Indian Private Sector Banking

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A

Project report

OnConsumer behavior towards Third Party

Products (TPP) in Indian Private Sector

Banking

Submitted To

Prof.Rupal Parmar

Submitted By

Hetal Kalathiya

Shree Samanvay Institute of MBA

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PREFACE

Todays finicky customers will settle for noting less. The customer has come to

realize somewhat belatedly that he is the king. The customers choice of one

entity over another as his principal bank is determined by consideration of servicequality rather than any other factor. He wants competitive loan rates but at the

same time also wants his loan or credit card application processed in double quick

time.

As the traditional system is concern Banks mean that where there is cash

transactions are processing, where the receipts and payments or withdrawal and

deposits are made. But, now in a modern context Banks becomes the Basket of

products. Now a days, banks are offering the Third Party products like Mutual

Funds, Insurance and other financial securities products like Demat Accounts etc.

along with the Saving Accounts, Current Accounts, Fixed Deposits, Over-draft,Term Loans and Cash-Credit etc.

So, as the mind set of the customers are concern some still not accepted the

concept of Banking with basket of products. Still there are banking customers

who believe that Banking should be for the only cash transactions and taking and

giving of money.

So, to know the consumer behavior towards this concept and the expectations of

the consumers from the banks for the third party products and to analyze the

perception gap we had taken 3 Private Sector Banks and analyze the productswhich they are offering and surveyed the Bank Consumers. The Products of Bankswhich we analyzed are

- Centurion Bank of Punjab

- HDFC Bank

- ICICI Bank

This is a some how new concept in the Indian Private Sector Banking so

researches are made on it for the acceptance but here we tried to enlighten the

expectations of the consumers plus also thrown the light on the perception gapexist for the same.

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Acknowledgement

It is really a matter of pleasure for us to get an opportunity to thank all the persons

who contributed directly or indirectly for the successful completion of the project

report Consumer Behavior towards Third Party Products in Indian Private SectorBanking.

First of all we are extremely helpful to our college S.K.PATEL INSTITUTE OF

MANAGEMENT & COMPUTER STUDIES for providing us with this

opportunity and for al its cooperation and contribution. We also express our

gratitude to our honorable director Prof. S.Chinnam Reddy , and are highly

thankful to our project guide Prof. Pratima Prakash for giving us the

encouragement and freedom to conduct our project.

We are also grateful to our coordinator Dr.S.G.Das and all our faculty membersfor their valueable guidance and suggestions for our entire study.

We are greatly thankful to Mr. Dhaval Barot, Relationship Manager- Centurion

Bank of Punjab, Ahmedabad, for providing us guidance and helping us for the

entire study.

Last but not least we are thankful to all the friends and all other persons who

directly or indirectly help us for this project.

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Executive Summary

The report Consumer Behavior Towards Third Party Products in Indian Private

Sector Banking aims to the assimilate data about the various aspects of the

consumers behavior regarding the behaviors of the consumers towards the Third

Party Products of the Indian Private Sector Banking and to know the acceptance of

and the expectations of the consumers from Third Party Products of the Indian

Private Sector Banking.

For this we surveyed the consumers of the various Banks in Botad Coty viz.

The report is a mixture of secondary and primary data with Questionnaires beingour major instrument to collect primary data.

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INDUSTRY

PROFILE

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INDIAN BANKING SECTOR

Banking in India has its origin as early as the Vedic period. It is believed that the

transaction from money lending to banking must have occurred even before menu,

the great Hindu jurist, who has devoted a section of his work to deposit his

advances and laid down rules relating to rest of interest. During the Mogul period,

the indigenous bankers played a very important role in lending money and

financing foreign trend commerce. During the day of east India Company, it was

the turn of the agency houses to carry on banking business. The general bank of

India was the first joint stock bank to t be established in the year 1786.the other

which followed where the bank of Hindustan and Bengal bank. The bank of

Hindustan is reported to have continued till 1906 while the other two failed in

mean time. In the first half of the 19 century the east India company established

three bank, the bank of Bengal in 1809, the bank of Bombay in 1840,the bank of

madras in 1843. This three banks also known as residency bank, where

independent units and functioned well. this tree banks where amalgamated in 1920

and new bank, the imperial bank of India was established on 27th jan,1921.with

passing of the state bank of India act in 1955the undertaking of the imperial bank

of India was taken by the newly constituted state bank of India. The reserve bank

which is the central bank was creatsd in 1935 by passing reserve bank of India act

1934.in the wakw of the Swadeshi movement, a numbers of banks with Indian

management were established in the country namely, Punjab national bank ltd,

bank of India ltd. canara bank ltd, Indian bank ltd,the bank of Baroda ltd, central

bank of India ltd. On July 19,1969,14 major banks of the country were

nationalized and 15th April 1980 six more commercial private sector banks were

also taken over by the government.

