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RETAIL BANKING
Submitted in partial fulfillment of the requirements for
Post Graduate Diploma in Management
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EXECUTIVE SUMMARY

Retail banking refers to banking in which banking institution execute transactions directly with
consumers rather than corporations or other banks. Services offered include:
1. Savings & checking accounts.
2. Mortgages.
3. Personal loans.
4. Debit cards.
5. Credit cards, etc.

Indian retail banking is showing phenomenal growth. Collaboration between banks and retail
ecosystem will also deepen to provide customer with a bouquet of product. Competition from
unconventional entities will quicken the pace of technology innovation. Housing will continue
to be the biggest growth segment followed by auto. Need to expand and diversify by focusing
on non-urban segment, varied income and demographic groups.
Key drivers:
1. Increased consumerism.
2. Internet.
3. Emergence of new age companies.
4. Technology, etc
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CONTENTS

1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. LITERATURE REVIEW
4. STATEMENT OF THE PROBLEM
5. OBJECTIVE OF THE STUDY
6. NATURE AND SCOPE OF STUDY
7. LIMITATION OF THE STUDY
8. METHODOLOGY
9. INTERPRETATION OF RESULT & OBSERAVTION
10. CONCLUSION
11. BIBLIOGRAPHY
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INTRODUCTION
INTRODUCTION TO BANKING:
Bank is an institution that deals in money and its substitutes and provides crucial
financial services. The principal type of baking in the modern industrial world is
commercial banking & central banking. Banking Means "Accepting Deposits for the
purpose of lending or Investment of deposits of money from the public, repayable on
demand or otherwise and withdraw by cheque, draft or otherwise."

-Banking Companies (Regulation) Act, 1949

The concise oxford dictionary has defined a bank as "Establishment for custody of
money which it pays out on customers order." Infact this is the function which the bank
performed when banking originated. "Banking in the most general sense, is meant the
business of receving, conserving & utilizing the funds of community or of any special
section of it.-By H.Wills& J. Bogan

"A banker of bank is a person, a firm, or a company having a place of business where
credits are opened by deposits or collection of money or currency or where money is
advanced and waned.” -By Findlay Sheras

Thus A Bank :

-Accept deposits of money from public,

- Pays interest on money deposited with it,

- Lends or invests money,

- Repays the amount on demand,

- Allow the money deposited to be withdrawn by cheque or draft.

ORIGIN OF WORD BANK: The origin of the word bank is shrouded in mystery.
According to one view point the Italian business house carrying on crude from of
banking were called banchi bancheri" According to another viewpoint banking is
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derived from German word "Branck" which mean heap or mound. In England, the issue
of paper money by the government was referred to as a raising a bank.

BANKING SYSTEM IN INDIA

HISTORICAL PERSPECTIVE:

We can identify three distinct phases in the history of Indian banking:

1. Early phase from 1786-1969.

2. Nationalization of banks and up to 1991 prior to banking sector reforms.
3. New phase of Indian banking with the advent of financial banking.

Banking in India has its origin as early or Vedic period. It is believed that the transitions
from many lending to banking must have occurred even before Manu, the great Hindu
furriest, who has devoted a section of his work to deposit and advances and laid down
rules relating to the rate of interest. During the mogul period, the indigenious banker
played a very important role in lending money and financing foreign trade and
commerce.

During the days of the East India Company it was the turn of agency house to carry on
the banking business. The General Bank of India was the first joint stock bank to be
established in the year 1786. The other which followed was the Bank of Hindustan and
Bengal Bank. The Bank of Hindustan is reported to have continued till 1906. While
other two failed in the meantime. In the first half of the 19th century the East India
Company established there banks, The bank of Bengal in 1809, the Bank of Bombay in
1840 and the Bank of Bombay in1843. These three banks also known as the
Presidency banks were the independent units and functioned well. These three banks
were amalgamated in 1920 and new bank, the Imperial Bank of India was established
on 27th January,1921.

With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial
Bank of India was taken over by the newly constituted SBI. The Reserve Bank of India
(RBI) which is the Central bank was established in April, 1935 by passing Reserve
bank of India act 1935.The Central office of RBI is in Mumbai and it controls all the
other banks in the country.

