RETAIL BANKING

INTRODUCTION
We dont want satisfied customerswe want delighted customers. It is the new
marketing mantra today. The same applies to banking as well. Retail banking and Rural
banking were once considered as taboos by the leading foreign and domestic banks. ut
cut!throat competition" inno#ation and ad#anced technology ha#e altogether changed the
faced of banking sector. $ow all banks ha#e recogni%ed the importance of retail banking.
Retail banking is that part of a bank that offers products and ser#ices primarily to
indi#idual customers" professional" self!employed indi#iduals or small businesses. The
focus is on creating products and ser#ices that meet the needs of the target customers and
are profitable for the bank as well.
The approach to retail banking products is more is more on a mass production
basis wherein all risk and operations are based on and geared to cater to a large number
of customers. This is therefore" significantly different from corporate banking or
wholesale banking where focus is on large si%ed customer accounts rather than large
numbers of customers.
&nderstanding retail banking will help in ser#icing your customer better as it
would gi#e you a perspecti#e and insight into how such products are structured and
specific re'uirements for each set of products. This would help you ad#ice your customer
in a more informed manner besides making you a more informed consumer.
With the ad#ent of (T)s" *(nytime banking has come into picture. +atellites
and telecom networks across the world ha#e made *(nywhere banking possible. $ow it
is the turn of *(nyhow banking" and the leading bank of the ne,t century will be the one
which has all these three (s.
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RETAIL BANKING

WHAT IS RETAIL BANKING?
Retail banking is howe#er- 'uite broad in nature it refers to the dealing of commercial
banks with indi#idual customers" both on liabilities and assets sides of the balance sheet.
.i,ed current/sa#ings accounts on the liabilities side- and mortgages" loans 0e.g. personal"
housing" auto and educational1 on the assets side are the more important of the products
offered by banks. Related ancillary ser#ices include credit cards" or depository ser#ices.
Todays retail banking sector is characteri%ed by three basic characteristics.
)ultiple products 0deposits" credit card" insurance" in#estments and
securities1.
)ultiple channels of distribution 0call center" branch" internet and kiosk1-
and
)ultiple customer groups 0consumer" small business" and corporate1
DEFINITION:
Retail anking +er#ices2!
Banking servies !r"vi#e# $" in#ivi#%a& 'e'(ers ") $*e !%(&i as "!!"se# $" $*"se
!r"vi#e# $" (%sinesses an# ins$i$%$i"ns+
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RETAIL BANKING

SWOT ANAL-SIS OF RETAIL BANKING
STRENGTH:.
1/ E'erging as a ne0 gr"0$* #river:
.or se#eral years banks #iewed consumer loan with skepticism. 3ommercial
loans denominated the loan portfolio as they generated high net yield with low
credit risk. 3onsumer loans on the other hand in#ol#ed smaller amount" large staff
to handle account and high default rates. 4#en regulators across the glob ha#e not
encouraged retail banking until now till #ery recently. 5owe#er " o#er past few
years" fierce competition among the lowered the spread and profitability an
commercial loan with deregulation and increase in consumer loan rate" the risk
ad6usted return in retail sector ha#e e,ceed the return on consumer loan.
,/ 1r"vi#es #iversi)ie# asse$ !"r$)"&i":
Retail banking includes comprehensi#e range of financial product and ser#ices
i.e. deposit product" auto loan" car loan" home loan" loan against e'uity shares"
mortgage loan" payment of bills" debit card" credit card" etc. These product
pro#ide an opportunity for banks to di#ersify the asset portfolio with higher profit
and relati#ely lower $7(.
2/ I'!r"ves s$an#ar# ") &iving:
8ue to ma6or economic reforms in Indian economy there has been an increase in
per capita income which has led to change in life style and growing urbani%ation
ha#e made the Indian population rise from obli#ion and resurge in modern era on
this front role of retail banking arises. Retail banking pro#ide all such product and
ser#ices0home loan" car loan" personal loan" etc1 to its customer which are
re'uired by them to maintain change in there life style in short it helps in
fulfilling aspiration of people through affordable credit.
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RETAIL BANKING

3/ CR4 $""&:
The indi#idual customer is deity of bank in retail banking segment . (ll product
and ser#ices are designed to satisfy need and wants of its customer. (s customer
in retail banking belong to different economic" cultural" educational" and social
background there demand is also #aried. It is acceptance of the banking product
and satisfaction of customer that yield profit in this segment. 5ence customer
+er#ice and 9uality implementation through use of 3R) tools will help banks
+uccess in this competiti#e world of retail banking.
5/ Inn"va$ive !r"#%$ #eve&"!'en$ :
The scope for de#elopment in financial ser#ices is unlimited. In retail banking
ball is in the court of bankers where they approach the customer finds out there
financial need and problem" designs the product and ser#ices" market them and
finally sells them to satisfy its customer.
6/ E"n"'ies ") sa&e:
Retail banking enables banks to utili%e e,isting capacities and reaching wider
population of customer. anks can get the benefits of information and transaction.
In process of e,tending #ariety of ser#ices" banks are ac'uiring enormous amount
of customer information .if this information is systematically recorded " banks can
efficiently utili%e this information in order to e,plore new segment and to cross
sell new ser#ices.
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RETAIL BANKING

WEAKNESS:.
1/ Av"i#s "r!"ra$e se$"r 2
Retail banking a#oids corporate sector totally which is the backbone of Indian
economy. )ain reason put forth or this is decline in corporate borrowing .
5owe#er bank can take certain step to manage there corporate clients such as
lower arte credit" higher amount of loan etc. )anaging corporate client is more
easier as they ha#e well defined financial policy and pro6ect and they concentrate
on product and ser#ices offered rather than on 3R) of bank unlike indi#idual
clients.
,/ 4arke$ing 7In$erna& an# E8$erna&/:
Retail banking re'uires strong marketing strategies to be adopted by bank both
internal and e,ternal . under retail banking segment top le#el management need
employees ds to introduce product properly to its employees because if the
employees are not aware regarding the product they are offering that product will
fail howe#er effecti#e the product is also bank re'uire to spend lot on its
marketing of product to general public because if public is not aware regarding
the product and ser#ice how will they opt for it . all this increases the cost and
time re'uired to introduce the product in the market which can reduce or make the
product out dated immediately on its arri#al.
2/ C*anges in $e*n"&"g9:
.uture of retail banking lies in the hand of IT . :arious It solution used by banks
such as 4!banking" phone banking " (T) le#erage the retail banking product and
ser#ice offered by banks. ut this has weekend the segment some how . if banks
are not able to adobt the latest technology it may pull back the growth of bank
also this technology re'uires lot of capital in#estment and if at all the technology
fails then it may shake the customers confidence on bank and bank may land up in
loosing its customer.
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RETAIL BANKING

3/ Re#%es $*e !r")i$a(i&i$9:
It is claimed that retail banking increases o#erall profitability of the bank but in
reality this is not the case because managing wide range of product and ser#ice
re'uires high 'uality technology " large number of staff and all this re'uires high
capital in#estment which reduces banks profitability.
5/ C"."r#ina$i"n a'"ng vari"%s #e!ar$'en$:
+uccess of retail banking is not the result of one department but is result of
#arious departments together. If there is lack of co!ordination among #arious
department of the bank then howe#er strong and effecti#e the may be the product
it will fail. +uppose if the front office is successful in attracting the customer but
back office is not able to e,ecute the deli#ery of product or ser#ice on time then
bank may land up loosing the customer although its 3R) was effecti#e.
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RETAIL BANKING

