1

A RESEARCH REPORT ON

Retail Banking strategy

SUBMITTED TOWARDS PARTIAL FULFILLMENT
OF
MASTER OF BUSINESS ADMINISTRATION
Academic Session
[2017-19]

Dr. A.P.J Abdul Kalam Technical University, Lucknow

Submitted for : Submitted by:

Dr. Anju Arora Rashi Pundir
Roll No. 1708570056
MBA 4th Sem.

S.D. COLLEGE OF MANAGEMENT STUDIES,

MUZAFFARNAGAR
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DECLARATION

I Rashi Pundir , roll no. 1708570056, a student of MBA-4th emester of

S.D.C.M.S, MUZAFFARNAGAR. hereby declare that the research project
report titled “Retail Banking ”is my original work and the same has not been
submitted to other university for the award of any other diploma or degree.

Place:
Date:
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ACKNOWLEDGEMENT

Every work requires a diligent effort not only on the part of the person directly involved in
the successful completion of the work but also the ones who are willing to help and guidance.
In the same regards, I would like to thank my HOD Mr. Dr. Alok Gupta, Guide Dr. Anju
Arora who has been a constant support in the working of the project.

Furthermore, I would like to express my gratitude to the employees of GENERAL LINE

Bank who helped me towards the successful completion of this dissertation and without
whose help, the completion of this report would not have been possible.

RASHI PUNDIR
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TABLE OF CONTENTS

Page no…
Chapter 1 : Introduction 04……...15
Introduction to Retail Banking

Chapter 2:Industry Profile 16

Chapter 2:Objectives 17

Chapter 2:Research Methodology 18

Chapter 3: GENERAL LINE Bank

19…….35
Distribution Strategies
Product centric Strategies
GENERAL LINE Branding

Chapter 4: Innovations by other banks 36……..71

Savings Account
Home Loans
Credit Cards
Auto Loans

Chapter 5: Data Analysis and Recommendation 72……..93

Chapter 6: Conclusion 94

Chapter 8: References 96

Annexure: Questionnaire 97……….99

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INTRODUCTION

What is Retail Banking ?

Retail banking is typical mass-market banking where individual customers use local branches
of larger commercial banks. Services offered include: savings and checking accounts,
mortgages, personal loans, debit cards, credit cards, and so forth.

Before Internet era, consumers largely selected their banks based on how convenient the
location of bank’s branches was to their homes or offices. With the Advent of new
technologies in the business of bank, such as Internet banking and ATMs, now customers can
freely chose any bank for their transactions. Thus the customer base of banks has increased,
and so has the choices of customers for selecting the banks.

This is just the beginning of the story. Due to globalization a new generation of private sector
banks and many foreign banks have also entered the market and they have brought with them
several useful and innovative products. Due to forced competition, public sector banks are
also becoming more technology savvy and customer oriented.

GROWTH IN RETAIL BANKING

Bankers have been increasingly shifting focus to retail banking to increase profitability and
reduce delinquency rates. Customer shifting, cost pressure and increased competition are
some of the reasons for this shift in focus. Retailing is now favored because of better norms,
lesser asset quality problem and low NPA. Further it offers many opportunities and potential
for credit expansion.

The size of the retail market is Rs 50,000 crore which includes credit card spending of
Rs10,000 crore. The markets for the other goods are Housing loan at Rs 25,000 crore (30%
CAGR), Personal Loan at Rs 4000 crore (10-15% CAGR) and auto loans at Rs75,000 crore
(5% CAGR)
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Moreover, Non-traditional competition, market consolidation, new technology, and the

proliferation of the Internet are changing the competitive landscape of the retail banking
industry. Today’ retail banking sector is characterized by following:

 Multiple products (deposits, credit cards, insurance, investments and securities)

 Multiple channels of distribution (call center, branch, Internet and kiosk)
 Multiple customer groups (consumer, small business, and corporate)

Today, the customers have many expectations from bank such as

(i) Service at reduced cost

(ii) Service “Anytime Anywhere”

(iii) Personalized Service

With increased number of banks, products and services and practically nil switching costs,
customers are easily switching banks whenever they find better services and products. Banks
are finding it tough to get new customers and more importantly retain existing customers.

According to a research by Reichheld and Sasser in the Harvard Business Review, 5%

increase in customer retention can increase profitability by 35% in banking business,
50% in insurance and brokerage, and 125% in the consumer credit card market.
Therefore banks are now stressing on retaining customers and increasing market share.

What do the banks need?

The banks now need to find out what to sell, whom to sell, when to sell, how to sell and
how to be different to increase profitability.

Banks need to differentiate themselves by adding value-added service, offerings and building
long-term relationships with their customers through more customized products, enhanced
value offerings, personalized services and increased accessibility. Banks also need to identify
customers and products that would be most profitable and target customers with products that
are most appropriate to their needs and serve the customers with greater cost efficiency.
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Banks also need to find out the avenues for increased customer satisfaction, which leads to
increased customer loyalty. This may be explained better from two initiatives bank took in
the past:

1. Earlier what drove many bankers to invest in ATMs was the promise of reduced branch
cost, since customers would use them instead of a branch to transact business. But
what was discovered is that the financial impact of ATMs is a marginal increase in fee
income substantially offset by the cost of significant increases in the number of
customer transactions. The value proposition, however, was a significant increase in
that intangible called customer satisfaction. The increase in customer satisfaction has
translated to loyalty that resulted in higher customer retention and growing franchise
value.

2. Bankers invested in Internet banking, believing that the Internet was a lower-cost
delivery channel and a way to increase sales. Studies have now shown, however, that
the primary value of offering Internet banking services lies in the increased retention
of highly valued customer segments. Again customer satisfaction drives the value
proposition.

Thus, banks need to retain existing customers with enhanced personalized services and
products, which best suits their needs and satisfies them the most.

Potential for Retail in India: Is sky the limit?

The Indian players are bullish on the Retail business and this is not totally unfounded.

There are two main reasons behind this.

Firstly, it is now undeniable that the face of the Indian consumer is changing. This is
reflected in a change in the urban household income pattern. The direct fallout of such a
change will be the consumption patterns and hence the banking habits of Indians, which will
now be skewed towards Retail products.
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At the same time, India compares pretty poorly with the other economies of the world that
are now becoming comparable in terms of spending patterns with the opening up of our
economy. For instance, while the total outstanding Retail loans in Taiwan is around 41% of
GDP, the figure in India stands at less than 5%. The comparison with the West is even more
staggering. Another comparison that is natural when comparing Retail sectors is the use of
credit cards. Here also, the potential lies in the fact that of all the consumer expenditure in
India in 2001, less than 1% was through plastic, the corresponding US figure standing at
18%.

But how competitive are the players?

The fact that the statistics reveal a huge potential also brings with it a threat that is true for
any sector of a country that is opening up. Just how competitive are our banks? Is the threat
of getting drubbed by foreign competition real? To analyze this, one needs to get into the
shoes of the foreign banks.

Going by international standards, a large portion of the Indian population is simply not
“bankable” – taking profitability into consideration. On the other hand, the financial services
market is highly over-leveraged in India.

Competition is fierce, particularly from local private banks such as GENERAL LINE and
GENERAL LINE, in the business of home, car and consumer loans.

There, precisely lie the pitfalls of such explosive growth. All banks are targeting the fluffiest
segment i.e. the upwardly mobile urban salaried class. Although the players are spreading
their operations into segments like self- employed and the semi-urban rich, it is an open
secret that the big city Indian yuppies form the most profitable segment. Over-dependence on
this segment is bound to bring in inflexibility in the business.
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What about the foreign giants?

The foreign banks have identified this problem but there are certain systematic risks involved
in operating in the Retail market for them. These include regulatory restrictions that prevent
them from expanding their branch network. So these banks often take the Direct Selling
Agent (DSA) route whereby low-end jobs like sourcing or transaction processing are
outsourced to small regional layers. So now on, when you see a loan mela or a road show
showcasing the retail bouquet of an elite MNC giant, you know that a significant commission
earned out of any such booking gets ploughed back to our own economy. Perhaps, one of the
biggest impediments in foreign players leveraging the Indian markets is the absence of
positive credit bureaus.

In the west the risk profile can be easily mapped to things like SSNs and this information can
be publicly traded. PAN is a step in this direction but lot more work need to be done. What
has been a positive step towards this is a negative file sharing started by a consortium of 11
banks. However, as a McKinsey study points out actual write-offs on NPAs show a strong
negative correlation with sharing of positive information. On top of this, the spend-now-pay-
later “credit culture” in India is just not picking up. A swift legal procedure against
consumers creating bad debt is virtually nonexistent.

Finally, the vast geographical and cultural diversity of the country makes credit policy
formulation a tough job and it simply cannot be dictated from a Wall Street or a Singapore
boardroom! All these add up to the unattractiveness of the Indian retail market to the foreign
players.

So over the past few years, in spite of the entry of MNCs in many industries, Retail Banking
has seen a flurry of panicky exits. Fewer than 40 remain in India and their share of total bank
assets currently 7.2% is falling. Those that remain might be thought to be likely buyers of
Indian banks.

Yet Citibank, HSBC and Standard Chartered—all in India for more than a century, and with
relatively large retail networks—seem to have no pressing need to acquire a local bank.
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Established foreign banks have preferred to take over customers or businesses from other
foreign banks that want to leave. Thus HSBC, in recent years, has acquired customers from
France's BNP, Germany's Deutsche Bank and Japan's Bank of Tokyo-Mitsubishi. ABN Amro
took over Bank of America's retail business.

So all for the keeping then?

This will perhaps be the most wrongful inference that can be drawn from the above. We just
cannot afford to look inwards and repeat the mistakes that were the side effects of the
Nationalization of the Banking System. A growing market can never be an alibi for lack of
innovation. Indian banks have shown little or no interest in innovative tailor-made products.
They have often tried to copy process designs that have been tested, albeit successfully, in the
West.
NEW PRIVATE BANKS: STRATEGY PAYING OFF

IT IS a story of growth. The regime of liberalisation in the 1990s aimed at giving impetus to
economic growth. Thus were born the new private sector banks among many other initiatives.

Once established, the new private sector banks promised to be among the leading growth
segments of the Indian economy. The stock market was also enthusiastic about these banks.
However, the initial euphoria gave way to growth pangs and barring a couple — GENERAL
LINE Bank and GENERAL LINE Bank — the rest seemed to falter. In most industries, only
a couple of companies graduate from the small to mid-size to large companies. It thus
appeared that this might be true for the new private sector banks too. Non-performing assets
piled up, profitability slipped and growth seemed to elude the rest of the banks. Things now
appear to be changing.

The promise of a revival is in the air as a couple of other private sector banks — IDBI Bank
and UTI Bank — start to make rapid strides. The Reserve Bank of India has granted fresh
licences to two new banks Kotak Mahindra and Rabobank. After all, it just may not be the
story of GENERAL LINE Bank and GENERAL LINE Bank alone. The future continues to
be promising, though the distances to travel continue to be huge.
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Size and scale

Size was the advantage of the new private sector banks. They were small and it seemed they
could grow faster by capturing market shares from the public sector banking behemoths.

However, if growth faltered then size could no longer be an advantage. It could, on the other
hand, prove to be a disadvantage. For example, without the rapid scaling up of operations, it
may be difficult to break-even.

In fact, loans may have been priced assuming a particular rate of growth. So, without
adequate growth, profitability will be affected. Without adequate profitability, the proportion
of non-performing assets could rise and capital adequacy might become a problem, affecting
future growth. Thus, the rapid scaling up of operations appeared to be a must to take
advantage of their strengths as new banks.

To a large extent, banks such as GENERAL LINE Bank, GENERAL LINE Bank, Centurion
Bank and UTI Bank have been successful in ramping up operations since 1996 to 2001. The
growth rate of loan assets at these banks has been impressive. In 2002, however, Centurion
Bank has slipped up. In addition, only in GENERAL LINE Bank and GENERAL LINE Bank
cases have the level of non-performing assets been relatively lower.

