TOPIC

COMPARATIVE STUDY OF STATE BANK OF PATIALA AND ICICI BANK ON CAR LOAN

INTRODUCTION
Bank is a financial institution which deals with other people's money i.e. money given by
depositors. A bank may be a person, firm or a company. A banking company means a company
which is in the business of banking. There are many recent trends of banking which are provided
by bank now a days i.e. Electronic Payment Services – E Cheques, e-governance, e-mail, e-
commerce, e-tail etc. In the same manner, a new technology is being developed in US for
introduction of e -cheque, which will eventually replace the conventional paper cheque. India, as
harbinger to the introduction of e -cheque, the Negotiable Instruments Act has already been
amended to include; Truncated cheque and E-cheque instruments. Electronic Funds Transfer
(EFT) Electronic Funds Transfer (EFT) is a system whereby anyone who wants to make payment
to another person/company etc. can approach his bank and make cash payment or give
instructions/authorization to transfer funds directly from his own account to the bank account of
the receiver/beneficiary.Automatic Teller Machine (ATM) Automatic Teller Machine is the most
popular devise in India, which enables the customers to withdraw their money 24 hours a day 7
days a week. It is a devise that allows customer who has an ATM card to perform routine
banking transactions without interacting with a human teller Point of Sale Terminal Point of
Sale Terminal is a computer terminal that is linked online to the computerized customer
information files in a bank and magnetically encoded plastic transaction card that identifies the
customer to the computer. During a transaction, the customer's account is debited and the
retailer's account is credited by the computer for the amount of purchase.

There are many services which are offered by banks i.e:- financial advisory services, cash
management , credit and debit cards, equipment leasing, venture capital, loan services etc. There
are various types of loans which are offered by banks like Car purchase loan, Home purchase
loan, land purchase loan, stamp duty loan, loan against property. Study is based on car loan
therefore, Car loans involve less paperwork and around three to six working days are required to
get the clearance. The interest rates vary from bank to bank based on their base rate. The
repayment process involves monthly EMIs and early repayment options

1
The auto industry (passenger cars and multi-utility vehicles) has been a leading indicator of the
growth of Indian economy. It has been growing at a rate of 16% for the past five years, roughly
twice the rate of our GDP (gross domestic product) growth. We expect the industry to double in
five years on the back of growing aspirations of the current set of manufacturers as well as the
continued inflow of global players.

This empirical study will be analysed the behavioral pattern exhibited by car customers towards
auto loan schemes and banks when they purchase their cars. The study was based on the data
collected from 50 passenger car owners consisting of professionals, employees of public and
private sector, businessmen and agriculturist . The survey will be done with the comparative
study of car loans availing by the customers through public bank like State bank of Patiala and
private bank i.e., ICICI Bank.

State Bank of Patiala (SBOP) is a nationalized Indian bank which is a subsidiary of the State
Bank of India. Founded in 1917 by the then Maharaja His Highness Bhupinder Singh, erstwhile
Patiala, the bank was initially named Patiala State Bank. It was named as State Bank of Patiala
after it became a subsidiary of SBI. The bank was set up with the sole aim of nurturing the
growth of agriculture, trade and industry. In 1948, the bank was brought under the control of the
Reserve Bank of India or RBI. Since its inception, the State Bank of Patiala has been constantly
working towards increasing its size and the volume of business.

ICICI bank is an Indian multinational banking headquartered in Mumbai, Maharashtra, India,

with its registered office in Vadodara. In 2014, it was the second largest bank in India in terms of
assets and third in term of market capitalisation. It offers a wide range of banking products and
financial services for corporate and retail customers through a variety of delivery channels and
specialised subsidiaries in the areas of investment banking, life, non-life insurance, venture
capital and asset management. The bank has a network of 4,450 branches and 14,404 ATMs in
India, and has a presence in 19 countries including India.

This study has been organized in four parts. The first section focuses on the introduction. Here, a
brief introduction about banking sector has been explained in which banking services, trends had
been explained and introduction of state bank of Patiala and Industrial credit and investment

2
corporation of India have been explained. The second part focuses on the need of the study this
will tells us about the consumer preferences for the car loan and which bank they prefer more for
taking car loan and the third part focuses on objective of the study in which objective is to know
about consumer perception, and time period for taking car loan, competitive interest rate. The
fourth part focuses on review of literature and the study tells about the various studies which has
been done earlier by various researchers. It helps to make study easier by providing information
about the topic. The fifth part focus on research methodology of the study and the study tells us
about the research methodology in sample design, sample size, sample procedure and method of
data collection had been taken place.

