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Personal banking survey, 2011
In our third annual survey of personal banking patterns we reached-out
to 1,500 respondents in 350 Indian towns- 40% of whom were in semiurban
areas. Branch proximity is the most important driver for selection
of a bank, but penetration of online banking is rising. As metros get
crowded, private banks will need to move to smaller areas where they
can leverage on better service as disappointment with service is higher in
these areas. De-regulation of interest rate on saving deposits may be
smooth as higher rates may not motivate people to switch banks. Private
banks continue to score high on satisfaction, SBI continues to score low.
Key trends on personal banking
Branch proximity emerged as the most important factor for bank selection.
Penetration of online banking is impressive at 46% and this should encourage
banks to invest in alternate channels like online and mobile banking.
Satisfaction level of private bank customers is comparable with foreign banks.
Private banks will need to move to smaller areas as market share may be peaking.
Superior service may help private banks to gain market share in spite of late entry
as respondents there are disappointed with service level, mostly from PSUs banks.
Customers of private banks expect wider ATM network and lesser marketing calls,
whereas clients of PSU banks expect them to improve service levels.
Penetration of retail loans is low and interest rate is the key criteria for selection.
Cross-selling penetration rate is low; foreign and private banks are more active.
Savings deposit rate de-regulation may be smoother
Our survey indicates that the de-regulation could be relatively smooth without the
risk of many customers switching bank accounts purely for higher interest rates.
Only 15% of respondents may move their savings account to another bank for a
higher rate; 7% in case of private banks. If service level of the other bank is
inferior, then only 9% may switch.
Savings accounts are more transaction-intensive than income-oriented.
Only 11% use sweeping facility with savings account, but 37% have linked their
accounts with automated transactions. Hence a shift can be cumbersome.
Key trends for banks
SBI continues to score high on proximity, but lower on customer satisfaction.
BOB has seen most improvement and scored highest among PSU banks.
ICICI Bank continues to register higher customer satisfaction levels.
HDFC Bank ranks high on satisfaction and most successful in cross-selling.
Axis Bank ranks high on customer satisfaction, but lower on cross-selling.
Survey highlights and key trends
We surveyed 1,530 people across 350 Indian towns and mostly in the middle and lower
middle class segments on their personal banking and borrowing patterns.
40% of our respondents were from semi-urban areas.
Respondent base was well spread-out across classes of banks. Compared to our past
surveys, respondent share of PSU banks has increased.
Proximity emerged as the major deciding-factor for selection of the bank followed by
salary account relationship that is more prominent in the larger towns.
Online penetration rate is quite impressive across classes of towns and this should
encourage banks to invest in alternate channels like online and mobile banking.
Customers of private banks are more satisfied with quality of service and products.
Customers of private banks expect wider ATM network and lesser marketing calls,
whereas clients of PSU banks expect them to improve service levels.
Penetration of retail loans and credit cards remains low.
Key takeaways
PSU banks dominate the semi-urban and urban areas while private banks have been
more focussed in the larger towns.
Market share of private banks in metros may be peaking and they will need to move to
smaller towns.
Superior service may help private banks to gain market share in spite of late entry as
respondents there are disappointed with service level, mostly from PSUs banks.
Savings deposit rate de-regulations may happen rather smoothly because depositors are
unlikely to switch banks for higher interest rates, especially if quality of service is poor.
Customers of private banks are less likely to switch banks purely for higher interest rate
on savings deposits.
Bank-wise trends
SBI continues to score high on proximity, but low on customer satisfaction.
BOB has seen most improvement and scored highest among PSU banks.
ICICI Bank continues to register higher customer satisfaction level.
HDFC Bank ranks high on satisfaction and most successful in cross-selling.
Axis Bank ranks high on customer satisfaction, but lower on cross-selling.
Respondent demographics
Survey covered 1,530 respondents 350 towns;
only 15% of them resided in the six metros.
Average age of our respondents was 35 years;
43% were in 26-35 years bracket.
