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CHAPTER VI
SUMMARY, CONCLUSIONS AND
SUGGESTIONS
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CHAPTER VI
SUMMARY, CONCLUSIONS AND SUGGESTIONS
In this Chapter, a summary of all the five chapters discussed earlier in detail, and Chapter-wise
main conclusions and suggestions will be presented.
CHAPTER I : INTRODUCTION
Commercial Banks are the oldest, biggest and fastest growing financial intermediaries in
India. They are also the most important Depositories of public saving and the most important
disbursers of finance. Commercial Banking in India is a unique system, the like of which exists
nowhere in the world.
Commercial Banks ordinarily are simple business or commercial concerns which provide
various types of financial services to the customers in return for payments in one form or
another, such as interest, discounts, fees, commission, and so on. Their objective is to make
profits. However, what distinguishes them from other business concerns (financial as well as
manufacturing) is the degree to which they have to balance the principle of profit maximization
with certain other principles like Social Banking. In India, especially, banks are required to
modify their performance in profit making if that clashes with their obligations in such areas as
social welfare, social justice, and promotion of regional balanced development.
The Banking System in India works under the constraints that go with Social Control and
Public Ownership. The Public Ownership of banks has been achieved in three stages: 1955,
1969 and 1980. Not only the Public Sector Banks but also the Private Sector and Foreign Banks
are required to meet targets in respect of sectoral deployment of credit, regional distribution of
branches and regional credit-deposit ratios. Lead Bank scheme, Differential Rate of Interest
scheme, Credit authorization scheme, inventory norms and lending systems prescribed by the
authorities, the formation of the credit plans and service area approach, have determined the
operations of the banks.
Till the late sixties, Commercial Banks were mainly financing trade, commerce and
industry. Social Banking/lending was not given due importance and recognition. After the
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nationalization (1969) and re-nationalisation (1980) there was a sea change in the lending
operations of the Commercial Banks. Social Banking / lending became one of the thrust areas
under the poverty alleviation programmes in the country.
Social Banking was the term coined by Prof. D.R. Gadgil, Chairman, Committee for
Organisational Framework for implementation of Social Objectives (1968). Social Banking
comprised Priority Sector Lending and Branch Expansion in the rural and semi-urban areas.
Later, Financial Inclusion became a component of the Social Banking in the year 2008 after the
Committee on Financial Inclusion submitted its Report.
The key components of Social Banking are:
iv. Skewing of bank lending towards ‘Priority Sectors’ – agriculture, small businesses and
entrepreneurs which were viewed as deserving as they contained large numbers of the
poor and had restricted access to formal credit.
v. Skewing of bank branch placement towards un-banked rural and semi-urban locations –
this constituted the centerpiece of social banking. State control of bank placement is used
to reach population that had previously had no access to formal financial institutions.
vi. Financial inclusion – It is the availability of banking services at an affordable cost to
disadvantaged and low-income groups. In India the basic concept of financial inclusion is
having a saving or current account with any bank.
Indian Banking has performed impressively in achieving social goals, extending the
geographical reach and functional spread of financial services, especially for the rural poor.
NEED FOR THE STUDY
The massive and speedy quantitative growth as well as the unprecedented growth in
social lending/banking has created a number of strains. However, since the mid 1980’s, banks
entered a phase of consolidation and enhanced sophistication. The commercial principles of
viability, efficiency, prudence and profitability are now receiving much attention.
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Indian economy is through a difficult phase of deregulation, where decisions are guided
by the market forces taking into account the target for profit maximization, whereas, Social
Banking/lending has its own target of upliftment of the poor people in the society with a
provision of concessions. In this context, there is a need to understand how far can these two
extremes, viz., profit maximization and social banking/lending will/can co-exist in the
deregulated market, particularly in a developing economy like ours. Hence, the study is
undertaken to evaluate the various aspects relating to Social Banking of Public Sector
Commercial Banks in general and State Bank of Hyderabad in particular and also the financial
viability of Social Banking.
OBJECTIVES OF THE STUDY
The Objectives of the study are
To analyse the components of Social Banking and to examine the policy towards Social
Banking.
To make an analysis of the performance of SBH in general and from the point of view of
Social Banking/lending in particular.
To examine the effect/impact of Social Banking on Profits of SBH.
To analyse the perceptions of the beneficiaries and the Bank Officials towards the
performance of the SBH in terms of Social Banking.
To examine the problems and prospects of Social Banking.
SCOPE OF THE STUDY
The Scope of the study is limited to Social Banking of the State Bank Hyderabad.
For the purpose of the study, STATE BANK OF HYDERABAD (SBH) is selected as it is
amongst the first group of banks, which was nationalized in the year 1955, and it has completed
a little more than six decades and has celebrated its diamond jubilee. STATE BANK OF INDIA
(SBI) and its ASSOCIATE BANKS together known as STATE BANK GROUP, account for a
larger portion of the banking business. SBH claims significantly a larger portion of the business
of State Bank Associates. In view of the important share of SBH, it was felt necessary to focus
the study on SBH.
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PERIOD OF THE STUDY
The period of the study for evaluation of the performance from the point of view of
Social Banking is from 1997 to 2012. The starting period is chosen as 1997 for the reason that
the II Phase of Reforms based on Narsimham Committee Report on Financial System were
implemented in the same year.
METHODOLOGY
The following are the details of the Methodology used.
Sources of Data
Both Primary and Secondary Sources are used for collecting the Data for the Study.
Primary Data
Primary Data are collected from the beneficiaries and Bank Officials by administering a
Schedule / questionnaire. The Sample of the beneficiaries is taken from the Nalgonda Region
and the Sample of the Bank Officials is taken from the Emlpoyees working at various Branches
of SBH operating in the 54 Mandals of Nalgonda District.
Secondary Data
Secondary Sources include the publications of RBI, SBI, annual reports of the SBH and various
Banking Reports.
Sample Selection
The following is the procedure used for the selection of the Stratified Sample of Beneficiaries.