COMPANY PROFILE OF ICICI:

ICICI Bank is India's second-largest bank with total assets of Rs. 3,849.70 billion (US$ 82 billion)
at September 30, 2008 and profit after tax Rs. 17.42 billion for the half year ended September
30, 2008. The Bank has a network of about 1,400 branches and 4,530 ATMs in India and
presence in 18 countries. ICICI Bank offers a wide range of banking products and financial
services to corporate and retail customers through a variety of delivery channels and through
itsspecialized subsidiaries and affiliates in the areas of investment banking, life and non-
lifeinsurance, venture capital and asset management. The Bank currently has subsidiaries in the
United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong
Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices
inUnited Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia.
Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares
are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited
and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

History:
ICICI Bank was initially advanced in 1994 by ICICI Constrained, an Indian budgetary
establishment, and was its entirely claimed auxiliary. ICICI's shareholding in ICICI Bank was
diminished to 46%through an open offering of shares in India in monetary 1998, a value
offering as ADRs recorded on the NYSE in financial 2000, ICICI Bank's procurement of Bank of
Madura Constrained in an all-stock amalgamation in financial 2001, and optional market deals
by ICICI to institutional speculators in monetary 2001 and monetary 2002. ICICI was shaped in
1955 at the activity of the World Bank, the Legislature of India and agents of Indian industry.
The key goal was to make an improvement monetary organization for giving medium-term and
long haul extend financing to Indian organizations. In the 1990s, ICICI changed its business from
an improvement money related organization offering just venture fund to a broadened

3
budgetary administrations aggregate offering a wide assortment of items and administrations,
both straightforwardly and through various auxiliaries and members like ICICI Bank. In 1999,
ICICI turn into the principal Indian organization and the main bank or money related
establishment from non-Japan Asia to be recorded on the NYSE.

With 7.2% share of India's aggregate non-sustenance credit distributions and 9% of the
managing an account framework's stores in FY11, ICICI Bank is the second biggest bank in the
nation after SBI regarding resource measure. The bank has lost its share of the managing an
account part's advances from 10.2% in FY07 to 6.8% in FY11. Toward the finish of Walk 2011,
the bank had resources of over US$ 104 billion (Rs 4.7 trillion) and an establishment of more
than 5,700 ATMs and 1,800 branches spread the nation over. Retail resources constituted 33%
of advances in FY11 as against 65% in FY07. The bank is concentrating on credit start in the vast
corporate, SME and horticulture fragments and on non-finance based items and
administrations. Other than the bank itself being the market pioneer crosswise over retail
advance portfolios, its backups ICICI Life coverage, ICICI General Protection and ICICI AMC are
pioneers in their separate organizations

NEED OF STUDY

The new car market is growing fast in India. It is helped a lot by easy availability of car loan in
the auto market. As the auto industry is growing car companies have tied up with various banks
and financial institutions for providing loan facility to prospective buyers. The auto industry and
related sectors are growing fast in India. The country has already become the world's second
fastest growing car market. All major car companies are now operating here. Many foreign
companies have seen major success in the market. The South Korean car maker Hyundai has
become the second largest car maker in the country soon after coming to the country. Its model
i10 has become its flagship brand after it surpassed Santro in sales.

The Indian car companies have joint hands with banks to offer car finance facility to its buyers.
Now most of cars can be purchased on credit in the market. In fact majority of cars are being
sold on credit only. For middle class Indians it is convenient to buy things on credit. As a result
most of the expensive buys like houses and motor vehicles are being sold on credit. Both cars
and two-wheelers are being sold on credit. The growing sales are helping in the growth of the
overall economy of the country. The growing trend of buying things on credit is fueled by the
fast growth of the banking industry. As foreign companies have entered the country it is resulting
in increased competition. Many of them are aggressively pushing sales of retail credit plans. As

4
the urban young workers are having more money in their hands, it is becoming easy for them to
get credit from banks. Fast emerging industries like information technology and related sectors
are helping young people earn more money and spend it on big ticket purchases.

There are many benefits of buying things on credit. You do not need to save for many months
and then buy some expensive item. You can do it easily after availing of some loan. This way,
any salaried person can easily buy an expensive item and pay easily in equated monthly
installments. Thus credit schemes like car loan are helping both salaried prospective buyers and
the overall auto industry.

OBJECTIVES OF THE STUDY

1. To study and analyze the various aspects of buying behavior of passenger car customers
towards car loan through public and private banks.
2. To analyze the reasons for using own funds instead of opting auto finance.
3. To study the loan tenure and arrangement of finance.
4. To study the competitive interest rates and transparent procedures to avail car loan.
5. To study the influence in availing finance from a particular bank.

