CONTENTS

SL. NO CHAPTER.1 1.1 1. 1.% 1.( 1.. 1.1./ 1.0 1.2 1.13 CHAPTER. .1 . .% .( .. CHAPTER.% CHAPTER.( CHAPTER.. ..1 .. ..% CHAPTER.CHAPTER./ CHAPTER.0 CHAPTER.2 CHAPTER INTRODUCTION Meaning of Retail Banking C!a"a#te"i$ti#$ of Retail Banking T&'e$ of Retail Banking Ob)e#ti*e of $t+,& D"i*e"$ of Retail Banking St"ategie$ att"ib+te$ to Retail Banking C!allenge$ in Retail Banking 1+t+"e '"o$'e#t$ of Retail Banking Re$ea"#! Met!o,olog& Li4itation RETAIL BAN5ING IN INDIA Int"o,+#tion Retail Banking 6 An In,ian S#ena"io Ob)e#ti*e$ of Retail Banking G"o7t! of Retail Banking in In,ia C!allenge$ to Retail Banking in In,ia RETAIL BAN5ING BULES T!e Di$t"ib+tion $&$te4 in Retail Banking PAGE NO

% / / / 0 2 13 11 10 3 /

Potential fo" Retail Banking8 I$ t!e $k& li4it9

Co4'etito"$ of t!e 'la&e"$ E4e"gen#e of fo"eign Giant$ A $na' "e'o"t of #all #ent"e in Retail Banking THE GLOBAL INDUSTR: GUIDE E;ECUTI<E SUMMAR: CONCLUSION BIBLIOGRAPH:

0
0 2 %3 %1 %% %. %-

1. INTRODUCTION 1.1 Meaning of Retail Banking:

Retail banking is typical mass- market banking where individual customers use local branches of larger commercial bank. ervices offered
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include: savings and checking accounts" mortgages" personal loans" credit cards" and so forth.# Retail banking aims to be the one-stop shop for as many financial services as possible on behalf of retail clients. ome retail banks have even made a push into investment services such as wealth management" brokerage accounts" private banking and retirement planning. $hile some of these ancillary services are outsourced to third parties %often for regulatory reasons&" they often intertwine with core retail banking accounts like checking and savings to allow for easier transfers and maintenance.

1.' characteristics

of Retail Banking

Multiple products % deposits" credit card" insurance" investment and securities& Multiple channels of distribution %call centre" branch" internet& Multiple customer group % consumer" small business and corporate&

1.! (ypes

of Retail Banks

1.!.1)ommercial bank=8 * commercial bank is a type of financial intermediary and a type of bank. +t raises funds by collecting deposits from businesses and consumers via checkable deposits" savings deposits" and time %or term& deposits. +t makes
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loans to businesses and consumers. +t also buys corporate bonds and government bonds. +ts primary liabilities are deposits and primary assets are loans and bonds. (his is what people normally call a bank the term )ommercial Bank# was used to distinguish it from an investment bank. ince the two types of bank no longer have to be separate companies" some have used the term# commercial bank ,to refer to bank which focus mainly on companies. +n some -nglish . speaking countries outside /orth *merica" the term trading bank was and is used to denote a commercial bank. 1.!.' )ommunity 0evelopment Bank. :)ommunity development banks %)0Bs& are a special kind of bank designed to serve the residence of and spur economic development in low to moderate income %1M+& areas. $hen )0Bs provide retail banking services" they usually target customers from financially underserved# demographics. )ommunity development banks can apply for formal certification as a community. 0evelopment 2inancial institution %)02+& from the community 0evelopment. 2inancial institutions fund of the 3. (reasury. 0epartment of the

1.!.! 4rivate bank 4rivate bank are banks which are not incorporated and hence the entirety of their assets is available to meet the liabilities of the bank. (hese banks have a long tradition in wit5erland" dating bank to at least the revocation of the -dict of /antes %1678&. 9owever most have now become
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incorporated companies" so the term is rarely true anymore. *lthough not termed banks# privately- owned digital gold currency providers" such as egold and gold Money be used as a substitute for a private bank. (he word private# also alludes to bank secrecy and minimi5ing ta:es via careful allocation of assets. *n offshore bank account may be used for this purpose. 1.!.; <ffshore Bank *n offshore bank is a bank located outside the country of residence of the depositor" typically in a low ta: =urisdiction %or ta: haven& that provides financial and legal advantages. (hese advantages typically include some or all of trong privacy %see also bank secrecy" a principle born with the 1>!; wiss banking *ct& ? 1ess restrictive legal regulation ? 1ow or no ta:ation %i.e. ta: haven& -asy access to deposits %at least in terms of regulation& ? 4rotection against local political or financial instability

1.!.8 aving Bank:* saving bank is a financial institution whose primary purpose is accepting saving deposits. +t may also perform some other functions. +n -urope" savings bank original ob=ective was to provide easily accessible savings products to all strata of the population. +n some countries" savings
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banks were created on public initiative" while in others socially committed individuals created foundation to put in place the necessary infrastructure. /owadays" -uropean savings banks have kept their focus on retail banking: payments" savings products" credits and insurances for individuals or small and medium-si5ed enterprises. *part from this retail focus" they also differ from commercial banks by their broadly decentrali5ed distribution network" providing local and regional outreach and by their socially responsible approach to business and society. 1.; OB>ECTI<ES (he purpose of this panel is to contribute to the knowledge and understanding of the future of retail banking as it is being shaped by the current forces on the financial markets. (he panel is addressed to people interested in the financial industry. +t will give an overview of the banking market structure by providing a vision of the status of the banking scenario and of the distribution structure in @ermany" +taly and wit5erland. +t will discuss key concept of retail banking such as strategy" resources and technology adopted by the banking sectors and how they are strongly interrelated with defining the success of the banks. (he panel aims at giving a vision of the actual situation and providing future direction and forecast of the banking structure in the ne:t years.