O11ORTUNITIES:.
1/ S"!e )"r inn"va$i"n:
&nder retail banking as banks try to pro#ide all those product and ser#ices
which are desired by its customer this segment has more scope for inno#ation
banks can keep on modifying its products as per the market demand which helps
them from not being out dated .
,/ Rise in !er a!i$a in"'e:
The rise of the Indian middle class is an important contributory factor in this
segment. The percentage of middle to high!income Indian households is e,pected
to continue rising. The younger population not only wields increasing purchasing
power" but as far as ac'uiring personal debt is concerned" they are perhaps more
comfortable than pre#ious generations. Impro#ing consumer purchasing power"
coupled with more liberal attitudes toward personal debt" is contributing to India;s
retail banking segment.
2/ E"n"'i gr"0$*2
Retail banking has immense opportunities in a growing economy like India. In the
RI3 Report India is stated as an economic superpower. (ccording to (. T.
<earney" a global management!consulting firm" recently identified India as the
;second most attracti#e retail destination; of => emergent markets. 5ence retail
banking has high opportunities in India.
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RETAIL BANKING

THREATS:
1/ Large #is(%rse'en$ ") &"ans:
The boom in the field of retail banking and the intense composition among the
to increases the customer base has resulted in the large disbursement of
customer loans" loans on credit cards" auto loans" educational loans etc. on easy
terms without much scrutiny this has brought with in an increase in the number
of cases of default in loan repayment thus increasing the banks $7(s.
,/ Iss%e ") %s$"'ers #igni$9:
anks ha#e been adopting carrot and stick policy by renegotiating loan terms
where the default is genuine and handing o#er reco#ery to third parties where
default is willful. )ost of the time" the third parties or e,ternal agents are not
trained to handle the loan repayment process. 5ence" they restore to strong arms
tactics with defaulting customers. )any cases of harassment and in#asion of
pri#acy ha#e been reported by the affected parties. +uch instances may hamper
the image and corporate #ision of the bank in near future.
2/ Iss%e ") %s$"'er !riva9:
3ustomer pri#acy is also affected in another way wherein customer ser#ice
representati#es of the banks ring up customers at any times at their places of
work" informing them about new products and ser#ices. This may cause
incon#enience to busy customers. It is also obligation on part of the banks not to
share the pri#ate information from the records of the customers with outside
agencies like market research groups and other ad#ertisers.
3/ IT:
The growth of IT has brought with it a number of frauds perpetrated with the
help of technology and which come under under the domain of cyber crimes.
anks are the #ictims of unscrupulous elements who ha#e in many instance
hacked banks website and stolen credit card number " pass word and other
confidential information relating to customer.
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RETAIL BANKING

NEED FOR RETAIL BANKING
7T*e U&$i'a$e Servie 1r"vi#er/
&ntil now banks were relying on financing " production based acti#ities. Retail
finance was not fa#ored by Indian banks" ut they ha#e to tune to it now with the demand
for loans from industrial sector is coming downing the past because of the economic
slowdown. (s a result banks ha#e become selecti#e in there lending acti#ities . .urther
changing demographics" a rapidly growing "middle!class" rise in disposable income "
changing life style and increasing ability of people to take credit risk are pro#iding banks
with an opportunity to shift there lending operation to retail finance.
5ence bankers ha#e been increasingly shifting to retail to increase profitability
and reduce delin'uency rates. 3ustomer shifting " cost pressure and increasing
competition are some of the other reasons .
Retailing is now fa#ored because of the better returns lesser asset 'uality
problem and low $7(. .urther it pro#ides many opportunities for credit e,pansion. It
helps banks in risk di#ersification and is important for low!cost resources mobili%ation by
banks.
.or anks" retail segment is the principal growth dri#er as they are slowly
gaining market share in the retail space. .oreign banks are securiti%ing #ehical loans to
raise off!balance sheet resources and to reduce o#erall cost of funding. .or e,ample"
ank of )uscat is taking o#er auto loans and personal loans from other banks signaling a
softer interest rate regime for consumer finance and gi#ing indication to the intensifying
competition in business.
The ob6ecti#e of the Retail ank is to pro#ide its target market customers a full
range of financial products and banking ser#ices" gi#ing the customer a one!stop window
for all his/her banking re'uirements. The products are backed by world!class ser#ice and
deli#ered to the customers through the growing branch network" as well as through
alternati#e deli#ery channels like (T)s" 7hone anking" $et anking and )obile
anking.
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RETAIL BANKING

The 58.3 ank 7referred program for high net worth indi#iduals" the 58.3
ank 7lus and the In#estment (d#isory +er#ices programs ha#e been designed keeping
in mind needs of customers who seek distinct financial solutions" information and ad#ice
on #arious in#estment a#enues. The ank also has a wide array of retail loan products
including (uto ?oans" ?oans against marketable securities" 7ersonal ?oans and ?oans for
Two!wheelers. It is also a leading pro#ider of 8epository 7articipant 0871 ser#ices for
retail customers" pro#iding customers the facility to hold their in#estments in electronic
form.
58.3 ank was the first bank in India to launch an International 8ebit 3ard in
association with :I+( 0:I+( 4lectron1 and issues the )aster debit card as well. The
ank launched its credit card business in late @>>A. y )arch @>>B" the bank had a total
card base 0debit and credit cards1 of C.@ million cards. The ank is also one of the leading
players in the merchant ac'uiring business with o#er C@">>> 7oint!of!sale 07D+1
terminals for debit / credit cards acceptance at merchant establishments. The ank is well
positioned as a leader in #arious net based @3 opportunities including a wide range of
internet banking ser#ices for .i,ed 8eposits" ?oans" ill 7ayments" etc.
.

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RETAIL BANKING

RETAIL BANKING IN INDIA
The Indian players are bullish on the Retail business and this is not totally
unfounded. There are two main reasons behind this. .irstly" 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. (t 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. .or instance" while the total outstanding Retail loans in
Taiwan is around CAE of F87" the figure in India stands at less than BE. The
comparison with the West is e#en more staggering. (nother comparison that is natural
when comparing Retail sectors is the use of credit cards. 5ere also" the potential lies in
the fact that of all the consumer e,penditure in India in @>>A" less than AE was through
plastic" the corresponding &+ figure standing at AGE.
Retail banking in India is not a new phenomenon. It has always been pre#alent
in India in #arious forms. .or the last few years it has become synonymous with
mainstream banking for many banks.
The typical products offered in the Indian retail banking segment are housing
loans" consumption loans for purchase of durables" auto loans" credit cards and
educational loans. The loans are marketed under attracti#e brand names to differentiate
the products offered by different banks. (s the has shown that the loan #alues of these
retail lending typically range between Rs.@>">>> to Rs.A>> lakh. The loans are generally
for duration of fi#e to se#en years with housing loans granted for a longer duration of AB
years. 3redit card is another rapidly growing sub!segment of this product group.
In recent past retail lending has turned out to be a key profit dri#er for banks with retail
portfolio constituting @A.B per cent of total outstanding ad#ances as on )arch @>>C. The
o#erall impairment of the retail loan portfolio worked out much less then the Fross $7(
ratio for the entire loan portfolio. Within the retail segment" the housing loans had the
least gross asset impairment. In fact" retailing make ample business sense in the banking
sector.

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RETAIL BANKING

While new generation pri#ate sector banks ha#e been able to create a niche in
this regard" the public sector banks ha#e not lagged behind. ?e#eraging their #ast branch
network and outreach" public sector banks ha#e aggressi#ely forayed to garner a larger
slice of the retail pie. y international standards" howe#er" there is still much scope for
retail banking in India. (fter all" retail loans constitute less than se#en per cent of F87 in
India #is!H!#is about =B per cent for other (sian economies I +outh <orea 0BB per cent1"
Taiwan 0B@ per cent1" )alaysia 0== per cent1 and Thailand 0AG per cent1. (s retail
banking in India is still growing from modest base" there is a likelihood that the growth
numbers seem to get somewhat e,aggerated. Dne" thus" has to e,ercise caution is
interpreting the growth of retail banking in India.