Growth at the other new banks has been less impressive although higher than the average for
the banking industry. Other consequences of lower growth, such as relatively higher non-
performing assets and lower profitability, have also been evident in other new banks. For
GENERAL LINE Bank and GENERAL LINE Bank, faster growth helped attract capital at
attractive rates, especially in GENERAL LINE Bank's case. This fuelled further growth.
Inorganic growth through acquisitions has also been possible for these two banks because
they were able to scale up and achieve adequate profitability. The future is predicated on
continued ramp up in the scale of operations. The merger of GENERAL LINE with
GENERAL LINE Bank may have already given them the necessary size. However, even for
them, ramping up operations are necessary to hide the non-performing assets acquired from
GENERAL LINE and diversify asset portfolios. GENERAL LINE Bank may have already
become as large as Corporation Bank. Still, ramping up operations is necessary to compete
with larger rivals such as the State Bank of India and GENERAL LINE Bank. Moreover,
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ramping up is necessary to convert new branches and new products into profit making
centres.

If growth is essential for GENERAL LINE Bank and GENERAL LINE Bank, it is even more
so for the others. Banks such as UTI Bank and IDBI Bank have already started seeing rapid
growth in operations. They may need to sustain the pace of growth and explore the inorganic
route to achieve the necessary size and strength. They will also need capital infusions and,
perhaps, the induction of a partner to achieve growth.

Focus on strategy

The focus rightly turns to strategies for achieving rapid growth. The success of GENERAL
LINE Bank and GENERAL LINE Bank was largely because of their focus on the triple A-
rated companies. That helped reduce level of non-performing assets and increase
profitability. Other banks were less focussed on the triple A sector.

To an extent, the difference in the degrees of success of the various private sector banks may
have been due to the differences in their target customers.

However, other banks may not have focussed on the non-triple A rated segment out of
choice. If GENERAL LINE Bank and GENERAL LINE Bank could focus on the triple A
segment and grab market shares from larger public sector rivals it was because of the support
of their larger parents — GENERAL LINE and GENERAL LINE.

In fact, GENERAL LINE and GENERAL LINE Bank teamed up to sell their products.
Lacking such support, other banks have had to look at assets of lower quality. Now, other
banks too are eyeing the triple A segment.

For banks such as IDBI Bank and UTI Bank, incremental growth is coming more from
companies in the top rated category. In the last couple of years, this was reflected in the
reduction in the net non-performing assets proportion and rising profitability in the case of
both IDBI Bank and UTI Bank.

Apart from the triple A segment, the focus seems squarely centred on retail banking. The
promise of larger spreads and lower delinquency appears to have whetted the appetite of
these new banks.
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However, here too, GENERAL LINE Bank and GENERAL LINE Bank have left the others
far behind. Their brands are much stronger than those of the other new banks.

The larger public sector banking rivals are also proving adept at building brands. Greater
efforts at brand building may be necessary for new banks to build quality retail assets. The
growth in the retail accounts of IDBI Bank and UTI Bank in the last year has been
impressive.

Low costs

A focus on the retail segment is also essential to become a least cost provider of services. The
two sources of low-cost resources are demand deposits, essentially belonging to the corporate
sector, and savings deposits, originating from the retail segment.

The efficient use of resources by the corporate segment may ensure that demand deposits do
not grow at a rapid rate in future.

Thus, to augment the base of demand deposits, new banks will have to capture market share
from old banks. On the other hand, savings deposits continue to grow at a rapid rate.

Thus, augmenting their low cost resource base may prove less of a problem. Interestingly,
GENERAL LINE Bank, the most successful of the lot, has the highest proportion of low-cost
liabilities. Demand and savings deposits account for 30 per cent of its total resources. That
the most successful new bank has also one of the least cost bases among Indian banks is no
coincidence.

For the other banks, the ratio is less than 20 per cent. That has had its impact on spreads and
profitability. Future growth is also predicated on remaining low-cost service providers on a
relative basis.
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BANK PROFILE
GENERAL LINE Bank is an Indian multinational bank and financial services company
headquartered in Mumbai. Based on 2013 information, it is the second largest bank in India
by assets and third largest by market capitalization.

GENERAL LINE Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its
specialised subsidiaries in the areas of investment banking, life and non-life
insurance,venture capital and asset management. 

GENERAL LINE Bank's equity shares are listed in India on Bombay Stock Exchange and
the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs)
are listed on the New York Stock Exchange (NYSE)
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OBJECTIVES OF THE STUDY

 To highlight the importance of retail banking and explains why banks are changing

their strategies and shifting their focus to retail banking.

 To understand what are the product centric and distribution centric strategies and

innovations being adopted by some of the top banks in India with special reference to

GENERAL LINE Bank

 To understand customer preferences towards the various initiatives taken by the bank.
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RESEARCH METHODOLOGY

The Research Methodology section is inclusive of all those techniques that were adopted
in course of the research. The research was conducted mainly to understand the position
of a Commercial Bank with respect to Universal Bank in terms of services offered. The
research also aims at measuring the risk exposure of commercial banks in course of
offering diversified services under ‘one-roof’ and also the perception of Managers and
Customers of Commercial Banks on Universal Banking concept. So, the research is both
exploratory and descriptive in nature

 Primary research to understand the customers’ perspective to the various initiatives

and their expectations from their retail banking providers.

 Secondary research from the internet, various books, magazines and journals

Organization studied : GENERAL LINE Bank

Sample size for the customer survey: 100

Tool Used: A structured questionnaire was used comprising of a set of questions to

gauge customers’ existing retail banking habits and future expectations in order to
understand their future requirements and what the banks should be focusing on.
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RETAIL BANKING STRATEGIES: GENERAL LINE BANK

GENERAL LINE Bank is India's second-largest bank with total assets of about
Rs.132,780 crore at September 30, 2004 and profit after tax of Rs. 873 crore in the half
year ended September 30, 2004 (Rs. 1,637 crore in fiscal 2004).

GENERAL LINE Bank has a network of about 470 branches and extension counters and
over 1,800 ATMs. GENERAL LINE Bank offers a wide range of banking products and
financial services to corporate and retail customers through a variety of delivery channels and
through its specialised subsidiaries and affiliates in the areas of investment banking, life and
non-life insurance, venture capital and asset management.

GENERAL LINE Bank set up its international banking group in fiscal 2002 to cater to the
cross-border needs of clients and leverage on its domestic banking strengths to offer products
internationally. GENERAL LINE Bank currently has subsidiaries in the United Kingdom and
Canada, branches in Singapore and Bahrain and representative offices in the United States,
China, United Arab Emirates and Bangladesh.

GENERAL LINE Bank's equity shares are listed in India on the Stock Exchange, Mumbai
and the National Stock Exchange of India Limited and its American Depositary Receipts
(ADRs) are listed on the New York Stock Exchange (NYSE).

As required by the stock exchanges, GENERAL LINE Bank has formulated a Code of
Business Conduct and Ethics for its directors and employees. (

At October 31, 2004, GENERAL LINE Bank, with free float market capitalization* of
about Rs. 220.00 billion (US$ 5.00 billion) ranked third amongst all the companies listed
on the Indian stock exchanges.
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RETAIL BANKING AND GENERAL LINE

Retail banking is a key element of GENERAL LINE’s growth strategy. With upward
migration of household income levels, increasing affordability of retail finance and
acceptance of use of credit to finance purchases, retail credit has emerged as a rapidly
growing opportunity for banks that have the necessary skills and infrastructure to succeed in
this business. GENERAL LINE Bank has capitalized on the growing retail opportunity in
India and has emerged as a market leader in retail credit.

Last year the bank added 10,000 retail customers everyday of the year, or a mind boggling
3.4 million customers, taking the tally of its customers to 10 million.

GENERAL LINE Bank offers a wide range of retail credit products. It has expanded the
market
significantly over the last few years by taking organized retail credit to a large number of
high-potential markets in India, by penetrating deeper into existing markets and by offering
customized solutions to meet the varying credit needs of the Indian consumer.

GENERAL LINE Bank is one of the leading providers of mortgage loans, two-wheeler loans,
commercial vehicle loans and personal unsecured loans, and continues to maintain leadership
in automobile finance.

Retail, is the clear growth driver at GENERAL LINE Bank. Retail portfolio grew by 75% last
year tp Rs 33,423 crore and deposits by 41% compared to the industry average of 17%.

GENERAL LINE Bank leads in every single retail segment it is present in be it mortgages,
auto loans, personal loans or credit cards. Its share of total deposits grew by 18.82% last year.
And with Rs 1,06,593 crore in average working funds, it is second only to the public
behemoth, the State Bank Of India.
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MARKET SHARE

Mortgages 28%
Auto loans 37%
Personal loans 29%

In case of auto loans, it is growing faster than the industry average and in credit cards it
currently has 26lakh customers and Citibank(market leader) is likely to drop way behind
GENERAL LINE Bank.

GENERAL LINE Bank’s total retail disbursements in fiscal 2005 were approximately
Rs. 200 billion. Retail credit constituted 18% of GENERAL LINE Bank’s balance sheet
at March 31, 2005, compared to only 6% at March 31, 2006.
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GENERAL LINE BANK’S STRATEGY TO CAPTURE

RETAIL POTENTIAL

Strong corporate
relationships

Brand
Achieving leadership in
retail financial services

Technology

Operational excellence

… the core of this strategy is the

relentless focus on the customer and
cross-selling of products

In the words of Chanda Kochchar, Executive Director, GENERAL LINE Bank “ Fast growth
in retail is not because of sheer passion for numbers, Rather, it’s the result of strategic
thinking.”

 Push retail growth by upping market shares and tapping new customers.
 Lower credit risk by tighter controls and better analysis
 Leverage balance sheet strength and strong corporate relationships
 Follow the customer worldwide and build scalable model for global rollout.
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I. PUSH RETAIL GROWTH BY UPPING MARKET

SHARES AND TAPPING NEW CUSTOMERS.

The key dimensions of GENERAL LINE’s retail strategy for increasing its market share
are:

 Innovative products
 Parity pricing
 Customer convenience through a vast range of delivery channels.
 Operational efficiencies, strong processes and customer focus.
 Cross-selling of the entire range of credit and investment products and banking
services to existing customers is a critical aspect of our retail strategy.
Since initial investments are high in Retail, fast growth and thereby economies of scale help
GENERAL LINE make profits much earlier. And today, the bank’s incremental retail
business is 30% the size of the industry and its operating costs are said to be among the
lowest. While the distribution network enables the bank to add numbers, stringent credit
practices help control quality and robust back office and use of technology help improve
efficiencies.

OPERATIONAL EFFICIENCIES
If the bank is adding 10,000 new customers everyday and if a customer does 70 to 75
transactions per year, then the bank must run an assembly- line like operation to process
transactions. Incredibly GENERAL LINE actually does it.

Hub And Spoke Model

GENERAL LINE employs a hub-and-spoke model to improve its operational efficiencies. It
has set up a centralized back office and 18 regional back offices (so called “factories” by the
bank) to do account opening, mailing of account statements, issuing of credit cards and ATM
cards, cheque books etc.
For instance, to process more than one crore cheques a month, which the bank does, the
cheques are scanned at the regional hubs. That helps speed up the process without adding
more employees.
 22

Impressively the bank’s team actually studies assembly line operations and shopfloor
operations of manufacturing companies like Ford and Hyundai Motor to improve the
turnaround time.
Standardization Of Processes
In GENERAL LINE bank, although distribution is decentralized, risk control is centralized.
Credit is separate from sales, which means while the sales team is responsible for getting new
business, it is the credit team working on the central credit policy, which approves or rejects
customer acquisitions.

In case of mortgages, there is a structured field investigation process to check on the legal
documents and property valuation. All that helps to keep a close watch on retail credit quality
and explains why the bank’s retail net NPA is 0.75%.

Since the processes are standardized, they are not just scalable but also replicated across
functions. For instance, earlier when a customer applied to open an account, a three- week
waiting period was involved. IN that time, his cheque book, ATM card and pin number
would arrive in seven separate envelopes, because the process was manual. Adopting a
“straight through” processing system lowered the waiting time to five days and reduced the
mail load to one envelope. Starting a few months ago, customers are now given a pre-printed
welcome kit when they open an account and the cards are activated the next day.

Besides, every quarter, the bank projects the increase in customer base and transactions for
the next quarter and accordingly increases its backoffice bandwidth.
 23

Ope ratio nal e xc e lle nc e

Prude nt c re dit po lic ie s

Bo ls te re d by a
c o mpany wide 6
s ig ma initiative

Ade quate fraud c o ntro l Rig o ro us c o lle c tio n

me c hanis m

These measures have ensured that the bank has followed a cautious approach while
maintaining high growth rates and profitability in all segments

CROSS SELLING STRATEGY

Cross-selling has emerged as one of the significant drivers of retail credit growth. In fiscal
2003, cross-selling accounted for about 20% of mortgage loans and auto loans and about 25%
of credit cards issued.

