Executive Summary

One of the key mainstays of present day society has been the enlightened and sorted out trade
of merchandise and ventures. In India, as in different nations around the globe, a sorted out
strategy for installment has developed after some time from a trade framework to the more
mind boggling types of fiscal exchanges. The overwhelming type of installment crosswise over
India in the twentieth century has been coins, money and checks. As we move into the 21st
century, installment through money and checks itself has experienced a change. It has moved
from being a physical paper-based trade of significant worth to a virtual electronic one. This is
in accordance with the advancement of electronic installments the world over. Plastic cash has
an additional capacity of distinguishing proof alongside that it monitors exchanges as they are
caused with all subtleties of buys, for example, shop name, date of procurement, measure of
procurement, city of procurement and so forth. Along these lines holder has the office of
"invigorating" his memory about his buys which is denied to the paper cash holder. On a large
scale level, since the information is accessible electronically, spending designs, rising patterns,
statistic subtleties and such other data can be agreed effectively which thus can be utilized for
boosting monetary improvement and for diminishing pointless and unnecessary review costs.
A noteworthy downside of plastic cash as installment mode is substantial reliance on
innovation (satellite telephone lines, PC joins, LANs, WANs and so on). A tangle in any of
these can cause a noteworthy interruption in acknowledgment methodology. Another hazard
connected to the utilization of plastic cash is that the moderate customers are not reacting to
the costly crusades propelled to present cards; alternate dangers that remaining parts are those
intrinsic to this sort of business, viz. administrative controls, fakes and terrible obligations.
Synopsis and Conclusion 193 The investigation has been made to realize the way of managing
money examples of customers and why they are not embracing the plastic cash in their
everyday lives. The examination additionally attempts to discover the job of part foundations
in the advancement of plastic cash in India. The audit of writing demonstrated that a large
portion of research work in the field attempted till now has been done in created nations like
the United States and other quick creating nations.

1
 RETAIL CREDIT EXPLOSION IN INDIAN BANKING
CHAPTER NO. 1 - INTRODUCTION

1.1 INTRODUCTION:-
Retail banking is, however, quite broad in nature- it refers to the copying of business banks
with individual customers, each on liabilities and assets sides of the record. Fixed, current /
savings accounts on the liabilities side; and mortgages, loans (e.g. personal, housing, auto, and
educational) on the quality aspect, are the more important of the products offered by banks.
Retail banking refers to provision of banking services to people and tiny businesses wherever
the money establishments are coping with sizable amount of low worth transactions. This is in
contrast to wholesale banking where the customers are large, often multinational companies,
governments and government enterprises, and the financial institutions deal in small numbers
of high value transactions. Retail banking includes a comprehensive vary of economic products
viz. deposit, products, loan products, consumer durable loans, loans against equity shares, loans
for subscribing to Initial Public Offers (IPOs) / Mutual Funds, bill payment services,
investment advisory services, credit / debit cards and other cards. These products provide an
opportunity for the banks to diversify the asset portfolio with high profitability and relatively
low NPAs. The categorization of retail banking services is shown in table-1. Today, many
proactive banks have entered the retail banking segment and have identified it as a principal
growth driver. They are slowly gaining market share within the retail house.
Retail Banking Sector is characterized by 3 basic characteristics:
Multiple products (Deposits, Loans, Credit Cards, Insurance, Investments and Securities).
Multiple channels of distribution (Branch, Internet and Kiosk, Call Centers, Mobile Phones,
ATM); and Multiple Consumer Group (Salaried people, Self Employed Professionals, Small
Business and SMEs) The Indian Banks are competing with one another to grab a pie of the
retail banking sector, which has tremendous potential as retail loans constitute only 8% of GDP
in India, whereas their share is regarding thirty-five in alternative Asian economies. Retail
banking environment today is changing fast. The dynamic client demographics demands to
make a differentiated application supported scalable technology, improved service, and
banking convenience. Higher penetration of technology and increase in world acquirement
levels has started to meet. Surplus deployable funds may be placed into use by the banks.
Products may be designed, developed, and marketed as per individual needs. Competition,
securitization, automation and regulation are the major forces that are driving and shaping

