Finance-1

A STUDY ON RETAIL FINANCE

GROUP 4
SECTION-1
2010PGP023 JAYANT KEJRIWAL
2010PGP024 ISHANT ARORA
2010PGP025 JITESH PRADEEP PATEL
2010PGP026 JOYBRATA ROY
2010PGP027 AMRIT AGARWAL
2010PGP028 KARTHIKEYAN D
2010PGP029 KAUSTUBH V RAWOOL
 Agenda
2

 Introduction
 Retail Banking
 Mobile Banking and Payments
 Steps for Dealers wanting to Offer Retail Finance
 Cards Market
 Self-Service Banking
 Financial Inclusion
 Future of Retail Financing
 Introduction
3

 What is retail financing?  Where to go for traditional

 A financing option that allows retail financing?
the purchase of retail goods  Most banks and credit unions
and services using credit. offer traditional retail
financing.
 Some retail goods and
services: furniture,  Various retail financial
mattresses and bedding, services
carpets and flooring, heating 1. Credit Card Solutions
and air conditioning, 2. Retail Banking
appliances and consumer
3. Mortgage and Loan
electronics
Solutions
 MphasiS Retail Financial Services Landscape
4
 Today’s Key Differentiator
5

 Vast experience and In-depth domain expertise

1. Understand trends in customer demands and
requirements
2. Establish the right staff mix with the right skill
sets
3. Optimally schedule staff
4. Continually monitor performance and
effectiveness
 Challenges in Retail Financial Services Industry
6

 Increasing regulations  Increasing customer demands

(accounting, financing and and expectations
book-keeping) as  High staff turnover in contact
 outsourcing potentially centers
transfers risk, management  Rapidly advancing
and compliance technological innovation
 to third parties operating  Increasing competition
offshore  Changing business models
 Shorter and more complex designed to improve how
product lifecycles firms attract,
 Increase in the number of  service and interact with their
channels for communication customers
 Indian Scenario
7

 Next big market for the  India’s population is the

retail financial services youngest in the world.
 ‘Debt averse’ to ‘spend
 GDP growth remains
now, worry later’
impressive.  Abundant employment
 As one of the ’BRIC’ opportunities
countries India is set to  India is the second-fastest
become the world’s growing cards market in
third-largest economy the Asia-Pacific region,
by 2050. with an annual growth rate
of more than 30 per cent.
 Retail Banking
8

• Savings and
transactional accounts
• Mortgages
• Personal loans
• Debit cards, credit cards
• Investments

Retail banking refers to banking in which

banking institutes execute transactions
directly with consumers, rather than
corporations or other banks. It includes
large number of low value transactions.
Services offered include:
 Environment
9

The Retail Banking environment today is changing fast

Increasing use of modern technology has further enhanced reach

and accessibility

Multiple products (deposits, credit cards, insurance, investments

and securities)

Multiple channels of distribution (call centre, branch, internet)

Multiple customer groups (consumer, small business, and

corporate)
 Categories
10

Banks are broadly classified into 2 groups namely—

Public Sector Banks (around 26)

Private Sector Banks (around 22)

Scheduled banks- Those banks which have been included in the Second
Schedule of Reserve Bank of India(RBI) Act, 1934

Non-Scheduled banks
 Facts & Figures
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Indian retail bank is worth $ 300 billion

Retail Banking is growing at more than a CAGR of 28%

Reserve ratios: CRR- 6%, SLR- 25%

Lending & Deposit rates: Base rate- 7.5-8%, deposit rate- 6-7.5%,
savings bank rate-3.5%

Policy rates: bank rate- 6%, repo rate- 6.25, reverse repo-5.25%
 Reasons for Growth
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India has 200 million Tremendous growth

The risk is spread and
households and 400 of the middle class
the recovery is good
million middleclass with increasing
compared to Increase in the
population more than investment in stocks
corporates where purchasing power
90% of the savings and bonds, increasing
there is higher risk of
come from the house demand for goods
NPA
hold sector and services
 Avenues for Development
13

Constant product innovation to match

the customer requirements

Quality service and quickness in

delivery

Introduction of new delivery

channels
Tapping of unexploited potential and
increasing the volume of business

Infrastructure outsourcing

Cross-selling of products
 Mobile Banking and Payments
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 Transactions such as balance checks, account transactions, payments, credit

applications etc. via a mobile device such as a mobile phone or Personal Digital
Assistant (PDA).

 Earlier SMS was used

 Now smart phones with WAP support are available for Mobile Web
 Competitive Analysis
15
 Mobile Channel Platforms
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Delivery Type Ubiquity Ease Of use Affordability Security

SMS Very High Very High Very High Low

Mobile Web Medium Medium Medium Medium

Mobile Content Application N/A High Medium Very High

Hybrids

SMS with Mobile Web Medium High Medium Medium

Secure SMS Low High High Very High

 Mobile Banking Services
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Account Payments, Content

Deposits,
Support
Services Investment
Information
• Mini- • Domestic and • Status of • General • Portfolio
statements international requests for information management
and checking fund transfers credit services services
of account
history • Micro- • Check • Loyalty- • Real-time
payment (cheque) related offers stock quotes
• Alerts on handling book and card
account requests • Location- • Personalized
activity or • Mobile based alerts and
passing of set recharging • Exchange of services notifications
thresholds data on security
• Commercial messages and prices
• Monitoring of payment email
term deposits processing • mobile
• ATM Location banking
• Access to card
statements
 Mobile Banking
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Challenges faced in
Mobile Banking
Advantages Disadvantages

