a study on customer awareness towards loan products & services

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October 2013, Volume: III,Special Issue: X “Re-engineering of Indian Economy-Opportunities & Challenges” On 24th October 2013

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A Study on Customer Awareness towards Loan Products & Services in

Bangalore with Special Reference to State Bank of India

Dr. G Nagarajan * Mr. A. Asif Ali ** Mr. N. Sathyanarayana*** Ms.Gowhar Jan.S****

Abstract:

The implementation of globalization, government policies and liberalization has made

the banking industry very competitive by providing various products and services to the

customers. The various services offered by the banks can be utilized by the customers only

when they are made aware of these services. The banker and customer have to know about

one another. The banker has to understand the customers’ needs and in the same way, the

customer has to know about the carious services offered by the banks. Increased level of

awareness among the customers leads to increased preferences. The purpose of this study was

to investigate the awareness and satisfaction level of customers towards various loans

rendered by SBI. The present study was to compare and analyze the customer awareness and

satisfaction towards banking services in SBI with reference to Bangalore region.

Key Words: Loan Products, Customer Awareness, loan, interest charges & income

_____________________________________________________________________

* Professor & Head, Department of Management Studies and Research Centre, Sambhram Institute of

Technology, Bangalore, Karnataka-560097. Email: [email protected], Phone - +91- 9742780195

** Asst. Professor, Department of Management Studies and Research Centre, T John Institute of Technology,

Bangalore, Karnataka-560083. Email: [email protected], Phone - +91- 9916083284

*** Asst. Professor, Department of Management Studies and Research Centre, T John Institute of Technology,

Bangalore, Karnataka-560083. Email: [email protected], Phone - +91- 9986314840

****Research Scholar in Commerce, Dravidian University, [email protected],

Phone - +91- 9535459458

1. INTRODUCTION:

Banking system is an important constituent of overall economic system. State Bank of

India is the India's largest bank by virtue of its size and importance it become leader among

the Public Sector Banks. It is a multinational banking and financial services company based

in India. It is a government-owned corporation with its headquarters in Mumbai,

Maharashtra. As of December 2012, it had assets of US$501 billion and 15,003 branches,

mailto:[email protected]




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including 157 foreign offices, making it the largest banking and financial services company

in India by assets. SBI is the most trusted and patronized bank. State Bank of India offers

largest banking network of Indian customers. The bank is also in the process of providing

complete payment solution to its clientele with its over 8500 ATMs and other electronic

channels such as Internet banking, Debit cards, Mobile banking etc.

2. REVIEW OF LITERATURE:

Ravi and Kundan basavaraj (2013) analyzed the customer preference and satisfaction

towards banking services both private and public banks in Shivamogga district. The authors

found business and vehicle loans are fast moving than other services and overall satisfaction

resulted at 50%. Further, overall satisfaction on bank deposit schemes resulted positively

while other services of banking still need to be given attention by focusing on customer

issues. They authors suggested that, bankers should work towards 100% customer

satisfaction that automatically fosters customer delight and to sustain customers on a long

term basis.

Sumedha Kalia and Urvashi Kalra (2012) investigated various factors influencing

customer’s perception and satisfaction level towards E-Banking. They found that, lack of

knowledge, inadequate legislations and security concerns are the major reasons for not using

E-Banking by the SBI customers. They suggested that, banks should provide “demo” on their

website for new users to know about online banking services and facilities of experts to

increase awareness in the minds of customers to use e banking safely.

Selvaraj (2011) measured and analyzed the awareness level of the customers towards

services provided by the State Bank of India of Erode district of Tamil nadu. He found that

70% of the sample respondents had low level of awareness towards the services provided by

the bank. It may be due to the fact that the study area was mostly covered by rural areas. The

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bank has to initiate necessary measures to increase the awareness level through conducting

awareness programs in the rural areas and the bank has to concentrate more on promotional

activities.

3. PROBLEM IDENTIFICATION:

Problems faced by customers

Customers standing in long queues waiting for counter clerk who comes late

and not on time.

Bank Employees irresponsible behavior with customers and not attending the

customers.

