EXCEL International Journal of Multidisciplinary Management Studies

Vol.2 Issue 1, January 2012, ISSN 2249 8834 Online available at http://zenithresearch.org.in/

INDIAN RETAIL BANKING INDUSTRY: DRIVERS & DOOMS - AN EMPIRICAL STUDY
DR.B.REVATHY*
*Associate Professor, Department of Commerce, Manonmaniam Sundaranar University, Tirunelveli - 627012.

ABSTRACT Banks play a vital role in spearheading the economic development of the nation and are the main stimulus of the economic progress. The highly regulated and directed banking system has transformed itself into one characterized by openness, competition and prudence. This development conforms to the liberalization and globalisation needs of the Indian economy. As gradual up gradation of skills and technology and restructuring and re-engineering processes are attempted by both foreign and private sector banks, public sector banks in India face new challenges. The need to become highly customer focused has forced the slowmoving public sector banks to adopt a fast track approach. The unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look new at their existing portfolio offering. Further, due to exposure to global trends after information explosion led by internet, customers demand better services from their banks. There is shift from mass banking products to class banking with an introduction of value added and customized products. Banks, privately owned or in the public sector have all jumped into retail band wagon. The nimble footed new generation private sector banks have taken a lead on this front and the public sector banks are trying to play catch up. In this context, an attempt is made in this paper to ascertain the extent of the customers‟ awareness and their level of satisfaction regarding retail banking. The study reveals that customers are highly aware of most of the retail banking products except a few like home banking, telebanking and institutional financing. The article identifies the routine operation factors as highly influencing the level of satisfaction of the customers. The study concludes that while retail banking offers phenomenal opportunities for growth, the challenges are equally daunting. How far the retail banking is able to lead growth of the banking industry in future would depend upon the capacity building of the banks to meet the challenges and make use of the opportunities profitably. KEYWORDS: Financial Inclusion, Financial Products, Innovation, Mechanization, Urbanisation. ___________________________________________________________________________ INTRODUCTION Indian banking industry during the course of its evolution and growth has transverse through innumerable twists and turns. The industry has emerged victorious against all odds by its sheer strength. It has braved many challenges, weathered many a storm and withstood many onslaughts and has emerged as one of the dynamic and vibrant industries. The secret of its success lies in its ability to adopt changes in the most admirable manner. Like an oscillating pendulum, the industry has witnessed extremely opposite and diverse conditions over the years. Banking industry has embraced a retail culture; of late it is nothing but yet another

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in . and  multiple customer groups (consumer. demat facilities. auto loans etc. Retail banking is a system of providing soft loans to the general public like family loans. branch. mostly to individuals. Retail banking segment is continuously undergoing innovations. loans against property.  INCREASINGLY AFFLUENT AND BULGING MIDDLE CLASS: About 320 million people will be added in the middle-income group in a period of 15 years approximately.. product reengineering. as well as smaller community banks. The term „Retail Banking‟ encompasses various financial products viz. As the face of the Indian consumer is changing. speedy and objective credit decisions whereas lenders get benefited from increased consistency and compliance. which is now skewed towards retail products. different types of deposit accounts. mutual funds. Net Banking and Mobile Banking.zenithresearch. credit cards. car loans. irrespective of their size. Following changing consumer demographics have led to the need for expansion of retail banking activities in India. January 2012. retail banking focuses strictly on consumer markets. Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. insurance. that is reflected in a change in the urban household income pattern. small business.org. have been increasingly focusing on retail segment for both resource mobilization and lending. Today‟s retail banking sector is characterized by three basic characteristics:  multiple products (deposits. Customers and small businesses get benefited from increased credit access. It caters to diverse customer groups and offers a host of financial services.EXCEL International Journal of Multidisciplinary Management Studies Vol. and corporate). payment of utility bills. housing. auto and other types of loan accounts. Retail banking is usually made available by commercial banks. reservation of railway tickets. ISSN 2249 8834 Online available at http://zenithresearch. adjustments and alignments. as well as through alternative delivery channels like ATMs. The products are backed by world-class service standards and delivered to the customers through the growing branch network.. RETAIL BANKING Retail Banking is a banking service that is geared primarily towards individual consumers. investments and securities). consumer. Phone Banking. It takes care of the diverse banking needs of an individual. insurance. ATMs and other technology-based services.2 Issue 1..in/ proof of its adaptability and tenacity. Internet and kiosk).  multiple channels of distribution (call centre.  YOUNGEST POPULATION IN THE WORLD: Changing consumer demographics indicate vast potential for growth in consumption both qualitatively and 133 www. give the customers a one-stop window for all their banking requirements. the direct fallout of such change is on the consumption pattern and hence on the banking habits of Indians. house loans. Banks. DRIVERS OF RETAIL BUSINESS IN INDIA The Indian players are bullish on the retail business and this is not totally unfounded. Unlike wholesale banking. etc. stock-broking. credit and debit cards.org. The objective of retail banking is to provide customers a full range of financial products and banking services. personal loans.

