An Overview of Retail Banking in India with reference to Customer Satisfaction of ICICI Bank at CBD Belapur Branch.

Dissertation Submitted to the Padmashree Dr. D.Y. Patil University in partial fulfillment of the requirements for the award of the Degree of

MASTERS IN BUSINESS ADMINISTRATION

Submitted By: Praveen Pandey (Roll No.0801110)

Research Guide:

Mrs Rupali Patil

Department of Business Management
Padmashree Dr. D.Y. Patil University CBD Belapur, Navi Mumbai

December 2008

An Overview of Retail Banking in India with reference to Customer Satisfaction of ICICI Bank at CBD Belapur Branch.

DECLARATION
I hereby declare that the dissertation An Overview of Retail Banking in India with reference to Customer Satisfaction of ICICI Bank at CBD Belapur Branch. Submitted for the MBA Degree at Padmashree Dr. D.Y. Patil Universitys Department of Business Management is my original work and the dissertation has not formed the basis for the award of any degree, associate ship, fellowship or any other similar titles.

Place: Mumbai Date: (Praveen Pandey) Signature of the Student

Certificate
This is to certify that the dissertation entitled An Overview of Retail Banking in India with reference to Customer Satisfaction of ICICI Bank at CBD Belapur Branch. is the bona fide research work carried out by Mr. Praveen Pandey student of MBA, at Padmashree Dr. D.Y. Patil Universitys Department of Business Management during the year 2007 -2009, in partial fulfillment of the requirements for the award of the Degree of Master in Business Management and that the dissertation has not formed the basis for the award previously of any degree, diploma, associateship, fellowship or any other similar title.

(Mrs.Rupali Patil)

(Dr. R. Gopal, Director, Department of Business Mgt, Padmashree Dr. D.Y. Patil University)

Place: Mumbai Date:

ACKNOWLEDGEMENTS
In the first place, I thank Mrs. Rupali Patil, Lecturer, Department of Business Management, Padmashree Dr. D.Y. Patil University, Navi Mumbai for having given me her valuable guidance for the project. Without her help it would have been impossible for me to complete the project. I would also like to thank the various people from the Banking Industry people who have provided me with a lot of information and in fact even sharing some of the confidential company documents and data many of which I have used in this report and without which this project could not have been completed. I would be failing in my duty if I do not acknowledge with a deep sense of gratitude the sacrifices made by my parents and thus have helped me in completing the project work successfully.

Place: Mumbai Date: Signature of the student.

TABLE OF CONTENTS
Chapter No
A B C 1 2 3 4 Part-I 5 5.1 6 6.1 7 7.1 7.2 7.3 8 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 8.9 8.10

Title
List Of Tables List Of Figures List Of Abbreviations Executive Summary Objective Of The Study Research Methodology Limitations Of The Study An Overview of Retail Banking in India Business & Economic Overview Financial Sector Overview Global Retail Banking Scenario Overall Global Scenario Indian Retail Banking A View Of India's Banking Industry Composition Of The Banking System In India Competition In The Indian Market Retail Banking An Indian Scenario Potential For Retail In India Retail Banking In India More Liberal Economic Policies: Opening The Marketplace Booming Businesses: Services, Agriculture And Manufacturing A Growing Labour Force: English-Speaking With It Savvy The Emerging Middle Class: Managing "New Money" Global Banks In India: Gaining A Foothold Crafting An India-Specific Retail Banking Strategy Reasons For The Change Over From Corporate Banking To Retail Banking Impact Of Retail Banking

Page No
09 10 11 12 14 15 17 18 19 21 23 23 25 26 27 28 29 29 31 32 32 33 33 33 34 34 38

TABLE OF CONTENTS (Cont)

Chapter No
8.11 8.12 8.13 8.14 8.15 8.16 8.17 9 9.1 9.2 9.3 9.4 9.5 9.6 10 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8

Title
Customer Service Retail Boom Strategies For Increasing Retail Banking Business Special Features Of Retail Credit Retail Lending: A Brief Write Up On Some Products Retail Lending: Some Critical Issues Growth Drivers Of Retail Banking The Future Of Retail Banking Technology Branding Products And Services Bank Management And Development Communications And Marketing Market And Customers Issues/Challenges To Retail Banking In India Advantages Disadvantages Opportunities Challenges To Retail Banking In India Emerging Issues In Handling Retail Banking Major Competitors In Navi Mumbai On Basic Parameters Sample Judgments Passed After Consumer Cases Conclusion

Page No
40 42 44 47 48 51 52 57 58 59 59 60 61 62 64 64 65 66 67 68 73 75 77

TABLE OF CONTENTS (Cont)

Chapter No
Part-II 11 11.1 11.2 11.3 11.4 11.5 11.6 12 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 13 13.1 13.2 13.3 13.4 13.5 13.6 13.7 14 14.1 14.2

Title
Customer Satisfaction of ICICI Bank At CBD Belapur Branch ICICI Group Organisation Structure Business Review ICICI Retail Banking Subsidiary Companies Market Price Information Annual Report Of ICICI bank ICICI Bank Products & Services At Glance Loans ICICI Bank Personal Loans Bank@Campus And Its Benefits Deposits Debit Card Investment Services Provided By The Bank SWOT Analysis Of ICICI Bank Study Of Customers Satisfaction OF ICICI Bank, CBD Belapur, Navi Mumbai Customer Satisfaction Importance Of Customer Satisfaction In Organization Customer Satisfaction And Loyalty Data Analysis And Interpretation Findings Suggestions Conclusion Reference Section Annexure Bibliography

Page No
80 81 82 85 85 89 90 93 102 107 108 111 115 117 117 118 123 130 130 132 133 135 151 152 153 154 154 156

A - LIST OF TABLES
Table No
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Title
Major Competitors In Navi Mumbai On Basis Parameters Market Shares In Navi Mumbai In Comparison to the Competitors Board Of Directors Of ICICI Bank Disclosure Of Complaints High & Low Prices Of Shares Of ICICI Bank In BSE And NSE High & Low Price Of Shares Of ICICI Bank In NYSE In 2008 Financial Highlights Of ICICI Bank In 2007- 08 Financial Highlights Of ICICI Bank In 2007- 08 After Appropriation Operating Result Data Of ICICI Bank Key Ratios Of ICICI Bank Credit Ratings Of ICICI Bank Awards & Public Recognition Composition Of Gross Advances (Net Of Write-Offs) Composition Of Gross (Net Of Write-Offs) Outstanding Retail Finance Portfolio Classification Of Gross Assets (Net Of Write-Offs And Interest Suspense) Information About Non-Performing Assets Key Financial Indicators Eligibility Criteria For Personal Loan Documentation For Personal Loan Service Charges And Fees For Personal Loans Service Charges And Fees For Bank@Campus SWOT Analysis Of ICICI Bank Competitive Swot Analysis With HDFC Bank Data Analysis And Interpretation Of Customer Satisfaction Of ICICI Bank At CBD Belapur Branch Navi Mumbai

Page No
73 74 84 87 91 92 93 94 95 96 96 97 98 99 99 100 100-01 109 109 111 114 123 124 135 150

B - LIST OF FIGURES

Fig No.
1 2 3 4 5 6

Title
Major Competitors In Navi Mumbai On Basis Parameters Market Shares In Navi Mumbai In Comparison to the Competitors Subsidiary Companies Of ICICI Bank Market Price Information ICICI Banks Global Network Data Analysis And Interpretation Of Customer Satisfaction Of ICICI Bank At CBD Belapur Branch, Navi Mumbai

Page No
73 74 89 90 101 135 150

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C - LIST OF ABBREVIATION

EU FDI GDP NAFTA SAARC M&A MNC VAT MRP FMCG EPCG DIPP CAGR NRI

European Union Foreign Direct Investment Gross Domestic Product North American Free Trade Agreement South Asian Association for Regional Corporation Mergers and Acquisition Multinational Corporation Value Added Tax Maximum Retail Price Fast Moving Consumer Goods Export Promotion Capital Goods Scheme Department of Industrial Policy and Promotion Compounded Annual Growth Rate Non Resident Indian

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CHAPTER- 1
EXECUTIVE SUMMARY
Wherever we go, whichever seminar we attend, whichever speaker we hear, we are told that Retail is the next big thing. One sector that has been a living proof of this theory is banking. The surge started a few years back and has really taken off in the last three to five years. Thus, it was forced me to have a detail study of the Retail Banking along with its various pin points. Customer satisfaction is a post purchase experience that a customer gets after consumption of products and services and becomes deciding factor for customer to make rational decision of repurchase and to recommend it to others. But in a purely service industry service is provided, consumed and analyzed at the point of consumption of service. This study basically focuses on measurement of customer satisfaction related to Service offered and rendered at ICICI Bank at CBD Belapur Branch in Navi Mumbai. Retail Banking is quite broad in nature - it refers to the dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet. Fixed, current / savings accounts on the liabilities side; and mortgages, loans (e.g., personal, housing, auto, and educational) on the assets side, are the more important of the products offered by banks. Related ancillary services include credit cards, or

12

depository services. Todays retail banking sector is characterized by three basic characteristics: 1. Multiple Products (deposits, credit cards, insurance, investments and securities) 2. Multiple Channels of distribution (call centre, branch, Internet and kiosk) 3. Multiple Customer groups (consumer, small business, and corporate) It happened to me and it could have happened to you. The moment one enters a bank, one looks for some assistance in our transaction. One expects to be served immediately or at the earliest. Quite contrary to this, when one enters any bank, one would try to catch the eye of an employee. Depending on the size of the bank, there will be any number of employees working unmindful of a customer's entry. With the exponential growth of touch points and sophistication, the frontline sales force is assuming the role of a relationship person and is constantly under the microscopic observation of the customer. At a time when channel innovation has become the order of the day to encourage effective banking habits among customers, a vital component of the supply chain, namely, customer interface is totally missing, and this is what inspired me to do my final project on this topic.

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CHAPTER- 2
OBJECTIVE OF THE STUDY
Learning in the classroom is partial unless it is added with practical experience and training. Training is the most important part of learning in any technical and professional education. It is an aim that practical training of small duration obviously had been made valuable and indispensable. Hence the objectives of the project are: PRIMARY OBJECTIVE: 1. To understand the concept of retail banking 2. To understand the reason for the growth of retail banking in India 3. To analyze the challenges & opportunities of retail banking 4. To study the few products being offered in retail banking portfolio 5. To analyzing the key to competitive advantage in retail banking SECONDARY OBJECTIVE: 1. To study the customer satisfaction ratio and views towards The ICICI bank, CBD Belapur branch, Navi Mumbai. 2. To study the customers attitude towards the financial products of the ICICI bank. 3. To study the customers opinion towards the services provided by the ICICI bank. 4. To study the working and functioning of sales dept. of the organization.

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CHAPTER- 3
RESEARCH METHODOLOGY

INTRODUCTION Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how a research is done scientifically. We can say that research methodology has many dimensions and research methods do constitute a part of the research methodology. It helps in the use of statistics, questionnaire and controlled experimentation and in recording evidences, sorting it out and interpreting it. Knowledge of research methodology is helpful in various fields. Research methodology plays key role in project work. It consists of series of actions or steps necessary to effectively carry out research and the desired sequencing of these steps. DATA COLLECTION METHOD Data is collected from both Primary and Secondary data source. The primary sources were mainly the customers and ICICI Bank LTD Customers and data was collected through survey technique. The survey technique was carried out through questionnaires and personal interview. The secondary data sources were the ICICI Bank annual report, Library and Internet.

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PRIMARY DATA SOURCE Primary data is that data which is collected for the 1st time Questionnaire and personnel interview methods were used to collect Primary data. This data was collected by asking questions to Customers of ICICI Bank as well as the competitor Banks, observation method was used through personal interview, questionnaire etc. SECONDARY DATA SOURCE The secondary data on the other hand are those which have already been collected by someone else and which have been already been passed through statistical process. The secondary data is collected from different books, library research, magazines, journals, internet, website of ICICI Bank and etc.

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CHAPTER- 4
LIMITATIONS OF THE STUDY
The overall data collected for the survey was through one branch of the bank at CBD Belapur, Navi Mumbai and the data was collected outside of the branch and its ATM as the branch manager was not able to provide me to conduct the research inside the branch and provide me with official datas, official assistance or any other kind of support due to their banks policy & procedures. Therefore it makes some limitations to collect the data and analyze. Following are the limitations of the study: The overview of retail banking was on secondary data The study of overview of retail banking was limited to a certain area to which it was important for me as the topic was vast and had to complete the project in a very short period This survey is for the customers satisfaction towards the ICICI CBD Belapur branch, who visited the ICICI bank branch or the ATM outside the ICICI bank branch in CBD Belapur at Navi Mumbai is only considered for study, hence the structure, other concepts of the banks are excluded for the detailed study.

The study is on the information collected from bank, during very

short period of the case study work. So only limited data is collected and no detailed study about case is carried out.

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OVERVIEW OF RETAIL BANKING IN INDIA

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Chapter- 5
BUSINESS & ECONOMIC OVERVIEW
The last year has witnessed significant developments in the global economy. Following the deterioration in the US sub-prime housing loan market, the US economy is expected to experience a sharp slowdown in growth. The Federal Reserve has reduced its forecast for US GDP growth in calendar year 2008 from the 1.3%2.0% range to between 0.3% 1.2percent. Growth in the Euro zone remained above expectations at 0.8% in the first quarter of calendar year 2008. However, downside risks to growth remain on account of adverse financial market conditions and increases in energy and food prices. Growth in China moderated slightly during the first quarter of calendar year 2008 to 10.6% as compared to 11.7% during the same period last year. During fiscal 2008, the Indian economy continued on its high growth path, despite some moderation due to difficult conditions in global markets and increasing inflationary pressures and monetary tightening. The Central Statistical Organisation (CSO) put GDP growth at 9.0% during fiscal 2008 following the 9.6% GDP growth in fiscal 2007, reflecting a slight moderation in growth of the economy. Growth in fiscal 2008 was driven mainly by double-digit growth in the services sector and growth in the industrial sector. The Index of Industrial Production (IIP) recorded an annual average growth rate of 8.1% in fiscal 2008, moderating from 11.5% in fiscal 2007.
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This was mainly due to moderation of growth in the manufacturing sector from 12.5% in fiscal 2007 to 8.6% in fiscal 2008. The momentum of growth in the services sector (including construction) continued with 10.7% growth during fiscal 2008 following the 11.2% growth in fiscal 2007. Growth in agriculture and allied activities increased to 4.5% during fiscal 2008 as compared to 3.8% in fiscal 2007. Inflation remained under control for most of fiscal 2008 with the annual average rate of inflation as measured by the Wholesale Price Index easing from 5.3% in fiscal 2007 to 4.4% in fiscal 2008. However, inflationary pressures picked up sharply from March 2008 with the year-on-year rate of inflation increasing from 5.1% for the week ending March 1, 2008 to 8.8% for the week ending May 31, 2008. The sharp increase in inflation was mainly due to the higher prices of primary articles, fuel group items and some manufactured products. The increase in inflation was in line with global price movements. Global oil prices increased sharply during fiscal 2008, increasing inflationary pressures experienced on this account. International crude oil prices increased from US$ 65.87 per barrel at March 30, 2007 to US$ 101.58 per barrel at March 31, 2008 and further increased to US$ 135.90 per barrel at June 13, 2008. In view of rising inflation, Reserve Bank of India (RBI) increased the Cash Reserve Ratio (CRR) from 6.00% to 7.50% during fiscal 2008 and further to 8.25% effective May 2008.

