangement between the two banks to provide
payment services to the respondent bank's customers in the correspondent bank's jurisdiction.
1.14 Functions of Banks:

1.14.1 PRIMARY FUNCTIONS:

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1) Accepting of Deposits: A bank is a financial institution that accepts deposits from the
general population. To their convenience, people can deposit their cash balance in one of the
following accounts.

a. Fixed or Time Deposit Account: - A fixed time deposit is a type of deposit account
that is received for a set length of time with no movement and pays a greater interest rate than
a standard savings account accepting fixed-term deposits for three months is the minimum
period required. Interest rates will vary depending on the amount and length of the deposit,
i.e., the greater the deposit amount/the longer the deposit time in the bank, the higher the
interest rate.

b. Savings Account:- A limited number of withdrawals, a lack of check and connected

debit card facilities, limited transfer choices, and the inability to be overdrawn are all
common aspects. Savings account transactions were traditionally kept in a passbook, and
were sometimes referred to as passbook savings accounts, with no bank statements; however,
similar transactions are now regularly recorded electronically and accessible online.

c. Current Account: - A current account, also known as a financial account, is a type of

deposit account used to conduct large-value transactions on a regular basis. Current Accounts
are used to store liquid funds and, unlike Savings Accounts, do not pay interest.
Businessmen, such as proprietors, partnership partnerships, trusts, associations of persons,
public and private corporations, and so on, open current accounts.It enables consumers to
make deposits and withdrawals at any moment without prior warning. The account is perfect
for making cheque payments to debtors. The primary goal of a current bank account is to
allow businesspeople with accounts to conduct financial transactions efficiently.

2) Advancing of Loans :- The bank advances money in any one of the following ways:

a. Overdraft Facilities:- A bank overdraft is a sort of financial instrument that a bank

offers to some customers in the form of an extended credit capacity that kicks in once the
account's principal balance hits zero.To put it another way, a bank overdraft is an unsecured
line of credit that is typically utilised to meet short-term liquidity needs.Customers of banks
are given a credit limit based on their relationship with the bank. The bank assesses different
interest and costs for account non-maintenance. The interest rate on an overdraft facility may
differ from one bank to the next.

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b. Money at Call:- It is money lent for a brief period of time, usually 1 to 14 days.
Typically, such advances are made solely to other banks and financial institutions.

c. Loans:- Banks make loans based on securities that can be easily sold on the open
market. A loan is issued when the bank has convinced itself that the party is sound.

d. Cash Credit :- Cash credit is a short-term loan that banks grant for enterprises,
financial institutions, and companies to meet their working capital needs. Even if there is no
credit balance, the borrowing firm can take money up to the borrowing limit.
e. Discounting Bill of Exchange:- Modern banks also offer discounting of bills of
exchange as a sort of loan. The owner of the bill of exchange might get a discount from the
bank using this procedure. In an exchange bill, the debtor receives the creditor's bills (that is,
the bills' owner's bills) and agrees to pay the indicated amount at maturity.The bank pays the
invoice's value to the owner after a minor deduction (in the form of a charge). The bank
receives payment from the party who accepts the bill of exchange when it expires. As a result,
such a loan is self-liquidating. An exchange invoice is a written, legally enforceable
document that outlines the buyer's duty to pay the seller a specific sum.

f. Investment in Government Securities- Government securities are a sort of financial

instrument in which investors can put their surplus money to work earning a fixed rate of
income while also growing their wealth over time. Treasury bills, bonds, and notes, for
example, are all examples of government securities. Furthermore, government securities are a
type of debt instrument.That is, as an investor, you give the government with a loan/debt in
order for it to fund its programmes. Bonds are issued by both the federal and state
governments to cover their fiscal needs. The money of the investor is safe with the
government, and the investor receives a predetermined rate of return on the capital invested.

3) Credit Creation: It is a well-known fact that banks do not maintain a 100% reserve
against deposits in order to meet depositor demands. The bank is not a cloakroom where you
may store your currency notes or coins and then retrieve them whenever you want. It is often
assumed that the money received by the bank will be advanced to others. A depositor must be
satisfied with the bank's commitment or assurance to repay him whenever he requests it. As a
result, the term 'credit creation' denotes a situation in which "a bank may receive interest
merely by allowing customers to overdraw their accounts or by purchasing assets and paying
21
for them with its own cheques, thus raising the total bank deposits," to borrow Benham's
words.

4) Cheque System of Payment of Funds :- A payment system is a method that allows a

payer to discharge his or her payment obligations to a beneficiary by facilitating the transfer
of value between them. Payment systems are a means of transferring payments from one
person to another, allowing businesses and conomies to function more efficiently. The
payment system allows for a two-way flow of payments in the economy in exchange for
goods and services. Payment systems enable consumers to send money to one another. Cash
is the most common and conventional payment method used by customers to buy products
and services in their daily life. Other payment tools are also available through banking
systems, and these are commonly utilised in business. Payment systems are made up of
instruments that can be used to make payments.

1.14.2 SECONDARY FUNCTIONS:-

Besides the above primary function , bank also perform may secondary functions such as
agency functions , general utility and social functions.

1. Agency Functions:-

Bank act as a agents to their customers in different ways: -

a. Collection and Payment of Credit and Other Instruments: - Commercial banks

collect and pay checks, bills of exchange, promissory notes, rent, interest, and other bills on
behalf of their customers, as well as make payments for income tax, fees, and insurance
premiums.

b. Purchase and Sale of Securities:- The manner different assets are bought and sold is
one important component of investing that is often ignored. The financial business is
expanding with numerous outlets for buying and selling stocks, bonds, and mutual funds,
thanks to decreased commission rates, looser regulatory constraints, and increased public
interest in investing.

In the North America , you can trade Investment Securities through the following four ways-

1. Brokerages

2. The company that issue them

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3. Banks

4. Individual Investors
c. Trustee and Executor :- One crucial aspect of investing that is frequently overlooked
is how different assets are acquired and sold. Because of lower commission rates, lighter
regulatory limits, and more public interest in investing, the financial industry is booming with
multiple venues for buying and selling stocks, bonds, and mutual funds.

d. Remittance of Funds :- Commercial banks occasionally serve as clients'

representatives or correspondents, particularly when dealing with numerous applications.

e. Letter of References :- Banks also share information about their customers' financial
situations with domestic and international traders, and vice versa.

f. Billion Trading :- Commercial banks in several countries trade in billions of dollars of

gold and silver. In October 1997, eight banks, including SBI, IOB, Canara Bank, and
Allahabad Bank, were granted permission to import gold under the open general licence
category.

B) General Utility Services :- In addition to agency services , banks render many more utility
services to the public. These services are-

a. Locker Facilities :- Customers of the bank have access to lockers. These lockers can
be used to store valuable or crucial documents. Their annual rent is really low.

b. Issuing letters of credit :- A letter of credit is an international payment instrument in

which a bank provides a monetary guarantee to enterprises that import and export
commodities. A letter of credit can be used for both import and export. International
businesses must deal with unknown suppliers and must obtain payment assurance before
progressing with any transaction. As a result, a letter of credit is required to ensure that
suppliers and exporters get paid.

c. Acting as Information Banks :- In today's environment, information systems are

critical for corporate organisations' growth and survival. For the administration of critical
information and data, all sectors of the industry are completely reliant on these. Information
systems are used from small enterprises to huge, strong businesses such as high street banks
and central and local government to regulate their data. We will cover the different benefits of
using information systems in the banking industry in this paper. We'll examine the
requirements of information systems at various levels, as well as the security requirements for
these reasons.
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d. Dealing in Foreign Exchange:- Major commercial bank branches also do foreign
exchange transactions. In India, commercial banks are the primary permitted foreign
exchange dealers.

e. Merchant Banking Services:- A merchant bank is a financial organisation that

specialises in underwriting, lending, financial consulting, and fundraising for major
enterprises and high- net-worth people (HWNIs). Merchant banks specialise on international
trade, which qualifies them to interact with multinational firms. Merchant banks, unlike retail
or commercial banks, do not offer financial services to the general public. J.P.

e. Help in Transportation of Goods:- After consigning products to their merchants, big

businessmen or industrialists transmit the Railway Receipt to the bank.