India and China.  DECLINING TREASURY INCOME OF THE BANKS: The Treasury income of the banks. direct debits and phone banking have contributed to the growth of retail banking in India. which predicted a bright future for Brazil. mentioned Indian demographic advantage as an important positive factor for India. The PSBs have been losing business to the www. With supply far exceeding demand it has been a race to the bottom. has been on the decline during the last two years. Technological innovations relating to increasing use of credit / debit card.org. Earlier the household savings went into banks and the banks lent out money to corporate.  DECLINE IN INTEREST RATES: Finally.  CONTINUING TREND IN URBANIZATION: Urbanization of Indian population is also an important feature influencing the retail banking. January 2012. with the banks jumping over one another to give out loans.org. The consumer has never been so lucky with so many banks offering so many products to choose from. In such a scenario. COMPETITION IN RETAIL BANKING The entry of new generation private sector banks has changed the entire scenario. is now the most important of the lot. internet and phone-banking. with the banks undercutting one another. Now they need to sell banking. ISSN 2249 8834 Online available at http://zenithresearch. ATMs. It will lead to greater demand for retail activities specially retail banking activities. due to increasing affluent with bulging middle class and youngest people in the world. During the 10 years after 1997. The BRIC report of the Goldman-Sachs. anywhere and anytime banking has attracted many new customers into the banking field. retail business provides a good vehicle of profit maximisation.  HIGHER ADAPTABILITY TO TECHNOLOGY: Convenience banking in the form of debit cards. It means that Indian consumers are now shifting from the tendency of buying more and better quality to new services and products. Russia.8 percent and continues to grow at the almost the same rate – not many countries in the world match this performance. A lot of foreign banks have already burnt their fingers in the retail game and have now decided to get out of a few retail segments completely.in 134 .EXCEL International Journal of Multidisciplinary Management Studies Vol. retail loans have put comparatively less provisioning burden on banks apart from diversifying their income streams.  INCREASING LITERACY LEVELS: Due to increase in the literacy ratio. 70% of Indian population is below 35 years of age which means that there is tremendous opportunity of 130 million people being added to working population.  INCREASING CONSUMPTION MINDSET OF INDIANS: Economic prosperity and the consequent increase in purchasing power have given a fillip to a consumer boom. people have developed a taste for latest technology and variety of products and services. decline in interest rates has also contributed to the growth of retail credit by generating the demand for such credit. which had strengthened the bottom lines of banks for the past few years. India's economy grew at an average rate of 6. which was earlier ignored. The nimble footed new generation private sector banks have taken a lead in this front and the public sector banks (PSBs) are trying to play catch up. Considering the fact that retail‟s share in impaired assets is far lower than the overall bank loans and advances.in/ quantitatively. The retail segment.2 Issue 1.zenithresearch.