2
consumer lending.Net banking, Phone banking, Mobile banking, ATMs and Bill payments are
the new facilities that banks AR victimization not solely to lure customers however additionally
or line to help them reduce their total operating costs. In India, commercial banks dominate the
market or consumer credit. The enormous competition has led to innovative retail banking
products that are extremely customer friendly and plug the loopholes in the existing similar
products.
Retail banking, also known as consumer banking expectation of the client on top of ne'er
before. Increasing use of recent technology has more increased has more increased reach and
accessibility. The market these days provides USA a challenge to supply multiple and
innovative modern services to the client through a consolidated window therefore on make sure
that the bank's client gets 'Uniformity and Consistency' of service delivery across time and at
each bit purpose across all channels. The pace of innovation is fast and security threat has
become prime of all electronic transactions. High value structure rendering mass-market
mating in prohibitively costly. Present day tech-savvy bankers are currently a lot of watching
reduction in their in-operation prices by adopting scalable and secure technology thereby
reducing the time interval to their customers therefore as to improve their shopper base and
economies of scale. The solution lies to plug demands and challenges lies in innovation of
recent providing with minimum dependence on branches- a multi-channel bank, and to
eliminate the disadvantage of an inadequate branch network. Generation of results in cross sell
and making extra revenues with utmost client satisfaction has become focus worldwide for the
success of a Bank. Traditional loaning to the company is slow moving in conjunction with high
NPA risk, treasure profits are now losing importance; hence retail Banking is now an
alternative available for the banks for increasing their earnings. Retail Banking is a beautiful
market section having an outsized variety of assorted categories of consumers. Retail Banking
focuses on individual and small units. Customized and wide-ranging products are available.
The risk is unfolding and therefore the recovery is slow, is the provision of services by a bank
to the public, rather than to companies, corporations, or other banks, which are often described
as wholesale banking. Banking services which are regarded as retail include provision of saving
and transactional accounts, mortgage personal loans, debit cards, and credit cards. Retail
banking is also distinguished from investment banking or commercial banking. It may also
refer to a division or department of a bank which deals with individual customers. In the U.S
the term commercial bank is used for a normal bank to distinguish it from an investment bank.

3
1.2 DEFINITION:-
Retail banking is typical mass-market banking wherever individual customer use native
branches of larger business banks. Services offered include: savings and checking accounts,
mortgages, personal loans, debit cards, credit cards, and so' 'Retail banking may be a banking
service that's in gear primarily towards individual consumers' 'Banking services for individual
customers' Retail banking is sometimes created obtainable by business banks, furthermore as
smaller community banks. In contrast to wholesale banking, retail banking focuses strictly on
shopper markets. Retail banking entities offer a good vary of private banking services,
furthermore as debit and credit cards. Through retail banking, shopper may additionally get
mortgages and private loans. Though retail banking is, for the foremost half, mass-market
driven, several retail banking merchandise may additionally reach tiny and medium sized
businesses. These days abundant of retail banking is efficient electronically via automated teller
machine machines (ATMs,) or through virtual retail banking referred to as on-line banking.
The Indian economy is growing at a gentle rate of eight.5 to September 11 within the last five
years. Most of the expansion has been contributed by the business and services sector. The
expansion within the agriculture sector throughout the past five years has been showing a
declined trend and may be a growing at a touch level two. The potential for growth in
agriculture and SME sector is gigantic. The foremost reasons for low growth area unit non
handiness of banking services at reasonable value and too at a remote location. As a result, a
massive majority of the population within the rural areas and unorganized sector is
disadvantaged from money facilities. This is often acting as a constraint to the expansion
impetus in these sectors. Therefore, access to money services at reasonable value - particularly
credit and insurance enlarge financial gain opportunities and provide money direction to the
agricultural poor. Such direction ensures social and political stability. Money inclusion offers
formal identity and provides access to the payment system and to saving, safety internet like
deposit insurance. Thus, money inclusion is considered vital for achieving comprehensive
growth and guaranteeing overall property growth of the economy. India ought to vary from the
developed countries. whereas within the developed countries, the main focus is on the
comparatively tiny share of population not having access to banks, in India the main focus must
air the overwhelming majority of the Indian population residing in rural and semi urban area
unit as WHO are financially excluded. One in all the vital aspects of retail banking in India is
that the reach of the bank to the retail banking shoppers. It's calculable that fifty of the banking
business of the country is conducted in seven metropolitan cities and Pune.

4
As per 2001 census, seventy-three of the country's population resided in rural areas. In
December 2003, sixty-two of rural households failed to have access to Bank services. It's been
calculable that regarding 12- tone system of the urban households additionally doesn’t have
such access. Thus, over forty eighth of all the households of the country stay excluded from
the advantages of banking. Gratuitous to mention that the majority of the household's area unit
the potential business field for retail banking merchandise. We, therefore, felt it applicable to
check the explanations and consequences of monetary inclusion in India as a district of our
research. Retail banking as a business model is adopted by all the banks on account of multiple
comfort factors for the banks viz. acquisition of an enormous client base, multiple product
offerings, higher evaluation and gain, scope for cross merchandising and up merchandising
money and on the far side money merchandise for increased per client revenue and in fact
higher risk proposition With the dynamic paradigm of technology because the driver for retail
banking explosion, banks area unit embrace totally different ways by redesigning their standard
business silos, re-engineering existing merchandise and inventing merchandise, services,
channels, relationships to extend the share of the customers' billfold.