In the wake of Swadeshi Movement, number of banks with the Indian management
were established in the country namely, Punjab National Bank Ltd., Bank of India Ltd.,
Bank of Baroda Ltd., Canara Bank. Ltd.on 19th July 1969, 14 major banks of the
country were nationalized and on 15th April 1980, 6 more commercial private sector
banks were taken over by the government.
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FUNCTIONS OF BANKS
PRIMARY FUNCTIONS:

- Acceptance of Deposits

- Making Loans & Advances

- Loans

- Overdraft

- Cash Credit

- Discounting of Bills of Exchange

SECONDARY FUNCTIONS :

- Agency Functions

- Collection of Cheques & Bills etc.

- Collection of interest and dividends.

- Making payment on behalf of customers.

- Purchase & sale of securities.

- Facility of transfer of funds.

- To act as trustee & executor.

UTILITY FUNCTIONS:

- Safe custody of customers’ valuable articles & securities.

- Underwriting facility.

- Issuing of travellers cheque letter of credit.

- Facility of foreign exchanges.

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- Providing trade information.

- Provide information regarding credit worthiness of their customer.

CLASSIFICATION ON BASIS OF OWNERSHIP
On the basis of ownership banks are of the following types :

1. PUBLIC SECTOR BANKS :

Public sector banks are those banks which are owned by the Government. The Govt.
runs these Banks. In India 14 banks were nationalized in 1969 & in 1980 another 6
banks were also nationalized. Therefore in 1980 the number of nationalized bank 20.
But at present there are 9 banks are nationalized. All these banks are belonging to
public sector category. Welfare is their principle objective.

2. PRIVATE SECTOR BANKS :

These banks are owned and run by the private sector. Various banks in the country
such as ICICI Bank, HDFC Bank etc. An individual has control over there banks in
preparation to the share of the banks held by him.

3. CO-OPERATIVE BANKS :
Co-operative banks are those financial institutions. They provide short term & medium
term loans to there members. Co-operative banks are in every state in India. Its
branches at district level are known as the central co-operative bank. The central co-
operative bank in turn has its branches both in the urban & rural areas. Every state co-
operative bank is an apex bank which provides credit facilities to the central co-
operative bank. It mobilized financial resources from richer section of urban population
by accepting deposit and creating the credit like commercial bank and borrowing from
the money mkt. It also gets funds from RBI.
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CLASSIFICATION ACCORDING TO RBI ACT 1934

Banks are classified into following two categories son the basis ofreserve bank Act.
1934.

SCHEDULED BANK :
These banks have paid up capital of at least Rs. 5 lacks. These are like a joint stock
company. It is a co-operative organization. These banks find their mention in the
second schedule of the reserve bank.

NON SCHEDULED BANK :

These banks are not mentioned in the second schedule of reserve bank paid up capital
of these banks is less then Rs.5 lacs. The no. such bank is gradually tolling in India

CLASSIFICATION ACCORDING FUNCTIONS

On the basis of functions banks are classified as under :

1. COMMERCIALBANKS:
The commercial banks generally extend short-term loans to businessmen & traders.
Since their deposits are for a short-period only. They cannot lend money for a long
period. These banks reform types or agency job for their customers. These banks are
not in a position to grant long-term loans to industries because their deposits are only
for a short period. The majority of joint stock banks in India are commercial banks
which finance trade & commerce only.

2. SAVING BANKS:
The principle function of these banks is to collect small saving across the country and
put them into productive use. These banks have shown marked development in
Germany & Japan. These banks are established in HAMBURG City of Germany in
1765. In India a department of post offices functions as a saving banks.

3. FOREIGN EXCHANGE BANKS :

These are special types of banks which specialize in financing foreign trade. Their
main function is to make international payments through purchase & sale of exchange
bills. As it well known, the exporters of a country prefer to receive the payments for
exports in their own currency. Thus these banks convert home currency into foreign
currency and vice versa. It is on this account that these banks have to keep with
themselves stock of the currency of various countries. Along
with that, they have to open branches in foreign countries to carry on their business.
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4. INDUSTIRAL BANKS :
The industrial banks extends long term loans to industries. In fact, they also help
industrials firms to sell their debentures and shares. Sometimes, they even underwrite
the debentures & shares of big industrial concerns.

5. INDIGENIOUS BANKS :
These banks found their origin in India. These banks made a significant contribution to
the development of agricultural and industries before independence. Mahajans, rural
moneylenders and jewelers have been the forerunner of these banks in India.

6. CENTRAL BANK :
The central bank occupies a pivotal position in the monetary and banking structure of
the country. The central bank is the undisputed leader of the money market. As such it
supervises controls and regulates the activities of commercial banks affiliated with it.
The central bank is also the higher monetary institution in the country charged with the
duty & responsibility of carrying out the monetary policy formulated by the government.
India’s central bank known as the reserve bank of India was set up in 1935.

