CHAPTER-I

INTRODUCTION TO SUBJECT

1.1 THEORETICAL FOUNDATION

1.1.1 Introduction
Banking is the pivotal of Indian economy. Banking, if we equate it with money lending, it
perhaps as old as civilization itself when ‘money’ in its modern form was not in
existence, people in order to obtain the goods and services, offered other goods and
services in return. This was - Barter an inconvenient system. Nevertheless people could
lend and borrow in the form of any other mutually acceptance form.
Banking institutions today form the heart of the financial structure of any country
whether it is developed or developing.
So, banks are like:
“Oxygen for economy which is necessary for the generation & management of the blood
i.e. the finance of the economy and circulates through the network of the bank i.e. “the
Network of Branches”.
Banks lending, investing and related activities facilitate the economic process of
production, distribution and consumption. Banks encourage investments and thereby help
in capital formation.

1.1.2 Definition of Banking:

Acc. To Sec. 5 (b)
“Banking is defined as accepting for the purpose of lending or investment of deposits of
money from public, repayable on demand or otherwise and withdrawals by cheque, draft,
order or otherwise.”
“Financial institution whose primary activity is to act as a payment agent for
customers and to borrow and lend money. Banks are important players of the market and
offer services as loans and funds”.
Banking Regulation Act of India, 1949 defines Banking as “accepting, for the purpose of

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lending or of investment of deposits of money from the public, repayable on demand or
otherwise or withdrawable by cheque, draft order or otherwise.” The Reserve Bank of
India Act, 1934 and the Banking Regulation Act, 1949, govern the banking operations in
India.

1.1.3 Evolution of Banking:

Origin: Its origin in the simplest term, can be traced to the origin of authentic history
soon after society recognized the benefits of using money as a medium of exchange, it
recognized the need for a “safe place” to store it. This “safe place” ultimately evolved
into financial institutions that “accept deposits and disburse loans” i.e. the modern
commercial banks.
Origin of the word “BANK”: On the other hand, even the origin of the word “BANK” is
shrouded in mystery. According to one view point, the Italian business houses carrying a
crude form of banking were called “Banchi Bancherii” According to another view point,
the word “Bank” is derived from the German word “Bank” which means heap or wound.
Subsequently, Italians started using the name “Banco” which means accumulation of
money or of stock.
Origin of Commercial Banking: The origin of commercial banking can be traceable in the
early times of human history. In the ancient Rome & Greece, the practices of storing
precious metals and coins at safe places and loaning out money for public and private
purposes on interest was prevalent. In England, banking had its origin with the London
Goldsmiths, who in the 7th century began to accept deposits from merchants and others
for safe keeping of money and other valuables. As public enterprise, banking made its
first appearance in Italy in 1157 when the Bank of Venice was founded.

1.1.4 History of Banking in India

There are three different phases in the history of banking in India.
1) Pre-Nationalization Era.
2) Nationalization Stage.
3) Post Liberalization Era.

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1) Pre-Nationalization Era:
In India the business of banking and credit was practices even in very early times. The
remittance of money through Hundies, an indigenous credit instrument, was very popular.
The hundies were issued by bankers known as Shroffs, Sahukars, Shahus or Mahajans in
different parts of the country.
The modern type of banking, however, was developed by the Agency Houses of Calcutta
and Bombay after the establishment of Rule by the East India Company in 18th and 19th
centuries.
During the early part of the 19th Century, ht volume of foreign trade was relatively small.
Later on as the trade expanded, the need for banks of the European type was felt and the
government of the East India Company took interest in having its own bank. The
government of Bengal took the initiative and the first presidency bank, the Bank of
Calcutta (Bank of Bengal) was established in 180. In 1840, the Bank of Bombay and IN
1843, the Bank of Madras was also set up
These three banks also known as “Presidency Bank”. The Presidency Banks had their
branches in important trading centers but mostly lacked in uniformity in their operational
policies. In 1899, the Government proposed to amalgamate these three banks in to one so
that it could also function as a Central Bank, but the Presidency Banks did not favor the
idea. However, the conditions obtaining during world war period (1914-1918)
emphasized the need for a unified banking institution, as a result of which the Imperial
Bank was set up in1921. The Imperial Bank of India acted like a Central bank and as a
banker for other banks.
The RBI (Reserve Bank of India) was established in 1935 as the Central Bank of the
Country. In 1949, the Banking Regulation act was passed and the RBI was nationalized
and acquired extensive regulatory powers over the commercial banks. In 1950, the Indian
Banking system comprised of the RBI, the Imperial Bank of India, Cooperative banks,
Exchange banks and Indian Joint Stock banks.

2) Nationalization Stage:
After Independence, in 1951, the All India Rural Credit survey, committee of Direction

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with Shri. A. D. Gorwala as Chairman recommended amalgamation of the Imperial Bank
of India and ten others banks into a newly established bank called the State Bank of India
(SBI). The Government of India accepted the recommendations of the committee and
introduced the State Bank of India bill in the Lok Sabha on 16th April 1955 and it was
passed by Parliament and got the president’s assent on 8th May 1955. The Act came into
force on 1st July 1955, and the Imperial Bank of India was nationalized in 1955 as the
State Bank of India
The main objective of establishing SBI by nationalizing the Imperial Bank of India was
“to extend banking facilities on a large scale more particularly in the rural and semi-urban
areas and to diverse other public purposes.
In 1959, the SBI (Subsidiary Bank) act was proposed and the following eight state-
associated banks were taken over by the SBI as its subsidiaries.

Name of the Bank Subsidiary with effect from

1. State Bank of Hyderabad 1st October 1959
2. State Bank of Bikaner 1st January 1960
3. State Bank of Jaipur 1st January 1960
4. State Bank of Saurashtra 1st May 1960
5 State Bank of Patiala 1st April 1960
6. State Bank of Mysore 1st March 1960
7. State Bank of Indore 1st January 1968
8.State Bank of Travancore 1st January 1960

With effect from 1st January 1963, the State Bank of Bikaner and State Bank of Jaipur
with head office located at Jaipur. Thus, seven subsidiary banks State Bank of India
formed the SBI Group.
The SBI Group under statutory obligations was required to open new offices in rural and
semi-urban areas and modern banking was taken to these unbanked remote areas.
On 19th July 1969, then the Prime Minister, Mrs. Indira Gandhi announced the
nationalization of 14 major scheduled Commercial Banks each having deposits worth Rs.
50 crore and above. This was a turning point in the history of commercial banking in

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India. Later the Government Nationalized six more commercial private sector banks with
deposit liability of not less than Rs. 200 crores on 15th April 1980, viz.
• Andhra Bank.
• Corporation Bank.
• New Bank if India.
• Oriental Bank of Commerce.
• Punjab and Sind Bank.
• Vijaya Bank.

In 1969, the Lead Bank Scheme was introduced to extend banking facilities to every
corner of the country. Later in 1975, Regional Rural Banks were set up to supplement the
activities of the commercial banks and to especially meet the credit needs of the weaker
sections of the rural society. Nationalization of banks paved way for retail banking and as
a result there has been an alt round growth in the branch network, the deposit
mobilization, credit disposals and of course employment.
The first year after nationalization witnessed the total growth in the agricultural loans and
the loans made to SSI by 87% and 48% respectively. The overall growth in the deposits
and the advances indicates the improvement that has taken place in the banking habits of
the people in the rural and semi-urban areas where the branch network has spread. Such
credit expansion enabled the banks to achieve the goals of nationalization, it was
however, achieved at the coast of profitability of the banks.
Consequences of Nationalization:
 The quality of credit assets fell because of liberal credit extension policy.
 Political interference has been as additional malady.
 Poor appraisal involved during the loan meals conducted for credit disbursals.
 The credit facilities extended to the priority sector at concessional rates.
 The high level of low yielding SLR investments adversely affected the profitability
of the banks.
 The rapid branch expansion has been the squeeze on profitability of banks emanating
primarily due to the increase in the fixed costs.

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 There was downward trend in the quality of services and efficiency of the banks.
3) Post-Liberalization Era
Thrust on Quality and Profitability: By the beginning of 1990, the social banking goals
set for the banking industry made most of the public sector resulted in the presumption
that there was no need to look at the fundamental financial strength of this bank.
Consequently they remained undercapitalized. Revamping this structure of the banking
industry was of extreme importance, as the health of the financial sector in particular and
the economy was a whole would be reflected by its performance.
The need for restructuring the banking industry was felt greater with the initiation of the
real sector reform process in 1992. the reforms have enhanced the opportunities and
challenges for the real sector making them operate in a borderless global market place.
However, to harness the benefits of globalization, there should be an efficient financial
sector to support the structural reforms taking place in the real economy. Hence, along
with the reforms of the real sector, the banking sector reformation was also addressed.
The route causes for the lackluster performance of banks, formed the elements of the
banking sector reforms. Some of the factors that led to the dismal performance of banks
were.
• Regulated interest rate structure.
• Lack of focus on profitability.
• Lack of transparency in the bank’s balance sheet.
• Lack of competition.
• Excessive regulation on organization structure and managerial resource.
• Excessive support from government.
Against this background, the financial sector reforms were initiated to bring about a
paradigm shift in the banking industry, by addressing the factors for its dismal
performance.
In this context, the recommendations made by a high level committee on financial sector,
chaired by M. Narasimham, laid the foundation for the banking sector reforms. These
reforms tried to enhance the viability and efficiency of the banking sector. The
Narasimham Committee suggested that there should be functional autonomy, flexibility
in operations, dilution of banking strangulations, reduction in reserve requirements and

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adequate financial infrastructure in terms of supervision, audit and technology. The
committee further advocated introduction of prudential forms, transparency in operations
and improvement in productivity, only aimed at liberalizing the regulatory framework,
but also to keep them in time with international standards. The emphasis shifted to
efficient and prudential banking linked to better customer care and customer services.

1.1.5 Law of banking

Banking law is based on a contractual analysis of the relationship between the bank
(defined above) and the customer—defined as any entity for which the bank agrees to
conduct an account.
The law implies rights and obligations into this relationship as follows:
1. The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the
customer; when the account is overdrawn, the customer owes the balance to the
bank.
2. The bank agrees to pay the customer's cheques up to the amount standing to the
credit of the customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the
customer, e.g. a cheque drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customer's
account as the customer's agent, and to credit the proceeds to the customer's
account.
5. The bank has a right to combine the customer's accounts, since each account is
just an aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the extent
that the customer is indebted to the bank.
7. The bank must not disclose details of transactions through the customer's account
—unless the customer consents, there is a public duty to disclose, the bank's
interests require it, or the law demands it.
8. The bank must not close a customer's account without reasonable notice, since
cheques are outstanding in the ordinary course of business for several days.

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These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular
jurisdiction may also modify the above terms and/or create new rights, obligations or
limitations relevant to the bank-customer relationship.

1.1.6 Banking channels

Banks offer many different channels to access their banking and other services:
• A branch, banking centre or financial centre is a retail location where a bank or
financial institution offers a wide array of face-to-face service to its customers.
• ATM is a computerised telecommunications device that provides a financial
institution's customers a method of financial transactions in a public space without
the need for a human clerk or bank teller. Most banks now have more ATMs than
branches, and ATMs are providing a wider range of services to a wider range of
users. For example in Hong Kong, most ATMs enable anyone to deposit cash to
any customer of the bank's account by feeding in the notes and entering the
account number to be credited. Also, most ATMs enable card holders from other
banks to get their account balance and withdraw cash, even if the card is issued by
a foreign bank.
• Mail is part of the postal system which itself is a system wherein written
documents typically enclosed in envelopes, and also small packages containing
other matter, are delivered to destinations around the world. This can be used to
deposit cheques and to send orders to the bank to pay money to third parties.
Banks also normally use mail to deliver periodic account statements to customers.
• Telephone banking is a service provided by a financial institution which allows its
customers to perform transactions over the telephone. This normally includes bill
payments for bills from major billers (e.g. for electricity).
• Online banking is a term used for performing transactions, payments etc. over the
Internet through a bank, credit union or building society's secure website.
• Mobile banking is a method of using one's mobile phone to conduct simple
banking transactions by remotely linking into a banking network

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1.1.7 General Aspect of Bank’s Services
According to Crowther, a bank “collects money from those who have it to spare or who
are saving it out of their incomes, and it lends this money to those who require it.” The
bank has the following features:
1) It deals with money; it accepts deposits and advances loans.
2) It also deals with credit; it has the ability to create credit.i.e. the ability to expand
its liabilities as a multiple of its reserves.
3) It is commercial institution; it aims at earning profit.
4) It is a unique financial institution that creates demand deposits which serve as a
medium of exchange and, as a result, the banks manage the payment system of the
country.

1.1.8 Services of Commercial Banks or Modern Banks

• Accepting Deposits: The first important function of a bank is to accept
deposits from those who can save but cannot profitably utilize this saving
themselves. To attract from all sorts of individuals, the banks maintain
different types of accounts:
• Fixed Deposit Account: Money in these accounts is deposited for fixed
period of time (say one, two, or five years) and cannot be withdrawn before
the expiry of that period.
• Current Deposit Account: These accounts are generally maintained by the
traders and businessman who has to make a number of payments every day
and money can be withdrawn from these accounts in as many times.
• Saving Deposit Account: The aim of these accounts is to encourage and
mobilize small savings of the public. Certain restrictions are imposed on the
depositors regarding the number of withdrawals and the amount to be with
drawn in a given period.
• Recurring Deposit Account: the purpose of these accounts is to encourage
regular savings by the public, particularly by the fixed income group.
• Home Safe Account: Under this scheme a safe is supplied to the depositor to
keep it at home and to put his small savings in it.

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• Advancing of Loans: The second important function of a bank is advancing
of loans to the public. After keeping certain cash reserves, the banks lend their
deposits to the needy borrowers. Various types of loans granted by the banks
are:
• Money at call: Such loans are very short period loans and can be called by
the bank at a very short notice of say one day to fourteen days.
• Cash Credit: It is a type of loan which is given to the borrower against his
current assets, such as shares, stocks, bonds, etc. The bank opens the account
in the name of the borrowers and allows him to withdraw borrowed money
from time to time upto a certain limit as determined by the value of his current
assets.
• Overdraft: Sometimes, the bank provides facilities to its customers though
which they are allowed to withdraw more than their deposits.
• Discounting of Bills of Exchange: Through this method, a holder of a bill of
exchange can get it discounted by the bank.
• Term Loans: The banks have also started advancing medium term and long
term loans. The maturity period for such loans is more than one year. The
interest is charged on the entire amount of the loan and the loan is repaid
either on maturity or in installments.
• Credit Creation: A unique function of the bank is to create credit. In fact,
credit creation is the natural outcome of the process of advancing loans as
adopted by the banks. When a bank advances loan to its customers, it does not
lend cash but opens an account in the borrower’s name and credit the amount
of loan to this account. Thus, whenever a bank grants loan, it creates an equal
amount of bank deposits. Creation of such deposits is called credit creation.
• Promoting Cheque System: banks also render a very useful medium of
exchange in the form of cheques. Through a Cheque, the depositor directs the
bankers to make payment to the payee. Cheque is the most developed credit
instrument in the money market.
• Agency Functions: Banks also perform certain agency functions for and on
behalf of their customers:

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 o Remittance of Funds
o Collection and Payment of credit instruments
o Execution of Standing Orders
o Purchasing and Sale of Securities
o Collection of Dividends on Shares
o Income Tax Consultancy
o Acting as Trustee and Executor

1.1.9 Broad Classification of Banks in India:

The RBI:
The RBI is the supreme monetary and banking authority in the country and has the
responsibility to control the banking system in the country. It keeps the reserves of all
scheduled banks and hence is known as the “Reserve Bank”.

Public Sector Banks:

• State Bank of India and its Associates (8)
• Nationalized Banks (19)
• Regional Rural Banks Sponsored by Public Sector Banks (196)
• Old Generation Private Banks (22)

Private Sector Banks:

• Foreign New Generation Private Banks (8)
• Banks in India (40)

Cooperative banks
• State Co-operative Banks
• Central Co-operative Banks
• Primary Agricultural Credit Societies
• Land Development Banks

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• State Land Development
Development Banks:
• Development Banks mostly provide long term finance for setting up industries. They
also provide short-term finance (for export and import activities)
• Industrial Finance Co-operation of India (IFCI)
• Industrial Development of India (IDBI)
• Industrial Investment Bank of India (IIBI)
• Small Industries Development Bank of India (SIDBI)
• National Bank for Agriculture and Rural Development (NABARD)
• Export-Import Bank of India

1.1.10 Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) is the central bank of India, and was established on
April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
Since its inception, it has been headquartered in Mumbai. Though originally privately
owned, RBI has been fully owned by the Government of India since nationalization in
1949.
RBI is governed by a central board (headed by a Governor) appointed by the Central
Government. The current governor of RBI is Dr.Y.Venugopal Reddy who succeeded Dr.
Bimal Jalan on September 6, 2003). RBI has 22 regional offices across India.The Reserve
Bank of India was set up on the recommendations of the Hilton Young Commission. The
commission submitted its report in the year 1926, though the bank was not set up for nine
years.

Monetary Authority
• Formulates, implements and monitors the monetary policy.
• Objective: maintaining price stability and ensuring adequate flow of credit to
productive sectors.