In May 2003, GENERAL LINE Bank acquired the entire paid-up capital of Transamerica
Apple Distribution Finance Private Limited (TADFL), which has now been renamed as
GENERAL LINE Distribution Finance Private Limited (IDFL). IDFL is primarily engaged in
providing distribution financing in the twowheeler segment. The acquisition is expected to
supplement the Bank’s retail franchise, especially in the two-wheeler segment.
 24

Inte rne t Banking Call Ce nte rs 500 Outle ts 1005 ATMs

Cus to mize d c ro s s -s e lling

by le ve rag ing re latio ns hips , brand and
te c hno lo g y

Fixe d de po s its Bo nds Life ins uranc e He alth ins uranc e

Powe r Pay Co ns ume r lo ans Auto & ho me Cre dit & de bit
loans c ards

CUSTOMER SERVICE STRATEGY

GENERAL LINE has the special account called “Value Added Savings Account:. Under this,
if the customer has more than Rs10,000 balance in his savings bank account that excess will
be transferred to Value Added Savings Account.

From that day onwards, he will be given fixed deposit interest rate on the remaining balancr.
As same as GENERAL LINE bank deposits, no entry load or exit load will be charged on
customers. Moreover customers can have access to GENERAL LINE Direct.com for share
trading. Besides it is offering various Tax saving schemes namely GENERAL LINE pension
plan, GENERAL LINE Safety bond, Tax Saving mutual fund schemes and so on.
 25

PRODUCTS

During fiscal 2003, GENERAL LINE had continued their focus on retail deposits. This has
reduced funding cost and has enabled them to create a stable funding base, with over 4.7
million deposit customers. Following a life stage segmentation strategy, GENERAL LINE
Bank offers differentiated liability products to various categories of customers depending on
their age group.

For e.g: Young Star Accounts for children below the age of 18 years, Student Banking
Services for students.

As the leading provider of retail financial services, we are constantly striving to provide
products and services that enable customers to fulfil their financial requirements.
 26

II. LOWER CREDIT RISK BY TIGHTER CONTROLS AND

BETTER ANALYSIS

While the distribution network enables the bank to add numbers, stringent credit practices
help control quality and robust back office and use of technology help improve efficiencies.

In GENERAL LINE bank, although distribution is decentralized, risk control is centralized.

Credit is separate from sales, which means while the sales team is responsible for getting new
business, it is the credit team working on the central credit policy, which approves or rejects
customer acquisitions.

In case of mortgages, there is a structured field investigation process to check on the legal
documents and property valuation. All that helps to keep a close watch on retail credit quality
and explains why the bank’s retail net NPA is 0.75%.

III. FOLLOW THE CUSTOMER WORLDWIDE AND BUILD

SCALABLE MODEL FOR GLOBAL ROLLOUT.

To diversify risk across geographies, the bank in the last two years has been increasing its
global footprint and following the Indian corporate customers overseas, where it has set up
seven representative offices or branches with applications put in for two more in South Africa
and Bangladesh, and a subsidiary in Russia.

Going forward the bank’s policy to consolidate its presence in existing markets, accelerate
growth, sustain profitability and build a business model to withstand the pressures of a global
rollout.

M&A as a route for growth is unlikely as the bank sees little value in acquisitions given the
bank’s own reach and equity with customers. Instead, he wants to grow it organically to keep
both costs and risks down.
 27

IV. LEVERAGE BALANCE SHEET STRENGTH AND STRONG

CORPORATE RELATIONSHIPS

In a bid to further strengthen its balance sheet, the bank securitized assets worth RS 10,700
crore. For marginally lower realization, it takes a lot of risk off the bank’s own balance sheet.
With Basel II norms round the corner, the bank will have to access low cost funds to protect
its profit margins and cover bad loans.
 28

GENERAL LINE’s DISTRIBUTION STRATEGY

Multi-channel driven retail customer expansion 

With the market expansion and customer expansion, GENERAL LINE can’t just
expand branches. Therefore it needs to look for another delivery model making it
convenient to the customers to do banking. So it needs a model to prevent the customer
from coming to the bank and at the same time service him.

So there are various other modes like Internet, Mobile, Phone Banking. Roughly, only 30%
of the transaction happens through branch, 50% through ATMs, and 10% with phone banking
and net banking, but cost wise these channels have a very low cost as compared to a branch
transaction. On a rough estimate, if at a branch GENERAL LINE has to spend Rs50 per
transaction, at an ATM it is almost 25% of the Rs50. So cost of transaction is very low.
Therefore it encourages customers to use the ATM or call up if he needs a cheque book etc. If
they want to transfer money, it encourages them to go online. GENERAL LINE has branches
open for 12 hours and migration of the customers from physical to online saves a lot of cost
to the bank.

To cope with the growth in expansion, GENERAL LINE is sourcing almost 2 lakh customers
per month. The branches are the same and there is tremendous pressure otherwise on the
branch. Therefore, it encourages migration.

Certain core activities customer will continue to do from the branches. There are people who
come to the bank just to find out the balance. Things are improving. India being a
conservative country, things are taking time. Earlier, there were so many apprehensions about
the success of ATMs. Today, it is convenient and popular.

GENERAL LINE has almost 1700 ATMs coming up. Right now there are 300 transactions
per ATM per day. The moment it crosses 400 plus, it starts putting up an ATM.

To efficiently distribute its products and services, GENERAL LINE Bank has
developed multiple access channels comprising lean brick and mortar branches, ATMs,
call centers and Internet banking.
 29

FY2001 saw a significant growth in the branch network (including extension counters) to
378, on account of the merger of Bank of Madura.  In March 2001, GENERAL LINE Bank
became the first Indian bank to cross the 500 ATM mark. The current network of 510 ATMs
is the largest in the country accounting for nearly 20% of all ATMs in the country.

Customers can now access their GENERAL LINE Bank accounts over telephones in 17
cities. These investments in channel infrastructure have enabled GENERAL LINE Bank to
achieve rapid growth in its retail business. During the year GENERAL LINE Bank added
over 2.5 million customer accounts, taking the total number of accounts up from 0.65 million
at March 31, 2000 to 3.2 million at March 31, 2001. A significant portion of this increase
came from savings accounts which increased from 0.29 million to 1.66 million. NRI accounts
also witnessed a strong growth and increased from 23,500 to 84,000. GENERAL LINE
Bank’s Internet banking customers increased 400% to 550,000 at March 31, 2001. 

Says O P Srivastava, head of the retail channel infrastructure group at GENERAL LINE
Bank,

“When the banking sector was liberalised we knew that to get a lead over the well entrenched
PSU banks, we had to take the help of delivery channels like ATMs. This was the only way
to counter the reach of national players.”

GENERAL LINE Bank is the most aggressive deployer of ATMs and has seen its base surge
from 125 ATMs in January 2000 to 1,200 ATMs today. Such has been the impact of ATMs
that GENERAL LINE Bank’s customer base has grown from two million to five million in
the last two years. GENERAL LINE attributes this increase to the increase in ATM outlets.

GENERAL LINE is also developing new strategies to leverage their ATM outlets. For
instance, rather than set up a branch in every suburb, GENERAL LINE Bank has hit upon a
ratio of 8 ATMs to one branch office, thus effectively reaching out to a large customer base,
at a substantially lower cost.
 30

Anywhere Banking

GENERAL LINE Bank is the second largest bank in the country. It services a customer base
of more than 5 million customer accounts through a multi-channel access network. This
includes more than 500 branches and extension counters, over 1800 ATMs, Call Centre and
Internt Banking.

Thus, one can access the various services GENERAL LINE Bank has to offer at anytime,
anywhere and from anyplace. To learn more about the various channels, please click on the
topic of your interest mentioned in the left menu.

Channels
Operations

ATMs

Internet
$ $ Banking
Branch
Pull $ Push Call
Branch Branch
Centers
Branch

m-Banking

Agents
 31

INTERNET BANKING WITH GENERAL LINE

Net Banking of GENERAL LINE Bank was the first among the new private banks to launch
its net banking service called Infinity. It allows the user to access account information over a
secure line, request cheque books and stop payment and even transfer funds between
GENERAL LINE bank accounts. GENERAL LINEBank.com, our Internet Banking Service,
is a convenient remote banking facility that provides easy and secure access to bank accounts.

With just a PC connected to the Internet, one can have his account information at
fingertips, from anywhere in the world, anytime.

What's on Offer

 Account Information
 eCheques (Online Funds Transfer)

 Bill Payment (Online payment of telephone, mobile, electricity, insurance

premia, credit card, etc.)

 Requests and intimations (submit a request for Cheque-book, Stop

payment instruction etc)

 Communication with the Account Manager (The mail-box facility

enables to send secure mail to the account manager to find out the status
of a request or for any clarifications)

 Customise GENERAL LINEBank.com

One can view your Bank ,Credit Card Demat accounts through a single User ID at
GENERAL LINEBank.com  
 32

GENERAL LINE BANK PHONE BANKING - WHY WALK

WHEN YOU CAN TALK

What's on offer

A user friendly automated service menu offers convenient access to the account coupled with
security as, all the transactions are protected by a ATM Pin - The Personal password to the
Banks & Credit card Account and TPIN for the Demat Account .

Some of the services offered on phone are:

 Banks Functionalities (Account Balance,Mini Statement,Cheque Book Request etc)

 Card Functionalities (Outstanding Balance,Details of Last Statement,Details of Last
Payment etc)

 Others( Lost/Replacement card, ATM pin re-issue, Standing Instructions etc)

GENERAL LINE MOBILE BANKING

With GENERAL LINE Bank, banking is no longer what it used to be. GENERAL LINE
Bank offers Mobile Banking facility to all its Bank, Credit Card and Demat customers.
GENERAL LINE Bank Mobile Banking enables the customer to bank while being on the
move.

GENERAL LINE Bank Mobile Banking can be divided into two broad categories

 Requests
 Alerts

Mobile Banking Requests:

    GENERAL LINE Bank Mobile requests provides customers with the following requests:

        a) Bank Requests ( account balance enquiry, cheque status inquiry etc)
        b) Credit Card Requests ( Due date reminder, approaching credit card limit etc)
        c) Demat Requests  
 33

ATMs

New Initiatives taken by GENERAL LINE for their ATMs

1)Mobile ATMs : Access Bank Accounts through mobile ATMs. GENERAL LINE
Bank now provides standard ATM facilities through ATM Vans

  2)Bulk Deposits : Now deposit any amount of money through GENERAL LINE Bank
Bulk Deposit ATMs giving the customer the convenience of depositing huge amount at one
time

3)ATM For visually challenged : GENERAL LINE Bank has launched ATMs with
special voice guided systems which guides a visually challenged person to access our ATMs
without any help

  4)Full Fledged Statement Printer : Print Detailed Account Statements anytime

through Full Fledged Statement Printers which will be made available at ATMs

ATMSharing
GENERAL LINE Bank has entered into an arrangement with Andhra Bank and Federal Bank
to share their ATM network. By this arrangement customers holding Debit cum ATM card of
GENERAL LINE Bank will be able to use the ATMs of the partner banks for Cash
withdrawal and balance enquiry transactions. The convenience of using this additional shared
network comes at the nominal cost of Rs. 20 per transaction for cash withdrawal and Rs.10
per transaction for balance enquiry at these ATMs.

LEVERAGING ATM STRENGTH

Videsh Sanchar Nigam Ltd., India's leading ISP and GENERAL LINE Bank, India's second
largest bank, recently tied up for distributing Tata Indicom's dial-up Internet services through
the GENERAL LINE Bank's ATM network. GENERAL LINE Bank customers will now be
able to buy and renew VSNL Internet packs, recently re-branded as Tata Indicom Internet
 34

service, through any one of the 1,675 GENERAL LINE Bank ATMs in India. This is the first
time in the country that an ISP would be using an ATM network to distribute its products.

This initiative will offer GENERAL LINE Bank's nearly 6 million ATM and debit card
holders, the convenience to buy or renew Tata Indicom Internet packs through ATMs by
purchasing the serial number and PIN required for online registration or renewal. After
purchasing a serial number and PIN, a user just has to go and register or renew his Internet
connection at http://signup.vsnl.com.

