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Summer Project Report
Summer Project Report
5/31/2011
A report on Retail Banking business in Bihar with special reference to IDBI Bank
In partial fulfillment of the requirements of the course of the Summer Internship Program (2010-2012)
By Deepika Agrawal
Retail Banking business in Bihar with special reference to IDBI Bank
Certificate of approval
The following Summer Project Report titled " Retail Banking business in Bihar with special reference to IDBI Bank" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate Diploma in Management for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Project Report only for the purpose it is submitted.
Signature
(i) Retail Banking business in Bihar with special reference to IDBI Bank
EXECUTIVE SUMMARY
Banking Industry which is basically my concern industry around which my project has to be revolved is really a very complex industry. The project titled RETAIL BANKING BUSINESS IN BIHAR WITH SPECIAL REFERENCE TO IDBI BANK was basically a research based project. The main motive behind doing this project is to know the industry, have an overview of retail banking, Know the different products available for retail banking by the bank, current situation and problems and their solutions. My project was totally based on primary data. The project started with studying the various products of IDBI Bank. This was done throughly in order to understand about retail banking and which products do it covers. My next step was to come out of the bank and do a comparative analysis of the bank with its peer banks.My basic objective was to find out what is the scope of retail banking business in Bihar. The comparative analysis between the banks helped me to understand their perceptions about the business they see in Bihar. My main findings through this project was that there is a huge market which still need to be catered in Bihar. Bihar being a developing state has the capacity to give good business to the banks. So, IDBI should continue its expansion strategy in Bihar as it would stand profitable for the bank.
(ii) Retail Banking business in Bihar with special reference to IDBI Bank
Acknowledgement
I would, at the very onset, like to thank Mr. Rizwan Khan, Deputy General Manager, IDBI Bank for providing me the opportunity to perform my Summer Internship Program in the Company. I, would like to, give special thanks and gratitude to Mr.Chandan Kumar, Mr. Sanjay Kumar, Miss. Pragya Nidhi for mentoring and providing the necessary data and information as and when required throughout the project. Their support and encouragement has been a source of inspiration for me and made my journey in IDBI a delight. I, would also offer my thanks to my Dean Mr. Srinivasan Govindrajan, Praxis Business School, Kolkata. My thanks also go to Mr. Charanpreet Singh, Asso. Dean, and Prof. Anindra Kumar Halder , Praxis Business School. I would also like to thank my classmates and seniors for extending me their help and cooperation whenever I approached them.
(iii) Retail Banking business in Bihar with special reference to IDBI Bank
Table of contents
S.No Chapter Particulars Page no.
1 2 3 4
i) ii) iii) 1)
5 6
2) 3)
4)
8 9
5) 6)
Certificate Of approval Executive Summary Acknowledgement Introduction 1.1 A Brief Introduction 1.2 Obejective Of The Study 1.3 Relevance of The Study 1.4 Scope Of The study 1.5 Limitations A Journey Through Banking 2.1 Origin Of Banking IDBI Profile 3.1 Journey From IDBI To IDBI Ltd. 3.2 IDBI Bank Ltd.- A Profile 3.3 IDBI Groups 3.4 IDBI- Its Products And Services Retail Banking 4.1 What Is Retail Banking 4.2 SWOT Ananlysis Of Retail Bnaking 4.3 Need For Retail Banking (The Ultimate Service Provider) 4.4 Retail Banking in India 4.5 Advantages Of Retail Banking 4.6 Disadvantages 4.7 Scope For Retail Banking In India 4.8 Present Snario 4.9 What Are Various Retail Banking Services 4.10 Retail Lending 4.11 Role Of IT In Retail Banking Retail Banking Of IDBI Bank 5.1 An Overview Of the product 5.2 The IDBI Bank Advantage Methodology 6.1 Research Type 6.2 Data type 6.3 Sample Selection
10 11 12
7) 8) 9)
6.4 Data Collection Method 6.5 Tools Used For Data Analysis The Study 7.1 What The Stats Say Colclusions And Suggestions Basic Findings Suggestions Bibliography And References
47 48 49 50 60 60 62 65
List of figures
Fig. No. 1- Banking structure in India Fig. No. 2- Main Events In The History Of IDBI Bank Fig. No.3- Number of Branches And ATMs Fig. No. 4-IDBI Bank Business Chart Fig. No.5- Branches In Bihar Fig. No.6- ATMs In Bihar Fig. No.7- Factors Considered Fig. No.8- Banks USP Fig. No.9- Special Rural Sheme Fig. No.10- Obstacles Faced Fig. No.11- Main Driver Of Banks Profitability Fig. No.12- CASA As % Of Total Deposits Fig. No.13- Current Account As % Of CASA Fig. No.14- Profitability Or Growth % Of Banks
List of tables
Table No. 1-Categorization of Retail Bank services Table No. 2- Interest Rates
List of appendices
Annexure Annexure 1- questionnaire Annexure 2- master sheet Annexure 3- schedule of facilities
Abbreviations
DFI- Development Financial Institution SLR- Statuory Liquidity Ratio SSI- Small Scale Industries GOI- Government Of India SME- Small And Medium Enterprises PFS- Provident Funds IPO- Initial Public Offer NPA- Non performing Assets CRM- Customer Relatitionship Management DD- Demend Draft EFT- Electronic Fund Transferring ECS- Electronic Clearing Services PAP- Payable At Par BR- Base Rate FCNR- Foreign Currency Accounts AQB- Average Quarterly Balance
1) INTRODUCTION
We dont want satisfied customerswe want delighted customers. It is the new marketing mantra today. The same applies to banking as well. Retail banking and rural banking were once considered as taboos by the leading foreign and domestic banks. But cutthroat competition, innovation and advanced technology have altogether changed the face of banking sector. Now all banks have recognized the importance of retail banking. Retail banking is that part of a bank that offers products and services primarily to individual customers, professional, self-employed individuals or small businesses. The focus is on creating products and services that meet the needs of the target customers and are profitable for the bank as well. The approach to retail banking products is more is more on a mass production basis wherein all risk and operations are based on and geared to cater to a large number of customers. This is therefore, significantly different from corporate banking or wholesale banking where focus is on large sized customer accounts rather than large numbers of customers. Understanding retail banking will help in servicing your customer better as it would give you a perspective and insight into how such products are structured and specific requirements for each set of products. This would help you advice your customer in a more informed manner besides making you a more informed consumer. With the advent of ATMs, Anytime banking has come into picture. Satellites and telecom networks across the world have made Anywhere banking possible. Now it is the turn of Anyhow banking, and the leading bank of the next century will be the one which has all these three As.
banking has in Bihar with special reference to IDBI Bank. The study also attempts to find the outcome of retail business of peer banks which will give the bank understudy an idea of its position to its peer banks in the area.
1.5 Limitations:
To make mistake is human nature and Im no exception. I have tried to make this project approachable and helpful for the bank, but at the same time I accept the occurrence of intermittent mistakes and do accept them sincerely.
There are three different phases in the history of banking in India: Pre-Nationalization Era. Nationalization Stage. Post Liberalization Era.
