“A Project Report on
Difference between customer’s opinion and their actual behaviour towards the concept of Universal Banking.”
With reference to
Under the guidance ofMr. Vivek Singh
Submitted by NihitMathur In the partial fulfilment of Summer Internship Program. In Retail Banking
Udai Institute of Management Studies
Guidance By Brijesh Awasthi
Udai Institute Of Management Studies , Jaipur
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Acknowledgement
Completion of this Project Report involved a lot of support and guidance of my mentors. I find immense pleasure to thank Prof. Dr. NeeranGautam , Director, UIMS, Jaipur for his cooperation and guidance. I also thank Prof. NishithSaxena , Deputy Chairman Training and Placement for his permission and guidance to take up this project.
It is my pleasure to thank Prof. BrijeshAwasthifor his immence support and expert guidance in the field of research.
I would like to express my respect and gratitude to my project guide Mr. Vivek Singh, Asst. Vice President and Branch Head for his able guidance and helpful suggestions. I would also like to thank all the employees of Axis Bank, Bittan MarketBranch , Bhopal.
Last but not the least I would like to thank my parents, family and friends for the moral support I got from them .
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Preface
The PGDM program is a well structured management program which is designed according to the current business environment. PGDM is designed to provide practical exposure along with the theoretical studies. The Summer Internship Program is an important part of this exposure. Under this students are required to undergo a training in an organization and also take up a project which helps the student in understanding the actual working conditions. This training has given me the exposure to the organization, its environment and practices. I have completed my project on the topic ‘ Customer’s Opinion and Behaviour towards the concept of Universal Banking’, with reference to Axis Bank. Universal banking means providing complete range of financial solutions under one roof. My research is basically focussed on finding out the difference (if there is any) between the opinion and their actual behaviour towards this concept. This study would help us to know weather the customers are actually using banks as there financial solutions provider or they are going towards the specialized organizations for Investment Banking, Insurance and FOREX solutions.
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INDEX
1. Acknowledgement 2. Preface
3.
Index a. Introduction to Industry and Company b. Introduction to Topic
4. Introduction
1. Research process
i.
Identification and Formulation of Problem
ii. Review Literature iii. Hypothesis iv.Research Design
1.
Data analysis and interpretation use of statistical tools Conclusions & Findings
2. Limitations
3.
4. Analysis 5. Bibliography
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Introduction A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:
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A central bank circulates money on behalf of a government and acts as its monetary authority by implementing monetary policy, which regulates the money supply. A commercial bank accepts deposits and pools those funds to provide credit, either directly by lending , or indirectly by investing through the capital markets. Within the global financial markets, these institutions connect market participants with capital deficits (borrowers) to market participants with capital surpluses (investors and lenders) by transferring funds from those parties who have surplus funds to invest (financial assets) to those parties who borrow funds to invest in real assets. A savings bank (known as a "building society" in the United Kingdom) is similar to a savings and loan association (S&L). They can either be stockholder owned or mutually owned, in which case they are permitted to only borrow from members of the financial cooperative. The asset structure of savings banks and savings and loan associations is similar, with residential mortgage loans providing the principal assets of the institution's portfolio.
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Indian Banking Industry: History Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. Despite the provisions, control and regulations of Reserve Bank of India, banks in India except theState Bank of India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the Udai Institute Of Management Studies , Jaipur Page 5
nationalization of the banking industry. Indira Gandhi, then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." The meeting received the paper with enthusiasm. Thereafter, her move was swift and sudden. The Government of India issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969.Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the Government of India controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. In the early 1990s, the then NarasimhaRao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more.
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Structure Reserve Bank of India (RBI) is the Central Bank and all Banks in India are required to follow the guidelines issued by RBI. The present structure of Indian Banking System is as follows :A) PUBLIC SECTOR BANKS • • • • State Bank of India and its 7 associate Banks, together called State Bank Group • Nationalized Banks (20 in number) • Regional Rural Banks sponsored by Public sector Banks
B) PRIVATE SECTOR BANKS • Old Generation Private Banks • New Generation Private Banks • Foreign Banks in India • Scheduled Co-operative Banks • Non Scheduled Banks C) CO-OPERATIVE SECTOR BANKS • • • • • • • • • • • • Central Co-operative Banks State Co-operative Banks Land Development Banks Primary agriculture Credit Societies Urban Co-operative Banks State Land Development Banks Export-Import Bank of India (EXIM Bank) Industrial Finance Corporation of India (IFCI) Industrial Development bank of India (IDBI) National Bank for Agriculture & Rural Development (NABARD) Industrial Investment Bank of India (IIBI) Small Industries Development Bank of India (SIDBI)
D) DEVELOPMENT BANKS
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Current Phase The industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstay of the Indian Banking System are in the process of shedding their flab in terms of excessive manpower, excessive non Performing Assets (Npas) and excessive governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions. PSBs, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from traditional sources, lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. The PSBs are of course currently working out challenging strategies even as 20 percent of their massive employee strength has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS) schemes. After a difficult FY09 Indian banks managed to grow their balance sheets in FY10 albeit at a lower average rate than that projected by the RBI. The monetary stimuli (reduction in repo rate, cash reserve ratio (CRR) and statutory liquidity ratio (SLR) offered to the banks by the RBI early in the fiscal made it easier to sustain margins But what really helped was the accretion of low cost deposits (CASA).
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Indian banks grew their advances and deposits by 16.9% YoY and 17.2% YoY respectively in FY10. The growth was mainly driven by a expansion in low cost deposits and growth in agricultural and large corporate credit. Having said that, higher delinquency levels in retail credit and debt restructuring took its toll on the sector.
With lesser avenues of credit disbursal, banks had to park most of the liquidity available with them with the RBI. In the retail portfolio, while home loans grew by 11% YoY, personal loans enjoyed a much smaller growth of 6% YoY due to bank's reluctance towards uncollateralized credit. Credit card outstanding in fact dropped by 27% YoY. Indian banks, however, enjoyed higher levels of money supply, credit and deposits as a percentage of GDP in FY10 as compared to that in FY09 showing improved maturity in the financial sector.
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Despite poor pricing power lower cost of funds helped Indian banks grow their net interest margins in FY10. While few like ICICI Bank chose to reduce their balance sheet size, most entities chose to reasonably grow their franchise as well as assets. Public sector banks outdid their private sector counterparts in terms of growth and franchise expansion in the last fiscal. Improved capital adequacy also helped banks to comfortably comply with Basel II. The higher efficiency levels were the hallmarks of better performance of Indian banks last year. Most banks had to restructure some loans in their portfolio during FY10 which deferred their interest income. Further the PSU banks had also to provide for the loss of interest on the agri-loans waived by the government. In FY10, as per the RBI mandate, all commercial banks in India as well as foreign banks operating in India migrated to the Basel II norms for capital adequacy. While some PSU banks are falling short of capital due to the same, they may witness some capital infusion from the government in FY11.
Future Prospects • With banks having complied with Basel II and having sufficient capital in their books; it will be a challenge to deploy the same safely and profitably in the event of persistence of economic slowdown. Banks are likely to concentrate more on non funded income in this scenario. • Banks, especially the private sector ones, are likely to face penetration concerns. The lack of credit penetration and the geographic concentration of bank credit is evident from the fact that 5 states having the highest proportion of per capita credit enjoy 55% of the total credit disbursals in the country. • RBI's roadmap for the entry of foreign banks and the acquisition of stake by the foreign entities in Indian private banks has been deferred for the time being. However, the tussle for higher market share in the already fragmented sector is only set to aggravate. • The proposal for Cabinet's approval to allow PSU banks to bring down the government's stake in them below the stipulated 51%, which is yet to be tabled, can help the bank raise substantial capital without borrowing at high rates and give the entities an opportunity to enhance their capital adequacy ratios besides competing with their private sector peers.
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Here is a list of the 10 Major Banks in India 1) State Bank of India (SBI) - SBI is India’s Largest Bank which is majority owned by the Government. The Company has a number of Subsidiaries and has been a market outperformer in recent times. Revenues of $22 Billion. The SBI has 7 subsidiaries of which 2 have been merged and 5 are remaining . ? State Bank Bikaner Jaipur ? State Bank of Hyderabad ? State Bank of Mysore ? State Bank of Patiala ? State Bank of Travancore 2) ICICI Bank – This is the largest Indian Private Bank with operations in all Financial Services Sectors. The Company has faced a bad time during the Lehman downturn but has recovered well. Revs of $12.5 Billion. ICICI Bank is also strong in almost all sectors of the financial industry and has one of the strongest management teams in the country. Like HDFC Bank majority of the shareholding is held by foreign investors. The company which overextended itself in the 20072008 boom has now reduced the size of its risky segments and is again back on the growth trajectory. 3) HDFC Bank – HDFC Bank like Axis Bank has shown remarkable growth in the last few years. The Bank which was founded by India’s largest housing finance company HDFC has assets of around $22 billion. One of the best rated banks in terms of service quality and growth. 4) Punjab National Bank – Punjab National Bank (PNB , is the second largest PSU bank with about 5000 branches across 764 cities. The Bank like BOB and SBI has shown good growth while at the same time managed to control bad debt. 5) Axis Bank - Axis Bank has been the best performing private bank along with HDFC Bank showing excellent growth in top line and bottom line. The Bank has been expanding into insurance and investment banking (acquired Enam).Axis Bank was formerly UTI Bank that begun operations in 1994.The Bank was promoted jointly by UTI,LIC and other state owned general insurers. One of the best Indian bank stock picks. 6) Bank of Baroda – Bank of Baroda (BoB) is the third largest bank in India and is government owned like SBI and PNB. BOB as it is popularly known has shown excellent growth over the last few years and has managed to control its NonPerforming Asset (NPA).The Bank has good management and manages to earn nice interest spreads. 7) Bank of India -Bank of India (BoI)is India’s 4th largest bank, with 3374 branches, including 27 branches outside India. It was the first bank in India promoted by Indian interests to serve all the communities of India. The stock of
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the company has not performed as well as it peers post the Lehman crisis. It has seen its market cap decrease relative to its larger PSU Bank peers 8) IDBI Bank - Industrial Development Bank of India Limited(IDBI) is a leading public sector banks . RBI categorized IDBI as an “other public sector bank”. The commercial banking arm, IDBI BANK, was merged into IDBI. This PSU Bank has supposed have great potential and could be the next ICICI in the making. 9) Kotak Mahindra Bank - This is the first NBFC to convert into a bank. The bank has its origins as an investment bank and is still very strong in the capital markets. The Bank and its sister concerns are present in most of the financial segments of the market like Private Equity, Wealth Management, Broking, Investment Banking etc. 10) Yes Bank – Yes Bank was founded by Ashok Kapur and RanaKapoor. This bank though still small compared to its larger peers, has come into the top 10 due to its path breaking performance over the last few years in terms of growth. It has managed to set new standards and has broken out from the league of smaller private banks. AXIS Bank Axis Bank was the first of the new private banks to have begun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The Bank as on 31st March, 2011 is capitalized to the extent of Rs. 410.54 cores with the public holding (other than promoters and GDRs) at 53.60%. The Bank's Registered Office is at Ahmadabad and its Central Office is located at Mumbai. The Bank has a very wide network of more than 1281 branches (including 169 Service Branches/CPCs as on 31st March, 2011). The Bank has a network of over 6270 ATMs (as on 31st March, 2011) providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM networks in the country. The Bank as on 31st March, 2011 is capitalized to the extent of Rs. 410.54 cores with the public holding (other than promoters and GDRs) at 53.60%. The Bank's Registered Office is at Ahmadabad and its Central Office is located at Mumbai. The Bank has a very wide network of more than 1281 branches (including 169 Service Branches/CPCs as on 31st March, 2011). The Bank has a network of over 6270 ATMs (as on 31st March, 2011) providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM networks in the country. Udai Institute Of Management Studies , Jaipur Page 12
The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve excellence. Commercial banking services which includes merchant banking, direct finance infrastructure finance, venture capital fund, advisory, trusteeship, forex, treasury and other related financial services.
