pub and pvt sector

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CHAPTER: 1

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CHAPTER: 1.1

INTRODUCTION

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 universality. In general,

banking may be classified as retail and corporate banking. Retail banking, which is

designed to meet the requirements of individual customers and encourage their saving,

includes payment of utility bills, consumer loans, credit cards, checking account and the

like. Corporate banking, on the other hand, caters to the needs of corporate customers like

bills discounting, opening letters of credit, managing cash, etc.

Metamorphic changes took place in the Indian financial system during the eighties and

nineties consequent upon deregulation and liberalization of economic policies of the

government. India began shaping up its economy and earmarked ambitious plan for

economic growth. Consequently, a sea change in money and capital markets took place.

Application of marketing concept in the banking sector was introduced to enhance the

customer satisfaction. The policy of privatization of banking services aims at encouraging

the competition in banking sector and introduction of financial services. Consequently,

services such as Demat, Internet Banking, Portfolio Management, Venture Capital, etc.,

came into existence to cater to the needs of public. An important agenda for every banker

today is greater operational efficiency and customer satisfaction. The new watchword for

the bankis pretty ambitious : customer delight.

The introduction to the marketing concept to banking sector can be traced back to American

Banking Association Conference of 1958. Bank marketing can be defined as the part of

management activity, which seems to direct the flow of banking services profitability to the

customers. The marketing concept basically requires that there should be thorough

understanding of customers need and to learn about market it operates in. Further the

market is segmented so as to understand the requirements of the customer at a profit to the

bank.

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1.1.2 INDIAN BANKING INDUSTRIES

The Indian banking market is growing at an astonishing rate, with assets expected to

reach US$1 trillion by 2010. An expanding economy, middle class, andtechnological innovations are all contributing to this growth.

The countrys middle class accounts for over 320 million people. In correlation with

the growth of the economy, rising income levels, increased standard of living, and

affordability of banking products are promising factors for continued expansion.

The Indian banking Industry is in the middle of an IT revolution, Focusing on

the expansion of retail and rural banking. Players are becoming increasingly

customer - centric in their approach, which has resulted in innovative methods of

offering new banking products and services. Banks are now realizing the

importance of being a big player and are beginning to focus their attention on

mergers and acquisitions to take advantage of economies of scale and/or

comply with Basel II regulation.Indian banking industry assets are expected to

reach US$1 trillion by 2010 and are poised to receive a greater infusion of foreign

capital, says Prathima Rajan, analyst in Celent's banking group and author of the

report. The banking industry should focus on having a small number of large

players that can compete globally rather than having a large number of fragmented

players."

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1.1.3 BANKING STRUCTURE IN INDIA

Scheduled Banks in India

(A) Scheduled Commercial Bank

Public sector Banks Private sector

Banks

Foreign Banks in

India

Regional Rural Bank

(28) (27) (29) (102)

NationalizedBank

Other PublicSector Banks

(IDBI)

SBI and itsAssociates

Old PrivateBanks

New PrivateBanks

(B) Scheduled Cooperative Banks

Scheduled Urban Cooperative

Banks (55)

Scheduled State Cooperative

Banks (31)

Here we more concerned about public and private sector banks and competition among

them. Today, there are 28 public sector banks and 27 private sector bank in the banking

sector: 19 old private sector banks and 8 new private sector banks. These new banks have

brought in state-of-the-art technology and Aggressively marketed their products. The

Public sector banks are facing a stiff competition from the new private sector banks. The

banks which have been setup in the 1990s under the guidelines of the Narasimham

Committee are referred to as NEW PRIVATE SECTOR BANKS.

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1.1.4 PUBLIC AND PRIVATE SECTOR BANKS

All the banks in India were earlier private banks. They were founded in the pre-

independence era to cater to the banking needs of the people. But after nationalization of

banks in 1969 public sector banks came to occupy dominant role in the banking structure.Private sector banking in India received a fillip in 1994 when Reserve Bank of India

encouraged setting up of private banks as part of its policy of liberalization of the Indian

Banking Industry. Housing Development Finance Corporation Limited (HDFC) was

amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI)

to set up a bank in the private sectors.

Private Banks have played a major role in the development of Indian banking industry.

They have made banking more efficient and customer friendly. In the process they have

jolted public sector banks out of complacency and forced them to become more

competitive.

A countrywide survey reveals that while the private banks have got a tight grip on the purse

strings of the salaried class and professionals in the country, a large majority of customers

in Corporate India still prefer the time-tested public sector banks for services ranging from

securing credit cards to making bond investment and fixed deposits.

According to survey, 60% businessmen in India prefer PSU banks when it comes to

sourcing credit cards and another 80% of them knock on the doors of state-owned banks

for securing personal and educational loans.

The reason: These businessmen find the PSU banks more reliable while the private sector

banks seem messy with their difficult-to-comprehend offers. It also points out that the

business community feels that the private banks charge high rates of interest and are very

"clever" with customers.

The preference for public sector banks for insurance is mainly due to general perception

that they are more reliable, secure and trustworthy. But for credits and debit cards, they feel

private banks provide prompt and efficient service as compared to the outdated services of

PSU banks that lead to wastage of time and procedural delays.

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1.1.5 PRESENT SCENARIO

The Indian banking has finally worked up to the competitive dynamics of the new

Indian market and is addressing the relevant issues to take on the multifarious

challenges of globalization. Banks that employ IT solutions are perceived to be

futuristic and proactive players capable of meeting the multifarious requirements

of the large customers base.

Private Banks have been fast on the uptake and are reorienting their

strategies using the internet as medium The Internet has emerged as the new and

challenging frontier of marketing with the conventional physical world tenets being

just as applicable like in any other marketing medium.

Nowadays there is a hardcore competition in Indian banking sector as

private banks are providing customer friendly convenience services like e-banking,

sms banking, net banking, phone banking, easy availability of loan etc. The public

sector banks are also adopting new technology in order to face competition with

private sector banks. The perception of Indian public has changed from public sector

banks to private sector banks.

The Indian public is moving towards private sector because of their

customer friendly services. But still, almost 80% of the banking business is

controlled by Public Sector Banks (PSBs). PSBs are still dominating the Indian

banking system. Shares of the leading PSBs are already listed on the stock

exchanges. The RBI has given licenses to new private sector banks as part of the

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liberalization process. With stiff competition and advancement of technology, the

service provided by banks has become more easy and convenient.

CHAPTER 1.2 RESEARCH METHDOLOGY

1.2.1 NEED FOR STUDY

The research project evaluation of the banking sector in India has primal importance due to

intense competition,and changing banking reforms. This research project is very important

because in today scenario there is strong competition in public and private sector banks.

Its very important for us to know which sector is performing well (public sector or private

sector).This research project is important for all customer who are availing the banking

facility. They can understand which sector is very reliable, and providing good services.

This research project is also important for share holder they can know the liquidity

position, profitability of both banks.

1.2.2 SCOPE OF STUDY

The scope of the study is to know the impact of service provided by PNB &HDFC

bank on customer satisfaction. Its not easy for covering all the boundaries for

collecting the data. So, this research study is limited within Ludhiana boundary. This

research study is covering some important aspect. In this research study analysis the

performance of PNB and HDFC bank. The performance is studied in the form of net

profit, interest earned, interest expanded, deposits and earning per share. The

performance is evaluated with the help of profit &loss account, income statement and

balance sheet. In this research study performance is evaluated for last five year from

2004-2008.The performance is evaluated only two banks (PNB and HDFC bank). This

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research study performance is measure in terms of profitability and customer

satisfaction..

1.2.3 OBJECTIVE OF STUDY

1. Comparative Study of the Financial Performance of PNB & HDFC BANK.

2. TO study the impact of service provided by PNB & HDFC on customer satisfaction.

RESEARCH METHODOLOGY

1.2.4 Hypothesis for the study

1) How much you are satisfied with the service of the bank? (Chi- square)

Null Hypothesis Ho: most of the people are not satisfied with the

Service of HDFC bank

Null Hypothesis H0: most of the people are not satisfied

With The Service of PNB bank

A successful completion of any project and getting genuine results from that depends

upon the method used by the researcher. The plan or the methodology for this study is

laid upon the following basis:

Research design

Sources of data collection

Research approach Research instruments

Sampling plan

Framework of the population

Sampling procedure

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Sampling unit

Sampling size

Contact method

1.2.5 (1) SECONDARY DATA (FINANCIAL ANALYSIS)

SAMPLE DESIGN

The sample for the study consisted of total of four banks from Public Sector and

Private Sector comprising of two each. The public sector banks comprised of 20

nationalised banks and 8 banks of the State Bank Group. The private sector banks consisted

of 21 old private banks and new 9 private sector banks. Thus, the total of 91 banks was

there in population for the study. The sampling technique used was stratified random

sampling. The selected banks were HDFC Bank, and Punjab National Bank

1.2.6 COLLECTION OF DATA

The entire structure of data for the study rests solely on secondary sources of

information. The study was carried out for the period from 2003-04 to 2007-08. Data

relating to performance indicators i.e. Net Profit, Interest Earned, Interest Expended, and

Establishment Expenses etc. of banks under study has taken from Bank Quest, IBA

Bulletins, Annual Reports of the banks and websites such as Moneycontrol.com,

Money.rediff.com and websites of the banks. Only those banks were selected for the

purpose of the study for which data for completed 12 months from 2003-04 to 2007-08 was

available. The raw data in the form of various for the sample banks was first recorded in a

master table and then subsequent statistical tools for the analysis were applied.