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Today the commercial banking system in India may be distinguished into:

Public sector bank

a. state bank of India and its associated banks called the state bank group

b. 20 nationalized bank

c. regional rural banks mainly sponsored by public sector banks

Private sector banks

a. old generation private bank

b. new generation private banks

c. foreign banks in India

d. scheduled co-operation banks

e. non scheduled banks

Co operative sector

The co-operative banking sector has been developed in the country to the

supplement the village money lender. the co operative banking sector in India is

devided into 4 components:

1. State co-operative bank

2. Central co-operative bank3. Primary agriculture credit societies

4. Land development bank

5. Urban co-operative banks

6. Primary Agriculture development banks

7. Primary land development banks

8. State land development banks

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since 1990 in many developed countries, while in developing countries public

deposits continue to be dominant in banks. In India, the share of banking assets is

around 75 per cent, as of end-March 2004. There is, no doubt, merit in recognizing

the importance of diversification in the institutional and instrument specificaspects of financial intermediation in the interest of wider choice, competition and

stability.

However, the dominant role of banks in financial intermediation in emergence

economies and particularly in India will continue in the medium term and the

banks will continue to be special for a long time. In this regard, it is useful t

emphasis the dominance of the banks in the developing countries in promoting

non-bank financial intermediaries and service including in development of debt

market. Even where role of banks is apparently diminishing in the emerging

markets, substantively, they continue to play a leading role in non-banking

financial activities, including the development of finance markets.

Third, internationalization of banking operations: The foreign controlled banking

assets, as a proportion of total domestic banking assets, increased significantly in

several European countries (Austria, Ireland, Spain, Germany and Nordic

countries), but increases have been fairly small in some others (UK and

Switzerland). Amongst the emerging economies, while there was marked increase

of foreign controlled ownership in several Latin American economies, the increase

has, at best, been modest in the Asian economies. Available evidence seems toindicate some correlation between the extent of liberalization of capital account in

the emerging markets and the share of assets controlled by foreign banks. as per

the evidence available, the form of branches, seem to enjoy on par with domestic

banks, as compared with most of the other developing countries. Furthermore, the

profitability of their operation in India is considerably higher than the foreign

banks operation in most other developing countries. India continues to grant

branch licenses more liberally than the commitments made to the W.T.O

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Fourth, the Share of state owned banks in total banking sector assets: Emerging

economies with predominantly government owned banks, tend to have much

higher state ownership of banks compared to their developed counterparts. whilemany emerging countries choose to privatized their public sector banking

industries after a process of absorption of the overhang problems by the

government, we have encouraged state run banks to diversify ownership by

inducting private share capital through public offerings rather than by strategic

sales and still absorb the overhang problems. the process has helped reduced the

burden on the govt, enhance transparency, encourage market displined and

improved efficiency as reflected in stock market valuation promote efficient new

private sector banks, while drastically reducing the share of the wholly

government owned public sector banks is a good example of a dynamic mix of

public and privet ownership in banks.

A noteworthy feature of banking reforms in India is the growth of newly licensed

privet sector banks, some of which have attained globally best standards in terms

of technology, services and sophistically promoted banks have surpassed branches

of foreign banks in India. And could be a role model for other banks.

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BANK SYSTEM

Introduction

The reserve bank of India (RBI) is Indias central bank. Through the bankingindustry is currently dominated by public sector banks, numerous privet and

foreign banks exist. Indias govt owned banks dominate the market. Their

performance has been mixed with a few being consistently profitable. Several

public sector banks are being restructured, and in some the govt either already has

or will reduce its ownership.

Private and foreign banks

The RBI has granted operating approval to a few privately owned domestic banks;

of these many commenced banking business. Foreign banks operate more than

150 branches in India. The entry of foreign banks is based on reciprocity,

economic and political bilateral relations. An inter-departmental committee

approves applications for entry and expansion.

Capital adequacy norm

Foreign banks were required to achieve an 8% capital adequacy norm by march

1993, while Indian banks with overseas branches had until march 1995 to meet

that target. All other banks had to do so by march 1996. the banking sector is to be

use as a model for opening up of Indias insurance sector to privet domestic and

foreign participants, while keeping the insurance companies in operation.

Banking

India has an extension banking network, in both urban and rural areas. All large

Indian banks are nationalized, and all Indian financial institutes are in the public

sector.

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RBI Bank

The reserve bank of India is the central banking institutions. It is the sole authority

for issuing bank notes and the supervisory for banking operations in India.

It supervises and administers exchange control and banking regulations, andadministers the govts monitory policy. It is also responsible granting licenses for

new bank branches. 25 foreign banks operate in India with full banking licenses.

Several licenses for private bank have been approved. Despite fairly broad

banking coverage nation wide, the financial system remains inaccessible to the

poorest people in India.

Indian banking system

The banking system has three tiers. These are then scheduled commercial banks:

the regional rural banks which operate in rural areas not covered by the scheduled

banks;

And the cooperative and special rural banks.

Scheduled and scheduled banks

There are approximately 80 scheduled commercial banks, Indian and forign;

almost 200 regional rural banks; more than 350 central cooperatives banks,20 land

development banks; and a number of primary agricultural credit societies .in terms

of business , the public sector banks, namely the state bank of India and the

nationalized banks, dominate the banking sector.

Logical financingAll sources of local financing are available to foreign-participation companies in

corporate in India, regardless of the extent of foreign participation. Under foreign

exchange regulations, foreigners and non-residents, including foreign companies,

Require the permission of the reserv bank of India to borrow from a person or

company resident in india

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THIRD PARTY

PRODUCTS

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Today Indian Private Sector Banks started to deal with the Third Party Products. Now a

days Private Banks are selling the Third Party Products like Mutual Funds and Insurance

mainly.