Regulator and supervisor of the financial system

• Prescribes broad parameters of banking operations within which the country’s

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 banking and financial system functions
• Objective: maintain public confidence in the system, protect depositors’ interest
and provide cost-effective banking services to the public. The Banking
Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI) for
effective redressal of complaints by bank customers

Manager of Exchange Control

• Manages the Foreign Exchange Management Act, 1999.
• Objective: to facilitate external trade and payment and promote orderly
development and maintenance of foreign exchange market in India.

Issuer of currency
• Issues and exchanges or destroys currency and coins not fit for circulation.
• Objective: to give the public adequate quantity of supplies of currency notes and
coins and in good quality.

Developmental role
• Performs a wide range of promotional functions to support national objectives.

Related Functions
• Banker to the Government: performs merchant banking function for the central
and the state governments; also acts as their banker.
• Banker to banks: maintains banking accounts of all scheduled banks.
• Owner and operator of the depository (SGL) and exchange (NDS) for government
bonds.
• There is now an international consensus about the need to focus the tasks of a
central bank upon central banking. RBI is far out of touch with such a principle,
owing to the sprawling mandate described above.

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1.1.11 Economic Functions
The economic functions of banks include:
1. Issue of money, in the form of banknotes and current accounts subject to cheque
or payment at the customer's order. These claims on banks can act as money
because they are negotiable and/or repayable on demand, and hence valued at par.
They are effectively transferable by mere delivery, in the case of banknotes, or by
drawing a cheque that the payee may bank or cash.
2. Netting and settlement of payments – banks act as both collection and paying
agents for customers, participating in interbank clearing and settlement systems to
collect, present, be presented with, and pay payment instruments. This enables
banks to economise on reserves held for settlement of payments, since inward and
outward payments offset each other. It also enables the offsetting of payment
flows between geographical areas, reducing the cost of settlement between them.
3. Credit intermediation – banks borrow and lend back-to-back on their own account
as middle men
4. Credit quality improvement – banks lend money to ordinary commercial and
personal borrowers (ordinary credit quality), but are high quality borrowers. The
improvement comes from diversification of the bank's assets and capital which
provides a buffer to absorb losses without defaulting on its obligations. However,
banknotes and deposits are generally unsecured; if the bank gets into difficulty
and pledges assets as security, to raise the funding it needs to continue to operate,
this puts the note holders and depositors in an economically subordinated
position.
5. Maturity Transformation – banks borrow more on demand debt and short term
debt, but provide more long term loans. In other words, they borrow short and
lend long. With a stronger credit quality than most other borrowers, banks can do
this by aggregating issues (e.g. accepting deposits and issuing banknotes) and
redemptions (e.g. withdrawals and redemptions of banknotes), maintaining
reserves of cash, investing in marketable securities that can be readily converted
to cash if needed, and raising replacement funding as needed from various sources
(e.g. wholesale cash markets and securities markets).

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1.1.12 Supervisory Functions:
In addition to its traditional central functions, the Reserve bank has certain nonmonetary
functions of the nature of supervision of banks and promotion of sound banking in India.
The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI
wide powers of supervision and control over commercial and cooperative banks, relating
to licensing and establishments, branch expansion, liquidity of their assets, management
and methods of working, amalgamation, reconstruction and liquidation. The RBI is
authorized to carry out periodical inspections of the banks and to call for returns and
necessary information from them. The nationalization of 14 major Indian scheduled
banks in July 1969 has imposed new responsibilities on the RBI for directing the growth
of banking and credit policies towards more rapid development of the economy and
realization of certain desired social objectives. The supervisory functions of the RBI have
helped a great deal in improving the standard of banking in India to develop on sound
lines and to improve the methods of their operation.

1.1.13 Promotional Functions:

With economic growth assuming a new urgency since Independence, the range of the
Reserve Bank’s functions have steadily widened. The Bank now performs a variety of
developmental and promotional functions, which, at one time, were regarded as outside
the normal scope of central banking. The Reserve Bank was asked to promote banking
habit, extend banking facilities to rural and semi-urban areas, and establish and promote
new specialized financing agencies. Accordingly, the Reserve bank has helped in the
setting up of the IFCI and the SFC: it set up the Deposit Insurance Corporation of India in
1963 and the Industrial Reconstruction Corporation of India in 1972. These institutions
were set up directly or indirectly by the Reserve Bank to promote saving habit and to
mobilize savings, and to provide industrial finance as well as agricultural finance. As far
back as 1935, the RBI set up the Agricultural Credit Department to provide agricultural
credit. But only since 1951 the Bank’s role in this field has become extremely important.
The Bank has developed the co-operative credit movement to encourage saving, to
eliminate money-lenders from the villages and to route its short term credit to agriculture.

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1.1.14 Types of Banks in India

1) Public Sector Banks

The public sector banks in India is formally owned and managed by the Government of
India. The government owns these banks. In India 20 banks were nationalized in 1969
and 1980 respectively. Social welfare is there main objective. It basically constitutes of
the following:
• State Bank of India and its subsidiaries: State Bank of India and its associates are
called State bank group. This group comprises of the State Bank of India (SBI)
and its seven subsidiaries viz. State Bank of Patiala, State Bank of Hyderabad,
State Bank of Travancore, State Bank of Bikaner and Jaipur, State Bank of
Mysore, State Bank of Saurashtra and State Bank of Indore.
• Nationalized Banks : This group consists of private sector banks that were
nationalized by the Government of India. On the 19th July 1969, fourteen major
Indian bans having deposits of more than Rs. 50 crores were nationalized. The
undertakings of these fourteen banks were taken over by and have vested in 14
new corporate bodies established under the baking companies (acquisition and
transfer of undertaking) act, 1970. It has been amended by banking companies
act 1994, according to which the share capital upto 49% of the nationalized banks
can be held by the public and the cost of the share capital will be owned by the
Government of India. These 14 banks are now manages by the Govt. of India
through the board of directors appointed by it. On 15th April 1980, six more
banks having deposits not less than Rs. 200 crores were also nationalized. The
undertakings of these banks were taken over and vested in six corresponding new
banks under the banking companies (acquisition and transfer of undertakings) act,
1980.
• Rural Banks : These were established by the RBI in the year 1975 of Banking
Commision. It was established to operate in rural areas to provide credit and
other facilities to small and marginal farmers, agricultural laborers, artisians and
small entrepreneurs.

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2) Private Sector Banks
Initially all the banks in India were private banks, which were founded in the pre
independence era to cater to the banking needs of the people. In 1921, three major banks
i.e. Banks of Bengal, Bank of Bombay, and Bank of Madras, merged to form Imperial
Bank of India. In 1935, the Reserve Bank of India (RBI) was established and it took over
the central banking responsibilities from the Imperial Bank of India, transferring
commercial banking functions completely to IBI. In 1955, after the declaration of first-
five year plan, Imperial Bank of India was subsequently transformed into State Bank of
India (SBI).
Following this, occurred the nationalization of major banks in India on 19 July 1969. The
Government of India issued an ordinance and nationalized the 14 largest commercial
banks of India, including Punjab National Bank (PNB), Allahabad Bank, Canara Bank,
Central Bank of India, etc. Thus, public sector banks revived to take up leading role in
the banking structure. In 1980, the GOI nationalized 6 more commercial banks, with
control over 91% of banking business of India.
In 1994, the Reserve Bank Of India issued a policy of liberalization to license limited
number of private banks, which came to be known as New Generation tech-savvy banks.
Global Trust Bank was, thus, the first private bank after liberalization; it was later
amalgamated with Oriental Bank of Commerce (OBC). Then Housing Development
Finance Corporation Limited (HDFC) became the first (still existing) to receive an 'in
principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private
sector. The first Private Bank in India to receive an in principle approval from the
Reserve Bank of India was Housing Development Finance Corporation Limited, to set up
a bank in the private sector banks in India as part of the RBI's liberalization of the Indian
Banking Industry. It was incorporated in August 1994 as HDFC Bank Limited with
registered office in Mumbai and commenced operations as Scheduled Commercial Bank
in January 1995. ING Vaysya, yet another Private Bank of India was incorporated in the
year 1930. Bangalore has a pride of place for having the first branch inception in the year
1934. With successive years of patronage and constantly setting new standards in
banking, ING Vaysya Bank has many credits to its account.

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3) Foreign Sector Banks
Foreign Banks in India always brought an explanation about the prompt services to
customers. After the set up foreign banks in India, the banking sector in India also
become competitive and accurative.
New rules announced by the Reserve Bank of India for the foreign banks in India in this
budget has put up great hopes among foreign banks which allows them to grow
unfettered. Now foreign banks in India are permitted to set up local subsidiaries. The
policy conveys that forign banks in India may not acquire Indian ones (except for weak
banks identified by the RBI, on its terms) and their Indian subsidiaries will not be able to
open branches freely.

1.1.15 Co-operative Banks:

The Co-operative bank has a history of almost 100 years. The Co-operative banks are an
important constituent of the Indian Financial System, judging by the role assigned to
them, the expectations they are supposed to fulfill, their number, and the number of
offices they operate. The co-operative movement originated in the West, but the
importance that such banks have assumed in India is rarely paralleled anywhere else in
the world. Their role in rural financing continues to be important even today, and their
business in the urban areas also has increased phenomenally in recent years mainly due to
the sharp increase in the number of cooperative banks.
While the co-operative banks in rural areas mainly finance agricultural based activities
including farming, cattle, milk, hatchery, personal finance etc. along with some small
scale industries and self-employment driven activities, the co-operative banks in urban
areas mainly finance various categories of people for self-employment, industries, small
scale units, home finance, consumer finance, personal finance, etc. Some of the co-
operative banks are quite forward looking and have developed sufficient core
competencies to challenge state and private sector banks.
According to NAFCUB the total deposits & lendings of Co-operative Banks is much
more than Old Private Sector Banks & also the New Private Sector Banks. This
exponential growth of Co-operative Banks is attributed mainly to their much better local
reach, personal interaction with customers, their ability to catch the nerve of the local

18
clientele. Though registered under the Co-operative Societies Act of the Respective States
(where formed originally) the banking related activities of the co-operative banks are also
regulated by the Reserve Bank of India. They are governed by the Banking Regulations
Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.
There are two main categories of the co-operative banks.
a) Short term lending oriented co-operative Banks – within this category there are three
sub categories of banks viz state co-operative banks, District co-operative banks and
Primary Agricultural co-operative societies.
b) Long term lending oriented co-operative Banks – within the second category there are
land development banks at three levels state level, district level and village level.

1.1.16 Features of Cooperative Banks

Co-operative Banks are organized and managed on the principal of co-operation, self-
help, and mutual help. They function with the rule of “one member, one vote”. Function
on “no profit, no loss” basis. Co-operative banks, as a principle, do not pursue the goal of
profit maximization. Co-operative bank performs all the main banking functions of
deposit mobilization, supply of credit and provision of remittance facilities. Co-operative
Banks provide limited banking products and are functionally specialists in agriculture
related products. However, co-operative banks now provide housing loans also.
UCBs provide working capital loans and term loan as well. The State Co-operative Banks
(SCBs), Central Co-operative Banks (CCBs) and Urban Cooperative Banks (UCBs) can
normally extend housing loans upto Rs 1 lakh to an individual. The scheduled UCBs,
however, can lend upto Rs 3 lakh for housing purposes.
The UCBs can provide advances against shares and debentures also. Co-operative bank
do banking business mainly in the agriculture and rural sector. However, UCBs, SCBs,
and CCBs operate in semi urban, urban, and metropolitan areas also.
The urban and non-agricultural business of these banks has grown over the years. The co-
operative banks demonstrate a shift from rural to urban, while the commercial banks,
from urban to rural. Co-operative banks are perhaps the first government sponsored,
government-supported, and government-subsidized financial agency in India. They get
financial and other help from the Reserve Bank of India NABARD, central government

19
and state governments. They constitute the “most favoured” banking sector with risk of
nationalization. For commercial banks, the Reserve Bank of India is lender of last resort,
but co-operative banks it is the lender of first resort which provides financial resources in
the form of contribution to the initial capital (through state government), working capital,
refinance.
Co-operative Banks belong to the money market as well as to the capital market. Primary
agricultural credit societies provide short term and medium term loans. Land
Development Banks (LDBs) provide long-term loans. SCBs and CCBs also provide both
short term and term loans. Co-operative banks are financial intermediaries only partially.
The sources of their funds (resources) are (a) central and state government, (b) the
Reserve Bank of India and NABARD, (c) other co-operative institutions, (d) ownership
funds and, (e) deposits or debenture issues. It is interesting to note that intra-sectoral
flows of funds are much greater in co-operative banking than in commercial banking.
Inter-bank deposits, borrowings, and credit from a significant part of assets and liabilities
of co-operative banks. This means that intra-sectoral competition is absent and intra-
sectoral integration is high for co-operative bank.
Some co-operative banks are scheduled banks, while others are non-scheduled banks. For
instance, SCBs and some UCBs are scheduled banks but other co-operative bank are non-
scheduled banks. At present, 28 SCBs and 11 UCBs with Demand and Time Liabilities
over Rs 50 crore each included in the Second Schedule of the Reserve Bank of India Act.
Co-operative Banks are subject to CRR and liquidity requirements as other scheduled and
nonscheduled banks are. However, their requirements are less than commercial banks.
Since 1966 the lending and deposit rate of commercial banks have been directly regulated
by the Reserve Bank of India.
Although the Reserve Bank of India had power to regulate the rate co-operative bank but
this have been exercised only after 1979 in respect of non-agricultural advances they
were free to charge any rates at their discretion. Although the main aim of the co-
operative bank is to provide cheaper credit to their members and not to maximize profits,
they may access the money market to improve their income so as to remain viable.

20
1.1.17 Common Products and Services provided by the bank
Banking covers so many services that it is difficult to define it. However, these basic
services have always been recognized as the hallmark of the genuine banker. These are
• The receipt of the customer’s deposits
• The collection of his cheques drawn on other banks
• The payment of the customer’s cheques drawn on himself
There are other various types of banking services like:
1) Loans and Advances – Overdraft, Cash Credit, etc.
2) Deposits – Saving Account, Current Account, etc.
3) Financial Services – Bill discounting etc.
4) Foreign Services – Providing foreign currency, travelers cheques, etc.
5) Savings – Fixed deposits, etc.
6) Money Transfer

1) Loans and Advances

Banks in India with the way of development have become easy to apply in loan market.
The following loans are given by almost all the banks in the country:
• Personal Loan
• Car Loan or Auto Loan
• Loan against Shares
• Home Loan
• Education Loan or Student Loan
In Personal Loan, one can get a sanctioned loan amount between Rs 25,000 to 10,00,000
depending upon the profile of person applying for the loan. SBI, ICICI, HDFC, HSBC
are some of the leading banks which deals in Personal Loan.
Almost all the banks have jumped into the market of car loan which is also sometimes
termed as auto loan. It is one of the fast moving financial product of banks. Car loan /
auto loan are sanctioned to the extent of 85% upon the ex-showroom price of the car with
some simple paper works and a small amount of processing fee.
Loan against shares is very easy to get because liquid guarantee is involved in it. Home
loan is the latest craze in the banking sector with the development of the infrastructure.

21
Now people are moving to township outside the city. More number of townships are
coming up to meet the demand of 'house for all'. The RBI has also liberalised the interest
rates of home loan inorder to match the repayment capability of even middle class
people. Almost all banks are dealing in home loan. Again SBI, ICICI, HDFC, HSBC are
leading.
The educational loan, rather to be termed as student loan, is a good banking product for
the mass. Students with certain academic brilliance, studying at recognised
colleges/universities in India and abroad are generally given education loan / student loan
so as to meet the expenses on tuition fee/ maintenance cost/books and other equipment.

2) Advances
• Overdraft:- Banks allow selected customers to write cheques in excess of the
balance in their current account, ie, to overdraw. Overdrafts are arranged up to
limits which depend on the customer's credit standing and the bank manager's
humour. The arrangements allow flexibility in the amount spent and, equally,
allow flexibility in repayments (although technically a bank can demand
repayment of an overdraft within 24 hours). In that respect overdrafts are unlike
personal loans, which are structured with regular repayments. Interest on
overdrafts is charged on the fluctuating daily balance.
• Cash Credit:- This facility is given by the banker to the customer by way of a
certain amount of credit facility. Its limit is fixed on the basis of security of the
company`s current assets. A major part of working capital requirement of any unit
would consist of maintenance of inventory of raw materials, semi finished goods,
finished goods, stores and spares etc. In trading concern the requirement of funds
will be to maintain adequate stocks in trade. Finance against such inventories by
banks is generally granted in the shape of cash credit facility where drawings will
be permitted against stocks of goods. It is a running account facility where
deposits and withdrawals are permitted.

22
3) Deposits
Banks are also called custodians of public money. Basically, the money is accepted as
deposit for safe keeping. But since the Banks use this money to earn interest from people
who need money, Banks share a part of this interest with the depositors. The quantum of
interest depends upon the tenor - length of time for which the depositor wishes to keep
the money with the Bank - and the ease of withdrawal. The thumb rule is, longer the
tenor, higher the rate of interest and lesser the restrictions on withdrawal, lesser the
interest. Exceptions, however, exist. Deposits are accepted from both resident (domestic)
or non-resident Indian customers.