Taiwan (52 per cent). The public sector and private sector banks who command over 80% market share in the banking industry must seize this opportunity in a big way and respond aggressively to market demands if the growth in retail banking has to be accelerated in the country. there is still much scope for retail banking in India. customers are now looking for alternate avenues for savings and investments such as pension funds. Reserve Bank has increased the risk weight from 100% to 125% in case of consumer credit including personal loans and credit cards. Further interest margins and revenue opportunities have become thin driving force for banks and financial services companies who look for lending opportunities where the delinquency rates on loans are low and risk is spread across a large base of customers. life insurance products etc. ISSN 2249 8834 Online available at http://zenithresearch. KYC issues and money laundering risks in retail banking is yet another important issue. retail loans constitute less than seven per cent of GDP in India vis-à-vis about 35 per cent for other Asian economies – South Korea (55 per cent). SIGNIFICANCE OF THE STUDY The banking and financial services industry in India is in a state of inevitable and rapid transition.zenithresearch. less than 2% was through credit cards. there is a likelihood that the growth numbers seem to get somewhat exaggerated. As retail banking in India is still growing from modest base. 135 www.2 Issue 1. However. PSBs need to figure out the means to generate profitable business in the days to come. The market for banking products and services has become more competitive than ever before. however. By international standards. In future the retail banking industry in India is likely to reach a value of $300 billion by 2012.EXCEL International Journal of Multidisciplinary Management Studies Vol.org.org. A rapidly growing middle class. Moreover customisation of services is fast becoming the norm than a competitive advantage. with an enormous appetite to borrow from banks for a better lifestyle. even if this compounded growth view to increase by another two percent during the next five years.in/ private sector banks in this segment. STATEMENT OF THE PROBLEM It has been observed that the retail finance portfolio witnessed a phenomenal growth of more than thirty percent in the year 2006-07. the risk element of the retail portfolio would remain stable.in . the compounded annual growth rate registered by the retail assets was at over twenty five percent. Retail lending is often regarded as a low risk area for money laundering because of the perception of the sums involved. players are focusing more and more on the retail and are waking up to the potential of this sector of banking. there are lot of issues that need to be addressed by banks to sustain the advantages derived from retail banking. has given banks and financial services companies an opportunity like never before to finance the demand side of the market. Malaysia (33 per cent) and Thailand (18 per cent). It shows that there is lot of scope for growth and development of retail banking in India. After all. Due to the steady fall in interest rates over the last two years. Of all the consumer expenditure in India in 2010. In the last three years. As retail banking sector is expected to grow at a rate of 30%. According to an estimate. mutual funds. The comparison with the west is even more staggering. the corresponding US figure is 20%. These are in fact the challenges that require to be attended on a war footing. January 2012.

In order to gauge the extent of customers‟ awareness towards retail banking services.1 LEVEL OF AWARENESS OF RETAIL BANKING SERVICES SBI Percentage of respondents Sl. Education loan. to ascertain the level of awareness among the respondents about retail banking services 2. No RETAIL BANKING SERVICES IOB Percentage of respondents TOTAL Percentage of respondents 93 40 58 53 28 www. 20 retail banking services ranging from tradition to ultra modern are listed out. to offer suggestions to expand the retail market through improved customer service. Schemes for children. Collecting bill/ cheque/ draft. Mobile banking and Institutional financing. January 2012.org.zenithresearch. Schemes for retired. Home banking.in respondents respondents 1 2 3 4 5 Deposits Locker Personal loan Education loan Schemes for women 54 28 35 33 16 90 47 58 55 27 58 20 34 31 17 97 33 57 52 28 112 48 69 64 33 respondents Number of Number of Number of 136 . Twenty services which are identified. Tele banking. are listed below – Deposits. Schemes for women. 60 customers each from SBI and IOB are selected on convenience sampling method.EXCEL International Journal of Multidisciplinary Management Studies Vol. Branch offices of SBI and IOB at Palayamkottai.in/ OBJECTIVES OF THE STUDY The main objectives of the study are: 1. The sample size is 120. Payment of insurance premium. ATMs.org. ANALYSIS AND INTERPRETATION TABLE . Tirunelveli District are chosen for the survey. Credit/Debit card. METHODOLOGY The major players in retail banking are State Bank of India (SBI) and Indian Overseas Bank (IOB). Housing finance. Personal loan.2 Issue 1. Mutual funds. Electronic fund transfer. Guarantee. to measure the level of satisfaction regarding retail products and services 3. ISSN 2249 8834 Online available at http://zenithresearch. Stock investment. Locker.

