A COMPARATIVE ANALYSIS ON THE TYPES OF RETAIL LOANS OFFERED BY BANKS AND TO JUDGE THE CUSTOMER PREFERENCE FOR THE SAME
Submitted in partial fulfillment of the requirements for Master of Business Administration (MBA) By VIVEK KUMAR GAUR CLASS OF 2009
ARMY INSTITUTE OF MANAGEMENT & TECHNOLOGY, PLOT NO M-l, POCKET P-5, GREATER NOIDA-201306 (UP)
July 2010
1
Acknowledgement ³For any successful work, it owes its thanks to many´
Summer training is one of the most vital and active part of the curriculum of management students. I did the work as a management trainee at AXIS Bank. Hard work, knowledge, dedication & positive attitude all are necessary to do any task successfully but one ingredient which is also very important than others and at times more important than others is cooperation & guidance o f experts and experienced person. Firstly I would like to extend my heartfelt gratitude to Mr._________________________ the Branch Manager, for his guidance throughout the project. Without his support and cooperation I would have failed in my endeavours e ndeavours and targets in the summer training. I emphatically express the regards and gratitude towards my speculative guide Mr. __________________________________________________________________ For his expert
and invaluable guidance, constant encouragement, and constructive criticism to accomplish such laborious and exhaustive work timely t imely and perfectly. I
avail
the
opportunity
to
thanks_______________________________________________________who helped to ease my burden of works and extended their helping hands hands during my training. I would also like to thank all the Staff of Axis Bank, lajpat nagar,N.delhi for their invaluable suggestion and cooperation to complete my project successfully.
2
Certificate of Originality
I ______________________________________________Roll No_______________ Class of 2009, a fulltime bonafide student of first year of Master of Business Administration (MBA) Programme of Army Institute of Management & Technology, Techno logy, Greater Noida.
I
hereby
certify
that
this
project
work
carried
out
by
me
at_____________________________________________________________________ and| the report submitted in partial fulfillment of the requirements of the programme is an original
work
of
mine
under
the
guidance
of
the
industry
_____________________________________________________________
mentor and
faculty
mentor______________________________________ , and is not based or reproduced from any existing work of any other person or on any earlier work undertaken at any other time or for any other purpose, and has not been submitted anywhere else at any time.
(Student's Signature)
Date: (Faculty Mentor's Signature)
Date:
3
Certificate from industry mentor
4
EXECUTIVE SUMMARY
INTRODUCTION
I have done my training from Axis Bank, lajpat nagar, New Delhi Branch. I learned there working and functioning of the bank. This training is surely going to help me a lot in future. My study is mainly focused on retail loans and after my training; I am more clear about retails loans. Axis bank is one of the fastest growing banks in India and has extremely competitive and profitable banking franchise. Axis bank is the first new generation private sector bank to be established in India under the overall reform programme initiated by Government of India in 1991.Axis bank started its operation from 1994. Earlier it was known as UTI bank, which in the year 200 4 transformed into Axis bank.
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CONTENTS S.NO
TOPIC
PAGE
Chapter 1
introduction to banking industry in india
13
1.1
Overview
14-17
1.2
Nationalize banks in india
18-19
1.3
Private banks in india
19-20
Chapter 2
Axis bank
21
2.1
About axis bank
22-28
2.2
Profile
29-35
Chapter 3
Loans
36-37
3.1
Types of loan
38-41
Chapter 4
Retail loans
42-43
4.1
Home loan
44-50
4.2
Personal loan
51-55
4.3
Educational loan
56-59
Chapter 5
Comparison of loans
60
5.1
Comparison of home loans
61
5.2
Comparison of personal loans
62
5.3
Comparison of educational loans
63
Chapter 6
Customer survey
64
6.1
Occupation of respondent
65
6.2
Types of loan
66
6.3
Distribution on the basis of sex
67
6.4
Distribution on the basis of age
68
Chapter 7
Limitations and recommendations
69
7.1
Limitations
70 6
7.2
Recommendations
71
8.
Glossary
72-75
9.
References
76
7
VI. OBJECTIVE OF THE STUDY
The objective of the study is divided into two parts:y
Primary objective and
y
Secondary objective
Primary objective:- the main objective of the study is to find out the interest
rates, tenure, percentage of funding, eligibility to apply for loans etc.