• Saving Account : Savings Bank Accounts are meant to promote the habit of
saving among the citizens while allowing them to use their funds when required.
The main advantage of Savings Bank Account is its high liquidity and safety. On
top of that Savings Bank Account earn moderate interest too. The rate of interest
is decided and periodically reviewed by the Government of India
• Current Account : It is basically used for business purposes. It doesn’t give any
interest on deposits. It can be held in the name of firms (include partnership firm,
pvt. Ltd. Co., ltd. Co., trust, association), person. Its prime purpose is to serve
the customers for their daily business transactions. A customer having current
account can withdraw money in the form of cash or cheque in a infinite number
of times and so is unrestricted.Current Account is primarily meant for
businessmen, firms, companies, public enterprises etc. that have numerous daily
banking transactions

4) Financial Services

• Bills Discounting:-This is the most important form in which a bank lends without
any collateral security. The seller draws bills of exchange on the buyer of goods
on credit. Such a bill may either be a clean bill or documentary bill which is
accompanied by documents of title to goods,viz railway receipts. The bank
purchase bills payable on demand and credit the customer`s account with the

23
 amount of bills less the discount. On maturity of the bills, the bank present them
to its acceptor for payment. In case the discounted bill is dishonored by the
nonpayment, the bank can recovers the full amount from the customer along with
the expense in that connection.

5) Foreign Services

• Traveler’s Cheque: A traveler's cheque is a preprinted, fixed-amount cheque

designed to allow the person signing it to make an unconditional payment to
someone else as a result of having paid the issuer for that privilege. As a traveler's
cheque can usually be replaced if lost or stolen (if the owner still has the note
issued with the purchase of the cheque), they are often used by people on vacation
in place of cash. The use of credit cards has, however, rendered them less
important than they previously were. Traveler's cheques are available in several
currencies such as U.S. dollars, Canadian dollars, pounds sterling, Japanese yen,
and euro. Upon obtaining custody of a purchased supply of traveler's cheques, the
purchaser should immediately write his or her signature once upon each cheque,
usually on the cheque's upper portion. The purchaser will also have received a
receipt and some other documentation that should be kept in a safe place other
than where he or she carries the cheques. When wanting to cash a traveler's
cheque while making a purchase, the purchaser should, in the presence of the
payee, date and countersign the cheque in the indicated space, usually on the
cheque's lower portion
• Money Transfer: Beside lending and depositing money, banks also carry money
from one corner of the globe to another. This act of banks is known as transfer of
money. This activity is termed as remittance business. Banks generally issue
Demand Drafts, Banker's Cheques, Money Orders or other such instruments for
transferring the money. This is a type of Telegraphic Transfer.
With the use of high technology and varieties of product it seems that "Free"
money transfers will become commonplace. We will see more bundling of

24
 tailored money services by banks and non-traditional entrants that will include
"free" money transfers. Many banks will even use money transfer services as loss-
leaders inorder to generate account openings and cross-sell opportunities. The
price evolution of money transfer products for banks will be similar to that of
consumer bill pay-the product is worth giving away as an account acquisition tool
to win overall market share and establish banking relationships.
ATM money transfer card products have had terrible bank adoption rates since
being introduced in the last three to four years. Remittees who are highly educated
and have been already been exposed to ATM technology in receiving countries
tend to have an interest in this product. Money transfer to India is one of the most
important part played by the banks. This service provide peace of mind to either
the NRIs or to the visitors to India. Many Indian banks have ATM'S (automatic
teller machine), enable to draw foreign currency in India.

6) Modern Banking Services :

• Credit Cards: Credit Card is “post paid” or “pay later” card that draws from a
creditline-money made available by the card issuer (bank) and gives one a grace
period to pay. If the amount is not paid full by the end of the period, one is
charged interest. A credit card is nothing but a very small card containing a means
of identification, such as a signature and a small photo. It authorizes the holder to
change goods or services to his account, on which he is billed. The bank receives
the bills from the merchants and pays on behalf of the card holder. These bills are
assembled in the bank and the amount is paid to the bank by the card holder
totally or by installments. The bank charges the customer a small amount for these
services. The card holder need not have to carry money/cash with him when he
travels or goes for purchasing. Credit cards have found wide spread acceptance in
the ‘metros’ and big cities. Credit cards are joining popularity for online
payments. The major players in the Credit Card market are the foreign banks and
some big public sector banks like SBI and Bank of Baroda. India at present has
about 3 million credit cards in circulation.

25
• Debit Cards: Debit Card is a “prepaid” or “pay now” card with some stored
value. Debit Cards quickly debit or subtract money from one’s savings account, or
if one were taking out cash.Every time a person uses the card, the merchant who
in turn can get the money transferred to his account from the bank of the buyers,
by debiting an exact amount of purchase from the card. To get a debit card along
with a Personal Identification Number (PIN). When he makes a purchase, he
enters this number on the shop’s PIN pad. When the card is swiped through the
electronic terminal, it dials the acquiring bank system – either Master Card or
Visa that validates the PIN and finds out from the issuing bank whether to accept
or decline the transaction. The customer never overspread because the amount
spent is debited immediately from the customers account. So, for the debit card to
work, one must already have the money in the account to cover the transaction.
There is no grace period for a debit card purchase. Some debit cards have monthly
or per transaction fees.Debit Card holder need not carry a bulky checkbook or
large sums of cash when he/she goes at for shopping. This is a fast and easy way
of payment one can get debit card facility as debit cards use one’s own money at
the time of sale, so they are often easier than credit cards to obtain. The major
limitation of Debit Card is that currently only some 3000-4000 shops country
wide accepts it. Also, a person can’t operate it in case the telephone lines are
down.
• Automatic Teller Machine: The introduction of ATM’s has given the customers
the facility of round the clock banking. The ATM’s are used by banks for making
the customers dealing easier. ATM card is a device that allows customer who has
an ATM card to perform routine banking transaction at any time without
interacting with human teller. It provides exchange services. This service helps the
customer to withdraw money even when the banks ate closed. This can be done
by inserting the card in the ATM and entering the Personal Identification Number
and secret Password. ATM’s are currently becoming popular in India that enables
the customer to withdraw their money 24 hours a day and 365 days. It provides
the customers with the ability to withdraw or deposit funds, check account
balances, transfer funds and check statement information. The advantages of

26
 ATM’s are many. It increases existing business and generates new business. It
allows the customers.
o To transfer money to and from accounts.
o To view account information.
o To order cash
o To receive cash.
The ATM services provided first by the foreign banks like Citibank, Grind lays bank and
now by many private and public sector banks in India like ICICI Bank, HDFC Bank, SBI,
UTI Bank etc. The ICICI has launched ATM Services to its customers in all the
Metropolitan Cities in India. By the end of 1990 Indian Private Banks and public sector
banks have come up with their own ATM Network in the form of “SWADHAN”. Over
the past year upto 44 banks in Mumbai, Vashi and Thane, have became a part of
“SWADHAN” a system of shared payments networks, introduced by the Indian Bank
Association (IBA).

• E-Cheques: The e-cheques consists five primary facts. They are the consumers,
the merchant, consumer’s bank the merchant’s bank and the e-mint and the
clearing process. This chequring system uses the network services to issue and
process payment that emulates real world chequing. The payer issue a digital
cheques to the payee ant the entire transactions are done through internet.
Electronic version of cheaques are issued, received and processed. The e-
chequing is a great boon to big corporate as well as small retailers. Mostmajor
banks accept e-cheques. Thus this system offers secure means of collecting
payments, transferring value and managing cash flows.
• Electronic Fund Transfer (EFT): Many modern banks have computerised their
cheque handling process with computer networks and other electronic
equipments. These banks are dispensing with the use of paper cheques. The
system called electronic fund transfer (EFT) automatically transfers money from
one account to another. This system facilitates speedier transfer of funds
electronically from any branch to any other branch. In this system the sender and
the receiver of funds may be located in different cities and may even bank with

27
 different banks. Funds transfer within the same city is also permitted. The scheme
has been in operation since February 7, 1996, in India. The other important type
of facility in the EFT system is automated clearing houses. These are the
computer centers that handle the bills meant for deposits and the bills meant for
payment. In big companies pay is not disbursed by issued cheques or issuing cash.
The payment office directs the computer to credit an employee’s account with the
person’s pay.
• Telebanking: Telebanking refers to banking on phone services.. a customer can
access information about his/her account through a telephone call and by giving
the coded Personal Identification Number (PIN) to the bank. Telebanking is
extensively user friendly and effective in nature.
o To get a particular work done through the bank, the users may leave his
instructions in the form of message with bank.
o Facility to stop payment on request. One can easily know about the cheque
status.
o Information on the current interest rates.
o Information with regard to foreign exchange rates.

• Mobile Banking: A new revolution in the realm of e-banking is the emergence of

mobile banking. On-line banking is now moving to the mobile world, giving
everybody with a mobile phone access to real-time banking services, regardless of
their location. But there is much more to mobile banking from just on-lie banking.
It provides a new way to pick up information and interact with the banks to carry
out the relevant banking business. The potential of mobile banking is limitless and
is expected to be a big success. Booking and paying for travel and even tickets is
also expected to be a growth area. According to this system, customer can access
account details on mobile using the Short Messaging System (SMS) technology6
where select data is pushed to the mobile device. The wireless application
protocol (WAP) technology, which will allow user to surf the net on their mobiles
to access anything and everything. This is a very flexible way of transacting
banking business. Already ICICI and HDFC banks have tied up cellular service

28
 provides such as Airtel, Orange, Sky Cell, etc. in Delhi and Mumbai to offer these
mobile banking services to their customers.
• Demat Account : Demat refers to a dematerialised account. Demat account is just
like a bank account where actual money is replaced by shares. Just as a bank
account is required if we want to save money or make cheque payments, we need
to open a demat account in order to buy or sell shares. A Demat Account holds
portfolio of shares in electronic form and obviates the need to hold shares in
physical form. The account offers a secure and convenient way to keep track of
shares and investments without the hassle of handling physical documents that get
mutilated or lost in transit. The Securities and Exchange Board of India (SEBI)
mandates a demat account for share trading involving more than 500 shares.

1.2 REVIEW OF LITERATURE

Arun K. Jain, Christian Pinson, Naresh K. Malhotra (1987) 1 analyzed that the
usefulness of loyalty as a construct for understanding and analysing the market for
banking services is here discussed. Using empirical data, the socio-demographic,
attitudinal and behavioural characteristics of loyal versus non-loyal bank patrons are
described. Bank loyalty can be measured and is useful in explaining differences in
banking skills, expected benefits and attitudes towards banks and level of utilisation of
banking services.

1
Arun K. Jain, Christian Pinson, Naresh K. Malhotra (1987), “Customer Loyalty as a Construct in the
Marketing of Banking Services”, International Journal of Bank Marketing, Volume: 5, Issue: 3, Page: 49 –
72, Publisher: MCB UP Ltd

29
Peter Kangis, Vassilis Voukelatos (1997)2 concluded in his study that quality
expectations and evaluation of services received were marginally higher in the
private than in the public sector in most of the dimensions measured; the relative
importance attached to each quality attribute was, however, of a similar profile for
the two sectors. The perception of the profile of services received was, however,
different between sectors, thus suggesting that they did deliver a different quality of
service. Discusses the implications for strategy since sectoral differentiation in
banking is becoming blurred as a result of increasing overlap between services and
competition from related and substitute industries. Identifies the distinctiveness of
what is perceived as a service on offer as essential ingredient to competitive
positioning in financial services.

Naser K.; Jamal A.; Al-Khatib K.(1999)3 concluded in his research study that the
Islamic banking system is gaining momentum. Many international conventional banks
have started to open branches which operate in accordance with the Islamic Shariah
principles in some Islamic countries. The Islamic banking system is expected to face
strong competition not only from the Islamic banks but also from well-established
conventional banks offering Islamic products and services. In this study, an attempt is
made to assess the degree of customer awareness and satisfaction towards an Islamic bank
in Jordan. A sample 206 respondents took part in this study. The analysis of their
responses revealed a certain degree of satisfaction of many of the Islamic banks facilities
and products. The respondents expressed their dissatisfaction with some of the Islamic
banks services. Although the respondents indicated that they are aware of a number of
specific Islamic financial products like Murabaha Musharaka and Mudaraba, they show
that they do not deal with them.

2
Peter Kangis, Vassilis Voukelatos (1997), “Private and public banks: a comparison of customer
expectations and perceptions”, Journal: International Journal of Bank Marketing, 1997, Vol. 15,
Issue: 7, Page: 279 – 287, published by MCB UP Ltd.

3
Naser K.; Jamal A.; Al-Khatib K.(1999), “Islamic banking: a study of customer satisfaction and
preferences in Jordan” . The International Journal of Bank Marketing, Vol. 17, No. 3, 1999, pp. 135-151
published by Emerald Group Publishing Limited

30
Luiz Moutinho, Anne Smith (2000)4 introduces a model which posits a crucial role for
the evaluation of bank customers’ attitudes towards both human tellers and automated
banking in mediating the ease of banking factor/perceived satisfaction linkage. The
model’s explicit consideration of the effects of bank customer attitudes towards human
tellers and automation provides additional explanatory power regarding how the
perceived trend towards ease of banking influences bank customer overall satisfaction,
switching and loyalty behaviour. A linear structural relations methodological approach is
used for the modelling process.

Faye X. Zhu, Walter Wymer, Injazz Chen (2002)5 explored the impact of information
technology (IT) on service quality in the consumer-banking sector. It proposes a service
quality model that links customer perceived IT-based service options to traditional
service dimensions as measured by SERVQUAL in the context of customer perceived
service quality and customer satisfaction. The model also incorporates several variables
affecting customers’ perceptions of IT-based services, and was tested by a structural
equation modeling approach using sample data collected from retail bank customers. The
results indicate that IT-based services have a direct impact on the SERVQUAL
dimensions and an indirect impact on customer perceived service quality and customer
satisfaction. The analyses also show that customers’ evaluations of IT-based services are
affected by their preference towards traditional services, experiences in using IT-based
services, and perceived IT policies.

Morna S.Y. Lee, Peter J. McGoldrick, Kathleen A. Keeling, Joanne Doherty (2003)6
reviewed that the telecommunications companies world-wide are developing 3G mobile
4
Luiz Moutinho, Anne Smith (2000), “Modelling bank customer satisfaction through mediation of
attitudes towards human and automated banking”, Journal: International Journal of Bank Marketing, Year:
2000, Vol. 18, Issue: 3, Page: 124 – 134, published by MCB UP Ltd.

5
Faye X. Zhu, Walter Wymer, Injazz Chen (2002), “IT-based services and service quality in consumer
banking”, International Journal of Service Industry Management, Volume: 13, Issue: 1, Page: 69 – 90,
MCB UP Ltd

6
Morna S.Y. Lee, Peter J. McGoldrick, Kathleen A. Keeling, Joanne Doherty (2003), “Using ZMET to
explore barriers to the adoption of 3G mobile banking services”, International Journal of Retail &
Distribution Management, Volume: 31, Issue: 6, Page: 340 – 348, MCB UP Ltd

31
phones and applications. In the UK, mobile banking is considered to be one of the most
value-added and important mobile services available. However, the adoption rate of using
3G mobile phones for financial services is yet to be determined. The current research
examined both innovative attributes and customers’ perceived risk in order to understand
customers’ behaviour and motivation toward this innovation. It has advanced the
theoretical frameworks of innovation and customers’ risk perception as new attributes
and risk dimensions were identified. The findings provide banking executives with a
better understanding of what are the perceived advantages and disadvantages of 3G
mobile banking services, helping them to plan marketing strategies and promotion
approaches for 3G mobile banking services in the future.

Ahmad Jamal, Kamal Naser (2003)7 reviewed in his study that customer satisfaction is
a significant issue for most marketers. Previous research has identified various factors
that determine customer satisfaction in retail banking sector in Western countries. The
current paper reports findings from a survey, which looked into determinants of customer
satisfaction in the retail banking in Pakistan. A total of 300 questionnaires were randomly
distributed to customers of a specific bank in Pakistan. Results indicate that there was a
strong relationship between service quality and customer satisfaction. There was,
however, no relationship between customer satisfaction and tangible aspects of the
service environment. The paper discusses implications for bank management.

Rahman, Zillur (2006)8 reviewed in his study that loyal customers are considered to be
the key to survival and success in many service businesses, in particular in the hospitality,
insurance and financial sectors. The assumption is that with customer satisfaction;
loyalty, retention and profitability will automatically follow. The current thinking is that
the relationship between satisfaction and loyalty is more complex then was originally
proposed, however. As commoditisation of many service offerings continues, new
sources of competitive differentiation/advantage will come from focusing on the

7
Ahmad Jamal, Kamal Naser (2003), “Factors Influencing Customer Satisfaction in the Retail Banking
Sector in Pakistan” Journal: International Journal of Commerce and Management, Vol. 13, Issue: 2, Pg. 29
– 53, published by: MCB UP Ltd
8

32
management of customer experiences. Because loyalty is so very important to the
survival and profitable growth of a company, measuring it becomes all the more
important. Existing approaches to the measurement of loyalty have not proved to be very
effective in this task. This study explores and tests the relationship between experience
and loyalty. For this purpose, a modified `loyalty acid test' is used. The study concludes
that, on average, a majority of customers are satisfied with the present functioning of the
bank but would definitely be delighted if the bank changed its interface with the
customers to become more cognitive (intelligent), emotional, physically pleasing and
well connected.