1.15 CHALLENGES OF PUBLIC AND PRIVATE SECTOR BANKS:-

With the emergence of international private sector banks, the banking industry is facing fierce
rivalry and a need to improve service quality in order to obtain a competitive advantage over
their consumers. Public sector banks are up against tough competition from private sector
banks, and they're under a lot of pressure to keep up with the services offered by
multinational banks. While public sector banks benefit from a positive image and a large rural
network, private sector banks offer superior services and amenities. The goal of our research
was to compare the public and private sectors on public perception, basic facilities, customer-
centric services, and bench strength. We conducted a field investigation with a sample size of
50 people.

Top Challenges facing the banking industry and financial institutions:-

The banking and finance business must adapt as mobile phone usage rises and younger clients
demand simplicity. Customers want banking services – from bill pay to deposits to purchases
– to be conducted on mobile phones, thanks to apps like Venmo, Apply Pay, and Google
Wallet, and financial institutions must compete by offering streamlined banking services.

Financial technology firms are becoming more competitive. Financial technology (FinTech)
companies are typically start-ups that provide financial services through software. FinTech
companies are becoming increasingly popular, causing traditional banking to be disrupted.
Traditional banks face a significant difficulty as a result of their inability to adapt fast to
changes in technology, operations, culture, and other aspects of the industry.

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Regulatory coercion Regulatory requirements are continuing to rise, and banks must devote a
significant portion of their discretionary budget on being compliant and developing systems
and processes to meet the rising demands.

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Chapter 2. Literature Review

Bhallabh (2002) examines the issues that have arisen as a result of the banking sector
reforms. Financial markets around the world have become increasingly intertwined as a
result of globalisation and technological advancements. Banks must adopt new
policies/strategies in response to changing market conditions if they are to survive
environment.

Kumar (2006) found that bank nationalisation in India marked a paradigm shift in banking,
with the goal of shifting the focus from class to popular banking. Internationally, efforts are
also being made to investigate the causes of low-income people's financial inclusion,
recognising it as both a problem and an opportunity.This is both an economic opportunity and
a corporate social duty. Financial inclusion is a possibility as a commercially viable
enterprise.

The Banking Industry is undergoing a paradigm transition in scope, content, structure,

functions, and governance, according to Laxman, deen, and Badiger (2008). The
information and communication technology revolution is having a significant impact on
the banking industry's operational environment.

The future problems of technology in banking were explored by Nair (2006). The author also
mentions how IT has a bright future in rural banking, but it is overlooked because it is
generally thought to be unviable in this segment. A successful bank must be nimble and agile
enough to respond to changing market conditions the new market paradigm and poor risk
management The key to extending the life of a product will be innovation the provision of
banking services to the underserved masses at the bottom of the pyramid.
Singh (2003) examined bank profitability management in a deregulated environment using
some financial parameters of managers for bank groups such as public sector banks, old
private sector banks, new private sector banks, and foreign banks, and found that profitability
has declined in the deregulated environment.

Singla (2008) investigates the significance of financial management in the industrialist rise of
banking. It is focused with examining the profitability position of sixteen banks from the
banker index during a six-year period (2001-2006). The study demonstrates that the
profitability position of the banks is improving.When compared to the prior year, was
reasonable during the study period. Capital that is strong position on the balance sheet Banks
are in a better position to handle and absorb economic shocks.Over a period of time, it has
remained steady.

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According to Subbaraoo (2007), the Indian banking sector has undergone change from
domestic to international banking, which necessitates a mix of modern technologies, well-
regulated evaluation, treasury management, product diversification, and internal controls.To
reach the pinnacles of success, you'll need control, external regulation, and highly trained
people resources.The international community plays a key role in meeting the challenges.

Aurora and Malhotra (1997) investigated the level of customer satisfaction and marketing
methods used in India's public and private banks. Their research looked into several aspects
of customer satisfaction in these banks and found that clients are more satisfied with
private banks due to their employees. They recommend that public sector banks be well-
equipped, employ qualified personnel, personalise services, eliminate long lines, and
maintain a pleasant environment.

Varghese (2000) compared the state and private banks in Kerela. He looked at the outcomes
of two banks from each category and compared them. There are no substantial differences in
the services provided by public and private banks, according to the data. Furthermore, banks
across all industries employ comparable internal marketing techniques.

In his Ph.D. research, "Performance of Public Sector Banks – A Case Study of State Bank of
Hyderabad," Prashanta Athma (2000) aimed to investigate the performance of Public Sector
Commercial Banks with a special emphasis on State Bank of Hyderabad. The study's
performance evaluation period is a little more than a decade, from 1980 to 1993-94.
V.N. Saxena (1978) looked into this. "Stock inspection processes and procedures, as well as
stock register maintenance, both need to be improved. It is necessary to adopt reforms in the
areas of sponsorship programmes, recovery, and consulting "... For banks, this could be a
beneficial tool.

Mumupilly (1980) looked into the profitability and costs of Indian commercial banks. The
paper provides an analytical assessment of changes in the components of cost of profits of
major groupings of Indian commercial banks since nationalisation. The study focuses on the
cost and profitability of the banking industry as a whole, rather than individual banks.

Srinivasa Reddy (2016) examines the performance of priority sector advances in India, as
well as their share of scheduled commercial banks, because commercial banks play an
important role in the Indian financial system and are supervised by the Reserve Bank of
India.

Sudesh (2007) investigated the quality of banking services in India and came to the
conclusion that public sector banks in India deliver bad service. These institutions score low
on tangibility, responsiveness, and empathy when compared to private sector banks.

27
According to the poll, management should keep a watch on potential failure points and make
every effort to handle customer complaints as promptly as possible.

The banking system's aid to vital sectors of the economy, according to Jaynal Ud-din
Ahmed (2010), has not received adequate funding from commercial banks. The examination
of prioritysectors NPAs in the study area, namely Barak Valley, was not included because to a
lack of data. According to the findings, appropriate loan recovery is required to boost bank
performance; otherwise, institutions would have a liquidity problem when recycling money.

With a focus on StateBank of India, Patna Circle, and Bihar, Mishra (2011) explained a
conceptual framework for nonperforming assets (NPAs) and examined the dimensional
approach to NPAs in India's banking sector.

A study on the efficiency of Indian commercial banks' NPA management was undertaken by
K.K.Siraj and P.Sudarsanan Pillai (2012). According to the survey, nationalised banks
outperform international and private sector banks.

Anne M Smith (1990) investigated how clients' views of quality service from banks are
influenced by the four distinctive qualities of services: intangibility, inseparability,
heterogeneity, and perishability. According to the findings, increased competition and rising
customer expectations have produced an environment in which quality is viewed as a crucial
strategic determinant for boosting customer happiness and, as a result, contributing to
financial service providers' profitability.

According to Liang et al (2004), there are two categories of service quality attributes:
product-related and non-product-related. Customers may perceive symbolic, functional, or
experiential benefits as a result of these characteristics. Customer satisfaction has a
favourable impact on a customer's trust and commitment to a service provider, which in
turn has a positive impact on a customer's behavioural loyalty, according to the study's
findings.

According to Sarin and Anil (2007), manpower in service firms should be focused on
customer satisfaction. Banking should highlight the areas that need to be improved, as well
as the methods that customers believe should be implemented in order to improve service
quality.

According to Laroche and Manning (1986), the most important factors in banking services
are location convenience, speed of service, competency, and friendliness of bank personnel.

Geiger (1975) conducted research to determine client wants. Customers' social standing and
perceptions of banks were investigated, as well as customers' assessments of the breadth of
services offered by banks, the effectiveness of various advertising and other sales promotion
28
measures, and customers' willingness to save and other habits. According to the findings,
satisfied customers are more hopeful than those who are dissatisfied with the services
provided by their banks.

Lewis and Birmingham (1991) investigated the demands, attitudes, and behaviour of the
young market for financial services and discovered that the needs and conduct of the youth
market are not uniform.

In a study of consumer choice criteria in financial institution selection in the United States,
Boyd et al (1994) discovered that reputation and loan interest rates, as well as savings rates,
are more important than personnel friendliness, modern facilities, and drive-in service. In his
study on rural bank marketing, Rajagopla Nair (1994) discovered that security and liquidity
are the most important requirements for rural customers' deposits, and that the interest rate on
fixed and demand deposits is not at all a criterion for rural bank depositors to deposit their
savings with commercial banks.
Huu Phuong Ta and Kar Yin Har (2000) investigated undergraduates' bank selection
preferences in Singapore. The Analytic Hierarchy Process was used to structure the selection
problem into a three-level hierarchy, and nine criteria for picking banks and five banks were
determined. According to the data, undergraduates place a greater emphasis on the pricing
and product characteristics of bank services.