Secondary objective:- the secondary objective of the study is to find out the
extent to which customer expectations match axis bank performance in retail loan services. This was done to help axis bank to recognize their faults in customer dealing. As in this world customer satisfaction is more important than huge profits, so customer satisfaction survey will help it in finding out its position.
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VII. SOME COMMON TERMS USED IN THE STUDY :-
1.Rate of interest :- fixed rate of interest as the name suggests, is the rate that remain fixed
throughout the tenure of the loan. The rate doesn¶t normally changes, till the full repayment of the loan. Floating rate is the rate is the rate which moves upwards or downwards depending upon the market forces.
2.Processing fees: - a processing fees is stamp charges. It is charged on the loan amount, when
the loan amount is sanctioned. It starts from 0.5% and Goes till 5%.
3.Penality:- it is also known as pre-closure charges. If the repayment of loan is done before the
tenure, then penalty charges are changed from the customer of the outstand o utstand loan.
4.tenure:- tenure is the duration/time for which loan is taken.
5.funding:- funding means max. percentage of loan to fund to the customer. Generally a small
amount of margin is kept with the bank, rest is given to the t he customer.
6.
generat ed by interest-bearing Net interest income:- (NII) is the difference between revenues generated
assets and the cost of servicing (interest-burdened) liabilities. For banks, the assets typically include commercial and personal loans, mortgages, construction loans and investment securities. The liabilities consist primarily of customers' deposits. NII is the difference between (a) interest payments the bank receives on o n loans outstanding and (b) interest payments the t he bank makes to customers on their deposits. depo sits. NII = (interest payments on o n assets) í (interest payments on liabilities) liabilities)
7. Net profit:- In simplistic terms, net profit is the money left over after paying all the expenses
of an endeavor. In practice this can get very complex in large organizations or endeavors. 9
Net profit= profit= Gross profit profit - Pre-tax profit profit 8.Market
capitalization :-
Market
capitalization/capitalisation capitalization/capitalisation (often market
cap)
is
a
measurement of size of a business enterprise (corporation) equal to the share price times the number of shares outstanding of a public company. As owning stock represents ownership of the company, including all its equity, capitalization could co uld represent the public opinion o pinion of of a company's net worth and is a determining factor in stock valuation. Likewise, the capitalization of stock markets or economic regions may be compared to other economic indicators.
9.Assets:- In financial accounting, assets are economic resources. Anything tangible or
intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simplistically stated, assets represent ownership of value that can be co nverted into cash (although cash itself is also considered an asset).
E MI at its due 10.charges for the late payment of EMI :- If the borrower doesn¶t pay the EMI date,then he/she will charged with fines. This T his generally according to the time t ime for which the payment is delayed.
10
CHAPTER 1
INTRODUCTION OF BANKING INDUSTRY IN INDIA
11
BANKING IN INDIA
1.1 Overview
Banking in India originated in the first decade of 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the "The Bank of Bengal" in Calcutta in June 1806. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras. The presidency banks were established under charters from the British East India Company. They merged in 1925 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. For many years the Presidency banks acted as quasi-central banks, as did their successors. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers.
RESERVE BANK OF INDIA
Central Bank and supreme monetary authority Scheduled Banks Cooperative Urban Cooperatives
Non Scheduled Banks Commercial
State Cooperatives
Public Sector
Other Nationalized Banks
SBI & Associates
12
Private Sector
Foreign Banks
Regional Rural Banks
Early History
The first fully Indian owned bank was the Allahabad Bank, established in 1865. However, at the end of late-18th century, there were hardly any banks in India in the modern sense of the term. The American Civil War stopped the supply of cotton to Lancashire from the Confederate States. Promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondichery, then a French colony, followed. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking centre.
The Bank of Bengal, which later became the State Bank of India.
Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. co mmunities.
The presidency banks dominated banking in India. There were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old
13
fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments."
By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership. Punjab National Bank is the first Swadeshi Bank founded by the leaders like Lala Lajpat Rai, Sardar Dyal Singh Majithia. The Swadeshi movement in particular inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.
1.2 Nationalized banks in India
Banking System in India is dominated by nationalized banks. The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. The major objective behind nationalization was to spread banking infrastructure in rural areas and make available cheap finance to Indian farmers. Fourteen banks were nationalized in 1969. Before 1969, State Bank of India (SBI) was the only o nly public sector bank in India. SBI S BI was nationalized in 1955 under the SBI Act of 1955. The second phase of nationalization of Indian banks took place in the year 1980. Seven more banks were nationalized with deposits over 200 crores.
List of Public Sector Banks in India is as follows
Allahabad Bank
State Bank of India (SBI)
State Bank of Indore
State Bank of Mysore
14
State Bank of Patiala
State Bank of Travancore
Syndicate Bank
UCO Bank
Union Bank of India
United Bank of India s
Vijaya Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Indian Bank
Oriental Bank of Commerce
Punjab National Bank
State Bank of Hyderabad
Dena Bank
State Bank of Saurashtra
Indian Overseas Bank
Punjab and Sind Bank
State Bank of Bikaner & Jaipur
1.3 Private Banks in India
All the banks in India were earlier private banks. They were founded in the pre-independence era to cater to the banking needs of the people. But after nationalization of banks in 1969 public sector banks came to occupy dominant role in the banking structure. Private sector banking in India received a fillip in 1994 when Reserve Bank of India encouraged setting up of private banks as part of o f its policy of liberalization of the Indian Banking Indu stry. Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private pr ivate sector. Private Banks have played a major role in the development of Indian banking industry. They have made banking more efficient and customer friendly. In the process they have jolted public sector banks out of complacency and forced them to become more competitive.
List of Private Sector Banks in India is as follows
Bank of Rajasthan
Bharat Overseas Bank
15
Axis Bank
Centurion Bank of Punjab
Federal Bank
ICICI Bank
IndusInd Bank
Jammu & Kashmir Bank
Karur Vysya Bank
SBI Commercial and International Bank South Indian Bank
United Western Bank
Catholic Syrian Bank Dhanalakshmi Bank HDFC Bank IDBI Bank
ING Vysya Bank
Karnataka Bank
Kotak Mahindra Bank
YES Bank
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CHAPTER 2
COMPANY PROFILE AXIS BANK
17
COMPANY PROFILE
2.1 ABOUT AXIS BANK
Start on 1994
On July 2007 UTI Bank rebrand as Axis Bank
2.1.1 Promoters
y
Unit Trust Of India (UTI)
y
Life Insurance Corporation (LIC)
y
General Insurance Corporation (GIC)
y
National Insurance Company Limited
y
New India Assurance Company Limited
y
The Oriented Insurance Company Co mpany Limited
y
United India Insurance Company Limited
2.1.2 Capitalization
407.44
crore
Public Holding (other than promoters and GDRs) = 54.51%
18
2.1.3 Registered Office
Ahmadabad
Central Office
Mumbai
2.1.4 DISTRIBUTION
Total Branches
More than 1042 branches (including 56 Service Branches/CPCs as on 30th June 2010).
ATM
Over 4474 ATMs (as on 30th June 2010) providing 24 hrs a day banking convenience to its customers.
2.1.5 Bank Strengths
The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve exce llence.
19
2.1.6 MANAGEMENT (KEY PEOPLE)
NAME
KEY POSITION
Dr. Adarsh Kishore
Chairman
Smt. Shikha Sharma
M.D. & CEO
Shri M. M. Agrawal
Deputy Managing Director
Shri J.R. Varma
Director
Dr. R.H. Patil
Director
Smt. Rama Bijapurkar
Director
Shri R.B.L. Vaish
Director
Shri M.V. Subbiah
Director
Shri K. N. Prithviraj
Director
Shri V. R. Kaundinya
Director
Shri S. B. Mathur
Director
Shri M. S. Sundara Rajan
Director
2.1.7 FINANCIAL STATEMENT OF AXIS BANK
20
Balance Sheet of Axis Bank
------------------------------------- in Rs. Cr. ------------------------------------Mar '06
Mar '07
Mar '08
Mar '09
Mar '10
12 mths
12 mths
12 mths
12 mths
12 mths
Total Share Capital
278.69
281.63
357.71
359.01
405.17
Equity Share Capital
278.69
281.63
357.71
359.01
405.17
Share Application Money
13.44
0.00
2.19
1.21
0.17
Preference Share Capital
0.00
0.00
0.00
0.00
0.00
Reserves
2,593.50
3,120.58
8,410.79
9,854.58
15,639.27
Revaluation Reserves
0.00
0.00
0.00 0. 00
0.00
0.00
8,770.69
10,214.80
16,044.61
Capital and Liabilities:
Net Worth
885.63
2, 3,402.21
Deposits
40,113.53
58,785.60
87,626.22
117,374.11
141,300.22
Borrowings
2,680.93
5,195.60
5,624.04
10,185.48
17,169.55
Total Debt
42,794.46
63,981.20
93,250.26
127,559.59
158,469.77
Other Liabilities & Provisions
4,051.03
5,873.80
7,556.90
9,947.67
6,133.46
Total Liabilities
49,731.12
73,257.21
109,577.85
147,722.06
180,647.84
Mar '06
Mar '07
Mar '08
Mar '09
Mar '10
12 mths
12 mths
12 mths
12 mths
12 mths
2,429.40
4,661.03
7,305.66
9,419.21
9,473.88
Balance with Banks, Money at Call 1,212.45
2,257.27
5,198.58
5,597.69
5,732.56
Advances
22,314.23
36,876.48
59,661.14
81,556.77
104,343.12
Investments
21,527.35
26,897.16
33,705.10
46,330.35
55,974.82
Gross Block
898.68
1,098.93
1,384.70
1,741.86
2,107.98
Accumulated Depreciation
345.33
450.55
590.33
726.45
942.79
553.35
648.38
794.37
1,015.41
1,165.19
Capital Work In Progress
14.37
24.82
128.48
57.48
57.24
Other Assets
1,679.98
1,892.07
2,784.51
3,745.15
3,901.06
Assets Cash & Balances with RBI
Net Block
21
Total Assets
49,731.13
73,257.21
109,577.84
147,722.06
180,647.87
Contingent Liabilities
36,524.72
55,993.04
78,028.44
104,428.39
296,125.58
Bills for collection
8,518.42
11,751.83
16,569.95
29,906.04
35,756.32
Book Value (Rs)
103.06
120.80
245.13
284.50
395.99
2.1.8 FINANCIAL PERFORMANCE IN Q1 YEAR
22
Auditors
M/s. S. R. Batliboi Batliboi & Co. Auditors
Chartered Accountants
Registrar and Share Transfer Agent
M/s. Karvy Computershare Private Limited
1.2.
Profile
Axis Bank is one of the fastest growing banks in the country and has an extremely competitive and profitable banking franchise evidenced by: Comprehensive portfolio of banking services includes Corporate Credit, Retail Banking, Business Banking, Capital Markets, Treasury and International Banking. 23
2.2.1 VISION 2015
y
To be the preferred financial solutions provider excelling in customer delivery through insight.
y
empowered employees and smart use of technology.
2.2.2 Core Values
Customer Centricity
Ethics
Transparency
Teamwork
Ownership
2.2.3 Mission and Values
Customer Service and Product Innovation tuned to diverse needs of individual and corporate clientele.
Continuous technology up gradation while maintaining human values.
Progressive globalization and achieving international standards.
Efficiency and effectiveness built on ethical practices. pract ices.
Customer Satisfaction through providing qua lity lity service serv ice effectively and efficiently e fficiently.. 24
"Smile, it enhances your face value" is a service quality stressed on Periodic Customer Service Audits.
Maximization of Stakeholder value.
Success through Teamwork, Integrity and People. Peo ple.
2.2.4 COMPETITORS
Major Private Sector competitors:
y
HDFC
y
ICICI
Major Public Sector competitors:
y
SBI
y
PNB
Axis bank
HDFC bank
ICICI bank
SBI
PNB
1994
Aug,1994
1955
July,1955
Lahore,1895
Founded
Dr. Adarsh
Jagdish Capoor
Mr.K.V.
Mr.O.P.BHATT
Mr.K.R.kamath
Chairmen
85909.36
Rs. 7326
Operating
Kishore $19.0 million million
kamath $ 941.25
$ 1.4 billion
crore
million
income
Crore RS 742 crore
$ 646.01
$ 1.03 billion
$2.473 billion
Rs. 3905
Net profit
million Crore 1,47,479
1,67,404
2,02,017
Approx. 300,000 25
2,49,330
deposites
