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Project Report on Retail Banking in India

MEANING OF RETAIL

Retail means sale of goods in small quantities, it is concerned with buying of goods in small
quantities from the wholesaler and selling them in small quantities to the ultimate
consumers as per their requirements. The person engaged in this trade is called the
“retailer”. He acts as a link between the wholesaler and the customers. In retail trade goods
are sold to the ultimate consumers for personal use and for the use of the business in small
quantities only. The retailer does not specialize in a particular line or a particular product.
Rather he maintains a large variety of goods. Generally, sales are limited to a local and on
a small scale.

MEANING OF BANKING

Banking has come to occupy a pivotal position in a nation’s economy. According to the
modern concept, banking is a business which not only deals with borrowings, lending
and remittance of funds, but also an important instrument for fostering economic growth.

The Banking Regulation Act 1949, defines the term banking as “the accepting for
the purpose of lending or investment of deposits of money from the public or otherwise
and withdraw able by cheque, draft, order or otherwise.” Thus, the essentials of banking
are:

(1) There should be acceptance of deposited.
(2) Deposits should be from the public.
(3) Deposits should be repayable on demand or expiry of a term or after a specified
periods.
(4) The purpose of deposits should be lending or investment.

“Bank” is an institution which deals in money and credit. It buys money from depositors
and sell to the borrowers. It is body of persons whether incorporated or not who carry

etc are some of the privileges extended to the customers by the banks in are eagerness to . repayable on demand and which supplies and facilitates all kinds of exchanges. banks with vision and insight are trying to woo this market through a series of innovative additions to their products. courier pickup for cheques and documents. banks seem to have realized that the only sustainable way to increase deposits is to look at small and middle class consumer retail deposit and not the price sensitive corporate depositors. But during the last couple of years or so. auto loans. It is reported that Indian retail market has the potential to be second only to the USA. National Readership Survey 5puts Indian households with monthly of over Rs. technology and marketing methods. 2 lakhs and above is growing at the rate of 30 per cent per annum. (cluster deposits which can be broken into smaller units to help meet depositors’ overdraft without breaking up entirely). Another reason is the current liquidity the margins are 1 to 2 percent above the prime rate. RETAIL BANKING Retail banking means mobilizing deposit form individuals and providing loan facilities to them in the form of home loans.on the business of banking. According to the survey.5 million. the category of households with annual income of Rs. More and more companies are tapping the capital market directly for finance. This is one of the main reasons for the banks to focus vigourously on the much ignored retail deposits. tele banking network. Fixed and unfixed Deposits. is becoming popular. in retail market they are 3to4 percent. services. extended banking time. With financial sector reforms gathering momentum. credit cards. centralised database for ‘any branch banking’ (whereby the customer can access his account in any of the branches irrespective of where the account is maintained). This used to be considered by the banks as a tough proposition because of the volume of operations involved. 5000 at 4. A bank may defined as a corporation or person which collects deposits from the public. the banking system is facing increasing companies from non-banks and the capital market. No winder. room services (whereby the customers are visited at their residences offices to enable them to open their accounts). automatic teller machines. etc.

retail advances account for a mere seven per cent of total lending. On the assets side. The new private sector banks are making inroads in the markets they serve.cultivate the retail market. A large number of banks and non-banks have launched or relaunched retail products and are attempting to grow their share of the personal financial services market. while competition from non-banks is growing. however. In short. retail banking has gained an irresistible allure for banks because of its apparently higher margins and potential fir growth. older institutions need to revamp their distribution capabilities. As they witness these trends. Corporate Credit. banks have secured sizeable deposits-23 percent of GDP. Many organization like ICICI are betting that a large part of their future growth will come from retail customers. banks realize that they cannot remain passive. Even the term lending institutions have decided that they need to go retail to raise funds. retail banking looks like a cool oasis. Yet. As this disintermediation takes place and competition shrinks margins. a willingness to switch between financial services providers. retail banking looks like a cool oasis. Retail banking is much more than as opportunity to addressing dwindling margins. many non-banks lack the minimum size to make the necessary investments and address the challenges of retail banking. The penetration of products like car loans or credit cards is very low. Customers now have many more personal financial options. Corporate customers rely less on commercial banks every day as other fund raising avenues present themselves. as HDFC is in house loans. RETAIL BANKING-A COOL OASIS To bankers struggling through the shifting sands of corporate credit. In respect. With their large branch networks. With very few focused multi-line banks. and a demand for lower interest rates. It is an imperative to preserve profits and market positions. in the bold new world of retail banking the customer is crowned as king. customer . a growing credit culture. non banks are often significant players in retail lending.

