Retail Banking in India

RETAIL BANKING IN INDIA
SUMMER TRAINNING PROJECT REPORT
ON
“RETAIL BANKING IN INDIA”
Submitted by:
SUNIL KUMAR
Roll No.-0806770065
(MBA-2008-10)
In partial fulfillment of the requirement for MBA Degree

Programme of Uttar Pradesh Technical University, Lucknow.
HINDUSTAN INSTITUTE OF MANAGEMENT AND

COMPUTER STUDIES, FARAH,MATHURA
Preface
1
After completing two semester of Master of Business Administration

at Hindustan Institute of Management and Computer Studies,
Mathura. I worked with Industrial Development Bank of India, Agra
for my summer training project for 2 months where I was expected to
report Mr. Deepak Mangal who was my project guide from the
organization.
The title of my project was Retail Banking in India. The Objective of the
project was to study retail banking status in the country, its opportunities,
challenges, and factors affect its growth.
2
Table of Contents
1. Introduction-Industrial Development Bank of India

2. Retail Banking in India
An introduction
Origin and Regulation of Banking
3. Benefit & Scope of Retail Banking
4. Advantages & Disadvantages of Retail Banking
5. Opportunities and Challenges to Retail Banking in India
6. Strategies for increasing Retail Banking business in India
7. Emerging issues in retail banking
8. Growth drivers in retail banking
9. Boom in retail banking industry
10.Future of retail banking
11. Industrial Development Bank of India
Retail banking products
Performance
12.Conclusion
3
Introduction-Industrial Development Bank of India

Industrial Development Bank of India Limited is one of India’s largest
banks. It has essayed a significant role in the country’s industrial and
economic progress for over 40 years – first as a Development Financial
Institution and now as a full-service commercial bank.
Post the October 2004 merger of the erstwhile IDBI Bank with its parent
company, IDBI is now a universal bank. The merger was aimed at
consolidating business across the value chain and reaping the benefits
of economics of scale , thus enabling it to offer an array of customer –
friendly services to its existing and prospective clients , both within the
geographical boundaries of India and, in due course ,abroad. The
subsequent merger of erstwhile The United western Bank Limited with
the Bank in October 2006 has significantly improved its reach and
strengthened its customer and product portfolio.
IDBI today rides on the back of a robust business strategy, a highly

competent and dedicated workforce and a state-of-the-art information
technology platform, to structure and deliver personalized and innovative
banking services and customized financial solutions to its clients across
convenient delivery channels. The bank currently boast of a balance
sheet and business size (deposits plus advances of more than Rs. 1,
00,000 crore each and major Government shareholding (around 53%).
Evolution and Changing Role of IDBI Bank
4
For over 40 years, IDBI Bank has essayed a key nation-building role,
first as the apex Development Financial Institution in the realm of
industry and now as a full-service commercial bank. As a development
institution, the erstwhile IDBI stretched its canvas beyond mere project
financing to cover an array of services that contributed towards balanced
geographical spread of industries, development of identified backward
areas, emergence of a new spirit of enterprise and evolution of a deep
and vibrant capital markets. Today, IDBI, as a new generation universal
Bank, touches the five of millions of Indians through an array of
corporate, retail, SME and Agri products & services without diluting its
secular development finance charter.
1964 - On july1, IDBI was established by an act of Parliament, as a

wholly-owned subsidiary of reserve Bank of India, to catalyze the
development of a diversified and efficient industrial structure in the
country, in tune with national priorities.
1976 - 100% ownership was transferred from RBI to the Government of

India.
1995 – Domestic reduced GOI’s stake, initially to 72% and post-capital

restructuring, to 58.1%. The current GOI shareholding is around 53%.
2004 – On October 1, IDBI was converted into a banking company to

undertake the entire gamut of banking activities while continuing to play
its secular DFI role.
2005 – On April 2, IDBI merged its hitherto banking subsidiary with itself.
However, the appointed date of merger was fixed as October 1, 2004.
2006 – On October 3, The United Western Bank ltd, a private sector
bank was merged with IDBI.
2006 – IDBI announced its foray into Life Insurance business jointly with
Federal Bank and Fortis Insurance International. A Memorandum of
Understanding was signed by three partners on July 11, 2006 to this
effect, followed by a joint venture agreement on November 23, 2006.
2006 – IDBI Gilts Ltd. Was incorporated as a wholly-owned subsidiary of
the bank on December 13, 2006 to undertake primary dealership
business.
5
VISION
“To be the trusted the partner in progress by leveraging quality

human capital and setting global standard of excellence to build the
most valued financials conglomerate.”
6
Management & Organization
IDBI Bank is a Board-managed organization. The responsibility for the

day-to-day management of operations of the Bank is vested with the
Chairman & Managing Director and two Deputy Managing Directors,
who draw upon the support and expertise of a cross-disciplinary Top
Management Team. As on March 31, 2008, IDBI Bank had combined
employee base of 8989 employees.
Board of Directors-
Mr. Yogesh Agarwal, Chairman & Managing Director
Mr. O.V. Bundellu, Deputy Managing Director

Mr. G.C. Chaturvedi
Mr. Ajay Shankar
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Mr. G.C. Chaturvedi
Mr. Ajay Shankar

Mr. K. Narasimha Murthy
Mr. Hiralal Zutshi

Mr. A. Sakthivel
Mr. Subhash Tuli
Branch Network
○ 561 branches across the country.

○ 1000 ATMs.
○ 256 centers.
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Subsidiaries
IDBI Gilts Limited
9
IDBI Gilts Ltd. was set up as a wholly owned subsidiary of IDBI Bank
Ltd. to undertake Primary Dealership [PD] Business. In accordance with
RBI guidelines, the PD business of IDBI Capital Market Services Ltd.
[ICMS] has been de-linked and transferred to IDBI Gilts Ltd. The
company was incorporated in December 2006 and became operational
from July 24, 2007. The company's business ambit includes Bond
trading, underwriting in auctions of primary issuance of Government
dated securities and treasury bills. In addition, IDBI Gilts also plans to be
a major player in the interest rate and credit derivative market.
IDBI Intech Limited
IDBI Intech Ltd. is a wholly owned subsidiary of IDBI Bank Ltd. IDBI has
set up IDBI Intech Ltd. (INTECH) in March 2000 to tap the opportunities
arising from the IT sector.
Intech capitalizes on the banking business knowledge acquired over the
years supplemented with experience in Implementation & Management
of state-of-the-art IT Infrastructure, Technology applications and
Systems for one of the largest universal bank in India and uniquely
positions itself, in the Information Technology Service Provider Space, to
offer the IT-related products and services to the IDBI Group companies
and the other organizations, focusing mainly on the BFSI sector.
Intech operates in a multi-dimensional framework and provides IT

related services in the area of Consultancy, System Integration, System
implementation & support, Applications & Server hosting and other IT
related managed services and specialized training.
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IDBI Home Finance Limited
IDBI Home finance Ltd. is 100% subsidiary of IDBI Bank Ltd. acquired
the entire shareholding of Tata Finance Ltd. in Tata Home finance Ltd. in
September 2003. The name of the company was changed to IDBI Home
finance Ltd. Over the years, the company has taken steps to enhance its
retail reach, strengthen brand image, improve asset quality, thereby
achieving business growth finance Ltd. is 100% subsidiary of IDBI Bank
Ltd. acquired the entire shareholding of Tata Finance Ltd. in Tata Home
finance Ltd. in September 2003. The name of the company was changed
to IDBI Home finance Ltd. Over the years, the company has taken steps
to enhance its retail reach, strengthen brand image, improve asset
quality, thereby achieving business growth
IDBI Capital Market Services Limited
IDBI Capital Market Services Ltd. (head quartered in Mumbai), is a

leading provider of financial services and is a 100% subsidiary of IDBI
Bank Ltd. The company was set up in 1993 with the objective of catering
to specific financial requirements of financial institutions, banks, mutual
funds and corporate houses. The company provides a complete range of
financial products and services that includes:
○ Stock Broking-Institutional and Retail
○ Derivatives Trading
○ Distribution of Mutual Funds
○ Investment Banking
○ PF/Pension Fund Management
○ Retail Marketing of Bonds and IPOs
○ Depository Services
○ Research Services
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Over the last 5 years, the company has been ranked amongst the
leading players in each of these businesses. It has a strong agent
network which caters to the investment needs of retail investors in
instruments like IPOs, Bonds, etc.
The company is a major player in the Equity and Derivatives market and
a leading manager of Pension & Provident Funds in the country. The
company has executed several mandates on the Issue Management and
Corporate Advisory Services.
The company offers an online investment portal idbipaisabuilder.in with
advanced features and tools for an easy and informed investing
experience in Equities, Mutual Funds and IPOs.
Retail Banking
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DEFINITION:
“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”
The Retail Banking environment today is changing fast. The

changing customer demographics demands to create a differentiated
application based on scalable technology, improved service and banking
convenience. Higher penetration of technology and increase in global
literacy levels has set up the expectations of the customer higher than
never before. Increasing use of modern technology has further
enhanced reach and accessibility.
The market today gives us a challenge to provide multiple and
innovative contemporary services to the customer through a
consolidated window as so to ensure that the bank’s customer gets
“Uniformity and Consistency” of service delivery across time and at
every touch point across all channels. The pace of innovation is
accelerating and security threat has become prime of all electronic
transactions. High cost structure rendering mass-market servicing is
prohibitively expensive.
Present day tech-savvy bankers are now more looking at reduction in
their operating costs by adopting scalable and secure technology
thereby reducing the response time to their customers so as to improve
their client base and economies of scale.
The solution lies to market demands and challenges lies in innovation of
new offering with minimum dependence on branches – a multi-channel
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bank and to eliminate the disadvantage of an inadequate branch

network. Generation of leads to cross sell and creating additional
revenues with utmost customer satisfaction has become focal point
worldwide for the success of a Bank.
Retail Banking an Introduction
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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. Retail banking refers to provision of
banking services to individuals and small business where the financial
institutions are dealing with large number of low value transactions. This
is in contrast to wholesale banking where the customers are large, often
multinational companies, governments and government enterprise, and
the financial institution deal in small numbers of high value transactions.
The concept is not new to banks but is now viewed as an important
and attractive market segment that offers opportunities for growth and
profits. Retail banking and retail lending are often used as synonyms but
in fact, the later is just the part of retail banking. In retail banking all the
needs of individual customers are taken care of in a well-integrated
manner.
Today’s retail banking sector is characterized by three basic

characteristics:
○ Multiple products (deposits, credit cards, insurance, investments
and securities)
○ Multiple channels of distribution (call center, branch, internet)
○ Multiple customer groups (consumer, small business, and
corporate).
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Origin of Banking
Banks are among the main participants of the financial system in

India. Banking offers several facilities and opportunities.
16
Banks in India were started on the British pattern in the beginning of the
19th century. The first half of the 19th century, The East India Company
established 3 banks The Bank of Bengal, The Bank of Bombay and The
Bank of Madras. These three banks were known as Presidency Banks.
In 1920 these three banks were amalgamated and The Imperial Bank of
India was formed. In those days, all the banks were joint stock banks
and a large number of them were small and weak. At the time of the 2nd
world war about 1500 joint stock banks were operating in India out of
which 1400 were non- scheduled banks. Bad and dishonest
management managed quiet a quiet a few of them and there were a
number of bank failures. Hence the government had to step in and the
Banking Company’s Act (subsequently named as the Banking
Regulation Act) was enacted which led to the elimination of the weak
banks that were not in a position to fulfil the various requirements of the
Act. In order to strengthen their weak units and review public confidence
in the banking system, a new section 45 was enacted in the Banking
Regulation Act in the year 1960, empowering the Government of India to
compulsory amalgamate weak units with the stronger ones on the
recommendation of the RBI. Today banks are broadly classified into 2
groups namely—
(a) Scheduled banks.
(b) Non-Scheduled banks.
Benefits of Retail Banking
Traditional lending to the corporate are slow moving along with

high NPA risk, treasure profits are now loosing importance hence Retail
Banking is now an alternative available for the banks for increasing their
earnings. Retail Banking is an attractive market segment having a large
number of varied classes of customers. Retail Banking focuses on
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individual and small units. Customize and wide ranging products are
available. The risk is spread and the recovery is good. Surplus
deployable funds can be put into use by the banks. Products can be
designed, developed and marketed as per individual needs.
Scope for Retail Banking in India
○ All round increase in economic activity

○ Increase in the purchasing power. The rural areas have the large
purchasing power at their disposal and this is an opportunity to
market Retail Banking.
○ India has 200 million households and 400 million middleclass
population more than 90% of the savings come from the house hold
sector. Falling interest rates have resulted in a shift. “Now People
Want To Save Less And Spend More.”
○ Nuclear family concept is gaining much importance which may lead to
large savings, large number of banking services to be provided are
day-by-day increasing.
○ Tax benefits are available for example in case of housing loans the
borrower can avail tax benefits for the loan repayment and the
interest charged for the loan.
Advantages and Disadvantages of Retail Banking
Advantages
Retail banking has inherent advantages outweighing certain
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disadvantages. Advantages are analyzed from the resource angle and

asset angle.
RESOURSE SIDE
○ Retail deposits are stable and constitute core deposits.
○ They are interest insensitive and less bargaining for additional
interest.
○ They constitute low cost funds for the banks.
○ Effective customer relationship management with the retail
customers built a strong customer base.
○ Retail banking increases the subsidiary business of the banks.
ASSETS SIDE
○ Retail banking results in better yield and improved bottom line for a
bank.
○ Retail segment is a good avenue for funds deployment.
○ Consumer loans are presumed to be of lower risk and NPA
perception.
○ Helps economic revival of the nation through increased production
activity.
○ Improves lifestyle and fulfils aspirations of the people through
affordable credit.
○ Innovative product development credit.
○ Retail banking involves minimum marketing efforts in a demand –
driven economy.
○ Diversified portfolio due to huge customer base enables bank to
reduce their dependence on few or single borrower
○ Banks can earn good profits by providing non fund based or fee
based services without deploying their funds.
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DISADVANTAGES
○ Designing own and new financial products is very costly and time
consuming for the bank.
○ Customers now-a-days prefer net banking to branch banking. The
banks that are slow in introducing technology-based products, are
finding it difficult to retain the customers who wish to opt for net
banking.
○ Customers are attracted towards other financial products like
mutual funds etc.
○ Though banks are investing heavily in technology, they are not
able to exploit the same to the full extent.
○ A major disadvantage is monitoring and follows up of huge volume
of loan accounts inducing banks to spend heavily in human
resource department.
○ Long term loans like housing loan due to its long repayment term
in the absence of proper follow-up, can become NPAs.
○ The volume of amount borrowed by a single customer is very low
as compared to wholesale banking. This does not allow banks to
to exploit the advantage of earning huge profits from single
customer as in case of wholesale banking.
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Opportunities in Retail Banking
Retail banking has immense opportunities in a growing economy

like India. As the growth story gets unfolded in India, retail banking is
going to emerge a major driver.
The rise of Indian middle class is an important contributory factor in this
regard. The percentage of middle to high-income Indian households is
expected to continue rising. The younger population not only wields
increasing purchasing power, but as far as acquiring personal debt is
21
concerned, they are perhaps more comfortable than previous

generations. Improving consumer purchasing power, coupled with more
liberal attitudes towards personal debt, is contributing to India’s retail
banking segment.
The combination of above factors promises substantial growth in retail
sector, which at present is in the nascent stage. Due to bundling of
services and delivery channels, the areas of potential conflicts of interest
tend to increase in universal banks and financial conglomerates. Some
of the key policy issues relevant to the retail-banking sector are: financial
inclusion, responsible lending, and access to finance, long-term savings,
financial capability, consumer protection, regulation and financial crime
prevention.
Challenges to Retail Banking in India
○ The issue of money laundering is very important in retail banking.

This compels all the banks to consider seriously all the documents
which they accept while approving the loans.
○ The issue of outsourcing has become very important in recent past
because various core activities such as hardware and software
maintenance, entire ATM set up and operation (including cash,
refilling) etc., are being outsourced by Indian banks.
22
○ Banks are expected to take utmost care to retain the ongoing trust
of the public.
○ Customer service should be at the end all in retail banking.
Someone has rightly said, “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 dependency on technology has brought IT departments’
additional responsibilities and challenges in managing, maintaining
and optimizing the performance of retail banking networks. It is
equally important that banks should maintain security to the
advance level to keep the faith of the customer.
○ The efficiency of operations would provide the competitive edge for
the success in retail banking in coming years.
○ The customer retention is of paramount important for the
profitability if retail banking business, so banks need to retain their
customer in order to increase the market share.
○ One of the crucial impediments for the growth of this sector is the
acute shortage of manpower talent of this specific nature, a
modern banking professional, for a modern banking sector.
If all these challenges are faced by the banks with utmost care and
deliberation, the retail banking is expected to play a very important role
in coming years, as in case of other nations.
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Strategies for Increasing Retail Banking Business
○ Constant product innovation to match the requirements of the

customer segments
The customer database available with the banks is the best source of
their demographic and financial information and can be used by the
banks for targeting certain customer segments for new or modified
product. The banks should come out with new products in the area of
securities, mutual funds and insurance.
○ Quality service and quickness in delivery
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As most of the banks are offering retail products of similar nature, the
customers can easily switchover to the one, which offers better
service at comparatively lower costs. The quality of service that
banks offer and the experience that clients have, matter the most.
Hence, to retain the customers, banks have to come out with
competitive products satisfying the desires of the customers at the
click of a button.
○ Introduction of new delivery channels

Retail customers like to interface with their bank through multiple
channels. Therefore, banks should try to give high quality service
across all service channels like branches, Internet, ATMs, etc.
○ Tapping of unexploited potential and increasing the volume of

business
This will compensate for the thin margins. The Indian retail banking
market still remains largely untapped giving a scope for growth to the
banks and financial institutions. With changing psyche of Indian
consumers, who are now comfortable with the idea of availing loans
for their personal needs, banks have tremendous potential lying in
this segment. Marketing departments of the banks be geared up and
special training be imparted to them so that banks are successful in
grabbing more and more of retail business in the market.
○ Infrastructure outsourcing
This will help in lowering the cost of service channels combined with
quality and quickness.
○ Detail market research
Banks may go for detail market research, which will help them in
25
knowing what their competitors are offering to their clients. This will
enable them to have an edge over their competitors and increase
their share in retail banking pie by offering better products and
services.
○ Cross-selling of products
PSBs have an added advantage of having a wide network of
branches, which gives them an opportunity to sell third-party products
through these branches.
○ Business process outsourcing

Outsourcing of requirements would not only save cost and time but
would help the banks in concentrating on the core business area.
Banks can devote more time for marketing, customer service and
brand building. For example, Management of ATMs can be
outsourced. This will save the banks from dealing with the intricacies
of technology.
○ Tie-up arrangements
PSBs with regional concentration can reap the benefit of reaching
customers across the country by entering into strategic alliance with
other such banks with intensive presence in other regions. In the
present regime of falling interest and stiff competition, banks are
aware that it is finally the retail banking which will enable them to hold
the head above water. Hence, banks should make all out efforts to
boost the retail banking by recognizing the needs of the customers. It
is essential that banks would be imaginative in predicting the
customers' expectations in the ever-changing tastes and
environments. It is the innovative and competitive products coupled
26
with high quality care for clients will only hold the key to success in
this area. In short, bankers have to run very fast even to stay where
they are now. It is the survival of the fastest now and not only survival
of the fittest.
Special Features of Retail Credit
One of the prominent features of Retail Banking products is that it

is a volume driven business. Further, Retail Credit ensures that the
business is widely dispersed among a large customer base unlike in the
case of corporate lending, where the risk may be concentrated on a
selected few plans. Ability of a bank to administer a large portfolio of
retail credit products depends upon such factors :
○ Strong credit assessment capability

Because of large volume good infrastructure is required. If the credit
assessment itself is qualitative, than the need for follow up in the future
reduces considerably.
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○ Sound documentation
A latest system for credit documentation is necessary pre-requisite for
healthy growth of credit portfolio, as in the case of credit assessment,
this will also minimize the need to follow up at future point of time.
○ Strong possessing capability

Since large volumes of transactions are involved, today transactions,
maintenance of backups is required
○ Regular constant follow- up

Ideally, follow up for loan repayments should be an ongoing process. It
should start from customer enquiry and last till the loan is repaid fully.
○ Skilled human resource

This is one of the most important pre-requisite for the efficient
management of large and diverse retail credit portfolio. Only highly
skilled and experienced man power can withstand the river of
administrating a diverse and complex retail credit portfolio.
○ Technological support
This is yet another vital requirement. Retail credit is highly technological
intensive in nature, because of large volumes of business, the need to
provide instantaneous service to the customer large, faster processing,
maintaining database, etc.
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Emerging Issues in Handling Retail Banking
○ KNOWING CUSTOMER
‘Know your Customer’ is a concept which is easier said than
practiced. Banks face several hurdles in achieving this. In order
to that the product lines are targeted at the right customers-present
and prospective-it is imperative that an integrated view of
customers is available to the banks. The benefits flowing out of
cross-selling and up-selling will remain a far cry in the absence of
this vital input. In this regard the customer databases available
with most of the public sector banks, if not all, remain far from
being enviable.
What needs to be done is setting up of a robust data
warehouse where from meaningful data on customers, their
preferences, there spending patterns, etc. can be mined.
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Cleansing of existing data is the first step in this direction. PSBs

have a long way to go in this regard.
○ TECHNOLOGY ISSUES
Retail banking calls for huge investments in technology. Whether
it is setting up of a Customer Relationship Management System or
Establishing Loan Process Automation or providing anytime,
anywhere convenience to the vast number of customers or
establishing channel/product/customer profitability, technology
plays a pivotal role. And it is a long haul. The Issues involved
include adoption of the right technology at the right time and at the
same time ensuring volumes and margins to sustain the
investments.
It is pertinent to remember that Citibank, known for its
deployment of technology, took nearly a decade to make profits in
credit cards. It has also to be added in the same breath that
without adequate technology support, it would be well nigh
possible to administer the growing retail portfolio without allowing
its health to deteriorate. Further, the key to reduction in
transaction costs simultaneously with increase in ability to handle
huge volumes of business lies only in technology adoption.
PSBs are on their way to catch up with the technology much
required for the success of retail banking efforts. Lack of
connectivity, stand alone models, concept of branch customer as
against bank customer, lack of convergence amongst available
channels, absence of customer profiling, lack of proper decision
support systems, etc., are a few deficiencies that are being
overcome in a great way. However, the initiatives in this regard
should include creating flexible computing architecture amenable
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to changes and having scalability, a futuristic approach, networking

across channels, development of a strong Customer Information
Systems (CIS) and adopting Customer Relationship Management
(CRM) models for getting a 360 degree view of the customer.
○ ORGANIZATIONAL ALIGNMENT
It is of utmost importance that the culture and practices of an
institution support its stated goals. Having decided to take a plunge
into retail banking, banks need to have a well defined business
strategy based on the competitive of the bank and its potential.
Creation of a proper organization structure and business operating
models which would facilitate easy work flow are the needs of the
hour. The need for building the organizational capacity needed to
achieve the desired results cannot be overstated.
This would mean a strong commitment at all levels, intensive
training of the rank and file, putting in place a proper incentive
scheme, etc. As a part of organizational alignment, there is also
the need for setting up of an effective Corporate Marketing
Division. Most of the public sector banks have only publicity
departments and not marketing setup. A fully fledged marketing
department or division would help in evolving a brand strategy,
address the issue of alienation from the upwardly mobile, high net
worth customer group and improve the recall value of the
institution and its products by arresting the trend of getting receded
from public memory. The much needed tie-ups with
manufacturers/distributors/builders will also facilitated smoothly. It
is time to break the myth PSBs are not customer friendly. The
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attention is to be diverted to vast databases of customers lying

with the PSBs till unexploited for marketing.
○ PRODUCT INNOVATION
Product innovation continues to be yet another major challenge.
Even though bank after bank is coming out with new products, not
all are successful. What is of crucial importance is the need to
understand the difference between novelty and innovation? Peter
Drucker in his path breaking book: “Management Challenges for
the 21st Century” has in fact sounded a word of caution: “innovation
that is not in tune with the strategic realities will not work;
confusing novelty with innovation (should be avoided), test of
innovation is that it creates value; novelty creates only
amusement”. The days of selling the products available in the
shelves are gone. Banks need to innovate products suiting the
needs and requirements of different types of customers. Revisiting
the features of the existing products to continue to keep them on
demand should not also be lost sight of.
○ PRICING OF PRODUCT
The next challenge is to have appropriate policies in place. The
industry today is witnessing a price war, with each bank wanting to
have a larger slice of the cake that is the market, without much of a
scientific study into the cost of funds involved, margins, etc. The
strategy of each player in the market seems to be: ‘under cutting
others and wooing the clients of others’. Most of the banks that
use rating models for determining the health of the retail portfolio
do not use them for pricing the products. The much needed
transparency in pricing is also missing, with many hidden charges.
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There is a tendency, at least on the part of few to camouflage the

price. The situation cannot remain his way for long. This will be
one issue that will be gaining importance in the near future.
○ PROCESS CHANGES
Business Process Re-engineering is yet another key requirement
for banks to handle the growing retail portfolio. Simplified
processes and aligning them around delivery of customer service
impinging on reducing customer touch-points are of essence. A
realization has to drawn that automating the inefficiencies will not
help anyone and continuing the old processes with new technology
would only make the organization an old expensive one. Work
flow and document management will be integral part of process
changes. The documentation issues have to remain simple both in
terms of documents to be submitted by the customer at the time of
loan application and those to be executed upon sanction.
○ ISSUE CONCERNING HUMAN RESOURCES

While technology and product innovation are vital , the soft issues
concerning the human capital of the banks are more vital. The
corporate initiatives need to focus on bringing around a frontline
revolution. Though the changes envisaged are seen at the
frontline, the initiatives have to really come from the ‘back end’.
The top management of banks must be seen as practicing what
preaches. The initiatives should aim at improved delivery time and
methods of approach. There is an imperative need to create a
perception that the banks are market-oriented.
This would mean a lot of proactive steps on the part of bank
management which would include empowering staff at various
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levels, devising appropriate tools for performance measurement

bringing about a transformation – ‘can’t do ‘to’ can do’ mind-set
change from restrictive practices to total flexible work place, say.
By having universal tellers, bringing in managerial controlling work
place, provision of intensive training on products and processes,
emphasizing, coaching etiquette, good manners and best
behavioural models, formulating objective appraisals, bringing in
transparency, putting in place good and acceptable reward and
punishment system, facilitating the placement of young /youthful
staff in front-line defining a new role for front-line staff by
projecting them as sellers of products rather than clerks at work
and changing the image of the banks from a transaction provider
to a solution provider.
○ RURAL ORIENTATION
As of now, action that is taking place on the retail front is by and
large confined two metros and cities. There is still a vast market
available in rural India, which remains to be trapped. Multinational
Corporations, as manufacturers and distributors, have already
taken the lead in showing the way by coming out with exquisite
products, packaging and promotions, keeping the rural customer in
mind. Washing powders and shampoos in Re.1 sachet made
available through an efficient network and testimony to the
determination of the MNCs to penetrate the rural market. In this
scenario, banks cannot lack behind.
In particular PSBs, which have a strong rural presence, need
to address the needs of rural customers in a big way. These and
only these will propel retail growth that is envisaged as a key
strategy for portfolio expansion by most of the banks.
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Some Critical Issues
○ CUSTOMER SERVICE
Customer service is perhaps the most important dimension of retail
banking. While most public sector banks offer the same range of
service with similar technology/expertise, the level of customer
service matters the most in bringing in more business. Perhaps
more than the efficiency of service, the approach and attitude
towards customers will make the difference.
Front line staffs have to be educated in this regard. A scheme of
entrusting a group of important customers to the care of each
employee/officer with a person to person knowledge and intimacy
can be implemented all sundry advices/notices such as Dr. /Cr.
advices. TDR maturity advices, etc. whether signed by employees
or officers should be identifiable by the name of those signing, and
inviting customers to contact them for further assistance in the
35
matter.
A customer centered organization has to be built up, whose
ultimate goal is to "own" a customer. Focused merchandizing
through effective market segmentation is the need of the hour. A
first step can be the organization of the various retail branches to
enter for different market segments like up market individuals,
traders, common customers, etc..
For the SIB (Small Industry and Business) sector banks, the focus
should be on identifying efficient units and allocations of loans lo
these units. These banks should try Merchant Banking services en
a small scale.
With agricultural output growing at a fast rate and mechanization
setting in, banks should try to cater to the credit needs of the
people involved in this profession. A wide network is absolutely
imperative for this sector.
Separate branches/divisions should be opened for traders and
similar government businesses. Special facilities for cash tendered
in bulk and immediate issue of drafts, by extending facilities like
"guarantee bond" system, will go a long way in mitigating problems
faced by traders who are the major customers for drafts issue.
Provision for cash counting machines in these branches will
reduce the monotony of cashiers and unnecessary delays, thus
resulting in better productivity and ultimately in improved customer
service.
The personal segment is however the most important one. With
the urban segment moving away because of disintermediation and
competition from foreign banks, retail banks should focus en the
rural/semi-urban areas that hold the maximum potential. Innovative
schemes like "paper-gold" schemes can be introduced. In the
36
urban areas, private banking to affluent customers can be

introduced, through which advisory and execution services could
be provided for a fee. Foreign currency denominated accounts can
also be introduced for them.
Nationalized banks compare very poorly with the foreign banks
when it comes to the efficiency in services. In order to improve the
speed of service the bank should.
 Improve the rapport between the controlling offices and the
branches to ensure that decisions arc communicated fast.
 Make sure that the officials as well as the staff are fully aware of
the rules so that processing is faster.
○ TECHNOLOGY
In the current scenario, the importance of technology cannot be
understated for retail banks which entail large volumes, large
queues and paperwork. But most of the banks are burdened with a
large staff strength which cannot be done away with. Besides, in
the rural and semi-urban areas, customers will not be at home in
an automated, impersonal environment.
The objective would be to ensure faster and easier customer
service and more usable information, instantly, economically and
easily to all those who need it -customers as well as employees.
Proper management information systems can also be
implemented to aid in superior decision making.
Communication technology is especially needed for money
transfer between the same city and also between cities. There are
inordinate delays in India because of geographical and other
factors. Modem technology can make it possible to clear any
check anywhere in India within three days. Installation of FAX
facilities at all the big branches will facilitate speedy transfer of
37
payment advices. Computerization will be of great help in

improving back-office operations. At present, 60% of India's rural
branches can have PCs. These can be used for quick retrieval and
report generation. This will also drastically reduce the time bank
staffs spend in filling and filing returns. Housekeeping operations
can also be speeded up.
○ PRICE BUNDLING
Price bundling is a selling arrangement where several different
products are explicitly marketed together to a price that is
dependent on the offer. As banks are multi-product firms this
strategy is more applicable to retail banking. Price bundling offers
several economic and strategic benefits to a bank. It offers
economies of, utilization of the existing capacities and reaching
wider population of customers. Bank can get the benefits of
information and transacting. In the process of extending variety of
services, banks are acquiring enormous amount of customer
information. If this information is systematically stored, banks can
efficiently utilize this information in order to explore new segments
and to cross-sell new services to these segments. Cross-selling
opportunities and larger customer base can also be the motive for
merger against usually stated advantage of cost savings. Price
bundling can be used in order to lengthen the relationship with a
customer. It will reduce the need of resources to be put on
acquiring new customers and saves time of the bank. Among the
strategic benefits, price bundling may cause less aggressive
competition; it differentiates its products compared to rivals in the
same market where the products are sold individually or in other
kinds of bundles.
Retail banking offers many services and it gives an opportunity to
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the bank to combine different services in different kinds of bundles.

In many cases demand for one service affects the demand for
another service, for example current or savings account and
payment services are highly related, and here price bundling is a
better alternative than individual selling. Banks have to analyze the
customer segment and bundle products before applying the pricing
strategies.
The first step in price bundling decision is to select the customer
segment. The bundle is targeted to choose a strategic objective. If
there are two products (A and B) that are considered to be bundled
together, the comprehensive strategic objectives for the different
customer segments are:
• Cross-selling to customers that only buy one of the products.
• Retaining customers that already buy both of the products.
• Acquiring new customers when they buy neither product for the
time being.
○ INNOVATION
The scope for innovation in financial services is unlimited.
Although banks have introduced a variety of deposit and loan
products, the basic features of all these products are almost one
and the same. Among the delivery channels, ATMs have emerged
as ubiquitous money centers. Almost all banks have established
their ATMs. India had only 400 ATMs, which increased to 3,600.
Out of this 881 ATMs have Swadhan connectivity. It is projected
that the number of ATMs will reach up to 35,000 by the end of. The
question arises is, are they cash cows? The answer is certainly no.
For most of the banks the overhead costs on these ATMs are far
higher than the revenue generated by them. ATM operation costs
39
are largely fixed in nature - the cost of the machine, its

maintenance, replenishment of currency, and the satellite
(network) connection. There should be a minimum number of
transactions to cover these costs. Banks have to innovate wide
range of services in addition to cash withdrawals. ATMs should
allow customers to buy postal and revenue stamps, payment of
bills, event tickets, sports tickets, etc. Banks can offer ATM
screens for slide show advertising also. However, the advantage of
the ATM has always been speed and convenience, probably on
introduction of these new services customer has to spend more
time at a point. ATMs can guide the customer also. For example, if
a customer's account balance has reached to bare minimum the
ATM can give a helpful suggestion that "we notice your balance is
low, can we help with a loan?" ATMs can be either within the
premises of a branch or at a remote place. On premises ATMs are
highly immune to competition, but branches can reduce the staff,
on installation of ATM. The scope for wider services through off-
premises ATMs is very high; it provides great opportunity for fee
revenue. The cost of maintenance of off-premises ATMs is higher
in terms of replenishment, cash couriers, armed security etc. In the
US, approximately 23 percent of ATMs are offering sale of postage
stamps. It is the right time for banks to question themselves
whether ATM is a service channel, sales channel, or branding
opportunity.
The future of retail banking lies more in mobile banking. Mobile
telephone market is penetrating, and mobile phones are ideal to
utilize Internet banking services without customer accesses to PC.
By a tacit acceptance India has around three million mobile phone
users and this number is expected to reach to eight million by
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2003.
Smart card revolution will further change the face of retail banking.
Smart cards can store information; carry out local processing on
the data stored and can perform complex calculations. At present,
India has around 3.4 million smart card users and it is estimated
that by the end of 2004 it will reach 14.7 million.
Drivers of Retail Banking in India
MACRO-ECONOMIC FACTORS
○ Shift in the pattern of GDP from hitherto agriculture and

manufacturing sectors to services sector with increase per capita
income especially that of the younger generation. [India's industrial
sector accounted for about 21.8% of GDP, where as the services
sector accounted for around 56.1 of GDP in 2002-03 as per
revised estimates released by Central. Statistical Organization].
○ The lower uptake in the non-retail sector has compelled bans to
shift their focus on retail assets - specially housing finance- for
deployment of funds for a longer period, which is considered as the
safest within the retail portfolio. Housing loans and other retail loans
are comparatively high yielding in terms of interest spread and
safer, as risk is diversified among a large number of individuals
across the geographic dimensions. The sector enjoys a privilege
of lowest NPAs amongst all categories of banks.
○ Depressed stock and real estate markets as compared to those
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prevailing in 1992-93 to 1995-96 thereby diverting deposits to the

banking sectors.
○ Comparatively stable real estate prices during last 4/5 years have
laid to spurt in demand for housing loans.
○ Inflation continued to be under control.
○ Keenness shown by the consumer goods/ automobile
manufacturers to -push up finance schemes through market tie-up
with banks with a view to increasing their marketing share.
DEMOGRAPHIC / BEHAVIORAL FACTORS
○ Growing concept of nuclear families than the joint families

necessitating need for housing units as well as other items of
consumer durables.
○ Increased number of dual income families resulting in higher
income and savings.
○ Increased demand for dwelling units due to gradual shift of
population from rural/semi-urban centre to urban/metro centre for
employment.
○ Shift in the attitude of the Indian household from "save and buy'
theory to a `buy and repay' principle.
○ Increased middle-income segment and their income levels.
○ Emergence of new sectors such as Information Technology,
media, etc. In the economy that resulted in higher income
opportunities and major impact on change in urban consumption
pattern.
○ Awareness and sophistication in urban and semi-urban
households for urban convenience. Social security and status
42
have also contributed to higher demand for housing units, cars,

etc.
Boom in Retail Banking
Keeping pace with the average 8.5 per cent growth of the Indian
economy over the past few years, the retail banking sector in India has
also witnessed phenomenal growth. It has faced up to the need of the
hour and introduced anytime, anywhere banking, for its customers
through ATMs, mobile and internet banking. It has also offered services
like D-MAT, plastic money (credit and debit cards), online transfers, etc.
This has not only helped in reducing operational costs but facilitated
greater conveniences to its customers.
○ High-Tech Banking
ATMs - With growing technological innovations, banks have
significantly expanded their ATM network over the past three
years. According to the RBI data as of end-June 2008, the number
of ATMs in the country had climbed to 36,314 compared to 27,088
and 20,267 as at end-March 2007 and 2006, respectively.
○ Loan disbursement
Technology has facilitated the growth in retail loan disbursements,
making the whole process simpler and faster. The sector has
43
delivered a growth of around 30 per cent per year over the past 4-
5 years. As per the RBI data, although the retail portfolio of banks
saw a slowdown to 29.9 per cent during 2006-07 from 40.9 per
cent in 2005-06, the growth was faster than the overall credit
portfolio of the banking sector (28.5 per cent).
○ Plastic Money
Credit cards have also played an important role in promoting retail
banking. The use of credit cards has been growing significantly
over the last few years. The number of credit cards outstanding at
the end- June 2008 stood at 27.02 million as against 24.39 million
in June 2007, with usage increasing by 10.73 per cent during this
period.
○ Core Banking Solutions (CBS)

The concept of CBS, which allows a customer to fulfil a wide range
of banking operation online, has come alive during the past four
years. The number of bank branches providing CBS rose rapidly to
44 per cent at end- March 2007 from 28.9 per cent at end March
2006. Electronic fund transfer facilities and mobile banking are
expected to provide a further fillip to the retail banking in the
coming years.
○ Future Outlook
Indian retail banking, according to a report, is likely to grow at a
CAGR of 28 per cent till 2010 to Rs 97,00 billion. So, although the
revolution in retail banking has changed the face of the Indian
banking industry as a whole, it has still miles to go.
44
○ The reasons for this shift to retail, particularly the housing finance
segment, are many. The important among these include—
○ The poor credit off take to the corporate, commercial and other
business sector because of industrial slowdown.
○ Risky nature of lending to corporate, given in industry recession
and uncertainty prevalent in the economy.
○ High disintermediation pressure, leading many highly rated
corporates to tap the domestic and/or overseas markets directly for
finance, rather than approaching the banks.
○ Relatively safe nature of some of the retail credit finance with
lesser incidence of loan turning bad.
○ Rising disposable income, changing lifestyles/aspirations and
willingness to spend for more luxuries of the higher middle class.
○ Better availability of loans, because of the consultancy lowering
interest rates, as a result of the low interest regime followed by the
regulating authorities, the housing loans interest rates hailed to
almost 7.5 – 8% in last 5 years.
○ Increased government incentives in form of tax rebates etc. in the
case of certain loans like housing loans.
○ Banks are aware with abundant reserve requirement by RBI; they
are searching revenues for packing the surplus funds.
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Future of Retail Banking
Retail banking has significant past and glorious future over the
years. Retail banking has proved as an effective tool not only to
improve the bottom lines of the banks concerned but also to significantly
contribute to the development of the individual consumers availing the
services or products in particular and to the overall development of the
society in general with the needs of the consumers ever multiplying.
There is definitely a vast scope for the furtherance of the Retail Banking
business.
The society is made of the individuals and the environment surrounding

him. As development takes place in the society, the needs of the people
grow faster than ever. The wealth creation and its professional
management are yet another distinct advantage the society or nation
can derive from Retail Banking. The depth of the untapped resources in
the retail segment is not yet measured. These resources could be
channelized for nation building.
On the whole, looking ahead, the prospects of retail banking are brighter
than ever and the bankers have to give continued thrust to this area of
banking. Thus, with the consumers ever multiplying needs there is
definitely a vast scope for the furtherance of the retail banking business.
Operationally, there is a possibility that technology go beyond merely
reducing the cost & improving the quality of current products. It may
prove possible, even profitable, to combine functions in new ways.
46
Retail Banking Products of the IDBI Bank
Deposits-Saving accounts
Super Saving Account

The Super Savings Account is a complete financial package that
provides easy access to customer’s money and complete banking
convenience too. It offers a whole range of options for optimal
management of the money. Which means, with Super Savings Account
not only save the money but also make it grow.
Apart from the basic benefits of a savings account, It offers options for
faster transfer of funds, options to pay your bills or tax online and options
to grow money at attractive interest rates in the savings account.
All these features are offered for a minimum balance of Rs 5,000.
Powerkids Saving Account
With the growing focus on the Kids segment and its requirements, IDBI
Bank realized the importance of introducing a product specifically
catering to this market. Now a days, parents start saving money for their
children right from the day they are born and by supporting this thought
IDBI has designed the “POWERKIDZ” account, cut for the needs of
children.
It is a piggy bank for the Kids that will not just keep their money safe but
provide an interest on the same, allow them to take out money when
required, make smart purchases by way of exclusive debit card, teach
47
them to operate their account in a better and convenient way and also
advise them from time to time about better investment options.
Kids at a young age can start saving the amount received from
parents/guardian into these account which will not just inculcate the habit
of saving but also act as an instrument in guiding them into financial
sector. Coupled with various training programs and with insight to
various other products children can make better investment decisions in
future. They can even have the benefit by availing education loan from
IDBI bank at a competitive interest rate for funding their higher education
in India and Overseas.
Roaming Current Accounts
IDBI Bank offers five Roaming Current Accounts – Basic, Special,

Bronze, Silver and Gold to suit your business needs. Based on the
balance, choosed to maintain in the account, for specific Roaming
Current Account accordingly.
Roaming Current Account from IDBI Bank comes packed with a host of
services and facilities that makes the banking convenient and hassle-
free. With services such as multi-city and multi-branch banking,
electronic funds transfers, national clearing in selected cities, 24x7 cash
withdrawals from ATMs, Internet Banking, Phone Banking and SMS
Banking, customers are assured of faster remittances and collection of
funds at competitive rates. What’s more, extended IDBI Banking hours
and Sunday Banking, all this to simplify banking for you.
Features
➢ Make payments to your vendors in different cities without any
costs
➢ Receive payments from your customers without any charge
deducted from the amount
➢ Do all your banking right from where you are or wherever you
travel
➢ Most importantly, maintain better relations with your vendors and
customers.
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Suvidha Fixed Deposits

IDBI Bank Suvidha Fixed Deposits have always stood for safety,
credibility and attractive rates of interest. Its interest rates are among the
highest in the industry that provides the benefit of high rates of return on
your savings. These deposits have been further packed with the
following features:
➢ Anytime access to the deposits.

➢ Deposits across tenures of 15 days to 10 years.
➢ Various Options to choose accordingly.
Range of Suvidha Fixed Deposits
➢ Monthly Quarterly Income Plans-For those who seek regular

incomes.
➢ Quarterly Compounding Fixed Deposit-Ideal for those who want a
higher rate of return combined with a low risk Fixed Deposit.
➢ Recurring Deposit-Ideal for those who want to save a fixed sum
every month.
➢ Sweep in Savings-Earn fixed deposit rate on your savings account.
➢ Overdraft against Fixed Deposit-Tide over your urgent cash
requirements without breaking your fixed deposits.
➢ Senior Citizens Fixed Deposits-Earn higher rates
Suvidha Tax Saving Tax Fixed Deposit
IDBI Suvidha Tax-Saving Fixed Deposit which gives dual benefits of tax
exemption u/s 80c of the Income Tax Act and higher returns on your
investments with interest rates at 8.5%* p.a. for regular deposits and 9%
p.a. for Senior Citizens.
Other benefits:
➢ Zero Balance Savings Account

➢ Free local Cheque Book
➢ International ATM-cum-Debit Card
➢ Free Internet Banking facilities.
49
Super Shakti Account for Women

IDBI Bank’s Savings Account for Women, along with this account one
Zero Balance Savings Account is offered absolutely free for her child
below the age of eighteen years. The Account offers a host of features,
which include:
➢ Free Transactions at other Bank ATMs.
➢ An account opening balance of just Rs.1000
➢ An AQB requirement of Rs. 5000.
➢ A Zero balance account for your child below the age of 18 years.
➢ Debit Card Free for the first year.
➢ A free Personalized/Customized PAP Cheque Book.
➢ Quarterly Account Statement
➢ Free Demand Draft at Home Branch
➢ Free Payorder for payment of School/colleges fees and remitting
funds to their parents.
➢ Phone Banking
➢ Mobile Banking
➢ Free Statement by e-mail
➢ Demat Account at just Rs.200.
➢ Locker services at a concessional rate
➢ Investment advisory services.
➢ Free local personalized Cheque Book
Jublee Plus Saving Account
IDBI has brought to the senior citizens an account which can facilitate
banking transactions with hosts of facilities catering to the needs of the
customer. This is deal in which customer cannot just save the money but
also make it grow. Also get the benefit of getting another account with an
AQB of Rs. 1,000.
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➢ An account with a balance of just Rs. 5,000 (Category A branches)

Rs. 2,500 (Category B branches) and Rs. 1,000 (Category C
branches)
➢ Free Sponsor’s account with AQB of Rs 1000 with the senior
citizen account.
➢ Tax Savings options viz: Fixed Deposit
➢ Relationship Manager to guide about investments.
➢ Exposure to TPD products.
➢ Provide them with various investment options.
➢ Free debit card
➢ Free Personalized / Customized local Cheque Book.
➢ Free PAP cheque book
➢ Higher limit on PAP facility
➢ Higher limit on ATM withdrawal
➢ Free monthly statement of account.
➢ Free Demand Draft at home branch and Free Pay order
➢ Free OCC on non branch location
➢ Phone Banking
➢ Mobile Banking
➢ Free Statement by email
➢ Locker services at a concessional rate
➢ Auto Sweep out/sweep in facility
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Retail Loan-Home Loans

IDBI provides Home Loans for constructing a home, purchasing a ready
built house/flat, residential plot and even for re-financing existing loans.
Advantages of IDBI Ultra Flexible Home Loans

○ Maximum Funding
○ Flexibility of choosing between Floating or Fixed interest rate
○ Attractive rate of interest
○ EMI on daily reducing balance
○ Personalized doorstep service
○ Simple documentation
○ Legal and technical assistance
○ Balance transfer facility
○ Reassessment and adjustment of applicant's loan eligibility in case
of change of income and residence status.
Loan against Property

IDBI Bank provides loan against property which can be used for:
○ Education
○ Business
○ Marriage
○ Purchase or improvement of property
○ Medical treatment or any other personal need
Advantages
○ Tenor up to 15 years
○ Attractive Rate of Interest
○ Maximum Funding
○ Interest rate on daily reducing balance
○ Fixed and floating interest rate options
○ Simple documentations
52
○ Personalized doorstep services

○ Free legal and technical assistance
Education Loan
Education loans from IDBI Bank aim at providing financial support to

deserving/ meritorious students for pursuing higher education in India
and abroad. With an array of courses to choose from and easy
repayment options, IDBI Bank makes sure complete financial backing.
Personal Loan
Personal Loans from IDBI comes with an insurance cover. This means
when times are tough, customer'll have an insurance cover to take care
of the EMI's.
➢ In case of death or disability due to an accident, the principle

outstandings will be paid by the insurance company.
➢ In case of loss of job, the insurance company will pay the EMIs for
up to 3 months
Loan Against Security
Exigencies in life could crop up at the most unexpected time. As an

investor one would have invested in Securities with a long-term
perspective in mind but are left with no other option than sell the
Securities to meet your urgent financial requirements. IDBI offers Loan
against Securities, which provides liquidity to the Securities without
having to sell them.
Loan Against Securities is provided in the form of an overdraft facility

Against Securities. It helps to meet the exigencies in life, giving an easy
and flexible access to short-term funds without the need to sell your
Securities.
53
A pledge is created in favour of the Bank and the Drawing Power (DP) is
calculated based on the applicable margins set by the Bank. Facility will
be renewed after every 12 months depending on the performance of the
account. What makes it more attractive is that customer pay only on the
amount utilized.
Reverse Mortgage Loan

Senior Citizens are an imperial component of the Indian society. There is
significant increase in cost of good health care facilities along with little
social security. Senior Citizens require a regular cash flow stream for
supplementing pension/other income and addressing their financial
needs.
Reverse Mortgage seeks to monetize the house as an asset and

specifically the owner’s equity in the house. The scheme involves the
Senior Citizen borrower(s) mortgaging the house property to IDBI, in
return of periodic payments to the borrower(s) during the latter’s lifetime
to help them in sustaining themselves. It has following advantages:
➢ Maximum Funding
➢ Services at doorstep
➢ Simple documentation
➢ Personalized services
➢ Free legal and technical assistance
➢ Attractive rate of inter
Consumer Durable Loan

Loan scheme to finance purchase of consumer durables such as
Television, Electronic Audio System, ACs, Lap Top/ PCs including
accessories, Multi Media Kits, Generators, Hand Video Camera and
54
furniture articles to an individual salaried or businessmen for the use of

their residential / business premises.
Cards-Gold Debit-cum- ATM

The Gold Debit-cum-ATM Card, not only provide withdrawal of cash
and make purchases through the card, but also avail of a host of
services and facilities that make banking simple and enjoyable.
Benefits
Petrol surcharge waiver: Currently, there is a surcharge of 2.5% at all

petrol pump transactions. This petrol surcharge will be waived off for
transactions carried out on the Gold Debit-cum-ATM Card.
Insurance cover: It provide insurance cover for lost/stolen cards
Daily Limits: You can withdraw cash upto Rs. 75,000/- and make
purchases worth Rs. 75,000/- in a day.
Discounts at Merchant Establishments: IDBI Bank in association with

VISA and MasterCard has tied up with various merchant establishments.
You can avail of attractive discounts at these merchant establishments
by making purchases through the Gold Debit Card.
IDBI Bank International Debit-cum-ATM Card

This card enables access Customer’s IDBI Bank account from anywhere
in the world, anytime of the day or night. It not only lets you withdraw
money from any of bank’s ATMs (Automated Teller Machines) and
associated bank’s ATMs, but also empowers you to shop, dine and
travel without the worry of carrying cash with you all the time.
55
Benefits of IDBI Bank International Debit-cum-ATM Card
○ Enjoy the following benefits with the IDBI Bank International Debit-
cum-ATM Card
○ Loyalty points with great rewards
○ Enhanced access to over 10 lakh VISA & MasterCard ATMs
worldwide and 14 million VISA merchant establishments & 26
million MasterCard merchant establishments worldwide.
○ Promotional programmers with exciting prizes
○ Zero lost card liability insurance
Payments-Electronic Bill Payment

The Electronic Bill Payment facility from IDBI cuts out the hassles of
going through each month for paying bills.
This bill payment service gives you the flexibility of viewing and paying
bills online. All is needed to enter your billing details in our Internet
Banking, and, then start paying utility bills, insurance premiums, etc,
month on month, absolutely hassle-free.
The Electronic Bill Payment contains:
Electronic Bill Presentment and Payment: This feature allows viewing

and paying off all your bills online.
Electronic Bill Payment. This feature allows paying off all those bills
appearing physically.
Tax Payment
Through IDBI simple tax payment service, taxes can be paid, sitting from
the comfort of your home or office in any of the following ways:
1. Direct Taxes Online

2. Central Excise Duty and Service Tax Online
3. Payment at our branches-
56
○ Direct Taxes
○ Indirect Taxes
○ State Tax
Online Payment Services

The Internet Banking facility at IDBI Bank offers online payment facility
linked to merchant websites / e-shops serving as a payment gateway.
The Bank offers this facility to any agency requiring online payment
services such as online shopping malls, online share trading agency,
AMCs selling mutual funds online.
Insurance-Wealthsurance
Wealthsurance is a first of its kind combination of comprehensive
investment choices, protected by powerful insurance options, all
presented with a reasonable charge structure, making it a one stop
solution to a customer’s wealth building plans. Wealthsurance offers
investment choices such as Guaranteed Return Fund, Equity Funds, and
Debt Funds etc. ensuring that the customer would find all his investment
requirements satisfied with this one powerful product. The powerful
insurance benefits of Wealthsurance ensure that a customer’s wealth
plan is not affected by unforeseen events that may strike them.
The guiding philosophy behind this product is that wealth will grow better
with a protective cover. So, while one’s wealth stays invested, the
insurance benefits ensure that life’s uncertainties such as death, terminal
illness, 17 major diseases, sickness requiring hospitalization or serious
accidental injuries, do not disturb its growth. Wealthsurance is thus
designed to also give living benefits to ensure one’s well-being in their
lifetime. Customers can opt for a ready plan or build their own plan by
57
choosing their own sum assured investment plan, affordable premium,

policy term and the type of insurance cover.
Family Care
The Family Care Policy is a complete health insurance plan that covers
insurer, his/her spouse and two dependent children up to the age of 25
years. It enables customer to access the best medical treatment in case
of a sudden illness, accidents or an emergency surgery, without any
hassles.
The Family Care policy covers the hospitalization expenses as a result
of any illness and accident. Unlike any other regular policy, wherein a
family has to take individual policies for each member, this unique family
floater policy gives you the flexibility of taking one policy that covers the
entire family under a single sum insured.
Internet Banking
In today's digital world, Internet banking assumes a special significance.
Realizing that the default access to the banking information in the near
future would be only through the Internet, IDBI Bank has made available
to a globally benchmarked Internet Banking facility.
With IDBI's Internet Banking, your Bank travels with you around the
world and you have on-line, real-time access to your accounts.
58
Phone Banking
IDBI Bank Phone Banking service enables customers to access
authentic, instantaneous information of account balances and
transactions. The service is available totally free of cost round the clock,
365 days a year.
SMS Banking
Features of SMS Banking
○ Balance enquiry
○ Last three transaction
○ Cheque payment status
○ Cheque book
○ Statement request
○ Demat - free balance holding
○ Demat - last two transactions
○ Bill payment
59
Performance of the IDBI Bank
Profitability:
IDBI reported a net profit of Rs.314 crore for the quarter and Rs.859
crore for the year ended March 31, 2009, as against Rs.245 crore and
Rs.729 crore in the corresponding quarter and year ended March 31,
2008. This amounts to an increase in net profit by 17.7% for the year
and 28.2% for the quarter, compared to corresponding period of last
year.
Net Interest Income (NII) for the quarter ended March 31, 2009 stood at
Rs.481 crore as against Rs.241 crore in the corresponding quarter of the
previous year, recording a growth of 100%. NII for the year ended March
31, 2009, stood at Rs.1326 crore as against Rs.676 crore in the previous
year, recording a growth of 96%.
Fee based income during the year has shown considerable improvement
to Rs.901 Crore as against Rs.504 Crore in the previous year, recording
a growth of 79%.
Business: As of March 31, 2009, IDBI’s total business (deposits and

advances) stood at Rs.215829 crore as against Rs.155211 crore as of
March 31, 2008, registering a growth of 39%.
Deposits increased to Rs.112401 Crore at end-March 2009 from

Rs.72998 crore at end-March 2008, with a robust growth of 54%.
Advances also increased by 26% to Rs.103428 crore, as compared to

Rs. 82213 crore as at end- March 2008.
60
As of March 31, 2009, aggregate assets stood at Rs.172402 crore as

against Rs.130694 crore as on March 31, 2008, registering a growth of
32%.
Gross NPAs reduced to Rs.1436 Crore (1.38%) from Rs.1565 Crore

(1.87%) in the previous year, despite slowdown in economy.
Net NPAs reduced to Rs.949 Crore (0.92%) from Rs.1083 Crore (1.30%)
in the previous year.
CAR: IDBI continued to maintain a sound capital base as indicated by its

Capital Adequacy Ratio (CAR). As against the stipulated RBI norm of
9%, the Bank's CAR (post dividend) stood at 11.57% (Tier-I: 6.81%) as
of March 31, 2009.
Conclusion
61
Retail banking is the fastest growing sector of the banking industry

with the key success by attending directly the needs of the end
customers is having glorious future in coming years.
Retail banking sector as a whole is facing a lot of competition ever

since financial sector reforms were started in the country. Walk-in
business is a thing of past and banks are now on their toes to capture
business. Banks therefore, are now competing for increasing their retail
business.
There is a need for constant innovation in retail banking. This

requires product development and differentiation, micro-planning,
marketing, prudent pricing, customization, technological up gradation,
home / electronic / mobile banking, effective risk management and asset
liability management techniques.
While retail banking offers phenomenal opportunities for growth,

the challenges are equally discouraging. How far the retail banking is
able to lead growth of banking industry in future would depend upon the
capacity building of banks to meet the challenges and make use of
opportunities profitably.
However, the kind of technology used and the efficiency of
operations would provide the much needed competitive edge for
success in retail banking business. Furthermore, in all these customer
interest is of chief importance. The banking sector in India is
representing this and I do hope they would continue to succeed in this
traded path.
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Retail Banking in India

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Retail Banking in India

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RETAIL BANKING IN INDIA

SUMMER TRAINNING PROJECT REPORT

In partial fulfillment of the requirement for MBA Degree

HINDUSTAN INSTITUTE OF MANAGEMENT AND

After completing two semester of Master of Business Administration

1. Introduction-Industrial Development Bank of India

Introduction-Industrial Development Bank of India

IDBI today rides on the back of a robust business strategy, a highly

Evolution and Changing Role of IDBI Bank

1964 - On july1, IDBI was established by an act of Parliament, as a

1976 - 100% ownership was transferred from RBI to the Government of

1995 – Domestic reduced GOI’s stake, initially to 72% and post-capital

2004 – On October 1, IDBI was converted into a banking company to

“To be the trusted the partner in progress by leveraging quality

Management & Organization

IDBI Bank is a Board-managed organization. The responsibility for the

Mr. O.V. Bundellu, Deputy Managing Director

Mr. Ajay Shankar

Mr. G.C. Chaturvedi

Mr. Ajay Shankar

Mr. Hiralal Zutshi

Mr. Subhash Tuli

○ 561 branches across the country.

IDBI Gilts Limited

IDBI Intech Limited

Intech operates in a multi-dimensional framework and provides IT

IDBI Home Finance Limited

IDBI Capital Market Services Limited

IDBI Capital Market Services Ltd. (head quartered in Mumbai), is a

“Retail banking is typical mass-market banking where individual

The Retail Banking environment today is changing fast. The

bank and to eliminate the disadvantage of an inadequate branch

Retail Banking an Introduction

Retail banking is, however, quite broad in nature - it refers to the

Today’s retail banking sector is characterized by three basic

Banks are among the main participants of the financial system in

Traditional lending to the corporate are slow moving along with

Scope for Retail Banking in India

○ All round increase in economic activity

Advantages and Disadvantages of Retail Banking

disadvantages. Advantages are analyzed from the resource angle and

Opportunities in Retail Banking

Retail banking has immense opportunities in a growing economy

concerned, they are perhaps more comfortable than previous

Challenges to Retail Banking in India

○ The issue of money laundering is very important in retail banking.

Strategies for Increasing Retail Banking Business

○ Constant product innovation to match the requirements of the

○ Quality service and quickness in delivery

○ Introduction of new delivery channels

○ Tapping of unexploited potential and increasing the volume of

○ Business process outsourcing

Special Features of Retail Credit

One of the prominent features of Retail Banking products is that it

○ Strong credit assessment capability

○ Strong possessing capability

○ Regular constant follow- up

○ Skilled human resource

Emerging Issues in Handling Retail Banking

Cleansing of existing data is the first step in this direction. PSBs

to changes and having scalability, a futuristic approach, networking

attention is to be diverted to vast databases of customers lying