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The banking sector has under gone turbulent changes in the past few years. The financial sector reforms have brought in the entry of new private sector and foreign banks in the country. The conventional banking as outlined above has given way for professional and high-tech banking. There has been a paradigm shift from the monopolies of public sector banks to competitive banking. Public sector banks can no longer remain complacent with their conventional products and services. With walk in business virtually being ruled out, banks are now scouting for quality consumers both for building their resources and assets There were times when the corporate clientele occupied the centre stage and the retail ones were pushed to the back seat. The slow down of the economy, sluggish industrial growth and slump in agricultural activities have pushed the commercial banks to look to the retail customers. Retail banking has both pros and cons. In a situation like today, the bankers have very 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% in the coming years. Major Players: State Bank of India, HDFC Bank, UTI Bank, IDBI Bank and ICICI Bank The ratio of retail credit to net credit in the global level is around 5%. In India, it is 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 is already rated as a major hub for economic development. Increase in per capita, change in lifestyle and growing urbanization has made the Indian population rise
RETAIL BANKING from oblivion and resurges in a modern era. Traditionally against incurring a debt, the policy of save and spend is gradually giving way to spend and save concept.
WHAT IS RETAIL BANKING?
Retail banking can be crudely defined as the antonym of wholesale or bulk banking. It is nothing, but shared business. A deposit of Rs.1 lakh from single customer vs. small deposits of Rs. 10,000 each from 10 different customers. The corporate and retail divide is nothing but internal segmentations and the customer remains always a customer. Retail banking generally refers to offering financial services, products related to deposits 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 recurring deposits, savings bank deposits, fixed deposits, credit cards, housing and consumer loans and educational loans are offered by banks to the above mentioned marked segments. The domain of retail banking market has tremendous growth potential for banks and finance companies, as at present it is largely untapped. The penetration level is 2.5 to 3 % and is in a scenario when the requirements of the consumers are growing. In the past, people never believed in buying consumer goods on credit. But today the attitude is changing. The demand for consumer products has increased. Today, about 70% of consumer goods purchased are through finance schemes/loans as against 40% about 1 to 6 years ago. The home loans alone account for nearly two-third of the total retail portfolio of the bank
ADVANTANGES OF RETAIL BANKING
Retail banking has inherent advantages outweighing certain disadvantages. Advantages are analyzed both from the resource angle and asset angle.
RESOURCE Stable and constitute core deposits. Less bargaining for additional interest. Low cost funds. Builds customer base. Increases subsidiary business A safe and convenient saving avenue. ASSET SIDE Better yield and improved bottom line. Good Avenue for funds deployment. Lowe risk and NPA perception. Helps economic revival of the nation through increased production activity. Improves lifestyle and fulfills aspirations of the people through affordable credit. Innovative product development. Minimum marketing efforts in a demand-driven economy. Risk weight in certain segments like housing loan.
RETAIL BANKING According to the Reserve Bank of India annual report for 2001-02, as on March 22, 2003, retail credit outstanding amounted to Rs 1,60,000 crore, including housing loans, loans for consumer
Net Bank Credit
durables, loans to individuals against shares and bonds, other non-priority sector personal loans and advances against fixed deposits. That's 14.1 per cent of
Retail credit Others
net bank credit outstanding, and 15.6 per cent of non-food gross
bank credit. Incremental retail credit in FY02, at Rs 14,114 crore, was 20.8 per cent of incremental net bank credit, and 26.3 per cent of non-food bank gross credit. Retail credit increased by only Rs 7,026 crore in FY01, and accounted for merely 13 per cent of incremental non-food gross bank credit. The sharp acceleration in the rate of growth of retail credit is clear. The fastest growing business segments are housing loans, incremental growth in which was Rs 6,203 crore in FY02, compared with Rs 2,043 crore in the preceding year; and the category "other non-priority sector personal loans", the outstanding of which increased by Rs 5,338 crore in FY2002 compared with Rs 2,655 crore in the previous year. The higher exposure to retail lending has come at the cost of credit to industry. Compare the 32.6 per cent of incremental non-food gross bank credit that went to medium and large scale industry five years ago, in 1996-97, WITH the 17.7 per cent that went into the segment last year. Or consider the 13.8 per cent of incremental non-food gross bank credit that went to small scale industries in 1996-97 with the measly 2.2 per cent that went into the segment last year to realize how lending has changed in the last five years.
COMPOSITION OF RETAIL CREDIT (Figures in brackets indicate percentage to the total) Rs. In crores
44) 5566 (1.D.11) 536727 (100) Banks With Large Network Actuals Bank April 01 ICICI Bank 510 UTI Bank 303 HDFC Bank 207 IDBI Bank 77 GTB 101 Total 1234 Source: Annual Report and websites of respective banks March 02 1000 480 410 225 200 2313 N.54) 4 other non-priority sector personal loans 15409 (3.RBI Mar-01 16143 (3.R 5 .36) 18064 (3.84) 5 sub-total 35510 (8.84) 469153 (100) Mar-02 22346 (4.31) 1520 (0.36) 54283 (10.52) 2 Consumer durables 3855 (0.S.M.I.L.19) 1697 (0.28) 23402 (4. No 1 Type Housing Mar-00 14100 (3.RETAIL BANKING Sr.86) 6 Gross bank credit 400818 (100) Source: Report on Trend and progress of Banking in India 2001-02.85) 41470 (8.16) 7015 (1.96) 3 loans to individuals against shares/bonds 2146 (0.