Customer satisfaction in banks was investigated by Hallowell Roger (1996), who discovered
that banks should only target and serve those clients whose requirements they can meet better
and more profitably than their competitors. Customers will be maintained for longer periods
of time, consume various goods, and promote the bank to their friends and relatives, perhaps
resulting in higher returns for the bank's stockholders.

According to Meidan (1976), nearly 90% of respondents banked at the branch closest to
their home and workplace. The single most essential consideration in choosing a bank
was found to be convenience in terms of location.

Dutta et al., 2009 did a study to look into customer perceptions and expectations across all
banks' Information and Knowledge Management departments. Foreign banks were found to
be the most popular, followed by private banks and public banks.

Vashisht (1987) examined the performance of private sector banks in India based on six
indicators: branch expansion, deposit, credit, priority sector advances, DRI advances, and net
profit from 1971 to 1983 in his PhD dissertation, "Performance Appraisal of Commercial
Banks in India." He has proposed establishing marketing techniques for deposit mobilisation,
profit planning, and SWOT analysis in order to increase performance.

29
In his research work "Productivity in Indian Banking Business," Singh (1990) analysed the
trends and changes in productivity in the Indian banking industry, with a focus on employee
and branch productivity. To analyse productivity trends, the researcher employed seventeen
indices. Because banking is a service industry, more emphasis has been placed on staff
productivity. On the basis of these indicators, he conducted cross-sectional and inter-temporal
analyses, which he grouped into three categories:

• Per employee indicators (Labour productivity)

• Per branch indicators (Branch productivity)

• Financial ratios measuring productivity

The study period was divided into four sub-periods, from 1969 to 1985. In addition to
comparing the growth rates of various variables, the relative performance of various positions
has been assessed using average T-scores and ranking based on them.

In her thesis, "Profits and Profitability of Indian Nationalized Banks," Amandeep (1991)
believed that banks have become an instrument to efficiently meet the needs of the economy's
development in order to promote overall socioeconomic transformation. According to the
study, two elements determine and influence a bank's profitability: spread and burden. Credit
policy, priority sector lending, significant geographical development, growing establishment
expenditures, low non-fund revenue, deposit composition, and all other factors. She has
chosen 11 parameters that affect a bank's profitability in order to determine the most
important variable. The report advised banks to concentrate their efforts on spread and burden
management.

Krishna (1996) defines profitability analysis in depth in his article "Profitability Analysis: An
Overview." It is a rate that expresses profit as a percentage of total assets or sales, or any
other variable that represents assets or sales, according to the researcher. What should be
utilised in the numerator and denominator to calculate the profit rate is determined by the
goal being measured. Krishna (1996) defines profitability analysis in depth in his article
"Profitability Analysis: An Overview." It is a rate that expresses profit as a percentage of total
assets or sales, or any other variable that represents assets or sales, according to the
researcher. What should be utilised in the numerator and denominator of the numerator and
denominator of the numerator and denominator of the numerator and denomin

In his technical study on the profitability and productivity in Indian banking, Ramamurthy
(1998) argued that the banking structure and profitability structure of the banking system
across the country have an impact on bank profitability. When banks are classified as large,
medium, or small, the larger banks have more room for economies of scale. The author

30
believes that the network of branches, often known as franchise strength, is one of the most
important factors of a bank's profitability. According to the study, Indian banks have :

• Higher interest spreads than banks abroad

• Higher operating costs than banks abroad

• Higher risk provision level.

In terms of the influence of liberalisation, the author claims that during the post-reform
period of 1992-96, the banking system's overall productivity increased from Rs. 45.33 crore
to Rs. 73.40 crore in terms of per employee business.

Malhotra (1999) examined the performance of PSBs as a result of banking sector reforms in
her research "Banking Sector Reforms: Experience of PSBs." A brief review of banking
reforms was conducted in the first section. Deregulation of lending and deposit rates is one of
the most significant reforms. Entry deregulation, a revamped branch licencing policy,
financial health measures, operational efficiency measures, and reserve preemption are all on
the table. After splitting the reform period of 1992-98 into two phases, the researcher
analysed the influence of banking sector reforms on PSBs in the second half. Phase I covers
the years 1992-1993 to 1995-1996, and Phase II covers the years after that. Bank profitability
dropped from 0.28 per cent to -0.38 per cent.

The influence of liberalisation on the Indian banking system was investigated by Bisht et al.
(2002). They demonstrated that the current banking structure is the result of a long-term
process of expansion, reorganisation, and consolidation that went through three major stages:
pre-nationalization, post-nationalization, and post-liberalization. With the advent of the
internet, the arrival of the fourth phase can clearly be discerned, which resulted in massive
structural changes in banking by replacing brick and mortar branches with electronic delivery
channels to provide clients with more 18 options. Traditional banking is no longer an option,
as technology has altered the game's rules.

In their article, Bhinde et al. (2002) provided a critical review of ongoing banking sector
reforms. They discovered that the conventional face of banking has shifted from that of
an intermediary to that of a provider of speedy, cost-effective, and efficient services.
Consolidation, re-capitalization, adoption of prudential requirements, legislative framework,
corporate governance, and Basel-II norms are all issues that the Indian banking sector is
currently confronting. The reform process will not be painless. Along with accomplishments,
there are also traps to be avoided. As a result, policymakers must establish a balance between
the two. Authorities face a continuing problem in recognising fresh hazards, implementing
31
detrimental incentives, and improving the banking industry in order to keep up with changes
in the environment and technology.
CRISIL (2002) found that reducing operating expenses boosted bank profitability, contrary to
prevalent belief that only trading earnings helped banks improve their bottom. The reduction
in operating costs was made feasible by PSBs implementing large-scale VRS. According to
the findings, the banking industry is currently experiencing the benefits of labour cost
rationalisation and other cost-cutting initiatives. The ability of banks to replicate and sustain
such initiatives, according to the study, will be a deciding factor in enhancing their
productivity and profitability.

Ram Mohan (2002) assessed the performance of public sector banks (PSBs) in absolute and
relative terms following deregulation, as well as the reasons for their better performing. The
author stated that the banking system has not collapsed and that no banking crisis has
occurred. The improvement in lowering spreads of PSBs is a significant feature that supports
their better performance. Key performance measures such as interest spread, intermediation
cost, nonperforming assets, provision and contingencies, and net profits as a percentage of
total assets were used to assess PSB performance from 1991 to 1999. However, from 1994-95
to 1999-00, he compares public sector banks, private sector banks, and foreign banks in terms
of relative performance.

The author concluded that government-owned banks have had low exposure to riskier assets
such as real estate and the stock market, in part due to regulatory rules. Another reason for
banks' survival throughout the deregulation era was the government's sensible decision to
avoid full-fledged capital convertibility. The author also mentioned the need for PSBs to be
recapitalized in his piece. Last but not least, government ownership promotes bank
recapitalization at the onset of reforms, which has undoubtedly resulted in more expensive
bailouts down the road. Furthermore, it was noted that, despite the economic crisis, the
government had no alternative but to inject cash into the banking industry due to necessary
Basel criteria for banks.

When analysing the financial performance of private sector banks from 1994 to 1995, Pathak
(2003) stated that private sector banks have provided an unique banking experience. Because
of the growing popularity of such services, their public-sector competitors have begun to
imitate them. He looked at the financial performance of these institutions in terms of deposits,
advances, earnings, return on assets, and productivity.

The author attempted to get insight into the financial operations of these institutions in this
research. For financial analysis, a sample of five banks was chosen. All of these banks'

32
financial records were examined, and their financial performance was compared. All of the
constituents performed admirably, but the HDFC Bank came out on top.

