Attitude of Customers towards Public Sector & Private Sector Banks
⇒ Industry Overview 03
⇒ Industry Characteristics 04
⇒ Research Objective 05
⇒ Sampling Design 06
⇒ Research Design 07
⇒ Data Collection 09
⇒ Time Planning 10
⇒ Data Analysis 10
⇒ Findings 11
⇒ Recommendation 18
⇒ Questionnaire 20
Although some form of banking, mainly of the money-lending type, has been in
existence in India since ancient times, it was only over a century ago that proper
banking began. The earliest institutions which undertook banking business under the
British regime were agency houses which carried on banking business, in addition to
their trading activities.
With a view to bring commercial banks into the mainstream of economic development
with definite social obligations and objectives, the Government issued ordinance on 19
July 1969 acquiring ownership and control of 14 major banks in the country, with
deposits exceeding Rs 50 crores each. Six more commercial banks were nationalised
from 15 April 1980. The objectives of public sector banking system were outlined on 21
The three decades after nationalization saw a phenomenal expansion in the
geographical coverage and financial spread of the banking system in the country. As
certain rigidities and weaknesses were found to have developed in the system, during
the late eighties the Government of India felt that these had to be addressed to enable
the financial system to play its role in ushering in a more efficient and competitive
In the post-nationalization era, no new private sector banks were allowed to be set up.
However, in 1993, in recognition of the need to introduce greater competition, which
could lead to higher productivity and efficiency of the banking system, new private
sector banks were allowed to be set up in the Indian banking system.
Commercial Banking System in India consisted of 302 scheduled banks (including
foreign banks) and one non-scheduled bank at the end of March 1999. Over the period
March 1998 to March 1999, the number of scheduled banks increased by three while
that of non-scheduled banks remained unchanged at one. Of the scheduled banks, 223
are in public sector and these account for about 83 per cent of the deposits of all
scheduled commercial banks. In the public sector banking system, there are 196
regional rural banks, specially set up to increase the flow of credit to small borrowers in
the rural areas. These banks have specified areas of operations usually limited to two to
three districts. They also undertake some other commercial banking business. The
remaining 27 banks in the public sector are regular commercial banks and transact all
types of commercial banking business. Some important indicators in regard to progress
of commercial banking in India during the recent past are given in table 13.4.
Amongst the public sector banks, as on March 1999, the State Bank of India (SBI)
group (SBI and its seven associates) is the biggest unit with 13,290 offices and deposits
exceeding 1,39,000 crore aggregating Rs 1,71,782.48 crore and advances of Rs
1,14,430.37 crore. In the associate banks, SBI owns either the entire or the majority of
share capital. The SBI and its associate banks as a group account for around 31.9 per
cent of aggregate banking business (aggregate of deposits and advances) conducted
by the public sector banks and around 26.2 per cent of the aggregate business of the
entire banking system. The remaining 19 banks in the public sector are more
nationalised in 1969 and 1980 respectively
The banking industry has moved gradually from a regulated environment to a
deregulated market economy. The market developments kindled by liberalization and
globalization have resulted in changes in the intermediation role of banks. The pace of
transformation has been more significant in recent times with technology acting as a
catalyst. While the banking system has done fairly well in adjusting to the new market
dynamics, greater challenges lie ahead.
The financial system is the lifeline of the economy. The changes in the economy get
mirrored in the performance of the financial system, more so of the banking industry.
Liberalization and de-regulation process started in 1991-92 has made a sea change in
the banking system. From a totally regulated environment, we have gradually moved
into a market driven competitive system. Our move towards global benchmarks has
been, by and large, calibrated and regulator driven. The pace of changes gained
momentum in the last few years.
Structure and ownership pattern would undergo changes. There would be greater
presence of international players in the Indian financial system. Similarly, some of the
Indian banks would become global players. Government is taking steps to reduce its
holdings in Public sector banks to 33%. However the indications are that their PSB
character may still be retained.