D. facilitating services are needed so that the core service can be used.R 6 . and supporting services exactly discriminates the service package from the services of competitors.S. facilitating service.L.M. N.I. Core service is the reason for being in the market.RETAIL BANKING Retail Banking Functions available in India A banks retail offering can be broadly categorized into Core service. and supporting service.
pension schemes Current account Savings account Time deposits Safety vaults Additional insurance facility for family members savings Counseling on post retirement Services to senior citizens Debit cards Credit cards Telephone banking Internet banking Supporting services Making payments at door step N.R 7 . educational loans Current account Savings account Time deposit account to Time deposits Delivery of loan at promised time period Interest rate option: Fixed/floating Flexibility in pre-payment of loan Counseling on Real-estate markets Legal services for documentation ECS for payment of loan installments Insurance products: Life insurance. housing loans.S.I. personal loans.RETAIL BANKING Categorization of retail bank services: Core services Payment services Facilitating services Cash Foreign Currency Requirement Traveler Charges DD/ Bankers Cheque IT Current account and savings account EFT ATM card Standing instructions from customers for making payments Inter branch/interbank transfer of funds Safety vault Telephone banking Internet banking Conversion of excess balance Loan products: Consumer loans.D.M.L.
Sector Analysis Market size is Rs.L. newly employed or low salaried and Parents of young adults.20000 Profile Young. More influence is amongst the people who aspire to buy a two or four wheeler for improving their social status. Self-Employed. People with families.R 8 . Major Influencers – Dealers. to start new business. 7500 crore next only to housing segment N. higher middle class. DSA Newly employed people are more attracted towards this loan as people like to have more in very short time.M.D.RETAIL BANKING OVERVIEW OF MAJOR CATEGORIES OF RETAIL OFFERING Auto Finance CUSTOMER PROFILE Average customer age is less than 30 yrs. Small businessmen to enhance their services. settled job. ambitious.) 3000 – 8000 10000. Three Wheelers & other MPV’s ( Business Use) Heavy Vehicles Businessman & Self-Employed Income Group (Rs. office going or businessman.I. Target customers can be classified into the following income groups: Vehicle Category Two Wheelers Cars & other MPV’s ( Personal Use) Cars.S.
Increase in GDP growth. motorcycles and scooters has registered good growth It will also provide a boost to the auto manufacturing sector. This has proved to be advantageous for customers also. Banks and NBFCs have tie up arrangements with the automobile dealers for making available vehicle finance.R 9 . increasing income levels .I. HSBC. Competition The sector offers intense competition among players. They can complete all the formalities with less paper work at the auto dealers’ showroom itself without going to bank.RETAIL BANKING About 75% of the vehicles especially the cars sold in the country are through consumer loans schemes.S. Poor urban transport in many areas. Nearly 3 lacs second hand cars have been financed. Major competitors in the sector include ICICI. Infact on account of liberal financing by banks. SBI. Default rate for car loans is around 1 %. Market Leader N. Increased income levels and changing lifestyles. The factors that propel growth are : Low interest rates. HDFC etc.L. production of passenger cars. Even for second hand cars finance is available.D.M.
This approach aims to minimize overlaps between two segments by categorizing customers into various segments based on the stage of life they have reached. For eg: The target market for auto finance are people belonging to the age group of 28-35 yrs. Consumer Credit N.. 2002 was over Rs. ICICI banks retail portfolio as on September 30.61 billion. Every bank has its unique segmentation and targeting strategy.RETAIL BANKING The auto finance market is led by ICICI.R 10 .M.S. 77. This has helped them to decide which segment is to be targeted for which retail offering.D. ICICI’s Segmentation Strategy The ICICI bank in India has adopted ‘Life Stage Segmentation Strategy’. 134. having a settled job or business and belonging to middle class.35 bn on March 31. ICICI is also adopting a strategy of creating a liability based product along with a asset based product and vice-versa.L. ICICI bank funds about 15 % of cars that are rolled out. as compared to combined retail portfolio of ICICI and ICICI bank of about Rs. The banks philosophy is to have product idea for every stage of an individual’s life from childhood to retirement and the bank has a wide product range. Similarly ICICI also follows a segmentation strategy to divide its market into strata’s. This helps them to decide upon their target audience and what are their wants and needs.I. Market Targeting Strategy: Based on the Life Stage Segmentation Strategy ICICI has divided its market into various segments constituting people from different age group and income class. 2002.
Consumer loans are normally taken by people buying new houses. medical expenses etc.RETAIL BANKING Consumer credit sector is growing at 15% Easy credit terms Consumer credit encompasses extension of loans for white goods. There are nearly 12 lakh outlets contributing to Rs. is on the rise. 3000 . Basic understanding of middle class drivers is a must. return is high and at the same time competition is low.14000 Cr to the GDP (about 1. educational loans. washing machine. This explains the relatively higher rate of interest.10000 p.S. Credit Cards: N.M. Usually availed by young married couples but with the change in people’s perception about loans every strata of the society is getting attracted to Customers normally belong to middle class families.L.I. Default rate is a bit high at 3%-4%.D. finance for meeting travel. dish-washer. fridge etc. Banks also offer loans through tie-ups with corporates. Customer Profile Customers in the income bracket of Rs. For unsecured loans. so the target customers are mostly those people who take housing loans. cell phones. AC’s. 35000 Cr are in the pipeline.m.2% of GDP) Further investments of Rs.R 11 . People aspiring to improve their standard of living are normally attracted towards this loan. Demand for loans for acquisition of TV.
really represent just one type of card. Yet. credit cards. Traditionally used by rich people to avoid carrying heavy cash. There is a large middle class segment who are prospective cardholders and cannot satisfy the normal criteria for issuance of cards. Many big players of the market are averse towards cities other than tier-I.RETAIL BANKING Mention cards and most people will think of credit cards.M.5 bn cardholders in India but the average amount spent is very low.R 12 .I. A debit card is simply used as substitute for cash or check payments Consumer profile Credit card users generally belong to the income bracket of Rs. Other cards include debit cards.D. 90. N. Sector Analysis: Card industry has migrated from paper-based to terminal-based as a part of risk administration.S. slowly people in India are getting acquainted with the plastic money culture. Tier-I cities are highly targeted by multiple issuers and acquirers. However.a. A charge card carries all the features of credit cards except that you cannot defer your payment to the card company.L. There are about 5. popular as they are. smart cards and charge cards. Most of the middle class people do not go for credit cards because they do not want to fall in the debit trap in view of their low income levels. which are accepted as a payment device at over 20 million shops worldwide. A smart card is used to store cash in an electronic form.000 p. and above.