Let us see both the industry in detail.

MUTUAL FUNDS

History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of

India, at the initiative of the Government of India and Reserve Bank the. The history of

mutual funds in India can be broadly divided into four distinct phases

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up

by the Reserve Bank of India and functioned under the Regulatory and administrativecontrol of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the

Industrial Development Bank of India (IDBI) took over the regulatory and administrative

control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the

end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector

banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation

of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June

1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund

(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda

Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set

up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,004

crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fundindustry, giving the Indian investors a wider choice of fund families. Also, 1993 was the

year in which the first Mutual Fund Regulations came into being, under which all mutual

funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer

(now merged with Franklin Templeton) was the first private sector mutual fund

registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive

and revised Mutual Fund Regulations in 1996. The industry now functions under the

SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual fundssetting up funds in India and also the industry has witnessed several mergers and

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acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets

of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under

management was way ahead of other mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust

of India with assets under management of Rs.29,835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and certain other

schemes. The Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and does not come

under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores ofassets under management and with the setting up of a UTI Mutual Fund, conforming to

the SEBI Mutual Fund Regulations, and with recent mergers taking place among

different private sector funds, the mutual fund industry has entered its current phase of

consolidation and growth. As at the end of September, 2004, there were 29 funds, which

manage assets of Rs.153108 crores under 421 schemes.

The graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

Note:

Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of

the Unit Trust of India effective from February 2003. The Assets under management ofthe Specified Undertaking of the Unit Trust of India has therefore been excluded from the

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total assets of the industry as a whole from February 2003 onwards.

Mutual Funds: An overview

Introduction

A Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is invested by the fund manager in

different types of securities depending upon the objective of the scheme. These could

range from shares to debentures to money market instruments. The income earned

through these investments and the capital appreciation realized by the scheme are shared

by its unit holders in proportion to the number of units owned by them (pro rata). Thus a

Mutual Fund is the most suitable investment for the common man as it offers an

opportunity to invest in a diversified, professionally managed portfolio at a relatively low

cost. Anybody with an investible surplus of as little as a few thousand rupees can investin Mutual Funds. Each Mutual Fund scheme has a defined investment objective and

strategy.

A mutual fund is the ideal investment vehicle for todays complex and modern financial

scenario. Markets for equity shares, bonds and other fixed income instruments, real

estate, derivatives and other assets have become mature and information driven. Price

changes in these assets are driven by global events occurring in faraway places. A typical

individual is unlikely to have the knowledge, skills, inclination and time to keep track of

events, understand their implications and act speedily. An individual also finds it difficult

to keep track of ownership of his assets, investments, brokerage dues and bank

transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified

and experienced staff that manages each of these functions on a full time basis. The large

pool of money collected in the fund allows it to hire such staff at a very low cost to each

investor. In effect, the mutual fund vehicle exploits economies of scale in all three areas -

research, investments and transaction processing. While the concept of individuals

coming together to invest money collectively is not new, the mutual fund in its present

form is a 20th century phenomenon. In fact, mutual funds gained popularity only after the

Second World War. Globally, there are thousands of firms offering tens of thousands of

mutual funds with different investment objectives. Today, mutual funds collectivelymanage almost as much as or more money as compared to banks.

A draft offer document is to be prepared at the time of launching the fund. Typically, it

pre specifies the investment objectives of the fund, the risk associated, the costs involved

in the process and the broad rules for entry into and exit from the fund and other areas of

operation. In India, as in most countries, these sponsors need approval from a regulator,

SEBI (Securities exchange Board of India) in our case. SEBI looks at track records of the

sponsor and its financial strength in granting approval to the fund for commencing

operations.

A sponsor then hires an asset management company to invest the funds according to theinvestment objective. It also hires another entity to be the custodian of the assets of the

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fund and perhaps a third one to handle registry work for the unit holders (subscribers) of

the fund.

In the Indian context, the sponsors promote the Asset Management Company also, in

which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the

Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor of theBirla Sun Life Asset Management Company Ltd., which has floated different mutual

funds schemes and also acts as an asset manager for the funds collected under the

schemes.

Recent trends in mutual fund industry

The most important trend in the mutual fund industry is the aggressive expansion of the

foreign owned mutual fund companies and the decline of the companies floated by

nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early nineties and got

off to a good start due to the stock market boom prevailing then. These banks did not

really understand the mutual fund business and they just viewed it as another kind of

banking activity. Few hired specialized staff and generally chose to transfer staff from the

parent organizations. The performance of most of the schemes floated by these funds was

not good. Some schemes had offered guaranteed returns and their parent organizations

had to bail out these AMCs by paying large amounts of money as the difference between

the guaranteed and actual returns. The service levels were also very bad. Most of these

AMCs have not been able to retain staff, float new schemes etc. and it is doubtful

whether, barring a few exceptions, they have serious plans of continuing the activity in amajor way.

The experience of some of the AMCs floated by private sector Indian companies was

also very similar. They quickly realized that the AMC business is a business, which

makes money in the long term and requires deep-pocketed support in the intermediate

years. Some have sold out to foreign owned companies, some have merged with others

and there is general restructuring going on.

