A

PROJECT REPORT
ON
TOPIC NAME
Submitted for the partial fulfillment of the requirement for the
award of degree
Of
Bachelor of Business Administration
Session (2022-2025)

SUBMITTED TO: SUBMITTED BY:

Faculty Name : Aurag sir Student Name: Simardeep
kaur
Roll No: 220973105272

PT. DEEN DAYAL UPADHYAY MANAGEMENT COLLEGE

MEERUT
 DECLARATION
I Simardeep Kaur , hereby declare that: I have completed all the necessary
requirements for the BACHELOR OF BUSINESS ADMINISTRATION at PT
DEEN DAYAL UPADHAYA MANAGEMENT COLLEGE. The information
provided in my application is accurate to the best of my knowledge. I agree to
abide by the academic rules and regulations set forth by the institution. I
understand the importance of academic integrity and have not engaged in any form
of plagiarism or dishonest practices in my work. I accept responsibility for
maintaining the standards and ethics expected by the institution. I will notify the
relevant authorities of any changes to my personal information during my course of
study.

Signature: ___________________________
Student's Full Name: SIMARDEEP KAUR
Student Roll Number : 220973105272
 ACKNOWLEDGEMEMT
I would like to extend my heartfelt gratitude to all those who have
supported me throughout the course of my project. First and foremost,
I express my sincere thanks to the DIRECTOR : NIRDESH VASHISTHA,
for their valuable guidance and encouragement, which have been
crucial to the completion of this project. I am also deeply grateful to the
HEAD OF DEPARTMENT : ROBIN RASTOGI , for their constant support
and for creating a conducive environment for academic growth. My
sincere appreciation goes to my FACULTY SUPERVISOR : ANURAG
MATHUR, for their insightful guidance, continuous encouragement, and
constructive feedback, which have helped me refine and improve my
work at every step. Without their dedication and support, this project
would not have been possible. I also acknowledge the contribution of
all the staff and faculty members who have assisted me during this
endeavor.
EXECUTIVE SUMMARY
 INTRODUCTION ABOUT CUST.
PREFERENCE TOWARDS THE
PUBLIC AND PRIVATE SECTORS
BANK
Customer preference towards public and private sector banks is shaped
by various factors including trust, service quality, convenience, and
product offerings. Public sector banks (PSBs), typically owned by the
government, have built a strong reputation for reliability and stability.
They cater to a broad demographic, especially in rural and underserved
areas, and are often seen as a symbol of financial security. On the other
hand, private sector banks, which are privately owned, tend to offer
more innovative banking solutions, faster services, and a more
personalized customer experience. These banks are often preferred by
younger, urban customers who value advanced digital tools and efficient
services.

The choice between public and private sector banks depends on

individual customer needs, such as the importance of traditional banking
services, the desire for modern digital features, and the level of service
speed or convenience. As competition grows, both sectors continue to
adapt their offerings to meet the changing demands of a diverse
customer base, each excelling in different aspects of banks.
 CUSTOMER SATISFACTION