In his essay "Post-1991 Banking Sector Reforms in India: Policies and Impact," Kalita
(2004) noted that banking sector reforms in India began as a follow-up measure to the
country's economic liberalisation and financial sector reforms. Because the banking sector is
the lifeblood of the economy, it was given top priority in the financial sector reforms. The
reforms attempted to make India's banking system more competitive, adaptable, efficient,
and productive, as well as to adhere to international accounting standards and be free of
government supervision.

n their article "Comparing Performance of Public and Private Sector Banks: A Revenue
Maximization Efficiency Approach," Ram Mohan and Ray (2004) compared the
performance of three types of banks - public, private, and foreign - using physical quantities
of input and outputs and comparing the revenue maximisation efficiency of banks. The study
found that public sector banks performed much better than private sector banks, but not
significantly better than international banks.

Data envelopment analysis was used to compare public, commercial, and foreign banks in
India in this study (DEA). Physical input and output quantities are employed in DEA. As a
result, efficiency measures based on output-input numbers may be more appropriate. In the
case of India, the ideas of using deposits and loans as output were acceptable during the
nationalised era, when maximising these was indeed a bank's goal. Banks, on the other hand,
are primarily concerned with increasing their profits. When it comes to optimising income,
interest and operating expenses are viewed as inputs. Finally, they came to the conclusion that
PSBs' improved performance can be attributed to their higher technical efficiency rather than
their superior allocative efficiency.

In his research, Bansal (2005) sought to determine the impact of liberalisation on the
productivity and profitability of India's public sector banks. In the postliberalization period,
from 1991 to 2002, the researcher assessed the productivity and profitability of 27 PSBs.
Employee productivity (labour productivity), branch productivity, and overall productivity
have all been used to assess PSB productivity. The researcher assigned different banks to
each of the three production levels. He employed characteristics like Deposit, Advances,
Business, Total Income, Total Expenditure, Burden, Spread, and Net Profit to measure
productivity. According to the survey, the best performers in terms of total productivity were
BOB, BOI, SBI, COB, and OBC, while SBBJ, SB, AIIB, SBM, and UCB were ranked last.

When analysing the profitability of all PSBs, the trend analysis revealed that while net
earnings have increased in absolute terms for the majority of PSBs, profitability has
33
decreased. However, a few banks have improved their profitability during the research
period. Increased rivalry has resulted in a shrinking spread, which is the fundamental reason
for the falling trend in profitability. The researcher employed a variety of ratios to assess
profitability, including interest income, interest expended, spread, non-interest income, non-
interest expenditure, burden, and net profits to working capital ratios. Interest income to total
income ratios, interest expanded to total spending ratios, and staff expenditure to operating
expenditure ratios were also employed by the researcher.

Business India (2006) convened a panel debate to choose the finest bank in the Indian
banking market based on a number of factors. Business India examined 24 banks for the
purpose of the panel discussion. While the remaining banks (out of a total of 88) were still
eligible to be chosen by the panel. Business India essentially short-listed this universe of 24
banks. The panellists chose the 24 competitors from each of the three categories of banks —
public sector, private, and foreign – based on factors such as size and visibility. Banks that
drew notice had a profile that included those who were clearly leaders in specific areas. In
order to create a short list, the judges chose a few general criteria to evaluate the candidates in
the first round. Financial and operational success, management quality, the building of a
growth platform, value creations, and how stockholders reacted to these factors. Thirteen
banks were shortlisted in Round I; six banks were chosen in Round II; and in Round III, two
banks, HDFC Bank and ICICI Bank, battled against each other.

The panellists used the CRAMEL Model to calculate distinct ratios under each metric, such
as capital sufficiency, resources employed, asset quality, management efficiency, earnings
quality, and liquidity. Finally, ICICI Bank was named the Best Bank in India by Business
India in 2006. On its current trajectory, the ICICI group will soon become the country's
largest financial behemoth. It has considerable market shares in numerous business lines,
including house loans, auto loans, and insurance. It has demonstrated to the world that India
can establish world-class institutions in just five years after becoming a full-fledged bank.

In his essay "Ratio Analysis: An Effective Tool for Performance Analysis in Banks," Jain
(2006) addressed numerous ratios related to bank profitability. Costing Ratio, Returns / Yield
Ratio, and Spread Ratios are the three categories in which the author categorised the various
ratios. These ratios can be used to understand a bank's financial situation, operations, and
investment appeal. Such a ratio study, he continued, can be used to perform an inter-branch
comparison to investigate the strengths and weaknesses of particular banks, allowing them to
make strategic decisions and take appropriate corrective actions.

The author advocated for calculating average cost of deposits, average cost of borrowings,
average cost of interest-bearing liabilities, average cost of funds, and operating expenses to

34
average working funds as part of the costing ratio. Similarly, he calculated yield on advances,
yield on investment, average return on interest earnings, average return on funds, and non-
interest income to average working funds and total income in the yield/return category. Under
spread category, he subcategorized the ratios such interest spread, net interest margin and
burden ratios. The importance of ratio analysis as a technique for analysing the performance
of different banks / bank branches was emphasised by the author. Aside from profitability
measures, the author proposed the following kinds of ratios for comparing bank performance:
Productivity Ratios, NPA Ratios, and Capital Ratios.

In his article "Indian Banking - The Challenges Ahead," Leeladhar (2006) stated that the
Indian financial system, of which banking is a crucial component, has been significantly
widening and deepening in recent years. The financial sector's rising role in resource
allocation has huge potential benefits for the efficiency with which our economy operates.
Given the importance of the Indian financial sector, the importance of a strong and resilient
banking system cannot be overstated. The banking sector's expanded importance in the Indian
economy, as well as rising levels of liberalisation and competition, have placed several
pressures on banks. Operating in such a rigorous climate has presented banks with numerous
hurdles, including customer service and branch management.

In his paper "Reforms Productivity and Efficiency in Banking: The Indian Experience,"
Mohan (2006) stated that the goal of reforms in general is to accelerate the economy's
growth momentum, as measured by per capita income. As a result, the banking sector's
success has far-reaching consequences across the economy. Financial intermediation is
necessary for both extensive and intensive growth to occur. As a result, financial system
improvement is critical for increased productivity and economic growth.

The author emphasised how banking productivity affects the rest of the economy. Recent
study has offered compelling evidence that financial advancements contribute to economic
growth. The contribution of finance-related activities to GDP and the process of financial
deepening are both basic indicators of financial development. Financial deepening,
according to the author, is easier to quantify; examining productivity and efficiency changes
in banking, on the other hand, is more difficult and must be viewed in light of the changing
features of the Indian banking system. The evolution of India's banking industry must be
understood in the context of the country's general economic reforms, as well as the rapid
changes that have occurred in the worldwide environment in which banks operate. From
1996 to 2004, the author studied the spread (net interest margin), intermediation cost
(operation expense), non- interest income, and net profit of major Asian banks. The author
found that as the reform period progressed, more and more banks began to list on the stock
exchange, resulting in increased market discipline and governance. The trend of efficiency
35
and technical change seen in Indian banking is in line with expectations in an industry
undergoing fast transformation as a result of deregulation factors. As deregulation gains
traction, commercial banks will need to come up with creative ways to supplement their
income, particularly fee income, in order to improve efficiency and productivity levels.
When the economic environment (market potential) changes, a few pioneering banks may
move quickly to seize new opportunities, while others react warily.

In their study work, Gopal and Dev (2006) looked at the productivity and profitability of a
few public and private banks in India. During the years 1996-97 to 2003-04, they looked at
the impact of globalisation and liberalisation on the productivity and profitability of Indian
banks. According to the author, the creation of new private sector banks, as well as the
admission of new foreign banks, has posed significant obstacles in the form of fierce
competition among Indian banks in this age. The PSBs are likewise being pushed into greater
profit orientation by the spirit of competition and the emphasis on profitability. They chose
five large banks for their analysis based on the highest amount of deposit mobilisation from
both the public and private sectors throughout the time period under consideration. The
process of globalisation and liberalisation has had a significant impact on the Indian banking
sector, according to the findings. The Indian banking sector has been obliged to adopt
appropriate strategies that focus on productivity and sustainability as a result of ongoing
banking reforms with an emphasis on transparency and efficiency. Except in a few cases, the
productivity index is determined to be larger than one in the selected banks, according to the
study. SBI and PNB were the most successful in terms of achieving the desired profitability,
followed by HDFC Bank and ICICI Bank but the performance of J& K Bank, Canara Bank
and Bank of India was poor in terms of achievements. The only significant element
determining profitability was the interest spread. During the study period, there was a strong
positive correlation between productivity and profitability, indicating that banks were
efficient in their resource utilisation.