A Successful makeover as AXIS BANK In 2007 the bank decided to have an identity of its own distinct from its parentUTI-I. Thus was born a brand Axis - a word which connotes solidity and gives a feel of transcending geographical boundaries. The Bank successfully rebranded itself as Axis Bank in July 07 which has helped it in shedding the faint perception of being government owned entity. This brand makeover was very well executed, thus ensuring No slippages in the bank growth trajectory which was evident from the 67% growth in its customer accounts to 9.9 mn during FY08 as against 5.93 mn during FY07. Axis Bank currently has global footprints in four countries by way of 3 branches in Singapore, Hong Kong, Dubai and 2 representative offices in Shanghai and Dubai. It has also sought permission from the Sri Lankan Government to open a branch in Sri Lanka in the current fiscal. In these locations it offers corporate credit and trade finance solutions, debt syndication and wealth management services to NRI population settled in these cities.
UTI Mutual Fund The setting up of the Unit Trust of India (UTI) in 1963 heralded the birth of the Indian mutual fund industry. The fund's sponsors are public sector financial giants like Life Insurance Corporation, SBI, Bank of Baroda and Punjab National Bank. The sponsors hold equal stakes in the asset management company, UTI Asset Management Company Private Limited. UTI Mutual Fund remains the largest fund in the country with assets of over Rs.35,028crore under management as of Aug 2006. In 2003, UTI was divided into two parts, UTI Mutual Fund (UTI MF) and a specified undertaking of UTI or UTI-I. UTI MF was brought under SEBI regulations while UTI-I was kept under direct government control since its schemes offered guaranteed returns.
UTI Bank Udai Institute Of Management Studies , Jaipur
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UTI Bank began its operations in 1994 when the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance Corporation Ltd. and its associates viz. National Insurance Company Ltd., The New India Assurance Company, The Oriental Insurance Corporation and United Insurance Company Ltd.
The Conflict Of Brand UTI: According to a deal between the government and the funds four sponsors — State Bank of India, Life Insurance Corporation, Bank of Baroda and Punjab National Bank — UTI's nine subsidiaries could use the brand name for free till January 2008. After the period ended, UTI Bank, UTI Securities, UTI Technology Services and UTI Investor Advisory Services had to pay royalty to the fund house. UTI Bank was offered to keep the brand name beyond 2008 without any royalty payment. But UTI MF wanted a non-compete clause to be built in besides insisting on investing jointly in brand promotion. But last year, UTI Bank decided to set up an asset management company to operate a venture capital fund and get into the private equity business. That's when UTI MF objected to the use of a common brand name since it already had a Bangalore-based subsidiary UTI Ventures. The year long conflict ended when UTI Bank finally decided to change its name to Axis Bank. Chairman and CEO of UTI bank Mr P J Nayak told that the decision to re-brand the Bank emanated from the need to move out of a scenario of brand confusion that is created by several shareholder-unrelated entities using the UTI brand.
Promoters Axis Bank Ltd. has been promoted by the largest and the best Financial Institution of the country, UTI. The Bank was set up with a capital of Rs. 115 crore, with UTI contributing Rs. 100 crore, LIC - Rs. 7.5 crore and GIC and its four subsidiaries contributing Rs. 1.5 crore each.
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SUUTI - Shareholding 23.68% Erstwhile Unit Trust of India was set up as a body corporate under the UTI Act, 1963, with a view to encourage savings and investment. In December 2002, the UTI Act, 1963 was repealed with the passage of Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 by the Parliament, paving the way for the bifurcation of UTI into 2 entities, UTI-I and UTI-II with effect from 1st February 2003. In accordance with the Act, the Undertaking specified as UTI I has been transferred and vested in the Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), who manages assured return schemes along with 6.75% US-64 Bonds, 6.60% ARS Bonds with a Unit Capital of over Rs. 14167.59 crores. The Government of India has appointed Shri K. N. Prithviraj as the Administrator of the Specified undertaking of UTI, to look after and administer the schemes under UTI - I, where Government has continuing obligations and commitments to the investors, which it will uphold.
Board of Directors Dr. Adarsh Kishore Smt. Shikha Sharma Shri S. K. Chakrabarti Dr. R.H. Patil Smt. Rama Bijapurkar Shri R.B.L. Vaish Shri M.V. Subbiah Shri K. N. Prithviraj Shri V. R. Kaundinya Shri S. B. Mathur Shri Prasad R. Menon Shri R. N. Bhattacharyya
Chairman Managing CEO Deputy Director Director Director Director Director Director Director Director Director Director
Director
&
Managing
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FINANCIALHIGHLIGHTS Profit after tax up 34.76% to `3,388.49 crores Net Interest Income up 31.14% to `6,562.99 crores Fee & Other Income up 32.39% to `4,135.16 crores Deposits up 33.93% to `189,237.80 crores Demand Deposits up 17.78% to `77,767.40 crores Advances up 36.48% to `142,407.83 crores Retail Assets up 33.32% to `27,759.23 crores Network of branches and extension counters increased from 983 to 1,390 Total number of ATMs went up from 4,293 to 6,270 Net NPA ratio as a percentage of net customer assets down to 0.26% from 0.36% Earnings per share (Basic) increased from `65.78 to `82.95 Proposed Dividend up from 120% to 140% Capital Adequacy Ratio stood at 12.65% as against the minimum regulatory norm of 9%
Universal Banking Universal Banking is a fast growing concept in the banking industry. Universal banking means the availability of complete financial solutions(products) under one roof. We can consider it The Financial Super Market. Traditionally the basic banking services are savings accounts, current accounts, salaried accounts, personal loans, loans for business purpose, overdraft facilities, lockers etc, but along with these services if bank provide services like mutual fund investments,
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share broking, life insurance, general insurance, gold and other non traditional banking services then the bank is said to be a Universal Bank. Recent mergers between the commercial banks and the investment banks have renewed the interest in universal banks, banks that combine the commercial and the investment banking within one single structure. In principle, universal banks can exploit economies of scope in provision of financial services, providing these services more efficiently by providing them together. By closely monitoring their portfolio companies, universal banks can also improve quality of corporate governance (Roe, 1990). Universal banking can finance economic growth better because it facilitates the financing and monitoring of the small firms and eases their access to the capital markets (Roe, 1990; Petersen and Rajan, 1994). Gorton and Schmidt (1999) provide evidence that bank-monitored German firms perform better than non-bank-monitored firms. Cantillo Simon (1998) states that share prices suffered a 7% discount when bankers were evicted from corporate boards in the United States in 1914. The latest mantra is Universal Banking, which is combination of Commercial &Investment Banking. The concept is most relevant in the United Kingdom and the United States, Barclays Bank, Chase Manhattan and Citicorp are some of the examples of it. Where historically there was a distinction drawn between pure investment banks and commercial banks. In the US, this was a result of the GlassSteagall Act of 1933. In both countries, however, the regulatory barrier to the combination of investment banks and commercial banks has largely been removed, and a number of universal banks have emerged in both jurisdictions. However, at least up until the global financial crisis of 2008, there remained a number of large, pure investment banks. In other countries, the concept is less relevant as there is not regulatory distinction between investment banks and commercial banks. Thus, banks of a very large size tend to operate as universal banks, while smaller firms specialized as commercial banks or as investment banks. This is especially true of countries with a European Continental banking tradition. Notable examples of such universal banks include Deutsche Bank of Germany, and UBS and Credit Suisse of Switzerland. Universal banking is the solution to FIs problems. A universal bank participates in many kinds of banking activities and is both a Commercial bank and an Investment bank. The merger of ICICI and ICICI bank is probably the largest merger seen incorporate India Industry, which has redefine banking in the highly competitive era of globalization and liberalization. Post merger, the new entity- ICICI Bank is thefirst Universal Udai Institute Of Management Studies , Jaipur Page 17
Bank in India and the second largest commercial bank in the country after SBI. Financial Institutions & Insurance Companies are now merging ahead to capture new business areas and leading towards Universal Banking. The banking sector deregulation that took place in India during the early 1990sposed a threat to the survival of Development Financial Institutions (DFIs). They were cut off from the concessional funding extended by the government and were exposed to intense competition from local and foreign banks. Over a period of time, Industrial Credit and Investment Corporation of India Ltd. (ICICI), which was set up as a DFI in 1955, underwent significant changes to meet these challenges. To exploit the synergies brought by universal banking, it went in for mergers and acquisitions and finally reverse merged with its subsidiary ICICI Bank. History Of Universal Banking India Historically, India followed a very compartmentalized financial intermediariesallowed to operate strictly in their own respectively fields. However, in the 1980sbanks were allowed to undertake various non-traditional activities through subsidiaries. This trend got momentum in the early 1990s i.e., after initiation of economic reforms with banks allowed undertaking certain activities, such as, hire-purchase and leasing in ±housing. While this in a way represented a gradual move towards universal banking, the current debate about universal banking in India started with the demand from the DFIs that they should be allowed to undertake banking activity in-house. In the wake of this demand, the Reserve Bank of India constituted in December 1997, a working group under the chairmanship of ShriS.H. Khan, the Chairman & the Managing Director of IDBI (hereafter referred to as Khan Working Group-KWG). The KWG, which submitted its report in May1998, recommended a progressive move towards universal banking. The Second Narsinham Committee appointed by Government in 1998 also echoed the same sentiment. In January 1999, the Reserve Bank issued a Discussion Paper setting out issues arising out of recommendations of the KWG and the Second Narsinham Committee. Since then a debate has been going on about universal banking in general and conversion of DFIs into universal banks in particular. With theopening up of the insurance sector to the private participation, the debate has gonebeyond the narrow concept of universal banking.