Definition of Satisfaction: Satisfaction means a feeling of pleasure

because one has something or has achieved something. It is an action of
fulfilling a need, desire, demand or expectation. Every rationale
customer compares the cost (price) and benefit (utility) of any product or
services. Customers compare their expectations about a specific
product/services and its actual benefits. This comparison results into
three types of customers: dissatisfied customers (expectations are more
than actual performance of the service); satisfied customers (actual
benefits realized from services are equal to or more than expectations);
indifferent customers (actual performance and expectation are exactly
equal). Westbrook (1981) reported that overall satisfaction is the
outcome of customer's evaluation of a set of experiences that are linked
with the specific service provider. It is observed that organization's
concentration on customer expectations resulted into greater satisfaction
(Peters and Waterman, 1982). It is said that satisfaction is a function of
customer's belief about fair treatment (Hunt, 1991). Customer
satisfaction has become important due to increased competition as it is
considered very important factor in the determination of bank's
competitiveness (Bartell, 1993; Haron et al. 1994). Satisfaction is a post
purchase evaluative judgment associated with a specific purchase
decision (Churchil and Suprenant, 1992). The customer satisfaction is
indispensable for the successful survival of any organization.
Continuous measurement of satisfaction level is necessary in a
systematic manner (Chakravarty et al.1996; Chitwood, 1996; Romano
and Sanfillipo, 1996). To measure customer satisfaction with different
aspects of service quality, Parasuraman, Valerie Zeithaml and Berry
developed a survey research instrument called SERVQUAL . It is based
on the premise that the customers can evaluate a firm's service quality by
comparing their perceptions of its service with their own expectations.
SERVQUAL is seen as a measurement tool that can be applied across
broad spectrum of service industries. In its basic form, the scale contains
24 perception items and a series of expectation items, reflecting the five
dimensions of service quality. Their findings suggest that, in reality,
SERVQUAL scores measure only two factors: intrinsic service quality
(resembling what is termed functional quality) and extrinsic service
quality (which refers to the tangible aspects of service delivery and
"resembles to some extent what Gronroos refers to as technical
quality").Generic dimensions customers use to evaluate service quality
are credibility, security, access communication, understanding the
customer, tangibles, reliability, responsiveness, competence, courtesy.
Customer Satisfaction in Banking Financial liberalization and
deregulation has increased the competition among banks to attract
potential customers. Every banker tries to provide superior services to
keep satisfied customers. In India, emergence and growing popularity of
Indian banking products raises competition among Indian banks. Indian
banks have to face numerous challenges in the recent age. Firstly, they
are competing with their peers and secondly they have to cope with the
conventional banks. Satisfied customer is the real asset for any
organization that ensures long-term profitability even in the era of great
competition. It is found that satisfied customer repeat his/her experience
to buy the products and also creates new customers by communication
of positive message about it to others (Dispensa, 1997). On the other
hand, dissatisfied customer may switch to alternative products/services
and communicate negative message to others. So, organizations must
ensure the customer satisfaction regarding their goods/services
(Gulledge, 1996). SERVQUAL Scale Parasuraman et al., (1988, 1991)
developed.
SERVQUAL instrument to measure the dimensions of service quality
that is frequently used by researchers. It consists of 24 items that are
compiled into five dimensions: tangibility; reliability; responsiveness;
assurance and empathy. This study applied five dimensions of service
quality that are explained as under: Reliability– This dimension shows
the consistency of services towards performance and dependability.
Tangibles- It shows the physical aspects of the services as physical
facilities, appearance of personnel and tools & equipment used for
provision of services. Responsiveness- It reflects the willingness or
readiness of employees to provide services to customers. Assurance-
This dimension indicates the employees' knowledge, courtesy and their
ability to incorporate trust and confidence.
The Reserve Bank of India is the apex bank and the monetary authority,
which regulates the banking system of the country. It is the banker’s
bank, it governs all the banks of the country, like cooperative banks,
commercial banks and development banks. The commercial bank
includes public sector banks, private sector bank, foreign bank, regional
rural bank, local area banks, etc. Before 1969, except eight banks (SBI
and seven associate banks), all the banks in India were private sector
banks after which 14 commercial banks got nationalised in July 1969
and 6 in 1980.
Further, in the year 1993, Liberalisation policy is introduced, after which
private banks came into the picture.
Nowadays both the categories of banks are doing good in the sector by
providing pronounced facilities and services to their customers. But,
tough competition can be seen between the public sector and private
sector banks. So, here we have discussed the differences between Public
Sector and Private Sector Banks.
 Comparison Chart

BASIS FOR
PUBLIC SECTOR BANK PRIVATE SECTOR BANK
COMPARISON

Meaning Public Sector Banks are the banks Private Sector Banks refers to the
whose complete or maximum banks whose majority of stake is
ownership lies with the held by the individuals and
government. corporations.

