Insights into Credit Management: Banking Customer Survey Indian Bank Katpadi Branch

Chapter I
1. Introduction

Indian Bank is the seventh largest nationalized bank in India which is established on August 15,
1907. Indian Bank, headquartered in Chennai, has been a significant player in India's banking
sector. It boasts a vast network of over 5,846 branches and employs around 41,089 staff
members. with 3,106 ATMs and 1,780 BNAs, it serves a customer base exceeding 100 million.
By March 31, 2023, Indian Bank had accumulated a total business volume of ₹11.64 lakh crore,
equivalent to approximately US$140 billion. This showcases its considerable influence within
India's financial landscape. The bank places a strong emphasis on information security, obtaining
certification for adhering to the ISO27001:2013 standard. This highlights its commitment to
fortifying information systems and ensuring robust security measures. Indian Bank extends its
reach globally with branches in Colombo and Singapore, including Foreign Currency Banking
Units. It also maintains relationships with 227 correspondent banks across 75 countries,
facilitating smooth international transactions. Since 1969, Indian Bank has been owned by the
Government of India, solidifying its status as a public sector bank and underlining its importance
in the nation's financial framework. A significant milestone occurred on April 1, 2020, with the
merger of Allahabad Bank into Indian Bank.

1.1 Background of the Problem:

In the banking sector, managing credit effectively is crucial for financial stability and
profitability. Over time, the banking industry has seen significant changes due to
advancements in technology, evolving regulatory requirements, and shifting customer
expectations. Today, banks are increasingly focused on understanding and meeting
customer needs to stay competitive and build customer loyalty. Additionally, the use of
data analytics and technology has become essential in making informed lending decisions
and providing personalized customer experiences.
1.2 Statement of the Problem:
One of the challenges faced by the bank is the lack of comprehensive insights into
customer preferences and behaviors in credit management. This limited understanding
may lead to mismatches between the products and services offered and what customers
actually need. Moreover, banks encounter difficulties in accurately assessing credit risks,
managing defaults, and ensuring compliance with regulations while meeting customers'
expectations for quick and hassle-free credit processes. In addition, the banking industry
is becoming more competitive, requiring banks to differentiate themselves by offering
innovative credit products and superior customer experiences. However, integrating
technology into credit management processes presents its own set of challenges,
including outdated systems, data fragmentation, and cybersecurity concerns. These issues
 underscore the need for a deeper understanding of customer preferences and effective
credit management strategies in today's banking landscape.

1.3 Dimensions of the study:

Customer Satisfaction: We will look into how happy our customers are with our credit
processes, like applying for loans, how quickly they get approved, and their experiences
with our customer service.
Credit Risk Assessment: We will check how well our methods for assessing credit risks
are working. This includes things like our credit scoring systems, how we analyze
financial statements, and the way we evaluate the things customers offer as security.
Loan Portfolio Performance: We will see how well our loans are doing overall. This
involves looking at whether our loans are good quality, how many customers are
struggling to pay them back, and if they are making us money. We will also see how our
credit management strategies affect these things.
Technology Adoption: We will see how much we are using technology in managing
credit. This includes whether we are using online platforms for loan applications, systems
that can make decisions automatically, and using data to understand and manage risks
better.
Regulatory Compliance: We will check if we are following all the rules set by the
regulators when it comes to managing credit. This includes things like making sure we
are lending responsibly, classifying risks properly, and keeping enough money aside for
potential losses.
Customer Perception: We will understand how customers see our credit products and
services. This involves whether they trust our decisions about lending them money and if
they are happy with the overall experience of borrowing from us.
Comparative Analysis: We will compare how different branches or areas of our bank
are managing credit. This helps us see where we are doing well and where we could do
better.
Employee Training and Development: We will look into how our training programs
help our staff get better at managing credit. This includes teaching them how to assess
risks, communicate well with customers, and make sure we are following all the rules.
Financial Inclusion: We will see how much we are helping people who might struggle
to get credit elsewhere. This includes offering loans to groups or businesses that might
not usually qualify, like small businesses or people in rural areas.
Long-Term Sustainability: We will check if our way of managing credit is going to
work well in the future. This involves thinking about how the market might change, what
new risks might come up, and making sure we are meeting our customers' needs as they
evolve over time.
1.4 Importance of the Study:
This study seeks to make credit management better at Indian Bank by looking at things
like how happy customers are, how well risks are assessed, and how technology is used.
By improving these areas, we can make customers happier, keep the bank stable
financially, and follow rules better. Also, by checking how loans are doing and what
customers think, we can make our services better. Using technology well and following
rules helps keep things smooth and trustworthy. Comparing different practices helps us
learn what works best. Overall, this study helps Indian Bank improve how it manages
credit, making it more successful in a competitive banking world.
1.5 Purpose of the Study:

 Understand how customers feel about the bank's credit services.

 Improve credit management processes based on customer feedback.
 Enhance customer satisfaction and loyalty through better credit management.
 Identify areas of improvement in loan application and approval procedures.
 Evaluate the effectiveness of current credit risk assessment methods.
 Ensure regulatory compliance and build trust with customers.
 Optimize loan portfolio performance for better financial outcomes.

1.6 Scope of the Study:

The study will focus on examining the credit management practices within Indian Bank,
particularly regarding customer satisfaction, risk assessment, and regulatory compliance.
It will encompass an analysis of loan application procedures, approval timelines, and
customer service interactions. Additionally, the study will explore the effectiveness of
credit risk assessment methods employed by the bank and evaluate its adherence to
regulatory guidelines. The scope extends to assessing the performance of the bank's loan
portfolio and understanding customer perceptions of credit products and services.
Comparative analysis across different branches or regions will provide insights into
variations in credit management practices.

1.7 Objectives of the Study

1.7.1 Primary Objectives:
1. Understand Indian Bank's credit operations through customer feedback.
2. Customer satisfaction, product awareness, loan usage, credit perceptions.
3. Identify strengths and areas to improve credit management practices.
 1.7.2 Secondary Objectives:
1. Assessing awareness and usage of advanced loan products offered by Indian
Bank.
2. Understanding factors influencing customers' choice of Indian Bank for loans.
3. Evaluating the influence of credit scores on loan approvals and limits.
4. Measuring customer satisfaction with the credit limits provided by the bank.
5. Gathering feedback on loan repayment experiences and impact on financial
well-being.

1.8 Chapter Scheme

The thesis is presented in 6 chapters;

Chapter I deals with the introduction and design of the study. It includes
introduction, need for the study, scope of the study, objectives of the study, research
methodology and limitations of the study.
Chapter II encompasses the review of literature. This chapter presents the review of
the literature related to the topic of the present study.
Chapter III discusses the research methodology
Chapter IV consists of data analysis and interpretation. The analyses have been made
on the basis of the objective of the study. Statistical analysis and interpretation of data
are presented in this chapter.
Chapter V recapitulates the summary of findings, suggestions and conclusion. In this
chapter the results of the study have been summarized and presented along with
possible suggestions.
 Chapter II
REVIEW OF LITERATURE