1.2.7 TOOLS OF ANALYSIS

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Analysis and interpretation of performance indicators was done to compare the different

categories of banks which in turn helped in studying the performance of the banks taken

under the study. To compare the different categories of banks on the basis of various

performance indicators such as net profit, interest earned, establishment expenses, total

advances etc. various statistical tools have been applied viz., Arithmetic mean, Standard

Deviation, Coefficient of Variation, Compounded Annual Growth rate. Following were the

tools used to analyse the secondary data.

.1. ARITHMETIC MEAN

The Arithmetic Mean is an average. The formula for arithmetic mean is:

2. STANDARD DEVIATION

The Standard Deviation is an absolute measure of dispersion that expresses variation in the

same units as the original data. The formula for standard deviation is:

S.D. =

3. COEFFICIENT OF VARIATION

The Coefficient of Variation is one relative measure of dispersion. It relates the standard

deviation and the mean by expressing the standard deviation as a percentage of the mean.

The unit of measure, then, is percent rather than the same units as the original data. The

formula for coefficient of variation is

10

=n

A.M. (X ) X1 + X2 + X3 + + Xn

= Xi/n

n

i=1

(Xi - X )2 / (n-1)

=Coefficient of

Variation (C.V.)


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4. COMPUNDED ANNUAL GROWTH RATE

The Compounded Annual Growth Rate of the performance indicators such as

Establishment Expenses, Spread, etc. can be calculated for a period of six years i.e. 2001-

02 to 2006-07. The formula for calculating compounded annual growth rate (CAGR) is:

1.2.8 (2) PRIMARY DATA (DATA ANALYSIS)

DATA COLLECTION METHOD

Primary data means data collected by personal interviews account holders depending

upon availability of time & other sources.

Questionnaire is prepared to study the impact of services provided by PNB & HDFC

bank on customer satisfaction. A survey was conducted keeping in view the objective of the

study.

The questionnaire contains both open- ended and close - ended questions.

Various supplementary questions were also asked to gain maximum information

from the respondents.

1.2.9 SAMPLING PLAN

CAGR = [(Final Value / Initial Value)1/n - 1] x 100

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Sampling is an effective step in collection of primary and secondary data and has a great

influence on the quality of results. The sampling plan includes the population, sample size and

sampling design.

1.2.10 POPULATION

The study is aimed to include the customers of respective banks so local branches of

Ludhiana city would be selected for the study.

1.2.11 SAMPLE SIZE

The sample size for the research was 80customers.

1.2.12 SAMPLING DESIGN

Because of geographical constraint, method of Simple Random Sampling will be

incorporated to select the samples from Ludhiana. Because of this process, each element of

the target population has an equal chance of being selected into the sample.

1.2.13 Statistical tools

Classification and Tabulation transforms the raw data collected through questionnaires and

personal interviews into useful information by organizing and compiling the bits of data

contained in each of the 80 questionnaires i.e., observations and responses are converted

into understandable and orderly statistics for further analysis and interpretation.

Following applications of statistics are used to organize and analyze the data:

Calculating the percentage of the responses.

Formula used:

Percentage= (Number of responses/Total responses)*100

Graphical analysis by means of pie charts and bar graphs etc.

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Mean method in ranking type questions.

Chi-square test is applied

CHAPTER: 213


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CHAPTER 2.1

2.1.1 PROFILE OF PNB

Punjab National Bank (PNB) is one of India's largest nationalized banks, with some 4,500

locations. The financial institution offers services in personal and corporate banking,

including industrial, agricultural, and export finance, as well as international banking. Its

personal lending services include loans for housing, autos, and education. PNB's diverse

client list includes Indian conglomerates, small and mid-sized businesses, non-resident

Indians, and multinational companies.

PNB with over 37 million satisfied customers and over 4589 offices, It has continued

to retain its leadership position among the nationalized banks. The bank enjoys strong

fundamentals, large franchise value and good brand image. Besides being ranked as one of

India's top service brands, PNB has remained fully committed to its guiding principles of

sound and prudent banking. Apart from offering banking products, the bank has also

entered the credit card & debit card business; bullion business; insurance business; Gold

coins & asset management business, etc.

Network Area:

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PNB has over 4500 branches and offices bringing the Punjab National Bank to your

doorstep. Around 2400 offices come under the network of Centralized Banking Solution or

CBS. A need for centralized banking system prompted PNB to go computerized and what

followed was the establishment of CBS in Punjab National Bank branches in all the leading

cities like Delhi, Pune, Chennai, Mumbai, Ahmadabad, Chandigarh, Gurgaon, Hyderabad,

Jalandhar, Kolkata, Ludhiana,Noida.

The bank has been focusing on expanding its operations outside India and has

identified some of the emerging economies which offer large business potential. Bank has

set up representative offices at Almaty: Kazakhistan, Shanghai: China and in London.

Besides, Bank has opened a fully fledged Branch in Kabul, Afghanistan.

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PNB's Financial Numbers

2.1.2 HISTORY OF PNB

PNB was founded in the year 1895 at Lahore (presently in Pakistan) as an off-shoot

of the Swadeshi Movement. Among the inspired founders were Sardar Dayal Singh

Majithia, Lala HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C.

Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, Lala Dholan Dass.

With a common missionary zeal they set about establishing a national bank;

the first one with Indian capitalowned, managed and operated by the Indians for

the benefit of the Indians. The Lion of Punjab, Lala Lajpat Rai, was actively

associated with the management of the Bank in its formative years.

THE HISTORY

1895 : PNB established in Lahore.

1904 : PNB established branches in Karachi and Peshawar.

1939 : PNB acquired Bhagwan Dass Bank Limited.

1947 : Partition of India and Pakistan at Independence. PNB lost its premisesin Lahore, but continued to operate in Pakistan.

1960 : PNB amalgamated Indo-Commercial Bank Limited (established in

1933) in a rescue.1961 : PNB acquired Universal Bank of India.

1963 : The Government of Burma nationalized PNB's branch in Rangoon(Yangon).

1969:

The Government of India nationalized PNB and 13 other majorbanks on 19th July, 1969.

1978:

PNB opened a branch in London.

1986:

The Reserve Bank of India required PNB to transfer its Londonbranch to State Bank of India after the branch was involved in afraud scandal.

1988:

PNB acquired Hindustan Commercial Bank Limited in a rescue.

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Punjab National Bank continues to maintain its frontline position in the Indian banking

industry. In particular, the bank has retained its number one position among the

nationalized banks in terms of number of branches, operating and net profit in the year

2006-07. The performance highlights of the bank in terms of business and profit are shown

below:

Sales $2.32 billion

Profits $.28 billion

Assets $24.12 billion

Market Value $2.79 billion

Employees 58,300

MISSION

To provide excellent professional services and improve its position as leader in the

field of financial and releated services;build and maintain a team motivated and

commited workforce with high work ethos;use latest technology aimed at customer

satisfaction and act as an effective catalyst for socio-economic development.

2.1.3 AWARDS & ACHIEVMENTS OF PNB

Best ITTeam ofthe YearAward"

At the IDRBT BankingTechnology awards for the year2005-06.

SKOTCH Challenger Award for Change Management for the year 2005-06

Best IT User in Banking &

Financial Services Industry -2004

by NASSCOM in partnership with EconomicTimes

Golden Peacock Awardfor Excellence in Corporate Governance - 2005 byInstitute of Directors

FICCI's Rural DevelopmentAward

for Excellence in Rural Development - 2005

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Skotch Challenger Award forExemplary use of Technology

for becoming a pioneer in Public Banks - 2005

Golden Peacock NationalTraining - 2004 & 2005

by Institute of Directors

National Award for Excellencein SSI Lending

Ranked 2nd for 4 consecutive years - 2002, 2003,2004 & 2005

Banking Technology Awards2004Runner up in 'Best IT Team ofthe Year Award 2005'

Jointly Adjudged by IBA, Finacle & TFCI

Money Outlook Award - 2004Runner up in 'Best Bank(public Sector) of the yearAward' -2005

CHAPTER 2.2.1

PROFILE OF HDFC BANK

HDFC Bank, one amongst the firsts of the new generation, tech-savvy commercial banks

of India, was incorporated in August 1994, after the Reserve Bank of India allowed setting

up of Banks in the private sector. The Bank was promoted by the Housing Development

Finance Corporation Limited, a premier housing finance company (set up in 1977) of India.