No. of banks 27 22

Share in banking industry 79.2% 19.7%

Customer Base Large Relatively small

Interest rate on deposits High Marginally lower

Promotion Based on seniority Based on merit

Growth opportunities Low Comparatively high

Job security Always present purely based on performance

Pension Yes No N
o
o
Definition of Public Sector Bank
Public Sector Banks are the banks whose more than 50% shareholding
lies with the central or state government. These banks are listed on stock
exchange. In the Indian Banking System, PSB’s are the largest category
of banks and emanated before independence.
Over 70% of the market share in the Indian Banking sector is dominated
by the public sector banks. These banks are broadly classified into two
groups, i.e. Nationalised Bank and State Bank and its associates. There
are 27 public sector banks in India, which differ in their size. Of these,
there are total 19 nationalised banks in India, while 8 State Bank of India
Associates. Almost all PSB’s share same business model, organisational
structure and human resource policies. Hence, competition can be seen
among these banks, in the market segment they cater.
Definition of Private Sector Bank
Banks whose greater part of the equity is held by private shareholders
and entities rather than government is known as private sector banks.
After most of the banks had got nationalised in the two tranches, but
those non-nationalised banks carried on their operations, known as Old
Generation Private Sector Banks. Further, when the liberalisation policy
was coined in India, the banks which got a license like HDFC bank,
ICICI bank, Axis bank, etc. are considered as New Generation Private
Sector Banks.
Post liberalisation, the banking sector in India has taken a drastic change
due to the emergence of private sector banks, as their presence has
constantly been increasing, offering a diverse range of products and
services to their customers. They posed a stiff competition in the
economy.
The satisfaction of the customers is very important factor in all service
industries to enhance and improve the profitability and financial
performance of the concern. Banking sector is purely financial service
industry and the customer’s satisfaction is much more important to run
banking business successfully. The satisfaction level of the customers is
varying due to different kinds of banking services and their benefit to the
customers. There are so many factors that are responsible in the
discrimination of the services for different types of banking customers
and lead to uneven satisfaction level. In India, Private and Public sector
banks are providing the financial services to the different types of
customers in rural and urban areas. The offices of the Private and Public
sector banks are increasing rapidly .

It is obvious that the numbers of offices of Public sector are five times
more than the Private sector bank offices. But, the compound annual
growth rates (CAGR) of Private sector Banks are higher than two times
of Public sector banks offices. This absolute and relative growth of
Public and Private sector banks directing towards enhancement of
customers’ satisfaction level to retain existing and attract new
customers.

The points given below explain the differences between

public sector and private sector banks:

1. Public Sector Banks are the banks, whose maximum shareholding

is with the government. On the other hand, Private Sector Banks
are the one whose maximum shareholding is with individuals and
institutions.
2. At present, there are 27 public sector banks in India, whereas there
are 22 private sector banks and four local area private banks.
 3. Public Sector banks dominate the Indian banking system, by the
total market share of 72.9%, which is followed by Private sector
banks, by 19.7%.
4. Public sector banks are established since long, while private sector
banks emerged a few decades ago, and so the customer base of
public sector banks is greater than the private ones.
5. Transparency in terms of interest rate policies can be seen in the
public sector. The interest rate on deposits offered by the public
sector banks to its customers is slightly higher than the private
sector banks.
6. When it comes to promotion of employees, public sector banks
consider seniority as a base. Conversely, merit is the basis of
private sector banks, to promote employees.
7. If we talk about growth opportunities in a public sector banks is
quite slow in comparison to a private sector bank.
8. Job security is always present in a public sector bank, but private
sector bank job is secure only when the performance is good
because performance is everything in a private sector.
9. Along with job security, one more pro, of a public sector bank is
the after retirement benefit, i.e. pension. On the contrary, pension
scheme is not provided by private sector banks to its employees.
However, other retirement benefits like gratuity, etc. are offered by
the bank.
GENERAL BANKING SCENARIO IN INDIA