Though there were several studies done by various researchers/authors pertaining to

credit/loan products & Services. The researcher could not find research pertaining to

awareness of customers towards perception towards credit/loan products & Services in the

current scenario with respect to SBI in Bangalore region. Thus the researcher has made an

effort to do study in this area and topic has been entitled as “A Study on Customer

Awareness towards Loan Products & Services in Bangalore with Special Reference to

State Bank of India”.

4. OBJECTIVES OF THE STUDY:

To study the role of customers in public sector banks in India.

To know the customer satisfaction of State Bank of India in India with reference to

Bangalore.

To evaluate the level of awareness of towards loan products & Services.

To measure the financial strength & ability of customers towards banking services.

To assess the credit scores and interest charges by State Bank of India towards loan

products.

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5. RESEARCH METHODOLOGY

The present study has been conducted on the basis of primary data and was descriptive in

its nature. Primary data obtained by interacting with various people, getting the

questionnaires filled by them. The data was collected by means of questionnaire and was

classified and analyzed carefully. Questionnaire was constructed innovatively and

systematically distributed to respondents in the study field. In this research, the questionnaire

was formed as a direct and structured one. The questions were mostly close-ended questions.

Open-ended question has been used only for deriving suggestions from the respondents.

6. SAMPLING DESIGN:

Table: 1 Sampling Design to meet Objectives:

Location : Bangalore Region

Sampling units : SBI Customers

Sampling method : Non Probability Convenience Sampling

Sample Size : 220 Respondents

Instrument for data collection : Structures Questionnaire

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7. TOOLS AND TECHNIQUES OF DATA ANALYSIS:

The statistical analysis carried out in the study by using MS-Excel and SPSS (Statistical

Package for Social Science) Software. The statistical technique like Chi-square, ANOVA, has

been used for the analysis. Analyzed & interpreted data have been presented in the form of

tables, charts and figures.

8. QUESTIONNAIRE RELIABILITY TEST:

The researcher has used Cronbach’s Alpha reliability test to evaluate the reliability of the

questionnaire for the survey study. The analysis was done using SPSS.

Table: 2 Cronbach's Alpha Reliability Statistics

Cronbach's Alpha N of Items

.943 29 (Data Compiled by using SPSS)

As statistics tells more the Alpha value near to 1 more will be the reliability.

The above table-2 reveals that the Cronbach’s Alpha value = .943. Therefore based on the

Alpha value it can be decided that the framed questionnaires are more reliable with each

other and the questionnaire survey can be conducted by using the questionnaire.

9. DATA ANALYSIS & INTERPRETATION:

Hypothesis: 1

H0: Gender and awareness about loan products and services are independent.

H1: Gender and awareness about loan products and services are related.

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Table 3: Gender wise awareness of loan/credit products and services

Particulars Gender

Total Male Female

Awareness

about

loan/credit

products and

services

Highly Aware Count 21 4 25

% of Total 9.5% 1.8% 11.4%

Aware Count 44 17 61

% of Total 20.0% 7.7% 27.7%

Neither Aware

nor Not Aware

Count 37 57 94

% of Total 16.8% 25.9% 42.7%

Not Aware Count 7 13 20

% of Total 3.2% 5.9% 9.1%

Highly Not

Aware

Count 6 14 20

% of Total 2.7% 6.4% 9.1%

Total Count 115 105 220

% of Total 52.3% 47.7% 100.0% (Data Compiled from the primary questionnaire by using SPSS)

Table 4: Chi-Square Tests

Value df Asymp. Sig. (2-sided)

Pearson Chi-Square 32.378a 4 .000

Likelihood Ratio 34.002 4 .000

Linear-by-Linear Association 26.059 1 .000

N of Valid Cases 220

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 9.55. (Data Compiled by using SPSS)

Graph 1: Gender wise awareness of loan products and services

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(Graph Compiled by using Ms-Excel)

From the table 3 it can be identify that, out of 220 total respondents 115 (52.3%) are male and

105 (47.7%) are female. Out of male respondents majority fall under aware 44 (20%)

followed by neither aware nor not aware 37 (16.8%) followed by highly aware 21 (9.5%) and

the lowest level of respondents fall under highly not aware are aware category are 6 (2.7%).