loyalty points etc.000. ICICI. The potential is anticipated at 40 million. growth at 20-25 % p. SBI. Other important players in the sector are HSBC. Card business is popular on account of its wider acceptability Credit card usage also entitles holders for attractive bonus. Credit card culture pioneered by foreign banks initially like Citibank. Credit cards have increased from 5 lacs in 1992 to 60 lacs in 2002 (avg. (which is less than 1% of total personal consumption spending in India.RETAIL BANKING although tier-II cities have a potential of being a promising markets for credit cards. in our country. N. Card business is a very potential and fast growing market is no where near the market potential. HDFC Bank. as compared to 30% in US. incentives. There are 6 million cards in use. StanChart etc. The debit cards usage is also becoming popular with a card base of one million.R 13 .D.I. another late entrant has reached a card base of over 70.M. SBI.) Credit cards in India are used more as a transactional investment rather than as a medium of servicing credit. State Bank of India. ICICI Bank has a card base of 9 lacs and 6 lacs respectively. UTI etc. a late entrant has already issued 9 lakh cards.a.18000 Cr.S.) The average annual spending through credit cards is around Rs. Payment habits have undergone a change. It offers an attractive interest of 30% to 36%. Citibank Suvidha credit card is also turning out to be a great success story. Competition Banks in India have realized that the credit card business need not remain an exclusive preserve of foreign banks like Citibank or Standard Chartered Bank.L.
Self-employed people due to lack of proper identity (i. a suitable banking product is required.L. there could be great success awaiting them.S.a.e.03 14 ALL OTHERS Segmentation. Census of 2001 shows that India has 423 towns (Eight Metros. 396 Towns). If only these banks becomes market savvy and exploit branches to the hilt in issuance of credit cards. The network of branches does not seem to be effectively utilized for marketing by Indian banks in credit card business. Similarly.RETAIL BANKING There is a case for reduction in the rate of interest on debit balances from present level of over 30% p.M. which makes the housewife to feel liberated and empowered. Interestingly.88 9. Banks have to design suitable products to meet the requirements of rural rich and rural poor. The potential segments which many banks have not explored so far are selfemployed people and housewives. either salary certificate of PNR number) are still borrowing at a higher rate and banks are no t assessing the credit risk premiums properly.R 14 . Andhra bank and HDFC bank rather than any other foreign banks have taken positive steps in this regard. N.77 16 CITIBANK STAN CHART SBI HSBC 5. 19 Mini Metros. and that financial products are very rare for urban poor and low salaried persons. CREDIT CARDS MARKET SHARE (in lakhs) 15.I.D. The survey of NCAER shows that rural India is gradually possessing variety of consumer durables and electronic goods.
R 15 .I. its trends.L. the major players involved and the prospects of the industry going forward. In this article we look at the nature of this industry. This is apart from the numerous banks that have entered in to the fray.S.Nesting becomes a lucrative business If one were to study the sector-wise performance over the last five years. The housing finance industry is estimated to be worth nearly Rs 330 bn (FY02) and is estimated to have grown by nearly 28% compared to FY01. the housing finance industry has outperformed everyone’s expectations. Loan disbursals have grown at a CAGR of over 35% in the last five years.RETAIL BANKING Housing Loan .M. N. A huge deficit of nearly 40 m (FY02E) dwelling units is likely to ensure that the robust growth rates in this sector will continue in the future.D. But the industry is still fragmented with a large number of players spread across different parts of the country. There are nearly 383 HFCs or housing finance companies in the country currently.
Insecurity of staying in rental houses. These customers generally are in the income bracket of Rs.I.RETAIL BANKING CONSUMER PROFILE Customers normally belong to age group of 25-35. and above. 8000/. DINK . Industry in Transition Demand for this category is picking up due to N.m.e.R 16 . both the husband and spouse earning. Indian middle class forms the major chunk of the customer portfolio.M.S. Primary influencers in a housing loan decision are Tangible Factors: Builders Housing Estate agents Banks Friends & Relatives Intangible Factors: In India. Sense of Belongingness. owning a house has a high social regard.‘double income no kids’ i.D.L.p. Normally availed by : Newly married couples Families breaking up into nuclear families People aspiring to acquire higher status and improved standard of living. The average consumer age is 31 years.
choice or option for fixed/floating interest rates etc. The emergence of a new class of families called DINK or ‘double income no kids’ has played its part. interest on reducing balance method. Changing demographics of the Indian populace has also played an important role in the development of this industry.25-8. Canfin Home. Fall in interest rates has changed the way the salaried class view housing loans. There is very stiff competition in the matter of interest rates.R 17 . Bank of Baroda etc. More hassle-free. SBI.5% now.RETAIL BANKING Steady fall in interest rates.5%).rate cuts are announced at very frequent intervals. 000 Cr.D. Earlier.40. Offer of free insurance cover for various risks. Competition The key players are HDFC. LICHF.M. thereby making loans cheaper.L. ICICI. which has now come down to just 8-10 years' salary. The interest rates on housing loans have declined from average 1718% in 1994 to 7. N. houses would cost on an average 20 years of salary. Size of the loan varies from Rs.S. 1 Cr. Income tax shelters on interest paid.I. 2 lakhs to Rs. Increased start-up salaries. Average tenure of housing loans is 15 years Lower default rate is a big attraction for banks to take-up to housing finance (default rate is just 0. Aspirational changes in lifestyle. The market size is expected to grow to Rs. Offer of various incentives in the form of low or no charges for pre-closure of loan-lower processing / administrative/ documentation charges.