2. Review of Literature
A literature review is a piece of academic writing demonstrating knowledge and
understanding of the academic literature on a specific topic placed in context. A literature
review also includes a critical evaluation of the material; this is why it is called a Literature
Review rather than a Literature Report.
1) According to (Pasha SA, 2017) credit management means the total process of lending
starting from inquiring potential borrowers up to recovering the amount granted.
2) According to (Sahlemichael M,2009) notes that, in banking sector, credit management is
concerned with activities such as accepting application, loan appraisal, loan approval,
monitoring, and recovery of non-performing loans.
3) According to (Myers CS, 2003) describe credit management as methods and strategies
adopted by a firm to ensure that they maintain an optimal level of credit and its effective
management. It is an aspect of financial management involving credit analysis, credit
rating, credit classification and credit reporting.
4) According to (Nelson L,2002) views credit management as simply the means by which
an entity manages its credit sales. It is a prerequisite for any entity dealing with credit
transactions since it is impossible to have a zero credit or default risk.
5) According to (Nwanna IO,2017) Credit plays a very vital part in the economic growth
and development of a country. These roles credit plays can be categorized into two: it
enables the transfer of funds to where it will be most effectively and efficiently used and
secondly, credit economizes the use of currency or coin money as granting of credit has a
multiplier effect on the volume of currency or coin in circulation.
6) The strength of financial system has central role in the country (Das and Ghosh, 2007)
as its failure can upset economic development of the country.
7) Banks are profit-making organizations performing as intermediaries linking borrowers
and lenders in bringing for the time being available resources from business and
individual customers as well as providing loans for those in require of financial support
(Drigă, 2012).
8) Credit is one of the many factors that can be used by a firm to impact demand for its
products (Kagoyire & Shukla, 2016).
9) Myers and Brealey (2003) define credit as a process whereby ownership of goods or
services is allowed devoid of spot payment upon a contractual agreement for later
payment
10) Policies and procedures must be useful for granting credit to customers, collecting
payment and limiting the risk of non-payments (Kagoyire & Shukla, 2016; Wadike,
Abuba and Wokoma, 2017).
11) According (Tetteh LF,2012) sound credit-giving is one of the most essential principles
which strengthen financial institutions in their financial standing. This researcher stressed
that, sound credit giving establishes credit limits as well as develop credit granting
process for approving new credits.
12) Ofonyelu and Alimi (2013) studied how the bank’s risk on borrowers affected NPLs.
The study used descriptive research design. The study found that NPLs could be reduced
through credit analysis which involves analytical manipulation. While the study
confirmed the importance of credit management in managing loans, the study did not
document the specific components affecting how loans performed which is crucial in
assessing the effect of loan performance.
13) The specific components relating to credit management were examined in the current
study. Gakure et.al (2012) examined on credit management techniques and banks
performance of unsecured loans. The study used descriptive research design. The study
indicated that credit management techniques had a positive effect on the bank’s
performance.
14) Credit granting procedure and control systems are necessary for the assessment of loan
application, which then guarantees a bank’s total loan portfolio as per the bank’s overall
integrity (Boyd, 1993). It is necessary to establish a proper credit risk environment, sound
credit granting processes, appropriate credit administration, measurement, monitoring
and control over credit risk, policy and strategies that clearly summarize the scope and
allocation of bank credit facilities as well as the approach in which a credit portfolio is
managed.
15) Macaulay (1988) conducted a survey in the United States and found credit risk
management is best practice in bank and above 90% of the bank in country have adopted
the best practice. Inadequate credit policies are still the main source of serious problem in
the banking industry as result effective credit risk management has gained an increased
focus in recent years.
 Chapter III
RESEARCH METHODOLOGY

3.1 Research Methodology:

A research methodology is an outline of how a given piece of research is carried out. It
defines the techniques or procedures that are used to identify and analyse information
regarding a specific research topic. The research methodology, therefore, has to do with how
a researcher designs their study in a way that allows them to obtain valid and reliable results
and meet their research objectives.

3.2 Research Design:

The research design refers to the overall strategy that you choose to integrate the different
components of the study in a coherent and logical way, thereby, ensuring you will
effectively address the research problem; it constitutes the blueprint for the collection,
measurement, and analysis of data.

3.3 Data Source:

The data required for the study is primary in nature. Questionnaire method has been used
for the collection of data. In this regard, a structured questionnaire was prepared and
administered among the Bank Customers. The secondary data have also been obtained
from the Customer Loan Documents and other research papers.

3.4 Sampling:

In banking research, judgment sampling, based on researcher choice, may lack

representativeness. Random or stratified sampling methods are better, ensuring diverse
representation. Random sampling picks participants fairly, while stratified sampling groups
based on traits, ensuring diversity. These methods reduce bias, yielding reliable conclusions
for banking decisions. Judgment sampling, though convenient, may lead to errors and lacks
representativeness. Thus, for robust findings, banking research favors representative
samples, making judgment sampling less suitable.

