Banking in India

Banking in India, in the modern sense, originated in the last decades of the 18th
century. Among the first banks were the Bank of Hindustan, which was established in
1770 and liquidated in 1829–32; and the General Bank of India, established in 1786
but failed in 1791.

The largest bank, and the oldest still in existence, is the State Bank of India (S.B.I). It
originated as the Bank of Calcutta in June 1806. In 1809, it was renamed as the Bank
of Bengal. This was one of the three banks funded by a presidency government, the
other two were the Bank of Bombay in 1840 and the Bank of Madras in 1843. The
three banks were merged in 1921 to form the Imperial Bank of India, which upon
India's independence, became the State Bank of India in 1955. For many years the
presidency banks had acted as quasi-central banks, as did their successors, until
the Reserve Bank of India was established in 1935, under the Reserve Bank of India
Act, 1934.

In 1960, the State Banks of India was given control of eight state-associated banks
under the State Bank of India (Subsidiary Banks) Act, 1959. These are now called
its associate banks. In 1978 the Indian government nationalised 14 major private
banks, one of the big bank was Bank of India. In 1978, 6 more private banks were
nationalised. These nationalised banks are the majority of lenders in the Indian
economy. They dominate the banking sector because of their large size and
widespread networks.

The Indian banking sector is broadly classified into scheduled and non-scheduled
banks. The scheduled banks are those included under the 2nd Schedule of the Reserve
Bank of India Act, 1934. The scheduled banks are further classified into: nationalised
banks; State Bank of India and its associates; Regional Rural Banks (RRBs); foreign
banks; and other Indian private sector banks. The term commercial banks refer to both
scheduled and non-scheduled commercial banks regulated under the Banking
Regulation Act, 1949.

Generally banking in India is fairly mature in terms of supply, product range and
reach-even though reach in rural India and to the poor still remains a challenge. The
government has developed initiatives to address this through the State Bank of India
expanding its branch network and through the National Bank for Agriculture and
Rural Development (NABARD) with facilities like microfinance.

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Introduction to Banking
Customers are broadly classified into two:

 Personal Customers: Individuals having single or joint accounts (including

minors)
 Non-personal Customers: Non-individual costumers like Proprietary concerns,
Partnerships, Companies, Trusts, Associations, Clubs, Societies, Institutions,
Government Departments, NGOs, SHGs, etc.

Accounts are broadly classified into two:

 Customer accounts (external accounts): Deposit accounts (Savings, Current,

Recurring), Loan accounts (Demand loan, Term loan, etc.) and Contingent
accounts (Bank Guarantee, etc)
 Office accounts (internal accounts): Cash balance accounts, fixed assets
accounts, Drafts accounts, Sundry deposit accounts, Interest account, etc.

Basic Deposit Accounts

 Savings Account: Running account for savings with restriction in number of
withdrawals.
 Current Account: Running account for savings without restriction in number
of withdrawals.
 Term Deposit: Deposit for a fixed period where interest is paid
monthly/quarterly.
 Special Term Deposit: Deposit for a fixed period where interest in
compounded.
 Recurring Deposit: Regular (monthly) deposit of a fixed amount for a fixed
period.

Types of loan accounts

Overdraft:

 A current account when permitted to overdraw becomes an overdraft

account.
 Can be operated by cheque, ATM, etc

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  A type of advance of temporary nature to valued clients sometimes against
Term Deposit, NSC, etc
 A running account where further withdrawals (debits) can be permitted as
and when deposit (credit) comes.

Demand Loans:

 Basically an advance payable on demand.

 Payment in instalments also generally allowed.
 Given against bank deposits, NSCs, insurance policies.
 Gold loans and pension loans are given as demand loans
 Only one debit allowed for disbursement. Cannot be operated by
cheque and ATM

Term Loans:

 Loan payable as per pre-determined instalments over a fixed term.

 Extended for assets such as car, house, land, building, plant and machinery.
 Installments are to be paid out of the income of the person in case of Personal
Segment Loans.
 Installments are to be paid out of the income of the activity financed in case of
non-personal segment loans.

Cash credit

 An advance facility for financing the working capital needs of commercial

activities.
 A running account on the lines of overdraft.
 An account where all the receipts and payments of the activity on account
of day-to-day operations are expected to be reflected.
 Extended against the stocks and receivables of the unit.

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RETAIL BANKING
Retail banking refers to banking in which banking institutions execute transactions
directly with the consumers, rather than corporations and other banks. Services
offered include: savings and checking accounts, mortgages, personal loans, debit
cards, credit cards, and so forth or it is a typical mass-marketing banking where
individual customers use local branches of larger commercial banks.

Retail banking has a wider connotation and is not the same as that of retail lending.
Retail banking refers to the efforts of the bankers to reach up to the customers on both
fronts of the balance sheet i.e., liabilities side as well as assets side. Under liabilities
side we have deposits and under the assets side we have credit schemes of the various
banks. The job of the banker has become very difficult in this segment too. Bankers
today are offering sops to attract potential customers.

Retail banking sector is characterized by three basic characteristics

1. Multiple Products (deposits, credit cards, insurance, investment etc)

2. Multiple Delivery Channels (call centre, branch, Internet and Kiosk)

3. Multiple Customer groups (consumer, small business, and corporate).

Objectives of Retail Banking

The objective of retail banking is to increase penetration by providing increasing level
of services and increased access, by offering value added services to customers by
packing with them with retail banking products and services.

The retail banking offers considerably better spread of 3 – 4 % service compared to

very thin spread available to banks in case of corporate clients.

Various Segment in Retail Banking

Basically there are three important segments in retail banking which include –

1. Deposit products (convenient deposit schemes such as flexi – deposits),

2. Loans products (such as housing loans, education loans, conveyance loans, personal
loans for diverse purposes such as medical expenses, travel abroad) and other
products.