Net Profit for the year ended March 31, 2006 was Rs. 1,141 crores. Results ofthe latest

quarter ended June 2007, indicate that the bank continues to grow in a steady manner.

Amalgamations

In 2002, HDFC Bank witnessed its merger with Times Bank Limited (a private sector bank

promoted by Bennett, Coleman & Co. / Times Group). With this, HDFC and Times

became the first two private banks in the New Generation Private Sector Banks to have

gone through a merger. In 2008, RBI approved the amalgamation of Centurion Bank of

Punjab with HDFC Bank. With this, the Deposits of the merged entity became Rs. 1,22,000

crore, while the Advances were Rs. 89,000 crore and Balance Sheet size was

Rs.1,63,000crore.

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Tech-Savvy

HDFC Bank has always prided itself on a highly automated environment, be it in terms of

information technology or communication systems. All the branches of the bank boast of

online connectivity with the other, ensuring speedy funds transfer for the clients. At the

same time, the bank's branch network and Automated Teller Machines (ATMs) allow

multi-branch access to retail clients. The bank makes use of its up-to-date technology,

along with market position and expertise, to create a competitive advantage and build

marketshare.

2.2.2 Business Overview:

HDFC provides loans for resident Indians and NRIs for purchase of house, flat or

bungalow from developers as well as for self constructed houses. Several options are

available to the customers, including:

Maximum amount (upto 85% of cost of property)

Maximum term (20 years)

Fixed interest rate / adjustable interest rates

For repayment of loans, HDFC provides following options:

Flexible loan instalment plans

Trench based EMI (i.e. customers can fix the installments they wish to pay till the

time the property is ready for possession)

Accelerated Repayment Scheme (i.e. increasing the EMI and replaying faster)

HDFC also provides home improvement loans for external repairs, tiles fixing/flooring,

painting, plumbing, waterproofing etc. For adding space or additional rooms, it provides

home extension loans. Other type of loans include short term bridging loan(selling old

property to buy a new/bigger home), land purchase loan, loans to professionals for non

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residential purpose (such as clinic, office etc.) and mortgage loans for

marriage/education/medical expenses.

HDFC offers two kinds of deposits, at fixed and variable interest rates and it has been

awarded AAA rating for its deposits from both CRISIL and ICRA for the twelfth

consecutive year, representing highest safety as regards timely payment of principal and

interest. Several plans are available, including monthly/annual income, cumulative/non-

cumulative and senior citizen deposits.

HDFC Realty, the real estate property division of HDFC, helps customers in finding

opportunties for buying/selling/leasing/renting of residential property and commercial

plot/land across various cities in India. HDFC Realty is managed by Home Loan Services

India Private Limited, a wholly owned subsidiary of HDFC.

2.2.3 HISTORY OF HDFC BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst the first

to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a

bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry

in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited',

with its registered office in Mumbai, India. HDFC Bank commenced operations as a

Scheduled Commercial Bank in January 1995.

HDFC is India's premier housing finance company and enjoys an impeccable track

record in India as well as in international markets. Since its inception in 1977, the

Corporation has maintained a consistent and healthy growth in its operations to remain the

market leader in mortgages. Its outstanding loan portfolio covers well over a million

dwelling units. HDFC has developed significant expertise in retail mortgage loans todifferent market segments and also has a large corporate client base for its housing related

credit facilities. With its experience in the financial markets, a strong market reputation,

large shareholder base and unique consumer franchise, HDFC was ideally positioned to

promote a bank in the Indian environment.

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HDFC Bank began operations in 1995 with a simple mission: to be a World Class Indian

Bank. We realized that only a single minded focus on product quality and service

excellence would help us get there. Today, we are proud to say that we are well on our

way towards that goal.

Network Area:

HDFC Bank was incorporated in August 1994, and, currently has a nationwide network of

1412 Branches and 2890 ATM's in 528 Indian towns and cities.

2.2.4 AWARDS AND ACHIEVEMENTS OF HDFC BANK

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class IndianBank". We realised that only a single-minded focus on product quality and serviceexcellence would help us get there. Today, we are proud to say that we are well on our waytowards that goal.

It is extremely gratifying that our efforts towards providing customer convenience havebeen appreciated both nationally and internationally

2009

Asian Banker Excellence in Retail Financial Services - 'Asian Banker Best Retail Bank in

India Award 2009

2008

1. Finance Asia Country Awards for Achievement 2008 -'Best Bank and Best Cash

Management Bank'

2. CNN-IBN- 'Indian of the Year (Business)'

3. Nasscom IT User Award 2008-'Best IT Adoption in the Banking Sector'

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4. Business India - 'Best Bank 2008'

5. Forbes Asia -Fab 50 companies in Asia Pacific

6.Asian Banker Excellence in Retail Financial Services Best Retail Bank 2008

-Asiamoney Best local Cash Management Bank Award voted by Corporates

7. Microsoft & Indian Express Group Security Strategist Award 2008 -World Trade Center

Award of honour for outstanding contribution to international trade services.

8. Business Today-Monitor Group survey- One of India's "Most Innovative Companies"

CHAPTER: 3

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CHAPTER 3

REVIEW OF LITERATURE

C. Howley & P. Savage(28 July 1980) in their paper bank marketing in the Personal

Sector explore that During a period which has witnessed considerable growth in the

number of organizations which offer banking and associated services, one of the more

notable developments has been the identification of the personal sector as an entity by

the Clearing Banks. From a position which largely considered personal banking as down-

the-banking-market, the banks have done a rapid about-turn by recognizing the importance

of this sector. To this end they have designed ranges of services which meet the needs of

this sector and have developed specific marketing strategies.

T.P.A. Carey(24 Oct 1989) in his paper strategy formulation by banks explores that The

revolution experienced in the banking industry over the last decade has led to a constant

series of changes with banks attempting to adjust their internal organisation to suit the ever-changing external environment. The author includes edited extracts from his research into

this process of strategic formulation and the translation of marketing and planning concepts

to meet the needs and character of the corporate market in Britain. Major issues influencing

the development of a competitive strategy are examined, topics of strategic formulation,

differentiation and the nature of transactions between banks and their customers are

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discussed, and the findings of market and industry analysis, outlining the practical use to

which research findings have been put, is illustrated. Findings reveal that banks have been

forced to identify the profitability and content of the constituent parts of their total

business, and market segmentation is now seen as a necessary discipline. The current

economic environment requires not only a more rapid adjustment to change, but to be

effective must create within the organisation a culture which induces managers to act as

agents of change.

W. Hultman&L. Randolph(15 Nov 1995) in their paper marketing strategies of offices of

foreign banks in the changing US financial markets explores that US money and capital

markets have changed dramatically over the past 25 years. Despite the change and

uncertainty, lending activities of branches and agencies continued to expand in US marketsthrough the early 1990s. The focus of lending by agencies and branches of foreign banks

has been altered to accommodate their overall growth. The largest relative gain in loan

activities of foreign banks has been in real estate and business loans. In addition, loans to

other financial institutions have declined in relative terms. The change in lending activities

is consistent with what has been termed a commercial-industrial strategy, one of several

unique marketing strategies that have been employed by major US banks.

M. Mainelli (22 May 1997) in his paper industrial strengths: operational risk and banks

explores that Banks are often smug about their management of risk. Smugness may well be

justified for market and credit risks, but banks can learn much from industry about

managing operational risk. In order to manage operational risk, industry has evolved

enterprise risk/reward management systems which coordinate an internal market for risk

with variations to capital charges. Industry has at least three lessons to teach banks: use

activity-based costing variances to quantify operational risk; link operational risk to

external prices via an enterprise risk/reward management system; and establish measures to

govern an enterprise risk/reward unit.

