Only the very rich in India actually choose their bank -- the rest generally walk into the nearest branch.

Indian banks may be falling over each other to show that they are the most valued by customers or have the best services, but banking in India is yet to become customer-driven, in the sense of the customer choosing which organisation to bank with.

A survey by market research firm IIMS Dataworks shows that Indian consumers rarely distinguish between banks in their decisions to opt for the one over the other. They go for the bank that comes their way, for one reason or the other.

Although trust, quality of services and ease of access do determine the choice of bank among retail customers, not many people can distinguish between banks in terms of brand recall.

An analysis of brand recall among retail-banking customers shows that there is not much branding awareness or brand recall among the 144 million paid workers who have banking relationships.

"There is little competition and service delivery is not very intensive. Only very high income groups make a choice to go to a particular bank, others just walk into the nearest bank branch," says K C Chakrabarty, chairman and managing director, Punjab National Bank [Get Quote].

About 60 per cent of the working population still do not have bank accounts, he adds.

Brand recognition of private banking institutions remains limited to the higher income work-force while there is a nearly absolute dominance of nationalised banks in the mind-space of the average earners.

While State Bank of India [Get Quote] dominates the mind space almost as a singular monolith, PNB's brand recall seems to be in line with its status as the second largest public sector bank in the country.

Among the relatively low income segments, the only private bank that has any significant brand recall is ICICI Bank [Get Quote].

The government's policy of getting public sector banks to open branches across India, irrespective of commercial logic, meant that these banks enjoyed a high level of public trust. But in the future, public sector banks cannot hope to bank on trust alone, says a banking industry source.

With the private sector seeking to establish low cost channels like ATMs and banking correspondents instead of full-fledged branches in rural areas, the profitability of public sector banks, which maintain a relatively expensive branch network in similar locations, will come under increasing pressure.

"The data released by IIMS Dataworks reveal that if you take SBI out of the picture, customers now have the same level of trust in private banks as they have in the public sector banks," says Sandip Ghosh, executive director, Invest India Market Solutions.

About 30.8 per cent of respondents chose public sector banks due to the trust factor while it is 28.6 per cent for private banks.

Private sector banks, except foreign banks, can now compete with public sector banks on the trust factor.

However, the challenge for them is to expand rapidly without necessarily opening branches in places where other low-cost options make sense.