One of the most important factors that influences purchase of passenger cars in India is the
availability of auto finance or consumer credit. This empirical study analyses the behavioral
pattern exhibited by passenger car customers towards auto loan schemes and financiers when
they purchase their cars.

Finding just the right car can be a challenge but deciding how to pay for it can be even
tougher. With a personal loan from a bank or building society you can spread the cost over one
to seven years. The monthly repayments can be higher than for other options, but you own the
car and the total amount you pay should work out less than most other methods.

Tenor in finance can have multiple usages, but it most commonly refers to the amount of time
left for the repayment of a loan or until a financial contract expires. It is most commonly used for

5
non standardized contracts, such as foreign exchange and interest rate swaps, while the term
maturity is usually used to express the same concept for government bonds and corporate bonds.

Compare interest rates of top 20 Car loan banks in India :- to know about the interest rate of the
banks for the repayment and which bank have less interest rate and the procedure for taking the
car loan. Majority of buyers, around the world, apply for a car loan while purchasing a new or
used car. In fact, getting a loan for cars has become a lot easier than it used to be a decade ago.
There are various government and private banks, car financing firms and auto-dealers that
provide loans on attractive interest rates and longer repayment facilities. Therefore, being a
buyer, it is important to understand all the important car loan factors before finalizing a bank or a
finance company.

REVIEW OF LITERATURE

A literature review is a critical and in depth evaluation of previous research and further study is
done on the basis of that previous research. The study is based to know about consumer buying
behavior for taking car loan and how a new car buyer feels about his purchase. What factors
determine his reactions when he begins living with his new car and the time period for taking the
loan and from which bank consumer will preferred for taking car loan. Various studies are
following:-

Pavleen et al. (2003) in their article have perceived that the family as a reference group has one
of the strongest, most immediate and pervasive effects on a consumer’s personality motivation
and attitudes. The author have affirmed that from the marketing point of view investigating the
family as a consumption unit becomes crucial since attitudes towards saving and spending, and
even towards brands and products, are often molded by the family.

Bell (1967) studies how a new car buyer feels about his purchase and what factors determine his
reactions when he begins living with his new car. The finding of this investigation suggests the
effect of a customer’s self confidence, his personality, and the quality of service he receives upon
his cognitive dissonance.

Grubb & Gregg (1968) tests a methodology for measurement of self-concept and consumer
behavior in comparable terms and, therefore, to further substantiate the relationship of self theory

6
to consumer behavior. The authors suggests that the owners of a specific make of automobiles
perceive themselves as having self-concepts similar to those of others who own that make of
automobile, and significantly.

William (1991) investigated the effects of the extrinsic cues of price, brand and store
information on consumer perception of product quality. They found that price had a positive
effect on perceived quality but a negative effect on perceived value and respondents’ willingness
to buy. Increase in self assessed knowledge was associated with decrease in the utilization of
sales persons recommendations.

Samson (1992) has observed that purchase decisions are determined on the basis of both
absolute attributes of the alternatives and their relative positions within the particular choice set
under consideration. He has further suggested that consumers are less likely to choose
alternatives that were selected by other consumers for reasons that do not apply to them and that
consumers are less likely to choose alternatives that are offered with unneeded features or
premium even when these features do not reduce the value of the product in any way.

Park et al. (1994) assessing the consumer knowledge have observed that consumer knowledge is
an important construct in understanding consumer behavior such as information search and
information processing. Increase in self assessed knowledge was associated with decrease in the
utilization of sales persons recommendations.

Richard et al. (2003) in their large – scale, national study investigates the influences of monthly
payment incentives (rebates and low interest rates) on the decision process of both car and truck
owners and lessees. Results suggest that incentives were found rated significantly more
important among lessees than among buyers. While evidence suggests that incentives obviously
should not be used on a wholesale basis, there appears to be a niche among which incentives may
be successful. Authors suggests that lessees would be more open to choosing a vehicle that has
an attractive monthly payment via rebates and other incentives.

Diehl (2005) suggests that consumers often search for and choose from ordered sets, commonly
from options listed from best to worst. Greater search can lead to more positive evaluations for
improving versus declining orderings because consumers experience more positive moments on

7
which to base their evaluation. Overall evaluations are influenced by differences in these key
moments over and above quality changes of the set.

Lerouge & Luk (2006) in their article proposes that many buying decisions require predictions
of another person's product attitudes. Yet, consumers are decisions require predictions of another
person's product attitudes. Yet, consumers are often inaccurate predictors, even for familiar
others.