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RETAIL BANKING

AD>ANTAGES OF RETAIL BANKING
Retail anking has inherent ad#antages outweighing certain disad#antages.
RESOURCES SIDE:
Retail deposit are stable and constitute core deposit
They are interest insensiti#e and less bargaining for additional interest
They constitute the low cost for banks
4ffecti#e 3R) with the retail customer builds a strong customer base.
Retail banking increases the subsidiary business of a bank.
ASSETS SIDE:
Retail banking results in better yield and impro#e bottom line of a bank.
Retail segment is a good a#enue for funds deployment.
The consumer loan are presumed to be of lower risk and $7( perception.
5elp economic re#i#al of the nation through increased production acti#ities.
Impro#es lifestyle and fulfills aspiration of people through affordable credit.
Inno#ati#e product de#elopment.
Retail segment in#ol#es minimum marketing efforts in a demand dri#en
economy.

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RETAIL BANKING

1RESENT SENARIO
There has been a considerable growth in the retail!banking sector in India" which
makes up for about A/Bth of the o#erall bank credit. Typically" the retail banking industry
encompasses the ser#ices such as credit cards" 5ousing loans? 4ducation loans" (uto
loan" etc
Retail banking has brought in a drastic makeo#er in the o#erall banking scenario
in India. The e,ceptional impro#ement in the banking system in India is a result of strong
initiati#es taken up by both the go#ernment and pri#ate companies
( recent market research report named" Indian Retail anking +ector (nalysis 0@>>J1
published by R$3D+ pro#ides an e,clusi#e tour to the entire retail!banking industry of
India. (s per the report" )ainstream banking and retail banking ha#e become one and
the same thing for the past se#eral years now. (ppro,imately" @@E of the total
outstanding ad#ances were deri#ed from the retail portfolios of the banks in India till
)arch @>>C.
The contribution of retail banking to the o#erall banking sector has been
outstanding. Frowing at a rate of A@@E" the retail!banking sector of India managed to
reach a worth of KJL billion in the year @>>B" as per e,perts at R$3D+. The retail
banking sector in India should reach a worth of K=A> billion by the year @>A>" anticipate
the e,perts. 7rofiles of key players along with the strategies and plans adopted by them
for the growth of the industry are also talked about in it. esides discussing the present
scenario of the financial system in India the report offers a reliable prediction of the
market in the years to come.
The ratio of retail credit to net credit at the global le#el is around BE. In India" it
is interesting to note that this ratio is o#er A>E as on )arch=A" @>>@ 0+ource 2 RI"
(nnual Report 1. With the economy reforms set in motion " the country is already rated as
a ma6or hub for economic de#elopment. Increase in per capita income " change in life
style and growing urbani%ation ha#e made the Indian population rise from obli#ion and
resurge in modern era. The policy of and spent is gradually gi#ing way to spend and sa#e
concept.

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RETAIL BANKING

WHAT ARE >ARIOUS RETAIL BANKING
SER>ICES?
Retail banking includes comprehensi#e range of financial product and ser#ices i.e.
deposit product" auto loan" car loan" home loan" loan against e'uity shares" mortgage
loan" payment of bills" debit card" credit card" etc. These product pro#ide an opportunity
for banks to di#ersify the asset portfolio with higher profit and relati#ely lower $7(.
Today the most proacti#e banks ha#e entered the retail banking segment and ha#e
identified it as a principal growth dri#er.
Ca$eg"ri@a$i"n ") Re$ai& Bank servies

C"re servies Fai&i$a$ing servies S%!!"r$ing servies
7ayment ser#ices 3ash
.oreign currency
re'uirements
Tra#eller che'ue
88/bankers che'ue
IT
4.T
)aking payment at door
step
Internet banking
Telephone banking
3urrent account
and sa#ing account
(T) card
+tanding instruction
from customer for
making payments
Inter branch transfer of
fund
+afety #ault
3redit card
8ebit card
+er#ice to senior citi%en
Telephone banking
Internet banking
3on#ersion of e,cess
balance to time deposit
?oan product2
3onsumer loan
5ousing loan
3urrent account
+a#ing account
8eli#ery of loan at
promised time

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RETAIL BANKING

7ersonal loan
4ducation loan
Time deposit account Interest loan option
.le,ibility
in paying
loan
3ounseling on Real estate
market
?egal ser#ices for
documentation
43+ for payment of loan
installment
Insurance product2
?ife insurance
7ension scheme
3urrent account
+a#ing account
Time deposit
account
+afety #aults
(dditional insurance
facility for family
members.
3ounseling on post
retirement sa#ing
>ARIOUS 1RODUCT OF RETAIL BANKING

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RETAIL BANKING

1/ H"'e L"ans:
T9!es ") H"'e L"ans
There are a #ariety of home loans a#ailable2
H"'e 1%r*ase &"ans: This is basic home loan for the purchase of a new home.
E8is$ing *"'e i'!r"ve'en$ &"ans: These loans are gi#en for implementing
repair works M inno#ations in home that has already been purchased by the
borrower.
H"'e "ns$r%$i"n &"an: This is a loan gi#en for the construction of a new
home.
H"'e e8$ensi"n &"an: his is gi#en for e,panding or e,tending an e,isting home
such as adding a room or floor etc.
H"'e "nversi"n &"an: This is loan gi#en to those who ha#e financed the
present home with loan M wish to purchase another home for which e,tra funds
are necessary. The home con#ersion loan allows the borrower to transfer the

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RETAIL BANKING

e,isting loan to the new home loan" which includes the e,tra amount re'uired"
thus doing away with the need to pre!pay the pre#ious loan.
Lan# 1%r*ase L"ans: This is loan which is pro#ided to purchase land either for
construction of a home or for in#estment in land.
Bri#ge L"an: These are loans gi#en to persons who are looking to sell their
e,isting home M purchase another. The bridge loan helps finance the purchase of
the new home until the old one is sold.
Ba&ane $rans)er &"an: This is loan which allows the borrower to repay an
e,isting loan M a#ail of another loan at lower rates of interest.
Re)inane &"ans: This is a loan that is gi#en in order to repay debts incurred from
un!organi%ed sourced such as relati#es" friends etc. which may ha#e been taken to
purchase the home.
S$a'! D%$9 L"an: This is a loan sanctioned to pay the stamp duty amount
necessary to be paid on the purchase of a home.
L"an $" NRIs: These are similar to loans gi#en to domestic borrowers but are
specifically ear!marked loans to $RIs as the repayment is usually from foreign
currency sources.
E&igi(i&i$9 $er's )"r *"'e &"ans
The primary concern of a housing finance company is to determine the loan
amount that the borrower is comfortably able to repay. The repayment capacity is
determined by taking into consideration factors such as income" age" 'ualification"
number of dependents" spouses income" assets" liabilities" stability M continuity of
occupation M sa#ings history.

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RETAIL BANKING

D"%'en$a$i"ns reA%ire'en$s B !re.a!!r"va&
(t the time of application for a home loan" the housing finance company would
ask for the following common documents2
In case the borrower is a salaried employee" proof of income i.e. salary
certificate/slips M T8+ certificate 0.rom AJ1 of the borrower M co!applicant" if
any.
In case the borrower is self!employed- details of business track record M a copy of
the audited financial statement of the last two years of the borrower M co!
applicant" if any.
3opy of bank account statement for the last J months.
3opy of the latest credit card statement.
7assport si%e photograph.
+ignature #erification from the borrowers banker.
7roof of residence.
&pon receipt of all the documents along with the duly completed application
form" the housing finance company recei#es the details M communicate its decision
regarding appro#al of he loan application.

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RETAIL BANKING

D"%'en$a$i"n reA%ire'en$s B !"s$.a!!r"va&C #is(%rsa& s$age:
(fter a loan application has been appro#ed M at the time that the borrower re'uires
the funds for payment" the following documents are re'uired to be furnished2
A. (llotment letter
@. 7hotocopies of title deeds
=. (greement to sell
C. $on!encumbrance certificate
B. (ppro#ed plans M clearance certificates along with estimates if the property is
self!constructed.
Re!a9'en$ 1eri"#
Repayment options range generally from B to AB years. ( few housing finance
companies also offer a @>!year repayment period" usually at a higher rate of interest.
$RIs can a#ail of a housing loan for a ma,imum period of L years. Repayment is usually
taken in 4'uated )onthly Installments 04)I1 by way of post!dated che'ues. This fi,ed
money that is repaid to the housing finance company e#ery month comprises of both
interest M principal repayment.
C"&&a$era& Se%ri$ies
5ousing finance companies usually take securities as collateral in addition to the
mortgage of the property being purchased. These collateral securities could be guarantees
from one or two persons 0guarantors1" assignment of life insurance policies" shares" units
of &nit Trust of India" bank deposits M other securities. These securities are taken so as to
ensure that the loan is repaid in the e#ent that the borrowers normal source of income is
no longer a#ailable.
+ecurity for the loan is a first mortgage of the property to be financed" normally
by way of deposit of title deeds. ?i'uidation of the mortgaged property is usually the last
resort of the housing finance company for repayment of the loan.

