Management Thesis

FINAL REPORT OF MANAGEMENT THESIS-“I”

-: Berhampur:-

-: TITLE: -

“INTEREST RATE FLUCTUATION AND ITS IMPACT ON DEMAND FOR CONSUMER DURABLE LOANS.”

Under the guidance of:-

Dr. R.K Panda (INC, Berhampur)

PRESENTED BY: -

Himanshu Sekhar Sahoo. ENROLLMENT NO.:-7NBBH072 (A)

CONTENT ACKNOWLEDGEMENT CHAPTER-

1

INTRODUCTION Objective Limitation Methodology

CHAPTER-

2

OVERVIEW OR ABSTRACT OF THE STUDY BANKING Industry Profile

CHAPTER -

3

SUMMARY OF THE THESIS Company Profile OF SBI AND ICICI BANK Company profile of sbi and icici bank in berhampur

CHAPTER-4

CHAPTER-5

EFFECT OF INTEREST RATE ON DEMAND OF CONSUMER DURABLE AND VEHICLE LOAN (A COMPARISON STUDY BETWEEN SBI AND ICICI BANK) CONCLUDING REMARKS SUGGESTIONS

REFERENCE

ACKNOWLEDGEMENT To bring out this project a successful one I have received help from various sources. Firstly I acknowledge my wholehearted thanks to my principal Mr. Madanmohan Sahu. It gives us a great pleasure to express my sincere and deepest sense of gratitude to Dr.R.K.Panda, for suggesting the topic of this project, his ready and able guidance throughout the course of this management thesis. I am greatly indebted to him for his constructive and helpful suggestion from time to time during the progress of this management thesis and without which this project would never have been completed.

I also thankful to those personal who gave their valuable time in giving us the necessary data and we also thankful to ICFAI NATIONAL COLLEGE ,Berhampur to make the project successful.

Mr. Himanshu Sekhar Sahoo

Chapter-1 INtrODuction An Interest Rate is a fee paid on borrowed assets. “The fee is compensation to the lender for foregoing other useful investments that could have been made with the loaned money. Instead of the lender using the assets directly, they are advanced to the borrower. The borrower then enjoys the benefit of the use of the assets ahead of the effort required to obtain them, while the lender enjoys the benefit of the fee paid by the borrower for the privilege.” Causes of interest rates •

Deferred consumption- When money is given as loan the lender defers spending the money on consumption goods. Since according to time preference theory people prefer goods now to goods later, in a free market there will be a positive interest rate.

•

Inflation-During inflation, the purchasing power of money gets reduced. A given amount of money buys fewer goods in the future than what it can buy now. The borrower therefore needs to compensate the lender for this.

•

Alternative investments- The lender has a choice between using his money in different investments. If she chooses one, she forgoes the returns from all the others. Different investments effectively compete for funds.

•

Risks of investment. There is always a risk that the borrower will go bankrupt, abscond, or otherwise default on the loan. This means that a lender generally charges a risk premium to ensure that, across his investments, he is compensated for those failures.

•

Liquidity preference- People prefer to have their resources available in a form that can immediately be exchanged, rather than a form that takes time or money to realize.

•

Taxes- Because some of the gains from interest may be subject to taxes, the lender may insist on a higher rate to make up for this loss.

Study of consumer behavior is of utmost importance in the backdrop of a growing economy. As Indian economy is continuously growing since last several years, people’s income and expenditure pattern have also undergone important changes. Like any part of urban India, the consumption behavior in Berhampur is also getting changed very fast. It is in this background that a large number of corporate retailers have started their operations in this small but important town in the Southern part of this state. Due to increased purchasing power propelled by the new income sources in recent years, the consumers are found to be extra motivated to purchase varieties of consumer Durables which are extra expensive in nature. Proposed study would be a modest venture to understand the role of loans provided by the banks to stimulate the demand for consumer durables.

Objective The purpose of the present study is to accomplish the following objectives:  To know the reasons of fluctuation in interest rate.

 To know the effect of interest rate fluctuation on demand for consumers durable loan provided by SBI.

Limitation Though the present study aims to achieve the objectives that cited above in full earnestness and accuracy, it hampered due to certain limitations. Some of the limitations of this study summarized as follows. 

Sample size is limited due to the limited period allocated for the survey.