5
1.3 ROLE OF RETAIL BANKING:-

Banks play many different roles in local and global economy. Retail banking is that part of
banking which deals with individual customers and small businesses. In contrast, commercial
banks deal with big businesses and corporations. Retail banking, compared to other kinds of
retail businesses, lags as far as coming up with innovative products. This is partly due to the
nature of the banking business. Retail banking in many, if not most, countries adhere to the
conservative banking philosophy. Such a message was echoed by Tang Shunning, vice
chairman of the China Banking Regulatory Commission, when he challenged the Chinese
banks to come up with innovative products to stay competitive.

SERVICES OFFERED BY RETAIL BANKING

Retail banks offer a variety of important services to their customers. The retail banking sector
is often described as a typical mass-market banking, offering services such as savings and
checking accounts and all kinds of personal loans, including auto loans and student loans. Retail
banks also offer mortgage services, debit and credit card services and ATM services--all of
which have become essential to today's consumers.

WHAT ROLES DO RETAIL BANKS PLAY WITHIN ECONOMIES?

Retail banks play a critical role in their home economies, and their activities have implications
for the global economy as well. They offer critical credit functions, which largely fuel the

6
engine of economic growth in their economies. When problems hit the retail banking sector the
result is often dire economic circumstances for the economy. When retail banks are failing,
little or no credit is available for credit seekers, and economic activity becomes depressed.

RETAIL BANKS AND THE SUB PRIME CRISIS

A major challenge to retail banking surfaced in late 2008. Retail banks as well as commercial
banks had provided sub-prime mortgages to consumers who were not qualified for the size of
the loans they received. Although this process generated much of the housing boom of the early
21st century, eventually the loans became too cumbersome for borrowers to pay back. This
problem led to loan defaults across the United States and led to many bank failures, not only
in the United States but around the world. It produced serious deterioration in the global
economy and led to the economic and financial crisis that dominated the political landscape in
early 2009.

RETAIL BANKING AND CONSOLIDATION ISSUES

Some banks turned to consolidation as a way of cutting expenses to survive difficult economic
conditions. Often consolidation works as intended, but it also has its limitations. Federal law
prohibits any single bank in the United States from holding more than 10% of the U.S. customer
market. When banks merge they also make gains in their customer base. Several banks in the
United States are approaching the 10% mark, so for those banks, further consolidation may not
be a way to solve their problems. The Indian economy is growing at a steady rate of 8.5 to 9%
in the last 5 years. Most of the growth has been contributed by the industry and services sector.
The growth in the agriculture sector during the past 5 years has been showing a declined trend
and is growing at a little level 2%. The potential for growth in agriculture and SME sector is
enormous. The major reasons for low growth are non-availability of banking services at
affordable price and too at a distant location. As a result, a vast majority of the population in
the rural areas and unorganized sector is derived from financial facilities. This is acting as a
constraint to the growth impetus in these sectors. Therefore, access to financial services at
affordable prices - especially credit and insurance enlarge income opportunities and offer
financial empowerment to the rural poor. Such empowerment ensures social and political
stability. Financial Inclusion gives formal identity and provides access to the payment system
and to saving, safety net like deposit insurance. Therefore, financial inclusion is considered
critical for achieving inclusive growth and ensuring overall sustainable growth of the economy.
India should be different from the developed countries. While in the developed countries, the