. tele banking.org.2 Issue 1. deposits.in Source: Primary Data The table depicts the awareness amongst the respondents regarding retail banking services. But for the other items of retail banking services viz. mutual funds. education loan.zenithresearch. The analysis of individual retail banking services reveals that for certain items of retail banking services viz.2%. schemes for women. January 2012.org.in/ 6 7 8 9 10 11 12 Schemes for children Schemes for retired ATMs Credit/ Debit card Housing finance Guarantee 13 11 56 42 27 18 22 18 93 70 45 30 27 19 14 52 31 43 13 17 32 23 87 52 72 22 28 32 25 108 73 70 31 33 27 21 90 61 58 26 28 Collecting bill/ cheque/ 16 draft Payment of insurance 26 premium Home banking Tele banking Mutual funds Stock investment Electronic transfer Mobile banking Institutional financing 7 10 13 16 fund 17 13 43 9 15 35 29 14 15 16 17 18 12 17 22 27 28 4 10 11 10 7 17 18 17 11 10 23 27 27 9 8 19 23 22 19 20 19 3 32 5 4 3 7 5 23 6 19 5 www. The level of awareness amongst the respondents regarding retail banking services is greater in SBI than in IOB. personal loan. credit/debit card.EXCEL International Journal of Multidisciplinary Management Studies Vol.4% whereas the same for IOB is 35. mobile banking. home banking.. ATM. customers‟ awareness is greater in SBI than in IOB. locker facility. stock investment and electronic fund transfer. ISSN 2249 8834 Online available at http://zenithresearch. children and retired and for housing finance the level of customers‟ 137 . The average percentage of awareness regarding all the 20 services for SBI accounts 38.

vital activities of the banks are covered viz.93 SBI I III IOB RANK 67. Expeditious service and Wide range of services with less cumbersome procedures.57 II III IV V VI I IV VII VIII II www.52 62. January 2012.87 59.52 efficient banking operations Credibility & Accessibility Ease of account opening Computerization of services Introduction of innovative services 70 62.2 LEVEL OF SATISFACTION GARRETT'S SCORE ACTIVITIES SBI Good personal services & Smooth/ 73.in/ awareness is vice versa. LEVEL OF SATISFACTION REGARDING RETAIL BANKING SERVICES To determine the level of satisfaction amongst the respondents regarding retail banking activities. Ease of account opening. The customers are asked to rank their level of satisfaction regarding these vital banking activities.2 Issue 1.62 cumbersome procedures Source: Primary Data The respondents of SBI are most satisfied regarding its personal services & smooth/ efficient banking operations whereas the same scored the III place amongst the respondents of IOB. Duty conscious staff & Courteous behaviour.93 60. Garrett's Ranking technique is applied to rank the responses. TABLE .org..08 IOB 62. Good personal services & Smooth/ efficient banking operations. the same 138 . Computerization of services. Introduction of innovative services.in Duty conscious staff & Courteous 57.58 62. Credibility & accessibility scored II rank amongst the SBI respondents. ISSN 2249 8834 Online available at http://zenithresearch. Credibility & Accessibility.zenithresearch.org.EXCEL International Journal of Multidisciplinary Management Studies Vol. On the whole.12 61. as the awareness regarding retail banking services is satisfactory.43 63.2 behaviour Expeditious service 55.02 VII VIII V VI Wide range of services with less 55.72 61.67 59. retail banking has immense opportunity in a growing economy like India.

101 Time taken to update the pass .015 .205 .696 loan Lay out of the bank Atmosphere of the bank .EXCEL International Journal of Multidisciplinary Management Studies Vol.079 F6 .436 -. No 1 2 3 Component Variables F1 Working hours of the bank Speed of deposit of money .008 .097 .047 -.zenithresearch.071 -.org.192 F7 -0.021 .805 .152 systematic execution Computerization in the bank .047 .147 4 .151 .103 .418 -.157 F5 .819 .058 -. Rotation component matrix.304 -. January 2012.027 -.032 . .162 .272 -.039 5 6 7 Bank's publicity regarding its .031 .org.271 .014 -.771 .157 .785 book Time taken for sanction of .317 .024 8 .816 F2 -.020 .044 -.059 F3 .103 .147 -.023 -.254 -. FACTORS INFLUENCING SATISFACTION REGARDING RETAIL BANKING Factor analysis technique is used to group the variables of the retail banking services influencing the level of satisfaction among the respondents.025 .580 -. the most commonly used factor analysis technique is applied for analysis.047 .038 . TABLE – 3 ROTATED COMPONENT MATRIX FOR THE VARIABLES INFLUENCING THE LEVEL OF SATISFACTION REGARDING RETAIL BANKING SERVICES Sl.166 .184 -.014 .210 -.116 .644 . Final ranking is for wide range of services with less cumbersome procedures in SBI and for introduction of innovative services in IOB.004 -. ISSN 2249 8834 Online available at http://zenithresearch.775 .356 Unambiguous procedures & .156 .098 -.120 .201 .644 12 139 .in 9 10 11 .475 towards the customers Service charges Schemes for IT relief .140 .201 www.44 -.170 .in/ scored I place amongst the IOB respondents.054 .2 Issue 1.040 .011 F4 .143 .227 -.0580 .708 -.107 -.586 .831 -.105 .96 .020 -.063 .035 .069 -.095 services and performance Staffs‟ attitude & approach .

