PRICING VIS-À-VIS SERVICE A COMPARITAVE ANALYSIS OF VARIOUS BANKING PRODUCTS

Presented by :

Raghvendra kumar

(131206)

Scope of study

In banking industry Interest rates and services are highly dynamic, It is important to keep base rate and services according to RBI rules and regulations.

So the study of RBI rules, regulations, Competitors’ services are very important along with customers’ needs and perceptions.

Company profile

The Industrial Development Bank of India (IDBI) was established in 1964 under an Act of Parliament as a wholly owned subsidiary of the Reserve Bank of India.

In 1976, the ownership of IDBI was transferred to the Government of India.

It was made the principal financial institution for coordinating the activities of institutions engaged in financing, promoting and developing industry in India.

After the public issue of IDBI in July 1995, the Government shareholding in the Bank came down from 100% to 75%.

It has 2342 ATMs, 1467 branches including one overseas branch at DIFC, Dubai and 996 centers including two overseas centers at Singapore & Beijing.

The Bank has an aggregate balance sheet size of INR 3.2 trillion as on 31 March 2013.

Objectives of the studies

1. To study and analyze various banking products of IDBI Bank ltd. and its competitors.

2. To understand customers’ perceptions towards bank’s retail products.

Research Methodology

Information sources:

1. The information has been collected from website of RBI, IDBI and various banks such as SBI, ICICI, PNB .

2. Intranet of IDBI Bank.

3. Responses and suggestions from customers.

Sample size:

Targeted was 200 customers in which 154 responded.

Sampling procedure:

4. Convenience sampling

5. Online survey

Analysis methods:

Comparative analysis

Limitations of the study

1. Due to specialization of the subject, a major part of the project time has been dedicated to understand and learn about Market condition, Banking products and services.

2. The study can provide insights based on the current products, trends and results. It may not be applicable in different period of time.

Current Scenario analysis

1. Monetary Policy Review 2014-15 ( April 01, 2014 ): Repo rate 8.00%. the reverse repo rate 7.00% Marginal Standing Facility (MSF) rate unchanged at 9.00%.

Following the first bi-monthly Monetary Policy Review, no bank, except for Bank of Maharashtra, announced revisions in their Base Rates.

While UBI, CBI, OBC and BoB reduced their respective domestic deposit rates, PNB and IDBI Bank decided to increase their deposit rates on certain maturity buckets.

2. Non-maintenance of minimum balance:

RBI, in its first bi-monthly Monetary Policy Review 2014-15, had also proposed that banks do not levy any penal charges for non-maintenance of minimum balance in any inoperative accounts.

3. Minors to operate savings bank accounts:

RBI, with a view to promote financial inclusion, notified that minors above 10 years of age will be allowed to open and operate savings bank accounts.

Rates

Base Rates: (as on May 19, 2014)

SBI, BoI, CBI, HDFC Bank and ICICI Bank have the most competitive Base Rate at 10.00%, followed by Canara Bank at 10.20%. All other major public sector banks (including IDBI Bank) offer a Base Rate of 10.25%.

Savings Bank Deposit Rates: (as on May 19, 2014)

All the Public Sector Banks offer an interest rate of 4.00% except

Bharatiya Mahila Bank: 4.50%

IndusInd Bank: 5.50%

Kotak Mahindra Bank: 6.00%

Ratnakar Bank: 5.50%

Yes Bank: 6.00%

Changes in Domestic Term Deposit Rates

IDBI Bank introduced a new bucket of 5 years with the interest rate of 9.10%, w.e.f. May 12, 2014

PNB increased the interest rate on the maturity bucket of 271 days to < 1 year by 25 bps from 8.00% to 8.25%.

BoB reduced the interest rates on the maturity buckets of 1 year to 6 years 3 months, > 6 years 3 months to 10 years and 1111 days by 5 bps from 9.10% to 9.05%, w.e.f. May 02, 2014.

BoI reduced interest rates on the maturity buckets of 1 year only and > 1 year - 15 months by 20 bps from 9.25% to 9.05% w.e.f. May 15, 2014.

New products by various banks

Dena Bank (444 days term deposit scheme)

Dena Bank re-launched its special 444 days term deposit scheme. The scheme is valid from May 01, 2014 . The deposit scheme is applicable only to deposits below 1 crore and offers an interest rate of 9.15%.

ICICI Bank (NRI Pro and NRI Premia savings accounts)

NRI Pro savings account offers NRI customers added services like priority services, preferential rates on money transfer and banking benefits for family members in India.

NRI Premia offers all services offered by NRI Pro along with access to a dedicated relationship manager and a travel insurance (including air accident coverage up to 1 crore)

Citi Bank (Citi Prestige and Citi Ultima Infinite credit cards)

While Citi Prestige is a global credit card,

Citi Ultima Infinite is an exclusive by invite only credit card.

Federal Bank (Vidya Gold Scheme)

It provides finance to parents to meet the educational expenses of their children. The maximum amount of credit that can be availed under this gold loan scheme is 1 lakh. The Bank offers two interest rate options for this scheme: 11.88% (Combo offer with new SB/RD account) and 12.55% (for standalone customers). The repayment period for this credit scheme is upto 12 months.

Karnataka Bank (Missed Call Banking)

As part of this facility the customer gets information about his account balance and mini statement through SMS after he/she gives a missed call from his/her registered mobile number to Karnataka Bank’s number.

Which bank’s saving account do you prefer where Rate of Return (interest rate) is high or where they provide more offers

(such as discount on Travels, Electronics etc.)?

High rate of returns

92 60%

More offers 62 40%

Findings and suggestions:It is observed from the above data that most of the customers i.e. 60% of the total respondents preferred High rate of returns. Many banks always try to attract potential customers by providing many offers to open saving account. Banks should generate more awareness about new offers along with rate of return of saving accounts. Banks should do joint advertisement with Make my trip, Croma etc.

Which bank’s home loan do you prefer where you get less Interest rate or some other benefits (such as free life/property

insurance etc.)?

Less interest rate 79 51%

Other benefits (such as free life/property insurance etc.)

75 49%

Findings and suggestions:It is observed from above responses that majority of the customers (51%) want less interest rate and remaining (49%) want other benefits. The gap between this is very narrow; banks can take benefit by advertising their other benefits such as free life/ property insurance along with loans.

Which one will you prefer with respect to ATM

Maximum withdrawal in one day with more ATM charge

93 60%

Minimum withdrawal in one day with no ATM charge

61 40%

Findings and suggestions:It is observed from the above responses that 60% of customers are ready to pay some extra charges if banks allow them to withdraw more from ATM. Banks should provide flexible withdrawal according to customers.

Will you ready to pay some charge if bank’s persons will come to your home to clear doubts regarding internet

banking, phone banking , SMS banking etc?

Yes 104 68%

No 50 32%

Findings and suggestions:It is observed form above responses that 68% of customers are ready to pay some extra charge if Banks will provide home service , this shows customers inclination towards services therefore Banks should take care of customers’ requirements. Banks should appoint more number of relationship managers who can help them in their home.

Are you satisfied with your banking services

Highly satisfied 34 22%

Satisfied 70 45%

Neutral 35 23%

Dissatisfied 15 10%

Highly dissatisfied 0 0%

Findings and suggestions:It is inferred from the above responses that majority of the customers (45%) are satisfied , 22% of customers are highly satisfied but still there are 23% of customers in Neutral and 10% of customers are Dissatisfied so Banks should always take feedback from customers and try to resolve customers’ problems. Customers mainly faces problems because of bank’s timing, link failure , processing time, hidden charges.

Conclusion

Indian banking industry is very competitive and customers are very conservative, But rising in Income and urbanization are helping to customer to think beyond price side of products and moving towards services. So to attract customers banks should take care more about services.

Thank you