• Security • Easy-to-use • Text-only and limited

to 140-160 characters
per message
• Scalability & • Common
Reliability messaging tool • Does not offer a
among consumers secure environment
• Application
distribution • Works across all
wireless operators
• Personalization
• Affordable for
• Solution Handset consumers
operability
• Requires no
software
installation
 Mobile Banking in India
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 India’s mobile phones to reach more than the targeted half

billion people by the end of 2010
 Approximately 43 million urban Indians used their mobile phones
to access banking services during quarter ending August, 2009
 15% of the total urban Indian mobile phone users
 32 banks given approval by RBI to provide services
 21 banks have started providing these services
 Daily cap of Rs.50,000/- per customer
 Transactions up to Rs.1,000/- facilitated by banks without end-to-
end encryption
 The risk aspects addressed through adequate security measures
 Steps for Dealers wanting to Offer Retail Finance
20

Getting Started
 Starting off is difficult , face the most obstacles in

this stage
 Convincing Sales Representatives is a major issue

in most Retail Finance Programs

 Sales Representatives worry about losing control

over transactions
 Why offer Retail Finance
21

 Actually gives more control to the

company/dealers

 Improves cash flow cycle

 A well developed program can become a source of

a new revenue stream
 Steps
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 Step 1 : Finding the right person

 Step 2 : Dedicated division for retail finance

 Step 3 : Allow time for business to develop

 Step 4 : Liaison with Banks and other financial

institutions
 Possible Mistakes
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 Assuming overnight profitability

 Choosing the wrong company to associate with

 Cards Market
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 Two main types

Credit Card

Debit Card
 A credit card is a small plastic card issued to
users as a system of payment.
− It allows its holder to buy goods and services based on the
holder's promise to pay for these goods and services
− The issuer of the card creates a revolving account and grants
a line of credit to the consumer
−  If amount is paid within credit time no interest is paid but if
even a single Rs. is left unpaid the interest is charged on
whole amount
 Cards Market
25

 A debit card (also known as a bank card or check

card) is also a plastic card that provides an alternative
payment method to cash when making purchases
 The difference is that the funds are withdrawn directly from
either the bank account or from the remaining balance on
the card
 Debit Card can also be used as an ATM

 Some other electronic cards are:

 ITZ Cash Card
 SBI VishwaYatra Card
 Self-Service Banking
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 Using technology to remove human involvement in the

banking process
 E.g. Automatic cash handling systems, ATM

1. Automatic Cash Handling System:

 Using processes of dispensing, counting and
tracking cash in a bank, retail, casino or other business
environment
 Done by using specially designed hardware and software
for the purposes of loss prevention, theft deterrence and
reducing management time
 Self-Service Banking
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2. ATM
 ATMs began in 1968 in US, UK
 Currently there are about 1.8 million worldwide and 33000 in
India(2007)
 On 1st April ’09 RBI declared that ATMs of all banks can be used by
everyone without paying any transaction fees
 Increase in the usage of ATM reduces the load on the brank
branches
 ATMs are of two types on and off-premise
 As per the latest RBI data, during the quarter ended June, banks
reported daily transactions worth Rs 1,145 crore through ATMs
showing the importance that ATM has in the current banking world
 Financial Inclusion
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Financial inclusion may be defined as the process of ensuring access to

financial services and timely and adequate credit where needed by
vulnerable groups such as weaker sections and low income groups at
an affordable cost.

 Basic concept - having a saving or current account with any bank

 In reality it includes loans, insurance services and much more.

Indian Scenario:
 First-ever Index of Financial Inclusion – Ranked 50 among hundred countries.
 Only 34% of Indian individuals have access to or receive banking services
 Financial Inclusion
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RBI initiative – No-Frill Account

 Offered to low-income groups
 Have a low minimum or nil balance with some restriction in transactions.
 The individual bank has the authority to decide whether the account should have zero or
minimum balance
 Banks are now considering FI as a business opportunity in an overall environment that
facilitates growth.
 Six million new ‘No Frill’ accounts were opened in the period between March 2006-2007
 Simplified KYC norms
Self Help Groups
 SHGs are usually groups of women who get together and pool money from their savings and
lend money among them
 Usually they are working with the support of an NGO
 40 million households are linking with the banks through SHG
 The SHG gives loans against the group members’ guarantee
 Peer pressure within the group helps in improving recoveries
 Future Strategies
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Demand side Factors

 Grass root Level Organizations
 Deceleration in Agricultural Growth
 Financial Education
 Rural Infrastructure
Supply Side Factors
 Less Outreach
 Mobile Banking
 Human Resource Constraints
 Inefficient Financial Sector
 Technology
 Micro-finance institutions
 References
31

 http://www.vrl-financial-news.com/retail-banking/r
etail-banker-intl/reports/retail-financial-services--
an.aspx
 http://
economics.about.com/cs/finance/a/india_banking.h
tm
 http://www.bisil.com/Retail%20Finance.html
 http
://www.retailowner.com/RetailFinanceBasics/tabid/
374/Default.aspx
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