auto loans and credit cards may be more vulnerable to web-based competitors. says the report made available to the Economic Times. cautions that other consumer business such as residential mortgages. here’s a shocker. The moody’s report. most US banks have thin margins or low market shares in these businesses mitigating this impact. WEB IMPACT ON BANKS RETAIL REVENUES: For all those gurus who’ve been predicting that the net will end the business of said banks. Even in the SILICON valley-driven USA. However. at least in the intermediate term. According to a report by moody’s Investors service. . telephone and computers.management capabilities. operating culture. the internet is not expected to impact large US banks’ core profitability or competitive position. The core retail banking business of deposit taking will be sheltered form web-based competitors and margin shrinkage on this business. customer inertia and the relatively limited cost savings available to consumers from net banking. Need for convenient access to physical locations coupled with the advantages of multiple delivery channels like branch. The rating agency is skeptical of banks ability to generate substantial incremental revenues from cross-selling financial products to existing customers via the net. This is despite the despite business being the simple-most important profit source for most American retail banks. compensation system and operations processing. ATM. The reason: the absence of a convenient alternative at present to using cash. consumers need to leave money in transactional accounts. however. Internet is not expected to have a major impact in banks’ retail revenues. are cited as the main factors supporting its view.

Banks offer convenience and choice and the web-based channels of banks have reported rapid growth in the number of customers by retaining current customers. however. The advent of the internet could. With low bank fees for individual transactions and relatively small bank deposits. cautions moody’s. . make convenient physical receipts. the Internet could facilitate an increase in fee income by generating fees from Internet service arrangements like bill presentment and clearing. however have a powerful effect on banks acquisition strategies by creating uncertainty about the value of purchasing large branch networks. inhibition towards paying ATM charges for using another bank’s ATM network by the consumer and time consuming.Banks have to maintain a comprehensive and effective web based capability to maintain their competitive position. the study says. if smart cards or stored value cards or other electronic cash substitute gain popularity. For some banks. alternatives could become more attractive to customers. Customers prefer to use a variety of channels to conduct their banking which is why it remains to be seen whether a business model based solely on internet banking will generate adequate returns and sustain long term competition against conventional banking systems. the opportunity cost in terms of interest income for customers is not material where the deposits are not large. On the other hand. difficult and disruptive nature of switching accounts also contribute to the ‘stickiness’ of retail deposits. The need for customers to take frequent physical receipts. banks might be able to reduce costs of servicing the retail customers by moving them over into a paperless environment. According to moody’s a survey indicated that 35 per cent of Internet banking customer disconnect because they don’t find it convenient. However. make convenient physical delivery of cheques using ATMs.

a revolution that will change the rules and every thing we have understood of the retail market. technology. who will benefit from increased competition through better products. customization to individual needs. Providers of retail products and services will battle for market and market share. the price to the customer will have to be at maximum benefit. Economic boundaries are disappearing. Distribution will be the next key benchmark of success. No matter how brilliant the product you have. Again. The customer will demand (and therefore the provider will have to respond) for greater convenience of access to the product or service and all this at the best cost of delivery. Through innovation in production and delivery and cost reduction strategies. It is battle that will be fought at different levels and the real winner will be the customer. and post transaction service. will be the buzz-words of this thrust. your distribution flexibility will be the customers’ selection parameter. says moody’s. Anticipation. listening and responding to your customers needs. The quality and range of products will expand exponentially –convenience of usage. and the global village is a reality – where the retail customer will have a choice in a manner we may have never imagined. quality of the product and responsive strategies for distribution will also have a link to price. Constraints of location. the use of technology – specifically the Internet-and realigned strategies will drive this important criterion of success. timing. Re-defined methods. financial products and other services. pricing. The intelligent customer will be ruthless with any price distortions. which as a consequence of inefficiencies or market exploitation – his cost benefit analysis will not allow for these variables. Companies will have to innovate and continuously upgrade their products. Efficiencies on this front will be the next item on your report card. . THE RULES HAVE CHANGED As the 1900s come to their close and we look eagerly towards the new millennium.Banks could introduce various incentives to the persuade customers to forego paper statements for the basic savings account and credit card. accessibility etc will all be history. distribution. and a host of other user-friendly add-ons will create a whole new frontier of applications.

exploit and link technology to your business will be the greatest challenge of the new millennium and I am convinced that the retail war will be won and lost on this one aspect. Above all these. It is an intangible. the relationship with the customer starts with the transaction. Technology will perhaps be the single largest driver of this detail thrust. Organisation we have to give equal importance to cost sale needs of customers as the pitch made prior to the sale. (e) Unlike corporate banking. but an organizations attitude to the customer will be the basis determinant of success for any retail operation. being able to recognize the immense potential that technology provides at all stages in the retail chain will be of paramount importance. Being able to keep abreast. . There are interesting and challenging times ahead – the future promises a lot but will also make extraordinary demands. Attitude to the customer will influence all the areas we have discussed and will ensure excellence in each one of them. which (hopefully) is never expected to need post sale service or one which offers the best after sale service if required ? Clearly. (c) Investments in technology are large.Would you prefer a product. I would list attitude towards customer as the single point basis on determining the winner of the race. retail banking involves a large number of small accounts. but more importantly. RISK INVOLVED IN RETAIL BUSINESS There are of course. To leverage. does not and with it. We will have to invest in technology far ahead of immediate needs and be able to anticipate the future direction at a pace we are perhaps not used to. it is not prescribed in a manual nor is it a quantifiable item in the balance sheet. The customer will be the most important aspect of your business and ultimately the winner of the retail war. (d) Operating efficiency level needs to be very high. purely because technology increasingly we influence on the entire chain in a retail business cycle. The entire strategy will evolve around the absolute ability of the organisation to be at the cutting as edge of technology. considerable risks in retail banking. They are : (a) Databases on credit history are large. (b) Collection mechanisms are poor.

Loan 3. SBI which is included in study. Phone Banking . HDFC Bank provide the following service :- 1. In the present scenario HDFC bank Ltd. It has 227branches throughout the India in Rewari city HDFC has one branch also and one ATM’s. (h) The right systems and the right – architecture needs to be put in place first. with lesser hierachy and It is possible for these banks to forget closer ties with customers also. To day customer prefer private banks because they can have personal relationship with the bank personnel. Which have taken decades of option for the old private sector bank to build. These two are also providing the retail banking service. (g) Retail segment is not something you can get into overnight. Debit Card 6. Information technology has enabled many private banks are emerging strong in banking and financial services with the marketing of new product and service based on technological capabilities. Online A/C 5. is a fast emerging bank. (f) Demands on processing capabilities are higher. Apart from the HDFC bank. SBI is the one bank in India. services and ideas. the other bank like PNB. PRODUCT RANGE OF RETAIL BANKING New Private sector banks have great resource mobilizing and asset expansion capabilities which cannot be undermined by the fact these banks volume. Current A/C 2. Corporate Salary A/C 4. Now the emergence of the retail concept of the banking customers are expecting more and better services. These bank are dominating the market with new product. These both are the public sector bank.

7. Bill Pay SBI & PNB Provides following services :- Deposit -Demand Deposit  Current Deposit  Saving Deposit -Time Deposit  Fixed Deposit  Akshaya Deposit  Cumulative Deposit  Pragati Deposit Loan :-  Housing finance for individuals  Car finance  Finance for consumer disables  Finance for Scooter/Motorcycles . Intercity/ Inter Branch Banking 8. Net Banking 9.

 Finance against future lease Rentols  Personal loan to pensioness  Personal loan to serving Army officers. Your first 50 cheque leave are o Offered free. . 10000 only . Govt. This can be as:-  Premium current account – From any branch  HDFC bank Trade .Small business  HDFC bank plus. The regulars an average quarterly balance of the Rs.ATM’s HDFC’S RANGE OF PRODUCT Current A/C:- Under this account a person can deposit and with draw money as many times in a day as he wants .Besides the free ATM card and easy accessibility. & other Employees  Education loan scheme  Advance against life policy  Advance against bank deposits .

The borrowers may with draw the amount of the loan in lamp sum in instalment. HDFC bank provides following loan under the retail banking segment :-  Car Loan (For new and used cars). Loans are granted generally against the security of assets or on the personal security of the borrower.  Loans against securities and two wheelers .Varity of finance schemes New Car loan :- Loan amount : upto 90% Of car value Tenure : 12 to 48 month Personal Loan :. A loan is a specified amount sanctioned for a period of times.Loans :. Car Loan :.To Suits every need. Similarly it may be repayable in lump sum or in instalment.  Personal loan.For anything you have in mind .  Consumer loan.

7000 to 1 lakh (Max 85% of product value) Tenure : 6 to 36 months Eligibility : Salaried and self employed individuals Loan against securities . For HDFC bank A/C holders only.S Two wheelers and Consumer loan :- Whatever your dream. CS. Engineers M. Washing Machine. Eligibility : Salaried. 25000 to Rs 10 lack Tenure :12 to 48 months.B.An overdraft facility .  Holiday abroad  Wedding in the family  Higher education  No security or granter required Loan amount: Rs. HDFC have a scheme  Two wheelers  Personal computer and AC  Durable like TV. individuals. Loan amount : Rs. self-employed doctors and CAS.A. Refrigerator etc.

50000 to Rs. E-age banking service from any where. employees receive an array of rewards with then monthly pay cheque. Corporate salary A/c:- With HDFC bank’s corporate salary A/C. All at no extra coast to organisation. at any time:-  Phone banking  Inter branch banking  Net banking  Bill payable  Free phone banking  Free mobile banking  Free demand draft  Free International debit card  Direct salary credit  Overdraft facility  Demote A/C  Joint A/C facility  Free Demand Draft . 50000 to Rs.100000 onwards. 20 lakh (upto 60%of market value of demand share) Mutual Fund – Rs. 10 lakh LIC policy – Rs.Loan amount – Rs.

Instead you can access your account any time form any part of the world. request for a new cheque book or even cheque your account balance. both locally and globally. and do so when you have the time . all through the year. In Mumbai you can pay BPL Mobile bills. in Delhi you can pay Airtel bills and in Chennai you can pay RPG and Sky cell cellular bills through this facility. transfer money within their own accounts. get a demand draft. Whenever you make payments. NETBANKING : Internet banking is just like normal banking. You can deposit a local cheque in one branch and get it credited to your account in another city. The present ATM cards allow you to access your account 24 hours a day. ask for a cheque book or a statement. The Debit and ATM Card. which you spend in long queues or writing cheques. BILLPAY : HDFC bank provides its customers to pay their mobile bills in some selected cities over the phone as well as through their ATMs. open a fixed deposit. order a demand drafts. with a one big exception that you don’t have to go to the bank for transactions. will give you the freedom to access your savings or current at merchant location and ATM’s. when issued as visa compliant cards.and not when the bank is open. make a TDS enquiry request a stop payment of on a cheque.PHONE BANKING: HDFC bank provides phonebanking facility to its customers. So you can withdraw cash form another branch. . Debit Cards HDFC Bank’s International debit card provide seamless freedom and fiscal management to spending. all by phone INTERCITY/ INTERBRANCH BANKING: At HDFC you can access your account from any of their 131 branches in 26 cities. You can also pay MTNL bills in Mumbai and Delhi and MSEB bills in Pune and Mumbai. stop cheque payment etc. open a fixed deposit. With the help of this service customers can get their account detail. the amount will be instantly debited from your account. through a self-cheque. Through the net banking you can transfer funds within the same bank. It saves a lot of time .

SBI & PNB PRODUCT RANGE Deposit Deposits accepted by bank may be categorised as demand deposit and time deposit. Any transaction limit for the Debit Card? For the safety of the card holders. you are protected from fraudulent charges from the moment you report the loss to the bank. What if your Debit Card is lost or stolen? If your card is lost or stolen. Demand Deposit Demand deposits are those deposits that can be withdrawn without notice. (at merchant location there is no transaction limit.) and this is subject to the available balance in your account. Bank undertake to repay such deposits as demand. . You only need to sign the transaction slip.How does it work? All you need to do is present your card to the merchant who will swipe it through the electronic terminal and enter the amount of your purchase. the bank have a daily limit of Rs. The following types of deposit accounts are classified under Demand Deposits. 15000 at ATM. Your debit card can be used at any merchant location displaying the visa electronic logo or at any ATM displaying the circus logo of course. Your account will be automatically debited for the amount of your purchase. you can always use it any HDFC Bank ATM as a normal ATM card.

a person can deposit and with draw money as many times in a day as he wants. Saving Bank Account is subject to the restriction as to the number of withdrawal as also the amount of withdraw as also the amount of withdrawal permitted by banks during any specified period. which is repayable after a period of notice rather than repayable after a fixed date or period. Money can be withdrawn by issuing cheques. The following type of account in both banks are classified under Retail Time Deposits. Any person including a minor can open this account by depositing a small sum of money. Any purpose of savings. Balances in the Saving Bank Account cans interest at rates as determined by RBI from time to time. Time Deposit Any deposit. (a) Current Account (b) Saving Account Current Account : Under this accounts. Saving Accounts : This account is opened for the purpose of savings. Current acount are remunerative type of deposit accounts as no interest its payable on the credit balances outstanding in these accounts. is a time deposit or popularly called as term deposits. However there is no restriction on the number and amount of deposits that can be made on any day.  Fixed Deposit  Apshaya Deposit  Cumulative Deposit  Pragati Deposit .

Apshaya Deposit :- Apshaya Deposit is a reinvestment deposit Scheme where the depositors makes a lumpsum deposit at one time for a fixed period and receive payment there of on Maturity with interest .Fixed Deposit :- Fixed Deposit where the depositor makes a lumpsum deposit where the depositors makes a lumpsum deposit at one time for a fixed period and receive payment there of on Maturity with interest.