Methodology The present study is developed on the basis of secondary data. Secondary data obtained from a selected no. of bank branches functioning in Berhampur. According to plan two banks under public sector and two banks in private sector were covered. Again as per the requirement of the study, time series monthly data on the amount of loan sanctioned, no of loans and the rate of interest on these loans were obtained from the selected bank branches. List of bank branches studied are

i)

ICICI Bank, Dharma Nagar Branch, Berhampur

ii)

State Bank Of India, Main Branch, Berhampur

ANALYSIS: By regressing the amount of loan on rate of interest rate the true causal behavior between the variable were studied. By calculating the Karl Pearson coefficient the rate of correlation were obtained. The disaggregated picture of correlation coefficient bank wise tested with paired T test. The seasonality behavior of rate of interest and demand for consumer durable loans were studied on the basis of time series statistical tool.

CHAPTER-2 BANKING INDUSTRY PROFILE Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1925 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. The first fully Indian owned bank was the Allahabad Bank, established in 1865. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The Bank of Bengal, which later became the State Bank of India. By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership.

CHAPTER -3

Company profile of sbi and icici bank SBI :State Bank of India (SBI) (LSE: SBID) is a Public Sector Banking Organisation (PSB), in which the Government of India is the biggest shareholder. It is the largest bank in India and is ranked at 380 in 2008 Fortune Global 500 list, and ranked 219 in 2008 Forbes Global 2000. Measured by the number of branch offices, SBI is the second largest bank in the world. SBI traces its ancestry back to the Bank of Calcutta, which was established in 1806; this makes SBI the oldest commercial bank in the Indian subcontinent. SBI provides various domestic, international and NRI products and services, through its vast network in India and overseas. With an asset base of $126 billion and its reach, it is a regional banking behemoth. In recent years the bank has focused on four priorities, first, reducing its huge staff through the Golden handshake scheme known as the Voluntary Retirement Scheme, second, computerizing its operations, third, implementation of Business Process ReEngineering(BPR), and fourth, trying to change the rude attitude of its staff through a program aptly named 'Parivartan' or 'change'. On the whole, the Bank has been successful in the first three initiatives but has failed in Parivartan. Type

Public (BSE, NSE:SBI) & (LSE: SBID)

Founded

Calcutta, 1806 (as Bank of Calcutta) Corporate Centre,

Headquarters

Madame Cama Road, Mumbai 400 021 India

Key people

Chairman Om Prakash Bhatt

Industry

Banking Insurance Capital Markets and allied industries

Products

Loans, Credit Cards, Savings, Investment vehicles, SBI Life (Insurance) etc.

Revenue

USD 22.4 billion (2008)

ICICI Bank:-

ICICI Bank is India's second-largest bank. The Bank has a network of about 573 branches and extension counters and over 2,000 ATMs. ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its whollyowned subsidiary. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. In 2001, ICICI bank acquired Bank of Madura Limited. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has subsidiaries in the United Kingdom, Canada and Russia, branches in Singapore and Bahrain and representative offices in the United States, China, United Arab Emirates, Bangladesh and South Africa. Today, 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 its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank Limited, together with its subsidiaries, offers various banking products and financial services in the areas of commercial banking, investment banking, and insurance to retail and corporate customers primarily in India. The company offers various deposit products, which include time deposits, savings accounts, current accounts, and certificates of deposits. Its loan portfolio includes home loans, automobile loans, commercial business loans, two wheeler loans, personal loans, agricultural loans, working capital loans, and credit cards, as well as offers dealer funding, and technology and developer financing products and services. ICICI Bank also offers various agricultural and rural banking products, including loans for crop production, micro-finance, and purchase of farm equipment, as well as offers commodity based finance, and various savings, investment, and insurance products. In addition, it offers foreign exchange and derivatives, escrow, investment banking, demat,

equity underwriting and brokerage, venture capital and private equity, and life and general insurance products and services. Further, the company provides custodial, tax collection, cash management, mobile banking, Internet banking, online banking, ATM, and treasury banking services. As of March 31, 2008, ICICI Bank had a network of 1,308 branches and operated 3,950 automated teller machines. It also has operations in the United Kingdom, Canada, Russia, Singapore, Bahrain, Dubai, Sri Lanka, Hong Kong, Qatar, Bahrain, the United States, China, the United Arab Emirates, Bangladesh, South Africa, Thailand, Indonesia.

