A PROJECT REPORT ON TRANSPARENCY IN PRIVATE SECTOR BANKS TOWARDS THEIR CUSTOMERS

Submitted in the Partial fulfillment of the Requirement for The Degree of Master of Business Administration

Submitted to : Mr. Kamaldeep Singh

Submitted by : Ranvir kaur Class MBA IV Uni Roll No. 7079222630

GNA- Institute of Management & Technology Phagwara Punjab Technical University , Jalandhar Session 2007-2009

PREFACE
Project report is an intergrated part of the management cource . the project report is designed to provide a participation of management program as on job experience, this gives the student a chance to use and apply the academic knowledge to have an insight of corporate culture. This program help the student to involve managerial abilities and involve in active participation . the practical experience help the student to view the real business world closely which in turn widely influence their perception and argument and the understanding of the real situation. I was really fortunate to avail the opportunity to understand the Transparency in Private Sector Towards their Customers.

ACKNOWLEDGEMENT

Before I get into thick of things, I would like to add a few heart felt words for the people who were a part of this project in numerous ways, people who gave unending support right from the stage the projects idea was conceived. No work is considered complete unless due acknowledgement is given to those who made the work possible. I take this opportunity to thank the person who made this project a success. Words at my command are inadequate to express my sincere and profound gratitude to Mr.Kamaldeep Singh for his meticulous guidance, keen supervision, constructive criticism, friendly attitude and whole hearted help at all stages of this project. His unforgettable, positive approach and freehand acumen made this project possible.. I consider myself lucky to have love and blessings of my parents. I am extremely thankful my friends and to all the respondents for devoting their invaluable time and worthwhile information without which this project would not have been a complete story. I am indebted to all those who directly or indirectly contributed for making this project a reality Above all, I am grateful to the God, Almighty, who sustains this beautiful world and without whose grace nobody can ever succeed Ranvir Kaur

CONTENT
Chapter name Page No.

1. INTRODUCTION TO THE PROJECT (1.1)

6-26

Meaning of transparency -Transparency in Private Sector Banks -Qualitative Characteristics of Transparency in private sector banks. -Objectives of Transparency in Banks

(1.2) Banking System in India - Transparency in public sector banks (1.3) RBI Policies of transparency in banks towards Customers (1.4) Measures taken by RBI for enhancement of Transparency in banks 2. RESEARCH METHODOLOGY (2.1) Objective of project (2.2) Primary data to be collected (2.3) Sample design, size & method to be used (2.4) Limitation of project 27-30

6. FINDINGS & CONCLUSION

52-54

Bibliography
ANNEXURE

INTODUCTION

MEANING OF TRANSPARENCY
In general TRANSPARENCY means visibility and clarity of each & everything, which helps in preventing corruption, financial irresponsibly and underhand dealings. In other words, transparency is an ANTI-CORRUPTION TOOL. We all know that Corruption is at the top of the global development agenda and it is one of the most important obstacles to promote sustainable economic growth and poverty reduction. Corruption is the consequence of the failure of any of a number of accountability relationships & giving wrong information about anything for our private or personal profits. But transparency refers to the release of information by institutions, which is relevant to evaluating those institutions. The purpose for transparency is enhancing access to information, raising public awareness and stimulating civil society initiatives which help in prevent corruption. TRANSPARENCY IN PRIVATE SECTOR BANKS means giving reliable, relevant and timely information about the activities of the public sector banks to the customers. It Includes ensuring openness about policy intentions, formulation and implementation AND non-asymmetry of information between public and public sector banks. These conditions are necessary for controlling government officials moral hazard. The value of transparency Becomes one of key values with accountability, which the public sector should pursue in democratic countries.

TRANSPARENCY IN PRIVATE SECTOR BANKS

We know that Private sectors banks can have both positive and negative effects on the development. But private sectors banks are highly transparent in the services towards customers, public, government etc. TRANSPARENCY measures help to reduce negative effects of private sectors banks & help in enhancing their positive contributions. It is

ensure that there is transparency in all operations and services at all stages of government banks. Customers are fully aware about the various Products and facilities available in the bank. And there is a uniform strategy, which is adopted to eliminate any possibility of discrimination on caste, creed and religion or economic status of the clients. Secrecy norms are simultaneously observed to protect the interests of our customers. There is no one-size-fits-all policy for enhancing transparency, but principles of good practice exist and many have been successfully tested in banks. Transparency can be defined as successful two-way communication about public policy. The institutional arrangements that make it possible reflect national culture, history and values. However, transparency starts from a core set of measures that are so fundamental as to be almost indistinguishable from governments basic legislative, administrative and fiscal functions. Core measures help to ensure that people who are affected by policies know about them and can respond to them. Guidelines for good transparency practices have emerged in the fiscal and regulatory areas. In order for market discipline of banking institutions to be effective, banks must be sufficiently transparent; that is banks must provide a sufficient amount of accurate and timely information regarding their conditions and operations to the public. Improved public disclosures of such information lead to increased transparency and should lead directly to more effective market discipline. Improvement in customer service by private sector banks has always been the focal point of endeavors of the Reserve Bank and Government of India. Towards this end, on the occasion of the celebration of Golden Jubilee of India's Independence, the private sector banks have brought out '; citizens charters. These charters are regarded as code of fair banking and provide information on various banking services offered by the banks to their customers for bringing about transparency in the matter of customer service. The Charters are intended to make the customers aware of their rights and also grievances redressal mechanism set up by the banks for dealing with customers' complaints. On the occasion of observance of Consumers Rights Day on March 15 the world over, it was decided to observe March 15, 1999 as the '; Customers Day'; in order to focus attention on the rights and responsibilities of the consumers and to generate awareness among them.
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Notice Boards have been displayed in the branch premises indicating time norms for various types of transactions like encashment of cheques, issuance of demand drafts, receipt and payment of cash, collection of cheques etc in private sector banks. Payment of interest is also effected for the delayed collection of cheques beyond the stipulated period. Brochures containing various schemes are being distributed to the customers. Reserve Bank is continuously taking steps to ensure that customers get treated fairly. So various steps are taken for proper treatment of fair practices by enhancing transparency in private sector banks. The quality of service rendered by banks is monitored by Reserve Bank with special emphasis on service rendered by banks to pensioners. Banks have been advised to include senior citizens in their Branch level Customer service committees. Any non observance of the RBI guidelines or banks code of commitment to the individual customer can be taken up first with the banks own consumer redressal machinery and if no satisfactory response is obtained by the customer he can complain to the Reserve Banks Banking Ombudsmen who have offices at 15 centres, details of which are available on the Banks website. The goal of achieving transparency has become more challenging task for private sector banks in recent years as banks activities have become more complex and dynamic. Many banks now have large- scale international operations and significant participation in securities and/or insurance businesses in addition to traditional banking activities. Their product lines change rapidly and include highly sophisticated transactions, and they have complex legal and managerial structures. These banks present formidable challenges to market participants and supervisors who need to formulate ongoing assessments of banks activities and risks. At the same time as transparency has become more challenging for public sector banks. But all the public sector banks maintains adequate records drawn up in accordance with consistent accounting policies and practices that enable supervisors and public to obtain a true and fair view of the financial condition of the bank and the profitability of its business and services of the customers in this competitive world

