Description
This Project report studies and analyzes the historical perspective, latest current trends and futuristic picture of the retail banking in India.
Project Report
RETAIL BANKING
MICRO - ECONOMICS
By: Nikhil Abbi Sridhar Emani Piyush Gupta Sagar Gupta Rahul Sangani Rohit Solanki
1
(B002) (B021) (B025) (B027) (B050) (B057)
Table of Contents
Introduction …………………………………………………………3 Retail banking v/s Commercial Banking……………………………3 History of banking in India………………………………………….4 Current Scenario…………………………………………………….5 Review of Literature………………………………………………...5 Various Aspects of Retail Banking………………………………….6 Categorization of Retail Banking Services………………………….7 Indian Banking System: A Mixed Oligopoly.....................................7 Advertising Strategy…………………………………………………8 Recent trends………………………………………………………...9 Competition – India and Abroad……………………………………11 Drivers of Growth…………………………………………………..13 Future of Retail Banking……………………………………………14 References & Bibliography…………………………………………16
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Introduction
Retail banking is a banking service that is geared primarily toward individual consumers.It refers to the mobilization of deposit from individual and lending to small business and in retail loan market and thus it consists of large volumes of low value transactions It focuses strictly on consumer markets. Although retail banking is, for the most part, massmarket driven, many retail banking products may also extend to small and medium sized businesses. Today much of retail banking is streamlined electronically via Automated Teller Machines (ATMs), or through virtual retail banking known as online banking. The term ‘retail banking’ encompasses retail deposit schemes, retail credit, retail loans, credit cards, debit cards, insurance products, mutual funds, and depository services, including demand facilities and services to customers according to their needs. So, retail banking includes various financial services and products forming a part of the assets as well as liabilities segment of the banks. Retail banking on the assets side of the balance includes a wide range of loan products such as housing, auto, consumption and educational loans. The following are the features of retail banking: ? ? ? ? ? ? Strong credit assessment capability; Regular and constant follow-up; Strong processing capability; Skilled human resources; Technological support; Sound documentation.
Retail Banking v/s Commercial Banking
Wholesale banking (Commercial Banking) refers to dealing with large customers often multinational companies, governments or government enterprises Wholesale banks deal in large-valued transactions, usually in small volumes. They draw funds from and lend funds to businesses. It also includes the transactions which the banks conduct with each other via interbank market separate from customers. Whereas, Retail banking is about mobilisation of deposits from individuals and lending to small business and in retail loan markets. Retail banking consists of large volumes of lowvalue transactions. It’s about providing banking services to individual customers. Also, retail banking provides an opportunity for banks to diversify their asset portfolios with high profitability and relatively low NPA’s because of lower risks compared to commercial banking.
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History of Banking in India
Early Phase (1786 to 1935) ? ? ? ? Banking in India originated in the last decades of the 18thcentury. The first banks were The General Bank of India, which started in 1786, and the Bank of Hindustan, both of which are now defunct. Bank of Calcutta, one of the 3 presidency banks originated in June 1806, which almost immediately became the Bank of Bengal. The other two presidency banks were the Bank of Bombay and the Bank of Madras Allahabad Bank established in 1865 Foreign banks start to arrive, particularly in Calcutta, in the 1860s. The Comptoire d’Escompte de Paris opened a branch in Calcutta in 1860 and another in Bombay in 1862
Pre Nationalization Phase (1935 to 1969) ? The RBI (Reserve Bank of India) was established in 1935 as the Central Bank of the Country ? In 1949, the Banking Regulation act was passed and the RBI was nationalized and acquired extensive regulatory powers over the commercial banks. ? In 1955, the Industrial Credit and Investment Corporation of India Limited (ICICI) was incorporated at the initiative of World Bank, the Government of India and representatives of Indian industry ? In 1964, IDBI comes into existence Post Nationalization Phase (1969 to 1990) ? In 1969, GOI nationalized 14 major private banks ? NABARD set up in 1982 as an apex unit of agricultural & rural credit ? Board for Industrial & Financial Reconstruction (BIFR) came into existence under Sick Companies (Special Provisions) Act and started its operations wef May 15, 1985. Modern Phase (1991 – till date) ? In November, 1991; The Committee on Banking Sector Reforms Committee headed by Mr. M. Narasimhan, submits its recommendations to finance minister. The key
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recommendations being to reduce Cash Reserve ratio (CRR) , Statutory Liquidity Ratio (SLR) progressively, gradual de-regulation of interest rates The GOI headed by Narasimha Rao implements recommendations by Narasimhan committee
Banking Sector Reforms since 1992 ? Out of the 27 public sector banks (PSBs), 26 PSBs achieved the minimum capital to risk assetsratio (CRAR) of 9 per cent by March 2000 ? The share of the public sector banks in the aggregate assets of the banking sector comes down from 90 per cent in 1991 to around 75 per cent in 2004 ? Since 1993, twelve new private sector banks have been set up ? Reduction in the Government shareholding in public sector banks to 51 per cent.
Current Scenario
Structure of Banking in India
Review of Literature
? Among the prominent studies which have been reviewed, Petersen and Rajan (1995) argue that a bank having market power is more willing to engage in relationship lending, with the result that the supply of credit available to young firms is higher than in a traditionally competitive environment. Banks facing a pool of risky borrowers have an incentive to take on riskier projects. Since a successful firm will not be lured away by a competitor, banks will benefit from capital requirements, taking into account the riskiness of the asset, such that more risky loans have higher capital requirements. Therefore, if a bank wants to increase its capital-to-asset ratio, it may shift its lending to lower risk loans such as mortgages and away from higher risk loans such as business lending.
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Boot and Thakor (2000) present a model in which banks can engage in both relationship and transactional lending. They argue that banks may actually do more relationship and transactional lending, the former in competitive environment. Consider a monopoly bank that offers both types of loans. Relationship loans are offered to low and medium quality borrowers. Since relationship loans have a high value for such borrowers, the monopoly bank can capture part of all this value. High quality borrowers however place less value on relationship, and so it is not worth the added cost to the banks to invest in it. When banks’ competition increases, the surplus value that any one bank can extract from relationship loans decreases. Uppal (2008) examines that retail credit notwithstanding, the cautionary approach advocated by the RBI is bound to increase further. Banks need to realize that in their enthusiasm to distribute retail credit on a very massive scale, the cardinal principles of lending are not followed. In the present market scenario, the key to success for any bank lies in aggravating and emphasizing the various retail marketing activities.