David J. Urban, Michael D. Pratt (2000)9 presented the results of a telephone survey of
801 consumers concerning the relationship between bank mergers and service quality
perceptions. The setting of the study is a US state which has seen much merger activity.
The survey results provide evidence of a significant relationship between bank mergers
and service quality perceptions that differs based on the demographic characteristics of
the respondents. Among these demographic characteristics are gender, ethnicity,
education, and income. In addition to the survey results, the article also contains several
managerial implications, including a need for complementarity of marketing strategies
for both acquired and non-acquired banks.

Jaume Llorens Monzonis (2006)10 analysed the dimensionality of the concept of

perceived value in the banking sector, adapting the GLOVAL scale of measurement of
perceived value to the banking services sector. Design/methodology/approach – A total
of 200 customers of financial entities were surveyed, and structural equations models
were used to verify the reliability and validity of the scale of perceived value.
Findings – Perceived value is found to be a multidimensional construct composed of six
dimensions: functional value of the establishment, functional value of the personnel;
9
David J. Urban, Michael D. Pratt (2000), “Perceptions of banking services in the wake of bank mergers:
an empirical study”, Journal of Services Marketing, Volume: 14, Issue: 2 Page: 118 – 131, MCB UP Ltd

10
Juan Carlos Fandos Roig, Javier Sanchez Garcia, Miguel Angel Moliner Tena, Jaume Llorens Monzonis
(2006), “Customer perceived value in banking services”, International Journal of Bank Marketing, Volume:
24, Issue: 5, Page: 266 – 283, Emerald Group Publishing Limited

33
functional value of the service; functional value price; emotional value; and social value.
A scale of overall perceived value in financial services was obtained, composed of six
dimensions and represented by 22 items that are significant for their measurement.
Research limitations/implications – In future studies it would be interesting to include
items to measure non-monetary sacrifices, such as waiting times, queues, etc.
Practical implications – A tool for measuring the value of financial entities as perceived
by the customer is presented; with it the value perceived by customers can be quantified,
evaluated and monitored.
Originality/value – This study proposes a scale of measurement of the value perceived by
consumers in the banking sector which incorporates valuations of functional aspects and
of affective aspects, thus obtaining an overall quantification of the value perceived by the
customer of the purchase made.

Arturo Molina, David Martín-Consuegra, Águeda Esteban (2007)11 investigated the

impact of relational benefits on customer satisfaction in retail banking. This paper
presents a causal model that identifies a connection between the relational benefits
achieved through a stable and long-term relationship with a given bank and customer
satisfaction with retail banking. The results show that confidence benefits have a direct,
positive effect on the satisfaction of customers with their bank. However, special
treatment benefits and social benefits did not have any significant effects on satisfaction
in a retail banking environment. This study was conducted in a retail banking setting, and
may not be generalized in other service sectors. It has also focused on the relationship
between relational benefits and satisfaction, while other factors that may have an
influence on consumer satisfaction have not been considered. Practical implications –
The findings suggest that banks can create customer satisfaction through relational
strategies that focus on building customer confidence. Therefore, frontline employees
should be committed to establishing and maintaining confidence benefits for customers.

11
Arturo Molina, David Martín-Consuegra, Águeda Esteban (2007), “Relational benefits and customer
satisfaction in retail banking”, Journal: International Journal of Bank Marketing, Year: 2007, Vol.: 25,
Issue: 4, Page: 253 – 271, published by Emerald Group Publishing Limited

34
Al-Hawari, Mohammad; Ward, Tony; Newby, Leonce (2009)12 highlighted the
significance of service quality factors on customer retention within the Australian
traditional and automated banking contexts. Design/methodology/approach - The relative
importance of traditional and automated service quality factors on customer retention was
examined with the intention of determining which indicator factors are likely to have a
significant impact on customer retention. The paper then proposes a conceptual model of
the relationship between service quality factors within the two contexts and customer
retention. AMOS 5 was used to test for the hypothesized relationships. Findings - All of
the traditional service quality factors have positively influenced customer retention.
Conversely, this paper finds that automated service quality in general has no positive
significant influence on customer retention. Research limitations/implications- This
research was applied to the financial institutions in Queensland, Australia. Further testing
of the proposed conceptual model across different industries and countries is needed to
determine the generalisability and consistency of this study's findings. Practical
implications - The proposed model of retention prediction has the potential to help
Australian bank managers to strengthen the customer-bank relationship and, ultimately,
to enhance customer retention ratios. Originality/value - The key contribution of this
paper is a conceptualisation of customer retention predictors that takes into account both
traditional and automated service customer interactions with banks.

12
Al-Hawari, Mohammad; Ward, Tony; Newby, Leonce (2009), “The relationship between service quality
and retention within the automated and traditional contexts of retail banking”, Journal of Service
Management, Volume 20, Number 4, 2009 , pp. 455-472(18), Emerald Group Publishing Limited

35
 CHAPTER-II
INTRODUCTION TO THE ORGANIZATION

2.1 PROFILE OF THE BANK

Cooperative institutions are intended for the welfare of the common man particularly the
poor section and have continues to play a vital role in the economic and social upliftment
of the masses.
The Citizens Urban Cooperative Bank Ltd., Jalandhar was started in 1989 with a meagre
capital, few members and small operational limits of Jalandhar and Jalandhar
Cantonment has become a leading Urban Cooperative Bank in Northern India in a
short span with total business mounting to about Rs. 330 crores and ten branches
spread over in the area of operation of the bank. The Bank has brought a revolution
in Banking segment in its area of operation and is contributing to the needs of the
localities by providing attractive saving schemes and need based credit. The Bank is
pioneer in introducing cooperative movement for urbanities and providing them an
opportunity to become a partner in banking industry and avail triple benefits as an
investor, depositor and borrower. The Bank is in profit since its inception and is
sharing the same with its members.
The Bank has made tremendous progress across the border since its inception. The
membership of the Bank has risen from 62 members to more than 7000 and paid up
Capital from 10500.00 to Rs.6.22crores. As on 31.12-2008, the Bank’s Own funds have
grown to Rs. 28.26crores and working capital to Rs. 272.95crores which is a
manifestation of peoples confidence in the area of operation of the Bank. The deposits of
the Bank have grown to Rs. 229.44 crores and advances have increased to
Rs. 120.30crores. All the branches of the Bank are in profits and for the financial year
2007-08, the bank has shown a net profit of Rs. 129 lacs. The Bank is accredited with
highest Audit Classification ‘A’ by Registrar Cooperative Societies, Punjab since its
inception. The Bank has created a niche in its area of operation. The Bank is providing
credit for all viable economic activities in its area of operation and catering to all
segments of society. The Bank has taken initiative in promoting and providing financial
assistance to small scale industry, traders, shop keepers, unemployed youth and Weaker

36
Sections. The inbuilt feature is to deploy funds in its area of operation only, thus
contribute and serve as an ideal banking vehicle for economic development of these
Districts. The Credit Deposit (CD) ratio of the Bank is 53% as against 31% in its area of
operation.

2.1.1 Addresses and Phone No's of the Branches

Branches Phone No.s

Main Branch, Opp. Circuit House, Jalandhar 222007, 224712, 235364
Partap Bagh, Mandi Fenton Ganj, Jalandhar 241006, 223382
Banga Road, Nawanshahar 20837, 24467
Mithapur Road, Ravinder Nagar, Jalandhar 273170, 462170
Kishanpura Chowk, Ind. Area Road, Jalandhar 294011, 297085
New Sabzi Mandi, G.T. Road, Jalandhar 204056
G.T. Road Banga 61084, 63012
G.T. Road, Opp. GNA, Goraya 63763
Mandi Road, Nurmahal 42994

2.1.2 Management :-
The Citizens Urban Coop Bank Ltd., Jalandhar is a body corporate registered under the
Punjab Cooperative Societies Act 1961 and the rules framed there under. The Bank
functions according to the Bye-Laws framed by it and registered by the Registrar,
Cooperative Societies, Punjab. The Bank is governed under the democratically elected
Board of Directors who are well reputed persons of the area. The term of the board is 5
years. The Board has employed a Chief Executive Officer and further staff to run day to
day working of the Bank. The Board of Directors under the chairmanship of Sh. K.K.
Sharma have drawn up ambitious futuristic plans to compete with other banking
institutions in the region. The Board is well diversified and is being represented by
various sections of the society including bankers, educationists, cooperators, industrialists
and traders. The Board is further assisted by experienced professionals like Financial
Consultants, Legal Advisors, internal and external auditors.

2.1.3 Recovery Management

37
The Bank has also constituted a separate Recovery Cell, directly under the Chief
Executive Officer, headed by experienced banking professional which is responsible for
liquidating stressed accounts and supporting the branches in recovering overdues which
are not possible through ordinary ways. With consistent efforts, the NPAs of the Bank
have considerably reduced and are heading for major decline in future. Efforts are made
that there are no overdues exceeding 60 days in current borrowal accounts.

2.1.4Human Resource Development

The Urban Cooperative Bank has always considered human resources as its most
important critical success factor. The bank gives utmost priority to career planning and
development of its workforce to enrich and enhance their skills. The involvement of the
staff at all levels has been one of the factors for result achieved by the bank

The changes in present banking are witnessed very often. to develop schemes and
knowledge of all categories of employees ,training progrmmes are designed at various
institutions Human Resource development always find a high priority on the Bank's
agenda in the past and in the financial year 2007-08 too, number of measures will be
taken to upgrade and fine tuning the knowledge of it's officers and other sub-ordinate
staff including sending them to training in various institutes including Agriculture, Co-
op. Staff Training Institute, Jalandhar an undertaking of Punjab State Co-op. Bank Ltd.
and Vai-Kunth Mehta Insitute of Co-op. Management, Pune. Besides that Executives &
Directors will be send to attend various seminars and workshops which will be conducted
by NAFSCOB, New Delhi to educate them about the Banking regulation act and co-
operative societies act. Policy decision is the major role of board of directors.To update
their banking related knowledge training programmes by various agencies were was also
arranged for the directors and directors were sent to participate.

38
2.1.5 Information Technology

With globalization and opening up of economy, the banking sector has become very
competitive and the cooperative banks have to upgrade them at par with nationalized
banks, foreign banks and private banks. This bank has also taken a big leap forward by
computerizing and automating all its branches with plush interiors. In the present bank
scenario ,technology upgradation has become a buzzword and therefore, to offer value
added services, core banking solution is accepted. In the near future all the branches will
be interconnected. Cash counting machines have also been provided in all the branches
which would help in saving valuable time of the customers.

2.1.6 Audit and Control

With a view to detect and rectify the deficiencies in day to day's working as early as
possible, the system of concurrent audit of each branch and head office is continued
during the year under review. This system help to maintain transparency and accuracy in
bank's working to improve the qualitative work, inspection cell is also functioning

the accounts of the bank are audited by the statutory authority, the chief auditor,
cooperative societies Punjab. All this is possible due to cooperation of the auditors in
completing the audit in time and for the suggestions in improving the working of the
bank. Further to have the system full proof, the inspection is also conducted by the
reserve bank of India with regular intervals.

In view of banks satisfactory performance on all fronts, bank has been placed under audit
classification 'A'.for the year 2007-08.this bank has always been classified 'A' since its
inspection.

2.1.7 Meeting Social Obligations

39
The bank has fully shouldered its responsibility towards meeting its social obligations
and has participated in socio economic activities which directly resulted in betterment of
financial status of down-troddens. The bank has participated in various socio -economy
activities and sponsored various sports tournaments, medical camps and cultural
programs during the financial year 2007-08.

2.1.8 Financial Inclusion

In response to the government concerns on the large sections of population being

financially exclude despite being strong presence of the commercial banks, the
government and reserve bank of India is continuing to push the banks to open "NO
FRILL ACCOUNT" of people and made some simplifications with "KYC"norms .In this
respect ,the bank has started the "JANTA BACHAT KHATA" scheme to meet the
requirement of poor people who are unable to open the account with handsome amount.
This scheme is getting popularity among the needy and deserving memebers of the
society and more and more members of the public are coming under the banking fold.
The bank endeavour for 100% financial inclusion at all its centers

2.1.9 Cash Reserve Ratio and Statutory Liquidity Ratio

As every cooperative bank is required to maintain 3% cash reserve ratio and 25%
statutory liquidity ratio of the time and demand liabilities as per R.B.I guidelines and on
the basis of the same, the urban cooperative bank is continuously maintaining CRR and
SLR much above the prescribed stipulation of R.B.I

Required as on 31.03.2008 Maintained

Cash Reserve Ratio Rs. 6.73 crores Rs. 9.11 crores

Statutory Liquidity Ratio Rs 56.13 crores Rs. 62.38 crores

2.1.10 Construction of Corporate and Head office at model town road Jalandhar

40
during a span of more than 20 yeras ,the bank has achieved substancial growth and
expanded its business tremendously.The present space for the head office located in a
rented bulilding has fallen short due to increaese in size of bank.The bank has aquired its
own land measuring 11000sqft in 1987 at the most prestigious location at model town
road ,new jawahar nagar jalandhar.Construction of the corporate and head office of the
bank about 5500 sqft is in full swing which is undertaken by MARKFED the bank has
already set a side Rs 5.79 crore out of profit for the construction of the new building. The
beautiful bulilding of new corporate and head office will add tremendous value with
regard to profitability ,business and credibility of the bank.

The bank has shifted its head office on july 10 ,2009.the new head officer has complete
set up comprising of offices top management ,board room.conference hall,credit
departmant,finance department,establishment,IT etc.The new head office branch has an
area of 5500 sqft which is fully automated and computerized. It has extended business
hours from 8.00 am to 8.00pm in the new branch to provide exclusive facilities to the
customers.It operate on single window service and would have all types of deposit,loans
and insurance products.further there is no branch of any commercial bank within a radius
of 1.5 KMS from the centre.

This area is thickly populated and has commercial and residential buliding.the new
branch will get tremendous response due to this huge potential. The new branxch would
have an on site ATM and would be connected to all branches.The new branch will act as
a nodal branch for all inter branch,intra bank transactions and main centralized activities
of the bank will be conducted in new branch.

2.2 HISTORY OF THE BANK

The Citizens Urban Co-op. Bank Ltd., Jalandhar which has emerged as a leading Urban
Co-op. Bank of Northern India was infact conceived in the late 80's and started
functioning on 17/11/1989 after receiving final nod from the Reserve Bank of India with
62 members and share capital of Rs. 10,500/- within operational limits of Jalandhar and
Jalandhar Cantonment.

41
Since then, Citizens Bank has made a tremendous progress in all the Areas of Banking
Sphere. Only recently, In the financial year 1999-2000, Citizens Bank has set up a mile-
stone in the Urban Co-op. Banking by achieving a 100 crores Deposit target within 10
years of it's working, thereby becoming the only Urban Co-operative Bank of Northern
India who has met the 1st condition of the R.B.I. for getting schedule Bank status.
Marching ahead, Bank's Deposits now stands at 117.42 crores which is in itself a
manifestation of people's confidence residing in the area of operation of the Bank.
Citizens Bank which has nine Branches made consistent profit gain right from it's
inception and has also earned a net profit of Rs.3.64 crores during the last financial year
2000-01. Bank has achieved this profit growth despite the fact that rate of interest was
reduced from 0.5%-1% during the last financial year. The most satisfying aspect for the
Bank management is that, all the nine branches have recorded profit in the financial year
2000-01. Bank has also taken initiative in the loan sector & advanced Rs. 88 crores to
weaker sections of the society, small-scale industries, housing, traders, shopkeepers and
unemployed youths in the financial year 2000-01. This advancement has registered an
increase of Rs.7 crore from the financial year 99-2000. Further Bank has distributed 17%
Dividend to it's members for the year 99-2000. The present membership of the Bank now
stands at 6566 and share capital has increased to Rs. 4.09 Crores. Whereas Bank's own
funds and working capital has touched to Rs. 12.19 crores and Rs. 137.52 crores
respectively in the financial year 2000-01.
Infact, Bank has achieved it's objective to a great extent by helping the people of weaker
sections, financing S.S.I.'s and developing infrastructure in the area of operation
of the Bank.
All the nine branches of the Bank has been approved from R.B.I to open N.R.I. & N.R.E.
Accounts.

2.3 ACHIEVEMENTS AND MILESTONES

42
• In order to encourage the best and honest employees of the bank and to create a
competition amongst the staff members to achieve their targets and to improve
their service ,the bank has started to honour the best worker of every branch.18
staff members were honored and awarded by the hon’ble Sh. Manoranjan Kalia,
cabinet minister, local bodies and industries, Punjab in the special general body
meeting of the bank held on 16.06.2007.

• In the memory of founder chairman of the bank sh. Vijay sethi ,the bank started
giving 'Vijay Sethi award' to best cooperative officer of the department and best
cooperator state every year.for the year 2007, the bank honured Miss kusumjit
Sidhu, IAS, financial commissioner ,cooperation, punjab as best cooperative
officer and Sh .Sukhdeep Singh as best cooperator of the state.