The general banking scenario in India has become very dynamic now-a-
days. The picture of Indian banking was completely different as the
Government of India initiated measures to play an active role in the
economic life of the nation. Another Work done by Parasuraman,
Zeithaml and Berry (Leonard L) between 1985 and 1988 provides the
between the customers expectation of performance and their
perceived experiences of performance. This provides the measurer with
a satisfaction Gap which is objective and quantities in nature. According
to Garbrand customer satisfaction equals perception of performance
divided by expectation of performance. So we can recognize where we
need to make changes to create improvements and determine if these
changes, after implemented, have led to increased customer
satisfaction. If you cannot measure it, you cannot improve it.-Lord
William Thomson Kelvin (1824-1907).The Indian banking system is
characterized by a large number of banks with mixed ownership. The
commercial banking segment comprises 27 public sector banks in which
the Government has majority ownership, 40 private sector banks, and
33 foreign banks.. In 1991, by comparison, public sector banks share of
the total assets of the banking system was a little over90 percent. The
Reserve Bank of India was nationalized on January 1, 1949 under the
terms of the Reserve Bank of India (Transfer to Public Ownership) Act,
1948. In 1949, the Banking Regulation Act was enacted which
empowered the Reserve Bank of India (RBI) to regulate, control, and
inspect the banks in India.” The Banking Regulation Act also provided
that no new bank or branch of an existing bank could be opened
without a license from the RBI, and no two banks could have Common
directors. By the 1960s, the Indian banking industry had become an
important tool to facilitate the speed of development of the Indian
economy. The Government of India issued an ordinance and
nationalized the 14 largest commercial banks with effect from the
midnight of July 19, 1969. A second dose of nationalization of 6 more
commercial banks followed in 1980. The stated reason for the
nationalization was to give the government more control of credit
delivery. With the second dose of nationalization, the Government of
India controlled around 91% of the banking business of India. Later on,
in the year 1993, the government merged New Bank of India with
Punjab.
 LITERATURE REVIEW
Understanding customer preferences toward public and private sector
banks is a critical area of research in banking studies, as it helps banks
develop strategies to cater to diverse customer needs and improve
service delivery. Various studies have explored the factors influencing
customer decisions, including service quality, trust, convenience,
technology adoption, and product offerings. This literature review
highlights key themes and findings from existing research on customer
preference between public and private sector banks.

1. Trust and Stability:

 Public Sector Banks (PSBs): One of the most cited reasons for
customer preference for public sector banks is their perceived stability
and trustworthiness. Studies show that customers associate PSBs with
greater financial security due to their government backing, especially
during economic crises. (Sundararajan, 2018). PSBs are often seen as
less risky compared to private banks, leading to long-term customer
loyalty (Aggarwal & Jain, 2019).

 Private Sector Banks (PSBs): While trust remains important for

customers, private banks often emphasize service quality and
technological innovation. Some studies suggest that the younger
generation, particularly in urban areas, may not prioritize stability over
convenience and personalized services (Nair, 2020).

2. Service Quality and Customer Satisfaction:

 Research consistently shows that private sector banks are viewed

more favorably in terms of service quality. Private banks generally
offer more personalized and faster services compared to their
 public sector counterparts, which tend to be more bureaucratic
(Gupta & Kaur, 2020).

 Customer Satisfaction: Several studies (e.g., Choudhury & Bose,

2019) reveal that service quality dimensions such as
responsiveness, , communication, and empathy are more developed
in private banks, leading to higher customer satisfaction. In
contrast, PSBs, while improving, often face challenges with longer
wait times and less personalized customer interactions.

3. Technological Innovation and Digital Banking:  Private Sector

Banks are often at the forefront of technological innovation. Research
shows that private banks’ early adoption of digital banking services,
such as mobile banking apps, chatbots, and contactless payments, has
attracted tech-savvy customers (Kaur & Yadav, 2021). Studies by
Sharma & Singh (2020) highlight that the younger population prefers the
convenience and speed offered by private banks' digital platforms.

 Public Sector Banks have made significant strides in digitalization,

but the adoption of technology tends to be slower and less seamless
compared to private banks (Patel & Padhiyar, 2021). However, PSBs are
focusing on improving their digital offerings to match customer
expectations.