3. Other products

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Various delivery Channels of Retail Banking
The delivery of these products and service can be through –

1. Branch banking

2. Internet banking or Mobile Banking

3. Automated teller machines (ATM)

4. Call centres

Other Advantages of Retail Banking

Banking industry includes a number of businesses such as corporate banking,
investment banking, wealth management, capital market etc. In India the Retail
Banking scenario has been the market changing from a seller‘s market to a buyer‘s
market. Some advantages of Retail Banking are as follows –

1. Retail deposits are stable and constitute core deposits.

2. They are interest insensitive and less bargaining for additional interest.

3. They constitute low cost funds for the banks.

4. Effective customer relationship management with the retail customers built a strong
customer base.

5. Retail banking increases the subsidiary business of the banks

6. Consumer loans are presumed to be of lower risk and NPA perception.

7. Improves lifestyle and fulfils aspirations of the people through affordable credit.

8. Retail banking involves minimum marketing efforts in a demand — driven

economy.

9. Banks can earn good profits by providing non fund based or fee based services
without deploying their funds.

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Retail banking has become a very important component in the business mix of banks.
Retail banking offers multiple comfort factors for banks to do business. Large and
divergent customer base across income segment offers huge scope for banks to
develop and offer multiple products and services. In addition to traditional products
and services offered by banks over the years, the retail model has undergone rapid
innovation in the past decade with regard to products, processes, people and
technology.

Technology has become the driver for retail banking explosion, and technology
products like ATM, internet banking, mobile banking, card products like debit cards
and credit cards and remittance products products RTGS and NEFT are making their
presence felt in retail space. Banks are embracing different strategies, redesigning
their conventional business silos, reengineering their channels, product and services to
increase the share of customer wallet.

A bank functions can be divided into various divisions like:

Retail/Personal Banking: This division provides a range of financial services into

individual customers and small companies. It operates mainly through branch
networks.

Retail banking includes routines transactions like deposits and withdrawals of money:
money transfer, foreign currency exchange and traveller‘s cheque encashment. They
also deal with personal and small loans, credit and mortgages; insurance policies;
investment schemes; pension funds; and advice to customers on various financial
matters. Apart from offering home loans, car loans, educational loans, consumer
loans, etc, they also develop various deposit schemes and help people fill their coffers.

Corporate Banking: They deal with medium to large scale companies and
government agencies. It could start at the local branch manager level, though more
complex dealings are routed through corporate divisions of clearing banks and their
merchant banking subsidiaries. Corporate banking deals with credit and advances,
trade finance, foreign exchange management, asset management, lease financing of
heavy equipment, infrastructure, machinery, credit risk assessment, etc.They also
advice clients on matters such as corporate mergers and acquisition, raising capital
and business strategy regarding competitors and outside factors.

Merchant Banking: Investment management is the primary activity of this group. It

could be on behalf of corporate clients or institutional investors- like pension funds,
investment trusts, or those in the securities business. This group also handles public
issue and marketing of shares, debentures and other such papers. It may also include
other stock market functions such as dematerialization services, investment advisory

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services, etc. Merchant banking executives research into capital market, advice and
manage funds on various corporate and individual customers.

Treasury Groups: This group takes care of the total funds of the bank including
foreign exchange reserves. Responsibilities include bank portfolio management,
dealing in foreign currency, etc. There are Forex (foreign exchange) dealers in this
group who exclusively deal with the foreign market. They buy and sell foreign
exchange at minimum exchange cost thereby earning maximum profit from the
transactions.

Rural Banking: This group deals with the banking and credit needs of the people of
the rural sector. Not all banks have this group and some banks have separate
subsidiary companies for rural banks.

Product Management: This group conceptualizes various banking services and then
develops; implements and manages them. They have the responsibility for a banking
product (meaning services like personal loans, home loans, credit cards, loans against
shares, educational loans, etc.). Apart from these main functional groups, there is an
appraisal group to analyse economic feasibility of industrial projects, the bank's
exposure to financial risk and long term returns. There are internal auditors who audit
the bank's internal books of accounts. There are various groups of professionals like
lawyers, engineers, agricultural scientists, chartered accountant, company secretary,
cost accountant and economists who work in various departments in advisory
capacities. They help make decisions on issues that are legal, technical or economic in
nature. For example, the economist advises various functional groups on the
implications of the Union budget on the business of the banks, consumer buying
pattern, etc

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POTENTIAL FOR RETAIL IN INDIA

The Indian players are bullish on the Retail business and this is not totally unfounded.
There are two main reasons behind this. Firstly, it is now undeniable that the face of
the Indian consumer is changing. This is reflected in a change in the urban household
income pattern. The direct fallout of such a change will be the consumption patterns
and hence the banking habits of Indians, which will now be skewed towards Retail
products. At the same time, India compares pretty poorly with the other economies of
the world that are now becoming comparable in terms of spending patterns with the
opening up of our economy. For instance, while the total outstanding Retail loans in
Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The
comparison with the West is even more staggering. Another comparison that is natural
when comparing Retail sectors is the use of credit cards. Here also, the potential lies
in the fact that of all the consumer expenditure in India in 2001, less than 1% was
through plastic, the corresponding US figure standing at 18%.

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Retail Banking V/S Corporate Banking

Retail banking refers to the division of a bank that deals directly with retail customers.
Also known as consumer banking or personal banking, retail banking is the visible
face of banking to the general public, with bank branches located in abundance in
most major cities.

Banks that focus purely on retail clientele are relatively few, and most retail banking
is conducted by separate divisions of banks, large and small. Customer deposits
garnered by retail banking represent an extremely important source of funding for
most banks.

Corporate banking, by comparison

Corporate banking, also known as business banking, refers to the aspect of banking
that deals with corporate customers. The term was originally used in the United
States to distinguish it from investment banking, after the Glass-Steagall Act of
1933 separated the two activities.