43
 • To encourage the staff , the bank management honoured the staff members whose
working during the year found outstanding.

• Further keeping in view the competition of the banking industry and attractive
packages given to the staff by the private as well as foreign banks, the bank has
introduced incentive scheme for the staff in which incentive to the staff will be
given on achieving the yearly target. With the implementation of this scheme, the
staff will be benefited financially, the staff will be motivated, and their morale
will be boosted up.

2.4 SERVICES PROVIDED BY THE BANK

The citizen urban cooperative bank-a leader in the urban cooperative banking sector in
northern India, realizing the need of the hour, has already initiated steps to prepare itself
to face the new challenges and to win the confidence of the public by providing a
customer friendly attitude and atmosphere.

With a view to having a very clear and focused approach strategies, bank has
computerized, air-conditioned and automated all its branches. New departments such as
retail banking, npa management and recovery ,distribution of third party product such as
life insurance were formed with a view to adopt a more focused approach. The
modernization of the service and improvement in the infrastructure of the bank has given
big boost in the working of the bank. Bank has continued to provide customer friendly
with precision ,regularity and efficiency. Similarly anti-money laundering standards have
been set up in the bank as per R.B.I guidelines.

Customer care is always the first and foremost duty of the Citizens Bank. Keeping this
aspect in mind, Bank is planning to introduce evening service at one of it's Branch.
Besides that, for saving the valuable time of it's esteemed customers and to provide better
and quick service, currency counting machines would be installed in the remaining seven
branches. This facility has already been provided in the Head Office and it's Mithapur
Branch.

44
Deposits

Deposits are the prime source of funds for the banks. The enormity of deposits replicates
the amount of profit that a bank can make. This is so because large chunk of deposits are
given away as loans which renders higher interest rate than that given on deposits. So, it
is customary to encourage large number of huge deposits. This can be done by providing
different types of deposits according to the needs of varied customers.

30000
26205
25000 24023
20502
20000 17077 18256

15000
DEPOSITS (IN LACS)
10000

5000
0
2004-05 2005-06 2006-07 2007-08 2008-09

Thee deposits as offered by Urban cooperative bank are explained below

A. Current

B. Savings

C. Special savings

D. Loan Compulsory

E. Nominal Compulsory

F. Fixed

G. Recurring

45
CURRENT ACCOUNT

It is basically used for business purposes. It doesn’t give any interest on deposits. It can
be held in the name of firms (include partnership firm, pvt. Ltd. Co., ltd. Co., trust,
association), person. Its prime purpose is to serve the customers for their daily business
transactions. A customer having current account can withdraw money in the form of
cash or cheque in a infinite number of times and so is unrestricted.Current Account is
primarily meant for businessmen, firms, companies, public enterprises etc. that have
numerous daily banking transactions. Current Accounts are cheque operated accounts
meant neither for the purpose of earning interest nor for the purpose of savings but only
for convenience of business hence they are non-interest bearing accounts. In a Current
Account, a customer can deposit any amount of money any number of times. He can also
withdraw any amount as many times as he wants, as long as he has funds to his credit.
Generally, a higher minimum balance as compared to Savings Account is required to be
maintained in Current account.

As per RBI directive banks are not allowed to pay any interest on the balances
maintained in Current accounts. However, in case of death of the account holder his legal
heirs are paid interest at the rates applicable to Savings bank deposit from the date of
death till the date of settlement. Because of the large number of transactions in the
account and volatile nature of balances maintained, banks usually levy certain service
charges for operating a Current account.

Current Account can be opened by: An individual who has attained majority. Sole
proprietorship concerns, Partnership concerns, Hindu Undivided Family (HUF), Limited
Companies. Clubs, Societies, Trusts, Executors and Administrators. Others - Govt. and
semi Govt. bodies, local authorities etc.

Documents Required for Opening a Current Account

Following documents are required in case of individuals Two passport size

photographs ,Proof of residence i.e. Passport/driving license/Gas / Telephone / Electricity
Bill/ Ration card/voters identity card ,An introduction of the person from an existing
account holder., PAN number / Declaration in form no.60 or 61 as per the Income Tax

46
Act 1961 Different set of documents are required as per bank's norms if the account is
opened by partnership firms, private and public limited companies, HUFs / specified
associates, societies, trusts etc.

SAVING ACCOUNT

Savings Bank Accounts are meant to promote the habit of saving among the citizens
while allowing them to use their funds when required. The main advantage of Savings
Bank Account is its high liquidity and safety. On top of that Savings Bank Account earn
moderate interest too. The rate of interest is decided and periodically reviewed by the
Government of India. Presently, the rate of interest is 3.5% compounded half yearly.
Savings Bank Account can be opened in the name of an individual or in joint names of
the depositors. Savings Bank Accounts can also be opened and operated by the minors
provided they have completed ten years of age. Accounts by Hindu Undivided Families
(HUF) not engaged in any trading or business activity, can be opened in the name of the
Karta of the HUF.

The minimum balance to be maintained in an ordinary savings bank account varies from
bank to bank. It is less in case of public sector banks and comparatively higher in case of
private banks. In most of the public sector banks, minimum balance to be maintained is
Rs. 100. In accounts where cheque books are issued, a minimum balance of Rs. 500/- has
to be maintained. For Pension Savings Accounts, minimum balance to be maintained is
Rs. 5/- without cheque facility and Rs. 250/- with cheque facility.

Things to Consider While Opening a Savings Account

It is advisable to seek the following information from bank before opening the account:

• Minimum balance requirements.

• Penal provisions in case the balance falls below the minimum stipulated amount

• Penalty in case of return of cheques issued or instruments sent on collection.

• Collection facilities etc. offered and charges applicable.

47
 • Details of charges, if any for issue of cheque books and limits fixed on number of
withdrawals, cash drawings, etc.

Document Required For Opening a Savings Account

Two passport size photographs ,Proof of residence i.e. Passport/driving license/Gas /

Telephone / Electricity Bill/ Ration card/voters identity card, An introduction of the
person from an existing account holder,PAN number / Declaration in form no.60 or 61 as
per the Income Tax Act 1961.

SPECIAL SAVINGS

This concept and deposit was prevalent earlier, but now it is not in use. In this deposit a
customer can withdraw the money only3 times (less than savings ie 5 times). However,
this deposits gives an interest at the rate which is higher than the savings account.
Earlier, when it was in use these deposits gave a return of 0.5% higher than that of
savings deposits

LOAN COMPULSORY
These deposits are made compulsory for a customer who wants to take a loan from JCC.
For this customer it is required to keep 2.5% of the loan amount in these deposits. It
gives the same interest rate as saving deposits.

NOMINAL COMPULSORY
It is similar to loan compulsory deposits in most ways. However, the difference is that
these deposits are held by customers having less loan amount. These deposits are there to
help small loan takers, so that these people don’t need to keep 2.5% of their loan amount
as deposits. It gives the same interest rate as saving deposits.

48
FIXED DEPOSITS

Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit Account, a
certain sum of money is deposited in the bank for a specified time period with a fixed rate
of interest. The rate of interest for Bank Fixed Deposits depends on the maturity period. It
is higher in case of longer maturity period. There is great flexibility in maturity period
and it ranges from 15days to 5 years. The interest can be compounded quaterly, half-
yearly or annually and varies from bank to bank. Minimum deposit amount is Rs 1000/-
and there is no upper limit. Loan / overdraft facility is available against bank fixed
deposits. Premature withdrawal is permissible but it involves loss of interest.

in the meeting of the board of directors held on 29.06.2009 the rate of interest on
domestic term deposits have been revised w.e.f 01.07.2009 and the new rate of interest on
domestic term deposits are as under

Rate of Interest on Domestic Term Deposits :

46 days to 90 days 5.00%

91 days to180days 6.25%

181 days to less than one year 7.25%

One years to Two years 8.00%

Above Two years to Five years 8.10%

Above Five years to Ten years 8.25%

1/2% more interest on domestic term deposits above 180 days will be given to pensioners
,senior citizens. chartiable trusts and institutions, urban cooperative societies, freedom
fighters, widows and female divorcees.

Things to Remember Before Opening a FD Account

Before opening a fixed deposit account, check the financial position of the bank. Also, try
to check the rates of interest for different banks for different periods. Instead of putting a
big amount in one fixed deposit, keep the amount in five or ten small deposits. This way,

49
in case of any premature withdrawal of partial amount, then only one or two deposits may
need to be prematurely encashed. Thus, the loss of interest will be less than if a single big
deposit were to be encashed. Check deposit receipts carefully to ensure that all details
have been properly and accurately filled in. Do not leave the renewal column unfilled.
Otherwise, on maturity the fixed deposit amount will go back into an FD. Before
investing in a FD it is important to consider the rate of interest and the inflation rate. A
high inflation rate can eat into your real returns. So, it is vital to have a look at the
inflation rate before arriving at the real rate of interest. If the deposit is withdrawn
prematurely, then a penal interest rate is charged as follows. Penal interest rate for FD
Time from subscription Less than 1 year is 1% 1 to 3 years is 2% More than 3 years is
3%.Note that no penal interest is charged to the heirs of FD holder who has died in the
duration of the maturity of FD.

Advantages of Fixed Deposit

• Fixed deposits with the banks are nearly 100% safe as all the banks operating in
the country, irrespective of whether they are nationalised, private, or foreign, are
governed by the RBI's rules and regulations, and give due weightage to the
interest of the investor. Till recently, all bank deposits were insured under the
Deposit Insurance & Credit Guarantee Scheme of India, which has now been
made optional. Nonetheless, bank deposits are among the safest modes of
investment.

• One can get loans up to 75- 90% of the deposit amount from banks against fixed
deposit receipts. Though the interest charged will be slightly more than the
interest earned by the deposit.

Tax Implications

• The amount invested in fixed deposits with a maturity period of 5 years in a

Scheduled bank is eligible for tax deduction under section 80C. However, the
interest earned on the deposit is taxable.

50
 • Tax will be deducted at the source, if the interest income on a fixed deposit per
annum exceeds Rs.10000.

At fixed deposits counter, depositor comes for three things as stated below-
1. Depositing new FDs
2. Renewal of matured FDs
3. Cash withdrawal from FDs
Now, the procedure followed by the banker at Urban citizen cooperative bank when the
depositor comes for the above stated three services is as follows

1. Depositing new FDs - Here the depositor can give cash, cheque of the same bank
(UCB) , cheque of other bank. The pre requisites for this are FD form (given in
Appendix 4), Photo proof, PAN card . The depositor also mentions the time
period for which he wants to deposit the amount. After completing the formalities
on the depositor side the procedure followed by banker is He follows the path:
Fixed master transaction create new which is applicable to UCB only. Here he
creates new account where the account number is automatically given by the
system. In the new account the banker enters the period for which the deposit is to
be kept and rate of interest for that particular time period. The print of the receipt
created is taken and is given to the customer.
2. Renewal of matured FDs -Here depositor comes for renewal of his FDs. He
follows the following procedure.
a. He should have brought the earlier receipt of his FD.
b. He should mention the time for which the FD should be renewed.
c. After this banks fill up a slip containing FD a/c number, name, matured
amount, date (all this data from earlier receipt)
d. After this the officer debits the current receipt . Here a/c number, receipt
number is entered and then the receipt is debited.
e. Then credit to other receipt is done .Here the banker enters the details of new
receipt such as date for renewal, period for which FD should be renewed and
amount
f. Thereafter print of the new receipt is taken which is given to the client.

51
 3. Cash withdrawal for FDs - Here depositor withdraws cash and first and fourth
step of the above procedure is followed. That is only the receipt is debited. After
this for the customer to withdraw the cash, the amount is credited to savings a/c
(If he is having the a/c in the UCB) or he is given pay slip (if he is not having a/c
in UCB).

RECURRING DEPOSIT

Under a Recurring Deposit account (RD account), a specific amount is invested in bank
on monthly basis for a fixed rate of return. The deposit has a fixed tenure, at the end of
which the principal sum as well as the interest earned during that period is returned to the
investor. Recurring Bank Account provides the element of compulsion to save at high
rates of interest applicable to Term Deposits along with liquidity to access those savings
any time. Since a recurring deposit offers a fixed rate of return, it does not provide
protection against inflation.

There is great flexibility in period of deposit with maturity ranging from 6 months to 120
months. The minimum monthly deposit varies from bank to bank. In most of the public
sector banks, one can start a Recurring Deposit Account with a monthly installment of
Rs. 100/- only. There is no upper limit on investing. The rate of interest varies between 7
and 11 percent depending on the maturity period. Loan/overdraft facility is also available
against Recurring Bank Deposits.

The deposit for RD account is paid in monthly installments and each subsequent monthly
installment has to be made before the end of the calendar month and is equal to the first
deposit. In case of default in payment, penalty is levied for delayed deposit at the rate of
Rs. 1.50/- for every Rs. 100/- per month for deposits up to 5 years and Rs. 2/- per Rs.
100/- in case of longer maturities.

In case of Recurring Deposit being closed before completing the original term of the
deposit, interest will be paid at the rate applicable on the date of deposit, for the period
for which the deposit has remained with the Bank. Premature withdrawal is also
permissible but penalty is levied. TDS is not applicable on Recurring Deposits.

52
How to open a RD Account

A Recurring Bank Deposit account can be opened at any bank that offers this facility.
However, some banks insist that you open a savings bank account with them to operate a
Recurring Deposit account.

Total deposits of the bank as on March 31,2008 were 240.23 as against Rs 205.02
crores as on March 31,2007 registering an increase of 22.46%. The deposit portfolio of
bank is diverged with large number of small depositors comprising of pensioners and
senior citizens,which enables the bank to mitigate against any unforeseen risks.The
growth in deposits is primarily attributed to the personalized service approach of the bank
and relationship with the local community .As matter of cooperative philosphy and social
measure ,the bank is giving higher rate of interest ie 0.5% above the scheduled rates on
deposits from senior citizens ,pensioners ,charitable trusts and cooperative societies. The
bank pays 8.5 % per annum to senior citizens and pensioners.

Being member of the Deposit Insurance and Credit Guarantee Corporation

(DICGC),under whom,the money of the depositors is insured and its premium upto
March,2009 has already been paid to the said institution by the bank. As advised by the
reserve bank of india, "Know Your Customer"(KYC) policy is under strict
implementation.

Loans and Advances

LOANS

One of the reasons for boom in Indian economy is that now a days loans are easily
available and the rate of interests at which they are available are very reasonable. Urban
citizen cooperative bank is giving loan for and loan against any and every thing.
Government too is encouraging people to take loans for certain purposes. For example,
government is encouraging people to take housing loans by giving tax concessions

53
 13980
14000 13189
12000
9567 10429 10344
10000
8000
LOANS AND
6000 ADVANCES(IN LACS)
4000
2000
0
2004-05 2005-06 2006-07 2007-08 2008-09

.Following are the some types of loans provided by urban citizen cooperative bank-

Personal loan/Consumer loan - Personal loan is a lump sum amount that a person take
from a bank . Such loans help to take care of your immediate requirements without much
of a hassle. In fact, personal loan is one of the quickest ways of borrowing money. Also,
no questions regarding the end use of the loan are asked. You can use the loan amount for
any purpose such as home renovation, marriage expenses, medical expenses, holidays,
consumer durables, higher education etc. While applying for the loan, the lender usually
conducts a credit worthiness check, before giving the loan. Personal loans are repayable
in equal monthly installments (EMIs) and the loan tenure varies from 1 to 5 years.
The maximum amount of personal loan for which you are eligible depends upon your
take-home salary. The exact loan amount depends on your eligibility and takes into
account many other things as well, like your credit rating, job security, residential
location and the ability to repay the loan amount in time.

You can also apply jointly with a co-applicant, say your spouse for personal loan. This
allows you to increase your loan eligibility, as the income of your spouse is also added to
your income, for the purpose of calculating the total loan amount. The loan range in case
of personal loan is Rs. 50,000 to Rs. 20, 00,000.

54
As personal loans are given without any security and involve a high risk, the interest
charged is usually more as compared to other loans, usually varying from 12 to
24%.Urban citizen cooperative bank is providing personal loan @14.00% with effect
from 1 July, 2009. Apart from this, interest processing fee is also charged from the
borrowers. Processing fee is payable at the time of processing of loan application. A pre-
payment fee is payable in case you decide to pre-close your loan account. Both
processing fee and pre-payment fee are in the range of 2-3%. You can get the benefits of
preferred interest rates, priority processing and simpler documentation, if you are an
existing customer with the bank. Generally, personal loans are sanctioned within 72
hours.

Types of Personal Loans

• A secured loan is one in which you need to attach a guarantee against the sum of
money borrowed. This can either be in the form of your property or any
fixed/movable asset. Upon default, there is a risk of the asset being taken over by
the bank and sold off.

• An unsecured loan is one in which no security needs to given for the money
borrowed. However, in this case, the lender would be charging a higher rate of
interest, taking into account the high risk involved in lending the sum. In case the
recipient fails to repay the loan, the lender can seek legal help to make up for the
loss incurred.