Nalgonda, as shown in Table 1.1, is one of the six lead districts of the SBH and of the six lead
districts (Hyderabad, Nalgonda, Karimnagar, Nizamabad, Adilabad and Khammam) it is having
percentage wise highest Rural Population. The beneficiaries include the borrowers under the
Priority Sector Lending – Agriculture, Small Scale Industries, Small Business and SHG Account
Holders under the Financial Inclusion.
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TABLE 1.1
URBAN-RURAL CLASSIFICATION OF POPULATION OF LEAD DISTRICTS OF
SBH IN A.P.
District Total
Population
Rural
Population
Percentage of Rural Population to Total
Population
Adilabad 24,79,340 18,23,000 73.52
Hyderabad 36,86,460 Nil Nil
Karimnagar 34,77,070 27,98,130 80.47
Khammam 25,65,410 20,57,360 80.19
Nalgonda 32,38,440 28,08,990 86.74
Nizamabad 23,42,800 19,20,270 81.96
Rangareddy 35,06,670 16,38,530 46.72
Source: APonline, www.aponline.gov.in
The selection of beneficiaries and Bank officials is as follows:
The total number of beneficiary accounts in the 59 mandals of Nalgonda district is 987 for Small
Scale industries, 6,777 for Small business and 1,00,504 for Agriculture as on March 2010
records of the bank. The two mandals having highest and lowest accounts under SSI, SBF and
Agriculture are chosen for the sample which is as follows.
A sample 20 per cent from the mandals having highest number of accounts in case of Small
Scale Industries and Small Business and 1 per cent in case of Agriculture are taken. In case of
mandals having lowest number of accounts total beneficiaries are taken for the sample. Thus a
sample of 53 beneficiaries from SSI segment, 104 from SBF and 130 from Agriculture segment
totaling 287 is taken. However, the total number of beneficiaries are taken as 300 (as shown in
the table below) as shown in Table 1.2.
The parameters chosen for the evaluation of Beneficiary satisfaction levels is adapted from “A.
Parasuraman, Valarie A. Zeithaml, and Leonard Berry, ‘SERVQUAL: A Multiple Item Scale for
Measuring Consumer Perceptions of Service Quality’, Journal of Retailing 64 (1988): 12 – 40”
(Appendix I).
Out of a total of about 150 employees working in the 54 branches giving service in 59 mandals
of the Nalgonda District a sample of 100 bank officials (Officers and Clerks in the Ratio of 1:2)
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are taken to ascertain their attitudes and perceptions on Social Banking activities undertaken by
the SBH.
TABLE 1.2
SEGMENT WISE AND MANDAL WISE SAMPLE OF BENEFICIARIES
Segment Mandals having
Maximum/Minimum
Number of Accounts
Total Number of
Accounts and
Name of
The Mandal
Sample
Size
Percentage
to Total
Small Scale
Industries
(987)
Highest 262
MSME
Miryalaguda
52 20
Lowest 01
Chandur
01 100
Total 53
Small Business
(6,777)
Highest 486
Suryapet
97 20
Lowest 07
College Complex
07 100
Total 104
Agriculture
(1,00,504)
Highest 12,833
ADB Miryalaguda
128 + 13 20
Lowest 02
Maithri Women
02 100
Total 130
Grand Total 300
Note: Figures in parentheses are total number of beneficiary accounts under that segment
for the year 2009-10
Source: Records of Nalgonda Regional Branch of State Bank of Hyderabad.
Hypotheses
H0 – There is no Significant Difference in the Satisfaction Levels of the different Beneficiary
Groups
H1 – There is a Significant Difference in the Satisfaction Levels of the different Beneficiary
Groups
Tools for Analysis
Data are analysed by using simple tools such as Ratios, Averages, Percentages, Trend
Percentages and Compounded Annual Growth Rate. The responses of the beneficiaries and
employees are analysed with the help of Chi-square test, Factor Analysis and ANOVA. Multiple
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Likert Question Responses are summed together in interval data and ANOVA test has been used
to test whether there is any significant difference in the Satisfaction Levels of the Beneficiaries
Group-Wise. To check the appropriateness of the application of Factor Analysis, Preliminary
tests like Kaiser-Meyer-Olkin & Bartletts’ Measure of Sampling Adequacy, Test of Sphericity,
Communalities, Eigen Value and Scree Plot and Component Matrix and Rotated Component
Matrix are applied.
Limitations
The following are the limitations of the study:
8. Since sampling itself suffers from certain inherent limitations, likewise the present study,
which is based on sample, may also suffer from certain limitations on account of the
sample procedure. Limitations of the sample may affect the quality of results.
9. The quality of the service varies from region to region, from branch to branch and even
within a branch from person to person. The study is confined to 6 branches of SBH
functioning in the Nalgonda district as it is not possible for an individual researcher to
conduct an exhaustive survey covering all the regions and branches.
10. Data are collected from those customers who happened to be present in the branch on the
days visited to the branch for data collection. The customers were not selected on a
random sample basis as the bank does not give information of their account holders as
they have to maintain strict confidentiality about their customer’s information.
11. Data are collected from those employees who happened to be present in the branch and
were willing to express their perception about the Social Banking activities. The sample
size is 100 only. The employees were not selected on random sample basis.
12. The total responses may be equal to the total sample of 303 customers as some of them
may not have certain transactions.
13. The scope of the study as regards to customers is limited to the ‘farmers, Small
Businessmen, Small Scale Unit owners, members of the Self help groups’ at the six
mandals of the Nalgonda district and who have availed loan from the branches of the
SBH for their specific activity.
14. The scope of the study as regards to the employees is limited to the employees presently
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(in the financial year 2011-12) working at the various branches of SBH at Nalgonda
district in the clerical and officer cadres.
Review of Literature
The study of earlier research work will certainly help the researcher in presenting the
report in a clear and precise manner with valuable suggestions and conclusions. In fact, a brief
history of yesteryear’s reports, surveys and research articles in the similar area helps as a
‘backbone’ for the present study. Therefore a review of the past, related studies in the field are
as important as the present study.
Research Gap
The above review of literature points out that many studies have been made on commercial
banks in general and on individual aspects of Social Banking like Lead Bank Scheme, Service
Area Approach, Rural Banking, Rural lending etc. But no study having a holistic approach of
Social Banking has been made. It would therefore be appropriate to make such a study to
address the gap.