Non Probility of Convenient Sampling method has been followed to choose the
respondents from the Customer in Vellore city. The size of the sample is determined to be
230.
3.5 Period of Study:

The period of study consists of Three months i.e., from Feb 2024 –May 2024. The
 identification of problem, framing of objectives and preparation of questionnaire were done
during Feb 2024. The data collection was made during March 2024. The grouping and
regrouping of data was made and analysis has been made during the month of April 2024.
The preparation and presentation of the thesis have been made during the period May 2024.

3.6 Hypothesis:

H1:

Research Framwork:
 Chapter IV
DATA ANALYSIS AND INTERPRETATIONS
 Chapter V
FINDINGS, SUGGESTIONS AND CONCLUSION
 REFERENCES
1) Pasha SA, Mintesinot B. Assessment of credit risk management system in Ethiopian
banking. International Journal of Business and Management Invention. 2017;6(4):98-110.
2) Sahlemichael M. Credit risk management system of Ethiopian commercial banks (Case
of some public and private banks). Siskos, Catherine. "Blazing New Trails." Kiplinger's
Personal Finance Magazine; 2009.
3) Myers CS, Brealey RA. Principles of Corporate Finance. New York: McGrawHill; 2003
4) Nelson L. Solving Credit Problem; 2002. Available:http://www.cfo.com
5) Nwanna IO, Oguezue FC. Effect of credit management on profitability of deposit money
banks in Nigeria. IIARD International Journal of Banking and Finance Research.
2017;3(2):137–161.
 6) Das, A. and S. Ghosh, (2007). Determinants of credit risk in Indian state-owned banks:
An empirical investigation. Economics and Statistics, 58(2): 355-372.
7) Drigă, I. (2012). Financial risks analysis for a commercial bank in the Romanian banking
system, Annales Universitatis Apulensis Series Oeconomica, 14(1), pp. 164-177.
8) Kagoyire, A., and Shukla, J. (2016). Effect of credit management on performance of
commercial banks in Rwanda (A case study of Equity bank Rwanda LTD). International
Journal o Business and Management Review, 4(4), 1-12
9) Myers, C. and Brealey, R. (2003). Principles of corporate finance. New York: McGraw-
Hill.
10) Wadike, G. C., Abuba, S. and Wokoma, D. A. (2017). Enhancing Management Strategies
for Profitability of Corporate Organisations in Nigeria. Equatorial Journal of Finance and
Management Sciences, 2017: 2 (2): 17- 33.
11) Tetteh LF. Evaluation of credit risk management practices in Ghana commercial bank
limited (Doctoral dissertation, Kweme Nkruma University of Science and Technology;
2012.
12) Ofonyelu, C. C., & Alimi, S. R. (2013). Perceived Loan Risk and Ex Post Default
Outcome:Are the Banks’ Loan Screening Criteria Efficient? Asian Economic and
Financial Review, , 3(8), 991-1002.
13) Gakure, R.W., Ngugi, J., Ndwiga P.M., & Waithaka, S. (2012). Effect of credit
management techniques on the performance of unsecured bank loans employed
commercial banks in Kenya. International Journal of Business and Social Research, 2,4,
31-45.
14) Boyd, A. (1993). How the industry has changed since deregulation. Personal Investment,
11(8), 85-86.
15) Macaulay, F. R. (1988). Some theoretical problems suggested by the movements of
interest rate, bond yields, and stock prices in the United States since 1856., New York,
NBER.

