A Study on Customer Perception in Banking Industry Using Gap Analysis

A STUDY ON CUSTOMER PERCEPTION IN BANKING INDUSTRY USING GAP ANALYSIS

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Dr. Hema Hema Bh Bhala alakris krishn hnan an

Background

Our perception is an approximation of reality. reality. Our brain attempts to make make sense out of the stimul stimulii to which which we are exposed exposed.. This This works well when when we are about to perceive familiar facts. However, our perception is sometimes “off” when we are not clear about concepts. Perception is a process by which an individual select, organize & Interpret stimuli in a meaningful picture of the world Also, we can describe as “how we see the world around us” Perception is the process of selecting, organizing, & Interpreting or attaching meaning to events happening in environment The Concept of Perception

Perception is one of the objects studied by the science of consumer behaviour. Analyzing the works of scientists studying consumer behaviour, it is possible to make a conclusion that perception is presented as one of personal factors, determining consumer behavi behaviour our.. Person Personal al factor factorss mean mean the closes closestt enviro environme nment nt of a human, human, includ including ing every everythi thing ng what what is insi inside de the the perso person, n, his his head head and soul soul,, char charac acte teri rizi zing ng him him as a personality. Using his sensory receptors and being influenced by external factors, the person person receives receives informatio information, n, accepts and adapts it, forms his personal personal attitude, attitude, opinion, and motive, which can be defined as factors that will influence his further activity and behaviour. Perception within this context is considered as one of the principal personal factors, conditioning the nature and direction of remaining variables.

Authors J. C. Mowen (1987), D. L. Loudon and A. J. Della Bitta (1993) determine perception as a phase of information processing, while C. G. Walters and B. J. Bergiel (1989), F. G. Crane and T. K Klarke (1994), G. D. Harrell, G. L. Frazier (1998), M. R. Solomon (1999), B. Dubois (2000) define perception as a separate variable of consumer

Assistant Professor, Park Global School of Business Excellence. Reach Dr.Hema @ he [email protected][Type te text]

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behaviour having features of the process and including separate phases of the process. C. G. Walters alters and B. J. Bergiel Bergiel (1989) characteriz characterizee perception perception as a solid process during which which an indivi individual dual acquir acquires es knowled knowledge ge about about the environm environment ent and interp interpret retss the information according to his/her needs, requirements and attitudes. The works of F. G. Crane and T. K Klarke (1994), G. D. Harrell, G. L. Frazier (1998), M. R. Solomon (1999) (1999),, B. Dubois Dubois (2000) (2000) presen presentt percept perception ion as a more complicated process, during which sensory receptors of a consumer capture a message sent by external signals and the information received is interpreted, organized and saved, providing a meaning for it and using it in a decision making process. Customer Perception

Customer perception is an important component of our relationship with our customers. customers. Customer satisfaction satisfaction is a mental state which results results from the customer’s customer’s comparison of expectations prior to a purchase with performance perceptions after a purchase. A customer may make such comparisons for each part of an offer called ‘‘domain-spec ‘domain-specific ific satisfact satisfaction’ ion’’’ or for the offer offer in total called called ‘‘global ‘global satisfactio satisfaction’ n’’. ’. Moreover, this mental state, which we view as a cognitive judgment, is conceived of as falling somewhere on a bipolar continuum bounded at the lower end by a low level of satisfaction where expectations exceed performance perceptions and at the higher end by a high level of satisfaction where performance perceptions exceed expectations .

Customer Perception on Service

These characteristics of service also make service unique and different from goods as described below 1. Intangibility . Unlike manufactured goods that are tangible, a service is intangible. The products from service are purely a performance. The consumer cannot see, taste, smell, hear, feel or touch the product before it purchased 2. Heterogeneity . A service is difficult to produce consistently and exactly over time. Service performance varies from producer to producer, from customer to customer,