N. The graph above gives us the breakup of market share based on outstanding housing loans as on March 31. It is easier for banks to appraise/assess as they look into fewer aspects like background.M. property documents and age of the property etc. Among banks. banks have garnered close to 35% share of the housing finance market by offering competitive rates of interest. previous track record.R 18 . Currently. employment. experience.S. a brief view at the level of fragmentation in the industry is of significance.RETAIL BANKING It provides a big impetus for housing construction activities also-growth in infrastructure industry. What is significant is the fact that banks have stepped in to the domain of these HFCs and are capturing market share of the incremental loans disbursed. copy of IT returns. 2002. Transaction cost is also low. But in terms of the housing loan assets.D. The split up pie of the market share indicates that HDFC is still the market leader followed by SBI.I. LIC Housing Finance limited (LICHF) occupies second spot next to HDFC.L. SBI and ICICI Bank have been the most aggressive as far as loan disbursals are concerned. Market Fragmentation Before going any further. number of dependants. proof for pay.
D. N. while banks have shown increased interest in acquiring housing assets.L. Banks have a clear advantage in the field simply because they access the lowest cost funds in India. but in the recent past they seem to have taken a greater interest in building retail assets. the HFCs believe banks cannot match them in a critical area — service. HFCs are unperturbed.6% FY99 17.1% 16. The reasons range from a feeling that banks will lose interest in retail finance after a point to a belief that banks are not geared to servicing a big thrust into housing finance.2% 17.RETAIL BANKING We expect the trend to continue with banks gaining a larger share in incremental loan disbursals. a loan from a bank is less expensive than one from a housing finance company. Performance of HFCs Particulars Growth in income Growth in net profits FY98 15. Among non-banking finance companies.S. Banks have always had subsidiaries handling housing finance.4% 17. In short.R 19 .1% FY01 21. the most significant entrant has been ICICI Home Finance. Despite the overwhelming advantage that banks have. The relatively low risk in a housing portfolio has spurred new entrants in the last few years. Sundaram Finance and Tata Finance launched housing finance subsidiaries in the recent past.4% FY00 14.0% 3.M. Arguably. As things stand.I.9% Source: NHB % change compared to corresponding previous period New dynamics An important development in the housing finance business has been the entry of new players.
L. between 1999 and 2001. Even here. Dewan's housing loan disbursement grew from Rs 163 crore to Rs 200 crore. low-risk business. Changing Contours The fast-changing environment has had a telling impact on HFCs. is likely to hold firm. between 2000 and 2002. Smaller HFCs that have wide distribution networks can only hope to leverage their reach for a commission. seems to have triggered a determined move to diversify income stream. Despite that. the HFCs are trying to tap new opportunities that have come up. With their geographical spread and customer knowledge.597 crore.D. LIC Housing's disbursements to individuals grew from Rs 945 crore to Rs 1. Dewan is unlikely to grow at LIC Housing's pace in the current environment.8-2 per cent. Using their existing infrastructure to sell other financial products to retail customers has caught the fancy of the HFCs. For instance. Following heightened competition. HDFC feels that its current spread. spreads (difference between interest income and expenditure) have declined over the last couple of years.I. in particular. insurance or commercial banking. On the other hand. a HDFC has the resource base to promote subsidiaries in most other areas of financial intermediation — be it asset management. the bigger players are in a different league. Why Is It a safe Bet? N.S. For example. LIC's superior pedigree and access to resources appears to have played a critical role in larger disbursements.RETAIL BANKING Access to resources: Another differentiator Dewan Housing and LIC Housing Finance both run operations with a profitability level of about 20 per cent.R 20 .M. of 1. The opening up of the insurance industry. Competition has whittled down high margins and changed housing finance into a low margin.
5 per cent of assets had problems. N. the market leader in housing finance. FY02.RETAIL BANKING A house is generally the single largest investment an individual makes in a lifetime. had aggregate bad loans of about 0. a tightly run company such as Cholamandalam Finance reported in June 2001 that 1. thereby ensuring that the business remains one of the financial sector's safest. In terms of dwelling units the Urban Affairs and Employment Ministry has stated that cumulatively India will have to add a minimum of 6.D. None of the factors that have thus far made home loans one of the safest deployment avenues is likely to change in the near future.81 per cent of its portfolio on March 31.M. had aggregate bad loans of 0.5 per cent in March 2002.5 m houses per year to add 33 m houses in order to bridge the current gap. Thus. Corporation Bank. If they lose possession of a house.4 per cent of gross advances in March 2001. THE relatively negligible risk in housing finance is best illustrated through an example. Among non-banking financial companies (NBFCs). Moreover.e.I. At the end of the ninth five-year plan period i. had an aggregate bad loan of 5. the emotional dimension of a house makes it intrinsically safer for a lender. it would mean a lot of personal wealth slipping out.5 m per year. one of the soundest banks in the country. a much smaller company. a portfolio of housing assets seems safer than a mixed portfolio that other financial intermediaries have. Kya Hoga Next?? Prospects of the housing finance industry look encouraging mainly due to the fact that the gap in demand and supply has not been corrected adequately. Dewan Housing Finance. 2001.R 21 .S. HDFC. At the other end of the spectrum. the shortfall in dwelling units was in the region of 40 m.L. At present the supply of houses stands at close to 2. Another factor that adds to the safety of the loan is that most borrowers have a significant level of personal money invested in a house.