General factor includes location of the bank and bank‟s innovation.033 .org.088 .016 -.244 .023 .142 . Routine operation factor includes working hours of the bank.018 -. 140 www.in . Ambience factor comprises of layout of the bank and its atmosphere.159 regarding the bank services Quick response for queries Location of the bank Bank's innovation Source: Primary Data . Interactive factor includes bank‟s publicity regarding its services & performance and staffs‟ attitude & approach towards the customers.264 . Ambience factor. ISSN 2249 8834 Online available at http://zenithresearch.119 .100 .041 .417 .684 .612 .239 -. Interactive factor.287 . Thus 16 variables of retail banking services are identified as the factors which affect the level of satisfaction of the respondents regarding retail banking services.050 -.020 0. Service charges and schemes for IT relief are covered under situational factor.2 Issue 1. Actually 20 variables of the bank services are chosen for the rotated matrix. Situational factor.167 . Mechanization factor. Staff factor includes expertise of bank employees regarding the bank services and quick response for queries.org.in/ 13 Expertise of bank employees .zenithresearch.085 -. Mechanization factor includes unambiguous procedures & systematic execution and computerization in the bank.108 . 4 variables of low values on the basis of respondents‟ perception are ignored.098 . January 2012. Eigen value and the percentage of variance. Staff factor and General factor.795 .578 14 15 16 Extraction method Rotation method : Principal Component Analysis : Varimax with Kaiser Normalization The above table indicates the rotated factors for 16 variables. speed of deposit of money.073 .70 -.138 . The table beneath depicts the number of variables in each factor.EXCEL International Journal of Multidisciplinary Management Studies Vol. time taken to update the pass book and time taken for sanction of loan. All these 16 variables are short listed into 7 factors such as Routine operation factor.

076 Sl.894 58.139 1. retail banking is going to emerge astonishingly.905 39. higher is the intensity of the factors influencing the level of satisfaction of the respondents towards retail banking services. but as far as acquiring personal debt is concerned.081 5.822 7. time taken to update the pass book and time taken for sanction of loan.564 1.zenithresearch. Kearney.2 Issue 1.. 2. 4 2 2 2 2 2 2 4. Thus the routine operation factor which comprises of the four variables viz. 4.EXCEL International Journal of Multidisciplinary Management Studies Vol.813 52. The percentage of middle to high income Indian households is expected to continue rising. Improving consumer purchasing power.156 1.in OPPORTUNITIES AND CHALLENGES OF RETAIL BANKING IN INDIA As the growth story gets unfolded in India. 3.486 21.697 5.123 10. Eigen value is the highest at 4. a global management consulting firm. speed of deposit of money. T. working hours of the bank.225 2.086 6. is contributing to India's retail banking segment. Higher the Eigen values.417 1. they are perhaps more comfortable than previous generations.727 46.486. ISSN 2249 8834 Online available at http://zenithresearch. No Factors Number of Eigen variables value Percentage variance explained 141 . highly influence the level of satisfaction of the respondents.225 for the routine operation factor. 6. Routine operation factor Ambience factor Interactive factor Situational factor Mechanization factor Staff factor General factor Source: Primary Data Eigen value is computed to ascertain the degree of influence of the factors.097 and the percentage of variance explained by this factor is 5. www. The younger population not only wields increasing purchasing power.in/ TABLE – 4 EIGEN VALUE – LEVEL OF SATISFACTION REGARDING RETAIL BANKING SERVICES Cumulative of percentage of variance explained 1. coupled with more liberal attitudes toward personal debt.org.097 21.591 64.216 1. 5.org.123 31. January 2012. 7. A. The rise of the Indian middle class is an important contributory factor in this regard. recently identified India as the "second most attractive retail destination" of 30 emergent markets. The least influencing factor is 'general factor' whose Eigen value is 1.782 7.