Technology as an enabler is separately discussed in the report. It would not be out of
place, however, to state that most of the changes in the landscape of financial sector
discussed above would be technology driven. In the ultimate analysis, successful
institutions will be those, which continue to leverage the advancements in technology in
re-engineering processes and delivery modes and offering state-of-the-art products and
services providing complete financial solutions for different types of customers.
Banks will take on competition in the front end and seek co-operation in the back end,
as in the case of networking of ATMs. This type of competition will become the order of
the day as Banks seek to enlarge their customer base and at the same time to realize
cost reduction and greater efficiency.
To determine the Attitude of Customers towards Public sector & private Sector banks
To profile the customers in terms of:
⇒ Their savings pattern
⇒ Their banking pattern (frequency of transactions)
⇒ Preferences while selecting a bank for transacting for the first time
Since most of the country’s population is now engaged in banking transactions, it would
be infeasible to interview all of them. Hence the method of sampling was used.
The basic idea of sampling is that by selecting a representative sample, it’ll prove useful
in drawing valid conclusions and help in achieving a reliable result for this research.
This method is used mainly because of the large and the widely spread nature of the
To give reliable results by the sampling procedures 2 important factors should be taken
Accuracy: The degree to which bias is absent from the sample.
Precision: It should fully represent its population in all respects.
The relevant population in our case is all those transact with banks (Public or Private)
on a rather frequent basis and hold accounts in alteast one bank. The method of simple
random sampling is used.
Parameters of Interest
In our survey of estimating the attitudes of the bankers, the entire population is divided
into various parameters to enable us to diagnosis the perception the various categories
of users. These parameters are:
The income level
Area of residence
Since only people who hold bank accounts and are engaged in frequent banking
transactions applicable for this research, there was a list prepared of selected people
doing so. However, it was prepared on random basis.
Type of sample
For the purpose of this research, the probability random sampling method was adopted.
With this sample design, care has been taken to avoid arbitrary or biased selection of
sample element. Also, it will help in predicting the behaviour of the total population.
We intended to follow Normal Distribution curve while testing Hypothesis, a sample of
60 respondents was selected.
We have seen to it that our survey has equal participation from people of both sexes. In
addition, we have taken care that the survey has cut across various occupation barriers,
so that the results are not job or occupation specific.
The background information about public and private sector banks was collected by
visiting various sites and scanning various magazines.
However, the research analysis was based mainly on the primary data input received
from the customers themselves while conducting the fieldwork.
Purpose of the study:
The research design is of Descriptive type which aims to find out the Attitude of
customers towards public and private sector banks while selecting of transactions. It
aims to find answers to question like….
Is your bank at a convenient location for you?
Do you trust your bank?
Does the age of the bank matter when selecting them?
Do you prefer to use Modern technology in banking?
To what extent does the physical environment affect your decision about transacting
with a bank?
Does your bank’s commitment towards social causes have any bearing your selection
The instrument used for the research is the questionnaire, which was prepared after a
thorough knowledge of various aspects of factors that influence a particular consumer in
the bank-selection procedure.
There were two main objectives while framing the questionnaire.
First it aimed to find out generally to find out the selecting pattern of a person for a bank.
⇒ Is the bank at a convenient location?
⇒ To what extent does their friends’ opinion matter?
⇒ To what extent does the physical environment affect your decision?
⇒ Is the age of the bank important?
And secondly, it aimed at the intricate details, which a customer takes into consideration
while selecting a bank like,
⇒ Transaction tracking system availability
⇒ Staff-friendliness with the customers
⇒ ATM coverage by the banks
⇒ Net Banking facility
⇒ 24-customer service
The study was mainly focused on getting as diverse sample size, which is a healthy
representation of the population. So the incomes, area of residence, occupation were
the study’s variables.
The preparation of the questionnaire and the administration of the survey were carried
out by the same research team.
All places of Mumbai were covered in the survey.