6 FY81 16.0 14.RETAIL BANKING Apart from that the Indian economy may have reached a stage where interest rates may continue to remain soft over the long-term.D.R 22 .9 FY01E 12.M.3 FY91 14.4 Source: NHB N.8 6.L.0 23.6 3.I.6 19.S.7 8. Housing shortage continues (million units) Rural Urban Total FY71 11. This is likely to ensure a steady demand for housing loans.2 22.3 7.
RETAIL BANKING SWOT ANALYSIS ICICI BANK STRENGTHS WEAKNESSES Retail banking supermarket with the ability to cross-sell entire range of credit products. Excessive focus on non-branch distribution channel reducing the scope of personal interaction needed for the sale of retail products.M.L.R 23 . Innovative products Technological superiority Wide distribution High top of mind awareness due to aggressive advertising Strong Credit controls High Customer Service Standards Economies of scale through growing volumes.I. Number and spread of branches is very low as compared to PSU banks.D.S. 24x7 service levels Efforts are concentrated more towards the urban consumers thus ignoring the rural counterpart. N.
StanChart etc. Along with the Home Loan.I. LIC Housing etc. Rapid increase in the retail loan market size to the tune of 30 – 40 % LATEST HAPPENINGS Of late banks are coming up with innovative product offerings and promotion schemes to tie up old customers and attract new customers.S. lots of Non Banking Financial Institutions have emerged and have eaten up the banks’ market share. Some of the innovative offerings are listed below: Standard Chartered ANZ has launched the Home Saver Account. The bank claims that the effective interest rate gets reduced by upto 45% because of this scheme. competition from Citibank. Of late. Citibank N.D. Stiff competition in the housing loans segment from HDFC. The excess balance in your savings account will earn interest that will be adjusted against your future EMI payments. Educating people by way of advertisements might help competitors to reap the benefits.R 24 .RETAIL BANKING OPPORTUNITY THREAT Changing consumer outlook towards loans and related products Rising consumer income levels Increasing banking habits among Indian consumers Being No. your will get a FREE savings bank account into which you may deposit your monthly salary. The EMI for the loan will be automatically reduced from your account. In the Credit card segment.M.1 in the auto finance segment paves the way to consolidate its market leadership across all the segments.L.
in case you get a large lump-sum annual bonus from your employer.M. Should you require money in an emergency at any point you can avail of a over draft on this savings account at an interest rate that is the same as that on your Home loan.L. Oriental Bank of Commerce has started to offer a free property insurance cover of the value of property and a free accident cover of upto Rs. This works out much cheaper than taking an over draft on a normal savings account Dewan Housing Finance and LIC Housing Finance Ltd. matched this offer) Citibank offers a flexi-savings account to reduce your cost of borrowing. GICHFL gives Consumer loans for purchase of home equipment at the same interest rate as the home loan to customers at rates of interest that N.D.I.S. The bank will automatically open a Saving Account from which you can give standing instructions to deduct the EMI payments for the loan.R 25 . Gives a free personal accident cover along with the loan. Most banks require that you present a guarantor who will back you up if you default on your loan repayment. the highest from any bank (only Tata Hsg Fin. 5 lacs. The customer has to be a housing loan borrower for the period not less than 6 month with a good repayment record FREE DOUBLE PROTECTION PLAN in the form of Personal Accident Risk Cover and Property Insurance GIC Housing Fin. Citibank gives home loans upto 90% of the property value. It can often be embarrassing to ask friends to stand guarantor as most banks do not accept relatives as guarantors. You can then prepay the loan at any point in time and be given instant credit for the same. offers consumer loans to their existing Home Loan customers at a discount to market rates.RETAIL BANKING Offer loans with no guarantors.
D.I.S. HDFC Offer Flexible (Customized) Repayment Schemes. after availing of a loan can approach HDFC anytime thereafter to increase the Equated Monthly Installment which will help him repay the loan faster. The total loan amount including the housing loan can be upto 90% of the value of the home. Flexible Loan Installment and Balloon Payment Scheme Pari Passu/ Second Mortgage Arrangements: HDFC has a tie-up with a large number of Public Sector Organizations and banks which enable us to offer loans to your employees with the flexibility of their spouse also availing a loan from his/her own employer Safe Document Storage Facilities: HDFC has state of art storage facilities.RETAIL BANKING are the lower than other consumer loans. without having to repay their old loan N. In this way valuable documents are stored safely over the period of the loan and are released almost immediately after a customer repays his loan A customer. Customers may also apply for an additional loan amount for the purchase of the new house. The tenure of the consumer loan is restricted to 5 years. keeping in mind the fact that each individual has a unique problem requiring unique solutions. HDFC has developed various repayment options like Step Up Repayment Facility. at various locations where loan and property documents are stored. which are theft and fire proof. Through this scheme customers can apply to have their existing loan transferred towards the purchase of the new home. This gives the customer the option of selling their existing house.L. Home Conversion Loan offered to its existing customers who are interested in moving to a new house.M.R 26 . if they wish to.
2% penalty levied.L.I. The loan amount initially taken must exceed Rs. you will be charged 2% if you refinance the loan from another company Hudco Will waive the last 2 EMI payments on the loan if the customer has a perfect repayment record with no bounced cheques.M. The Administrating fees stand reduced from0.S. Else no guarantor You can prepay up to 25% of the outstanding loan in any year without paying a penalty. HSBC Offers flexible interest rate loans that can be reset every year depending on the prevailing interest rates at that point. earthquake cover and personal accident cover.D. There is a discounted start-up fee for Government employees. This is not available for the Floating rate loan. Free triple insurance . For amounts over that. 10 lacs. N.property cover.RETAIL BANKING The fixed rate loan can be converted to floating without any penalty charges.7% to 0.R 27 . The new interest rate will be applicable for the rolling one year Guarantor is required only for loans more than Rs. 5 lacs and no prepayments where to have been made during the tenure of the loan. the floating rate loan has a 1% prepayment penalty. However. Each prepayment has to be at least 10% of the outstanding loan.5% only. However. given free along with the loan ( not available for the Floating rate loan) You can prepay the entire loan in any year without any prepayment penalty.