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5.1 FINANCIAL SECTOR OVERVIEW

The financial sector mirrored the developments in the Indian economy. Credit growth during fiscal 2008 moderated, given the tightening of interest rates in the economy. Non-food credit increased by 22.3% in fiscal 2008 compared to 28.0% in fiscal 2007. Based on data published by RBI, at February 15, 2008, industry accounted for 39.6% of non-food gross bank credit, retail credit for 24.5%, agriculture and allied activities for 11.7%, trade for 5.8%, real estate for 2.6% and other sectors for the balance 15.8%. The credit-deposit ratio remained within the range of 69.0%-74.0% during fiscal 2008 and was about 73.0% in March 2008. The incremental credit-deposit ratio was about 71.9% for fiscal 2008 compared to about 86.0% for fiscal 2007. Deposits of the banking system grew by Rs. 6,029.54 billion, or 22.9%, in fiscal 2008 compared to 24.2% in fiscal 2007. In response to the increase in the cash reserve ratio and the liquidity conditions, banks have increased their lending rates. The average yield on 10-year Government securities increased relatively moderately from 7.8% in fiscal 2007 to 7.9% in fiscal 2008, given the continued demand for government securities on account of the mandated holding requirement for banks and other financial intermediaries. First year retail premium underwritten in the life insurance sector recorded a growth of 30.7% (on weighted received premium basis) to reach Rs. 526.59 billion in fiscal 2008 with the private sectors retail market share (on
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weighted received premium basis) increasing from 35.5% in fiscal 2007 to 50.5% in fiscal 2008. The non-life insurance industry was de-tariffed with effect from January 1, 2007, whereby insurance premiums were freed from price controls, resulting in a reduction in premium rates and a negative impact on industry growth. Gross premium in the non-life insurance sector (excluding specialised insurance institutions) grew by 12.6% to Rs. 281.31 billion in fiscal 2008 as compared to 22.4% growth in fiscal 2007 with the private sectors market share increasing from 34.9% in fiscal 2007 to 39.9% in fiscal 2008. Total assets under management (on average assets basis) of mutual funds grew by 50.0% from Rs. 3,590.97 billion in March 2007 to Rs. 5,385.08 billion in March 2008. Equity markets remained stable and buoyant during the first half of fiscal 2008, followed by a period of significant decline in the BSE Sensex on account of developments in global financial markets. The Sensex continues to remain volatile, due to global concerns as well as inflationary pressures and other downside risks to growth. The Indian financial sector has remained resilient to the adverse developments in global markets. Given the long-term growth prospects of the Indian economy, the growth outlook of the financial sector in India continues to be robust.

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Chapter- 6
GLOBAL RETAIL BANKING SENARIO
September 2008 is likely to be remembered as the month that saw the collapse of the financial world, as we knew it. Icons of Wall Street went belly-up, lost their identity by converting themselves into commercial banks, sliced themselves up into pieces or were forced by regulators to merge with other banks. A large number of marquee names are now owned by governments. Wall Street will never look the same again. Amongst all this global turmoil, there is a positive outlook for India. As we analysed the audited results (2007-08) of banks in India for the Best Banks Survey, we could not but compare the strength of the Indian banking system to the over-leveraged banks in the US and Europe. In the previous years assessment (Business Today, February 24, 2008) we had decided to add more weight to the strength parameters vis-a-vis the growth and size parameters. Time has proven us right.

6.1 OVERALL GLOBAL SCENARIO

It is useful to note some telling facts about the status of the Indian banking industry juxtaposed with other countries, recognizing the differences between the developed and the emerging economies.

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First, the structure of the industry: In the worlds top 1000 banks, there are many more large and medium-sized domestic banks from the developed countries than from the emerging economies. Illustratively, according to The Banker 2004, out of the top 1000 banks globally, over 200 are located in USA, just above 100 in Japan, over 80 in Germany, over 40 in Spain and around 40 in the UK. Even China has as many as 16 banks within the top 1000, out of which, as many as 14 are in the top 500. Second, the share of bank assets in the aggregate financial sector assets: In most emerging markets, banking sector assets comprise well over 80 per cent of total financial sector assets, whereas these figures are much lower in the developed economies. Furthermore, deposits as a share of total bank liabilities have declined since 1990 in many developed countries, while in developing countries public deposits continue to be dominant in banks. In India, the share of banking assets in total financial sector assets is around 75 per cent, as of end-March 2004. Third, internationalization of banking operations : The foreign controlled banking assets, as a proportion of total domestic banking assets, increased significantly in several European countries (Austria, Ireland, Spain, Germany and Nordic countries), but increases have been fairly small in some others (UK and Switzerland). Amongst the emerging economies, while there was marked increase of foreign-controlled ownership in several Latin American economies, the increase has, at best, been modest in the Asian economies.

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Chapter- 7
INDIAN BANKING INDUSTRY
The annual growth in bank credit to the commercial sector is at 25.4% as on March 31, 2007 and was lower than 27.2% against previous year. Till 2010, retail banking is expected to grow at a CAGR of 28% to touch a figure of INR9, 700 billion. This requires expansion and diversification of retail product portfolio, better penetration and faster service mechanism. During 2006-07, gross credit extended by Indian commercial banks grew by 34.83% to touch INR19, 495 billion The annual growth in bank credit to the commercial sector is at 25.4% as on March 31, 2007 and was lower than 27.2% against previous year Retail credit constitutes about 25% of the total credit and has grown by 28.0% to INR4, 218.3 billion Till 2010, retail banking is expected to grow at a CAGR of 28% to touch a figure of INR9, 700 billion The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as priority sectors. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the
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nationalization of 6 more commercial banks in 1980. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold. After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save on manpower costs and provide better services.

7.1 A VIEW OF INDIA'S BANKING INDUSTRY

India's banking industry is one of the major beneficiaries of the country's ascendant economic power. Improving consumer purchasing power, coupled with more liberal attitudes toward personal debt, is fuelling India's explosive banking segment. Global banks should be encouraged further by the relatively under penetrated status of the country's various retail lending segments. The retail market for mortgages, credit cards, automobile loans and other consumer loans is expected to jump from its 1999 total of US$9.7 billion to US$36.7 billion in 2004. Even with this strong performance, significant opportunities for continued retail lending growth remain as retail lending figures lag India's regional peers.

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7.2 COMPOSITION OF THE BANKING SYSTEM IN INDIA

At present the number of Nationalised banks is 20. Several Foreign banks were allowed to operate as per the guidelines of RBI. At present the banking system can be classified in following categories: PUBLIC SECTOR BANKS

Reserve Bank of India State Bank of India and its 7 associate Banks Nationalised Banks (20 in number) Regional Rural Banks sponsored by Public sector Banks

PRIVATE SECTOR BANKS

Old Generation Private Banks New Generation Private Banks Foreign Banks in India Scheduled Co-operative Banks Non Scheduled Banks

CO-OPERATIVE SECTOR BANKS

State Co-operative Banks Central Co-operative Banks Primary agriculture Credit Societies Land Development Banks Urban Co-operative Banks State Land Development Banks
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DEVELOPMENT BANKS

Industrial Finance Corporation of India (IFCI) Industrial Development bank of India (IDBI) Industrial Credit & Investment corporation of India (ICICI) Industrial Investment Bank of India (IIBI) Small Industries Development Bank of India (SIDBI) National Bank for Agriculture & Rural Development (NABARD) Export-Import Bank of India

7.3 COMPETITION IN THE INDIAN MARKET

The fact that the statistics reveal a huge potential also brings with it a threat that is true for any sector of a country that is opening up. Just how competitive are our banks? Is the threat of getting drubbed by foreign competition real? To analyze this, one needs to get into the shoes of the foreign banks. In other words, how do they see us? Are we good takeover targets? Going by international standards, a large portion of the Indian population is simply not bankable taking profitability into consideration. On the other hand, the financial services market is highly over-leveraged in India. Competition is fierce, particularly from local private banks such as HDFC and ICICI, in the business of home, car and consumer loans. There, precisely lie the pitfalls of such explosive growth. All banks are targeting the fluffiest segment i.e. the upwardly mobile urban salaried class. Although the players are spreading their operations into segments like self-employed and the semi-urban rich, it is an open secret that the big city Indian yuppies form the most profitable segment.
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Chapter- 8
RETAIL BANKING AN INDIAN SCENARIO
8.1 POTENTIAL FOR RETAIL IN INDIA
The Indian players are bullish on the Retail business and this is not totally unfounded. There are two main reasons behind this. Firstly, it is now undeniable that the face of the Indian consumer is changing. This is reflected in a change in the urban household income pattern. The direct fallout of such a change will be the consumption patterns and hence the banking habits of Indians, which will now be skewed towards Retail products. At the same time, India compares pretty poorly with the other economies of the world that are now becoming comparable in terms of spending patterns with the opening up of our economy. For instance, while the total outstanding Retail loans in Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The comparison with the West is even more staggering. Another comparison that is natural when comparing Retail sectors is the use of credit cards. 'Booming Indian Retail Banking Sector, the market research report provides extensive research and rational analysis on the Indian banking industry. This report has been made to help clients in analyzing the opportunities, challenges and drivers critical to the growth of the retail banking industry in India.

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The forecast given in this report is not based on a complex economic model, but is intended as a rough guide to the direction in which the market is likely to move. The future projection undertaken in this report is done on the basis of the current market scenario, past trends, and rules and regulations laid by Reserve Bank of India (RBI). KEY FINDINGS OF THE REPORT In terms of ownership, debit cards are more in number than credit cards but in terms of transactions, use of credit cards is more prevalent than debit cards The ATM outlets in India increased at a rate of 28.09% from March 2006 to March 2007 Outstanding Education loan segment is expected to grow at 36.41% till March 2009 from March 2007 onwards to cross Rs. 27000 Crore Mark Two-wheeler finance industry is projected to forge ahead at a CAGR of 14.21% till 2009-10 from 2005-06 Indian Mutual Fund industry witnessed a growth of 49.88% from May 2006 to May 2007, and a higher 215.61% growth was recorded in closed ended schemes Increasing number of millionaires in India is increasing the scope of Wealth Management Services Bankable households in India are estimated to move up at a CAGR of 28.10% during 2007-2011

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8.2 RETAIL BANKING IN INDIA

India is poised to become the world's fourth largest economy in the span of two decades. Economic prosperity is providing many in this populous nation with real purchasing power; it simply is an opportunity that cannot be overlooked by global banks. Despite its appeal, India remains a developing economy. Thus, global banks seeking a presence or expansion in India must craft a business strategy that considers the country's attendant challenges: long-established competitors; rudimentary infrastructure; dynamic political environment; restrictive regulations; and developing country operational risks. These challenges should be weighed against the potential gains from entering the marketplace, as well as the likely cost of doing nothing. However, recognizing the growth opportunities is only the beginning. Global banks targeting India as a source of new growth will have to do much more than just "show up" - success will lie in the details of execution. During the last decade, India has emerged as one of the biggest and fastest growing economies in the world. The strengthening economy in India has been fuelled by the convergence of several key influences: liberalization policies of the government, growth of key economic sectors, development of an English-speaking, well-educated work force and the emergence of a middle class population.

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8.3 MORE LIBERAL ECONOMIC POLICIES: OPENING THE MARKETPLACE

India's debt crisis in the early 1990s forced the government to radically reform its economic policies. The resulting liberalization program opened the market for foreign investment, fostered domestic competition and spawned an era of privatization. In the 10 years after 1992, India's economy grew at an average rate of 6.8 percent. During April to June 2004, the economy continued to show its strength and grew by 7.4 percent.

8.4 BOOMING BUSINESSES: SERVICES, AGRICULTURE AND MANUFACTURING

Domestic industries have prospered from the development of India's capital markets and the increased foreign trade and investment across sectors. The rapidly expanding services sector (including telecommunications and information technology), has benefited from government spending and explosive demand for IT and IT-enabled services (ITES), such as call centers and back-office administration. Agriculture and core industries (such as steel, cement and automobiles) are expected to remain strong over time because of affordable consumer credit and the robust economy.

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8.5 A GROWING LABOUR FORCE: ENGLISH-SPEAKING WITH IT SAVVY

Global investors are attracted to India because of the growing number of well-educated, English-speaking workers who are comfortable working in information technology. India's IT work force will be augmented by a booming population of engineering students. The number of engineering students admitted at the university level rose in 2004 to 341,649 from 310,590 in 2003. Furthermore, India's labour pool also serves as an expanding customer base for retail bank products and services.

8.6 THE EMERGING MIDDLE CLASS: MANAGING "NEW MONEY"

The development of India's economy is boosting overall consumer purchasing power. The percentage of middle to high income Indian households is expected to continue rising. The younger, more educated population not only wields increasing purchasing power, but it is more comfortable than previous generations with acquiring personal debt.

8.7 GLOBAL BANKS IN INDIA: GAINING A FOOTHOLD

The competitive environment in India presents both challenges and opportunities to global banks seeking market entry. Entrenched domestic competitors and restrictive equity ownership ceilings imposed by the government create obstacles for banks establishing a foothold in India.
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Primary challenges include tough competition and government ceilings on foreign equity ownership. Opportunities exist because global banks often have technological advantages, well-honed, efficient processes and appealing products and services.