Eligibility Criteria for Personal Loans

Salaried Individuals

• Minimum Age of the Applicant - 21 years

• Maximum Age of Applicant at Loan Maturity - 58 years

• Minimum Employment Period - 2 years in total and 1 year at present organization

• Minimum Income - Rs. 8000 per month

55
Self Employed Professionals & Businessman

• Minimum Age of the Applicant - 25 years

• Maximum age of Applicant at Loan Maturity - 65 years

• Minimum Business Period - Minimum 3 years in current business and 5 years

total experience

• Minimum Annual Income - Rs.60,000

Documents Required for Personal Loan

• Bank Statement for last three months (where salary/income is credited)

• Salary Slips for last three months (if salaried) or ITR for the last two years (if self
employed)

• Proof of Continuity in Current Job - Form 16 / Company Appointment Letter (if

salaried)

• Proof of Identity (Copy Of Passport / Driving License / Voters ID / PAN Card /

Photo Credit Card / Employee ID Card)

• Proof of Residence (Copy Of Ration Card / Utility Bill / LIC Policy Receipt)

• Proof of Qualification Highest Degree (for Professionals / Govt employees)

• For Professionals - proof of qualification, say degree, registration with

professional council, etc.

• Two passport size photographs

Auto loan

With a plethora of auto loan opportunities available in India these days, it is now possible
for you to buy your dream car within a matter of days. No need to save up money for
making complete down payment at the time of buying. Urban citizen cooperative bank
offer an easy auto loan service to provide its constomer satisfactory service. Just gather

56
enough amount for the initial payment and pay the rest in easy installments, by taking up
a loan. The best part about auto financing is that, apart from the new cars, loans are
available for old cars as well. After you have decided to take an auto loan, check out the
various schemes available in the bank. After undertaking a thorough research of each
and every scheme, you will need to pick the one that suits you the most, in terms of
interest rate, monthly installments, duration, and so on. The size of the loan will depend
upon the cost of the vehicle and its type (standard or premium), along with the percentage
financing you want or are being offered.

Type of vehicle Rate of Interest

Three Wheelers/Scooter/Motor Cycle /Light Vehicle 11.25%

Car loans Upto Rs 4.00 lacs 11.25%

Car loans Above Rs 4.00 lacs 11.50%

Trucks and other Heavy Vehicles 13.50%

There is no necessity for any collateral to get a car loan from urban citizen cooperative
bank Usually, the bank hypothecates the car in its name. The endorsement for
hypothecation is made in the Registration Certificate (RC) book of the vehicle, which
gets cancelled after the loan is repaid. Usually the tenure of auto loan varies from 1 to 5
years. However, Urban cizen cooperative bank has a schemes that offer loans for 7 years
as well.

General Features

• In case of a new car, loan amount is up to 90% of cost of the car.

• In case of used car, loan amount is up to 80% of the car.

• The maximum loan amount is up to 3 times the annual salary (for salaried
professionals) or 6 times the annual income (for self employed professionals).

• Urban citizen cooperative Bank generally offer a preferential treatment to their

existing customers. If you have savings or current account with a bank, it is easier

57
 to get the loan and you might also get preference in terms of rate of interest.

• Loan is given for a period of 1 to 5 years.

• If you want to go for an early settlement of the loan amount, certain charges are
taken as a penalty.

• For the purpose of auto loan, the interest is calculated on compound basis.

• In case you have been declared bankrupt, applied for bankruptcy, defaulted in
some loan in the past or a court case pending against you, it will be very difficult
for you to get an auto loan.

• The rate of interest for an auto loan is 11.25% percent.

Eligibility Criteria

• Minimum Age of Applicant While Applying For Loan: 21 years

• Maximum Age of Applicant at Loan Maturity: 58 years

• Minimum Employment: 1 year in current employment and minimum 2 years of

employment in general

• Minimum Annual Income: Rs 100,000 (net)

• Telephone: Must at Residence

Documents Required

• Proof of Identity (Copy of Passport, PAN Card, Voters ID Card or Driving

License)

• Income Proof (Latest salary slip with form 16 - for salaried individuals or IT
returns for the last two financial years - for self employed individuals and
professionals)

• Address Proof (Copy of Ration Card/Driving License/Voters Card/Passport

/Telephone Bill/ Electricity Bill/Life Insurance Policy/ Pan Card)

• Bank Statement (For the last 6 months)

• Two passport size photographs

58
Real estate is currently one of the fastest growing sectors in India. Banking sector is also
registering profitable business since the last few decades, with the growth of real estate.
Majority of the banks are also offering easy home loans at attractive rates to their
customers. Now that getting a home loan is so easy, it seems everyone can fulfill his / her
long cherished dreams of purchasing lands, building their houses and expanding their
homes. Different types of home loans are tailored to suit the heterogeneous requirements
of the customers. The description of some of the most common types of home loans is
given below.

Types Of Home Loans

• Home Purchase Loans: This is the basic home loan for the purchase of a new
home.

• Home Improvement Loans: These loans are given for implementing repair
works and renovations in a home that has already been purchased by you.

• Home Construction Loan: This loan is available for the construction of a new
home.

• Home Extension Loan: This is given for expanding or extending an existing

home. For instance, you may apply for a loan for the addition of an extra room in
your home and for similar cases.

• Home Conversion Loan: This is available for those who have financed the
present home with a home loan and wish to purchase and move to another home
for which some extra funds are required. Through home conversion loan, the
existing loan is transferred to the new home including the extra amount required,
eliminating the need of pre-payment of the previous loan.

• Land Purchase Loans: This loan is available for purchase of land for both
construction and investment purposes.

• Stamp Duty Loans: This loan is sanctioned to pay the stamp duty amount that
needs to be paid on the purchase of property

59
Type of Loan Rate of Interest

House and Building (Owned )

Upto to Rs 5.00 Lacs 10.25%

Above Rs 5.00 Lacs to 20.00 Lacs 10.80%

Above Rs 20.00 Lacs to Rs 25.00 lacs(Maximum) 11.25%

House and Buliding(Trust and Edu. Society) 13.00%

General Information

• The loan amount is based on the repayment capacity of the customer. However, it
cannot be more than 85% of the cost of the property (including the cost of the
land).

• The minimum term of home loan is 5 years, while the maximum duration for the
loan is 20 years, subject to the retirement age of the applicant.

• Home Loans can be applied either individually or jointly, with spouse, children
(son or daughter) and even earning parents (father or mother), but if staying with
the applicant and having regular income.

• Home loan eligibility can be enhanced by repaying the outstanding loans,

clubbing the income, increasing the home loan tenure and opting for a step-up
loan.

• The amount of loan sanctioned varies from bank to bank. Generally, the
maximum loan amount granted for the applicant would be 80% to 85% of the cost
of the home.

• The eligibility for the applicant depends upon his/her capacity of repayment. It
stiffens with the increase in home loan rates.

• Processing charge, pre-payment penalties, commitment fees and miscellaneous

costs accompany a home loan, in many of the cases.

60
 Eligibility Criteria

• The minimum age limit for the person applying for loan is 21 years.

• For Government employees and those working at public limited companies, the
maximum age limit for applying for home loan is 60 years, while for salaried
individuals, it is 58 years.. For self employed people, the maximum age limit is 65
years.

• The applicant should be graduate.

• The applicant should have a stable source of income, at the time of availing the
loan and should have a saving history as well.

Documents Required

Salaried Customers Self Employed Professionals Self Employed Businessman

Application form with Application form with Application form with

photograph photograph photograph

Identity and Residence Proof Identity and Residence Proof Identity and Residence Proof

Education Qualifications Education Qualifications

Latest Salary-slip Certificate and Proof of Certificate and Proof of
business existence business existence

Last 3 years Income Tax

Form 16 Business profile
returns (self and business)

Last 3 years Income Tax

Last 3 years Profit /Loss and returns (self and business) &
Last 6 months bank statements
Balance Sheet Last 3 years Profit /Loss and
Balance Sheet

Education Loan

Education is the essence of life. To ensure that no deserving student is denied education
for want of funds, the government is promoting education loans in a big way. The basic
aim or idea behind education loan is to bring education within the reach of students and
help them improve their prospects in life. Any student who has secured admission in an

61
institute of repute, whose degree/diploma is recognized by University/Institute affiliated
to any Central/State Statutory Body or recognized by AICTE (All India Council of
Technical Education) and other institutes of repute, is eligible for educational loan.
Education loans cover cost of the school/college fee, hostel expenses, and cost of books
and stationery. Apart from this, any other expense required to complete the course can
also be considered. The maximum amount of education loan is up to Rs. 7.50 lakh in case
of studies in India and Rs 15 lakhs for studying abroad. The sum of money offered is
against a third-party guarantee. The third-party guarantee can come from an uncle,
neighbor or friend standing guarantee for the full amount of the loan.
On an average, an education loan has to be repaid over a period of 5 to 7 years, with the
provision of a grace period of one year after completion of studies. The loan money has
to be repaid within 84 months in equated monthly installments (EMIs), commencing 12
months after course completion or 6 months after getting the job, whichever is earlier. In
case of overseas study loan of 7 lakhs or above, the sum of money is usually given
against fixed deposits, NSC certificates and property worth the loan amount.

General Information for taking education loan from urban citizen cooperative bank
is:

• The exact rate of interest for education loan differs from one bank to the other.
However, it usually varies from 10 to 15 percent.
• Apart from the fee of the course, a list of other expenses is also covered by
education loans. However, the list depends upon the bank from which you are taking the
loan.
• Education loan can be offered at fixed as well as floating interest rate. The
interest is usually charged on a daily or monthly reducing balance.
• Generally, nationalized banks have been seen to offer variable interest rates,
while private and foreign banks charged fixed interest rates on education loans.
• While applying for education loan, you will have to pay a percentage of the loan
amount, as processing fee.

62
• In most of the cases, the entire fee for a course is not financed by the bank. A
certain proportion, called margin, has to be paid by the applicant. The margin
requirements on education loans are not very rigid, with the average being 5 percent for
studying in India and 15 per cent for abroad.

The Urban citizen cooperative bank ltd is providing higher education loan at the rate of
12.50%.

Marriage Loan

Marriage is one of the most important events in a person's life. You want to make sure
that all the arrangements are perfect and match the occasion. Marriage loans ensure that
money is not a hindrance in marriage preparations. Several Indian banks offer loans for
marriage. The loan is available for meeting the expenses of marriage of your own self as
well as that of your daughter, son dependent sister and dependent brother.
The marriage loan amount that can be sanctioned varies from bank to bank and from
customer to customer, depending on a number of factors, such as, security/collateral
offered by the customer, repayment capacity of the borrower, age of the borrower.
Generally, it is twice the net annual income of the applicant. There is no fixed interest
rate for marriage loans in India.
For the loan to be disbursed, the bride and the groom should not be less than 18 years and
21 years of age respectively. Anyone can apply for the loan. He/she has to fill a form at
bank outlet. The bank charges processing fees, at the time of submission of the form,
which varies from one bank to the other. The repayment of the loan can be done either
through monthly/quarterly/half yearly installments or under Equated Monthly
Installmentsscheme. The eligibility criteria to take marriage loan from Urban citizen
cooperative bank is

• Minimum Age for loan: 21 years (groom)/ 18 years (bride)

• Maximum Age of Applicant at the Time of Loan Maturity: 60 years
• Net Annual Income: Rs. 1,44,000 pa
• Years in Current Job / Profession: 1 year
• Years in Current Residence: 1 year

63
Business Loan

Business loans are available to self employed professionals, firms and corporations, to
meet their operating expenses, finance capital expenditure (or acquisition of fixed assets)
towards starting or expanding a business. Even industrial units are given business loans,
to swap existing high-cost debt from other bank / financial institution. Apart from
providing funding, bank can also issue letters of credit or give a guarantee, on behalf of
the customer, to the suppliers and even government departments, for the procurement of
goods and services on credit.

The maximum amount of business loan that can be sanctioned varies from bank to bank.
However, the minimum loan amount is Rs. 25000 and maximum loan tenure is 5 years.
Generally, no security is required for business credit up to a certain limit. For business
loans above the limit, banks usually require a collateral security or a percentage of
business loans as margin, in the form of fixed deposit with the bank. Business loans are
similar to an overdraft and are available like a limit on current account. In this case, the
interest is charged only on the actual amount utilized, rather the entire amount of loan.

Types of Business Loans

Professional Loans

Professional loans, as their very name suggests, are provided to self employed
professionals like Doctor, Chartered Accountant, Interior Decorator, Architect, Company
Secretary, etc. Unsecured in nature, this type of loan is not given to manufacturing,
trading or processing units. The amount of loan varies between Rs. 25000 to Rs. 25 lakh,
considering the age of the applicant, his financial standing, his repayment capacity,
tenure of the loan (maximum 5 years), etc. The urban citizen cooperative bank
provides loans to professionals including doctors,chartered accountants,company
secretaries,architects,engineers at the rate of 12.25%.

In case of professional loans, the rate of interest depends upon the prime lending rate, is
calculated on diminishing balance and can be on the fixed as well as fluctuating basis. In

64
many cases, it depends upon the customer's profile and his financial capacity. The
payment is made through EMIs and in only a few cases, tangible collateral security is
required. Most of the finance companies also charge a process fee, usually 1% of the loan
amount.

Trade Loans

Trade loans are provided to traders/ businessmen, so as to help them either open a new
business or operate/expand an existing one. The amount of loan varies between Rs.
25000 to Rs. 100 lakh, considering the age of the customer, his financial standing, his
repayment capacity, tenure of the loan, etc. The maximum duration for which the loan is
given is 5 years and it has to be repaid through Equated Monthly Installments or EMI.

The rate of interest depends upon the prime lending rate and can be offered on the fixed
as well as fluctuating basis. There are many banks that require customers to furnish
collateral security for the loan, in the form of mortgage of land (not agricultural land) and
building. Apart from that, National Savings Certificates, Government Bonds, Bank's
Term Deposits, Assignment of Life Insurance Policies, Approved Shares & Bonds (in the
name of borrower/proprietor/partner/director) are also acceptable.

Loan against home

Loan against home connotes a loan that is given or disbursed against the mortgage of
home, as a certain percentage of market value of the property. Generally, the loan amount
that is sanctioned ranges from 40% to 70% of the market value, with a minimum
threshold limit of Rs 2 lakh. A loan against home works out to be much cheaper than
personal loan. The rate is lower because the lending entity has a security in the form of
the housing mortgage vis-à-vis a personal loan that is given without any security.

The tenure for repaying loan against home has an upper limit of 10 years. The loan can be
taken for any purpose and the customer is not required to disclose the motive behind the
loan, to the lending authority. The criteria for loan against home are same as that of a
home loan. Part prepayment as well as full prepayment of the loan is generally allowed

65
by most lending institutions, though with a charge. Loan against property is available in
case of both residential and commercial property. Many housing finance companies allow
individuals to take loan against home even if they have taken a housing loan from them.

Amount of Loan Depends Upon

• Your income, savings, debt obligations

• Cost/value of the property mortgaged
• Your repayment track record for other loans, credit cards, etc
• Number of years in service/ business

The Urban citizen cooperative bank ltd is providing loan against home in following
manner:

Loan against home Rate of interest

a)Business purpose(upto 60.00 lacs) 13.75%

b)General purpose(upto rs 60.00 lacs) 14.00%

Generally, loan processing charge of 2% is levied. Pre-payment is allowed after 6

months. Generally, prepayment charge equivalent to 4% of the outstanding principal
is levied. In most of the cases, the minimum amount of loan against property is Rs
25,000 and the maximum amount is Rs 60.00 Lacs. The charges that might apply in
case of loan against property are processing fee, pre-payment fee, charges for
changing from fixed to floating rate of interest and charges for changing from
floating to fixed rate of interest.

Advances

Advances of the bank registered a phenomial increase during the year under review .Total
advances of the bank increased from Rs. 10344 lacs as on march 31,2007 to Rs. 13189
lacs as on march 31,2008 registring an increase of 27.50%.The bank is concentrating on
retail advance mainly for small business,traders,small scale industries.The bank has well

66
defined creditr policy which takes due care of concentration of advances in particular
segment.As against the myth of charging higher rates by cooperative banks , the lending
rates of the bank are competitive or lower in comparison with lending rates of other
public and private sector banks following the philosphy of mutual benefit of
cooperation .The bank is adhering to all sensitive norms like capital adequecy,asset
classifications and provisioning.

Advances to Priority Sector

Priority sector constitutes small scale industry,self employement scheme,housing and

infrastructure finance and weaker section of the society.The reserve bank of india has set
up statutory requirements for the banks to lend atleast 60% of the total advances to
priority sector .The bank has met this obligation by lending 65.69% of the total advances
to priority sector upto the year 2007-08.

Internet Banking:
Internet banking involves use of internet for delivery of banking products and services.
With internet banking is now no longer confirmed to the branches where one has to
approach the branch in person, to withdraw cash or deposits a cheque or request a
statement of accounts. In internet banking, any inquiry or transaction is processed online
without any reference to the branch (anywhere banking) at any time. The Internet
Banking now is more of a normal rather than an exception due to the fact that it is the
cheapest way of providing banking services.

Benefits of Internet Banking: •

• Reduce the transaction costs of offering several banking services and diminishes
the need for longer numbers of expensive brick and mortar branches and staff.
• Increase convenience for customers, since they can conduct many banking
transaction 24 hours a day.
• Increase customer loyalty.
• Improve customer access. Attract new customers.