7
focus is on the relatively small share of population not having access to banks, in India the
focus has to be on the vast majority of the Indian population residing in rural and semi urban
areas who are financially excluded. One of the important aspects of retail banking in India is
the outreach of the bank to the retail banking clients. It is estimated that 50% of the banking
business of the country is conducted in seven metropolitan cities and Pune. As per the 2001
census, 73% of the country's population resided in rural areas. In December 2003, 62% of rural
households did not have access to Bank services. It has been estimated that about 12% of the
urban households also do not have such access. Thus, over 48% of all the households of the
country remain excluded from the benefits of banking. That most of the households are the
prospective business field for retail banking products. We, therefore, felt it appropriate to study
the reasons and consequences of financial inclusion in India as a part of our research project.
Retail Banking as a business model is adopted by all the banks on account of multiple comfort
factors for the banks viz. acquisition of a huge customer base, multiple product offerings, better
pricing and profitability, scope for cross selling and up selling financial and beyond financial
products for increased per customer revenue and of course better risk proposition. With the
changing paradigm of technology as the driver for retail banking explosion, banks are
embracing different strategies by redesigning their conventional business silos, re-engineering
existing products and inventing products, services, channels, relationships to increase the share
of the customers' wallet. The issue of retail banking is extremely important and topical. Across
the globe, retail lending has been a spectacular innovation in the commercial banking sector in
recent years. The growth of retail lending, especially, in emerging economies, is attributable to
the rapid advances in information technology, the evolving macroeconomic environment,
financial market reform, and several micro-level demand and supply side factors. India too
experienced a surge in retail banking. There are various pointers towards this. Retail loan is
estimated to have accounted for nearly one-fifth of all bank credit. Housing sector is
experiencing a boom in its credit. The retail loan market has decisively got transformed from
a sellers' market to a buyers' market. Gone are the days where getting a retail loan was
somewhat cumbersome. All these emphasize the momentum that retail banking is experiencing
in the Indian economy in recent years. 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. Today's retail banking

8
sector is characterized by three basic characteristics: Multiple products (deposits, credit cards,
insurance, investments, and securities), Multiple channels of distribution (call center, branch,
Internet, and kiosk), and Multiple customer groups (consumer, small business, and corporate).

What is the nature of retail banking?

In a recent book, retail banking has been described as 'hotter than vindaloo'. Considering the
fact that vindaloo, the Indian-English innovative curry available in umpteen numbers of
restaurants of London, is indeed very hot and spicy, it seems that retail banking is perceived to
be the in-thing in today's world of banking.

1.4 ORIGIN AND HISTORY OF BANKING IN INDIA:-

Banks area unit among the most participants of the national economy in India. Banking offers
many facilities and opportunities. Banks in India were started on land pattern within the starting
of the nineteenth century. The primary half the nineteenth century, the Malay Archipelago
Company established three banks:
The Bank of geographic area.
The Bank of Mumbai
The Bank of Madras
These 3 banks were referred to as presidency banks. In 1920 these 3 banks were amalgamated,
and the Imperial Bank of India was formed. In those days, all the banks were joint stock banks
and an outsized range of them were tiny and weak. At the time of ordinal warfare regarding
1500 joint stock banks were operative in India out of that 1400 were non-scheduled banks.
Because of imprecise and dishonest management there have been variety of bank failures. Thus
the govt. had to step in and also the Banking company's Act (subsequently named because the
Banking Regulation Act) was enacted that led to the
elimination of the weak banks that weren't in an exceedingly position to satisfy the assorted
necessities of the Act. In order to strengthen their weak units and review public confidence
within the banking industry, a replacement section forty five enacted within the banking
regulation act within the year 1960, empowering the govt. of India to obligatory amalgamate
weak units with the stronger ones on the advice of the run. These days banks area unit broadly
speaking classified into two groups namely:
Scheduled-banks
Non- regular banks

9
Scheduled banks because the name counsel square measure the banks, that square measure
accounted within the second schedule of the Federal Reserve Bank of Asian nation (RBI) Act,
1934. The bank needs to satisfy the financial organization that's affairs don't seem to be
administered in a very means that causes damage to the interest of the depositors. Regular
banks could be a banking corporation whose minimum paid up capital is Rs.25 lakhs and
doesn't damage the interest of the depositors. Listed within the second regular. Money reserve
magnitude relation is maintaining with run batted in. regular banks square measure allowed to
borrow cash from run batted in for normal banking functions. Returns to be submitted
sporadically. Regular banks members will be of financial institutions. Non-scheduled banks
square measure the banks that don't fit rules nominative by the Federal Reserve Bank of Asian
nation or say the banks that don't come back underneath the class of regular banks. It's not
listed within the second regular. Money Reserve magnitude relation maintained with
themselves. Non- scheduled banks don't seem to be allowed to borrow cash from run batted in
for normal banking functions. No such provision of submitting periodic returns. They cannot
be the members of financial institution.
There square measure 3 completely different phases within the history of banking in Asian
nation.
Pre – Nationalization Era
Nationalization Stage
Post Relaxation Era
Pre-Nationalization Era: In Asian nations the business of banking and credit was practiced even
in early times. The payment of cash through Hun dies, associate degree autochthone credit
instrument was highly regarded. The hundis were issued by bankers called Shroffs, Sahukars,
Shahus or Mahajans in numerous a part of the country. Organizational Structure of Banks in
Asian nation bank square measure classified in varied classes in keeping with completely
different criteria. The subsequent charts indicate the banking structure.
During the first a part of the nineteenth century, the degree of foreign trade was comparatively
little because the trade enlarged, the requirement for the banks of the escort was felt and
therefore the government of the Malay Archipelago Company took interest in having its own
bank. The primary banks were the overall banks of Asian country that started in 1789 and
therefore the Bank of Hindustan, each of those square measure currently defunct. The oldest
bank alive is that the banking company of India that originated within the name of Bank of
metropolis in June 1806. It soon became the Bank of Mumbai and therefore the Bank