8.8 CRAFTING AN INDIA-SPECIFIC RETAIL BANKING STRATEGY

As global banks have experienced in the past, successfully competing in India requires substantially more consideration than merely choosing the right market to target. It warrants a well-crafted strategy that addresses the numerous risks and challenges specific to India's developing economy. The confluence of rapid economic development, elevated consumer purchasing power levels and an underserved retail banking population position India as a potential growth region for the 21st Century. However, India's banking history has also seen global banks failing to establish a profitable operation in the country. Success will truly lie in the details of execution.

8.9 REASONS FOR THE CHANGE OVER FROM CORPORATE BANKING TO RETAIL BANKING

The financial sector reforms undertaken by the Government since the year 1991 have accelerated the process of disintermediation which has encouraged blue chip corporate to access cheaper funds to meet their working capital requirements directly from investors in India and abroad through capital market instruments and external Commercial
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Borrowings route thus by-passing Banks in the process. The deregulation of markets and interest rates has lead to cut throat competition among Banks for corporate loans making them to lend even at PLR or sub PLR and offer other valued services at comparatively cheaper rates to big and high value Corporates. In the process, most of the banks have experienced substantial reduction in interest spreads and drain on their profitability. The introduction of stringent Asset Classification, Income Recognition and provisioning norms has resulted in growing menace of NPAs in corporate loans which has affected the asset quality, profitability and capital adequacy of banks adversely. The risks involved in corporate loans are very high as Corporates have to keep all their eggs in one basket. The risks involved in retail Banking advances are comparatively less and well diversified as loan amounts are relatively small ranging from Rs. 5000 to Rs. 100 lacs and repayable normally in short period of 3-5 years except housing loans (where repayment period is long up to 15 years in some cases) and from fixed source of income like salaries.

Whereas corporate loans give average return of just 0.5 to 1.5 percent only, the retail advances offer attractive interest spread of 3to 4 percent, because retail borrowers are less interest rate sensitive than the Corporates. Another reason for large interest spreads on retail advances is that the retail customers are too fragmented to bargain effectively.
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 While corporate loans are subject to ups and downs in trade frequently, retail loans are comparatively independent of recession and continue to deliver even during the sluggish phase of economy. Retail Banking gives a lot of stability and public image to banks as compared to corporate banking. The housing loans, which form the major chunk of retail lending and where NPAs are the least, carry risk weight of just 50% for capital adequacy purposes. This is likely to come down further as new Basel Capital Accord or (Basel II) norms are put in place from the year 2006. This offers added incentive to banks for lending to this retail segment as against corporate lending where capital consumption is higher.

The greater amount of consumerism in the country with upswing in income levels of burgeoning middle class, which has propensity to consume to raise their standard of living, is enlarging the retail markets. This market is growing 2 50 percent per year and boosting the demand for credit from households. The potential is huge as present penetration level is just over 2 percent in the country. Given the easy liquidity scenario in the country the growth rate in this sector is likely to go up manifold in the years come. This offers great potential for banks to enlarge their loan books.

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 The Indian mindset is also changing and consumers prefer to improve their quality of life even if it means borrowing for facilities like housing, consumer goods vehicles and vacationing etc. Borrowing and lending is no longer considered a taboo. The peer pressure and demonstration effect is further pushing up demand for housing loans, consumer products and automobiles. The profiles of customers are fast changing from conservative dodos to fashionable peacocks. All these developments give big push to Retail Banking activities.

Retail Banking clients are generally loyal and tend not to change from one Bank to another very often.

Large numbers of Retail clients facilitate marketing, mass selling and ability to categorize/select clients using scoring system and data mining. Banks can cut costs and achieve economies of scale and improve their bottom-line by robust growth in retail business volume.

Through product innovations and competitive pricing strategies Banks can foster business relationship with customers to retain the existing clients and attract new ones.

Innovative products like asset securitization can open new vistas in sustaining optimal capital adequacy and asset liability management for banks.

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 Retail Banking offers opportunities to banks to cross sell other retail products like credit card, insurance, mutual fund products and demat facilities etc. to depositors and investors.

8.10 IMPACT OF RETAIL BANKING:

The major impact of retail Banking is that, the customers have become the Emperors the fulcrum of all Banking activities, both on the asset side and the liabilities front. The hitherto sellers market has transformed into buyers market the customers have multiple of choices before them now for cherry picking products and services, which suit their lifestyles and tastes and financial requirements as well. Banks now go to their customers more often than the customers go to their banks. The Non-Banking finance companies which have hitherto been thriving on retail business due to high risk and high returns thereon have been dislodged from their profit munching citadel

Retail Banking is transforming banks into one stop financial super markets.

The share of retail loans is fast increasing in the loan books of banks.

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 Banks can foster lasting business relationship with customers and retain the existing customers and attract new ones. There is a rise in their service as well.

Banks can cut costs and achieve economies of scale and improve their revenues and profits by robust growth in retail business. Reduction in costs offers a win win situation both for banks and the customers.

It has affected the interface of banking system through different delivery mechanism

It is not that banks are sharing the same pie of retail business, the pie itself is growing exponentially. Retail Banking has fuelled a considerable quantum of purchasing power through a slew of retail products.

Banks can diversify risks in their credit portfolio and contain the menace of NPAs. Retail banking allows bank to cross sell other products and services as it is far easier to sell other products to the same customer rather than search for absolutely new ones. Cross selling is one of the best avenues for relationship.

Banking and retention of customers. Banks can thus increase their business volume and improve their bottom-line substantially.
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 Re-engineering of business with sophisticated technology based products will lead to business creation, reduction in transaction costs and enhancement in efficiency of operations.

8.11 CUSTOMER SERVICE

Customer Service is the service provided in support of a companys core products. Customer Service most often includes answering questions, taking orders, dealing with billing issues, handling complaints, and perhaps scheduling maintenance or repairs. Customer Service can occur on site, or it can occur over the phone or via the internet. Many companies operate customer service call centres, often staffed around the clock. Typically there is no charge for customer service. Quality customer service is essential to building customer relationships. It should not, however, be confused with the services provided for sale by a company. Services tend to be more intangible than manufactured products. There are generally two types of customer expectations. The highest can be termed as desired service: the level of service the customer hopes to receive. The threshold level of acceptable service which the customers will accept is adequate service. Yet there is hard evidence that consumers perceive lower quality of service overall and are less satisfied. POSSIBLE REASONS MIGHT BE Increasing use by companies of self-service and technology-based service is perceived as less service because no human interaction or human personalization is provided.
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 Technology-based services (Automated Voice Systems, Internet-Based Services, and Technology Kiosks) are hard to implement, and there are many failures and poorly designed systems in place. Customer expectations are higher because of the excellent service they receive from some companies. Thus they expect the same from all and are frequently disappointed.

Organizations have cut costs to the extent that they are too lean and are too understaffed to provide quality service.

The intensely competitive job market results in less skilled people working in frontline service jobs; talented workers soon get promoted or leave for better opportunities.

Many companies give lip service to customer focus and service quality; but they fail to provide the training, compensation, and support needed to actually deliver quality service.

Delivering consistent, high-quality service is not easy, yet many companies promise it. The gaps model positions the key concepts, strategies, and decisions in services marketing in a manner that begins with the customer and builds the organizations tasks around what is needed to close the gap between customer expectations and perceptions.
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The following four provider gaps, shown below are the underlying causes behind the customer gap: Gap 1: Not knowing what customers expect. Gap 2: Not selecting the right service designs and standards. Gap 3: Not delivering to service standards. Gap 4: Not matching performance to promises.

8.12 RETAIL BOOM

1. HIGH-TECH BANKING ATMs - With growing technological innovations, banks have significantly expanded their ATM network over the past three years. According to the RBI data as of end-June 2008, the number of ATMs in the country had climbed to 36,314 compared to 27,088 and 20,267 as at end-March 2007 and 2006, respectively. 2. LOAN DISBURSEMENT Technology has facilitated the growth in retail loan disbursements, making the whole process simpler and faster. The sector has delivered a growth of around 30 per cent per year over the past 4-5 years. As per the RBI data, although the retail portfolio of banks saw a slowdown to 29.9 per cent during 2006-07 from 40.9 per cent in 2005-06, the growth was faster than the overall credit portfolio of the banking sector (28.5 per cent).

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3. PLASTIC MONEY Credit cards have also played an important role in promoting retail banking. The use of credit cards has been growing significantly over the last few years. The number of credit cards outstanding at the endJune 2008 stood at 27.02 million as against 24.39 million in June 2007, with usage increasing by 10.73 per cent during this period. 4. CORE BANKING SOLUTIONS (CBS) The concept of CBS, which allows a customer to fulfil a wide range of banking operation online, has come alive during the past four years. The number of bank branches providing CBS rose rapidly to 44 per cent at end- March 2007 from 28.9 per cent at end March 2006. Electronic fund transfer facilities and mobile banking are expected to provide a further fillip to the retail banking in the coming years. 5. FUTURE OUTLOOK Indian retail banking, according to a report, is likely to grow at a CAGR of 28 per cent till 2010 to INR 97,00 billion. So, although the revolution in retail banking has changed the face of the Indian banking industry as a whole, it has still miles to go.

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8.13 STRATEGIES FOR INCREASING RETAIL BANKING BUSINESS

CONSTANT PRODUCT INNOVATION TO MATCH THE REQUIREMENTS OF THE CUSTOMER SEGMENTS The customer database available with the banks is the best source of their demographic and financial information and can be used by the banks for targeting certain customer segments for new or modified product. The banks should come out with new products in the area of securities, mutual funds and insurance. QUALITY SERVICE AND QUICKNESS IN DELIVERY As most of the banks are offering retail products of similar nature, the customers can easily switchover to the one, which offers better service at comparatively lower costs. The quality of service that banks offer and the experience that clients have, matter the most. Hence, to retain the customers, banks have to come out with competitive products satisfying the desires of the customers at the click of a button. INTRODUCTION OF NEW DELIVERY CHANNELS Retail customers like to interface with their bank through multiple channels. Therefore, banks should try to give high quality service across all service channels like branches, Internet, ATMs, etc.

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TAPPING OF UNEXPLOITED POTENTIAL AND INCREASING THE VOLUME OF BUSINESS This will compensate for the thin margins. The Indian retail banking market still remains largely untapped giving a scope for growth to the banks and financial institutions. With changing psyche of Indian consumers, who are now comfortable with the idea of availing loans for their personal needs, banks have tremendous potential lying in this segment. Marketing departments of the banks be geared up and special training be imparted to them so that banks are successful in grabbing more and more of retail business in the market. INFRASTRUCTURE OUTSOURCING This will help in lowering the cost of service channels combined with quality and quickness. DETAIL MARKET RESEARCH Banks may go for detail market research, which will help them in knowing what their competitors are offering to their clients. This will enable them to have an edge over their competitors and increase their share in retail banking pie by offering better products and services. CROSS-SELLING OF PRODUCTS PSBs have an added advantage of having a wide network of branches, which gives them an opportunity to sell third-party products through these branches.

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BUSINESS PROCESS OUTSOURCING Outsourcing of requirements would not only save cost and time but would help the banks in concentrating on the core business area. Banks can devote more time for marketing, customer service and brand building. For example, Management of ATMs can be outsourced. TIE-UP ARRANGEMENTS PSBs with regional concentration can reap the benefit of reaching customers across the country by entering into strategic alliance with other such banks with intensive presence in other regions. In the present regime of falling interest and stiff competition, banks are aware that it is finally the retail banking which will enable them to hold the head above water. Hence, banks should make all out efforts to boost the retail banking by recognizing the needs of the customers. It is essential that banks would be imaginative in predicting the customers' expectations in the ever-changing tastes and environments. It is the innovative and competitive products coupled with high quality care for clients will only hold the key to success in this area. In short, bankers have to run very fast even to stay where they are now. It is the survival of the fastest now and not only survival of the fittest.

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8.14 SPECIAL FEATURES OF RETAIL CREDIT

One of the prominent features of Retail Banking products is that it is a volume driven business. Further, Retail Credit ensures that the business is widely dispersed among a large customer base unlike in the case of corporate lending, where the risk may be concentrated on a selected few plans. Ability of a bank to administer a large portfolio of retail credit products depends upon such factors: STRONG CREDIT ASSESSMENT CAPABILITY Because of large volume good infrastructure is required. If the credit assessment itself is qualitative, than the need for follow up in the future reduces considerably. SOUND DOCUMENTATION A latest system for credit documentation is necessary pre-requisite for healthy growth of credit portfolio, as in the case of credit assessment, this will also minimize the need to follow up at future point of time. STRONG POSSESSING CAPABILITY Since large volumes of transactions are involved, today transactions, maintenance of backups is required REGULAR CONSTANT FOLLOW- UP Ideally, follow up for loan repayments should be an ongoing process. It should start from customer enquiry and last till the loan is repaid fully.
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SKILLED HUMAN RESOURCE This is one of the most important pre-requisite for the efficient management of large and diverse retail credit portfolio. and complex retail credit portfolio. TECHNOLOGICAL SUPPORT This is yet another vital requirement. Retail credit is highly technological intensive in nature, because of large volumes of business, the need to provide instantaneous service to the customer large, faster processing, maintaining database, etc. Only highly skilled and experienced man power can withstand the river of administrating a diverse

8.15 RETAIL LENDING: A BRIEF WRITE UP ON SOME PRODUCTS

(Since the bankers focus more on this products a detail write up on these products has been provided.) HOUSING LOANS: A host of factors, such as, number of dual income families, high salaried employees with high purchasing and borrowing powers, phenomenal growth of the information technology sector, attractive tax sops etc., have contributed to the buoyancy in the housing sector. Investing in a house has always been on top of the agenda for most Indian families. Thus, the banks are going in for housing finance with more vigor. Since these loans are very secure, with low incidence of default, demand for housing loans has been
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growing by leaps and bounds, and they form a growing avenue for deployment of funds by banks. The housing finance market has a penetration of just 1.2 percent of the GDP, much below the levels in emerging markets such as, Thailand (seven percent) and Malaysia (22 percent). According to Industry estimates, the housing finance market in India is witnessing an annual growth between 30 to 35 percent. The RBI has reduced the risk weight age on bank's loans against residential housing properties to 50 percent from 100 percent which will effectively double the credit disbursements capacity of banks. The housing finance players are dropping interest rates/fees and undercutting each other, due to the reason that they find ways to deploy the low cost funds mobilized, in their pursuit of aggressive growth. CONSUMER LOANS: India is the second largest consumer market in the world and consumers in this country are dreaming of buying opportunities. The aspirations of these consumers can be fulfilled only when the consumer lending gathers momentum and grows at a much faster pace, which can be made possible by the lending institutions at an affordable rate. With significant spurt in income levels (especially in middle-income segment) and consumerism, consumer loans, also called personal loans, are now-a-days very popular in India. People find personal loans are easy to arrange and made at fixed interest rate and on the basis of fixed monthly repayment program. Interest rate is on from the time the loan is availed. The amount of interest due is

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added to the amount borrowed and the total sum is repaid by equal monthly instalments over the repayment period and the same is commonly known as EMI. BANC ASSURANCE: The last vehicle for this transformation of the financial sector is the universalization of banking, which is increasingly blurring the boundary between bank and non-bank financial services. This trend is already well developed in certain European countries - as exemplified by the widespread distribution of insurance products through bank branches, a phenomenon known as banc assurance - and presages the formation of conglomerates that provide all types of financial services. Banc assurance - a term coined by combining the two words bank and insurance (in French) - connotes distribution of insurance products through banking channels. Banc assurance encompasses terms such as `Allfinanz' (in German), `Integrated Financial Services' and `Assurebanking'. This concept gained currency in the growing global insurance industry and its search for new channels of distribution. Banks, with their geographical spread and penetration in terms of customer reach of all segments, have emerged as viable sources for the distribution of insurance products. Three important issues that are critical to making banc assurance a success are: business model suitability, functional compatibility and attitudinal flexibility. These are briefly addressed in this book to give a perspective on the complexity of the concept of banc assurance.