Various Aspects of Retail Banking
Throughout more than two years of financial crisis and economic turmoil, the retail business has proved to be an irreplaceable source of stability for most banks. What this sector lacks in explosive performance it makes up for by providing a cushion against sharp downturns. Let us look at the services offered by banks as Retail banking. Retail Banking services can be classified into three types of services: i. Core Banking Services ii. Facilitating services iii. Supporting services
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Categorization of Retail Banking Services
Core Services Payment Services Facilitating Services i. Cash ii. Foreign Currency requirements iii. Traveler Cheques iv. DD/Bankers cheque v. NEFT/RTGS Current A/c & Savings i. ATM cards A/c ii. Standing Instructions iii. Intra/Inter-bank transfer iv. Lockers Supporting Services 1. Doorstep payments 2. Internet Banking 3. Telephone Banking
1. Credit cards 2. Debit cards 3. Senior citizen benefits 4. Mobile Banking 5. Internet Banking 1. Interest rate: floating/ fixed 2. Flexibility in prepayment of loan 3. Counselling on real estate markets 4. ECS for payment of instalments 1. Additional insurance facility for family members 2. Counselling on post retirement savings
Various Loan Products: Consumer, Personal, Housing, Education loans
i. ii.
Current Account Savings Account
Insurance Products: Life Insurance, Pension Schemes
i. ii.
Current Account Savings Account
Indian Banking System: A Mixed Oligopoly
The underlying view of mixed competition is that state ownership provides an indirect means of regulating the conduct of private firms using market instruments rather than using administrative-judicial interventions. A general result of this literature is that the publicly owned firm will act more aggressively and have greater market share than the private firms. There is a significant difference between banks and ordinary firms. In the industrial organization, firms mainly interact in the output market and have no or little interactions in the input market. Banks, on the other hand, have to interact in both the deposit (input) market, and the loan (output) market; moreover by lending to each other they add another dimension to their relationship. Above all, unlike ordinary firms, banks have to deal with loan default risk and its knock-on effects on different aspects of banking. Despite large scale divestments many state-owned banks in developing and transition economies, entry of private and foreign banks has still remained a subject of state control.
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In India, RBI governs the licensing of new banks in Private sector. Some of the guidelines are: ? Companies that have an exposure of 10% or more to real estate and brokerage businesses in terms of revenue or assets are not eligible to seek licences. ? To be able to float a bank, a corporation or a non-banking financial company (NBFC) will need a “diversified ownership, sound credentials and integrity”, and a 10-year track record. ? The norms have kept the minimum capital required for new banks at Rs.500 crore. ? Those who secure in-principle approval will have to set up banks within a year and need to have capital adequacy ratio of 12%. In fact, state presence is a common feature in banking systems all over the world. It is, therefore, reasonable to expect that the banking industry in India & many other economies (especially emerging) resembles mixed oligopoly with strategic interactions among banks occurring at many dimensions.
Advertising Strategy
Financial Institutions and banks offer various products to its customers such as personal loans, home loans, savings account, credit cards and so on. It is very essential for a financial company to know, which user to target for what product and when. The goal of data analytics and data mining department is to arrive at accurate answers to these 3 questions, (Which User, What Product, When), it is a rewarding exercise for the bank, users and definitely the analytics manager. The problem is very simple. A customer may have purchased a single product or multiple products from a bank. The company would ideally like if all its customers bought all of its products. This possibility however does not exist, therefore without any targeting model; the company would be wasting money, time and resources by randomly targeting customers for its products.
For example, a customer has savings account in a bank, based on the information given to the bank along with account status and history, banks could target him/her as a prospect for a personal loan product based on a logic / algorithm. The logic / algorithm could be as simple as if a customer from metro with account balance of Rs One Lakh or more for over 6 months should be a prospect for home loans Rs 20 Lakhs or personal loans over Rs 3 Lakh. This is a simple example.However it could be a complicated neural network or logistic regression model. Cross Sell Models: A customer of a product is a likely prospect for another product if his account activity positively predicts likelihood of purchase. Target model has to predict purchase of the additional product. Up Sell Models: A customer can be targeted for higher segment product in the same category based on his account status and demographics. Normal saving accounts customers can be sold for Premium segments customers, if his account balance is over a period of time.
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Deep Sell Models: A customer can be sold more of same product based on his need. Target model has to predict his need.These target models are also called response models that only predict the purchase behavior of a customer for a given product. This model is ineffective as the cost of randomly targeting a customer for product is less than cost of targeting using predictive response model. The main reason is because of below limitations of traditional response model ? All customers behave in two ways: Purchase or do not Purchase. ? Behaviour of customers during absence of any marketing activity. ? Maximum lifetime value to be derived from customer is unkown; this will result in underselling or selling lower value products when higher products could have been sold. If these issues are taken care of by strong statistical modelling then loss making response model can be made profitable. Financial institutions try to boost the sales and their market share using some advertisement strategies. Banking firms generally opt for the below advertising techniques : ? Through Sales and Promotion Retail banks advertise through sales and promotion: i. To identify and attract new customers ii. To introduce a new product iii. To increase total number of users for an established brand iv. To encourage greater usage among users v. To educate consumers regarding product improvements vi. To bring more customers into retail stores vii. To establish fluctuating sales pattern viii. To increase reseller inventories ix. To combat competitor’s marketing efforts Personalized selling Based on the past transactional records or the type of account, banks offer various offers and schemes to the customers based on their need patterns. Through phone or net banking Telephone and net banking are other ways of advertising their new products and services. Bank Campaigns Many banks like ICICI, Deutsche bank, IDBI, and ING Vyasya do campaigning for advertising using banners and hoardings.
? ? ?
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Recent trends
The domestic retail banking segment is growing at a rate of 30% per annum and is a major contributor to banks bottom-line. Deutsche Bank recently launched its retail banking operations in India, making it the first country in Asia where the German bank has launched retail banking business.
As shown in the above pie-chart, Retail banking comprises 58% of the total Banking Business. It has been showing tremendous boom in the past decade and continues to penetrate more into the market.
The above figure gives vivid pictures of how retail banking has figured into high volume business. Traditionally, retail banks have used branches, ATM, call centers, mobile, and Internet to interact with their customers, though newer direct channels such as social media have emerged recently. Branches have always played an important role and remain a key banking channel. However the changing needs and preferences of customers, coupled with growing technological innovations, has led to the increased popularity and adoption of direct channels over the last decade. Direct channels are expected to hold the highest share of global banking transaction volume by 2012, though traditional channels are still expected to command the highest share of the sales volume. In recent times, we have witnessed aggressive entry strategies of foreign banks to Retail Segment, customer retention initiatives by PSU Banks and aggressive price-war on Retail Credit. Rapid penetration of Personal Computers, Mobile phones and on-line Trading and purchase options has encouraged increased usage of technology banking.Booming economy and continuous per capita income will further push the living standards of people.