67
 • Easy online application for all accounts, including personal loans and mortgages

Financial Transaction on the Internet:

• Electronic Cash: Companies are developing electronic replicas of all existing
payment system: cash, cheque, credit cards and coins.
• Automatic Payments: Utility companies, loans payments, and other businesses
use on automatic payment system with bills paid through direct withdrawal from a
bank account.
• Direct Deposits: Earnings (or Government payments) automatically deposited into
bank accounts, saving time, effort and money.
• Stored Value Cards: Prepaid cards for telephone service, transit fares, highway
tolls, laundry service, library fees and school lunches.
• Point of Sale transactions: Acceptance of ATM/Cheque at retail stores and
restaurants for payment of goods and services. This system has made functioning
of the stock Market very smooth and efficient. BANKING SERVICES IN INDIA
• Cyber Banking: It refers to banking through online services. Banks with web site
“Cyber” branches allowed customers to check balances, pay bills, transfer funds,
and apply for loans on the Internet.

Automatic Teller Machine:

The introduction of ATM’s has given the customers the facility of round the clock
banking. The ATM’s are used by banks for making the customers dealing easier. ATM
card is a device that allows customer who has an ATM card to perform routine banking
transaction at any time without interacting with human teller. It provides exchange
services. This service helps the customer to withdraw money even when the banks ate
closed. This can be done by inserting the card in the ATM and entering the Personal
Identification Number and secret Password.
ATM’s are currently becoming popular in India that enables the customer to withdraw
their money 24 hours a day and 365 days. It provides the customers with the ability to
withdraw or deposit funds, check account balances, transfer funds and check statement

68
information. The advantages of ATM’s are many. It increases existing business and
generates new business. It allows the customers.
• To transfer money to and from accounts.
• To view account information.
• To order cash
• To receive cash.

2.5 PERFORMANCE OF THE BANK

Although the bank is facing stiff competition from the public sector and new generation
private sector banks with the enhanced technological advancement in banking operations,
but due to focused personalized service approach to the members nad small
depositors,the bank has shown tremendous growth in all areas of its operations and attain
new heights of progress during the financial year 2007-08 as under. The financial
performance of the bank for the year ended March 31,2008 at a glance is as under

Mar-07 Mar-08
2582.0
Gross income 8 1807.24
Profit before depreciation ,tax and provisions 471.55 279.72
Depreciation on fixed assets 34.85 30.86
Profit before provisions and contingencies 436.7 248.86
Provisions and contingencies 198.57 119.83
Profit after tax 238.13 129.03
Working funds 28048 24003
Paid up capital 662 577
Reserves and surplus 2247 2095
Net worth 3037 2674

• Gross income increased to Rs 2582.08 lacs as against rs. 1807.24 lacs in the
previous year registering a growth of 42.87%

69
 • Bank has earned the interest of rs 2516.14 lacs during the financial year ended
march 31,2008as against rs 1731.72 lacs in the previous year depicting a growth
of 45.30%
• The operating profit increased from rs 248.86 lacs to 436.70 lacsduring the year
registering a 75.48%increase in operating profits
• The profit after tax has increased to 238 lacs as against 129 lacs registering a
growth of 84.50%
• Fixed assets of the bank has increased from rs 189.16 lacs to rs 461.60 lacs
• Net worth of the bank has increased to rs 3037 lacs as against rs 2674 lacs due to
increase in profitability
• Reserves and surplus as on march 2008 increased to rs 2247 lacs from rs 2095
lacs as on march 2007

2.5.1 Working capital

The working capital during the financial year 2006-2007 has shown significant growth as
it has gone to rs 280.48 crores as on march 31,2008 as against rs 240.03 crores a son
31.03.2007

35000
30584
30000 28048
25000 24003
20526 21878
20000
15000 working capital(in lacs)

10000
5000
0
2004-05 2005-06 2006-07 2007-08 2008-09

70
2.5.2 Share capital

The membership of citizen urban cooperative bank ltd jalandhar continued to grow
during the year 2007-08 ,the paid up share capital of the bank has increased from rs. 5.77
crores as on march 31,2007 to rs 6.62 crores as on march 31,2008.

800
708
700 662
600 577
499 547
500
400
share capital paid up(in
300
lacs)
200
100
0
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09

2.5.3 Reserves and other funds

The strength of any economic organization can be gauged from its own funds which
plays a crucial role in enhancing members faith and confidence in ht eorganization.the
bank has accumulated the reserves and other funds to rs 22.47 crores as on 31.03.2008

2.5.4 Investment

The bank investment portfolio as on 31 st march ,2008 stood at rs 57 crores comprising

of government securities .the bank has also classified its investment into ‘held to

maturity’, ‘available for sale’ ‘held to maturity’ categories as per R.B.I guidelines.
Further the bank is in process of introducing asset liabilities management guidelines.

2.5.5 Profitability

Although the bank is facing stiff competition from the public sector and new generation
private sector banks with the enhanced technological advancement in banking operations,

71
but due to focused personalized service approach to the members and small
depositors,the bank has been able to achieve fabulous profitability during the year. Net
profit of the bank after tax increased to rs 238 lacs as against rs 129 lacs in the previous
year showing a growth of 84.50%.during the year the bank has written off rs 84.79 lacs as
bad debts and provided for 100% NPAs of merged kurali branch

2.5.6 Dividend

Urban citizen cooperative bank constantly endeavours to share the growth of the bank
with the share holders in the form of dividend distribution and higher capital appreciation
by retaining adequate quantum of profits to meet future plans.the bank has given 12%
dividend for the year march 31,2008 amounting to rs 75.02 lacs to the valued share
holders of the bank.

Citizens Bank which has nine Branches made consistent profit gain right from it's
inception and has also earned a profit after tax of Rs 238.13lakhs during the last
financial year 2007-08. Bank has achieved this profit growth despite the fact that rate of
interest was reduced from 0.5%-1% during the last financial year. The most satisfying
aspect for the Bank management is that, all the nine branches have recorded profit in the
financial year 2007-08. Bank has also taken initiative in the loan sector & advanced Rs.
13189 Lacs to weaker sections of the society, small-scale industries, housing, traders,
shopkeepers and unemployed youths in the financial year 2008. This advancement has
registered an increase of 27.50% from the financial year 2007. Further Bank has
distributed 12% Dividend to it's members for the year 2007-08. The present membership
of the Bank continue to grow during 2007-08, the paid up share capital of the bank has
increased from Rs 5.77 crores as on March 31 2007 to Rs 6.62 crore as on March31 2008.
Whereas Bank's working capital has touched to Rs. 28048 Lacs in 2008 from 24003 lacs
in year 2007.

72
2.6 FUTURE PROSPECTS/ PLANS

The citizens urban co-op. Bank, Ltd. Jalandhar is a fast growing institution which has
made an indelible mark in the history of urban banking in Northern India. The Board of
Directors under the chairmanship of Sh. K.K. Sharma have drawn up ambitious futuristic
plans to compete with other Banking institutions in the region..

• New Branches : The citizens bank which has now nine branches is planning to
setup three more branches during the financial year 2001-02, thereby increase the
total number of branches to 12. The proposed places for the setting-up of new
branches are :

• Kapurthala

• Bhogpur

• J.P. Nagar, Jalandhar

The above branches are proposed to setup during the year subject to the approval by the
RBI. For the early issuance of licenses, necessary correspondence is being made with the
RBI. Besides that, to have it's own premises is the priority of every organisation. Keeping
this priority in mind, citizens bank has decided to get the bank building constructed by
the engineering cell of Punjab Markfed on it's 53 marla plot adjoining, Hotal Shangrila,
Jalandhar and architectural assignment has already been assigned.

73
 CHAPTER-III
OBJECTIVES OF THE STUDY & RESEARCH METHODOLOGY

3.1 OBJECTIVES
This study has been conducted with a variety of important objectives in mind. The
following provides us with the chief objectives that have tried to achieve through the
study. The extent to which these objectives have been met could be judged from the
conclusions and suggestions, which appear in the later of this study.

• To study the services provided by Citizens Urban Co-Op. Bank Ltd.

• To study the satisfaction level of the customers with Citizens Urban Co-Op. Bank
Ltd.
• To get information regarding different conditions to be fulfilled for opening an
account in the bank.
• To know the type of services provided by Citizens Urban Co-Op. Bank Ltd. in
deposits accounts.
• To know the staff attitude towards bank’s customers.

2.4 RESEARCH METHODOLOGY

Research means a search for knowledge or gain some new knowledge and methodology
can properly refer to the theoretical analysis of the methods appropriate to a field of study
or to the body of methods and principles particular to a branch of knowledge. A
Research methodology has a specified framework for collecting the data in an effective
manner. Research methodology means a "defining a problem, defining the research
objectives, developing the research plan, collecting the information, analyzing the
information and presentation of findings." Such framework is called "Research Design".
The research process that was followed by me consisting following steps;
A) Defining the problem
B) Developing the research plan

74
 C) Collection of Data
D) Analysis and Interpretation of Data
E) Presentation of findings

A) Defining the problem and research objectives

• My research problem is to know services provided by Citizens Urban Co-Op.
Bank Ltd.

B) Developing the Research Plan

The development of research plan has following steps:
1. Data source
2. Research approach
3. Type of Research Design
4. Research instrument
5. Sampling plan
i) Sample unit
ii) Sample size
iii) Contact methods
6. Questionnaire Design

1. Data Source: The researcher can get two types of data:

a) Primary Data
b) Secondary Data

a) Primary Data
Primary data is a data which did not exist earlier and is being collected by the researcher
first time for its specific objectives. In other words, direct collection of data from the
source of information, technology including personal interview, observation,
Questionnaire and through schedules.

75
b) Secondary data
Any data which have been collected earlier for some purpose are the secondary data.
Indirect collection of data from sources containing past or recent past information like
bank's brochures, annual publication, books etc. Secondary sources used are:
 Text books
 Internet sites
 Newspaper articles
 Broachers

2. Research Approach
Survey is best suited for descriptive and analytical research. Survey are undertaken to
learn about people's knowledge, beliefs, preferences, satisfaction and so on and to
measure these magnitudes in the general public. Therefore, I have done this survey for
Descriptive and analytical research process.
Descriptive research includes surveys and fact finding enquiries of different kinds. The
main purpose is description of the state of affairs is noted down and analytical research
used to analyze the material and facts.

3. Research instrument
Questionnaire: Questionnaire (also known as self-administered survey) is a type of
statistical survey handed out in paper form usually to a specific demographic to gather
information in order to provider better service or goods. A document that contains a set of
questions that has been specially formulated as a means of collecting information and
surveying opinions, etc on a specified subject or theme, etc .
A questionnaire was constructed for my survey.

4.Sampling plan
Sample is a group of few items which represents the population or universe from where it
has been taken. The sampling plan calls for three decisions;

76
a) Sample unit
b) Sample size
c) Contact methods

a) Sample unit – who is to be surveyed?

The target population must be defined that has to be sampled. It is necessary so as to
develop a sample frame so that everyone in the target population has an equal chance of
being sampled. I have completed my survey in Jalandhar .

b) Sample size - how many people have to be surveyed?

Generally, large sample size gives more reliable results than small samples. The sample
consisted of 100 respondents. The sample was drawn from people having different
educational qualification, age group, occupation. The selection of the respondents was
done on the basis of Simple Random Sampling.
Simple random sampling is the technique in which every item in the universe and
population has an equal chance of being selected in the sample. Researcher has no role to
play or he cannot influence the selection process there is no possibility of biasness. It can
easily assess the accuracy of estimate.

c) Contact methods
Once the sampling plan has been determined the Questionnaire is how the subject should
be contacted i.e. by telephone interview, personal interview, mail etc. Here, in my survey,
I have contacted the respondents through personal interviews.

5. Questionnaire Design :
There are 13 questions in my questionnaire and I asked all these questions from 100
respondents in Jalandhar City.

77
C) Collecting the information
After this, I have collected the information from the respondents with the help of
Questionnaire.

D) Data Analysis and Interpretation

The next step is to extract the pertinent findings from the collected data. I have tabulated
the collected data and developed frequency distributions. Thus, the whole data was
grouped aspect wise and was presented in tabular form. Thus, frequencies and
percentages were prepared to render impact of study.

E) Presentations of findings
This was the last step of survey.

3.3 LIMITATIONS OF THE STUDY

Due to constraints of time and resources, the study is likely to suffer from certain
limitations. Some of these are mentioned here under so that the findings of the study may
be understood in a proper perspective.

The limitations of the study are:

 Some of the respondents of the survey were unwilling to share information.
 The research was carried out on in-house customers. i.e. within the branch in the
small city of Punjab viz. Jalandhar so the response may vary by including the
respondents from other branches in other areas as well.
 The research was carried out in a short period of 6 weeks as a part of summer
training. Therefore the sample size and other parameters were selected
accordingly so as to finish the work within the given time frame.
 The information given by the respondents might be biased because some of them
might not be interested to give correct information.

78
 CHAPTER-IV
DATA PRESENTATION, ANALYSIS AND INTERPRETATION

Q1. Do you have account in Citizens Urban Co-Op. Bank Ltd. ?

Table 4.1 : Account in Citizens Urban Co-Op. Bank Ltd.

Response No. of %age of Respondents
Respondents
Yes 100 100%
No 0 0%
Total 100 100%

0%

100%

Yes No

Graph 4.1 : Account in Citizens Urban Co-Op. Bank Ltd.

Interpretation :
The study is limited to only those 100 respondents who have account in Citizens Urban
Co-Op. Bank Ltd. From the above graph it is clear that all the 100% respondents have
their account in Citizen Urban Co-op. Bank.

79
Q2.Are you aware of banking services provided by Citizens Urban Co-Op. Bank Ltd.?

Table 4.2 : Awareness of banking services

Particulars No. of %age of Respondents
Respondents
Saving A/c 56 56%
Current A/c 20 20%
Fixed Deposits 10 10%
NRI A/c 4 4%
Loans 10 10%
Total 100 100%

10%
4%
10%

56%
20%

Saving A/c Current A/c Fixed Deposits NRI A/c Loans

Graph 4.2 : Awareness of banking services

Interpretation:
The study shows that maximum numbers of people are aware of saving account of
Citizens Urban Co-Op. Bank Ltd. From the above graph it is clear that 56% of the
respondents are aware of Saving account, 20% current account, 10% loans and fixed
deposits and remaining 4% are aware of NRI A/c.

80
3. How do you come to know about these services of Citizens Urban Co-Op.
Bank Ltd.?

Table 4.3: Source of information regarding services of the bank

Particulars No. of Respondents %age of Respondents
TV 10 10%
Friends 30 30%
Hoarding /Banner 10 10%
Newspaper 35 35%
Pamphlets 15 15%
Total 100 100%

15% 10%

30%

35%

10%

TV Friends Hoarding /Banner Newspaper Pamphlets

Graph 4.3: Source of information regarding services of the bank

Interpretation :
From the above graph it is clear that majority of the respondents have come to know
about the services of Citizens Urban Co-Op. Bank Ltd. through newspaper. 30%
respondents have come to know about the product & services of Citizens Urban Co-Op.
Bank Ltd. through friends, 15% through pamphlets and 10% through hoarding, banner &
television.

81
4. From how long the you are dealing with Citizens Urban Co-Op. Bank Ltd. ?

Table 4.4 : Period of dealing with the bank

Duration No. of respondents %age of respondents
1 Year 10 10%
2-3 Years 20 20%
3-5 Years 44 44%
More than 5 years 26 26%
Total 100 100%

10%
26%
20%

44%

1 Year 2-3 Years 3-5 Years More than 5 years

Graph 4.4 : Period of dealing with the bank

Interpretation :
From the above graph it is clear that 44% of customers are dealing with Citizens Urban
Co-Op. Bank Ltd. from last 3-5 years, 26% of customers are dealing with Bank from last
more than 5 years, 20% of customers are dealing with Bank from last 2-3 years and 10%
of them are dealing with Bank from last one year.

82
5. Why do you have opened account with Citizens Urban Co-Op. Bank Ltd. ?

Table 4.5 : Reasons to open an account in Citizen Urban Co-op. Bank

Responses No. of Respondents %age of Respondents
Network 24 24%
Quick Services 52 52%
Brand Name 14 14%
One stop bank 10 10%
Total 100 100%

10%
24%
14%

52%

Network Quick Services Brand Name One stop bank

Graph 4.5 : Reasons to open an account in Citizen Urban Co-op. Bank

INTERPRETATION:
The table shows 24% customers have opened their account in Citizens Urban Co-Op.
Bank Ltd. due to good network of branches. 52% customers have opened their account
due to quality of services provided by the Citizens Urban Co-Op. Bank Ltd. Only 14%
customers have opened their account due to brand name. Other 10% customer’s response
to one stop bank reason. Citizens Urban Co-Op. Bank Ltd. is a one stop bank because it
provides all modern banking services and products to customers under one roof.

83
6. How much time you spent for any transaction in Citizens Urban Co-Op. Bank
Ltd. ?