Identification and formulation of Problem A research problem, in general refers to some difficulty which a researcher experiences in the context of either a theoretical or practical situation and wants to obtain the solution for the same. Necessities of a research problem:
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• There must be an Individual, or a Group, or an Organization to whom the problem can be attributed. • There must be at least two courses of action to be pursued. • There must be at least two possible outcomes of the course of action, of which one should be preferable to the other. • The course of action available must provide some chance of obtaining the objective, but they cannot provide the same chance. There are two types of research problems: i. Those which relate to the state of nature. ii. Those which relate to the relationship of variable. Initially the researcher must single out the problem he wants to study. He must decide the general areas of interest and aspect of a subject matter that he would like to inquire then the feasibility of a particular solution has to be considered before a working formulation of the problem can be set up. The best way of understanding the problem is to discuss it with those who are expertise in the matter and then the available literature. The basic outcome of the review will be the knowledge as to what data and other material is available for operational purpose which will enable the researcher to specify his own research problem in a meaningful content Techniques Involved in Defining a Problem: • Statement of the Problem in general way • Understanding the Nature of Problem • Surveying the Available Literature • Developing the Ideas Through Discussions • Rephrasing the Research Problem After this the researcher rephrases the problem into analytical and operational term: to put the problem in as specific term as possible. Keeping all the things mentioned above in mind we have tried to formulate a specific research problem. The Problem The general opinion of customer regarding universal banking has been in favor of it, but do they actually go for complete financial solutions through a bank or they go to specialized organizations for their different financial solutions. The customers usually favor the Concept of Universal Banking but here I am trying to find out whether they actually avail all types of financial services viz. commercial banking, investment banking and insurance through banks or they like to avail different services from different specialized organizations. Are customers really going towards Universal Banking.??
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Objectives Once the problem is identified the next step is to find the objectives of research. Whether that the identified problem is a genuine problem or not, and it can be rectified or not. The main purpose of doing a research on a specific topic is to discover answers to those questions through the application of scientific procedure. Objectives of the study • To find out the major factors on the basis of which the customers move or not move towards Universal Banking.
•
To understand the behavior of customers and compare it with their opinion.
• To find out the services availed by the customers and from where they avail these services. Review of Literature Universal Banking and Equity Investment: Consequences on Bank Risk and Investment By Laetitia LEPETIT, march 2002. This paper analyses the effects of bank equity stakes in firms on bank risk and on welfare. The first purpose of this research is to determine the likelihood that financing a firm simultaneously with both equity investment and loans increases the risk of a bank’s asset portfolio under conditions of imperfect information. They showed that there is a negative relationship between the risk of a universal bank’s asset portfolio and its level of equity investment as long as the latter does not exceed a critical threshold. Its second purpose is to compare bank risk and the value of the investment associated with stylized universal and specialized banking systems. We show that each system has advantages and disadvantages interms of bank risk and investment, which are formally outlined. Universal Banking, Conflicts ofInterest and Firm Growth LiliXie¤ Department of Economics Ball State University [email protected] July 25, 2007 This paper studies the relationship between universal banking and firm performance. With 40 developing and developed countries, they found that the overall effect of
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universal banking on firm growth is negative. This suggests that the negative effect of conflicts of interest dominates the positive effect of economies of scale and scope in universal banking. However, in countries with stronger protection of creditors' rights and higher information efficiency, conflicts of interest are less likely and the negative relationship between universal banking and firm growth is significantly weaker. THE FUTURE OF UNIVERSAL BANKING Georg Rich and Christian Walter Cato Journal, VoL 13, No.2 (Fall 1993). The purpose of this paper is to analyze the German and Swiss experience with regard to universal banking. They attempted to show to what extent that experience supports or refutes the arguments against universal banking frequently voiced in the Anglo-Saxon world. Since they were most familiar with the Swiss banking system, they rely heavily on their own experience. Based on this analysis, they have drawn various conclusions aboutthe future of universal banking.
Hypothesis Hypothesis means assumption based on some relevant facts or condition or rationalization. Hypothesis-testing will result in either accepting the hypothesis or in rejecting it. If the researcher had no hypotheses to start with, generalizations established on the basis of data may be stated as hypotheses to be tested by subsequent researches in times to come. Hypothesis should be very specific and limited to the piece of research in hand because it has to be tested. Working hypotheses are more useful when stated in precise and clearly defined terms. It may as well be remembered that occasionally we may encounter a problem where we do not need working hypotheses, especially in the case of exploratory researches which do not aim at testing the hypothesis.
• The null hypothesis (H0) states that no association exists between the two cross-tabulated variables in the population, and therefore the variables are statistically independent. H0: There is no association between the two variables. • The research hypothesis (H1) proposes that the two variables are related in the population. H1: The two variables are related in the population.
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Ho(Null): Customer’s actual behaviour is same as their opinion towards Universal Banking. H1(Alternate): Customer’s actual behaviour differs from their opinion towards Universal Banking. Research Methodology Type of Research: This is a Descriptive Research. Descriptive Researchincludes surveys and fact-finding enquiriesof different kinds. The major purpose of descriptive research is description of the state ofaffairs as it exists at present. The main characteristicof this method is that the researcher has no control over the variables; he can only reportwhat has happened or what is happening. Sampling Design Type of Universe :Axis Bank Customers who are using commercial banking facilities of the bank. Sampling Unit :Axis Bank customers walking into Bittan Market Branch, Bhopal. Sample size: 100 Sampling Procedure:Non Probability Judgmental Sampling.
Scaling Technique: Measurement is an important function in daily life. It is the normal human mentality that we like to measure both the tangible things and abstract things. Thus scaling techniques is a part of measurement process. In research we quite often face the measurement problem specially when the concepts to be measured are complex and abstract and we do not possess the standardized measurement tools. We also face the similar problem in measuring attitudes and opinion, we face the problem of their valid measurement. Meaning of Scaling Scaling describes the procedure of assigning numbers to various degrees of opinion, attitudes and other concepts. Scaling is a continuum, consisting of the highest point and lowest point along with several intermediate points between the two extreme ends. Thus ‘scaling’ is applied to the procedure for attempting to determine quantitative measures of subjective abstract concepts. I have used Likert Scale.
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Likert Scale: Likert scale is developed by utilizing the item analyses approach. Where a particular item is evaluated on the basis of how well it discriminates between those persons whose total score is high and total score is low. The scale consist number statements which express a favorable or unfavorable attitude towards the given object to which the respondent is asked to react. Each person gives a numerical score indicating its favorableness and unfavorableness. Usually 5 degree scale is used for measurement.
(5) (3) (4) (2) (1) NEUTRAL HIGH LOW HIGH VERY LOW
LIKERT TYPE SCALE:
Each point carries a score. Response indicating the least favorable degree scores (1) while response indicating the most favorable degree scores (5). We have used the likert scale for measuring the degree of response of the media advertisers. The questionnaire is prepared by using the Likert scale to attain and measure the closest possible behavioural aspects. Method of Data Collection: The task of data collection begins after a research problem is defined. While deciding about the methods of data collection to be used for study, the researchers should keep in mind that there are two types of data:
i. Primary Data: The primary data are those which are collected for the 1st time, and thus happen to be original in character. ii. Secondary Data: The secondary data are those data which have already been collected by someone else and which have already been passed through the statistical process.
There are various ways of collecting primary data such as: i. Observation Method ii. Interview Method iii. Questionnaire Method As per we are doing a Descriptive research so I need to evaluate the magnitudes which affect the perception and opinion of the Media Advertisers. Thus I have tried to include all those factors which are generally seen by the Media Advertising consultancies before giving advertisement on any news channel. I have collected primary data for my research work. Thus for collecting primary data I have selected:
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i. Questionnaire method ii. Interview Method. I have prepared two Questionnaires, one on Likert scale and other on Yes No basis While collecting the primary data from the Axis Bank customers I have talked to the customers walking into the Bittan Market, Bhopal branch and got my questionnaires filled. Sometimes I was also required to explain the meaning of the concept to make them understand my questionnaire. DATA ANALYSIS Measures of Asymmetry (SKEWNESS) Skewness is the measure of asymmetry and shows the manner in which the items are clustered around the average. In a symmetrical distribution, the item shows a perfect balance on either side of the mode, but in a skew distribution the balance is thrown to one side. The amount by which the balance exceeds on one side measures the skewness of the series. The difference between the mean median or the mode provides an easy way of expressing skewness in a series. The significance of skewness lies in the fact that through it one can study the formation of series and can have idea about the shape of the curve, whether the data is normal or not when the items of a given series are plotted on graph. KURTOSISKurtosis is the measure of Flat-Topedness of a curve. Kurtosis is the humpedness of the curve and points to the nature of distribution of the items in the middle of the series. It may be pointed out here that knowing the shape of the distribution curve is crucial to the use of statistical methods in research analyses since most methods make specific assumptions about the nature of the distribution curve. Kurtosis gives the following idea: • • • • • How peaked or flat the distribution is. The absolute value is 3 If negative flat distribution If positive more peaked than normal If positive more peaked than normal
Reliability Test
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Case Processing Summary N Cases Valid Excludeda Total 100 0 100 % 100.0 .0 100.0
a. Listwise deletion based on all variables in the procedure.
Reliability Statistics Cronbach's Alpha .689 N of Items 10
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Scale Statistics Mean Variance Std. Deviation 4.84190 N of Items 10
39.4800 23.444 Descriptive Statistics
Minimu Maximu N Range m m Sum Mean
Std. Deviation
Varianc e Skewness Std. Error .241 .241 .241 .241 Kurtosis Std. Statistic Error .551 .141 -.607 1.804 .478 .478 .478 .478
Frequency Tables
Statistic Statistic Statistic Statistic Statistic Statistic Statistic Statistic Statistic Awareness Attraction Success Availmoreservices Valid 1 Enhanceawarenes s 2 100 100 100 4.00 1.00 5.00 371.00 3.7100 .92436 .94168 .854 .887 .577 .753 2.0 .90453 13.0 .95325 29.0 .909 85.0 1.15802 1.341 100.0 .757 .86987 .97959 1.02494 .960 1.051 -.888 .818 -1.120 -.874 -.964 -.535 -1.275
3.00 Awareness 5.00 411.00 4.1100 2.00
100 3.00 Percent 2.00 Frequency 100 4.00 2 100 4.00 11 4.00 16 56 4.00 15 4.00 4.00 100 4.00 1.00 11.0 1.00 2.0
5.00 422.00 4.2200Cumulative .75985 Valid Percent 5.00 421.00 4.2100 2.0 5.00 410.00 4.1000 11.0 Percent .86801
.241
1.160
.478
Understandfpbette 3 r 4 Findecbetter 5 Findecquicker Rememering Total Need Valid N (listwise)
1.00 3.9800 16.0 5.00 398.0016.0 56.0 5.00 382.0056.0 1.00 3.8200 15.0 5.00 403.0015.0 1.00 4.0300 1.00 100.0 5.00 370.00 3.7000 100.0 1.00 5.00 360.00 3.6000
.241
.336
.478
100 100 100 100 100
-.795 -.904 -.809 -.391
.241 .241 .241 .241
-.301 .909 .116 -.756
.478 .478 .478 .478
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The above table and graph shows that the customers are highly aware of the concept of Universal Banking. The maximum number of customers agreed that they were aware of this concept. The highest frequency is of 4.
