Factors Affecting Customer’s Decision for Taking out Bank Loans in Ahmedabad

“Factors affecting Customer’s Decision for taking out Bank loans in Ahmedabad”   EXECUTIVE SUMMARY Purpose: The recent global financial crisis has highlighted the intense competition between banks for attracting customers; thus, research on selection criteria used by customers to choose a bank for doing business has been enriched with new methodologies, findings and recommendations for both banks and customers. This is ever more important when we take into account that banks and generally the financial system have lost their reputation and credibility, as a result of certain financial transactions which brought about the economic crisis. Hence, the banking industry appears as one of the most rapidly emerging sectors needing to identify the main factors that lead to maintenance of existing customers and ways to attract new ones. Methodology: This is carried out using quantitative survey of 150 respondents of the Ahmedabad city. Each respondent are personally contacted to fill up the questionnaire. Finding:

• Out of 150 respondents, 86.7% respondents have received a loan, and 13.3% respondents have not received a loan. This confirms that most of the respondents have received a loan but few of them have not actually received but they consider the important factors for receive a loan.
• Respondents are considering loan factor, competitive interest rates as one of the most important parameter.
• In t value is positive for parameter like, customer services professionalism and credibility of staff is good, potential customer complaints, variety of product- service provided by the bank, enough information about loan, time duration for loan, simpler procedure, total cost, ability to finance maximum to security (property), EMI Based capabilities, possibility of early repayment, no need of underwriting property, ability to provide insurance program to protect the payment of installments, competitive interest rates and privilege terms in comparison with other banks. So these parameter not only important but more than important for the customers.
• The association between respondents received a loan with demographic factor, man are 1.71 times more likely to take a loan than a women and in age group between 31-40 and 41-50, respondents are more likely to take a loan than other age group.
• Similarly, there is sufficient correlation exists between the variables to proceeds with the analysis for take a loan.
• For that twelve important factors have been extracted from twenty eight variables contributed about 62% variation in customers decision for taking out bank loan.

Recommendation:

• Customers place more emphasis on factors like interest rates, installments and other factors like, total cost, simpler procedure. Therefore, such factors should be considered seriously by the banks in designing their marketing strategies by widening their branches and providing good customers services to customers.
• Since the age category between 41-50 has the most usage and more representation in the sample, banks should target its marketing mix toward this category.
• Bank should also focus on total cost, carried by customers to take out a loan due to higher competition in the market there are different scheme available for processing fees for the loan.
• Bank should require reduced interest rate on loans and high interest rate on savings and services offered. In this respect, Polish bank customers do not differ from customers of the banking industry in other countries.

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