The foreign owned companies have deep pockets and have come in here with the

expectation of a long haul. They can be credited with introducing many new practices

such as new product innovation, sharp improvement in service standards and disclosure,

usage of technology, broker education and support etc. In fact, they have forced the

industry to upgrade itself and service levels of organizations like UTI have improved

dramatically in the last few years in response to the competition provided by these.

Types of Mutual Funds

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Mutual fund schemes may be classified on the basis of its structure and its investment

objective.

ByStructure:

Open-ended Funds

An open-end fund is one that is available for subscription all through the year. These do

not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset

Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Closed-ended Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15

years. The fund is open for subscription only during a specified period. Investors can

invest in the scheme at the time of the initial public issue and thereafter they can buy or

sell the units of the scheme on the stock exchanges where they are listed. In order toprovide an exit route to the investors, some close-ended funds give an option of selling

back the units to the Mutual Fund through periodic repurchase at NAV related prices.

SEBI Regulations stipulate that at least one of the two exit routes is provided to the

investor.

Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are

open for sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective:

Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long-

term. Such schemes normally invest a majority of their corpus in equities. It has been

proven that returns from stocks, have outperformed most other kind of investments held

over the long term. Growth schemes are ideal for investors having a long-term outlook

seeking growth over a period of time.

Income Funds

The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate debentures

and Government securities. Income Funds are ideal for capital stability and regular

income.

Balanced Funds

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The aim of balanced funds is to provide both growth and regular income. Such schemes

periodically distribute a part of their earning and invest both in equities and fixed income

securities in the proportion indicated in their offer documents. In a rising stock market,

the NAV of these schemes may not normally keep pace, or fall equally when the market

falls. These are ideal for investors looking for a combination of income and moderate

growth.

Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and

moderate income. These schemes generally invest in safer short-term instruments such as

treasury bills, certificates of deposit, commercial paper and inter-bank call money.

Returns on these schemes may fluctuate depending upon the interest rates prevailing in

the market. These are ideal for Corporate and individual investors as a means to park

their surplus funds for short periods.

Load Funds

A Load Fund is one that charges a commission for entry or exit. That is, each time you

buy or sell units in the fund, a commission will be payable. Typically entry and exit loads

range from 1% to 2%. It could be worth paying the load, if the fund has a good

performance history.

No-Load Funds

A No-Load Fund is one that does not charge a commission for entry or exit. That is, nocommission is payable on purchase or sale of units in the fund. The advantage of a no

load fund is that the entire corpus is put to work.

INSURANCE

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Today concept of Banc assurance is getting very common, selling Insurance of another

company to the Bank customers.

Lets see the Bancassurance in detail.

Bancassurance

Introduction

With the opening up of the insurance sector and with so many players entering the Indian

insurance industry, it is required by the insurance companies to come up with innovative

products, create more consumer awareness about their products and offer them at a

competitive price. New entrants in the insurance sector had no difficulty in matching

their products with the customers' needs and offering them at a price acceptable to the

customer.

But, insurance not being an off the shelf product and one which requiring personal

counseling and persuasion, distribution posed a major challenge for the insurance

companies. Further insurable population of over 1 billion spread all over the country has

made the traditional channels of the insurance companies costlier. Also due to heavy

competition, insurers do not enjoy the flexibility of incurring heavy distribution expenses

and passing them to the customer in the form of high prices.

With these developments and increased pressures in combating competition, companies

are forced to come up with innovative techniques to market their products and services.

At this juncture, banking sector with it's far and wide reach, was thought of as a potential

distribution channel, useful for the insurance companies. This union of the two sectors iswhat is known as Bancassurance.

What is Bancassurance?

Bancassurance is the distribution of insurance products through the bank's distribution

channel. It is a phenomenon wherein insurance products are offered through the

distribution channels of the banking services along with a complete range of banking and

investment products and services. To put it simply, Bancassurance, tries to exploit

synergies between both the insurance companies and banks.

Bancassurance if taken in right spirit and implemented properly can be win-win situation

for the all the participants' viz., banks, insurers and the customers.

Advantages to banks

Productivity of the employees increases.

By providing customers with both the services under one roof, they can improve

overall customer satisfaction resulting in higher customer retention levels.

Increase in return on assets by building fee income through the sale of insurance

products.

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Can leverage on face-to-face contacts and awareness about the financial

conditions of customers to sell insurance products.

Banks can cross sell insurance products Eg: Term insurance products with loans.

Advantages to insurers

Insurers can exploit the banks' wide network of branches for distribution of

products. The penetration of banks' branches into the rural areas can be utilized to

sell products in those areas.

Customer database like customers' financial standing, spending habits, investment

and purchase capability can be used to customize products and sell accordingly.

Since banks have already established relationship with customers, conversion

ratio of leads to sales is likely to be high. Further service aspect can also be

tackled easily.

Advantages to consumers

Comprehensive financial advisory services under one roof. i.e., insurance services

along with other financial services such as banking, mutual funds, personal loans

etc.

Enhanced convenience on the part of the insured

Easy access for claims, as banks are a regular go.