CHAPTER II: TRENDS AND PROGRESS OF COMMERCIAL BANKING IN INDIA :
WITH SPECIAL REFERENCE TO SOCIAL BANKING
In this chapter, the origin of Commercial Banks in India, its progress before and after
nationalization, recent developments in the banking industry in India are discussed. For the
purpose of the study, the concept of ‘Social Banking Concept’ and the performance of the Banks,
particularly the performance of the Public Sector banks, is also discussed.
While Section – A dealt with the historical perspectives, progress and emerging trends of
commercial banks in India, Section – B dealt with the Concept of Social Banking and the
performance of the Banks.
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Post Reform Progress of the Commercial Banks
The volume of the operations, profitability and soundness position are definite indicators of the
performance of any business activity.
The Deposits and Advances of all Scheduled Commercial Banks have registered a growth rate of
15.568% and 15.766% for the period 1950-51 to 2011-12. During the period 1998-99 to 2011-
12 Private Sector Banks ranked first in terms of Deposits and Advances with a CAGR of 20.45
per cent, 24.94 per cent respectively. In case of Profits the Foreign Banks outperformed the
other Bank Groups by registering a CAGR of 28.78 per cent. However, Public Sector Banks
performed better with regard to arresting the NPAs in Priority and Non Priority Sector Advances
with a CAGR of (11.77) per cent and (14.26P per cent respectively.
Priority Sector Lending
Priority Sector lending policy identifies those sectors of the economy and sections of the
society which are crucial for the development of the nation but were hither-to-neglected by the
Commercial Banking Institutions. The Priority Sector includes Agriculture, SSIs, Small road
and water transport operators, Small Business, Retail Trade, Professional and self employed
persons, State sponsored organization for Scheduled Castes / Scheduled Tribes, weaker sections,
Funds provided to RRBs, Education, Housing loans, Consumption loans, Micro-credit, Self-Help
Groups, Loans to the software industry, Loans to the specified industries in the food and agro-
processing sector, investment by banks in venture capital etc. The broad classification of these
sectors is done as Agriculture, Small and Medium Enterprises and other Priority Sectors.
The Priority Sector Advances by Public Sector Commercial Banks registered a CAGR of
20.422 per cent – Total Agricultural Advances, 24.00 per cent – Direct Agricultural Advances,
17.80 per cent – Indirect Agricultural Advances, 18.62 per cent - SSI, 24.32 per cent – Other
Priority Sector Advances during the period 1969-2012.
The CAGR of Priority Sector Advances is highest in case of Private Sector Banks with a CAGR
of 26.10 per cent followed by Public Sector Banks (19.40%) and Foreign Banks(18.72%)
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Branch Expansion
With the objective of increasing banking penetration and financial inclusion rapidly
banks were advised to allocate at least 25 per cent of total number of branches proposed to be
opened during the year in unbanked rural (Tier 5 and Tier 6) centres in their Annual Branch
Expansion Plan (ABEP). An unbanked rural centre would mean a rural (Tier 5 and Tier 6) centre
that does not have a brick and mortar structure of any scheduled commercial bank for customer
based banking transactions.
The Branch Expansion during the period 1969-2012 has registered a CAGR of 5.40 per
cent for Total Branches, 7.67 per cent for Rural Branches and the (4.31) for the decrease in
Population per Bank Office. The Population per Bank Office decreased from 63,800 to 9,399.
Private Sector Banks registered a highest CAGR of 7.03 per cent for the increase in Total
number of Branches, 2.08 per cent for Rural Branches, 7.08 per cent for Semi-Urban Branches
and 10.03 per cent for the Metro Branches. Foreign Banks dominated the scenario with 8.31 per
cent CAGR for Urban Branches.
Financial Inclusion
The progress made by banks under the FIPs (April 10 – March 13) for key parameters,
during the three year period is as follows:
2, 68, 000 banking outlets have been set up in villages as on March 13 as against 67,694
banking outlets in villages in March 2010
Nearly 109 million Basic Savings Bank Deposit Accounts (BSBDAs) have been added,
taking the total number of BSBDAs to 182 million. Share of ICT (Information and
Communications technology) based accounts have increased substantially – Percentage
of ICT accounts to total BSBDAs has increased from 25% in March 10 to 45% in March
13.
With the addition of nearly 9.48 million farm sector households during this period, 33.8
million households have been provided with small entrepreneurial credit as at the end of
March 2013
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With the addition of nearly 2.25 million non farm sector households during this period,
3.6 million households have been provided with small entrepreneurial credit as at the end
of March 2013.
About 4904 lakh transactions have been carried out in ICT based accounts through BCs
(Business Correspondents) during the three year period.
Conclusion:
Indian Banking, especially the Public Sector Banks, has performed impressively in achieving
social goals, extending the geographical reach and functional spread of financial services,
especially for the rural poor. The massive and speedy quantitative growth as well as the
unprecedented growth in social lending/banking has created a number of strains. However since
the mid-1980’s, banks have entered a phase of consolidation and enhanced sophistication. The
commercial principles of viability, efficiency, prudence and profitability are now receiving much
attention. The new banking scenario has called for more efficiency on the part of the banks
simultaneously with shouldering the responsibility of developing the backward regions and
neglected social sectors. The Indian Banking system has responded positively for this call by
improving the quality of the assets and the profitability. At the same time, the Reserve Bank has
been making consistent efforts to strengthen credit delivery, improve customer service and
encourage banks to provide banking services to all segments of the population. Despite
considerable expansion of the banking system in India, large segments of the country’s
population are not adequately served, some as savers and others as borrowers. The expansion of
banking services that are designed to serve all potential customers efficiently is, therefore,
emerging as a major concern that is engaging the attention of the authorities: Reserve Bank of
India/Government.
CHAPTER III: PERFORMANCE OF STATE BANK OF HYDERABAD : WITH
SPECIAL REFERENCE TO SOCIAL BANKING
In this Chapter it is proposed to present a brief profile of the State Bank of Hyderabad. It is also
proposed to discuss about the Performance of the State Bank of Hyderabad in general and Social
Banking in particular.