In a fundamental review of the Indian banking business, Ramudu and Rao (2006) found
that since the Indian economy opened its doors to MNCs, the Indian banking sector has seen
unusual developments in terms of new goods and services, as well as shift competition. The
number of IPOs that have taken place in the banking sector is astounding. Given these recent
events, a thorough examination of the profitability of the Indian banking sector is
unavoidable. SBI, ICICI, and HDFC are the three major Indian banks chosen by the
researchers. Different profitability metrics such as OPM, NPM, ROE, EPS, PEB, DPS, and
DPR were utilised to analyse the profitability of these banks. They looked at the data across a
five-year period from 2001 to 2005. They employed statistical tools such as the Arithmetic
Mean, Compounded Annual Growth Rate (CAGR), and one-way analysis of variance to
36
analyse the data and interpret the results (ANOVA). The study's goal is to look into SBI,
ICICI, and HDFC's economic viability. SBI outperformed ICICI and HDFC in terms of
Earnings per Share and Payout Ratio, as well as CAGR in most of the metrics, according to
the report. In terms of OPM, NOM, ROE, and PER, on the other side, HDFC outperformed.
ICICI paid the biggest part of its earnings in terms of pay-out-ratio, despite the fact that its
earning capability was not higher than the other two banks. The compound annual growth
rate (CAGR) in all of the parameters of SBI was more than of ICICI and HDFC.

Rathod and Kulkarni (2006) took out the information of new banking trends with ING
Vyasya Bank as a case study. They divided their research on banking in India into three
phases: pre-nationalization (1948-68), post-nationalization (1969-91), and LPG (1991
onwards), with high-tech banking, core banking, ebanking, internet banking, RTGS, product
innovation, enhanced customer services, Basel I and II implementation, consolidation and
universalization, risk management technique adoption, and marketing concept. They claimed
that as a result of globalisation, the Indian financial system has experienced numerous issues.
Globalization has both benefits and drawbacks (challenges). Global banking issues include
improving customer service, technology innovation, risk management system updates, and
product diversification. India's banks should be prepared to meet these difficulties in order to
become more competitive and operate as global players. The author conducted a case study of
ING Vyasya Bank's numerous products and other financial services in light of evolving client
financial needs. They came to the conclusion that Indian banking has altered dramatically in
the LPG era. It is tackling problems in the changing environment by providing clients with a
variety of items. Customers and banks have both benefited from recent banking trends. Banks
are fighting to serve client expectations in the post-reform age, and they seek to demonstrate
their efficiency. The performance patterns in Indian banking suggest that a large number of
institutions are capable of meeting global challenges.

In his article "Commercial Banks in India: Problems Ahead," Saikrishna (2006) examined
the opportunities and challenges that banks in India faced in the current situation.
Globalization and privatisation, according to the author, have boosted competitiveness in the
banking sector. Banks must be adequately equipped to operate in such a competitive market.
Banks must maintain international standards in order to compete and attract more clients;
they must provide high-quality services to their customers and incorporate innovative
technology. Literature 27 The largest difficulty for the banking sector is reaching out to the
rural masses through shared technological platforms and lowering service costs. Banks must
adapt to the many challenges offered by the competitive world. In conclusion, the author
predicted that the Indian financial sector will expand not just in size but also in complexity in
the future years. With the increasing impact of globalisation, liberalisation, privatisation, and
37
now banking changes in India, competition will heat up even further. To keep growing and
strengthening the Indian banking sector as well as the Indian economy, commercial banks in
India must successfully address these issues and concerns. The first line of defence against
financial dangers is the financial strength of banks. In order to absorb future financial shocks,
banks should always maintain good operating standards, a risk management system, and a
sound capital structure. The key to success will be the efficient distribution of information
about the customer's wants and preferences.

Arora and Kaur (2006) attempted to assess the banking sector's performance in India
following the reforms. The banking sector, which is a vital aspect of India's financial system,
has seen significant changes as a result of the country's continuing economic and financial
reforms. The fundamental goal of these changes was to align the banking sector with
worldwide best practises and standards, which will have a long-term impact on the Indian
financial system as a whole. In India's banking sector, these financial sector changes have
sparked stronger competition convergence and consolidation. Banks have been divided into
four categories for the sake of analysis: private sector, foreign banks, nationalised banks, and
SBI and its allies. They compared banks based on seven key performance indicators,
including returns on assets (ROA), capital asset, risk weighted ratio, NPA to net advances,
business per employee, net profitability ratio, NPA level, and off-balance-sheet businesses,
during a period of nine years, from 1996 to 2005. The academics discussed the most recent
banking trends and advancements. The data demonstrates that the banking sector, notably
PSBs, has experienced exceptional growth. Their results are comparable to those of banks in
other industries, but they fall short in key categories such as asset quality, business per
employee, capital adequacy requirements, and profitability. The study concluded with some
recommendations for improving PSB performance, including operating costs, staff cost
rationalisation, HRD, NPA reduction, investment in quality assets, technology upgrades, risk
management techniques, market-driven approach, instance relationship management, and
credit delivery mechanisms, among others. With India's growing integration into the global
financial system, the Indian banking sector still has a long way to go before it can compete
with its western counter parts.

Tondon (2006) investigated the impact of globalisation on Indian banking in his article. The
financial sector's management has been geared toward a steady balancing of efficiency and
stability, as well as shifting public and private ownership shares. The growth of the financial
markets has been largely positive. The author discussed the banking sector's issues as well as
the way ahead. The Indian banking system is being reshaped; it is confronted with both
obstacles and opportunities, particularly after 2009, when it will be completely exposed to
competition. The major challenges that the Indian banking sector is preparing for by adopting
38
newer technology, strengthening their capital base to become Basel-II compliant, reducing
nonperforming assets (NPA), lowering operating costs, improving corporate governance,
restructuring their organisations, and sharpening their customer-centric initiatives. Indian
banks may be consolidated through mergers and acquisitions (M&A) in order to compete
effectively with giant global banks. According to the author, implementing Basel-II
regulations is providing new obstacles, and impaired assets remain a major source of worry.
To meet the high operational costs and shore up capital, banks are under increasing pressure
to enhance their profitability. The author also drawn analogies between the Indian financial
system and the banking systems of China and the rest of the world. In terms of size, return on
assets, and non-performing assets, he compared the Bank of China to its Indian counterpart
and the rest of the world (NPAs). According to the author, the Indian banking system would
experience a transition driven by consolidation, convergence, and technology. The Indian
banking system is transitioning from a big number of small banks to a limited number of
large banks, with a focus on improving banking competence and efficiency and integrating
with global banking. Finally, the author stated that India's expanding worldwide impact
benefits Indian banks in three ways: it allows them to serve Indian enterprises' cross-border
banking needs, serve multinationals' local banking needs, and expand their global footprints.
Despite fierce competition, the economy's expansionary phase is predicted to provide
abundant opportunity for the banking industry to expand. The Indian banks' growth trajectory,
adherence to global best practises, and risk management standards are all going to propel
them onto the global map, making them a force to be reckoned with. The path will be long
and difficult, and success will be determined by attention, flexibility, and effective execution.

In his paper "Indian Bank: Banking on Expansion," Bharathi (2007) stated that as the
banking sector approaches exponential growth, consolidation, reforms, and compliance
remain the most important topics on the boardroom agenda of Indian banks. He stated that
India has the world's second fastest expanding economy, and that a strong banking system
would be critical in boosting the country's levels of activity. The author stated that the Indian
banking sector is growing at a steady pace as a result of liberalisation, increasing economic
conditions, changing consumer demographics, and expanding market prospects, and that it is
currently ranked among the most desirable banking destinations.

Shyamala (2007), in her inaugural address on the special features of financial sector reforms
in India at the 18th Annual National Conference on Forex Association of India on April 6,
2007 in Bangkok, said that reforms were introduced as a part of structural adjustment and
have had a profound impact on the functioning of banks. The fundamental goal of financial
sector reforms was to increase resource allocative efficiency, ensure financial stability, and
retain trust in the financial system by improving its soundness and efficiency.
39
Simultaneously, reforms in many parts of the financial market were implemented in order for
the financial sector to effectively perform its intermediation role. The reform process was
carried forward through study and recommendation by several committees/working groups,
as well as thorough interactions with experts and market participants, with the goal of making
the reform measures mutually reinforcing. She also emphasised the financial sector's role on
change. Various initiatives implemented over the last 15 years have greatly improved the
profitability, asset quality, and capital position of the commercial banking sector. Reforms
have included contemporary measures such as financial conglomerate oversight, new capital
instruments, procyclical prudential provisioning, credit information companies, and financial
inclusion. She also outlined the next work agenda for Draft Accounting Aspects, Derivatives,
Stress Testing, Basel-II, Mortgage Guarantee Companies, and FSAP self-assessment.