While that law was repealed in the 1990s, corporate banking and investment banking
services have been offered for many years under the same umbrella by most banks in
the United States and elsewhere. Corporate banking is a key profit centre for most
banks; however, as the biggest originator of customer loans, it is also the source of
regular write-downs for loans that have soured.

Retail Banking Products and Services

Retail banking encompasses a wide variety of products and services, including:

 Checking and savings accounts – customers are generally charged a monthly

fee for checking accounts; savings accounts offer slightly higher interest rates
than checking accounts but generally cannot have checks written on them.

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  Certificates of deposit (CDs) and guaranteed investment certificates (in
Canada) – these are the most popular investment products with conservative
investors, and an important funding source for banks since the funds in these
products are available to them for defined periods of time.
 Mortgages on residential and investment properties – because of their size,
mortgages account for both a substantial part of retail banking profits, as well
as the biggest chunk of a bank‘s exposure to its retail client base.
 Automobile financing – banks offer loans for new and used vehicles, as well as
refinancing for existing car loans.
 Credit cards – the high interest rates charged on most credit cards make this a
lucrative source of interest income and fees for banks.
 Lines of credit and personal credit products – home equity lines of credit
(HELOC) have diminished significantly in their importance as a profit centre
for banks after the U.S. housing collapse and subsequent tightening of
mortgage lending standards.
 Foreign currency and remittance services – the increase in cross-border
banking transactions by retail clients, and the higher spreads on currencies paid
by them, makes these services a profitable offering for retail banking.

Retail banking clients may also be offered the following services, generally through
another division or affiliate of the bank:

 Stock brokerage (discount and full-service)

 Insurance
 Wealth management
 Private banking

The level of personalized retail banking services offered to a client depends on his or
her income level and the extent of the individual‘s dealings with the bank. While a
client of modest means would generally be served by a teller or customer service
representative, a high-net-worth individual who has an extensive relationship with the

10
bank would typically have his or her banking requirements handled by an account
manager or private banker.

Although brick-and-mortar branches are still necessary to convey the sense of solidity
and stability that is crucial to banking, the reality is that retail banking is perhaps one
area of banking that has been most impacted by technology, thanks to the proliferation
of ATMs and the popularity of online and telephone banking.

Corporate Banking Products and Services

The corporate banking segment of banks typically serves a diverse range of clients,
ranging from small- to mid-sized local businesses with a few millions in revenues to
large conglomerates with billions in sales and offices across the country. Commercial
banks offer the following products and services to corporations and other financial
institutions:

 Loans and other credit products – this is typically the biggest area of business
within corporate banking, and as noted earlier, one of the biggest sources of
profit and risk for a bank.
 Treasury and cash management services – used by companies for managing
their working capital and currency conversion requirements.
 Equipment lending – commercial banks structure customized loans
and leases for a range of equipment used by companies in diverse sectors such
as manufacturing, transportation and information technology.
 Commercial real estate – services offered by banks in this area include real
asset analysis, portfolio evaluation, and debt and equity structuring.
 Trade finance – involves letters of credit, bill collection and factoring.
 Employer services – services such as payroll and group retirement plans are
typically offered by specialized affiliates of a bank.

Through their investment banking arms, commercial banks also offer related services
to their corporate clients, such as asset management and securities underwriters.

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Importance to the Economy

Retail and commercial banks are of critical importance to the domestic and global
economies. Retail banking brings in the customer deposits that largely enable banks to
make loans to their retail and business customers. Commercial banks, for their part,
make the loans that enable businesses to grow and hire people, contributing to
expansion of the economy.

For proof of the importance of banks to the economy, one needs to look no further
than the global credit crisis of 2007-08. The crisis had its roots in the U.S. housing
bubble and the excessive exposure of banks and financial institutions around the world
to derivatives and securities based on U.S. home prices.

As iconic American investment banks and institutions either

declared bankruptcy (Lehman Brothers) or were on the verge of it (Bear Stearns,
AIG, Fannie Mae, Freddie Mac), banks grew increasingly reluctant to lend money,
either to their counterparts or to companies. This resulted in a near-total freeze in the
global banking and lending mechanism, causing the most severe recession worldwide
since the Great Depression in the 1930s.

This near-death experience for the global economy led to renewed regulatory focus on
the largest banks that are deemed ―too big to fail‖ because of their importance to the
worldwide financial system.

Biggest Retail and Commercial Banks

The amount of domestic deposits held by a bank is a widely used measure to gauge
the size of its retail banking operation. Based on that, as well as consolidated
assets, the biggest commercial and retail banks in the United States are:

 JPMorgan Chase
 Wells Fargo
 Bank of America
 Citigroup
 U.S. Bancorp
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In Canada, the five biggest commercial and retail banks are:

 Royal Bank of Canada

 Toronto-Dominion Bank
 Scotia bank
 Bank of Montreal
 Canadian Imperial Bank of Commerce

The Bottom Line

Retail and commercial banks are essential for the smooth functioning of an economy.
Most large banks have specialized divisions that deal in retail banking and corporate
banking; both businesses are among the largest profit centres for most banks.

Opportunities and Challenges

Retail banking has immense opportunities in a growing economy like India. As the
growth story gets unfolded in India, retail banking is going to emerge a major driver.
How does the world view us? The BRIC report is viewing India as an economic
superpower. A.T. Kearney, a global management-consulting firm, recently identified
India as the ―second most attractive retail destination of 30 emergent markets.

The rise of Indian middle class is an important contributory factor in this regard. The
percentage of middle to high-income Indian households is expected to continue rising.
The younger population not only wields increasing purchasing power, but as far as
acquiring personal debt is concerned, they are perhaps more comfortable than
previous generations. Improving consumer purchasing power, coupled with more
liberal attitudes towards personal debt, is contributing to India‗s retail banking
segment.

The combination of above factors promises substantial growth in retail sector, which
at present is in the nascent stage. Due to bundling of services and delivery channels,

13
the areas of potential conflicts of interest tend to increase in universal banks and
financial conglomerates. Some of the key policy issues relevant to the retail-banking
sector are: financial inclusion, responsible lending, and access to finance, long-term
savings, financial capability, consumer protection, regulation and financial crime
prevention.

