Professional Documents
Culture Documents
Subject Module
On
(Credit: 4)
Module Contributor(s)
Dr. Shavita
July,2021
1
SYLLABUS
Mutual Funds in India and the Marketing Strategies Involved: Marketing of Insurance Products-Life
and Non Life Products, Marketing of Pension Funds, National Pension Scheme.
2
CONTENTS
Unit No. Unit Name Page No.
3
UNIT I
Introduction:
Nowadays customer is becoming more sophisticated about their choice and quality of service being
served to them. Throughout the life, customers try their best to fulfill their demands. The place where
things are swapped or say common needs are fulfilled is called the market. The efforts to make people
aware of your offerings inspiring them to deal with you and let them believe that in doing so, they are
fulfilling their needs at its best is called marketing. After the banking sector improvements, marketing
has established as a more combined function within financial service. Financial institutions as banks
have done rapid changes in the operational environment. The marketing of bank products has become
a very difficult subject as it involves the knowledge of economics, sociology, psychology and also
essential marketing idea. In marketing, it is the customer who has the personal choice and the
intonation of effective marketing of banking products lies in the regular and professional tactic
towards fulfilling customer’s needs.
A Conceptual Framework
The forces of deregulation, advancing technology and general trend towards globalization have vastly
increased the competitive pressures within the financial services market that has in turn affected both
the structure and operation of financial service providing firms like banks. Banks are providers of
financial services, financial intermediaries and key participants in a nation’s payment system. As such
banks play a major role in the economy and in the financial well being of a nation. In India since
1992, deregulation, technology, and aggressive competition fostered more changes in the banking
industry than it has experienced in its entire history. Precisely because of competition, providing
financial services in an able manner requires an excellent marketing orientation.
Financial service is part of financial system that provides different types of finance through various
credit instruments, financial products and services. In financial instruments, we come across cheques,
bills, promissory notes, debt instruments etc.In financial products, we come across different types of
mutual funds. Extending various types of investment opportunities. In addition, there are also
4
products such as credit cards, debit cards, etc. In services we have leasing, factoring, hire purchase
finance etc., through which various types of assets can be acquired either for ownership or on lease.
Thus, financial services enable the user to obtain any asset on credit, according to his convenience and
at a reasonable interest rate.
Marketing
India Banks were traditionally in the ‘business of banking’, namely borrowing from one market and
lending to another. However, since the commencement of banking sector reforms in the early 1990s,
their orientation has become the ‘business of financial services’, with a much wider focus in relation
to consumer market needs and consequent marketing strategies. Marketing as a narrow management
function, appears to be in decline. Marketing as a management philosophy and orientation, espoused
and practiced throughout the corporation, is however seen increasingly as critical to the success of any
organization This is reflected in a heightened emphasis on being “close to the customer”, stressing
customer satisfaction and customer relationship building, understanding customer value and the
enhanced product offering, and the brand equity represented in a loyal customer base. Increasingly
these are the domains and responsibilities of employees throughout the organization, whether it is
customer service, sales, manufacturing, R&D or top management, and not just of “the marketing
staff’.(Jerry Bank Marketing has been defined as ‘that part of management activity which seems to
direct the flow of banking services profitably to selected customers.(Reekie, 1972)’ Marketing of
Bank’s services implies the delivery (maintaining existing demand) and creation (creating of new
demand) of want satisfying (i.e, right) services at right price, at right time, at right place, and to a right
customer. (Saxena KK, 1988)’
A financial market is a broad term describing any marketplace where buyers and sellers participate in
the trade of assets such as equities, bonds, currencies and derivatives. Financial markets are typically
defined by having transparent pricing, basic regulations on trading, costs and fees, and market forces
determining the prices of securities that trade. Financial markets can be found in nearly every nation
in the world. Some are very small, with only a few participants, while others – like the New York
Stock Exchange (NYSE) and the forex markets – trade trillions of dollars daily. Investors have access
to a large number of financial markets and exchanges representing a vast array of financial products.
Some of these markets have always been open to private investors; others remained the exclusive
5
domain of major international banks and financial professionals until the very end of the twentieth
century.
Capital Markets
A capital market is one in which individuals and institutions trade financial securities. Organizations
and institutions in the public and private sectors also often sell securities on the capital markets in
order to raise funds. Thus, this type of market is composed of both the primary and secondary
markets. Any government or corporation requires capital (funds) to finance its operations and to
engage in its own long-term investments. To do this, a company raises money through the sale of
securities – stocks and bonds in the company’s name. These are bought and sold in the capital
markets.
Stock Markets
Stock markets allow investors to buy and sell shares in publicly traded companies. They are one of the
most vital areas of a market economy as they provide companies with access to capital and investors
with a slice of ownership in the company and the potential of gains based on the company’s future
performance. This market can be split into two main sections: the primary market and the secondary
market. The primary market is where new issues are first offered, with any subsequent trading going
on in the secondary market.
Bond Markets
A bond is a debt investment in which an investor loans money to an entity (corporate or
governmental), which borrows the funds for a defined period of time at a fixed interest rate. Bonds are
used by companies, municipalities, states and U.S. and foreign governments to finance a variety of
projects and activities. Bonds can be bought and sold by investors on credit markets around the world.
This market is alternatively referred to as the debt, credit or fixed-income market. It is much larger in
nominal terms that the world’s stock markets. The main categories of bonds are corporate bonds,
municipal bonds, and U.S. Treasury bonds, notes and bills, which are collectively referred to as
simply “Treasuries.”
6
Money Market
The money market is a segment of the financial market in which financial instruments with high
liquidity and very short maturities are traded. The money market is used by participants as a means
for borrowing and lending in the short term, from several days to just under a year. Money market
securities consist of negotiable certificates of deposit (CDs), banker’s acceptances, U.S. Treasury
bills, commercial paper, municipal notes, Eurodollars, federal funds and repurchase agreements
(repos). Money market investments are also called cash investments because of their short maturities.
The money market is used by a wide array of participants, from a company raising money by selling
commercial paper into the market to an investor purchasing CDs as a safe place to park money in the
short term. The money market is typically seen as a safe place to put money due the highly liquid
nature of the securities and short maturities. Because they are extremely conservative, money market
securities offer significantly lower returns than most other securities. However, there are risks in the
money market that any investor needs to be aware of, including the risk of default on securities such
as commercial paper.
Cash or Spot Market
Investing in the cash or “spot” market is highly sophisticated, with opportunities for both big losses
and big gains. In the cash market, goods are sold for cash and are delivered immediately. By the same
token, contracts bought and sold on the spot market are immediately effective. Prices are settled in
cash “on the spot” at current market prices. This is notably different from other markets, in which
trades are determined at forward prices. The cash market is complex and delicate, and generally not
suitable for inexperienced traders. The cash markets tend to be dominated by so-called institutional
market players such as hedge funds, limited partnerships and corporate investors. The very nature of
the products traded requires access to far-reaching, detailed information and a high level of
macroeconomic analysis and trading skills.
Derivatives Markets
Derivative is named so for a reason: its value is derived from its underlying asset or assets. A
derivative is a contract, but in this case the contract price is determined by the market price of the core
asset. If that sounds complicated, it’s because it is. The derivatives market adds yet another layer of
complexity and is therefore not ideal for inexperienced traders looking to speculate.However, it can
be used quite effectively as part of a risk management program. Examples of common derivatives are
forwards, futures, options, swaps and contracts-for difference (CFDs).
7
Forex and the Interbank Market
Interbank market is the financial system and trading of currencies among banks and financial
institutions, excluding retail investors and smaller trading parties. While some interbank trading is
performed by banks on behalf of large customers, most interbank trading takes place from the banks’
own accounts. The forex market is where currencies are traded. The forex market is the largest, most
liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes
all of the currencies in the world. The forex is the largest market in the world in terms of the total cash
value traded, and any person, firm or country may participate in this market.
The OTC Market
The over-the-counter (OTC) market is a type of secondary market also referred to as a dealer market.
The term “over-the-counter” refers to stocks that are not trading on a stock exchange such as the
Nasdaq, NYSE or American Stock Exchange (AMEX). This generally means that the stock trades
either on the over-the-counter bulletin board (OTCBB) or the pink sheets. Neither of these networks is
an exchange; in fact, they describe themselves as providers of pricing information for securities.
OTCBB and pink sheet companies have far fewer regulations to comply with than those that trade
shares on a stock exchange. Most securities that trade this way are penny stocks or are from very
small companies.
Third and Fourth Markets
These don’t concern individual investors because they involve significant volumes of shares to be
transacted per trade. These markets deal with transactions between broker-dealers and large
institutions through over-thecounter electronic networks. Third market comprises OTC transactions
between broker-dealers and large institutions. Fourth market is made up of transactions that take place
between large institutions. The main reason these third and fourth market transactions occur is to
avoid placing these orders through the main exchange, which could greatly affect the price of the
security. Because access to the third and fourth markets is limited, their activities have little effect on
the average investor. Financial institutions and financial markets help firms raise money. They can do
this by taking out a loan from a bank and repaying it with interest, issuing bonds to borrow money
from investors that will be repaid at a fixed interest rate, or offering investors partial ownership in the
company and a claim on its residual cash flows in the form of stock.
1. Promoting investment
The presence of financial services creates more demand for products and the producer, in order to
meet the demand from the consumer goes for more investment. At this stage, the financial services
come to the rescue of the investor such as merchant banker through the new issue market, enabling
the producer to raise capital.
The stock market helps in mobilizing more funds by the investor. Investments from abroad is
attracted. Factoring and leasing companies, both domestic and foreign enable the producer not only to
sell the products but also to acquire modern machinery/technology for further production.
2. Promoting savings
Financial services such as mutual funds provide ample opportunity for different types of saving. In
fact, different types of investment options are made available for the convenience of pensioners as
well as aged people so that they can be assured of a reasonable return on investment without much
risks.
For people interested in the growth of their savings, various reinvestment opportunities are provided.
The laws enacted by the government regulate the working of various financial services in such a way
that the interests of the public who save through these financial institutions are highly protected.
9
4. Maximizing the Returns
The presence of financial services enables businessmen to maximize their returns. This is possible due
to the availability of credit at a reasonable rate. Producers can avail various types of credit facilities
for acquiring assets. In certain cases, they can even go for leasing of certain assets of very high value.
Factoring companies enable the seller as well as producer to increase their turnover which also
increases the profit. Even under stiff competition, the producers will be in a position to sell their
products at a low margin. With a higher turnover of stocks, they are able to maximize their return.
6. Economic growth
The development of all the sectors is essential for the development of the economy. The financial
services ensure equal distribution of funds to all the three sectors namely, primary, secondary and
tertiary so that activities are spread over in a balanced manner in all the three sectors.
7. Economic development
Financial services enable the consumers to obtain different types of products and services by which
they can improve their standard of living. Purchase of car, house and other essential as well as
luxurious items are made possible through hire purchase, leasing and housing finance companies.
Thus, the consumer is compelled to save while he enjoys the benefits of the assets which he has
acquired with the help of financial services.
8. Benefit to Government
The presence of financial services enables the government to raise both short-term and long-term
funds to meet both revenue and capital expenditure. Through the money market, government raises
short term funds by the issue of Treasury Bills.These are purchased by commercial banks from out of
their depositors’ money.
In addition to this, the government is able to raise long-term funds by the sale of government
securities in the securities market which forms apart of financial market.
10
9. Expands activities of Financial Institutions
The presence of financial services enables financial institutions to not only raise finance but also get
an opportunity to disburse their funds in the most profitable manner. Mutual funds, factoring, credit
cards, hire purchase finance are some of the services which get financed by financial institutions.
The financial institutions are in a position to expand their activities and thus diversify the use of their
funds for various activities. This ensures economic dynamism.
In the absence of financial services, there will be paucity of funds which will adversely affect the
working of companies and will only result in a negative growth of the capital market.
11. Promotion of Domestic and Foreign Trade
Financial services ensure promotion of domestic as well as foreign trade. The presence of factoring(A
factor is essentially a funding source that agrees to pay a company the value of an invoice less a
discount for commission and fees.) and forfaiting (Forfaiting is a means of financing that enables
exporters to receive immediate cash by selling their medium and long-term receivables—the amount
an importer owes the exporter—at a discount through an intermediary)
12. Balanced Regional development
The government monitors the growth of economy and regions that remain backward economically are
given fiscal and monetary benefits through tax and cheaper credit by which more investment is
promoted. This generates more production, employment, income, demand and ultimately increase in
prices.
The producers will earn more profits and can expand their activities further. So, the presence of
financial services helps backward regions to develop and catch up with the rest of the country that has
developed already.
7Ps of Marketing
Marketing field can be so challenging and often innovating. The innovative field of marketing
requires regular strategic and effective decision making in ensuring that consumers get full
11
satisfaction for their consumptions which are the sole objective of marketing while making sufficient
profit for the organization. To achieve this set objective of consumers’ satisfactions, you as a
marketing manager must make decisions regarding to their marketing mix. Marketing mix is the set of
tools that the firm uses to pursue its marketing objectives in the target market (kotler 1997).
Marketing mix- also refers to as marketers’ controllable tools are the variables which marketers can
control in order to achieve a desired market reactions towards their product offerings at a particular
point in time. Albeit, many tools do exist for marketing managers to utilize, but few of the most
popular tools are referred to as the ‘Ps’ of marketing. Formerly, we can identify these four(4)
marketing controllable ‘Ps’ as utilized by most marketing managers to achieving a set marketing
objectives; these Ps are referred to as controllable because they are the variable tools which marketers
can control to achieve a desirable market reactions. .
These Ps are:
Product variable
Promotion variable
Price variable
Place/distribution variable
(1) Product variable: This refers to the tangible product and services that the marketer have in his
offerings. It refers to it packaging, shape size, Portability, engineering features, and the supportive
services rendered after sales to increase consumer satisfaction. In order To achieve some desired
objective on the product, marketers can choose to develop more attractive and effective product to
meet identified sets of needs and want of the target market. Marketers can also choose to modify an
existing product to a more refined suitable brand e.g. by modifying it shapes, packages etc. To meet
with consumers need and wants.
(2)Promotion variable: the promotion variable involves all strategies which the marketer employs to
communicate it product offerings to the target market. The objective is to
Create product awareness
Educate the market
Also to create a good organizational image.
(3) Price variable: price refers to the value which consumers’ places on a particular marketer’s
product offering, and it is often express in monetary terms. Price is a critical tool of marketing
because it effects goes a long way to determine the demands of the product offering in the market, and
it can also hinder or catapult an organization’s returns on investments. An effective price is that price
that reflects the actual value of a particular marketer’s product. So to achieve a set desire, marketer
must make critical decisions regarding to the organization’s pricing policies. The consumers’
sensitivities to prices in the target market go a long way to affect a marketers pricing decision making.
Also; you as a Marketer must make decisions to the amount of discount to be allowed in order to
encourage demand. In terms of a new product, marketers make decision on the pricing method to
employ in order to encourage purchase, most especially at the introduction stage.
(4)Place/distribution variable: The distribution variable is another controllable which marketers can
employ to determine, where, when and how he want it product offerings to circulate within the target
market, the necessary mechanism to employ for an effective transfer of goods and services to the
target market in order to achieve the objective of marketing which is consumers’ satisfaction. One of
the strategic duties of a Marketing manager is to ensure that product are available to the market at the
right time, in the appropriate quantity, and at the right place while also ensuring minimal
transportations and storage cost in order to reduce huge cost acquirement on a product.
The marketing manager also makes decisions regarding to;
• Kind and numbers of retail outlets to carry its product.
• Geographical location to cover with it product.
• Numbers of storage houses to be employed
• Selection of middle men to distribute its product
• Mode of transportation to encourage in order to having an effective distribution of it product etc.
However, these days marketers have recognized and encourage the following added 3Ps to it
marketing strategies, haven realized their effectiveness to an organization’s marketing strategies.
The following 3ps are;
People
Process and
Physical evidence 13
(5)People: people refer to the marketing personals that carry out these marketing activities. These
people who provide the services to the target market now forms other marketing tools since there
level of creativity, skills, and product and market awareness goes a long way to influence purchase.
Marketing manager now invest adequate amount of time in training their marketing personnel in order
to equip them with the necessary skills required to have positive influence in the target market.
(6) Process: the process here refers to the ways in which marketer employ to providing relevant and
supportive services to their customer in order to give them more satisfaction for their patronage.
Marketing manager must make key decisions such as the kind of after sales service, home delivery
etc. to employ because these process when effectively employed will go a long way to create brand
loyalty and also a long lasting relationship with the customer.
(7)Physical evidence: this is the physical environment of the business, it has formed other marketing
tools because consumers are likely to be influence by what they see and most organizations today are
accesses by their physical structures. In order to Influence costumers’ confidence to the organization,
marketing manager must ensure a more conducive atmosphere to attract more customers while
realizing marketing objectives. All of these controllable variables are very much important to the
marketer because it’s one of the most important keys use to open and close and adjust doors of
opportunities in the target market. While any adjustment on these controllable mixes can have effect
on the marketing objective, marketing managers must then decide on the volumes and amount of
adjustment to make on these 7Ps in any given market situations.
14
UNIT-II
Retail Banking
Introduction:
Retail Banking is a banking service that is geared primarily toward individual consumers. Unlike
wholesale banking, retail banking focuses strictly on consumer markets. Although retail banking is,
for the most part, mass-market driven, many retail banking products may also extend to small and
medium sized businesses. Pure retail banking is generally conceived to be the provision of mass
market banking services to private individuals. Attractive interest spreads since spreads are wide,
since customers are too fragmented to bargain effectively; Credit risk tends to be well diversified, as
loan amounts are relatively small. There is less volatility in demand and credit cycle than from large
corporate. Higher delinquencies especially in unsecured retail loans and credit card receivables. In
some banks retail banking was christened as consumer banking as the focus was towards individual
consumers.
Retail Banking as a concept in India has been initiated by the PSBs and nurtured by the foreign banks
and new generation private sector banks. The retail banking objectives of any bank would mainly
focus on the following:
1. Generating superior returns on assets.
2. Acquiring sufficient funding
3. Enhancing risk management
4. Understanding customers and regaining their trust.
5. Coping with increased demands regarding product transparency and overall service levels.
6. Achieving multi channel excellence with fully integrated banking channels.
Banking Services
The primary operations of banks include:
• Keeping money safe while also allowing withdrawals when needed
• Issuance of checkbooks so that bills can be paid and other kinds of payments can be delivered by
post
• Provide personal loans, commercial loans, and mortgage loans (typically loans to purchase a home,
property or business)
• Issuance of credit cards and processing of credit card transactions and billing
• Issuance of debit cards for use as a substitute for checks
• Allow financial transactions at branches or by using Automatic Teller Machines (ATMs) 15
• Provide wire transfers of funds and Electronic fund transfers between banks
• Facilitation of standing orders and direct debits, so payments for bills can be made automatically
• Provide overdraft agreements for the temporary advancement of the Bank’s own money to meet
monthly spending commitments of a customer in their current account.
• Provide internet banking system to facilitate the customers to view and operate their respective
accounts through internet.
• Provide Charge card advances of the Bank’s own money for customers wishing to settle credit
advances monthly.
• Provide a check guaranteed by the Bank itself and prepaid by the customer, such as a cashier’s
check or certified check.
• Notary service for financial and other documents
• Accepting the deposits from customer and provide the credit facilities to them.
From the above discussion of bank marketing, it can be understood that the existence of the bank has
little value without the existence of the customer. The key task of the bank is not only to create and
win more and more customers but also to retain them through effective customer service. Customers
are attracted through promises and are retained through satisfaction of expectations, needs and wants.
Marketing as related to banking is to define an appropriate promise to a customer through a range of
services (products) and also to ensure effective delivery through satisfaction. The actual satisfaction
delivered to a customer depends upon how the customer is interacted with. It goes on to emphasize
that every employee from the topmost executive to the junior most employee of the bank is market.
Due to the introduction of LPG policy and IT Act of 2000 the scope of the market has enhanced.
Customer’s expectations are high from the service industry like a banking industry. Only those banks
will survive who will provide efficient and customer desired services
This reveals a key point – that even customer management decisions have an element of risk. There is
a risk implicit in using resources on this customer that could be used on that one. There is a risk in a
price for a product in that it might retain unwanted customers or deter potentially profitable ones.
Banks have long taken a fine-grained and analytically-rich approach to risk management. There’s a
great deal of discussion and debate around what will ultimately happen to banking as a result of the
massive changes in connectivity, utility, mobility and customer experience taking place right now.
One thing is for sure, the world is changing.
We see PayPal owning online payments, with others like Stripe hot on their tails.
Square is attempting to disrupt the POS and circumvent the existing payments rails by going cardless.
Simple and Move n bank are vying for the new definition of the ‘bank account’.
Telcos like Rogers applying for banking licenses, and ISYS pitching head-to-head with banks for
mobile wallet dominance in North America.
We also see Facebook and Twitter becoming increasingly dominant channels for customer dialog.
Intermediate or Dis-intermediate?
So will banks get disinter mediated in all this? Well, yes and no. In economics, disintermediation is
generally defined as the removal of intermediaries in a supply chain: “cutting out the middleman”. So
there are not too many middlemen in the typical retail banking distribution chain. To some extent in
financial services this is already happening with the decline in stock brokers, insurance agents, etc in
favor of direct. However, conversely, a bunch of newer aggregators and intermediaries are popping up
as the interface to the bank or payments providers.
New intermediary plays in the last couple of years include Square, iTunes, Simple, Mint, and others.
Probably the most interesting new intermediary to emerge in the last year or so is Google Wallet (or
Google, or THE Google wallet – not like THE face book though…). If you doubt the veracity of my
statement, here’s proof – after just over 18 months of operation, Square supports 1/8th of all US
merchants. They didn’t exist 2 years ago.
So we’re likely to see more variations on a theme in banking and payments, where new players are
coming into the ecosystem and offering value beyond the traditional methods of distribution. In20its
purest form, this will be simply a challenge to the branch-led distribution model. How so? Ultimately,
with mobile banking and payments, the branch and resultant paperwork processes becomes a
convenience “penalty” for transactional and basic on boarding. This friction is a target for disruptors.
Banks cannot possibly own the Telco, mobile operating systems, marketing companies, retailers,
locations and other elements that will drive the delivery of banking products and services in the near
future. This is where the customer will live – this is where they’ll engage. I won’t come to your
branch, download your “App” or even visit your website to directly engage the bank if someone else
can deliver me that product as I need it.
Along with segmentation, judicious combination of ‘Ps’ is essential to satisfy customers. But when it
comes to service marketing the context is different. In service marketing the human factor has an
overriding role to play. Again, due to intangible nature of service products, tangibilising them
becomes important. Furthermore, due to the presence of the human factor producing quality product is
crucial.
Such a combination is termed as marketing mix. Framing a market mix for service industry like bank
is a laborious task. The level of customer satisfaction is not static among bank customers. The level of
satisfaction will vary with the changing level of standard. It also changes to different customer
segments according to their respective attitudes and aspirations. The multi-faceted development in the
socioeconomic fabrics has made it urgent that Indian banks reframe their marketing mix. Due to
increasing competition from other financial institutions, has made it necessary that Indian commercial
banks review the line of banking service, channels of management pricing strategies and promotional
stages. Investors started to invest their savings in other avenues of investment, earning 50 to 100 per
cent of returns.
Furthermore co-operative banks and other non-banking financial institutions also offer attractive
dividend in return. Thus it is high time to think about reframing marketing mix of banking service.
The First ‘P’ – Product Strategy
First among the PS of bank marketing is product mix. Product stands for both goods and service
combination offered to the public to satisfy their needs. In the highly regulated banking industry all
offered the same type of products. Actually the bank takes little time and no additional investment to
develop a financial product or service. But the drawback is that no brand can be marketed with unique
selling proposition for long because it can be copied immediately. Thus it is better to focus on some
selected ideas relating to products, which have immediate operational utility as well as feasibility on
banks. In the evolution of bank products, the products can be categorized into three groups. They22
are
Core products, Formal products, and augmented product. Core products are those products, which
define the business. For a bank, some of the core products are Savings Bank Account, Current
Account, Term deposit, Recurring deposit, Cash credit, Term loan, overdraft and the like. This has
two basic characteristics. Firstly, they define the business of a commercial bank that is whatever
banking service was extended these core products are there. Second is that, core products do not have
strong marketing content, that is, the product must be specifically designed in view of the needs of
customers in well defined homogeneous market segment. Since core products, are used as basic tools
of commercial banking and serve the full range of customer segments or at least a large number of
them, their marketing content cannot be rated as very high. But these core products are indispensable
to any business. Furthermore, these products provide a basis for the development of more
sophisticated and marketing oriented products.
Formal Product
In the line product evolution, the next type of product is Formal product. Formal product is usually a
combination of two or more core products and they have strong marketing content as they cater to
some specific customer needs. During the last few years an ocean of formal products has hit the
market due to rising customer expectation and anxiety to attract the attention of customers. Sulabha,
over drafi: of Canara bank, Vijayasree units of Vijaya bank, Smart Money of Hong Kong Bank, two-
in-one of Standard Chartered banks, unfixed deposit of Citibank are some of the examples of Formal
products. One of the basic features of services is intangibility. Tangibilising the intangible service
product was a major challenge to the marketer. In other words, to help the customer in order to form a
metal image of the intangible product is the main function to achieve competitiveness in service
marketing. On the other hand, if banks are applying core products alone, this will create stress upon
customers to finalize how to apply core products as according to the requirement of the customer.
That means it will restrict the application of bank services which results in limited banking business.
Contrary to this, formal product will give right product with specific names as according to the
requirements of customers to boost the banking business.
Augmented Product
This is a hither modification of formal product. This is the age of value addition. Everybody is sold to
the idea of value added product and services. Now it is common in the market that some ancillary
benefits are attached. The main advantage of an augmented product stems from its strong marketing
content. Because augmented product is made out of formal product which itself has a strong
marketing content. It is further reinforced through value addition. A very good example 23
for
augmented product is Smart Money Account with Hong Kong Bank. When one opens a Smart Money
Account, an account holder will also get free Any Time Money Card. Or when one opens a fixed
deposit account, then the deposit holder will get the facility of safe custody free of cost.
The Second ‘P’ – Price Strategy
Price in the case of service, different terms are used for different services like fees for legal service,
fare for transport service, commission agency services, premium for insurance service, interest for the
use of money. Two characteristics, which have great impact on determining the prices of services are
perish ability and intangibility. In banking industry, price is the amount of money that will determine
the exchange rate of bank product or services between the bank and customers. Price determination of
the banking products or services is subject to regulation either by the Government or by the Reserve
Bank of India. It is a unique feature of the bank price that the products are mostly designed by the
banker while the price is determined by the RBI and Government of India Due to this, there is
uniformity in the price of bank product throughout India. Hence the chance of competition on the
basis of price is almost nil. As a part of the economic liberalization programme of the Government,
pricing in Indian banking is steadily being deregulated. Successive credit policy pronouncement of
RBI during the last few years has already brought about substantial deregulation and flexibility for
banks in evolving their pricing strategy. Soon after the announcement of the RBI’s credit policy in
October 1994, ICICI bank announced a unique price structure for its deposits rate. The Bank offered
10 per cent for deposit of ‘6’ months to 2 years and 8 per cent for 3 years maturity. Even the area of
ancillary service charges the raised pricing structure announced by Indian Bank Association aroused a
lot of debate. Even though complete deregulation of the price regime is still to materialize, price is
fast becoming a strategic tool for bankers for their marketing.
Third ‘P’ – Place/ Distribution of Banking Products
The most important element in distribution strategy relate to this issue of location of the banks to
render their service. Distribution means delivery of the products or service at the right time and at the
right place. The place where the banking products or service are delivered is an important element in
bank marketing. The place strategy of Indian banks has been on the basis of too many parameters.
Prior sanction from RBI and responsibility of banks towards development of banking habit in remote
unbanked areas has been some of the important given parameters. So from the marketing stand point,
place strategy is not fully positive to Indian baulks. Some of the major trends in this are
The branch licensing policy of RBI is already a thing of the past. This was one of the first
policy responses of the government to the Narasimharn Committee Report on Financial
system 1991. 24
Branch expansion on the basis of social banking consideration has achieved its objectives
substantially. Compared to any nation in the world, India has the largest bank branch network.
Practically it covers every nook and corner of the country.
Thirdly, banks in India have been experimenting with a few strategies relating to place. That
is, extending their reach through means other than branch expansion as well. The first such
strategy is the concept of extension centre, satellite office etc. Secondly, the concept of special
counters for certain customer segments for example, for pensioners, non-resident Indian, etc.
Thirdly mobile office is also a part of current banking practice. Through this, the banker came
to the doorstep of the customers.
Fourthly, technology has also been deployed by banks for implementing their place strategy.
Home banking and ATM are in Indian banking. Fifthly, a recent innovation is that of strategic
alliance. This trend has been set up in motion mainly by the newly set-up private banks in
order to overcome the drawback arising out of the limited branch network. Some of these
banks entered into strategic alliance with already established banks having wide branch
network. One such alliance is between Global Trust Bank and Vijaya bank.
The Fourth ‘P’ – Promotion of banking Products
The promotion is to inform and remind individuals and persuade them to accept, recommend or use of
a product service or idea. Promotion is a demand stimulating aid through communication. Any
marketing promotion campaign has two objectives. ‘They are to inform the prospective customer and
then to persuade him. Due to the inherent intangible nature of services, the customer of banking
service relies more on subjective impression rather than concrete evidence. When a bank comes out
with a new product, it makes its target customer segment aware of it only through marketing
promotion. It may be in various forms like press advertisement, sales campaign, word of mouth,
personal interaction directly mailing. Making the customer may be enough if the product is unique or
in great demand. But this may not be so always. So the second fundamental objective of a promotion
campaign is to persuade the customer to buy the product in preference to other similar products
available in the market. Now this persuasion too could be in different ways like by working on an
emotional plan by an objective of presentation of benefit of the product by identifying the product
with some strong need of customers. Along with the above fundamental objective, it also has some
subsidiary objectives like image building of an organization, the growth of a newly started industry.
The primitive effort for banking services consists of both personal and impersonal devices. Personal
device is purely subjective in nature and it differs from person to person. Impersonal promotion can
be through advertising, publicity and sales promotion. Personal selling is the responsibility of 25
the
bank staff. Impersonal selling should be done by the respective banks and their association like Joint
Publicity Committee for public sector banks and Indian Bank Association. A study conducted by Dr.
Raja opal reveals that apart from savings bank account and fixed deposit account, the awareness of
other deposit schemes are relatively less amongst rural savers. Among lending schemes, gold loans,
agricultural loans and Government sponsored lending schemes are very popular in the rural areas’.
The bank must try to understand the real needs and aspirations of the society and provide such
product or services which will satisfy their assets. Marketing strategy should be designed to suit not
only the present market but also the potential future market.
The Fifth ‘P’ – Process of banking Products
The process is crucial to the bank marketing strategy. It gives value to the buyer and an element of
uniqueness to the product. It is very significant because ut provides competitive advantage to the
bank. The importance of process in bank marketing strategy is based on ‘value chain concept’ given
by Michael Porter. The concept basically stresses close attention to all the organizational activities
which go into marketing the final product to the customer. In the banking context, a typical value
chain would encompass all activities right from the product conceptive stage down to its marketing at
branch level. All these ultimately lead to the customer’s satisfaction with the product he has
purchased. The value chain concept emphasizes that all these organizational activities have to be
closely monitored and reviewed as an ongoing basis and all those activities which do not add value to
the product used to be reviewed and modified. It is also useful in focusing attention on those
organizational activities or processes which give uniqueness to the product. And the element of
uniqueness in the product is a basic condition for acquiring competitive advantage.
Securitization is the process by which the selected pool of credit assets (loans) of the bank is sold to a
trust that is turn issues securities against banking of such assets and sells the same to prospective
investors. Even after sale, the bank undertakes to service the debts and passes on the recovery to the
trust for distribution among investors. Portfolio management, Bank manages the investment portfolio
of a client which involves investment of a client’s fund in stock and securities and to buy and sell
securities with an objective to achieve higher return for the client. Custodial service is another
product. It is a product offered to the shareholders whereby the banks undertake to collect dividend on
behalf of their clients, arrange for transfer of shares and attend annual general meeting on their behalf.
Since liberalization and globalization, the foreign exchange market in India is witnessing a sea
change. RBI permitted commercial banks to offer the following products to its customers to enable
them to hedge the risks invo1vc.d in investments and reduce overall risks significantly.
Constructing an effective credit card marketing strategy isn’t as simple as throwing a precious metal
into a card’s name or casting Alec Baldwin for television spots. That’s not to say such tactics cannot
be effective, but rather that real success stems from the creation of an environment in which
marketing is not a separate function, but an integrated part of all credit card operations, ranging from
underwriting to product development and customer retention. In short, the best marketers engage in
activities and institute polices that foster the most efficient use of marketing dollars possible.
There are, of course, many ways to do this – some innovative, some tried and true – and a lot depends
on your company’s corporate philosophy, structure, financials, etc. However, there are 5 tactics in
particular that you would be remiss in not implementing immediately, if you haven’t already done so.
1. Focus each product on a single consumer need:
By focusing each credit card offer on a distinct consumer need, you garner both the ability to present
more effective value propositions to consumers and a customer base that behaves as predictably as
possible, thereby making it easier to forecast card profitability as well as adjust marketing strategies
based on early returns. This is obviously difficult to achieve if the same card is trying to address
disparate needs. For example, if a card provides lucrative rewards as well as low introductory interest
rates, you’ll wind up with some customers who spend a lot and always pay their bills in full, some
who spend and only pay the minimum, and some who transfer balances with no guarantee that they
will keep their cards following the expiration of intro rates.
On the other hand, if you offered three different cards – one high-interest rewards credit card, 0%
credit card for new purchases, and one balance transfer credit card – you’d garner three highly-
31
predictable customer groups. That, of course, would allow you to target underwriting and marketing
more effectively, better manage risk, and ultimately make more money.
2. Bring together marketing and underwriting:
Too often the marketing and underwriting teams at credit card companies are disparate entities that
have effectively little, if anything, to do with one another. You know what this leads to? Applicants
that do not fit the underwriting criteria used to develop offers and underwriting. Conservatism that
could easily be avoided. A credit card’s marketing message significantly affects the type of consumer
that will apply for it. And if the only direction given a marketing team is that each account cannot
cost the company more than $100, for example, they’ll likely meet that constraint, but in doing so
may attract riskier, less profitable customers. This would, in turn, necessitate an underwriting
adjustment to the point that each account could no longer cost more than $70, which would push the
marketing team to rely more heavily on the lowest-hanging fruit – even riskier, less profitable
customers than before. The only way to break this vicious cycle is to integrate those two separate
teams.
Product and Marketing Managers at small to medium sized banks and credit unions have many of the
same goals as their peers at larger institutions: provide attractive products and services that compete
in the market, while increasing profitability. Unfortunately, the smaller financial institutions are often
limited in resources, with employees wearing multiple hats across various organizational functions.
They know that they could drive more profitable cardholder behavior through targeted marketing
campaigns, but they simply lack the time and resources to effectively execute these programs.
THE CHALLENGE
Marketers need to drive additional debit card usage, grow interchange revenue, and strengthen their
“Primary Financial Institution” status. They could execute a debit card marketing campaign to their
cardholders, but they face several challenges:
• Segmentation – The FI’s cannot afford to market to their entire base, so it is imperative that they
target a specific receptive segment.
• Execution – Campaign concept, creative design, printing and mailing – all this takes time and
resources, both of which are in short supply.
• Fulfillment – Figuring out which cardholders qualified for a reward and delivering the appropriate
reward can be time consuming.
• Measurement – The marketers need hard results to justify their spending. So while they may know
what to do, they also know that on their own, they just don’t have the scale and resources required to
execute an efficient and effective debit card campaign.
THE SOLUTION
In early 2012, Saylent offered the “Treat Yourself” turnkey debit card marketing campaign. The
33
campaign targeted underperforming debit cards, specifically those performing 1-5 POS Signature
transactions per month. Cardholders were incented to elevate usage to 15 or more POS Signature
debit card transactions per month. Cardholders were rewarded with a free movie ticket if they
reached the goal.
Saylent delivered a complete turnkey campaign across six financial institutions, handling every
aspect of the campaign, from segmentation to execution to post-campaign measurement and
reporting. Saylent’s Card360 Payment Intelligence software was used for segmentation, qualification
analysis and reporting.
Segmentation – The Card360 software shifted through over 1.8 million transactions on
290,000 active debit cards across six institutions, and in the blink of an eye found just over
26,000 cardholders, or about 9%, that fit the target profile.
Execution – Saylent provided the campaign concept and creative design. Every institution’s
direct mail piece was customized with their individual branding. Fis need only provide logos,
card art, return address and final approval on the design. Direct mail postcards were sent out
to the 26,000 targeted cardholders, again after approval by the FI’s.
Fulfillment – Saylent’s Card360 evaluated each cardholder’s transaction behavior to identify
if the incentive criteria were met. After the campaign period came to a close, incentive
fulfillment was managed by Saylent and in the hands of the cardholders within weeks.
Measurement – At the close of the campaign period, and again after 3, 6, and 12 months, the
targeted cardholders are analyzed and the results reported. The marketers were armed, not
with mere estimates, but with the actual results showing a dramatic, sustainable change in
behavior.
Marketing of loans
To summarize, customer acquisition has become complex as the average consumer is more
sophisticated, knowledgeable and more importantly- connected. Good news and bad news alike
spread fast, rumours abound and impressions are quick and pervasive. New age media like Wiki leaks
today have the power to make or break a customer’s impression of a bank in seconds.
35
When it comes to customer retention, the challenge is all the more interesting and it borrows heavily
on these trends as loyalty is at an all time low. Hence, increased share of wallet initiatives today look
scarily similar to customer acquisition strategies rather than retention. Customer initiatives need to
build on loyalty and the key to this is delivering contextual and relevant customer experiences in real
time. According to Ernst & Young, a new era of retail banking is emerging where the challenge
remains to keep the customer experience and wider brand perceptions central to all strategic thinking.
Customer experience is the key to retention with customers increasingly finding that price, brand
strength and personal attention drive satisfaction. There are reasons why the need for customer
centricity has taken centre stage and this requires us to take a step back to understand what this
implies.
Since the last decade or so, banks competed with each other via investing into building an extensive
product portfolio or a multi-channel strategy or with a relationship focus. Of course, no particular
option is mutually exclusive; however, it is only one of these approaches that achieves mainstream
adoption in a bank and becomes all pervading. That said, with the growing maturity of banks and
importantly, sophistication of consumers, these are no longer feasible avenues of achieving “unique”
competitive advantage. It’s time to dig deeper. To a consumer, a bank stands for its brand promise – a
succinct expression of what the bank stands for. It’s time that banks took a deeper look into this brand
promise and capitalize on the maturity that their customers have acquired.
A bank’s brand promise is tacit; it signifies customer expectations at one level and is the subconscious
image a bank creates in a customer’s mind. This is marketed by the bank’s echelon – the decision and
delivery of what value a bank will fundamentally deliver to its customers. What the bank will stand
for is decided in closed boardrooms with ample time and effort investment from the Chairman, CEO,
President and other CXOs. Large amount of funds are spent on getting this message across via various
marketing campaigns targeting every relevant medium- from the local billboard to Sachin Tendulkar’s
cufflink. When successful, it leaves an impression in the minds of existing customers of the
incremental value to be delivered over the next interaction and a distinct expectation in the mind of
prospects.
Unfortunately this is where the gap exists today. The promised experience is, however, delivered at
the last mile, consisting of actual people that a customer interacts with. The reality today is that the
highly occupied teller is at most times so far buried in the computer screen that there isn’t even a
smile exchanged over the counter. This is usually what follows after a glossy full length feature in the
local newspaper advertisement that talks of service with a smile as the bank’s brand promise.
Upon scrutiny, we understand that at one level, bank employees are unable to deliver on this higher
brand value due to lack of an understanding. Consider this, how can a teller know how “customer
36
centricity” as a theme translates to everyday actions or reactions. At a second level, supporting
systems are also unprepared to capture the tacit aspects of what delivering on brand promise entails.
At a third level and possibly the most important, there needs to be sufficient focus and investment on
hiring, training and nurturing. This training and education should be targeted towards the customer
facing executives; educating them about the need to understand the concept of ‘customer experience’
and focus at an interactions level. Ultimately, the present level of preparedness among average bank
branch leads to customer dissonance and thereby, lack of loyalty.
To address this gap, a lot of thought needs to go into deriving an understanding of the fundamental
reason or value a customer expected when they chose one bank over the other. With this fundamental
understanding, banks can then build on converting existing customers from satisfaction to loyalty and
eventually to advocacy – this has to translate into every transaction and every conversation. What this
also requires in part is investing in customer experience management software that aid banks to
deliver on this brand promise.
This strategic investment can bring about a whole new level of competitive advantage to banks across
the world and will be the platform of the future to compete on. So, if you are a decision maker at a
bank, have you asked yourself today and do you know why your customers chose you? What is your
ultimate competitive advantage? Will customer experience be your next big bet?
On the other hand, if you offered three different cards – one high-interest rewards credit card, one 0%
credit card for new purchases, and one balance transfer credit card – you’d garner three highly-
predictable customer groups. That, of course, would allow you to target underwriting and marketing
more effectively, better manage risk, and ultimately make more money.
Debit cards were supposed to be toast. The industry started writing their obituary when financial
reform targeted overdraft fees and interchanges or “swipe” fees, which had made debit cards
extremely lucrative for banks. So why is it that banks are now pushing debit cards like never before?
Because banks are earning less from debit cards, you might think that they’d want to steer customers
away from using them. In fact, just the opposite is true. Banks are trying to make up for the decrease
in the amount collected per fee with increased volume. “You need economies of scale” to make
today’s debit-based business model work, says Brian Riley, senior research director at CEB Tower
Group.
39
In reality, the actual increase in debit card marketing is probably a lot higher, since the direct mail
stats don’t take into account the exponential rise in online marketing that’s taking place. A decade
ago, direct mail used to account for more than 60% of openings, but it’s now fallen to less than a third
of that, Riley says Comparatively, only 4% of new applications for card accounts used to come via the
Internet, but now that figure has climbed to almost 40%.
While loan business overall is down, the ability to quickly respond to a customer’s behavior,when
they are shopping for a loan can be the difference between expanding a current relationship or
potentially losing a customer. By leveraging relatively easily accessible credit bureau insight, you can
deliver highly relevant communications through multiple channels to generate a steady stream of
qualified and ready- to – borrow households.
As the name implies, a loan behavioral trigger lead is created when a customer or prospect is applying
for a new loan or is about to refinance an existing loan. Used extensively by the mortgage industry
recently due to the large number of households seeking to refinance, triggers also point to households
looking for an equity line of credit, new car or even a credit card.
These loan shopper lists are available on a daily, weekly or monthly basis and are very time sensitive
since the candidate is actively seeking a loan or line of credit. As can be expected, using daily triggers
is the most expensive due to both the cost of the list and the cost of daily processing, but these list also
produce the best results.
The lists can be customized, allowing a financial institution to select candidates based on filters such
as credit score, amount of revolving debt, seasoning, LTV, monthly payment amounts, number of
recent inquiries on file or any other criteria desired. Phone numbers can also be appended to the lists
for an additional charge. History shows that those households with multiple recent inquiries are better
prospects since they are considered ‘active shoppers’.
By helping to solve for the mystery of timing, many multichannel loan trigger programs can result in
marketing program performance improvement of 5x, 10x or more traditional loan acquisition
40
programs. The challenge for many banks and credit unions is developing an implementation strategy
that can process and deliver communications daily and can follow-up on the leads quickly and
effectively.
If the program is focused on identifying current customers shopping for a new loan, there is the
potential to connect with these households using direct mail, email, digital communications, mobile
and a phone call. This integrated cross institutions don’t know which channel(s) their customer is
most responsive to. In addition, while a phone call and email are the quickest to implement, the
penetration of usable/allowable p numbers and email addresses is limited.
Some banks reach out multiple times using direct mail and email to ensure they are ‘in the mix’ when
the customer makes a final lending institution decision, while many financial institutions are using
their online banking ‘offer’ pages and even retargeting strategies to keep their message front and
center. Due to the time sensitivity, mobile messaging may also be effective if a financial institution
has the capability to connect with a customer through texting. In all cases landing pages are an
important component of the communication strategy.
Loan behavioral triggers can also target prospects within a certain geographic area using close to the
same strategy. The primary difference is the difficulty in appending to the files and the hesitation of
most organizations to use email for prospecting. Digital communication can still be integrated,
however, using advanced geo combined with SEO tools. With prospecting, integrating a landing page
is paramount to success.
2. List Options
All major credit bureaus have the ability to support behaviorally based loan trigger programs and can
provide lists on a daily basis. They can also allow your inst based on a wide selection of credit and
non created equal. Each tend to use different collection, aggregation and reporting strategies and as a
result differ on their depth of data for any particular household.
As a result, many of my clients have begun to use multiple bureaus to support their event trigger
programs. By doing so, greater data can be leveraged for both selection and modeling purposes. In
fact, a recent case study by Datamyx found a 70% lift in marketing universe (scalability) as well as a
25% improvement in both response and conversion rates by using three bureaus as opposed to just a
single bureau.
3.Creative Messaging
As with any effective direct marketing program, it is important to use creative that clearly states the
benefit to the customer as well as how the customer should respond. Since the nature of 41
this
marketing communication is in response to a overt customer activity, the communication should be
direct with regards to why the customer should include your bank in the competitive set for a new or
refinanced loan. If they are a current customer, you should also leverage the power of your
relationship with the customer. All channels should support each other and should provide multiple
options for response. A phone number should be provided as well as a landing page where the
customer/prospect can initiate the loan application process. Most importantly, since the loan can most
likely not be closed online, immediate follow-up by a live representative of the lending area is
paramount to the success of the program. Without timely follow-up, the customer/prospect will move
to one of the several other alternative organizations that have also reached out to the candidate.
The biggest shift in debit card marketing is the reintroduction of rewards programs, which were
eliminated in “knee-jerk” fashion a few years ago, says Riley. Today’s programs are different from
the ones they’re replacing, though. The older programs allowed users to swipe cards and accumulate a
pool of points that could be cashed in. The typical debit card reward program nowadays gives
customers rewards in the form of a percentage or dollar amount off at a local business or national
retailer they’ve shopped at before. Customers pay the full amount up front at the cash register with
their debit cards, and later get a credit for the discount on their statements.
“It kind of changes the whole mindset,” Riley says. “To me, a reward is aspirational.”
Inspirational doesn’t always lend itself to smart spending, though, since some people are tempted to
overspend in order to get a “free” perk. This more restrained, coupon-esque approach to rewards is
probably a better fit for today’s consumers, who are always looking for a deal.
There is another kind of innovation from Down Under. You have heard of Diners, Visa and Master
cards. Have you heard of a Barter card?
Barter card is the world’s largest barter trading exchange. Barter card enables member businesses to
exchange goods and services with other member businesses without using cash or cash equivalents. It
operates in 9 countries with a member database of over 75000. Members earn Barter card Trade
Dollars for the goods and services they sell and this value is recorded electronically in the member’s
account database.
According to International Reciprocal Trade Association more than 400,000 businesses transacted
$10 billion globally in 2008 and the volume of business is growing. Barter exchanges are taking a leaf
out of the time-share condominium business. They are marketing barter cards as a tool of enhancing
capacity utilization and volumes. Hotels, for instance, which are suffering from low occupancy, are
“banking” rooms to create credits which can later be used to buy flowers, paint and chicken. The
barter cards of the world are making the exchange methods more sophisticated and with the touch and
feel of bank credit cards. They issue monthly statements and an interest-free line of credit –with solid
security and safety. A hotel in need of Rs 50,000 worth of paints may offer meals worth Rs 50,000. It
is unlikely that the paint supplier will use Rs 50,000 to buy biriyanis or tandoori chickens. But he does
not have to. In the exchange transaction, the hotel owes Rs 50,000 to the network, not to the paint
supplier. The paint supplier is free to buy other stuff he needs by using his “credit”. The exchange
43
becomes a sophisticated, multilateral barter clearing house.
The banking system is unlikely to be replaced by these innovations in payment systems. They will
merely supplement it. Therefore, Voltaire’s advice may still be valid, “If you see a Swiss banker jump
out of a window, follow him. There is surely money to be made,”
However, some clients are able to adopt disciplined savings habits, and make regular deposits and
withdrawals. Sonia Reyes, the Banks financial manager, described increases in deposits and
withdrawals every two weeks to every month, patterns that mirror income receipts and utility payment
schedules.
Mr. Raymond Lopez, a loan officer, observed improvements in quality of life for clients who adopt an
active savings strategy. Clients who make regular deposits are more capable of accumulating the
resources to improve their housing, invest in their childrens education and/or expand their businesses.
They are also better positioned to handle unforeseen expenses due to illness, death or accident.
Core Marketing Strategy
The bank continues to promote savings through (1) loan officers, (2) financial education, and (3)
annual promotional campaigns. Loan officers remain the primary salespeople for deposit accounts,
although their primary product is credit. Currently, there is no separate fleet of officers to promote
savings. Cecilia Ramon feels this might be valuable in the long term, specifically to target salaried
and higher income savers.
Annual Campaigns
ADOPEM‟s marketing team manages three promotional campaigns each year, each of which offers
distinct incentives for clients with high deposit balances and strong credit ratings. These campaigns
include: Mother’s Day. Clients with high levels of deposits are entered into an electronic drawing for
cash prizes based on their total deposits.
O Clients with deposits totaling 1,000 pesos or more have the opportunity to win 100,000 pesos
o Clients with deposit amounts between 500 and 999 have the opportunity to win 30,000 pesos 44
o Clients with deposits between 250 and 500 have the opportunity to win 10,000 pesos.
Back to School. The bank offers a back-to-school promotional package for clients who purchase a
new financial product, make a significant deposit or have maintained a strong credit history.
Christmas. This Christmas, the bank entered all credit clients into raffles to win 5 prizes of 10,000
pesos each, and raffled television sets to remittance clients.
Targeted Campaigns
Savings Cans. The marketing department has designed decorative orange savings cans specifically for
clients with inactive accounts to encourage savings. The cans show an overflowing list of the many
reasons to save including education, housing, vacation, security, business, cars and retirement, and a
series of maxims such as the simple phrase: „he who saves, always has.
Nike Girl Effect: Savings Accounts for Girls. In early 2010, ADOPEM launched a program to provide
targeted savings accounts and financial education to young girls. The project is part of the Nike
Foundations Girl Effect campaign to promote girls empowerment, and is funded through a partnership
between Women’s World Banking (WWB) and the Nike Foundation.
Personal Loan/Signature Loan : A personal loan does not require the borrower to provide collateral
and so it is an unsecured loan. The purpose or intention of a personal loan is to fund immediate
financial contingencies. It could be for business capital, marriage, medical expenses or even foreign
trips, though the end use of the capital really depends on the borrower, as long as it is for a legitimate
financial need.
Two latest salary slip/current dated salary certificate with the latest Form 16
Home Loan: A home loan is an amount of money that an individual borrows from a bank or money
lending company at a certain rate of interest to be paid with the EMI every month.. Property is taken
as a security by the money lending company for the Home Loan.
• The property can either be commercial or personal in nature.
• When the borrower cannot pay the dues, the lender will possess all the legal rights to recover the
outstanding loan amount by sale of the property.
Features
Other Features
Property Papers:
Account Statement:
Last 6 months Bank Account Statements for all Bank Accounts held by the applicant/s
If any previous loan from other Banks/Lenders, then Loan A/C statement for last 1 year
Interest charged on home loans is tax deductible, meaning you can claim the expenses when you are
filing income tax.
Eligibility:
Before opting for a home loan one must assess his / her current financial liquidity and arrive at an
estimated amount on how much one can comfortably afford. The loan amount should be able to
derive a specific monthly installment and repayment amount. One should take into consideration any
changes that might affect your future income patterns, interest rates fluctuations and the type of
lifestyle.
CIBIL Score:
Banks take into account CIBIL scores before disbursing the loan amount and its corresponding
interest rates. Today, it has become imperative to maintain a good CIBIL score to showcase one’s
financial attribute as healthy and stable. Timely payment of credit cards, other EMIs and a stable
source of income contribute majorly to a healthy CIBIL score. This is an important pre-requisite to
determine the capacity of the applicant.
Lending Institution
Many institutions offer the best of interest rates but below par services to the customers. One often
looks for the best customer service such as personal assistance, understanding the requirements and
tagging along the entire home loan process in addition to the basic offerings details such as interest
rates and tenure for the loans. While the interest rate is important, one should also look at other
aspects as mentioned. One should look into the institution holistically to finally determine the best
suited financial institution.
Hidden Charges:
Such as processing fee, service, and administrative fee, etc. All the charges are a percentage of the
home loan amount and need to be given due importance while signing the agreement. One should
seek clarity from the officials on each and every charge and only then should one finalize the home
loan application.
A car loan is secured against the vehicle you intend to purchase, which means the vehicle serves as
collateral for the loan. If you default on your repayments, the lender can seize the auto. The loan is
paid off in fixed installments throughout the loan.
Pros
Usually a lower interest rate
Easier to obtain with mediocre credit history
Often a convenient “on the spot” finance solution
Cons
You don’t have title to the car until the final repayment is made
An upfront deposit is generally required to secure the loan.
49
Education Loan
Education loan is a loan that students apply for in order to complete their educational requirements.
Almost all banks in India offer education loans.
Gold Loan
A gold loan is a loan against gold. It is a secured loan where gold articles such as gold jewellery,
ornaments etc. are taken as collateral by the lending bank/NBFC. The loan is given to the borrower
against this gold as a collateral.
Apart from banks such as SBI, ICICI Bank, HDFC Bank etc., non-banking finance companies
(NBFCs) also offer gold loans to individuals. NBFCs which offer gold loans include Muthoot
Finance, Manappuram Finance etc.
50
Minimum and maximum gold loan amount
The amount of loan that an individual can get against a gold article will vary from lender to lender.
For instance, ICICI Bank offers gold loans between Rs 10,000 and Rs 1 crore. Whereas the State
Bank of India (SBI) offers gold loans between Rs 20,000 and Rs 20 lakh. While, Muthoot Finance
offers gold loans starting from a minimum amount of Rs 1,500 with no maximum limit.
To avail a gold loan, the bank or NBFC will ask you to provide various documents. Documents
normally required include your proof of identity such as PAN, Aadhaar etc. and proof of address like
Aadhaar, passport, Voter-ID card etc, and your photograph. Any additional documents required would
vary from lender to lender.
Surrender value is the value of the policy that you get when you terminate the insurance plan
voluntarily.
4. You may get a low interest rate
51
Interest rates charged by insurance companies on loans taken against their life insurance policies
are generally lower than those charged on personal loans.
the interest charged on loan taken against a life insurance policy depends upon the premium
already paid
3. Quick availability of loan
4. Loans are secured and require limited scrutiny
1. You can get a smaller loan amount in the initial policy years
2. Not getting loan on all type of life insurance
A loan can be taken only against traditional life insurance policies and not against a term plan.
3. There is a waiting period
You won’t be eligible for taking a loan against your life insurance plan as soon as you buy it. There is
a waiting period of around three years. The lender basically checks whether you have paid premium,
or have defaulted, during the three-year waiting period. Accordingly, the loan is sanctioned basis the
surrender value.
4. Default on repayment of loan
In case of default in repayment of loans or default in payment of future premiums, the insurance
policy will lapse. The policyholder needs to pay interest on the loan taken against the policy as well as
premiums on the policy. The insurance company also has the right to recover the principal and
interest due from the surrender value of the policy.
Loan against FD
You just need to place the bank FD as collateral with the bank and avail a loan. The amount you get
will be in the form of an overdraft (OD) against your bank FD.
Interest rates of loans against FD are usually 1-2 per cent higher than contracted rates of FD placed as
collateral.
The borrower will continue to earn interest on FDs used as collateral during the loan tenure.
Most banks do not charge processing fees on availing loan against FD
The maximum amount that you can avail as a loan will depend on the amount of FD and the tenure
left till maturity.
5) A PPF subscriber needs to submit Form D for a loan request. Interest is charged at 2% over the
PPF interest rate. And the loan taken from the PPF account has to be repaid within 36 months.
Loan Against Securities are typically offered as an overdraft facility in your account after you have
deposited your securities. You can draw money from the account, and you pay interest only on the
loan amount you use and for the period you use it.
Small More than Rs. 25 Lakh and More than Rs. 10 Lakh and Upto Rs. 2
Upto Rs. 5 Crore Crore
Medium More than Rs. 5 Crore and More than two crore rupees but does not
Upto Rs. 10 Crore exceed five crore rupees
MUDRA LOAN
Pradhan Mantri Mudra Yojana (PMMY) is a scheme set up by the Government of India (GoI) through
MUDRA (a subsidiary of SIDBI) that helps in facilitating micro credit upto Rs. 10 lakh to small
business owners. MUDRA supports Financial Intermediaries to extend loans to the non-corporate,
non-farm sector income generating activities of micro and small entities with credit needs upto Rs. 10
lakhs). The interventions have been named ‘SHISHU’, ‘KISHOR’ and ‘TARUN’ to signify the stage
of growth / development and funding needs of the beneficiary micro unit / entrepreneur.
‘SHISHU’
This stage would cater to entrepreneurs who are either in their primitive stage or require lesser funds
in order to get their businesses started.
‘KISHOR’
This section of entrepreneurs would belong to either those who have already started their business and
want additional funds to mobilize their business.
‘TARUN’
If an entrepreneur meets the required eligibility conditions, he/she could apply loan for upto Rs.10
lakhs. This would be the highest level of amount that an entrepreneur could apply for a startup loan.
Stand-Up India (SUI) scheme for financing SC/ST and/or Women Entrepreneurs has been launched
by Hon’ble Prime Minister (PM) on April 05, 2016.
The objective of the SUI scheme is to facilitate bank loans between Rs.10 lakh and Rs. 1 Crore to at
least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower
per bank branch.
Eligibility
55
UNIT-III
Introduction
A mutual fund is a type of professionally managed collective investment scheme that pools
money from many investors to purchase securities. While there is no legal definition of the term
mutual fund, it is most commonly applied only to those collective investment vehicles that are
regulated and sold to the general public. They are sometimes referred to as “investment
companies” or “registered investment companies. Most mutual funds are open- ended, meaning
stockholders can buy or sell shares of the fund at any time by redeeming them from the fund
itself, rather than on an exchange Hedge funds are not considered a type of mutual fund,
primarily because they are not sold publicly.
The erstwhile Unit Trust of India (UTI) was set up by the Reserve Bank of India in 1963 and
functioned under its regulatory and administrative control. In 1978, the Industrial Development
Bank of India (IDBI) took over regulatory and administrative control of the UTI. The
Government of India enacted the Securities and Exchange Board of India Act, 1992 on 4 April
1992 which created the Securities and Exchange Board of India (SEBI). SEBI issued a
comprehensive set of regulations in 1993 and revised them again in 1996. These included
regulations covering the Indian mutual fund industry. All mutual funds in India today are
regulated by SEBI. The Association of Mutual Funds of India (AMFI) is a self-governing
association of Indian Mutual Funds that regulates its members’ sales, distribution and
communication practices. Investors can invest in Indian mutual funds directly or through
distributors under codes of practice developed by AMFI.
Types:
There are 3 principal types of mutual funds: open-end funds, unit investment trusts (UITs); 56
and
closed-end funds.
Open-end funds-
Open-end mutual funds must be willing to buy back their shares from their investors at the end
of every business day at the net asset value computed that day. Most open-end funds also sell
shares to the public every business day; these shares are also priced at net asset value. A
professional investment manager oversees the portfolio, buying and selling securities as
appropriate. The total investment in the fund will vary based on share purchases, share
redemptions and fluctuation in market valuation. There is no legal limit on the number of shares
that can be issued.
Closed-end funds-
Closed-end funds generally issue shares to the public only once, when they are created through
an initial public offering. Their shares are then listed for trading on a stock exchange. Investors
who no longer wish to invest in the fund cannot sell their shares back to the fund (as they can
with an open-end fund). Instead, they must sell their shares to another investor in the market; the
price they receive may be significantly different from net asset value. It may be at a “premium”
to net asset value or, more commonly, at a “discount” to net asset value. A professional
investment manager oversees the portfolio, buying and selling securities as appropriate.
Unit investment trusts or UITs issue shares to the public only once, when they are created. UITs
generally have a limited life span, established at creation. Investors can redeem shares directly
with the fund at any time (as with an open-end fund) or wait to redeem upon termination of the
trust. Less commonly, they can sell their shares in the open market. Unit investment trusts do not
have a professional investment manager. Their portfolio of securities is established at the
creation of the UIT and does not change.
57
Marketing strategies used by mutual funds in India
With assets under management (AuM) recently surpassing pre-crisis levels, the mutual fund
industry has plenty of positive momentum. Opportunities for growth exist, including
continuing investor demand for exchange traded funds (ETFs). Firms are also seeking cost
reductions, efficiencies and improved risk management through renewed attention to
operational enhancements. On the regulation front, money market funds remain in the
spotlight, with the SEC’s recent unanimous vote proposing changes for these funds.
As mutual fund firms look forward, three core strategies will shape their approach for the
remainder of the year:
Unlike hedge and private equity funds, mutual funds emerged from the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank) relatively unscathed, and the
regulatory landscape for mutual funds as a consequence has remained relatively quiet. The
significant exception, of course, is money market funds, where the SEC’s recent proposal is
expected to draw substantial discussion and comment. Additionally, Mary Jo White as the
SEC’s new chair will clearly impact the SEC’s agenda and may bring an even greater focus on
SEC enforcement actions.
58
2. Growth Opportunities amid Market Turbulence
As the U.S. economy continues to recover, mutual fund leaders will look to reenergize growth
strategies. For 2013, fund firms will likely continue to enter the ETF market as a growth play.
One issue firms may want to keep in mind when expanding into the ETF space is the
downward pressure larger firms will likely continue to exert on profit margins. In 2012, the
industry saw several ETFs shut down due to fee pressures and declining investor interest in the
investment offering. “For many, survival in the ETF space will depend on scale as firms with
more AuM will have an easier time offsetting fee reductions,” says Jim Eckenrode, executive
director of the Deloitte Center for Financial Services, Deloitte Services LP. “However, a fund
with a niche offering, favorable name recognition or a good track record can overcome size
and margin constraints.”
With AuM growth likely to continue, fund companies are expected to shift part of their focus
back to the operations side of the business. Leading up to 2008, many firms generated multiple
new fund offerings and paid less attention to operational improvements as they rushed to
attract assets. With the onset of the financial downturn, cost-cutting took center stage, and
operations and technology investments took a backseat
Marketing strategies used by mutual funds in India to attract the customers and create
demand for their products are:-
This is the most common mutual-fund strategy. Basically, if your portfolio does not have
a plan or a structure, then it is likely that you are employing a wing-it strategy. If you are
adding money to your portfolio today, how do you decide what to invest in? If you
already have a plan or structure, then adding money to the portfolio should be really easy.
Most experts would agree that this strategy will have the least success because there is
little to no consistency.
59
Market-Timing Strategy:
The market timing strategy implies the ability to get into and out of sectors, assets or
markets at the right time. The ability to market time means that you will forever buy low
and sell high. Unfortunately, few investors buy low and sell high because investor
behavior is usually driven by emotions instead of logic. The reality is most investors tend
to do exactly the opposite – buy high and sell low. This leads many to believe that market
timing does not work in practice.
Buy-and-Hold Strategy:
This is by far the most commonly preached investment strategy. The reason for this is that
statistical probabilities are on your side. Markets generally go up 75% of the time and
down 25% of the time. If you employ a buy-and-hold strategy and weather through the ups
and downs of the market, you will make money 75% of the time. If you are to be more
successful with other strategies to manage your portfolio, you must be right more than 75%
of the time to be ahead. The other issue that makes this strategy the most popular is it’s
easy to employ. This does not make it better or worse, it’s just easy to buy and hold.
Performance-Weighting Strategy:
This is somewhat of a middle ground between market timing and buy and hold. With this
strategy, you will revisit your portfolio mix from time to time and make some
adjustments.
Earlier the entire industry was revolving around investment and savings oriented plans.
As the interest rates are moving southwards, all the players are deliberately focusing on
selling pure risk covers in an effort to capture the new customers. The premium on such
products is low as it covers only the risk aspect and does not factor in investments or
savings. Even the market leader LIC has withdrawn some of the products, which are
positioned, on the assured returns platform. Though the share of the term plans in the
product portfolio is quite negligible, the shift towards the term products is already visible.
60
Typically a term plan does not provide anything by way of maturity, unlike moneyback
or endowment policies. Globally, close to a third of the policies fall into this category
must be encouraging news to the players.
Value For Money (VFM)
The sea change since the sector opened up has been on the way the basic products have
been packaged innovatively, often tailor made to provide a bundle of benefits to the
customers. This is possible through the introduction of riders, which have added value to
the risk cover at minimal cost. Riders are nothing but
add-ons coming along with the base policies for a slightly additional premium. Riders
have become the major instruments for the organizations to lure the customers away from
the competitors. The removal of 30% cap on the premium of the base policy for the health
riders alone has come as a shot in the arm for many players since this is used as an Unique
Selling Proposition by many private players vis a vis the LIC. Later, LIC has also started
announcing riders along with the main policies dancing to the tune of the market forces.
This could see many non-life players going out of the business as life insurers offer a
plethora of personal line products as add-ons. Riders can also be availed by the existing
policyholders.
Tapping the Niche Markets
All the players have turned their eyes towards the rural market. Towards ensuring
equitable distribution of insurance policies in every nook and cranny of the country,
IRDA stipulates the rural obligations to be met by the players over the years.
The rural obligation on part of the new private insurance companies is incremental 61
in
nature. It goes from 5% to 15% over the period of 5 years for life insurance and from 2%
to 5% in case of general insurance. IRDA has also defined what it meant by rural.
2. Secondly, the density of the population should be less than 400 persons per square
kilometer.
Nevertheless all the players depend heavily on their agents force to reach out (LIC has
reached a figure of 8,50,000 agents and planned to increase it to 1 million by this year),
they are trying out other distribution channels also like banks and corporate agencies.
LIC is also exploring ways to rope in Regional Rural Banks (RRBs) across the country.
Cross-selling could be another key strategy in selling insurance provided the restrictions
on the functioning of corporate agencies are lifted. Once the curbs are removed, the
market may see a wave of cross-selling. Royal Sundaram Alliance may offer household
insurance with Sundaram Housing Finance and sell customers of Sundaram Finance
Mutual Fund a whole range of insurance products. ICICI-Prudential and HDFC Standard
will tie up with their parent companies to use their network.
Once the much-awaited Insurance Brokers Regulations comes into force, the industry is
poised to change the way the insurance products are sold with the entry of brokers.
While an insurance agent represents an insurance company and offers only the products
of that company, an insurance broker is independent and represents a number of
insurers. He can also compare the benefits of different policies and premiums to find the
best coverage for the customer.
- Life insurance coverage for atleast one person in 75% of the households
Though the issue of de-tariffing in general insurance has been debated upon at length, the
response from the industry is quite mixed. By fixing a tariff for a product, Tariff
Advisory Committee (TAC) maintains discipline in the market and makes sure that the
insurance companies do not resort to under pricing to gain market share. IRDA is now
working on detariffing the general insurance sector beginning with commercial vehicle
business since it constitutes more than two fifth of the non-life business volume. Both
IRDA and TAC are working out the modus operandi of the deregulations of motor
premium. Sensing the indifferent attitude of the private general insurers towards motor
insurance, the Government is contemplating on coming out with obligations to be met by
the private insurers in this segment (like rural business).
The PFRDA Bill 2011 (proposed to be enacted as a law) provides for the establishment of an
63
Authority to promote old age income security by establishing, developing and regulating pension
funds, to protect the interests of subscribers to schemes of pension funds and for matters
connected therewith or incidental thereto.
An Interim Authority has already been created vide Govt Resolution dated 10th October 2003 and
14th November 2008 and is fully functional. The passage of the bill will confer statutory status to
the Interim PFRDA to develop and regulate National Pension System (NPS) earlier known as
New Pension Scheme.
The pension fund functions in accordance with the terms of its Certificate Of Registration and
the Regulations issued by Authority from time to time. PF is mandated to invest and manage
the pension assets of the subscribers covered under NPS, which is inclusive of but not
confined to the following-
5. Public disclosure.
64
B. Pension Funds (PFs) for Private Sector
HDFC Pension Management Co. Ltd.
ICICI Prudential Pension Fund Management Co. Ltd.
Kotak Mahindra Pension Fund Ltd.
LIC Pension Fund Ltd.
Reliance Capital Pension Fund Ltd.
SBI Pension Funds Pvt. Ltd
UTI Retirement Solutions Ltd
Pension Fund (PF) to be incorporated by Birla Sunlife Insurance Co. Ltd
“Scheme(s)” means any scheme under National Pension System or a scheme of Pension Fund,
which is regulated by Authority
A. Schemes applicable to Government Employees
65
Marketing of Pension Funds can be increased by
• Introducing a minimum level of support for the poorest among the elderly.
• Introducing a minimum access age so that it is clear that benefits are preserved for retirement.
The Pension Fund Regulatory & Development Authority Act was passed on 19th September,
2013 and the same was notified on 1st February 2014.PFRDA is regulating NPS, subscribed by
employees of Govt. of India, State Governments and by employees of private
institutions/organizations & unorganized sectors. The PFRDA is ensuring the orderly growth and
development of pension market.
The Government of India had, in the year 1999, commissioned a national project titled
“OASIS”(an acronym for old age social & income security) to examine policy related to old age
income security in India. Based on the recommendations of the OASIS report, Government of
India introduced a new defined contribution Pension System for the new entrants to Central/Sate
Government except to Armed Forces.
National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme
designed to enable the subscribers to make optimum decisions regarding their future through
systematic savings during their working life. NPS seeks to inculcate the habit of saving for
retirement amongst the citizens. It is an attempt towards finding a sustainable solution to the
problem of providing adequate retirement income to every citizen of India. 66
Under the NPS, individual savings are pooled in to a pension fund which are invested by
PFRDA regulated professional fund managers as per the approved investment guidelines in to
the diversified portfolios comprising of government bonds, bills, corporate debentures and
shares. These contributions would grow and accumulate over the years, depending on the
returns earned on the investment made.
At the time of normal exit from NPS, the subscribers may use the accumulated pension
wealth under the scheme to purchase a life annuity from a PFRDA empanelled life insurance
company apart from withdrawing a part of the accumulated pension wealth as lump-sum, if
they choose so.
National Pension System (NPS) is a retirement benefit Scheme introduced by the Government of
India to facilitate a regular income post retirement to all the subscribers. PFRDA (Pension Fund
Regulatory and Development Authority) is the governing body for NPS.
National Pension System (NPS) is based on unique Permanent Retirement Account Number
(PRAN) which is allotted to every subscriber. In order to encourage savings, the Government of India
has made the scheme reassuring from security point of view and has offered some attractive benefits
for. NPS account holders.
Benefits of NPS
67
Flexible- NPS offers a range of investment options and choice of Pension Fund Manager (PFMs) for
planning the growth of your investments in a reasonable manner and see your money grow.
Individuals can switch over from one investment option to another or from one fund manager to
another subject, of course, to certain regulatory restrictions. The returns being totally market-related.
Simple – Opening an account with NPS provides a Permanent Retirement Account Number
(PRAN), which is a unique number and it remains with the subscriber throughout his lifetime.
The scheme is structured into two tiers:
Tier-I account: This is the non-withdraw able permanent retirement account into
which the accumulations are deposited and invested as per the option of the
subscriber.
Tier-II account: This is a voluntary withdraw able account which is allowed only
when there is an active Tier I account in the name of the subscriber. The withdrawals
are permitted from this account as per the needs of the subscriber as and when
claimed.
Portable- NPS provides seamless portability across jobs and across locations, unlike all current
pension plans, including that of the EPFO. It would provide hassle-free arrangement for the
individual subscribers. Regulated- NPS is regulated by PFRDA, with transparent investment
norms, regular monitoring and performance review of fund managers by NPS Trust.
Tax benefits: The first benefit of the NPS consists of the income tax deduction that is available to
the individuals when they make their own contribution to the fund. There is an overall limit of
Rs 1.5 lakh for contributions under eligible investments for Section 80C, pension fund
contributions (Section 80CCC) and contribution to NPS (Section 80CCD). Apart from this, if
there are co-contributions from the employer, then Employer contributing to the NPS on behalf
of an employee will get deduction from his income (i.e. employer’s income) an amount
equivalent to the amount contributed or 10% of BASIC SALARY + DA of the employee,
whichever is less.)
Dual benefit of Low Cost and Power of compounding – The account maintenance costs under
NPS are the lowest as compared to similar pension products available in India, like retirement
plans offered by Insurance companies and mutual funds. While saving for a long-term goal such
68
as retirement, the cost matters a lot. Over 35-40 years, the charges can shave off a significant
amount from the corpus.
Till the retirement pension wealth accumulation grows over a period of time with a
compounding effect. The account maintenance charges being low, the benefit of accumulated
pension wealth to the subscriber eventually become large.
Architecture of NPS
NPS is based on Personal retirement accounts (PRAs) created for individual members. NPS
accumulates savings into subscriber’s PRA while he is working and use the accumulations at
retirement to procure a pension for the rest of his life.
NPS has an unbundled Architecture, with inbuilt checks and balances, where each function is
performed by a different entity which is renowned in its area, to achieve maximum operational
efficiency and at a low cost.
A Central Recordkeeping Agency (CRA) which maintains the data and records- NSDL is
acting as Central Record Keeping agency (CRA) which is associated with various
national level projects for recordkeeping functions.
Competing pension fund managers for generating and maximizing returns on investments
of subscribers
69
Funds are managed by professional Fund Managers from Public & Private sector with proven
track record and as per the PFRDA approved investment guidelines. At present there are 8
pension fund managers managing the pension wealth of subscribers. They are:
(** The Hon’ble High-Court Delhi has permitted HDFC Pension Management Company Ltd. To
carry on pension fund management business till further orders.)
Axis Bank, functions as Trustee Bank.
Individuals who are employed and contributing to NPS would enjoy tax benefits on their
own contributions as well as their employer’s contribution as under: -
(a) Employee’s own contribution – Eligible for tax deduction up to 10% of Salary (Basic
+ DA) under Section 80 CCD(1) within the overall ceiling of Rs. 1.5 lacs under Sec 80
CCE.
(b) Employer’s contribution – The employee is eligible for tax deduction up to 10% of
Salary (Basic + DA) contributed by employer under Sec 80 CCC(2) over and above the
limit of Rs. 1.5 lacs provided under Sec 80 CCE.
Tax benefit for self-employed:
Eligible for tax deduction up to 10 % of gross income under Sec 80 CCD (1) with in the
overall ceiling of Rs. 1.5 lacs under Sec 80 CCE.
Tax benefits would be applicable as per the Income Tax Act, 1961 as amended from time
to time.
At least 40% of the accumulated pension wealth of the subscriber needs to be utilized for
purchase of annuity providing for monthly pension to the subscriber and balance is paid
as lump sum payment to the subscriber. However, the subscriber has the option to defer
the lump sum withdrawal till the age of 70 years.
71
At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for
purchase of annuity providing for monthly pension to the subscriber and the balance is
paid as a lump sum payment to the subscriber.
Death of the subscriber:
The entire accumulated pension wealth (100%) would be paid to the nominee/legal heir
of the subscriber and there would not be any purchase of annuity/monthly pension.
Under National Pension System, PFRDA has entrusted the responsibility of receiving,
processing and settlement of all withdrawal claims made to Central Recordkeeping
Agency (CRA) and CRA has created a special NPS claim processing cell (NPSCPC) for
this purpose for handling all types of withdrawal claims. The CRA will monitor the
performance of NPSCPC on the withdrawal processing as per the instructions provided
by PFRDA in this regard. At present the NPSCPC is fully functional.
The subscribers can submit their claims for withdrawal from NPS through any of the
POP-SP’s to NPS Claim processing cell (NPSCPC) for processing of the claims.
The Central Government had introduced the National Pension System (NPS) with effect from
January 1, 2004 (except for armed forces). Hence, all Central Government employees, Central
Autonomous Bodies joining on or after 01-01-2004 are mandatorily covered under NPS.
Corporate Model
Trust/Society
For Subscribers
The employees of the corporate entity, enrolled by the employer having Indian Citizenship
between the age of 18-60 years and complying with the KYC norms, are eligible to be registered
as subscribers under NPS.
The exit from the Swavalamban Scheme would be on the same terms and conditions on which
exit from Tier-I account of NPS is permitted, that is, exit at age 60 with 40% minimum
annuitisation of pension wealth and exit before age 60 with 80% minimum annuitisation of
pension wealth. However, the exit would be subject to the overriding condition that the amount
of pension wealth to be 73lientele73 should be sufficient to yield a minimum amount of Rs.
1,000 per month. If the annuitized pension wealth does not yield an amount of Rs. 1,000 per
month, the percentage of pension wealth to be 73lientele73 would be increased so that the
pension amount becomes Rs. 1,000 per month, failing which the entire pension wealth would be
subject to annuitisation. This minimum pension ceiling may be revised from time to time.
*However, the exit would be subject to the overriding condition that the amount of pension
wealth to be 73lientele73 should be sufficient to yield a minimum amount of Rs. 1,000 per
month. If the annuitized pension wealth does not yield an amount of Rs. 1,000 per month, the
percentage of pension wealth to be 73lientele73 would be increased so that the pension amount
becomes Rs. 1,000 per month, failing which the entire pension wealth would be subject to
annuitisation. This minimum pension ceiling may be revised from time to time.
73
Atal Pension Yojana
1. Atal Pension Yojana (APY) is open to all bank account holders. The Central Government
would also co- contribute 50% of the total contribution or Rs. 1000 per annum, whichever is
lower, to each eligible subscriber, for a period of 5 years, i.e., from Financial Year 2015- 16 to
2019-20, who join the APY before 31st December, 2015, and who are not members of any
statutory social security scheme and who are not income tax payers. Therefore, APY will be
focused on all citizens in the unorganized sector.
2. Under APY, the monthly pension would be available to the subscriber, and after him to his
spouse and after their death, the pension corpus, as accumulated at age 60 of the subscriber,
would be returned to the nominee of the subscriber.
3. Under the APY, the subscribers would receive the fixed minimum pension of Rs. 1000 per
month, Rs. 2000 per month, Rs. 3000 per month, Rs. 4000 per month, Rs. 5000 per month, at the
age of 60 years, depending on their contributions, which itself would be based on the age of
joining the APY. Therefore, the benefit of minimum pension would be guaranteed by the
Government. However, if higher investment returns are received on the contributions of
subscribers of APY, higher pension would be paid to the subscribers.
4. A subscriber joining the scheme of Rs. 1,000 monthly pension at the age of 18 years would be
required to contribute Rs. 42 per month. However, if he joins at age 40, he has to contribute Rs.
291 per month. Similarly, a subscriber joining the scheme of Rs. 5,000 monthly pension at the
age of 18 years would be required to contribute Rs. 210 per month. However, if he joins at age
40, he has to contribute Rs. 1,454 per month. Therefore, it is better to join early in the Scheme.
The contribution levels, the age of entry and the pension amounts are available in a table given in
frequently asked questions (FAQs) on APY, which is available on www.jansuraksha.gov.in.
5. The minimum age of joining APY is 18 years and maximum age is 40 years. Therefore,
minimum period of contribution by any subscriber under APY would be 20 years or more
74
UNIT-IV
Concept of Distribution
Introduction
In June 1995 Santos and Peffers published an academic study of the evolution of ATMs which
showed that “early adopters” (those who deployed ATM technology before 1979) tended to gain
substantial market share due to their bold investments. The same study showed that once ATM
technology became widespread, it no longer provided banks with an obvious competitive
advantage. Instead, ATMs became a strategic necessity—that is, they became a necessary
condition for survival, not a money-making differentiator.
Multiple Delivery Channels
Let’s look at Citibank. From 1977 to 1988, the bank increased its market share in New York city
from 4% to 13.4%. Most analysts agree that the ATM was a significant driver of that growth.
During that period, ATMs served as a competitive advantage for Citibank. Today, however, no
bank would expect to increase its market share by launching ATM access. In fact, most
customers have grown to expect ATMs to be one of their banking options.
That’s because ATMs have become a strategic necessity.
What will be the ATM of tomorrow? Which technologies will provide banks a temporary
competitive advantage? Which will become strategic necessities? There is a wealth of new
delivery channels on the horizon, and most bank managers are busy trying to determine which
ones to embrace. If the history of ATMs is a good predictor for the evolution of other banking
delivery channels, banks will profit from devoting more resources to understanding emerging
technologies—and deploying them quickly. Let’s review some of the key delivery channels
banks are using and talking about today:
1. BRANCHES: Many customers continue to flock—and probably always will—to this
traditional banking delivery channel. Only a few banks nationwide have rid themselves of bricks
and mortar.
2. ATMS: ATMs have evolved as the primary delivery channel for cash withdrawals. They are
75
continuously being enhanced with foreign language, touch-screen, advanced transaction, video
conferencing, and related capabilities. This channel is likely to continue to be an important one
for most banks.
3. PHONE BANKING: With low set-up costs for banks, phone banking is another delivery
channel that’s taken hold recently. Telecommunication companies and call centers now offer
sophisticated voice response and video
telephone services which increase functionality for bankers who prefer to contact their banks from
home.
4. KIOSKS: Video kiosks give customers a direct connection to the most appropriate service
agents. Although currently most don’t link directly to a customer’s records, this functionality is
expected in the near future. At that time, banking kiosks will become enhanced ATMs.
5. PC BANKING THROUGH PERSONAL FINANCIAL SOFTWARE: Quicken, Microsoft
Money, Managing Your Money, and related programs are a familiar delivery channel to
many customers. These personal financial software companies offer direct links to many
large banks. Some banks reject this delivery channel because they
believe customers will transfer their loyalty to the software company, not the bank.
10.SMART CARDS / E-CASH: Although they won’t offer all the functionality of the delivery
channels outlined above, experts believe smart cards and e-cash will replace cash for certain
purchases
Each delivery channel has its own strengths and weaknesses. And each has a viable chance of
becoming the next ATM. So, what should the bank technology manager do?
> In his 1513 writing Il Principle, Niccolo Machiavelli said, “There is nothing more difficult to
take in hand, more perilous to conduct, or more uncertain in its success than to take the lead in
the introduction of a new order of things”
But such leadership—particularly in delivery channel technology—is what allows a bank to
build or defend its strategic position.
> When the future is highly uncertain, and the risk of being unprepared for the future is large,
smart businesses find ways to prepare for any future they can anticipate. Banks who choose not
to be early adopters must position themselves so they can deploy new technologies quickly
enough that they won’t lose their existing customers.
> Don’t build your company’s architecture for today’s delivery channel; instead, make it
flexible enough to incorporate tomorrow’s. Think about all the delivery channels your
customers might demand in the future—and build a system that will allow you to deploy
those channels quickly, effectively, and securely.
In the fierce competitive market, needs of customer keep changing. Hence, our marketing
strategy must be dynamic and flexible to meet the changing scenario. Here are steps:
Emphasis, though in a discrete manner, should be given to mobilize more of term deposits as 77
they are more profitable for the bank in comparison to demand. Introduction of products
comparable to “Kisan Vikas Patra” and product with the facility of tax rebate under section
88 of Income Tax Act will of much help in this regard.
Scheme
Bank should form a scheme that meets the needs of customers..A bunch of such schemes can also
form a product. A bank product may include deposit scheme, an account offering more
flexibilities, technically sound banking, tele/mobile/net banking, an innovative scheme targeted to
special group ofcustomers like children, females, old aged persons, businessman etc. In short,
a bank product may consist of anything that you offer to customers.
Man is a bundle of sentiments and emotions. This can effectively be helpful in branding our
products. Considering the features of products and target groupof customers, the product can be
effectively branded so as to sound it catchyand appealing. Some proven examples are Apna
Ghar, Dhan Laxmi, Kuber, Flexi Deposit, Smart Kid, Sapney, Vidya etc. The branding should
be done in such a way that the brand name must attract the customers. It should be easy to
remember. The target group and the silent feature of the product should resemble brand name.
This will help a lot in making the brand successful. All employees and all our campaigns
should refer the product by its brand name only so that to strike the same in the customer’s
mind.
The national perspective plan for women states that 94 pc of women workers are engaged in the
unorganized sector and 83 pc of these in agriculture and allied activities like dairy, animal
husbandry, sericulture, handloom, handcrafts and forestry. Banks should do something to
improve their access to credit which they require.
Bancassurance
The bank insurance model (BIM), also sometimes known as bancassurance, is the partnership or
relationship between a bank and an insurance company whereby the insurance company uses
the bank sales channel in order to sell insurance products, an arrangement in which a bank and
an insurance company form a partnership so that the insurance company can sell its products to
the bank’s client base. 78
BIM allows the insurance company to maintain smaller direct sales teams as their products are
sold through the bank to bank customers by bank staff and employees as well. The bank and the
insurance company share the commission. Insurance policies are processed and administered by
the insurance company. The banks are the agent of the insurance companies to sell them more
and more policies. Bancassurance is an efficient distribution channel with higher productivity and
lower costs than traditional distribution channel.
Competitive Environment:
To make Indian banks competitively strong they should follow latest technology , innovative
and globally accepted products/ services followed by appointment of experienced, skilled and
tech friendly professionals.
Technology:
Another important challenge is that Indian public sector banks should use innovative
technology to facilitate financial inclusion for the unbanked population of India through use of
biometric techniques and rapidly growing mobile network.
Transformation of Human Capital:
There is a need to develop and manage the human resources to make the human capital adaptable to the
changing environment .Banks s Banks should provide on-the-job training to the efficient staff to
make them capable to understand and work with latest technology and its application.
Rural Marketing:
This is a big challenge before the Indian banks to enhance rural marketing to increase their
customers. Banks should open their branches not only in the urban and semi-urban areas but
also in the rural areas.
Customer Focus & Awareness:
The banks require improving on providing services to the customers and also focusing on
profitability & efficiency of banks.The banks have to explore out fastest and efficient means
of providing services with the use of IT applications, telebanking, internet banking and
improving delivery system by improving the attitude and behavior of the staff also.
79
Customer awareness is also a challenge before the banks. Bank can market their products and
services by giving the proper knowledge about the product to customer or by awarding the
customer about the products. Bank should literate the customers.
Research, as a general concept, is the process of gathering information to learn about something
that is not fully known. Nearly everyone engages in some form of research. From the highly
trained geologist investigating newly discovered earthquake faults, to the author of best selling
spy novels gaining insight into new surveillance techniques, to the model train hobbyist
spending hours hunting down the manufacturer of an old electric engine, each is driven by the
quest for information.
a. For marketers, research is not only used for the purpose of learning, it is also a critical
component needed to make good decisions. Market research does this by giving
marketers a picture of what is occurring (or likely to occur) and, when done well, offers
alternative choices that can be made. For instance, good research may suggest multiple
options for introducing new products or entering new markets. In most cases marketing
decisions prove less risky (though they are never risk free) when the marketer can select
from more than one option.
80
b. Using an analogy of a house foundation, marketing research can be viewed as the
foundation of marketing. Just as a well-built house requires a strong foundation to
remain sturdy, marketing decisions need the support of research in order to be viewed
favorably by customers and to stand up to competition and other external pressures.
Consequently, all areas of marketing and all marketing decisions should be supported
with some level of research.
c. While research is key to marketing decision making, it does not always need to be
elaborate to be effective. Sometimes small efforts, such as doing a quick search on the
Internet, will provide the needed information. However, for most marketers there are
times when more elaborate research work is needed and understanding the right way to
conduct research, whether performing the work themselves or hiring someone else to
handle it, can increase the effectiveness of these projects.
Market research not only helps in identifying new business opportunities, but also helps in
designing marketing campaigns that will directly target your potential consumers’ interest and
help in increasing sales. Marketing research provides valuable information about the potential
of a particular market segment, during a specific time, and within particular age group.
Marketing research is a good evaluation tool that can be of great use in comparative studies.
You can track your company’s progress as well as the growth of your competitors. By
keeping an eye on your competitors, you can devise strategies that would keep you ahead of
your business rivals.
81
With market research, you can reduce the chances of loss to a large extent. Before launching
a product, you can identify problems and determine solutions. Research carried out after the
launch of a product can help you find loopholes and devise plans to counter that loss and
increase profits.
Consumers are more concerned about the state of the economy, and their money, than ever
before. Banks and other financial institutions are consequently under pressure to effectively
understand and serve the needs of their customers. In addition to the need to convey stability and
ethical conduct, banks must also offer stellar customer service, excellent rates, and just the right
level of convenience.
Public relations is the management function which evaluates public attitudes, identifies the
policies and procedures of an individual or an organization with the public interest, and plans
and executes a program of action to earn public understanding and acceptance.”
Public relations is defined as a management function which identifies, establishes, and maintains
mutually beneficial relationships between an organization and the publics upon which its success
or failure depends. Whereas advertising is a one-way communication from sender (the marketer)
to the receiver (the consumer or the retail trade), public relations considers multiple audiences
(consumers, employees, suppliers, vendors, etc.) and uses two- way communication to monitor
feedback and adjust both its message and the organization’s actions for maximum benefit.
A primary tool used by public relations practitioners is publicity. Publicity capitalizes on the
news value of a product, service, idea, person or event so that the information can be
disseminated through the news media. This third party “endorsement” by the news media
83
provides a vital boost to the marketing communication message: credibility. Articles in the
media are perceived as being more objective than advertisements, and their messages are more
likely to be absorbed and believed.
Public relations’ role in the promotional mix is becoming more important because of what Philip
Kotler describes as an “over communicated society.” Consumers develop “communication-
avoidance routines” where they are likely to tune out commercial messages. As advertising loses
some of its cost-effectiveness, marketers are turning to news coverage, events, and community
programs to help disseminate their product and company messages. Some consumers may also
base their purchase decisions on the image of the company, for example, how environmentally
responsible the company is. In this regard, public relations plays an important role in presenting,
through news reports, sponsorships, “advertorials” (a form of advertising that instead of selling a
product or service promotes the company’s views regarding current issues), and other forms of
communication, what the company stands for.
Public relations specialists need to operate at many levels to ensure that various publics of a
company receive coordinated, positive messages about the firm. These groups include
customers, suppliers, employees, the media, stockholders, and government regulators.
Companies that practice integrated marketing communication strategies know that public
relations strategies are best used in concert with advertising, sales promotion, and personal selling
in order to send a consistent message to customers and other stakeholders. As part of the total
IMC plan, public relations departments may perform any or all of the following functions to
achieve communications objectives:
The world of business is characterized by fierce competition and in order to win new customers
and retain the existing ones, the firms have to distinguish themselves from the competition. But
they also need to create and maintain a positive public image. A PR specialist or firm helps them
both create and maintain a good reputation among both the media and the customers by
communicating in their behalf and presenting their products, services and the overall operation in
the best light possible. A positive public image helps create a strong relationship with the
customers which in turn increases the sales.
Advertisement:
an audience (viewers, readers or listeners; sometimes a specific group) to take or continue to take
some action. Most commonly, the desired result is to drive consumer 85lientel with respect to a
commercial offering, although political and ideological advertising is also common. This type of
work belongs to a category called affective labour.
In Latin, ad vertere means “to turn toward”. The purpose of advertising may also be to reassure
employees or shareholders that a company is viable or successful. Advertising messages are
usually paid for by sponsors and viewed via various old media; including mass media such as
newspaper, magazines, television advertisement, radio advertisement, outdoor advertising or
direct mail; or new media such as blogs, websites or text messages.
Publicity:
85
Publicity is the movement of information with the effect of increasing public awareness of a
subject. The subjects of publicity include people (for example, politicians and performing artists),
goods and services, organizations of all kinds, and works of art or entertainment.
Publicity is gaining public visibility or awareness for a product, service or your company via the
media. It is the publicist that carries out publicity, while PR is the strategic management function
that helps an organization
communicate, establish and maintain communication with the public. This can be done internally,
without the use of media.
From a marketing perspective, publicity is one component of promotion which is one component
of marketing. The other elements of the promotional mix are advertising, sales promotion, direct
marketing and personal selling.
Recently in the marketing world, the terms “publicity” and “public relations” are often thought of
and discussed in the same breath. These terms are also often used interchangeably. However,
they shouldn’t be. They are in fact quite different – a difference many people do not fully
understand
Publicity is simply just one arrow in the quiver that is public relations. Publicity is the
effort to garner
media coverage or exposure about a brand, product, event, etc. It’s focus is narrow. Public
relations, on the other hand, is the higher level development of an over-arching strategy for
furthering a marketing or communications goal of an organization. It is often associated
with the term “reputation management.”
It is true that publicity is a tool that PR professionals can use, but it is only a single tool.
If your PR firm is limited to just creating publicity, then you do not truly have a PR
firm.
Other aspects of PR (beyond publicity) might include: community outreach, corporate
social responsibility programming and sponsorships, government relations, grassroots
communications and engagement efforts, “public” presentations and other tools used to
86
position the organization as thought leaders, new media tactics, and many more.
These two industries are very different even though they’re commonly confused as being one and
the same. The following ten properties just scratch the surface of the many differences between
advertising and public relations.
Advertising:
The Company pays for ad space. You know exactly when that ad will air or be published.
Public Relations:
Your job is to get free publicity for the company. From news conferences to press releases,
you’re focused on getting free media exposure for the company and its products/services.
Advertising:
Since you’re paying for the space, you have creative control on what goes into that ad.
Public Relations:
You have no control over how the media presents your information, if they decide to use your
info at all. They’re not obligated to cover your event or publish your press release just because
you sent something to them.
3. Shelf Life
Advertising:
Since you pay for the space, you can run your ads over and over for as long as your
budget allows. An ad generally has a longer shelf life than one press release.
87
Public Relations:
You only submit a press release about a new product once. You only submit a press release
about a news conference once. The PR exposure you receive is only circulated once. An editor
won’t publish your same press release three or four times in their magazine.
4. Wise Consumers
Advertising:
Consumers know when they’re reading an advertisement they’re trying to be sold a product or
service.
“The consumer understands that we have paid to present our selling message to him or her, and
unfortunately, the consumer often views our selling message very guardedly,” Paul Flowers,
president of Dallas-based Flowers & Partners, Inc., said. “After all, they know we are trying to
sell them.”
Public Relations:
When someone reads a third-party article written about your product or views coverage of
your event on TV, they’re seeing something you didn’t pay for with ad dollars and view it
differently than they do paid advertising. “Where we can generate some sort of third-party
‘endorsement’ by independent media sources, we can create great credibility for our clients’
products or services,” Flowers said.
Advertising:
In advertising, you get to exercise your creativity in creating new ad campaigns and materials.
Public Relations:
In public relations, you have to have a nose for news and be able to generate buzz through
that news. You exercise your creativity, to an extent, in the way you search for new news
to release to the media.
Advertisements by banks:
Just like any business, banks should also use an advertising campaign that will reach consumers
and convince them to make financial transactions such as credit loan, business loan, and savings
88
account. However, financial companies should know that the marketing campaign for them is a
little bit different compared to traditional strategies use by most businesses.
These are some of the helpful tips on bank advertising campaign in order to reach people
and turn them into customers:
Before engaging to advertising, a bank should know the current situation of the
market
by reviewing the current market, a financial company can tailor its advertising
campaign that would make this appealing to more people. For example, high optimism
among businesses means that commercials about credit loans would be very effective to
consumers.
This can be done by identifying the target-market. For example, a bank which
focuses on commercial loans should define itself as a brand that caters to
entrepreneurs and business-minded customers.
With the bombardment of commercials, businesses are finding it hard to catch the
attention of the already desensitized consumers. With this consideration, it is important
that banks create an advertising campaign that would emotionally appeal to their
consumers, and ideally, it should be a positive emotion such as happiness, sense of
security, and belongingness.
When creating ads, it is important for banks to define the purpose and goal of the
campaign. By doing this, they can tailor the content of the ad and identify the media which
can be used to reach their target-market.
The message should tell what are the benefits bank consumers can get
The best way to catch the attention of consumers is to use a commercial telling them the
advantages and benefits they can enjoy in a certain product or service. For example, banks
can show their low interest rates and high credit loans in the commercial to get the
attention of people.
89
Image Building
1. Differentiate:
Any financial institution that looks like, acts like, or sounds like other banks and credit unions
can’t complain when they are forced to compete on rates, fees and price. Differentiation is the key
to a strong brand.
2. Personal communications:
You hear financial institutions bragging about how personal they are all the time, wonders how
often they send handwritten thank you cards for loans, mortgages and renewals. How often do
your employees make phone calls to
customers thanking them for their business? Imagine how much love you could buy with a simple
expression of appreciation. How many direct marketing messages do you send that start with
“Dear Valued Customer…?”
3. Mobile solutions:
If your financial institution isn’t offering some form of mobile banking service currently, there
had better be plans underway or you risk falling behind competitively. Demand for services like
remote deposit, SMS, and apps for smart phones and iPads is growing rapidly, and are quickly
becoming common consumer expectations.
90
How can you focus on cultivating profitable relationships if you don’t first understand who
profitable customers are, why they are profitable and how they got that way?
For credit unions, Paul Stull, SVP/Arizona State Credit Union, says that “if you look at your most
unprofitable members, you will find that they have as many or more services per household as
your most profitable
5. E-mail service:
It’s simply stunning how many financial institutions still don’t utilize email marketing tools.
Even today, you still hear bankers say things like, “No, we don’t really collect people’s email
addresses.”
Financial institutions act as if they are immune to the principles of consumer psychology. People
make all decisions (not just purchase decisions) for two reasons: the real reason and the “good
reason”
Globalization
In this age of globalization, the key to survival and success for many financial institutions is to
cultivate strategic partnerships that allow them to be competitive and offer diverse services to
consumers. In examining the barriers to – and impact of – mergers, acquisitions and
diversification in the financial services industry, it’s important to consider the keys to survival in
this industry:
In 2008, there were very high rates of mergers and acquisition (M&A) in the financial services
91
sector.
Diversification Encouraged by Deregulation
Because large, international mergers tend to impact the structure of entire domestic industries,
national governments often devise and implement prevention policies aimed at reducing
domestic competition among firms..
Nearly a decade later, the implementation of the Second Banking Directive in 1993
deregulated the markets. The ability for business entities to use the internet to deliver financial
services to their 92lientele also impacted the product-oriented and geographic diversification
in the financial services arena.
Going Global
Asian markets joined the expansion movement in 1996 when “Big Bang “financial reforms
brought about deregulation in Japan. Relatively far-reaching financial systems in that country
became competitive in a global environment that was enlarging and changing swiftly. By 1999,
nearly all remaining restrictions on foreign exchange transactions between Japan and other
countries were lifted. Following the changes in the Asian financial market, the United States
continued to implement several additional stages of deregulation.
The immediate effects of deregulation were increased competition, market efficiency and
enhanced consumer choice. Deregulation sparked unprecedented changes that transformed
customers from passive consumers to powerful and sophisticated players. Studies suggest that
additional, diverse regulatory efforts further complicated the running and managing of financial
institutions by increasing the layers of bureaucracy and number of regulations.
Simultaneously, the technological revolution of the internet changed the nature, scope and
competitive landscape of the financial services industry. Following deregulation, the new reality
has each financial institution essentially operating in its own market and targeting its audience
with narrower services, catering to the demands of a unique mix of customer segments. This
deregulation forced financial institutions to prioritize their goals by shifting their focus from
rate-setting and transaction-processing to becoming more customer-focused.
92
Challenges and Drawbacks of Financial Partnerships
Since 1998, the financial services industry in wealthy nations and the United States has been
experiencing a rapid geographic expansion; customers previously served by local financial
institutions are now targeted at a global level.
Deregulation has also been the major factor behind this geographic diversification, and
beginning in the early 1980s, a sequence of policy changes implemented a gradual reduction of
intrastate and interstate banking restrictions.
An additional driving force for financial service firms’ geographic diversification has been the
proliferation of corporate combination strategies such as mergers, acquisitions, strategic alliances
and outsourcing. Such consolidation strategies may improve efficiency within the industry,
resulting in M&A’s, voluntary exit, or forced withdrawal of poorly performing firms.
Consolidation strategies further empower firms to capitalize on economies of scale and focus on
lowering their unit production costs. Firms often publicly declare that their mergers are
motivated by a desire for revenue growth, an increase in product bases, and for increased
shareholder value via staff consolidation, overhead reduction and by offering a wider array of
products. However, the main reason and value of such strategy combinations is often related to
internal cost reduction and increased productivity.
Unfavorable facts about the advantages and disadvantages of the major strategies used as a
tool for geographic expansions within the financial services sectors were obscured in 2008
by the very high rates of M&As. 93
Conclusion
The conclusion regarding the impact, advantages and disadvantages of domestic and
international geographic diversification and expansion on the financial service industry is the
fact that with globalization, the survival and success of many financial service firms lies in
understanding and meeting the needs, desires and expectations of their customers.
The most important and continually emerging factor for financial firms to operate successfully in
extended global markets is their ability to efficiently serve discerning, highly sophisticated,
better educated, more powerful consumers addicted to the ease and speed of technology.
Financial firms that do not to realize the significance of being customer-oriented are wasting
their resources and eventually will perish. Businesses that fail to recognize the impact of these
consumer-driven transformations will perish.
Key Words:
Unit I: Marketing, Financial Services, Capital Market, Money Market, Spot Market, OTC, Forex,
Financial Instruments, Factoring, Forfaiting, Debt Instrument, Financial Intermediaries, Hire
Purchase, Bond Market, Derivatives, Marketing Mix , Secondary Market, Digital Banking.
Unit II: Retail banking, Education Loan, Personal Loan, Housing Loan, Barter Card, Retail Traders,
Conveyance, Plastic Money. Price Discounts, Allowances, Unbundled Pricing, Internal Factors,
External Factors, Distribution, loan, MSME, Banking Products.
Unit III: Mutual Funds, Life Insurance, Non Life Insurance, Pension Plans,Pension Fund
Management, Investment, Penetration, Risk, Insurance Industry, Open Ended Funds, Close Ended
Funds, Mobile Investing, Promotion, Physical Evidence, Deferred Plan
Unit IV: Point of Sale , Distribution Channel, Financial Service, Bancassurance, Advertising, Sales
Promotion, Public Relation, Social Media Marketing, Personnel Selling, Social Media Marketing,
94
Digital Economy, Payment Ecosystem.
References
https://ddceutkal.ac.in/syllabus
http://www.himpub.com/documents/Chapter1321.pdf
https://www.jagannathuniversity.org/
www.ddegjust.ac.in
https://nou.edu.ng/sites/
Further Readings
Varshney, P.N., and Mittal D.K., Indian Financial System, Sultan Chand & Sons, New Delhi.
Vinod Kothari, Lease Financing and Hire Purchase (Including Merchant Banking and Mutual Funds),
Wadhwa and Co.(P). Ltd. Nagpur.
Sundharam, K.P.M., and Varshney, P.N., Banking and Financial System, Sultan Chand and Sons,
New Delhi.
Meir, Kohn, Financial Institutions and Markets, Tata McGraw Hill, New Delhi.
James, B. Bexly, Selling Financial Products, Prentice Halls
Keith Pond, Retail Banking, Global Professional Publishing Limited.
Zeithaml,V.A, Bitner M.J., Pandit A. Services Marketing, Mc Graw Hill Education.
95
Progress Check
Multiple Choice Questions (MCQ)
50._____ concepts holds that consumers if left alone will ordinarily not buy enough of the
Organization s products. 10
5
A. Marketing.
B. Product.
C. Selling.
D. Buying.
ANSWER: A
51. _____ involves managing demand, which in turn involves managing customer relationship.
A. Marketing management.
B. Direct marketing.
C. Production management.
D. Advertising.
ANSWER: A
52. At which stage in the International Trade Cycle does a country usually import foreign goods?
A. Introduction stage.
B. Growth stage.
C. Maturity stage.
D. Saturation stage.
ANSWER: B
53. In India, main Products of Retail Banking are ________.
A. Loan products
B. Card Products
C. Deposit Products
D. All of these
ANSWER : D
54. The availability of cash and other cash like marketable instruments that are useful in purchases
and investments are commonly known as _______
A. Liquidity
B. Credit
C. Marketability
55. Banking sector comes under which of the following sectors ________.
A. Marketing sector
B. Service sector
C. Industrial sector 10
6
10
7
56.A set of complex and closely connected instructions, agents, practices, markets transactions,
claims and liabilities relating to financial aspects of an economy is referred as: _____.
A. Financial system
B. Financial market
C. Financial institution
57.________ is a market for financial assets which have a long or indefinite maturity.
A. Financial market
B. Capital market
C. Money market
58. ________was constituted to protect the interests of investors in securities and to promote the
development of and to regulate the securities market through appropriate measures.
A. RBI
B. SEBI
C. BSE
59. The maximum load that a fund can exchange is determined by ________
A. SEBI
B. RBI
C. AMFI
60. NBFC performs great role for finance in _______
A. Wholesale sector
B. Big Scale industries
C. Small scale and Retail sector
61. ______has constantly endeavored to develop the commercial bills market.
A. Commercial bank
B. RBI
C. SBI
62.IDBI is the abbreviation of ……
A) Industrial Development Bank of India
B) Industrial Bank of India
C) Industrial Development Bank
D) Indian Development Bank of India
63.ATM means
A) Any Time Money 10
8
B) Auto Truck of Mahindra
C) Automated Teller Machine
D) None of above
64.Aadhaar is
A) 12 digit number card
B) Identity proof issued by UIDAI
C) Both (a) & (b)
D) None of above
65.Bancassurance means_______
(A) Banks promising to give loans
(B) Bank promising to pay interest
(C) Banks selling insurance products
(D) Assurance to repay loans
A Bankassurance
B.Bancassurance
C.Bankinsurance
D.Bancinsurance
A.branch banking
B. specialized banking
C localized banking
D.None of these
87.--------------- insurance is to help business to servive from the blow of losing the important person
178
A. Unit linked insurance
B. Group insurance
C. Ordinary insurance
D. Key man insurance
88. KYC is ------ 179
A. Know Your Credit
B.Know Your Customer
C. Know Your Cash
D.All
89.The main purpose of having Life insurance is:
A. As an avenue for long-term investment
B. As a medium for getting income tax benefits from savings
C. As a governmental programme for reducing poverty
D. As an avenue for short-term investment
E. None of the above
90.State which of the statements given below is correct
A. People generally feel that life related risks are imminent
B. Religious beliefs interfere with the purchase of life insurance
C. People are always keen to buy insurance
D. Life insurance cannot be denied to anyone at any time
E. Life insurance is to be sold to people who are not in good health
91.Select the expanded form of SA as commonly used in life insurance
A. Sum Assured
B. Surrender of Assurance
C. Supplementary Assurance 11
3
D. Stamp Act
E. Survivor’s Annuity
92.Objective of IRDA includes
A. policy holder protection
B. healthy growth of the insurance market
C. both a and b
D. only a
93.RPG rule 1988 set up an institution for building the confidence of the policy holders in insurance.
A. management
B. ombudsman
C. council
94. Which of the following insurance contract is not based on the principle of indemnity.
A) Fire insurance
B) Marine insurance
C) Life insurance
D)All
95.Which of the following instruments are traded in a capital market?
A) Corporate bonds
B) U.S. Treasury bills
C) Banker’s acceptances
D) Repurchase agreements
96.Which of the following instruments is not traded in a money market?
A) Banker’s acceptances
B) U.S. Treasury Bills
C) Eurodollars
D) Commercial paper
E) None of the above
97. Where does bitcoin comes from?
A) From Mining
B) We have to create one
C) Bitcoin.org
D) NSA
98. POS stands for: 11
4
A. Point of Service
B. Point of Sale
C. Point of Satisfaction
D. None of The Above
99. Which card is known as 'Check Card':
A. Debit Card
B. Credit Card
C. Both of The Above
D. None of The Above
100. Lack of proper management of funding and investment-related risk of the bank leads to…..
A. Liquidity risk
B. reputation risk
C. Strategic risk
D. none of these
11
7
Q 34. What are the advantages and disadvantages of Debit Card?
Q35. Explain how public relations could improve the effectiveness of marketing communications and firms
total marketing mix.
Q36. Describe a set of best practices that can help credit card marketers make their card post preferred card
to use in their customers’ wallets.
Q37. Write notes on
i. Concept of Barter card, marketing Strategy of Barter card.
ii. Difference between Credit Cards Vs Debit cards, marketing Strategy of Credit cards.
Q38. What are pension funds? How they are different from Mutual Funds? Explain the marketing strategies
involved in marketing of Pension Funds In India.
Q39.What is globalization? How it has impacted the financial services? What steps have been taken in India
to make financial services open to global competition? What are its resultant benefits to all stakeholders?
Q40.Write a detailed note on themarketing issues and strategies used by companies in marketing Life
Insurance products in India.
11
8