In his article, Mitra (2007) asserted that financial sector reforms have resulted in significant
improvements in the banking sector. He explained that the essence of financial liberalisation
consists of three sets of actions: first, opening a country to the free flow of international
finance; second, removing controls and restrictions on the functioning of domestic banks and
other financial institutions so that they can properly integrate as participants in global
financial markets; and third, giving the central bank autonomy so that its supervisory and
regulatory role can be properly carried out.According to the author, banking sector changes
have boosted competitiveness, convergence, and consolidation in indian banking industry.
The Narasimham Committee-II (1998) advocated second-generation changes to provide
better accountability and market discipline, to which our banking system responded
positively. On the basis of profitability and provision, return on assets, net NPA as a
proportion of net advances, and business per employee, the author evaluated the banking
sector's performance in the post-reform period. He divided the banking industry into three
categories: Indian private sector banks, nationalised banks, and SBI and its allies. The author
stated that financial sector reforms have resulted in significant changes in our country's
banking sector. As the financial landscape has altered, our banks have more options to
develop abroad through self-expansion, strategic alliances, and other means.
Chapter 3. Research Methodology

Research design used to carry out this study is descriptive research because it deals with
statistical data and the main aim of the report is to describe the factors affecting the problem
mentioned and making comparison between banks performance in context of NPA. The study
is done on the basis of data for the period of 5 years from the financial year 2012-2017 and
secondary data is collected mainly from the sources available at internet like the RBI website,
websites of the banks etc. Data is presented with the help of Graphs, charts and tables etc.

40
3.1 Sample Design :- A sample design is a method for selecting a representative sample . It
refers to the methods or procedures used by the researcher to select items for the sample. The
sample design may also specify the number of items to be included in the sample, i.e. the
sample size. Before any data is gathered, the sample design is determined.

The methodology and design adopted for the study is as follows:

Area of Study -The study has been conducted in Chandigarh city having a population of
more than nine lacs. Chandigarh is known as one of the best experiments in urban
planning and modern architecture in the twentieth century in India.

Period of the Study-

The present research study is related to “Customer Satisfaction: A Comparative study of

Private Sector Banks ”. The survey lasted for about six months.

Data Collection-

This study is based on questionnaire methods. Primary data were collected from men and
women respondents living in Bhiwandi city. People from all walks of life were contacted. The
total number of respondents was 160.The researchers have covered customers from two
banks, three each from private sector. Under HDFC and Axis Bank were selected among
Private Sector Banks.

Sampling-

A sample of 160 customers has been selected using convenient sampling method. The data
has been interpreted satisfactorily whenever and wherever needed.

Sampling Technique:
All of the people who had a savings account were considered. The study was based on the
idea that respondents will provide honest and fair replies in a pragmatic and non-biased
manner.

SAMLING DESCRIPTION:-

The material was collected and evaluated according to their socioeconomic background,
which included the features of their respondents, in order to better understand the nature and
characteristics of various respondents in this study. This description demonstrates that the
respondents in this survey come from a variety of backgrounds, broadening the study's
breadth.

41
Limitations :- Every study has certain limitations. Same is true with this study also. Some of
the limitations faced during this study are: For the purpose of this study only data of 5 years
has been taken that is from financial year 2013-2017.

Due to constraints of time and resources, the study is likely to suffer from certain
limitations. Some of these are mentioned here under so that the findings of the study
may be understood in a proper perspective. The limitations of the study are:

• The study is based on the secondary data and the limitation of using
secondary data may affect the results.

• The secondary data was taken from the annual reports of the Private
Sector Banks. It may be possible that the data shown in the annual
reports may be window dressed which does not show the actual
position of the banks.

Financial analysis is mainly done to compare the growth, profitability and financial
soundness of the respective banks by diagnosing the information contained in the financial
statements. Financial analysis is done to identify the financial strengths and weaknesses of
the two banks by properly establishing relationship between the items of Balance Sheet and
Profit & Loss Account. It helps in better understanding of banks financial position, growth
and performance by analyzing the financial statements with various tools and evaluating the
relationship between various elements of financial statements.
FOR THIS PURPOSE THE FOLLOWING PARAMETERS HAVE BEEN STUDIED

1. Credit Deposit Ratio

2. Interest Expenses to Total Expenses

3. Interest Income to Total Income

4. Other Income to Total Income

5. Net Profit Margin

6. Net worth Ratio

7. Percentage Change in Net Profits

8. Percentage Change in Total Income

9. Percentage Change in Total Expenditure

42
10. Percentage Change in Deposits

11. Percentage Change in Advances

3.2 Primary Data :-

Primary data is information that is used or obtained for the first time and has never been used
before. There are a variety of primary data sources from which information can be gathered.

I choose the following resources for our research :

QUESTIONNARE:

This type of data collection is very popular, especially for large inquiries. In our study, we
asked respondents to answer 11 basic questions with accurate information.

RESPONDENTS:

Respondents aid in the development of a more accurate understanding of our research. I meet
the respondents both inside and outside of the banks.
3.3 Secondary Data:-

Secondary data is information that is already available in a ready-to-use format and has been
used by people for a variety of purposes. Secondary data can come from a variety of places,
including newspapers, periodicals, journals, books, reports, records, and other publicly
available material.

BANKS ANNUAL REPORTS:

Banks publish annual reports to keep the public informed about their profitability and
growth. These annual reports are quite helpful in providing us with the most up-to-date data
and other relevant information for our research. It informs us about the rise or fall in profits
as well as other facilities

JOURNAL AND PUBLICATIONS OF DIFFERENT BANKS:-

I also take into account the bank's periodicals and papers published at various times. I learn
about the locations of the branches, ATMs, and other essential information.

MANUALS AND BROACHERS OF DIFFERENT BANKS:-

I enlist the assistance of bank employees and others who provide me with detailed
information and data that may not be available elsewhere. They are willing to help in
any way they can.

43
INTERNET :-

I also take the consideration the internet facility with which I collect lot of latest information.

Limitations of The Study are:-

Some of the respondents of the survey were unwilling to share information.

The research was carried out in a short period. Therefore the sample size and other
parameters were selected accordingly so as to finish the work within the given time frame.

The information given by the respondents might be biased because some of them might not
be interested to give correct information.

The officials of the bank supported me a lot, but did not have sufficient time to make the
points more clear.
CHAPTER 4. Analysis and Interpretation of Data

4.1 Findings of the Study:

Majority of the respondents whether in public or private sector banks have savings account in
banks.

People want a change in the behaviour of the staff of the public sector banks.

In private sector banks proper ,promotional activities should be taken up so as to make the
population aware of the services provided by the banks even in rural areas.

The facility that was availed by most of the people at public sector banks was that of
ATM/Debit cards. The least availed facility was that of Demat account and foreign transfer of
funds.

The facility that was availed by most of the people at private sector banks was that of
internet/phone banking by ATM/Debit card.

Majority of respondents do not want to shift from their present bank.

4.2 Classification :-

Private sector banks and public sector banks are distinguished primarily by who owns the
majority of their shares, with private individuals and companies owning the majority of

44
shares in private sector banks and the government owning the majority of shares in
public sector banks.

The banking business has risen in leaps and bounds in recent years, and it now provides some
of the best chances for professional development. Working for a public sector bank, on the
other hand, may be very different from working for a private sector bank in terms of working
hours, level of competition, and professional learning curve.

Job stability and remuneration might also vary significantly, so it's vital to investigate
these factors before deciding on the best financial business for a successful career. Before
we go any further, it's vital to consider what separates public and private banks.

4.3 Conceptual Differences:

Public Sector - Public sector banks are known for having a more organised organisational
structure and a larger customer base. In comparison to privately-owned banks, the work
climate is also less competitive, and professionals are less likely to be focused on hitting
targets and being the best performance in a team.There is usually a larger emphasis on
offering appropriate training to their employees in order to help them refresh their knowledge
and abilities in order to improve their performance in the long run. When compared to private
sector banks, job security is substantially stronger, and for some, this may be the most
important factor in establishing a long-term career.