RESEARCH METHODOLOGY

Research is a systematic method of finding solutions to problems. It is essentially an

investigation, a recording and an analysis of evidence for the purpose of gaining knowledge.
According to Clifford woody, “research comprises of defining and redefining problem,
formulating hypothesis or suggested solutions, collecting, organizing and evaluating data,
reaching conclusions, testing conclusions to determine whether they fit the formulated
hypothesis”

Sampling Design

A sample design is a finite plan for obtaining a sample from a given population. Simple random
sampling will be used for this study.

Universe
The universe chooses for the research study the Car Customers.

Sample Size
Number of the sampling units selected from the population is called the size of the sample.
Sample of 50
Car Customers will be obtained from the population.

Sampling Procedure
The procedure adopted in the present study will be based on probability sampling, which is also
known as chance sampling. Under this sampling design, every item of the frame has an equal
chance of inclusion in the sample.

8
Methods of Data Collection
The data’s will be collected through Primary and secondary sources.

Primary Sources
Primary data are in the form of “raw material” to which graphical methods are applied for the
purpose of analysis and interpretations.
The primary sources are discussion with Car Customers, data will be collected through
questionnaire.

Secondary Sources
Secondary data’s are in the form of finished products as they have already been treated
statistically in some form or other. The secondary data mainly consists of data and information
collected from customer records, Bank websites and also discussion with the Car Customers.
Secondary data will also be collected from journals, magazines and books.

Questionnaire
A well defined questionnaire that will be used effectively can gather information on both overall
performance of the system as well as information on specific components of the system. The
questions then be arranged in proper order, in accordance with the relevance.

Variables of the Study

The direct variable of the study will be Car Customers availing loan from Public and Private
Banks

Presentation of Data
The data will be presented through charts and tables.

Limitations of the study:

Though many efforts made to make the report accurate and reliable but it suffer from certain
limitations such as:-

9
  It is difficult to find out the person who get loan from these banks.
 Sometimes respondents may not respond well to all the questions in the questionnaire.
 Possibility of error because many persons don’t give right answer of my questions

Chaptalization Scheme
This research project consists of seven chapters, excluding reference and appendices list. The
chapters are presented below.

CHAPTER 1 Introduction

CHAPTER 2 Objective & Scope of Study

CHAPTER 3 Review of Literature

CHAPTER 4 Research Methodology

CHAPTER 5 Data Analysis and interpretation

CHAPTER 6 Recommendation

CHAPTER 7 Conclusions & Implications

Bibliography

Annexure

QUESTIONNAIRE:

1) What is your occupation?

Business man
Government employee
House wife
Student
Other

10
2) From how many years you are associated with this bank?
Less than 1 year
1-5
More than 5 yea
3) How do you come to know about the home loan schemes of this bank?
News paper
Television
Internet
Other resources
4) Are you aware of these types of home loans?
Home purchase loan
Home construction loan
Home improvement loan
Home extension loan
Home equity loan Land purchase loan
5) Are you aware all terms and conditions of home loans?
Yes No
6) Are you satisfied with the interest rate charges by your bank?Strongly agree
AgreeStrongly
disagree Disagree
7) Your bank offers which type of services? Mobile banking Net banking Forex banking
8) Do you agree that your bank loan processing is fast?
Strongly agree Agree
Strongly Disagree Disagree
9) Do you satisfy with the after home loan services provided by your bank are bestas
compare to other bank?
Strongly agree Agree Strongly disagree Disagree
10) Does the cost of home loan is appropriate, according to your demand?
Yes No

11
REFERENCES

D. Gershoff & Gita Venkataramani Johar ( 2006), “Do You Know Me ? Consumer Calibration
of Friends' Knowledge”, Journal of Consumer Research, Vol. 32, pp. 496 – 503.

Aradhana Krishna (1994), “The effects of Deal Knowledge on Consumer Purchase

Behavior”, Journal of Marketing Research,Vol.31, pp.102-108.

Edmunds (2010) http://www.edmunds.com/advice/finance/articles/159646/article.html James

Helperin”New Credit Scoring System Affects Auto Loans”.

C.Whan Park, David L Motherbaugh & Lawrence Feick (1994),“Consumer Knowledge

Assessment”, Journal of Consumer Research, Vol.21, pp.210 – 218.

Davy Lerouge & Luk Warlop (2006), “Why it is so Hard to Predict Our Partner's Product
Preferences – The Effect of Target Familiarity on Prediction Accuracy”, Journal Of Consumer
Research, Vol. 33, pp. 393.

William B Doods (1991), “ Effects of Price , Brand & Store Information on Buyers Product
Evaluation”, Journal of Marketing Research, pp.301-319.

12