4. Branch Network and Accessibility:

 Public Sector Banks traditionally have a wider branch network,

especially in rural and semi-urban areas. Several studies (e.g., Bhat
& Singh, 2018) have shown that PSBs are preferred by customers
from less urbanized regions due to their easy access to physical
branches, ATMs, and government-related services.
 Private Sector Banks are often seen as more urban-centric, with
fewer branches in rural areas. However, they compensate for this
by offering robust digital banking options, which are more
accessible in urban environments (Joshi & Pandya, 2022).
5. Product Range and Pricing:

 Private Sector Banks are known for offering a wider variety of

products, including high-end wealth management services,
personalized loans, and exclusive credit cards. Research by Soni &
Sharma (2020) suggests that customers in higher-income brackets
tend to prefer private banks for such specialized financial services.
 Public Sector Banks, while offering basic banking services at
competitive rates, may have fewer product options tailored to
affluent or tech-savvy customers. However, they continue to attract
customers due to their competitive interest rates on loans and
deposits (Bansal & Singh, 2017).

6. Customer Perception and Preference Factors:

 Studies have found that customer preferences are influenced by

several factors, including age, income, education, and location. Younger,
more affluent, and urban customers often lean toward private banks due
to their focus on innovation and customer-centric services (Rani &
Dhiman, 2019). On the other hand, older customers, those from rural
areas, or those who value reliability and security, are more inclined to
prefer public sector banks (Soni & Sharma, 2020).

 A study by Patel (2021) found that perception of value (considering

both financial and non-financial aspects) was a significant driver in
preference for private banks, particularly among younger customers,
while perceived safety was crucial in driving preference for PSBs
among older generations.
Puja K and Yukti A reveals that Private Banks have more satisfied
customers due to good services. Private sector banks are successfully
maintaining level of quantity of its customers by providing better
banking services than Public sector Banks. In any economy, innovative
technologies and changing expectations of markets, consideration of
quality of each and every service is important to enhance customers’
satisfaction level. Further, Puja K and Yukti A advocated that success
mantra could be customer centric orientation, where the customer
relationships management with its customers in Private sector Banks has
been successful in achieving its goals. However, Public sector banks
have to improve in the area of dealing with the customers. Private Banks
need to focus on their loan and insurance services while Public sectors
banks need to improve their infrastructural facilities and provide some
training to the employees’ who are dealing with customers. Equipped
with latest technology, developed infrastructure and well trained
employees, convenient office hours and locations of the branches are the
factors affecting the customers’ satisfaction level.

Mishra US, Sahoo KK, Mishra S and Patra SK (2010) explained that
service quality, customers satisfaction, customers retention, customers
loyalty etc. are the major challenges to in attracting and retaining
customers in banking sector. Among all, customers’ satisfaction is
playing a significant role in attracting, retaining customers and creating
brand loyalty among the customers. Mishra US, Mishra BB, Praharaj S,
and Mahapatra R observed that whole banking sector is facing the
challenge of attracting and retaining customers. They revealed that
public sector banks are better than private sector banks in attracting and
retaining customers. The main factors for opening a new account are
convenient location and reputation of the banks etc. Retired or higher
age group business man customers prefer public sector banks due to its
high reputation. The customers of public sectors banks are more satisfied
than private sector banks. But, the major factors of dissatisfaction of
customers in public sector banks are enquiry counter and front office
services. The private sector banks are executing pure banking services
while public sector banks have to deploy some social responsibilities.

Nirmaljeet V and Prabhjot KM explains that infrastructural facilities

in the branch not only leads to customer satisfaction but overall
improves the working of the branch revealed that the Private Banks has
advanced technologically but the reverse situation is available in Public
sector banks observed from their analysis that that customer satisfaction
in banks vary according to the quality of services. Nominal charges of
services, location of bank branches and staff attitude towards solving
problems of customers are the factors responsible for highest customer’s
satisfaction. Private bank customers are more satisfied with their bank
because of their multiple branches at convenient locations and
technological facilities. Public sector banks are not so technologically
advanced. But, Public sector banks are maintaining satisfaction level of
the customers due to its reliability, high reputation in the society and low
charges of the services. Customer care services of the Private Banks are
better than Public sector banks.
Vijay PG and Agarwal PK found in their research that the empathy,
friendly attitude of staff, and customer guidance, customer support are
the behavioral treatment factors for high customers’ satisfaction.
Tangibility and empathy are the other factors create satisfaction among
customers. Private and Public sectors banks are needed to consider the
weak areas of the concern to enhance the level of satisfaction.