R. Barth & E. Nolle (24 Sep 1997) in their paper commercial banking structure,

regulation, and performance: An International Comparison, , the paper attempts to

contribute to an assessment of the appropriate balance between market and regulatory

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discipline to ensure that banks have sufficient opportunities to compete prudently and

profitability in a competitive and global financial marketplace. In the process of conducting

such an assessment, the paper necessarily provides information as to whether the U.S. is

out-of-step with banking developments in other industrial countries

A. Lowe & J. Kuusisto (23 Jun 1999) in this paper researcher find that as structural

changes, new market entrants, new technologies and increasing customer demands gather

momentum, retail banks are under pressure to reduce their cost structures so that they can

remain competitive. The banks are in danger of over reacting to these new pressures by

neglecting the strategic value of their own institutional stature. Even though there is

growing evidence that retail customers are not very happy with the services that banks

deliver, customers still trust their banks as a safe and secure place to keep their money.They do so because of the banks institutional stature rather than their sophistication in

customer service. The implications of this paper for both academics and practitioners are

that many banks may be overlooking the importance of institutional stature as an important

service differentiator and industry entry barrier.

A. Mukherjee & P. Nath (18 May 2002) in their paper Performance benchmarking and

strategic homogeneity of Indian banks explore the linkage between performance

benchmarking and strategic homogeneity of Indian commercial banks. Devises a method of

benchmarking performance of Indian commercial banks using their published financial

information. Defines performance by how a bank is able to utilize its resources to generate

business transactions and is measured by their ratio, which is then called the efficiency.

The concept of efficiency is critical from a marketing perspective. Methodologically, in

order to overcome some of the shortcomings of simple efficiencies obtained through self-

appraisal of individual banks, a more democratic concept of cross-efficiency evaluated

with the process of peer-appraisal has been brought in to benchmark the banks. Clusters

banks based on similarity in business policy which offers a framework for competitive

positioning in the target market and serves as a basis for long-term strategic focus. Finds

that the public sector banks generally outperform the private and foreign banks in this

rapidly evolving and liberalizing sector.

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G. chandar & R.N. Anantharaman (5 Aug 2003) in their paper Customer perceptions of

service quality in the banking sector of a developing economy: a critical analysis, explore

that There seems to be a great amount of variation with respect to the level of service

quality offered by the three groups of banks. Identifies the factors that discriminate the

three groups of banks. Customers in developing economies seem to keep the technological

factors of services such as core service and systematization of the service delivery as the

yardstick in differentiating good and bad service while the human factors seem to play a

lesser role in discriminating the three groups of banks. The service quality indices with

respect to the three groups and the Indian banking industry as whole, offer interesting

information on the level of service quality delivered by banks in India.

D.Rao (17 Nov 2004) study the banking reforms in India. The main theme of the paper is

to present a systematic analysis of the impact of Banking Sector Reforms in the areas of

efficiency and profitability of commercial banks, both in public and private sector over a

period of 11 years since the initiation of reforms measures in 1992-93. It starts with a

historical review of the development of Indian Commercial Banking in the pre-reform

period and the circumstances and conditions necessitated initiation of reforms. It also

reviews the main recommendations of the 'Committee on the Financial System' (1991) and

the 'Committee on the Banking Sector Reforms' (1998), both presided over by Shri M.

Narasimham and their implications for the banking sector. The focus of the analysis is on

the evaluation of response of banks in public and private sector individually and as a group

to reform measures in the areas of efficiency and profitability during the study period. It

also makes a study of comparative performance of public and private sector banks as a

group in each area of indicators selected relating to the areas of efficiency and profitability.

The implementation of Prudential Norms relating to Asset Classification and Capital

Adequacy by banks is assessed.. The performance of banks groups are analyzed in two

ways: (i) Time-Series, and (ii) Period-wise using principal component analysis. The paerthus provides a comprehensive review of banking reforms and shifts that have taken place

in the policies and practices of commercial banks. It concludes with major findings of the

study and the suggestions that emanate to improve operational and financial performance

of commercial banks.

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S. Debasish (June 2005) study the in this article researcher told that the Performance

evaluation of the banking sector in India has primal importance due to intense competition,

greater customer demands and changing banking reforms. This study attempts to measure

the relative performanceof Indian banks over the period 20012005using the profitability

and liquidity. The analysis uses nine input variables and seven output variables.

Segmentation of the banking sector in India was done along the following basis: bank

assets size, ownership status and years of operation. Overall, the analysis supports the

conclusion that foreignowned banks were on average most efficient and that new banksare

more efficient that old ones, which areoften burdened with old debts. In terms of size, the

smaller banks are globally efficient, but large banks are locally efficient. Moreover, this

studyfinds evidence of concentration of efficiency parameters amongpeer bank groups.

T.Mohan ( 24 July 2006) Study the productivity and efficiency at public and private sector

banks in India based on the series of research this study explore that the India's public

sector banks (PSBs) are compared unfavorably with their private sector counterparts,

domestic and foreign. In this paper, researcher attempt a comparison between PSBs and

their private sector counterparts based on measures of efficiency and productivity that use

quantities of outputs and inputs. Efficiency measures a firms performance relative to a

benchmark at a given point in time; productivity measures a firms performance over time.

Both measures are relevant in attempting a comparison between the private and public

sectors. Out of a total comparisons researcher have made, there are no differences in three

cases, PSBs do better in two, and foreign banks in one. To put it differently, PSBs are seen

to be at a disadvantage in only one out of six comparisons. It is difficult, therefore, to

sustain the proposition that efficiency and productivity have been lower in public sector

banks relative to their peers in the private sector.

P.KUMAR (8 November2006) studies the Investment growth of private banks much

ahead of public sector. In this research paper find that in year 2006-07 private sector bank

is declaring good result as compare to public sector. A comparison between 15 private

sector banks operating in the country and 25 public sector banks (PSBs) shows that private

sector banks performed better in terms of growth of investment in 2006-07. In the case of

private sector banks, investment at the aggregate level showed a significant increase during

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2006-07, against that of 2005-06, while PSBs showed a marginal increase. The total

investment of 15 private sector banks increased by 21.9% to Rs 2,03,387 crore during

2006-07 from Rs 1,66,865 crore during 2005-06. Researcher find that in year 2006-07

private sectors is showing better result because of government policy for foreign

investments in banking sector. Five private sector banks recorded more than 40% growth in

investments during 2006-07. These were Kotak Mahindra Bank (140.3%), Yes Bank

(127.6%), Centurion Bank (57.9%), Bank Of Rajasthan (41.9%) and DCB (41.3%).On the

other hand, the total investment of 25 PSBs increased by only 5.1% to Rs 6,32,205 crore

during 2006-07 from Rs 6,01,715 crore during 2005-06. The share of investment to total

assets decreased from 31.39% to 27.24%.

VYAS & DHANDE (8 Jan 2007) study on the Impact of New Private Sector Banks onState Bank of India commercial banks, especially the dominant public sector banks, have

been exposed to competition from the new banks set up in the private sector with the latest

technology. This has created a need for the public sector banks to improve their business

efficiency and volume, which is a good sign of competitive effectiveness. Induced stiff

competition in the banking sector certainly raises some issues relating to the functioning of

domestic banks. The study mainly focuses on the State Bank of India (SBI), the premier

bank in the Indian banking sector, as to what extent it has been affected by the entry of new

private sector banks. The study applies the t-test for finding the significant difference in the

performance of SBI before and after the entry of private sector banks, with the help of

financial ratios selected as the parameters for ascertaining the changes in the business of

SBI. The results indicate that the presence of new private sector banks does not pose any

threat to SBI at the moment; however, the same cannot be said in the future. The SBI has a

strong network as compared to these new banks, and its presence has been for more than

hundreds of years in the region. These facts certainly have a major impact on the results of

the study.

Balasubramanian (22 Feb 2007) study that financial Performance of Private Sector Banks

in India .This research paper related to Private sector banks .In this article writer says that

private banks play an important role in development of Indian economy. After

liberalization the banking industry underwent major changes. The economic reforms totally

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have changed the banking sector. RBI permitted new banks to be started in the private

sector as per the recommendation of Narashiman committee. The Indian banking industry

was dominated by public sector banks. But now the situations have changed new

generation banks with used of technology and professional management has gained a

reasonable position in the banking industry. The main idea of this article is to make an

evaluation of the financial performance of Indian private sector banks.

S. Balakrishnan (30Mar 2007) explore that the Indian banking system is a mish-mash of

the public sector, ex-term lending institutions, old Indian private sector, new Indian private

sector and foreign banks. Researcher analyze that so many in diversity of ownership and

numbers have survived is proof of a vibrant and growing market for banking and financial

services in the country. Public sector banks are just about coming out of their hugeproblems with non-performing loans. Thanks to treasury profits from falling interest rates

and they (and borrowers) getting lucky with appreciating real estate (in many cases), non

performing asset are no longer a drag on balance sheets. Despite reforms, liberalization,

allowing the entry of private sector into banking and listing public sector banks on the

stock exchanges, traditional measures hold sway when it comes to judging performance

and ranking. Much abused indicators are growth in deposits and advances on a point-to-

point basis: March 31 to March 31, September 30 to March 31. Every year, towards fiscal

close, this leads to a mad rush, especially on the part of public sector banks, to boost and

window dress balance sheets, lest performance is seen as inadequate.