QUALITATIVE CHARACTERSTICS OF TRANSPARENCY IN PRIVATE SECTOR BANK

Qualitative Characteristics of transparency as public disclosure of reliable and timely information that enables users of that information to make an accurate assessment of a banks financial condition and performance, its business activities, and the risks related to those activities. The critical qualitative characteristics of information that contribute to bank transparency are further elaborated. These characteristics are:

QUALITATIVE CHARACTERSTICS OF TRANSPARENCY

COMPREHENSIVENESS

COMPARABILITY

TIMELINESS & RELIABILITY

RELEVENCE

Comprehensiveness
To enable market participants and other users of information especially public or customers to make meaningful evaluations of banks, information should be comprehensive. This often implies the Aggregation, consolidation and assessment of information across a number of activities and services, which are provided to customers.

Comparability
Comparability of informations that are given to the customer helps in increasing the trust, which helps in effective market discipline and effective banking supervision. It improves regulatory frameworks for public disclosure and transparency.

Relevance
The effectiveness of the interaction with customers depends greatly on meaningful and relevant public disclosure. If the customers get complete and relevant information from the bank according to their requirements, the satisfaction level of the customer increases. Effectiveness of transparency helps in encouraging high-quality public services at reasonable cost and maximum satisfaction of the customers.

Timeliness &Reliability
Market discipline, however, can only work if market participants have access to timely and reliable information, which enables them to assess a banks activities and the risks inherent in those activities. Improved public disclosure strengthens market participants ability to encourage safe and sound banking practices towards customers. It identifies the following six broad categories of information, each of which should be addressed in clear terms and appropriate detail to help achieve a satisfactory level of bank transparency: Financial performance of bank in public sector Financial position (including capital, solvency and liquidity) of bank Risk exposures (including credit risk, market risk, liquidity risk, and operational, legal and other risks)

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Accounting policies of bank .

OBJECTIVES OF TRANSPARENCY IN BANKS

In this competitive world, private sector banks are suffering from great competition with private sector banks. So , private sector banks are ready to meet the challenges posed by emerging technologies and business processes, new financial instruments, the growing scale and scope of financial institutions, and changing regulatory frameworks. With the increasing use of latest technology, , private sector banks provides the quality services to their valued customers with complete TRANSPARENCY & disclosure of accurate & reliable information. Our public sectors established the idea that the public has a right to know about information acquired or developed by government agencies. Now transparency has become a mainstream instrument of regulation, which not only helps in avoiding negative activities but also helps in enhancing positive effects.

Main objectives of TRANSPARENCY in , private sector banks are following:

Transparency is a smooth and more effective tool in order to gain the satisfaction from services of the bank by the customers. So main objective of it is to disclose the true picture of the requirements of the customers which leads to customer satisfaction. TRANSPARENCY in , private sector banks is essential to create customer satisfaction by exhibiting trustworthy behavior, showing genuine commitment to service, communicating information to customers efficiently and accurately, delivering services competently, handling potential and manifest conflicts skillfully, and improving overall customer relationship quality.

Its main objective is to strengthen the framework for consumer protection to provide an avenue for redress in cases where consumers are placed in a disadvantaged or unfair position resulting from financial transactions and to reduce these kind of unfair practices which is unsafe for the customers.
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Transparency contributes towards maintaining market confidence, and strengthens accountability for citizens to demand better public services, and more efficient and effective regulation from the private sector to improve its competitiveness.

Its objective is to enhance the better regulation in the , private sector banks, which refers to improving the quality of financial regulation and supervision in order to enhance its effectiveness, efficiency and consistency. While the comprehensive and timely availability of financial information will enhance market discipline in emerging market economies, the disclosure of information must be complemented with the ability of the market players to analyze, digest and appropriately interpret the information to achieve the desired results.

Its other objective is to create real social, environmental and cultural value such as charities, social businesses, community projects and environmental initiatives. Each one is a practical, well-grounded initiative dedicated to social aims, which benefit the community, care for the environment, respect human freedom and pursuing social, environmental and cultural goals with complete disclosure of information.

Transparency is becoming an important regulatory frontier in , private sector banks in developing countries. Governments have designed disclosure systems whose objective is to reduce health and safety risks, minimize corruption, protect civil rights, and improve public services.

The objective of transparency systems is to promote public priorities to reduce race and gender discrimination. Transparency means consistency in the information regarding interest rates or other bank charges.