S'e#ifi#all& it i$ ai4e, at Better understanding the change of the market of retail bankingpast" present and future-in order to improve the definitions of relevant research directions.
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 -valuating the direction of the ongoing market" with regard to actual and foreseen changes in the banking environment and in other conditions which affect the banking functionA 0efining future perspectives and future business models and to provide information on e-banking" competitors and future market directions. 1.8 D"i*e" of Retail banking: %a& -conomic prosperity %b& )hanging consumer demographics %c& (echnological innovation %d& 0ecline in interest rates 1.St"ategie$ Att"ib+te$ to Retail Banking= 1owest price uperior convenience

9igh ervice Buality 4ersonalised and tailor products and services 4rovide advice and acknowledge importance of their customer. 1./ C!allenge$ in Retail banking= )ustomer retention <perational risk Reputational risk 1egal risk 0ependency on information technology

1.0

1+t+"e P"o$'e#t$ of Retail Banking: )ustomer centric banking )RM in Business transformation
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 Branch Banking hift from routine banking transactions to electronic channels

2ocusing more on providing value added services through branches 1.> RESEARCH METHODOLOD: (he data collected is mainly from secondary sources but will also including primary source. )ollection of primary data by means of interviewing concerned authorities of +)+)+ bank %4uri&" and secondary data from sources such as =ournals" websites" books and maga5ines.

1.1C Li4itation= +nformation regarding cost advantage and benefits derived by bank will be divulged. (ime is a ma=or constraint

. RETAIL BAN5ING IN INDIA

Abstract:
(he growth of Retail Banking is an important milestone in +ndian Banking ector 0evelopments" and the private sector banks are performing much better than the counter parts. 9owever" the retail banking in +ndia is very small by world standards. (he retail loan constitutes less than 6-DE of the @04 vis-F-vis 17E to 6CE for *sian -conomies and the housing loans are =ust '.8E of the @04 vis-a-vis '8E to 6CE in other nations. (his is because of the retail banking in +ndia has not reached in its full potential.

.1 Int"o,+#tion
(he operations of any banking uni are divided into two broad categories vi5." wholesale banking or corporate banking and Retail Banking. (he wholesale banking covers the financial needs of corporate houses" financial institutions" trust etc. and the si5e of the account is Buite large. Retail Banking" on the other hand" is not a new phenomenonA it has always been prevalence in various forms. But for the last few years" it has become synonymous with main stream banking for many banks. (ypically" it refers to dealing with individual consumers both on the liabilities and asset side of the balance sheet. <n the liabilities side" in the form of deposits such as fi:ed" current" saving account. $hereas on the asset side in the form of various loans such as personal loans" housing loan" auto loan" educational loans etc. Beside this" the retail banking also provides various ancillary services such as mobile-banking" phone banking" internet banking" depository services etc.

. Retail Banking 8 An In,ian S#ena"io

+ndian retail banking is up and kicking. 0uring 'CC;-C8 retail contributed ;'E of overall credit growth. @rowing at the )*@R of !8E over last 8 years the retail asset touched Rs1" 7>"CCC crore. Ma=or product segments of retail credit include housing finance" auto finance" personal loans" consumer durable loan and credit cards to name a few. 9ousing constitutes the biggest segment of ;7E of the entire retail creditA followed by the auto loans segment which constitutes almost 'D.7E. $hile the balance retail credit is used by consumer durables at D.'E" educational and other personal loans take the remaining 16E. Banks are increasing their dominance in housing finance and capturing the market share of the housing finance companies. 0uring 'CC;-C8" the market share of banks stood at 6'E" against the !!E by 9ousing finance companiesA Rs'-8 lakh margins constitutes almost a third of the loan si5e. (he consumer durable loan follows the auto loan market in the third position" constituting appro:imately DE of total credit. Metro centers continue to dominate the market with '>E of total retail credit" closely followed by the rural market at 'DE of total retail market. 3rban and emi 3rban centers contribute around ''E each. +n the educational loan segment" disbursement of domestic banks has surged by 1!E to Rs'';> crore in 'CC;-C8A up from Rs1>7! crore in 'CC!-C;. (he number of students availing education loans has increased to 1" ;C"CCC from 1" and C7"CCC during this period.