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RETAIL BANKING

In$eres$ Ra$e Ca&%&a$i"n
In India" the interest on home loans is usually calculated on )onthly Reducing or
yearly reducing balance.
(. )onthly Reducing alance2 The principal on which the interest is paid reduces
e#ery month as the 4)I is paid.
. (nnual Reducing alance2 The principal is reduced at the end of the year. This
method of calculating interest is more e,pensi#e as the borrower continues to pay
interest on a certain of the principal" which has already been paid back to the
housing finance company by way of the 4)I.
The effecti#e interest rate is appro,imately >.LE higher than the monthly
reducing balance method.
Fees D C*arges
5ome loans are usually accompanied by some or all of the following charges2
Interest ta, which is payable on the interest paid on the home loan M not on the
principal. This a, is sometimes included in the rate of interest on the home loan.
7rocessing charge is a fee payable to the lender on applying for a loan it could be
a fi,ed fee or a percentage of loan amount applied for M sanctioned. These
charges are usually to co#er administrati#e e,penses incurred by the housing
finance company in processing a loan application.
7repayment penalties are sometimes charged when a loan is repaid before the end
of the agreed duration of the plan. This usually ranges between >.BE M AE of the
amount being repaid.
3ommitment fees are sometimes charged when a loan is not a#ailed of within a
stipulated period of the loan application being processed M sanctioned.

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RETAIL BANKING

)iscellaneous charges could include documentation or consultant charges.
Ta8 Bene)i$s
Ta, benefits are a#ailable under2
A. 4,emption under section GG of IT act 0Rebate1 for repayment of principle up to Rs.
A>">>>.
@. 8eduction under section @C of IT act for interest payment on housing loans up to Rs.
AB>">>> 0in respect of self!occupied house property ac'uired or constructed with capital
borrowed on or after A.C.NN" M ac'uisition or construction is completed within = years
from the end of the financial year in which the capital borrowed1. Ta, benefit will defer
in case of the property has been leased out.
,/ A%$" L"ans:
T9!es ") A%$" L"ans
(uto loans or car loans could be of the following nature2
Ne0 ar &"an: This is most opted for as it pro#ides a simple loan for purchasing a
new car.

,,
RETAIL BANKING

Use# ar &"an: This is loan facility offered on second hand car purchases. This
in#ol#es #aluation of the car being purchased by way or certified #alues of used
cars.
A%$" Re)inane: This is a loan facility gi#en on an e,isting car owned by the
borrower pro#ided that the car is not hypothecated to any financier.4ligibility
terms .or (uto ?oans
Typically most financiers ha#e similar eligibility criteria for auto loans. The age
of the borrower should be between @!BG years. (nnual income should be abo#e Rs.
J>">>>. (dditional information is taken with the loan application form.
The si%e of the loan amount sanctioned depends on the cost of the #ehicle" the
type of car 0standard or 7remium1 M the percentage financing. &sed cars get lower is
offered. ( new car can get upto N>E financing. &sed cars get lower financing.
8epending on the model M its resale" the amount in used cars like the )aruti G>> could
go up.
D"%'en$a$i"ns ReA%ire'en$s B 1re.A!!r"va&
In case the borrower is a salaried employee" proof income i.e. salary
certificate/slips M T8+ certificate 0.rom AJ1 of the borrower M co!applicant" if
any.
In case of borrower is self!employed" details of business track record M a copy of
the audited financial statements of the last @ years of the borrower M co!applicant.
If any.
3opy of bank statements for the last J months.
3opy of the latest credit card statement.
7assport si%e photograph.
+ignature #erification from the borrowers bank.
7roof of residence.

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RETAIL BANKING

&pon receipt of all the documents along with the duly completed application
form" the car finance company/bank re#iews the details M communicates its decision
regarding appro#al of the loan application.
D"%'en$a$i"n reA%ire'en$s B 1"s$ a!!r"va&C#is(%rsa&
(part from the loan documentation the borrower is re'uired to submit
photocopies of the following2
A. Registration 3ertificate 0R3 book1.
@. Insurance policy.
=. Road transport ta, papers.
The R3 book is usually endorsed as hypothecated to the financier until full
repayment of the loan amount" when the hypothecation is cancelled. (fter the last
payment is made the bank issues a $D3 M form =B to cancel the hypothecation on the
car. This is submitted to the RTD for updating the R3 book. The insurance company also
re'uires an $D3 o make the necessary changes on the insurance policy.
Re!a9'en$ 1eri"#
&sually 3ar financing is a#ailable from A!B years. +ome financiers offer longer
tenure loans up to L years. The tenure is usually dependent on the brand of car being
purchased. ( super premium car such as the )ercedes would be restricted to tenure of =
years only. (s tenure increases the 4)I reduces but the total interest outflow is higher.
+ome financiers allow a facility for back loading of the 4)I where in the 4)I
payments are lower initially M increases as the borrowers income increases.
C"&&a$era& Se%ri$ies
Typically there is no re'uirement for any additional collateral to be pro#ided. The
R3 book is endorsed for hypothecation to the financier which by itself is ade'uate
security for the financier.

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RETAIL BANKING

In$eres$ Ra$e Ca&%&a$i"n
The interest is usually charged on a rate or on a reducing balance basis which
could be daily" monthly" 'uarterly on annually.
The rack rate is the rate that he financier offers upfront. These are usually
negotiable based on simple negotiating skills or on a credit profile which satisfies most of
the financiers re'uirements immediately. +ome banks offer a deduction based on
relationship pricing criteria i.e. if the borrower has any other relationship with the bank
by way of deposits" credit cards or other loans with a good track record of repayment.
Fees D C*arges
There are fees M charges in addition to interest rate. 7rocessing fees" ad#anced
4)Is if applicable" stamp charges" registration charges M insurance ha#e to be paid prior
to the transaction being completed.
)ost financiers do not co#er insurance M registration. The price of the car is taken
to be the e,!showroom price" which does not include insurance M registration charges.
Ta8 Bene)i$s
+alaried employees cannot a#ail of ta, benefits on the loan taken for purchasing a
car. 5owe#er self employed persons can a#ail of ta, benefits on depreciation as well as
on the interest paid on the amount borrowed for the purchase of the #ehicle.
2/ T0" 0*ee&er D "ns%'er #%ra(&e &"an:

Two wheeler loans are gi#en for purchase of mopeds" scooters M motor!cycles.
3onsumer durable loans co#er purchase of durables such as refrigerators" washing
machines" )usic systems" camcorders M 8:8 7layers.

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RETAIL BANKING

E&igi(i&$9 Ter's )"r T0" W*ee&ers D "ns%'er D%ra(&e L"ans
roadly" the eligibility criteria are2
A. etween @A years M J> years
@. )inimum gross monthly income of Rs.C"B>> for salried employees.
=. )inimum annual income of about Rs. CB">>> for self!employed indi#iduals.
The loan amount sanctioned range from Rs. L.B>> to Rs. N>>>> for two wheeler
loans. 3onsumer durable loans are usually of a smaller amount M #ary as per the nature
of the durable being purchased.
)ost of the financiers re'uire a down payment to be made by the borrower
towards the purchase of the two!wheeler or consumer durable.
D"%'en$a$i"n ReA%ire'en$s
In case the borrower is a salaried employee" proof on income that is salary
certificate/slips M T8+ certificate 0.rom AJ1 of the borrower M co!applicant" if
any. 5owe#er" the stringency of his re'uirement is wai#ed in most cases.
In case the borrower is self!employed" details of business track record M a copy of
the audited financial statements of the last @ years of the borrower M co!applicant"
if any. These documents are not mandatory in most cases.
+ignature #erification from the borrowers banker/7roof of identity.
7roof of residence.
&pon receipts of all the documents along with the duly completed application
form" the finance company/bank re#iews the details M communicates its decision
regarding appro#al of the loan applications.
7ost!dated che'ues are collected from the borrower as part of the documentation
re'uirement.