Bank@Home
There are two basic services in Bank@Home
1. Remote Service Delivery
2. Cash on Tap

1. Remote Service Delivery:

 The main components of this service are the drop boxes, which are installed at certain
defined locations (residential complexes, shopping complexes, etc.).

2. Cash on Tap:

This service offers the customer the facility to call the Phone Banking team and ask for cash
from his A/c to be delivered to him (CASH WITHDRAWAL) or for someone to pick up cash
from him for depositing into his A/c.(CASH DEPOSIT).

NEW PRODUCT FOR INTERNET BANKING USERS

GENERAL LINE Bank's Retail Internet Banking customers have a new assistant to help
them manage their personal finance and taxation problems - the GENERAL LINE Bank
Munshi.

This digital avatar of the traditional Munshi, who used to manage his master's finances, will
facilitate on-line calculation of Income Tax and offline fulfillment by filing Income Tax
Returns.
 35

The service, which is the result of a strategic tie-up between GENERAL LINE Bank and
Munshikaka.com, was launched in the city today. Munshikaka is promoted by Shailesh V
Haribhakti, Managing Partner, Haribhakti & Co., and K N Vaidyanathan, former Business
Head, Morgan Stanley Dean Witter.

GENERAL LINE Bank is now the first bank in India to offer such on-line taxation and
personal finance services coupled with offline fulfillment to its customers. Currently the
service is being offered at 65 branches spread across nine cities.

Services like GENERAL LINE Bank Munshi, which not only can accurately compute a
person's taxes but also have the ability - when it is allowed - to file them on-line will be a
great boon to the taxpayers as well as an excellent support for the Income Tax
authorities."

According to K N Vaidyanathan MD & CEO, Advantage E-Accounting, "The services of

GENERAL LINE Bank Munshi have been tailored with three Cs and one F in mind -
Content, Counsel, Calculator and Fulfillment. What we hope to do is to take the latest that
technology has to offer and marry it to the traditional service that the Munshi used to offer to
his master."

The Bank has a unique product for salaried class called "Power Pay". The Bank has already
garnered more than 6,00,000 customers under this segment. GENERAL LINE Bank Munshi
services will be of immense help to this segment.

CHANNEL MIGRATION

Call
Internet
Centre
2%
5%
ATM
Branch Internet
15%
78% Call 8%
Branch
Centre
34%
7%

June'00

ATM
51%
Aug'02
 36

E-LOBBIES

By installing self-service machines and maybe a one-man enquiry point at the large
corporate, the bank has provided a convenient service for the employees. These clients make
good cross-selling prospects as they are a relatively risk-averse segment. Keeping in line
with the idea of offering convenient, anytime, anywhere banking, GENERAL LINE Bank
has pioneered the idea of unstaffed branches in India. Its e-lobbies are its answer to
expanding its branch network while still controlling costs. Using leading edge technology,
the self-service banking centers allow customers to pay bills, withdraw money, video-
conference with a customer service executive, carry out online broking and make other such
transactions, without needing a cashier. The e-lobbies also offer Braille and voice-enabled
ATMs for visually impaired customers. At some locations, the e-lobbies also display artwork
by upcoming artists, acting as an art gallery.

DISTRIBUTION THROUGH INTERMEDIARIES

GENERAL LINE Bank has seen 100% of its incremental growth in its home loan portfolio
through the DSA network. Home Loans disbursed by GENERAL LINE bank for the year
2002-03 were Rs7000 crore. Evenits, by now famous ‘loan melas’ are conducted by DSAa
under the supervision of its employees. The bank also grew its retail personal loan, auto loan
and credit card portfolio utilizing its 1000 odd DSAs. About 70% of the incremental growth
in personal loans, 40% of its Rs 4100crore incremental growth in auto finance and 60% of
credit card issuance came from DSAs.

DIRECT APPROACH

Recognising the inconvenience of visiting a branch in the highly populated and traffic
congested cities like Mumbai and Delhi, GENERAL LINE Bank decided to use direct agents
to sell its mortgages. Supported by the call centre, which would identify prospects and
initiate dialogue, the direct sales agent could arrange a convenient time to visit and discuss
the product with the prospective client.
 37

This allowed the bank for personal preferences to be catered for. For example, couples could
invite the agent to meet them at home after dinner when both husband and wife are present.
A similar sales model was used to sell other products, such as credit cards and personal
loans.

To sell its automobile and two-wheeler loans, GENERAL LINE Bank teamed up with the
manufacturers and dealers – so that it became the preferred financier at each level – from the
customer to the dealer to the manufacturer. During the fiscal year 2002, it increased its lead
in the automobile loans market, expanding its distribution network to 145 cities and towns
across India.

The key drivers for growth were the strength of our corporate relationships with leading
automobile manufacturers, strong distribution capability and customer service focus.

PRODUCT CENTRIC INNNOVATIONS IN GENERAL LINE

If the bank goes to a guy who is already banking with one of the nationalized bank, what is
the new thing it can tell him? That is where new and innovative products help. The new
products at GENERAL LINE give a lot of value added services to the customer making the
product more attractive from the plain vanilla products available at other banks.

Moreover, it also focuses on the customized products for various segments like r "Young
star" account focused on young children; ‘Bank on Campus ‘for the college student and
salary account for the working people. GENERAL LINE also focuses a lot on cross selling to
promote the products.
 38

GENERAL LINE provides the following retail banking products

for its customers:
SAVINGS ACCOUNTS
Features
 The GENERAL LINE Bank Ncash debit card is a debit-cum-ATM card providing the
convenience of acceptance at merchant establishments and cash withdrawals at
ATMs.
 Auto Invest Account
 Internet Banking is offered free of cost.
 Anywhere Banking - This facility entitles the account holder to withdraw or deposit
cash upto a limit of Rs.50,000 across all GENERAL LINE Bank branches.
 A customer can give the bank various types of standing instructions like transferring
to fixed deposit accounts at regular intervals.
 An average quarterly balance of Rs 5,000 only.

SPECIAL SAVINGS ACCOUNT

Features

 An operating account with free multi city chequebook facility.

 A saving account, which offers to sweep balances above Rs.25,000 in multiples of
Rs.5,000 to a fixed deposit for 1 year.
 No minimum balance requirement. In other words, there is no penalty for non-
maintenance of minimum balances in the accounts.
 Internet Banking
 Free Anywhere banking
 Free collection of outstation cheques
 Free monthly account statements.
 Payroll processing for employees of the organisation through GENERAL LINE Bank
Salary Accounts
 Inward remittance through Money2India for FCRA approved trusts.
 39

  SENIOR CITIZENS SAVINGS ACCOUNT

Features

 Higher Interest Rates.

 Demand Loan / overdraft against deposits will be upto 90% of the deposit.
 The upcountry cheque collection facility for locations with GENERAL LINE Bank
presence free of charge to the Senior Citizen customers.
 Auto Invest Account
 Internet Banking is offered free of cost.
 Anywhere Banking - This facility entitles the account holder to withdraw or deposit
cash upto a limit of Rs.50,000 across all GENERAL LINE Bank branches.

A Fixed deposit with a minimum value of Rs.10,000 and avail zero balance facility in
the savings accounts

WOMEN ACCOUNT
The features of the account have been specially designed keeping in mind a woman's
financial requirements. These include :

A)Recurring Deposits

B)Financial planning of children

C) Family Shield Insurance

In addition to these, all features of the existing bank account are available with this account
as well such as

 Free international debit card

 Internet Banking
 Phone Banking
 ATM's
 40

BANK@CAMPUS 

With bank@campus, GENERAL LINE Bank's Student Banking Service, a student can now
look forward to the new face we have given to banking - his / her computer monitor.

In addition, he gets:
Free personalised cheque book
Free Phone Banking
Free GENERAL LINE Bank Ncash Debit Card
Free transfer of funds into his / her account from any GENERAL LINE Bank account
Free supplementary credit card (if you have an GENERAL LINE Bank Credit card.*
Annual statement of accounts

 CURRENT ACCOUNTS

Made to Order current account

Made2order current account, unlike the normal current account which is

based on the quarterly balance, allows the customer to have customized
current account based on the business requirement. The made2order current
account is totally flexible and can be adapted to changing business
requirement, without having the requirement to Current Accounts have
specific requirement of Quarterly Average Balance (QAB) maintenance and
inturn offer various facilities free of cost to the customer based on the QAB.

A personalized schedule of charges is derived for each customer based on:

 Service Required
 QAB as agreed to be maintained in the account
 Float expected in the account
 41

YOUNG STARS ACCOUNT

Banking can be fun

Here, at Young Stars, cute companions will guide your child through the world of banking
-through checking the account balance, fun zones and special pages on the internet. It makes
banking a pleasure and of course teaches your child to manage their personal finances.

 With the pocket money that you transfer to your child's account, you can even shop with him
/ her at Young Stars very own shopping page.

 You can even open a recurring deposit in your child's name.

 Once you are done with your 'banking', you can access your child's account with all the fun
links to special zones designed to suit your child's area of interests and also impart knowledge
on the current events of the world.

LOANS

Home Loan:
• Attractive interest rates
• Door-step service from enquiry stage till final disbursement
• Can transfer your existing high-interest rate loan
• Free personal accidental insurance
• Special 100% funding for select properties
• Personal Loan
• Car Loan
• Two Wheeler Loan
• Commercial Vehicle Loan
• Loans against Securities
• Farm Equipment Loans
• Construction Equipment Loans
• Office Equipment Loans
• Medical Equipment Loans
• Loan against Gold
 42

GENERAL LINE CARDS

GENERAL LINE TRAVEL CARD

The GENERAL LINE Bank Travel Card is a powerful new concept for international
travelers: a pre-paid card, you can buy using Indian rupees, and withdraw in any local
currency in the world.

Convenient & Secure:No more hassles of finding Money Changers and encashing
travellers cheques!

As good as Cash: GENERAL LINE Bank Travel Card gives access to local currency
through 8,50,000 VISA ATMs.

One can also shop at over 13 million merchants who accept VISA Electron Cards.

Worldwide Assistance: Round the clock medical and travel assistance.

 
 43

DEBIT CARDS

GENERAL LINE Bank HPCL Debit Card- The Sensible Choice

Basic Features

GENERAL LINE Bank and HPCL bring the "Fuel" Debit Card. A debit card designed with
just your convenience in mind. Just hand it over at any HPCL pumps and SAVE on your fuel
purchases. In fact you can use the card for all your shopping, dining and traveling needs, so
you spend with total control.

Your GENERAL LINE Bank HPCL Debit Card comes packed with the following features:

 Direct On-line debit to your GENERAL LINE Bank account.

 Refund of surcharge* for fuel purchases at HPCL pumps.
 Accepted at over 90,000 shops, more than 1,800 GENERAL LINE Bank ATM's and
more than 10,000 VISA ATMs all over India.
 International card offering deposit access at over 13 million shops and & VISA
ATM's all over the world.
 Speed-O-Miles Rewards Programme.
 24 Hour Customer Care Centre
 Itemized billing on your bank statement.
 Lost card insurance.

GENERAL LINE Bank Ncash Debit Card- Power Your Wallet

Basic Features
Combining the acceptability of a credit card and the prudence of an ATM Card, the
GENERAL LINE Bank Ncash Debit card is a most convenient accessory for you. No
more fear of overspending. No more searching for the nearest ATM. Only more comfort
and convenience! With the GENERAL LINE Bank Ncash Debit Card you can shop using
VISA Electron's on-line debit program, and debit your GENERAL LINE Bank account
directly when transacting at any VISA accredited member establishment or ATM across
the world!
 44

RECENT LAUNCH

GENERAL LINE Bank has recently launched `Mutual Fund Sweep Account' for its current
account holders. According to a bank release, customers can park surplus funds in their
current accounts in high-liquidity mutual funds through an automatic sweep facility.

Initially, the mutual fund schemes available under this facility are restricted to liquid fund
schemes of Prudential GENERAL LINE AMC and GIC Mutual Fund. The choice of funds
would be increased subsequently.

The release quoted Ms Chanda Kochchar, Executive Director, GENERAL LINE Bank, as
saying, "it is a unique product that merges the transaction efficiency of the banking account
with the returns potential of a liquid mutual fund and is likely to change the way mutual
funds are sold and distributed.''