7. AGRICULTURAL BANK :
The commercial and the industrial banks are not in a position to meet the credit
requirements of agriculture. Hence, there arises the need for setting up special type of
banks of finance agriculture. The credit requirements of the farmers are two types.
Firstly the farmers require short term loans to buy seeds, fertilizers, ploughs and other
inputs. Secondly, the farmers require long-term loans to purchase land, to effect
permanent improvements on the land to buy equipment and to provide for irrigation
works.

There are two types of agriculture banks:

1. Agriculture co-operative banks, and

2 . Land mortgage banks.

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RETAIL BANKING:
Retail banking, also known as consumer banking, is the provision
of services by a bank to individual consumers, rather than to
companies, corporations or other banks. Services offered
include savings and transactional accounts, mortgages, personal
loans, debit cards, and credit cards. The term is generally used to
distinguish these banking services from investment
banking, commercial banking or wholesale banking. It may also
be used to refer to a division or department of a bank dealing
with retail customers.
In the U.S., the term commercial bank is used for a normal bank
to distinguish it from an investment bank. After the Great
Depression, through the Glass–Steagall Act, the U.S. Congress
required that banks only engage in banking activities, whereas
investment banks were limited to capital markets activities. This
separation was repealed in the 1990s. Commercial bank can also
refer to a bank or a division of a bank that mostly deals with
deposits and loans from corporations or large businesses, as
opposed to individual members of the public (retail banking).

A retail bank in Leeds, United Kingdom

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PRODUCTS:
Typical products offered by a retail bank include:

 Transactional accounts
 Checking accounts (American English)
 Current accounts (British English)
 Savings accounts
 Debit cards
 ATM cards
 Credit cards
 Traveler's cheques
 Mortgages
 Home equity loans
 Personal loans
 Certificates of deposit/Term deposits

What is 'Retail Banking'

Retail banking, also known as consumer banking, is the typical mass-market banking
in which individual customers use local branches of larger commercial banks. Services
offered include savings and checking accounts, mortgages, personal loans, debit/credit
cards and certificates of deposit (CDs). In retail banking, the focus is on the individual
consumer.

BREAKING DOWN 'Retail Banking'

Retail banking aims to be the one-stop shop for as many financial services
as possible on behalf of individual retail clients. Consumers expect a range
of basic services from retail banks, such as checking accounts, savings
accounts, personal loans, lines of credit, mortgages, debit cards, credit
cards and CDs. Most consumers utilize local branch banking services,
which provide onsite customer service for all of a retail customer's banking
needs. Through local branch locations, financial representatives provide
customer service and financial advice. Financial representatives are also
the lead contact for underwriting applications related to credit-approved
products.
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Expanded Services in Retail Banking

Banks are adding to their product offerings to provide a greater range of
services for their retail clients. In addition to basic retail banking accounts
and customer service from local branch financial representatives, banks
are also adding teams of financial advisors with broadened product
offerings, with investment services such as wealth
management, brokerage accounts, private banking and retirement
planning. Some of these ancillary services are also offered through
outsourced third-party affiliations. All of the expanded offerings allow for
increased convenience through greater connectivity of accounts, which
helps customers to access funds and make personal transactions more
quickly and easily.

Internet Finance and Retail Banking

In the 21st century, a movement towards internet finance banking
operations has also broadly expanded the offerings for retail banking
customers. Several online banks now provide banking services to
customers purely through internet and mobile applications. These banks
offer nearly all of the accounts and services provided by traditional banks,
often with lower fees from reduced banking branch expenses. Examples of
these banks include Simple, Moven and GoBank.

U.S. Banking Landscape Profile

In 2015, the top five largest U.S. commercial banks held over half of the
industry's customer deposits. As of 2015, the top five largest commercial
banks are JPMorgan, Bank of America, Wells Fargo, Citibank and U.S.
Bank. In the banking industry, consumers also rely on the Federal Deposit
Insurance Corporation (FDIC) to insure their bank deposits. As a leading
U.S. government entity, the FDIC was responsible for insuring deposits at
6,638 banking institutions in 2014.