The following is the gist of the Progress made:
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The State Bank of Hyderabad is now the largest Associate Bank of SBI with over 1500
branches, about 14,000 employees and Assets worth of Rs.767 billion;
SBH has the third largest branch network of 963 branches in the State of Andhra Pradesh;
SBH has outperformed State Bank Group and the Scheduled Banks in terms of CAGR for the
growth in number of branches, Amount of Deposits and Advances for the period 1942 to
2012. SBH registered a CAGR of 2.67%, 18.67% and 20.05% for the Branches, Deposits
and Advances respectively.
The CAGR registered for the period 1999 to 2012 are: Paid up Capital & Reserves –
21.604%, Deposits – 19.467%, Net Advances – 23.985%, Investments 19.18%, Net NPAs as
per centage to Advances decreased by 16.24%.
The Trends of Profitability of SBH for the period 1997-98 to 2011-12 are: Net Profit –
21.33%, Return on Assets – 4.06%, Earnings per Share – 20.35%, Profit per Employee –
20.90%;
Recognising the importance of the Customer Satisfaction, the SBH has designed policy for
achieving Customer Satisfaction and have constituted the following committees to oversee
the level of Customer service in the Bank – Head Office Customer Service Committee,
Standing Committee on Customer Service, Customers Grievances Redressal, Business
Process Re-engineering, Specialised Branches, Lead Bank Scheme, Rural Institute for Self
Employment Training and Feed Back Policy.
Gallup inc & IBA, in their 2008 National survey of Banks have rated the SBH as #1 in
Customer Satisfaction in Savings Bank account amongst 23 midsized Banks.
SBH is striving hard for continuous Technology up gradation through implementing core
banking solutions since 2005, is a member of all payment settlement systems, provides
facilities for Inter-Bank Remittances to Customers through RTGS, NEFT & ECS at all its
branches. Additionally Bank also provides State Bank Group Payment facility (SBGRT) for
remittances to branches belonging to entire SB Group, covering more than 15,500 branches.
SBH has been adjudged as the #1 Tech Savvy Bank in India in a survey conducted by the
Business World Magazine in association with Pricewaterhouse Cooper in December 2009.
The Bank has accorded due primacy to Human Resources Development (HRD) as a
Corporate Philosophy. The HRD Process is directed towards Providing skill-based Training,
Job Enrichment Programmes, Introduction of Distance Learning, Arranging Workshops,
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overseeing Effective functioning of Quality Circles, implementation of Employee Welfare
Schemes etc.
SBH is imparting continuous training to its employees for improving their efficiency. About
50 per cent of the total employees of all Cadres each year (since 2000-01) undergo the
training.
The Bank’s Progress in terms of Social Banking for the period 1997-98 to 2011-12 is –
Total Priority Sector Lending 18.57%, Agricultural Advances – 18.94%, SSI Advances –
15.70%, Small Business Advances – 14.98%, Advances to Other Priority Sectors – 36.45%.
The Population group-wise share of branches of the SBH over the years 1997-98 to 2011-12
have registered a CAGR of 1.614 per cent for Rural Branches, 3.921 per cent for Semi-Urban
Branches, 5.673% for Urban Branches, 4.133 per cent for Metropolitan Branches and 3.650
per cent growth in overall branches. SBH outperformed against the growth rates of the
industry, State Bank Group and Nationalised Banks averages.
SBH is playing its due role towards the achievement of the Financial Inclusion. It achieved
100 per cent Financial Inclusion in four lead districts – Nizamabad, Ranga Reddy, Koppal
and Raichur.
It achieved 207.20% CAGR in the increase of number of beneficiaries under Social Security
Pensions and NREG scheme, 128.16% in the issue of smart cards, 223.82 per cent growth in
number of villages covered and 3900 per cent growth in appointing Business Correspondents
under the Financial Inclusion Programme.
SBH sponsors Deccan Grameena Bank (RRB). The performance of DCB may be considered
as an indirect factor for the Social Banking Performance of SBH. The sponsored RRB has
recorded very healthy growth rates – 2.677 per cent for Branch Expansion, 17.529 per cent
for Deposits, 21.27 per cent for Advances, 27.11 per cent for Net Profit, 32.55 per cent for
the Number of Beneficiaries in SHGs, 106.96 per cent for Aggregate limit of Kisan Credit
Cards for the period 1997-98 to 2011-12.
SBH registered a 29.04 per cent growth rate for total Donations towards Community
Services.
Conclusion
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Efficiency, Excellency, Effectiveness other such words are not superlative and hence they do not
have given measures. They are all comparative terms. In that sense it can be said that the State
Bank of Hyderabad is able to achieve efficiency, for, compared to the past it is showing
improvement in the bench marks which it has fixed for itself in its mission statement. Compared
to the industry averages and other Banks-group wise State Bank of Hyderabad is a little behind
in the Priority Sector Lending. However it is ahead than the State Bank Group and the industry
average in accepting Deposits and giving Advances and Branch expansion in Rural and Semi
Urban Areas. The Bank is duly giving its services in the Financial Inclusion area and has well
sort out Financial Inclusion Plan. The Bank has Policies for improving Customer satisfaction,
Technology Upgradation and Human Resource Development. Therefore it can be said that the
State Bank of Hyderabad is able to achieve the efficiency and the journey is still on.
Suggestion: It can be said that the State Bank of Hyderabad is able to achieve the efficiency.
However, Social Banking is not just achieving the targets. It is not just a scheme, but it is the
right approach, perhaps the properly oriented attitude of the banker is Social Banking in the true
sense. Therefore State Bank of Hyderabad needs to imbibe the spirit of Social Banking in true
sense and should become the torch bearer.
CHAPTER IV: SOCIAL BANKING AT SBH : PERCEPTIONS OF THE
BENEFICIARIES AND EMPLOYEES OF SBH
In this chapter, an attempt is made to assess the Beneficiaries (basically availing the Priority
Sector Advances in the rural areas) level of satisfaction of services offered at the retail banking
in the branches of SBH in the District of Nalgonda and solicit their suggestions for the
improvement of customer service. It is also attempted to assess the employee’s perceptions
towards the Social banking activities taken up by the Bank.