Most of the private sector and foreign banks have been offering a sweep facility in the
savings account through which customers can park surplus funds in fixed deposits. However,
mutual fund sweep account is a new product.
 45

CHALLENGES FOR GENERAL LINE BANK

The Changing Market

 Increasing customer expectations

 Complex products

 Reduced pioneer advantage

 Competitive pressure on margins

 Products to client service orientation

The Operations Challenge

 Retail business is a transaction oriented business

 Growth in business volumes

 Increase in customer numbers

 Higher transaction volumes

 Operational challenge present in all aspects of the business

 Front Office

 Back Office

 Various systems and processes linking them

 46

MEETING THE CHALLENGE

Operations

 Anticipate transaction volumes and build capacity to meet the same

 Improve productivity of processes

 Re-engineer processes to enhance efficiencies of scale

 Sufficient internal controls and risk management practices

Organisation Structure

 Evolving organisation structure

o Geographic to functional orientation

o Customer centric orientation for identified segments

o Product centric orientation for mass market

 Product centric approach helps gain market share

 Customer centric approach helps deepen relationships

Understanding the customer

 Market research and customer surveys to help in

o designing appropriate products and processes

o improving cross sell ratio and profitability

 Controlling cost by eliminating unnecessary product features and processes

 47

 Pricing products according to value to customer rather than cost

 Managing performance of employees in delivering customer delight

Alliances and partnerships

 Bundling of services to improve convenience to customers

 Overcoming regulatory constraints

 Enhancing customer experience and promoting stickiness

Gauging Customer Satisfaction

 Regular tracking of customer requests and requirements

 Analysis of the same

 Ascertaining change in processes required to meet customer requests

 Re-engineer processes based on feedback

The retail lending portfolio of the bank is growing @ 40-50%, the deposit products by 30-
40% and credit cards by over 100%. The Balance Sheet mix of corporate and retail is now

68:32. However, this mix is changing and the incremental growth of

corporate to retail is now 45:55.
 48

GENERAL LINE: TOUCHING EVERY ASPECT OF CUSTOMER

INTERACTION
 49

Vision

Shared Functions
MR
&
DA Systems & IT Collections
Operations

Product,
Invest. Process,
& Policy Risk
Media &
Channels &
Relat- Comp-
Communication
ions liance
Customer

Liab.
Phy-
E-
Assets sical enabled Liab.
Assets
Liab.
Assets Services
A/cs HRD
Culture
&
Stra- MIS
tegy Services

Services

Legal & Secretarial

Positioning

GENERAL LINE BANK’S BRANDING CAMPAIGN

 50

Services differ from physcial goods as they emphasise experience qualities, which can only
be discerned after purchase or during consumption.

Service offering are becoming an integral part of today’s business and in the process of
differentiating one’s offerings effectively in the eyes of the consumer, branding services have
started playing an important role. Building a strategic relationship with the customer is very
essential.

To develop service brands, choose appropriate brand architecture, position the brand, develop
the programmes needed to deliver the brand and align the business system to the brand
promise.

How GENERAL LINE bank is branding its services?

Philosophy:

 ‘Trademark customer experience differentiates a bank from competitors offering the

same products and services’.
 Service levels must be better than the expectations that are built through marketing
and advertising, and then people will talk about your service.
 Touch customers in many ways (insurance, banking, mortgage financing, retirement
planning), and through various channels (branch, online, direct mail, telephone etc).
 Catch customers young. Target audience must be youngsters in their twenties with
whom it can establish a lifelong relationship.
 Tap into its vast quantities of information about customers’ habits.

Brand-building exercise:
 51

 ‘Umbrella’ campaign: Conveyed values of safety, security, and shield against

calamities for investors (positioning the brand so as to communicate the value
proposition).
 Used Amitabh Bachchan as their brand ambassador.

 Unified and new group identity for GENERAL LINE has been the focus of their
branding strategy

LATEST CAMPAIGN: Banking on Emotional Bonding

Team GENERAL LINE bank had a one point brief- get its customers believe in what the
bank has been assuring all along- trust and bond them emotionally with it.
The aim of GENERAL LINE’s branding strategy is: Ensuring that the bank’s large
clientele is assured that the bank is and will be, there for them. Very simply put, it is to
build trust through bonding.

Since the bank’s positioning in the technological arena, infrastructure and working model has
already been established, it wanted to show an emotional connect with the consumer now.
Hence the recurring idea in GENERAL LINE’s recent campaign stresses on the quest for
making banking an act of building emotional bonds; and a consumer’s transaction with the
bank is the cue for this personalizing act.

Challenges
The three facets that stand out when it comes to GENERAL LINE Bank are: its
technology, its services and the convenience it provides. Hence the challenge before it
was to build a financing brand into a service. While services can be advertised they can
also be replicated by competitors. Therefore GENERAL LINE had to do something
completely different that could just represent GENERAL LINE Bank.

The campaign’s main task was to establish trust between the people and the bank. Concepts
like trust, bond etc can manifest themselves in several ways. However the closest link
between the two is a simple gesture. Being Indians and showing that Indian-ness, gestures are
intrinsic to conveying our emotions.
 52

“The hand on the heart is symbolic of the fact that “I am here for you”. The rationale behind
such a campaign was that the marginal utility of an emotional connection wouldn’t diminish
easily.

However the bigger challenge in establishing this brand image was to build an
emotional connect that could cut across the different income groups, as GENERAL
LINE is a bank for everyone. The bigger thought was that ‘in every situation of your life,
whenever you would need a person, I (the bank) will be there.”
Acting on human tendencies, there are times when we are confident of our moves we require
someone else to inform us about the same. This is conveyed through the ‘Hum Hai Na’
gesture. This campaign has been able to capture those moments when one requires outside
assurance on a particular errand or circumstance.

Commercial used: A newly married couple saying goodbye to the girl’s parents. The father is
skeptical about his daughter’s future being left in the hands of the new entrant in the family-
the son-in law instills confidence in him with a simple’ Hum Hai na’ gesture.
The next situation is a teacher instilling the same trust in a mother leaving her kid to the
school on the first day.
Another instance shows a football coach assuring his player of the same faith in the next
situation. The last scene is the face of GENERAL LINE putting forth that same trust in its
customer.
The bank portrays itself as a family oriented bank, in their services, products and proposition.
While this is true, it was always seen from the bank’s point of view. Now the bank is
transferring these qualities to the customer’s point of view. The first part of the campaign is
the emotional connect with the consumer, that is why the intrinsic real-life situations. The ad
is all about owning the reassurance.

“Trust me, I understand what you need” is what the bank is trying to say.

INNOVATIONS IN SAVINGS ACCOUNT

 53

OFFERS OF FEW OF THE OTHER BANKS

2 In 1: Give Me More!

You have already burnt your fingers in the Dalal Street boom of the early 90s. You have so
risk averse that you the maxim – "Once bitten twice shy" has become your mantra. You earn
enough to be able to save something at the end of every month. You would like to invest your
savings in a place, which gives you the flexibility to access it at times of emergency and yet
gives you handsome returns. However, you don’t know where to go. Your neighborhood
bank only gives you 4.5% interest per annum on your savings account. If the money is put
into a fixed deposit account it gets out of your reach for a certain length of time.

This is where the aptly named 2 in 1 or a ‘flexi’ account fits the bill.

Available at many of the foreign and private banks, it amalgamates the features of a savings
or a current account and a fixed deposit account.

STANDARD CHARTERED BANK

As soon as one opens a 2 in 1 account with the bank, the deposit starts earning a rate of
interest higher than that for a plain savings account (which means a minimum of 7.75% for a
period of 30 to 45 days). The minimum average balance on a quarterly basis should be
Rs50,000 if linked with the savings account or Rs1,00,000 with the current account. This is
the total average balance in the fixed deposit and the linked account over the quarter. With a
cheque book and an ATM card part of the deal one can withdraw money, if need be, by
breaking one’s deposit down to the last paise. The amount withdrawn will lose 1% of the
interest rate applicable for the period while the rest of the deposit will continue to earn the
higher rate of interest.

Take, for example, the once staid deposits. Some bank accounts combine a savings deposit
account with a fixed deposit. A sweep-in account, as it is called, works like this: the account
will have a cut-off, say, Rs 25,000; any amount over and above that gets automatically
transferred to a fixed deposit which will earn the customer a clean 2 per cent more than the
returns that a savings account gives.
 54

Today, even the traditionally staid public sector bankers have started walking that extra mile
in search of new businesses. Innovations are taking place at every level -- from the branch
manager's glass cabin to the sanitised treasury rooms and the chairman's sprawling office.

State Bank of India chief A K Purwar is trying to bring his big bank to the doorsteps of
different professional groups in a unique way. Soon after he took over as chairman, Purwar
introduced a product called "Teacher Plus", where the teaching community was offered a
bundle of products like home loans, car loans, personal loans and so on at a concessional rate.

Similar products were subsequently introduced for lawyers, doctors and  policemen. Now
Purwar is extending the segmented approach further to launch a package for the tourism
industry covering travel agents, hoteliers and holiday-makers.

That marked a new innings for Citi in India, which is evident in its "Junior Package", where
the bank's specially trained investment counsellors help parents to create wealth to meet the
long-term needs of their children through regular investment schemes. It also allows the child
to learn money management through India's first child ATM/debit card.

KOTAK MAHINDRA BANK

Kotak Mahindra Bank has introduced a variant of the sweep-in account. If the balance tops
Rs 1.5 lakh, the excess runs into Kotak’s liquid mutual fund.

“Even if the money is there only for the weekend, a liquid fund can earn you a clean 4.5
per cent per annum,” points out Shashi Arora, vice president, marketing, Kotak Mahindra
Bank.

That’s not a small gain considering that your current account does not pay you any interest.
And if, meanwhile, you want to buy a big-ticket home theatre system, the minute you swipe
your card the invested sum will return to your account.
 55

GENERAL LINE Bank

The bank offers a savings account in two options. The first option is just like any savings a/c
with the conditions that a minimum average quarterly balance of Rs5,000 must always be
maintained else Rs150 per quarter will be charged. The second option, known as the sweep-
in account combines the feature of a fixed deposit and a savings account. With no minimum
balance requirement, one has to keep a fixed deposit of Rs25,000 and when in need of cash
can just transfer or ‘sweep’ in funds to the savings account. Here again non-maintenance will
attract a penal charge of Rs150 per quarter. Deposits are held in units of Rs1, which gives one
the flexibility to withdraw the exact amount needed without losing up on interest. One can
even jump from option 1 to option 2. However, this will attract an account closure charge of
Rs100.

Yet another product is the super saver account. This is similar to HSBC’s
SmartMoneyAccount. With a minimum amount of Rs25,000 in a fixed deposit one can
withdraw upto 75% of the deposit by paying 2% plus interest tax (for a limit of Rs0.2mn)
over the deposit rate only for the period one uses the money.

CO-BRANDED DEBIT CARD: GENERAL LINE BANK, ESCOTEL IN

TIE-UP

ESCOTEL, the cellular service provider, and GENERAL LINE Bank had jointly launched
GENERAL LINE Bank Escotel international debit card on Wednesday.

Announcing the launch, Mr Neeraj Swaroop, Country Head, Retail Banking, GENERAL
LINE Bank, had said:

"With this alliance we intend to offer our customers in Kerala one of the most comprehensive
and advanced debit card facilities. This is also in keeping with our commitment to proactively
assess customer needs and deliver innovative services."

Mr B. Ramakrishna, COO, Escotel (Kerala), said: "It had always been our effort to provide
our customers with value that goes far beyond the normal benefits of mobile usage. Which is
why we have entered into a tie-up with GENERAL LINE Bank to give our customers a
whole range of benefits."
 56

GENERAL LINE Bank

Auto Sweep

Here the account holder decides the minimum amount to be kept in his/her savings account.
Any excess over it will automatically get transferred to the Quantum – fixed deposit account.
For eg, if one instructs the bank to keep Rs10,000 as the minimum balance. All money above
Rs10,000 will be transferred to the Quantum fixed deposit account giving one the advantage
of a higher interest rates. The minimum period under this facility will be of 30 days.

Reverse Sweep

Former England captain Mike Gatting tried this shot once too often in the 1987 World Cup
Cricket Final and ultimately threw away his wicket. Australia went on to win the Final.
However, the account holder here can take a chance. If he/she has issued a cheque or wants to
withdraw an amount which is higher than what is in his/her savings account, the bank will
just break the fixed deposit account in units of Rs1,000 or in multiples thereof and transfer it
in the savings account to meet the shortfall.