Table 4.6 : Average time for any transaction

Time Spent No. of Respondents %age respondents
5 to 10 minutes 60 60%
15 to 20 minutes 30 30%
More than 20 minutes 10 10%
Total 100 100%

10%

30%
60%

5 to 10 minutes 15 to 20 minutes More than 20 minutes

Graph 4.6 : Average time for any transaction

INTERPRETATION :
The above graph shows 60% customers spent only 5 to 10 minutes to perform only
transaction in the Bank. 30% customers spent 5 to 10 minutes and only 10% customers
spent more than that in Citizens Urban Co-Op. Bank Ltd.

84
 7.Are you satisfied with the time taken by bank for opening of an account ?

Table 4.7 : Satisfaction with the time taken by bank for opening a/c
Level of satisfaction No. of Respondents %age of respondents
Highly satisfactory 48 48%
Satisfactory 50 50%
Not satisfactory 2 2%
Total 100 100%

2%

48%

50%

Highly satisfactory Satisfactory Not satisfactory

Graph 4.7 : Satisfaction with the time taken by bank for opening a/c

Interpretation :
The pie diagram shows the percentage of satisfaction level of customer for opening of
A/c 50% of the customers is satisfied with the time taken by bank for opening of an A/c,
48% of the customers are highly satisfied with the time taken by bank for opening of an
A/c & 2% of the customers are not satisfied with the time taken by bank for opening of
an A/c. Therefore, it has been analyzed that most of the customers of the bank are
satisfied with the time taken by bank for opening of A/c in the bank

85
8. Are you satisfied with the services provided by Citizens Urban Co-Op.
Bank Ltd.?

Table 4.8 : Satisfaction with the services of the bank

Satisfaction Level No. of Respondents %age of Respondents
Highly Satisfied 24 24%
Satisfied 32 32%
Average Satisfied 38 38%
Not Satisfied 6 6%
Total 100 100%

6%
24%

38%

32%

Highly Satisfied Satisfied Average Satisfied Not Satisfied

Graph 4.8 : Satisfaction with the services of the bank

Interpretation:
From the above graph it is clear that majority of the respondents are average satisfied
with services provided by Citizens Urban Co-Op. Bank Ltd. whereas 32% of the
respondents are satisfied & 24% are highly satisfied with Citizens Urban Co-Op. Bank
Ltd. The remaining 6% respondents are not satisfied with the services provided by bank.

86
9. Are you satisfied with the time taken by bank for clearing of cheques:

Table 4.9 : Satisfaction level with the time taken by bank for clearing cheques
Level of satisfaction No. of Respondents %age of respondents
Highly satisfactory 4 4%
Satisfactory 72 72%
Not satisfactory 24 24%
Total 100 100%

4%
24%

72%

Highly satisfactory Satisfactory Not satisfactory

Graph 4.9 : Satisfaction level with the time taken by bank for clearing cheques

Interpretation :
The pie diagram shows the percentage of satisfaction level of customer regarding time
taken by bank for clearing of cheques.72% of the customers are satisfied with the time
taken by bank for clearing of cheques, 4% of the customers are highly satisfied with the
time taken by bank for clearing of cheques, 24% of the customers are not satisfied with
the bank for clearing of cheques. It has been observed that the most of the customers are
satisfied with the time taken by bank for clearing of cheques but still there are many
people who are not satisfied with the time taken by bank for clearing of cheques i.e. still
24% of the customers are not satisfied so, bank staff should be more efficient.

87
10. How many times do you visit Citizens Urban Co-Op. Bank Ltd. in a month?

Table 4.10 : No. of visits at Citizen Urban Co-op. Bank Ltd.

No. of Visits No. of Respondents %age of Respondents
1-4 Times 70 70%
5-10 times 20 20%
11-15 times 10 10%
Never 0 0%
Total 100 100%

10%

20%

70%

1-4 Times 5-10 times 11-15 times

Graph 4.10 : No. of visits at Citizen Urban Co-op. Bank Ltd.

Interpretation :
From the above graph it is clear that majority (70%) of the respondents visit the Citizens
Urban Co-Op. Bank Ltd. 1-4 times in a month, 20% respondents visit 5-10 times and
remaining 10% respondents visit the Bank 11-15 times in a month.

88
11. Would you like to recommend the name of Citizens Urban Co-Op. Bank Ltd.
to your known person ?

Table 4.11: Recommending the name of bank

Response No. of Respondents %age of Respondents
Yes 86 86%
No 4 4%
Can’t Say 10 10%
Total 100 100%

10%
4%

86%

Yes No Can’t Say

Graph 4.11: Recommending the name of bank

Interpretation :
From the graph it is clear that 86% customers would like to recommend the name of
Citizens Urban Co-Op. Bank Ltd. to other persons. Only 4% customers would not like to
recommend the name of Citizens Urban Co-Op. Bank Ltd. and 10% customers are
confused to give response.

89
12 How do you rate the attitude of staff of Citizens Urban Co-Op. Bank Ltd.
towards customers ?

Table 4.12 : Rating the attitude of attitude of bank staff

Response No. of Respondents %age of Respondents
Highly Satisfied 14 14%
Satisfied 60 60%
Dissatisfied 20 20%
Highly Dissatisfied 4 4%
Total 100 100%

4% 14%
20%

62%

Highly Satisfied Satisfied Dissatisfied Highly Dissatisfied

Graph 4.12 : Rating the attitude of attitude of bank staff

Interpretation :
From the above graph it is clear that 14% respondents are highly satisfied with the staff
behaviour of Citizens Urban Co-Op. Bank Ltd. while 60% respondents are satisfied with
the staff behaviour. 20% of the respondents are not satisfied with the staff behaviour of
Citizens Urban Co-Op. Bank Ltd. and 4% are highly dissatisfied with staff behaviour.

90
13. Are you satisfied with overall performance of Citizens Urban Co-Op. Bank Ltd.?

Table 4.13 : Satisfaction with the overall performance of the bank

Satisfaction Level No. of %age of Respondents
Respondents
Highly Satisfied 16 16%
Satisfied 34 34%
Average Satisfied 46 46%
Not Satisfied 4 4%
Total 100 100%

4% 16%

46%
34%

Highly Satisfied Satisfied Average Satisfied Not Satisfied

Graph 4.13 : Satisfaction with the overall performance of the bank

Interpretation:
From the above graph it is clear that majority (46%) of the respondents are average
satisfied with the overall performance of Citizens Urban Co-Op. Bank Ltd. where
they are operating their account. 34% of the respondents are satisfied, 16% are
highly satisfied and remaining 4% respondents are not satisfied with the performance
of Citizens Urban Co-Op. Bank Ltd.
CHAPTER - V
SUMMARY, CONCLUSIONS & RECOMMENDATIONS

91
5.1 FINDINGS OF THE STUDY

• The study is limited to only those 100 respondents who have account in Citizens
Urban Co-Op. Bank Ltd.
• The study shows that maximum numbers of people are aware of saving account of
Citizens Urban Co-Op. Bank Ltd.
• It is revealed from the research study that majority of the respondents have come
to know about the services of Citizens Urban Co-Op. Bank Ltd. through
newspaper followed by other sources i.e. friends, pamphlets, TV, Banners etc.
• It is depicted from the study that 44% of customers are dealing with Citizens
Urban Co-Op. Bank Ltd. from last 3-5 years, 26% of customers are dealing with
Bank from last more than 5 years, 20% of customers are dealing with Bank from
last 2-3 years and 10% of them are dealing with Bank from last one year.
• Citizens Urban Co-Op. Bank Ltd. is a one stop bank because it provides all
modern banking services and products to customers under one roof.
• It can be analyzed from the research study that 60% customers spent only 5 to 10
minutes to perform only transaction in the Bank. 30% customers spent 5 to 10
minutes and only 10% customers spent more than that in Citizens Urban Co-Op.
Bank Ltd.
• It has been analyzed that most of the customers of the bank are satisfied with the
time taken by bank for opening of A/c in the bank
• It is clear that majority of the respondents are average satisfied with services
provided by Citizens Urban Co-Op. Bank Ltd.
• It has been observed that the most of the customers are satisfied with the time
taken by bank for clearing of cheques but still there are many people who are not
satisfied with the time taken by bank for clearing of cheques i.e. still 24% of the
customers are not satisfied so, bank staff should be more efficient.

92
 • From the study it is clear that majority (70%) of the respondents visit the Citizens
Urban Co-Op. Bank Ltd. 1-4 times in a month, 20% respondents visit 5-10 times
and remaining 10% respondents visit the Bank 11-15 times in a month.
• It is revealed that 86% customers would like to recommend the name of Citizens
Urban Co-Op. Bank Ltd. to other persons. Only 4% customers would not like to
recommend the name of Citizens Urban Co-Op. Bank Ltd. and 10% customers are
confused to give response.
• The study shows that 14% respondents are highly satisfied with the staff
behaviour of Citizens Urban Co-Op. Bank Ltd. while 60% respondents are
satisfied with the staff behaviour. 20% of the respondents are not satisfied with
the staff behaviour of Citizens Urban Co-Op. Bank Ltd. and 4% are highly
dissatisfied with staff behaviour.
• Majority (46%) of the respondents are average satisfied with the overall
performance of Citizens Urban Co-Op. Bank Ltd. where they are operating their
account. 34% of the respondents are satisfied, 16% are highly satisfied and
remaining 4% respondents are not satisfied with the performance of Citizens
Urban Co-Op. Bank Ltd.

5.2 CONCLUSION
The customer satisfaction is very important for success of Bank. Only those Banks will
be at the top which satisfied their customer. If the employees are performing their Job
efficiently it will improve the customer relations.
The face of Indian banking is changing rapidly. The competition and challenges in Indian
banking sector is increasing day by day. I made this project on the topic entitled
“Services provided by Citizens Urban Co-Op. Bank Ltd.”. From the above study I
concluded that the account holders of Citizens Urban Co-Op. Bank Ltd. are satisfied with
the bank. The banking is providing all modern banking products & services like Saving
A/c, Current A/c, Fixed Deposits, NRI A/c, Loans etc. to customers of Citizens Urban
Co-Op. Bank Ltd.
Citizens Urban Co-Op. Bank Ltd. is one of the fastest growing co-operative bank in
Jalandhar. The bank has to take necessary initiatives in order to increase customer base.

93
The bank should increase number of branches and install ATMs at the prime locations of
Jalandhar. The bank can also introduce gifts and prizes from time to time. The interest for
different deposits account should be increased.
From the above study, I can conclude that Citizens Urban Co-Op. Bank Ltd. has
maintained excellent position in the market and the customers are satisfied with the
overall performance of Citizens Urban Co-Op. Bank Ltd. So, we can say that Citizens
Urban Co-Op. Bank Ltd. is well known for understanding the customer needs in the
modern era of banking.

5.3 RECOMMENDATIONS
 Citizens Urban Co-Op. Bank Ltd. should increase the number of branches in the
city.
 The bank should bring out new products and schemes at time-to-time so that more
people can be attracted.
 Even some gifts and prizes may be offered to the customers for their retention.
 Citizens Urban Co-Op. Bank Ltd. should install ATMs in the prime locations of
Jalandhar City.
 Customer feedback should be taken at regular intervals, so as to keep track of the
changing requirements of the customers.
 The bank should increase rate of interest of deposit accounts.
 The need of the customer should properly be understood so that customer feels
satisfied.
 24 hours banking should be induced so as to facilitate the customers who may not
have a free time in the daytime. It will help in facing the competition more
effectively.
 Employees’ behavior should be so nice so that customer don’t feel any hesitation
in asking his doubts.

94
 BIBLIOGRAPHY

Books :

• Khan Masood Ahmed (1992), “Banking in India”, Anmol publications, 3rd Edition,
New Delhi.

• Kotahri C.R. (2005)- “Research Methodology” Tata Mcgraw Hill, New Delhi.

• Seethapathi K., Sivaram Y G and Rama T S, (2003) “Indian Banking System – The
Changing Scene”, ICFAI University Press
• P. N. Varshney (1999) - “Indian Financial System And Commercial Banking”,
Sultan Chand & Sons Publication.

Websites :

• http://www.emeraldinsight.com/10.1108/eb010811

• www.emeraldinsight.com/10.1108/02652329710194964

• www.emeraldinsight.com/Insight/html/Output/.../0320170304.pdf -

• www.emeraldinsight.com/Insight/html/Output/.../0320180303.pdf

• http://www.emeraldinsight.com/10.1108/09564230210421164

• http://www.emeraldinsight.com/10.1108/09590550310476079

• www.emeraldinsight.com/10.1108/eb047465

• http://www.emeraldinsight.com/10.1108/08876040010320948

• http://www.emeraldinsight.com/10.1108/02652320610681729

• www.emeraldinsight.com/Insight/ViewContentServlet?.../pdf/...

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 • http://www.ingentaconnect.com/search/article?

title=Banking+Services&title_type=tka&year_from=1998&year_to=2009&datab

ase=1&pageSize=20&index=3

• www.emeraldinsight.com/10.1108/09564230910978539

Journals

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a Construct in the Marketing of Banking Services”, International Journal of Bank
Marketing, Volume: 5, Issue: 3, Page: 49 – 72, Publisher: MCB UP Ltd
Peter Kangis, Vassilis Voukelatos (1997), “Private and public banks: a comparison of
customer expectations and perceptions”, Journal: International Journal of Bank
Marketing, 1997, Vol. 15, Issue: 7, Page: 279 – 287, published by MCB UP Ltd.
• Naser K.; Jamal A.; Al-Khatib K.(1999), “Islamic banking: a study of customer
satisfaction and preferences in Jordan” . The International Journal of Bank Marketing,
Vol. 17, No. 3, 1999, pp. 135-151 published by Emerald Group Publishing Limited
• Luiz Moutinho, Anne Smith (2000), “Modelling bank customer satisfaction
through mediation of attitudes towards human and automated banking”, Journal:
International Journal of Bank Marketing, Year: 2000, Vol. 18, Issue: 3, Page: 124
– 134, published by MCB UP Ltd.
• Faye X. Zhu, Walter Wymer, Injazz Chen (2002), “IT-based services and service
quality in consumer banking”, International Journal of Service Industry
Management, Volume: 13, Issue: 1, Page: 69 – 90, MCB UP Ltd
• Morna S.Y. Lee, Peter J. McGoldrick, Kathleen A. Keeling, Joanne Doherty
(2003), “Using ZMET to explore barriers to the adoption of 3G mobile banking
services”, International Journal of Retail & Distribution Management, Volume:
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• Ahmad Jamal, Kamal Naser (2003), “Factors Influencing Customer Satisfaction
in the Retail Banking Sector in Pakistan” Journal: International Journal of

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 Commerce and Management, Vol. 13, Issue: 2, Pg. 29 – 53, published by: MCB
UP Ltd
• David J. Urban, Michael D. Pratt (2000), “Perceptions of banking services in the
wake of bank mergers: an empirical study”, Journal of Services Marketing,
Volume: 14, Issue: 2 Page: 118 – 131, MCB UP Ltd
• Juan Carlos Fandos Roig, Javier Sanchez Garcia, Miguel Angel Moliner Tena,
Jaume Llorens Monzonis (2006), “Customer perceived value in banking
services”, International Journal of Bank Marketing, Volume: 24, Issue: 5, Page:
266 – 283, Emerald Group Publishing Limited
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97
 QUESTIONNAIRE

Q1. Do you have account in Citizens Urban Co-Op. Bank Ltd. ?

Yes  No 

2. Are you aware of banking products provided by Citizens Urban Co-Op. Bank
Ltd.?
Saving A/c  Current A/c 
Fixed Deposits  NRI A/c 
Loans 

3. How do you come to know about these services of Citizens Urban

Co-Op. Bank Ltd. ?
TV  Friends 
Hoarding /Banner  Newspaper 
Pamphlets 

4. From how long the you are dealing with Citizens Urban Co-Op. Bank Ltd. ?
1 Year  2-3 Years 
3-5 Years  More than 5 years 

5. Why do you have opened account with Citizens Urban Co-Op. Bank Ltd. ?
Network  Quick Services 
Brand Name  One stop bank 

6. How much time you spent for any transaction in Citizens Urban Co-Op. Bank Ltd.?
5 to 10 minutes  15 to 20 minutes 
More than 20 minutes 

98
7. Are you satisfied with the time taken by bank for opening of an account ?
Highly satisfactory  Satisfactory 
Not satisfactory 

8. Are you satisfied with the services provided by Citizens Urban Co-Op. Bank
Ltd.?
Highly Satisfied  Satisfied 
Average Satisfied  Not Satisfied 

9. Are you satisfied with the time taken by bank for clearing of cheques:
Highly satisfactory  Satisfactory 
Not satisfactory 

10. How many times do you visit Citizens Urban Co-Op. Bank Ltd. in a month?
1-4 Times  5-10 times 
11-15 times  Never 

11. Would you like to recommend the name of Citizens Urban Co-Op. Bank Ltd.
to your known person ?
Yes  No  Can’t Say 

12 How do you rate the attitude of staff of Citizens Urban Co-Op. Bank Ltd.
towards customers ?
Highly Satisfied  Satisfied 
Dissatisfied  Highly Dissatisfied 

13. Are you satisfied with overall performance of Citizens Urban Co-Op. Bank Ltd.?
Highly Satisfied  Satisfied 
Average Satisfied  Not Satisfied 

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Thanks for participating in the Survey.

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