Attraction Cumulative Frequency Valid 2 3 4 5 Total 10 9 41 40 100 Percent 10.0 9.0 41.0 40.0 100.0 Valid Percent 10.0 9.0 41.0 40.0 100.0 Percent 10.0 19.0 60.0 100.0
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The above table and graph shows that most of the customers of Axis bank are highly attracted towards the concept of Universal Banking. 4 and 5 have the highest frequency.
Success Cumulative Frequency Valid 2 3 4 5 Total 1 17 41 41 100 Percent 1.0 17.0 41.0 41.0 100.0 Valid Percent 1.0 17.0 41.0 41.0 100.0 Percent 1.0 18.0 59.0 100.0
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The above table and graph shows that maximum number of customers think that this concept would be successful in India. The highest frequencies are of 4 and 5.
Availmoreservices Cumulative Frequency Valid 1 2 3 4 5 Total 1 5 8 44 42 100 Percent 1.0 5.0 8.0 44.0 42.0 100.0 Valid Percent 1.0 5.0 8.0 44.0 42.0 100.0 Percent 1.0 6.0 14.0 58.0 100.0
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The above table and graph shows that mostofthe customers are agreeing to the fact they may avail more services than they actually intend to when they come to a Universal Bank. The highest frequencies are for 4 and 5.
enhanceawareness Cumulative Frequency Valid 1 2 3 4 5 Total 1 7 9 47 36 100 Percent 1.0 7.0 9.0 47.0 36.0 100.0 Valid Percent 1.0 7.0 9.0 47.0 36.0 100.0 Percent 1.0 8.0 17.0 64.0 100.0
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The above table and graph shows that most of the customers agree to the fact that coming to a Universal Bank can enhance their awareness of financial products.
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understandfpbetter Cumulative Frequency Valid 1 2 3 4 5 Total 1 9 13 45 32 100 Percent 1.0 9.0 13.0 45.0 32.0 100.0 Valid Percent 1.0 9.0 13.0 45.0 32.0 100.0 Percent 1.0 10.0 23.0 68.0 100.0
The above table and graph shows that most of the customers agree that Universal Banking can make them understand the financial products better.
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Findecbetter Cumulative Frequency Valid 1 2 3 4 5 Total 4 13 14 35 34 100 Percent 4.0 13.0 14.0 35.0 34.0 100.0 Valid Percent 4.0 13.0 14.0 35.0 34.0 100.0 Percent 4.0 17.0 31.0 66.0 100.0
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The above table and graph shows that most of the customers agree that Universal Banking can make their financial decision making better.
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Findecquicker Cumulative Frequency Valid 1 2 3 4 5 Total 1 5 15 48 31 100 Percent 1.0 5.0 15.0 48.0 31.0 100.0 Valid Percent 1.0 5.0 15.0 48.0 31.0 100.0 Percent 1.0 6.0 21.0 69.0 100.0
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The above table and graph shows that most of the customers agree that Universal Banking can make their financial decision making quicker.
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Rememering Cumulative Frequency Valid 1 2 3 4 5 Total 2 14 13 54 17 100 Percent 2.0 14.0 13.0 54.0 17.0 100.0 Valid Percent 2.0 14.0 13.0 54.0 17.0 100.0 Percent 2.0 16.0 29.0 83.0 100.0
The above table and graph shows that most of the customers think that Universal Banking helps them to remember the products and their details.
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Need Cumulative Frequency Valid 1 2 3 4 5 Total 1 18 20 42 19 100 Percent 1.0 18.0 20.0 42.0 19.0 100.0 Valid Percent 1.0 18.0 20.0 42.0 19.0 100.0 Percent 1.0 19.0 39.0 81.0 100.0
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The above table and graph shows that most of need complete financial solutions under one roof.
the customers think that they
Interpretation: As we can see in the above table the different statistics of the collected data is shown. This table is a SPSS generated table which shows range, maximum, minimum , mean, Std. Deviation, Variance, Skewness, and Kurtosis. Mean: The maximum points to each factor given according to the LIKERT scale is 5 and minimum is 1, the mean of all the factors is more closer to the maximum value than the minimum value. This means that the customer’s opinion is towards the positive side. These results means that customers show more interest in universal banking. Std Deviation: Std. Deviation is the measure of the average deviation of values from its mean. Std. Deviation less than 1 means that there is closeness is the opinion of all the customers. Opinion of customers do not differ from each other or if it does the difference is negligible. Thus most of the customers have a positive opinion about Universal Banking. Udai Institute Of Management Studies , Jaipur Page 40
Analysis of actual information from questionnaire 2: FOREX services: total users- 20 Specializ ed 7 Bank 13
Out of 20 FOREX services users 13 avail services from that comes out to be 65 %. Most of the customers of axis bank avail FOREX services from a Universal Bank. We can say that the customers are towards Universal Banks.
Gold: Total buyers- 31 bank 6 open market 25
Out of 31 customers who invest in gold 25 customers buy it from open market. This shows that customers investing in gold prefer other vendors over Banks. Mutual Funds: Total- 39 Bank 23 Specializ ed 16
Out of 39 customers investing in mutual funds 23 invest through banks and only 16 invest through specialized mutual fund companies. This show that the Universal banks are scoring good in terms of mutual funds.
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Bonds: Total- 8 Bank 2 Specializ Post ed office 5 1
As only 8 customers out of 100 were having saving bonds so it is not possible to conclude much but we can still observe the distribution. Online Trading: Total- 28 Bank 17 Specializ ed 11
Out of 28 customers availing online share trading services 17 avail them through a bank and others through specialized organizations. This reveals that more customers prefer banks for share trading which is again a positive for Universal Banking.
Life Insurance: Total - 95 Bank 19 Specializ ed 76
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When it comes to life insurance the customers are still not keen to go to banks. Only 19 out of 95 customers holding a Life Insurance policy go to banks, while 76 of them go to specialized firms and the highest score was of LIC.
Health Insurance: Total - 40 Bank 13 Specializ ed 27
Out of 40 customers holding Health Insurance 27 of them go to specialized general insurance companies and only 13 go to banks. This means banks again score low in Health Insurance.
Vehicle Insurance: Total-97 Bank 9 Specializ ed 88
Out of 97 customers 88 have their Vehicle Insurance from specialized organizations and only 9 customers have Vehicle Insurance from Bank. This shows lack of interest of customers in Banks for Vehicle Insurance.
Findings: 1. Customers have a very positive opinion towards the concept of Universal Banking.
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2. Customer’s actual behavior towards this concept is just a little 3.
4.
5.
6.
different from their positive opinion. Most customers go to banks for investment banking services like Mutual Funds, Share Trading, Broking, Demat Accounts, thus being in favor of Universal Banking. Banks also proved that being Universal is good by scoring high in FOREX Services where most of the customers avail FOREX services from banks. Banks only score low in the insurance sector. Most of the customers prefer specialized organizations for Life Insurance and General Insurance. Banks also score low when it comes to investment in Gold here also most of the customers purchase Gold from open market rather than banks.
Conclusion: Universal banking is a fast growing concept. Most of the banks are providing complete financial solutions under one roof. This research was an attempt to analyse weather the customers actually responding positively to the concept of Universal Banking or they just has a positive opinion about it. The study showed that the customers are actually availing bank services for most of their financial solutions. Mutual Fund investment, share broking and trading and FOREX services are being availed by the customer through banks. The only sector where the banks have to catch up is the Life Insurance and General Insurance. Customers still prefer specialized organizations over banks for their Insurance needs. We can conclude that this concept of Universal Banking has a very positive future with few concerns. It’s the one stop financial solutions that would flourish in the future. Financial Hyper Markets are growing and providing quicker and better financial solutions. Now bank is not just a bank it has become a complete financial solutions provider.
Limitations of the Study:
1. The study was not vast and was restricted to 100 respondents.
2. Different respondents had different financial and educational background.
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Bibliography: www.scribd.com www.axisbank.com www.wikipedia.com e-books www.google.com Research Methodology by C.R. Kothari www.banknet.com
Questionnaires: Questionnaire 1 Name Age Occupation: Ph. No. : : :
Q1. Are you aware of the concept of Universal Banking? Highly Agree Disagree Agree Not Sure Disagree Highly
Q2. Are you attracted towards the concept of Universal Banking? Highly Agree Disagree Agree Not Sure Disagree Highly
Q3. Do you think this concept will be successful in India? Highly Agree Disagree Agree Not Sure Disagree Highly
Q4. Availability of a complete range of financial services under one roof can make me avail more services than I intend to avail?
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Highly Agree Disagree
Agree
Not Sure
Disagree
Highly
Q5. Will Universal Banking enhance your awareness of financial products? Highly Agree Disagree Agree Not Sure Disagree Highly
Q6. Will Universal Banking help you to understand all financial products better? Highly Agree Disagree Agree Not Sure Disagree Highly
Q7. Will the concept of one stop shopping make your financial decision making better? Highly Agree Disagree Agree Not Sure Disagree Highly
Q8. Will Universal Banking make your financial decision making quicker? Highly Agree Disagree Agree Not Sure Disagree Highly
Q9. Will concept of one stop shopping help you remember all the products and details? Highly Agree Disagree Agree Not Sure Disagree Highly
Q10. Do you need all the services provided by Universal Banks? Highly Agree Disagree Agree Not Sure Disagree Highly
Questionnaire 2 Name Age Occupation: Ph. No. : : :
Q1. Dou you avail FOREX services? Yes
No
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If Yes from which organization? Udai Institute Of Management Studies , Jaipur
Q2. Do you invest in Gold? Yes If Yes where did you buy it from?
No
Q3. Do you invest in Mutual Funds? Yes If Yes from which organization? Q4. Do you invest in Saving Bonds? Yes If Yes from which organization?
No
No
Q5. Did you avail online share trading service? Yes If Yes from which organization? Q6. Do you have a Demat Account? Yes If Yes from which organization? Q7. Do you hold a Life Insurance policy? Yes No If Yes from which organization? Q8. Do you hold a Health Insurance policy? If Yes from which organization? Q9. Do you hold a Vehicle Insurance? Yes If Yes from which organization? Q10. Do you pay your bills through this bank? Yes No No Yes No No
No
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doc_529773680.docx
Difference between customer’s opinion and their actual behaviour towards the concept of Universal Banking.”