50 per cent in insurance and brokerage. with each bank competing to have a large slice of the cake of the market. of course. ensuring that all bank products and services are available. January 2012. Thus. According to a research by Reichheld and Sasser in the Harvard Business Review.EXCEL International Journal of Multidisciplinary Management Studies Vol. many consumers still prefer the personal touch of their neighbourhood branch bank. which at present is in the nascent stage. Specific challenges include ensuring that account transaction applications run efficiently between the branch offices and data centres.org. CHALLENGES OF RETAIL BANKING FOR THE INDUSTRY AND ITS STAKEHOLDERS: Retention of customers is going to be a major challenge. distributed networks and applications operating properly in support of business objectives becomes essential. and across the entire organization is essential for today‟s retails banks to generate revenues and remain competitive. The most significant challenge is to devise appropriate pricing mechanism.in . consumer protection. Rising indebtedness could turn out to be a cause for concern in the future. 5 per cent increase in customer retention shall increase profitability by 35 per cent in banking business. and 125 percent in the consumer credit card market. Retail lending is often regarded as a low risk area for money laundering because of the perception of the sums involved. ISSN 2249 8834 Online available at http://zenithresearch. providing instant updates to checking accounts and rapid movement of money for stock transfers. Technology has made it possible to deliver services throughout the branch bank network. financial capability. Illustratively. Inspite of availing the services of ATMs and Internet Banking. 2004-05). Besides.in/ The combination of the above factors promises substantial growth in the retail sector. margins etc. Banks must also consider seriously the type of identification documents they will accept and other processes to be completed.. responsible lending. The industry today is witnessing a price war. this dependency on the network has brought IT departments‟ additional responsibilities and challenges in managing. Most of the banks that use rating models for determining 142 www.zenithresearch. the areas of potential conflicts of interest tend to increase in universal banks and financial conglomerates. India's position. KYC issues and money laundering risks in retail banking is yet another important issue. regulation and financial crime prevention. whereby keeping these complex. there are network management challenges. is not comparable to that of the developed world where household debt as a proportion of disposable income is much higher. Expressing concerns about the high growth witnessed in the consumer credit segments the Reserve Bank has. Information technology poses both opportunities and challenges. as a temporary measure. Such a scenario creates high uncertainty. maintaining and optimizing the performance of retail banking networks. long-term savings. competition for clients may also lead to KYC procedures being waived in the bid for new business. at all times. Some of the key policy issues relevant to the retail banking sector are: financial inclusion. Due to bundling of services and delivery channels. access to finance. put in place risk containment measures and increased the risk weight from 100 per cent to 125 per cent in the case of consumer credit including personal loans and credit cards (Midterm Review of Annual Policy. However.2 Issue 1. However. without much of a scientific study into the cost of funds involved.org. banks need to emphasise retaining customers and increasing market share.

However. While retail banking offers phenomenal opportunities for growth. In the west the risk profile can be easily mapped to things and this information can be publicly traded. o Charging very high interest rates /service charges.org.in o Lack of transparency in disclosing fees/charges/penalties and non-disclosure of detailed billing procedure. which is the need of the hour.in/ the health of the retail portfolio do not use them for pricing the products.EXCEL International Journal of Multidisciplinary Management Studies Vol. there is increasing menace of hacking. which is difficult to be checked. the challenges are equally daunting. ISSN 2249 8834 Online available at http://zenithresearch.  Technology crisis: Even though technology lends a supportive hand to the overall development of the banking sector through internet banking. 143 .  Absence of positive credit bureau: One of the biggest impediments in foreign players leveraging the Indian markets is the absence of positive credit bureau.zenithresearch.  Credit card issues: Various undesirable practices are exercised by credit card issuing institutions and their agents.  Rural exposure: Lack of proper infrastructure facilities in the rural area hinders the interest of private banks to access rural areas. Credit and Debit cards etc.  Lack of apt product strategy: Indian banks have shown little or no interest in innovative tailor-made products. phasing and farming through which scanners are creating havoc indulging in cyber crimes on a large scale. This issue will be gaining more importance in the near future. the kind of technology used and the efficiency of operations would provide the much needed competitive edge for success in retail banking business. DOOMS OF INDIAN RETAIL BANKING INDUSTRY  Rural/Agricultural credit: Organized Banking has failed to focus on the provision of Rural Credit or Agricultural Credit as it is very costly to finance micro units in remote areas. www. How far the retail banking is able to lead growth of the banking industry in future would depend upon the capacity building of the banks to meet the challenges and make use of the opportunities profitably.  Deficiency in legal framework: A swift legal procedure against consumers creating bad debt is virtually nonexistent. The products of the West will not work out in our diversified economy anymore. ATMs. phone banking.2 Issue 1.  Unpopularity of credit culture: The spend-now-pay-later “credit culture” in India is just not picking up among rural population. Some of them are: o Unsolicited calls to members of the public by card issuing banks/ direct selling agents pressurising them to apply for credit card.org. January 2012. Technology has changed this by reducing the costs of low unit financing. which troubles the customers.