A customer (also known as a client, buyer, or purchaser) is the recipient of a good, service,
product, or idea, obtained from a seller, vendor, or supplier for a monetary or other valuable
consideration.
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A Beneficiary is a person who gains as a result of some Policy, Scheme, Activity or such other
similar gain. Therefore a customer (who is the recipient of the banking service) who is availing
the Advances under the Priority Sector Lending and is a Customer to the Rural or Semi-Urban
branches of the Bank can be defined as the beneficiary of the SBH.
The Nalgonda District Profile
The Nalgonda District is one of the poorest of the Districts having acute problem of drinking
water. In its ground waters a high degree of floride is concentrated. Agriculture is still a major
bread winner for the inhabitants of the Nalgonda District. Most of the Nalgonda is dry, inspite of
some irrigation projects.
The Financial requirements of the district are taken care by 222 branches of various Banking and
Non-Banking financial institutions of the Organised Sector. SBH has outperformed these
financial institutions in the Nalgonda District in terms of Deposits, Advances and Priority Sector
lending for the years 2008-09,2009-10,2010-11.
Profile of the Respondent Farmers : Majority of the farmers are in the age group of 40 and
above years, have no formal education, are completely dependent upon farming, belong to
Backward Class, are small and marginal farmers, and are growing paddy twice a year.
Profile of the Respondent Small Business / Service Enterprises Persons: These are not
professionals and have taken up business for their livelihood with a meager capital of Rs.50,000
to 1,00,000. Small Kirana Stores, Milk Vending, Mechanic Shop, Mirchi bandi are the examples
of the small businesses taken up by the respondents. Majority of the respondent Small Business
Persons are in the age group of 31-41 years, are graduates, belong to Backward Class, are
earning between Rs.50,000 – 1,00,000.
Profile of the Respondent Small and Medium Enterprises: Majority of the respondents
running SMEs are graduates, are owning Rice Mills, have less than 10 Crore turnover, earning
profits in between 5-10 crores and are employing 10 – 50 people.
Profile of the Respondent Self Help Groups: A self-help group (SHG) is a village-based
financial intermediary usually composed of 10–20 local women. Members make small regular
savings contributions over a few months until there is enough capital in the group to begin
lending. Funds may then be lent back to the members or to others in the village for any purpose.
All the respondent Self Help Groups were started in Between the year 2005 – 2010; 12 out of
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13 SHGs are SHGs for Women; Number of members for each SHG is ranging from 30 to 150,
majority of the SHG leaders are Primary School Pass, and are in the age group of 31-41.
Perceptions of the Beneficiaries:
1. Reasons for becoming Customer/Beneficiary: Majority of the respondent customer
beneficiaries became the customer of the Bank because of the nearness of the Branch
either to the Place of their work or their residence.
2. Frequency of Visits: Majority of the Farmers and SHGs are visiting the Branch once in
a month, majority of the Small Business and SMEs are visiting the Bank daily.
3. Availing of the Various Services/Products: All the respondents are availing Savings
Deposit, remittance facility and ATM facility, few are availing Personal Advances and
Term Deposits.
However none is using Term Deposit qualifying for income tax benefit, NRI Services and
International Banking and Merchant Banking Services.
4. Satisfaction levels: The satisfaction levels for each of the services used is compared
within the groups by using Chi-Square test. There is a significant difference in the levels
of the satisfaction amongst the groups
One way ANOVA test and multiple comparisons are applied to further analyse the
satisfaction levels. The tests revealed that there is no significant difference amongst the
satisfaction levels of the SHGs and Small Business. However there is a significant
difference amongst the satisfaction levels of the Farmers, SMEs with SHGs and Small
Business.
SMEs are better satisfied followed by SB/SHGs. Farmers are the least satisfied amongst
the four groups. Illiteracy and lack of awareness could be the major reason.
5. Factor Analysis: Factor analysis grouped the 19 determinants influencing the
satisfaction levels into four factors – Service Delivery, Behavioural Aspects, Product
Features, Facilities Apparent.
6. Bank Services: Future Utilisation: Majority of the respondents felt that they shall
continue to use the services of the SBH in the near future.
7. Bank Services: Recommendation to Others: Majority of the respondents said that they
would recommend SBH to their friends and relatives.
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8. Repayment of Advances: Majority of the respondents said that they are repaying their
Loan instalments regularly.
9. Types of Transactions: Display of timings: Most of the respondents said that time to
be taken for various types of transactions is not displayed in the branches.
10. Time-taken: Reasonability: Majority felt that the time taken for banking transactions is
not reasonable.
11. Formalities or Procedures:Nature: Majority felt that the formalities are not simple.
12. Products/Services of the Bank : Economic Status: Most of the respondents felt that
their economic status bettered by using banking services.
13. Products/Services of the Bank: Social Status: Majority of the respondents were neutral
on this aspect.
14. Customer Grievance Redressal Mechanism: Majority respondents were not satisfied
with the grievance redressal mechanism.
15. Customer Rights: Awareness: Majority of the respondents are not aware about their
rights.
16. Grahak Mithra Service: Respondents are not satisfied with the service.
17. Single Window Service: Not happy with the service.
18. SBH Website: Majority do not know about the service, and even those who know did
not use the SBH Website.
19. Customer Feedback: Awareness: Majority are not aware and even those who are
aware are indifferent about it.
20. Non Banking Products: Awareness: Expressed their ignorance.
21. Help Line: The respondents who know about the service are very low, however none
have used the service.
22. Overall Opinion about the SBH: Out of 300 respondent customers majority of them are
satisfied with the services provided by the Bank. However, only 30 per cent of the
customers say that SBH is giving better services compared to other banks. 36 percent
said that it is giving the same services. But 24 per cent of them said it is giving poor
services when compared to other banks.