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Fee based income from remittance is shrinking due to RTGS and other technology initiatives. Higher short term interest and flatter yield curves along with phenomenal rise in nuclear and dual income families & enhanced spending power is leading to accelerating penetration of retail banking. Apart from these, macro-level factors like increasing literacy levels, higher adaptability to technology banking , growing consumerism and fiscal incentives to housing loans have been a part of retail boom. Banks continue to offer valued added Products and Services for customer acquisition and retention.Retail banking technology is gaining its importance due to the continued demand. Customer Relationship Management (CRM) is going to be a mandatory requirement for banks to leverage the existing relationship as retail banking customers are demanding more and more features and product differentiation.
Competition – India and Abroad
The Indian players are bullish on the Retail business and this is not totally unfounded. There are two main reasons behind this. Firstly, it is now undeniable that the face of the Indian consumer is changing. This is reflected in a change in the urban household income pattern. The direct fallout of such a change will be the consumption patterns and hence the banking habits of Indians, which will now be skewed towards Retail products. At the same time, India compares pretty poorly with the other economies of the world that are now becoming comparable in terms of spending patterns with the opening up of our economy. For instance, while the total outstanding Retail loans in Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The comparison with the West is even more staggering. Another comparison that is natural when comparing Retail sectors is the use of credit cards. Here also, the potential lies in the fact that of all the consumer expenditure in India in 2001, less than 1% was through plastic, the corresponding US figure standing at 18%. Measuring the competition The fact that the statistics reveal a huge potential also brings with it a threat that is true for any sector of a country that is opening up. Just how competitive are our banks? Is the threat of getting drubbed by foreign competition real? To analyze this, one needs to get into the shoes of the foreign banks. In other words, how do they see us? Are we good takeover targets? Going by international standards, a large portion of the Indian population is simply not “bankable” – taking profitability into consideration. On the other hand, the financial services market is highly over-leveraged in India. Competition is fierce, particularly from local private banks such as HDFC and ICICI, in the business of home, car and consumer loans. There, precisely lie the pitfalls of such explosive growth. All banks are targeting the fluffiest segment i.e. the upwardly mobile urban salaried class. Although the players are spreading their operations into segments like self- employed and the semi-urban rich, it is an open secret that the big city Indian yuppies form the most profitable segment. Over-dependence on this segment is bound to bring in inflexibility in the business.
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The foreign giants’ leap The foreign banks have identified this problem but there are certain systematic risks involved in operating in the Retail market for them. These include regulatory restrictions that prevent them from expanding their branch network. So these banks often take the Direct Selling Agent (DSA) route whereby low-end jobs like sourcing or transaction processing are outsourced to small regional layers. So now on, when you see a loan mela or a road show showcasing the retail bouquet of an elite MNC giant, you know that a significant commission earned out of any such booking gets ploughed back to our own economy. Perhaps, one of the biggest impediments in foreign players leveraging the Indian markets is the absence of positive credit bureaus. In the west the risk profile can be easily mapped to things like SSNs and this information can be publicly traded. PAN is a step in this direction but lot more work need to be done. What has been a positive step towards this is a negative file sharing started by a consortium of 11 banks. However, as a McKinsey study points out actual write-offs on NPAs show a strong negative correlation with sharing of positive information. On top of this, the spend-now-pay-later “credit culture” in India is just not picking up. A swift legal procedure against consumers creating bad debt is virtually non-existent. Finally, the vast geographical and cultural diversity of the country makes credit policy formulation a tough job and it simply cannot be dictated from a Wall Street or a Singapore boardroom! All these add up to the unattractiveness of the Indian retail market to the foreign players. So over the past few years, in spite of the entry of MNCs in many industries, Retail Banking has seen a flurry of panicky exits. Fewer than 40 remain in India and their share of total bank assets currently 7.2% is falling. Those that remain might be thought to be likely buyers of Indian banks. Yet Citibank, HSBC and Standard Chartered—all in India for more than a century, and with relatively large retail networks—seem to have no pressing need to acquire a local bank. Established foreign banks have preferred to take over customers or businesses from other foreign banks that want to leave. Thus HSBC, in recent years, has acquired customers from France's BNP, Germany's Deutsche Bank and Japan's Bank of TokyoMitsubishi. ABN Amro took over Bank of America's retail business. This will perhaps be the most wrongful inference that can be drawn from the above. We just cannot afford to look inwards and repeat the mistakes that were the side effects of the Nationalization of the Banking System. A growing market can never be an alibi for lack of innovation. Indian banks have shown little or no interest in innovative tailor-made products. They have often tried to copy process designs that have been tested, albeit successfully, in the West. Each economic culture has its own traits and one who successfully adapts those to the business is the eventual winner. A case in point is the successful implementation of microcredit networks in Bangladesh. Positioning a bank as a tech-savvy financial vendor in a country where Internet penetration is an abysmal 1.65% can only add to the over-leveraging as pointed out earlier. The focus of the sector should remain in macroeconomic wealth creation and not increasing the per capita indebtedness that will do little but add to the NPA burden. Retail Banking in India has to be developed in the Indian way, notwithstanding the long queues in front of the teller counters in the Public sector banks!
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Drivers of Growth
Retail banking in India has fast emerged as one of the major drivers of the overall banking industry and has witnessed enormous growth in the recent past. The growth drivers of retail lending are analyzed as under.
Macro-economic Factors
The lower uptake in the non-retail sector has compelled bans to shift their focus on retail assets -specially housing finance for deployment of funds for a longer period, which is considered as the safest within the retail portfolio. Housing loans and other retail loans are comparatively high yielding in terms of interest spread and safer, as risk is diversified among a large number of individuals across the geographic dimensions. The sector enjoys a privilege of lowest NPAs amongst all categories of banks.
Demographic / Behavioral Factors
Growing concept of nuclear families compared to joint families has necessitated need for housing units as well as other items of consumer durables. Increased number of dual income families resulted in higher income and savings.and increased demand for dwelling units due to gradual shift of population from rural/semi-urban centre tourban/metro centre for employment are also important factors.Shift in the attitude of the Indian household from ‘save and buy' theory to a `buy and repay' principle added to it.