Average annual household income of our
respondents was Rs0.4m pa; less than 5%
earned more than Rs1m pa.
Who do they bank with?
Distribution of respondents across banks
63% of respondents had their principal
banking relationship with PSU banks
and 35% with private banks
Large banks dominated survey
Share of small PSU banks was lower
than their share in deposits
Distribution of respondents across towns…
In metros private banks’ share was higher
than PSU banks; this could be the peak.
In metros, respondents with Axis Bank
outnumbered SBI and ICICI.
SBI’s share in urban and semi-urban centres
is significantly higher than private banks.
PSU banks’ share in semi-urban areas is
nearly double of their share in metros.
… and across income slabs
PSU banks dominate among middle and lower
middle class respondents.
In mid-income category, share of private
banks is higher.
Foreign banks focus at the top-end.
Small PSU banks have a miniscule share in the
top-end of the pyramid.
What drives customers’ selection?
Proximity is the prime driver for bank
selection among respondents forming key
criteria for 71% of respondents.
Foreign and private banks have leveraged
on salary account products where PSU
banks are lagging behind.
Youngsters are looking beyond proximity,
partly as they are more net savvy.
Is one bank account enough?
Nearly half the respondents had multiple banking
relationships.
Higher proportion of private banks’ clients and
those with higher income had >1 accounts.
Multiple relationships for private banks indicates
that they added clients by offering better
products to customers of other banks.
Among PSU Banks, SBI had lesser respondents
with multiple bank accoun
Online banking
Nearly half of our respondents use the online
channel for banking services.
Penetration rate in smaller towns is also impressive.
Nearly three-fourths of respondents in the age
group 15-25 years use online banking.
Penetration of online banking is much higher among
private banks versus PSU bank customers.
In future, online and mobile-banking can emerge as
key replacement of branch-based banking.
Credit card ownership
18% of respondents had credit cards, most credit
card holders were located in metros.
Average income for a credit card holder is nearly
double of those without credit card.
Private and foreign banks’ higher share in credit
cards also reflects on their branch mix (more
metros) and customer mix (higher income).
HDFC Bank has been most effective in cross
selling credit card to its customer base.
Borrowing patterns
Borrowing pattern across city-groups
Only 12% of respondents had a retail loan.
Auto loans dominate in smaller towns whereas
home loans are more popular in metros.
Low interest rate is the most important reason
for selection of the bank, followed by existing
relationship and convenient procedures.
Foreign banks leverage on easier procedures.
Cross selling
20% of respondents got cross selling calls;
foreign and private banks are more aggressive.
Banks focus on credit cards, retail loans and
insurance & investment products.
Private banks try to market credit cards, while
SBI focuses on debit cards and loans.
Axis seems to be cross-selling lesser than peers.
Are customers satisfied?
65% of the respondents feel that their bank
offers above average level of services.
Customers of foreign and private banks are
more pleased than those with PSU banks.
Among foreign banks, HSBC scores lower.
ICICI, Axis and HDFC Bank score well.
Among PSU banks, BOB, Canara and Union
score above average.
SBI continues to score below average and
significantly lower than private banks.
Smaller PSU banks also score lower.
PSU banks will need to take measures to
improve service levels or else may see loss of
market share to private banks.
What disappoints customers?
Customers are generally disappointed with
service levels and ATM network.
Customers of private banks expect wider ATM
network and those of SBI expect improvement in
service levels.
Disappointment with service levels is higher in
semi-urban areas and this may help private
banks to win market share in spite of late entry.
Key takeaways from the survey
RBI is contemplating to de-regulate the rate of interest offered by banks on savings
deposits that constitute ~25% of total deposits (currently this rate is set at 4%).
Our survey indicates that the transition could be relatively smooth with lesser risk of
customers switching between banks purely for higher interest rates.
Only 15% of respondents may move their savings account to another bank for a higher
interest rate, assuming they perceive similar customer service levels.
However if service levels are perceived to be inferior, then only 9% may switch.