V.Matsuo (17 Apr2007) studied the performance of the three major public and private

sector banks. It provides the major highlights of the industry in the quarter and also

provides the global Indian scenario of the banking industry analyzing industry trends in the

quarter and against the quarter of the previous year. It presents the outlook of the industry.

QPAC makes a comparative analysis of the three major public sector banks and three major

private sector banks separately. Private sector banks have been analyzed on the parameters

like operational performance (operating profit margin, Net NPA), financial performance

(profit after tax PAT, net interest margin, capital adequacy ratio CAR) and stock

performance while the Public sector banks have been analyzed on the parameters like

operational performance (operational profit vs. OPM, segmented income, provisioning vs.

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net income) , financial performance (net profit vs. net profit margin, CAR) and the stock

performance. QPAC provides the company analysis of the major players in question along

with the projections for the coming quarters, year as a whole and the next year with the

Industry aggregate.

Sherman & Delener (10 Sep2008) study that PSU banks lose business to their private

sector peers. In this article explore that private sector bank is increasing their market share

very rapidly. Private sector domestic banks have wrested market share from their public

sector peers in the country, while foreign banks have managed to hold their turf between

1994-95 and 2006-07. Though public sector banks still hold the major chunk of the market,

the private sector banks are increasing their share. The private banks ramped up their share

to 23.4 per cent in 2006-07 from 8.9 per cent in 1994-95. The share of PSU banks fell to

69.2 per cent in 2006-07 from 83.8 per cent during the period. Researcher says that players

like ICICI Bank and HDFC Bank with the help of technology expanded their business

rapidly. Gradually, these players captured business from the public sector banks. Some of

the big corporate houses moved their accounts to these private banks leading to a sizeable

reduction in the business of state-owned banks.

Assael H. (23 Nov 2008) studies the public sector banks in India outperform private sector

banks .in this research study proves that public sector bank is growing much faster ascompare to private sector bank. In public sector bank in year 2008 result is showing better

as compare to private sector. Researcher finds that people are thinking that public sector

bank is much safe as compare to private sector bank. Researcher review of third quarter

results of 41 banks shows that PSU banks had outperformed their private sector peers. PSU

banks recorded a combined net profit of Rs 10,810 crore in the December 2008 quarter

compared with Rs 7,212 crore in the corresponding quarter last year. Private-sector banks

posted a net profit of Rs 3,185 crore compared with Rs 2,519 crore during the same period.

This research study shows that public sector bank is showing rapid growth as compare to

private sector bank.

Sinha (14May 2009) study the Return of the Public Sector in this article researcher told

that slowdown in economy has positive impact of public sector bank. People are shifting

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there money from private sector banks to public sector banks. Researcher told that the world

leading IT company Infosys announced that it had shifted cash worth Rs 1,000 crore from

private sector banks to public sector major State Bank of India (SBI). Infosys thus did

exactly what thousands of retail investors had already done.

CHAPTER: 4

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CHAPTER 4.1 FINANCIAL PERFORMANCE (Secondary Data Analysis)

NET PROFIT

STATISTICAL TOOLS:-

Arithmetic mean Coefficient of

variation

Compound annual

growth

PNB 1590.39 21.38% 13.07%

HDFC 1109 35.72% 21.41%

BANK 2003-04 2004-05 2005-06 2006-07 2007-08

PNB 1108.69 1410.12 1439.31 1540.08 2048.76

HDFC 602.72 853.62 1115.94 1382.54 1590.18

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Fig 1 Net profit for the banks under study

INTERPRETATION:-

Net Profit is one of the most driving and motivating force for every business concern.

Profits must be earned to: a) pay the dues to stakeholders, b) expand or diversify the

business

Arithmetic mean:-Fig.1 showed Net Profit for both the banks taken under study through

2003-04 to 2007-08 and provided that the maximum average net profit Punjab National

Bank was amounting to Rs.1509.392 crores, respectively. The minimum average net profit

amounting to Rs.1109 crores was earned by the HDFC Bank.

Standard deviation:-The maximum standard deviation of net profit was noticed in HDFC

Bank. The major reason behind high standard deviation of HDFC Bank was of steep

increase in the net profit from the 2001-02 to 2002-03. The minimum standard deviation

was of PNB.

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Coefficient of variation:-The coefficient of variation revealed the consistency and it was

max HDFC Bank (35.72 %), respectively. The least coefficient of variation was noticed in

the Punjab national Bank of India (21.38 %) and it showed the maximum consistency.

Compounded annual growth: - The laudable compounded annual growth rate of net

profit has been attained by HDFC Bank (21.41%) followed by PNB (13.07 %). The reason

for high growth rate of HDFC Bank was due to sharp increase of 68 per cent in interest

earned between the period 2006-07 and 2007-08 and moreover, the bank is gaining market

share in private banking, retail banking, credit cards and most of the other verticals in

which it is present whereas, there was only 16.4 per cent increase in interest earned of

Punjab National Bank during the period 2006-07 and 2007-08 of the study.

(2) INTEREST EARNED (RS INCRORE)

Statistical tools:-

Arithmetic mean Coefficient of Compounded annual

BANK 2003-04 2004-05 2005-06 2006-07 2007-08

PNB 7779.70 8459.85 9584.15 11537.48 14265.02

HDFC 2548.93 3093.49 4475.34 6889.02 10115.00

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variation growth

PNB 17174.21 25.39 % 12.89%

HDFC 5424.356 57.37% 31.74%

INTERPRETATION:-The major chunk of a banks income flows in from interest

earned which comprises the following as per schedule 13 of Banking Regulation ct 1949,

a) Interest/discount on advances/bills, b) Income on investments, c) Interest on balances

with Reserve Bank of India and others. All banks intend to maximum the interest income

by improving credit deposit ratio and extending long-term loans especially in the

deregulated environment when the interest rate witnessed a declining trend.

Arithmetic Mean:-Fig 2. Represented the position as regards interest earned and provided

that the maximum average interest earned by Punjab National Bank was amounting to

Rs.17174.21 crores .The minimum average interest of Rs 5424.356 crores was earned by

the HDFC Bank.

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Standard Deviation & coefficient of Variation: - The maximum standard deviation of

Interest Earned was noticed in HDFC Bank.. The minimum standard deviation was noticed

by PNB. The coefficient of variation revealed the risk and it was maximum in case of

HDFC Bank (57.37%) followed by PNB (25.39 %), respectively. The least coefficient of

variation was noticed in Punjab National Bank i.e. (25.39% per cent), and it was the

highest consistent performer because it manages all aspects of its business much better than

other banks do.

Compounded Annual Growth:-The compounded annual growth rate revealed that

splendid performance was recorded by HDFC Bank (31.74%) followed by PNB (12.89%),

respectively. The reason for high growth rate of HDFC Bank was due to sharp increase of

74 per cent in advances and 67 per cent increase advances during the period FY 2006-07

and FY 2007-08 of the study .

3) INTEREST EXPENDED (RS IN

CRORE)

BANK 2003-04 2004-05 2005-06 2006-07 2007-08

PNB 4154.99 4453.11 4917.39 6022.91 8730.86

HDFC 1211.05 1315.56 1929.50 3179.45 4887.12

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Statistical tools:-


variation

Compounded annual

growth

PNB 5655.85 32.88% 16.01%

HDFC 2504.36 61.69% 32.18%

INTERPRETATION:-Among the expenses incurred by a bank, interest expended the

leading amount of expenses. As per schedule 15 of Banking Regulation Act 1949, the

interest expended comprises of a) Interest on deposits, b) Interest on Reserve Bank of

India/Inter Bank Borrowings and others

Arithmetic mean:-The study of interest expended as presented in Fig3 revealed

that amount of average interest expended was maximum in case of Punjab National Bank,

Rs.5655.852 crores, respectively and minimum has been noticed in case of HDFC Bank

Rs.2504.536 crores.

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Standard Deviation:-The maximum standard deviation of interest expended was

noticed in PNB. The minimum standard deviation was noticed by HDFC Bank.

Coefficient of Variation:-The coefficient of variation of 61.69 per cent is highest

in case of HDFC Bank. The least coefficient of variation was noticed in Punjab National

Bank i.e. 32.88 per cent, and it was a more consistent performer as it manages all aspects of

its business much better than other banks do.