Name of the branches of SBI and Associate branches in Berhampur:1-SBI Main Branch City Hospital road, Gate bazar Berhampur. 2- SBI Gandhi Nagar branch Gandhi Nagar Berhampur 3- SBI Gosaninuagan Branch Gosaninuagan main road Berhampur 4- SBI medical branch MKCG medical road, Berhampur 5- SBI regional branch Brahma Nagar Berhampur 6 -SBI industrial branch Court peta square, Berhampur Associate Branches of SBI in Berhampur State Bank Of Hyderabad, Station Road, Berhampur

ICICI Bank Dharma Nagar, Berhampur.

CHAPTER -4 Effect of interest rate on demand of consumer durable and vehicle loan (a comparison study between sbi and icici bank) TABLE 1 : NO OF CONSUMER DURABLE LOANS AND AMOUNT TAKEN THROUGH OUT THE YEAR

60

MONTH

50

40

30

IN SBI

NO. OF AMOUNT OF AMOUNT OF CONSUMER LOAN TAKEN IN LOAN PER DURABLE LOANS LACS. PERSON IN SBI given by SBI BANK (PERSONAL AND NOOFCONSUMERDURABLELOANS VEHICAL LOAN)

20

10

0

JAN 2008

49

59.520

1.214

FEB 2008

32

36.00

1.125

Jan-08 Feb-08 Mar- Apr-08 May- Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 08 08

MARCH 2008

04

06.00

1.5

APRIL 2008

37

42.40

1.146

MAY 2008

32

37.00

1.156

JUNE 2008

42

51.60

1.228

JULY 2008

31.2

37.618

1.205

AUGUST 2008

31.2

37.618

1.205

SEPTEMBER 2008

31.2

37.618

1.205

OCTOBER 2008

31.2

37.618

1.205

NOVEMBER 2008

31.2

37.618

1.205

DECEMBER 2008

29

40.37

1.392

CHART 1: NO. OF CONSUMER DURABLE AND VEHICLE LOAN TAKEN IN SBI BANK

CHART 2: AMOUNT OF LOANS TAKEN IN LACS IN SBI BANK

70 60 50 AMOUNTOFLOANSTAKENINLACS.

40 30 20 10 0 Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec08 08 08 08 08 08 08 08 08 08 08 08

TABLE 2: AMOUNT OF LOANS TAKEN IN A YEAR IN SBI BANK

MONTH

AMOUNT OF LOAN TAKEN IN LACS.

JAN 2008

59.520

FEB 2008

36.00

MARCH 2008

06.00

APRIL 2008

42.40

MAY 2008

37.00

JUNE 2008

51.60

JULY 2008

37.618

AUGUST 2008

37.618

SEPTEMBER 2008

37.618

OCTOBER 2008

37.618

NOVEMBER 2008

37.618

DECEMBER 2008

40.37

OBSERVATION:It is clear from the table that the highest amount of loan taken is 59.52 lacs in the month of January, and lowest loan taken is 6 lacs in the month of March. The lowest amount of loan taken in this month is due to the reason that this is the end of the financial year and people are busy with their paper works, auditing and tax related works that’s why the amount of loan taken gone down this month.

TABLE 3: INTEREST RATE FLUCTUATION THROUGH OUT THE YEAR IN SBI BANK

MONTH

INTEREST RATE

JAN 2008

12.75

FEB 2008

12.75

MARCH 2008

12.25

APRIL 2008

12.25

MAY 2008

12.25

JUNE 2008

12.25

JULY 2008

12.75

AUGUST 2008

13.75

SEPTEMBER 2008

13.75

OCTOBER 2008

13.75

NOVEMBER 2008

13.75

DECEMBER 2008

13.00

OBSERVATION:In table 3 the minimum interest rate charged by SBI bank is only 12.25% which is much lower than the interest rate of other private level banks. SBI bank is always

concentrating to give much benefit to the customer in lowest cost and that’s why the popularity is never diminishing despite of presence of world class competitors.

CHART 3: INTEREST RATE THROUGH OUT THE YEAR IN SBI BANK

14 13.5 13 12.5 12 11.5 11 10.5 10

INTEREST RATE

Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec08 08 08 08 08 08 08 08 08 08 08 08

TABLE 4: NO OF CONSUMER DURABLE LOANS AND AMOUNT

TAKEN THROUGH OUT THE YEAR IN ICICI BANK MONTH

NO. OF CONSUMER DURABLE LOANS

AMOUNT OF LOAN TAKEN IN

AMOUNT OF LOAN PER

GIVEN BY ICICI BANK (PERSONAL AND VEHICAL LOAN)

LACS.

PERSON IN ICICI BANK

JAN 2008

10

5.50

0.55

FEB 2008

12

6.24

0.52

MARCH 2008

14

5.46

0.39

APRIL 2008

28

10.40

0.357

MAY 2008

30

14.40

0.48

JUNE 2008

27

75.60

2.8

JULY 2008

28

12.60

0.45

AUGUST 2008

20

8.40

0.42

SEPTEMBER 2008

19

8.55

0.45

OCTOBER 2008

18

10.80

0.6

NOVEMBER 2008

22

9.90

0.45

DECEMBER 2008

13

5.20

0.4

TABLE 5: INTEREST RATE OF ICICI BANK MONTH

INTEREST RATE OF ICICI BANK

JAN 2008

14.5%

FEB 2008

15%

MARCH 2008

15%

APRIL 2008

13%

MAY 2008

13%

JUNE 2008

13%

JULY 2008

13%

AUGUST 2008

13.5%

SEPTEMBER 2008

13.5%

OCTOBER 2008

13.5%

NOVEMBER 2008

14.5%

DECEMBER 2008

14.5%

OBSERVATION:table 5 shows that interest rate of ICICI bank is nowhere less than 13% i.e. the minimum interest rate charged by ICICI bank is 13%.

TABLE :-6

MONTH

AMOUNT OF LOAN PER PERSON IN SBI BANK

AMOUNT OF LOAN PER PERSON IN ICICI BANK

JAN 2008

1.214

0.55

FEB 2008

1.125

0.52

MARCH 2008

1.5

0.39

APRIL 2008

1.146

0.357

MAY 2008

1.156

0.48

JUNE 2008

1.228

2.8

JULY 2008

1.205

0.45

AUGUST 2008

1.205

0.42

SEPTEMBER 2008

1.205

0.45

OCTOBER 2008

1.205

0.6

NOVEMBER 2008

1.205

0.45

DECEMBER 2008

1.392

0.4

OBSERVATION:Table 6 is a comparison of amount of loans taken per person between SBI bank and ICICI bank. This table shows that the most of the customers are interested to take loans from SBI bank, the reason behind that is the trust and customer satisfaction towards SBI bank is higher than any other private bank. That’s why most of the customers are interested to take loan from SBI rather than any other bank.

CHART 4: COMPARISON OF AMOUNT OF LOAN PER PERSON BETWEEN SBI BANK AND ICICI BANK 3 2.5

AMOUNTOFLOANPERPERSON INSBI BANK

2

AMOUNTOFLOANPERPERSON INICICI BANK

1.5 1 0.5 0 Jan- Feb- M Apr- M Jun- Jul- Aug- Sep- Oct- Nov- Dec08 08 ar- 08 ay- 08 08 08 08 08 08 08 :- 08 08

TABLE 7

MONTH

NO. OF CONSUMER DURABLE LOANS GIVEN BY SBI (PERSONAL AND VEHICAL LOAN)

NO. OF CONSUMER DURABLE LOANS GIVEN BY ICICI BANK (PERSONAL AND VEHICAL LOAN)

JAN 2008

49

10

FEB 2008

32

12

MARCH 2008

04

14

APRIL 2008

37

28

MAY 2008

32

30

JUNE 2008

42

27

JULY 2008

31.2

28

AUGUST 2008

31.2

20

SEPTEMBER 2008

31.2

19

OCTOBER 2008

31.2

18

NOVEMBER 2008

31.2

22

DECEMBER 2008

29

13

OBSERVATION:-

Table 7 shows that more no of customers are taking loans from SBI bank than ICICI bank. As we all know that ICICI bank is the no. 1 bank giving the top facilities and having the less formalities to take a loan from bank than SBI bank but people taking loans in a great no from SBI bank.

TABLE :-8 MONTH

AMOUNT OF AMOUNT OF LOAN TAKEN IN LOAN TAKEN IN LACS.(SBI) LACS.(ICICI)

JAN 2008

59.520

5.50

FEB 2008

36.00

6.24

MARCH 2008

06.00

5.46

APRIL 2008

42.40

10.40

MAY 2008

37.00

14.40

JUNE 2008

51.60

75.60

JULY 2008

37.618

12.60

AUGUST 2008

37.618

8.40

SEPTEMBER 2008

37.618

8.55

OCTOBER 2008

37.618

10.80

NOVEMBER 2008

37.618

9.90

DECEMBER 2008

40.37

5.20

OBSERVATION:This table shows that the amount of loan taken in SBI bank is higher than the loans taken from ICICI bank. Despite of high formalities, mandatory security submission and long procedure in SBI bank customers are taking high amount of loans from SBI because they realized the conduct of ethical behavior in SBI bank which is highly lacking in ICICI bank, that’s why people have more faith on SBI bank than any other private sector bank.

TABLE 9:MONTH

INTEREST RATE OF SBI BANK

INTEREST RATE OF ICICI BANK

JAN 2008

12.75

14.5%

FEB 2008

12.75

15%

MARCH 2008

12.25

15%

APRIL 2008

12.25

13%

MAY 2008

12.25

13%

JUNE 2008

12.25

13%

JULY 2008

12.75

13%

AUGUST 2008

13.75

13.5%

SEPTEMBER 2008

13.75

13.5%

OCTOBER 2008

13.75

13.5%

NOVEMBER 2008

13.75

14.5%

DECEMBER 2008

13.00

14.5%

OBSERVATION:This table shows clearly another reason of popularity of SBI bank that is its interest rate. It’s clearly proved from this data that SBI bank offers minimum interest rate which will encourage the customers to take more loan. Other private bank offers more features apart from core features and they charge this expenditure on customer through interest rate. That’s why we find higher interest rate in private sector banks than public sector banks.

Regression analysis:Regression analysis is based on the relationship between two or more variables. The known variable is the independent variable and the variable we are trying to predict is the dependent variable. An inverse relationship exists between the variables. If X represents the cause and Y, the effect we are searching for Y= a +b X In this analysis I have taken

X= Rate of interest for different month Y= Amount of loan of bank REGRESSION ANALYSIS OF SBI BANK:Y= Amount of loan taken from SBI X2

XY

12.75

162.5625

758.88

36.00

12.75

162.5625

459

MARCH 2008

06.00

12.25

150.0625

73.5

APRIL 2008

42.40

12.25

150.0625

519.4

MAY 2008

37.00

12.25

150.0625

453.25

JUNE 2008

51.60

12.25

150.0625

632.1

JULY 2008

37.618

12.75

162.5625

479.6295

AUGUST 2008

37.618

13.75

189.0625

517.2475

SEPTEMBER 2008

37.618

13.75 189.0625

517.2475

OCTOBER 2008

37.618

13.75

189.0625

517.2475

NOVEMBER 2008

37.618

13.75

189.0625

517.2475

DECEMBER 2008

40.37

13.00

169

524.81

TOTAL

498.598

155.25

2013.188

5969.56

MONTH

AMOUNT OF LOAN TAKEN IN LACS.(Y)

INTEREST RATE

JAN 2008

59.520

FEB 2008

(X)

X= Rate of interest rate for different months

SCATTERED DIAGRAM FOR SBI BANK X-axis: interest rate Y- axis; amount of loan

This is the regression line of two variables. The regression line should be drawn on the scatter diagram in such a way that when the squared values of the vertical distance from each plotted point to the line are added, the total amount will be the smallest possible amount. We obtain the following formulae to calculate the coefficient a and b in the regression line Y=a+bX 



b = n∑XY – (∑X)( ∑Y) n∑X2 – (∑X)2 a= Y–bX



For SBI bank the value of ‘b’ is



12( 5969.56) - (155.25) (498.598) 12 *(2013.188) – (155.25)2 = -103.6497

Here the value of b= -103.6497 From this we came to the analysis that in the increase in the value of X by 100 pts the value of Y decreases by103.6497 pts, in other words with the increase in interest rate by 100 pts the value of amount of loan taken decreases by 103.6497 pts. Here we can conclude that with the increase in interest rate the demand for loan decreases that’s why the demand of loan for consumer durables is price elastic. REGRESSION ANALYSIS OF ICICI BANK:Y= Amount of loan taken from ICICI bank X= Rate of interest rate for different months

MONTH

AMOUNT OF LOAN INTEREST RATE TAKEN IN LACS. (Y) OF ICICI BANK (X)