Auto Renewal

Under this facility when the fixed deposit a/c attains maturity, the bank will automatically
renew the principal and accrued interest for a further period as stipulated by the a/c holder.

TIMES BANK
High returns! Free savings account! Free ATM card! Anywhere Banking! HomeBanking! So
declares the brochure of Times Bank. The bank, like many others, also has a scheme linking a
fixed deposit account with a savings account. This they call it the Times Convenience
Deposit.

Features

Investing in Times Convenience Deposit means that the entire amount is held in units of one
rupee. So, if one ever needs money, one needs only to break the amount required. The rest of
the amount continues to earn the original high rate of interest.

Times Overdraft Deposit

Times Overdraft Deposit is a fixed deposit automatically linked to a free savings/current

account (no minimum balance requirement) against which one can overdraw upto 75% and
even 90% in exceptional situations.
 57

INNOVATIONS IN HOME LOANS

There’s plenty of innovation happening in home loans. As a product progresses in its life
cycle, innovations follow. In home loans, a steady decline in interest rates made buying a
house on credit an affordable proposition. Then came floating rates. Now, unable to
differentiate themselves on rates anymore, lenders are trying to sell convenience to the
customers.

ABN Amro sent the home mortgage market afire with its 6 per cent home loan offering last
year. The product offers a 6 per cent interest rate for two years after which the interest rate is
reset in tune with the prevailing market rate. All the other big home loan players slashed their
rates after this was announced.

Home saver product and its variants from Citibank, HSBC and Stanchart.

The interest rate on the loan is determined by the balance you maintain in the savings account
with the bank. The home builder can maintain a higher balance in his or her savings account
and bring down the interest rate on the home loan. The rate is calculated on a daily basis on
the net loan amount.

Stanchart claims that since the launch of its home saver product in April 2002, close to 40 per
cent of its customers have chosen it.

Says Vishu Ramachandran, regional head, consumer banking, Standard Chartered: “We
believe that there are several ways to innovate and create value in the process, even in
developed product areas.”

Another new private bank, IDBI Bank, is also playing hard to feature on the innovation
index. Two years ago, for instance, it introduced instant account opening to its customers.
The account holders are given account numbers, ATM cards and chequebooks as soon as
they filled in their account opening forms.

Last year, it introduced 110 per cent  home loans. The provocation for launching the product
is the fact that for the first few years, most people live in a home devoid of the things that
make it a home. IDBI Bank's home loan allows customers to buy their home and use the
additional 10 per cent to furnish it and add amenities immediately.
 58

Home loans seem to be one area where most of the innovations are taking place. At least
three financial intermediaries -- GENERAL LINE, GENERAL LINE Bank and
HSBC -- claim to have been the first to start home loans with floating rate interest.
Today, over 75 per cent of  incremental home loans are disbursed at floating rates.

Standard Chartered Bank went one step ahead and linked its customer's home loan account
with a current account, where the principal amount of the loan gets reduced on a daily basis
as the excess cash in the current account automatically flows in towards repaying the home
loan.
 59

LEADER IN HOME LOAN MARKET

GENERAL LINE Bank has overtaken GENERAL LINE, a major player in home loan
market, for the fiscal 2003-04 by registering disbursements of Rs 13,278 crore as against Rs
12,697 crore recorded by the latter.

The disbursals of GENERAL LINE Bank, which has grown aggressively in a time span of
five years, rose from Rs 8,659.4 crore in FY-03 to Rs 13,278 crore in FY-04. The bank at
present
has a market share of about 27 per cent of the total market of Rs 5,00,000 crore
approximately, banking industry sources said.

In the words of GENERAL LINE Bank Home Loans’ Rajiv Sabharwal,

"We will continue to try and provide competitive rates, along with innovative add-on
services. We will also increase our presence even beyond the 400-plus locations where we
are currently present".

According the GENERAL LINE's annual performance, the disbursals of the entity in FY-04
grew by 28 per cent at Rs 12,697 crore (Rs 9,951 crore in FY-03).

GENERAL LINE chairman Deepak Parekh has in the past gone on record that the housing
finance company was not looking at a market share growth but would focus on growing
profitably.

Both entities were marketing their home loan products through their branch networks and
direct sales agents. GENERAL LINE Bank was also sourcing housing loans from GENERAL
LINE.

GENERAL LINE Bank was currently offering home loans at 7.5 per cent for all tenures on
floating rates while in case of GENERAL LINE, the rates were pegged between 7.5 to 8.5 per
cent
 60

INNOVATIONS IN CREDIT CARDS

The Evolution of Credit cards

The acceptance of the Credit Card as a replacement for cash has become a reality and
the average usage has hit 3.5 Cards per person in advanced markets; the turnover matching
that for Cash and Cheques. Innovations in the Cards market have resulted in the evolution of
the card from being a “convenient alternative to Cash” to becoming the “financial window”
for the bank to offer bundled services to consumers.

Credits Cards thus, have become an integral part of Consumer Finance with banks becoming
large issuers and acquirers over the years. This has been a natural evolution with the
intermediation of Banks disappearing and the avenues for large scale secured loans being a
distant past.

The expanding gamut of credit cards:

Today, Card products span a wide range of offerings that are structured to meet the
requirements/demands/life style of consumers. Cards issuers constantly analyse customer
behaviour, competition and technological advances to innovate and improve the productmix
for specific customer segments. These are implemented using a combination of:

 Features
 New Card Designs
 Fee / APR / Charges linked to option of services
 Pricing Strategies
 Loyalty / Rewards / promotions /campaigns
 Behavioural / Transactional Scoring, to impact:
 Credit Limit
 Over limit etc.

In addition, host of generic services are linked to the Card Products (these would wary from
an issuer to issuer with most of the underlying features being alike)

INNOVATIONS IN THE CARDS BUSINESS

Aided by technology and innovation fuelled by the market needs and underlying growth
propositions, numerous card types have evolved to meet the needs of various consumer
groups. Banks have roped in partners for Co-branding, Co-issuing, Affinity, and Loyalty
programs to encourage cardholders to increase card spends and also to revolve the credit thus
promising to maximise the value for each $ spent by the customer.

Cards businesses are evolving with intense competition, attractive ROI, joining of retailers
and telecom companies into this space, Card being the underlying proposition in e-commerce
and the best and most convenient vehicle for delivering financial services across borders.
Continuous improvement of processes, practices, services, technology, alliances and products
have reached a stage where the offerings on Card products include the following variants,
covering those segments as well, which were outside the traditional consumer segment:
 61

 Corporate / Business Cards (AMEX having a $45 BN spend on their 4.9 Million
Cards Portfolio in one Year)
 Business Purchase Cards (Meeting all the Purchase requirements of a small / Medium
Enterprise)
 Co-branded Cards aimed at maximizing benefits to the Card Holder by both the
issuing and Co-branding partners.
 Co-issuing for and on behalf of a partner
 Affinity Cards representing a close user group with the benefits realised on the spend
by the Affinity Group
 Instalment Loans with EMI linked to Card outside the Credit Limit
 Personal Loan linked to a Card
 Consumer Loan disbursed through a Card with a credit line equivalent to the Loan
amount…The paid up instalments adding to Open To Buy (OTB)
 Secondary Limits on the Cards during high spend seasons
 Hybrid products covering the features of the Card and the Loan
 Virtual Card (e-card for exclusive use on the net)
 A Card as part of the Mobile Phone SIM card for making Payments etc.

Standard Chartered’s Marathon Credit Card

   
Standard Chartered Bank in association with VISA International has introduced the
Marathon credit card. This special card is issued to celebrate the spirit of the Standard
Chartered Mumbai Marathon and to compliment the spirit of fitness.

Standard Chartered Bank is the market leader in sport based affinity card programmes. Its
earlier success includes that of the Cricket Card, the Soccer Card and Olympic Games Card.
The Marathon Card is a logical extension of the Standard Chartered Bank product suite. It has
partnered with Reebok in its endeavour to promote fitness among the customers.

The exclusive offers for the customer include:

Free Reebok Running Shoes: A pair of Reebok 3D Runner Shoes worth Rs. 2290/- are
offered free with every card

Balance Transfer at 0.99%: An attractive balance transfer at a very low interest rate of
0.99% per month, for the first 6 months.

Supplementary Card free for life: All Marathon cardmembers could gift their near and dear
ones supplementary Marathon Credit Cards. These cards are offered free for life.

Win Reebok treadmills: On spending just Rs 900/- on the Marathon Credit Card every
month, customers get a chance to win Reebok treadmills worth Rs.2, 45,000/- each, for a
period of 8 months.

Citibank’s "Premium"
 62

Citibank launched the Citibank Ultima and Diners Club Elite

card programs. With this synchronized dual card launch,
Citibank has established the super-premium "Black" category
of cards in the country. Both cards break all previously
defined limits of consumer indulgence and extend the
possibilities of a card to levels never previously envisaged
on a financial services product.

Created to complement the lifestyle of the ultra-affluent, membership of both cards is by

invitation only. 

The twin launch aims at ensuring that both Citibank Cardmembers and Diners Club loyalists
have the opportunity to experience superlative features and benefits designed exclusively for
their card programmes.

Offered through the Visa network, the Citibank Ultima Card's launch in India follows its very
successful introduction in Singapore and Hong Kong. With an annual fee of Rs. 50,000, the
Ultima will be India's most exclusive credit card superseding the Platinum Card category.
Bundled with five free supplementary Citibank Ultima Cards, cardmembers will be
automatically enrolled onto the CitiGold Wealth Management banking platform and have
access to a personal Relationship Manager who will assist them in their investments and
personal finances.

The Citibank Ultima Card also provides a Personal Accident Air cover of Rs. 1 Crore. In
addition, the Ultima offers members preferential-rate access to a rare bouquet of: exclusive
spa programs under Ultima Rejuvenation, golfing options in the UK, Australia and Asia
under Ultima Golf, rare and exotic holiday options under Ultima Holidays and Ultima
Indulgence, travel privileges under Ultima Stay, the best known retail marquees in watches &
jewelry, porcelain figurines, fashion accessories, etc. under Ultima Retail, on-demand
personal services under 24/7 Ultima Personal Assistant Services and a reward program with
an unlimited gift menu or expiry.

Rewards and sales

 63

The strategy of offering rewards in the form of a discounted meal or a holiday may sound
run-of-the-mill, but credit card companies still feel that it is a good way of increasing sales.
Encouraging cardholders to use their cards initially through rewards and benefits is a good
way of increasing category awareness and drives up card sales volumes.

"Smartfill, the co-branded card launched by Standard Chartered Bank and Bharat
Petroleum in association with Visa, is an example of offering a value proposition. It
enables cardholders to earn one reward point for every Rs 125 spent on the card. Cardholders
also get a fee waiver on purchase of fuel at over 225 designated Bharat Petroleum outlets in
10 cities across the country," he added.

The need of the hour is to develop new and innovative areas of usage of cards, which are not
only relevant to the customers but also make business sense to the companies.

GENERAL LINE recently launched the Health Plus Credit Card, where it has joined hands
with National Insurance Company and MasterCard International to offer cashless mediclaim
of Rs 50,000 and a critical illness cover of Rs 1.5 lakh on each card, discounts at leading
hospitals and on healthcare services and products. By offering such value-added services we
feel that we will not only win the loyalty of the existing customers but also get new
customers.

The company had also launched a co-branded card earlier this year for government
employees, with e-seva, an e-governance initiative of the Government of Andhra Pradesh.

"The companies should encourage usage of cards for daily needs, micro-payments (buses,
trains, cinema tickets) and utilities (telephone, electricity and gas). Our thrust areas are
 64

therefore on increasing usage avenues through tie-ups with new categories. For instance,
paying MTNL telephone bills at IOC pumps through credit cards and so on."

Apart from this, Citibank also has a variety of tailor-made products to suit
every need — `a card for every reason'.

It has exclusive cards for the top customer tier (Citibank Platinum, Diners Club, Citibank
Gold), affinity cards (World Wildlife Fund, CRY, cricket), cards for youth (Citibank-MTV),
cards for women, cards for teens (Times I Card) as well as powerful co-brands delivering
unique benefits — be it airlines co-brands with Jet Airways and Diners Club-British Airways,
fuel (Indian Oil), automobile (Maruti), entertainment (Times Card), hotels (Diners Club-Taj),
a card specifically designed for Internet usage (Citibank e-Card) and so on. Each of these
cards comes with customised features, rewards schemes and usage offers and is specifically
targeted at relevant customer usage needs.