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8.16 RETAIL LENDING: SOME CRITICAL ISSUES

Banks are facing fierce competition not only amongst themselves but also from aggressive NBFC's. As a result, interest rates on retail lending too have come down. More importantly, in their eagerness to book more business, credit quality is often overlooked, and there is a risk that many of these loans will end up as NPAs. For example, the Credit Card marketed through direct selling agents aggressively thrusting cards to all and sundry, is also likely to have serious repercussions and impact on NPA of banks. Banks are charging at the hectic range of 30 percent to 36 percent plus levies like service charges, which make the effective charge at more than 36 percent, as against the average cost of 20 percent or so, by quoting those high credit losses in the credit card segment. The number of debit cards issued in India has increased from four lakh in April 2000 to 160 lakh in December 2001. Debit cards are catching up fast and may overtake credit cards as a payment system in India very soon.

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8.17 GROWTH DRIVERS OF RETAIL BANKING

The growth drivers of retail lending are analyzed as under: MACRO-ECONOMIC FACTORS Shift in the pattern of GDP from hitherto agriculture and manufacturing sectors to services sector with increase per capita income especially that of the younger generation. [India's industrial sector accounted for about 21.8% of GDP, where as the services sector accounted for around 56.1 of GDP in 2002-03 as per revised estimates released by Central. Statistical Organization]. The lower uptake in the non-retail sector has compelled bans to shift their focus on retail assets - specially housing finance- for deployment of funds for a longer period, which is considered as the safest within the retail portfolio. Housing loans and other retail loans are comparatively high yielding in terms of interest spread and safer, as risk is diversified among a large number of individuals across the geographic dimensions. The sector enjoys a privilege of lowest NPAs amongst all categories of banks and Inflation continued to be under control. Comparatively stable real estate prices during last 4/5 years have laid to spurt in demand for housing loans.
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DEMOGRAPHIC / BEHAVIORAL FACTORS Growing concept of nuclear families than the joint families necessitating need for housing units as well as other items of consumer durables. Increased number of dual income families resulting in higher income and savings.

Increased demand for dwelling units due to gradual shift of population from rural/semi-urban centre to urban/metro centre for employment.

Shift in the attitude of the Indian household from "save and buy' theory to a `buy and repay' principle and increased middleincome segment and their income levels.

Emergence of new sectors such as Information Technology, media, etc. In the economy that resulted in higher income opportunities and major impact on change in urban consumption pattern.

Awareness

and

sophistication

in

urban

and

semi-urban

households for urban convenience. Social security and status have also contributed to higher demand for housing units, cars, etc.
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FAVORABLE ROLE OF RBI Inclusion of housing loans within the priority sector. Direct finance up to Rs.10 -lakhs in case of rural and semi-urban areas now form part of the priority sector advances. This promoted banks to go for housing loans in a big way as it helped them to attain their targets of priority sector lending. Reduction in risk weight age bank's extending loans for acquisition of residential house properties to 50 per cent from 100 per cent. Reduction in Capital Adequacy Ratio requirement has effectively doubled the credit disbursement capacity of banks.

Banks have elongated repayment periods of retail loans years to 50/20 years besides quoting fixed/ variable rate of interests based on their asset liability management structure and study of behavioral pattern of demand and time deposits.

Deregulation of interest rate with option to quote fixed/ variable interest rate.

Continuous reduction in bank rate, which resulted in reduction in lending rates as well.

South ward movement in CRR and SLR ratios increasing lending capacity of banks.
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CATALYST-ROLE OF GOVERNMENT Tax exemptions for payment of interest on capital borrowed for purchase/ construction of house property and principle repayment. This made housing finance affordable and within the reach of common man. [It is important to note that the housing sector has been recipient of a large number of fiscal incentives in the last 6th budgets]. These exemptions also changed the profile of the retail segment from hitherto cash transactions to book transactions.

The Government could not ignore the importance of housing sector in overall development of the economy due to the following factors like Housing construction activities can generate opportunities for employment. In the present context of jobless GDP growth, this issue assumes important as the housing construction provides massive job opportunities for both unskilled and skilled man power.

Mass construction of houses will result in the benefits of the nation by the way of healthy standard of leaving, motivation to save more and thereby providing sustainable economic recovery. This would also lead to growth in related industries as well.

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INITIATIVES ON THE PART OF BANKS The growth in retail banking has been facilitated by growth in banking technology and automation of banking processes to enable extension of reach and rationalization of costs. ATMs have emerged as an alternative banking channels which facilitate low-cost transactions vis--vis traditional branches / method of lending. The interest rates on retail loans have declined from a high of 1618%in 1995-96 to presently in the band of 7.5-9%. Ample liquidity in the banking system and falling global interest rates have also compelled the domestic banks to reduce interest rates of retail lending.

Banks could afford to quote lower rate of interest, even below PLR as low cost [saving bank] and no cost [current account] deposits contribute more than 1/3rd of their funds [deposits].The declining cost of incremental deposits has enabled the Banks to reduce their interest rates on housing loans as well as other retail segments loans.

Easy and affordable access to retails loans through a wide range of options / flexibility. Banks even finance cost of registration, stamp duty, society charges and other associated expenditures such as furniture and fixtures in case of housing loans and cost of registration and insurance, etc. in case of auto loans.
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Chapter- 9
THE FUTURE OF RETAIL BANKING

Retail banking has significant past and glorious future over the years. Retail banking has proved as an effective tool not only to improve the bottom lines of the banks concerned but also to significantly contribute to the development of the individual consumers availing the services or products in particular and to the overall development of the society in general with the needs of the consumers ever multiplying. There is definitely a vast scope for the furtherance of the Retail Banking business. On the whole, looking ahead, the prospects of retail banking are brighter than ever and the bankers have to give continued thrust to this area of banking. Thus, with the consumers ever multiplying needs there is definitely a vast scope for the furtherance of the retail banking business. Operationally, there is a possibility that technology go beyond merely reducing the cost & improving the quality of current products. It may prove possible, even profitable, to combine functions in new ways. The Banker asked European banks what they consider the future of retail banking to be. The results, put together with the help of Henrion Ludlow Schmidt and Enalyzer, highlight the sectors strengths and fears as it heads into the 21st century. The Banker surveyed the top 300 banks in western Europe plus the top 100 banks in central and eastern Europe based on our rankings and asked
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bankers for their views. With the help of Henrion Ludlow Schmidt, one of Europes leading independent brand consultancies, and Enalyzer, which markets cutting edge eResearch solutions, we received detailed online responses from 58 banks across 26 countries. The key findings from the responses of the 58 banks are divided into topic areas as follows, and calibrated replies can be noted in the charts related to the 56 individual questions asked in six key question blocks.

9.1 TECHNOLOGY
The provision of online banking facilities and converging technologies will dominate the retail bank of the future to provide product information, give financial advice and to allow customers to access and manage their accounts online. Ninety-three percent of respondents see an increase in online transactions. Internet banking will be the norm in five years time 86% selected online as one of the top three methods used to contact banks allowing 24-hour availability. ATMs are regarded as one of the main future methods of contact with the customer (62%), which is interesting given reciprocity agreements diminishing branded experience and the discussion about the cashless society.

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Banks will need to develop powerful technology solutions, driven by customer demand. Bankers still expect personal callers at their branches (56%). Mobile phone contacts are not expected to be that significant (30%) but there is the question of what impact 3G technology will make in the future.

9.2 BRANDING
Brand reputation and building stronger brands is of crucial significance to bankers planning the future of retail banking in Europe. Ninety-six percent think it is extremely important or important to build up brand reputation and personality to create stronger customer loyalty.

9.3 PRODUCTS AND SERVICES

The majority of the participants find personalised/individual products and services of high quality and innovation crucially important for supporting customers needs and aspirations. Competence in financial advice is regarded as extremely important or important by 96%.

The product offer should be clear (86%) and the breadth of offer is also considered key (70%).

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 The most important ancillary products and services are 24-hour service (57%), pensions (57%), portfolio management (54%), financial consultation (54%) and insurance products (52%), whereas less than 10% consider stock broking, communication products or legal products as important.

Low fees and service charges do not seem to be very significant. They are seen as extremely important or important by only 58%. However, the majority of respondents think that reducing interchange fees for card transactions are less important. Opinion is divided over the onestop-shop offering all products under a single umbrella. 9.4 BANK MANAGEMENT AND DEVELOPMENT All respondents see the vital contribution of people, in terms of attitudes and knowledge. Bankers acknowledge that it will be their staff who secure their survival in the next five years. Staffs need to be skilled, helpful and motivated. Having a company culture, a clear vision and values are important for the majority. More than one-third (38%) believe acquisitions will play a less significant role in the future. Ethics and transparency are being recognised as significant business drivers.

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 The implementation of performance standards could help to improve financial performance (82%). Local branches are still considered as extremely important or important by 70%.

Banks are likely to stay banks free of coffee shops and gimmicks.

One-stop-shop and more relaxed ambience in branches are regarded as less important.

One respondent commented that the development of retail banking would depend highly on tax regulations.

9.5 COMMUNICATIONS AND MARKETING

Like branding, the importance of communications and marketing cannot be denied. Ninety-four percent expect marketing to be of growing importance in shaping the retail bank of the future. Furthermore, pro-active marketing is regarded as very important to retain and foster the customer relationship (87%). The bankers questioned see a strong importance of internal communications (see also Branding).

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9.6 MARKET AND CUSTOMERS Banks are becoming more Customer focused. The majority agree that a stronger focus should be put on the private client sector (extremely important or important for 83%) as well as on banking for small businesses (89%). Relationships with customers will change considerably although personal contact will still be important. The highest overall agreement is over the growing importance of customer relationship management, including attraction of customers but also building up customer loyalty. Seventy percent of bankers expect their customers to become less loyal and to transfer between banks more frequently. Seventy-seven percent believe ethical management of funds will increasingly influence customer choice. Almost all believe that it is extremely important or important to differentiate from competitors. Business models that focus on core competence suggest that the retail bank of the future might:

Build core financial products that are highly specialised but sold to retail instructions.

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Commission financial products from specialised manufacturers to be re-branded/white-labelled and combined with own products.

Specialise in financial retail, only sourcing appropriate products and packaging as needed, either on demand or through long-term supplier contracts.

Do everything, build, package, brand and sell own financial products and services.

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Chapter- 10
Issues/Challenges to Retail Banking in India
10.1 ADVANTAGES
Retail banking has inherent advantages outweighing certain

disadvantages. Advantages are analyzed from the resource angle and asset angle. RESOURCE SIDE Retail deposits are stable and constitute core deposits. They are interest insensitive and less bargaining for additional interest. They constitute low cost funds for the banks. Effective customer relationship management with the retail customers built a strong customer base. Retail banking increases the subsidiary business of the banks. ASSETS SIDE Retail banking results in better yield and improved bottom line for a bank. Retail segment is a good avenue for funds deployment. Consumer loans are presumed to be of lower risk and NPA perception.

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 Helps economic revival of the nation through increased production activity. Improves lifestyle and fulfils aspirations of the people through affordable credit. Innovative product development credit. Retail banking involves minimum marketing efforts in a demand driven economy. Diversified portfolio due to huge customer base enables bank to reduce their dependence on few or single borrower Banks can earn good profits by providing non fund based or fee based services without deploying their funds.

10.2 DISADVANTAGES
Designing own and new financial products is very costly and time consuming for the bank. Customers now-a-days prefer net banking to branch banking. The banks that are slow in introducing technology-based products, are finding it difficult to retain the customers who wish to opt for net banking. Customers are attracted towards other financial products like mutual funds etc. Though banks are investing heavily in technology, they are not able to exploit the same to the full extent.

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 A major disadvantage is monitoring and follow up of huge volume of loan accounts inducing banks to spend heavily in human resource department. Long term loans like housing loan due to its long repayment term in the absence of proper follow-up, can become NPAs. The volume of amount borrowed by a single customer is very low as compared to wholesale banking. This does not allow banks to to exploit the advantage of earning huge profits from single customer as in case of wholesale banking.

10.3 OPPORTUNITIES
Retail banking has immense opportunities in a growing economy like India. As the growth story gets unfolded in India, retail banking is going to emerge a major driver. The rise of Indian middle class is an important contributory factor in this regard. The percentage of middle to high-income Indian households is expected to continue rising. The younger population not only wields increasing purchasing power, but as far as acquiring personal debt is concerned, they are perhaps more comfortable than previous generations. Improving consumer purchasing power, coupled with more liberal attitudes towards personal debt, is contributing to Indias retail banking segment. The combination of above factors promises substantial growth in retail sector, which at present is in the nascent stage. Due to bundling of services
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and delivery channels, the areas of potential conflicts of interest tend to increase in universal banks and financial conglomerates. Some of the key policy issues relevant to the retail-banking sector are: financial inclusion, responsible lending, and access to finance, long-term savings, financial capability, consumer protection, regulation and financial crime prevention.