Innovative and better product ranges

Bancassurance in India

Bancassurance in India is a very new concept, but is fast gaining ground. In India, the

banking and insurance sectors are regulated by two different entities (banking by RBI

and insurance by IRDA) and bancassurance being the combinations of two sectors comes

under the purview of both the regulators. Each of the regulators has given out detailed

guidelines for banks getting into insurance sector. Highlights of the guidelines are

reproduced below:

RBI guideline for banks entering into insurance sector provides three options for

banks. They are:

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Joint ventures will be allowed for financially strong banks wishing to undertake

insurance business with risk participation;

For banks which are not eligible for this joint-venture option, an investment

option of up to 10% of the net worth of the bank or Rs.50 crores, whichever is

lower, is available;

Finally, any commercial bank will be allowed to undertake insurance business asagent of insurance companies. This will be on a fee basis with no-risk

participation.

The Insurance Regulatory and Development Authority (IRDA) guidelines for the

Bancassurance are:

Each bank that sells insurance must have a chief insurance executive to handle all

the insurance activities.

All the people involved in selling should under-go mandatory training at aninstitute accredited by IRDA and pass the examination conducted by the

authority.

Commercial banks, including cooperative banks and regional rural banks, may

become corporate agents for one insurance company.

Banks cannot become insurance brokers.

Lifeinsurers:

1. Allianz Bajaj Life Insurance Co. Ltd.

2. Amp Sanmar Assurance Co. Ltd.

3. Birla Sun Life Insurance Co. Ltd.

4. Dabur Cgu Life Insurance Company Pvt.Ltd.

5. Hdfc Standard Life Insurance Co. Ltd.

6. Icici Prudential Life Insurance Co.Ltd.

7. Ing Vysya Life Insurance Co. Pvt. Ltd.

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8. Life Insurance Corporation Of India

9. Max New York Life Insurance Co. Ltd.

10. Metlife India Insurance Co. Pvt. Ltd.

11. Om Kotak Mahindra Life Insurance Co. Ltd.

12. Sbi Life Insurance Co.Ltd.

13. Tata Aig Life Insurance Co. Ltd.

Non-Life Insurers:

1. Bajaj Allianz General Insurance Co.

2. Icici Lombard General Insurance Co.

3. Iffco Tokyo General Insurance Co.

4. National Insurance Co.

5. New India Assurance Co.

6. Oriental Insurance Co.

7. Reliance General Insurance Co.

8. Royal Sundaram Alliance Insurance Co.

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9. Tata Aig Life Insurance Co.

10. United India Insurance Co.

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COMPANYPROFILE

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History of the Peoples Bank

The Botad peoples co-operative Bank in Gujarat State, India. wasestablished on 19thSeptember 1996 with a small capital of Rs.5000 under

the leadership of Late Dr. Vallbhbhai Patel as a Chairmen and Late

Bhupatrai Kothari as a Manager director has made tremendous and real

progress under the leadership of the former Chairman Late pro. Shamjibhai

Dhanani. Bank during past years bank has played vital role and leading

role for the development of industries,economy of Botad city.

Due to the great support and faith of customer, employees, The

Botad peoples co-operative Bank has got very nice position in themarket.As we know there is very much tough and cut throat competition in

banking sector yet The Botad peoples Co-Operative Bank regularly

increases its deposits and creates a good image.

Besides this, this bank is registered as insured bank by the

insurance and credit guarantee corporation of India, which has approved by

RBI, In addition, since last three years, this bank got A grade in the audit

inspection. It is also big achievement of this bank. In the year of 2007, the

bank co-coordinated with ING-VYSYA LIFE INSURANCE.

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Corporate Value and Culture

The Botad peoples co-operative Bank focuses not only to learn profitbut also to provide valuable services and products to the society.

It believes in maintain good and healthy relation with its employees and

customers.

It believes in smooth functioning of all departments from top to bottom

level.

This bank provides quick services to their customers compare to other

banks exist in Botad city.

It also accepts the suggestions and remarks of its employees and

customers

It strictly follows circulars which are timely announced by RBI.

This bank every year appreciates students who have secured above 80

percentages.

This Bank have good staff who always put their best effort to satisfy

their customers need and proved full information and solve theirdoubts.

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Bank Profile:

1. Head Office: Sardar shaker Bhawan

Haweli chowk paliyad

Road,Botad-364710

Dist. Bhavnagar

2. Phone number (02849) 242319

3. Fax Number (02849)253114

4. E mail Id [email protected]

5. Registration Number sec/7013

6. License Number OBD GUJ.1553P

7. No.of employees 7

8. Working Hours Transation Time 10

To 4 pm Saturday

10 am to 1 pm

9. Products Liability and Asset products

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http://in.mc1374.mail.yahoo.com/mc/[email protected]://in.mc1374.mail.yahoo.com/mc/[email protected]


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Product Range

The Botad peoples Co-Operative bank provides diversified products to

its customers. The products can be categorized in

Liability products

Assets products

Liability Products

Saving Account:

The Botad peoples Co-Operative bank provides 3.5%

interest on the savin accounts and the person gets interest only up to

between 10th of the month and ending day of the month.If any one takes

out money between these periods then he or she will not get the interest on

he money in saving account.