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RETAIL BANKING

Re!a9'en$ 1eri"#
Repayment of two wheeler loans are usually o#er J to =J months" whilst those of
consumer durable loans are between A@ to =J months.
C"&&a$era& Se%ri$ies
&sually no collateral security is re'uired in two wheeler M consumer durable
loans.
In$eres$ Ra$e Ca&%&a$i"n
Interest is charged at a flat rate M range between L.BE M AB.@BE for two wheeler
loans. The rates on consumer durable loans are #aried depending on the seasonality of the
product being sold.
Fees D C*arges
)ost two!wheeler financiers charge a flat processing fee of @E or Rs. B>>
whiche#er is higher.
The additional charges on consumer durable financing are similar to that of the
two!wheeler charges" the difference being that there are slabs of loan amounts of
appro,imately of upto Rs. A>">>> between Rs. A>">>> M Rs. @>">>> M abo#e Rs. @>">>>
M fees are based on these amounts.
Ta8 Bene)i$s
+alaried employees cannot a#ail of ta, benefits on the loan taken for purchasing a
two wheeler. 5owe#er" self employed persons a#ail of ta, benefits on depreciation as
well as on the interest paid on the amount borrowed for the purchase of the #ehicle of
durable if it is for professional purposes.

,:
RETAIL BANKING

3/ 1ers"na&CUnse%re# L"ans:
7ersonal loan is an all!purpose loan for which the end use can be to meet any
personal re'uirements of the borrower.
E&igi(i&i$9 Ter's F"r 1ers"na&CUnse%re# L"ans
Typically" the take home salary has to be o#er Rs. G">>>. The borrower should be
o#er @A years of age M less than BG years old.
?oan eligibility is determined primarily by the borrowers capacity to repay i.e.
his current earnings are the primary determinant. The bank usually tries to impro#e that
the 4)I does not e,ceed =>!C>E of the net take home salary. The borrowers place of
residence M work place M employment track record are gi#en higher priority than in
secured loans.
The ma,imum amount of loan sanctioned is usually in the range of about normal
household e,penses M outflows such a s any 4)I on other loan etc. M regular outflows.
)ost banks lend anywhere between Rs.AB">>> to Rs.A> lakhs towards personal loans.
D"%'en$a$i"ns ReA%ire'en$s B 1re.A!!r"va&
In case the borrower is a salaried employee- proof of income i.e. salary
certificate/slips M T8+ certificate 0.orm AJ1 of the borrower M co!applicant" if
any.
In case the borrower is self!employed2 details of business track record M copy of
the audited financial statements of the last @ years of the borrower M co!applicant"
if any.
3opy of bank account statements for the last J months.

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RETAIL BANKING

3opy of the latest credit card statement.
7assport si%e photograph.
+ignature #erification from the borrowers banker.
7roof of residence.
&pon receipt of all the documents along with the duly completed application
form" the bank re#iews the details M communicates its decision regarding appro#al of the
loan application.
D"%'en$a$i"n ReA%ire'en$s B 1"s$ a!!r"va&CDis(%rsa&
7ost appro#al" the bank collects post!dated che'ues for the full tenure of the loan
prior to disbursal along with the collateral securities" if any.
Re!a9'en$ 1eri"#
7ersonal loans are usually short tenure loans up to ma,imum of three years. In
rare cases some banks offer a B!year repayment option. There is usually a J months lock
in period in either case.
C"&&a$era& Se%ri$ies
&nsecured loans are by definition unsecured. They are designed for people who
dont want to undergo the hassles of pro#iding security or hypothecation or are willing to
pay the higher price of such loans. $o collateral or guarantee is usually taken by the
bank. 5owe#er" in case of software professionals" some banks are ask for a guarantor or a
co!applicant.
In$eres$ Ra$e Ca&%&a$i"n
Interest rates currently #ary between AB to =>E. ?onger tenure loans are usually
priced higher. (s also loans to persons with a higher risk profile.

,<
RETAIL BANKING

Fees D C*arges
The usual fees M charges include2
7rocessing fees" which could be about A!=E of the loan amount being sanctioned.
.oreclosure or prepayment penalty ranges between @!=E of the amount being
repaid.
+ome banks also charge a commitment fee of appro,imately AE of the loan
amount" which is le#ied in case the sanctioned loan is not a#ailed of within
stipulated time duration.
Ta8 Bene)i$s
Ta, benefit on personal loans are not a#ailable to salaried employees. 5owe#er"
self employed persons may a#ail of ta, benefits on the interest amount paid if the loan is
for professional purposes.
5/ E#%a$i"na& &"an:

4ducational loan usually co#er a #ariety of courses. It pays for the cost of tuition
fees" hostel fess" mess fees M e,amination fees. The cost of books" e'uipment M other
instruments re'uired by the student are also co#ered. +ome financiers co#er the cost of
airfare if the studies are being undertaken o#erseas.

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RETAIL BANKING

E&igi(i&i$9 Ter's )"r E#%a$i"na& L"ans
The terms for eligibility for an 4ducational ?oan #ary from bank to bank. The
primary re'uirement is that the student should ha#e got admission to the course that he is
seeking the loan for. )ost banks also specify an age criteria such as AJ!@J years etc. The
past academic track record of the student would also be considered.
The ma,imum loan amount #aries by indi#idual banks as well as the institution
that the student would pursue his/her academics. It could be for studies abroad. The
repayment capacity of the student M in se#eral cases" the parents M/or guardians is of
utmost concern to the bank. &sually no margin money is re'uired for loans uptoRs.C
?akhs. .or loans in India M ABE for studies in abroad" to be borne by the applicant. The
parents income would also be considered by most banks.
D"%'en$a$i"n ReA%ire'en$s B 1re.A!!r"va&
The documentation re'uirements would depend on the specific re'uirements as
per the policy of the bank gi#ing the loan. 5owe#er" a confirmation of admission
by the educational institution is necessary. Dther documents would include.
3opy of bank account statements for the last J months.
7assport si%e photograph.
+ignature #erification from the borrowers banker.
7roof of residence.
Incase either of the borrowers parents is a salaried employee- proof of income i.e.
salary certificate/slips M T8+ certificate 0.ormAJ1 of he borrower M co!applicant"
if any.

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RETAIL BANKING

Incase either of the borrowers parents is self!employed- details of business rack
record M a copy of the audited financial statements of the last @ years of the
borrower M co!applicant.
8ocuments with respect of past academic track record of the student.
(irline booking details" in case of foreign uni#ersity education.
D"%'en$a$i"ns ReA%ire'en$s B 1"s$.A!!r"va&CDis(%rsa&
8isbursement of the educational loan is made directly to the institution to which
the student is admitted. 5ostel M mess fees are also paid likewise. (irfare is directly paid
to the airlines. The student is gi#en certain amounts to make book or
instrument/e'uipment purchases on a monthly or 'uarterly basis. Receipts for each
payment are forwarded to the bank.
When the loan amount e,ceeds Rs. A lakh" banks usually re'uires a ?ife Insurance
7olicy e'ual to or more than the loan amount. This is the security that the bank takes to
reco#er the outstanding amount in case the student is unable to repay the loan amount.
Re!a9'en$ 1eri"#
( holiday period is usually gi#en for educational loan re'uirement before he/she
starts paying back the loan in 4)Is. The holiday period ranges from J months to a year.
5owe#er" if the students starts working immediately on completing the course" he does
not en6oy a holiday period. Repayment stars J months after completion of the course or
on commencement of a 6ob" whiche#er is earlier.
C"&&a$era& Se%ri$ies
+ome banks do not re'uire collateral security to be furnished if the amount being
borrowed is less than Rs. @B">>>. .or amounts greater than that $+3s" bonds" property
mortgage etc. are taken as collateral.
+ome banks re'uire the applicant to take a ?ife Insurance 7olicy at the time of
disbursal loan.