HDFC Bank is a leading Indian retail bank. Innovative products and

smart banking solutions make us the banker of choice for millions
of users each day. With a nationwide network
of 4,281 branches, 12,054 ATMs and 240,000+ merchants (point-
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of-sale) accepting HDFC Bank credit and debit cards, we continue

to redefine banking convenience.
Personal banking solutions from HDFC Bank offer smart features
and benefits to ensure that you make the most of your relationship
with us. Our retail banking products and services are designed to
meet the end-to-end needs of all types of users. From zero balance
savings accounts to customized salary accounts, flexible home and
personal loans to 360 NRI Banking services, HDFC Bank is for
everybody.
HDFC Bank is preferred because it offers the entire banking
experience under one roof. Amazing offers, customized solutions,
minimum paperwork and quick turnaround times are some of the
hallmarks of HDFC Bank that has made it the banker of choice in
India.

Retail banking refers to the consumer-oriented services offered by

commercial banks. These services include checking
and savings accounts, mortgages and various types
of loans and investment services relating to retirement and educational
planning.
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HOW IT WORKS (EXAMPLE):

Retail banking encompasses the services offered to consumers by

commercial banks. The term "retail" refers to the almost storefront-
shopping nature of commercial banking services.

Most commercial banks have extensive retail banking services and

products to reach a wide consumer base.

Here's a brief story about Bob's day at his bank XYZ. He arrives at the
bank one day to deposit a $2000 paycheck into his account. He decides to
deposit $1000 of the paycheck into his existing checking account. The
other $1000 he decides to use to open a savings account. Bob sits with a
bank representative who explains the various savings account options and
helps him with opening an account once he's made a decision.

Additionally, the account representative informs Bob of retirement plans

the bank offers as well as educational savings plans for his children.
Before he leaves, Bob also takes information on auto loans offered by the
bank since he is considering purchasing a new car. While at the bank, Bob
was able, in one place, to deposit money, open a savings account and find
information relating to banking products he may need in the future.
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LITERATURE REVIEW

Investopedia explains 'Retail Banking'

Retail banking aims to be the one-stop shop for as many financial services as possible on
behalf of retail clients. Some retail banks have even made a push into investment services such
as wealth management, brokerage accounts, private banking and retirement planning. While
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. Dr. Chaisomphol Chaoprasert in his article:

LITERATURE REVIEW OF SERVICE QUALITYIMPROVEMENT IN THE RETAIL BANKING
INDUSTRY
Talks about the importance of Service Quality Improvement .

The paper analyzes past studies regarding service quality improvement in the retail banking
industry. The continuing trend to a model of service quality improvement, from personnel
counter services to electronic services, is demonstrated. Improved service quality should be
adopted to maintain the core competence and this paper contributes knowledge and
background for banks to apply these findings to better shape and focus their positions in the
market and also to provide service quality to customers.

2. Innovation in Retail Banking

by
Frances X.
Frei Patrick T. Harker Larry W. Hunter
Reviews about, how does a retail bank innovate? Traditional innovation literature would
suggest that organizations innovate by getting new and/or improved products to market.
However, in a service, the product is the process. Thus, innovation in banking lies more in
process and organizational changes than in new product development in a traditional sense.
This paper reviews a multi-year research effort on innovation and efficiency in retail banking,
and discusses both the means by which innovation occurs along with the factors that make
one institution better than another in innovation. Implications of these results to the study of
the broader service sector will be drawn as well.
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STATEMENT OF THE PROBLEM

As a statement of problem I have taken the example of HDFC bank in my
research study:
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OBJECTIVE OF THE STUDY

• To study awareness regarding Retail Banking.

• To explore various schemes offered by Retail Banking.

• To highlight the development in Retail Banking.

• To analysis growth of banking business.

 To come with conclusion, findings & suggestions.

• To analysis and interpret the additional services business through Retail

Banking.

• To find out awareness level & reaction of customers towards direct banking
channels provided by bank.

• To analysis various factors concerning of Retail Banking.

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NATURE AND SCOPE OF STUDY

FUTURE EXPECTATIONS IN THE RETAIL BANKING:

 Collaboration between banks and the retail
ecosystem will also deepen to provide customers
with a bouquet of products.
 Competition from unconventional entities will
quicken the pace of technology innovation.
 Housing will continue to be the biggest growth
segment, followed by auto.
 Need to expand and diversify by focusing on non-
urban segment, varied income and demographic
groups.
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Retail Growth-India
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RETAIL BANKING RISK:

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LIMITATION OF THE STUDY

The project had several limitations due to some constraints, due to the
market condition, limitations during the course of the project are:

1. Some of the respondents did not answer as they were busy hence the
right information could not be obtained.

2. Since the researcher was not familiar with the area of operation the
study took more time than what it actually deserves.
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METHODOLOGY
The study will be based primary data as well as secondary data. But the
role of secondary data will be higher.
"Research comprises of defining & redefining hypothesis or suggested solutions, collecting,
organizing & evaluating data making deductions &reaching conclusion"
The term research Methodology here comprises of all research activities carried on in
connection with the "Analysis of various scheme sunder Saving, FD and Demat account
provided by HDFC Bank". The basic purpose of research methodology is to describe the
research procedure. It helps the researches to adopt the right way to move on for carrying the
study.