10.4 CHALLENGES TO RETAIL BANKING IN INDIA

The issue of money laundering is very important in retail banking. This compels all the banks to consider seriously all the documents which they accept while approving the loans. The issue of outsourcing has become very important in recent past because various core activities such as hardware and software maintenance, entire ATM set up and operation (including cash, refilling) etc., are being outsourced by Indian banks. Banks are expected to take utmost care to retain the ongoing trust of the public. Customer service should be at the end all in retail banking. Someone has rightly said, It takes months to find a good customer but only seconds to lose one. Thus, strategy of Knowing Your Customer (KYC) is important. So the banks are required to adopt innovative strategies to meet customers needs and requirements in terms of services/products etc. The dependency on technology has brought IT departments additional responsibilities and challenges in managing, maintaining and optimizing the performance of retail banking networks.
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It is

equally important that banks should maintain security to the advance level to keep the faith of the customer. The efficiency of operations would provide the competitive edge for the success in retail banking in coming years. The customer retention is of paramount important for the profitability if retail banking business, so banks need to retain their customer in order to increase the market share. One of the crucial impediments for the growth of this sector is the acute shortage of manpower talent of this specific nature, a modern banking professional, for a modern banking sector. If all these challenges are faced by the banks with utmost care and deliberation, the retail banking is expected to play a very important role in coming years, as in case of other nations.

10.5 EMERGING ISSUES IN HANDLING RETAIL BANKING

KNOWING CUSTOMER Know your Customer is a concept which is easier said than practiced. Banks face several hurdles in achieving this. In order to that the product lines are targeted at the right customers-present and prospective-it is imperative that an integrated view of customers is available to the banks. The benefits flowing out of cross-selling and up-selling will remain a far cry in the absence of this vital input.

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TECHNOLOGY ISSUES Retail banking calls for huge investments in technology. Whether it is setting up of a Customer Relationship Management System or Establishing Loan Process Automation or providing anytime, anywhere convenience to the vast number of customers or establishing channel/product/customer profitability, technology plays a pivotal role. And it is a long haul. The Issues involved include adoption of the right technology at the right time and at the same time ensuring volumes and margins to sustain the investments. It is pertinent to remember that Citibank, known for its deployment of technology, took nearly a decade to make profits in credit cards. PSBs are on their way to catch up with the technology much required for the success of retail banking efforts. Lack of connectivity, stand alone models, concept of branch customer as against bank customer, lack of convergence amongst available channels, absence of customer profiling, lack of proper decision support systems, etc., are a few deficiencies that are being overcome in a great way. However, the initiatives in this regard should include creating flexible computing architecture amenable to changes and having scalability, a futuristic approach, networking across channels, development of a strong Customer Information Systems (CIS) and adopting Customer Relationship Management (CRM) models for getting a 360 degree view of the customer.

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ORGANIZATIONAL ALIGNMENT It is of utmost importance that the culture and practices of an institution support its stated goals. Having decided to take a plunge into retail banking, banks need to have a well defined business strategy based on the competitive of the bank and its potential. Creation of a proper organization structure and business operating models which would facilitate easy work flow are the needs of the hour. The need for building the organizational capacity needed to achieve the desired results cannot be overstated. PRODUCT INNOVATION Product innovation continues to be yet another major challenge. Even though bank after bank is coming out with new products, not all are successful. The days of selling the products available in the shelves are gone. Banks need to innovate products suiting the needs and requirements of different types of customers. should not also be lost sight of. PRICING OF PRODUCT The next challenge is to have appropriate policies in place. The industry today is witnessing a price war, with each bank wanting to have a larger slice of the cake that is the market, without much of a scientific study into the cost of funds involved, margins, etc. There is a tendency, at least on the part of few to camouflage the price. The Revisiting the features of the existing products to continue to keep them on demand

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situation cannot remain his way for long. This will be one issue that will be gaining importance in the near future. PROCESS CHANGES Business Process Re-engineering is yet another key requirement for banks to handle the growing retail portfolio. Simplified processes and aligning them around delivery of customer service impinging on reducing customer touch-points are of essence Work flow and document management will be integral part of process changes. The documentation issues have to remain simple both in terms of documents to be submitted by the customer at the time of loan application and those to be executed upon sanction. HUMAN RESOURCES While technology and product innovation are vital, the soft issues concerning the human capital of the banks are more vital. The corporate initiatives need to focus on bringing around a frontline revolution. Though the changes envisaged are seen at the frontline, the initiatives have to really come from the back end. The top management of banks must be seen as practicing what preaches. The initiatives should aim at improved delivery time and methods of approach. There is an imperative need to create a perception that the banks are market-oriented.

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RURAL ORIENTATION As of now, action that is taking place on the retail front is by and large confined two metros and cities. There is still a vast market available in rural India, which remains to be trapped. Multinational Corporations, as manufacturers and distributors, have already taken the lead in showing the way by coming out with exquisite products, packaging and promotions, keeping the rural customer in mind. Washing powders and shampoos in Re.1 sachet made available through an efficient network and testimony to the determination of the MNCs to penetrate the rural market. In this scenario, banks cannot lack behind. In particular PSBs, which have a strong rural presence, need to address the needs of rural customers in a big way. These and only these will propel retail growth that is envisaged as a key strategy for portfolio expansion by most of the banks.

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10.6 MAJOR COMPETITORS IN NAVI MUMBAI ON BASIC PARAMETERS

PARAMETERS/BANKS PRODUCT ADVERTISMENT MANPOWER NET-BANKING PHONE BANKING INVESTMENT SCHEME NETWORK CREDIBILITY

IDBI 20% 3% 10% 3% 10% 5% 2% 20%

ICICI 15% 45% 50% 50% 40% 25% 40% 10%

SBI 30% 15% 2% 10% 5% 50% 40% 40%

HDFC 15% 20% 3% 12% 5% 10% 5% 20%

AXIS 10% 7% 25% 8% 30% 5% 3% 5%

CANARA BANK 10% 10% 10% 17% 10% 5% 10% 5%

COMPARATIVE GRAPHS
60% 50% 40% 30% 20% 10% 0% IDBI ICICI SBI HDFC AXIS CANARA BANK

PRODUCT ADVERTISMENT MANPOWER NET-BANKING PHONE BANKING INVESTMENT SCHEME NETWORK CREDIBILITY BANKS

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MARKET SHARES IN NAVI MUMBAI IN COMPARISION TO COMPETITORS

BANK NAME SBI HDFC ICICI PNB IDBI AXIS OTHERS % OF SHARE 30% 15% 25% 10% 5% 5% 10%

SBI 30% ICICI 25% 20% HDFC 15% PNB 10% IDBI AXIS 5% 0% OTHERS SBI HDFC ICICI PNB IDBI AXIS OTHERS

% OF SHARE

10.7 SAMPLE JUDEMENTS PASSED AFTER CONSUMER CASES

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1. The banker is supposed to safeguard the interest of the depositors when his amount is entrusted to the custody of the Bank and the Bank is liable to return the amount with interest. In the absence of any directions from the customer, no banker can unilaterally and arbitrarily transfer the money of a depositor from his account and deposit in the account of another customer. This amounts to deficiency in service by the bank. Dilip Madhukar Kambli Vs. Nilesh Vasant Borkar and Ors 1991(1) CPR 571(SCDRC- New Bombay, Maharashtra). 2. The compliant was filed for alleged deficiency in respect of freezing of account and dishonouring cheques and for withdrawal of guarantee. It was held that since a suit was instituted prior to the filing of the present case, the complainant can take up the legitimate pleas therein as well as file counter claim, if so advised. Parallel proceedings in the Civil Suit as well as in the present complaint are not contemplated although remedy under the Consumer Protection Act is in addition to the remedy provided in Civil Court. The complainant, therefore, has to be relegated to the remedy in the Civil Court. It was further held that complicated questions of fact are involved particularly with respect of a will alleged to have been forged. This question requires recording of detailed evidence and on mere affidavits and that too between the present parties, the complainant and the bank cannot be properly adjudicated. The other brothers of the complainant who are taking benefit under the will are
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not parties in the complaint. On that ground also, the complainant is to be relegated to his remedy in the Civil Court. Sh. Gurdev Singh v. Punjab National Bank 1999 (3) CPR 23 (SCDRC - Punjab) 3. Where the complainant has availed credit facilities from the bank and the bank has initiated proceedings before the competent authority for the recovery of the amount due from the complainant, the Commission without going into the merits of the case, left it to the complainant to defend those proceedings and raise therein all questions available for the complainant and dismissed the complaint. M/s. Master Drillers, Nagpur and ors., v. Nagpur Nagarik Sahakari Bank Ltd., & Ors 1996 (2) CPR 89 (NC)

10.8 CONCLUSION
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INTRODUCTION: The growth and retail banking in terms of volumes and types of products has been quite pronounced in the recent years. Some of the basic reasons attributed for this spurt are: Indias economic prosperity Consequent increase in purchasing power Changing consumer demographic with one of the highest section of the population below the age of 35 years Technological innovation such as ATMs, Credit cards etc Decline in treasury income causing retail banking to be the focus of profit maximization and decline in interest in recent years There has also been an expansion in the nature and product offered under retail banking PRODUCTS: There are two ways to look at bank products that are offered to customers. The traditional products (and now new ways in which they are offered) and new products. The website of any of the banks in India would typically show the following products in the retail banking segment: Deposits
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 Loans (housing, personal, education, etc.) Investments Cards Insurance Demat services Online services It may be noted that deposits are a part of the liabilities whereas all other products mentioned are either its assets or a part of its fee based services. Therefore, only for deposits, banks have to pay its customers i.e. have an obligation towards them; whereas in case of the customers have to pay the banks i.e. customers have an obligation to the bank. While the above are provided to India residents, Non Resident Indians (NRIs) are provided remittance services and property solutions in addition to some of the products/ services offered to resident Indians. SERVICES: In retail banking customer is a customer of branch and gets all his banking services at the branch be it depositing or withdrawing money, applying for a loan, getting an update on the pass book etc. the advantage of branch banking is that it bring the bank and the customer face to face with each other. This face-to-face banking has new variant i.e. door step banking there still is a direct interface with the customer but now it is the bank which visits the customers rather than the other way around. The contact center of the bank is also contributed for providing prompt services to the customers.
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There is a need for constant innovation in retail banking. In bracing for tomorrow a paradigm shift in bank financing through innovative products and mechanism involving constant up gradation and revalidation of banks internal system and processes is called for. Banks now need to use retail as a growth trigger. This requires product development and differentiation, micro-planning, marketing, prudent pricing, customization, technological up gradation, home / electronic / mobile banking, effective risk management and asset liability management techniques. While retail banking offers phenomenal opportunities for growth, the challenges are equally daunting. How far the retail banking is able to lead growth of banking industry in future would depend the retail banking upon the capacity building of banks to meet the challenges and make use of opportunities profitably. However, the kind of technology used and the efficiency of operations would provide the much needed competitive edge for success in retail banking business. Furthermore, in all these customer interest is of paramount importance. The banking sector in India is demonstrating this and I do hope they would continue to chart in this traded path.

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CUSTOMER SATISFACTION OF ICICI BANK AT CBD BELAPUR BRANCH, NAVI MUMBAI

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CHAPTER- 11
ICICI GROUP
OBJECTIVE

The ICICI Group was formed with the objective of supporting Indias growth and development. While they have transformed from a development bank to a diversified financial services group, this vision continues to form the core of all they do. ICICI partner the growth of Indian business and help individuals improve their quality of life, through convenient access to financial products and services. They are focusing on the full spectrum of financial services needs, from banking in rural areas to banking for the Indian community overseas. In addition to financial services, ICICI support initiatives for socio-economic development through projects focused on healthcare, education and access to markets. ICICI seek to improve access to opportunity, and the ability to make the most of it, for businesses and individuals - to help people move towards a better life.

11.2 VISION To be the leading provider of financial services in India and a major global bank.

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11.3 MISSION They will leverage their people, technology, speed and financial capital to: Be the banker of first choice for our customers by delivering high quality, world-class products and services. Expand the frontiers of our business globally. Play a proactive role in the full realisation of Indias potential. Maintain a healthy financial profile and diversify our earnings across businesses and geographies. Maintain high standards of governance and ethics. Contribute positively to the various countries and markets in which they operate. Create value for our stakeholders.

11.1 ORGANISATION STRUCTURE

The organisation structure is designed to be flexible and customer-focused. At the same time, they seek to ensure effective control and supervision and consistency in standards across the organisation. The organisation structure is divided into the following principal groups: Corporate Centre, comprising financial reporting; planning and strategy; asset liability management; investor relations; secretarial; corporate communications; risk management; compliance; internal audit; legal; financial crime
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prevention

and

reputation

risk

management; and the Banks proprietary trading operations across various markets. Retail Banking Group, comprising the retail liabilities, retail assets and small enterprises businesses. Rural, Micro-banking and Agri-business Group, comprising the rural and agricultural lending and other banking businesses. Wholesale Banking Group, comprising the corporate & investment banking, project finance and government banking businesses. International Banking Group, comprising the Banks international operations, including operations in various overseas markets as well as products and services for non-resident Indians, international trade finance, correspondent banking and wholesale resource mobilisation. Global Markets Group, comprising our global client-centric treasury operations. Global Operations & Middle Office Groups, which are responsible for back-office operations, controls and monitoring of our domestic and overseas operations. The Human Resources Management Group is responsible for the Banks recruitment, training, leadership development and other personnel management functions and initiatives. The Technology Management Group (TMG) is responsible for enterprise-wide technology initiatives, with dedicated technology teams serving individual business groups and managing information security and shared infrastructure.