APPENDIX

Insights into Credit Management: Banking Customer Survey Indian Bank Katpadi Branch
Questionnaire
This Survey has been designed as a method of data collection for Research on “Insights into
Credit Management: Banking Customer Survey Indian Bank Katpadi Branch” This survey
is purely for the purpose of research. Please answer freely and your answers will not be disclosed
to anyone.
Please tick(√) the relevant options.
1) Name:__________________
2) Gender Male Female
3) Age
i) Less than 30 Years ii) 31 to 40 years iii) 41 to 50 years
iv) Above 50 year
4) Marital Status
i) Married ii) Unmarried
5) Academic Qualification
i) SSLC ii) HSC iii) Graduate iv) Post Graduate iv) No formal education
6) Occupation
i) Business ii) Public Sector iii) Private sector
iv) Self-employed v) Students
7) What is your current employment status?
i) Employed full-time ii) Employed part-time iii) Self-employed
vi) Unemployed v) Retired
8) How long have you been with your current employer/business?
i) Less than 6 months ii) 6 months to 1 year iii) 1-3 years
iv) Over 3 years
9) Annual Income
i) Less than Rs. 3,00,000 ii) Rs. 3,00,001 to Rs. 6,00,000 iii) Rs. 6,00,001 to
Rs.9,00,000
iv) Rs. 9,00,001 to Rs. 12,00,000 v) Above 12,00,000
10) Which type of account do you have in the Indian Bank?
i) Savings A/c ii) Loan A/c iii) Fixed A/c iv) Current A/c v) Gold Loan A\c
11) Are you aware of products & services provided by Indian bank?
i) Yes ii) No
12) Have you used the Following Products/Services being offered by the bank?
Loan Products:
13) Are you aware of the advance products (loan segments) of Indian bank?
i) Yes ii) No
14) Which type(s) of loans do you currently have with our institution? (Select all that
apply)
i) Education loan ii) Salary loan iii) Business loan iv) Street vendor loan
v) Housing loan vi) Other (please specify): _____________
15) If you prefer Indian Bank for taking loan than what influence you to take loan from
Indian Bank?
i) Competitive interest rates ii) Flexible repayment options iii) Trustworthiness and
reliability of the bank iv) Good customer service
Assessment of Credit worthiness:

16) What are your primary sources of income? (Select all that apply)
i) Salary/wages ii) Business income iii) Investment income iv) Rental
income
v) Pension/retirement benefits vi) Other (please specify): _______
Credit Terms:

17) Do you believe that having a good credit score positively impacts your ability to
secure higher credit limits for banking loans?
i) Strongly agree ii) Agree iii) Neutral iv) Strongly disagree
Credit Monitoring:
18) How do you mitigate the risk of defaulting on loan payments?
i) Maintaining an emergency fund ii) Creating a budget and sticking to it
iii) Diversifying income sources vi) Purchasing insurance coverage
v) Other (please specify): ______
19) How long have you been a borrower with our institution?
i) Less than 1 year ii) 1-3 years iii) 3-5 years iv) Over 5 years
20) How satisfied are you with the credit monitoring services provided by your bank or
lender?
i) Very satisfied ii) Satisfied iii) Neutral iv) Dissatisfied v) Very dissatisfied
21) How do you primarily manage your loan repayments? (Select all that apply)
i) Online payments ii) Auto-debit from bank account iii) Manual payments through
bank
branches iv) other (please specify): _______
22) How have your loans impacted your financial well-being and future plans? (Select all
that apply)
i) Enabled education or career advancement ii) Facilitated business growth or expansion
 iii) Supported housing or property ownership iv)Helped in meeting emergency financial
needs
v) Other (please specify): _______
23) How confident are you in your ability to manage your loan obligations in the future?
i) Very confident ii) Confident iii) Neutral iv) Not confident v) Very
unconfident
Credit Limit:
24) How satisfied are you with the credit limit offered on your banking loan(s)?
i) Very satisfied ii) Satisfied iii) Neutral iv) Dissatisfied
v) Very dissatisfied
25) Have you ever requested an increase or decrease in your credit limit for a banking
loan?
i) Yes ii) No
26) Reasons for Credit Limit Adjustments:
a. If yes, what was the primary reason for requesting a change in credit limit?
i) Increased financial need ii) Decreased financial need Better credit score
ii) Lower credit score Other (please specify): ________
27) Over all satification of the Indian Bank Katpadi branch?
i) Very Satisfied ii) Satisfied iii) Neutral iv)Dissatisfied
v) Very Dissatisfied