'.! Ob)e#ti*e$ of Retail Banking

.%.1 Gene"al ob)e#ti*e$ i. +t aimed at measure the impact of all the pricing variables on credit growth ii. (o finding relationship between growth of 0eposits with banks and the loans given out. iii. Relationships between interest rates offered on deposit and the interest rates charged on loans and other pricing variables such as Repo rate" 1R" )RR" Benchmark rate iv. *imed to find out the seasonality patterns in credit growth .%. S'e#ifi# ob)e#ti*e$ 1. 4redicting the 1osses arising out of account charge-offs in the ne:t months. '. 4redicting the 4robability of 0efault for every account on the books and developing some sort of a score to e:plain the risk in giving out new loans to e:isting customers !. 0eveloping some sort of an *pplication score to foretell the future risk of charge-off for prospective customers if booked and hence help in the decision of booking the account. ;. 0eveloping a score to indicate the future profitability of a booked accountGprospect 8. 0eveloping a score to identify the ease of collecting outstanding balances from an account so that the collection resources can be properly utili5ed 6. 0eveloping a core to improve the chances of a prospective account responding to your tele -marketing call positively
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D. +dentifying which of the other banking products can be cross-sold to your e:isting customer. 7. egmenting the customer base to identify the segments which will help in improving R<>. +n the case of a home loan portfolio G auto loan portfolio" develop a model to calculate a probability that an e:isting account can actually refinance his mortgage with another bank. '.; G"o7t! of Retail Banking In In,ia @rowth of Retail 0eposits @rowth of Retail 1ending @rowth of *ncillary Retail Banking ervices -mergence of Banc *ssurance G"o7t! of Retail De'o$it$ (he +ndian Banks have witnessed a Buantum =ump in their retail deposits" as presented in (able 1. Retail 0eposit of Banks in +ndia %as on !1st 0ecember 'CC>& %Rs. +n bn& Bank?$ Na4e 4/B B+ %*ll *ssociate& +)+)+ 902) +0B+ A4o+nt !D'.8C !76!.CC '6'!.CC 1!;;.CC D;'.CC G"o7t! Rate D.8! 'C.CC 6'.CC '6.CC 17.CC

 G"o7t! of Retail Len,ing (he emergence of retail lending has more to do with economic prosperity %after 1>>'" +ndian economy grew at an average rate of 6.7 percent&" improving consumer purchasing power coupled with more liberal attitude towards personal debt." increasing penetration of middle to high income households" changing consumer demographics %+ndia is one of the country having DCE of the population below !8 years of age&" technology advancements" developments of the software industry" increase in treasury income of the banks" decline in interest rates" etc. +ndia has witnessed a shift from wholesale lending to retail lending especially private sector banks" as shown in (able '.

Table = Si@e of "etail loan 'o"tfolio of In,ian Bank$ AA$ on %1 $t Ma"#! 332B AR$. In BnB Bank?$ Na4e +)+)+ B+ %*ll *ssociate& 902) 4/B +0B+ *ll +ndia %-:cluding 2oreign Banks& Retail Loan 1!;D.8; >86 >'1 687 !1; !68; C of t!e total Po"tfolio 1CC 86 ;! '1 16 67

(here is still much scope for retail lending in +ndia" after all" retail loan constitutes less than '8E of @04 in +ndia vis-F-vis 17E to 6CE for other *sian economies %table -!&

Table %= Retail Loan Aa$ a 'e"#entage of GDPB of A$ian E#ono4ie$ Na4e of t!e Co+nt"& +ndia (hailand ingapore Horea (aiwan Malaysia 9ong Hong Retail Loan a$ a C of GDP 16 17 ;> 8C 8' 88 6C

2urther" the RB+ report on trends and progress of +ndia" has shown that the loan value of these retail lending typically range between Rs.'C" CCC to Rs 1CC lakh. (he loans are generally for duration of 8 to D years with housing loan granted for a longer duration of 18 years. P+bli# <$ P"i*ate Bank = A #o4'a"ati*e Anal&$i$ of "etail banking=8 *s we know that both the public and private banks have been trying their best to create a niche in this regard" but the private sector banks are much better than their counterparts %(able-;&. (his is because of the fact that private sector has laid more stress on virtual banking and very keen in applying +( in their banks. But now the public sector has also reali5ed the potential of +(" and also moving towards the state of the art virtual banking system.
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Table (=8 Retail Banking G"o7t! Rate= P+bli# Se#to" <$ P"i*ate Se#to" Bank$ A"ea 9ome 1oan )onsumer 0urables 4ersonal 1oan <verall Retail loans P"i*ate Se#to" AICICID P+bli# Se#to" ASBID HD1CD UTI an, IDBIB PNBD Cana"a BankD BOB an, BOIB 87.CC 8C.;; D.D' 6D.CC '6.7; 6'.CC !6.CC

G"o7t! of An#illa"& Retail Banking Se"*i#e$ in In,ia (he growth of related ancillary services is given below: %a& ATM$ = (he entry of foreign and private sector banks such as 902) Bank" +)+)+ Bank" )ity Bank" tandard )hartered Bank" etc. led to the growth of *(Ms not with their own networks but their partners bankIs network also whom they have got mutual understanding for sharing *(MIs of other banks where they have no account. %(able-8& Table .= N+4be" of ATM$ of Diffe"ent Bank$ in In,ia Na4e 0ena Bank 9 B) Bank of +ndia +0B+ yndicate Bank *ndhra Bank )orporation Bank 3(+ G *:is Bank 902) Bank +)+)+ Bank B+ J *ssociates 4/B N+4be" of ATM$ !>C 1;' ;C; '!' 1C7D ;>' 1C1' '>'' 1!76 '71! 76CC ;'8C

Ab& Mobile Banking# :- *ll over the world" mobile phones have become one of the convenient means of carrying out of banking transaction. +n Horea" there are 1'million mobile phones users. But in +ndia" *very few people use mobile even for simple banking Bueries inspite of having ;D million mobile users based with nearly two million being added every month. (his was due to low level of awareness" frauds and security problems" comple: process etc. however" the various banks have entered into strategies tie ups with mobile companies so that customers can avail banking services. 2or e.g. +)+)+ has signed M<3 with Reliance +ndia ervices of mobile banking free of cost to those clients who have Reliance hand sets.