R 28 . Free accident death cover for the owner Special 100% funding for select properties Higher eligibility for self-employed professionals through segment-specific schemes LIC Hsg Finance Ltd.RETAIL BANKING ICICI Launches a 30 year tenure home loan. Avoid this penalty by prepaying up to 99% of your loan if need be Tata Hsg Finance Offers Home Loans up to 90% of the value of the property and 100% in some new projects.M. Most banks charge as high as 2% as processing and administrative fees Prepayment is 2% if the entire loan is pre paid else it is 0%.S.5% for loans covered by a life insurance cover that is taken from LIC. You can repay up to 33% of the outstanding loan in any year without paying penalty. The life cover must be taken for a minimum period that covers the tenure of the Home Loan SBI Offers Home Loans with no start-up costs. N. else 2% charge on pre paid amount. the longest available ICICI also launches a variable rate loan with a monthly rest basis versus the regular fixed rate loan that is on an annual rest basis No guarantors are required for loans up to 20 years in most cases No pre payment fees for any part payment as long as the loan is not fully retired.I.L. will lower quoted interest rate by 0.D.
RETAIL BANKING Prepayment penalty of 0% for up to 4 prepayments in each year.S. The original EMI cheques will be used by IDBI to recover the loan amount from you over the remaining tenure of the loan. Free accident and property insurance. The sharp rise in the unaided recall of Private Indian banks is testament to the aggressive advertising and marketing drive of these players over the past one year A reading of the list of top 10 banks in terms of recall shows a doubling of the number of Indian investors who are now aware of the Indian private banks like N. Advertising: Private Indian Banks have managed to create a greater awareness about themselves over the last 2 years.D. The premium payable for a Tata AIG Single Premium Life Cover can also be included in the loan amount sanctioned. The entire loan can be retired without incurring any penalty. If you have taken a fixed rate loan at a high rate of interest a few years back.L. the fifth round of a syndicated study by ORG-MARG on the investment and banking habits and preference of the Indian investor.M.R 29 . according to the findings of the latest round of INVESTRACK (V). You will not get the benefits of any further fall in interest rates in this product. You will also get free gifts to compensate you for the difference as the old and new EMI. then you can enter into an arrangement with IDBI bank to transfer the loan to them at the current lower rate of interest. IDBI Bank offers balance transfer scheme.I.
is an important medium of making the prospective consumers aware of the various products as also the players offering them.S. banks are opting for advertising to gain strategic differentiation. Advertising by banks has been a recent phenomenon.RETAIL BANKING ICICI Bank and HDFC Bank compared to two years ago. in the retail banking industry.L. An analysis of banks’ advertising brings out the following features: A major chunk of total advertising spend belongs to the private & International banks.R 30 . Although it has only a 6% influence (based on our primary research findings) in the purchase decision it plays a major role in induce a customer to include the advertised bank in his consideration list. 51% of Indians are now aware of ICICI Bank and 42% are aware of HDFC Bank compared to 27% and 26% respectively when the last round of INVESTRACK was conducted.I. Unaided Recall of Banking Brands Bank Brands SBI Canara Bank ICICI Bank PNB BoB BoI HDFC Bank Citibank Central Bank 2000 82 % 53 % 27 % 47 % 48 % 44 % 26 % 37 % 42 % 2002 83 % 54 % 51 % 49 % 49 % 44 % 42 % 36 % 36 % Advertising. Realizing that product advantages are not any more sustainable. While recall for the other banks that are part of the top 10 remains largely unchanged.M. N.D.
R 31 . This conveyed a message of the bank being as popular and famous as the celebrity. ICICI and HDFC head the fleet of banks in terms of their advertising spends.S. N. The advertisements have both factual as well as emotional appeal.RETAIL BANKING Another observation reveals that banks with less penetration have higher advertising spends. Message: With the shift in positioning there has also been change in the message conveyed from service focused to customer interest focused. It is the first to sign up a celebrity ‘Amitabh bachchan’ for its advertising. The international banks are striving to achieve a local appeal in a bid to woo consumers The following is the summary of a few banks’ advertising strategies: ICICI Positioning: The bank’s initial positioning was mainly on service factor and now this has changed to a customer’s interest focused and a friendly bank.I.M.D.L. The private banks focus on cashing upon emotional needs of a consumer whereas public banks stick to traditional advertising focusing only on the product features. Television and hoardings seem to be the preferred mode of advertisement across all banks.
M.L. anticipating customers growing needs and designing products accordingly. Easy life – the fictional character in the ICICI ads is the first brand icon associated with any bank.RETAIL BANKING Mr.R 32 .e. Message: The bank is trying to promote its global expertise to the Indian customers.I. newspapers. HSBC Positioning: The bank’s positioning conveys an international appeal to the local consumer.S. magazines. Besides this. i. It is also the first bank to address the emotional appeal and attach it to the physical appeal. ATMs also form an effective advertising tool as their mere presence makes the consumer aware of the bank.D. Media : N. ATM machines are also effectively utilized to cross-sell the bank’s retail offerings to its already existing customers. Media : The general preference is for television. service levels at par with international standards. radio etc. hoardings.
Media : The most preferred medium by the bank are hoardings and print media.RETAIL BANKING As far as media is concerned HSBC has more concentration on print media as compared to other mediums.L. Message: The bank’s presence in the housing sector for a fairly long period is portrayed in its advertisements.” ”Poised for higher growth “ N.I. They also focus on promoting the simplicity in work procedure.D. HDFC Positioning: Positioning of the bank conveys Expertise service. superior service. grow to service.S.R 33 .M. They rely on word of mouth and goodwill which they have created through 25 years of service. The following table shows PUNCHLINES of some banks:- BANKS CANARA BANK INDIAN BANK PUNCH LINE “Service to grow. Their ads also strive to bring the bank out of the ‘only housing’ image. It tries to address the financial needs of the consumers.