4.4 Analysis Data Collected

1. Gender

Particulars No of Respondents Percentage%

Male 2 12%

Female 15 88%

Total 17 100%

Analysis: From the above result I come to know that out of 17, 2 respondents are male and 15
are female which is 12% and 88% repectively.

INTERPRETATION: From the above data I can conclude that most of our respondents are
female.

45
 The

2. respondents were asked about which banking sector’s services do their avail.

Table 2: banking sector’s service which the respondents avail.

Banking sector Number of respondents

PUBLIC 30

PRIVATE 53

BOTH 24

Graph 2: Banking Sector’s service which the respondents avails

INTERPRETATION:- It was found that most of the respondents were availing services of
private sector banks while those of the public sector banks where less as compared to other
sector.

46
 The

3. respondents were asked about the type of account they have in the public sector as
well as private sector banks.

Table 3.1 Number of type of account held in public sector banks

Types of Accounts

Name of Savings Current Fixed Deposit Demat

Account
Total number 94.1% 6.9% 0% 0%
of respondents

Graph 3.1:- Number of type of accounts held in public sector banks

Analysis: 94.1% people own Saving Account , 6.9% own Current Account , 0% Fixed
Deposit and also 0% Demat Account.

INTERPRETATION:- It was found that in case of public sector banks, maximum

number of account holders owns Saving Account . After Saving Account most prefer

47
 The

account is Current Account prefer by people and non of the people owns Fixed Deposit
and Demat Accounts.

4. basic purpose of this question was to know the most preferred bank.

Table 4: Number of respondents preferring different banks.

Name of Bank No of Respondents

Punjab National Bank 5

Union Bank 3

Indian Bank 4

Bank of India 5

HDFC Bank 0

Bank of Maharashtra 0

48
Analysis: From above graph , it is seen that 5.6% stake of the respondents follows to Punjab
National Bank followed by Union Bank. It is the bank which provide fast services and also
ATM machine is more compared to the other private sector banks.

INTERPRETATION:- From the above graph , it is seen that Punjab National Bank is the
most preferred bank as compared to other Public and Private sector banks.

5. The main aim to ask this question was to know the criteria for opening bank account.

Table 5: Ranking Criteria

INTERPRETATION:- By analysing this graph , we can conclude that most of the people is
influenced by the quick and speedy Services provided by the bank and Brand Image is given
less preference than others.

6.The respondents were asked about the facilities they were availing in public as well as
private sector banks.

49
 Table 6.1 Number of people availing different facilities at public and private sector banks:

Facilities Availed Number of Respondents

ATM/Debit Card 14

Credit Card 2

Insurance 0

Mobile Banking 12

Graph 6.1 : Number of people availing different facilities at public sector banks

INTERPRETATION:- From the above graph , it was found that was availed by most of the
people at public sector banks was that of ATM/Debit Cards which hold 82.4% of respondents.
It was clearly observed by the graph that Insurance facility has not been used by any of the
respondent.

7. The main aim of the question was to know how often did you use your debit cards. Table
7.1

50
Graph 7.1: Number of peoples % using debit card.

INTERPRETATION:- From the above given graph, it is clearly seen that each and every
customer use the Debit Card facility to shop . No one is there who has never used it.

8. The purpose of this question is to know the satisfaction level they were having with their
banks overall performance.

Table 8.1: Satisfaction level of the customers regarding the facilities availed from the
public sector banks.

Level of Satisfaction No of Respondents

Excellent 4

Very Good 9

Good 5

51
Analysis : It was found that 24% of the respondents were highly satisfied ranked excellent
from the products and services availed by them. 53% were just satisfied given very good
and 29% have moderate view. INTERPRETATION:- People have mixed type of view
regarding the view.

9. The respondents were asked that if they have given option, would they like to shift from
the present banks:-

Table 9.1 Number of customers ready to shift from present bank.

Percentage

21%

79%

1st Qtr 2nd Qtr

52
Graph 9 :- Number of customers ready to shift from their present bank or not.

INTERPRETATION:- From the above graph we can conclude that the number of
respondents ready to shift from their present bank is 21% while 79% customers seems to
be satisfied from their bank and hence willing to shift from their present bank to other.

10. The aim to ask this question was to know the reasons for your performance in the
particular bank.

Graph 10:- Performance of the bank

INTERPRETATION:- It was found that 53% of the respondents given their reason of
performance to Quick and Fast Services. 59% were upto Friendly Behaviour and 18% were
of Reliability.

11. The aim to ask this question was to know whether the respondents faces any problem
regarding the services provided them by their preferred bank.

Table 11 Problem faced by customers

53
 Types of Problems No of Respondents

Reference 45

Time consuming 11

Too many formalities 12

No problem 5

Percentage
9%

10%

23% 58%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

INTERPRETATION:- It was found that most of the respondents are facing problem of
reference. Respondents also find that the time and too much formalities also cause problem
in banks.

Chapter 5. Suggestion and Conclusion

5.1 Suggestion :-

Banks provide important services to both the general population and the financial industry.
Not only is the variety of services and profit vital, but so are the quality of services, the cost
of services, and the security of public funds. Throughout the research, a number of financial
and non-financial issues have surfaced. Depositors' difficulties, borrower's problems,
employee's problems, and management's problems are all among them. These issues are
discussed in depth at the proper locations. The Narsimhan Committee's report from 1998

54
places a greater emphasis on the consideration of banks. There will be significant changes in
the financial sector over the next three years. Not only will the faces of banks change, but so
will the character of the institutions. Global banks, which will begin operations in the country
in 2005, will face strong competition. We have attempted to provide my simple, concrete, and
realistic solutions in response to those issues, which are as follows: Not only will the faces of
banks change, but so will the character of the institutions. Global banks, which will begin
operations in the country in 2005, will face strong competition. We have attempted to provide
my simple, concrete, and realistic solutions in response to those issues, which are as follows:

1. To compete with local and global banks, all public sector banks should be integrated as
quickly as feasible into 8-10 large banks.

2. There should be appropriate recruitment of more officers in the public sector banks so that
the branches, which are really understaffed and overburdened, become systematically
sufficient.

3. The bank management should have freedom terminate the inefficient employees.

4. The work of employees of public sector banks should be associated with the targets i.e.
they should be given targets of specific amount or specific job.

5. All the public sector banks should provided refresher training course at least once in a year,
which must includes the topics related with latest trends in banking, various management,
building public relations, communications skills, good behavior etc. actually they should
be trained to behave properly with customers and to feel that customers is very important.
Not only the borrower but depositor is also very important and be respected.
6. The employees should motivate for doing extra work or doing more than target. This
motivation may be monetary or non monetary.

7. All the banks must have ATM facilities. It will be better to have networking ATM system
i.e. if it is not possible to install ATMS in all parts of city there should be tie up with other
banks. Presently, some banks are doing the same.

8. There should be flexibility in organizational structure of banks. The top management

should have liberty to appoint professional from out of banking sector(if required).

9. There should be incentive and penalty mechanism for employees.

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10. There should be tie up with manufacturer of consumer goods to finance the customer
e.g. the manufacturers of cars, bikes, television, fridge, computers etc.

11. The bank should raise additional capital through public issues, foreign direct
investment (FDI) etc. to meet the capital requirements under the base and to meet the
growing domestic and international competition.

12. There should not be government intervention and the bank should be liberated to run
on professional basis.

5.2 Recommendations :-

1. Public Sector Banks:-

Bank staff should be customer friendly and highly motivated to serve the normal customer.

As far as possible, banks should reduce its documentations process while providing loans.

Computerization should be done in banks at all level and the operators should be properly
trained.

Token system should be induced so as to minimize the waiting lines in the banks.

Quick services should be provided.

2. Private Sector Banks:-

24 hours banking should be induced so as to facilitate the customers who may not have free
time in the day time. It will help in facing the competition more effectively.
More ATM coverage should be provided for the convenience of the customers.

Customer care services should be provided by banks.