2,
RETAIL BANKING

In$eres$ Ra$e Ca&%&a$i"n
Interest on educational loan is charged on a simple basis during study period or
upto commencement of repayment 0interest rates are as per RI guidelines at ha time1.
Fees D C*arges
.ees M charges include2
A. 7rocessing fees
@. 8ocumentation cost
=. 7re!payment penalty
C. 7enal interest for o#erdue amount M o#erdue period.
Ta8 Bene)i$s
&nder section G>4 of the IT (ct" a deduction will be allowed in respect of
repayment of loan educational purposes" sub6ect to the following conditions.
In computing total income of an assessee being an indi#idual" these shall be
deducted" in accordance with" M sub6ect to" the pro#ision of this section2 any amount
from the pre#ious year" out of his income chargeable to ta," or any appro#ed charitable
institution for the purpose of pursuing his/her higher education such loan" pro#ided that
the amount that may be so deducted shall not e,ceed Rs. @B">>>. The deduction abo#e
shall be allowed in computing the total income in respect of the initial assessment year M
L years immediately succeeding the initial assessment year or until the loan referred to
abo#e" together with interest thereon" is paid by the assessee in full" whiche#er is earlier.

22
RETAIL BANKING

6/ 1&as$i '"ne9:
( barometer of maturity of an economy with a few e,ceptions is the stage of
de#elopment reached by its payment systems. 3ash in the form of notes and coins make
up 6ust one form of payment system. The de#elopment in banking brought about a second
phase in payment system" through paper instruments namely che'ues and credit transfers.
The re'uirement for greater fle,ibility and con#enience and de#elopment of technology
has gi#en rise to electronic payments and this is where plastic cards ha#e been pro#ided.
The credit card can be defined as a small plastic card that allows its holder to buy
goods and ser#ices on credit and to pay at fi,ed inter#als through the card issuing
agencies.
Reg%&a$"r9 )"r ar#s
In #iew of this e#er!increasing role of credit cards" a working group was set up for
regulatory mechanism for cards. The terms of reference of the working group were fairly
broad and the group was to look into the type of regulatory measures that are to be
introduced for plastic cards 0credit" debit and smart cards1 for encouraging their growth in
a safe" secure and efficient manner" as also to take care of the best customer practices and
grie#ances redressal mechanism for the card users. The Reser#e bank has been recei#ing
a number of complaints regarding #arious undesirable practices by credit card issuing
institutions and their agents. +ome of them are2

&nsolicited call to members of the public by card issuing banks/direct selling
agents pressuri%ing them to apply for credit card.
3ommunicating misleading/wrong information regarding credit cards regarding
conditions for issue" amount of ser#ice charges/wai#er of fees" gifts/pri%es.

23
RETAIL BANKING

+ending credit cards to persons who ha#e not applied for them/acti#ating unsolicited
cards without the appro#al of the recipient.
3harging #ery high interest rates/ser#ice charges.
?ack of transparency in disclosing fees/charges/penalties. $on Odisclosure of
detailed billing procedure.

The working group deliberated a number of ma6or issues relating to customer grie#ances
and rights2
Transparency and disclosure.
3ustomers rights protection and
3ode of conduct.

The group recommended that the most important terms and conditions should be
highlighted and ad#ertised and sent separately to the prospecti#e customer. These terms
and conditions include #arious issues relating to.
.ees and charges.
8rawl limits.
illing.
8efault.
Termination/re#ocation of card membership.
?oss/theft/misuse of card and
8isclosure.
While building a regulatory o#ersight in this regard we need to ensure that neither
does it reduce the efficiency of the system nor does it hamper the credit card
usage.

25
RETAIL BANKING

T9!e ") ar#s iss%e# (9 a Bank are2
Cas* ar#:

(lso known as an (T) card. This has been discussed in detail earlier. ( special
plastic card is used for getting currency notes from a machine. <nown as automated teller
machine.

De(i$ Car#s:

8ebit cards allow for direct withdrawal of funds from a customers bank account.
The spending limit is determined by the users bank upon a#ailable balance in the
account of user. It is a special plastic card connected with electromagnetic identification
hat one can use to pay for things purchased directly from his bank account. &nder the
system" card holders account are immediately debited against purchase or ser#ices
through the computer network. 5ence" under debit card the cardholder must ha#e
ade'uate balance in his account. This system is intended to replace che'ue system of
payment. 8ebit card M smart card issuance by banks in India should be appro#ed by the
respecti#e banks board as well as by RI. These can be issued only for customer
maintaining satisfactory accounts M for a minimum period of si, months.

26
RETAIL BANKING

C*eA%e ar#s:


It is a card gi#en to customer by the bank that he must show when he writes a
che'ue" which promises that the bank will pay out the money written on the che'ue.
&nder check card system" the card holder is gi#en a card M a che'uebook. 5e has to use
the che'ues" while purchase is made M the traders gets guaranteed payment. The
customer does not get free credit" he has to keep sufficient balance in his account or the
bank will pro#ide o#erdraft up to a specific limit" of course on interest payment basis.
C*arge Car#:
( small usually plastic card pro#ided by an organi%ation with which one may buy
goods from #arious shops" etc. The full amount owed must then be paid on demand. In
credit cards" the card holders get credit or loan for payment of periodical bills when
sufficient balance is a#ailable in their accounts. In a charge card such credit facility is not
a#ailable. The periodical bill amount is paid off by charging it to customers account. (
fee is also payable by the card holder to the card issuing institution.

2:
RETAIL BANKING

S'ar$ Car#s:
With the use of credit cards" we may a#ail of credit facility on our purchase of
goods/ser#ices from appro#ed sales outlets. ( smart card howe#er" enables the
cardholder to perform #arious other banking functions apart from credit purchases. .or
e,amples" with smart cards" we can draw cash from (T)s" we can #erify entries in our
accounts" seek information pertaining to our accounts" etc. This is possible because the
card has an integrated circuit with microprocessor chip embedded in the card for
identification purposes. The card can also perform calculations M maintain records.
C"nveniene Users:
3redit card customers are typically e,tended an unsecured credit at least up to =>
days. eyond the period" the bank charges interest on outstanding bills. 5owe#er" some
cardholders may prefer to pay off their full dues before the free credit period. +uch
cardholders are called con#enience users.

2;
RETAIL BANKING

RETAIL LENDING
4#eryone dreams of li#ing a comfortable life and does all one can to make this
dream come true. Today this has become much easier" as with higher le#els of income
and multiple earning members in the family" it is easy to a#ail loans to fulfill aspirations
uying a home" car or any small household item such as T: or a refrigerator using
money borrowed from a bank or a finance company has become the way of life today.
This has created a big business opportunity for finance companies.
They are offering loans to all types of customers for all types of assets. Retail
lending has thus become one of the key business #erticals for finance companies. This
necessitates banks to follow processes for conducting business profitably. There are two
main areas in lending. ?oan Drigination and ?oan +er#icing. The process of #alidating
customers" con#incing them that the finance company is the right source for their loan
re'uirement and finally offering the loan with terms and conditions that make business
sense to the finance company is ?oan Drigination and once the loan is disbursed" the
process of managing the repayments from customers and responding to the customer
re'uests for pre payments" early settlement" rescheduling" etc. is ?oan +er#icing.
?ending has become #ery competiti#e as customers are in the mode of shopping
for loans. .inance companies ha#e to continuously offer new financial products to
customers and thus two of the important aspects of the business are time!to!market and