RETAIL BANKING SBI BANK HDFC BANK HSBC BANK INDIAN OVERSEAS BANK DENA BANK ICICI BANK VIJAYA BANK FEDERAL BANK IDBI ORIENTAL BANK OF COMMERCE DHFL ”With you.M.S.R 34 .I. Get ahead” “Where every individual is committed” “The friendly housing loan people” CONSUMER SURVEY RESEARCH OBJECTIVE Top of mind awareness of consumers for banks offering various retail products. Factors influencing their purchase decision. To study the comparative influence of various mediums of advertisements in creating awareness amongst the consumers.all the way “ “We understand your world” “The world’s local bank” “Good people to grow with” “The trusted family bank” “May I help you” “A friend you can bank with” “Your perfect banking partner” “Plan ahead. N.D.L.
M.S.L. Sample Size A random sample of 100 were administered with the questionnaire and responses collected. Mira road. Data relating to age was collected. Churchgate and Andheri regions in Mumbai. Research Area The research was carried out at Borivali. RESEARCH METHODOLOGY An exploratory research was conducted in order the study the consumer perception about various banks offering retail products and the banks they opt for.D. Respondents’ profile Data was collected from respondents across all age and income groups.R 35 .I. Based on the nature of retail banking products age groups were identified and classified as follows: N.RETAIL BANKING To find the immediate competitors in the minds of consumer for every retail product. This segmentation helped us to gain insights into the perception and preferences across all age groups.
earning <5000 5000-8000 8000-1 5000 >1 5000 27% Proffessional Profile 9 7 Students Salaried Businessmen Retired 29 Retail products being also designed for students and retired people.RETAIL BANKING Majority of the respondents belonged to the age group of 25 – 40 17% 15% 1 8-25 yrs 25-40 yrs years. 800015000 constitute the major chunk of the respondents using retail product. they were considered for the survey. 23% 45% 40-55 yrs 55 yrs & above Respondents earning Rs.S.D. The reason associated with it is that this group is the highest user of retail offerings. 30% 13% Income Profile 15% 15% Non.I.R 36 .L. This income group qualifies almost all eligibility criteria of retail offerings.M. 15 N.
S. DATA INFLUENCING FACTORS ANALYSIS 15 Word of mouth Goodwill N. The Questionnaire consisted of suitable combination of Rating Scale. Sources of Data Questionnaires were administered to people with experience of any retail offering. Data Collection Tools Data was collected using Questionnaires.R Advertisement Interest rates Processing 40 35 30 25 % 20 15 10 5 0 35 37 The respondents were asked to rank the following factors 7 6 time 37 Factors . An in depth interview was also conducted while administering the questionnaire.I.L.D.M. Ranking Scale and open ended Questions in the level of importance. currently using or used in the past. Secondary Sources: Data was collected from the various websites from the internet as well as Journals of Marketing.RETAIL BANKING Salaried and businessmen being the major users of retail users of retail products.
M. In our survey majority of the respondents Housing loan 21% Retail Products Availed Others 11% credit cards 25% had availed Vehicle loan followed by credit cards.L. The responses for different retail products were as follows- N.D.R 38 .S. that’s the reason why processing time is considered as most valuable factor in consideration list.I. This is the stage where people try to bring alive their aspirations of having their own home and vehicle and hence these loan constitute major chunk of retail product availed by the respondents. BANKS CONSIDERED FOR RETIAL OFFERINGS Respondents were asked which banks they considered for purchasing a retail offering before selecting a specific bank. In our survey majority of the respondents belong to the age group of 25-40 and majority of them are Personal loan 10% Education loan 6% Vehicle loan 27% salaried people.RETAIL BANKING according to their preferences in the extent to which they influence their purchase decision. Time is the most valuable factor in today’s world of hectic schedules. Majority of the respondents considered processing time to be the major influencing factor for making purchase decision while interest rate forms a close second.
D.L.R HSBC 18% 39 . ICICI forms the major chunk in the HDFC 25% SBI 9% consideration list for vehicle loan followed by HDFC.I. 25 years of superior service has helped HDFC in creating goodwill in the mind HDFC 37% SBI 12% of people and has helped the bank for consideration. ICICI has created a place of its own in the mind of customers by ICICI 35% Banks Considered For Vehicle Loans OTHERS 16% CITI BANK 15% its heavy advertisement and superior service in every category of retail offering. Banks Considered For Credit Cards OTHERS 11% ICICI 16% STAN CHART 20% CITI BANK 35% N.M.RETAIL BANKING Banks Considered For Housing Loan OTHERS 28% ICICI 23% Majority of the respondents considered HDFC and ICICI for availing housing loan. Through aggressive advertisements and superior service ICICI has created a major place in the consideration list.S.
Being the first bank to launch credit cards and through aggressive advertisements in the past CITI BANK has created awareness amongst the customers and by providing superior service it CITI BANK still acquire major share in the consideration list.S.RETAIL BANKING Majority of the respondents considered CITI BANK for credit cards followed by STAN CHART and HSBC.R 40 .D.M.I. Banks Considered For Educational Loan DENA BANK 8% OTHERS 21% CORP ORATIO N BANK 5% SBI and HDFC form the major chunk for consideration in this category followed by SBI. Banks Considered For Educational Loan DENA BANK 8% OTHERS 21% CORP ORATIO N BANK 5% HSBC 9% HDFC 22% SBI 35% N.L. Interest rates being the major factor for educational loan PSUs have the HSBC 9% HDFC 22% SBI 35% competitive edge due to low interest rate.
R 41 .I.S.D. being an old and experienced player. Customer’s awareness of SBI through various Billboards / Hoardings 17% Word Of Mouth 26% Radio 3% Television 19% Awarness Of SBI Through Various Medium media was measured. SBI. AWARENESS OF BANKS THROUGH VARIOUS ADVERTISING MEDIUMS Awareness Of ICICI Through Various Mediums Billboards / Hoardings 17% Television 35% ICICI in general has a high level of awareness among the people owing to its extensive advertising. Low interest rates and an extensive presence in varied locations seem to be the primary reason for this. awareness through television is the highest level followed by newspapers.M.RETAIL BANKING SBI outrages other banks in the consideration list for educational loan. has immense New spapers & Magazines 35% awareness through the word of mouth media. N. Word Of Mouth 18% Radio 3% New spapers & Magazines 27% Among these.L.
OTHERS 10% CITI BANK 19% ICICI 24% KOTAK 13% SBI 10% HDFC 21% HSBC 3% N.D.M.R 42 .I.S. Top Of Mind Awareness For Car Loan The graph reveals that close to fifty percent of the awareness is about ICICI and HDFC.L. The reason for the largest pie is that a large chunk of the TG is also an avid reader of newspapers and magazines.RETAIL BANKING Awareness Of HDFC Through Various Medium Billboards / Hoardings 22% Television 13% HDFC being a private and an aggressive player. especially in the home finance arena. has taken the print media as its stalwart for New spapers & Magazines 39% Word Of Mouth 21% Radio 5% awareness.
GE CAPITAL 15% HDFC 14% HSBC 6% SBI 12% Top Of Mind Awareness For Housing Loan OTHERS 12% CITI BANK 13% ICICI 24% According to our survey HDFC is the clear market leader in the awareness paradigm.L.M.RETAIL BANKING Customers do not seem to regard HSBC as a bank offering car loan owing to its limited advertising about this product.I.D. Top Of Mind Awareness For Personal Loan OTHERS 13% CITI BANK 13% ICICI 27% The personal loan market is a relatively fragmented market with respect to awareness.R 43 .S. This area is also being aggressively HDFC 31% SBI 20% N.
Relation between basic-banking and retail-banking choices The survey also tried to study. analyze and correlate respondents’ decision in selecting a bank for general banking purposes and for availing retail products. Also people have had accounts with the PSU banks as private banks were non-existent earlier.R 44 . N. However due to efficient service.RETAIL BANKING invaded by many other players owing to the increased requirement for homes.S.L. A quarter share of the awareness pie of ‘Others’ can be attributed to a gamut of CITI BANK 24% HDFC 8% HSBC 16% the recent new launches as also the varied co-branded credit cards. competitive rates and a caring attitude people have started to prefer private banks for meeting their retail needs. The reason associated with this behavior is the close proximity and long existence of PSU banks making them safe and trustworthy. besides being one. The findings revealed that people generally prefer PSU banks close to their locality to bank with whereas private banks and foreign banks have higher preference on the retail banking front. Top Of Mind Awareness For Credit Cards OTHERS 21% ICICI 19% SBI 12% CITIBANK is also perceived to be a market leader.D.M.I. and hence are reluctant to change their banks. short processing time.
auto and personal loans. Proceesing time and interest rates are major influencing factor for making purchase decision.S. N.M.I.L. As per survey ICICI and HDFC are to major brand name considered for housing.RETAIL BANKING Conclusion • • • The scenario is becoming highly competitive in every sphere of banking activity.more so u n respect of retail lending.R 45 .D.
I.RETAIL BANKING • • • • • Awareness through television is the highest level followed by newspapers.L. logistics. Lastly maintaining harmony with the environment.indiainfoline. marketing. Bibliography • • • • • Professional Banker Websites of Banks www. True to Infosys cult. New kind of management skills are required to manage the retail lending portfolio.M. bankers do need to understand that: Growth comes from repeat business Repeat business from relationships Relationship from customers Customers relationship based on trust Trust emanates from customers faiths/beliefs and.org Economic times N.S. Banks have to prepare themselves for facing a soft interest regime.rbi.R 46 .com www. The future of banking is dependent on technology.D.
Which bank(s) do you bank with presently? ____________________________________ 2.M.D. Cost Processing time Goodwill Word of mouth _______ _______ _______ _______ N. Rank the following factors according to their weightage in your purchase decision.I.S.RETAIL BANKING QUESTIONNAIRE 1.L.R 47 .
Are you satisfied with the bank’s service? Yes No 8.D. How did you become aware of them? (tick relevant) Banks => Television Newspapers & Magazines Radio Word of mouth Billboards/Hoardings a) b) c) d) 6.RETAIL BANKING Advertisement ________ 3.M.I. Please specify 4. Which banks did you consider in your decision making before buying this product? a) b) c) d) _______________________ _______________________ _______________________ _______________________ 5.L.S. Which bank comes to mind when thinking about car loan ____________________________________ N.R 48 . Which retail banking product have you availed? ڤHousing Loan ڤPersonal Loan _________________ ڤCar Loan ڤEducation Loan ڤOthers. Would you suggest any improvement? ________________________________________________________ ________________________________________________________ ____________ 9. Which bank did you choose and why? _____________________ Reason:_________________________________________________ ________________________________________________________ ________________________________________________________ __________________ 7.
L.I.S. Please recommend a retail product. will be readily availed by you.D. Which bank comes to mind when thinking about personal loan ____________________________________ 11. _____________________________________ N.M. not currently available. Which bank comes to mind when thinking about housing loan. ____________________________________ 12. Would you recommend your bank to someone else for the same product or any other product that your bank offers? Yes No 13. which if offered.RETAIL BANKING 10.R 49 .
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