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BOARD OF DIRECTORS OF ICICI BANK N. Vaghul, Chairman Sridar Iyengar L. N. Mittal Narendra Murkumbi Anupam Puri Arun Ramanathan M. K. Sharma P. M. Sinha Marti G. Subrahmanyam T. S. Vijayan V. Prem Watsa K. V. Kamath, Managing Director & CEO Chanda D. Kochhar, Joint Managing Director & CFO V. Vaidyanathan, Executive Director Madhabi Puri Buch, Executive Director (w.e.f. June 1, 2007) Sonjoy Chatterjee, Executive Director (w.e.f. October 22, 2007)

1 2 3 4 5 6 7 8 9 10 11 12

13 14 15

16

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11.2 BUSINESS REVIEW

During fiscal 2008, the Bank continued to grow and diversify its asset base and revenue streams by leveraging the growth platforms created over the past few years. They maintained our leadership position in retail credit, achieved robust growth in our fee income from both corporate and retail businesses, strengthened our deposit franchise and significantly scaled up our corporate and international banking operations.

11.3 ICICI RETAIL BANKING

ICICI Bank was among the first bank to identify the growth potential of retail credit in India. Between 2003 and 2006 the banking system as a whole saw significant expansion of retail credit, with retail loans accounting for a major part of overall systemic credit growth. However, due to the increase in interest rates following inflationary pressures, retail credit growth in the banking system has moderated from about 30% over the last few years to about 1015% currently. They continue to believe that retail credit has robust long-term growth potential, driven by sound fundamentals, namely, rising income levels and favourable demographic profile. At the same time, the retail credit business requires a high level of credit and analytical skills and strong operations processes backed by technology. ICICI retail strategy is cantered on a wide distribution network, comprising their branches and offices, direct marketing agents and dealer and real estate developer relationships; a comprehensive and competitive product suite; technology-enabled back-office processes; and a robust credit and

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analytical framework. They are the largest provider of retail credit in India. The total retail portfolio was Rs. 1,316.63 billion at March 31, 2008, constituting 58% of our total loans at that date. During fiscal 2008, ICICI continued their focus on strengthening their retail deposit franchise to create a stable funding base. Their current and savings account (CASA) deposits as a percentage of total deposits increased from 22% at March 31, 2007 to 26% at March 31, 2008, with savings account deposits increasing by 36% during fiscal 2008. During the year, they have expanded their branch network substantially. At March 31, 2008, they had 1,262 branches & extension counters compared to 755 branches & extension counters at March 31, 2007, including the addition of about 200 branches through the merger of Sangli Bank. Cross-selling new products and also the products of our life and general insurance subsidiaries to our existing customers is a key focus area for the Bank. Cross-sell allows them to deepen their relationship with their existing customers and helps them reduce origination costs as well as earn fee income. CUSTOMER SERVICE Customer service is a key focus area for the Bank and they have adopted a multi-pronged approach to continuously monitor and enhance customer service levels. The Customer Service Council comprising whole time directors and senior management meets regularly to review their customer

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service initiatives. They have implemented a structured customer feedback process where feedback is received from customers through e-mail, mobile messaging and telephone. They conduct regular training programmes for employees to improve customer handling and interaction and have incorporated customer service metrics in performance evaluation. Their service quality team is also responsible for tracking resolution and turnaround times for service requests, identifying root causes to be addressed through process improvements, rewarding achievements in customer service and institutionalising learnings from customer feedback. DISCLOSURE OF COMPLAINTS The movement of the outstanding numbers of complaints is given below:

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a) Customer complaints in fiscal 2008 Number of complaints pending at the beginning of the year 579 Number of complaints received during the year* 185,431 Number of complaints redressed during the year 184,147 Number of complaints pending at the end of the year 1,863 * Includes complaints received via customer service touch points (phone banking) with effect from October 1, 2007 complaints received through e-mail with effect from April 1, 2007.

b) Awards passed by the Banking Ombudsman in fiscal 2008 Number of unimplemented awards at the beginning of the year 4 Number of awards passed by the Banking Ombudsman during the year 7 Number of awards implemented during the year 6 Number of unimplemented awards at the end of the year 1 * Includes

The 4 awards pending as on March 31, 2007 have become null and
void, as the customers have not accepted them.

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11.4 SUBSIDIARY COMPANIES OF ICICI BANK

On March 31, 2008, ICICI Bank had 17 subsidiaries as listed below:

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11.5 MARKET PRICE INFORMATION

The performance of the ICICI Bank equity share relative to the BSE Sensitive Index (Sensex) during the period April 1, 2006 to March 31, 2008 is given in the following chart:

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The reported high and low closing prices and volume of equity shares of ICICI Bank traded during fiscal 2008 on BSE and NSE are set out in the following table:

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The reported high and low closing prices and volume of ADSs of ICICI Bank traded during fiscal 2008 on the NYSE are given below:

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11.6 ANNUAL REPORT OF ICICI BANK

The Fourteenth Annual Report of ICICI Bank Limited with the audited statement of accounts for the year ended March 31, 2008.

FINANCIAL HIGHLIGHTS The financial performance for fiscal 2008 is summarised in the following table:

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APPROPRIATIONS The profit & loss account shows a profit after tax of Rs. 41.58 billion after provisions and contingencies of Rs. 29.05 billion and all expenses. The disposable profit is Rs. 51.56 billion, taking into account the balance of Rs. 9.98 billion brought forward from the previous year. Your Directors have recommended a dividend rate of 110% (Rs. 11 per equity share of face value Rs. 10) for the year and have appropriated the disposable profit as follows:

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OPERATING RESULTS DATA The following table sets forth, for the periods indicated, the operating results data.

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KEY RATIOS

The following table sets forth, for the periods indicated, the key ratios.

CREDIT RATINGS ICICI Banks credit ratings by various credit rating agencies at March 31, 2008 are given below:

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AWARDS & PUBLIC RECOGNITION The Bank received several awards during fiscal 2008, including the following: Best Bank in India by Euromoney Fabulous 50 companies in Asia by Forbes Asia Best Domestic Bank in India by Asset Triple A Best Bank of the Year (India) by The Banker Asias Best Financial Borrower 2007 by Euromoney Excellence in Remittance Business by Asian Banker Innovative Technology Award by CIO Best Regional Private Bank by The Banker Excellence in Financial Reporting by Institute of Chartered Accountants of India (ICAI) Most Preferred Brand for home loans, auto loans, credit cards and financial advisory services by CNBC Awaaz Best Private Sector Bank by Outlook Money NDTV Profit Awards 2007 Padma Bhushan by President of India on May 5, 2008. Mr. K. V. Kamath, MD&CEO was awarded ASSET QUALITY AND COMPOSITION Loan Concentration They follow a policy of portfolio diversification and evaluate their total financing in a particular sector in light of their forecasts of growth and profitability for that sector. Between 2003 and 2006 the banking system as a whole saw significant expansion of retail credit, with retail loans accounting for a major part of overall systemic credit growth. Accordingly,
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during these years, they increased their financing to retail finance. Recently, due to the increase in interest rates, retail credit growth in the banking system has moderated from its peak levels. At the same time, there has been an increase in demand for credit from the corporate sector, especially for foreign currency financing. Following this trend, the loans and advances to retail finance constituted 58.6% of the total loans and advances at year-end fiscal 2008 compared to 65.2% at year-end fiscal 2007. The following tables set forth, at the dates indicated, the composition of their gross advances (net of write-offs).

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The following table sets forth, at March 31, 2008, the composition of their gross (net of write-offs) outstanding retail finance portfolio.

The following table sets forth, at March 31, 2007 and March 31, 2008, information regarding the classification of their gross assets (net of writeoffs and interest suspense).

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The following table sets forth, at the dates indicated, information regarding their non-performing assets, or NPAs.

KEY FINANCIAL INDICATORS

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ICICI Banks Global Network, Today, Spans 18 Countries.

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CHAPTER- 12
ICICI BANK PRODUCTS & SERVICES AT GLANCE
LOANS
Online Loans Home Loans Loan Against Property Personal Loans Car loan Two Wheeler Commercial Vehicle Loans against Securities Loan Against Gold Farm Equipment Construction Equipment Office Equipment Medical Equipment Pre-approved Loans Retail Assets Branches Flexi Cash Farmer Finance Rural Housing Finance Retail Warehouse Receipt Based Finance Business Instalment Loans
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 Aquaculture Finance Horticulture Finance Self Help Group Finance

ACCOUNTS & DEPOSITS

Savings Account Special Savings Account Life Plus Senior Citizens Savings Account Fixed Deposits Security Deposits Recurring Deposits Tax-Saver Fixed Deposit Young Stars Savings Account Child Education Plan Bank@Campus Salary Account Advantage Woman Savings Account EEFC Account Resident Foreign Currency (Domestic) Account Privilege Banking No Frills Account Rural Savings Account People's Savings Account Self Help Group Accounts Outward Remittance

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 Freedom Savings Account Common Service Charges

CARDS
Consumer Cards Credit Card Travel Card Debit Cards Commercial Cards Corporate Cards Prepaid Cards Purchase Card Distribution Cards Business Card

INVESTMENT
ICICI Bank Bonds [ICICI Bank Tax Saving Bonds] GOI Bonds [Government of India Bonds] Mutual Funds [Investment in Mutual Funds] IPO [Initial Public Offers by Corporates] ICICI Bank Pure Gold [Investment in "Pure Gold"] Forex Services [Foreign Exchange Services] Senior Citizens Savings Scheme, 2004

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INSURANCE
Health Insurance Overseas Travel Insurance Student Medical Insurance Motor Insurance Home Insurance Life Insurance

DEMAT
Overview Account Opening ISIN Lookup Settlement Calendar Charges Digitally Signed Statement Mobile Banking Service Request Forms Access Account Online Membership Guide Demat Branches Guidance Procedure for Transmission of Shares

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ONLINE SERVICES
Branchfree Banking smsNcash Bill Payment (New Billers Added) Receive Funds Funds Transfer Convert to EMI Smart Money Order Prepaid Mobile Recharge Ticket Booking Online Tax Calculation Account to Card Transfer Mobile Banking Funds Transfer Mobile Banking [iMobile] Shopping Share Trading Special Promotions & offers Online Loans and Credit Cards Demand Draft Online Mumbai Suburban Season Ticket Instant Voice Response (IVR) Banking ATM Banking

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12.1 LOANS
ICICI Bank offers wide variety of Loans Products to suit Customers requirements. Coupled with convenience of networked branches/ ATMs and facility of E-channels like Internet and Mobile Banking, ICICI Bank brings banking at your doorstep. Select any of their loan product and provide your details online and their representative will contact you for getting loans. The No. 1 Home Loans Provider in the country, ICICI Bank Home Loans offers some unbeatable benefits to its customers - Doorstep Service, Simplified Documentation and Guidance throughout the Process. The NO 1 financier for car loans in the country. Network of more than 1500 channel partners in over 780 locations. Tie-ups with all leading automobile manufacturers to ensure the best deals. Flexible schemes & quick processing. Hassle-free application process on the click of a mouse. Range of services on existing loans & extended products like funding of new vehicles, refinance on used vehicles, balance transfer on high cost loans, top up on existing loans, Extend product, working capital loans & other banking products. Avail attractive schemes at competitive interest rates from the No 1 Financier for Two Wheeler Loans in the country. Finance facility up to 90% of the On Road Cost of the vehicle, repayable in convenient repayment options and comfortable tenors from 6 months to 36 months. Ride home on your Dream Two Wheeler with our hassle free finance.
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Preferred financier for almost all leading tractor manufacturers in the country. Flexible repayment options in tandem with the farmer's seasonal liquidity. Monthly, Quarterly and Half-yearly repayment patterns to choose from. Comfortable repayment tenures from 1 year to 9 years.

12.2 ICICI BANK PERSONAL LOANS

ICICI Bank Personal Loan provides with instant money for a wide range of your personal needs like, renovation of home, marriage in the family, a holiday with family, child's education, Medical expenses or any other emergencies. Key Benefits of ICICI Bank Personal Loan: Loan up to 15 lacs No security/guarantor required Faster Processing Minimum Documentation Attractive Interest Rates 12-60 Months repayment options Loans available for both salaried & self employed individuals Loan on Phone" facility

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ELIGIBILITY CRITERIA FOR PERSONAL LOAN CRITERIA Age Net Salary Eligibility SALARIED 25 yrs. - 58 yrs. SELF - EMPLOYED 25 yrs. - 65 yrs.

Net annual income - Rs. Net Profit after tax - Rs. 96,000 p.a Employees companies, companies, of Public Private 150000 p.a Ltd. Doctors, Ltd. Architects, Manufacturers 3 Years MBA's, CA's, Traders &

Government Engineers,

companies or MNCs. Years profession Years current residence DOCUMENTATION DOCUMENTS (PRE SANCTION) Latest 3 months Bank Statement (where salary/income is credited) 3 Latest salary slips Last 2 years ITR with computation of income / Certified Financials Proof of Turnover (Latest Sales / in 1 Year in 1 Year current job /

1 Year

SALARIED Yes Yes

SELF EMPLOYED Yes

Yes

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Service tax returns) Proof of Continuity current job (Form 16 / Company appointment letter ) Proof of Continuity current profession (IT Returns / Certificate of business continuity issued by the bank) Proof of Identity (any one) Passport / Driving License / Voters ID / PAN card / Photo Credit Card / Employee ID card Proof of Residence (any one) Ration Card / Utility bill / LIC Policy Receipt Proof of Office (any one) Lease deed / Utility bill / Municipal Tax receipt / title deed Proof of Qualification Highest Degree (for Professionals / Govt employees Yes Yes Yes Yes

Yes

Yes

Yes

Yes Yes

Yes

CHANGING MODE OF REPAYMENT If you wish to change the mode of repayment of the ICICI personal loan, this needs to be done with the permission of ICICI bank. Stopping payments on post-dated cheques or otherwise cancelling or revoking mandates would be considered 'committed with a criminal intent' according to the ICICI terms and conditions.

