Retail Banking

Current scenario and Future

prospects
 “Retail banking is typical mass-
market banking where individual
customers use local branches of
larger commercial banks. Services
offered include: savings and
checking accounts, mortgages,
personal loans, debit cards, credit
cards, and so”.
• It refers to the dealing of commercial
banks with individual customers,
both on liabilities and assets sides of
 Retail Bank Components
Checking Accounts
Savings Accounts
Time Deposit

Liabilities

Wealth
Management Assets Personal Loan
Fee Based Credit Cards
Mortgage
Auto
Pillars of Retail Banking
(New)Paradigm
• Multiple Products
• Multiple Channels
of Distribution
• Multiple
Customers Groups
Today’s retail banking sector is characterized
by three basic characteristics:

○ Multiple products (deposits, credit

cards, insurance, investments
andsecurities)
○ Multiple channels of distribution (call
center, branch, internet)
○ Multiple customer groups
(consumer, small business, and
corporate)
 Present scenario
• Indian retail banking sector registered a
decline in share of 5.02 per cent during
the first quarter of FY ’10.
• the private banks are performing better
than the public banks in terms of their
revenue from retail segment.
• The private and public banks have
registered about 54.27 per cent and 35.47
per cent share in retail banking during Q1
FY ’10 respectively
• Revenue wise comparison
§ the public sector banks registered a growth of
28.96 per cent in total income while their income
from the retail segment grew only 9.92%.

§ private banks registered only 13.52 per cent

growth in total income during the period but their
income from retail segment registered a minimal
decline of 0.16 per cent
• Share wise comparison

§ Share of retail banking for public banks declined 6.14

percentage points during the period from 41.61 per cent in
Q1 FY ’09 to 35.47 per cent in Q1 FY ’10.

§ The share of retail banking for private banks declined by

7.44 percentage points during the period from 61.71 per
cent in Q1 FY ’09 to 54.27 per cent in Q1 FY ’10.
Source: ASSOCHAM Financial Pulse

Quarter wise growth of banking

sector in India
 Key Players
•
Public Sector Banks
1 Bank of Baroda
2 State Bank of India
3 Allahabad Bank
4 Canara Bank
5 Punjab National Bank
•
Private Sector Banks
1 HDFC Bank
2 Axis Bank
3 ICICI Bank
4 Kotak Mahindra Bank
5 Ing Vysya Bank
•
Foreign Sector Banks
1 Citibank
2 Standard Chartered Bank
3 HSBC Bank
4 ABN AMRO Bank
5 American Express
 PSB and their share of retail
banking segment
• State Bank of Hyderabad - 81.84 %
• Andhra Bank - 42.14%
• State Bank of India- 39.81%
• Indian Bank - 38.01 %.
• Punjab National Bank - 35.14 %
• UCO Bank - 37.42 %,
• Central Bank of India 34.45 %
• Canara Bank - 33.42 %
• Union bank of India - 31.36 %
 private banks share of retail banking

• Ing Vysya Bank Limited - 80.20 %

• Kotak Mahindra Bank Limited - 75.36
%
• HDFC Bank of India - 74.82 %
• ICICI Bank Limited - 53.52%
• Axis Bank - 47.16 %
• South Indian Bank - 46.92 %
• J&K Bank - 45.90  %
• IDBI Bank - 43.45 %
• The Bank of Rajasthan Limited -
22.91 %
 Banks which registered Decline in share of
retail banking

• Oriental Bank of commerce - 33.96 %

• Allahabad Bank - 10.54 %
• Corporation Bank - 7.81%
• Bank of India - 7.71 %
• Indian Overseas Bank - 6.64 %
• Bank of Baroda - 5.88 %
• The Federal Bank Limited -
20.07 %
• IndusInd Bank - 16.22 %
• Dhanalakshmi Bank - 15.89%
• Karnataka Bank  - 13.29 %
 Drivers Of Retail Growth
CHANGING CONSUMER DEMOGRAPHICS
Growing disposable incomes
Youngest population in the world
Increasing literacy levels
Higher adaptability to technology
Growing consumerism
Fiscal incentives for home loans
Changing mindsets-willingness to
borrow/lend
Desire to improve lifestyles
Banks vying for higher market share
 Industry’s response to the
change
“Any where”, “Any time” Banking
v Improved processes/Bundled product offerings
v Faster service/Reduced TATs
v Customer specific products/offerings on a regular basis
v ‘Bank’ customer has replaced ‘Branch’ customer
v Focus on understanding customer needs/ preferences
v Segmentation/Differentiation of customers
v Customer driven strategies
v Building relationships
 Future Of Retail Banking

v The accelerated retail growth has been on a historically low

base

v Penetration continues to be significantly low compared to global

bench marks

v Share of retail credit expected to grow from 22% to 36%

v Retail credit expected to grow to Rs.575,000 crs by 2010 at an

annual growth rate of 25%

Source: Cygnus industry insight

 Future of Retail Banking
Contd….

v Dramatic changes expected in the credit portfolio of

Banks in the next 5 years
v Housing will continue to be the biggest growth segment,
followed by Auto loans
v Banks need to expand and diversify by focussing on non
urban segment as well as varied income and
demographic groups
v Rural areas offer tremendous potential too which needs
to be exploited
Strategic prerequisites….

Performance oriented leadership

Sophisticated marketing and sales

Efficient distribution channels
Process efficiency and ease of scalability
Superior credit policy, procedures and skills
Source:
Mckinsey
 Challenges

v Sustaining Customer loyalty – according to Harvard Business review 5%

increase in customer retention can increase profitability by 35% and 1% in
consumer credit card market.
v Information technology-Insuring that all bank product and service are
available at all time and across the entire organisation.

v NPA reduction & Fraud prevention

v Bringing Rural masses into mainstream banking

v KYC issue and money Laundering
• “It takes months to find a good customer but
only seconds to lose one.” Thus, strategy of
Knowing Your Customer (KYC) is important. So
the banks are required to adopt innovative
strategies to meet customer’s needs and
requirements in terms of services/products
etc.
• The issue of money laundering is very
important in retail banking. This
compels all the banks to consider
seriously all the documents which they
• One of the crucial impediments for
the growth of this sector is theacute
shortage of manpower talent of this
specific nature, a modernbanking
professional, for a modern banking
sector
 Strategies for Future…
§ Reaching to masses : Need to customize
§ Customer segmentation/differentiation
§ Data mining/CRM based campaigns
§ Products per customer/loyalty
§ Promoting low risk retail lending products

§ Offer an array of products and financial advisory.

 Strategies for Future… Contd.

§ Cost effective expansion

§ Renewed emphasis on superior execution by front-
line employees
§ Grow through Alliances:
§ Hospitality Education
§ Retailers Automobiles
§ Consumer Durables Housing/Construction
 Winning Strategy

The bank that best addresses

and anticipates customers needs,
delivers consistently higher
quality service and connects to
the customer via their channel of
choice wins