STEP IN RESEARCH PROCEDURE

• Defining and analyzing the problem.
• Determining sources of information
• Preparing data collection format
• Collection of data
• Analysis of data
• Interpretation of data
• Preparation of report

RESEARCH DESIGN
A research design is like arrangement of conditions for collections &analysis of data in a
manual that aims to combine relevance to the research purpose with economy in procedures.
A research design is purely & simply the framework of plans for a study that guides the
collections & analysis of data the research design is the conceptual structure within which the
research is conducted. It constitutes the blue print for the collection, measurement & analysis
of the data.
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The research design with help to answer the following questions :

• Why the study is being made?
• From where the data needed can be collected?
• What time is required for the study to be competed & how much material is needed. • What
will be the technique for data collections?
• How the data can be analyzed?
• How the answers to above questions can be found with minimum efforts, time & money?
TYPES OF RESEARCH DESIGN

EXPLORATORY RESEARCH
Design These designs are the first step to start any research & are absolutely essential to
obtain the proper definition of the problem. It helps in classifying the concepts of the study.
The major emphasis is the discovery of ideas and insights by study the available information.

DESCRIPTIVE RESEARCH DESIGN

These are concerned with describing the characteristics of a particulars phenomenon in detail
the descriptive study requires a clear specifications of who, what, when, where, why & how
aspects of research.
The methodology adopted to achieve the project objective involved descriptive research
method.
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SOURCES OF DATA COLLECTION

To make the research complete it is very necessary to have useful and authentic data there are
two types of data collection sources.

PRIMARY SOURCE OF DATA COLLECTION:

Primary data are those which are collected afresh & for the first time, &this happens to be
original in character. Simple well drafted questionnaire was circulated among all respondents.
Full freedom was provided to an individual to answer the questions. Personal & Telephonic
Interviews, observation, personal opinion &viewpoints of the respondents about the various
schemes helped incompletion of the project.

SECONDARY SOURCES OF DATA COLLECTION:

These are those which are collected by someone else & which have been passed through
statically process. Brochures, Manuals, Journals, Magazines, Site of HDFC Bank and various
Articles provided lot many inputs for successful completion of project.
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INTERPRETATION OF RESULT & OBSERAVTION

For interpretation of this project I take a comparison of 3 banks:
1. ICICI BANK.
2. HDFC BANK.
3. AXIS BANK.

1. COMPARATIVE STUDY OF RETAIL BANKING STRATEGIES ADOPTED BY

VARIOUS PRIVATE SECTOR BANK COMPARISION:
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2. BRANCHES & ATM IN COMPARATIVE STUDY WITH RETAIL BANKING:

3. COMPARATIVE STUDY OF RETAIL BANKING SAVING ACCOUNTS:

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4. COMPARATIVE STUDY OF SHARE HOLDER OF INSTITUTIONAL

INVESTORS:

5. COMPARATIVE STUDY OF RETAIL BANKING ON PRIVATE BANKS:

BANKS ICICI HDFC AXIS

DEC-15 70.30% 48.60% 37.30%
MAR-16 68.90% 47.50% 37.50%
JUN-16 67.90% 47.00% 35.00%
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CONCLUSION

AS IS/BEFORE TO BE/NOW
PRIORITY Credit & risk Customers & retailing
APPROACH Secure & conventional Customer centric retail
location for financial banking(customer is
transactions(banks king)
dictate terms)

CUSTOMER BASE Corporations & other Retail consumers,

banks corporate clients, other
banks

FORMATS Single entity Multi-location, multi

branch

MORE EMPHASIS Improving transactional Providing service and

ON efficiency value to customers

CUSTOMIZATION Rarely there Highly customized

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BIBLIOGRAPHY

1. BOOKS REFFERED:
a. Research methodology by C.R. Kothari.
b. Business Research & Methods by Donal R. & Schindler.
c. Retail Banking by UCO Bank Manual.

2. MAGAZINE:
a. Business Today.
b. Business World.
3. ANNUAL REPORT OF BANKS:
a. Manuals.
b. Brochures.
c. Websites: www.hdfcbank.com
www.indiainfoline.com
www.icicibank.com
www.axisbank.com