Compounded Annual Growth:-The compounded annual growth rate revealed that

splendid performance was recorded by HDFC Bank (32.18%) followed by PNB (16.01%),

respectively.

(4) ESTABLISHMENT EXPENSES

(RS IN CRORE)

BANK 2003-04 2004-05 2005-06 2006-07 2007-08

PNB 1654.06 2121.23 2114.97 2352.95 2461.54

HDFC 204.09 276.67 486.82 776.85 1301.35

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STATISTICAL TOOLS

INTERPRETATION: -In banking parlance, establishment expenses refer to the amount

expended on employees in the form of salaries and provisions (contribution to gratuities


variation

Compounded annual

growth

PNB 2140.85 14.5% 44.85%

HDFC 609.15 73.27% 8.28%

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funds, provident funds and pension funds etc. Establishment cost is inseparable part of any

banking organization.

ARITHMETIC MEAN:-The analysis of data contained in table Fig 4 indicated that the

mean establishment expenses (employee cost) was again highest in case Punjab National

Bank, Rs.2140.85 crores, and lowest has been noticed in case of HDFC Bank Rs.609.158

crores.

STANDARD DEVIATION: - The maximum standard deviation of establishment

expenses was noticed in HDFC Bank. The minimum standard deviation was noticed by

Punjab National Bank.

COEFFICIENT OF VARIATION:-The coefficient of variation of 73.27 per cent is

highest in case of HDFC Bank and PNB (14.5%), respectively. The least coefficient of

variation was noticed in case of PNB (14.5%), and it also showed the maximum

consistency.

COMPOUNDED ANNUAL GROWTH: - The analysis of compounded annual growth

rate revealed that HDFC Bank was leading by recording a growth rate of 44.85 per cent

followed by PNB (8.28 %) respectively. As we have seen in the table 4.6 that the average

establishment expense was maximum in case of public sector banks i.e. Punjab National

Bank but the compounded annual growth rate of public sector was much less than that of

private sector i.e. HDFC Bank.

(5) DEPOSITS

(RS IN CRORE)

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STATISTICAL TOOLS

BANK 2003-04 2004-05 2005-06 2006-07 2007-08

PNB 87916.40 103166.89 119684.92 139859.67 166457.23

HDFC 30408.86 36354.25 55796.82 68297.94 100768.60


variation

Compounded annual

growth

PNB 123417 25% 13.62%

HDFC 58325.29 48.26% 27.08%

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INTERPRETATION:

ARITHMETIC MEAN:-The analysis of data contained in Fig 5 indicated that the mean

total deposit of Rs.123417crores was again highest in case of PNB followed by,

Acceptance of deposits is the primary activity of banking system. More and more deposits

should be mobilized at cheaper rates of interest to enhance advances. The various types of

deposits mobilized by banks are: a) term deposits, b) saving fund deposits, c) current

deposits, d) recurring deposits, e) miscellaneous deposits. The lowest has been noticed in

case of HDFC Bank i.e. Rs.58325.29 crores.

STANDARD DEVIATION:-The maximum standard deviation of total deposits was

noticed in Punjab National Bank. The minimum standard deviation was noticed by HDFC

Bank.

COEFFICIENT OF VARIATION:-The coefficient of variation of 48.26 per cent was

highest in case of HDFC Bank. The least coefficient of variation was noticed in case of

PNB (25.00%), and it also showed the maximum consistency.

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COMPOUNDED ANNUAL GROWTH:- The analysis of compounded annual growth

rate revealed that HDFC Bank was leading by recording a growth rate of (27.08 %). The

minimum growth rate has been noticed by PNB i.e. 13.62% per cent. HDFC Bank was

showing highest growth rate because it was focusing on growth, taking on slightly more

risk than other banks.

(6) ADVANCES (Rs in CRORE)

STATISTICAL TOOLS:

BANK 2003-04 2004-05 2005-06 2006-07 2007-08

PNB 47224.72 60412.75 74627.37 96596.92 119501.57

HDFC 17744.51 25566.30 35061.26 46944.78 63426.90

BANK Arithmetic mean Coefficient of

variation

Compounded annual

growth

PNB 79672.59 36.17% 20.40%

HDFC 37748.75 47.75% 29.02%

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INTERPRETATION:-Advances are the major product of banking system. The advances

must gain momentum if the banks are to improve its operating performance. A bank

sanctions advances in various forms like: a) bank overdrafts, b) cash credits, c) discounting

of bills, d) term loans and others.

ARITHMETIC MEAN:-The analysis of data contained in Fig 6 indicated that the mean

total deposits was highest by b Punjab National Bank,of Rs79672.59 crores, respectively

and lowest has been noticed in case of HDFC Bank i.e. Rs.37748.75 crores.

STANDARD DEVIATION:-The maximum standard deviation of total deposits was

noticed in Punjab National Bank. The minimum standard deviation was noticed by HDFC

Bank.

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COEFFICIENT OF VARIATION:-The coefficient of variation of 47.75 per cent was

highest in case of HDFC Bank . The least coefficient of variation was noticed in case of

Punjab National Bank (36.17%), and it also showed the maximum consistency.

COMPOUNDED ANNUAL GROWTH:- The analysis of compounded annual growth

rate revealed that HDFC Bank is leading by recording a growth rate of 29.02 per cent. The

minimum growth rates have been noticed by Punjab National Bank i.e. 20.40 per cent.

HDFC Bank was showing highest growth rate because it was focusing on growth, taking

on slightly more risk than other banks

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(7) EARNING PER SHARE (RS IN CRORE)

STATISTICAL TOOLS:-

BANK 2003-04 2004-05 2005-06 2006-07 2007-08

PNB 41.79 44.72 45.05 48.84 64.98

HDFC 21.16 27.55 35.64 43.29 44.87

BANK Arithmetic mean Coefficient of

variation

Compounded annual

growth

PNB 49.20 14.75% 9.23%

HDFC 34.50 32.28% 16.22%

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INTERPRETATION:-Earnings per share are generally considered to be the single

most important variable in determining a share's price. It is also a major component used to

calculate the price-to-earnings valuation ratio. . It shows the efficiency with which banks

deploy their assets and shareholders are interested in earning per share of the bank for the

purpose of investment.

ARITHMETIC MEAN:-In Fig7, the mean analysis showed that the maximum mean EPS

of Rs Punjab National Bank Rs 49.20 and HDFC Bank Rs 34.50 respectively. The reason

for showing maximum mean return by PNB was due to the banks strategy of expanding its

portfolio of services has paid off handsomely.

STANDARD DEVIATION: - The maximum standard deviation was again recorded

highest by HDFC Bank. The minimum was recorded by the PNB Bank.

COEFFICENT OF VARIATION:-The coefficient of variation was maximum shown by

HDFC Bank which revealed that there was more risk involved and the minimum return was

noticed by PNB and it also showed that it was more consistent.

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COMPOUNDED ANNUAL GROWTH:- The maximum compounded annual growth

rate is in case of HDFC Bank i.e. 16.22%. The minimum compounded annual growth rate

was of PNB (9.23%) but it remained the best choice for the investors.

CHAPTER 4.2

CUSTOMER SATISFACTION (PRIMARY DATA ANALYSIS)

1. IN WHICH BANK DO YOU HOLD AN ACCOUNT?

BANK NAME NO.OF RESPONDENTS

PUNJAB NATIONAL

BANK

45

HDFC BANK 35

TOTAL 80

48

56%

44%PNB

HDFC


49/80

Interpretation: - After conducting a survey I have found that in 80 respondents,

45respondents of Punjab national bank and rest of the respondents 35 in HDFC bank. It

means majority of person is having account in Punjab National bank because it is very

oldest bank in India.

2. FROM HOW LONG YOU ARE OBTAINING THE SERVICE OF THE BANK?

PNB HDFC TOTAL PERCENTAGE

LESS THAN SIX

MONTHS

3 2 5 6.25

1-2 YEAR 5 5 10 12.5

2-3 YEAR 11 13 24 30

3-5 YEAR 14 9 23 28.75

MORE THAN

FIVE YEAR

12 6 18 22.5

TOTAL 45 35 80 100

49

6%

12%

30%29%

23%LESS THAN SIX MONTH

1-2 YEAR

2-3 YEAR

3-5 YEAR

MORE THAN FIVE YEAR


50/80

Interpretation: It was found that mostly respondents obtaining the service of bank from 2-

3 years. The total percentage of 2-3 years was 30.0%.After 2-3years the highest percentage

28.75% was 3-5 year .Then after more than five year was 22.5%, 1-2 year 12.5% and rest

of respondents was obtaining the service from bank less than six months. In less than six

months respondents was a college student that is the reason they are obtaining the service

of the bank less than six months.