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and from time to time. This characteristic characteristic of service service makes it difficult difficult to standardize the quality of the service 3. Inseparability . In service industries, usually the producer performs the service at the time the consumption of the service takes place. Therefore, it is difficult for the producer to hide mistakes or quality shortfalls of the service. In comparison the goods producers, have a buffer between production and customers’ consumption 4. Perishability . Unli Unlike ke manu manufa fact ctur ured ed goods goods,, serv servic ices es canno cannott be stor stored ed for for late later r consumption. This makes it impossible to have a quality check before the producers send it to the customers. The service providers then only have one path, to provide service right the first time and every time. 5. Non-returnable . A service is not returnable, unlike products. On the other hand, in many services, customers maybe fully refunded if the service is not satisfactory. satisfactory. 6. Needs-match uncertainty . Service attributes are more uncertain than the product. This yield to higher variance of making a match between perceived needs and service is greater than perceived need and product match. 7. Interpersonal . Service tends to be more interpersonal than products. For example, compare buying a vacuum cleaner to contracting for the cleaning of a carpet. While customers will judge the quality of the vacuum cleaner by how clean the carpet is, customers will tend to judge the quality of the carpet cleaning service on both the appearance of the carpet and the attitude of the technician. 8. Personal . Customers often view services to be more personal than products. For example, a customer may perceive the service of her car (balancing the tires) as more personal than purchasing new tires. If the same customer has problems later with the tires, the defect in the tires would be less personal than if the tires were never balanced. 9. Psychic . Even though the food at a restaurant might not be as delicious as other famous restaurants., the customers will recognize the restaurant and tend to be satisfactions if the service of the restaurant is excellent. Another example is when a flight is delayed, and people tend to be upset with this poor service . However, if the gate agent is very helpful and friendly, people tend to still be pleased with the service (Groth, & Dye, 1999).


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Like other industries, banking and financial services companies have reached the conclus conclusion ion that the relati relations onship hip with with the custom customer er should should not (metap (metaphor horica ically lly and literally) end at the bank door. Customer access after the transaction adds value to the transaction. Definition of Banking

Banking means accepting for the purpose of lending or investment, of deposits of money money from from the the Publ Public ic,, repay repayabl ablee on dema demand nd or other otherwi wise se and with withdr draw aw able able by cheques, draft, order or otherwise. Features of Banking: 1. Dealing in Money:

The banks accept deposits from the public and advancing them as loans to the needy people. The deposits may be of different types- Current, Fixed, Savings, etc. accounts. The deposits are accepted on various terms and conditions. 2. Deposits must be withdrawable:

The deposits (other than fixed deposits) made by the public can be withdrawable by cheques, draft or otherwise, i.e., the bank issue and pay cheque. The deposits are usually withdrawable on demand. 3. Dealing with Credit:

The banks are the institutions that can create Credit i.e., creation of additional money for lending. Thus, ‘Creation of Credit’ is the unique feature of banking. 4. Commercial in Nature:

Since all the banking functions are carried on with the aim of making profit, it is regarded as a commercial institution. 5. Nature of Agent:

Besides the basic functions of accepting deposit and lending money as loans, banks possess the character of an agent because of its various agency agenc y services.


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Measuring Customer Perception in the Banking Industry

Banking operations are becoming increasingly customer dictated. The demand for 'banking super malls' offering one-stop integrated financial services is well on the rise. The ability of banks to offer clients access to several markets for different classes of financi financial al instru instrumen ments ts has become become a valuabl valuablee compet competiti itive ve edge. edge. Conver Convergen gence ce in the industry to cater to the changing demographic expectations is now more than evident. Bancassurance and other forms of cross selling and strategic alliances will soon alter the business dynamics of banks and fuel the process of consolidation for increased scope of business and revenue. The thrust on farm sector, health sector and services offers several investment linkages. In short, the domestic economy is an increasing pie which offers extensive extensive economies of scale that only large banks will be in a position position to tap. With With the phenomenal increase in the country's population and the increased demand for banking serv servic ices es;; spee speed, d, serv servic icee quali quality ty and custom customer er sati satisf sfact actio ion n are are goin going g to be key differentiators for each bank's future success. Thus it is imperative for banks to get useful feedback on their actual response time and customer service quality aspects of retail banking, which in turn will help them take positive steps to maintain a competitive edge.

The working of the customer's mind is a mystery which is difficult to solve and understanding the nuances of what perception the customer has to attain satisfaction is, a challenging task. This exercise in the context of the banking industry will give us an insight into the parameters of customer satisfaction and their measurement. This vital information will help us to build satisfaction amongst the customers and customer loyalty in the long run which is an integral part of any business. The customer's requirements must be translated and quantified into measurable targets. This provides an easy way to monitor improvements, and deciding upon the attributes that need to be concentrated on in order to improve customer satisfaction. We can recognize where we need to make changes to create improvements and determine if these changes, after implemented, have led to increased customer satisfaction.


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The Need to Measure Customer Perception:

Satisfied customers are central to optimal performance and financial returns. In many places in the world, business organizations have been elevating the role of the customer to that of a key stakeholder over the past twenty years. Customers are viewed as a group whose satisfaction with the enterprise must be incorporated in strategic planning efforts. Forward-looking companies are finding value in directly measuring and tracking customer satisfaction as an important strategic success indicator. Evidence is mounting that placing a high priority on customer satisfaction is critical to improved organizational performance in a global marketplace. With better understanding of customers' perceptions, companies can determine the actions required to meet the customers' needs. They can identify their own strengths and weaknesses, where they stand in comparison to their competitors, chart out path future progress progress and improvement improvement.. Customer Customer satisfact satisfaction ion measurement measurement helps to promote promote an increased focus on customer outcomes and stimulate improvements in the work practices and processes used within the company. When buyers are powerful, the health and strength of the company's relationship with its customers – its most critical economic asset – is its best predictor of the future. Assets on the balance sheet – basically assets of production – are good predictors only when buyers are weak. So it is no wonder that the relationship between those assets and future future income is becoming more and more tenuous. As buyers become become empowered, sellers have no choice but to adapt. Focusing on competition has its place, but with buyer power on the rise, it is more important to pay attention to the customer. Customer satisfaction is quite a complex issue and there is a lot of debate and confusion about what exactly is required and how to go about it. This article is an attempt to review the necessary requirements, and discuss the steps that need to be taken in order to measure and track customer satisfaction.


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Need and Importance of the Study

One of the most important developments in banking sector has been the growth of the financial industry over the past two decades. The benefits of financial industry can be seen seen in the the form form of lar large scal scalee indu indust stri rial al devel developm opmen ent, t, incr increas eased ed empl employ oyme ment nt opportunitie opportunities, s, higher turnover as well as revenue revenue generation generation to the government and also increase in export of goods and services.

Banking industry in India has undergone a process of evolution with the package of time. To count or to depend on a bank merely by the function it is supposed to perform would be insufficient in the world that we live today. today.

Investments play a vital role on the part of the customers. A real investor does not simply throw his or her money random investment; he or she performs through analysis and commits capital only when there is a reasonable expectation of profit. Hence they both are interdependent i.e., it all depends upon the customer. “Customer knows what to expect”. Today banks have a relationship management approach with their clients.

Banks are offering more customized solutions to their clients. The need of the hour is not only to introduce more value added products for which the customers are willing willing to pay here but also to innovate & enter new segments segments like small small business business & periodical finance.

Everything resolves around around the customer and banks via with their innovative and quali quality ty produ product ctss to suit suit thei theirr clie client nts. s. Today oday the the bott bottom om line line for for any custo custome merr is convenience understanding and evaluating the customers perception on the service & products of a bank has without doubt become a need, which propels the body to structure itself for better performance and service.

Thus delivering high quality service to clients is just as important as delivering performance that meets or exceeds their expectations. It is in this context that that a study is necessary to know about awareness levels on the services provided by the public and


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private sector banks namely, Public Sector Banks : State Bank of India, Indian Bank and Indian Overseas Bank and Private Sector Banks : ICICI, HDFC and IndusInd Bank and the customer perception towards the banks.

Objectives The objectives of the study are: ♦

To evaluat evaluatee the differ different ent factor factorss conside considered red by the invest investors ors while while making making investments.

♦

To study the services provided by Private Sector and Public Sector banks and the performance of it.

♦

To analyz analyzee the service service facili facilitie tiess those those are being being effect effective ively ly utiliz utilized ed by the customers.

♦

To ascert ascertain ain sugges suggestio tions ns from from the invest investors ors for furthe furtherr improv improveme ement nt of the institutions.

Methodology

The data required for this study has been collected from the primary sources. Initially a ‘Pilot Study’ will be conducted for testing the questionnaires. The pilot survey will will help help in making making certai certain n improv improveme ement nt in the final final questio questionnai nnaire. re. A struct structure ured d questionnaire shall then be prepared for the respondents in order to collect primary data. The questionnaire is designed based on the objectives.

Source of Data

The researcher proposed to gather the required data through primary data and secondary data. Primary data are those those which are collected afresh and for the first time, and thus happen to be original in character. It will be collected through questionnaires method. Secondary data is collected from the possible records like books, magazines, periodicals and websites.


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Universe

The proposed study is to find out the services rendered by the Public and Private Sector Banks Banks to their Customers. Customers. The population population is uncountable uncountable and is considered considered as infinite. infinite. However, However, the proposed proposed sample for the study from from Private Private Sector Banks and Public Sector Banks are 300 respectively.

Sampling Method

The universe of the study is the account holders of Public and Private Sector banks and the sampling technique adopted will be convenient sampling method.

Statistical Tools and Techniques

The collected data have been analyzed with the help of tools like Gap Analysis and Factor Analysis

Limitations of the Study

The time spent for canvassing the bankers and customers to get the questionnaire filled was considerable. Further, there was reluctance on the part of customers to respond the questionnaire. The cost and time factors are the other limitations. However adequate care was taken to collect unbiased data.

Gap Analysis

The gap analysis is carried out between the expected level and derived level of satisfaction on the various aspects such as

Loan Flexibility; Easy Access; Security; Customer friendly Latest Facilities (Phone banking, Net banking, etc); Reasonable Interest rate for Credit card transaction.


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This analysis is carried out using t-test based on the average score of the values obtained for each factors. The significance is assessed using 5% level. The results are presented in the following tables with suitable interpretations.

Gap Analysis on Expected and Derived Level of Satisfaction – State Bank of India

The table provides mean difference between expected level of satisfaction and the derived level of satisfaction on the various aspects of customer perception, its t-value and p-value. The aspects considered are Loan Flexibility, Easy Access, Security, Customer friendly, Latest Facilities (Phone banking, Net banking, etc), Reasonable Interest rate for Credit card transaction. Table 1: Gap Analysis- Expected and derived level of satisfaction - SBI

Aspects

Mean Difference

t-value

p- value

S/NS

Loan Flexibility Easy Access Security Temperature Customer friendly Latest Facilities (Phone

Expected-Derived 0 .9 0 .9 0.78 0.91 0.46 0.63

59.059 57.559 37.566 45.525 16.389 23.912

0.004 0.009 0.001 0.000 0.002 0.001

S S S S S S

banking, Net banking, etc) Reasonable Interest rate

0 .6

22.551

0.000

S

for Credit card transaction S-significant(pvalue <= 0.05); NS- Not significant (p value >0.005) It is found from the table 1 that all the mean difference values are positive indicat indicating ing that the expect expected ed level level of satis satisfact faction ion is more more than than the derived derived level level of satisfaction. Further it is implied that all the aspects are found significant resulting that the the expect expected ed level level of sati satisf sfact actio ion n is signi signifi fican cantl tly y more more than than the the deri derived ved leve levell of satisfaction of the respondents on the various facilities in SBI.

It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects relating to facilities in SBI.

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Gap Analysis: Analysis: E xpected and derived level of Satisfacti Satisfaction on - SB I

Loan Flexibility 4 3 Reasonable Interest Rates

2

Easy Access

1 Expected

0

Latest Facilities

Derived Security

Customer Friendly

Gap Analysis on Expected and Derived Level of Satisfaction – IOB

The table provides mean difference of IOB between expected level of satisfaction and the derived level of satisfaction on the various aspects of customer perception, its tvalue and p-value. The aspects considered are loan Flexibility, easy access, security, customer friendly, latest Facilities (Phone banking, Net banking, etc), reasonable interest rate for credit card transaction. Table 2: Gap Analysis- Expected and derived level of satisfaction - IOB

Aspects

Mean Difference (E-D)

t-value

p- value

S/NS

Loan Flexibility Easy Access Security Customer friendly Latest Facilities (Phone

0.9 0.9 0 .9 0.93 0.96

62.95 46.123 55.687 46.165 54.311

0.002 0.000 0.003 0.000 0.000

S S S S S


0 .2

9.703

0.005

S

for Credit card transaction S-significant(pvalue <= 0.05); NS- Not significant (p value >0.005)

It is found from the table 2 that all the mean difference values are positive indicat indicating ing that the expect expected ed level level of satis satisfact faction ion is more more than than the derived derived level level of satisfaction. Further it is implied that all the aspects are found significant resulting that

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the the expect expected ed level level of sati satisf sfact actio ion n is signi signifi fican cantl tly y more more than than the the deri derived ved leve levell of satisfaction of the respondents on the various aspec ts of Indian Overseas bank.

It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects of Indian Overseas bank.

Gap Analysis: Analysis: Expected and Derived level of Satisfaction Satisfaction - IOB

Loan Flexibility 4 3

Easy Access

2 1 0

Reasonable Reasonable Interest Rates

Expected

Security

Derived

Customer Friendly Latest Facilities

Gap Analysis on Expected and Derived Level of Satisfaction – Indian Bank

The table provides mean difference of Indian Bank between expected level of satisfaction and the derived level of satisfaction on the various aspects of customer perception, its t-value and p-value. The aspects considered are loan Flexibility, easy access, security, customer friendly, latest Facilities (Phone banking, Net banking, etc), reasonable interest rate for credit card transaction.

Table 3: Gap Analysis- Expected and derived level of satisfaction - IB

Aspects

Mean Difference

t-value

p- value

S/NS

Loan Flexibility

Expected-Derived 0.62

24.097

0.003

S


Easy Access Security Customer friendly Latest Facilities (Phone

0.65 0.87 0.86 0.94

25.474 29.992 36.987 40.098

0.009 0.001 0.007 0.006

S S S S


0.92

50.028

0.004

S

for Credit card transaction It is found from the table 3 that all the mean difference values are positive indicat indicating ing that the expect expected ed level level of satis satisfact faction ion is more more than than the derived derived level level of satisfaction. Further it is implied that all the aspects are found significant resulting that the the expect expected ed level level of sati satisf sfact actio ion n is signi signifi fican cantl tly y more more than than the the deri derived ved leve levell of satisfaction of the respondents on the various aspec ts of Indian bank.

It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects of Indian bank.

Gap Analysis: Expected an d Derived Lev el of Satisfaction- IB

Loan Flexibility 4 3 Reasonable Interest Rates

2

Easy Access

1 Expected

0

Latest Facilities

Derived

Security

Customer Friendly

Gap Analysis on Expected and Derived Level of Satisfaction – ICICI Bank

The table provides mean difference between expected level of satisfaction and the derived level of satisfaction on the various aspects of customer perception, its t-value and p-value. p-value. The aspects considered considered are loan Flexibilit Flexibility y, easy access, security security,, customer customer


friendly friendly,, latest latest Facilitie Facilitiess (Phone (Phone banking, banking, Net banking, banking, etc), reasonable interest rate for credit card transaction. Table 4: Gap Analysis- Expected and derived level of satisfaction - ICICI

Aspects

Mean Difference

t-value

p- value

S/NS


Expected-Derived 0.61 0.61 0.61 0.61 0.72

24.637 25.066 23.922 21.494 28.127

0.005 0.001 0.001 0.000 0.004

S S S S S

0.75

29.045

0.001

S


for Credit card transaction S-significant(pvalue <= 0.05); NS- Not significant (p value >0.005) It is found from the table 4 that all the mean difference values are positive indicat indicating ing that the expect expected ed level level of satis satisfact faction ion is more more than than the derived derived level level of satisfaction. Further it is implied that all the aspects are found significant resulting that the the expect expected ed level level of sati satisf sfact actio ion n is signi signifi fican cantl tly y more more than than the the deri derived ved leve levell of satisfaction of the respondents on the various facilities in ICICI bank. It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects relating to facilities in ICICI bank.

Gap Analysis; Analysis; Expected and Derived Level of S atisfaction atisfaction ICICI

Loan Flexibility 4 3 Reasonable Reasonable Interest Rates

2

Easy Access

1 Expected

0

Latest Facilities

Derived Security

Customer Friendly


Gap Analysis on Expected and Derived Level of Satisfaction – HDFC Bank

The The tabl tablee prov provid ides es mean mean diff differ eren ence ce of HDFC HDFC betw between een expec expecte ted d level level of satisfaction and the derived level of satisfaction on the various aspects of customer perception, its t-value and p-value. The aspects considered are loan Flexibility, easy access, security, customer friendly, latest Facilities (Phone banking, Net banking, etc), reasonable interest rate for credit card transaction.

Table 5: Gap Analysis- Expected and derived level of satisfaction - HDFC

Aspects

Mean Difference

t-value

p- value

S/NS


Expected-Derived 0 .6 1.01 0.66 1.02 0.56

24.373 38.813 25.678 39.331 21.336

0.002 0.002 0.004 0.009 0.008

S S S S S


0.16

8.131

0.000

S

for Credit card transaction S-significant(pvalue <= 0.05); NS- Not significant (p value >0.005) It is found from the table 5 that all the mean difference values are positive indicat indicating ing that the expect expected ed level level of satis satisfact faction ion is more more than than the derived derived level level of satisfaction. Further it is implied that all the aspects are found significant resulting that the the expect expected ed level level of sati satisf sfact actio ion n is signi signifi fican cantl tly y more more than than the the deri derived ved leve levell of satisfaction of the respondents on the various facilities in HDFC bank. It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects relating to facilities in HDFC bank.


Gap Analysis: Expected and Derived Level of SatisfactionHDFC


2

Easy Access

1 Expected

0

Latest Facilities

Derived Security

Customer Friendly

Gap Analysis on Expected and Derived Level of Satisfaction – IndusInd Bank

The table provides mean difference of IndusInd bank between expected level of satisfaction and the derived level of satisfaction on the various aspects of customer perception, its t-value and p-value. The aspects considered are loan Flexibility, easy access, security, customer friendly, latest Facilities (Phone banking, Net banking, etc), reasonable interest rate for credit card transaction. Table 6: Gap Analysis- Expected and derived level of satisfaction - Indusind

Aspects

Mean Difference

t-value

p- value

S/NS


Expected-Derived 0.75 0.72 0.33 0.3 1

28.686 29.609 13.971 12.166 26.055

0.002 0.001 0.003 0.009 0.008

S S S S S


1.03

27.061

0.003

S

for Credit card transaction It is found from the table 6 that all the mean difference values are positive indicat indicating ing that the expect expected ed level level of satis satisfact faction ion is more more than than the derived derived level level of satisfaction. Further it is implied that all the aspects are found significant resulting that the the expect expected ed level level of sati satisf sfact actio ion n is signi signifi fican cantl tly y more more than than the the deri derived ved leve levell of satisfaction of the respondents on the reasonable interest rates.


It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects relating to various facilities in Indusind bank.

Gap Analysis: Expected and Derived level of Satisfaction Indusind


2

Easy Access

1 Expected

0

Latest Facilities

Derived Security

Customer Friendly

Factor Analysis

The factor analysis is mainly employed for 2 purposes 1. For For dat dataa red reduc ucti tion on 2. For identifyin identifying g the factor which influences influences most.

In this section the factor analysis under extraction method of principal component analysis is employed to identify the important aspects relating to customer perception on public sector and private sector banks.

Important factors are identified with extraction value more than 0.7. The results are presented in table 7. Table 7 describes the extraction values for each aspect relating to customer perception on public sector and private sector banks. through principal component analysis.


Table 7: Extraction Values- Aspects relating to customer perception on service of banks Aspects

Extraction values

Customer Friendly

0.888

Easy Access

0.910

Can Relax

0.795

Stress Reduction

0.771

Security

0.836

Safe

0.720

Go to bank with a trobled mind and ther sort it out for you

0.816

Sleep in night without worrying whats going on

0.640

Facilities are too good

0.657

Come away with a aproportion of what you want

0.764

Got what you went down for

0.743

Everything went according to plan

0.762

Met expectations

0.767

To be unsatisfied when you come and you are still in the same level 0.409 as you went before Happy with results

0.551

Content with whats been done for you

0.574

Awareness about net banking

0.534

Not frustrated

0.462

Everything goes smooth

0.710

No hassle

0.787

Straight forward

0.409

It is found from the table 7 that among the 21 aspects relating to customer perception towards public and private sector banks 14 aspects are considered as more important than other aspects because of their expectation value more than 0.7. Further it


can be deduced that “ easy access” access” is considered considered as very important because because of its high extraction value 0.910 followed by “customer friendly” (0.888); “security” (0.836); “Go to bank with a troubled mind and there sort it out for you” (0.816); “can relax” (0.795) and so on. It is concluded that among the various aspects relating to perception of customers “easy access” is considered as more important than the other factors.

Factors Influencing Customer Perception 1 0.9 0.8 0.7 0.6 0.5

Series1

0.4 0.3 0.2 0.1 0

t u o d e k l a W

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k n a b o t o G

g n i v e i h c A

u o y t a h w t o G

t e M

h t i w y p p a H

h t i w y p p a H

g n i h t y r e v E

t h g i a r t S

Findings based on GAP Analysis 

It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects relating to facilities in SBI.



It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects of Indian Overseas bank.



It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects of Indian bank.




It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects relating to facilities in ICICI bank.



It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects relating to facilities in HDFC bank.



It is concluded that the respondents’ expectation are significantly more than they derive on the various aspects relating to various facilities in Indusind bank.

Findings from Factor Analysis 

It is concluded that among the various aspects relating to perception of customers “easy access” is considered as more important than the other factors.

SUGGESTIONS, DISCUSSIONS AND CONCLUSIONS Suggestions

The following suggestions are the outcome of the research and applications of these 

Every bank should take precautions to keep customers experience safe. safe. It should take continued efforts to safeguard online banking transactions.

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All internet banks should provide close interaction between bank service and web based e-commerce and even service through direct electronic payments.



The bank should provide more convenient international transactions which means internet along with general trends.



Elimination of geographical boundaries will help free acc ess of internet banking.



The bank should provide more customer awareness and need of transparency in their dealings.

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All banks should provide digital certification procedure as it helps the customers data that they receive from the correct system.

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The banks should come up with innovative ways of service at their door steps this may be a costly affair but will surely give positive results in the long run.

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The banks banks should should take the initiati initiative ve of traini training ng the advisors advisors about about the new schemes from time to time which also makes the advisors connected to the bank.


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The banks should also emphasis on the monitoring of EMI which directly relates to the returns of a loan amount.

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The company should come up with proper fixed deposit plans at this point of time where the market is highly volatile and the investors become very cautious at this level.

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The banks banks should should use brand brand ambassa ambassador dorss for example example the CEO’ CEO’s of major major compani companies es where where the company company allocat allocatee the funds. funds. This will will probabl probably y ensure ensure proper results.

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The banks should focus on the advertising strategy and also the marketing of the bank product.

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The bank doesn’t have enough tax saving plans or appropriate plans for tax so which they should come up with.

Managerial Implications and Discussions Good Performance, Questionable Health

Indian banks have compared favourably on growth, asset quality and profitability with other regional banks over the last few years. The banking index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period. Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regul regulat atio ions ns betw betwee een n comme commerc rcia iall and and co-o co-ope pera rati tive ve banks banks.. Howe However ver,, the the cost cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. While bank lending has been a significant driver of GDP growth and employment, periodic instances of the “failure” of some weak banks have often threatened the stability of the system. Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulat regulation ionss beyond beyond Schedul Scheduled ed Commer Commercia ciall Banks Banks (SCBs) (SCBs),, unless unless addres addressed sed,, could could


seriously weaken the health of the sector. Further, the inability of bank managements (with some notable exceptions) to improve cap ital allocation, increase the productivity of their service platforms and improve the performance ethic in their organisations could seriously affect future performance.

Opportunities and Challenges for Players

The bar for what it means to be a successful successful player player in the sector has been raised. Four challenges must be addressed before success can be achieved. First, the market is seei seeing ng disc discont ontin inuou uouss grow growth th driv driven en by new new prod produc ucts ts and serv servic ices es that that incl includ udee opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations. Second, banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates provided. This will expose the weaker banks. Third, with increased interest in India, competition from foreign banks will only intensify. Fourth, given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks.

Need to Create a Market-Driven Banking Sector with Adequate Focus on Social Development

The term “policy makers” used in this thesis, refers to the Ministry of Finance and the RBI and includ includes es the other other relevan relevantt governm government ent and regula regulator tory y entitie entitiess for the banking sector. We believe a co-ordinated effort between the various entities is required to enable positive action. This will spur on the performance of the sector. The policy makers need to make co-ordinated efforts on six fronts: Help shape a superior industry structure in a phased manner through “managed consolidation” and by enabling capital availability.

Focus on Social Development

Focus strongly on “social development” by moving away from universal directed norms to an explicit incentive-driven framework by introducing credit guarantees and


market market subsid subsidies ies to encoura encourage ge leadin leading g public public sector sector,, privat privatee and foreig foreign n players players to leverage technology to innovate and profitably provide banking services to lower income and rural rural market markets. s. Create Create a unifie unified d regula regulator tor,, distin distinct ct from from the central central bank of the country, in a phased manner to overcome supervisory difficulties and reduce compliance costs. Improve corporate governance primarily by increasing board independence and accountabilit accountability y. Accelerate Accelerate the creation creation of world class supporting supporting infrastruc infrastructure ture (e.g., payments, asset reconstruction companies (ARCs), credit bureaus, back-office utilities) to help the banking sector focus on core activities. Enable labour reforms, focusing on enriching human capital, to help public sector and old private banks become competitive.

Need For Decisive Action by Bank Managements

Management imperatives will differ by bank. However, there will be common themes across classes of banks: PSBs need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall organisational performance ethic. The last, i.e., strengthening human capital will be the the sing single le bigg bigges estt chall challeng enge. e. Old Old priv privat atee sect sector or banks banks also also have have the the need need to fundamentally strengthen skill levels. However, even more imperative is their need to examine their participation in the Indian banking sector and their ability to remain independent independent in the light of the discontinuities discontinuities in the sector. sector. New private banks could could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitably serve segments like the rural/low income segments; actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms.

Attracting, developing and retaining more leadership capacity would be key to achieving this and would pose the biggest challenge. Foreign banks committed to making a play in India will need to adopt alternative approaches to win the “race for the custom customer” er” and build build a valuevalue-cre creati ating ng custom customer er franchi franchise se in advance advance of regula regulatio tions ns potentially. At the same time, they should stay in the game for potential acquisition opportunities as and when they appear in the near term. Maintaining a fundamentally long-term value-creation mindset will be their greatest challenge. The extent to which


Indian policy makers and bank managements develop and execute such a clear and complementary complementary agenda to tackle emerging emerging discontinui discontinuities ties will lay the foundations for a high-performing sector in the near future

Scope for Future Research

There is a wide scope to extend this study in the future. Future researchers may continue the same study or they can study by taking all the private sector banks or public sector banks. The study may be done as a world wide study to bring about the potential of the bank ban k industry.

Conclusion

The last decade has seen many positive developments in the Indian banking sector. The policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance Finance and relate related d governm government ent and financi financial al sector sector regula regulatory tory entities entities,, have made made several notable efforts to improve regulation in the sector. The sector now compares favourably with banking sectors in the region on metrics like growth, profitability and non-performing assets (NPAs). A few banks have established an outstanding track record of innovation, growth and value creation. This is reflected in their market valuation. However, However, improved improved regulations regulations,, innovation, innovation, growth and value creation creation in the sector sector remain limited to a small part of it. The cost of banking intermediation in India is higher and bank penetration is far lower than in other markets. India’s banking industry must strengthen itself significantly if it has to support the modern and vibrant economy which India aspires to be. While the onus for this change lies mainly with bank managements, an enabling policy and regulatory framework will also be critical to their success. The failur failuree to respon respond d to changi changing ng market market realit realities ies has stunte stunted d the developm development ent of the financial sector in many developing countries. A weak banking structure has been unable to fuel continued growth, which has harmed the long-term health of their economies. In this “white paper”, we emphasise the need to act both decisively and quickly to build an enabling, rather than a limiting, banking sector in India.


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A Study on Customer Perception in Banking Industry Using Gap Analysis

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