1. Pre-Nationalization Era: In India the business of banking and credit was practiced even in very early times. The remittance of money through Hundies, an indigenous credit instrument, was very popular. The hundies were issued by bankers known as Shroffs, Sahukars, Shahus or Mahajans in different parts of the country. The modern type of banking, however, was developed by the Agency Houses of Calcutta and Bombay after the establishment of Rule by the East India Company in 18 th and 19th centuries. During the early part of the 19th Century, the volume of foreign trade was relatively small. Later on as the trade expanded, the need for banks of the European type was felt and the government of the East India Company took interest in having its own bank. The government of Bengal took the initiative and the first presidency bank, the Bank of Calcutta (Bank of Bengal) was established in 1806. In 1840, the Bank of Bombay and in 1843, the Bank of Madras was also set up. These three banks were known as Presidency Bank. The Presidency Banks had their branches in important trading centers but mostly lacked in uniformity in their operational policies. In 1899, the Government proposed to amalgamate these three banks in to one so that it could also function as a Central Bank, but the Presidency Banks did not favor the idea. However, the conditions obtaining during world war period (1914-1918) emphasized the need for a unified banking institution, as a result of which the Imperial Bank was set up in1921. The Imperial Bank of India acted like a Central bank and as a banker for other banks. 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 1950, the Indian Banking system comprised of the RBI, the Imperial Bank of India, Cooperative banks, Exchange banks and Indian Joint Stock banks. 2. Nationalization Stages: After Independence, in 1951, the All India Rural Credit survey, committee of Direction with Shri. A. D. Gorwala as Chairman recommended amalgamation of the Imperial Bank of India and ten others banks into a newly established bank called the State Bank of India (SBI). The Retail Banking business in Bihar with special reference to IDBI Bank
Government of India accepted the recommendations of the committee and introduced the State Bank of India bill in the Lok Sabha on 16thApril 1955 and it was passed by Parliament and got the presidents assent on 8th May 1955. The Act came into force on 1st July 1955, and the Imperial Bank of India was nationalized in 1955 as the State Bank of India. The main objective of establishing SBI by nationalizing the Imperial Bank of India was to extend banking facilities on a large scale more particularly in the rural and semi-urban areas and to diverse other public purposes. In 1959, the SBI (Subsidiary Bank) act was proposed and the following eight state-associated banks were taken over by the SBI as its subsidiaries. Name of the Bank 1. State Bank of Hyderabad 2. State Bank of Bikaner 3. State Bank of Jaipur 4. State Bank of Saurashtra 5. State Bank of Patiala 6. State Bank of Mysore 7. State Bank of Indore 8. State Bank of Travancore Subsidiary with effect from 1st October 1959 1st January 1960 1st January 1960 1st May 1960 1st April 1960 1st March 1960 1st January 1968 1st January 1960
With effect from 1st January 1963, the State Bank of Bikaner and State Bank of Jaipur with head office located at Jaipur. Thus, seven subsidiary banks State Bank of India formed the SBI Group. The SBI Group under statutory obligations was required to open new offices in rural and semiurban areas and modern banking was taken to these unbanked remote areas. On 19th July 1969, then the Prime Minister, Mrs. Indira Gandhi announced the nationalization of 14 major scheduled Commercial Banks each having deposits worth Rs. 50 crore and above. This was a turning point in the history of commercial banking in India. Later the Government Nationalized six more commercial private sector banks with deposit liability of not less than Rs. 200 crores on 15th April 1980, viz. Andhra Bank. Retail Banking business in Bihar with special reference to IDBI Bank
Corporation Bank. New Bank if India. Oriental Bank of Commerce. Punjab and Sind Bank. Vijaya Bank. In 1969, the Lead Bank Scheme was introduced to extend banking facilities to every corner of the country. Later in 1975, Regional Rural Banks were set up to supplement the activities of the commercial banks and to especially meet the credit needs of the weaker sections of the rural society. Nationalization of banks paved way for retail banking and as a result there has been an all round growth in the branch network, the deposit mobilization, credit disposals and of course employment. The first year after nationalization witnessed the total growth in the agricultural loans and the loans made to SSI by 87% and 48% respectively. The overall growth in the deposits and the advances indicates the improvement that has taken place in the banking habits of the people in the rural and semi-urban areas where the branch network has spread. Such credit expansion enabled the banks to achieve the goals of nationalization, it was however, achieved at the coast of profitability of the banks. Consequences of Nationalization: The quality of credit assets fell because of liberal credit extension policy. Political interference has been as additional malady. Poor appraisal involved during the loan meals conducted for credit disbursals. The credit facilities extended to the priority sector at concessional rates. The high level of low yielding SLR investments adversely affected the profitability of the banks. The rapid branch expansion has been the squeeze on profitability of banks emanating primarily due to the increase in the fixed costs. There was downward trend in the quality of services and efficiency of the banks.
3. Post-Liberalization EraThrust on Quality and Profitability: By the beginning of 1990, the social banking goals set for the banking industry made most of the public sector resulted in the presumption that there was no need to look at the fundamental financial strength of this bank. Consequently they remained undercapitalized. revamping this structure of the banking industry was of extreme importance, as the health of the financial sector in particular and the economy was a whole would be reflected by its performance. The need for restructuring the banking industry was felt greater with the initiation of the real sector reform process in 1992. The reforms have enhanced the opportunities and challenges for the real sector making them operate in a borderless global market place. However, to harness the benefits of globalization, there should be an efficient financial sector to support the structural reforms taking place in the real economy. Hence, along with the reforms of the real sector, the banking sector reformation was also addressed. The root causes for the lackluster performance of banks, formed the elements of the banking sector reforms. Some of the factors that led to the dismal performance of banks were. Regulated interest rate structure. Lack of focus on profitability. Lack of transparency in the banks balance sheet. Lack of competition. Excessive regulation on organization structure and managerial resource. Excessive support from government. Against this background, the financial sector reforms were initiated to bring about a paradigm shift in the banking industry, by addressing the factors for its dismal performance. In this context, the recommendations made by a high level committee on financial sector, chaired by M. Narasimham, laid the foundation for the banking sector reforms. These reforms tried to enhance the viability and efficiency of the banking sector. The Narasimham Committee suggested that there should be functional autonomy, flexibility in operations, dilution of banking strangulations, reduction in reserve requirements and adequate financial Retail Banking business in Bihar with special reference to IDBI Bank
infrastructure in terms of supervision, audit and technology. The committee further advocated introduction of prudential forms, transparency in operations and improvement in productivity, only aimed at liberalizing the regulatory framework, but also to keep them in time with international standards. The emphasis shifted to efficient and prudential banking linked to better customer care and customer services
Cooperatives
Scheduled
NonScheduled (4)
Old
New
Reserve Bank of India was nationalized in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks.
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The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted for the need of following: To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage.
The Reserve Bank of India declared that IDBI Bank Limited, a public sector bank, is clubbed along with nationalized banks. RBI acknowledged this in the F.No. 7/95/2005-BOA with effect from 31st December, 2007 stating that IDBI Ltd. Will now be treated on par with nationalized banks.
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3) IDBI PROFILE
Change of name of IDBI Ltd. to IDBI Bank Ltd. became effective from May 07, 2008
Merger of United Western bank with IDBI Ltd on October 03, 2006.
Merger of IDBI bank Ltd. with IDBI Ltd. became effective from April 02, 2005.
a new company under the name of Industrial Development Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under the Companies Act, 1956 on September 27, 2004. Industrial Development bank of India (IDBI) was constituted under Industrial Development bank of India Act, 1964
Industrial Development Bank of India Limited In response to the felt need and on commercial prudence, it was decided to transform IDBI into a Bank. For the purpose, Industrial Retail Banking business in Bihar with special reference to IDBI Bank
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Development bank (transfer of undertaking and Repeal) Act, 2003 [Repeal Act] was passed repealing the Industrial Development Bank of India Act, 1964. In terms of the provisions of the Repeal Act, a new company under the name of Industrial Development Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under the Companies Act, 1956 on September 27, 2004. Thereafter, the undertaking of IDBI was transferred to and vested in IDBI Ltd. with effect from the effective date of October 01, 2004. In terms of the provisions of the Repeal Act, IDBI Ltd. has been functioning as a Bank in addition to its earlier role of a Financial Institution. Merger of IDBI bank Ltd. with IDBI Ltd. Towards achieving the faster inorganic growth of the Bank, IDBI Bank Ltd., a wholly owned subsidiary of IDBI Ltd. was amalgamated with IDBI Ltd. in terms of the provisions of Section 44A of the Banking Regulation Act, 1949 providing for voluntary amalgamation of two banking companies. The merger became effective from April 02, 2005. Merger of United Western bank with IDBI Ltd. The United Western bank Ltd. (UWB), a Satara based private sector bank was placed under moratorium by RBI. Upon IDBI Ltd. showing interest to take over the said bank towards its further inorganic growth, RBI and Govt. of India amalgamated UWB with IDBI Ltd. in terms of the provisions of Section 45 of the Banking Regulation Act, 1949. The merger came into effect on October 03, 2006. Change of name of IDBI Ltd. to IDBI Bank Ltd. In order that the name of the Bank truly reflects the functions it is carrying on, the name of the Bank was changed to IDBI Bank Limited and the new name became effective from May 07, 2008 upon issue of the Fresh Certificate of Incorporation by Registrar of Companies, Maharashtra. The Bank has been accordingly functioning in its present name of IDBI Bank Limited.
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Vision of IDBI The vision for the Bank is for it to be the trusted partner in progress, by leveraging quality human capital and setting global standards of excellence, to build the most valued financial conglomerate. Our experience of financial markets helps us to effectively cope with challenges and capitalize on the emerging opportunities by participating effectively in our countrys growth process.
Management and Organization IDBI Bank is a Board-managed organization. The responsibility for the day-to-day management of operations of the Bank is vested with the Chairman & Managing Director and two Deputy Managing Directors, who draw upon the support and expertise of a crossdisciplinary Top Management Team. IDBI Bank Ltd employee base includes professionals from the fields of accountancy, management, engineering, law, computer technology, banking and economics. R M Malla- Chairman and Managing director B P Singh- Deputy Managing Director K Narasimha Murthy- Director SubhashTuli-Director R P Singh- Director Lila Firoz Poonawalla- Director H L Zutshi- Director B S Bisht- Director Rakesh Singh- Director Retail Banking business in Bihar with special reference to IDBI Bank
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No. of Branches Metro Urban Semiurban Rural Overseas 241 310 188 87 1
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Bill Payment Card to Card Money Transfer Online Payments Pay Mate Investments Advisory Smart Financial Planning Mutual Fund Insurance Fixed Income Securities Cards Gold Debit Card International Debit cum ATM Card Gift Card World Currency Card Cash Card KIDS Debit Card Foundation Day Cash Back Scheme 2009 Platinum Card Institutional Banking Institutional Savings Account Corporate Payroll Account 24 Hours Banking Phone Banking SMS Banking Account Alerts Internet Banking Other products Lockers India Post Retail Banking business in Bihar with special reference to IDBI Bank
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Preferred Banking NRI Services Capital Market IPO Demat Corporate Banking Following products and services are offered by IDBI Bank for the corporates: Project Finance Infrastructure Finance Syndication, Underwriting & Advisory Services Carbon Credits Business Working Capital Cash Management Services Trade Finance Tax Payments Derivatives Technology Upgradation Fund Scheme (TUFS) Film Financing Scheme Direct Discounting Bills Rehabilitation Finance SME Finance Following SME Finance products are offered by the IDBI Bank: Sulabh Vyapar Loan Dealer Finance Funding under CGFMSE Direct Credit Scheme - SIDBI Retail Banking business in Bihar with special reference to IDBI Bank
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Preferred customer scheme - IDBI Bank / SIDBI Vendor financing (Pre - Sale) Vendor financing (Post - Sale) Lending Against the Security of Future Credit Card Receivables Finance to Medical Practitioners Loan to SRWTO SME Hosiery Special Current Account Fig. No.4-IDBI Bank Business Chart
IDBI BANK
RETAIL BANKING
DEVELOPMENT BANK.
SAVING ACCOUNT
CURRENT ACCOUNT
INVESTMENT
PERSONAL SAVING
CORPORATE SAVING
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4) Retail Banking
4.1 WHAT IS RETAIL BANKING?
Retail banking is however; quite broad in nature it refers to the dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet. Fixed current/savings accounts on the liabilities side; and mortgages, loans (e.g. personal, housing, auto and educational) on the assets side are the more important of the products offered by banks. Related ancillary services include credit cards, or depository services. Todays retail banking sector is characterized by three basic characteristics. Multiple products (deposits, credit card, insurance, investments and securities). Multiple channels of distribution (call center, branch, internet and kiosk); and Multiple customer groups (consumer, small business, and corporate)
DEFINITION: Retail Banking Services:Banking services provided to individual members of the public as opposed to those provided to businesses and institutions.
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customer in retail banking belong to different economic, cultural, educational, and social background there demand is also varied. It is acceptance of the banking product and satisfaction of customer that yield profit in this segment. Hence customer Service and Quality implementation through use of CRM tools will help banks Success in this competitive world of retail banking. 5) Innovative product development : The scope for development in financial services is unlimited. In retail banking ball is in the court of bankers where they approach the customer finds out there financial need and problem, designs the product and services, market them and finally sells them to satisfy its customer. 6) Economies of scale: Retail banking enables banks to utilize existing capacities and reaching wider population of customer. Banks can get the benefits of information and transaction. In process of extending variety of services, banks are acquiring enormous amount of customer information .if this information is systematically recorded , banks can efficiently utilize this information in order to explore new segment and to cross sell new services.
WEAKNESS:1) Avoids corporate sector : Retail banking avoids corporate sector totally which is the backbone of Indian economy. Main reason put forth or this is decline in corporate borrowing. However bank can take certain step to manage there corporate clients such as lower arte credit, higher amount of loan etc. Managing corporate client is more easier as they have well defined financial policy and project and they concentrate on product and services offered rather than on CRM of bank unlike individual clients. 2) Marketing (Internal and External):
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Retail banking requires strong marketing strategies to be adopted by bank both internal and external. under retail banking segment top level management need employees to introduce product properly to its employees because if the employees are not aware regarding the product they are offering that product will fail however effective the product is also bank require to spend lot on its marketing of product to general public because if public is not aware regarding the product and service how will they opt for it. All this increases the cost and time required to introduce the product in the market which can reduce or make the product out dated immediately on its arrival. 3) Changes in technology: Future of retail banking lies in the hand of IT. Various It solution used by banks such as E-banking, phone banking, ATM leverage the retail banking product and service offered by banks. But this has weekend the segment some how. If banks are not able to adopt the latest technology it may pull back the growth of bank also this technology requires lot of capital investment and if at all the technology fails then it may shake the customers confidence on bank and bank may land up in loosing its customer. 4) Reduces the profitability: It is claimed that retail banking increases overall profitability of the bank but in reality this is not the case because managing wide range of product and service requires high quality technology , large number of staff and all this requires high capital investment which reduces banks profitability. 5) Co-ordination among various department: Success of retail banking is not the result of one department but is result of various departments together. If there is lack of co-ordination among various department of the bank then however strong and effective the may be the product it will fail. Suppose if the front office is successful in attracting the customer but back office is not able to execute the delivery of product or service on time then bank may land up loosing the customer although its CRM was effective.
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OPPORTUNITIES:1) Scope for innovation: Under retail banking as banks try to provide all those product and services which are desired by its customer this segment has more scope for innovation banks can keep on modifying its products as per the market demand which helps them from not being out dated . 2) Rise in per capita income: The rise of the Indian middle class is an important contributory factor in this segment. The percentage of middle to high-income Indian households is expected to continue rising. The younger population not only wields increasing purchasing power, but as far as acquiring personal debt is concerned, they are perhaps more comfortable than previous generations. Improving consumer purchasing power, coupled with more liberal attitudes toward personal debt, is contributing to India's retail banking segment. 3) Economic growth: Retail banking has immense opportunities in a growing economy like India. In the BRIC Report India is stated as an economic superpower. According to A. T. Kearney, a global management-consulting firm, recently identified India as the 'second most attractive retail destination' of 30 emergent markets. Hence retail banking has high opportunities in India.
THREATS:
1) Large disbursement of loans: The boom in the field of retail banking and the intense composition among the to increases the customer base has resulted in the large disbursement of customer loans, loans on credit cards, auto loans, educational loans etc. on easy terms without much scrutiny this has brought with in an increase in the number of cases of default in loan repayment thus increasing the banks NPAs. Retail Banking business in Bihar with special reference to IDBI Bank
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2) Issue of customers dignity: Banks have been adopting carrot and stick policy by renegotiating loan terms where the default is genuine and handing over recovery to third parties where default is willful. Most of the time, the third parties or external agents are not trained to handle the loan repayment process. Hence, they restore to strong arms tactics with defaulting customers. Many cases of harassment and invasion of privacy have been reported by the affected parties. Such instances may hamper the image and corporate vision of the bank in near future. 3) Issue of customer privacy: Customer privacy is also affected in another way wherein customer service representatives of the banks ring up customers at any times at their places of work, informing them about new products and services. This may cause inconvenience to busy customers. It is also obligation on part of the banks not to share the private information from the records of the customers with outside agencies like market research groups and other advertisers. 4) IT: The growth of IT has brought with it a number of frauds perpetrated with the help of technology and which come under the domain of cyber crimes. Banks are the victims of unscrupulous elements who have in many instance hacked banks website and stolen credit card number, pass word and other confidential information relating to customer.
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While new generation private sector banks have been able to create a niche in this regard, the public sector banks have not lagged behind. Leveraging their vast branch network and outreach, public sector banks have aggressively forayed to garner a larger slice of the retail pie. By international standards, however, there is still much scope for retail banking in India. After all, retail loans constitute less than seven per cent of GDP in India vis--vis about 35 per cent for other Asian economies South Korea (55 per cent), Taiwan (52 per cent), Malaysia (33 per cent) and Thailand (18 per cent). As retail banking in India is still growing from modest base, there is a likelihood that the growth numbers seem to get somewhat exaggerated. One, thus, has to exercise caution is interpreting the growth of retail banking in India. The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Master debit card as well. The Bank launched its credit card business in late 2001. By March 2005, the bank had a total card base (debit and credit cards) of 4.2 million cards. The Bank is also one of the leading players in the merchant acquiring business with over 42,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.
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RESOURCES SIDE: Retail deposit are stable and constitute core deposit They are interest insensitive and less bargaining for additional interest They constitute the low cost for banks Effective CRM with the retail customer builds a strong customer base. Retail banking increases the subsidiary business of a bank.
ASSETS SIDE: Retail banking results in better yield and improve bottom line of a bank. Retail segment is a good avenue for funds deployment. The consumer loan is presumed to be of lower risk and NPA perception. Help economic revival of the nation through increased production activities. Improves lifestyle and fulfills aspiration of people through affordable credit. Innovative product development. Retail segment involves minimum marketing efforts in a demand driven economy.
4.6 DISADVANTAGES
v Designing own and new financial products is very costly and time Consuming for the bank. v Customers now-a-days prefer net banking to branch banking. The banks that are slow in introducing technology-based products, are finding it difficult to retain the customers who wish to opt for net banking. v Customers are attracted towards other financial products like Mutual funds etc. v Though banks are investing heavily in technology, they are not able to exploit the same to the full extent. v A major disadvantage is monitoring and follows up of huge volume of loan accounts inducing banks to spend heavily in human resource department. Retail Banking business in Bihar with special reference to IDBI Bank
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v Long term loans like housing loan due to its long repayment term in the absence of proper follow-up, can become NPAs. v The volume of amount borrowed by a single customer is very low as compared to wholesale banking. This does not allow banks to exploit the advantage of earning huge profits from single customer as in case of wholesale banking.
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banking and retail banking has become one and the same thing for the past several years now. Approximately, 22% of the total outstanding advances were derived from the retail portfolios of the banks in India till March 2004. The contribution of retail banking to the overall banking sector has been outstanding. Growing at a rate of 122%, the retail-banking sector of India managed to reach a worth of $67 billion in the year 2005, as per experts at RNCOS. The retail banking sector in India should reach a worth of $310 billion by the year 2010, anticipate the experts. Profiles of key players along with the strategies and plans adopted by them for the growth of the industry are also talked about in it. Besides discussing the present scenario of the financial system in India the report offers a reliable prediction of the market in the years to come. The ratio of retail credit to net credit at the global level is around 5%. In India, it is interesting to note that this ratio is over 10% as on March31, 2002 (Source: RBI, Annual Report). With the economy reforms set in motion, the country is already rated as a major hub for economic development. Increase in per capita income, change in life style and growing urbanization has made the Indian population rise from oblivion and resurge in modern era. The po licy of and spent is gradually giving way to spend and save concept.
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Table No. 1-Categorization of Retail Bank services Core services Payment services Facilitating services Cash Foreign currency requirements Traveller cheque DD/bankers cheque IT EFT Supporting services Making payment at door step Internet banking Telephone banking
ATM card Standing instruction from customer payments Inter branch transfer of fund Safety vault for making
Credit card Debit card Service to senior citizen Telephone banking Internet banking Conversion of excess balance to time deposit Delivery of loan at promised time Interest loan option Flexibility in paying loan Counseling on Real estate market Legal services for documentation ECS for payment of loan
Loan product: Consumer loan Housing loan Personal loan Education loan
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installment Insurance product: Life insurance Pension scheme Current account Saving account Time account Safety vaults deposit Additional insurance facility for family members. Counseling on post retirement saving
Everyone dreams of living a comfortable life and does all one can to make this dream come true. Today this has become much easier, as with higher levels of income and multiple earning members in the family, it is easy to avail loans to fulfill aspirations. Buying a home, car or any small household item such as TV or a refrigerator using money borrowed from a bank or a finance company has become the way of life today. This has created a big business opportunity for finance companies. They are offering loans to all types of customers for all types of assets. Retail lending has thus become one of the key business verticals for finance companies. This necessitates banks to follow processes for conducting business profitably. There are two main areas in lending. Loan Origination and Loan Servicing. The process of validating customers, convincing them that the finance company is the right source for their loan requirement and finally offering the loan with terms and conditions that make business sense to the finance company is Loan Origination and once the loan is disbursed, the process of managing the repayments from
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customers and responding to the customer requests for pre payments, early settlement, rescheduling, etc. is Loan Servicing. Lending has become very competitive as customers are in the mode of shopping for loans. Finance companies have to continuously offer new financial products to customers and thus two of the important aspects of the business are time-to-market and flexibility. But as number of customers increase, the risk of increase in the number of defaulters prevails. Thus finance companies have to do the balancing act. On one hand they have to acquire more business by lending to more customers and on the other hand they have to lend to select customers so that the rate of delinquency is under control.
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Technology provides Retail Banks with various delivery channels:1) Automated Teller Machines(ATM): The trend in banking has evolved from a cash economy to cheque economy and thereon to the plastic card economy. One of the channels of banking services delivery is vide the ATM or the Automated Teller Machines, whose traditional and primary use is to dispense cash upon insertion of a plastic card and its unique PIN or Personal Identification Number. Current and savings account holders of a bank who hold a certain minimum balance in their accounts (determined by each bank as per their policy) are issued an ATM card. The card is a plastic card with a magnetic strip with the account number of the individual. When the card is inserted into the ATM, the machines sensing equipment identifies the account holder and asks for his/her identification code number. This is referred to, usually, as the PIN and is issued by the banks computers. This number is unknown to the banks staff and is secret and unique to that individual. When the person uses the ATM and it asks for the PIN, the cardholder identifies himself/herself by pressing the relevant number buttons on the machine. The machine then verifies the account number on the ATM card along with the secret code number stored in the ATM. When the matches found, the ATM pops a menu screen, which allows the user to transact almost all types of bank transactions. 1) Tele banking: Tele banking or phone banking service offered by banks to enable customers to access their accounts for information or transactions. Similar to the ATM PIN, a telephone PIN (T-PIN) is provided to each account holder. The customer can call the exclusive telebanking numbers and provide the details to identify himself/herself to the automated voice. Typically, the bank account number and the T-PIN are asked for. Upon the respective numbers matching the computerized systems the customer is given access to his account to query or transact on his account. Though cash withdrawal and deposit are
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not enabled through this service many banks offer cash delivery or collection service to certain classes of customers. 2) Internet Banking: One of the channels of service delivery to a banking customer is through the Internet. The access to account information as well as transaction is offered through the worldwide network of computers on the Internet. Every bank has special firewalls & its own security measures to protect the accounts from non-authentic use from unauthorized users. Data are encoded using algorithms with a 128-bit key or, in some cases, with a 1,024-bit encryption. Each account holder is provided a PIN similar to that of the ATM or Phone banking PIN. The access to the account is allowed upon a match of the account details & PIN entered on the computer system. A higher level of security may be reached by an electronic finger-print. The finger print is taken before & after the transaction. Then both versions are compared. In case of any difference, the transaction is aborted. Account querying as well as transaction is possible on the Internet banking platform. The accounting is instantaneous & funds transfers can be affected immediately. Though cash transactions are not possible at present, the next phase of evolution in Internet banking will allow those as well.
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Preferred banking program is designed to offer services to a select group of discerning and deserving individual like you. Preferred banking special features help you to save your time, and help you build wealth through efficient deployment of assets. Your Lifestyle reflects your personality. Every element of the preferred banking attempts to complement your status and style. Preferred banking investment advisory, offers you a one stop solution with all products range from fixed deposits to Govt.of2 India Bonds and Mutual funds to Unit Linked Insurance Plans. Royale Account The IDBI Bank Royale Account has been designed to make banking services more convenient for esteemed customers. This new service guarantees you as our privileged customer elaborate and personalized service of the highest order. For all the banking requirements a dedicated relationship manager would be attached to the account. Retail Banking business in Bihar with special reference to IDBI Bank
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With the Royale Account comes the Platinum Debit Card that provides enhanced daily cash withdrawal limit. This lifetime free debit card provides you privileges, which span lifestyle pursuits like shopping, dining and travel. Features of IDBI Royale Account: Zero balance Power Plus account for the one family member Free Locker (5x6x19) or 50% discount in other locker rentals. Higher limit of cash withdrawal from any bank ATM. (with Platinum/Gold debit card). Higher Limit for Point of sale. Discount on Demat transaction charges Doorstep banking. Free Personalized PAP Cheque Book. Free Demand Draft and Pay order
Deposits
Savings Bank accounts commonly referred to as Savings accounts, have huge potential for mobilizing low cost deposit and stable deposits. In our Bank, savings accounts are offered to prospective customers as value added retail liability product.
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have leveraged us to provide superior services. Savings Account Interest Rate - 4.00% p.a. (w.e.f. May 03,2011)
Current Accounts
Current accounts are meant for customers who have to carry out business and/ or large number of transactions in the account every day. There are no restrictions on the number of transactions in current accounts. Core Current Account No two businesses are the same, which is why at IDBI Bank; we offer different types of Current Accounts to choose from, to our customers. The types of Current Accounts that we offer are as follows: Our Core Current Account is a straightforward and easy to use Current Account designed to make even the smallest of business experience hassle free. The Core Current Account comes loaded with a number of features, which include: Free PAP (payable at par) chequebook Free PAP utilisation Free Electronic Funds Transfer Free Pay Orders and Demand Drafts Free Demand Drafts on non-branch locations Free home / non-home branch cash deposit Free any branch cash withdrawal Free Internet/ mobile/ Phone Banking and ATM services Free other bank ATM transactions
Fixed Deposits
Fixed Deposits, also known as Term Deposits or Time Deposits, are deposits accepted by the bank for fixed period and are repayable on expiry of the fixed period. Interest is paid at quarterly rests to the depositor. At the specific request of the depositor, interest could be paid at monthly rests also, but at a discounted rate. The Bank decides the rates of interest on fixed deposits of various maturities from time to time by taking into account the market conditions and directives of the Reserve Bank of India in this regard. IDBI Bank revises fixed deposit rates at an attractive interest rate of 9.50% p.a. for 500 days for normal deposits and 10.25% p.a. for senior citizens w.e.f May 5,2011.
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Recurring deposit
Ideal for those who want to save a fixed sum every month This type of deposit helps you add to your savings at your complete convenience. You can start saving any amount from Rs. 100 to Rs. 1 lakh every month. The amount as decided by you, will be deducted every month from your savings account. Further, there is no Tax deducted at source on these deposits and also no charges for executing your standing instructions.
Loans
We, at IDBI Bank offer a wide range of loan products to suit all your needs ranging from home to education, a holiday to buying a laptop. Select from our loan offerings and we shall be glad to service you on the same. The various loan offerings by IDBI Bank are as follows: Choose from various range of Personal Banking services like: Home Loans Loan Against Property Education Loan Personal Loan Loans Against Securities Reverse Mortgage Loan Auto loans Table No. 2- Interest Rates Home Loans (Fixed) Below Rs 75 lacs ROI(%) p.a 12.25% 12.75%
Loan for commercial property purchase (Floating) 15.25% p.a (Linked to BR)
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Reverse Mortgage Loan (Fixed) Fixed (Re-Phasement after every 5 years )- 12.25% Educational Loan (Floating) Type Up to Rs 4 lakhs Above Rs 4 lakhs For the students of IIT,IIM and ISB (up to Rs 20 lakhs ) Auto Loan(Fixed) Vehicle Segment Segment A: Small/Mid-size/ Utility & Premium MUVs Segment B: Premium Segment C: Luxury & SUV Segment D: Classic ROI(%) p.a Tenor up to 36 months 11.50% p.a 12.00% p.a 11.50% p.a 11.50% p.a 11.50% p.a Tenor up to 60 months 12.00% p.a 13.00% p.a 12.00% p.a 11.75% p.a 11.75% p.a ROI(%) p.a 12.75% p.a (Linked to BR) 12.75% p.a (Linked to BR) 12.00% p.a (Linked to BR)
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24Hrs Banking
Phone Banking IDBI Bank Phone Banking service enables you to access authentic, instantaneous information on your account balances and transactions. The service is available totally free of cost round the clock, 365 days a year. Mobile Banking Our SMS banking initiatives permit you to access your Bank account and carry out various banking transactions and inquires. No need of visiting the bank time and again! Account Alerts IDBI Bank's new Account Alert service gives you all this and more. With Account Alert, your bank account transaction information will be delivered to you automatically, wherever you are. No more visiting the bank branch or ATM to check routine things like account balances, cheque clearance, verification of ATM transactions, bill payment verifications, etc. Account Alerts allows you to monitor finely any type of activity on your accounts, and be notified by email or cell phone SMS as and when they are executed. Internet Banking With IDBI's Internet Banking, your Bank travels with you around the world and you have online, real-time access to your accounts. Admittedly, such a service requires security of the highest nature and complete privacy protection. We provide a completely secure environment, using 128-bit encryption SSL (Secure Sockets Layer), digitally certified by Verisign. 128-bit SSL guarantees world-class security for Internet and e-commerce applications. Pay Mate IDBI Bank Pay Mate Service presenting a simple, convenient and secure way to make payments The Pay Mate service has a tie up with various merchants across India (click here for the list of merchants). You can now shop with any of these merchants and can pay simply through your Mobile Phone. IDBI Bank offers this service to its customers absolutely free of charge. . Money Transfer Sending money within India has never been this simple, convenient, fast and safe. IDBIs Card to Card Money Transfer facility; a first of its kind money transfer service in India is the absolute Retail Banking business in Bihar with special reference to IDBI Bank
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way to send money anywhere, anytime to any Visa Debit or Credit cardholder in India. Banks customers can now transfer money from their Bank account or Visa card to any other Visa debit or Credit card across the country through this service. Transfer Funds We can use Internet Banking; ATMs or branches for transferring money across the country. The only information we need to know is the 16-digit card number of the transferee. To carry out a transfer, simply log on to IDBIs Internet Banking at www.idbibank.com, or visit the nearest IDBI ATM or branch and transfer the required amount. The money is directly credited into the recipients card, no matter where he is. Investment We believe that all the investors share a common goal, regardless of their objectives: superior and sustained returns with a tight control over risk. Meeting your long-term investment goal is dependent on a number of factors: your investment capital, your expected rate of return, inflation, taxes and your investment time horizon. To meet your requirements, we offer you investment options based on your risk tolerance and return expectations. Relationship Managers are equipped to advise you on various investment profiles. They then help you with your investments and subsequently support you by tracking your investments on a regular basis. Mutual Funds Mutual funds offer a simple and effective way to diversify your investment without the hassles of tracking individual stocks on a daily basis. Click here for more details on the options we offer GoI 8.0% Savings (Taxable) Bonds. 8% GoI Savings Bonds is a good option for investors looking for high yielding risk free instruments. Capital Gain Bonds Invest your long-term capital gains on sale of your asset in the specified assets. Retail Banking business in Bihar with special reference to IDBI Bank
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Insurance Services IDBI brings to you Birla Sun Life Insurance, one of the leading providers of life insurance products. NRI a/c Being an NRI (non-resident Indian) and privy to special benefits and privileges in India, its only but natural to expect world class levels- be it banking or any other service. Welcome to IDBI, where you are treated as special and your needs exclusive. While we offer basic NRI banking products like Non Resident Rupee Checking Account, Non Resident Rupee Term Deposits and Foreign Currency Non Resident Deposit, we realize that the requirements of the customers are manifold. Non-Resident External (NRE) Repatriable account for your investment needs your account anytime, anywhere with Internet Banking, shop at more than 8.3 million locations and withdraw funds in 140 countries. Non-Resident Ordinary (NRO) An account for your income and expenses, access your account at more than 250 ATMs across the country, pay your bills in India from anywhere in the world. FCNR Retain your funds in foreign currency, no exchange risk; earn attractive returns on your fund. ATM Automated Teller Machine (ATM) is a sophisticated computer terminal which makes it possible for a customer holding Debit cum ATM Card to avail specified banking services through ATMs at any time (24 hours) without any personal interaction with the bank personnel. Our Bank has ATMs with On-Line connectivity across all its branches. The Bankhas also installed many offsite ATMs. IDBI Bank is a member of VISA, MASTERCARD, CASHNET, NFS, BANCS & AMERICAN EXPRESS ATM networks. With this, Debit cum ATM Card holder of any of the net worked banks / institutions can transact specified banking transaction at any ATM of the networked banks / institutions. Retail Banking business in Bihar with special reference to IDBI Bank
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At present, Debit cum ATM Card customers can undertake following transactions on our Banks ATMs: i) Withdraw cash up to the daily cash withdrawal limits stipulated for the type of the card. These limits can be enhanced on request of customer. ii) Deposit cash / cheque (not more than 20 notes / cheques at a time). This facility is not available on cash dispenser. iii) Carry out certain functions like balance enquiry, print mini statement recording last 10 transactions and/or inform balance in the account. iv) Register request for cheque book and statement of account. v) Change Personal Identification Number (PIN). vi) Avail other value added services like Bill Payments, mobile recharge, VISA money transfer etc. Debit card customers can also withdraw cash and make balance inquiry from ATMs of other Banks which are members of CASHNET, NFS, BANCS, VISA & MasterCard networks. The amount of cash withdrawals through these ATMs is maximum of Rs.10,000/- per transaction.
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6) Methodology
6.1 Research Type
My research is based on the primary data. Primary data has been used to understand the scope of retail banking business in Bihar and then to make suggestions useful for the bank under study i.e. IDBI Bank ltd.
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7) The Study
To carry on the survey work, six banks were considered including the IDBI Bank. A comparative study has been done between the banks. The banks taken were on the basis of their size and their integration in Bihar. The banks selected on this basis were as under.
The above branches have been compared on various parameters. Factors taken for comparison were the visibility of the banks, factors which they consider before opening a branch, their profitability and few more. The comparison helped me to come to a conclusion of the scope of retail business in Bihar and what IDBI Bank should do in order to improve on its already flourishing business.
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Branches in Bihar
60 50 40 30 20 10 0 Axis Bank Branches in Bihar Branches in Patna 50 6 ICICI Bank 22 6 IndusInd 2 1 Corporatio n Bank 6 3 Oriental IDBI Bank Bank of Commerce 18 2 15 3
Interpretation:
Branches of a particular bank show the visibility of the bank. Typically retail banking can be defined as mass-market banking in which individual customers use local branches of larger commercial banks. Through this definition we can clearly make out the role that number of branches play in retail business of a particular bank. According, to the RBI rules, a bank will get license to open branches in urban area only when they open 2-3 branches in rural and semiurban areas. Bihar, the state understudy is a mixture of the three, rural, semi-urban, and urban areas. From the above figure we can see the number of branches, which the seven banks compared, have in Bihar. From here we can conclude that IDBI needs to expand itself in the area.
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2) How many ATMs do you have in Bihar? Out of these haw many are in Patna?
ATM's in Bihar
250 200 150 100 50 0 Axis Bank ATM's in Bihar ATM's in Patna 200 50 ICICI Bank 54 11 IndusInd 4 2 Corporatio n Bank 7 4
IDBI Bank 12 6
Interpretation:
As a branch is important for the visibility of a bank, similarly, are the ATMs. ATM hits are one of the source of income for the banks. Comparing the number of ATMs which the other banks have, IDBI needs to expand the number of its ATMs.
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3) What are the factors you consider while opening new branches in Bihar? a. Business potential b. Volume of mass catered c. Presence of competitors d. Demography of the area e. Area accessibility Factors Business potential Volume of mass catered Presence of competitors Demography of the area Area accessibility
Axis Bank ICICI IndusInd Corporation Oriental IDBI Bank Bank of Commerce Total selected
* *
5 1
* * * *
1 2 1
Factors Considered
6 5 4 3 2 1 0 Business potential Total selected 5
Presence Volume of Demograp Area of mass hy of the accessibilit competitor catered area y s 1 1 2 1
Fig. No.7- Factors Considered Retail Banking business in Bihar with special reference to IDBI Bank
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Interpretation:
From the above figure we can conclude that the most important factor which the banks sees before opening a branch in an area is the business potential of that area. Again if we compare the above figure with the number of branches that the selected banks have in Bihar, we can see that banks like ICICI and Axis have a good number of branches in Bihar. This clearly indicates that these banks believe that there is much business potential in the area and thus IDBI Bank have a huge scope in this business. 4) Over which products do you consider your bank has an USP over other banks?
Sweep-in Current account with 6.5% interest rate
Innovations. They were first to introduce Any where banking, ATMs etc. FD interest rate. Appx. Highest amongst peers
IndusInd
Corporation Bank
2.5 lakh insurance free of each ATM card at the time of delivery.
IDBI Bank
SERVICE like any std Pvt. bank with PSU bank security, charge less A/cs, higher int. rate,PRF & Royal a/cs,sweep-in facility etc
Interpretation:
The purpose behind asking the USP of every bank was to help the bank understudy, i.e., IDBI Bank to know the prevailing products of its peer banks. According, to the banks the products defined by them where those which they consider has an advantage over all other banks. Retail Banking business in Bihar with special reference to IDBI Bank
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Doing a competitors product analysis IDBI can bring an improvisation in its products if required. 5) According to you state the scope of retail business in the rural areas of Bihar? The common answer to this question by all the banks was very high potential. According, to all the banks, Bihar is in its development stage. Not only in its capital city, Patna, but even in the outskirts the development process is appreciable. As said by them the agriculture sector is the major revenue generator for our country. So, they focus more on the areas with agriculture land. Also they have different products for different areas. The reach of other banks to rural and semi-urban areas except SBI is not much. The banks consider that there is scope for their bank to expand their wings to these areas now. So, we can conclude that these areas have a capacity to provide retail business to the banks and hence IDBI Bank can have more branches in Bihar. 6) Do you have any special rural scheme? If yes name them.
No such scheme
No such scheme
KCC, loan for each stage of agricultural cycle KCC, loans for each stage of agricultural cycle,working agri branches
Fig. No.9- Special Rural Sheme Retail Banking business in Bihar with special reference to IDBI Bank
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Interpretation:
The above are the various products which the banks provide in the rural areas. In Bihar rural areas can be a major business provider to the banks. So, the banks believe that they need to have few exceptions in their products when they cater the customers of the rural areas. They have provided few added facilities like the customers there need not maintain a high AQB in their accounts. Also there are loans for the farmers at subsidized interest rates. These attractive offers helps bank to get more customers from these areas. Through this study IDBI can see what its competitors provide so that by improving its products, it can have an edge over all its peer banks. 7) What do you consider is the biggest obstacle while conducting business in Bihar?
Answers:
a. Movement of cash b. Bringing of deposits c. Small customer database d. Unawareness of the mass e. Lower education level
Interpretation:
The following were the main issues which were raised by the banks regarding their biggest obstacle while conducting business in Bihar. The level of education being less deprives the customers from understanding the exciting and new schemes. Thus they keep themselves aloof of taking any new risk and follow the traditional way of banking. This does not initiate the banks to open new branches in rural areas. But even facing the following issues the banks said that they could overcome this problem by talking to customers and explaining the about the new schemes. The banks said that they would impart KYC knowledge through branch level. Setting up Canopies, distributing pamplets, making anouncements through radio, demonstrative advertisements through television and the best word of mouth will certainly prove useful for the bank.
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8) What obstacles do you face while dealing with the customers in Bihar?
Axis Bank-Ignorance and illiteracy ICICI Bank-KYC and security problems IndusInd-Customers come for small loans, KYC, unawareness among people Corporation Bank-KYC Oriental Bank of Commerce-No problem
Interpretation:
To achieve any objective, there are some problems that could not be over-looked through. Even when the banks believe that they have a good scope of increasing their business in Bihar, they face few problems while reaching to their goal. The major problem we could conclude while dealing with customers in this area was KYC (Know Your Customer). According, to them there is unawareness among the customers about the formalities that need to be done for opening an account. IDBI should maintain a good CRM as this is the only way of dealing with customers having less knowledge about banking.
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** Further the four questions are branch based. As it was not possible to get the profitabilty of the bank on the whole so I restricted these questions on the branch level. The branches were selected on the basis that they should be located in the same area as business capacity varies with area. The CASA% and profitabilty % are all on approximation basis given by the banks as these are confidential matters of the banks which could not provided to any outsider. 9) Which is the main driver of your Banks profitability?
IDBI Bank-Best CRM resulted in Volume of CASA, TPD, Financial advisory services
Interpretation:
Profitability of a bank gives a clear picture of its performance. This question has been asked in order to have an idea what other banks consider as their profitability factor. IDBI Bank from here can conclude what its peer banks consider as important and then work on the same, if required, accordingly.
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Interpretation:
CASA is said to be directly related to reducing the cost of funds. Lower CASA is not a good signal for the bank. From above we can see that Axis Bank and ICICI are having very high CASA percentage in their total deposits. So, IDBI needs to improve on its CASA %. 11) What is the percentage of current account in CASA%?
Oriental Corporat Bank of IndusInd ion Bank Commer ce 53% 50% 50%
Fig. No.13- Current Account As % Of CASA Retail Banking business in Bihar with special reference to IDBI Bank
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12) What is the percentage profitability and growth percentage of your bank?
Chart Title
160% 140% 120% 100% 80% 60% 40% 20% 0% Axis Bank Profitability% Growth% 30% ICICI Bank 25% IndusInd 0 150% Corporatio n Bank 20% 50% Oriental Bank of Commerce
Interpretation:
The data being highly confidential for the banks, an approx. Figure had been provided to help having an insight of the banks. We can see an average profitability of all the banks. Talking about the growth% IndusInd had a huge growth from its last fiscal year.
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The credibility of IDBI bank is good in comparison to its competitors (Government Of India) is a major share holder in the company.
as GOI
IDBI bank has potential market in Bihar region and thus has opportunities for growth. The products of IDBI bank has good credibility in the region and is in par with its competitors. The initial balance for A/C opening is Rs, 5000/- and thats why people are reluctant in opening the same but now the bank provides Zero Balance Account which can help them in increasing their CASA ratio. There is still an unawareness among the mass about the bank being a fully owned Government bank. The TPD products of the bank is not yet popular among the mass. The various rates of interest like the current interest rate of Fixed deposit which is 9.5% for 500 days and an additional .75% for senior citizen is quite appreciated by the common mass. The privilege given to the preferred customer and royal customer like home service is liked and appreciated by the customers. The ATM facilities provided by the bank makes its services hustle free. The vaious add ons by the ATM are cash deposit by way of envelopes, payment of bills, payment of LIC premium, recharging mobile phones, card to card transfer. Retail Banking business in Bihar with special reference to IDBI Bank
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While interacting with few customers I could easily find out that the customers were most excited to know about the various services which are provided for free on their various accounts. The services like free money transfer, free ATM transactions, free DD and many more. The documents required to fill before opening any account is very clear and easy to understand. The network of IDBI in Bihar is lagging behind a little than its competitors like ICICI bank and Axis bank. It can be distilled from the research that IDBI bank has good market share as compared to its competitors considering the amount of resources deployed by them in the market. The modern days technology like internet banking, phone banking, used by IDBI bank for providing banking services has sent positive signals in the mind of consumers.
62 Suggestions
IDBI is a very flourished bank. During the two months I could not find any flaw in the functioning of the bank. After doing my training in the bank and doing my researh work I could reach to a few conclusion which are mentioned above. From these conclusions I could come to the following suggestions. Though IDBI is in its expansion stage, it does not have much visibility in Bihar till date. IDBI has only 15 branches in Bihar out of which 3 are in Patna. There is big untapped market in Bihar, so it becomes necessary for IDBI bank, in order to take an edge over the competitors, to open more branches to serve the vast market of Bihar especially. IDBI considers ATM hits as one of their major source of income. By ATM hits it means customers using the ATM of IDBI bank when they are having accounts in other banks. As one customer hits the ATM of IDBI bank, the bank gets some commission from the bank in which the customer has its account. IDBI has very less ATMs in the Bihar region. So, IDBI should have more ATMs in the region as this income is the fastest and easiet to gain. The modern days technology like internet banking, phone banking, used by IDBI bank for providing banking services has sent positive signals in the mind of consumers. IDBI should maintain its technology and update it timely as IT too has a big role in increasing the business of an organization. Bank should think for Innovators of tomorrow for beating the competition and share the ideas of the customers for making a better tomorrow for all.
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Advertising is an effective brand building method, so this can solve the awarness problem.This is an effective weapon in todays scenario. IDBI recently changed their way of advertising. Through the new hoardings IDBI displayed themselves being a fully owned government bank. A short advertising campaign like this in Bihar has produced good results in a short span of times. while talking to few customers during my research work I was informed that through these hoardings and TV advertisements they could clear thier concept of IDBI being a fully government owned bank. The advertisements also says NOT JUST FOR THE BIG BOYS, which clearly means that IDBI is now into retail. This helped IDBI gain more recognition and so its preferrable for IDBI bank to carry on this campaign with more intensity. Bank will be in a WIN WIN situation if it provides valued services to its customers and create a value creation for them. IDBI could also have some extension counters in the branches which have business capability. This would be a privelage for the customers as now they need not wait to aavail any service. This will definately increase the walk-in of the bank. As Government is the majority share holder in the shares of IDBI bank, which makes this bank more reliable than other private banks, this thing can be used in the favour of IDBI bank by making people aware about this fact and winning their faith. Bank should think to add Value with Creativity and Innovation for real work of its customers.
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Retail banking being a new service and new concept, IDBI requires regular follow up and certain checking parameters.It also needs high level of trust and maintaining the ethics of the service provided by them. Adding new features and providing additional facilities to customers will always strengthen the brand and create barrier for new entrants. Every bank is trying to aware its USP so SBI should pay attention for it and try to compete with this new service and should provide unique features. Proper awareness of the product should be given through word of mouth, seminars, Pamphlets, communication media, internet etc.
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Annexure-1 Questionnaire 1) How many branches do you have in Bihar? Out of these how many are in Patna? 2) How many ATMs do you have in Bihar? Out of these haw many are in Patna? 3) What are the factors you consider while opening new branches in Bihar? a. Business potential b. Volume of mass catered c. Presence of competitors d. Demography of the area e. Area accessibility 4) Over which products do you consider your bank has an USP over other banks? 5) According to you state the scope of retail business in the rural areas of Bihar? 6) Do you have any special rural scheme? If yes name them. 7) What do you consider is the biggest obstacle while conducting business in Bihar? 8) What obstacles do you face while dealing with the customers in Bihar? 9) Which is the main driver of your Banks profitability? 10) What is the percentage of CASA in total deposits? 11) What is the percentage of current account in CASA%? 12) What is the percentage profitability and growth percentage of your bank?
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2.
3.
4.
USP
Innovations. They were first to introduce Any where banking, ATMs etc.
2.5 lakh insurance free of each ATM card at the time of delivery.
5. 6.
Very high
Very high No frill account and low avg. quarterly balance Movement of Cash
7.
since they cater to a niche segment they have small customer data base
Bringing deposits
8.
9.
Customers come for small loans, KYC, unawareness among people Third Party products (Aviva life Insurance & Mutual Fund)
KYC
Operational Efficiency
CRM
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10 11 12
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Annexure -3 The various shedule of facilities and charges can be found out through the following website.
http://www.idbi.com/schedule_of_charges.asp
THANK YOU
Retail Banking business in Bihar with special reference to IDBI Bank