3. WHICH TYPE OF ACCOUNT YOU HAVE IN YOUR BANK?

TYPEOF

ACCOUNT


SAVING 22 17 39 48.75

CURRENT 11 6 17 21.25

DEMAT 4 5 9 11.25

FIXED DEPOSIT 8 7 15 18.75

TOTAL 45 35 80 100

50

49%

21%

11%

19%

SAVING

CURRENT

DEMAT

FIXED DEPOSIT


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Interpretation: - It was found that in case of PNB & HDFC bank, maximum number of

account holders that is 48.75% own Savings account 21.25% have current account, 11.25%

have Demat account, 18.75% have fixed deposit account. So it can be said that majority of

account holder have saving and current account.

4. THE AIM TO ASK THIS QUESTION WAS TO KNOW ABOUT THE

REASONS FOR THEIR PREFERENCE IN BANK:-

4.1 Why You Are Selecting Punjab National Bank?

The major factor which are affecting while selecting a bank that is service quality, brand

name, safety and easily approachable. This is very important factor for selecting a bank.

No of respondents for this question = 45 out of 80.

Rank From 1-5, Rank 1 Least and Rank 5 as Best

Rank

1(Low)

Rank

2

Rank

3

Rank

4

Rank5(High) MEAN(RANK)

Service

quality

3 9 17 11 5 3.13

Brand name

2

21 9 11 2 2.77

Safety 2 6 10 18 9 3.57

Easily

approachable

NIL 5 16 21 3 3.48

Key to table 4.1: All the figures are multiplied with their respective ranks above and

results are added for different factors. For calculation of the mean, the sum obtained for all

the factors are divided by the number of respondents i.e. 45.

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Interpretation: Here it can be seen in case of PNB that for maximum number of

respondents Safety is the most important factor. Easily approachable at the second place

with a very little difference from first phase. There is a big gap between the safety and

service quality most desired factor. Service quality lies at the third place with a very little

difference from the second place. Brand Name is the factors to which the respondents

give the least preference in selecting a bank.

4.2 WHY YOU ARE SELECTING HDFC BANK?

The major factor which are affecting while selecting a bank that is service quality, brand

name, safety and easily approachable. This is very important factor for selecting a bank.

No of respondents for this question = 35 out of 80.

Rank From 1-5, Rank 1 Least and Rank 5 as Best

Rank

1(Low)

Rank 2 Rank 3 Rank 4 Rank5(High) MEAN

(RANK)

Service

quality

NIL 3 10 18 4 3.65

Brand name 1 4 8 17 1 3.02

Safety 3 4 20 6 2

3.0

Easily

approachable

1 3 18 11 2 3.28

Key to table 4.2: All the figures are multiplied with their respective ranks above and

results are added for different factors. For calculation of the mean, the sum obtained for all

the factors are divided by the number of respondents i.e. 35.

Interpretation: - Here it can be seen in case of HDFC bank that for maximum number of

respondents service quality is the most important factor. Easily approachable at the

second place with a very little difference from first phase. Brand Name lies at the third

place with very big difference from the second place. Safety is the factors to which the

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respondents give the least preference in selecting a bank. In HDFC bank people think that

this bank is less safe as compare to public sector or PNB.

5. HOW MUCH YOU ARE SATISFIED WITH THE SERVICE OF THE BANK?


High satisfied 2 5 7 8.75

Satisfied 13 19 32 40

Average 24 7 31 38.75

Dissatisfied 4 4 8 10

Highly

dissatisfied

2 Nil 2 2.5

TOTAL 45 35 80 100

53

9%

40%39%

10%

2%

High satisfied

satisfied

Average

dissatisfied

High ly d issatisfied


54/80

Interpretation:-It was found that 40% respondents satisfied with the service of the bank.

In 40% respondents majority of respondents from HDFC bank. The average respondents is

second highest percentage 38.75.in average respondents the majority of respondents from

PNB bank.10% respondents was not satisfied,8.75% respondents highly satisfied .only

2.5% respondents was highly dissatisfied from the bank.

SPSS Analysis

Chi Square test

YOU ARE SATISFIED WITH THE SERVICE OF PNB BANK

Observed N Expected N Residual

H S 2 9.0 -7.0

S 13 9.0 4.0

A 24 9.0 15.0

D 4 9.0 -5.0

H D 2 9.0 -7.0

Total 45

A. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cellfrequency is 9.0.Null Hypothesis: There are no significances that Most of the people are not satisfied With

the Service of PNB bank

To check the test of significance chi square test after the test the result come out the

minimum value is very large to the expected value. The expected frequencies value

is 5 and our expected value is 9 which are very high. So our first hypothesis that

there are no significances that Most of the people are not satisfied With the Service

of PNB bank is not accepted.

YOU ARE SATISFIED WITH THE SERVICE OF HDFC BANK

Observed N Expected N ResidualH S 5 8.8 -3.8

S 19 8.8 10.3

A 7 8.8 -1.8

D 4 8.8 -4.8

Total 35

54


55/80

B 0 cells (.0%) have expected frequencies less than 5. The minimum expected cellfrequency is 8.8.Null Hypothesis: There is no significances that most of the people are not satisfied With

the Service of HDFC bank

To check the test of significance apply chi square test the found that the expected

value is very large from the table expected value. The expected value is 5 at 0.

Significance level but our expected value is 8.8 which is very far away from the

table value so there is no significances that most of the people are not satisfied with

the Service of HDFC bank is not accepted.

Test Statistics

YOU ARE

SATISFIEDWITH THESERVICEOF PNBBANK

YOU ARE

SATISFIEDWITH THESERVICEOF HDFC

BANK

Chi-Square(a,b)

40.444 16.543

Df 4 3Asymp.Sig.

.000 .001

A. 0 cells (.0%) have expected frequencies less than 5. The minimum expectedcell frequency is 9.0.B 0 cells (.0%) have expected frequencies less than 5. The minimum expectedcell frequency is 8.8.

55


56/80

6. DO YOU FACE ANY PROBLEM AFTER OPENING THE ACCOUNT TILL NOW?


YES 33 29 62 77.5

NO 12 6 18 22.5

TOTAL 45 35 80 100

56

33

12

29

6

0

5

10

15

20

25

30

35

Yes No

PNB

HDFC


57/80

Interpretation: - It was found that 77.5% of the respondents faced from there bank. 22.5%

of respondent said they have not any problem after opening the account till now. The

respondent were facing problem from their existing bank regarding too many formalities,

time consuming and employee behavior.

7. IF YES, WHICH TYPE OF PROBLEM YOU ARE FACING?

No of respondents = 62


ACCOUNT

OPENING

4 2 6 9.67

LOAN

SANCTION

6 9 15 24.19

CLEARANCE 21 15 36 58.06

ANY OTHER 2 3 5 8.08

TOTAL 33 29 62 100

57

10%

24%

58%

8% ACCOUNTOPENING

LOAN SANCTION

CLEARANCE


58/80

Interpretation:-It was found that in case of PNB & HDFC bank that the maximum

respondents were facing problem of clearance.58.06% respondents find they have problem

of clearance, 24.19% respondents facing problem of loan sanction & enquiery,9.67%

respondents facing problem of account opening . They find bank cannot give proper

information while opening the account. The rest of respondents facing problem that in bank

they have to follow too many formalities, time consuming and employee behavior.

8. ARE YOU SATISFIED WITH THE BEHAVIOR OF STAFF OF THE BANK?

Level ofsatisfaction

PNB. (No. ofrespondents)

HDFC( No. ofrespondents)

TOTAL Percentage(%)

Satisfied 24 27 51 63.75

Not Satisfied 21 8 29 36.25

TOTAL 45 35 80 100

58

73%

27%

Satisfied

Not Satisfied


59/80

Interpretation:-It was found that 63.75% respondents were satisfied with the behavior of

employee.36.25% respondents were not satisfied with the behavior of the bank. In 36.25%

respondents the majority of respondents from PNB bank. Customer was not satisfied with

the behavior of employee they said that in PNB employee behavior is very casually.

9. WHICH BANK DID YOU CONSIDER BEST FOR THE PURPOSE OF TAKING

LOAN?

BANK NAME No. of Respondents Percentage (%)

PNB 21 26.25

HDFC 29 36.25

OTHER 30 37.5

TOTAL 80 100

Interpretation:- By analyzing this Graph, we can conclude that maximum i.e.37.5 % of

customers prefer to take loan from State Bank Of India, Canara Bank, Punjab and Sindh

59

26%

36%

38%PNB

HDFC

OTHER


60/80

Bank, Axis Bank, Citi Bank etc. Followed by HDFC36.25 % and PNB 26.25 % of the

customers. In PNB the least prefer for taking loan the reason behind that is in PNB bank

customers have to follow number of formalities for taking loan.