With reference to
Under the guidance ofMr. Vivek Singh
Submitted by NihitMathur In the partial fulfilment of Summer Internship Program. In Retail Banking
Udai Institute of Management Studies
Guidance By Brijesh Awasthi
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Acknowledgement
Completion of this Project Report involved a lot of support and guidance of my mentors. I find immense pleasure to thank Prof. Dr. NeeranGautam , Director, UIMS, Jaipur for his cooperation and guidance. I also thank Prof. NishithSaxena , Deputy Chairman Training and Placement for his permission and guidance to take up this project.
It is my pleasure to thank Prof. BrijeshAwasthifor his immence support and expert guidance in the field of research.
I would like to express my respect and gratitude to my project guide Mr. Vivek Singh, Asst. Vice President and Branch Head for his able guidance and helpful suggestions. I would also like to thank all the employees of Axis Bank, Bittan MarketBranch , Bhopal.
Last but not the least I would like to thank my parents, family and friends for the moral support I got from them .
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Preface
The PGDM program is a well structured management program which is designed according to the current business environment. PGDM is designed to provide practical exposure along with the theoretical studies. The Summer Internship Program is an important part of this exposure. Under this students are required to undergo a training in an organization and also take up a project which helps the student in understanding the actual working conditions. This training has given me the exposure to the organization, its environment and practices. I have completed my project on the topic ‘ Customer’s Opinion and Behaviour towards the concept of Universal Banking’, with reference to Axis Bank. Universal banking means providing complete range of financial solutions under one roof. My research is basically focussed on finding out the difference (if there is any) between the opinion and their actual behaviour towards this concept. This study would help us to know weather the customers are actually using banks as there financial solutions provider or they are going towards the specialized organizations for Investment Banking, Insurance and FOREX solutions.
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INDEX
1. Acknowledgement 2. Preface
3.
Index a. Introduction to Industry and Company b. Introduction to Topic
4. Introduction
1. Research process
i.
Identification and Formulation of Problem
ii. Review Literature iii. Hypothesis iv.Research Design
1.
Data analysis and interpretation use of statistical tools Conclusions & Findings
2. Limitations
3.
4. Analysis 5. Bibliography
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Introduction A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:
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A central bank circulates money on behalf of a government and acts as its monetary authority by implementing monetary policy, which regulates the money supply. A commercial bank accepts deposits and pools those funds to provide credit, either directly by lending , or indirectly by investing through the capital markets. Within the global financial markets, these institutions connect market participants with capital deficits (borrowers) to market participants with capital surpluses (investors and lenders) by transferring funds from those parties who have surplus funds to invest (financial assets) to those parties who borrow funds to invest in real assets. A savings bank (known as a "building society" in the United Kingdom) is similar to a savings and loan association (S&L). They can either be stockholder owned or mutually owned, in which case they are permitted to only borrow from members of the financial cooperative. The asset structure of savings banks and savings and loan associations is similar, with residential mortgage loans providing the principal assets of the institution's portfolio.
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Indian Banking Industry: History Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. Despite the provisions, control and regulations of Reserve Bank of India, banks in India except theState Bank of India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the Udai Institute Of Management Studies , Jaipur Page 5
nationalization of the banking industry. Indira Gandhi, then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." The meeting received the paper with enthusiasm. Thereafter, her move was swift and sudden. The Government of India issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969.Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the Government of India controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalized banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. In the early 1990s, the then NarasimhaRao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more.
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Structure Reserve Bank of India (RBI) is the Central Bank and all Banks in India are required to follow the guidelines issued by RBI. The present structure of Indian Banking System is as follows :A) PUBLIC SECTOR BANKS • • • • State Bank of India and its 7 associate Banks, together called State Bank Group • Nationalized Banks (20 in number) • Regional Rural Banks sponsored by Public sector Banks
B) PRIVATE SECTOR BANKS • Old Generation Private Banks • New Generation Private Banks • Foreign Banks in India • Scheduled Co-operative Banks • Non Scheduled Banks C) CO-OPERATIVE SECTOR BANKS • • • • • • • • • • • • Central Co-operative Banks State Co-operative Banks Land Development Banks Primary agriculture Credit Societies Urban Co-operative Banks State Land Development Banks Export-Import Bank of India (EXIM Bank) Industrial Finance Corporation of India (IFCI) Industrial Development bank of India (IDBI) National Bank for Agriculture & Rural Development (NABARD) Industrial Investment Bank of India (IIBI) Small Industries Development Bank of India (SIDBI)
D) DEVELOPMENT BANKS
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Current Phase The industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstay of the Indian Banking System are in the process of shedding their flab in terms of excessive manpower, excessive non Performing Assets (Npas) and excessive governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions. PSBs, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from traditional sources, lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. The PSBs are of course currently working out challenging strategies even as 20 percent of their massive employee strength has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS) schemes. After a difficult FY09 Indian banks managed to grow their balance sheets in FY10 albeit at a lower average rate than that projected by the RBI. The monetary stimuli (reduction in repo rate, cash reserve ratio (CRR) and statutory liquidity ratio (SLR) offered to the banks by the RBI early in the fiscal made it easier to sustain margins But what really helped was the accretion of low cost deposits (CASA).
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Indian banks grew their advances and deposits by 16.9% YoY and 17.2% YoY respectively in FY10. The growth was mainly driven by a expansion in low cost deposits and growth in agricultural and large corporate credit. Having said that, higher delinquency levels in retail credit and debt restructuring took its toll on the sector.
With lesser avenues of credit disbursal, banks had to park most of the liquidity available with them with the RBI. In the retail portfolio, while home loans grew by 11% YoY, personal loans enjoyed a much smaller growth of 6% YoY due to bank's reluctance towards uncollateralized credit. Credit card outstanding in fact dropped by 27% YoY. Indian banks, however, enjoyed higher levels of money supply, credit and deposits as a percentage of GDP in FY10 as compared to that in FY09 showing improved maturity in the financial sector.
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Despite poor pricing power lower cost of funds helped Indian banks grow their net interest margins in FY10. While few like ICICI Bank chose to reduce their balance sheet size, most entities chose to reasonably grow their franchise as well as assets. Public sector banks outdid their private sector counterparts in terms of growth and franchise expansion in the last fiscal. Improved capital adequacy also helped banks to comfortably comply with Basel II. The higher efficiency levels were the hallmarks of better performance of Indian banks last year. Most banks had to restructure some loans in their portfolio during FY10 which deferred their interest income. Further the PSU banks had also to provide for the loss of interest on the agri-loans waived by the government. In FY10, as per the RBI mandate, all commercial banks in India as well as foreign banks operating in India migrated to the Basel II norms for capital adequacy. While some PSU banks are falling short of capital due to the same, they may witness some capital infusion from the government in FY11.
Future Prospects • With banks having complied with Basel II and having sufficient capital in their books; it will be a challenge to deploy the same safely and profitably in the event of persistence of economic slowdown. Banks are likely to concentrate more on non funded income in this scenario. • Banks, especially the private sector ones, are likely to face penetration concerns. The lack of credit penetration and the geographic concentration of bank credit is evident from the fact that 5 states having the highest proportion of per capita credit enjoy 55% of the total credit disbursals in the country. • RBI's roadmap for the entry of foreign banks and the acquisition of stake by the foreign entities in Indian private banks has been deferred for the time being. However, the tussle for higher market share in the already fragmented sector is only set to aggravate. • The proposal for Cabinet's approval to allow PSU banks to bring down the government's stake in them below the stipulated 51%, which is yet to be tabled, can help the bank raise substantial capital without borrowing at high rates and give the entities an opportunity to enhance their capital adequacy ratios besides competing with their private sector peers.
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Here is a list of the 10 Major Banks in India 1) State Bank of India (SBI) - SBI is India’s Largest Bank which is majority owned by the Government. The Company has a number of Subsidiaries and has been a market outperformer in recent times. Revenues of $22 Billion. The SBI has 7 subsidiaries of which 2 have been merged and 5 are remaining . ? State Bank Bikaner Jaipur ? State Bank of Hyderabad ? State Bank of Mysore ? State Bank of Patiala ? State Bank of Travancore 2) ICICI Bank – This is the largest Indian Private Bank with operations in all Financial Services Sectors. The Company has faced a bad time during the Lehman downturn but has recovered well. Revs of $12.5 Billion. ICICI Bank is also strong in almost all sectors of the financial industry and has one of the strongest management teams in the country. Like HDFC Bank majority of the shareholding is held by foreign investors. The company which overextended itself in the 20072008 boom has now reduced the size of its risky segments and is again back on the growth trajectory. 3) HDFC Bank – HDFC Bank like Axis Bank has shown remarkable growth in the last few years. The Bank which was founded by India’s largest housing finance company HDFC has assets of around $22 billion. One of the best rated banks in terms of service quality and growth. 4) Punjab National Bank – Punjab National Bank (PNB , is the second largest PSU bank with about 5000 branches across 764 cities. The Bank like BOB and SBI has shown good growth while at the same time managed to control bad debt. 5) Axis Bank - Axis Bank has been the best performing private bank along with HDFC Bank showing excellent growth in top line and bottom line. The Bank has been expanding into insurance and investment banking (acquired Enam).Axis Bank was formerly UTI Bank that begun operations in 1994.The Bank was promoted jointly by UTI,LIC and other state owned general insurers. One of the best Indian bank stock picks. 6) Bank of Baroda – Bank of Baroda (BoB) is the third largest bank in India and is government owned like SBI and PNB. BOB as it is popularly known has shown excellent growth over the last few years and has managed to control its NonPerforming Asset (NPA).The Bank has good management and manages to earn nice interest spreads. 7) Bank of India -Bank of India (BoI)is India’s 4th largest bank, with 3374 branches, including 27 branches outside India. It was the first bank in India promoted by Indian interests to serve all the communities of India. The stock of
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the company has not performed as well as it peers post the Lehman crisis. It has seen its market cap decrease relative to its larger PSU Bank peers 8) IDBI Bank - Industrial Development Bank of India Limited(IDBI) is a leading public sector banks . RBI categorized IDBI as an “other public sector bank”. The commercial banking arm, IDBI BANK, was merged into IDBI. This PSU Bank has supposed have great potential and could be the next ICICI in the making. 9) Kotak Mahindra Bank - This is the first NBFC to convert into a bank. The bank has its origins as an investment bank and is still very strong in the capital markets. The Bank and its sister concerns are present in most of the financial segments of the market like Private Equity, Wealth Management, Broking, Investment Banking etc. 10) Yes Bank – Yes Bank was founded by Ashok Kapur and RanaKapoor. This bank though still small compared to its larger peers, has come into the top 10 due to its path breaking performance over the last few years in terms of growth. It has managed to set new standards and has broken out from the league of smaller private banks. AXIS Bank Axis Bank was the first of the new private banks to have begun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The Bank as on 31st March, 2011 is capitalized to the extent of Rs. 410.54 cores with the public holding (other than promoters and GDRs) at 53.60%. The Bank's Registered Office is at Ahmadabad and its Central Office is located at Mumbai. The Bank has a very wide network of more than 1281 branches (including 169 Service Branches/CPCs as on 31st March, 2011). The Bank has a network of over 6270 ATMs (as on 31st March, 2011) providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM networks in the country. The Bank as on 31st March, 2011 is capitalized to the extent of Rs. 410.54 cores with the public holding (other than promoters and GDRs) at 53.60%. The Bank's Registered Office is at Ahmadabad and its Central Office is located at Mumbai. The Bank has a very wide network of more than 1281 branches (including 169 Service Branches/CPCs as on 31st March, 2011). The Bank has a network of over 6270 ATMs (as on 31st March, 2011) providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM networks in the country. Udai Institute Of Management Studies , Jaipur Page 12
The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve excellence. Commercial banking services which includes merchant banking, direct finance infrastructure finance, venture capital fund, advisory, trusteeship, forex, treasury and other related financial services.