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BANKING SYSTEM IN INDIA

Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively

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Private Sector Banks Private banking in India was practiced since the begining of banking system in India. The first private bank in India to be set up in Private Sector Banks in India was IndusInd Bank. It is one of the fastest growing Bank Private Sector Banks in India. IDBI ranks the tength largest development bank in the world as Private Banks in India and has promoted a world class institution in India.The first Private Bank in India to receive an in principle approval from the Reserve Bank of India was Housing Development Finance Corporation Limited, to set up a bank in the private sector banks in India as part of the RBI's liberalisation of the Indian Banking Industry. It was incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and commenced operations as Scheduled commercial banks in Jan. 1995. ING Vysya, yet another Private Bank of India was incorporated in the year 1930. Bangalore has a pride of place for having the first branch inception in the year 1934. With successive years of patronage and constantly setting new standards in banking, ING Vysya Bank has many credits to its account. List of Private Banks in India

Bank of Punjab Bank of Rajasthan Catholic Syrian Bank Centurion Bank City Union Bank Dhanalakshmi Bank Development Credit Bank Federal Bank HDFC Bank ICICI Bank IDBI Bank IndusInd Bank ING Vysya Bank Jammu & Kashmir Bank Karnataka Bank Karur Vysya Bank Laxmi Vilas Bank
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South Indian Bank United Western Bank UTI Bank

RBI POLICIES OF TRANSPARENCY IN PRIVATE SECTOR BANKS TOWARDS THEIR CUSTOMERS The role of banks in intermediation of financial needs of different classes of customers has undergone significant changes. For the sake of convenience, banks' various roles towards their customers can be broadly categorized as 1. Acceptors of deposits 2. Credit providers

3. Providers of payments and remittances services 4. Provider of foreign exchange services 5. Facilitators in circulation of currency notes/coins; and 6. Providers of financial instruments. We all know that there is always the deregulation of interest rates in banking sectors. On the deposit side, interest rates on all deposits, except savings accounts, have been deregulated. Similarly, on the bank lending, rates to be charged by the banks on most of the credit facilities have been deregulated except a small component for lending related to certain segments. Simultaneously, in 1993, as per the new licensing policy, fresh licenses were issued to a few private sector banks with the objective of enhancing the level of competition in the sector. One of the expected outcomes of this policy was expanding the reach of banking services, both in qualitative and quantitative terms. Technology emerged as the backbone of banking operations, revolutionizing service delivery through new platforms and channels. But it became evident gradually, these developments created more challenges for the customer in terms of service quality, non-human interface, unsolicited marketing of products, ever-increasing fine-prints on documents etc. all of which got compounded on account of basic financial unawareness on part of the ordinary customer.
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Self-regulation by the banking industry would have been the ideal redressal for the emerging challenges. But due to heterogeneous and complex nature of the problems coming to light, some regulatory initiative had become necessary. In the mid term review of the Monetary and Credit Policy 2003-2004, it was decided to review the level of public service provided by the Reserve Bank and banks, and to evolve appropriate incentives to facilitate change on an ongoing basis. Accordingly, the Committee on Procedures and Performance Audit on Public Services were set up. The Committee focused on the inadequacy in banking services available to common person and looked into the need to (i)Benchmark the current level of service (ii) Review the progress periodically (iii) Enhance the timeliness and quality (iv) Rationalize the processes taking into account technological developments (v) Suggest appropriate incentives to facilitate change on an ongoing basis. To overcome the problems regarding customer dissatisfaction, Private sector banks

become more transparent towards their customers. Transparency helps in improving the quality of customer service & it also helps in increasing public awareness. Policies of TRANSPARENCY in different type of services are as shown below:Transparency in Deposit Accounts With regard to account holders, it would be useful, to recollect some of the important incremental measures taken by RBI regarding transparency, which over a period have made significant impact: Banks are required to inform customers upfront about the requirement of minimum balances and the charges if such balances are not maintained. They are also required to inform customers one month in advance any changes in such minimum balances and charges.

It has been clarified to banks that NRO accounts can be held jointly with residents. In case of collection of cheques, banks are required to formulate and disclose their policy for affording immediate credit, time frame for collection and interest payment for delayed

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collection, taking care to ensure that the interests of the small depositors are fully protected. The policy should clearly lay down the liability of the banks by way of interest payments due to delays for non-compliance with the standards set by the banks themselves. Compensation by way of interest payment, where necessary, should be made without any claim from the customer.

Banks are required to provide both the drop box facility and the facility for acknowledgement of the cheques at the regular collection counters and no branch should refuse to give an acknowledgement if the customer tenders the cheques at the counters.

Banks have been advised to ensure that brief, intelligible particulars are invariably entered in passbooks / statements of account and they adhere to the prescribed monthly periodicity while sending statement of accounts.

It has been clarified to banks that payment to the survivor /nominee of a deceased depositor where there is a valid nomination or where the account has been opened with a survivorship clause is a valid discharge of liability provided inter alias it has been made clear to the survivor(s) / nominee that he would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him shall not affect the right or claim which any person may have against the survivor(s) / nominee to whom the payment is made. In such cases insistence on production of legal representation is unwarranted and would, invite serious supervisory disapproval. In such case, therefore, while making payment to the survivor(s) / nominee of the deceased depositor, the banks have to desist from insisting on production of succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee, irrespective of the amount standing to the credit of the deceased account holder.

In case where the deceased depositor had not made any nomination or for the accounts other than those styled as 'either or survivor' (such as single or jointly operated accounts), banks have been told to adopt a simplified procedure for repayment to legal heir(s) of the depositor keeping in view the imperative need to avoid inconvenience and undue hardship to the common person. In this context, banks may, keeping in view their risk management systems, fix a minimum threshold limit, for the balance in the account of the deceased depositors, up to which claims in respect of the deceased depositors could be settled

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without insisting on production of any documentation other than a letter of indemnity. In the case of term deposits, banks are advised to incorporate a clause in the account opening form itself to the effect that in the event of the death of the depositor, premature termination of term deposits would be allowed. The conditions subject to which such premature withdrawal would be permitted may also be specified in the account opening form. Such premature withdrawal would not attract any penal charge. In order to avoid hardship to the survivor(s) / nominee of a deposit account, banks are advised to obtain appropriate agreement / authorization from the survivor(s) / nominee with regard to the treatment of pipeline flows in the name of the deceased account holder. Banks are advised to settle the claims in respect of deceased depositors and release payments to survivor(s) / nominee(s) within a period not exceeding 15 days from the date of receipt of the claim subject to the production of proof of death of the depositor and suitable identification of the claim(s), to the bank's satisfaction. Information should not be gathered in the name of KYC with the intention of using it for cross selling of services. The banks should obtain the information required for opening an account independent of any other information that they may seek for cross-selling purposes with the consent of the customer. The forms containing this information must not be a part of the account opening form. The KYC procedure for opening accounts for those persons who intend to keep balances not exceeding rupees fifty thousand (Rs. 50,000/-) in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed rupees one lakh (Rs. 1,00,000/-) in a year has been simplified to enable those belonging to low income groups without documents of identity and proof of residence to open banks accounts. In such cases banks can take introduction from an account holder on whom full KYC procedure has been completed and has had satisfactory transactions with the bank for at least six months. Photograph of the customer who proposes to open the account and his address need to be certified by the introducer. Recently, clarification had also been issued to facilitate account opening by close relatives, e.g. wife, son, daughter and parents etc. who live with their husband, father/mother and son, as the case may be, who may not have the utility bills required for address verification in their name.
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Transparency in Bank Lending On the lending side, guidelines were issued on Fair Practices Code for Lenders, including comprehensive details in loan applications and conveying reasons for rejection of loans. In terms of the guidelines banks are required to ensure that loan application forms in respect of priority sector advances up to Rs.2.00 lakhs contains comprehensive information about the fees / charges and any other matter which affects the interest of the borrower. The Guidelines were further revised to ensure that all loan applications in respect of all categories of loans irrespective of the amount of loan sought by the borrower contains comprehensive information about fees / charges etc.

Banks are also required to convey in writing, the main reason/reasons that have led to rejection of the loan applications in case of all categories of loans irrespective of any threshold limits, including credit card applications.

RBI has issued comprehensive Credit Card Guidelines relating to credit card operations of banks/NBFCs in November 2005. These guidelines have been issued aimed at encouraging growth of credit cards in a safe, secure and efficient manner as well as to ensure that the rules, regulations, standards and practices of the card issuing banks are in alignment with the best customer practices. These guidelines address issues relating to billing, use of Direct Selling Agents (DSAs) and other agents, protection of customer rights, customer confidentiality, fair practices in debt collection, redressal of grievances, etc. Master Circular on the issue has since been issued.

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Transparency in Payment Systems The traditional role of banks as providers of various payment and settlement services to customers is getting redefined. Until recently, requirements of customers, be it corporate or retail, were determined and extended by banks based on their perception and understanding of customer necessities. This to a large extent was also dictated by the banks ability to offer such products. The scenario is fast changing and changing for the better. Now, the banks are encouraged to innovate and tailor products to suit various segments of customers, apart from being more sensitive to their demands. Competition between banks for market share and the emergence of other service providers are other reasons for this push. It is also necessary to put into context the magnitude of challenges that are ahead of us. The paper clearing volumes we handle is the sixth largest in the world with a volume of 1.44 billion cheques cleared during the year 2007. The RBI has launched the Cheque Truncation System in the National Capital Region of New Delhi on February 1, 2008 with the participation of 10 banks in the pilot run. Once fully operational, the system will be the largest in the world and leapfrog the country into migrating the paper based instruments to the electronic mode. The electronic suite of products is continuously expanding in terms of coverage of branches, volume of transactions and number of users availing the facility. The Reserve Bank has intervened and mandated (a) reasonability in pricing of transactions effected through ATMs, (b) compulsory use of electron systems infrastructure, etc. Whilst the clearing cycle operating across the country on a T+1 basis for cheques payable locally, favourably compares with the best in the world, it is necessary to look into the entire cycle from the time a customer deposits a cheque at a branch till the point of realisation of credit in his account. There is scope for continuous improvement in overall cycle. Going by the number of complaints, it is felt that customer-service in this area is not customer-centric. Albeit the fact that electronic payment products are improving their share in the overall retail portfolio, the volume of paper instruments would continue to be significant in the near future as well. The share of electronic payment products like RTGS, NEFT and ECS is rising by the day and the number of branches of public sector banks which are offering this facility is also

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increasing, which helps in increasing transparency. It is necessary to make available these products across all bank branches. While the build-up should continue, banks need to also concentrate on reaching geographical areas and segments of populace that have not been embraced by this expansion. It is difficult to achieve financial inclusion without involving rural-India in the payment system out-reach and those banks who do so first, will reap the benefits of increase in volumes and increase in market-share, leading to concomitant increase in revenues, and of-course increase in other businesses as well. And as we all know, the electronic medium is location independent can leave a better audit-trail and will surely improve customer involvement and service expectations. It is our vision that electronic products reach 50% of volume and 95% of value by the end of March 2009. Private sector Banks adopt a STOCK approach while conceiving and bringing out products. Products that are Secure and scalable, Transparent in terms and conditions of usage, Operationally resilient and efficient, Cost-effective and reasonably priced, and Knowledgeable to staff and customers. The customers have an equal if not higher responsibility to ensure banks adopt this approach while innovating products for them.

Transparency in redressal of public grievance Open house meeting is conducted at branches/Regional Offices/Central Office on 15th of every month in which the customers can express whatever grievances they have, for quick redressal. In the normal circumstances, such complaints are settled within three days. At Central Office, Customer Service Department has been created under a General Manager who is assisted by an Assistant General Manager. conducted by the Customer Service This department looks after the Central Office, in which customers complaint, customer service and other related matters. Periodical surveys are Department, views/suggestions/options are solicited from the customers. Customers Fortnight is celebrated once in a year in which Central Office Executives, Regional Managers and Officials from Regional Office visit the branches and convene meetings of the customers to find our their views/grievances. Complaints/Suggestion boxes and complaint registers are available in all the branches for the customers to put

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forth their complaints/views/suggestions. At Central Office, Vigilance Department headed by the General Manager takes care of the vigilance matters. Customers meetings are also convened at half-yearly intervals in all the branches in which the customers are requested to express their views/grievances with regard to the customer service. Specific meetings of specialized nature of customers such as SSI Exporters, Industrialists, and Women Entrepreneurs are being convened by the Central Office/Regional Offices to know their problems, difficulties at the operational level. Vigorous trainings are imparted to all the staff members to extend courteous, competent and prompt service to all types of customers without discrimination. Various circulars are issued every now and then emphasizing the need for courteous and prompt customer service. Recently, our bank has nominated Quality Assurance Officer in all major city branches that are available in the banking hall during the business hours for coordinating the various needs of the customers. Telex, Fax, E-mail and Telephone facilities are available at Central Office for prompt action and speedy redressal of the grievances. Sometimes, officials from Central office are also deputed to the branches to enquire the complaints/matter and to settle them then and there. So in this way public sector banks are completely transparent & accountable for any kind of grievances.

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MEASURES TAKEN BY RBI TOWARDS ENHANCING TRANSPARENCY IN PRIVATE SECTOR BANKS

Following are the measures taken by government, which helps in improving the quality of customer service & enhancing Transparency: All the banks were advised to constitute a Customer Service Committee of the Board with a view to strengthening the corporate governance structure in the banking system and also to bring about ongoing improvements in the quality of customer service provided by the banks. In order to encourage a formal channel of communication between the customers and the bank at the branch level, banks were advised to take necessary steps for strengthening the branch level customer service committees with greater involvement of customers. Further as senior citizens usually form an important constituency in banks, banks were advised to preferably include a senior citizen in the branch level committees. The Banking Ombudsman Scheme was revised to enlarge the scope of the Scheme to include customer complaints on certain new areas, such as, credit card complaints, deficiencies in providing the promised services even by banks' sales agents, levying service charges without prior notice to the customer and non- adherence to the fair practices code as adopted by individual banks. The Scheme therefore provides a forum to bank customers to seek redressal of their most common complaints against banks, including those relating to credit cards, service charges, promises given by the sales agents of banks, but not kept by banks, as also, delays in delivery of bank services. The bank customers would be able to complain about non-payment or any inordinate delay in payments or collection of cheques towards bills or remittances by banks, as also non-acceptance of small denomination notes and coins or charging of commission for acceptance of small denomination notes and coins by banks. The present Scheme also allows appeals from both banks and complainants against the decisions of Banking Ombudsmen. Recognizing an institutional gap in measuring the performance of the banks against codes and standards based on established best practices, Reserve Bank of India has taken the

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initiative in setting up the Banking Codes and Standards Board of India (BCSBI). It is an autonomous and independent body, adopting the stance of a self-regulatory organization in the larger interest of improving the quality of customer services by the Indian banking system. Banks register themselves with the Board as its members and provide services as per the agreed standards and codes. The Board in turn, monitors and assesses the compliance with codes and standards, which the banks have agreed to. The registration of banks with the BCSBI, as members, enables the Reserve Bank of India to derive greater supervisory comfort, so also the customers of the member banks. This would also enable the BCSBI to accommodate the bank-specific differences in the customer service related benchmarks set by the banks for themselves. As on date, around 71 banks have joined the BCSBI as members. Measures for ensuring TRANSPARENCY in reasonableness of service charges: Reserve Bank has made it obligatory for banks to display and update, in their offices/branches as also on their websites, the details of various service charges in a prescribed format. The banks are also required to display the service charges and fees on the homepage of their website at a prominent place under the title of Service Charges and Fees so as to facilitate easy access to the bank customers. Reserve Bank has also placed a web-link to these web pages of banks in its website to facilitate comparison of service charges and thereby enabling the customer to take an informed decision. A Working Group was also set up to look into the issue of reasonableness of bank charges, which submitted its Report in August 2006. The Working Group indicated broad principles of reasonableness that banks should adopt in fixing and notifying the service charges for providing basic services to individuals. Guidelines have been issued to the banks based on the recommendations of the Working Group and steps taken by the banks in this regard are being examined. Instructions to guard against incidence of excessive interest rates & charges Excessive interest and charges were being levied on certain loans and advances, banks were advised to lay out appropriate internal principles and procedures so that usurious interest, including processing and other charges, are not levied by them on small value loans, particularly personal loans and such other loans of similar nature. Banks are also

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required to fix appropriate ceiling on the interest, including processing and other charges, which is transparent to public.

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Research Methodolo gy

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OBJECTIVE OF STUDY The major objectives of the project TRANSPARENCY IN PRIVATE SECTOR BANKS are 1) To know the preferences of the investor as regard to public sector banks and private sector banks. 2) To study the performance of private sector banks. 3) To examine the satisfaction of customers in private sector banks. 4) To examine the causes and effects of transparency in banks.

DATA TO BE COLLECTED The primary data has been collected with the help of questionairre which has been filled by the customers from public sector banks and private sector banks located in Hoshiarpur. SAMPLE SIZE AND SAMPLING TECHNIQUE

A sample contains 50 customers from 12 banks in Hoshiarpur. The sample includes the customers of public sector banks and private banks. The selection of the respondent has been done on the basis of convenience sampling.

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UNIVERSE OF THE STUDY

The universe of the study consists of customers of few banks located in Hoshiarpur. Majority of customers are from rural areas and semi urban areas belongs to middle class families. The customers of public sector banks and private sector banks have filled questionnaires. The names of these banks are as given below: -

PUBLIC SECTOR BANKS

STATE BANK OF INDIA STATE BANK OF PATIALA PUNJAB NATIONAL BANK ORIENTAL BANK OF COMMERCE

PUNJAB AND SIND BANK SYNDICATE BANK ALLAHABAD BANK CORPORATION BANK

PRIVATE SECTOR BANKS HDFC BANK KOTAK MAHINDRA BANK ICICI BANK BANK OF PUNJAB

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LIMITATIONS OF PROJECT
1) Collection of data by questionairre method can have the limitations of the inability and unwillingness of respondent to provide information. 2) The findings of the study are based on subjective opinion of the respondents. These could not be verified. 3) The accuracy of the result is also limited by the reliability of the tools of investigation of data. 4) The present study is only confined to banks located in Hoshiarpur.

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ANALYSIS AND INTERPETATIO N

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ANALYSIS OF PRIMARY DATA

PREFERENCES OF PEOPLE
.

The table showing the %age of people who prefer public sector banks & private sector banks are as below: -

TABLE 3.1 PREFERENCES OF PEOPLE

Public sector banks Private sector banks

71.4% 28.6%

From this table it is clear that, the first preference of people is PUBLIC SECTOR BANKS and around 71.4% of the people like government banks. According to public point of view, private sector banks are growing day-by-day and providing services in better way than public sector banks but still they prefer public sector banks. Only 28.6% of people prefer private sector banks. The pie-chart showing the preferences of people are as below: GRAPH 4.1

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28.60%
private public

71.40%

ASSOCIATION OF PEOPLE WITH DIFFERENT TYPES OF BANKS

The table showing the %age of people dealing in different types of banks: -

TABLE 3.2 ASSOCIATION OF PEOPLE WITH DIFFERENT TYPES OF BANKS

STATE BANK OF INDIA (SBI) STATE BANK OF PATIALA (SBP) PUNJAB NATIONAL BANK (PNB) PUNJAB & SIND BANK (PSB) AXIES BANK HDFC BANK (HDFC) ICICI BANK (ICICI) ALAHABAD BANK (AB) CANARA BANK (CB) COPERATIVE BANK (COB) KOTAK MAHINDRA BANK (KMB)

13/61 8/61 11/61 2/61 4/61 11/61 5/61 2/61 2/61 2/61 1/61

21.4% 13.20% 18.04% 3.27% 6.55% 18.04% 8.20% 3.27% 3.27% 3.27% 1.60%

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This table shows the intensive study of banks i.e out of public sector banks which banks are mostly preferred by people. This table shows that large number of people deals with public sector banks i.e 44 people deals with public sector banks {State bank of India (SBI) , state bank of patiala (SBP), Punjab national bank (PNB), Allahabad bank (AB), and so on}. And only small number i.e about 17 people deals in private sector banks {HDFC bank, ICICI bank and so on}.This shows that most of the people prefer public sector bank because they believe on it. The graph showing the %age of people dealing in different types of banks: -

3.27% 3.27% 3.27% 8.20%

1.60% 21.40%

18.04% 6.55% 3.27%

13.20%

18.04%

SBI SBP PNB PSB AB HDFC ICICI AB CB COB KMB

TIME PERIOD OF DEALINGS OF PEOPLE IN PUBLIC SECTOR

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BANKS
The table showing the %age of people dealing in public sector banks from different time period is shown below: -

TABLE 3.3 TIME PERIOD OF DEALINGS OF PEOPLE IN PUBLIC SECTOR BANKS

One month Six months One year More than one year

9.1% 10% 24.5% 56.4%

From above table 56.4% people are dealing in public sector banks from more than one year and they are completely satisfied from the services provided by these banks. The graph showing % age of people and the period of their dealings are as below: -

GRAPH 3.3

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%AGE OF PEOPLE Vs TIME PERIOD

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 1 2 3 4 1 2 3 4

VISITS OF THE PEOPLE WHO ARE DEALING IN PUBLIC SECTOR BANKS

The table showing the %age of people dealing in public sector banks and their number of visits in that banks is shown below: -

TABLE 3.4 VISITS OF THE PEOPLE WHO ARE DEALING IN PRIVATE SECTOR BANKS

Daily Once in a week Once in a month Rarely

5% 9.6% 75.4% 10%

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From this table we conclude that the highest % age of people (75.4%)visit these banks once in a month and lowest % age of people (5%) visit these banks daily. According to public point of view majority of people says that there is no need of visiting the banks daily because their accounts are safe in government banks. The graph showing % age of people and the time period of their dealings are as below: -

GRAPH 3.4

%AGE OF PEOPLE Vs NUMBER OF VISITS

80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 1 2 3 4

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DIFFERENT TYPES OF ACCOUNTS THE PEOPLE HAVE IN PUBLIC SECTOR BANKS

The table showing the %age of people dealing in public sector banks and different types of accounts the people have in these banks is shown below:

TABLE 3.5 DIFFERENT TYPES OF ACCOUNTS THE PEOPLE HAVE IN BANKS

Saving account Current account Term deposits Insurance policy Mutual funds

90% 50% 70% 40% 10%

People who are dealing with private sector banks are fully enjoying the new schemes of these banks and take the benefits of interest rates. Approximately 90% of people are having saving account in private sector banks with interest rate 3.5% p.a and 70% of people are having term deposits (FDR & RD) with interest rate between 8-9 %. And take other benefits of insurance policy & mutual funds.
The graph showing the %age of people dealing in private sector banks and different types of accounts the people have in these banks is shown below:

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GRAPH 3.5

%AGE OF PEOPLE Vs TYPE OF ACCOUNT

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 1 2 3 4 5

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DIFFERENT TYPES OF LOANS THE PEOPLE TAKEN FROM PRIVATE SECTOR BANKS
The table showing the %age of people dealing in private sector banks and different types of loans the people taken from banks is shown below:

TABLE 3.6 DIFFERENT TYPES OF LOANS THE PEOPLE TAKEN FROM PRIVATE SECTOR BANKS

Personal loan (PL) Corporate loan (CL) Automobile loan (AL) Real estate loan (REL) Agricultural loan (AGL) Any other (AOL)

80% 30% 70% 20% 40% 10%

From this table we conclude that about 80% of people take personal loan, 30% of people take corporate loan, 70% of people take Automobile loan, 20% of people take Real estate loan, 40% of people take Agricultural loan and 10% of people take other types of loans from public sector banks with transparent and reasonable rate of interest and fulfill their desires and needs.

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The graph showing the %age of people dealing in public sector banks and different types of loans the people taken from banks is shown below:

GRAPH 4.6

%AGE OF PEOPLE & DIFFERENT TYPES OF LOANS TAKEN BY DIFFERENT PEOPLE

80% 70% 60% 50% 40% 30% 20% 10% 0% PL CL AL REL AGL AOL PL CL AL REL AGL AOL

SATISFACTION LEVEL OF PEOPLE REGARDIND INTEREST RATES OF PUBLIC SECTOR BANKS

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The table showing the %age of people dealing in public sector banks and their satisfaction level towards interest rates charged by these banks on various types of loans and interest rate given by banks on deposits to the customers is as below

TABLE 3.7 SATISFACTION LEVEL OF PEOPLE REGARDING INTEREST RATES OF PRIVATE SECTOR BANKS

Less satisfied Satisfied More satisfied Not satisfied

30% 40.2% 25.6% 4.2%

From this table we conclude that about 40.2% people are satisfied and 25.6% people are more satisfied from the interest rates of these banks. According to public point of view, the interest rate given on deposits in private sector banks are more than public sector banks thats why 30% of people are less satisfied and 4.2% people are not satisfied from the interest rate of public sector banks. But majority of people are in the favor of public sector banks because of the trust of public on these banks due to complete disclosure of information by public sector banks.

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The graph showing the %age of people dealing in private sector banks and their satisfaction level towards interest rates charged by these banks on various types of loans and interest rate given by banks on deposits to the customers is as below
GRAPH 3.7

%AGE OF LEVEL OF SATISFACTION OF INTEREST RATE

50% 40% 30% 20% 10% 0% 1 2 3 4 1 2 3 4

OPINIONS OF PEOPLE REGARDIANG TRANSPARENCY IN PRIVATE SECTOR BANKS

The table showing the opinions of people regarding transparency in private sector banks is as below: -

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TABLE 3.8 OPINIONS OF PEOPLE REGARDIANG TRANSPARENCY IN PRIVATE SECTOR BANKS

Strongly agree Agree Disagree Neutral Strongly disagree

46.2% 23.07% 20% 8.73% 2%

From this table we conclude that about 46.2% people are strongly agree with the transparency of private sector banks and 23.07% people are agree with it. According to their opinions, private sector banks are highly transparent and trust worthy towards their customers. And about 20% people are disagree & 2% of people are strongly disagree with public sector transparency. According to them private sector banks are more transparent.

The graph showing the opinions of people regarding transparency in private sector banks is as below: -

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GRAPH 3.8

%AGE PEOPLE ABOUT THEIR OPINION REGARDINGTRANSPARENCY IN PRIVATE SECTOR BANKS

50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 1 2 3 4 5 1 2 3 4 5

AFFECT OF TRANSPARENCY ON TRUST OF THE PEOPLE ON BANKS

The table showing the opinions of people regarding the effect of transparency on the development of trust in that banks is as below: -

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TABLE 3.9 EFFECT OF TRANSPARENCY ON TRUST OF THE PEOPLE ON BANKS

Affect to great extent Affect neutral Does not Affect Not at all Affect

79.4% 10% 5.2% 5.3%

From this table we conclude that about 79.4% people believe that if the banks are more transparent then the trust of the private on the bank increases and it effect to great extent. But 5.2% of people do not consider that more transparency of banks helps in increasing the trust of people on those banks. The graph of above chart is as below: GRAPH 3.9

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EFFECT OF TRANSPARENCY
80.00% 60.00% 40.00% 20.00% 0.00% 1 2 3 4 1 2 3 4

KIND OF TRANSPARENCY WHICH IS NECESSARY FOR BENEFICIAL INVESTMENT

The table showing the kind of transparency that people wants for their beneficial investment is as below: TABLE 3.10 KIND OF TRANSPARENCY THAT PEOPLE WANTS

Transparency of changes in interest rates Transparency of periodicity in interest rates Transparency of charges taken by bank

50% 40% 10%

From this table it is conclude that about 50% people want interest rate transparency and change in interest rates ,40% people want complete transparency of prediocity of interest rates and 10% people want transparency of amount charged by banks. According to public opinion, majority of people says that all the banks have a responsibility to give whole information about interest rates, balance left in the account of customers, the clear picture of charges taken by banks and information about other essentials of the customers. Majority of people says that public sector

47

banks give whole information and these banks do not provide any hidden charges from the customers. The only motive of private sector banks is to serve their customers with complete transparency of information The chart showing %age of people & the kind of transparency that people wants for their beneficial investment is as below: -

GRAPH 3.10

KIND OF TRANSPARENCY

LOSS OF INVESTOR DUE TO SOMETHING HIDDEN BY PRIVATE SECTOR BANKS

The table showing the %age of people who suffer from loss by private sector banks: -

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TABLE 3.11 LOSS OF INVESTOR DUETO SOMETHING HIDDEN BY PRIVATE SECTOR BANKS

YES NO

17.5% 82.5%

From above table it is conclude that about 82.5% people are secured in public sector banks and they are not suffered from any kind of loss due to anything hidden by the bank but about 17.5% people suffered from loss.
The graph showing the %age of people who suffer from loss by private sector banks are as below: -

GRAPH 3.11

%AGE OF PEOPLE SUFFERED FROM LOSS

90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

YES NO

YES

NO

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CORRECTNESS AND RELEVANCY OF INFORMATION GIVEN BY PRIVATE SECTOE BANKS

The table showing the %age of people who are agree or disagree about the information given by private sector banks is as below: -

TABLE 3.12 CORRECTNESS AND RELEVANCY OF INFORMATION GIVEN BY PRIVATE SECTOE BANKS

Strongly agree

50%

Agree Neutral Disagree Strongly disagree

35% 5% 5% 5%

From the above table we conclude that we conclude that 50% of people are strongly agree with the correctness and relevancy of information given by public sector banks, 35% are agree, 5% are disagree and 5% are strongly disagree.

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The graph showing the %age of people who are agree or disagree about the information given by public sector banks is as below: -

GRAPH 3.12

%AGE OF PEOPLE & RELEVANCY OF INFORMATION IN PRIVATE SECTOR BANKS

50% 40% 30% 20% 10% 0% 1 2 3 4 5 1 2 3 4 5

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Findings And
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Conclusi on

SUMMARY OF FINDINGS
From the above findings it is conclude that majority of people prefer Public sector banks. The public is fully aware about all the information regarding services providing in public and private sector banks and this transparency of the information by the bank reduces the risk of customers.

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Majority of the people are satisfied from the interest rate charged by these banks on loans and interest rate given by these banks on deposits. Interest rates of private sector banks on are less as compare with public sector banks but due to complete disclosure of information by these banks the satisfaction level and trust of the customers on public sector banks increases.

Private sector banks give timely, reliable relevant and comparable information without any discrimination. Majority of Public sector banks do not charge any kind of hidden charges from the customers and do not hide any kind of information from the customers which leads to any kind of loss of customers but only few banks done this due to which small percentage of customers suffered from loss.

CONCLUSION
From the above discussion, it is clear that transparency is main and important tool for developing the trust of the private in the banking sector. And private sector banks are successful in providing services towards their customers with complete transparency and disclosure of timely, relevant, reliable and comparable information of interest rates on deposits, interest rate on loans, amount left in the account

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of customers, charges of all the services of the bank, information regarding remittance of money and all other type of information. And majority of the people prefer private sector banks and take all the benefits of different schemes of deposits, loans and other products of these banks with complete disclosure of information by these banks.

SUGGESTION

There is no doubt that public sector banks are highly transparent towards their customers and majority of customers are in the favor public sector transparency, which is the strength for public banks.But some people are not in the favor of public sector transparency.So the task becomes more challengable for public banks. In this competitive world, there is a great competion between public sector banks & private sector banks. People start moving towards private sector finiancial institutions because these institutions provide better services than public sector banks. In this situation the only suggestion for public sector banks is to continue the policy of transparency of all kind of information towards their customers and try to give much better services to the customers in comparision to private sector bank.Only then public sector banks obtain their objectives and attract their customer.

BIBLIOGRAPHY
REFERENCES SITES
1. 2. www.rbi.org.com www.pnbindia.com

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3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

www.sbiindia.com www.obcindia.com www.sbpindia.com www.hdfc.com www.wikipedia.com www.google.com www.yahoo.com www.indianmba.com www.helplinelaw.com www.interestrate.com

REFERENCES BOOKS
1. 2. 3. George Kopits, Jon D. Craig, Transparency in government operations,1998, pages 42 T. T. Ram Mohan, Rupa Rege Nitsure, Mathew Joseph, Regulation of financial intermediaries in emerging markets, 2005, pages 262 Edward Mayo, Banking and social cohesion2001, pages 320

QUESTIONNAIRE

Dear respondents,

I am a student of MBA (sem IV) of GNA-IMT, Phagwara. I am carrying out a project on TRANSPARENCY IN PRIVATE SECTOR BANKS TOWARDS CUSTOMERS. I request you to please spare some of your valuable time for filling the following questionnaire. The information provided by you will be kept confidential and used only for study purpose.
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RANVIR KAUR Which banking sector you prefer most? Public sector banks Private sector banks

Name those banks with which you are associated?

. ..
For how many years you are dealing in that bank? One month Six months One year More than one year

How often do you visit these banks? Daily Once in a week Once in a month Rarely

What type of account do you have with these banks?

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Saving account Current account Term deposits Insurance policy

Mutual funds
What the interest rate given to you by these banks?

.
What type of loans provided by these banks to you?

Personal loan
Corporate loan Automobile loan Real estate loan Agricultural loan Any other loan What the interest rate charged by banks to you on loan?

.
Are you satisfied with the interest rate charged by bank to you on loan? Less satisfied Satisfied More satisfied Not satisfied

Are you satisfied with the interest rate given to you by bank on deposits? Less satisfied Satisfied More satisfied

Not satisfied

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Give your opinion regarding saying that public sector banks are more transparent as compare to private sector banks? Strongly agree Agree Disagree

Neutral
Strongly disagree

Does the transparency of bank effect your trust in that bank? Effect to great extent Effect neutral Does not effect Not at all effect

What kind of transparency do you think is necessary for beneficial investment? Transparency of change in interest rates Transparency of periodicity of interest rates Transparency of charges taken by bank

Have you ever suffered any kind of loss because of something hidden by the bank? Yes

No

Are you agree with the saying that the bank provides you the correct and relevant information of your requirement? Give reason.

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Strongly agree
Agree Neutral Disagree Strongly disagree

CONSULTANCE PROFILE NAME-: AGE-: OCCUPATION-:

THANKS

YOU

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