Retail Banking: Directly dealing with customers .

It is different from commercial banking which deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). Services that a bank provides: 1. Personal Banking 2. NRI Banking 3. Corporate Banking 4. Business Banking 5. Agri and Rural Banking Retail Banking is a separate division in a bank that provides the following services: Accounts and Deposits: Vanilla products like Dream deposits, Savings account, Salary account, Recurring deposits and Fixed Deposits. Loans: Home loans, Personal loans and car loans Cards: Debit cards, commercial cards Investments: Bank Bonds, GOI Bonds, Mutual Funds Online Services Demat Mobile Banking Internet Banking Wealth Management Interest rate Spread- Lending - Borrowing SBI is the countrys largest bank in terms of deposits and loans. The market cap of SBI rose Rs. 70,000 crore in 1 year which is the highest among all listed companies. Opening up more branches aggressively and offering a range of new home loan products. Strategy ad opted in case of PSU banks in terms of retail banking to fight against the private players is devis ing a plan for product pricing, market strategy and restructuring new verticals. Also risk management plays a very important role especially post Lehman crisis while regulating the management of different products. SBI also surpassed the home loan market which was initially dominated by HDFC. High focus on branch expansion (HDFC planning to open up 20-25% of its branch strength every year) and making use of centralised processing servers. SBI teaser loanEconomic Factors influencing retail segment: 1. Interest Rates 2. Demand factor Margins generally 3% In order to tame inflation, RBI raises the interest rates. In this year for the fifth time, RBI has raised repo rate to 6% (b y 25 basis points) and reverse repo rate to 5% (by 50 basis points). This p rompts the banks to raise deposit rates that gets reflected in the base rate (this is primarily to attract savers who go for stocks) while the loans for corporates and individuals tend to be costlier. NHB (apex housing bank) trying to extend its refinanci ng support to NBFCs who are mostly active in the rural belt. Also 39 MFIs have aquired NBFC licence from RBI. NHB provides refinance facilities to lenders against their existing housing loans. The NBFCs basically lack the long term resources and refinan cing helps them correct their asset -liabilities mismatch as housing loans are typically of a long tenure. Issues concerning the economy this year : Inflation, rate hikes Since the central bank has started monetary tightening from October 2009, 40 banks h ave raised deposit rates and 26 their lending rates. Under review is the special housing loan scheme of SBI that offers a fixed 8% rate for the first year and 9% in the second and thir d year. There is a need to review base rates (the minimum rate at which they can lend) when interest rates go high since the input cost goes up. Most banks have pegged their base rates in the range of 7.50% and 8.25%. However many have raised their prime lending rates b y 50 basis points which gets reflected in increased home loan rates. In terms of deposits, since April 2010 to September 2010, deposit rose just 3.9% against 6.4% a year ago. Banks have refrained from raising deposit rates due to poor credit demand (loan demand). Interest ra tes on 1 year deposits are around 7% for most banks while inflation is around 10% resulting in a negative 3% real return thus making bank deposits unattractive. Also future lending rate hikes will be rare.