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SERVICE CHARGES Prepayment of the loan is possible after 180 days of availing the loan. Foreclosure charges as applicable would be levied on the outstanding loan. Part pre-payment is not allowed. No other fees or commitment charges are levied. Description of Charges Personal loans Loan Processing Charges / 2* % of loan amount + Origination Origination Charges Charges of 1.5% of loan amount Prepayment Charges 5% on the principal outstanding Charges for late payment (loans) 2% per month Cheque Swap Charges Rs. 500/Cheque bounce charges Rs. 200/-

12.3 BANK@CAMPUS AND ITS BENEFITS

Technology-enabled service, through automated channels, without physical branch access. BENEFITS TO THE STUDENT

Free Internet Banking Free Phone Banking (in select cities*) Free ICICI Bank Ncash Debit Card Free Access to any Bank's ATM Other Benefits

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FREE INTERNET BANKING

Enquire about balance Download detailed statement of accounts View details of all accounts maintained with ICICI Bank Transfer funds between your account and any other ICICI Bank account Pay your utility bills-mobile, electricity and telephone bills Request a cheque book and demand drafts Request to stop payment of cheque Report your lost Debit cards Open Fixed and Recurring deposits online Access information on personal finance, computing & the Internet, ecommerce, lifestyle etc. Liaise with your Account Manager Invest in mutual funds

FREE PHONE BANKING

Enquire about balance Request a tele-draft Obtain mini-statements Request a cheque book Request to stop payment of cheque Intimate lost Debit card Transfer funds between ICICI Bank accounts

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OTHER BENEFITS

Own a chequebook personalised with your name. Receive an annual statement of account

ELIGIBILITY

You must be a student. You have to be above 18 years of age.

DOCUMENTATION Documentation guidelines for student accounts

Verified True Copy of college identification documents with photograph of the applicant. (Such college shall be one of the colleges recognized by an Indian University / Technical Body or a deemed University.)

Mandatory information to be provided in account opening form includes

Basic details like name, current address, permanent address, phone numbers, date of birth, nationality, residential status should be captured in Account Opening Form. College and course particulars including end date for the course. Details of parents / guardian - name, address, phone numbers, nationality, residential status. Expected international transfer of funds in the case of foreign students. Photograph and signature

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SERVICE CHARGES AND FEES Bank@Campus Available to Eligibility Minimum average quarterly balance Charges for non maintenance of minimum quarterly average balance Cash transactions at base branch No Branch Access for cash (branches in same city) Non ICICI Bank ATMs) transactions balance enquiry - Free. Rs.50 per D.D. up to Rs.10, 000; Issue of DD drawn on ICICI Bank by cheque/transfer Rs.3 per thousand rupees or part thereof for DD of more than Rs.10,000, subject to a minimum of Rs.75 and maximum of Rs. 15,000 Statement Free Annual statement Free monthly e-mail statement on Debit Card Fees for first Account request Holder Debit Card Fees for joint Account Holder Free Free ATM Interchange (Transactions at Rs.18 per cash withdrawal and Rs.250 per quarter All cities Students pursuing pre-approved courses only and b/w 18-27 yrs of age Rs 500

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Debit Card Cash withdrawal limit Internet Banking Phone Banking Mobile Banking Cheque Books ATM Transaction Cheque collection charges from upcountry locations (I-Bank branch) Cheque collection charges from upcountry locations (Non I-Bank branch)

Daily spending/withdrawal limit: 25,000/25,000 Free Free Free Free, Order & A/c payee only Unlimited Free of Cost Free

Free

12.4 DEPOSITS
ICICI Bank offers wide variety of Deposit Products to suit your requirements. Coupled with convenience of networked branches/ ATMs and facility of E-channels like Internet and Mobile Banking, ICICI Bank brings banking at your doorstep. Select any of their deposit products and provide your details online and our representative will contact you for Account Opening.

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1) ICICI Bank offers you a power packed Savings Account with a host of convenient features and banking channels to transact through. So now you can bank at your convenience, without the stress of waiting in queues. 2) We understand that as you reach the age to retire, you do have certain concerns. Whether your hard earned money is safe and secure. Whether your investments give you the kind of returns that you need. That's why we have an ideal Banking Service for those who are 60 years and above. The Senior Citizen Services from ICICI Bank has several advantages that are tailored to bring more convenience and enjoyment in your life. 3) It's really important to help children learn the value of finances and money management at an early age. Banking is a serious business, but we make banking a pleasure and at the same time children learn how to manage their personal finances. 4) Safety, Flexibility, Liquidity and Returns! A combination of unbeatable features of the Fixed Deposit from ICICI Bank. 5) When expenses are high, you may not have adequate funds to make big investments. But simply going ahead without saving for the future is not an option for you. Through ICICI Bank Recurring Deposit you can invest small amounts of money every month that ends up with a large saving on maturity. So you enjoy twin advantages- affordability and higher earnings.

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12.5 DEBIT CARD

Combining the acceptability of a credit card and the prudence of an ATM card, the ICICI Bank Debit card is a most convenient accessory for you. No more fear of overspending. No more searching for the nearest ATM. No more searching for the nearest ATM.

With the ICICI Bank Debit Card you can shop using VISA Electron's on-line debit program, and debit your ICICI Bank account directly when purchasing goods or services at any shop displaying the ICICI Bank/VISA Electron logo.

12.6 INVESTMENT
At ICICI Bank, we care about all your needs. Along with Deposit products and Loan offerings, ICICI Bank assists you to manage your finances by providing various investment options ranging from ICICI Bank Tax Saving Bonds to Equity Investments through Initial Public Offers and Investment in Pure Gold. ICICI Bank facilitates following investment products: ICICI Bank Tax Saving Bonds Government of India Bonds Investment in Mutual Funds Initial Public Offers by Corporates
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Investment in "Pure Gold" Foreign Exchange Services Senior Citizens Savings Scheme, 2004

You can invest in above products through any of our branches. For select products ICICI Bank also provides the ease of investing through electronic channels like ATMs and Internet (ICICIdirect.com)

12.7 SERVICES PROVIDED BY BANK

BRANCHES You can find a host of ICICI retail products at our widespread Bank Branch network-Bank Accounts, Credit and Debit cards, Bonds, Demat Accounts, Loans against Shares, etc. INTERNET BANKING If the customers have ICICI Net Banking Facility then he can login at www.icicibank.com and use the web to make transactions, money transfers, credit card payments & bill payment & many more online services. ICICI Bank does not ask you for any personal information other than your user ID and password when you login. ICICI Bank offers a variety of features to make online banking a pleasure.

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PHONE BANKING A user friendly automated service menu offers you convenient access to your account coupled with security as, all your transactions are protected by a Atm Pin - The Personal password to your Banks & Credit card Account and Tpin for your Demat Account. But if you do need any assistance our officers will be glad to help you. ATM ICICI Bank's 24 Hour ATM network is one of the largest and most widespread ATM Network in India. Our ATMs are located in commercial areas, residential localities, major petrol pumps, airports, near railway stations and other places which are conveniently accessible to our customers. ICICI Bank ATMs features user-friendly graphic screens with easy to follow instructions. We have introduced ATMs which interact with customers in their local language for increased convenience. ANYWHERE BANKING ICICI Bank is the second largest bank in the country. It services a customer accounts through a multi-channel access network. This includes branches and extension counters, ATMs, Call Center and Internet Banking. Thus, one can access the various services ICICI Bank has to offer at anytime, anywhere and from anyplace. To learn more about the various channels, please click on the topic of your interest mentioned in the left menu.

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MOBILE BANKING Bank on the move with ICICI Bank Mobile Banking. With ICICI Bank, Banking is no longer what it used to be. ICICI Bank offers Mobile Banking facility to all its Bank, Credit Card, Demat and Loan Customers. ICICI Bank Mobile Banking can be divided into two broad categories of facilities: ICICI Bank Mobile Banking Alerts facility keeps you informed about the significant transactions in your Accounts. It keeps you updated wherever you go.

ICICI Bank Mobile Banking Requests facility enables you to query for your account balance.

BANK @ HOME: There are two basic services in Bank@Home 1. Remote Service Delivery 2. Cash on Tap 1. Remote Service Delivery The main components of this service are the drop boxes, which are installed at certain defined locations (residential complexes, shopping complexes, etc.). A customer can drop in a request for a variety of services into the drop box. These requests will be picked up daily and sent to the

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branch where they will be taken up for processing on the next working day and the normal Tats will apply from then on. This service has no - charges. The services available in Remote Service Delivery are:

Cash Withdrawal Application for DD/PO/Fund Transfer Lead generation for Bank A/c and Demat A/c opening. ATM/Debit card PIN regeneration. ATM/Debit card de-blocking and re-issue. Chequebook request. Statement Request. Internet/Mobile Banking registration. Request for FD Renewal. Request for Balance certificate/Interest Certificate. Linking of A/c to existing Internet banking id. 2. Cash on Tap: This service offers the customer the facility to call the Phone Banking team and ask for cash from his A/c to be delivered to him (CASH WITHDRAWAL) or for someone to pick up cash from him for depositing into his A/c. (CASH DEPOSIT). The Cash on Tap service is available in two variants:

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a) Express Delivery If the customer requests the service to be carried out in the same working day. In this case all calls made on working days between 8 A.M. and 6 P.M. on working days, will be serviced by the branch within two hours. The express delivery transactions are charged a flat fee of Rs. 40/per transaction for all Non - HNI customers. These transactions are FREE for HNI customers. b) Normal Delivery If the customer requests the service to be carried out on the next working day. All calls made after 6 P.M. or calls made on non working days will be serviced within two hours of the branch opening on the next working day. A customer can call and request for a cash delivery or a cash pickup at a given time on the next working day. All normal delivery transactions are FREE for all customers.

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12.8 SWOT ANALYSIS OF ICICI BANK TO UNDERSTAND THE POSITIONING OF THE BANK BETTER
STRENGTH Right strategy for the right products. Superior customer service vs. competitors. Great Brand Image Products have required accreditations. High degree of customer satisfaction. Lower response time with efficient and effective service. Dedicated workforce aiming at making a long -term career in the field. OPPORTUNITIES WEAKNESSES

Some gaps in range for certain sectors. Customer service staff needs training. Processes and systems, etc Management cover insufficient. Sectoral growth is constrained by low unemployment levels and competition for staff

THREATS

Profit margins will be good. Could extend to overseas broadly. New specialist applications. Could seek better customer deals. Fast-track career development opportunities on an industrywide basis. An applied research centre to create opportunities for developing techniques to provide added-value services.

Legislation could impact. Great risk involved Very high competition prevailing in the industry. Vulnerable to reactive attack by major competitors Lack of infrastructure in rural areas could constrain investment. High volume/low cost market is intensely competitive.

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COMPETITIVE SWOT ANALYSIS WITH HDFC BANK

STRENGTHS

WEAKNESSES

O P W O Strategies S O Strategies P Weakness: Workforce O Strength: Large Capital base. R Responsiveness. T Opportunity: Market Expansion. U Opportunity: Outsourcing of Non N Core Business. I Strategy: Deep Penetration into T Rural Market. Strategy: Outsource Customer I Care & other E-Helps. E S S T Strategies W T Strategies T Weakness: Not Equal to H Strength: Low operating costs International Standards. R E A Threat: Increased Competition Threat: Entry of many Foreign from others Pvt. Banks. Banks. T S Strategy: Steps to Ensure Loyalty by old Strategy: Consider additional benefits Customers.

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STRENGTHS 1. BRAND NAME: ICICI Bank has earned a reputation in the market for extending quality services to the market vis--vis its competitors. It has earned a strong Brand name in banking in a very short span of time. 2. MARKET SHARE: ICICI Bank has the largest market share of 34% in the IT & ITES industry in Hyderabad according to our survey (within the limitation of the sample size.) 3. HUGE NETWORK: ICICI Bank has the highest number of linked branches in the country. The bank operates through a network of 450 BRANCHES AND over 1800 ATMs across India, thus enabling them to serve customer in better way. 4. DIVERSIFIED PORTFOLIO: ICICI Bank has all the products under its belt, which help it to extend the relationship with existing customer. Some Products, which ICICI Bank is offering are: Retail Banking Business Banking Merchant Establishment Services (EDC Machine) Personal loans & Car loans Demat Services with E-Broking Mutual Fund (ICICI Bank is the Distributor of all Mutual Fund) Insurance Housing Loans

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5. SALARY ACCOUNT: One very interesting thing that we have observed in our survey is that ICICI is having an edge over other banks in case of Salary Account. Most of the companies are having their Salary Account with ICICI even if their Current Account is with any other Bank. This is mainly because of the huge network of ATMs and branches of ICICI. 6. WORKING HOURS: ICICI is the only bank which is having its working hours from 8 to 8 which is one of the major strength of ICICI Bank with respect to IT & ITES Industry. As most of the IT & ITES companies are global players and their Parent company is in US, Thus some have their Office time in the morning and some have it in the evening so if the working hour of the bank is 8 to 8 it is very convenient for them. 7. TREASURY DEPARTMENT: ICICI is the only bank which is having its treasury department especially for Hyderabad Customers. So customers can get the best rates for foreign exchange. 8. AGGRESSIVE MARKETING: ICICI Bank is known for its aggressive marketing of its products. Recent Endorsement of its product by Amitabh Bahchan proves the same. This gives ICICI an edge over other banks. 9. TECHNOLOGY: From its inception, ICICI Bank has adopted a policy of selecting internationally proven and specialized Packaged Systems for its technology. ICICI banks technology platform has been acknowledged globally as one of the best in terms of robustness, flexibility and cost efficiency.

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WEAKNESS 1. TRANSACTION COST: ICICI Bank charges high cost for its transactions. Through our data analysis we have find out that most of the small companies prefer nationalized banks only because of this cost factor. Also the group has found out that there are companies which are going for multi bank system i.e. they are using only those facilities of ICICI Bank which are provided at cheaper rates and for other services they are going to nationalize banks and MNCs. So there exists a huge potential for ICICI Bank if they are ready to make their transaction cost flexible. 2. FOCUS ONLY ON HIGH END CUSTOMERS: The bank targets only the top bracket of clients and does not cater to the needs of small customers. Due to this reason the bank may sometimes loose good clients. 3. DEFENSIVE APPROACH IN LENDING: ICICI Bank has a defensive approach in lending. Mainly to IT & ITES companies Bank do not provide loan as these companies are not having collaterals so bank hesitate in giving loans to them. Because of this policy companies prefer nationalized banks and ICICI Bank in turn sometimes loose potential customers. 4. LITTLE PRESENCE OUTSIDE INDIA: ICICI Bank is having little presence Outside India, because of which companies are preferring MNC Bank, mainly Citibank. So if ICICI Bank tries to emerge outside India then it has a huge potential of customers.