Savings deposits are not income-oriented, but transaction-intensive.
This is evident from the fact that while only 11% of respondents use sweeping balance
facilities*, 37% of them have monthly transactions linked to their savings accounts.
Younger respondents (15-25 years) are more likely to switch banks.
Customers of private banks are likely to be stickier as their perception of service levels
of other banks is either at par or inferior.
Will customers move savings account?
Only 15% of respondents may change bank
for higher rate of interest on savings deposits.
This proportion drops to 9% if service level is
inferior.
Only 7% of private bank customers may
switch for higher interest rate.
Among leading banks, SBI stands higher risk
of customer switches.
Savings deposit is not income-oriented…
Only 11% of respondents use sweeping facilities.
Use of this facility is more popular among higher
earning and large balance customers.
Share of sweeps is higher in case of foreign and
private banks; lower in case of PSU banks.
27% of respondents actively track fixed deposit
(FD) rates offered by their banks; higher in case
of PSU banks.
… but transaction-intensive
37% of respondents have linked monthly
transactions to savings account; 50% in case
of private banks.
This is 2-3x that of people using sweeps.
Monthly transactions related to payment of
utility bills, credit card/ loan repayment,
receipt of dividend/ tax refund etc.
Therefore, it will be cumbersome for people to
change their principal bank account.
Private banks are holding on to their edge
Private banks have been able to gain
customer mind-share for the better quality
of their services.
Our current and previous surveys show that
customer satisfaction among private banks
is higher than PSU banks.
Better service and product standards will be
key to market share wins by private banks.
SBI leads on access, but lags on service
Proximity is the most important driver
for bank selection among customers.
SBI gets high customer rating with its
wide branch and ATM network.
While SBI has invested in the expansion
of its physical network, it seems to be
lagging behind on softer issues like
customer service.
Nearly half of SBI’s customer dislike its
service as compared to overall average
of 24%.
This is the second year when SBI’s
score on customer satisfaction is belowaverage.
While customer addition drives CASA
growth, better service levels help to
improve profitability through cross-sells.
Selection of bank on multiple parameters
While proximity was the key criterion for
selection of principal bank for 71% of our
respondents…
… its share was much lower at 47% among the
young respondents (15-25 years).
The selection process of young respondents is
broad-based and assigns higher weight to
salary accounts, references and ATMs.
As a result, banks that are able to offer reach,
products and service levels will be able to
garner higher share of young clients.
Young respondents are also more sensitive to
interest rates and probability of shifting banks
in lieu of higher rates on savings deposits is
nearly double that of other age groups.
Banks may use this opportunity to customize
products and services for younger clients,
especially when interest rate on savings deposit
is de-regulated.
Cross-sell opportunity
Banks are more aggressive in cross selling to
the younger population- cross selling rate is 2x
the overall average.
However, more marketing calls are also
disappointing customers.
Age-wise product cross sale indicate that banks
focus more on debit cards and loans, marketing
of credit cards is lower than in older segment.
Interesting comments by respondents
The service standard at any branch of a public bank depends a lot on the manager of the
branch, if the manager is good than the performance of staff will also be good and vice versa.
The staff at public banks is not supportive and they take longer lunch breaks and tea breaks
whenever they want to, without even considering the requirement of customers.
Private banks offer a better service standard than government banks, but their charges are
higher and there are hidden charges when dealing with the private banks.
Customer service of SBI in our region is not good because average age of the staff in the
bank is very high hence, they are not efficient like the private banks’ young staff.
We selected SBI because no other bank has branches in our region.
We opened an account in ICICI because it recently opened up a branch in our region.
Banking with ICICI is not user friendly. Their security and fraud prevention measures do not
take the user friendliness and user experience into account, creating hassles for customers.
HDFC Bank deducts amount on balance inquiry and there is no guidance on missing cheques.
Axis Bank gave us zero balance account facility when we first opened up an account, but they
changed this without informing us, resulting in a heavy fine which we had to pay.
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