%#BInte"net Banking:-+)+)+ Bank was the pioneer to introduce internet banking. 1ater on" 902) Bank" )iti Bank" +0B+ and other banks followed the suits. *s per the industry estimates" there is =ust C.1 per cent of the total banking population who use the internet banking where as in Horea and ingapore nearly ;C-8CE of their population is banking over the internet. (he biggest drawback for the use of internet banking in +ndia is the lack of infrastructure facilities. But now the +( Ministry is keen of e:panding the internet penetration" the day is not too far when greater pat of our population would be using the internet banking. 2urther" the banks also in the process of setting up strategic alliance with other groups of improving the banking scenes. <n /ovember 1;" 'CC8" B+ and (ata )onsultancy ervices %() &
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have performed a =oint venture called )--dge (echnology 1td. $hich will offer technology J consultancy services in the field of banking industry. A,B C"e,it E Debit Ca",$= $hile the usage of cards by customer of the

banks in +ndia has been in vague since the mid 1>7CIs" it is only since early 1>>CIs that the market has witnessed a Buantum =ump. (he total numbers of cards issued by ;' banks have been increased from ;.7> crore in Kuly 'CC8 to !>.'! crore since 0ecember 'CC>. B+ has more than 18 million of card base users and it has established 6CCCC 4< %4oint of ale& through out the country. (he +)+)+ bank has about 8 million credit card users where as 902) bank has ' million credit card users and growing at a rate of 8CCC per month. 9owever" when comparison is made internationally" the consumer e:penditure through plastic bags is less than 'E in +ndia where as in the 3 *A this figure is standing at D;E. 2urther" in Horea there is ;.D credit card per bankable population where as in the +ndia this figure stands only C.8. (he various factors responsible for this trend are:

1. '. !. ;.

1ack of awareness Most of 4< are located at big super markets" shopping malls. Most of merchants insist on minimum amount of buying in order to use the credit card. 4eople have also unaccounted money" that why prefer to do shopping on cash basis. +t is very important to mention that the debit cards are more popular

than credit cards" because the money drawn from *(Ms of used at merchantIs outlets is limited to the balance held in their account. <n the other hand"
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credit cards are issued on case to case basis based on the credit worthiness age" =ob and annual income of the account holders. 4resently" the total number of debit cards in circulation is more than 6C million whereas credit cards in circulation are 'Cmillion. (he 902) bank has a debit card more than '.8 million and growing at the rate of 7CCC per month.

%e&

De'o$ito"& Se"*i#e$:

+)+)+

Bank"

+ndusind

Bank"

Bank

of

Ra=asthan 1td. -tc provide depository services to their clients. %f& Inte"national P"e$en#e= 4ublic as well as private sector banks are now

in the process of setting up retail banks in other nations. 2or e.g. B+ has" launched retail banks in Mauritius by acBuiring +ndia <cean +nternational Bank 1td. +n that country. +t has also set up retail bank in )hina" and other banks that are in the process of setting up retail banks in )hina are +)+)+" 902)" B+ have already established their retail banks in 0ubai and other nations.

Ban# A$$+"an#e 0ue to all the movements" the boundaries that have kept various financial services separate from each other have vanished. (he coming together of different financial services has provided synergies in operations and development of new concepts. <ne of these is Banc *ssurance. Banc *ssurance simply means selling of insurance products by banks. +n this arrangement" insurance companies and banks undergo a tie-up" thereby allowing banks to sell the insurance products to its customers. (his is a
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system in which a bank has a corporate agency with one insurance company to sell its products. By selling insurance policies bank earns a revenue stream apart from interest. +t is called as fee-based income. (his income is purely risk free for the bank since the bank simply plays the role of an intermediary for sourcing business to the insurance company. )oming to +ndia" Banc *ssurance is a new bu55word in +ndia. +t originated in +ndia in the year 'CCC when the @overnment issued notification under Banking Regulation *ct which allowed +ndian Banks to do insurance distribution. +t started picking up after +nsurance Regulatory and 0evelopment *uthority %+R0*& passed a notification in <ctober 'CC' on L)orporate *gencyL regulations. *s per the concept of )orporate *gency" banks can act as an agent of one life and one non-life insurer. )urrently Banc *ssurance accounts for a share of almost '8-!CE of the premium income amongst the private players in +ndia

.. C!allenge$ to Retail Banking in In,ia *lthough" the retail banking offers phenomenal opportunities for growth" the challenges are eBually daunting as e:plained below: 1& * study conducted by Reichheld et al %published in 9arward Business Review&" which identified that" 8E increase in customer retention can increase profitability by !8E in banking business" 8CE in +nsurance and Brokerage J 1'8E in credit card market#.
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(hus the customer retention is of paramount important for the profitability of retail banking business" so banks need to retain their customer in order to increase the market share. '& (he issue of money laundering is very important in retail banking. (his comples all the banks to consider seriously all the documents which they accept while approving the loans. !& (he dependency on the technology has brought +( departments additional responsibilities and challenges in managing" maintaining and optimi5ing the performance of retail banking networks. +t is eBually important that banks should maintain security to the level to keep faith of the customer. ;& (he issue of outsourcing has become very important in recent past because various core activities such as hardware and software maintenance" entire *(M setup and operation" M+ and data centre

8&

Management" etc being outsourced by +ndian Banks. (hatIs why before taking any decision on outsourcingA banks are e:pected to take utmost care to retain the ongoing trust of public.