60


61/80

10. WHICH BANKS DO YOU PREFER FOR DEPOSITING YOUR MONEY?

Banking Sector Number of Respondents Percentage (%)

PNB 40 50

HDFC 22 27.5

OTHER 18 22.5

TOTAL 80 100

Interpretation:-It was found that 50% respondents prefer for deposting money in PNB

bank because customer thinking that PNB bank is safe more as compare to private sector

bank. In HDFC bank 27.5% respondents and rest 22.5% respondents prefer for deposting

money in SBI, Bank of Baroda etc.Mostly customer prefer for money deposting in Publicsector bank.

11. WHICH TYPE OF SERVICES YOU ARE AVAILING FROM YOUR BANK?

61

50%

27%

23%

PNB

HDFC

OTHER


62/80

Interpretation:-It was found that 37.5% respondents avail ATM/debit card facility from

PNB &HDFC bank. 22.5% respondents avail investment advisory services, 20%

respondents avail internet/mobile/phone banking service and 13.75% respondents avail

foreign transfer of funds services. The rest respondents avail 6.25% Forex & trade services.

12. WOULD YOU LIKE TO SHIFT FROM PRESENT BANK TO OTHER BANK?

OPINION PNB. (No. of

respondents)

HDFC( No. of

respondents)

TOTAL Percentage

(%)

Facilities availed PNB.(No. of

Respondents)HDFC ( No. of

Respondents) TOTALPercentage

(%)

ATM/Debit card 16 14 30 37.5

Internet/Mobile /PhoneBanking 6 10 16 20

Forex & Trade Services

5 NIL 5 6.25

Foreign Transfer of Funds 11 NIL 11 13.75

Investment Advisory 7 11 18 22.5

Total 45 35 80 100

62

37%

20%

6%

14%

23%

ATM/Debit card

Internet/Mobile /PhoneBanking

Forex & TradeServices

Foreign Transfer of Funds

Investment Advisory


63/80

YES 5 8 13 16.25

NO 40 27 67 83.75

TOTAL 45 35 80 100

Interpretation:-It was found that 83.5% customer dont want to shift from present bank to

other bank. Only 16.25% respondents want to shift from present bank to other bank. The

person who want to shift from present bank mostly customer was HDFC bank because in

this bank safety for money is less as compare to PNB & SBI. PNB customers want to shift

because in this bank behavior of employee and service quality is not as good as compare to

HDFC and ICICI bank.

63

5

8

40

27

0

5

10

15

20

25

30

35

40

45

Yes No

PNB

HDFC


64/80

13. DO YOU THINK YOUR BANK IS IMPROVING BETTER THAN BEFORE?


YES 39 32 71 88.75

NO 6 3 9 11.25

TOTAL 45 35 80 100

Interpretation:-It was found that 88.75% respondents said that this bank improving better

than before. They said in earlier all branches work done manually, now all work done

through computers. Only 11.25% respondents were said that this bank was not improving

better than before. These customers were having more expectation from their existing bank.

64

39

32

6

3

0

5

10

15

20

25

30

35

40

45

Yes No

PNB

HDFC


65/80

CHAPTER: 5

65


66/80

CHAPTER 5.1 (FINDING)

5.1.1 FINDING OF STUDY CONCLUDED FROM SECONDARY

DATA

1. The maximum average net profit is captured by PNB followed by the HDFC Bank

whereas, in case of compounded annual growth rate, HDFC Bank recorded the highest

value followed by PNB Bank and the high growth rate of HDFC Bank was due to sharp

increase of 68 per cent in interest earned between the period 2006-07 and 2007-08 and

moreover, the bank is gaining market share in private banking, retail banking, credit

cards and most of the other verticals in which it is present. All the banks showed

insignificant difference.

2. The interest earned growth rate was maximum in case of HDFC Bank followed by

PNB. This high growth rate of HDFC. The reason for high growth rate of HDFC Bank

was due to sharp increase of 74 per cent in advances and 67 per cent increase advances

during the period FY 2006-07 and FY 2007-08 of the study.

3. The interest expended was also increased at fastest rate in private banks viz.; HDFC

Bank because the growth rate in deposits was highest in HDFC banks as compared to

PNB .PNB were having significant difference between their performances and the

banking industry on account of various indicators.

4. Establishment expenses being major item of expenses has grown at a lesser rate in PNB

than in HDFC banks and this is because HDFC banks are employing personnel with

professional skill and experience in large number whereas, in PNB they are about to

overstaffed.

5. As regards total deposits, though PNB because of its vast network was leading in total

deposits but the growth rate analysis revealed that HDFC Bank topped the chart

followed and whereas, least growth has been recorded in case of PNB. The reason for

high growth in HDFC Bank was due to its prima facie focus on growth, taking onslightly more risk than other banks and same was the case with total advances.

6. The maximum compounded annual growth rate in case of Earning per share was is in

case of HDFC Bank i.e. 16.22%. The minimum compounded annual growth rate was of

PNB (9.23 %) but it remained the best choice for the investors.

66


67/80

5.1.2 FINDING OF STUDY CONCLUDED FROM PRIMARY DATA

1. More number of people has account with Punjab National Bank.

2. Majority of the respondent whether in PNB or in HDFC banks have savings account

with banks.

3. Number of problems faced by customer is more in Punjab National bank. But still

customer prefer to PNB because PNB is safer as compare to HDFC bank.

4. People want a change in the behavior of the staff of the PNB.

5. People are more satisfied from the HDFC banks due to the better services provided by

them in terms of speedy transactions, fully computerized facilities, more working hours (in

case of HDFC Bank, the number of working hours are 12), good Investment Advisory

services, efficient and co-operative staff, better approach to Customer Relationship

Management.

6. In PNB mostly customer thinks it is safe bank as compare to HDFC bank.

7. The facility that was availed by most of the people at PNB & HDFC banks was that of

ATM/Debit Cards. The least availed facility was that of demat account and foreign transfer

of funds.

8. Mostly HDFC bank customer wants to shift from other bank because they think that publicsector bank is safer as compare to HDFC bank.

9. Mostly customer said that PNB & HDFC bank is improving better than before.

67


68/80

5.2 SUMMARY

The research project Comparative Analysis of the performance of PNB & HDFC bank

was undertaken with the following objectives:

1) .The performance of different categories of banks was analysed on the basis of

certain performance indicators such as Net profit, Operating profit, Interest

expended, Spread, Return on Assets etc. The study was carried out for five years

period from 2003-04 to 2007-08. Only those banks were chosen for which

completed data of 12 months for the study period was available. The selected banks

were HDFC Bank and Punjab National Bank. To achieve the objective, various

statistical tools have been applied such as Coefficient of Variation, Compounded

Annual Growth Rate. The performance of the HDFC banks was more efficient

during the period of study than the PNB.

2) To study the impact of service provided by PNB & HDFC on customer satisfaction.

People are more concerned about the safety and surety of the money that they are

depositing the banks. Punjab National Bank has proved them by showing consistent

performance even during the time of recession. They are successful in building up an

accurate and reliable image in the mind of people. Moreover if we take into account present

scenario the PNB score over the private sector banks. In HDFC bank mostly customer is

satisfied with service quality of the bank. To study the impact of services provided on

customer satisfaction I have applied chi-square test. I have also applied pie chat & mean

for analyzing the data. The result of chi-square test is that the in both bank customer is

satisfied from the service of the bank.

68


69/80

5.3 CONCLUSION

The study was conducted to have depth knowledge of the Financial & Market research on

PNB & HDFC Bank. A survey with the help of the questionnaire was carried out to know

impact of services provided by PNB & HDFC bank on customer satisfaction. After analysis

all the financial data I found that in PNB bank net profit, deposit, advances and earnings

per share in year 2004-08 is high. But in HDFC bank the compounded annual growth rate

is very high as compare to PNB. In HDFC bank slandered deviation is also high it means

HDFC bank taken some risk but in PNB slandered deviation was very low. In HDFC bank

coefficient of variation is high as compare to PNB. It means in HDFC bank variation in

deposit, advances, earning per share and interest earned is very high. But in PNB bank is

consistent growth rate. After the data analysis of PNB & HDFC BANK I found that the

service quality of HDFC bank is very high as compare to PNB bank. BUT in HDFC bank

customer feel this bank is less reliable as compare to PNB bank. In PNB mostly customer

is having problem with staff behavior. The staff behavior of PNB is very casually. I have

app

pub and pvt sector

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