Favorable Role of RBI
Favorable actions like reduction in Capital Adequacy Ratio requirement have effectively doubled the credit disbursement capacity of banks. Banks have elongated repayment periods of retail loans years to 50/20 years besides quoting fixed/ variable rate of interests based on their asset liability management structure and study of behavioral pattern of demand and time deposits.Deregulation of interest rate with option to quote fixed/ variable interest rate.Continuous reduction in bank rate, which resulted in reduction in lending rates as well.South ward movement in CRR and SLR ratios increasing lending capacity of banks.
Catalyst-role of Government
Tax exemptions for payment of interest on capital borrowed for purchase/ construction of houseproperty and principle repayment. This made housing finance affordable and within the reach of common man.These exemptions also changed the profile of the retail segment from hitherto cash transactions to book transactions.
Initiatives on the Part of Banks
The growth in retail banking has been facilitated by growth in banking technology and automation of banking processes to enable extension of reach and rationalization of costs. ATMs have emerged as an alternative banking channel which facilitates low-cost transactions vis-à-vis traditional branches / method of lending. It also has the advantage of reducing the branch traffic and enables banks with small networks to offset the traditional disadvantages by increasing their reach and spread .Easy and affordable access to retails loans through a wide range of options provided more flexibility.
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Future of Retail Banking
The retail banking sector of India has huge potential to grow domestically leading to further penetration, and also internationally exploring more and more opportunities in captivating markets.
Next-Gen Mobile Banking
Despite the massive success of the Smartphones and devices like the iPad, banks have been traditionally slow to adopt these new technologies. All that is set to change in the near future.Soon, 2012 will be the year banks start grappling with the multi-screen environment in more sophisticated ways. Citibank did a great job of redesigning its U.S. retail banking website to work with tablets in its recent revamp. We’ll see more of this, along with websites that detect the browser types and serve up a site for your mobile mini-browser or tablet seamlessly. We already notice that Citi sends the users to a mobile-optimized online banking sign-on by default on a mobile mini-browser.
Phone as a bank account and wallet
In near future, we can see a flurry of mobile wallet activity, along with a push to modernize POS networks to cope with both better “offer” capability and to integrate near-field communication and other card less payment options. Square and Google Wallet took the forefront of these developments in 2011, but we can expect to see much more competition in 2012-13. Telephone companies, app developers, PayPal, Apple, Microsoft, and a bunch of others will all be dipping their toes in the phone-asa-wallet play this year. Airtel introduced the concept of Digital Wallets in India through its Airtel Money Programme.
Knowing the Customer
One of the major challenges today is integrating customer learnings and a single-view of the customer (an all-encompassing understanding of the customer) into a framework for dialog. As traditional metrics wane, marketers will be looking at mobile, social media, and other technologies to engage customers. This means more than social media messaging or simply pushing out Twitter offers. The new marketing team will look at customer behaviours and work to fit financial services into that landscape. Behavioural analytics and a single-view of the customer will be critical in this new environment. Banks try to measure the value and popularity of their brand in the social “cloud.” As they do so, they will work to improve customer referral and positive brand sentiment. Bank of America certainly found out this year, as Bank Transfer Day targeted their brand, that the social dialog is incredibly powerful as a tool both for growth and for damage. For banks of all sizes, a challenge in building and maintaining market share is delivery on the brand promise. For the first time, marketing and simple customer service will be hardwired into this new metric - having satisfied customer’s results in stronger brand advocacy and back again.
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Upgrade Core systems
The vulnerability of many banks will be their aging core systems and the problem of bridging the gap between today’s real-time engagement and yesterday’s batch-based processes. Increasingly we’ll start to see more failures of ATM networks, POS networks, and internet banking websites and the like, as we began to see in 2011. Primarily this will be a matter of unexpected loads being placed on digital channels, stressing the weakest links in the chain: integration points with core systems. Bankers will continue to discuss the need for better core systems capability. However, beset by limited budgets and the massive cost of core system replacement, they will begin exploring alternative solutions. Expect the “cloud” to offer some potential solutions here. The likes of Temenos, Fiserv, Oracle, Jack Henry, and others start to move some or all of their core systems capabilities into cloud configurations so that banks can transition to more robust systems on a pay-per-use basis, rather than big deal billion-dollar projects.
Interbank and P2P transactions
Peer-to-peer payments will continue to be a strong need for consumers in 2012 as they move away from the use of checks and cash for day-to-day transactions. The need to more simply move money from one person to the next has been one of the core reasons behind PayPal’s phenomenal success. We’ll see big pressure on wire transfer fees, and the gradual abandonment of ACH, in search of something better as a result of the high need for utility in the P2P arena. We can expect PayPal’s increasing domination in this area to push more solutions like ClearXchange to the fore as banks realize that their customers just aren’t writing checks anymore and that PayPal is cheaper than a bank-to-bank wire transfer. Loan to GDP ratio is less than 40%, which is only a fraction, compared to the developed economy. Every Bank has enough opportunities to perform without unhealthy competition. Banks overtake HFCs in Home Loans and NBFCs in Auto loans. The same trend would continue for next few years. Home Loan is expected to grow at 30% and Housing loan as % of GDP will touch 10%. Used Car finance is growing over 20% rate and is expected to continue.Also, a mix of Retail Credit is expected at – Home Loan 49%, Auto loans 28%, Personal loans 16% and Consumer durables 7%. Educational loans which are at low ebb also expected to grow at 20% in the Agricultural segment is expected maintain the 10% level. Personal loan segment is also expected to grow @ 20% with higher yield ranging from 12-16%.
Perspective of the Customer
Future of Retail Banking is for the CUSTOMER. Pricing is determined by Customer and there would be severe competition among Banks would ensure him better service at cheaper rate. The Customer would be able to discount his future earnings as Retail Credit for his higher standard of living.
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References & Bibliography
Books & Publications ? ? ? Uppal R K (2008), “Retail Banking in India: Emerging Issues and Future Outlook”, Management Trends, Vol. 4, No. 2, pp. 1-5 Uppal R K (2009), “Business Retail Banking Strategies in the Liberalized and Globalized Era”, The IUP Journal of Business Strategy, Vol VI, Nos. 3 and 4 Saha Bibhas, Sensarma Rudra (2009),“State Ownership and Bank Competition: A Mixed Oligopoly Approach”, Department of Accounting, Finance & Economics, , University of Hertfordshire Business School, Hat?eld, Herts
Non-periodical Web Document, Web Page, or Report ? Economics.about.com. Web. 2 Sept 2012 found on http://economics.about.com/cs/finance/a/india_banking.htm
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doc_503013551.pdf
This Project report studies and analyzes the historical perspective, latest current trends and futuristic picture of the retail banking in India.
Project Report
RETAIL BANKING
MICRO - ECONOMICS
By: Nikhil Abbi Sridhar Emani Piyush Gupta Sagar Gupta Rahul Sangani Rohit Solanki
1
(B002) (B021) (B025) (B027) (B050) (B057)
Table of Contents
Introduction …………………………………………………………3 Retail banking v/s Commercial Banking……………………………3 History of banking in India………………………………………….4 Current Scenario…………………………………………………….5 Review of Literature………………………………………………...5 Various Aspects of Retail Banking………………………………….6 Categorization of Retail Banking Services………………………….7 Indian Banking System: A Mixed Oligopoly.....................................7 Advertising Strategy…………………………………………………8 Recent trends………………………………………………………...9 Competition – India and Abroad……………………………………11 Drivers of Growth…………………………………………………..13 Future of Retail Banking……………………………………………14 References & Bibliography…………………………………………16
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Introduction
Retail banking is a banking service that is geared primarily toward individual consumers.It refers to the mobilization of deposit from individual and lending to small business and in retail loan market and thus it consists of large volumes of low value transactions It focuses strictly on consumer markets. Although retail banking is, for the most part, massmarket driven, many retail banking products may also extend to small and medium sized businesses. Today much of retail banking is streamlined electronically via Automated Teller Machines (ATMs), or through virtual retail banking known as online banking. The term ‘retail banking’ encompasses retail deposit schemes, retail credit, retail loans, credit cards, debit cards, insurance products, mutual funds, and depository services, including demand facilities and services to customers according to their needs. So, retail banking includes various financial services and products forming a part of the assets as well as liabilities segment of the banks. Retail banking on the assets side of the balance includes a wide range of loan products such as housing, auto, consumption and educational loans. The following are the features of retail banking: ? ? ? ? ? ? Strong credit assessment capability; Regular and constant follow-up; Strong processing capability; Skilled human resources; Technological support; Sound documentation.
Retail Banking v/s Commercial Banking
Wholesale banking (Commercial Banking) refers to dealing with large customers often multinational companies, governments or government enterprises Wholesale banks deal in large-valued transactions, usually in small volumes. They draw funds from and lend funds to businesses. It also includes the transactions which the banks conduct with each other via interbank market separate from customers. Whereas, Retail banking is about mobilisation of deposits from individuals and lending to small business and in retail loan markets. Retail banking consists of large volumes of lowvalue transactions. It’s about providing banking services to individual customers. Also, retail banking provides an opportunity for banks to diversify their asset portfolios with high profitability and relatively low NPA’s because of lower risks compared to commercial banking.
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History of Banking in India
Early Phase (1786 to 1935) ? ? ? ? Banking in India originated in the last decades of the 18thcentury. The first banks were The General Bank of India, which started in 1786, and the Bank of Hindustan, both of which are now defunct. Bank of Calcutta, one of the 3 presidency banks originated in June 1806, which almost immediately became the Bank of Bengal. The other two presidency banks were the Bank of Bombay and the Bank of Madras Allahabad Bank established in 1865 Foreign banks start to arrive, particularly in Calcutta, in the 1860s. The Comptoire d’Escompte de Paris opened a branch in Calcutta in 1860 and another in Bombay in 1862
Pre Nationalization Phase (1935 to 1969) ? The RBI (Reserve Bank of India) was established in 1935 as the Central Bank of the Country ? In 1949, the Banking Regulation act was passed and the RBI was nationalized and acquired extensive regulatory powers over the commercial banks. ? In 1955, the Industrial Credit and Investment Corporation of India Limited (ICICI) was incorporated at the initiative of World Bank, the Government of India and representatives of Indian industry ? In 1964, IDBI comes into existence Post Nationalization Phase (1969 to 1990) ? In 1969, GOI nationalized 14 major private banks ? NABARD set up in 1982 as an apex unit of agricultural & rural credit ? Board for Industrial & Financial Reconstruction (BIFR) came into existence under Sick Companies (Special Provisions) Act and started its operations wef May 15, 1985. Modern Phase (1991 – till date) ? In November, 1991; The Committee on Banking Sector Reforms Committee headed by Mr. M. Narasimhan, submits its recommendations to finance minister. The key
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?
recommendations being to reduce Cash Reserve ratio (CRR) , Statutory Liquidity Ratio (SLR) progressively, gradual de-regulation of interest rates The GOI headed by Narasimha Rao implements recommendations by Narasimhan committee
Banking Sector Reforms since 1992 ? Out of the 27 public sector banks (PSBs), 26 PSBs achieved the minimum capital to risk assetsratio (CRAR) of 9 per cent by March 2000 ? The share of the public sector banks in the aggregate assets of the banking sector comes down from 90 per cent in 1991 to around 75 per cent in 2004 ? Since 1993, twelve new private sector banks have been set up ? Reduction in the Government shareholding in public sector banks to 51 per cent.
Current Scenario
Structure of Banking in India
Review of Literature
? Among the prominent studies which have been reviewed, Petersen and Rajan (1995) argue that a bank having market power is more willing to engage in relationship lending, with the result that the supply of credit available to young firms is higher than in a traditionally competitive environment. Banks facing a pool of risky borrowers have an incentive to take on riskier projects. Since a successful firm will not be lured away by a competitor, banks will benefit from capital requirements, taking into account the riskiness of the asset, such that more risky loans have higher capital requirements. Therefore, if a bank wants to increase its capital-to-asset ratio, it may shift its lending to lower risk loans such as mortgages and away from higher risk loans such as business lending.
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Boot and Thakor (2000) present a model in which banks can engage in both relationship and transactional lending. They argue that banks may actually do more relationship and transactional lending, the former in competitive environment. Consider a monopoly bank that offers both types of loans. Relationship loans are offered to low and medium quality borrowers. Since relationship loans have a high value for such borrowers, the monopoly bank can capture part of all this value. High quality borrowers however place less value on relationship, and so it is not worth the added cost to the banks to invest in it. When banks’ competition increases, the surplus value that any one bank can extract from relationship loans decreases. Uppal (2008) examines that retail credit notwithstanding, the cautionary approach advocated by the RBI is bound to increase further. Banks need to realize that in their enthusiasm to distribute retail credit on a very massive scale, the cardinal principles of lending are not followed. In the present market scenario, the key to success for any bank lies in aggravating and emphasizing the various retail marketing activities.
Various Aspects of Retail Banking
Throughout more than two years of financial crisis and economic turmoil, the retail business has proved to be an irreplaceable source of stability for most banks. What this sector lacks in explosive performance it makes up for by providing a cushion against sharp downturns. Let us look at the services offered by banks as Retail banking. Retail Banking services can be classified into three types of services: i. Core Banking Services ii. Facilitating services iii. Supporting services
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Categorization of Retail Banking Services
Core Services Payment Services Facilitating Services i. Cash ii. Foreign Currency requirements iii. Traveler Cheques iv. DD/Bankers cheque v. NEFT/RTGS Current A/c & Savings i. ATM cards A/c ii. Standing Instructions iii. Intra/Inter-bank transfer iv. Lockers Supporting Services 1. Doorstep payments 2. Internet Banking 3. Telephone Banking
1. Credit cards 2. Debit cards 3. Senior citizen benefits 4. Mobile Banking 5. Internet Banking 1. Interest rate: floating/ fixed 2. Flexibility in prepayment of loan 3. Counselling on real estate markets 4. ECS for payment of instalments 1. Additional insurance facility for family members 2. Counselling on post retirement savings
Various Loan Products: Consumer, Personal, Housing, Education loans
i. ii.
Current Account Savings Account
Insurance Products: Life Insurance, Pension Schemes
i. ii.
Current Account Savings Account
Indian Banking System: A Mixed Oligopoly
The underlying view of mixed competition is that state ownership provides an indirect means of regulating the conduct of private firms using market instruments rather than using administrative-judicial interventions. A general result of this literature is that the publicly owned firm will act more aggressively and have greater market share than the private firms. There is a significant difference between banks and ordinary firms. In the industrial organization, firms mainly interact in the output market and have no or little interactions in the input market. Banks, on the other hand, have to interact in both the deposit (input) market, and the loan (output) market; moreover by lending to each other they add another dimension to their relationship. Above all, unlike ordinary firms, banks have to deal with loan default risk and its knock-on effects on different aspects of banking. Despite large scale divestments many state-owned banks in developing and transition economies, entry of private and foreign banks has still remained a subject of state control.
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In India, RBI governs the licensing of new banks in Private sector. Some of the guidelines are: ? Companies that have an exposure of 10% or more to real estate and brokerage businesses in terms of revenue or assets are not eligible to seek licences. ? To be able to float a bank, a corporation or a non-banking financial company (NBFC) will need a “diversified ownership, sound credentials and integrity”, and a 10-year track record. ? The norms have kept the minimum capital required for new banks at Rs.500 crore. ? Those who secure in-principle approval will have to set up banks within a year and need to have capital adequacy ratio of 12%. In fact, state presence is a common feature in banking systems all over the world. It is, therefore, reasonable to expect that the banking industry in India & many other economies (especially emerging) resembles mixed oligopoly with strategic interactions among banks occurring at many dimensions.
Advertising Strategy
Financial Institutions and banks offer various products to its customers such as personal loans, home loans, savings account, credit cards and so on. It is very essential for a financial company to know, which user to target for what product and when. The goal of data analytics and data mining department is to arrive at accurate answers to these 3 questions, (Which User, What Product, When), it is a rewarding exercise for the bank, users and definitely the analytics manager. The problem is very simple. A customer may have purchased a single product or multiple products from a bank. The company would ideally like if all its customers bought all of its products. This possibility however does not exist, therefore without any targeting model; the company would be wasting money, time and resources by randomly targeting customers for its products.
For example, a customer has savings account in a bank, based on the information given to the bank along with account status and history, banks could target him/her as a prospect for a personal loan product based on a logic / algorithm. The logic / algorithm could be as simple as if a customer from metro with account balance of Rs One Lakh or more for over 6 months should be a prospect for home loans Rs 20 Lakhs or personal loans over Rs 3 Lakh. This is a simple example.However it could be a complicated neural network or logistic regression model. Cross Sell Models: A customer of a product is a likely prospect for another product if his account activity positively predicts likelihood of purchase. Target model has to predict purchase of the additional product. Up Sell Models: A customer can be targeted for higher segment product in the same category based on his account status and demographics. Normal saving accounts customers can be sold for Premium segments customers, if his account balance is over a period of time.
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Deep Sell Models: A customer can be sold more of same product based on his need. Target model has to predict his need.These target models are also called response models that only predict the purchase behavior of a customer for a given product. This model is ineffective as the cost of randomly targeting a customer for product is less than cost of targeting using predictive response model. The main reason is because of below limitations of traditional response model ? All customers behave in two ways: Purchase or do not Purchase. ? Behaviour of customers during absence of any marketing activity. ? Maximum lifetime value to be derived from customer is unkown; this will result in underselling or selling lower value products when higher products could have been sold. If these issues are taken care of by strong statistical modelling then loss making response model can be made profitable. Financial institutions try to boost the sales and their market share using some advertisement strategies. Banking firms generally opt for the below advertising techniques : ? Through Sales and Promotion Retail banks advertise through sales and promotion: i. To identify and attract new customers ii. To introduce a new product iii. To increase total number of users for an established brand iv. To encourage greater usage among users v. To educate consumers regarding product improvements vi. To bring more customers into retail stores vii. To establish fluctuating sales pattern viii. To increase reseller inventories ix. To combat competitor’s marketing efforts Personalized selling Based on the past transactional records or the type of account, banks offer various offers and schemes to the customers based on their need patterns. Through phone or net banking Telephone and net banking are other ways of advertising their new products and services. Bank Campaigns Many banks like ICICI, Deutsche bank, IDBI, and ING Vyasya do campaigning for advertising using banners and hoardings.
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Recent trends
The domestic retail banking segment is growing at a rate of 30% per annum and is a major contributor to banks bottom-line. Deutsche Bank recently launched its retail banking operations in India, making it the first country in Asia where the German bank has launched retail banking business.
As shown in the above pie-chart, Retail banking comprises 58% of the total Banking Business. It has been showing tremendous boom in the past decade and continues to penetrate more into the market.
The above figure gives vivid pictures of how retail banking has figured into high volume business. Traditionally, retail banks have used branches, ATM, call centers, mobile, and Internet to interact with their customers, though newer direct channels such as social media have emerged recently. Branches have always played an important role and remain a key banking channel. However the changing needs and preferences of customers, coupled with growing technological innovations, has led to the increased popularity and adoption of direct channels over the last decade. Direct channels are expected to hold the highest share of global banking transaction volume by 2012, though traditional channels are still expected to command the highest share of the sales volume. In recent times, we have witnessed aggressive entry strategies of foreign banks to Retail Segment, customer retention initiatives by PSU Banks and aggressive price-war on Retail Credit. Rapid penetration of Personal Computers, Mobile phones and on-line Trading and purchase options has encouraged increased usage of technology banking.Booming economy and continuous per capita income will further push the living standards of people.
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Fee based income from remittance is shrinking due to RTGS and other technology initiatives. Higher short term interest and flatter yield curves along with phenomenal rise in nuclear and dual income families & enhanced spending power is leading to accelerating penetration of retail banking. Apart from these, macro-level factors like increasing literacy levels, higher adaptability to technology banking , growing consumerism and fiscal incentives to housing loans have been a part of retail boom. Banks continue to offer valued added Products and Services for customer acquisition and retention.Retail banking technology is gaining its importance due to the continued demand. Customer Relationship Management (CRM) is going to be a mandatory requirement for banks to leverage the existing relationship as retail banking customers are demanding more and more features and product differentiation.
Competition – India and Abroad
The Indian players are bullish on the Retail business and this is not totally unfounded. There are two main reasons behind this. Firstly, it is now undeniable that the face of the Indian consumer is changing. This is reflected in a change in the urban household income pattern. The direct fallout of such a change will be the consumption patterns and hence the banking habits of Indians, which will now be skewed towards Retail products. At the same time, India compares pretty poorly with the other economies of the world that are now becoming comparable in terms of spending patterns with the opening up of our economy. For instance, while the total outstanding Retail loans in Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The comparison with the West is even more staggering. Another comparison that is natural when comparing Retail sectors is the use of credit cards. Here also, the potential lies in the fact that of all the consumer expenditure in India in 2001, less than 1% was through plastic, the corresponding US figure standing at 18%. Measuring the competition The fact that the statistics reveal a huge potential also brings with it a threat that is true for any sector of a country that is opening up. Just how competitive are our banks? Is the threat of getting drubbed by foreign competition real? To analyze this, one needs to get into the shoes of the foreign banks. In other words, how do they see us? Are we good takeover targets? Going by international standards, a large portion of the Indian population is simply not “bankable” – taking profitability into consideration. On the other hand, the financial services market is highly over-leveraged in India. Competition is fierce, particularly from local private banks such as HDFC and ICICI, in the business of home, car and consumer loans. There, precisely lie the pitfalls of such explosive growth. All banks are targeting the fluffiest segment i.e. the upwardly mobile urban salaried class. Although the players are spreading their operations into segments like self- employed and the semi-urban rich, it is an open secret that the big city Indian yuppies form the most profitable segment. Over-dependence on this segment is bound to bring in inflexibility in the business.
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The foreign giants’ leap The foreign banks have identified this problem but there are certain systematic risks involved in operating in the Retail market for them. These include regulatory restrictions that prevent them from expanding their branch network. So these banks often take the Direct Selling Agent (DSA) route whereby low-end jobs like sourcing or transaction processing are outsourced to small regional layers. So now on, when you see a loan mela or a road show showcasing the retail bouquet of an elite MNC giant, you know that a significant commission earned out of any such booking gets ploughed back to our own economy. Perhaps, one of the biggest impediments in foreign players leveraging the Indian markets is the absence of positive credit bureaus. In the west the risk profile can be easily mapped to things like SSNs and this information can be publicly traded. PAN is a step in this direction but lot more work need to be done. What has been a positive step towards this is a negative file sharing started by a consortium of 11 banks. However, as a McKinsey study points out actual write-offs on NPAs show a strong negative correlation with sharing of positive information. On top of this, the spend-now-pay-later “credit culture” in India is just not picking up. A swift legal procedure against consumers creating bad debt is virtually non-existent. Finally, the vast geographical and cultural diversity of the country makes credit policy formulation a tough job and it simply cannot be dictated from a Wall Street or a Singapore boardroom! All these add up to the unattractiveness of the Indian retail market to the foreign players. So over the past few years, in spite of the entry of MNCs in many industries, Retail Banking has seen a flurry of panicky exits. Fewer than 40 remain in India and their share of total bank assets currently 7.2% is falling. Those that remain might be thought to be likely buyers of Indian banks. Yet Citibank, HSBC and Standard Chartered—all in India for more than a century, and with relatively large retail networks—seem to have no pressing need to acquire a local bank. Established foreign banks have preferred to take over customers or businesses from other foreign banks that want to leave. Thus HSBC, in recent years, has acquired customers from France's BNP, Germany's Deutsche Bank and Japan's Bank of TokyoMitsubishi. ABN Amro took over Bank of America's retail business. This will perhaps be the most wrongful inference that can be drawn from the above. We just cannot afford to look inwards and repeat the mistakes that were the side effects of the Nationalization of the Banking System. A growing market can never be an alibi for lack of innovation. Indian banks have shown little or no interest in innovative tailor-made products. They have often tried to copy process designs that have been tested, albeit successfully, in the West. Each economic culture has its own traits and one who successfully adapts those to the business is the eventual winner. A case in point is the successful implementation of microcredit networks in Bangladesh. Positioning a bank as a tech-savvy financial vendor in a country where Internet penetration is an abysmal 1.65% can only add to the over-leveraging as pointed out earlier. The focus of the sector should remain in macroeconomic wealth creation and not increasing the per capita indebtedness that will do little but add to the NPA burden. Retail Banking in India has to be developed in the Indian way, notwithstanding the long queues in front of the teller counters in the Public sector banks!
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Drivers of Growth
Retail banking in India has fast emerged as one of the major drivers of the overall banking industry and has witnessed enormous growth in the recent past. The growth drivers of retail lending are analyzed as under.
Macro-economic Factors
The lower uptake in the non-retail sector has compelled bans to shift their focus on retail assets -specially housing finance for deployment of funds for a longer period, which is considered as the safest within the retail portfolio. Housing loans and other retail loans are comparatively high yielding in terms of interest spread and safer, as risk is diversified among a large number of individuals across the geographic dimensions. The sector enjoys a privilege of lowest NPAs amongst all categories of banks.
Demographic / Behavioral Factors
Growing concept of nuclear families compared to joint families has necessitated need for housing units as well as other items of consumer durables. Increased number of dual income families resulted in higher income and savings.and increased demand for dwelling units due to gradual shift of population from rural/semi-urban centre tourban/metro centre for employment are also important factors.Shift in the attitude of the Indian household from ‘save and buy' theory to a `buy and repay' principle added to it.
Favorable Role of RBI
Favorable actions like reduction in Capital Adequacy Ratio requirement have effectively doubled the credit disbursement capacity of banks. Banks have elongated repayment periods of retail loans years to 50/20 years besides quoting fixed/ variable rate of interests based on their asset liability management structure and study of behavioral pattern of demand and time deposits.Deregulation of interest rate with option to quote fixed/ variable interest rate.Continuous reduction in bank rate, which resulted in reduction in lending rates as well.South ward movement in CRR and SLR ratios increasing lending capacity of banks.
Catalyst-role of Government
Tax exemptions for payment of interest on capital borrowed for purchase/ construction of houseproperty and principle repayment. This made housing finance affordable and within the reach of common man.These exemptions also changed the profile of the retail segment from hitherto cash transactions to book transactions.
Initiatives on the Part of Banks
The growth in retail banking has been facilitated by growth in banking technology and automation of banking processes to enable extension of reach and rationalization of costs. ATMs have emerged as an alternative banking channel which facilitates low-cost transactions vis-à-vis traditional branches / method of lending. It also has the advantage of reducing the branch traffic and enables banks with small networks to offset the traditional disadvantages by increasing their reach and spread .Easy and affordable access to retails loans through a wide range of options provided more flexibility.
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Future of Retail Banking
The retail banking sector of India has huge potential to grow domestically leading to further penetration, and also internationally exploring more and more opportunities in captivating markets.
Next-Gen Mobile Banking
Despite the massive success of the Smartphones and devices like the iPad, banks have been traditionally slow to adopt these new technologies. All that is set to change in the near future.Soon, 2012 will be the year banks start grappling with the multi-screen environment in more sophisticated ways. Citibank did a great job of redesigning its U.S. retail banking website to work with tablets in its recent revamp. We’ll see more of this, along with websites that detect the browser types and serve up a site for your mobile mini-browser or tablet seamlessly. We already notice that Citi sends the users to a mobile-optimized online banking sign-on by default on a mobile mini-browser.
Phone as a bank account and wallet
In near future, we can see a flurry of mobile wallet activity, along with a push to modernize POS networks to cope with both better “offer” capability and to integrate near-field communication and other card less payment options. Square and Google Wallet took the forefront of these developments in 2011, but we can expect to see much more competition in 2012-13. Telephone companies, app developers, PayPal, Apple, Microsoft, and a bunch of others will all be dipping their toes in the phone-asa-wallet play this year. Airtel introduced the concept of Digital Wallets in India through its Airtel Money Programme.
Knowing the Customer
One of the major challenges today is integrating customer learnings and a single-view of the customer (an all-encompassing understanding of the customer) into a framework for dialog. As traditional metrics wane, marketers will be looking at mobile, social media, and other technologies to engage customers. This means more than social media messaging or simply pushing out Twitter offers. The new marketing team will look at customer behaviours and work to fit financial services into that landscape. Behavioural analytics and a single-view of the customer will be critical in this new environment. Banks try to measure the value and popularity of their brand in the social “cloud.” As they do so, they will work to improve customer referral and positive brand sentiment. Bank of America certainly found out this year, as Bank Transfer Day targeted their brand, that the social dialog is incredibly powerful as a tool both for growth and for damage. For banks of all sizes, a challenge in building and maintaining market share is delivery on the brand promise. For the first time, marketing and simple customer service will be hardwired into this new metric - having satisfied customer’s results in stronger brand advocacy and back again.
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Upgrade Core systems
The vulnerability of many banks will be their aging core systems and the problem of bridging the gap between today’s real-time engagement and yesterday’s batch-based processes. Increasingly we’ll start to see more failures of ATM networks, POS networks, and internet banking websites and the like, as we began to see in 2011. Primarily this will be a matter of unexpected loads being placed on digital channels, stressing the weakest links in the chain: integration points with core systems. Bankers will continue to discuss the need for better core systems capability. However, beset by limited budgets and the massive cost of core system replacement, they will begin exploring alternative solutions. Expect the “cloud” to offer some potential solutions here. The likes of Temenos, Fiserv, Oracle, Jack Henry, and others start to move some or all of their core systems capabilities into cloud configurations so that banks can transition to more robust systems on a pay-per-use basis, rather than big deal billion-dollar projects.
Interbank and P2P transactions
Peer-to-peer payments will continue to be a strong need for consumers in 2012 as they move away from the use of checks and cash for day-to-day transactions. The need to more simply move money from one person to the next has been one of the core reasons behind PayPal’s phenomenal success. We’ll see big pressure on wire transfer fees, and the gradual abandonment of ACH, in search of something better as a result of the high need for utility in the P2P arena. We can expect PayPal’s increasing domination in this area to push more solutions like ClearXchange to the fore as banks realize that their customers just aren’t writing checks anymore and that PayPal is cheaper than a bank-to-bank wire transfer. Loan to GDP ratio is less than 40%, which is only a fraction, compared to the developed economy. Every Bank has enough opportunities to perform without unhealthy competition. Banks overtake HFCs in Home Loans and NBFCs in Auto loans. The same trend would continue for next few years. Home Loan is expected to grow at 30% and Housing loan as % of GDP will touch 10%. Used Car finance is growing over 20% rate and is expected to continue.Also, a mix of Retail Credit is expected at – Home Loan 49%, Auto loans 28%, Personal loans 16% and Consumer durables 7%. Educational loans which are at low ebb also expected to grow at 20% in the Agricultural segment is expected maintain the 10% level. Personal loan segment is also expected to grow @ 20% with higher yield ranging from 12-16%.
Perspective of the Customer
Future of Retail Banking is for the CUSTOMER. Pricing is determined by Customer and there would be severe competition among Banks would ensure him better service at cheaper rate. The Customer would be able to discount his future earnings as Retail Credit for his higher standard of living.
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References & Bibliography
Books & Publications ? ? ? Uppal R K (2008), “Retail Banking in India: Emerging Issues and Future Outlook”, Management Trends, Vol. 4, No. 2, pp. 1-5 Uppal R K (2009), “Business Retail Banking Strategies in the Liberalized and Globalized Era”, The IUP Journal of Business Strategy, Vol VI, Nos. 3 and 4 Saha Bibhas, Sensarma Rudra (2009),“State Ownership and Bank Competition: A Mixed Oligopoly Approach”, Department of Accounting, Finance & Economics, , University of Hertfordshire Business School, Hat?eld, Herts
Non-periodical Web Document, Web Page, or Report ? Economics.about.com. Web. 2 Sept 2012 found on http://economics.about.com/cs/finance/a/india_banking.htm
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