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5. POOR CUSTOMER CARE/SERVICE: With its aggressive marketing ICICI Bank is rapidly increasing its customer base. They are not however, increasing the number of employees accordingly. This is leading to deterioration of the standard of customer service. OPPORTUNITIES 1. NEW IT & ITES COMPANIES: IT & ITES sector is on a boom in the Indian market context, with new companies mushrooming in the market; it opens the door for ICICI bank to capture the huge untapped market. 2. DISSATISFIED CUSTOMERS OF OTHER BANKS: The group from its survey and analysis of IT companies have found out that there are many companies which are not satisfied with its current bank, so ICICI with its superior service quality and long working hours can capture those customers. 3. REMITTANCES: From the analysis group has also found out that ICICI bank has very little presence as far as the EEFC account is concerned. Companies prefer to bank with MNCs (which have greater presence in the foreign countries) and nationalized banks to get their inward remittances in spite of ICICI being providing one of the most competitive rates. So the bank can promote its EEFC account better and get the key to the door of huge potential market.

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4. BUSINESS ADVISING FOR SMALLER PLAYERS: The analysis has also indicated that the concept of business advising though very popular with the higher end players is virtually nonexistent in the lower end of the market. ICICI should take this opportunity to provide business advising to the smaller companies at competitive rates and try to take the first mover advantage. THREATS 1) ADVENT OF MNC BANKS: Large numbers of MNC banks are mushrooming in the Indian market due to the friendly policies adopted by the government. This can increase the level of competition and prove a potential threat for the market share of ICICI bank. 2) DISSATISFIED CUSTOMERS: The analysis indicated that though most of the companies are satisfied with the products offered by ICICI bank but the poor customer support/ service is creating a lot of dissatisfaction among the customers, this can prove to be a serious problem as far as the market reputation of the bank is concerned and cane be a major threat in future business acquisition. 3) EVER IMPROVING NATIONALIZED BANKS: With PSU banks like SBI going all out to compete with the private banks and government giving them a free hand to do so, it can prove to be serious threat for banks like ICICI.

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CHAPTER- 13
STUDY OF CUSTOMERS SATISFACTION OF ICICI BANK, CBD BELAPUR, NAVI MUMBAI 13.1 CUSTOMER SATISFACTION
As organizations become increasingly focused and driven by demand the need to get customer loyalty and retain their loyalty is critical. Customer satisfaction is the most effective way to active customer loyalty. Customer satisfaction and customer loyalty share many traits. Customer value is customers perception of the ratio of benefits to what he\she gives to obtain these benefits. The customer value trait is framework used to understand what is that customer wants. 1. Perceived product quality 2. value based pricing 3. perceived service quality Customers are satisfied when value satisfied meets or exceed

expectations. If their exceptions of value are not met, there is no chance of satisfying them. Finding out what customer wants however difficult and complex process. To be able to create and deliver customer value, it is important to understand its components. The benefits customers expect

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are shaped primarily by how they perceive product and service quality and whether or not their perceptions are valid. Customers are product and tangible service attributes as indicators of quality often enough cannot be observed directly. Unfortunately customers dont know to draw a distinct line between product and service and quality. Customers tend to combine product and service attributes together as a part of a total package to which they attach some individual perceived value. Most companies products fall somewhere between pure product and pure service. Managers incharge decide which attributes or tangibles or more important than other according to the needs of their customers. On the risk side of the education, the customers perception and exceptions become the determining factors. Transaction price, life cycle costs and the actual degree of the risk being taken constitutes the three components involved in the risk of buying. The actual price being paid for the product or service at the time of purchase represents the transaction cost. Life cycle costs are the total cost of ownership, which includes operating and service expenses.

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13.2 IMPORTANCE OF CUSTOMER SATISFACTION IN THE ORGANIZATION

With the increase in customers demand and competition it has become lot more importance at base your entire company on customer service. When doing this one must first realize that every member of your organization play an active role in customer service. This includes both external and internal customers within your company. In these organizations, top management frequent contacts with external customers. The top management uses consultative participative and supportive management styles to get through the customers. The staff focuses on of its attention on satisfying the customers need. According to Michel N. Bamber CEO, of Marks and Associates Business Growth Specialist, there are six critical steps in establishing and maintaining quality customer service viz: 1) Senior management commitment 2) Measurement and feedback 3) Communication and training 4) Core standards 5) Customer friendly system 6) Reward and recognition

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These six stages can be applied to any company in growth stage at its life cycle. The process of building your company around customer service is ongoing and no matter and how good one quality of.

13.3 CUSTOMER SATISFACTION AND LOYALTY

Customer satisfaction is worthless; this statement was made by Jeffery Gitomer, in his recent book Customer Satisfaction Is Worthless, Customer Loyalty Is Priceless. Gitomer researches and examines the differences between customer satisfaction and loyalty. According to him, loyal customers are happy with their purchase that, they will proactively refer someone to you. The customer walks away with feeling of WOW! People everywhere in todays business world are trying to figure out whats more important customer satisfaction or customer loyalty. Both, practitioners and academics understand that customer loyalty and satisfaction both are linked in extricable. Even through, loyal customer is most typically satisfied; satisfaction does not always translate into loyalty. Marketing concept has been designed by product and service providers in an effort to maximize customers satisfaction. Reported date in 1993 showed that customers satisfaction accounted for 1/3 of revenue received by largest US Research firms. Recently there has been a shift in a research dynasty from satisfaction to loyalty. People are starting to see satisfied customers as being only mediocre.

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Even through satisfaction and loyalty are linked together and loyal customers seen typically satisfied, satisfaction still represents and unreliable precursor to loyalty. As result of this, Oliver raises two questions. 1) What aspect of the satisfaction response has implications for loyalty? 2) What fraction of the loyalty response is due to this satisfaction component? For these question satisfaction and loyalty must be clearly defined in the post satisfaction has been defined as an evaluation or the perceived discrepancy between prior expectations and actual performance of the product. Recent definition of satisfaction according to Oliver is that satisfaction is the consumer sense that consumption moved out comes again a standard of pleasure versus displeasure. All these concepts combine provide the basic model customer value. Customers value the products or services more if the expected benefits seem greater than the expected risks being taken. If expected benefits do not overweight the expected risks, this customer will perceive the product to have a low customer value.

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13.4 DATA ANALYSIS AND INTERPRETATION

1) Are you satisfied with the Anywhere Banking facility provided by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 89 11 100

Interpretation:

From survey of various customers, it comes to know that nearly 90% customers are satisfied with the anywhere banking facility provided by ICICI bank while others are unsatisfied with this facility.

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2) Are you satisfied from the facilities provided with branches of ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 91 09 100

Interpretation:

From survey of various customers, it comes to know that nearly 90% customers are uses the branches facility of ICICI bank while others are not interested.

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3) Are you satisfied with the Internet Banking facility provided by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 74 26 100

Interpretation:

From survey of various customers, it comes to know that the customers which have demat account, which is the businessmens, mostly they use the Internet Banking facility.

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4) Are you satisfied with the Mobile Banking facility provided by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 69 31 100

Interpretation:

From survey of various customers, it comes to know that nearly 70% customers are satisfied with the mobile banking facility provided by ICICI bank while others are gives less response.

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5) Are you satisfied with the ATM facility provided by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 94 06 100

Interpretation: From survey of various customers, it comes to know that nearly 90% customers are satisfied with the anywhere banking facility provided by ICICI bank while others are unsatisfied with this facility.

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6) Are you satisfied with the Phone Banking facility provided by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 64 36 100

Interpretation:

From survey of various customers, it comes to know that nearly 65% customers are satisfied with the phone banking facility provided by ICICI bank while others are unsatisfied with this facility.

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7) Are you satisfied with the Bank @ Home facility provided by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 54 46 100

Interpretation:

From survey of various customers, it comes to know that the customers which have no time to come in bank, these customers mostly use this facility.
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8) Are you satisfied with the various deposits offered by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 83 17 100

Interpretation: From survey of various customers it comes to know that, above 80% customers are give response to various deposits in ICICI bank.

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9) Are you satisfied with the various loans offered by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 79 21 100

Interpretation:

From survey of various customers, it comes to know that the maximum customers are takes the various loans from ICICI bank.

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10) Are you satisfied with the various cards of ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 86 14 100

Interpretation:

From survey of various customers, it comes to know that the nearly about 85% customers are satisfied with the various cards offered by ICICI bank.

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11) Are you satisfied with the Investment in ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 76 24 100

Interpretation:

From survey of various customers, it comes to know that the maximum customers are give response to investment in ICICI bank.

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12) Are you satisfied with the Demat product offered by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total 71 29 100

Interpretation:

From survey of various customers it comes to know that, above 70% customers are using this product.

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13) Are you satisfied with the NRI Service offered by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total (%) 64 36 100

Interpretation:

From survey of various customers, it comes to know that the customers are give partially less response to NRI Service from other products of ICICI bank.

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14) Are you satisfied with the Private Banking facility offered by ICICI bank?

Sr.No. 1 2

Response Yes No Total

Total (%) 56 44 100

Interpretation:

From survey of various customers, it comes to know that the customers are give less response to private banking from other products of ICICI bank.

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15) Your Customers satisfaction towards various services provided by ICICI Bank.

Sr.No. 1 2 3

Response Highly satisfied Satisfied Not satisfied total

Total (%) 59 32 09 100

9% 32% 59%

Highly satisfied Satisfied Not satisfied

Interpretation:

From the survey it is found that the customers which are the businessmen who have less time to their banking, they use the services like bank @ home, internet banking, mobile banking. Nearly about 90% customers are satisfied with the services provided by the ICICI bank.

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16) Overall satisfaction towards ICICI Bank.

Sr.No. 1 2 3

Response Highly satisfied Satisfied Not satisfied Total

Total (%) 51 38 11 100

11% 38% 51%

Highly satisfied Satisfied Not satisfied

Interpretation:

Overall analysis of customers satisfaction towards financial products and services especially in the Bund Garden branch of ICICI bank, 51% customers disclosed their full satisfaction, whereas, others are partially satisfied.

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13.5 FINDINGS
From the details of the study, we can enumerate the observation of the project report i. e. customers satisfaction towards the ICICI Bank, Branch CBD Bealapr, Navi Mumbai in the form of finding as below. The ICICI Bank provides better customer service comparing to the other banks. The bank has personal touch and affection towards the customers. In this current dynamic well developed world, computerization has become necessary and bank has done computerization. The rate of interest in satisfactory according to the market conditions. Nearly about 90% customers, felt satisfied with the service. Most of the respondents were satisfied about the financial products of ICICI bank. The marketing system was also found to be satisfactory to the most of the respondents. Most of the customers like to make relationship with the bank nearer to them

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13.6 SUGGESTIONS
Though the ICICI Bank is doing well and have a progressive trend, some suggestions are given below to make the bank completely eligible to satisfy customers, investors, depositors, staff and the whole bank and for the overall success of the private sector. 1) The bank has to increase the rates on deposits for the stability in the competition of the market. 2) The bank should try to open ATM facility in the rural areas for the customers, which is mostly necessary for todays well developed world. 3) The bank has to increase agriculture loan facilities with minimize the rate of the interest. 4) Awareness in certain financial products has to be improved.

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13.7 CONCLUSION

In the wound up the study, I come to conclude that, financial products of the ICICI bank are good one. As well as the service providing facilities of the ICICI bank is better than the other private sector banks. At ICICI Bank utmost importance is given to customer retention. ICICI has been a successful in capturing the retail market. Now with the increase in the competition it is trying to maintain the relation with its old customers along with gaining the new ones. ICICI Bank holds a large market share when we talk about the private sector. Moreover they are working for customer satisfaction. Working project on ICICI Bank was a great experience. The project gave me a good insight into the basic management concepts and also gave me an opportunity to gain awareness towards the complicated issue of customer relationship management. A complete marketing this word has a great importance in organization thats why apart from job the other essential marketing is also given to the employees like Bank @ Home, NRI services etc.

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CHAPTER- 14
14.1 ANNEXURE COPY OF CREDIT CARD STATEMENT

QUESTIONNERY

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CUSTOMER SATISFACTION SURVEY OF ICICI BANK AT BELAPUR BRANCH

NAME: AGE: SEX:

PLEASE TICK IN APPROPIATE BRACKETS ACCORDING TO YOUR VIEWS 1) Are you satisfied with the Anywhere Banking facility provided by ICICI bank? YES NO 2) Are you satisfied from the facilities provided with branches of ICICI bank? YES NO 3) Are you satisfied with the Internet Banking facility provided by ICICI bank? YES NO 4) Are you satisfied with the Mobile Banking facility provided by ICICI bank? YES NO 5) Are you satisfied with the ATM facility provided by ICICI bank? YES NO 6) Are you satisfied with the Phone Banking facility provided by ICICI bank? YES NO 7) Are you satisfied with the Bank @ Home facility provided by ICICI bank? YES NO 8) Are you satisfied with the various deposits offered by ICICI bank? YES NO 9) Are you satisfied with the various loans offered by ICICI bank? YES NO 10) Are you satisfied with the various cards of ICICI bank? YES NO 11) Are you satisfied with the Investment in ICICI bank? YES NO 12) Are you satisfied with the Demat product offered by ICICI bank? YES NO 13) Are you satisfied with the NRI Service offered by ICICI bank? YES NO 14) Are you satisfied with the Private Banking facility offered by ICICI bank? YES NO 15) Your overall satisfaction towards various services provided by ICICI Bank. HIGHLY SATISFIED SATISFIED NOT SATISFIED 16) Your Overall satisfaction towards ICICI Bank. HIGHLY SATISFIED SATISFIED 155 NOT SATISFIED

14.2 BIBLIOGRAPHY
NEWS PAPERS, JOURNALS, MAGAZINES, REPORTS & BOOKS: The Economic Times, Times Of India & Business Standard Journal of Banking Information Technology and Management (Vol.5 Number 1 January-June 2008 RDRF) The Journal-Tackling the key issues in banking and capital markets, PWC,April 2008 India's Best Banks-2008 (India Today), Dec 2008 The Boston Consulting Group, Retail Banking: Facing The Future, Nov 2008 World Retail Banking Report, 2008, Capgemini, ING Group, EFMA. ICICI Banks Annual Reports 2007-08 Service Marketing { Valarie A. Zeithaml and Mary Jo Bitner} Principles Of Retail Management by Rosemary Varley & Md. Rafiq Banking & Its Credit Creation C.N. Reddy Banking Products And Services by Indian Indian Institute Of banking & Finance WEB-SITES & LINKS: www.ft.com www.researchandmarkets.com/reports www.reuters.com/article/pressRelease www.allbusiness.com/services/business-services www.icicibank.com
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