zenithresearch. it should start from the customer enquiry and continue till the loan is repaid in full. there is a need to provide instantaneous service to the customers.  SKILLED MAN-POWER www. Only experienced manpower can withstand the rigour of administering a diverse and complex retail credit portfolio. Although the players are spreading their operations into segments like self-employed and the semi-urban rich.org.  APPROPRIATE TECHNOLOGY Due to large volumes of business. the most important pre-requisite is the skilled and well-versed employees.in/  Absence of prompt loan repayment culture: Prompt loan repayment culture has not yet set in many sectors of society.in For the efficient management of a large and diverse retail credit portfolio.EXCEL International Journal of Multidisciplinary Management Studies Vol. major thrust is also given only to this segment. Similar to credit assessment. ISSN 2249 8834 Online available at http://zenithresearch. January 2012. Over-dependence on this segment is bound to bring in inflexibility in the business. PRE-REQUISITES FOR RETAIL BANKING One of the prominent features of retail banking is that it is a volume driven business.e. for quick processing of large number of transactions and for the maintenance of databases.  Thrust on the fluffiest segment: All banks are targeting the fluffiest segment i. 144 . Following are the prerequisites to enhance the ability of any bank to administer a large portfolio of retail banking products: STRONG CREDIT ASSESSMENT Once the credit assessment is carried out qualitatively. sound documentation also minimizes the need to follow up at a future point of time.  REGULAR AND CONSTANT FOLLOW UP As follow up for loan repayment is an ongoing process. the need for follow up in the future reduces considerably. excellent technological support for processing day-to-day transactions and maintenance of backups are required for smooth delivery.  STRONG PROCESSING CAPABILITY As huge volumes of transactions are involved.  SOUND DOCUMENTATION Proper and defect free documentation is vital for a healthy retail credit portfolio. the upwardly mobile urban salaried class. An appropriate technological support is a pre-requisite for ensuring growth in retail banking.org.2 Issue 1.

2 Issue 1.  For the efficient management of a large and diverse retail portfolio.  The benefits following out of cross–selling and up–selling will remain a far cry in the absence of robust data warehouse where from meaningful data about customers.zenithresearch. address the issue of alienation from the upwardly mobile.  Banks should leverage effectively on multiple delivery channels (internet. ISSN 2249 8834 Online available at http://zenithresearch. the most important pre-requisite is the skilled and well–versed employees. It can be considered as an unbanked segment. all banks need to make available a basic banking „no frills‟ account either with „nil‟ or very low minimum balances as well as charges that would make such accounts accessible to vast sections of population. It has always been looked upon as a charitable activity rather than a profitable activity. but are also in a position to operate. their preferences. January 2012.org. the earlier facilities should be embedded with services so that customers not only appreciate new technology.in/ SUGGESTIONS TO EXPAND THE INDIAN RETAIL MARKET  To enlist the “unbanked” segment of the society by the service providers is a method to expand the retail market. the time has come for the customer to demand a product that is not currently available in the Banker‟s kitty and the Bank has to literally create customer-specific products.in 145 .EXCEL International Journal of Multidisciplinary Management Studies Vol.  Rural Credit or Agricultural Credit is a segment to be explored. Banker is expected to assume the role of a Financial Engineer. It is this underserved segment should become the focus for the banks. 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.  A full fledged marketing department/division would help in evolving a brand strategy. ATMs etc) to reduce the cost of operations.org.  Banks should allow the earlier facilities to sink into the culture of the customers before any new facilities are launched. their spending patterns.  Now. Banks should follow customer friendly approach to enhance the marketing of their retail banking products. Also. Data warehouse is vital for success in retail banking. Banks should ensure innovative products to suit the needs and requirements of different types of customers. can be mined. To achieve greater financial inclusion. Only experienced man power can withstand the rigour of administering a diverse and complex retail credit portfolio.  It is time to break the myth that public sector banks are not customer friendly.  Banks should lower the minimum deposit requirement for opening new accounts as announced by RBI. etc. Banks should deliver the products and services rapidly in a dynamic market. www.