Out of female respondents majority fall under neither aware nor not aware 57 (25.9%)

followed by aware 77 (7.7%) and the lowest level of respondents fall under highly aware

category are 4 (1.8%). It can be inferred that majority of female respondents are not aware

compared to male respondents.

From the table 4 it can be identify that, the Pearson chi-square value is 32.378 and p-value is

less than .05, (p = 0.00). So we can reject the null hypothesis, and say that Gender and

awareness about loan products and services are related.

21

44

37

7 64

17

57

13 14

0

10

20

30

40

50

60

Highly Aware Aware Neither Aware

nor Not Aware

Not Aware Hithly Not

Aware

No. of

Res

pon

den

ts

Awareness about loan products and services

Gender Male Gender Female

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Hypothesis: 2

H0: There is a relationship between the customer’s income and awareness about the EMI &

Tax benefits they get out of loan they borrowed.

H1: There is no relationship between the customer’s income and awareness about the EMI &

Tax benefits they get out of loan they borrowed.

Table 5: Income wise awareness about the EMI & Tax benefits

Particulars

EMI & TAX BENEFITS

Total Highly

Aware Aware

Neither

Aware

nor Not

Aware

Not

Aware

Highly

Not

Aware

Income

per

month

"Less than

15000"

Count 0 5 14 4 26 49

% of Total 0.0% 2.3% 6.4% 1.8% 11.8% 22.3%

15001 - 25000 Count 0 23 0 1 25 49

% of Total 0.0% 10.5% 0.0% 0.5% 11.4% 22.3%

25001 - 50000 Count 6 14 26 8 31 85

% of Total 2.7% 6.4% 11.8% 3.6% 14.1% 38.6%

50001 -

100000

Count 0 8 12 1 7 28

% of Total 0.0% 3.6% 5.5% 0.5% 3.2% 12.7%

100000 and

above

Count 0 0 9 0 0 9

% of Total 0.0% 0.0% 4.1% 0.0% 0.0% 4.1%

Total Count 6 50 61 14 89 220

% of Total 2.7% 22.7% 27.7% 6.4% 40.5% 100.0% (Data Compiled from the primary questionnaire by using SPSS)







a. 12 cells (48.0%) have expected count less than 5. The minimum expected count is .25. (Data Compiled by using SPSS)

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From the table 5 showed the classification based on Income per month and awareness about

EMI & Tax benefits. It can be identify that, based on Income per month majority of

respondents fall under Rs 25,001 to Rs 50,000 category is 85 (38.6%) followed by Rs 15,000

to Rs 25,000 category is 49 (22.3%) followed by Rs 15,000 to Rs 25,000 category is 49

(22.3%) and the lowest level of respondents fall under Rs 1,00,000 and above category is 9

(4.1%). Based on awareness about EMI & Tax benefits majority of respondents fall under

highly aware 89 (40.5%) followed by neither aware nor not aware 61 (27.7%) followed by

aware 50 (22.7%) and the lowest level of respondents fall under highly aware category are 6

(2.7%). It can be inferred that majority of respondents falling under the income group of less

than Rs 15,000 to Rs 50,000 are highly not aware about EMI & Tax benefits out of loan they

borrowed.


less than .05, (p = 0.00). So we can reject the null hypothesis, and say that, there is no

relationship between the customer’s income and awareness about the EMI & Tax benefits

they get out of loan they borrowed.

Hypothesis: 3

H0: There is a significance relationship between the customer’s occupation and awareness

about the purpose of borrowing loan.

H1: There is no significance relationship between the customer’s occupation and awareness

about the purpose of borrowing loan.