Fix deposits:

The Botad Peoples Co-Operative bank had different fixeddeposits with different types of intrest

30 days to 45 days up to 4.00%



185 days to 1 year up to 7.5%

1 year to 2 year up to 9.0%

More than 2 years 9.25%

Extra services

Senior citizens will get additional Interest 0.5%

Fixed Deposit Quaterly Interest Rate 0.25%Less

Franking Machine for special adhesive stamp is there in this Bank

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Assets Products

Hypothecation cash credit

In this facility bank provides money to the person according to hisstock in this business.Whatever stock he is having,he is able to get the

loan.Bank checks the business position and stock register of previous and

current year.

Against Fixed Receipts

In this bank provide against the fixed receipt of the customers. Inthis he bank checks out the receipts and takes it with bank till he customer

pays money with decided interest.

Secured Loan

This loan is given against some security. The procedure is

according to legal rules and the care should be taken that the customer is

liable to the bank until the customer will pay he money with predefinedinterest.

Unsecured Loan

This loan is given rarely because it involves risk of bad

debts. This loan is given to the customers up to only Rs.50,000

Mortgage Loan

In his bank follows certain decided steps. First of all, the

customers present the clear document to the bank then the engineer checks

out market value of assets. He also checks out the balance sheet and P&L

account and other business documents.

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RESEARCH DESIGN

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Types Of Research:

There are certain types of research which can be classified according to their very

purpose as well as by the research strategy used. A research can be classified into the

following categories:

Exploratory research

Conclusive research (Descriptive research )

Explanatory research

1. Exploratory research:

Exploratory research is an initial research which explores the possibility of

obtaining as many relationships as possible between different variables without knowing

their end-use applications. Here, a general study will be conducted without having any

specific objectives.

2. Conclusive research (Descriptive research):

In this type of research, problem of a research is formulated and specific

objectives are established. This type of research may be a result of exploratory research.

At the, the research draws definite and concrete conclusion(s) for implementation.

3. Explanatory research:

Here, in this type of research, the emphasis is given on studying a situation or a

problem in order to explain the relationship between two or more than two particular

variables. In short, situation is there, and you are just expected to explain the situation in

order to reveal the solutions.

Our research project falls in the both second and third categories. Its a

combination of both types of research. As the project has definite problems and specificobjectives, our project is of descriptive, in nature. At the end of our research, an attempt

would be made to explain the satisfaction level of employees along with their reasons and

factors for the employees working in BPOs and Call Centers to effect implementation.

Research Objectives:

The first step of any research project is to define the problem that is to be

answered by the research project itself. This is the most important part of the research

process, as it provides a focus and direction for the project and identifies the specific

information the reader is looking at in the project.

Actually, research objectives enable the reader to understand exactly what theproject is attempting to achieve. If the definition of problem is unclear and objectives are

poorly defined, the result could be waste of time, money, energy and resources. In short,

research objective is a pre-requisite for any research project.

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Objectives of the Project:

To know the Acceptance of TPP in Banking by Customers

To get the knowledge about the Expectations of the customers from Banking

sector towards TPP

To get knowledge about the Management of Customer Relationship towards TPPin different Private Sector Banks

To know the Satisfaction Level of the Customers from the TPP

Research Methodology:

Data Collection:

Data gathering is a very important part of the research project process. It is through

data, with the help of which we would be able to analyze the problem in terms of factsand figures.

Actually, the reliability of research decisions depends on the quality of data gathered.

By taking this concept into consideration, the data can be classified into primary data and

secondary data. We have used both the types of data, as far as our project is concerned.

1. Primary data

2. Secondary data

1. Primary Data:

Primary data are generally information gathered or generated by the researcher

for the purpose of the project immediately at hand. When the data are collected for the

first time, then that data is called primary data.

We have used the following primary data in our project:

Observation

Personal interview-include both formal as well as an informal interview

Questionnaire

2. Secondary Data:

These are those data which are collected from the various sources which have

been already created for the purpose of first time use and future use.

We have used the following secondary data in our project:

Internet

Journals

Magazines

Publications, Articles and Research Papers done before

From various Organizations

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Sample Unit:

Botad Paliyad Road Area was surveyed

Sample Size:

At the planning stage of a statistical investigation part, the question of sample size is very

critical. If the sample size is large, there could be a waste of money, energy and

resources, and if it is small, it doesnt make any sense of practical use in making good

decisions. So, the sample should be taken in such a way that it can bring fair, accurate

level of accuracy and unbiased results. 100 Samples from the all three banks are to be

surveyed and analyzed

SamplingTechnique:

Convenience Sampling was used to collect the data from the various banks and from thevarious bank customers.

Types of data analysis used:

In order to properly analyze the data, there would be two types of data analysis in

this project. They are as follows:

Qualitative data analysis through Findings, Analysis and explanation

Quantitative data analysis through charts, schedules, figures, and structures

Limitations:

The sample size was restricted with in the area of Botad

Further it was a convenience sampling.

There were time and cost limitations.

This project has been done for academic purpose and not done as a professional

researcher for the company.

There are chance of bias form the side of consumer also so that we cannot get

proper data so there are some part of error also there in the project

Bank is not provided full information so that we cannot get sufficient data for the

project

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Data

Analysisand

Interpretation

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1. In which sectors bank do you have bank account?

Public Sector 60%

Private Sector 56%

Co-operative 42%

Customers Preference for t

Banking Sector

0%

10%

20%

30%

40%

50%

60%

70%

public

sector

private

sector

co-

operative

Banking Secto

Percentages

Series1

Interpretation

The above diagram stat that 60% customer having bank account in public sector

56% customer having bank account in private sector and 42% customer having

account in co-operative bank which indicate that major customer having account in public

sector

Most of the customer preferred public sector bank because they said that this bank

are more safe and also they got more benefit and interest than private sector bank

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2. Which type of Bank Account do you have?

Current Account 84%

Saving Account 76%

Fixed Deposits 42%

0%

20%

40%

60%

80%

100%

Current

Account

Saving

Account

Fixed

Deposits

Series1

Interpretation:-

We can see from the chart that majority of the customer have current and savingsaccount in the bank this shows that there are customer who have both saving and

current account for business

There are so many people who have their own business so they have special

current account for their business so they prefer both savings and current

account.

Almost 42% of the customers respond to fixed deposits so we can say that this

people are keep their money for longer period of time

3. Are you aware about the Third Party Products?

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Yes 52%

No 48%

Interpretation:-

We can see from the chart that majority of the customer are aware about TPPand almost half of the customer are not that much aware about TPP

TPP is not that much popular in the city of Botad so that many of the customer

are not aware about it

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46%

47%

48%

49%

50%

51%

52%

yes no

Series1


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4. If yes, then have you ever invested for the same?

Yes 85%

No 15%

0 %

2 0 %

4 0 %

6 0 %

8 0 %

1 0 0 %

y e s n o

S e ries

Interpretation:-

We can see from the chart that those who respond positively in the previous

question respond positively in this question also.

Almost 85% of them are clearly invested in third party product. Majority of

the customer invest in insurance and mutual fund.

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0%

20%

40%

60%

80%

insurance Mutual fund

Series1

5. If yes, then in which product had you invested?

Insurance 78%

Mutual Funds 22%

Interpretation:-

We can see form the chart that majority of the customer invested in insurance

because the awareness of mutual fund is not that much in the market

Almost 22% of the respondents respond to mutual fund. There are so fewer banks in

the city which sell mutual fund as TPP so most of the people are invest their money

in Insurance

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0%

20%

40%

60%

80%

yes no

Series1

6. Do you think Banks need to deal with Third Party Products?

Yes 72%

No 28%

Interpretation:-

We can see from the chart that majority of the respondents respond positively that

bank should deal with TPP

Those who respond positively to this question, they think that if the banks are deal

with TPP then there is no extra commission or other charger the customer have to

pay.

There are some person who respond negatively because they think that bank is not

proper for the TPP there should be some agent of people to sell the mutual fund or

insurance

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7. Which Criteria you consider before taking the decision of

investment through particular Bank?

Service 44%

Credit worthiness 72%

Relations 62%

0%

10%

20%

30%

40%

50%

60%

70%

80%

servise credit

worthiness

relations

Series1

Interpretation:-

We can see from the chart that credit worthiness is one of the most important criteria

for the any person while making investment in any bank followed by the relation the

bank keep with its clients and the last one is service - the bank is providing.

Majority of the clients choose the combination of service and the credit worthiness.

If the bank provide more credit to the customer then the customer will invest more in

the bank and also it will directly benefited to the customer.

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0%

10%

20%

30%

40%

50%

highly

satisfied

satisfied moderate dissatisfied highly

dissatisfied

Series1

8. How will you rate the Satisfaction level from the services provided

to you by the Bank through which you made your investment?

Highly Satisfied 34%

Satisfied 42%

Moderate 15%

Dissatisfied 5%

Highly Dissatisfied 4%

Interpretation:-

We can clearly see from the chart that majority of the respondents respond to highly

satisfied and satisfied from the service provided by the bank through the investment

made in the bank.

The people who are satisfied got all the services and the credit worthiness from the

bank and there some extra services also which the bank is provided to its regular

customer.

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0%

20%

40%

60%

80%

100%

yes no

Series1

There are some customer who respond to dissatisfied and highly dissatisfied with the

services the bank provided to them

9. Are you satisfied with the products which are provided to you by

your Bank?

Yes 82%

No 18%

Interpretation:-

The main aim for asking this question was to identify whether the customer are

satisfied with the services which the banks provide to them

Here we can see from the chart that majority of the customer are respond positively

that they are almost satisfied with the current services provided by the bank like

credit facility, online banking, monthly statement etc.

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10. Before this, have you ever made investment in any TPP of Banks?

Yes 36%

No 64%

0 %

2 0 %

4 0 %

6 0 %

8 0 %

y e s n o

S er ie s

Interpretation: -

The main aim for asking this question was to know whether the customer made

the investment in TPP in other bank before or not

We can see from the chart that majority of the customer respond negatively that

they did not make any investment in TPP with other bank before.

Generally the people are invested in their insurance with in bank so they made

first time investment in bank with the TPP

There are some people who made investment with other bank also like SBI,

HDFC etc.

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11. Which factor leads you to shift to this Bank?