X2

XY

JAN 2008

5.50

14.5

210.25

79.75

FEB 2008

6.24

15

225

93.6

MARCH 2008

5.46

15

225

81.9

APRIL 2008

10.40

13

169

135.2

MAY 2008

14.40

13

169

187.2

JUNE 2008

75.60

13

169

982.8

JULY 2008

12.60

13

169

163.8

AUGUST 2008

8.40

13.5

182.25

113.4

SEPTEMBER 2008

8.55

13.5

182.25

115.425

OCTOBER 2008

10.80

13.5

182.25

145.8

NOVEMBER 2008

9.90

14.5

210.25

143.55

DECEMBER 2008

5.20

14.5

210.25

75.4

TOTAL

173.05

2303.5

2317.825

SCATTERED DIAGRAM FOR ICICI BANK

X-axis: interest rate, Y- axis; amount of loan

166.00

We obtain the following formulae to calculate the coefficient a and b in the regression line Y=a+bX 



b = n∑XY – (∑X)( ∑Y) n∑X2 – (∑X)2 a= Y–bX



For ICICI bank the value of ‘b’ is



b = 12 (2317.825) – (166.00)( 173.05) 12(2303.5) – (166.00)2 = -10.609

Here the value of b=-10.609 From this we came to the analysis that in the increase in the value of X by 100 pts the value of Y decreases by10.609 pts, in other words with the increase in interest rate by 100 pts the demand of loan decreases by 10.609 pts. Here we can conclude that with the increase in interest rate the demand for loan decreases that’s why the demand of loan for consumer durables is price elastic.

Concluding remarks 1It is clear from the table that the highest amount of loan taken is 59.52 lacs in the month of January, and lowest loan taken is 6 lacs in the month of March. The lowest amount of loan taken in this month is due to the reason that this is the end of the financial year and people are busy with their paper works, auditing and tax related works that’s why the amount of loan taken gone down this month.

2The minimum interest rate charged by SBI bank is only 12.25% which is much lower than the interest rate of other private level banks. SBI bank is always concentrating to give much benefit to the customer in lowest cost and that’s why the popularity is never diminishing despite of presence of world class competitors.

3Table 5 shows that interest rate of ICICI bank is nowhere less than 13% i.e. the minimum interest rate charged by ICICI bank is 13%.

4This table is a comparison of amount of loans taken per person between SBI bank and ICICI bank. This table shows that the most of the customers are interested to take loans from SBI bank, the reason behind that is the trust and customer satisfaction towards SBI bank is higher than any other private bank. That’s why most of the customers are interested to take loan from SBI rather than any other bank.

5This table shows that more no of customers are taking loans from SBI bank than ICICI bank. As we all know that ICICI bank is the no. 1 bank giving the top facilities and having the less formalities to take a loan from bank than SBI bank, but people taking loans in a great no from SBI bank.

6This table shows that the amount of loan taken in SBI bank is higher than the loans taken from ICICI bank. Despite of high formalities, mandatory security submission and long procedure in SBI bank customers are taking high amount of loans from SBI because they realized the conduct of ethical behavior in SBI bank which is highly lacking in ICICI bank, that’s why people have more faith on SBI bank than any other private sector bank.

7This table shows clearly another reason of popularity of SBI bank that is its interest rate. It’s clearly proved from this data that SBI bank offers minimum interest rate which will encourage the customers to take more loan. Other private bank offers more features apart from core features and they charge this expenditure on customer through interest rate. That’s why we find higher interest rate in private sector banks than public sector banks.

Suggestions 1ICICI bank does not verify the securities and creditworthiness of customer and sanctions loan in a few days, this shows that they are not conducting the ethical behavior properly that’s why people perceive it as a non ethical institution. But SBI bank takes more time to verify the credit worthiness of customer and obeys all formalities before sanctioning the loan. 2Private Banks is more concentrating on the value added services and extra features, which they think that it, will attract the customers but they are neglecting the core features of a bank. This is the main reason despite heavy expenditure private banks are not able to compete with public sector banks and SBI being the pioneer of all the public banks.

Reference To make my project a successful one I have taken help from various sources, such as direct interaction journals and web sites. The books I have referred are  Financial management (ICFAI). Some of the journals I have referred are  Author

Mr. Raghu Mohan, Falling Interest?, Magazine BUSINESS WORLD 2008, 29 Sep 2008 in page no. 30.

 Author Mr. Katuri Nageswar Rao(Associate Dean,The Icfai school

of Financial studies and consulting Editor), Indian Banking The March Forward, Journal:- The Icfai University Press, (Professional Banker) 2008, VOL-VIII, Issue-2 February 2008, Page No 13.  Author Mr.Narayan Sethi, Financial Globalization Integration

and crisis, journal:The Icfai University Press, (Professional Banker) 2008, Vol-VI, Issue 9,September 2006, Page No. 45. The web sites I have referred for different information are www.iupindia.org www.indianeconomy.com WWW.SBIBANK.COM WWW.ICICIBANK.COM