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Table 7: Occupation wise awareness about the purpose of borrowing loan

Particulars

Awareness about the purpose of borrowing loan

Total Highly

Aware Aware

Neither

Aware nor

Not Aware

Not

Aware

Highly

Not

Aware

Occ

up

ati

on

Employee Count 0 62 55 3 0 120

% of Total 0.0% 28.2% 25.0% 1.4% 0.0% 54.5%

Employer Count 0 0 4 0 0 4

% of Total 0.0% 0.0% 1.8% 0.0% 0.0% 1.8%

Self

Employed

Count 0 28 29 28 5 90

% of Total 0.0% 12.7% 13.2% 12.7% 2.3% 40.9%

Others Count 0 2 1 3 0 6

% of Total 0.0% 0.9% 0.5% 1.4% 0.0% 2.7%

Total Count 0 92 89 34 5 220

% of Total 0.0% 41.8% 40.5% 15.5% 2.3% 100.0% (Data Compiled from the primary questionnaire by using SPSS)







a. 10 cells (62.5%) have expected count less than 5. The minimum expected count is .09. (Data Compiled by using SPSS)

From the table 7 showed the classification based on occupation of the respondents and

awareness about purpose of borrowing loan. It can be identify that, based on occupation

majority of respondents fall under employee category is 120 (54.5%) followed by self-

employed category is 90 (40.9%) and the lowest level of respondents fall under employer

category is 4 (1.8%). Based on awareness about purpose of borrowing loan majority fall

under aware 92 (41.8%) followed by neither aware nor not aware 89 (40.5%) followed by not

aware 34 (15.5%) and no respondent fall under highly aware category. It can be inferred that

majority of respondents falling under the occupation group of Employee and self-employed

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are aware 90 (40.9%) and neither aware nor not aware 84 (38.20%) about purpose of

borrowing loan.


less than .05, (p = 0.000). So we can reject the null hypothesis, and say that, there is no

significance relationship between the customer’s occupation and awareness about the purpose

of borrowing loan.

Hypothesis: 4

H0: There is no significance difference between the customer’s occupation and awareness

level about documents required, credit scores, prepayment penalty charges, interest charges,

growth benefits and financial strength & ability to repay the loan.

H1: There is significance difference between the customer’s occupation and awareness level

about documents required, credit scores, prepayment penalty charges, interest charges,

growth benefits and financial strength & ability to repay the loan.

Table 9: ANOVA

Sum of

Squares df

Mean

Square F Sig.

Awareness about

documents required

Between Groups 1.719 3 .573 1.165 .324

Within Groups 106.258 216 .492

Total 107.977 219

Awareness about

credit scores

Between Groups 32.767 3 10.922 10.559 .000

Within Groups 223.433 216 1.034

Total 256.200 219

Awareness about

prepayment penalty

charges

Between Groups 1.834 3 .611 .933 .426


Total 143.359 219

Awareness about

interest charges

Between Groups 10.395 3 3.465 5.081 .002


Total 157.709 219

Awareness about Between Groups 38.044 3 12.681 12.974 .000

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growth benefits Within Groups 211.133 216 .977

Total 249.177 219

Awareness about

Financial Strength

and Ability to Repay

the Loan

Between Groups 3.806 3 1.269 1.873 .135


Total 150.086 219

(Data Compiled by using SPSS)

Regarding awareness level about documents required, prepayment penalty charges, and

financial strength & ability to repay the loan 3 is the between-groups degrees of freedom, 216

is the within groups degrees of freedom, 1.165, 0.933 and 1.873 is the F ratio from the F

column, 0.324, 0.426 and 0.135 is the value in the Sig. column (the p value), respectively.

In these above cases, the p value equals 0.324, 0.426 and 0.135 which are greater than the α

level (.05), so we fail to reject null hypothesis and say that, there is no significance difference

between the customer’s occupation and awareness level about documents required,

prepayment penalty charges, and financial strength & ability to repay the loan.

Regarding awareness level about credit scores, interest charges and growth benefits 3 is the

between-groups degrees of freedom, 216 is the within groups degrees of freedom, 10.559,

5.081 and 12.974 is the F ratio from the F column, 0.000, 0.002 and 0.000 is the value in the

Sig. column (the p value), respectively. In these above cases, the p value equals 0.000, 0.002

and 0.000 which are lesser than the α level (0.05), so we can reject null hypothesis and say

that, there is significance difference between the customer’s occupation and awareness level

about credit scores, interest charges and growth benefits.

10. FINDINGS:

The major findings are as follows:

The majority of female respondents are not aware compared to male respondents

about loan products and services.

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The majority of respondents falling under the income group of less than Rs: 15,000 to

Rs 50,000 are highly not aware about EMI & Tax benefits out of loan they borrowed.

The majority of respondents falling under the occupation group of Employee and self-

employed are aware 90 (40.9%) and neither aware nor not aware 84 (38.20%) about

purpose of borrowing loan.

Gender and awareness about loan products and services are related.

There is no relationship between the customer’s income and awareness about the EMI

& Tax benefits they get out of loan they borrowed.

There is no significance relationship between the customer’s occupation and

awareness about the purpose of borrowing loan.

There is no significance difference between the customer’s occupation and awareness

level about documents required, prepayment penalty charges, and financial strength &

ability to repay the loan.

There is significance difference between the customer’s occupation and awareness

level about credit scores, interest charges and growth benefits.

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11. RECOMMENDATIONS:

The researcher would here by like to put forth the following recommendations to the bank

based on observation, analysis and interpretation of the collected data from the respondents.

The bank has to conduct awareness programs / loan melas to educate the customers

about loan products and services.

The bank has to provide customer support services to make awareness about the EMI

& Tax benefits they get out of loan they borrowed and prepayment penalty charges.

The bank has to provide a check list method about documents required for processing

the loan in order to identify financial strength & ability to repay the loan.

12. CONCLUSION:

It is felt that more than offering good value added products the bank has to make proper reach

of its innovative products & services to the customers by effective awareness strategies to

increase the purchase and performance of the bank. On the basis of the findings of the present

study some constructive, practicable and viable suggestions have been made. If the

Administrative Policy Makers of the State Bank of India seriously considers all the

suggestive measures, no doubt that even in the competitive trend State Bank of India will

shine and it will continue to be a leading bank in India.

13. REFERENCES:

Books:

1. Cooper Donald R., Business Research Methods, New Delhi, Tata McGraw Hill Education Private

Limited, 2009

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2. Gupta, S. P., Statistical Methods, New Delhi, Sultan Chand & Sons., 2008

3. Kothari, C.R., Research Methodology Methods and Techniques, New Delhi, New Age

International Pvt Ltd, Publishers., 2004

4. Kulkarni, Mahesh. K., Research Methodology and Project Work, Pune, Nirali Prakashan, 2003

5. Shajahan, S., Research Methods for management, Mumbai, Jaico Publishing House., 2006

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Articles/Journals:

1. Jithendra Kumar Mishra (2007), “Constituent Dimensions of Customer Satisfaction: A Study of

Nationalized and Private Banks”, (Revista Tinerilor Economist), The Young Economists Journal, Vol.

1, No.8, pp. 40-47.

2. Ravi and Kundan basavaraj (2013) “Customers Preference and Satisfaction towards Banking Services

with Special Reference to Shivamogga District in Karnataka”, Trans Asian Journal of Marketing &

Management Research, Vol.2, Issue 1, pp. 28-38.

3. Selvaraj (2011), “A Study on Customers' Awareness and Level of Satisfaction with Special Reference

to SBI of Erode District of Tamil Nadu”, JMIJMM, Vol.1, Issue 2, pp. 1-7.

4. Sumedha Kalia and Urvashi Kalra (2012), “Analysis of SBI Customer’s Attitude towards E-Banking”,

RJSITM, Vol.1, Issue 4, pp. 1-5.

5. Vigg Silky, Mathur Garima and Holani Umesh (2007), “Customer Satisfaction in Banking Services: A

Comparative Study of Public and Private Sector Banks”. The Journal of Indian Management and

Strategy 8M, Vol. 12, No. 2, PP 24-30.

6. VimiJham and Kaleem M Khan (2008), “Customer Satisfaction with Usage of Banks Distribution

Channels: An Empirical Investigation:, International Journal of Financial Services Management, Vol. 3

and pp 283-284.

Websites:

www.statebank of india.com

www.sbi.co.in

http://www.theshillongtimes.com/2012/03/08/sbi-customers-face-problem-updating-passbooks/

en.wikipedia.org

http://www.statebank/

a study on customer awareness towards loan products & services

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