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Profile of the Respondent Employees
The following is the brief profile of the respondent employees working at various branches of
SBH at the district of Nalgonda:
Employees working in the designation of clerk or officer are only considered for the
sample. Because only these employees usually come into the contact of the customers
for giving the services of the Bank;
Out of 100 respondent employees 20 per cent are women and 80 per cent are men;
37 per cent of the employee respondents are working in the officer cadre of which 5 are
women and 63 per cent are working in the clerical cadre of which 15 are women;
28 per cent of the employee respondents are in the age group of 21-30 years, 26 per cent
each are in the age group of 21-30 years and 31-40 years, and 20 per cent are in the age
group of above 50 years;
60 per cent of them are graduates and 40 per cent are post-graduates;
24 per cent of the respondent employees belong to Backward category, 40 per cent to
Other Category, 16 per cent of Scheduled Castes and 20 per cent to Scheduled Tribes;
22 per cent of the employees are having total service of 0-5 years, 10 per cent of them
have 6-10 years, 22 per cent of them have 11-20 years, 30 per cent of them have 21-30
years and 8 per cent of them have 31-40 years of service.
46 per cent of the respondent employees have worked 0-10 years in the rural and semi
urban branches, 16 per cent of them worked for 11-20 years, 32 per cent of them have
worked for 21-30 years and 6 per cent of them have worked for 31-40 years in the rural
and semi urban areas.
Perceptions of the Employees: The following are the perceptions of the Employees working in
various branches at Nalgonda District about the Social Banking Activities of the SBH.
1. Rural Customers/Beneficiary: Problems: Most respondent employees felt that the
Rural Customers are illiterate and lack awareness.
2. Training: Most of them felt that training programmes to impart specific skills to deal
with the rural customers should be organized.
3. Rural Customers/Beneficiary: Access to the Products: All the rural customers are
able to utilize the traditional products/services like deposits, advances, remittance facility
etc but unable to use the technology based products.
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4. Awareness Programmes: Rural Customers/Beneficiary: SBH is regularly organizing
awareness programmes.
5. Priority Sector Lending: Almost all the employees barring a few opined that the PSL is
not contributing to the NPAs. Therefore the Bank should continue to lend to the Priority
Sectors even if the policy of the lending to the Priority sector is done away.
6. Rural Branches: They felt that the Rural Branches are not contributing to the losses and
therefore the existing Rural Branches should be continued and even new branches also
should be opened.
7. Financial Inclusion: Bank is very actively taking up the programmes under Financial
Inclusion.
8. Recovery: Rural Customers/Beneficiary: Only some of the Customers are prompt in
their repayments. The reason being poverty, frequent crop failures or lack of marketing
skills. Therefore employees felt that some innovative solutions should be given to
address these issues.
9. Feed Back: Customers/Beneficiary: Many said that they are not getting any feed bank
from the customers.
10. Customer Grievance Redressal: They receive some complaints, but majority of the
complaints cannot be addressed in their arena.
11. Services Provided: Opinion: They felt that SBH is providing better service.
Conclusion
The customers expect quickness, courtesy and concern from the Bank. The rural
customers expect even advice and guidance from the Bank as these are mostly illiterate and lack
awareness. These are the important aspects of the customer service. Depositors, being the main
suppliers of the funds and Loanees, being the main seekers of the funds, assess the quality of the
services from these angles.
By and large, the customers of SBH are satisfied with services rendered by the Bank and
employees also carry a positive approach towards Social Banking.
CHAPTER V: SOCIAL BANKING AT SBH : PROBLEMS AND PROSPECTS
In this chapter it is proposed to understand the importance of Agriculture, Small &
Medium Enterprises and Rural Sector in terms of their contribution to the development of the
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economy and also the problems / challenges these sectors are facing, for, these sectors form the
major part of Priority Sector (as per the definition of Priority Sector Lending).
The Credit-Deposit Ratio of the Banks – Group wise, the Non Performing Assets of the
Banks – Group wise and Sector Wise are also examined to understand the problems and
prospects of carrying Social Banking Activity by SBH.
The Concept of Marginal costing is discussed and applied to the advances given to the
Agriculture and Small & Medium enterprises and other priority sectors to understand the net cost
or benefit of carrying Social Banking Activity by SBH.
The Problems and Prospects of Social Banking are also given.
Agricultural Sector: Agriculture has been a way of life and continues to be the single most
important livelihood of the Masses.
Growth: The following growth has been achieved in Agricultural Sector:
Considerable progress in achieving self-sufficiency and self-reliance in food grains
production,
The share of agriculture in real GDP, though decreased, is still at 14 per cent.
Gross Capital Formation (GCF) in agriculture and allied sectors rose to 20.1 per cent.
Challenges: The following are the challenges still to be addressed
The area under food grains has declined
In yield parameters, India is lagging behind the global levels in most crops
Access of small and marginal farmers to formal sources of agricultural credit is still
inadequate.
Mostly small and marginal farmers with small and fragmented landholdings,
Declining per capita availability of food grains,
Indian agriculture is still dependent on the monsoons,
Storage capacity is a major problem,
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Missing links of farmers with the markets.
Secondary food processing in India is very low.
The Challenges of the agriculture needs comprehensive and coordinated effort.
The Micro, Small and Medium Enterprises (MSMEs) play a pivotal role in the economic and
social development of the country, often acting as a nursery of entrepreneurship. They also play
a key role in the development of the economy with their effective, efficient, flexible and
innovative entrepreneurial spirit. The MSME sector contributes significantly to the country’s
manufacturing output, employment and exports and is credited with generating the highest
employment growth as well as accounting for a major share of industrial production and exports.
Growth
The following are the highlights of the MSME sector
MSMEs account for about 45% of India’s manufacturing output.
MSMEs account for about 40% of India’s total exports.
The sector is projected to employ about 73 millionn people in more than 31 million units
spread across the country.
MSMEs manufacture more than 6,000 products ranging from traditional to high tech
items.
For FY11, total production coming from MSME sector was projected at ` 10,957.6
billion, an increase of more than 11% over the previous year
Challenges
The following are the challenges faced by the MSME sector.
Lack of availability of adequate and timely credit
High cost of credit
Collateral requirements
Limited access to equity capital
Procurement of raw material at a competitive cost
Problems of storage, designing, packaging and product display
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Lack of access to global markets
Inadequate infrastructure facilities, including power, water, roads
Low technology levels and lack of access to modern technology
Lack of skilled manpower for manufacturing, services, marketing, etc
Multiplicity of labour laws and complicated procedures associated with compliance of such
laws
Despite the various challenges it has been facing, the MSME sector has shown admirable
innovation, adaptability and resilience to survive the recent economic downturn and recession.
