A PROJECT REPORT ON IMPACT OF SERVIVE QUALITY ON CUSTOMER LOYALTY IN PRIVATE AND PUBLIC SECTOR BANKS IN REQUIREMENT OF PARTIAL FULFILLMENT

OF MASTER OF BUSINESS ADMINISTRATION

SUBMITTED TO: Prof. Neha Parashar

SUBMITTED BY: Sony Gupta (117010592006) Mohit Yadav (117010592012)

INTRODUCTION TO BANKING
. A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customer with capital surpluses. Banking can be defined as structural network of institutions that offer financial services within a country. The members of the banking system and the functions they typically perform include: (1) commercial banks that take deposits and make loans, (2) investment banks which specialize in market issues and trading, and (3) national central banks that issue currency and set monetary policy.

FUNCTIONS OF BANK

Functioning of a Bank is among the more complicated of corporate operations. Since Banking involves dealing directly with money, governments in most countries regulate this sector rather stringently. In India, the regulation traditionally has been very strict and in the opinion of certain quarters, responsible for the present condition of banks, where NPAs are of a very high order. The process of financial reforms, which started in 1991 has cleared the cobwebs somewhat but a lot remains to be done. The multiplicity of policy and regulations that a Bank has to work with, makes its operations even more complicated, sometimes bordering on illogical. This section attempts to give an overview of the functions in as simple manner as possible. Banking Regulation Act of India, 1949 defines Banking as "accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheques, draft, and order or otherwise. Banks essentially performed the following functions: 1. Accepting deposits 2. Lending money to public(loans) 3. Transferring money from one place to another(remittances) 4. Credit creation 5. Acting as trustees 6. Keeping valuables in safe custody 7. Investment decisions and analysis 8. Credit Cards 9. Debit Cards 10. Signature Guarantees

TYPES OF BANKS Central Bank: A central bank, reserve bank, or monetary authority is the entity responsible forth monetary policy of a country or of a group of member states. Its primary responsibility is to maintain the stability of the national currency and money supply, but more active duties include controlling subsidized-loan interest rates, and acting as a lender of last resort to the banking sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.

Commercial Banks: A commercial Bank performs all kinds of banking functions such as accepting deposits, advancing loans, credit creation & agency functions. They generally advance short term loans to their customers, in some cases they may give medium term loans also. Industrial Banks: Ordinarily, the industrial banks perform three main functions: Firstly, Acceptance of Long term deposits: Since the industrial bank give long term loans , they cannot accept short term deposits from the public . Secondly, Meeting the credit requirements of companies like the industries require to purchase land to erect buildings and purchase heavy machinery and the industries require short term loans to buy raw materials & to make payment of wages to workers . Thirdly, it does some Other Functions - The industrial banks tender advice to big industrial firms regarding the sale & purchase of shares & debentures. Agricultural Banks: As the commercial & the industrial Banks are not in a position to meet the credit requirements of agriculture, there arises the need for setting up special types of banks to finance agriculture. Firstly, the farmers require short term loans to buy seeds, fertilizers, ploughs and other inputs. Secondly, the farmers require long term loans to purchase land, to effect permanent improvements on the land to buy equipment & to provide for irrigation works. Foreign Exchange Banks: Their main function is to make international payments through the purchase and sale of exchange bills. As is well known, the exporters of a country prefer to receive the payment for their exports in their own currency. Hence their arises the problem of converting the currency of one country into the currency of another .The foreign exchange banks try to solve this problem. These banks specialize in financing foreign trade. Indigenous Banks: According to the Indian Enquiry Committee , Indigenous banker is a person or a firm which accepts deposits , transacts business in hundies and advances loans etc.

ROLE OF BANKS 1. Capital Formation: The significance of DFIs lies in their making available the means to utilize savings generated in the economy, thus helping in capital formation. Capital formation implies the division of the productive capacity of the economy to the making of capital goods which incr eases future productive capacity. The process of Capital Formation involves three distinct but interdependent activities, viz., saving, financial intermediation and investment. However, poor country/economy may be, there will be a need for institutions which allow such savings, as are currently forthcoming, to be invested conveniently and safely and which ensure that they are channeled into the most useful purposes. A well-developed financial structure will therefore aid in the collections and disbursements of investible funds and thereby contribute to the capital formation of the economy. 2. Support to Capital Market: The basic purpose of DFIs particularly in the context of a developing economy, is to accelerate the pace of economic development by increasing capital formati o n , i n d u c i n g i n v e s t o r s a n d entrepreneurs, sealing the leakages of material and human resources by careful allocation thereof, undertaking development activities, including promotion of industrial units to fill the gaps in the industrial structure and by ensuring that no healthy projects suffer for want of finance and/or technical services. Hence, the DFIs have to perform financial and development functions on finance functions, there is a provision of adequate term finance and in development functions there include providing of foreign currency loans, underwriting of shares and debentures of industrial concerns, direct subscription to equity and preference share capital, guaranteeing of deferred payments, conducting techno-economic surveys, market and investment research and rendering of technical and administrative guidance to the entrepreneurs. 3. Foreign Currency Loans: Foreign currency loans are meant for setting up of new industrial projects as also for expansion, diversification, modernization or renovation of existing units in cases where a portion of the loan was for financing import of equipment from abroad and/or technical know-how, in special cases. 4. Assistance to backward areas:

Institutional finance to projects in backward areas is extended on concessional terms such as lower interest rate, extended repayment schedule and relaxed norms in respect of promoters contribution and debt-equity ratio. Such concessions are extended on a graded scale to units in industrially backward districts, classified into the three categories of A, B and c depending upon the degree of their backwardness. Besides, institutions have introduced schemes for extending term loans for project/areaspecific infrastructure development. Moreover, in recent years, development banks in India have launched special programmes for intensive development of industrially least developed areas, commonly referred to as the No-industry Districts (NIDs) which do not have any large-scale or medium-scale industrial project. Institutions have initiated industrial potential surveys in these areas. 5. Promotion of new entrepreneurs: Development banks in India have also achieved a remarkable success in creating a new class of entrepreneurs and spreading the industrial culture to newer areas and weaker sections of the society. Special capital and seed Capital schemes have been introduced to provide equity type of assistance to new and technically skilled entrepreneurs who lack financial resources of their own even to provide promoters contribution in view of long-term benefits to the society from the emergence of a new class of entrepreneurs. Development banks have been actively involved in the entrepreneurship development programmes and in establishing a set of institutions which identify and train potential entrepreneurs.