RESEARCH REPORT

on

SERVICE QUALITY ANALYSIS IN BANKING SECTOR WITH SPECIAL

REFERENCE TO

SBI AND AXIS BANK

Submitted in partial fulfilment for the award of

Master of Business AdministrationBy

ABHISHEK SINGHSystem Id. -2013014034

Batch 2013-15

Under the Supervision of

MRIDUL DHARWAL

Sharda UniversitySchool of Business Studies

DECLARATION FORM

 

 

I hereby declare that the Research Report Work entitled,   SERVICE QUALITY ANALYSIS IN BANKING SECTOR WITH SPECIAL REFERENCE TO SBI AND AXIS BANK, submitted by me, ABHISHEK SINGH System id. 2013014034 for the partial fulfillment of the Master of Business Administration (MBA) to Sharda university, Greater Noida is my own original work and has not been submitted earlier either to Sharda University or to any other Institution for the fulfillment of the requirement for any course of study. I also declare that no chapter of this manuscript in whole or in part is lifted and incorporated in this report from any earlier / other work done by me or others.

 Place    :   School of Business Studies    Date    :                                                                                              

Signature of Student:  ABHISHEK  Name of Student:        ABHISHEK SINGH 

Certificate by Faculty Guide

This is to certify that MR.ABHISHEK SINGH, student of MBA Batch 2013-15, System id.- 2013014034 has successfully completed his/her Research Report on SERVICE QUALITY ANALYSIS IN BANKING SECTOR WITH SPECIAL REFERENCE TO SBI AND AXIS BANK . This Report is submitted in partial fulfilment for the award of Management of Business Administration. His / Her work is original and authentic and to the best of my knowledge has not been copied from anywhere.

I wish him/her all the best in life.

MRIDUL DHARWAL Faculty Guide

INTRODUCTION

A SNAPSHOT OF THE BANKING INDUSTRY :

The Reserve Bank of India (RBI), as the central bank of the country, closely monitors developments

in the whole financial sector.

The banking sector is dominated by Scheduled Commercial Banks (SCBs). As at end-March 2002,

there were 296 Commercial banks operating in India. This included 27 Public Sector Banks (PSBs),

31 Private, 42 Foreign and 196 Regional Rural Banks. Also, there were 67 scheduled co-operative

banks consisting of 51 scheduled urban co-operative banks and 16 scheduled state co-operative

banks.

Scheduled commercial banks touched, on the deposit front, a growth of 14% as against 18%

registered in the previous year. And on advances, the growth was 14.5% against 17.3% of the earlier

year.

State Bank of India is still the largest bank in India with the market share of 20% ICICI and its two

subsidiaries merged with ICICI Bank, leading creating the second largest bank in India with a

balance sheet size of Rs. 1040bn.

Higher provisioning norms, tighter asset classification norms, dispensing with the concept of ‘past

due’ for recognition of NPAs, lowering of ceiling on exposure to a single borrower and group

exposure etc., are among the measures in order to improve the banking sector.

A minimum stipulated Capital Adequacy Ratio (CAR) was introduced to strengthen the ability of

banks to absorb losses and the ratio has subsequently been raised from 8% to 9%. It is proposed to

hike the CAR to 12% by 2004 based on the Basle Committee recommendations.

Retail Banking is the new mantra in the banking sector. The home loans alone account for nearly

two-third of the total retail portfolio of the bank. According to one estimate, the retail segment is

expected to grow at 30-40% in the coming years.

Net banking, phone banking, mobile banking, ATMs and bill payments are the new buzz words that

banks are using to lure customers.

With a view to provide an institutional mechanism for sharing of information on borrowers /

potential borrowers by banks and Financial Institutions, the Credit Information Bureau (India) Ltd.

(CIBIL) was set up in August 2000. The Bureau provides a framework for collecting, processing and

sharing credit information on borrowers of credit institutions. SBI and AXIS are the promoters of the

CIBIL.

The RBI is now planning to transfer of its stakes in the SBI, NHB and National bank for Agricultural

and Rural Development to the private players. Also, the Government has sought to lower its holding

in PSBs to a minimum of 33% of total capital by allowing them to raise capital from the market.

Banks are free to acquire shares, convertible debentures of corporate and units of equity-oriented

mutual funds, subject to a ceiling of 5% of the total outstanding advances (including commercial

paper) as on March 31 of the previous year.

The finance ministry spelt out structure of the government-sponsored ARC called the Asset

Reconstruction Company (India) Limited (ARCIL), this pilot project of the ministry would pave way

for smoother functioning of the credit market in the country. The government will hold 49% stake

and private players will hold the rest 51%- the majority being held by ICICI Bank (24.5%).

INTRODUCTION TO SBI AND AXIS

S T A T E B A N K OF I N D I A

State Bank of India’s operating profit and net profit for Q2’13 surged 54.5% and 40.2% yoy,

respectively, exhibiting a strong performance.

Advances growth to slow down: SBI recorded a handsome 37% yoy growth in advances,

translating into an 18% sequential growth in the first half. However, this momentum is likely to

decelerate considerably in the second half of 2012-13.

Robust rise in deposits: State Bank of India’s deposit base surged 28% yoy and its CASA

ratio improved from 39.45% to 39.71% over the same period. On a quarterly basis, the bank’s

deposits grew by 10.3%.

Improvement in the credit-deposit ratio: The Bank’s credit-deposit ratio increased from

68.9% in Q2’13 to 73.8% this quarter. This was following a robust 37% yoy increase in

advances, which exceeded the 28% growth in deposits over the same period.

Increase in the NII and NIM: SBI’s net interest income (NII) increased by 45% yoy to reach

Rs. 54.6 bn.

Profitability: The Bank’s ROE declined from 17.38% for H1’12 to 14.63% for H1’13.

The return on assets (annualized), however, increased from 0.99% in Q2’12 to 1.13% in

Q2’13.

The State Bank of India, the country’s oldest Bank and a premier in terms of balance sheet size,

number of branches, market capitalization and profits is today going through a momentous phase of

Change and Transformation – the two hundred year old Public sector behemoth is today stirring out

of its Public Sector legacy and moving with an agility to give the Private and Foreign Banks a run for

their money.

The bank is entering into many new businesses with strategic tie ups – Pension Funds, General

Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition,

Advisory Services, structured products etc – each one of these initiatives having a huge potential for

growth.

The Bank is forging ahead with cutting edge technology and innovative new banking models, to

expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes

to cover 100,000 villages in the next two years.

 

It is also focusing at the top end of the market, on whole sale banking capabilities to provide India’s

growing mid / large Corporate with a complete array of products and services. It is consolidating its

global treasury operations and entering into structured products and derivative instruments. Today,

the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial

borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list.

The Bank is changing outdated front and back end processes to modern customer friendly processes

to help improve the total customer experience. With about 8500 of its own 10000 branches and

another 5100 branches of its Associate Banks already networked, today it offers the largest banking

network to the Indian customer. 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.

With four national level Apex Training Colleges and 54 learning Centres spread all over the country

the Bank is continuously engaged in skill enhancement of its employees. Some of the training

programs are attended by bankers from banks in other countries.

The bank is also looking at opportunities to grow in size in India as well as internationally. It

presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in India –

SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming

a formidable group in the Indian Banking scenario. It is in the process of raising capital for its

growth and also consolidating its various holdings.

Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and take all

employees together on this exciting road to Transformation. In a recently concluded mass internal

communication programme termed ‘Parivartan’ the Bank rolled out over 3300 two day workshops

across the country and covered over 130,000 employees in a period of 100 days using about 400

Trainers, to drive home the message of Change and inclusiveness. The workshops fired the

imagination of the employees with some other banks in India as well as other Public Sector

Organizations seeking to emulate the programme.

ABOUT SBI:

The State Bank of India, the country’s oldest Bank and a premier in terms of balance sheet size,

number of branches, market capitalization and profits is today going through a momentous phase of

Change and Transformation – the two hundred year old Public sector behemoth is today stirring out

of its Public Sector legacy and moving with an agility to give the Private and Foreign Banks a run for

their money. The Bank is forging ahead with cutting edge technology and innovative new banking

models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland

and proposes to cover 100,000 villages in the next two years.

 

It is also focusing at the top end of the market, on whole sale banking capabilities to provide India’s

growing mid / large Corporate with a complete array of products and services. It is consolidating its

global treasury operations and entering into structured products and derivative instruments. Today,

the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial

borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list.

The Bank is changing outdated front and back end processes to modern customer friendly processes

to help improve the total customer experience. With about 8500 of its own 10000 branches and

another 5100 branches of its Associate Banks already networked, today it offers the largest banking

network to the Indian customer. 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.

With four national level Apex Training Colleges and 54 learning Centres spread all over the country

the Bank is continuously engaged in skill enhancement of its employees. Some of the training

programes are attended by bankers from banks in other countries.

The bank is also looking at opportunities to grow in size in India as well as internationally. It

presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in India –

SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming

a formidable group in the Indian Banking scenario. It is in the process of raising capital for its

growth and also consolidating its various holdings.

KEY AREAS OF OPERATION :

The business operations of SBI can be broadly classified into the key income generating areas such

as National Banking, International Banking, Corporate Banking, & Treasury operations. The

functioning of some of the key divisions is enumerated below:

a) CORPORATE BANKING

The corporate banking segment of the bank has total business of around Rs1,193bn. SBI has created

various Strategic Business Units (SBU) in order to streamline its operations.

These SBUs are as follows:

Corporate Accounts

Leasing

Project Finance

Mid Corporate Group

Stressed Assets Management

b) NATIONAL BANKING

The national banking group has 14 administrative circles encompassing a vast network of 9,177

branches, 4 sub-offices, 12 exchange bureaus, 104 satellite offices and 679 extension counters, to

reach out to customers, even in the remotest corners of the country. Out of the total branches, 809 are

specialized branches.

This group consists of four business group which are enumerated below:

Personal Banking SBU

Small & Medium Enterprises

Agricultural Banking

Government Banking

c) INTERNATIONAL BANKING

SBI has a network of 73 overseas offices in 30 countries in all time zones and correspondent

relationship with 520 international banks in 123 countries. The bank is keen to implement core

banking solution to its international branches also. During FY06, 25 foreign offices were

successfully switched over to Finacle software. SBI has installed ATMs at Male, Muscat and

Colombo Offices. In recent years, SBI acquired 76% shareholding in Giro Commercial Bank

Limited in Kenya and PT Indomonex Bank Ltd. in Indonesia. The bank incorporated a company SBI

Botswana Ltd. at Gaborone.

d) TREASURY

The bank manages an integrated treasury covering both domestic and foreign exchange markets. In

recent years, the treasury operation of the bank has become more active amidst rising interest rate

scenario, robust credit growth and liquidity constraints. The bank diversified its operations more

actively into alternative assets classes with a view to diversify the portfolio and build alternative

revenue streams in order to offset the losses in fixed income portfolio. Reorganization of the treasury

processes at domestic and global levels is also being undertaken to leverage on the operational

synergy between business units and network. The reorganization seeks to enhance the efficiencies in

use of manpower resources and increase maneuverability of banks operations in the markets both

domestic as well as international.

e) ASSOCIATES & SUBSIDIARIES

The State Bank Group with a network of 14,061 branches including 4,755 branches of its seven

Associate Banks dominates the banking industry in India. In addition to banking, the Group, through

its various subsidiaries, provides a whole range of financial services which includes Life Insurance,

Merchant Banking, Mutual Funds, Credit Card, Factoring, Security trading and primary dealership in

the Money Market.

e.1) Associates Banks:

SBI has seven associate banks namely

• State Bank of Indore

• State Bank of Travancore

• State Bank of Bikaner and Jaipur

• State Bank of Mysore

• State Bank of Patiala

• State Bank of Hyderabad

• State Bank of Saurashtra

All associate banks have migrated to Core Banking (CBS) platform. Single window delivery system

has been introduced in all associate banks. SBI’s seven associate banks are the first amongst the

public sector banks in India to get fully networked through CBS, providing anytime-anywhere

banking to its customers to facilitate a bouquet of innovative customer offerings.

e.2) Non-Banking Subsidiaries/Joint Ventures

i) SBI Life:

ii) SBI Capital Markets Limited (SBICAP)

iii) SBI DFHI LTD

iv) SBI Cards & Payments Services Pvt. Ltd. (SBICSPL)

v) SBI Funds Management (P) Ltd. (SBIFMPL)

f) Human Resources

NON BANKING SUBSIDIARIES:

The Bank has the following Non-Banking Subsidiaries in India :

SBI Capital Markets Ltd

SBI Funds Management Pvt Ltd

SBI Factors & Commercial Services Pvt Ltd

AXIS BANK

AXIS Bank:

Axis Bank was the first of the new private banks to have begun operations in 1994, after the

Government of India allowed new private banks to be established. The Bank was promoted jointly by

the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance

Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU

insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company

Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd.

The Bank today is capitalized to the extent of Rs. 403.63 crores with the public holding (other than

promoters and GDRs) at 53.72%.

The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai. The

Bank has a very wide network of more than 1100 branches and Extension Counters (as on 31st

December 2013). The Bank has a network of over 5055 ATMs (as on 31st December 2013)

providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM

networks in the country.

The Bank has strengths in both retail and corporate banking and is committed to adopting the best

industry practices internationally in order to achieve excellence.

Promoters

Axis Bank Ltd. has been promoted by the largest and the best Financial Institution of the country,

UTI. The Bank was set up with a capital of Rs. 115 crore, with UTI contributing Rs. 100 crore, LIC -

Rs. 7.5 crore and GIC and its four subsidiaries contributing Rs. 1.5 crore each.

Shareholding 24.09%

Erstwhile Unit Trust of India was set up as a body corporate under the UTI Act, 1963, with a view to

encourage savings and investment. In December 2002, the UTI Act, 1963 was repealed with the

passage of Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 by the Parliament,

paving the way for the bifurcation of UTI into 2 entities, UTI-I and UTI-II with effect from 1st

February 2011. In accordance with the Act, the Undertaking specified as UTI I has been transferred

and vested in the Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI),

who manages assured return schemes along with 6.75% US-64 Bonds, 6.60% ARS Bonds with a

Unit Capital of over Rs. 14167.59 crores.

The Government of India has currently appointed Shri K. N. Prithviraj as the Administrator of the

Specified undertaking of UTI, to look after and administer the schemes under UTI - I, where

Government has continuing obligations and commitments to the investors, which it will uphold.

Priority Banking Lounge:

As a Priority banking customer you will have access to an exclusive 'Priority Banking Lounge' at

branches. This will allow you to conduct your financial transactions in utmost comfort and

confidentiality through an exclusive Relationship Manager.

Dedicated Relationship Manager:

You will enjoy access to a dedicated Relationship Manager who will be your one point contact at

branch for all your banking transactions thus ensuring that you would neither have to move from one

counter to the other nor stand in queues to await your turn.

Home Banking:

Experience the convenience of our home banking facilities. Avail of free cash and cheque pick-up and

delivery at your office or residence.

Exclusive Priority Banking International Debit card:

This card allows you free access to all VISA ATMs in India. The card also comes with higher ATM

withdrawal limits, higher POS transaction limits at merchant establishments, enhanced insurance cover

and a host of special discounts and offers.

You also get Preferential Interest Rates and lowered Processing Fees on select Retail Loans.

Other Banking Privileges:

Enjoy a host of banking privileges like free at-par cheques, demand drafts and pay orders, free

passbook updates and monthly statements.

You would also be entitled to two free minor accounts, one free outward remittance per quarter and

free Mobile banking.

As a Priority Banking customer, there would be no issuance charges on Axis Bank's Travel Currency

Card.

Investment Privileges

Avail of assistance in financial planning. Investment advice, market information reports, and

invitations to investor meets are offered complimentary to you.

Lifestyle Privileges

However, it's not all about just financial services. We aim to provide a different Lifestyle experience

through special offers on premium brands, movie privileges, special events and lots more - especially

for our Priority Banking customers

Gold Credit Card

As an added privilege, Priority Banking customers may also apply for a Gold Standard Credit Card

and Gold Standard Secured Credit Card without any additional fee, subject to the applicable terms

and conditions.

Priority Banking customers would also be eligible for a 50% reduction on the Issuance Fee of Gold

Plus Credit Card and Gold Plus Secured Credit Card. Rs. 500 will be charged as the annual

maintenance charge for Priority Banking customers, subject to the applicable terms and conditions.

ABOUT AXIS BANK’S PROFILE

About AXIS Bank

The Unit Trust Of India (UTI) is a statutory public sector investment institution set up in 1964.

It mobilizes the savings of the community through the sale of its units under its various unit

schemes..The.resources thus mobilized are invested by the UTI mainly in the shares and debentures

of the companies. Income received from this investment, after meeting the expenses of the Trust, is

distributed to unit holders annually as dividend.

The Unit Trust Of India has introduced a number of Unit schemes so far, the Unit scheme,1964,the

Unit Linked Insurance Plan, 1971, Unit Scheme for Charitable and Religious Trusts and Registered

Societies, 1981, the Income Unit Scheme, 1982, Monthly Income Unit Scheme, 1983 and Growth

and Income Unit Scheme, 1983.

Review of literature

Indian Banking industry is one of the most technologically advanced industries with vast networks of

branches empowered by strong banking systems, their wide range of product and effective

distribution channel capabilities. However, regulatory, structural and technological factors are

significantly changing the banking environment throughout the world. One of the most important

factors that is motivating the growth of the Indian banking institutions is the liberalization. The

financial sector reforms in India were designed to infuse greater competitive vitality in the banking

system. To achieve this objective, the “Narsimhan Committee” was formed. The Narsimhan

Committee report suggested wide ranging reforms for the Indian banking sector in 1992, including

the important one to introduce internationally accepted banking practices so as to enable Indian

banks to achieve service excellence. The Committee recommended a liberal policy towards the entry

norms of private sector banks and foreign banks into the Indian banking sector.

The Interest rate structure has been deregulated to a great extent and banks have been given a great

degree of freedom in determining their rate structure for deposits and advances, as well as their other

product range. Banking has also become more competitive in respect of branch network. The end

result is that market power is getting shifted from banks to their customers. Financial liberalization

has led to intense competitive pressures, and retail banks are consequently directing their strategies

towards increasing customer satisfaction and loyalty through improved service quality. With such a

high potential in the Indian banking industry, all banks are looking ahead to establish themselves as

the most preferred bank by the customers and this can only happen when they are able to

differentiate themselves on the basis of service quality being offered by their competitors. Retail

Banking has immense opportunities in a growing economy like India.

Research methodology

RESEARCH DESIGN :

The methodology for the research study is descriptive and is as follows:

Research Approach: Quantitative research

Objectives:The main objective of our project is:

To assess and compare the overall service performance of SBI and AXIS bank.

To know in which service quality dimension the bank is performing well and in which dimen-

sion it needs improvement.

To know customers requirements or expectation for service.

Data Collection Method :

Data Collection Tool

Secondary data: Various websites, articles from magazines and news papers, books were used

for collecting secondary data.

Primary data: The primary data has been collected by the researchers by designing structured

questionnaire with the relevant question to the project study and research.

Type of questionnaire: Structured questionnaire.

ANALYSIS OF DATA :

The collected data in the study has been presented and analyzed using the various graphs

for satisfaction level, score of various factors on the particular dimensions, and overall dimension

score and is compared with other service.

Also data is analyzed through performance matrix.

LIMITAION OF STUDY :

The study was restricted to two banks, so the competitive scenario could not be studied.

Inadequate time was the major constraint during the whole project.

All the answers given by the respondents have been assumed true.

BENEFICIARIES OF PROJECT :

Beneficiary of this project is to the bank, to improve the customer satisfaction in the dimen-

sion in which they are lagging.

Key findings and analysis will helpful to them for provide better services to customers.

For researchers, to know the competitive advantage of both the banks and their services.