2<
RETAIL BANKING

fle,ibility. ut as number of customers increase" the risk of increase in the number of
defaulters pre#ails. Thus finance companies ha#e to do the balancing act. Dn one hand
they ha#e to ac'uire more business by lending to more customers and on the other hand
they ha#e to lend to select customers so that the rate of delin'uency is under control.
ROLE OF IT IN RETAIL BANKING
The growth in retail banking has been facilities by the growth in banking
technology and automation in banking process that enables in e,tension of reach and
rationali%ation of cost. (T) has emerged as an alternati#e channel which has facilitate
low cost transaction . It also has the ad#antage of reducing the branch traffic and enable
bank with small network to offset traditional disad#antage by increasing there reach and
spread.
Indian retail banks ha#e been e,tensi#ely using Information and 3ommunication
technologies for their operations like central accounting" customer information
management" transaction!processing and importantly" for numerous customer!facing
solutions. esides there are supporting or ancillary solutions such as security and
compliance in addition to the PmiddlewareP that banks use to link their customer!facing
applications to their core systems. The ma6or business focus of the IT sa##y retail banks
is in pro#iding products and ser#ices to the customers through a di#ersified base of
channels ! bank branches" (T)s" e!banking" e!branch" mobile!banking" +)+!banking"
etc. In India" the business growth is dri#ing technology spending in the retail banking
segment. Indian retail banks are looking to mo#e beyond their branch!centric distribution
models. 4,tending (T)s networks" ad#ancing online and phone banking" and
rationali%ing branch infrastructure are all on the cards.

3=
RETAIL BANKING

Technology pro#ide Retail anks with #arious deli#ery channel2!
1/ A%$"'a$e# Te&&er 4a*ines7AT4/ 2
The trend in banking has e#ol#ed from a cash economy to che'ue economy
and thereon to the plastic card economy. Dne of the channels of banking ser#ices
deli#ery is #ide the (T) or the (utomated Teller )achines" whose traditional and
primary use is to dispense cash upon insertion of a plastic card and its uni'ue 7I$ or
7ersonal Identification $umber.
3urrent and sa#ings account holders of a bank who hold a certain minimum
balance in their accounts 0determined by each bank as per their policy1 are issued an
(T) card. The card is a plastic card with a magnetic strip with the account number
of the indi#idual. When the card is inserted into the (T)" the machines sensing
e'uipment identifies the account holder and asks for his/her identification code
number. This is referred to" usually" as the 7I$ and is issued by the banks computers.
This number is unknown to the banks staff and is secret and uni'ue to that indi#idual.
When the person uses the (T) and it asks for the 7I$" the cardholder identifies
himself/herself by pressing the rele#ant number buttons on the machine. The machine
then #erifies the account number on the (T) card along with the secret code number
stored in the (T). When the matches found" the (T) pops a menu screen" which
allows the user to transact almost all types of bank transactions.


31
RETAIL BANKING

,/ Te&e (anking: !
Tele banking or phone banking ser#ice offered by banks to enable customers
to access their accounts for information or transactions. +imilar to the (T) 7I$" a
telephone 7I$ 0T!7I$1 is pro#ided to each account holder. The customer can call the
e,clusi#e tele!banking numbers and pro#ide the details to identify himself/herself to
the automated #oice. Typically" the bank account number and the T!7I$ are asked
for. &pon the respecti#e numbers matching the computeri%ed systems the customer is
gi#en access to his account to 'uery or transact on his account. Though cash
withdrawal and deposit are not enabled through this ser#ice many banks offer cash
deli#ery or collection ser#ice to certain classes of customers.
2/ In$erne$ Banking:
Dne of the channels of ser#ice deli#ery to a banking customer is through the
Internet. The access to account information as well as transaction is offered through the

3,
RETAIL BANKING

worldwide network of computers on the Internet. 4#ery bank has special firewalls M its
own security measures to protect the accounts from non!authentic use from unauthori%ed
users. 8ata are encoded using algorithms with a A@G!bit key or" in some cases" with a
A">@C!bit encryption.
4ach account holder is pro#ided a 7I$ similar to that of the (T) or 7hone
banking 7I$. The access to the account is allowed upon a match of the account details M
7I$ entered on the computer system. ( higher le#el of security may be reached by an
electronic finger!print. The finger print is taken before M after the transaction. Then both
#ersions are compared. In case of any difference" the transaction is aborted.
(ccount 'uerying as well as transaction is possible on the Internet banking
platform. The accounting is instantaneous M funds transfers can be effected immediately.
Though cash transaction are not possible at present" the ne,t phase of e#olution in
Internet banking will allow those as well.

32
RETAIL BANKING

4ARKETING STRATEGIES
7Inn"va$ive Re$ai& Banking/
The competition is intense in retail banking as almost all the public" pri#ate
and foreign banks are eyeing a share a on retail market pie . To meet the competition
retail banking product and ser#ices ha#e to become more competiti#e" and they are being
percei#ed as commodities. To le#erage the competiti#e en#ironment " they are reducing
the interest rate to increase the customer base
(ccording to 5emant <aul" +enior #ice! 7resident" Retail anking "&TI ank"
banks are formulating there marketing strategies around the customer life cycle because
they ha#e different credit re'uirement at different stage of there li#es Initially customers
look for personal loan after some time they look to buy a scooter or a car. (round the age
of =>!=B years " they look for home loans . so banks are not only de#eloping strong
product but also in#esting in de#eloping infrastructure and deli#ery points.
.or e,panding the market " banks ate de#eloping both market and product . they are
#enturing into new locations and addining depth to the e,isting geography. They are
increasing there penetration in e,isting location as well. They are are also increasing thre
presence in Tier!@ and Tier!= because these ha#e immense potential.
anks are tying up with small and organi%ed retailers 0malls1 to co!brand with
credit card companies to fuel retail growth. (s disposable income is increasing it gi#es
retail opportunities to sell more. anks are pro#iding retail loans to +mall and )edium
4ntrepreneurs 0+)41+ector They are also e,tending collaterali%ed loans and working
capital finance to suppliers and #endors to large corporate customers as a part of the
supply chain financing initiati#e. These banks are tying up with manufacturers" builders"
and #ehicle suppliers to facilitate 'uicker supply of loan In such a scenario IT has
become an important tool facilitating net banking" tele banking" mobile banking and
(T)" In retail financing they ha#e been concentrating on mortgages as this lending is
less risky e#en though it in#ol#es significantly larger than a#erage loan.

33
RETAIL BANKING

To be on safe side banks are targeting the upwardly urban salaried class despite
knowing that it is ig city Indian youth who are most profitable segment. 5owe#er
banks are also spreading there operations to include the self employed and semi!urban
rich
Retail anking co#ers both asset!side and liabilities!side products. The
liabilities side includes (T)" 4!banking" Tele!banking where the bank has to make
significant in#estment in infrastructure and technology. The asset side of bank has
#arious type of laons pro#ided by banks
ank can de#ise suitable strategies of segmentation" deli#ery channels and
pricing by understanding the frame work of retail banking. anking ser#ice can be
understood in three categories from the point of #iew of retail banking. 3ore ser#ices"
facilitating ser#ices are needed and supporting ser#ices are needed .

35
RETAIL BANKING

CR4 IN RETAIL BANKING
anks are commercial institutions whose chief acti#ity is to borrow money from
those entities that has surplus cash and lend money to those entities which are deficient in
cash" at different rate of establishment for carrying out business with money. &nder retail
banking acti#ity" banks ha#e to deal with a large number of indi#idual accounts whose
account si%e is #ery small when compare to the account si%e of corporate entities.
The indi#idual customer is the presiding deity of banks in the field of retail
banking. (ll the products and ser#ices are designed and formed to satisfy the financial
needs of the customers. The customers belong to different economic" cultural and social
background. 5ence the products and ser#ices offered are also #aried. Through out the
world it has been felt that main focus of the banks in the retail sector should be customer
ser#ice. It is the acceptance by the customers of the banking products and his satisfaction
with the ser#ices that brings out profit for the banks in this sector. &nlike corporate
banking where corporate customers ha#e a well defined financial policy and pro6ects" in
retail banking the onus lies on the banks to approach the customers" find out there
financial needs and problems" design the products and ser#ices" market them and finally
sell them to the satisfaction of the customer.

