Summer Training Report

“COMPARATIVE STUDY OF RETAIL LOAN SCHEMES OF

BANK OF BARODAVIS-S-VIS

COMPETITORS”

ADissertation report

Year 2010

Structure of the talk :-Objective IntroductionAbout Bank of Baroda

Heritage Services offered

Typical loan granting process Current scenario Future prospectsComparison of retail loan products of different

banksFindingsRecommendations Conclusion

Objective of the summer training :

To analyze the entire retail loan service scenario in order to find out the shortcomings and advantages over other competing banks.

To give executable suggestions in order to make Bank of Baroda a market leader in the existing segment of retail loans.

Introduction:Retail lending is the practice of loaning money

to individuals rather than institutions.Retail lending is done by banks, credit unions,

and savings and loan associations.Retail lending has taken a prominent role in the

lending activities of banks, as the availability of credit and the number of products offered for retail lending has grown.

One of the most lucrative options available to the bank today expand its business to expand its business as the income level as well as the consumption pattern of Indian customer is changing

Bank of Baroda Heritage and Ethics of Bank of Baroda Started on 20th July 1908 under the Companies Act

of 1887. The initial capital invested was Rs. 10 Lakhs. The Maharaja was none other than Sayajirao

Gaekwad who, with his visionary insight, planned the beginning of a reputed journey which over the years, came to be known as the Bank of Baroda.

In the present scenario, Bank of Baroda's public shareholding is 46.19 percent with a total equity capital of 365.53 crore. This is held by Retail Investors, Banks and Financial Institutions, Employees, FIIs and OCBs, Mutual Funds, Insurance Companies and Others.

Services offered by the Bank of Baroda Retail Banking Rural/Agri Banking Wholesale Banking SME Banking Wealth Management Demat Product Enquiry Internet Banking NRI Remittances Baroda e-Trading Interest Rates Deposit Products Loan Products ATM / Debit Cards

A typical loan granting process :

THE CURRENT SCENARIOThe robust credit pick-up in the fourth quarter of 2009-

10, which helped the banking system to top central bank’s credit growth projections for the financial year, was primarily driven by retail loans, but credit flow to the commercial real estate sector fell drastically following an increase in provisioning norms last year.

The share of personal loans,(education, home, consumer durable loans, among others, was 6.5 per cent in incremental non-food credit as on February from -0.2 per cent in October of 2009.

 Within the retail segment, education loans logged an impressive growth of 30 per cent, while housing loans grew by 8 per cent. Contraction in sub-sectors of retail loans such as consumer durables and loan against shares were also moderated.

The future prospects:

India is the next big market for retail financial services.

India is set to become the world’s third-largest economy by 2050

The market for banking products is growing at an even faster rate.

Over the next 20 years, the number ofpeople in their prime working years will continue to grow in India. Unlike in some of the other BRIC nations, where the population is ageing, this again will grow the market for all retail finance products.

Mortgage market is currently under-penetrated,

The credit card market in India will see a rapid boom.

The financial cards market will increase threefold within the next five years.

Just 59% of the Indian population reported to have a deposit account (compared to an average of over 85% in Western Europe), there is a lot of territory yet to be staked out for both banks and their suppliers

Changing Attitudes to Debt and Consumer Finance Rising affluence has altered consumer attitudes and the approach of the urban consumer has shifted from ‘debt averse’ to ‘spend now, worries later’

Comparison of various Retail loan products:

Criteria of comparison Interest rates Various charges on the Services provided

Total cost of any loan to a customer = Loan amount + Total interest charged throughout loan tenure + Processing fees & related taxes.

Time taken to disburse a loan Customer satisfaction level of each bank Names of the banks under consideration :-

Bank of BarodaState Bank of India IDBI BankPunjab National BankAllahabad Bank HDFC Bank ICICI BankAxis Bank

Findings of the survey :-1. Level of satisfaction installment amount

The number of customer who are satisfied with the installment amount as specified by the bank is highest for SBI and Bank of Baroda whereas this is very lesser for the private banks namely HDFC Bank and ICICI Bank and somewhat moderate for PNB. This is the result of customer orientation of the Public service banks.

2. Best Feature of the loanThe major concern of people while choosing a loan is

still low rate of interest and low processing fees. This is shown by the performance of SBI in the survey. The other most preferred inputs being less processing time followed by cordial nature of staff and availability of necessary information.

Most preferred bank for the next loan requirement

SBI is the most preferred bank for loan requirements as represented by this survey follwed by PNB, Bank of Baroda. ICICI and Union Bank enjoy the same preference level.