Hence Banks also should provide the requisite support to the MSME sector by giving innovative
services.
Rural Sector
Recently, the rural sector (including agriculture) is being seen as a potential source of domestic
demand, a recognition that is even shaping the marketing strategies of entrepreneurs wishing to
widen the demand for goods & services.
Growth
The following growth is achieved in the rural areas:
Since 1999-2000, per capita GDP in rural areas has grown at a 150 basis points faster rate
than urban India,
75 per cent of the new factories in manufacturing sector came up in rural India,
Manufacturing GDP in rural India witnessed 18 per cent CAGR during 1999-09 and is
now 55 per cent of Indian Manufacturing GDP,
Indian villages are growing larger and are classified as towns.
Challenges
A major challenge bothering the India is existence of the poverty among India’s rural people,
both individuals and communities,
is lack of access to productive assets and financial resources.
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High levels of illiteracy,
inadequate health care and
extremely limited access to social services
Microenterprise development, which could generate income and enable poor people to
improve their living conditions, has only recently become a focus of the government.
Migration of Youth to Urban Areas in search for livelihood.
Women in general are the most disadvantaged people in Indian society, though their status
varies significantly according to their social and ethnic backgrounds. Women are
particularly vulnerable in the rural areas, because of twin causes of illiteracy and poverty.
Credit-Deposit Ratio of the Banks – Group Wise
‘Credit-Deposit ratio’ is the proportion of loan-assets created by banks from the deposits
received. Higher credit-deposit ratio may be understood as an indicator of optimum utilisation of
the funds by the Banks and vice-versa.
Private Sector Banks registered highest CAGR of 3.731 per cent for the growth in CD
ratio for the period 1998-99 to 2011-12 followed by Public Sector Banks with a growth rate of
3.968 per cent and Foreign Banks with 2.1429 per cent. However the actual CD ratio of the
Foreign Banks is the highest than the other Bank groups throughout the period.
Nonperforming assets of the banks – group wise and sector wise
The percentage of the Non Performing Assets to the Advances of the Public Sector Banks
for the Priority Sector Lending has decreased from 26.25 per cent in the Financial Year 1996-97
to 4.01 per cent in the Financial Year 2010- 11 and for the non priority sector lending it has
decreased from 20.61 per cent to 2.05 per cent for the same period. This can be attributed to the
Efficient Credit management of the Banks.
The percentage of the Non Performing Assets to the advances given by the Private Sector
Banks to the Priority Sector has decreased from 8.51 per cent for Financial Year 2000 - 01 to
1.93 per cent in the Financial Year 2010-11. For the Non Priority Sector it has decreased from
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12.30 per cent to 4.61 per cent for the same period. As against the general understanding or
belief, the NPAs as a percentage to the Advances for Non Priority Sector are higher when
compared to the NPAs as a percentage to the Advances for the Priority Sector throughout the
period.
The Percentage of Non Performing Assets to the Advances of the Foreign Banks for the
Priority Sector has increased from 0.87 per cent in the FY2007 to 1.72 per cent in the year 2011.
For the non priority sector lending the percentage of the non performing assets to advances has
increased from 2.81 per cent to 3.93 per cent. The Priority sector lending Nonperforming assets
percentage to advances is lesser than the non priority sector lending throughout the period.
The percentage of the nonperforming assets to the Advances of SBH has decreased from
15.27 per cent in FY2001 to 1.74 per cent in the FY2011 for the Priority sector and it has
registered a decrease from 13.56 per cent to 1.20 per cent for the Non Priority Sector. The
performance of the State Bank of Hyderabad in terms of the reduction of the percentage of the
Non Performing assets to the Advances is better than the Public Sector Banks and the Private
Sector Banks.
Thus, Sector-wise NPAs analysis shows that the NPAs in case of Priority Sector is less
than Non Priority Sectors in case of Private Sector Banks, both Indian and Foreign, whereas in
case of Public Sector Banks it is the other way. However, the CAGR of the decrease in the
percentage of the NPAs of the Priority sector is (12.61 per cent) and the CAGR of the decrease
in the percentage of the NPAs of the non priority sector is (8.53 per cent). Therefore it is an
encouraging trend.
The concept of Marginal Costing
Marginal Cost is the addition to the total cost due to the production of one more unit of
output (can be understood as one more unit of Loan in case of Banking Services).
The weighted average interest rate earned from advances given to the agricultural and
SME & Priority Sector Advances by 54 Branches of SBH in the Nalgonda District for the FY
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2009-10 to 2011-12 is positive for all the three years. The interest earned on the agricultural
advances registered an increasing tendency and increased from 8.02 per cent in Financial Year
2009-10 to 9.83 per cent in the Financial Year 2011-12. The interest earned on the SME & other
Priority Sector advances, though has dropped in the Financial Year 2010-11, has also increased
from 10.48 percent in the Financial Year 2009-10 to 12 per cent in the Financial Year 2011-12.
The Interest expended by the SBH during the years 2009-10 to 2011-12 have increased from
5.74 per cent (decreased in the year 2010-11 to 5.33 per cent) to 6.95 per cent. Thus Agricultural
Advances have positive Contribution of 2.28, 3.18 and 2.88 per cent respectively for the period.
The SME & Other Priority Sector Advances have a positive Contribution of 4.74, 4.47 and 5.05
per cent respectively for the period.
Therefore lending to these sectors (Priority Sectors), as against the popular belief, need
not be essentially on the negative side.
Rural Branches in Nalgonda District:
Barring a few branches (only 2 to 3 branches) almost all the branches have registered a
positive contribution for all the three consecutive years for the Advances given to the
Agricultural, SME and other Priority Sectors.
Problems of Social Banking
The following are problems for carrying Social Banking Activities:
1. Out of the total Priority Sector Lending a major portion (18 per cent out of total 40 per cent)
a major portion is towards agriculture which is carried on in rural areas. Therefore
beneficiaries of the Social Banking are mostly from the rural background with little or no
education. Therefore lack awareness regarding the products and services offered by the Bank
and about the formalities and procedures to be followed while availing the services. This is
posing a problem to reach the beneficiaries.