A Successful makeover as AXIS BANK In 2007 the bank decided to have an identity of its own distinct from its parentUTI-I. Thus was born a brand Axis - a word which connotes solidity and gives a feel of transcending geographical boundaries. The Bank successfully rebranded itself as Axis Bank in July 07 which has helped it in shedding the faint perception of being government owned entity. This brand makeover was very well executed, thus ensuring No slippages in the bank growth trajectory which was evident from the 67% growth in its customer accounts to 9.9 mn during FY08 as against 5.93 mn during FY07. Axis Bank currently has global footprints in four countries by way of 3 branches in Singapore, Hong Kong, Dubai and 2 representative offices in Shanghai and Dubai. It has also sought permission from the Sri Lankan Government to open a branch in Sri Lanka in the current fiscal. In these locations it offers corporate credit and trade finance solutions, debt syndication and wealth management services to NRI population settled in these cities.
UTI Mutual Fund The setting up of the Unit Trust of India (UTI) in 1963 heralded the birth of the Indian mutual fund industry. The fund's sponsors are public sector financial giants like Life Insurance Corporation, SBI, Bank of Baroda and Punjab National Bank. The sponsors hold equal stakes in the asset management company, UTI Asset Management Company Private Limited. UTI Mutual Fund remains the largest fund in the country with assets of over Rs.35,028crore under management as of Aug 2006. In 2003, UTI was divided into two parts, UTI Mutual Fund (UTI MF) and a specified undertaking of UTI or UTI-I. UTI MF was brought under SEBI regulations while UTI-I was kept under direct government control since its schemes offered guaranteed returns.
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UTI Bank began its operations in 1994 when the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance Corporation Ltd. and its associates viz. National Insurance Company Ltd., The New India Assurance Company, The Oriental Insurance Corporation and United Insurance Company Ltd.
The Conflict Of Brand UTI: According to a deal between the government and the funds four sponsors — State Bank of India, Life Insurance Corporation, Bank of Baroda and Punjab National Bank — UTI's nine subsidiaries could use the brand name for free till January 2008. After the period ended, UTI Bank, UTI Securities, UTI Technology Services and UTI Investor Advisory Services had to pay royalty to the fund house. UTI Bank was offered to keep the brand name beyond 2008 without any royalty payment. But UTI MF wanted a non-compete clause to be built in besides insisting on investing jointly in brand promotion. But last year, UTI Bank decided to set up an asset management company to operate a venture capital fund and get into the private equity business. That's when UTI MF objected to the use of a common brand name since it already had a Bangalore-based subsidiary UTI Ventures. The year long conflict ended when UTI Bank finally decided to change its name to Axis Bank. Chairman and CEO of UTI bank Mr P J Nayak told that the decision to re-brand the Bank emanated from the need to move out of a scenario of brand confusion that is created by several shareholder-unrelated entities using the UTI brand.
Promoters Axis Bank Ltd. has been promoted by the largest and the best Financial Institution of the country, UTI. The Bank was set up with a capital of Rs. 115 crore, with UTI contributing Rs. 100 crore, LIC - Rs. 7.5 crore and GIC and its four subsidiaries contributing Rs. 1.5 crore each.
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SUUTI - Shareholding 23.68% Erstwhile Unit Trust of India was set up as a body corporate under the UTI Act, 1963, with a view to encourage savings and investment. In December 2002, the UTI Act, 1963 was repealed with the passage of Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 by the Parliament, paving the way for the bifurcation of UTI into 2 entities, UTI-I and UTI-II with effect from 1st February 2003. In accordance with the Act, the Undertaking specified as UTI I has been transferred and vested in the Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), who manages assured return schemes along with 6.75% US-64 Bonds, 6.60% ARS Bonds with a Unit Capital of over Rs. 14167.59 crores. The Government of India has appointed Shri K. N. Prithviraj as the Administrator of the Specified undertaking of UTI, to look after and administer the schemes under UTI - I, where Government has continuing obligations and commitments to the investors, which it will uphold.
Board of Directors Dr. Adarsh Kishore Smt. Shikha Sharma Shri S. K. Chakrabarti Dr. R.H. Patil Smt. Rama Bijapurkar Shri R.B.L. Vaish Shri M.V. Subbiah Shri K. N. Prithviraj Shri V. R. Kaundinya Shri S. B. Mathur Shri Prasad R. Menon Shri R. N. Bhattacharyya
Chairman Managing CEO Deputy Director Director Director Director Director Director Director Director Director Director
Director
&
Managing
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FINANCIALHIGHLIGHTS Profit after tax up 34.76% to `3,388.49 crores Net Interest Income up 31.14% to `6,562.99 crores Fee & Other Income up 32.39% to `4,135.16 crores Deposits up 33.93% to `189,237.80 crores Demand Deposits up 17.78% to `77,767.40 crores Advances up 36.48% to `142,407.83 crores Retail Assets up 33.32% to `27,759.23 crores Network of branches and extension counters increased from 983 to 1,390 Total number of ATMs went up from 4,293 to 6,270 Net NPA ratio as a percentage of net customer assets down to 0.26% from 0.36% Earnings per share (Basic) increased from `65.78 to `82.95 Proposed Dividend up from 120% to 140% Capital Adequacy Ratio stood at 12.65% as against the minimum regulatory norm of 9%
Universal Banking Universal Banking is a fast growing concept in the banking industry. Universal banking means the availability of complete financial solutions(products) under one roof. We can consider it The Financial Super Market. Traditionally the basic banking services are savings accounts, current accounts, salaried accounts, personal loans, loans for business purpose, overdraft facilities, lockers etc, but along with these services if bank provide services like mutual fund investments,
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share broking, life insurance, general insurance, gold and other non traditional banking services then the bank is said to be a Universal Bank. Recent mergers between the commercial banks and the investment banks have renewed the interest in universal banks, banks that combine the commercial and the investment banking within one single structure. In principle, universal banks can exploit economies of scope in provision of financial services, providing these services more efficiently by providing them together. By closely monitoring their portfolio companies, universal banks can also improve quality of corporate governance (Roe, 1990). Universal banking can finance economic growth better because it facilitates the financing and monitoring of the small firms and eases their access to the capital markets (Roe, 1990; Petersen and Rajan, 1994). Gorton and Schmidt (1999) provide evidence that bank-monitored German firms perform better than non-bank-monitored firms. Cantillo Simon (1998) states that share prices suffered a 7% discount when bankers were evicted from corporate boards in the United States in 1914. The latest mantra is Universal Banking, which is combination of Commercial &Investment Banking. The concept is most relevant in the United Kingdom and the United States, Barclays Bank, Chase Manhattan and Citicorp are some of the examples of it. Where historically there was a distinction drawn between pure investment banks and commercial banks. In the US, this was a result of the GlassSteagall Act of 1933. In both countries, however, the regulatory barrier to the combination of investment banks and commercial banks has largely been removed, and a number of universal banks have emerged in both jurisdictions. However, at least up until the global financial crisis of 2008, there remained a number of large, pure investment banks. In other countries, the concept is less relevant as there is not regulatory distinction between investment banks and commercial banks. Thus, banks of a very large size tend to operate as universal banks, while smaller firms specialized as commercial banks or as investment banks. This is especially true of countries with a European Continental banking tradition. Notable examples of such universal banks include Deutsche Bank of Germany, and UBS and Credit Suisse of Switzerland. Universal banking is the solution to FIs problems. A universal bank participates in many kinds of banking activities and is both a Commercial bank and an Investment bank. The merger of ICICI and ICICI bank is probably the largest merger seen incorporate India Industry, which has redefine banking in the highly competitive era of globalization and liberalization. Post merger, the new entity- ICICI Bank is thefirst Universal Udai Institute Of Management Studies , Jaipur Page 17
Bank in India and the second largest commercial bank in the country after SBI. Financial Institutions & Insurance Companies are now merging ahead to capture new business areas and leading towards Universal Banking. The banking sector deregulation that took place in India during the early 1990sposed a threat to the survival of Development Financial Institutions (DFIs). They were cut off from the concessional funding extended by the government and were exposed to intense competition from local and foreign banks. Over a period of time, Industrial Credit and Investment Corporation of India Ltd. (ICICI), which was set up as a DFI in 1955, underwent significant changes to meet these challenges. To exploit the synergies brought by universal banking, it went in for mergers and acquisitions and finally reverse merged with its subsidiary ICICI Bank. History Of Universal Banking India Historically, India followed a very compartmentalized financial intermediariesallowed to operate strictly in their own respectively fields. However, in the 1980sbanks were allowed to undertake various non-traditional activities through subsidiaries. This trend got momentum in the early 1990s i.e., after initiation of economic reforms with banks allowed undertaking certain activities, such as, hire-purchase and leasing in ±housing. While this in a way represented a gradual move towards universal banking, the current debate about universal banking in India started with the demand from the DFIs that they should be allowed to undertake banking activity in-house. In the wake of this demand, the Reserve Bank of India constituted in December 1997, a working group under the chairmanship of ShriS.H. Khan, the Chairman & the Managing Director of IDBI (hereafter referred to as Khan Working Group-KWG). The KWG, which submitted its report in May1998, recommended a progressive move towards universal banking. The Second Narsinham Committee appointed by Government in 1998 also echoed the same sentiment. In January 1999, the Reserve Bank issued a Discussion Paper setting out issues arising out of recommendations of the KWG and the Second Narsinham Committee. Since then a debate has been going on about universal banking in general and conversion of DFIs into universal banks in particular. With theopening up of the insurance sector to the private participation, the debate has gonebeyond the narrow concept of universal banking.