Also, Citibank will shortly launch a `Family Pack' in which the customer has an option of
going in for a different add-on card. A Gold Card customer, for instance, can give his wife a
Women's card, daughter an MTV card and so on. Also on the anvil is a co-brand with a
telecom player.

Yet another example of a credit card company trying to offer its customers value propositions
through co-branding is GENERAL LINE Bank. The bank has four co-branding relationships
— GENERAL LINE Bank-HPCL, GENERAL LINE Bank-BPL, GENERAL LINE Bank-
Trinetra and GENERAL LINE Bank-Amway. Each of these targets the need of particular
groups of people; we would continue to look for partnership and associations to provide other
value added services to the consumers," says the GENERAL LINE spokesperson.
 65

AUTO LOANS
INTRODUCTION

Chalti Ka Naam Gaadi....

You might be able to differentiate between a cylinder and a piston, but can you understand
the multiple car loan options in the market? You have 6/6 eyesight but still can't read the fine
print. Nowadays there are many cars in the market and as many (if not more) ways to buy
them. We help you in clearing the clutter behind all the jargon. Happy driving!

Comparison Of Different Banks/ Auto Finance Companies

EMI (per Rs 100,000 loan) Remarks

3 years5 years
1year (Rs)
(Rs) (Rs)

Citibank 9,120 3,565 2,445 Cardholders get a discount

HSBC 9,097 3,541 2,459 Existing customers get preferential rates

GENERAL
8,993 3,515 2,451 Check for accountholder benefits
LINE Bank

GENERAL GENERAL LINE bond holder get

8,973 3,492 2,438
LINE discount

Fiat Finance 8,912 3,423 - Only Fiat Cars

Kotak Mahindra 8,973 3,515 2,489 Comprehensive schemes incl leasing

Countrywide 8,993 3,515 2,451 Maruti Specials

Offered special services to expedite

ANZ Grindlays 8,993 3,493 2,438
delivery

Saraswat Bank - 3,500 2,425 Slow processing and FD requirements

Ford Credit 8,973 3,492 2,975 Only for Ford cars.

Source: Auto India- Dec '2001

New products or innovations in the car finance sector

 66

Car Overdraft:

GENERAL LINE Bank has already launched the Car Overdraft product in 2004 and it is
going to be a focus area in the year 2005. The overdraft facility is provided in the form of an
GENERAL LINE Bank Roaming Current Account (with an overdraft limit). An overdraft
account is opened for the customer with a pre-approved limit set up. This limit depends on
the vintage and condition of the car, which is valued before setting up the limit. Once this
limit is set up, the customers can then withdraw money from ATMs or use their debit cards at
various merchant establishments as per his requirement. The customer pays interest only on
the amount withdrawn by him from the account for the period it is withdrawn for. He also has
the flexibility of repaying a minimum of 5 per cent of the total outstanding every month, very
similar to the facility available on credit cards repayment. The car overdraft facility is like
providing mixed benefits of a personal loan, credit card, car loan, as also the regular benefits
of a roaming current account.

Loan on Phone:

This is a unique offer to some of GENERAL LINE customers who have been given a pre-
approved car loan based on their existing relationship. The customer can simply contact the
call centre to find out if he/she has a pre-approved loan. On getting a confirmation he can
walk into any dealership or contact our channel partner and take the car by completing
minimal documentation.

Used cars loans:

These are expected to get more aggressive. With better control on process of transactions on
used cars — highlighted by entry of organised players and showroom price tags, this is
expected to lead to more financing on used cars. The availability of used cars loans is now
expected to reach much beyond the current reach and into the C category smaller townships
across India. Refinance and top-up loans are also being offered for not just GENERAL LINE
Bank customers, but even customers with repayments from other financiers.

Car loans is another turf where competition is forcing innovation. For instance, Standard
Chartered is offering loans of up to 75 per cent of the value of a car less than five years old.
Even though it is classified as a personal loan, the rate is cheaper because the loan is secured
against the car and the money can be used for anything. Normally, personal loans are costlier
because they are unsecured loans.

GENERAL LINE Bank introduces `Car Overdraft' facility

GENERAL LINE Bank has launched the 'car overdraft' facility against the car as security.
Under the scheme, the bank will open an GENERAL LINE Bank roaming current account in
the customer's name with a pre-approved overdraft limit.

The account is accessible to the customer through multi-city cheque and debit card, according
to the bank. The limit of the overdraft will be determined on the basis of the vintage and
condition of the car.
 67

The customer will pay interest only on the amount withdrawn and for the period it is
withdrawn. They also get the flexibility of repaying only a minimum of five per cent of the
total outstanding every month.

In addition, customers will get all the regular benefits of GENERAL LINE Bank 'roaming
current account', including multi-city chequebook, fund transfer facilities, GENERAL LINE
Bank HPCL Visa Electron Debit card, internet banking, phone banking etc.

ANALYSIS AND RECOMMENDATION

“Which bank/s are you banking with?”

BANK CATEGORY

Name of the Bank

Public
Private
27.45%
Both

Pies show counts

41.18%

31.37%

As per the survey, most of the respondents (around 40%) are banking with both Private and
Public Sector Banks.

The number of respondents having their retail banking products from only public or private
banks were almost equal i.e 30%.
 68

“Which Retail Banking product/s do you currently have?”

AUTO LOANS HOME LOANS

Auto Loans Home Loans

Yes Yes
no no

Pies show counts

Pies show counts

CREDIT CARD

Credit Card no
Yes
no

Pies show counts

Yes

A majority of the respondents had already taken retail products namely home loans, auto
loans and credit cards.

None of the respondents had taken personal loans till now.

 69

“Which Channel of distribution do you use the maximum?”

CHANNEL USAGE

300
250
200
150
100
50
0
ATMs Internet Branch Phone Mobile
Banking Banking Banking Banking

As the graph clearly shows, the most popular and the most used channel for all retail banking
needs is still branch banking. This is followed by ATMs, internet banking and, phone
banking and mobile banking in that order.
 70

INTERNET BANKING USAGE IN VARIOUS AGE GROUPS

20-25 25-30
Internet Banking
Never Used
One
Tw o
Three
Four
Five

Pies show counts

30-40 >40

The above pie charts clearly show that the internet usage depends on the age of the customer.
The results are:

A majority of respondents in the age group >30 years have never used internet banking, the
reason for which could be that they find it too technical and complicated to understand.
The maximum percentage of internet banking users lies in the age group of 25-30 years who
are well versed with technology and internet.

Approx 16% and 22% in the age group 20-25 yrs and 25-30 yrs respectively use internet
banking as their second choice of banking transactions.
 71

BRANCH BANKING USAGE IN VARIOUS AGE GROUPS

20-25 25-30

9.52% 11.11% 11.11% Branch Banking

Don't Use it
28.57% One
Tw o
Three
22.22% 22.22%
Four
Five

Pies show counts

9.52%
52.38%

33.33%

30-40 >40

13.33%

33.33%

20.00%

66.67% 66.67%

As the above pie charts depict branch banking usage is also dependent on the age of the
customer segment. The key results are:
Branch banking is the most popular in the age group >30 years as there are almost 67% of
respondents in these age groups who prefer branch banking over all the other methods.
In the age groups up to 30 years, branch banking was the second choice for the majority of
the customers.
 72

“Reasons for not using the lower ranked channels”

40

30
29

20

14
10 12 12 12
10
8
Percent

4
0
Not Available Unable to use Time Consuming Costlier
Unreliable Complicated Unaw are Any other

Reason for not using a channel

Most people had ranked internet, phone and mobile banking as the least used channels.

The above graph shows that the reason for not using these channels is that they are
considered to be unreliable by 29% of the people. Thereafter the next important reason was
that around 14% of the respondents are not even aware that these channels are being provided
by their banks.
 73

TYPE OF BANK AND REASON FOR NOT USING TECHNOLOGY BASED CHANNELS

Public Private
Reason for not using a channel
Not Available
Unreliable
Unable to use
Complicated
Time Consuming
Unaw are
Costlier
Any other

Pies show counts

Both

A majority of people banking with public banks cited the reason that they did not use
technology based methods like ATM, internet etc. as they were either not available with the
bank or they did not know how to use them

On the other hand, the majority of private and foreign banks’ customers felt that these
methods were unreliable, time consuming and they were not aware that these services were
available with the bank.
The other reasons cited were:
- Never felt the need to use any other method
- Don’t want to try something new etc.
 74

REASON FOR NOT USING CERTAIN CHANNELS AND EDUCATION

Normal Graduate Post Graduate
4.76% 5.88%
Reason for not using a channel
9.52% 19.05%
Not Available
Unreliable
23.53% Unable to use
9.52%
Complicated
47.06%
Time Consuming
Unaw are
Costlier
14.29% 23.81% Any other

11.76%
Pies show counts

19.05% 11.76%

Engineer or IT Professional

15.38%

30.77%

7.69%

7.69%

30.77%
7.69%

For normal graduates, unreliability of technology based methods and inability to use them
was a major reason for not using them.

For post graduates, the main factors were unreliability and unawareness.

However, for engineers and IT professionals inability to use and unreliability seemed to be
not an important reason for not using these methods, as they seemed to be well versed with
technology and were more aware of the services being provided by their banks.
For this segment, the least used channel was branch banking for which the main reason was
that it was more time consuming than the other channels.
 75

“Convenience is more important for fulfilling my retail banking needs than the extra costs
involved”

As depicted by the graph, majority of the respondents felt that convenience was more

40

30

20

10
Percent

0
Strongly Agree Somewhat Agree Strongly Dis agree
Agree Dis agree

Convenience
important to them than the extra costs involved in getting those services.

This implies that even if banks charge a nominal fee for some of the extra services to make
retail banking more convenient to the customers, it would be acceptable to the customers.
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“Branch banking is the most reliable channel since it involves face to face interaction”

40

30

20

10
Percent

0
Strongly Agree Somewhat Agree Strongly Dis agree
Agree Dis agree

Branch Banking More Reliable

Most of the respondents felt that branch banking is definitely more reliable since it
involves face-to face interaction with the bank employees. This could be one of the reasons
for allow usage of internet and other banking channels being provided by the banks.

There were very few respondents who disagreed with branch banking being more reliable.
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“ I am concerned over the security aspects of internet banking transactions”

Strongly Disagree

5.9%
Disagree

13.7%

Strongly Agree
41.2%

Somew hat Agree

25.5%

Agree

13.7%

“Information concerning internet banking transactions can be tampered by others”

Strongly Disagree

3.9%
Disagree
11.8%
Strongly Agree
29.4%

Somew hat Agree Agree

41.2% 13.7%

Both the above graphs depict non reliability on internet banking of most of the respondents.
Only around 20% of the respondents to both questions, agreed that internet was a safe way to
access their accounts and for other banking purposes.
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SECURITY OF INTERNET BANKING & USAGE

Strongly Agree Agree Somewhat Agree
7.69%
Internet Banking
28.57% 28.57% Don't Use it
38.10% 23.08% One
Tw o
Three
4.76% Four
69.23%
4.76% 71.43% Five
14.29% 9.52%

Pies show counts

Disagree Strongly Disagree
14.29%

28.57%
33.33%

66.67%

57.14%

Security of the banking transactions over the internet seemed to be the most important
hindrance in making people use internet as a channel for retail banking.

Majority of the respondents who agreed that internet was not secure had either never used
internet as a channel or used it as their last choice for banking.

Similarly those who disagreed that internet was not secure, used it as their first or second
choice for retail banking functions. This shows their reliability on internet and preference for
convenience.
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“I would not like to use new technology based methods for my banking transactions”

40

30

20

10
Percent

0
Strongly Agree Somew hat Agree Strongly Disagree
Agree Disagree

Don't like to use technology based channels

Although most of the respondents felt that internet was not a safe method for banking, yet
a majority of them did not completely rejected the technology based methods to transact.