Data collection time
The instruments were administered from first week of February to fourth week of
February 2004 to collect the response. The team took around 4 weeks of time to gather
all the relevant information.
Efforts to remove bias:
The survey was conducted in public locations like bus stops, educational institutions,
corporate offices etc .to gather the primary data.
Since the questionnaire was designed to be administered only on those consumers who
transacted with banks and held alteast one account in any bank, the field staffs were
told to ask the consumers before they filled the questionnaire.
Relevance of secondary data
The secondary data was only used to give a brief review about the banking industry and
about the features about the 2 sectors in it, namely the Private and the Public that
separate them, to the respondents while filling up the questionnaire.
The complete schedule is given below.
Jan Jan Feb Mar Mar Mar
12-19 20-25 1-28 1-2 16-20 25-26
Survey Design Check
Survey Conduct Check
Secondary Data Check
Project Finalization Check
The collected data was handled carefully in the form of filled-up questionnaires. The
response was then transferred manually to an Excel spreadsheet.
Preliminary analysis of the pilot survey was done to find out the sample proportion. This
was done with the help of Ms Excel software and all the aspects of the research were
For each variable the functions used were “Count If” and “Mode” as questionnaire
consisted of nominal scale questions.
The collected data is presented in the form of Bar graphs, Pie-chart and cross
The profile of the respondents are as follows :
1 2 3
Income Level Category
Income Level Category
1 = Below 2 Lakhs
2 = 2-5 Lakhs
3 = Above 5 Lakhs
Results of Survey
Private Sector Banks are preferred over Public Sector Banks and thus a positive
attitude towards the private sector banks.
The main reasons noticed for this result are as follows:
1] Customers perceive that private sector provides more facility than public
No. Of. Facilities
2] Inquiries is more efficiently handled by private sector banks than public sector.
Handling Of Inquiries
3] Private sector are perceived to be friendlier than public sector.
4] One-to-One Correspondence is perceived to be better in private sector banks.
5] Private sector banks are perceived to have better ATM Coverage.
6] Private Sector Banks are perceived to have a better Crisis Handling System.
Crisis Handling System
7] Private Sector are perceived to be more operationally flexible.
8] Response Time is perceived to be better in private sector banks.
9] Private sector are perceived be more user friendly than public sector bank.
Ease of Language
But along with this, there are some factors on which public sector banks gain and they
are as follows:
1] Public Sector banks have Better Branch coverage
2] Public sector banks are situated at locations convenient to customers.
3] Charges levied for different transaction are lower in case of public sector banks than
Extent of Charge
Cross Tabulation for Gender and Preference
Public Sector Banks Private Sector Banks
Male 8 22
Female 19 13
The above tabulation shows that male prefer private sector banks whereas females
prefer public sector banks. The reason for this attitude is that females prefer security.
For them the age of the bank as well as the good will achieved by it is important. This is
proved by the following cross tabulation between Gender and Importance of bank age:
Bank Age - Important Bank Age – Not Important
Male 8 20
Female 25 7
Customers have a positive attitude for private sector banks than public sector banks but
the difference between the 2 categories is only of 6% (Overall Performance graph).
Thus this minimal difference is due to various factors enumerated above. There are
certain aspects on which public sector performance is better but there are couple of
others where private banks are far ahead. If public sector banks improve on these
factors than it is possible for them to compete with private sector banks effectively. Thus
the recommendations for public sector banks to build a better image and develop
goodwill and positive attitude amongst customers are as follows :
1. Provide more facilities (productsservices). If they are already available create
awareness amongst customers.
2. Better one to one correspondence. Give time to individual customer and need.
Project the image that the bank cares for them.
3. Flexibility in operations is desired. Ex: Providing customers with the notes of
denomination they demand. This type of flexibility though does not break the
rules of the bank but creates a friendly image in customers mind.
4. Reduced response time. Efficiency in operations is to be obtained. Technological
improvements have to be made and response time should be reduced through
highly computerized and technological oriented processes.