Services 10%

Product 42%

Relations 08%

Credit worthiness 22%

Return 18%

0 %

1 0 %

2 0 %

3 0 %

4 0 %

5 0 %

s e r v ic e p r o d u c t r e la t io n c r e d it

w or t h i nes s

r e t u r n

S erie s

Interpretation:-

The main aim for asking this question was to know about that what are various

factors which are responsible for the customers shifting from one bank to another

bank

We can see from the chart that product and credit worthiness is the highest ranked by

investors followed by service, return and relation

Relation and return also plays an important role for the shifting of customer from one

bank to another because the relation the banks are maintain with the customer and the

return the bank provided to the investment made by the customer is very important

aspects.

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0%

20%

40%

60%

80%

yes no

Series1

12.Do you think you may shift to any other Bank for Investment in

TPP in future?

Yes 68%

No 32%

Interpretation:-

The main aim for asking this question was to know whether investor want to shift

to other banks for investment in TPP or not

We can see from the chart that 68% of the customer wants to shift because they

think than there are also more options available in other bank also

Those who respond negatively said that they want to be with this bank only

because they are the highly satisfied customer

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13.Do you think you are getting the perceived product satisfaction?

Yes 52%

No 48%

46%

48%

50%

52%

yes no

Series1

Interpretation:-

The main aim for asking this question was to know whether the customers are

satisfied with the product offered by the bank or not

We can see from the chart that almost half of the customers are satisfied and half

of the customer respond negatively that they are not satisfied with the current

product offered by the bank

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Finding

s

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Findings

We found that how the various transaction and operational activity in the bank is

occurred in daily basis and how it interact with its customer

We also found that how the credit department works and the procedure for

opening of savings and current account

From the survey I have done in Botad, I found that almost half of the customer are

aware about the Third Party Product

Most of the people are invested their money in Insurance and not in mutual fund

because they are not that much aware about it and the basic things of mutual fund

There are some factors because of which the customer are shifted from one bank to

another, the main reasons include credit worthiness, relation, investment service,

relation with bank etc.

Most of the customer are satisfied with the current product provided by the bank

and they said that they do not want to shift in the case of TPP

TPP is one of the emerging concept among the people and in the Botad city, its

not that much popular because most of the bank do not provide that product other

than insurance

In the city majority of the customer have both savings and current account and

they also have insurance for their business also so they mainly deal with the TPP

for their business

Peoples are satisfied with the kind of services provided by the bank and the

product which are offered by the bank

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Conclusion

I hereby conclude that the summer internship program gives us lots of knowledge and we

got more practical knowledge then theory. We also know that how the corporate world

works and what all the norms, rules and regulation we have to follow once we entered in

to corporate

I have prepared this report on the consumer behavior towards TPP at Botad. This project

concludes that there is the market for third party product in the city because majority of

the people are not that much aware about the mutual fund and insurance also. So we

found that most of the customer have insurance and they are satisfied with the services

and the product which are offered by banks

Because of summer internship program in various company and financial corporate, as a

management student I learn lot of practical aspect from the corporate world and it will

surely help me in the future for my growth in corporate life.

Today in the world where smart work is appreciated and not the hard work, a bankmust be aware of its competitors and take such actions that would help it to snatch the

market share from the leader.

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Book Reference

Kothari C.R., 1990, Research Methodology, Second Edition

New Delhi, New Age International (P)Ltd. Publisher

Dr.S.P.Gupta and Dr.M.P.Gupta, Business Statistics, Fourteenth Edition, New

Delhi, Sultan Chand & Sons.

H.R.Ramanath, Research Methodology and Operation Research, Bombay/New

Delhi/Ahmedabad, Himalaya Publishing House

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Questionnaire on Consumer behavior towards Third Party Products

(TPP) in Indian Private Sector BankingObjective: - This Survey is aimed at identifying on Consumer behavior towards Third

Party Products (TPP) in Indian Private Sector Banking. The data and information given

by you in this questionnaire will be kept confidential and used for educational purposes

only. It will be a great help if you cooperate with usName:_____________________________________________________________

Gender: _________ Cell No: _______________

Age:

18-25 26-35 36-55 Above 56

Monthly Income

5000-10000 10000-20000 20000-30000 Above 30000

Educational Background

Under graduate Graduate Post Graduate

1. In which sectors bank do you have bank account? Public Sector

Private Sector

Co-operative

2. Which type of Bank Account do you have?

Current Account

Saving Account

Fixed Deposits

3. Are you aware about the Third Party Products? Yes

No

4. If yes, then have you ever invested for the same?

Yes

No

5. If yes, then in which product had you invested?

Insurance

Mutual Funds

6. Do you think Banks need to deal with Third Party Products? Yes

No

7. Which Criteria you consider before taking the decision of

investment through particular Bank?

Service

Credit worthiness

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Relations

8. How will you rate the Satisfaction level from the services provided

to you by the Bank through which you made your investment?

Highly Satisfied

Satisfied

Moderate

Dissatisfied

Highly Dissatisfied

9. Are you satisfied with the products which are provided to you by

your Bank?

Yes

No

10.Before this, have you ever made investment in any TPP of Banks? Yes

No

11.Which factor leads you to shift to this Bank?

Services

Product

Relations

Credit worthiness

Return

12.Do you think you may shift to any other Bank for Investment inTPP in future?

Yes

No

13.Do you think you are getting the perceived product satisfaction?

Yes

No

Documents

Indian Private Sector Banking