10
of Madras. All the 3 banks were incorporate in 1925 to create the imperial bank of Asian
country. The swadeshi movement witnessed the birth of many native banks as well as the
Punjab commercial bank, Bank of Baroda, and geographical region Bank. In 1995, the banking
company was established below the Reserve of India Act because the financial organization of
India. Nationalization stage: After Independence in 1951, the all Republic of Asian India Rural
Credit Survey committee counselled nationalized of the Imperial Bank of India. In 1955 the
imperial Bank of Republic of Asian country was nationalized and established because the
banking company of India. The most objective of creating SBI by nationalizing the Imperial
Bank of Asian country was 'to extend banking facilities on an
outsized scale a lot of notably within the rural and semi-urban areas and to various it for
alternative public functions. In 1959, the SBI Act was planned and therefore the eight state-
associated banks were taken by the SBI as its subordinates. With result from first January 1963,
these subsidiary banks shaped the banking company of Asian country cluster. On nineteenth
July 1969, the nationalized six a lot of business non-public sector banks with the deposit value
Rs fifty crores and higher than came into result. It absolutely was a turning purpose within the
history of economic banking in Asian country. Later the govt. nationalized six a lot of business
non-public sector banks with the deposit liability of not but Rs.20 crores on fifteenth April
1980. These banks were:
Andhra Bank Corporation Bank
New Bank of Asian country Oriented Bank of Commerce, Punjab and Sindh Bank Vijaya Bank.
In 1969, the bank theme was introduced to increase banking facilities to each corner of the
country. Later in 1975, Regional Rural Banks were established to supplement the activities of
the business banks and particularly to satisfy the credit wants of the weaker sections of the
agricultural society. Nationalization of banks sealed manner for. Retail banking and as a result
there has been an all spherical growth within the branch network, the deposit mobilization,
credit disposals and employment. The primary year once nationalization witnessed the overall
growth within the agriculture loans and therefore the loans to SSI by eighty-seven and forty
eighth severally. The general growth within the deposits and therefore the advances indicates
the advance that has taken place within the banking habits of the folks within the rural and
semi-urban areas wherever the branch network has unfolded. Such credit growth enabled the
banks to attain the goals of nationalization.
Post relaxation Era: Thrust on quality and profitability; the requirement for restructuring the
industry was felt bigger with the initiation of the important sector reform method in1992. The
reform method in 1992. The reform method has increased the opportunities and challenges for

11
the important sector creating them operate during a borderless world marketplace. However,
to harness the advantages of globalization. There ought to be an economical money sector to
support the structural reform going down within the real economy. The foundation causes for
the shortage luster performance of banks, shaped the weather of the banking sector reforms.
Several the factors are:
Regulated rate structure Lack of specialize in profit.
Lack of transparency within the bank's record Lack of competition.
Excessive regulation on organization structure and social control resources Excessive support
from Government.
During this context, the recommendations created by a high-level committee on the purposeful
sector, chaired by M. Narasimha, ordered the muse for the banking sector reforms. The
Narasimhan committee advised that there ought to be purposeful autonomy, flexibility in
operations, dilution of banking strangulation, reduction in reserve necessities and adequate
money infrastructure in terms of supervising, audit, and technology. The committee more
advocated introduction of prudent norms, transparency in operations and movements in
productivity, that aimed toward liberalization the restrictive framework however additionally
to stay them in tune with international standards. The stress shifted to economical and prudent
banking coupled to higher client care Band client services.