Identification and formulation of Problem A research problem, in general refers to some difficulty which a researcher experiences in the context of either a theoretical or practical situation and wants to obtain the solution for the same. Necessities of a research problem:
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• There must be an Individual, or a Group, or an Organization to whom the problem can be attributed. • There must be at least two courses of action to be pursued. • There must be at least two possible outcomes of the course of action, of which one should be preferable to the other. • The course of action available must provide some chance of obtaining the objective, but they cannot provide the same chance. There are two types of research problems: i. Those which relate to the state of nature. ii. Those which relate to the relationship of variable. Initially the researcher must single out the problem he wants to study. He must decide the general areas of interest and aspect of a subject matter that he would like to inquire then the feasibility of a particular solution has to be considered before a working formulation of the problem can be set up. The best way of understanding the problem is to discuss it with those who are expertise in the matter and then the available literature. The basic outcome of the review will be the knowledge as to what data and other material is available for operational purpose which will enable the researcher to specify his own research problem in a meaningful content Techniques Involved in Defining a Problem: • Statement of the Problem in general way • Understanding the Nature of Problem • Surveying the Available Literature • Developing the Ideas Through Discussions • Rephrasing the Research Problem After this the researcher rephrases the problem into analytical and operational term: to put the problem in as specific term as possible. Keeping all the things mentioned above in mind we have tried to formulate a specific research problem. The Problem The general opinion of customer regarding universal banking has been in favor of it, but do they actually go for complete financial solutions through a bank or they go to specialized organizations for their different financial solutions. The customers usually favor the Concept of Universal Banking but here I am trying to find out whether they actually avail all types of financial services viz. commercial banking, investment banking and insurance through banks or they like to avail different services from different specialized organizations. Are customers really going towards Universal Banking.??
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Objectives Once the problem is identified the next step is to find the objectives of research. Whether that the identified problem is a genuine problem or not, and it can be rectified or not. The main purpose of doing a research on a specific topic is to discover answers to those questions through the application of scientific procedure. Objectives of the study • To find out the major factors on the basis of which the customers move or not move towards Universal Banking.
•
To understand the behavior of customers and compare it with their opinion.
• To find out the services availed by the customers and from where they avail these services. Review of Literature Universal Banking and Equity Investment: Consequences on Bank Risk and Investment By Laetitia LEPETIT, march 2002. This paper analyses the effects of bank equity stakes in firms on bank risk and on welfare. The first purpose of this research is to determine the likelihood that financing a firm simultaneously with both equity investment and loans increases the risk of a bank’s asset portfolio under conditions of imperfect information. They showed that there is a negative relationship between the risk of a universal bank’s asset portfolio and its level of equity investment as long as the latter does not exceed a critical threshold. Its second purpose is to compare bank risk and the value of the investment associated with stylized universal and specialized banking systems. We show that each system has advantages and disadvantages interms of bank risk and investment, which are formally outlined. Universal Banking, Conflicts ofInterest and Firm Growth LiliXie¤ Department of Economics Ball State University [email protected] July 25, 2007 This paper studies the relationship between universal banking and firm performance. With 40 developing and developed countries, they found that the overall effect of
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universal banking on firm growth is negative. This suggests that the negative effect of conflicts of interest dominates the positive effect of economies of scale and scope in universal banking. However, in countries with stronger protection of creditors' rights and higher information efficiency, conflicts of interest are less likely and the negative relationship between universal banking and firm growth is significantly weaker. THE FUTURE OF UNIVERSAL BANKING Georg Rich and Christian Walter Cato Journal, VoL 13, No.2 (Fall 1993). The purpose of this paper is to analyze the German and Swiss experience with regard to universal banking. They attempted to show to what extent that experience supports or refutes the arguments against universal banking frequently voiced in the Anglo-Saxon world. Since they were most familiar with the Swiss banking system, they rely heavily on their own experience. Based on this analysis, they have drawn various conclusions aboutthe future of universal banking.
Hypothesis Hypothesis means assumption based on some relevant facts or condition or rationalization. Hypothesis-testing will result in either accepting the hypothesis or in rejecting it. If the researcher had no hypotheses to start with, generalizations established on the basis of data may be stated as hypotheses to be tested by subsequent researches in times to come. Hypothesis should be very specific and limited to the piece of research in hand because it has to be tested. Working hypotheses are more useful when stated in precise and clearly defined terms. It may as well be remembered that occasionally we may encounter a problem where we do not need working hypotheses, especially in the case of exploratory researches which do not aim at testing the hypothesis.
• The null hypothesis (H0) states that no association exists between the two cross-tabulated variables in the population, and therefore the variables are statistically independent. H0: There is no association between the two variables. • The research hypothesis (H1) proposes that the two variables are related in the population. H1: The two variables are related in the population.
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Ho(Null): Customer’s actual behaviour is same as their opinion towards Universal Banking. H1(Alternate): Customer’s actual behaviour differs from their opinion towards Universal Banking. Research Methodology Type of Research: This is a Descriptive Research. Descriptive Researchincludes surveys and fact-finding enquiriesof different kinds. The major purpose of descriptive research is description of the state ofaffairs as it exists at present. The main characteristicof this method is that the researcher has no control over the variables; he can only reportwhat has happened or what is happening. Sampling Design Type of Universe :Axis Bank Customers who are using commercial banking facilities of the bank. Sampling Unit :Axis Bank customers walking into Bittan Market Branch, Bhopal. Sample size: 100 Sampling Procedure:Non Probability Judgmental Sampling.
Scaling Technique: Measurement is an important function in daily life. It is the normal human mentality that we like to measure both the tangible things and abstract things. Thus scaling techniques is a part of measurement process. In research we quite often face the measurement problem specially when the concepts to be measured are complex and abstract and we do not possess the standardized measurement tools. We also face the similar problem in measuring attitudes and opinion, we face the problem of their valid measurement. Meaning of Scaling Scaling describes the procedure of assigning numbers to various degrees of opinion, attitudes and other concepts. Scaling is a continuum, consisting of the highest point and lowest point along with several intermediate points between the two extreme ends. Thus ‘scaling’ is applied to the procedure for attempting to determine quantitative measures of subjective abstract concepts. I have used Likert Scale.
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Likert Scale: Likert scale is developed by utilizing the item analyses approach. Where a particular item is evaluated on the basis of how well it discriminates between those persons whose total score is high and total score is low. The scale consist number statements which express a favorable or unfavorable attitude towards the given object to which the respondent is asked to react. Each person gives a numerical score indicating its favorableness and unfavorableness. Usually 5 degree scale is used for measurement.
(5) (3) (4) (2) (1) NEUTRAL HIGH LOW HIGH VERY LOW
LIKERT TYPE SCALE:
Each point carries a score. Response indicating the least favorable degree scores (1) while response indicating the most favorable degree scores (5). We have used the likert scale for measuring the degree of response of the media advertisers. The questionnaire is prepared by using the Likert scale to attain and measure the closest possible behavioural aspects. Method of Data Collection: The task of data collection begins after a research problem is defined. While deciding about the methods of data collection to be used for study, the researchers should keep in mind that there are two types of data:
i. Primary Data: The primary data are those which are collected for the 1st time, and thus happen to be original in character. ii. Secondary Data: The secondary data are those data which have already been collected by someone else and which have already been passed through the statistical process.
There are various ways of collecting primary data such as: i. Observation Method ii. Interview Method iii. Questionnaire Method As per we are doing a Descriptive research so I need to evaluate the magnitudes which affect the perception and opinion of the Media Advertisers. Thus I have tried to include all those factors which are generally seen by the Media Advertising consultancies before giving advertisement on any news channel. I have collected primary data for my research work. Thus for collecting primary data I have selected:
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i. Questionnaire method ii. Interview Method. I have prepared two Questionnaires, one on Likert scale and other on Yes No basis While collecting the primary data from the Axis Bank customers I have talked to the customers walking into the Bittan Market, Bhopal branch and got my questionnaires filled. Sometimes I was also required to explain the meaning of the concept to make them understand my questionnaire. DATA ANALYSIS Measures of Asymmetry (SKEWNESS) Skewness is the measure of asymmetry and shows the manner in which the items are clustered around the average. In a symmetrical distribution, the item shows a perfect balance on either side of the mode, but in a skew distribution the balance is thrown to one side. The amount by which the balance exceeds on one side measures the skewness of the series. The difference between the mean median or the mode provides an easy way of expressing skewness in a series. The significance of skewness lies in the fact that through it one can study the formation of series and can have idea about the shape of the curve, whether the data is normal or not when the items of a given series are plotted on graph. KURTOSISKurtosis is the measure of Flat-Topedness of a curve. Kurtosis is the humpedness of the curve and points to the nature of distribution of the items in the middle of the series. It may be pointed out here that knowing the shape of the distribution curve is crucial to the use of statistical methods in research analyses since most methods make specific assumptions about the nature of the distribution curve. Kurtosis gives the following idea: • • • • • How peaked or flat the distribution is. The absolute value is 3 If negative flat distribution If positive more peaked than normal If positive more peaked than normal
Reliability Test
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Case Processing Summary N Cases Valid Excludeda Total 100 0 100 % 100.0 .0 100.0
a. Listwise deletion based on all variables in the procedure.
Reliability Statistics Cronbach's Alpha .689 N of Items 10
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Scale Statistics Mean Variance Std. Deviation 4.84190 N of Items 10
39.4800 23.444 Descriptive Statistics
Minimu Maximu N Range m m Sum Mean
Std. Deviation
Varianc e Skewness Std. Error .241 .241 .241 .241 Kurtosis Std. Statistic Error .551 .141 -.607 1.804 .478 .478 .478 .478
Frequency Tables
Statistic Statistic Statistic Statistic Statistic Statistic Statistic Statistic Statistic Awareness Attraction Success Availmoreservices Valid 1 Enhanceawarenes s 2 100 100 100 4.00 1.00 5.00 371.00 3.7100 .92436 .94168 .854 .887 .577 .753 2.0 .90453 13.0 .95325 29.0 .909 85.0 1.15802 1.341 100.0 .757 .86987 .97959 1.02494 .960 1.051 -.888 .818 -1.120 -.874 -.964 -.535 -1.275
3.00 Awareness 5.00 411.00 4.1100 2.00
100 3.00 Percent 2.00 Frequency 100 4.00 2 100 4.00 11 4.00 16 56 4.00 15 4.00 4.00 100 4.00 1.00 11.0 1.00 2.0
5.00 422.00 4.2200Cumulative .75985 Valid Percent 5.00 421.00 4.2100 2.0 5.00 410.00 4.1000 11.0 Percent .86801
.241
1.160
.478
Understandfpbette 3 r 4 Findecbetter 5 Findecquicker Rememering Total Need Valid N (listwise)
1.00 3.9800 16.0 5.00 398.0016.0 56.0 5.00 382.0056.0 1.00 3.8200 15.0 5.00 403.0015.0 1.00 4.0300 1.00 100.0 5.00 370.00 3.7000 100.0 1.00 5.00 360.00 3.6000
.241
.336
.478
100 100 100 100 100
-.795 -.904 -.809 -.391
.241 .241 .241 .241
-.301 .909 .116 -.756
.478 .478 .478 .478
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The above table and graph shows that the customers are highly aware of the concept of Universal Banking. The maximum number of customers agreed that they were aware of this concept. The highest frequency is of 4.