6&

)ustomer service should be all and end all of retail banking. omeone has rightly said" +t takes months to find a good customer but only seconds lo lose one#. (hus" strategy of Hnowing Mour )ustomer %HM)& is paramount important. o the banks are reBuired to adopt innovative strategic to meet customerIs needs and reBuirements in terms of servicesG products etc.
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D&

1ast but not least" the efficiency of operative ness would provide the competitive edge for the success in retail banking in coming years. +f all these challenges are faced by the banks with utmost care and deliberation" the retail banking is e:pected to play a very important role in coming years" as in case of other nations.

%. RETAIL BAN5ING BLUES

(he banking scenario in +ndia is at the crossroads and is continuously evolving" but the progress has been remarkable over the past decade. +( 9*44-/-0 to me and it could have happened to you. (he moment one enters a bank" one looks for some assistance in our transaction. <ne e:pects to be served immediately or at the earliest. Nuite contrary to this" when one
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enters any bank" one would try to catch the eye of an employee. 0epending on the si5e of the bank" there will be any number of employees working unmindful of a customerIs entry. $ith the e:ponential growth of touch points and sophistication" the frontline sales force is assuming the role of a relationship person and is constantly under the microscopic observation of the customer. *t a time when channel innovation has become the order of the day to encourage effective banking habits among customers" a vital component of the supply chain" namely" customer interface is totally missing. $ith the advent of liberali5ation" the banking industry had made a head start towards the best banking practices at each interaction point of the supply chain. 9owever" the +ndian landscape is not a replica of the west and is in fact uniBue. 9ere is a look at the flipside of some of the common practices of +ndian banks. %.1 M+lti C!annel Di$t"ib+tion= (he technological aggregation has resulted in new modes of distribution of banking products. (oday consumers have various options to choose from. Banks are trying their best to acclimati5e customers to the new products and facilities in anticipation of reduced cost and ease of operation and fle:ibility for the customers %a transaction costs Rs. !8-;8 if done with physical presence of the customer at a branch" Rs.D through a cheBue and Rs.' on the internet&. (hese new creations have resulted in different channels of distribution of banking products and services. (he transaction simplicity through these channels is drawing people to these banks" not =ust for banking products but for other ancillary products such as payment of utility bills and insurance premium. +n +ndia there are around ;8CC *(Ms and if they continue to grow at the current pace" there will be around !8CCC by the end of the year 'CC8. (he cash movements through *(Ms are between Rs. !8CCC and Rs. ;8CCC cores
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each year.

o will the other channels grow along with *(MsO (he main

Buestion remains to be answered" if they are managing interactions among channels as rigorously as they manage each channel in isolation. P$e should congrats @(B %multi channel integration& and +)+)+ bank %migrating customer transactions to low cost remote channels& for winning the micro banker awardQ. $henever new channels are introduced" such offerings should be integrated" indicating strategic use of channels to enhance customer information and value. 9ence for mere survival" banks need to think in terms of integrating the different channels that are bound to grow with time. %. Call Cent"e AS+''o"t Se"*i#e$B: Banks have picked up the nuances of getting closure to the ultimate customer and separated the sales and service function. $ith call centers" services are being offered by stimulating customer interaction. (he initiation of such call centers services was much appreciated but very few changes have been effected since then and they are losing their efficacy. (he model since inception being the same" data are increasingly built around it. $ith such use data base" calls are being Bueued up" causing irritation to customers due to high waiting time. Banks have two options before them. %a& )hange the model and develop call centers around customers %accessing different accounts of a particular customer& instead of products per se. the ob=ective then would be to dig up the information across products and service them in a =iffy without much waiting time. %b& $ith the help of technology banks can redefine the acceptable waiting time of callers %customers& before they terminate the call for want of service from tele e:ecutives" towards improving the service levels of the banks.

%.% Te#!nolog&:

(echnology under lies the above two features this is

taken to be the cutting edged among banks and for the real product differentiation the public and private players are becoming tech savvy. $ith increasing emphasis on technology" banks try to leverage the good aspects of it and venture into new areas of cross selling their products through various channels. (he cost savings and the ease of effecting a transaction through technology are increasingly recogni5ed and are compelling bans to carry the same to almost all the dimensions of banking incidentally" the more advance the technology" the higher the cost savings generated with much wider coverage resulting in Buicker" cheaper and reliable service. 9owever one should not get lost in the ma5e of new technologies as statistics donIt support the proposition of technology aggression. % (he number of people accessing internet is D per 1CCC people" personal computers in use are 6 per 1CCC" cellular subscribers 6 per every 1CCC" urban population 'D.> percent of total population and this will grow to !'.' percent by 'C18&. (his reminds one of better channel synchroni5ation and integration but not proliferation. Banks should allow the earlier facilities to sink into the culture of the customers before any new facilities are launched. *lso" the earlier facilities should be embedded with services so that customers not only appreciate new technology" but are also in a position to operate.