5. Be more user-friendly (language). Customers (especially rural area) prefer to
interact in their local language and thus would like to visit banks where his
queries are better understood and thus efficiently solved.
6. Improved crisis handling system. This is the area where public sector banks
need to improve tremendously because private sector banks have setup a highly
technological systems to handle crisis situation like losing of cheques, ATM card,
credit card, etc. the system responds as quick as 1 minute in case of lost ATM
cards (Ex: Standard Chartered Bank). This time is of tremendous importance to
customer. Thus all care should be taken to reduce the time.
7. Better ATM coverage. If it already exist than creation of awareness about the
same amongst customers.
1. Copy of the sample Questionnaire
Attitude of Customers (Individuals) towards Private & Public Sector
• The following questionnaire is prepared with a view to evaluate the attitudes of
individuals towards the various Public and Private sector banks.
• The Questionnaire is to be filled keeping in mind the saving’s A/c.
• Please tick in the appropriate blanks and boxes.
Bank / Account Details
1. Mention the Banks (that you are aware of) in your area.
2. Do you hold accounts in more than one bank? (ie. Public as well as Private)
3. Which Banks do you deal in? What are the accounts that you hold?
4. How often do you perform transactions with the bank?
No. of transactions Public Private
1. Is your bank at a convenient location?
Branch Coverage Yes No Yes No
Travelling Convenience Yes No Yes No
2. Do your banks have a ‘transactions tracking system’?
3. If yes, to what extent is it important for you?
4. How does the bank levy the charges for different transactions? (E.g. issue of
(Tick in the applicable box)
Higher Standard Lower Higher Standard Lower
5. How would you rate the overall efficiency of your bank in the following?
(Tick in the applicable box)
Servies/Products Public Private
No. of facilities/products (E.g. bill
Good Average Bad Good Average Bad
payment, Credit cards, Debit cards, etc.)
Handling of Inquiries Good Average Bad Good Average Bad
Friendliness (behaviour) Good Average Bad Good Average Bad
One-to-one Correspondence Good Average Bad Good Average Bad
Ease of Language Good Average Bad Good Average Bad
Response Time Good Average Bad Good Average Bad
Flexibility (E.g. your bank provides notes in
Good Average Bad Good Average Bad
the denominations you demand)
ATM coverage by bank Good Average Bad Good Average Bad
System to deal with crisis situation Good Average Bad Good Average Bad
6. Do you prefer the use of modern technology in Banking?
7. To what extent are the following facilities important in your decision about
transacting with a bank?
Facilities Important Not important
24 hour Customer Service
8. If preferred, do you think the technologically advanced Private Sector banks tend to
gain by this?
9. To what extent are the following important while availing a Loan facility of a bank?
Facilities Important Not important
1. Are you aware of the Surveys conducted on Banks?
2. If yes, to what extent does it affect your decision about transacting with a bank?
3. To what extent does your friends’ opinion matter while transacting with a bank for
the first time?
4. To what extent does the physical environment affect your decision about transacting
with a bank?
5. Is your bank committed towards social causes? E.g. Gujarat Earthquake.
6. If yes, to what extent is it important in your decision about transacting with a bank?
7. How long is your relationship with the bank?
8. Is your bank favourably inclined towards the interviewee if he/she has long standing
relationship with the bank? (E.g. usually securities are required while granting loans,
but in certain cases, banks grant the loan to the customers on the basis of past
experience with the customer)
9. Do you trust your Bank?
10. If yes, to what extent is the age of the bank important?
11. Overall, which bank do you prefer more (Public/Private) and on what basis?
1. Name: _______________________
2. Gender: _______________________
Age group Tick
4. City/Town of Residence: ___________________
5. Marital Status: ___________________
6. Education Background:
7. Income level (per annum):
Income Level (in Rs.) Tick
Below Rs. 2 Lakhs
Rs. 2 – 5 Lakhs
Above Rs. 5 Lakhs
Thank you for your Valuable Time!