Attraction Cumulative Frequency Valid 2 3 4 5 Total 10 9 41 40 100 Percent 10.0 9.0 41.0 40.0 100.0 Valid Percent 10.0 9.0 41.0 40.0 100.0 Percent 10.0 19.0 60.0 100.0
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The above table and graph shows that most of the customers of Axis bank are highly attracted towards the concept of Universal Banking. 4 and 5 have the highest frequency.
Success Cumulative Frequency Valid 2 3 4 5 Total 1 17 41 41 100 Percent 1.0 17.0 41.0 41.0 100.0 Valid Percent 1.0 17.0 41.0 41.0 100.0 Percent 1.0 18.0 59.0 100.0
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The above table and graph shows that maximum number of customers think that this concept would be successful in India. The highest frequencies are of 4 and 5.
Availmoreservices Cumulative Frequency Valid 1 2 3 4 5 Total 1 5 8 44 42 100 Percent 1.0 5.0 8.0 44.0 42.0 100.0 Valid Percent 1.0 5.0 8.0 44.0 42.0 100.0 Percent 1.0 6.0 14.0 58.0 100.0
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The above table and graph shows that mostofthe customers are agreeing to the fact they may avail more services than they actually intend to when they come to a Universal Bank. The highest frequencies are for 4 and 5.
enhanceawareness Cumulative Frequency Valid 1 2 3 4 5 Total 1 7 9 47 36 100 Percent 1.0 7.0 9.0 47.0 36.0 100.0 Valid Percent 1.0 7.0 9.0 47.0 36.0 100.0 Percent 1.0 8.0 17.0 64.0 100.0
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The above table and graph shows that most of the customers agree to the fact that coming to a Universal Bank can enhance their awareness of financial products.
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understandfpbetter Cumulative Frequency Valid 1 2 3 4 5 Total 1 9 13 45 32 100 Percent 1.0 9.0 13.0 45.0 32.0 100.0 Valid Percent 1.0 9.0 13.0 45.0 32.0 100.0 Percent 1.0 10.0 23.0 68.0 100.0
The above table and graph shows that most of the customers agree that Universal Banking can make them understand the financial products better.
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Findecbetter Cumulative Frequency Valid 1 2 3 4 5 Total 4 13 14 35 34 100 Percent 4.0 13.0 14.0 35.0 34.0 100.0 Valid Percent 4.0 13.0 14.0 35.0 34.0 100.0 Percent 4.0 17.0 31.0 66.0 100.0
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The above table and graph shows that most of the customers agree that Universal Banking can make their financial decision making better.
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Findecquicker Cumulative Frequency Valid 1 2 3 4 5 Total 1 5 15 48 31 100 Percent 1.0 5.0 15.0 48.0 31.0 100.0 Valid Percent 1.0 5.0 15.0 48.0 31.0 100.0 Percent 1.0 6.0 21.0 69.0 100.0
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The above table and graph shows that most of the customers agree that Universal Banking can make their financial decision making quicker.
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Rememering Cumulative Frequency Valid 1 2 3 4 5 Total 2 14 13 54 17 100 Percent 2.0 14.0 13.0 54.0 17.0 100.0 Valid Percent 2.0 14.0 13.0 54.0 17.0 100.0 Percent 2.0 16.0 29.0 83.0 100.0
The above table and graph shows that most of the customers think that Universal Banking helps them to remember the products and their details.
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Need Cumulative Frequency Valid 1 2 3 4 5 Total 1 18 20 42 19 100 Percent 1.0 18.0 20.0 42.0 19.0 100.0 Valid Percent 1.0 18.0 20.0 42.0 19.0 100.0 Percent 1.0 19.0 39.0 81.0 100.0
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The above table and graph shows that most of need complete financial solutions under one roof.
the customers think that they
Interpretation: As we can see in the above table the different statistics of the collected data is shown. This table is a SPSS generated table which shows range, maximum, minimum , mean, Std. Deviation, Variance, Skewness, and Kurtosis. Mean: The maximum points to each factor given according to the LIKERT scale is 5 and minimum is 1, the mean of all the factors is more closer to the maximum value than the minimum value. This means that the customer’s opinion is towards the positive side. These results means that customers show more interest in universal banking. Std Deviation: Std. Deviation is the measure of the average deviation of values from its mean. Std. Deviation less than 1 means that there is closeness is the opinion of all the customers. Opinion of customers do not differ from each other or if it does the difference is negligible. Thus most of the customers have a positive opinion about Universal Banking. Udai Institute Of Management Studies , Jaipur Page 40
Analysis of actual information from questionnaire 2: FOREX services: total users- 20 Specializ ed 7 Bank 13
Out of 20 FOREX services users 13 avail services from that comes out to be 65 %. Most of the customers of axis bank avail FOREX services from a Universal Bank. We can say that the customers are towards Universal Banks.
Gold: Total buyers- 31 bank 6 open market 25
Out of 31 customers who invest in gold 25 customers buy it from open market. This shows that customers investing in gold prefer other vendors over Banks. Mutual Funds: Total- 39 Bank 23 Specializ ed 16
Out of 39 customers investing in mutual funds 23 invest through banks and only 16 invest through specialized mutual fund companies. This show that the Universal banks are scoring good in terms of mutual funds.
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Bonds: Total- 8 Bank 2 Specializ Post ed office 5 1
As only 8 customers out of 100 were having saving bonds so it is not possible to conclude much but we can still observe the distribution. Online Trading: Total- 28 Bank 17 Specializ ed 11
Out of 28 customers availing online share trading services 17 avail them through a bank and others through specialized organizations. This reveals that more customers prefer banks for share trading which is again a positive for Universal Banking.
Life Insurance: Total - 95 Bank 19 Specializ ed 76
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When it comes to life insurance the customers are still not keen to go to banks. Only 19 out of 95 customers holding a Life Insurance policy go to banks, while 76 of them go to specialized firms and the highest score was of LIC.
Health Insurance: Total - 40 Bank 13 Specializ ed 27
Out of 40 customers holding Health Insurance 27 of them go to specialized general insurance companies and only 13 go to banks. This means banks again score low in Health Insurance.
Vehicle Insurance: Total-97 Bank 9 Specializ ed 88
Out of 97 customers 88 have their Vehicle Insurance from specialized organizations and only 9 customers have Vehicle Insurance from Bank. This shows lack of interest of customers in Banks for Vehicle Insurance.
Findings: 1. Customers have a very positive opinion towards the concept of Universal Banking.
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2. Customer’s actual behavior towards this concept is just a little 3.
4.
5.
6.
different from their positive opinion. Most customers go to banks for investment banking services like Mutual Funds, Share Trading, Broking, Demat Accounts, thus being in favor of Universal Banking. Banks also proved that being Universal is good by scoring high in FOREX Services where most of the customers avail FOREX services from banks. Banks only score low in the insurance sector. Most of the customers prefer specialized organizations for Life Insurance and General Insurance. Banks also score low when it comes to investment in Gold here also most of the customers purchase Gold from open market rather than banks.
Conclusion: Universal banking is a fast growing concept. Most of the banks are providing complete financial solutions under one roof. This research was an attempt to analyse weather the customers actually responding positively to the concept of Universal Banking or they just has a positive opinion about it. The study showed that the customers are actually availing bank services for most of their financial solutions. Mutual Fund investment, share broking and trading and FOREX services are being availed by the customer through banks. The only sector where the banks have to catch up is the Life Insurance and General Insurance. Customers still prefer specialized organizations over banks for their Insurance needs. We can conclude that this concept of Universal Banking has a very positive future with few concerns. It’s the one stop financial solutions that would flourish in the future. Financial Hyper Markets are growing and providing quicker and better financial solutions. Now bank is not just a bank it has become a complete financial solutions provider.
Limitations of the Study:
1. The study was not vast and was restricted to 100 respondents.
2. Different respondents had different financial and educational background.
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Bibliography: www.scribd.com www.axisbank.com www.wikipedia.com e-books www.google.com Research Methodology by C.R. Kothari www.banknet.com
Questionnaires: Questionnaire 1 Name Age Occupation: Ph. No. : : :
Q1. Are you aware of the concept of Universal Banking? Highly Agree Disagree Agree Not Sure Disagree Highly
Q2. Are you attracted towards the concept of Universal Banking? Highly Agree Disagree Agree Not Sure Disagree Highly
Q3. Do you think this concept will be successful in India? Highly Agree Disagree Agree Not Sure Disagree Highly
Q4. Availability of a complete range of financial services under one roof can make me avail more services than I intend to avail?
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Highly Agree Disagree
Agree
Not Sure
Disagree
Highly
Q5. Will Universal Banking enhance your awareness of financial products? Highly Agree Disagree Agree Not Sure Disagree Highly
Q6. Will Universal Banking help you to understand all financial products better? Highly Agree Disagree Agree Not Sure Disagree Highly
Q7. Will the concept of one stop shopping make your financial decision making better? Highly Agree Disagree Agree Not Sure Disagree Highly
Q8. Will Universal Banking make your financial decision making quicker? Highly Agree Disagree Agree Not Sure Disagree Highly
Q9. Will concept of one stop shopping help you remember all the products and details? Highly Agree Disagree Agree Not Sure Disagree Highly
Q10. Do you need all the services provided by Universal Banks? Highly Agree Disagree Agree Not Sure Disagree Highly
Questionnaire 2 Name Age Occupation: Ph. No. : : :
Q1. Dou you avail FOREX services? Yes
No
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If Yes from which organization? Udai Institute Of Management Studies , Jaipur
Q2. Do you invest in Gold? Yes If Yes where did you buy it from?
No
Q3. Do you invest in Mutual Funds? Yes If Yes from which organization? Q4. Do you invest in Saving Bonds? Yes If Yes from which organization?
No
No
Q5. Did you avail online share trading service? Yes If Yes from which organization? Q6. Do you have a Demat Account? Yes If Yes from which organization? Q7. Do you hold a Life Insurance policy? Yes No If Yes from which organization? Q8. Do you hold a Health Insurance policy? If Yes from which organization? Q9. Do you hold a Vehicle Insurance? Yes If Yes from which organization? Q10. Do you pay your bills through this bank? Yes No No Yes No No
No
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