According to Doddaraju ME, the behavior of Public sector banks

employees are not so courteous comparatively Private sector banks. The
Public banks should provide special training and developmental
programs to the employees engaged in directly dealing with customers.
Development of infrastructure and tangibility of the banks are also
affecting the satisfaction level of the customers. The new schemes of the
investment and other related informations should be published and
displayed systematically. Customer relation management and
promotional schemes of the banks also increase satisfaction level.

Puri J, Yadav SP found that the public sectors bank performed better
than private sector banks in all dimensions and revealed that the new
private sector banks are performing better than the old private sector
banks. The technical efficiency was better in public sector banks
comparatively private sector banks indicated that the time factor is very
important for the customers and customer relationship should be
maintained to satisfy the customers. Location. of the bank, timely
delivery of the services and customer oriented policy making are the
factors enhance satisfaction in Private sector banks resulting larger
customers base. Public sector banks are equipped with latest technology
and technically trained staff. The infrastructural appearances and extra
services like home facility, round the clock facility etc. and query
resolution through telephone, lowest prices of the services and above all
availability of the multiple products are the special features in Private
Banks to enhance the level of satisfaction of the customers observed that
there is a significant relation between customer satisfaction and
dimensions of service quality in Public sector commercial Banks.

Khushboo B, Naveena C and Neha J explained in their study that

people are more satisfied from the Private sector banks due to their
better services provided by them in terms of fast transactions, fully
automatic computerized facilities, more and convenient working hours,
advisory services, skilled and co-operative staff, better customer
relationship management etc. But, there is need to make aware rural
customers about the services of Private Banks. The most facility availed
by customers of the Public sector banks are, slow services, low
knowledge of banking products appearance is the factors negative for
the satisfaction level of the customers.

Kesari S and Nitin G explain in his studies that Public sector banks
should work to attain the confidence of salaried class, lower age group
customers, students and self-employed businessman people. Private
sector banks should give much attention to the lower income group
customers also because the higher income group found the services
provided by banks to be more effective but high service charges, which
is out of the reach of the lower income group of custom

Seema S stated that the performance of urban banks on service delivery

and customer satisfaction exceeds the expectations of the customers in
terms of physical facilities, appearance of employees and attitude of
employees to help customers.

Kumar J, Thamilselvan R stated in his research that private sector

banks are competing with the public sector banks in terms of Capital
Adequacy, Asset Quality, Management Efficiency, Earning Capacity
and Asset Quality. They found that capital adequacy, assets quality and
liquidity in public sector banks while management efficiency, earning
quality banks was better, comparatively found that few customers are
dissatisfied because of the poor responsiveness and empathy of the
employees in urban and rural area branches. Further, concluded that
there is need to give special training to the employees who are working
in rural areas directly dealing with the customers. Equipment of
branches with latest technology, Publication of required informations on
the websites of the bank and unbiased behavior of the employees are the
factors lead to customers’ satisfaction in banking industry.
 OBJECTIVE OF STUDY
The objective of studying customer preferences towards public and private sector
banks is to understand the factors influencing customer behavior and decision-
making when choosing between these two types of financial institutions. This
study typically aims to achieve the following goals:

1. Identify Key Decision Factors:

Analyze the factors that influence customer preferences, such as interest
rates, service quality, accessibility, digital offerings, trust, reputation, and
customer service efficiency.
2. Understand Customer Expectations:
Determine what customers expect from their banking experience in both
public and private sector banks.
3. Compare Service Attributes:
Evaluate the perceived differences in attributes such as reliability,
transparency, innovation, and speed of services between public and private
sector banks.
4. Measure Customer Satisfaction:
Assess the level of satisfaction customers have with public and private
sector banks based on their services, processes, and overall experience.
5. Analyze Demographic and PsychographicTrends:
Examine how customer preferences vary by demographics (age, income,
education) or psychographics (lifestyle, attitudes, and values).
6. Identify Challenges and Opportunities:
Highlight challenges faced by banks in meeting customer expectations and
identify opportunities to enhance customer satisfaction and loyalty.
7. Understand the Impact of Digital Banking:
Explore the role of technology and digital banking services in shaping
customer preferences.
8. Provide Strategic Insights:
Offer recommendations for banks to improve their services, enhance
customer relationships, and attract more customers.

This study can help banks in both sectors tailor their strategies to meet customer
needs, improve competitiveness, and foster long-term growth.
 HYPOTHESIS OF THE STUDY
H01“There is no significant relationship between Gender of the
Customer and Bank
Preference (Private & Public)”

H02“Overall Satisfaction is independent of Employee Behavior ,Location

of the
Bank and Transection time

H03“There is no Significant relationship between Age of the Customer

and Bank Preference for Regular Transection (Private and Public)

H04 “There is no significant relationship between age and Bank

preference for
Online Services”

H05“There is no Significant relationship between age of the Customer

and
Services of Bank (Private and Public)”
 LIMITATION

 Time factor was the main limitation for the study as the project was
restricted to small period.

 The research was limited only to the Haldwani so the result can’t be
generalized to the whole bank.

 All the information, which is taken, is based on primary and secondary

data that has its own limitation.

 Some students might not give the information due to lack of interest and
knowledge.
 NEED OF THE STUDY
The need for a study on customer preferences towards public and
private sector banks arises from the growing competition in the banking
sector and the dynamic nature of customer expectations. The study
addresses the following essential aspects:

1. Understanding Customer Behavior

 Customers have varied needs and preferences based on factors like

service quality, accessibility, digital advancements, and cost of
services. The study helps understand these behaviors to tailor
offerings effectively.

2. Adapting to Market Trends

 With technological advancements and changing financial habits,

banks need to keep up with trends like digital banking,
personalized services, and customer-centric approaches.

3. Improving Service Quality

 A comparative analysis of public and private sector banks can

highlight gaps in service quality, helping banks identify areas for
improvement to meet customer expectations.

4. Building Customer Loyalty

 By understanding what drives customer satisfaction and loyalty,

banks can devise strategies to retain customers in a competitive
market.
5. Enhanced Competition and Growth

 The study helps banks gain insights into their strengths and
weaknesses relative to competitors, enabling them to position
themselves better and drive growth.

6. Catering to Diverse Demographics

 Different customer groups (based on age, income, education, and

location) have distinct needs. Understanding these preferences
allows banks to design inclusive products and services.

7. Impact of Digital Transformation

 With digital banking gaining prominence, understanding how it

influences customer preferences can help banks improve their
technological offerings.

8. Policy and Decision-Making

 Insights from the study can guide policymakers, bank

management, and stakeholders in formulating customer-centric
policies and strategies.

9. Promoting Financial Inclusion

 Public and private sector banks play a crucial role in financial

inclusion. Understanding customer preferences can help in
designing services that cater to underserved or unbanked
populations.

10. Risk Management and Brand Perception

 A better understanding of customer concerns regarding security,

trust, and reliability can help banks mitigate risks and enhance
their brand perception.
This study is crucial for banks to remain competitive, customer-focused,
and adaptable to the evolving financial ecosystem.

STATISTICS OF CUST.
PREFERENCE TOWARDS
PUBLIC AND PRIVATE BANKS
As of 2024, the Indian banking sector has witnessed notable shifts in
customer preferences between public and private sector banks. Key
findings include:

1. Service Quality and Customer Satisfaction

 Private Sector Banks: Studies indicate that private banks often

receive higher ratings in service quality and customer satisfaction.
This is attributed to their emphasis on personalized services and
efficient customer handling.
 Public Sector Banks: While traditionally known for their
extensive reach and trustworthiness, public sector banks have been
making concerted efforts to enhance service quality to match
private counterparts.

