A Comparative Study on the Performance of Public and Private Sector Banks

Abstract

newline Abstract newlineIndian banking has undergone tremendous changes over time and the entry of private newlinesector banks has transformed Indian banking both structurally and functionally. In this newlinecompetitive environment, presence of an effective banking system is essential for the newlineeconomic activities and industrial progress of a country. Looking at the prevailing newlinecompetitive environment among banks, it was thought to be imperative to study and newlinecompare the performance of public and private sector banks. The present study has newlinebeen conducted to analyze comparative financial performance and financial newlineinclusiveness of public and private sector banks. The study also analyzed relative newlinecustomer satisfaction levels of public and private sector banks. The comparison of newlinefinancial performance inclusiveness of selected bank groups was done on the basis of newlinesecondary data collected over 10 years (2005-06 to 2014-15), since the formal newlineinception of financial inclusiveness in 2005-06. Various statistical techniques like newlinepercentage method, compounded annual growth rate and ratio analysis were applied newlineto study and compare the financial performance and inclusiveness of selected bank newlinegroups. To gain an insight into the level of customer satisfaction with regard to newlineservices provided by public and private sector banks. A sample of 900 customers from newlinethree northern region states i.e. Punjab, Haryana and Himachal Pradesh was selected newlinefor primary survey. A well-structured questionnaire was used to collect the data. newlineCustomer satisfaction was studied on the basis of various parameters like newlineeffectiveness, accessibility, cost, tangibles, reliability and empathy. Association newlinebetween the selected parameters and socio-economic variables i.e. age, gender, newlineeducational qualification, occupation, annual income and area was studied using chi newlinesquare test. Mean and standard deviation also were calculated to identify the extent of newlinedispersion in the opinion of customers. newlineThe results revealed that in terms of financial performance, public sector banks were newlinebetter performers in credit-deposit ratio and investment-deposit ratio, whereas private newlinesector banks were ahead in terms of NPA management, return on assets, return on newlineequity, net interest margin and maintaining capital adequacy ratio. Cost of deposits of newlineboth the bank groups was found to be almost at par. The results of financial inclusion newlineconcluded that private sector banks were ahead in ATM penetration, Public sector newlinebanks need to promote the usage of debit cards other than using it as an ATM card. In newlinecustomer satisfaction, mobile and internet banking was a matter of concern for both newlinex newlinepublic and private sector banks. Private sector bank customers were comparatively newlinemore satisfied with effectiveness, reliability and tangibility indicators. On the other newlinehand public sector banks were more cost effective. Accessibility is still a matter of newlineconcern for public sector banks, whereas private sector banks need to maintain better newlinetransparency when it comes to levying fees and charges on services.