However, this problem is being tackled by the Bank by frequently organizing awareness
programmes.
2. The irregular repayments or the non-repayment of the loan instalments by the Rural
Customers due to crop failure or lack of awareness or political influence is a major problem
to the Bank as the Bank would be faced with a liquidity problem and low profits.
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This problem is being overcome by the Bank by regular follow up of each case individually
and by constant counseling.
3. Another problem faced by the Bank is relating to the diversion of funds from the purpose for
which the loans are taken to non productive activities like celebrations, personal
consumption, medical expenses, repayment of earlier loans (mostly taken from money
lenders) taken etc.
Hence the field officers are making regular visits to the site for careful assessment and for
giving constant counseling.
4. The Loan taken for the purchase of Agricultural equipment / Live Stock is misutilised and
the detection of this by the Bank officials is posing a big challenge as the quality products
would be shown at the time of inspection and later are replaced with inferior quality.
Therefore the field officers are visiting the site on regular basis for instilling discipline
among the beneficiaries.
5. The Rural Beneficiaries are not able to access Technology based Products/Services offered
by the Bank. As per the Policy guidelines of the Reserve Bank of India the Bank/s are
implementing several programmes under Financial Inclusion for providing ICT Information
and Communication Technology) based products / services to the under privileged.
6. Agriculture mostly is dependent on the monsoons. Climate changes and weather conditions
impact agriculture. These factors are uncontrollable and add to the risk of a farmer and the
Banker.
7. The Employees of the Bank do not posses complete knowledge of the activities taken up by
the Rural Customers, particularly the Farmers. Therefore they are finding it difficult to deal
with the rural customers.
Hence the Bank is implementing the Training Programmes to their employees to impart the
specific skills required to deal with Agriculture, Small and Medium Enterprises and such
other Priority Sectors.
Prospects of Social Banking
The following are the prospects available to the Banks for carrying out the Social Banking
Activities:
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1. Agriculture, SMEs, Small Businesses and Rural Sector are showing promising growth with
the continuous effort put by Government and other organizations and Departments since
independence, and therefore lending and recovery of loans under Social Banking would be
encouraging. This activity should be seen as an investment for converting marginal customer
into actual customer even for the other (other than Social Banking services like personal
loans, vehicle loans etc) Services / Products offered by the Bank.
2. Non-Priority Sector market is reaching to saturation, competition, also, is intensifying,
resulting in decreasing spreads. Hence the Banks have to tread new markets.
Therefore the Priority Sectors (including Rural Sector) are potential markets throwing
open big opportunity.
3. There is a general feeling that lending under Social Banking would pose a problem for the
profitability of the Banks as the rate of interest on loans would be low compared to the Non-
Priority Sectors and hence are loss making. But contrary to this belief the study proved that
Priority Sector is making positive contribution towards profits of the Bank.
4. The implementation of the reforms is encouraging as banks are able to bring down their non-
performing assets sharply. The CAGR decrease in the NPAs of the Priority Sector is higher
than the CAGR decrease of the non Priority Sector Advances for the period 1997-2012.
Hence there is an ample scope for the deployment of the funds in the Priority Sector.
5. The Credit Deposit Ratio of the Public Sector Banks in general and State Bank of Hyderabad
in particular is low when compared to the industry average. Instead of holding idle funds the
Bank can improve its profitability by lending under Social Banking and contribute to the
Economic Development of the country.
Conclusion:
The Agriculture, Small & Medium Enterprises and the Rural sector which form the core of the
Social Banking are all having immense potential for growth. These sector/s as a whole are
positively contributing to the economy. However these sectors are facing many challenges.
With the kind of Policy support the Government/s are extending to these sectors would soon
overcome their challenges and would achieve their full potential.
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The implementation of the reforms is encouraging as banks were able to bring down their non-
performing assets sharply. Capital position of banks also improved significantly. Competition
intensified during this phase as was reflected in the narrowing down of margins. Despite this,
however, banks slightly improved their profitability among others, due to increased volumes and
improvement in asset quality. Even for the Priority Sector Lending the Non Performing assets
have considerably reduced for all groups of the Banks – Public Sector, Private Sector, State Bank
Group and Foreign Banks. The asset quality for these advances also have shown improvement.
The State Bank of Hyderabad also has shown the improvement in the asset quality. The priority
Sector Advances have positively contributed to the incomes of the State Bank of Hyderabad for
the FY2010 to 2012. The Banks, particularly the Public Sector Banks, have enough liquidity as
CD ratio is less than 80 per cent.
The Commercial Banks, somehow, are not able to see the Agriculture or Small Business or other
Priority sectors as a profit making opportunity in spite of the positive contributions made by
these sectors to the GDP and the development of the economy. The Commercial Banks are
seeing the Priority sector lending and branch expansion to the unbanked areas as a mere
compliance function. This is evident from the fact that the priority sector lending is lingering
around the stipulated mark of 40 per cent for the Indian Banks and 32 per cent for the Foreign
Banks. With the liberalized policy for the branch expansion the CAGR of the Rural Branches
became negative. Despite all the attempts made by the Reserve Bank, the extent of financial
exclusion continued to be significant in India, when compared with some of the advanced as well
as developing countries.
Suggestions
For improving the quality of the Services given by the State Bank of Hyderabad Beneficiaries
suggested for the decrease in the interest rates of the Advances, increase in the interest rates of
the Deposits, no charging of the Security for giving advances, no Processing Fees to be charged
on Advances, simplification of the Procedures and Formalities, friendly and courteous behavior
of the employees, and special training imparted to the Employees.
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Employees have suggested the decrease in the interest rates on small and crop loans, quick
disposal of the complaints of the customers, proper training of the staff, to organize awareness
programmes frequently, improving the quality of the service given, opening of separate branches
for the low income groups and to provide crop insurance.
Areas for Further Research
Some of the areas for further research are given below:
A study on Social Banking in Private Sector Banks
A Comparative Study of Social Banking in Public Sector and Private Sector Banks
A Comparative Study of Social Banking in Indian Private Sector and Foreign Banks
Financial Inclusion – Role of Banks
Financial Inclusion – Role of RRBs
A Study on Evaluation of BC/BF Model