2. Financial Performance and Customer Perception

 Public sector banks have shown significant improvement in key

financial metrics, narrowing the gap with private banks. The
median net interest margin (NIM) among public sector banks
improved to 3.01% in fiscal 2024, up from 2.90% in fiscal 2023. In
contrast, private sector banks experienced a slight decline in NIM,
from 4.09% to 3.99% over the same period.

3. Technological Adoption and Digital Services

  Private banks have been at the forefront of adopting digital
technologies, offering advanced online and mobile banking
services that cater to tech-savvy customers. This has enhanced
customer convenience and satisfaction.
 Public sector banks are also investing in digital infrastructure to
improve customer experience, aiming to retain and attract
customers who prioritize technological convenience.

4. Customer Demographics and Preferences

 Younger customers and urban populations tend to prefer private

sector banks due to their modern facilities and innovative services.
In contrast, older customers and rural populations often favor
public sector banks, valuing their established presence and
perceived stability.

These insights reflect a dynamic banking environment in India, where

both public and private sector banks are evolving to meet changing
customer expectations and preferences.
 GRAPHIC REPRESENTATION OF
PUBLIC AND PRIVATE SECTOR
BANKS

Here is a graphical representation comparing public and private sector

banks across various performance metrics as of 2024.

 Public Sector Banks excel in accessibility due to their extensive

branch network.
 Private Sector Banks lead in customer satisfaction, service
quality, and digital adoption.
  The Net Interest Margin (NIM) indicates better financial
performance for private sector banks.

This comparison provides insights into areas of strength and

opportunities for improvement for both types of banks.

HISTORY OF PUBLIC AND

PRIVATE SECTOR BANKS
Public Sector Banks

Public sector banks (PSBs) are government-owned financial institutions

where the government holds a majority stake (51% or more). Their
history is closely tied to the development of modern banking in India
and globally.

1. Early Evolution:
o 18th Century: Banking in India started with the
establishment of the Bank of Hindustan in 1770, followed
by the General Bank of India in 1786.

19th Century: The Presidency Banks—Bank of Bengal (1806), Bank of

Bombay (1840), and Bank of Madras (1843)—laid the foundation of
formal banking.
2. Formation of State Bank of India (SBI):

 In 1955, the Imperial Bank of India was nationalized to form

SBI, marking a major milestone in public sector banking.

3. Nationalization of Banks:

 1969: The Indian government nationalized 14 major private banks

under Prime Minister Indira Gandhi to improve rural banking and
financial inclusion.

 1980: Another 6 banks were nationalized, increasing the share of

government-controlled banking.

4 Post-Liberalization Reforms:

In 1991, economic reforms encouraged competition and modernization

in public sector banks, focusing on profitability, efficiency, and
technology adoption.

5. Recent Consolidation:
From 2017 to 2020, several PSBs were merged to create stronger entities
(e.g., Punjab National Bank merging with Oriental Bank of Commerce
and United Bank of India).

Private Sector Banks:

Private sector banks are financial institutions where private entities or
individuals hold a majority stake. These banks often emphasize
customer-centric services and technology adoption.

1. Early Private Banks:

o Banks such as the Bank of Bengal and Bank of Bombay
initially operated as private banks before evolving into
government-controlled institutions.
o Other private entities, like the Allahabad Bank (established
in 1865), operated independently until nationalization.

Emergence of New Private Banks:

 After the 1991 economic liberalization, Reserve Bank of India

(RBI) allowed the entry of new private banks to foster competition
and innovation.

 Prominent new-generation private banks include HDFC Bank,

ICICI Bank, Axis Bank, and Kotak Mahindra Bank.

3. Technological Leadership:

 Private banks are known for pioneering digital banking and

offering tech-driven services, such as internet and mobile banking.

4. Foreign Participation:

 Private banks often have significant foreign investment, enhancing

their capital and global competitiveness.