12
1.5 CURRENT SCENARIO:-
The current situation in India is that the banking system is extremely developed. Yet, Indian
banking remains mean down from achieving world standards in size furthermore as
merchandise and services because the economic process continues, the strain on the banking
sector to cater to the wants of the economy also are growing systematically. The expansion in
economic activities has redoubled wholesale furthermore as retail banking within the country.
Higher financial gain levels among the households and a dynamical lifestyle that has accepted
outlay on white merchandise have accelerated credit start off and redoubled activities within
the retail banking sector. This is often except for the rise within the activities of the
wholesale/corporate banking sector because of the acceleration in industrial production and
alternative factors on the assembly facet. The general demands for banking merchandise and
services have a light-emitting diode to the innovation of latest merchandise and an additional
client friendly approach through the introduction of custom-made merchandise by the banks.
This sustained demand has additionally light-emitting diodes to increasing pressure on the
banks to be additional competitive to retain customers. The technological drive, that has
become imperative for the banks to deliver the merchandise and services that square measure
a part of new age banking, desires substantial investments. During this context, the smaller
banks realize it tough to fund comes geared toward raising the service delivery/distribution
mechanisms. This brings within the mergers and consolidation within the banking system.
Indian banks have additionally realized that with organic growth there’s desire to grow
inorganically furthermore, to be competitive with alternative players within the market. For
instance, the depository financial institution of India, India's largest bank, has a non-inheritable
seventy-six stake within the Kenyan Bank, Giro industrial Banks. ICICI Bank, Bank of India,
Bank of Baroda have additionally followed a constant route. Bank of Punjab has been unified
with warrior Bank of Punjab Ltd. several instances have started growing within the Indian
banking system the foremost necessary issue for the Indian banking system is to view and
sustain within the world banking surroundings. To satisfy these challenges of growing
Inorganically, Indian Banks square measure the world. The banks have additionally started
following international norms. There has been arise within the transparency within the system.
The utilization of technology within the banking system has modified things plenty, making
quicker processes, addressing client issues in an exceedingly additional economical means.
India has additionally complied with the core principles of effective banking direction of the
urban center committee. For increasing the scale of banking

13
system and international recognition, Indian Banks have started going in the get across
competition. However still India has twenty-two Banks that figure within the world high a
thousand and solely five Banks within the high five hundred. The table three.1 has shown the
overall assets of Indian banks.

Table 1.5.1:- Top Indian Banks by Total Assets

Bank Name Total Number of Number of Total Net Profit

Assets (Rs. Branches Employees Income (Rs. mn)
mn) (Rs. mn)
State Bank of India 4938695 9143 198774 431836 44067
ICICI Bank 253890 557 25479 187676 25401
Punjab National 1452674 4066 58047 108153 14393
Bank
Canara Bank 1328219 2532 46893 100890 13432
Bank of Baroda 1133925 2687 38737 82917 8270

Currently India has 222 regular business banks, of that 133 are regional rural banks. There are
seventy-one, 777 bank offices unfold across the country, of that forty third are placed in rural
areas, twenty second in semi-urban areas, eighteen in urban areas and the rest revolutionary
Organization 17 November within the metropolitan areas. the key bank teams (as outlined by
RBI) functioning throughout the reference amount of the report are banking concern of India
and its seven associate banks nineteen nationalized bank and also the IDBI Ltd, nineteen
previous non-public sector banks, eight new non-public sector banks and twenty nine foreign
banks. Now, commendable growth has been witnessed within the national economy of India
over the past few years. With chain of quite 65000 branches, Indian industry is one amongst
the biggest banking networks within the world. There has been a substantial growth within the
retail- banking sector in India that makes up for concerning 1/5th of the general bank credit.
The retail banking system encompasses the
services like credit cards, housing loans academic loans and automotive vehicle loans etc.

14
1.6 FUTURE SCENARIO OF RETAIL BANKING:-
The future appearance exotic for retail banking in India and the retail banking business silos
can bear a metamorphic transformation. The rising client situation and technology situation
provides opportunities for all players within the banking and monetary house. Several the
influencing parts in retail banking revenues are going to be third party distribution and wealth
management and personal banking solutions for the burgeoning mass affluent. merchandising
in retail banking are going to be associate degree rising space wherever banks are going to be
extending not solely on the far side banking solutions to hide the whole monetary designing of
shoppers however conjointly life vogue designing of the shoppers. Desegregation banks'
knowledge bases with third party monetary suppliers are going to become the order of the day
within the modified situation and outsourcing can be a natural sales and method within the
dynamical human resources paradigms publicly Sector Bank. Remote channels can rule the
dealing banking method and branch format are going to be chiefly used for relationship and
consultative banking. Core Banking Solutions are going to be total and client knowledge
integration are going to be the bottom within which retail initiatives are going to be addressed,
client data processing and CRM can exist as generic options of retail banking. The subsequent
area unit a number of the attention-grabbing findings that have emanated
from this analysis study concerning the general public Sector Banks - Most of the general
public Sector Banks don't have a centered model for retail banking either within the structure
or business objectives.
1) Generation of a retail banking business (either a retail plus or alternative retail product /
service) from the prevailing client base isn't totally tried.
2) In the majority of the public Sector Banks, there's no centralized client knowledge base for
client life cycle cantered retail initiatives.
3) Core Banking Solutions implementation isn't totally achieved to focus on the various
segments of shoppers. - Method models aren't totally centralized for an expert and standardized
approach.
4) Cross mercantilism is tried on a standalone basis at the branch level thanks to lack of
centralized knowledge base.
5) Remote Channels area unit solely evolving and has not matured for migration of shoppers
from the direct channels to remote channels.
6) Customer segmentation has not happened on the specified lines for effective retail banking.