%.( R+"al EF'o$+"e=

$hat is happening on the rural frontO $hy is there a reduction in the number of the new bank branchesO +s it because the rural areas suddenly lacked in potential or they lacked in infrastructure for banking in such area. 1ooking at the statistics" the scenario seems to have changed drastically after the larisimhan committee proposal in 1>>1. it has forced to the philosophy of free markets and could successfully circumvent the intentions of the @overnment about building a stable financial system uniBue to the +ndian economy. (he following matri: depicts the rural banking scenario on different parameters. Between March 1>>; and March 'CCC" the number of bank offices in rural areas %population between 1CCCC to 1CCCCC& rose from 117>C to 1;D'!. (he figures have been going up in urban %population between one lakh and 1C lakhs & from 7D;8 to 1C;;D and 87!> to 788D respectively. 9owever" around >7.8 percent at the rural borrowers still look to informal financing with credit limits below Rs. ' lakhs. (oday agricultural lending by commercial banks has almost eBualed the outstanding personal loans of rural consumers. %.. Roa, A!ea, (he branding of banks in +ndia is not popular atleast for now. ooner or later it will assume importance and it will be a pertinent Buestion for banks to identify themselves in an otherwise messy market where the products are pretty much the same. (he motto will be to get more and more people involved in their banking business and such a realationship will be hard to come by with plain vanilla products and services. the banking scenario in +ndia is at the crossroads and is continuously evolving" but the progress has been remarkable over the past decade. $ithout much leeway in the avenues for operations" the true challenge for the banks is to stand out in the midest of hard- hitting regulations of the ape: body. @lobali5ation"
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consolidation and want of e:pertise are drastically redefining the banking the ta:anomy. )ompanies will surely be looking forward to seeking leadership and e:perienced management talent to deal with these challenges. %.- T"an$fo"4ing Retail Banking P"o#e$$: (he retail banking environment is undergoing ma=or change. Retail Banking customers are much more active then they were a decade ago. <ver the past decade" third party distribution- such as mortgage brokers and independent banking customers are demanding more customi5ed products and services. (hese changes impose significant new demands on Retail Banks . if they are to stay competitive. (he answer lies in reconfiguring their business process . specially" redesigning" automating" integrating and standardi5ing. 2or many banks" incremental improvements to end .to- end processes in silos will be insufficient. $hatIs often reBuired a more comprehensive transformation that can be achieved by turning to modular" standardi5ed process models. (his popular modular" standardi5ed approach is a critical departure from the traditional end-toend" product based process and system architecture which encompassed the full value chain %service" product administration" and customer- data repository tasks& for each product.

uch a transition is helpful for scalable products . such as credit cards" simple loans" and other vanilla banking products. But it may not be suitable for all players in all circumstances. +t is particularly valuable for retail banks seeking to drive radical improvements in overall performance. * few leading banks have already adopted modular" standardi5ed processes and are now en=oying improved efficiencies and lower costs.
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%./ Si@e of t!e '"i#e: Banks need more fle:ible and more integrated processes to provide the targeted product and service offerings that their customers seek. 2or instance" customers now look for more varied mortgage offering- such as mortgages linked to current accounts % to reduce interest e:penses& and reverse mortgages % to provide cash during retirement&. (o maintain and build competitive advantage" banks need to improve fle:ibility and reduce costs. +f they donIt" specialist providers are likely to pick apart their best business. %.0 Going Mo,+la"= (raditionally" retail banks have organi5ed their operations by product line . such as loans" deposits and investments . in individual business silos" each of which has used different process models. Retail banking still tends to manage most of these various processes . from customer acBuisition to product service-in-house. /ow that they tend to cooperate more with e:ternal partners" banks have to rethink those old soils and process. (o make the transition to modular structures" a bank should take its traditional end- to .end silo organi5ation back to first principles and then assemble individual modules. (his involves peeling processes back to individual building blocks and then putting them together in the most efficient way possible . freBuently across product lines" in the back office" this often involves building scale. +n the middle office" it means consolidation separate process into shared utilities.

9owever" for some players it may be preferable to run a separate platform for a particular product- such as specialist mortgages or current accounts with special features . when the potential scale benefits of one central platform are insufficient to warrant the comple:ities of merging that productIs business process into the central platform. (here are two guiding principles in the transaction of modular structureA Modularity: @rouping similar types of tasks and defining functional building blocks consistently across different products or channels. )ommonality: (reating similar modules as one and considering

one common" standard solution. *pplying modularity creates interchangeable process blocks. 2or instance" scoring the risk of customer default is a task conducted for multiple products. (herefore" it is more efficient to treat this task as an integrated module rather than having it hard- wired into any one particular product or process %such as credit card organi5ation&.

(. T!e Di$t"ib+tion S&$te4 in Retail Banking=

<ver the last five years the few information technologies and the new communication infrastructures have become revolutionary forces changing business models" cost relation and not least nature of customer relationships. )ross-border consolidation and e:pansion" evolving distribution channels and shareholder pressure show a dramatic impact on the dynamics of retail banking. )ompetition from the non-banking sector" fiscal and monetary policies" globali5ation of financial markets and systems" incessant introduction of new products and services to the customers" increased mergers and changing practices are changing '1st century banking in a remarkable way. *ll this has led to a new market place in change and flow: old players adapting and new players entering every possible segment of the market with faster" cheaper and more speciali5ed services. (he industry of universal banking is restructuring and the customer has never met a richer supply of information and services. (he old relationship between bank and customer is changing. 2aced with intensifying competition and declining profit margins" institutions are now looking beyond their e:isting business models to identify profitable opportunities for the future.

.. Potential fo" Retail in In,ia= I$ t!e $k& li4it9

(he +ndian players are bullish on the Retail business and this is not totally unfounded. (here are two main reasons behind this. 2irstly" it is mow undeniable that the face of the +ndian consumer is changing. (his is reflected in a change in the urban household income pattern. (he direct fallout of such a change will be the consumption patterns and hence the banking habits of +ndians" which will now be skewed towards Retail products. *t the same time" +ndia 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. 2or instance" while the total outstanding Retail loans in (aiwan is around ;1E of @04" the figure in +ndia stands at less than 8E. (he comparison with the west is even more staggering. *nother comparison that is natural when comparing Retail sectors is the use of credit cards. 9ere the potential lies in the fact that of all the consumer e:penditure in +ndia in 'CC1" less than 1E was through plastic" the corresponding 3 figure standing at 17E.

..1 Co4'etiti*ene$$ of t!e 'la&e"$=

(he fact that the statistical reveal a huge potential also brings with it as threat that is true for any sector of a country that is opening up. Kust how competitive are our banksO +s the threat of getting drubbed by foreign competition realO (o analy5e this" one needs to get into the shoes of the foreign banks. +n other words" how do they see usO *re we good takeover targetsO
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- taking profitability into consideration. <n the other hand" the financial services market is highly over-leveraged in +ndia. )ompetition is fierce" particularly from local private banks such as 902) and +)+)+" in the business of home" car and consumer loans. (here precisely lie the pitfalls of such e:plosive growth. *ll banks are targeting the fluffiest segment i.e. the upwardly mobile urban salaried class. *lthough 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 +ndian yuppies from the most profitable segment. <ver-dependence on this segment is bound to bring in infle:ibility in the business.

.. E4e"gen#e of 1o"eign Giant$=

(he foreign banks have identified this problem but there are certain systematic risks involved in operating in the Retail market for them. (hese include regulatory restrictions that prevent them from e:panding their branch network. o these banks often take the 0irect elling *gent %0 *& route whereby low-end =obs like sourcing or transaction processing are outsourced to small regional layers. o now on" when you see a loan mela or a road show showcasing the retail bouBuet of an elite M/) gaint" you know that a significant commission earned out of any such booking gets ploughed back to our own economy. 4erhaps" one of the biggest impediments in foreign players leveraging the +ndian markets is the ab$en#e of 'o$iti*e #"e,it b+"ea+$. +n the west the risk profile can be easily mapped to things like /s and this information can be publicly traded. 4*/ is a step towards this is a negative file sharing started by a consortium of 11 banks. 9owever" as a McHinsey study points out actual write offs on /4*s show a strong negative correlation with sharing of positive information. <n top of this" the spend-now-pay-later
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credit culture# +n +ndia is =ust not picking yap. * swift legal procedure against consumers creating bad debt is virtually none:istent. 2inally" the vast geographical and cultural diversity of the country makes credit policy formulation a tough =ob and it simply cannot be dictated from a $all treet or a ingapore boardroomR *ll these add up to the unattractiveness of the +ndian retail market to the foreign players. o over the past few years" in spite of the entry of M/)s in many industries" Retail Banking has seen a flurry of panicky e:ists. 2ewer than ;C remain in +ndia and their share of total bank assets currently D.'E is falling. (hose that remain might be thought to be likely buyers of +ndian banks. Met )itibank" 9 B) and tandard )hartered . all in +ndia for more than a century" and with relatively large retail networks . seem to have no pressing need to acBuire a local bank. -stablished foreign banks have preferred to take over customers or businesses from other foreign banks that want to leave. (hus 9 B)" in recent years" has acBuired customers from 2ranceIs B/4" @ermanyIs 0eutsche Bank and KapanIs Bank of (okyo-Mitsubishi. *B/ *mro took over bank of *mericaIs retail business.

..% A $na'$!ot of #all #ent"e$ in Retailing Banking:

(his structure provides our firms clients with a well-established service in all their markets. +t gives them access to professional assistance which is characteri5ed by entrepreneurial flair" commitment to national markets" and an understanding of the commercial and cultural difference between each country. (he result is a focus on the issue that really matter.

-. THE GLOBAL INDUSTR: GUIDE

Retail Banking: @lobal +ndustry is an essential resource for top level data

and analysis covering the retail banking industry. +t includes detailed data market si5e J segmentation" te:tual analysis of the key trends and competitive landscape" and profiles of the leading companies. (his incisive report e:port analysis on a global" regional and country basis. ,@ung ho retailI- that is e:actly what can be said about the banking scenario in +ndia. 2oreign banks have been early movers. +ndian private banks have also 5eroed on the opportunity with vengeance. 4ublic sector banks" though late entrants are found to be eBually aggressive in the market. RB+" the regulator is watching the market with keen interest and has been actively rolling out a slew of guidelines and regulatory changes. +n a nutshell" to e:plosive growth for an e:tensive study. $e have prepared the report of +ndian retail banking by taking a keen insight into the global scenario- the 3 " the -uropean region and the *sia pacific region in particular have been analy5ed individually. ubseBuent to understanding the emerging trends globally" the report looks at the +ndian scenario. 9ere" retail has been seen in the backdrop of evolution of +ndian banking system. *nalysis has been made of th=e various segments of the retailA their relative si5e" growth rates" key trends and outlook of each segment is given separately. *n e:clusive chapter is dedicated to regulatory watch where in all the ma=or regulatory changes and impact there have been deliberated.

(he report is targeted at banks- both private and public sectorA financial services companies" regulator" research and consulting organi5ation" industry e:pert and educational institutions. Marketing departments of various banks will find the report very useful to formulate the business targets" where as others will find a huge treasure of information culled and presented very lucidly. (he report has been prepared from numerous sources which include: publication of banks on international settlements" +M2 and RB+" industry interactions annual reports of the bank" press release by different players" websites and proprietary and subscribed databases. 0ue diligence and adeBuate care has been taken in the report to check and validate the figures used.

/. E;ECUTI<E SUMMAR:
*fter a challenging period over recent years" retail banks have en=oyed a low interest environment and relatively stable economic indictor over the past years. (he focus for many has now shifted from focusing predominantly on cost cutting to actively looking for opportunities for growth. 9owever" the regulatory environment remains a challenging backdrop to any growth strategy with growing numbers of high net worth individuals and increasing wealth creation" the private banking and wealth management industry has traditionally been viewed as an area of great growth potential. 9owever" the sector is also facing some key challenges including increased regulatory pressure changes in legal and ta: environment and the risk associated with volatile earning streams and a high fi:ed cost base. $ith a few large global players and a large numbers of small private banks the industry is naturally inclined to compete or consolidate. +mportant to success of any retail bank is the key relationship between the revenue generating clientIs base and the cost of infrastructure reBuired to service" satisfy and delight client base and that increase the competition among them. Retail banks complete on service level" product range" convenience" customer relationships" reputation and the price. *lso consumers often choose a bank based on family history or habit. 2inancial intermediary play little part in the
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competition process of most markets but there seems to be a role of intermediaries in the mortgages" personal loans and pensions sectors. witching rates are low" across many banking products" as the cost of hassle of switching is perceived to be high. )ustomer who do switch banks" light poor service" credit refusal and better fee interest rate level as the reason for switching. (here are generally been innovation in the area of internet banking" innovation in banking lies more in process and organi5ational changes than in new product development in a traditional sense. 1iberali5ed domestic regulation intensified international competition" rapid innovations in new financial instruments and e:plosive growths in information technology fuel this change. $ith this change has come increasing pressure on managers and workers to dramatically improve productivity and financial performance. )ompetition has created a fast paced industry where firms must change in order to survive. *s a result" new electronic means of transacting with the banks continue to develop due to their relative cost of advantage with the paper based banking system. (he mechanicals and structure of payments systems in the various states inevitably very considerably. ome system use a third party operator other involve weeks of bilateral agreements between incumbent banks. ome payments systems have competing payment system providers e.g." visa and master card many have only one network per century. +nstead of viewing the bank as an assembly like provider of standardi5ed services" the bank can view themselves as a =ob shop with fle:ible production capabilities. *t the heart of
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the bank would be a comprehensive customer database and a product profit database. (he bank would be able to identify all the services used by any customerA the profit or loss on these services and the potentially profitable services which may be proposed to that customer. (his movement away from mass marketing" mass production and mass distribution is widespread throughout the financial services industry.

0. CONCLUSION
9ence we can conclude that Retail Banking# is a banking service that is geared primarily toward individual consumers. Retail banking entitles provide a wide range of personal banking services" including offering savings and checking accounts" bill paying services" as well as debit J credit cards. (hrough retail banking " consumers may also obtain mortgages and personal loans. *lthough retail banking is " for the most part" mass-market driven" many retail banking products may also e:tend to small and medium si5ed businesses. (oday much of retail banking is streamlined electronically via *utomated (eller Machine %*(Ms&" or through virtual retail banking known as Online Banking. Retail banking has been increasing at an attractive rate in +ndia. Ma=or drives for this growth rate increasing number of B4<s and +( industries. Banks shrinking profit margin" relatively safe lending and lower risk weights are also important factors while calculating capital needs of the banks. (he potential for growth is even much higher because compared to other sectors retail lending level is still very low.

2. BIBLIOGRAPH:

-:ecutive summary (he Revenue @rowth )hallenge in Retail Banking#- Bank *dministration +nstitute Retail Banking 4resentation at ++M H<1H*(*-%www.google.com& 4ress Release '7th may 'CC8 J 'CCD * +*/ B*/H-R -S)-11-/)- in R-(*+1 2+/*/)+*1 -RT+)- *$*R0

0eputy @overnor RB+ at '8th Bank -conomist )onference.