5.3 Conclusion:-

Customers are increasingly aware of not just the quality of service given by banks in India,
but also around the world. As a result, the new banking industry must serve and cater to all of
the needs of the clients, or else it would be impossible to survive in the upcoming
competition. Banks need to have a better understanding of what their clients really want. A

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bank is closed if it is not operating correctly. As a result, dealing with such situations is
challenging. Here, a basic philosophy of customers as God can work, and we must adhere to
it in order to live and serve better. The banking industry is on the verge of exploding. In this
context, it is critical for banks to adopt technology at a rapid pace if they are to remain
competitive. Mani Mamallan argues that banks should outsource their IT infrastructure needs,
allowing for early adoption and greater efficiency. In the current environment, a number of
banks have adopted a new infrastructure outsourcing deployment approach in order to reduce
the cost of service channels. As a result, other banks will have to coordinate their redesigned
business strategies as well. Both the business and technological changes that are necessary
are massive. Early adopters benefit from enhanced efficiencies in a highly competitive
banking industry.
Chapter 6. Bibliography

6.1 References:-

⚫ https://iorsjournal.org/papers/bank

⚫ www.google.in/public/private bank

⚫ https://academia.edu/report/on/bank

⚫ https://researchgate.org.in

⚫ https://www.bartbleby.com/org

⚫ https://scribd,com/comparative\

⚫ https://omicsonline.com.//

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•

APPENDIX

Which Sector Bank do you have your account?

In which Bank do you have your account?
Which type of account do you have in the Bank?
In case you have your account in more than one bank which one is your most
preferred bank?
Rank the selection criteria for opening account with bank?
Which facilities are you availing at your bank?
How often do you use debit card to shop?
How much satisfied are you with your bank’s overall performance?
Kindly rank the reasons for your preference in this particular bank?
If they have given option, would they like to shift from the present bank?
What kind of problems are you facing regarding the services provided by
their preferred bank?

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Don`t Worry! This report is 100% safe & secure. It`s not available publically and it`s not accessible by search engines(Google, Yahoo.
Bing, etc)

Any economy's backbone is its banking system. With the emergence of international private
sector banks, the banking industry is facing fierce rivalry and a need to improve service
quality in order to obtain a competitive advantage over their consumers. Public sector banks
are up against tough competition from private sector banks, and they're under a lot of
pressure to keep up with the services offered by multinational banks. While public sector
banks benefit from a positiveimage and a large rural network, private sector banks offer
superior services and amenities. The goal of our research was to compare the public and
private sectors on public perception, basic facilities, customer-centric services, and bench
strength. We conducted a field investigation with a sample size of 50 people. The world of
banking has assumed a new dimension at dawn of the 21st century with the advent of tech
banking, thereby lending the industry a stamp of university. Banking can also be classified as
retail and corporate banking. Retail banking that is designed to meet the requirement of
individual customers and their savings which includes payment of utility bills, credit cards,
consumer loans and checking bank account. Corporate banking on the other side caters to the
need of corporate customers such as opening letters, credit, managing cash, bills discounting
etc. Banks marketing can also be defined as the part of management activity which seems to
divert the flow of profit from banking services to clients Essentially, the marketing notion
necessitates a knowledge of the customer's need to learn about the market and how it
operates. Furthermore, the industry is categorized in order for banks to better understand the
needs of their customers. Services like portfolio management, internet banking, venture
capital etc. The services that banks provide to their customers are nearly completely focused
on managing money or finances for other individuals. Banks play a crucial role in our
economy. The basic duty of banks is to put the money in their account holders' accounts to
good use by lending it to individuals in need. Money is a means of exchange, or a system for
valuing goods and services that has been agreed upon. Precious stones, animal products, and
other valuable things were once utilised as a means of exchange, and are still used in some
places today. "Barter" is another name for this system. medium of exchange could be
anything with a predetermined value. Many different types of money are used nowadays.
Money is any thing or record that is widely accepted in a specific socio-economic setting or
country as payment for goods and services and debt repayment. Money has four major
functions: it is a medium of commerce, a unit of account, a store of value, and, in the past, a
standard ofpostponed payment. Money can be defined as any object or secure verifiable
record that performs certain functions.
Money simply indicates how much something is worth, whether it is a new gadget or two hours
of your effort. When you have money, a bank can operate as your financial institution. The
lifeblood of trade, commerce, and industry is finance. The banking industry now serves as the
backbone of modern enterprise. The financial system is crucial to any country's development.
The word bank is derived from either the old Italian word banca or the Frenchn word banque,
60
both of whichrefer to a bench or a money exchange table. For the purpose of lending or
exchanging, European money lenders or money changers used to display (show) coins from
various countries in large heaps (quantity) on benches or tables. A modern economy cannot
function without a bank. A bank, like any other business, is one that is heavily involved in
money transactions. No one can live without money nowadays, and without a bank, safe and
secure money transactions are impossible. A bank can be found wherever there is money. It
engages in a variety of activities. A bank performs

equity, putting even more pressure on the government. In India, the banking sector serves as
a meeting place for savers and investors. Since liberalization, the structure of the Indian
banking sector and our country's financial markets have undergone significant changes.
Banks play an important role in amassing public savings and making them available for
investment in the modern era. They also increase capital mobility by generating demand
deposits while granting loans and purchasing investment assets. As a result, we may infer
that the overall effects of the banking system in India have been favorable, resulting in a win-
win situation for all enterprises and investors. The history of India's banking sector is
important to understand. As a result, we've compiled a list of key elements about India's
banking system's history. Did you know that India's first bank, the 'Bank of Hindustan,' was
founded in 1770? Yes, you read that correctly. In the year 1770. Calcutta was the location of
the bank, which ceased operations in 1832. More than 500 banks were established during
that time period, but only a few of them survived, including the Bank of Bengal (1809), Bank
of Bombay (1840), and Bank of Madras (1843). Note: The Bank of Calcutta (India's oldest
commercial bank) was founded in 1806. The bank was given a royal status and renamed the
Bank of Bengal after three years. The three banks mentioned above were created during the
British Empire's reign in India. All of these financial institutions were combined into one.
The Reserve Bank of India (RBI) is the apex body in the Indian banking sector for all matters
connected to the banking system. It serves as India's "Central Bank" and acts as a banker to
all other banks. Functions:-
The Reserve Bank of India (RBI) is the financial system's regulator and supervisor. It
establishes the rules and regulations under which Indian banks and financial institutions must
function. The goal is to run the banks and financial system as efficiently as possible while
maintaining public trust in the system. It's a success for RBI when people have faith in the
banking system. How does the RBI maintain public trust? By guaranteeing that depositors'
money is safe with banks and that all banking and financial services run smoothly and
according to the rules. 2. Manager of Foreign Exchange: In India, all foreign currency flow
must be done as per 0FEMA (Foreign Exchange Management Act). It is the RBI who ensures
that transactions happens as per FEMA. The bigger role of RBI is in ensuring that external
trade happens in a seamless manner. Whether, the trader is a resident Indian or a foreign
national, they must be able to deal in foreign exchange in an easy and transparent manner. 3.
The Reserve Bank of India (RBI) is in charge of printing and issuing new currency notes in
India. The RBI is also in charge of exchanging outdated or damaged notes for new ones. In
this approach, the RBI can keep track of how much "excellent quality currency" is needed in
the market at any one time. "Cash" refers to both notes and coins in this context. 4. Banker to
61
 Banks: The Reserve Bank of India (RBI) has an account with all Indian banks. This is where
they maintain their statutory reserves and other deposits. As a result, RBI also serves as a
banker to the banks. The RBI is in charge of ensuring interbank transactions. As an
exceptional case, the RBI can lend money to banks PUBLIC SECTOR BANKS: Public sector
banks are ones in which the government owated equal. A bank can be divided into two groups
based on its stakeholders. Private sector banks are one of them. These banks work in a
different way. Let's look at how private sector banks operate and the benefits and drawbacks
that come with them. Co-OPERATIVE BANKS: A cooperative bank is a financial institution
that offers its customers retail and commercial banking solutions and services. The twist is
that, unlike other banks that are owned by the government or a private entity, customers own
the bank. Assume you have a group of people in your neighbourhood that have the same goal
and share a common interest. Everyone in the group is willing to put money aside 'as a
collective.' In this instance, a cooperative bank will be of assistance. The group might put
money aside and invest it in a common cause.

Report Title: STUDY BETWEEN PRIVATE SECTOR AND PUBLIC SECTOR BANKS

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