15
1.7 FEATURES OF RETAIL BANKING:-
One of the outstanding options of Retail Banking product is that it's a volume driven business.
Further, Retail Credit ensures that the business is widespread among an outsized client base
not like within the case of company loaning, wherever the chance is also focused on a particular
few plans. Ability of a bank to administer an outsized portfolio of retail credit products depends
upon such factors Strong credit assessment capability: Because of massive volume smart
infrastructure is needed. If the credit itself is qualitative then the necessity for follow up within
the future reduces significantly.

Today retail banking is characterized by following features:-

1. Retail banking aims at doing banking business in large volume of transaction involving low
volume.
2. The retail banking portfolio includes deposits and assets linked products as well as other
financial services provided to individual for personal consumption.
3. Retail banking business is an attractive market segment with opportunities for growth and
profits.
4. Retail banking is based on the maxim 'do not keep all the eggs in one basket'.
5. Retail banking industry is diverse and competitive. There are many retail banking products
that are extremely customer-friendly and are offered by many banks.
6. Banks adopt multiple channels of distribution of retail banking products. The channels
include call center, branch, internet, mobile phones, ATMs, etc.

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1.8 ADVANTAGES AND DISADVANTAGES OF RETAIL BANKING:-

ADVANTAGES: Retail Banking is mass market banking, where individual consumer's

diverse needs are fulfilled at the local level i.e.by providing multiple products. Retail banking
has the following advantages:-

1. Retail deposits are stable and constitute core deposits.

2. They are interest insensitive and less bargaining for additional interest.
3. It increases the subsidiary business of banks.
4. Retail banking results in an improved bottom line for banks.
5. It is a good avenue for fund deployment.
6. It builds a strong customer base

DISADVANTAGES: The following are the disadvantages:

1. There can be problems in managing a large number of clients, especially if IT system are not
sufficiently robust.
2. The cost of maintaining branch networks and handling large number of low-value
transactions tend to be relatively high.
3. Designing own and new financial products is very costly and time-consuming for the bank.
4. Long term loans like housing loans, due to its long repayment term, can became NPA in the
absence of proper follow-up.
5. Major disadvantages are monitoring and follow-up of huge volume of loan accounts banks
to spend heavily on the human resource department.
6. Though banks are investing heavily in technology, they are not able to exploit it to the
maximum.

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1.9 RETAIL BANKING: INDIAN SCENARIO:-
India began a technique of economic reforms within the wake of a balance-of-payments crisis
in 1991. The central plank of the reforms was reforms within the monetary sector, and banks
being the mainstay of monetary mediation, the banking sector reforms became inevitable. At
an equivalent time, reforms were additionally undertaken within the different segments of
monetary markets, to change the banking sector to perform its mediation role in an economical
manner. The thrust of those reforms was to push a diversified, economic, and competitive
financial set-up, with the final word objective of rising the allocate potency of
resources, through operational flexibility, improved monetary viability and institutional
strengthening. In India, retail banking has continuously been given importance since the
nationalization of banks in Asian nation, keeping the target to succeed in the mass across the
country by banking establishments. However, the thought of retail banking has taken a concrete
form in terms of volume and size within the recent past when the alleviation of the economy.
For the previous couple of years, growth of retail banking in Asian nation
has been maintaining nearly an equivalent pace there with of thought banking for several
leading banks.
Retail banking is turning into progressively advanced thought to outline. Generally, retail
banking in outlined to be the availability of mass market banking services to non-public
individuals; it's been swollen over the years to hide the small- and medium sized businesses
additionally. Some leading banks may additionally categories their 'private banking' business
(i.e. services to high internet price individual) in their definition of retail banking. Retail
Banking as a business model is adopted by all the banks in Asian nation on account of multiple
comfort factors for the banks viz, acquisition of a large client base, multiple product
offerings, higher rating and profit, scope for cross commercialism and up commercialism
monetary and on the far side monetary merchandise for accrued per client revenue and in fact
higher risk proposition. With the ever-changing paradigm of technology because the driver for
retail banking explosion banks square measure grasp completely different ways by redesigning
their standard business silos, re-engineering existing merchandise and inventing merchandise,
services, channels, relationships to extend the share of the customer's billfold. The evolution
of retail banking in Asian nation is derived back to the entry of foreign
banks. The traditional banking business by Public Sector Banks (Public Sector Banks) was
done on a lot of generalized approach and there was no specific demarcation as retail and non-
retail activities. Client and trade segmentation were adopted at intervals the general business