36
RETAIL BANKING

CONCLUSION
There is a need of constant inno#ation in retail banking. In bracing for tomorrow"
a paradigm shift in bank financing through inno#ati#e products and mechanisms
in#ol#ing constant up gradation and re#alidation of the banks internal systems and
processes is called for. anks now need to use retail as a growth trigger. This re'uires
product de#elopment and differentiation" inno#ation and business process reengineering"
micro!planning" marketing" prudent pricing" customi%ation" technological up gradation"
home / electronic / mobile banking" cost reduction and cross selling.
While retail banking offers phenomenal opportunities for growth" the challenges
are e'ually daunting. 5ow far the retail banking is able to lead growth of the banking
industry in future would depend upon the capacity building of the banks to meet the
challenges and make use of the opportunities profitably. 5owe#er" the kind of technology
used and the efficiency of operations would pro#ide the much!needed competiti#e edge
for success in retail banking business. .urthermore" in all these customers 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.

3:
RETAIL BANKING

INTER>IEW
0(nalysis1

.or better understanding of this topic I ha#e #isited I3I3I ank where I meat
)r. Ra6esh :inod +uba 0ranch )anager1. I had asked him certain set of 9uestion to
know his #iews and thoughts on this segment and here I ha#e tried to share with you all
his e,perience that he shared with me.
Reason for choosing I3I3I ank is that it is one of the best and leading bank
in Retail banking segment 0i.e. 7ri#ate ank1
9uestions was asked by me and replied was gi#en by the I3I3I ranch
)anager )r. Ra6esh :inod +uba2!
A. 5ow your products and ser#ices differ from other anksQ
. 4r+ RaEes* S%(a:. Dur product are inno#ati#e in terms of features" We pro#ide
simplified procedure of documentation" and competiti#e pricing. We also
pro#ide Gam. to Gpm. A@ hours banking ser#ices.
@. What is your primary moti#e behind Retail ankingQ
. 4r+ RaEes* S%(a:. 3ustomer satisfaction and profit go hand in hand" if there
are no customer there is no business and at the end we ha#e to do business and
business is not for charity.
=. What are the products and ser#ices included in Retail ankingQ
. 4r+ RaEes* S%(a:. Dur ank pro#ide wide range of product and ser#ices to the
customer such as 8eposits" ?oans 0i.e. 7ersonal loan " 5ome loan" 3ar loan etc.1"
8ebit and 3redit 3ards" Insurance" 8emat ser#ices" Dnline ser#ices" )oney
transfer" )obile anking" Internet anking" 3ore anking" 4!mail us" 3all us etc.

3;
RETAIL BANKING

C. 8o you think customers are comfortable with your Retail anking +er#icesQ
. 4r+ RaEes* S%(a:. Res" off course. ecause we are ha#ing multi!channel
distribution through BB> physical outlets" more than AG>> (T)s" mobile"
telephone and internet banking facilities. Therefore" customer can sa#e time and
money. (s a result customers are more comfortable with our Retail anking
+er#ices.
B. What are the pros and cons of Retail ankingQ
. 4r+ RaEes* S%(a:. There is no cons of Retail anking. 3ustomer want fast and
'uick ser#ices that we are pro#iding through Retail anking. (s there is
continuous inno#ation in Retail anking 0i.e. (T)" Internet anking" 7hone
anking etc.1
J. 8o you face a competitionQ
. 4r+ RaEes* S%(a:. Res" off course we do face competition from other banks and
in days ahead le#el of competition is going to be multiplied but with ad#ance
technology" inno#ati#e product and effecti#e 3R) we possess no threat.
L. What are the marketing strategies that you use in Retail ankingQ
. 4r+ RaEes* S%(a:. We are using Tele#ision" 7ress and Radio ad#ertising for
marketing our products.
G. What are you plan to do in futureQ
. 4r+ RaEes* S%(a: . (s our bank is one of the best and leading bank in India" We
are planning to mo#e further International anking and Rural anking in ne,t @
years.

3<
RETAIL BANKING

)r. Ra6esh +uba ha#e agreed the importance of Retail banking by saying that 2
Retail anking is #ery blood and marrow present day banking
C"n&%si"n:.
Retail anking is considered important by the bankers under this segment
inno#ati#e product" ad#anced technology and effecti#e 3R) are the only ways to
compete and win this segment . Dff course primary moti#e of this segment is customer
satisfaction as indi#idual customer is deity in this area of banking and not forgetting the
profit also.
In the #iew of banker rising income le#el" life style changes" low interest
rate regime and enhanced product offering ha#e gi#en a boost to the growth of Retail
segment. (ll this ha#e more to be e,ploited in the years to come keeping in #iew present
booming Indian economy.
(ccording to banker Retail anking has more to be e,ploited in India.


5=
RETAIL BANKING

FINDINGS
To know customer #iew about the products and ser#ices pro#ided by Retail
anks" I ha#e done sur#ey of A>> people and asked them certain set of 9uestion.
A. When sur#ey respondents were asked" 8o they aware of the term Retail ankingQ
@. 8o they know all Retail anking +er#ices pro#ided by anksQ
This ar diagram shows how many people are aware of the term Retail
anking and the ser#ices pro#ided by anks. The bar which is in ?a#ender M :iolet
colour indicates that G>E of the people are aware of the term Retail anking and out of
that J>E of the people knows all the ser#ices pro#ided by banks where as bar which is in
pink colour indicates that @>E of the people dont know the ser#ice which bank pro#ide
are called Retail anking.

51
0
10
20
30
40
50
60
70
80
90
100
1
E
R
C
E
N
T
A
G
E
-ES NO
RETAIL BANKING

=. When sur#ey respondent were asked" Which product they use of Retail ankingQ

0Feneral 3lassification1
. C> percentage people said 8eposit
. => percentage people said ?oan
. @> percentage people said 3redit card
. A> percentage people said Dthers 0i.e. 8emat ser#ices" 8ebit cards etc.1
De!"si$
L"an
Cre#i$ Car#
O$*ers


5,
RETAIL BANKING

C. When sur#ey respondent were asked" Which is the easiest mode of getting ser#ices
from anksQ
0Feneral 3lassification1
. @> percentage people said 7ersonal anking
. => percentage people said 7hone anking
. CB percentage people said Internet anking
. B percentage people said Dthers 0i.e. <iosk anking1
In$erne$ Banking
1*"ne Banking
1ers"na& Banking
O$*ers

52
RETAIL BANKING

B. When sur#ey respondent were asked" (re they satisfied with the ser#ice pro#ided by
anksQ
0
10
20
30
40
50
60
70
80
90
100
YES NO
This bar diagram shows" how many people are satisfied with the ser#ice
pro#ided by anks. The bar which is in #iolet colour shows LBE of people satisfied with
the ser#ices pro#ided by anks whereas the bar which is in pink colour shows @BE of
people not satisfied with the ser#ices pro#ided by anks. +ometimes with the treatment
gi#en by bank is rude and sometimes they are not co!operati#e so people feel
incon#enience with ser#ices pro#ided by banks.

53
RETAIL BANKING

BIBLIOGRA1H-
BOOKS2
3ommercial anking 0sep! @>>=1" I3.(I
0page no. =C!=L and =N1
anking and financial ser#ices! Renu sobti.
4AGFINES:
7rofessional banker 0.4!@>>J1" I3.(I
0page no. B=!BB1
Indian anking special0@>>C1" I3.(I
0page no. L@" LC1
WEBSITE:
www.google.com
0Retail banking
anking in India1
www. Fo@.com 0Retail anking in India1
www.icfaipress.org
ww.indiainfolinne.com
www.wikipedia.com
www.fotoshop.com
>ISIT:
I3I3I ank S(ndheri 0West1 branchT

55