Ltd. cost reduction and cross-selling. home / electronic / mobile banking.N. REFERENCES BOOKS Bhalla .  Banks should build collaborative relationships to convert bank branches into financial supermarkets.org. Ahuluwalia (2008) “Banking and Financial Services” Adhyayan Publishers. New Delhi 146 www. The scope of generating profit through retail banking rather than through any of the traditional methods has become one of the attractive options to the bank. as a popular saying goes as variety is the spice of life. be it a Indian financial player or a foreign entrant in the retail sector have to adopt a different approach in everything viz. S. (2010) “Banking in India” Surendra Publications. ALP Books.2 Issue 1. Globalization.N.in ..  Simplified processes and alignment around delivery of customer service impinging on reduced customer touch-points are of essence to enhance the sale of retail banking products. New Delhi Pani. micro-planning. Hajela T. However. New Delhi Manoranjan Sharma (2008) “Dynamics of Indian Banking – Views and Vistas” Atlantic Publishers. marketing.org. user-friendly mobile banking applications. New Delhi. technological up gradation. R. prudent pricing. (2009) “Banking Reforms” Anne Books Pvt.EXCEL International Journal of Multidisciplinary Management Studies Vol.zenithresearch. consolidation and want of expertise are drastically redefining the banking taxonomy. the true challenge for the banks in the current scenario is to stand out in the midst of hard-hitting regulations of the apex body. service providers can innovate and offer rich.. CONCLUSION With much scope in the avenues for operations. Banks now need to use retail as a growth trigger. it could be stated that while there are so many layers in the fray. “Banking Crisis in Historical Perspective”. innovation and business process reengineering. customisation. R. New Delhi Hemant. New Delhi Nanda.K. products. ISSN 2249 8834 Online available at http://zenithresearch. a paradigm shift in bank financing through innovative products and mechanisms involving constant up gradation and revalidation of the banks‟ internal systems and processes is called for. In bracing for tomorrow. (2009). Thus the participants. services to hold the Indian market share. coupled with web developments. January 2012.in/  With the effective usage of the cell phone technology. (2006) “Management of Financial Services” Discovery Publications. only those capable of addressing the above suggestions in the most efficient way would emerge successful. V.  There is a need for constant innovation in retail banking. This requires product development and differentiation.

org.EXCEL International Journal of Multidisciplinary Management Studies Vol.. Vol. Nov. New Delhi. Vol – XII. JOURNALS Jaiswal.in . Indian Journal of Marketing. 1. 2007. R.S.K. New Century Publications. R.zenithresearch. & Nettu Singh “Retail Banking: Indian Scenario". 147 www. XXXVII No. New Delhi Uppal.2 Issue 1. Sep.10.10.K & Rimpikaur (2007) “ Banking in the New Millennium” Mahamaya Publishing House.in/ Swami. K. 2008. Jan. Rimpikaur (2007) “Banking in India – Challengers and Opportunities”. Kolkata. Excel Books. 2007 Saurabh Goyal “Retail Banking: An Essence of Present Banking System” Journal of Banking & Finance. (2008) "Commercial Banking in the Changing Scenario”. ISSN 2249 8834 Online available at http://zenithresearch.K. New Delhi. New Delhi Vasant Desai (2006) “Banks & Institutional Management” Himalaya Publishing House. Mumbai. Vol.org. January 2012. No. New Delhi Uppal. Rajni Sofat & Preeti Hiro "Creativity and Innovations in Retail Banking". XVI No. Indian Journal of Marketing. B.

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