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arrange of Banks. Providing merchandise and services supported specific client segment wasn't
tried in a much-targeted approach.
Foreign banks operational in Asian nation set the trend and within the late 1970 and early
Eighties and came out with their client banking models with hybrid liability and plus
merchandise specifically targeted at the private phase. Normal leased Bank and Grind lays
Bank were the pioneers in introducing these forms of merchandise. Citibank created waves
within the early Eighties with their master card merchandise and spurred the retail banking
house. Banking company of Asian nation and a few public sector banks like Indian Overseas
Bank, Bank of Asian nation, Bank of Baroda, and Andhra Bank developed and marketed
plus merchandise and card merchandise to cater to the retail phase. In fact, Bank of Baroda and
Andhra Bank were 2 of the first players within the master card business within the PSB house.
The entry of latest generation non-public sector banks in the early Nineteen Nineties has created
a brand-new approach to retail banking by banks. With the advantage of technology right from
begin, these banks had a transparent positioning for retail banking and sharply strategized for
making new markets for the retail phase. Additionally, the new generation non-public banks
have exhibited a threat to the retail business of foreign banks that have by currently well
outlined business models for retail banking. To feature to the fuel, Public Sector Banks
additionally with technology initiatives and redefined business model for retail have sharply
entered the market house, making a retail war and capture their share of the pie within the
liberalized economic surroundings and also the resultant opportunities in retail banking. The
retail war is fully swing currently with a win - win scenario for all the players and the focus is
on capturing and rising the market share and client base.
A recent study seen that the retail banking system in Asian nation grew by a combined annual
rate of thirty 5% between 1999 and 2004 and also the figures are going to be a lot of higher
supported the performance of the banks during this house within the instant years. Retail
Banking is predicted to grow at on top of half hour and retail assets square measure expected
to the touch a whopping $300 billion by 2010.But even with this rate, still the potential for the
expansion in retail assets appearance terribly promising. The contribution of retail assets to
Gross Domestic Product (GDP) in Asian nation is 6 June 1944 and is relatively lesser than
that of different Asian counterparts like China (15%), Asian country (33%), Thailand (24%),
and Taiwan (52/%). This indicates the lower level of penetration of retail banking in Asian
nation and strengthens the views and methods of the retail players.

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1.10 COMPONENTS OF RETAIL BANKING INDIA:-

Economic Reforms attributed prosperity to the economy alongside associate overall

improvement of the buying power of the common mass, dynamic their tastes and preferences,
finance homes began to initiate with styles of product & services to catch larger section of the
population of India. Antecedent banking was similar with some few merchandise, savings a/c
and dealing supported Cheque / deposit slip. For many years, banks' angle towards client loans
was terribly skeptical. Loans were restricted to housing loans solely.

The situation has modified significantly within the last decade. The Indian Banking Sector has
witnessed a revolution in merchandise and connected services, e.g. earlier one was a client of
a branch of a specific branch, now-a-days due to core banking one could be a client of a bank,
not any specific branch. Universal banking has additionally enabled clients to induce a spread
of merchandise at a branch wherever as antecedent one had to be a customer of varied
alternative establishments. Favorable macroeconomic conditions continuing to underpin the
business and money performance of regular business banks (SCBs) throughout 2005-06. The
credit growth has become broad-based as credit enlargement in respect of the retail sector,
notably housing, and loans to business land has additional pronounced. On the liability facet,
deposits are growing at the next rate as compared with the previous years. However, the
enlargement of deposits couldn't keep up with the high credit growth compelling banks to
liquidate several their holdings of state securities. Reversing the trend of the previous years,
web profits of the SCBs, as a group, increased. To an oversized extent, this was expedited by
a pointy increase in deposits and web interest financial gain because
of a robust growth in credit volumes.

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