Challenges for the Industry and its Stakeholders:

First, retention of consumers is going to be a major challenge. According to a

research by Riechheld and Sasser in the Harvard Business review, 5 percent increase
in customer retention can increase profitability by 35 percent in banking business, 50
percent in insurance and brokerage, and 125 percent in the consumer credit card
market. Thus, banks need to emphasis on retaining consumer and increasing the
market share.

Second, rising indebtedness could turn out to be a cause for concern in the future.
India‘s position, of course, is not comparable to that of developed world where
household debt as a proportion of disposable income is much higher. Such a scenario
creates high uncertainty. Expressing concerns about the high growth witnessed in
consumer credit segments the reserve bank has, as a temporary measure, put in place
risk containment measures and increased the weight from 100 percent to 125 percent
in the case of consumer credit including personal loans and credit cards.

Third, information technology poses both opportunities and challenges. Even with
ATM machines and Internet Banking, many of the customers still prefer the personal
touch of their neighbourhood branch bank. Technology has made it possible to deliver
services throughout branch network, providing instant updates to checking accounts
and rapid movement of money for stock transfers. However, this dependency on the
network has bought IT department‗s additional responsibilities and challenges in
managing, maintaining and optimizing the performance of retail banking networks.

Fourth, KYC Issues and money laundering risks in retail banking is yet another
important issue. Retail lending is regarded as a low risk area for money laundering

14
because of the perception of the sums involved. However, competition for clients may
also lead to KYC procedures being waived in the bid for new business. Banks must
also consider seriously the type of identification documents the will accept and other
processes to be completed. The Reserve Bank has issued details guidelines on
application of KYC norms in November 2004.

Trends in Retail Banking

Growing a retail banking business is becoming increasingly challenging. The yield

curve is flattening, reducing bank‘s net interest margin. Competition is intensifying, as
new, non-traditional players enter the retail banking space. And consumer preferences
for financial products, payment methods and distribution channels continue to evolve,
providing revenue opportunities, but also introducing new operational challenges. The
changing dynamics of the retail banking business have significant implications for
financial institutions. In order to successfully compete in this environment, banks
must provide a distinctive customer experience and offer innovative product solutions
in order to differentiate their value proposition in the marketplace.

Key trends in retail Banking are:

1. Bifurcation of the retail banking business:

 National- Consolidate- Credit Cards

 Home Equity Loans Mortgages
 Local- Fragmented- Deposits
 Instalment Loans & Small Business Loans

2. Lack of differentiation in retail financial services:

 Many financial institutions are struggling to differentiate their value

propositions in the retail banking market.
 Free checking is now offered by all or most financial institutions.
 Most institutions no longer charge for online banking or online bill payment.

15
  Extended branch hours are increasingly common in many markets, as banks
seek to increase customer convenience.

3. Proliferation and growth of electronic payments.

4. Increasing demand for ATM access.

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 Objectives of the Study

The main objective of this project is to study the awareness of the satisfaction of
customers regarding the Allahabad Bank Retail Banking. During this second
semester I have to achieve something,
which is helpful for my career and some value addition to the Banking Industry. It
gives me good opportunity to expose and creating good impression of corporate mind.

1) To find out what type of problem customer are facing related to service delivered
by Allahabad Bank.

2) To find out the level of customer satisfaction from the product marketing of retail
banking.

3) To find out the level of working of nationalised joint stock bank of Allahabad
Bank.

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Research Methodology

The Research and Methodology adopted for the present study has been systematic and
was done in accordance to the objectives set which has been detailed as below.

Research Definition

Research is a process in which the researcher wishes to find out the end result for a
given problem and thus the solution helps in future course of action. According to
Redman & Mory, research is defined as a ―Systemized effort to gain new knowledge‖.

Research Design:

According to ―Claire Seltiz‖, a research design is the arrangement

of condition and analysis of data in manner that aims to combinerelevance to the
research purpose with economy in procedure.

Nature of Research:

Research is basically of two types.

1. Descriptive research

2. Explorative research

My research design is descriptive as descriptive research –

• Describe the characteristics of certain groups/ samples /populations

.• Estimate proportions in specified populations.

• Make specific predictions

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Determining sources of Data

There are two main sources of data

1. Primary data

2. Secondary data

Primary Data:

Primary data means original data that has been collected specially for the purpose in
mind. It means someone collected the data from the original source first hand. Data
collected this way is called primary data. Primary data has not been published yet and
is more reliable, authentic and objective. Primary data has not been changed or altered
by human beings; therefore its validity is greater than secondary data. The people who
gather primary data may be an authorized organization, investigator, enumerator or
they may be just someone with a clipboard. These people are acting as a witness so
primary data is only considered as reliable as the people who gathered it.

Primary data for this research, data are collected through a direct source like survey to
obtain the first hand information.

•Survey

Secondary Data:

Secondary data is the data that has been already collected by and readily available
from other sources. When we use Statistical Method with Primary Data from another
purpose for our purpose we refer to it as Secondary Data. It means that one purposes
Primary Data is another purposes Secondary Data. So that secondary data is data that
is being reused. Such data are cheaper and more quickly obtainable than the primary
data. These secondary data may be obtained from many sources, including literature,
industry surveys, compilations from computerized databases and information systems,
and computerized or mathematical models of environmental processes.

The secondary data for this study is collected from various Websites.

19
SAMPLING TECHNIQUE

(a) Sampling Unit: - Walk in customers and the company database of high ended
customer.

(b) Sample Size: Sample size for this project was restricted to 50 respondents. Since it
was not possible to cover the whole city/country in the available time period, it was
necessary for me to take a sample size of 50 respondents.

(c) Sampling Method: There are three methods of sampling:

1. Probability Sampling

2. Non-Probability Sampling

3. Quota For this research work Non- Probability Convenience Sampling has been
chosen because time limit for the completion of the work is limited.

Area of Study – Paschim Vihar, New Delhi

20
 Limitations to the Study

 Time Consuming

As compared to secondary research, where a person simply obtains pre-researched

information, primary research consumes a lot of time. To be done correctly primary
data collection requires the development and execution of a research plan. Going from
the start-point of deciding to undertake a research project to the end-point to having
results is often much longer than the time it takes to acquire secondary data. It was
tricky and time consuming to understand the mysteries of marketing.

 Not Always Feasible

Some research projects, while potentially offering information that could prove quite
valuable, are not within the reach of a marketer. Many are just too large to be carried
out by all but the largest companies and some are not feasible at all. Response of the
customer could be biased.

 Time Factor

As primary research takes a lot of time, its findings could be irrelevant by the time
they are processed.

 More number of resources are required.

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REVIEW OF LITERATURE

Meaning of Literature Review

• Provides an overview and a critical evaluation of a body of literature relating
to a research topic or a research problem.
• Analyzes a body of literature in order to classify it by themes or categories,
rather than simply discussing individual works one after another.
• Presents the research and ideas of the field rather than each individual work
or author by itself.
A literature review often forms part of a larger research project, such as within
a thesis (or major research paper), or it may be an independent written work,
such as a synthesis paper.

Purpose of a literature review

A literature review situates your topic in relation to previous research and

illuminates a spot for your research. It accomplishes several goals:

 Provides background for your topic using previous research.

 Shows you are familiar with previous, relevant research.

 Evaluates the depth and breadth of the research in regards to your topic.

 Determines remaining questions or aspects of your topic in need of

research.

22
 B. S. Viswanathan (1985) stated that the over dues to a large extent were on
account of wilful default, which was either due to ineffective recovery
machinery or because of unfavourable recovery climate.
 D. P. Khankhoje and V. T. Godse (1985) found that procedural flaws and gaps
cause delays in the process of loaning activity in the priority sector. So the
systems and procedures adopted by banks particularly with reference to
documentation and accounting have to be simplified. But the simplification of
systems and procedures should not weaken the follow-up, supervision and
control.
 U. C. Kulshresth (1985) conducted a survey in the Western Region of Uttar
Pradesh to review the progress and working of the Lead Banks and concluded
that the banks which were assigned the lead role undoubtedly made
considerable efforts in their lead districts in conducting of economic surveys,
preparing Credit Plans, branch expansion, deposit mobilisation and credit
deployment to priority sectors. Thus the Lead Bank Scheme holds out the
promise to attain socio-economic objects in the society and to develop the rural
economy at the district level.

 S. B. Dangat, S. R. Radkar and M. P. Dhongade (1986) conducted a micro

level study into the borrowings and utilisation of medium and long term loans
in Ahmednagar district and reported that the medium and long term loans were
diverted for conduct of marriages, for consumption and for construction of
residential buildings in all the size group of holdings in both developing
and underdeveloped regions. Proper appraisal of loan proposals, follow-up and
supervision after the disbursement of loans were suggested for effective
financing of agriculture.
 Satya Sundaram (1986) pointed out some of the problems facing the DRI
scheme. Funds are allocated, they are officially spent and yet the poor remains
in the same old state. If necessary safeguard are provided, the funds allocated

23
 for this purpose can through up the desired result. Economic Research
Department of the State Bank of India, Central Office, Bombay (1987)
conducted a study to observe the impact of bank credit on weaker sections in
Kerala. The study revealed that bank loans enabled the borrowers to become
self-employed businessmen or artisans whereas previously they were mere
wage eamers. The utilisation of bank loans generally raised the income and
employment of the borrowers and thereby improved the quality of life.

 N. J. Kurian (1987) conducted a concurrent evaluation of IRDP and found that

commercial banks account for 69 per cent of the loans, 23 per cent is accounted
by RRBs and the balance 8 per cent is provided by the co-operatives. The
repayment of loans by IRDP beneficiaries is no worse than that of other debtors
who generally are better off economically.
 H. C. Malhotra and D. K. Kulshrestha (1987) made an assessment of the
advances by commercial banks to the weaker sections of the society and
concluded that giving advances to them will be of no use, unless it is ensured
that the recipients use these advances for productive purposes.
 Suresh Mehta (2000) noticed that though the banks are flush with surplus
funds, they do not and it profitable and safe in lending to the SSI sector because
they are already saddled with high NPAs in this sector. To reduce the NPAs
level, banks have to strengthen their appraisal system and credit monitoring
mechanism; and SSI units have to develop capabilities to manage borrowed
funds more prudently and more transparently in business operations. These
arrangements will help both the banks and entrepreneurs to remain happy and
prosperous.
 Swami Agnives (2001) delivering the keynote address at a symposium on
―New Economic Policy and Problems faced by Agricultural Sector in Kerala‖
alleged that while the banks have given the farmers a raw deal, it had written-
off the loans availed by top industrialists to the tune of rupees one lakh crore as
non- performing assets.

24
COMPANY PROFILE OF ALLAHABAD BANK

Type: Public

Industry: Banking, Financial Services

Founded: 24th April 1865, 153 years in Allahabad

Headquarters: Kolkata, India

Number of Branches: 3248 branches

Services: Finance and Insurance

Consumer Banking

Corporate Banking

Key People: Smt. Usha Ananthasubramaniam (MD and CEO)

Shri N. K. Sahoo (Executive Director)

Shri S. Harisankar (Executive Director)

Branch Manager: Mrs. Sangeeta Bhatt Trivedi

25
19th Century

On 24 April 1865, a group of Europeans at Allahabad founded Allahabad Bank. By

the end of the 19th century it had branches
at Jhansi, Kanpur, Lucknow, Bareilly, Nainital, Calcutta, and Delhi.

20th Century

In the early 20th century, with the start of Swadeshi movement, Allahabad Bank
witnessed a spurt in deposits. In 1920, P & O Banking Corporation acquired
Allahabad Bank with a bid price of ₹436 (US$6.70) per share. In 1923 the bank
moved its head office and the registered office to Calcutta for reasons of both
operational convenience and business opportunities. Then in 1927 Chartered Bank of
India, Australia and China (Chartered Bank) acquired P&O Bank. However,
Chartered Bank continued to operate Allahabad Bank as a separate entity.

Allahabad Bank opened a branch in Rangoon (Yangon). At some point Chartered

Bank amalgamated Allahabad Bank's branch in Rangoon with its own. In 1963
the revolutionary government in Burma nationalized the Chartered Bank's operations
there, which became People's Bank No. 2.

On 19 July 1969, the Indian Government nationalised Allahabad Bank, together with
13 other banks.

In October 1989, Allahabad Bank acquired United Industrial Bank, a Calcutta-based

bank that had been established in 1940 and that brought with it 145 branches. Two
years later, Allahabad Bank established AllBank Finance Ltd, a wholly
owned Merchant Banking subsidiary.

21st Century

The government's ownership of Allahabad Bank shrank in October 2002 after the
bank engaged in an Initial Public Offering (IPO) of ₹100 million (US$1.5 million) of
shares, each with a face value ₹ 10. The IPO reduced the Government's shareholding
to 71.16%. Then in April 2005 the bank conducted a second public offering
26
of ₹ 100 million of shares, each with a face value ₹ 10 and selling at a premium
of ₹ 72. This offering reduced the Government's ownership to 55.23%.

In June 2006 the bank opened its first office outside India when it opened a
representative office in Shenzhen, Mainland China. In February 2007, Allahabad
Bank opened its first overseas branch, in Hong Kong. In March, the bank's business
crossed the ₹ 10 million mark.

PRODUCT AND SERVICES

1. Personal Banking

2. Social Banking

3. MSME Banking

4. Corporate Banking

5. International Banking

6. Other Services

Personal banking of Allahabad Bank is further divided into three main

categories:

i) Deposit Products

ii) Retail Credit Products; and

iii) Other Credit Products

27
Deposit Products:

It includes:

a) Flexi-Fix Deposit

b) Mahila Sanchay Account

c) Monthly Plus

d) Current plus Deposit Scheme

e) Rs 5 Banking

f) Vikash SB Account

g) Sishu Mangal Deposit Scheme

h) Premium SB Account

i) Premium Current Account

j) Tax Benefit Term Deposit Scheme

Retail Credit Products:

It includes:

a) Housing Loan

b) Saral Loan

c) Furnishing Loan

d) Gyan Dipika Scheme

e) Gold Loan Scheme

f) Personal Loan for Pensioners

28
g) Education Loan

h) Loan Against NSC (National Saving Certificate)/KVP(Kisan Vikas Patra)

i) Property Scheme

j) Reverse Mortgage Scheme

k) Loan Scheme for Doctors/Medical Practitioners

l) Commercial Vehicle Finance

m) Dream Car

n) Bank Rent Scheme

o) Trade Scheme

p) IPO/FPO Finance Scheme

q) Mobike Scheme

r) Overdraft Facility in SB Account

s) Housing Loan Scheme for NRI‘s (Non-Resident Indians)/PIO‘s (Persons of Indian

Origin)

Other Credit Products:

a) Akshay krishi – Kisan Credit Card Scheme

b) Allahabad Bank – EXPO Scheme

c) Allahabad Bank Tax Benefit Term Deposit Scheme 22

29
SOCIAL BANKING

Social Banking is also further segmented into three different categories:

i) Priority Sector

ii) Financial Inclusion

iii) Credit Facilities to Minority Communities

MSME BANKING

MSME stands for Micro, Small and Medium Enterprise. An ―enterprises‖ means an
Industrial undertaking or a business concern or any other establishment, by whatever
name called, engaged in the manufacture or production of goods pertaining to any
industry specified in the First Schedule to the Industries (Development and
Regulation) Act 1951 or employing plant and machinery in the process of value
addition to the final product having a distinct name or character or use or engaged in
providing or rendering of any service or services.

Some important MSME portals of Allahabad Bank are:

i) MSME Policy of the Bank

ii) Presence in MSME Cluster

iii) Specialized MSME Branches in Each State

iv) MSME Campaigns held and number of borrowers given loan in the campaigns

v) Training provided for the bank staff on MSME needs and number of persons
trained

vi) Online system of acknowledgement of loan application and loan tracking system

vii) Format of loan application form with check list

viii) Interest on MSME/Services Charge

30
ix) OTS Scheme of the Bank

x) Rehabilitation of sick MSME

xi) Branch Level Customer meets held

xii) Grievance Redressal Mechanism for MSME‘s

CORPORATE BANKING

Corporate banking includes:

i) Cash Management Services

ii) Gold Card Scheme for Exporters

iii) Allahabad e–Trade

iv) 3 – IN – 1 Account (Triple Advantage)

INTERNATIONAL BANKING

Allahabad Bank is well spread out in India and one overseas Branch at Hong Kong,
besides a Representative office at Shenzhen, China. Bank has also arrangements with
correspondents at various important overseas locations, which will ensure extending
to all our NRI customers rich banking experience.

We understand your needs and value your patronage and would request you to invest
your surplus funds in the various products offered by our Bank.

Non – Resident:

31
A. In terms of Regulation 2(vi) of FEMA 5, a Person resident outside India, who is a
citizen of India or is a person of Indian Origin.

B. Indian Residents working abroad on assignment with Foreign Governments,

Government agencies or in UNO and its affiliates IMF, IBRD etc and Government
officials and other officials of PSU's deputed abroad or assignments or posted abroad
to their own offices including Diplomatic Missions abroad.

C. A person of Indian Origin who is a citizen of any other country other than
Bangladesh or Pakistan if:

i) He/She at any point of time, held an Indian Passport.

ii) He/She or either of his/her parents or any of his/her grandparents was a citizen of
India by virtue of Constitution of India or Citizenship act 1955 (57 of 1955).

iii) The persons are a spouse of an Indian Citizen or a person referred to in sub clause
b (i) or (ii) above. 24

Students going abroad for studies are treated as Non Resident Indians provided their
stay abroad is for more than 182 days in the preceding financial year and broad their
intention to stay outside India for an uncertain period when they go abroad for studies.

Deposit Account: Non Resident Indians can open accounts under Repatriable and
Non Non Repatriable deposit schemes. In respect of Repatriable scheme the NRIs
have the choice of following schemes for depositing their savings with Our Bank.

32
OTHER SERVICES

Other important services of Allahabad Bank are:

 Insurance and Mutual Fund

 Government Business
 Depository Services
 E – Products
 Cards
 ASBA(Application Supported by Block Amount) Facility
 Account – Portability
 Agriculture Debt Wavier
 All Ayushman Bima Yojana
 Samadhan Financial Literacy & Credit Counselling Centre
 Deceased – Settlement
 Depository Receipt
 International Debit – Cum – ATM Card
 Money Transfer Services
 National Electronic Fund Transfer (NEFT)
 New Pension System (NPS)
 Non – Life Business Insurance
 Real Time Gross Settlement (RTGS)
 Regional MSME Care Centres

33
 WORK FLOW MODEL

Customer approaching the

bank/Enquiry

Introduction

Documentation

Savings, Fixed, Current and

Recurring A/C

Account holder
facility

Deposits Withdrawals

Cashier Cashier

Cash Supervision Cash Supervision

Account for the customer

34
ACCOUNT OPENING

Choose an institution

Go to the Bank or Website

Pick the product you want

Provide your information

Agree to terms

Print, sign and mail (if

applicable)

Congratulate Yourself!

35
Question 1
What kind of services do you expect from Allahabad Bank?

Criteria No. of responses Percentage

Quick Response 35 70%
Good customer satisfaction 10 20%
Extra facility for existing 5 10%
customer

Services Expected

10%

Quick response
20%
Good customer satisfaction

Extra facility for existing

members
70%

Interpretation:

70% of the clients want the service of quick response from the bank staff.

20% people expect good customer satisfaction.

10% feel that that there are not many facilities for existing clients. Hence, they want it
to be improved.

36
Question 2
What influences you at taking loans from Allahabad bank?

Criteria No. of responses Percentage

Advertisements 2 4%
Relatives/Friends 3 7%
Easy availability 15 33%
Trust 25 56%

Influence

4%
7%

Advertisements
Relatives/Friends

33% Easy Availability

56%
Trust

Interpretation:

56% people take loans from Allahabad bank because of the trust that has been built by
the bank over the years.

33% people take loans because they are easily available.

7% people take loans from Allahabad bank from the word of mouth of their relatives
or friends.

4% people take loans under the influence of advertisements.

37
Question 3
How do you find the processing procedure while availing the loan?

Criteria No. of Responses Percentage

Excellent 36 72%
Good 10 20%
Average 4 8%

Processing Procedure

8%

20%
Excellent
Good
Average

72%

Interpretation:

72% of the clients are very happy with the processing procedure while availing the
loans.

20% of the clients find the processing to be good enough for them.

8% of the clients find the processing procedure average and not very satisfactory.

38
Question 4
How do you find the cooperation of the bank employees in processing and helping you
with documentation?

Criteria No. of responses Percentage

Excellent 32 64%
Good 14 28%
Average 4 8%

Cooperation

8%

Excellent
28%
Good
Average
64%

Interpretation:

64% of the customers feel that employee cooperation is excellent.

28% of the customers feel that the employee cooperation is good.

8% of the customers say that employee cooperation is average as their documentation

took time.

39
Question 5
Were the branch personnel aware of Product and Services and responded to your
queries?

Criteria No. of responses Percentage

Excellent 42 84%
Good 8 16%
Average 0 0%

Awareness about Products and Services

0%

16%

Excellent
Good
Average

84%

Interpretation:

84% clients felt that the personnels/employees had excellent knowledge about the
products and services.

16% clients felt that the employees have satisfactorily good knowledge about the
products and services that the bank offers.

40
Question 6
Have all your transactions been smooth & error free?

Criteria No. of responses Percentage

Excellent 35 70%
Good 15 30%
Average 0 0%

Transactions- Smooth and Error-free

0%

30%

Excellent
Good
Average

70%

Interpretation:

70% of the clients have had excellent experience in making transactions.

30% of the clients have had satisfactorily good experience in making transactions.

41
Question 7
Is the information in the Bank Statement clear, easy to understand and adequate?

Criteria No. of responses Percentage

Excellent 41 82%
Good 7 14%
Average 2 4%

Information- Easy to undestand?

4%
14%

Excellent
Good
Average

82%

Interpretation:

82% of the customers find the info provided by the bank very easy to understand.

14% of the customers find the info satisfactorily well understandable.

4% of the customers say that they averagely understand the info, i.e., not very clearly.

42
Question 8
Will you recommend Allahabad Bank to your friends and relatives?

Criteria No. of responses Percentage

Definitely 35 70%
Maybe 15 30%
No 0 0%

Recommendation
0%

30%

Definitely
Maybe
No

70%

Interpretation:

70% of the people feel contented with the bank‘s services that they recommend the
bank to their friends/relatives.

30% of the people feel that they might recommend the bank to their
friends/relatives/acquaintances.

43
Question 9
How was your overall level of satisfaction with the bank?

Criteria No. of responses Percentage

Satisfied 43 86%
Normal 7 14%
Dissatisfied 0 0%

Level of Satisfaction
0%

14%

Satisfied
Normal
Dissatisfied

86%

Interpretation:

86% of the people are extremely satisfied with their experience at the bank and the
rest 14% say that they had a normal experience working with the bank.

44
 Strategies for ensuring high Customer Satisfaction
 Set service expectations and standards of behaviour - this means that managers
must set clear service expectations and standards of behaviour, beginning with
defining "excellent service."
 Identify and eliminate barriers and obstacles. Policies that do not make sense;
procedures that get in the way; and rules, norms that make satisfying customers
difficult all need to be eliminated to successfully improve service.
 Learn and develop skills. Clearly, personnel at all levels should learn new skills
related to service excellence and serve the customer.
 Listen to your customers. Measurement of customer satisfaction can be a
powerful way to improve service if the feedback is not focused on punishment.
 Managers need to help staff hear, first hand, how they are doing. For this
feedback to be effective, however, it must be tied to specific targets and goals
and needs to be frontline driven.
 Reinforce and support continuous improvement. The real challenge is keeping
the energy, learning, and improving alive.

45
 Summary of Findings

 With reference to table no.1, 70% expect quick response from the bank executives.

 With reference to table no.2, 56% customers take loans from Allahabad Bank take
loans because they trust the bank and the loans are easily available.

 With reference to table no.3, 72% customers find the procedure while taking the
loan excellent and they have trust in the bank and the loans are easily available too.

 With reference to table no.4, 64% customers find the cooperation of the bank
employees in processing and documentation excellent.

 With reference to table no.5, 84% people say that the awareness about products
and services among the employees is excellent.

 With reference to table no.6, the transactions done by the bank on behalf of the
customers has been smooth and error free.

 With reference to table no.7, 82% of the customers say that the information
provided to them in the bank statement and elsewhere has been easy to understand.

 With reference to table no.8, 70% of the customers say that they will recommend
the bank to the friends/relatives.

 With reference to table no.9, 86% customers are overall well-satisfied with the
bank.

46
 CONCLUSIONS– FUTURE GROWTH
The project aims to study the retail banking operations of ALLAHABAD BANK. The
study was very fruitful, it yielded the desired results, helped me understand the retail
banking. The study also helps in what are the customer opinions towards operations of
bank & its various product and services.

Any serious discussion of the future of the retail banking industry eventually raises a
basic question: will future customers still need retail banks? The answer, it turns out,
depends on banks themselves. With technology and non bank businesses providing
new options for safeguarding and managing their finances, customers will continue to
depend on banks only as long as banks can provide service and value that cannot be
found anywhere else.

The need to become highly customer focused has forced the slow-moving public
sector banks to adopt a fast track approach. The unleashing of products and services
through the net has galvanized players at all levels of the banking and financial
institutions market grid to look a new at their existing portfolio offering. Conservative
banking practices allowed.

Indian banks to be insulated partially from the Asian currency crisis. Indian banks are
now quoting at higher valuation when compared to banks in other Asian countries
(viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge
Non Performing Assets (NPAs) and payment defaults.

Co-operative banks are nimble footed in approach and armed with efficient branch
networks focus primarily on the high revenue niche retail segments.

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 customer‘s base.

ALLAHABAD BANK has a great opportunity to increase their market potential in the
present market situation.

47
 LEARNING EXPERIENCE

The dissertation is to define the retail banking and regarding the general services of
bank.

The study was very fruitful, it yield the desire result, helped me to understand the
banking services better. The study also yields what are the factors that banking is
looking forward for the customer.

The Indian banking has come from a long way from being a sleepy business
institution to a highly proactive and dynamic entity. This transformation has been
largely brought about by the large dose of liberalization and economic reforms that
allowed banks to explore new business opportunities rather than generating revenues
from conventional streams (i.e. borrowing and lending). The banking in India is
highly fragmented with 30 banking units contributing to almost 50% of deposits and
60% of advances.

Under the ambit of the nationalized banks come the specialized banking institutions.
The bank gives great importance towards customer satisfaction. The senior staffs with
their busy schedule try to advice the customer how to invest in better way. The
employees in the bank are well behaved and give a great deal of satisfaction to see
them how they approach their customers.

The bank plays an important role not only to fulfil their duties towards customer but
also to understand them better regarding what they want and how to maximize the
return on the investment.

The bank has set up separate department to impart training program for the
employees. The biggest achievement is the implementation of core banking solution.

48
 Bibliography

Book(s):

Banking Law and Practices (S.N. Maheshwari), 6th Edition

-By Kalyani Publishings

Websites:

https://www.allahabadbank.in/

www.rbi.org.in

https://en.wikipedia.org/wiki/Allahabad_Bank

49
 Questionnaire
Dear Sir/ Madam, As part of my BBA curriculum, I, Arushi Ahuja, am conducting a market
research regarding retail banking for which I need your personal views regarding banking
products & services in shape of a questionnaire designed by me. The data being collected are
solely for academic purpose. I request you to kindly extend your co-operation.

NAME: _______________________

Age group (pls tick): a) 18-30 years b) 31-50 years c) 51-65 years

1) What kind of services do you expect from Allahabad Bank?

a) Quick response b) Good customer relation c) Extra facility for existing customer

2) What influences you at taking loans from Allahabad bank?

a) Advertisement b) Friend/Relative c) Easy availability of loan d) Trust

3) How do you find the processing procedure while availing the loan?

a) Excellent b) Good c) Average

4) How do you find the cooperation of the bank employees in processing and helping
you with documentation?

a) Excellent b) Good c) Average

5) Is the branch personnel were aware of Product and Services and responded to your
queries?

a) Excellent b) Good c) Average

6) Have the transactions done by the bank been smooth & error free?

a) Excellent b) Good c) Average

7) Is the information in the Bank Statement clear, easy to understand and adequate?

a) Excellent b) Good c) Average

8) Will you recommend Allahabad Bank to your friends and relatives?

a) Definitely b) May be c) No

9) Your overall level of satisfaction with the bank?

a) Satisfied b) Normal c) Dissatisfied

50