Reasons for the above Low interest rate being the most favored reason. The second

being the helping nature of the staff. This shows that people want those loans which come without hassels and with coordination from the banking staff. People prefer low processing time, lesser paper works and a small number of people also prefer to have an efficient handling mechanism and good ambience inside the bank.

Loan margin satisfaction

Punjab National Bank has the highest satisfied customers in terms of loan margins offered followed by SBI, ICICI, Bank of Baroda and then HDFC bank.

Adequate feedback facility availableICICI bank leads the chart in terms of customer

grievance handling and adequate feedback facility. All the Public service bank enjoy the same postion as the policies used by these PSB’s are almost similar. This shows that there is a scope of improvement in terms of customer grievance handling by Bank of Baroda in order to take a winning edge over the other competiting PSBs.

Satisfaction level of cost of service

SBI enjoys the top position in offering the loans at the lowest cost while PNB and BOB share the same position. Private players are way behind in offering products at a lower rate.

Availability of sufficient informationBank of Baroda is present with ease of information

while opting for a loan. The credit goes to the loan executive that deal with customer in most efficient manner.

Loan processing timeLoan processing time is the third most important

criterion after interest rate and processing fee and PNB in leading the chart followed by Bank of Baroda and the ICICI. SBI lags in loan processing time and is hence is more annoying for the customers.

Repeating same bank for future loansThe customers of private bank don’t want to repeat

their bank for future loans. This shows gross dissatisfaction among loan customers of private banks. SBI and BOB both enjoy their equal status of being the favorite of customers for future loan needs.

Reason for not using Bank of Baroda services

This is a survey done among the non-customers of Bank of Baroda. The major reason that people cited for not using Bank of Baroda product is that they were not aware about its various schemes and facilities in the sub-urban areas. Also towards the rural and semi-urban areas there are very few branches available hence people don’t get a opportunity to come across to the Bank of Baroda products.

A few other reasons include non –availability of an introducer or a guarrantor for getting the loan or an account registered.

Service satisfaction level

The service satisfaction level of Bank of Baroda is more than any other bank followed by PNB and SBI.

Consumers prefer SBI because of its Teaser Rate policies but often report unhelping staff, lack of customer friendliness, too hectic procedure for getting the loan and often corruption and hence the service satisfaction level of SBI is lower than other 2 major players namely PNB and BOB.

Private banks lag because of their profit centric approach.

Recommendations (based on the findings)

Relaxing the lending norms for young working class.

The process of loan recovery and default settlement should be made as per the laws and no stringent measures should be adopted which lead to loss of goodwill of the bank.

Reason for State Bank of India being a market leader is that it offers loans at the least possible rates also known as “Teaser rates”. Adopt a follower’s strategy for this.

The other reason for SBI being a market leader is its availability and market presence.

If the customer is providing sufficient collateral than this necessity must be waved off as is done by HDFC bank which is doing a good business in retail loan segment.

In UCO bank if a person is providing the bank with many a times than required collateral, say 300% instead of 100% as required, then the bank is offering them loan at a comparatively lower rates

Step up facility should be promoted as a USP of Bank of Baroda as many people who are a worthy party often prefer bank with flexible step up policy.

Customization of services is a strict need of the hour. This is an art mastered by the private banks such as HDFC, ICICI and Axis and also by populist bank SBI. This flexibility in policies helps to get more and more customer retention for the bank.

Ambience of the bank is a major concern these days. Emphasis should be on enhancing the overall banking experience.

Aggressive promotions in the car loan category, development of a site exclusively for car loan customers.

Regarding the GOLD FUNDS, many banks are offering retail loans against Gold deposits as mortgages since the valuation of gold is increasing day by day, such practises whould be promoted by Bank of Baroda.

ConclusionThe Indian customer has come a long way from

purchasing to fulfilling their needs to buying a house on loan .

Customers now grab everything that comes their way but they do their own survey of optimum loans; same is the case with banks, and retail loans.

With innumerable choices before him, the customer is indeed the king.

If a bank has to succeed in the competitive world, it should be technological savvy, customer centric progressive driven by highest standards of corporate governance and guided by sound ethical values and above all should be cordial and should have personalize customer services.

Bibliography Philip Kotler, Marketing Management, 9th editionAkkar; Marketing Research http://www.bloombergutv.com/industry-news/

banking-industry-news/51016/retail-loans-back-in-demand.html

www.investorglossary.com/retail-lending.htm -http://www.oracle.com/us/industries/financial-

services/045390.pdfhttp://www.smsfi.com/blog-details/1096/

personal-loans:-advice-to-help-you-choose-smartly

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