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Retail Banking

Retail Banking

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Published by: rajunegi88 on Aug 22, 2009
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06/01/2013

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RETAIL BANKING 
Introduction
The banking sector has under gone turbulent changes in the past few years. Thefinancial sector reforms have brought in the entry of new private sector andforeign banks in the country. The conventional banking as outlined above hasgiven way for professional and high-tech banking. There has been a paradigmshift from the monopolies of public sector banks to competitive banking. Publicsector banks can no longer remain complacent with their conventional productsand services. With walk in business virtually being ruled out, banks are nowscouting for quality consumers both for building their resources and assetsThere were times when the corporate clientele occupied the centre stage and theretail ones were pushed to the back seat. The slow down of the economy,sluggish industrial growth and slump in agricultural activities have pushed thecommercial banks to look to the retail customers.Retail banking has both pros and cons. In a situation like today, the bankers havevery little option, but to chant the “Retail Mantra”
RETAIL BANKING IN INDIA
Retail credit outstanding as on March 22, 2003, amounted to Rs 1,60,000 crore.According to one estimate, the retail segment is expected to grow at 30-40% inthe coming years.Major Players: State Bank of India, HDFC Bank, UTI Bank, IDBI Bank and ICICIBankThe ratio of retail credit to net credit in the global level is around 5%. In India, itis interesting to note that this ratio is over 10% as on March 31, 2002 (Source:RBI, Annual report). With the economic reforms set in motion, the country isalready rated as a major hub for economic development. Increase in per capita,change in lifestyle and growing urbanization has made the Indian population rise
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RETAIL BANKING 
from oblivion and resurges in a modern era. Traditionally against incurring adebt, the policy of save and spend is gradually giving way to spend and saveconcept.
WHAT IS RETAIL BANKING?
Retail banking can be crudely defined as the antonym of wholesale or bulkbanking. It is nothing, but shared business. A deposit of Rs.1 lakh from singlecustomer vs. small deposits of Rs. 10,000 each from 10 different customers. Thecorporate and retail divide is nothing but internal segmentations and thecustomer remains always a customer.Retail banking generally refers to offering financial services, products related todeposits and assets to individual customers for personal consumption.Banks concentrate on various segments like professionals, housewives,pensioners, children, salaried class etc. Different types of products like recurringdeposits, savings bank deposits, fixed deposits, credit cards, housing andconsumer loans and educational loans are offered by banks to the abovementioned marked segments.The domain of retail banking market has tremendous growth potential for banksand finance companies, as at present it is largely untapped. The penetrationlevel is 2.5 to 3 % and is in a scenario when the requirements of the consumersare growing. In the past, people never believed in buying consumer goods oncredit. But today the attitude is changing. The demand for consumer productshas increased. Today, about 70% of consumer goods purchased are throughfinance schemes/loans as against 40% about 1 to 6 years ago. The home loansalone account for nearly two-third of the total retail portfolio of the bank
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RETAIL BANKING 
ADVANTANGES OF RETAIL BANKING
Retail banking has inherent advantages outweighing certain disadvantages.Advantages are analyzed both from the resource angle and asset angle.
RESOURCEASSET SIDE
Stable and constitute core deposits.Better yield and improved bottom line.Less bargaining for additional interest.Good Avenue for funds deployment.Low cost funds.Lowe risk and NPA perception.Builds customer base.Helps economic revival of the nation throughincreased production activity.Increases subsidiary businessImproves lifestyle and fulfills aspirations of thepeople through affordable credit.A safe and convenient saving avenue.Innovative product development.Minimum marketing efforts in a demand-driveneconomy.Risk weight in certain segments like housingloan.
Current scenario
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