This shows that although internet might be unpopular and considered unreliable, other
methods especially ATMs were very popular among the respondents. The same is depicted in
the graph above which shows that around 60% of the respondents disagreed or strongly
disagreed that they would not like to use any of the technology based methods.
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“I would like to use internet and other paid channels if I knew how to use them and if they
are available on a trial basis for a month”

30

20

10
Percent

0
Strongly Agree Somew hat Agree Strongly Disagree
Agree Disagree

Trial for internet banking

Approx 65 % agreed and 35% disagreed that they would like to try internet and other
methods on trial basis if they knew how to use them and if there banks provided them with all
the required information.

This shows that the banks more than just providing the services should also focus on
spreading awareness about them and also make people aware of how easy they are to use and
how to use them.
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“Factors considered important for choosing a retail bank”

Weightage to each factor

78.43 0.00 73.73

61.96 72.94

63.92 60.78
75.69 65.49
Charges/ Fees for services
Quality of Service
Loyalty/ Personal Experience
Branch Ambience and location
Speed/ Promptness of service
Brand image
Special Promotional Offers
Interest Rates on deposits/ loans etc
Others

According to the weights that were assigned to each of the factor and how they have been
weighted by the respondents, the above graph shows that the factors considered important for
choosing a retail bank in the sequence of importance are:
 Interest rates on deposits/ Loans etc.
 Speed/ Promptness of the service especially in case of loans
 Charges/ Fees for services
 Quality of service being provided including the behavior of the bank employees
 Branch ambience and location
 Brand image
 Special promotion offers
 Loyalty and personal experience.

Contrary to what is commonly believed, personal experience was not rated high by the
respondents as compared to the other factors in choosing a bank for their needs
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“Possible Reasons For Dis Satisfaction”

0.00
71.37 81.96

49.80

76.08

71.76
65.49
High Interest on Loans
Bad Service
Less number of delivery channles
Time consuming transactions
Lack of special offers
Inefficient staff
Other

As shown in the above graph, the most important reason cited for dis-satisfaction was high
interest on loans followed by bad service which includes ATMs usually not working, Mobile
message alerts not being received on time etc.

The least important reason for dissatisfaction was cited as Lack of special offers for existing
customers, the reason for which can be that customers want first to be satisfied with the
current products and services before being offered new products from the same bank.
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“What according to you should the banks do to retain you as a customer?”

30

24 24 24

20

16

12
10
Percent

0 2
Innovative Products Less Costly Services Bundling of banking
Convenient Distribut Provide Package Offe Better brand image

Tools to retain the customer

Approximately, 72% of the respondents felt that the banks should focus on providing:

- New and innovative products with value added features being added continuously
- More convenient and easy to use distribution channels
- Bundling of banking and non banking services For e.g Citibank MTV Creit card
bundles credit card features with discounts at various restaurants, pubs etc.

An equal number of respondents favored the above mentioned categories.

Only 2% favored package deals for various retail banking products, the reason could be that
people need different retail banking products at different stages of life and at different times.
TOOLS TO RETAIN CUSTOMERS 84

20-25 25-30
Tools to retain the customer
Innovative Products
Convenient Distribution Channels
Less Costly Services
Provide Package Offers
Bundling of banking and non banking services
Better brand image

Pies show counts

30-40 >40

As depicted by the above pie charts, people in different age groups have different
expectations from their banks which are as follows:

 Respondents in the age group of 20-25 and 25-30 had similar requirements as a
majority of respondents of both the groups favored bundling of banking and non
banking services followed by a need for innovative products.

 An equal number of respondents in the age group of 30-40 gave importance to

innovative products, convenient distribution channels and less costly services as tools
for banks to retain them
 85

 The respondents in the age group of greater than 40 wanted less costly services and
convenient distribution channels.

 Respondents in the age group of >30 years seemed to be more price sensitive towards
the products & services being provided by the banks.
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“What are the information tools that you use for making your retail banking products
decisions? “

 As per the above pie charts, family seems to be the key influencer in having an impact
on their retail banking decisions.

 All age groups except 25-30 years considered bank visits and meetings with the bank
staff as an important influencer.

 A majority of respondents (approx 45%) in the age group of 25-30 years considered
banking magazines and reviews as the most important search tool to take a decision
regarding their retail banking needs.
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“What could be your future retail banking need in the next two years?”

FUTURE RETAIL PRODUCTS DEMAND IN VARIOUS AGE GROUPS

20-25 25-30
Financial need in the next two years
Home Loan
Auto Loan
Credit Cards
Saving and Current Account
Personal Loan

Pies show counts

30-40 >40

The pie charts for future retail banking requirements give the following results:
 Majority of people in the age group (approx 50%) would need auto loans in the next
two years, which is for their first vehicle. Followed by this, approx 33% would need
credit cards.

 77% of the respondents in the age group 25-30 years mentioned that they would need
a home loan in the next two years followed by 23% who said that they would need
 88

auto loans. This finding proves that this is the most attractive segment for banks to
give housing loan offers.

 A similar result was shown in the segment of 30-40 years i.e a majority of them
needed home loans in the next two years followed by auto loans.

 A majority in the age group > 40 years planned to take home loans in the next two
years even though for them the intention was to buy a second car for the family.
Almost an equal number wanted to get credit cards and home loans in the near future.

 Only 13% of the respondents that too belonging to the age group of >40 years said
that they needed personal loans in the near future.

“I would prefer the bank I am currently banking with, for my next future retail banking
need”
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PREFERENCE FOR THE CURRENT BANK

Preference for the current bank

Yes
No

Pies show counts

Although personal experience and loyalty was not rated high as an important factor for
making retail banking decision, yet 73% of the respondents agreed that they would prefer
going to their current bank for their future retail banking needs as well.

This proves that cross selling can prove to an important strategy for banks to increase their
share in the customer’s wallet.

RECOMMENDATIONS
 90

 Although the banks have been providing distribution channels like in internet, phone
banking etc, most of the customers are reluctant to use them as they are either not
aware of it, think it is unreliable or do not know how to use them. Therefore the banks
need to focus on spreading more awareness about their benefits, usage and reliability
if they want to save costs at the distribution channel’s end.

 Banks need to focus on factors like promptness of service and quality of service in
order to gain the market share; this is essentially true for some of the Public Sector
Banks.
 Banks should devise future products looking at the individual requirements of the
various customer segments. Moreover they should direct their marketing strategies
towards segments which can be the most attractive for that particular retail product.
For e.g Home Loans for the age group of 25-30 years.

 Another aspect that was revealed out of this survey was that customers favor retail
banking products which combine a banking product with non banking products or
benefits. This is being implemented in the Credit and debit cards to a large extent but
now should also be linked to the other products.

 Customers today are willing to pay more for convenience, want better services, are
willing to try new product and delivery channels if they are safe. All this provides
immense opportunity for banks to continue inventing to grow in the retail banking
industry.

 What the retail banks need to do is identify new segments more frequently and come
up with more and more value-propositions which will give the customers enough and
more reasons to use their products. For e.g The banks could probably look at offering
a credit card to college students for their educational expenses."

CONCLUSION TO MY RESEARCH
 91

The retail banking scenario is changing at an immense speed. It is characterized by the:

o Significant change in demographic profile

o Huge market potential
o Increasingly challenging business environment
o Competitive tools are different – need to redefine delivery models and business
processes.

In this fast changing scenario, banks need to equip themselves with internal capabilities and
build efficient and viable business models to create the advantage of new opportunities
available into a long term sustainable competitive advantage
Banks today cannot restrict their learnings to the best practices followed in the industry but
they need to look at other benchmark industries to derive learning on various important
business parameters. They need to learn from each other and also benchmark not only
banking and financial services industries but winning companies across a wide range of
industries

A continuous innovation in every aspect of business can only help banks to keep pace with
the ever changing and ever evolving consumer mind.

REFERENCES
Book:
1. Retail Banking - Keith Pon
 92

2. For CAIIB Retail Banking-Indian Institute of Banking & Finance.

3. Financial Management - Khan & Jain
4. Principles and Practices of Bankin-IIBF
5. Financial Markets in India-Rakesh Shahani

JURNAL MAGGINES:

A. Financial Management And Policy

B. Multinational Business Finance
C. Business today.

Magazines:

 Chartered Financial Analyst- Indian Banking November 2004 “Retail Banking, the
new growth driver”
 Business Today January 2, 2005 “India’s Best Banks”
 Pitch: Marketing at crossroads December 15- January 14, 2004/05 “Banking ON
Emotional Bonding”
 Financial Express, Oct 21,2002 “Knowing Your Customer, New Age Banking
Way”
Business Standard “Innovation games bankers play” Tamal Bandyopadhyay | May
22, 2004

Websites:

 http://fic.wharton.upenn.edu/fic/papers/97/9748.pdf
 http://www.bseindia.com/downloads/PersonalFinance.pdf
 http://www.bcg.com/publications/files/Protecting_the_Franchise_as_New_Forces_Tr
ansform_Retail_Banking_Sep04_OfA.pdf
 http://www.myiris.com/cards/compare1.php
 http://www.General
linebank.com/pfsuser/aboutus/investorelations/annualreport/pdf/ar2k3.pdf
 www. Indiainfoline.com
 http--www.igi-online.com-downloads-pdf-ITJ2551_5OVKFbGH37.pdf
 http--www.General linebank.com-pdf_forms-investorpresentation.pdf
 http--www.bseindia.com-downloads-AsianBanking.pdf

QUESTIONNAIRE

1. Which bank/s are you currently banking with? (Please mention all)
 93

2. Which retail banking products do you currently have?

 Home Loans
 Auto Loans
 Credit Cards
 Savings Account
 Personal Loans
 Others ___________________________________

3. Rank the following channels from 1 to 5 in terms of how much do you use
these channels ( 1 being the rank of the channel that you use the most)

 Internet Banking
 ATMs
 Branch Banking
 Phone Banking
 Mobile banking

4. Tick the reason/s for not using the lower ranked channels mentioned in Q3:

 It is not available with my bank

 It is unreliable
 I don’t know how to use it
 I think its very complicated and confusing to use
 Its more time consuming than the other methods
 I don’t know if it’s available with my bank and for my banking needs
 It is costlier than the other channels
 I don’t have access to it (no internet connection, no phone, no ATM around my area
etc )
 Any other reason ____________________________

5. Please mark your level of agreement with the following statements:

1 - Strongly agree; 2 – Agree; 3 - Somewhat Agree 4 - Disagree
5 - Strongly Disagree

Trade off between Convenience and Costs

 “Convenience is more important for fulfilling my banking needs than the extra costs
involved”
 94

Reliability
 “Branch banking is the most reliable channel since it involves face to face interaction”
 I am concerned over the security aspects of internet banking transactions.
 Information concerning internet banking transactions can be tampered by others
 I don’t like to use new technology based channels for my banking transactions”

Triability

 To what extent would you use internet banking and paid channels if it is available on
a trial basis for a month

Very interested ----------------------------------------- Not Interested

1 2 3 4 5

6. Rate the factor from 1 to 5 in terms of their importance in choosing a retail

bank (5 being the highest and 1 being the least)

 Charges/ Fees for services

 Quality of service
 Loyalty/ Personal experience with the bank
 Branch ambience and location
 Speed/ promptness of service
 Brand image (like GENERAL LINE reliable)
 Special promotional offers (0% interest on credit cards for 1 year etc )
 Interest rates on deposits/ car loans/ auto loans/ credit cards etc
 Others Please specify ________________________________

7. Rate the possible reasons for dissatisfaction from a retail banking provider
(rate from 1 to 5; one being the lowest rating and 5 being the highest.)

 High interest rates on loans/ overdrafts

 Bad customer service
 Less number of delivery channels (branches/ ATMs etc)
 Time consuming transactions/ Processes
 Lack of special offers for existing customers
 Inefficient staff
 Mention if any other reason ______________________________

8. What according to you, should the banks do to retain you as a customer?

 Better and innovative products

 More convenient distribution channels
 Less costly services
 Combining financial services to provide package offers
 95

 Bundling of banking services and non banking services (such as tickets to concerts,
discounts at stores with credit cards etc)
 Establish a better brand image.
 Others please specify __________________________

9. Which of the following information search tools which you could use for
making a choice for your retail banking product?

 Family/ Friends/ Relatives advice

 Bank staff
 Website visits
 Newspapers
 Banking magazines and reviews
 Others

10. What could be you future financial needs in the next 2 years?

 Home Loans
 Car Loan
 Credit Cards
 Savings Account
 Personal loans
 Others ___________________________________

11. “I would prefer the bank I am currently banking with, for my next retail
banking need”

 Yes
 No: