UNIVERSITY OF MUMBAI

A PROJECT ON
IDBI BANK LTD
MASTER OF COMMERCE PART-1
SEMESTER-I
2014-15
SUBMITTED BY
RAJKUMAR D. VISHWAKARMA
ROLL NO-65
PROJECT GUIDE
Prof. Ajit Jadhav

SHANKAR NARAYAN COLLEGE OF ART &COMMERCE

BHAYANDAR(EAST), THANE-401105
1

DECLARATION
RAJKUMAR VISHWAKARMA student of M.COM-I (SEM-1)
SANKAR NARAYAN COLLEGE OF ART &COMMERCE hereby declare
that we have completed this project on IDBI BANK LTD in the
academic year 2014-15.
I declared that the project report is my original work and it
has not been submitted by me in part or full to any other
university/institution/statutory body for the award of any
degree/diploma/certificate.
Name of candidate: .

Sign: ..

Place:

Date: ..

CERTIFICATE
We certify that the above declaration is true to the best of our
knowledge and belief.
.

Project Guide

Coordinator

Prof. Ajit Jadhav

Prof . Ajit Jadhav

Date : ....

Date:
2

Date: .

SHANKAR NARAYAN COLLEGE ART & COMMERCE

BHAYANDAR (EAST) NAVGHAR ROAD THANE 401105

CERTIFICATE
This is certify that RAJKUMAR VISHWAKARMA has
completed the project titled IDBI BANK LTD under the guidance of
Prof. Ajit Jadhav in practical fulfilment of the requirement for the
award of Master of Commerce part-I studies degree for academic
period 2014-15.

..

..

PROJECT GUIDE
Prof. Ajit Jadhav

PRINCIPAL
Dr. V.N.YADAV

..

..

EXTERNAL GUIDE

CO-ORDINATOR
Prof. Ajit Jadhav

Date: ...
3

ACKNOWLEDGEMENT

The Gratification and joy that accompanies the successful completion

of any task would be incomplete without the humble and deep felt
expression of gratitude to everyone who has made it possible.
I would like to convey my sincere thanks to Prof. Ajit Jadhav , my
internal project guide, who has been a constant source of motivation
and inspiration and has helped in bring out the best in me.

INDEX

INTRODUCTION
HISTORY
IDBI PROFILE
JOURNEY IDBI TO IDBI BANK LTD
VISION OF IDBI
NUMBER OF BRANCHES & ATMs
PRODUCT &SERVICES
BUSINESS CHART
RETAIL BANKING
SWOT Ananlysis
Strength
Weakness
Opportunities
Threats
Need
Advantage
Disadvantage
Scopes
INTERPRETATION
CONCULSION & SUGGESTIONS
BIBLOGRAPHY &REFERENCES
5

IDBI BANK LTD

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. But
cutthroat competition, innovation and advanced technology have
altogether changed the face of banking sector. Now all banks have
recognized the importance of retail banking.
Retail banking is that part of a bank that offers products
and services primarily to individual customers, professional, selfemployed individuals or small businesses. The focus is on creating
products and services 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 sized customer accounts
rather than large numbers of customers.

Understanding retail banking will help in servicing your customer

better as it would give you a perspective and insight into how such
products are structured and specific requirements for each set of
products. This would help you advice your customer in a more
informed manner besides making you a more informed consumer.
With the advent of ATMs, Anytime banking has come
into picture. Satellites and telecom networks across the world have
made Anywhere banking possible. Now it is the turn of Anyhow
banking, and the leading bank of the next century will be the one
which has all these three As.

History
Banks are among the main participants of the financial system in
India. Banking offers several facilities and opportunities.
Banks in India were started on the British pattern in the
beginning of the 19th century. The first half of the 19th century, The
East India Company established 3 banks The Bank of Bengal, The
Bank of Bombay and The Bank of Madras. These three banks were
known as Presidency Banks. In 1920 these three banks were
amalgamated and The Imperial Bank of India was formed. In those
days, all the banks were joint stock banks and a large number of
them were small and weak. At the time of the 2nd world war about
1500 joint stock banks were operating in India out of which 1400
were non- scheduled banks. Bad and dishonest management
managed quite a few of them and there were a number of bank
failures. Hence the government had to step in and the Banking
Companys Act (subsequently named as the
Banking Regulation Act) was enacted which led to the
elimination of the weak banks that were not in a position to fulfill the
various requirements of the Act. In order to strengthen their weak
units and review public confidence in the banking system, a new
section 45 was enacted in the Banking Regulation Act in the year
1960, empowering the Government of India to compulsory
9

amalgamate

weak

units

with

recommendation of the RBI.

10

the

stronger

ones

on

the

Reserve Bank of India was nationalized in the year 1949. The general
superintendence and direction of the Bank is entrusted to Central
Board of Directors of 20 members, the Governor and four Deputy
Governors, one Government official from the Ministry of Finance,
ten nominated Directors by the Government to give representation
to important elements in the economic life of the country, and four
nominated Directors by the Central Government to represent the
four local Boards with the headquarters at Mumbai, Kolkata, Chennai
and New Delhi. Local Boards consist of five members each Central
Government appointed for a term of four years to represent
territorial and economic interests and the interests of co-operative
and indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1,

1935. The Act, 1934 (II of 1934) provides the statutory basis of the
functioning of the Bank.

The Bank was constituted for the need of following:

To regulate the issue of banknotes
To maintain reserves with a view to securing monetary stability
and
To operate the credit and currency system of the country to its
advantage

11

The Reserve Bank of India declared that IDBI Bank

Limited, a public sector bank, is clubbed along with
nationalized banks. RBI acknowledged this in the
Form No. 7/95/2005-BOA with effect from 31st
December, 2007 stating that IDBI Ltd. Will now be
treated on par with nationalized banks.

12

IDBI PROFILE

Journey From IDBI To IDBI Bank Ltd.

Industrial Development Bank of India Industrial Development bank
of India (IDBI) was constituted under Industrial Development bank of
India Act, 1964 as a Development Financial
Institution and came into being as on July 01, 1964 vide Go I
notification dated June 22, 1964. It was regarded as a Public Financial
Institution in terms of the provisions of Section 4A of the
Companies Act, 1956. It continued to serve as a DFI for 40 years till
the year 2004 when it was transformed into a Bank.

13

Industrial Development Bank of India Limited In response to the felt

need and on commercial prudence, it was decided to transform IDBI
into a Bank. For the purpose, Industrial Development bank (transfer
of undertaking and Repeal) Act, 2003 [Repeal Act] was passed
repealing the Industrial Development Bank of India Act, 1964. In
terms of the provisions of the Repeal Act, a new company under the
name of Industrial Development Bank of India Limited (IDBI Ltd.) was
incorporated as a Govt. Company under the Companies Act, 1956 on
September 27, 2004. Thereafter, the undertaking of IDBI was
transferred to and vested in IDBI Ltd. with effect from the effective
date of October 01, 2004. In terms of the provisions of the Repeal
Act, IDBI Ltd. has been functioning as a Bank in addition to its earlier
role of a Financial Institution.

Merger of IDBI bank Ltd. with IDBI Ltd. Towards achieving the faster
inorganic growth of the Bank, IDBI Bank Ltd., a wholly owned
subsidiary of IDBI Ltd. was amalgamated with IDBI Ltd. in terms of
the provisions of Section 44A of the Banking Regulation Act, 1949
providing for voluntary amalgamation of two banking companies.
The merger became effective from April 02, 2005.

14

Merger of United Western bank with IDBI Ltd. The United Western
bank Ltd. (UWB), a Satara based private sector bank was placed
under moratorium by RBI. Upon IDBI Ltd. showing interest to take
over the said bank towards its further inorganic growth, RBI and
Govt. of India amalgamated UWB with IDBI Ltd. in terms of the
provisions of Section 45 of the Banking Regulation Act, 1949. The
merger came into effect on October 03, 2006.

Change of name of IDBI Ltd. to IDBI Bank Ltd. In order that the name
of the Bank truly reflects the functions it is carrying on, the name of
the Bank was changed to IDBI Bank Limited and the new name
became effective from May 07, 2008 upon issue of the Fresh
Certificate of Incorporation by Registrar of Companies, Maharashtra.
The Bank has been accordingly functioning in its present name of
IDBI Bank Limited.

IDBI Bank Ltd. Today

IDBI Bank Ltd. is today one of India's largest commercial Banks. For
over 40 years, IDBI Bank has essayed a key nation-building role, first
as the apex Development Financial Institution (DFI) (July 1, 1964 to
September 30, 2004) in the realm of industry and thereafter as a full-

15

service commercial Bank (October 1, 2004 onwards). As a DFI, the

erstwhile IDBI stretched its canvas beyond mere project financing to
cover an array of services that contributed towards balanced
geographical spread of industries, development of identified
backward areas, emergence of a new spirit of enterprise and
evolution of a deep and vibrant capital market. On October 1, 2004,
the erstwhile IDBI converted into a Banking company (as Industrial
Development Bank of India Limited) to undertake the entire gamut
of Banking activities while continuing to play its secular DFI role. Post
the mergers of the erstwhile IDBI Bank with its parent company (IDBI
Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the
subsequent merger of the erstwhile The United Western Bank Ltd.
with IDBI Bank on October 3, 2006, the tech-savvy, new generation
Bank with majority Government shareholding today touches the lives
of millions of Indians through an array of corporate, retail, SME and
Agri products and services. Headquartered in Mumbai, IDBI Bank
today rides on the back of a robust business strategy, a highly
competent and dedicated workforce and a state-of-the-art
information

technology

platform,

to

structure

and

deliver

personalized and innovative Banking services and customized

financial solutions to its clients across delivery channels. As an
Universal Bank, IDBI Bank, besides its core Banking and project

16

finance domain, has an established presence in associated financial

sector businesses like Capital Market and Investment Banking, Home
Finance, Primary Dealership area and more recently, the Life
Insurance Business. Recently, IDBI Bank reorganized its business and
structure commensurate with its aspiration to become a 'Top 5' Bank
by asset size & market capitalization by the year 2012. As a first step,
to give the organization the focus necessary for accelerated growth,
the Bank has reorganized its businesses around nine verticals, six
customer verticals, each focusing on distinct customer segments and
three business verticals. Forward, IDBI Bank is strongly committed to
work towards emerging as the 'Bank of choice' and 'the most valued
financial conglomerate', besides generating wealth and value to all
its stakeholders.

17

Vision of IDBI

The vision for the Bank is for it to be the trusted partner in

progress, by leveraging quality human capital and setting
global standards of excellence, to build the most valued
financial conglomerate. Our experience of financial markets
helps us to effectively cope with challenges and capitalize on
the emerging opportunities by participating effectively in our
countrys growth process.
18

Number of Branches and ATMs

Branches/ATM

19

IDBI Groups
IDBI is a pioneer Institute in Nation building. To cater to its everexpanding needs, IDBI formed subsidiaries & joint ventures across
diverse areas of Banking & Financial System.

IDBI Capital Market Services

A wholly owned subsidiary, offers a full suite of financial products.
Its business includes stock broking, distribution of financial products,
Portfolio management of Pension / PF funds & Research services, etc.

IDBI Gilts Ltd

A wholly owned subsidiary commenced its operations as Primary
Dealer. The company presently focuses on Bond trading,
underwriting in auctions of G-sec and T-bills.

IDBI Intech Ltd

A wholly owned subsidiary, deals in the Information Technology
Services, Information Security Practice, Knowledge Management
Services, national contact centre and outbound contact centre.

20

IDBI Home Finance

A wholly owned subsidiary, deals in the Home finance arena. It was
acquired in September
2003 from Tata Home Finance Ltd

IDBI Fortis Life Insurance Company Ltd

A joint venture with Federal Bank and Fortis Insurance International.
It primarily deals in Life insurance space

IDBI- Its Products & Services

IDBI Bank offers a wide array of products and services to its
customers. For different customer groups and needs, there are
different types of products and services including Personal Banking,
Corporate Banking, SME Finance and Agriculture Business etc.

21

Personal Banking
Following products and services are offered under
Personal Banking:

Deposits
Savings Account
Current Account
Fixed Deposits
Suvidha Tax Saving Fixed Deposit
Pension Accounts
Sabka Account
Super Shakti Account for Women
Jubilee Plus Account

Loans
Home Loans
Loans Against Property
Education Loans
Personal Loan
Loan Against Securities
Reverse Mortgage Loan
Auto Loan
22

Payments
Tax Payments
Stamp Duty payments
Easy Fill

Bill Payment
Card to Card Money Transfer
Online Payments
Pay Mate

Investments Advisory
Smart Financial Planning
Mutual Fund
Insurance
Fixed Income Securities

Cards
Gold Debit Card
International Debit cum ATM Card
Gift Card
World Currency Card
23

 Cash Card
KIDS Debit Card
Foundation Day Cash Back Scheme 2009
Platinum Card

Institutional Banking
Institutional Savings Account
Corporate Payroll Account

24 Hours Banking
Phone Banking
SMS Banking
Account Alerts
Internet Banking

Other products
Lockers
India Post

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Preferred Banking
NRI Services
Capital Market
IPO
Demat

Corporate Banking
Following products and services are offered by IDBI Bank for the
corporate:
Project Finance
Infrastructure Finance
Syndication, Underwriting & Advisory Services
Carbon Credits Business
Working Capital
Cash Management Services
Trade Finance
Tax Payments
Derivatives
Technology Up gradation Fund Scheme (TUFS)
Film Financing Scheme
Direct Discounting Bills
Rehabilitation Finance

25

SME Finance
Following SME Finance products are offered by the IDBI Bank:
Sulabh Vyapar Loan
Dealer Finance
Funding under CGFMSE
Direct Credit Scheme - SIDBI
Preferred customer scheme - IDBI Bank / SIDBI
Vendor financing (Pre - Sale)
Vendor financing (Post - Sale)
Lending Against the Security of Future Credit Card Receivables
Finance to Medical Practitioners
Loan to SRWTO
SME Hosiery Special Current Account

26

IDBI Bank Business Chart

27

Retail Banking

WHAT IS RETAIL BANKING?

Retail banking is however; 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 depository services.

Todays retail banking sector is characterized by three basic

characteristics.

Multiple products (deposits, credit card, insurance, investments

and securities).
Multiple channels of distribution (call center, branch, internet
and kiosk); and
Multiple customer groups (consumer, small business, and
corporate)

28

DEFINITION:
Retail Banking Services:Banking services provided to individual members of the public as
opposed to those provided to businesses and institutions.

SWOT Analysis Of Retail Banking

STRENGTH:1) Emerging as a new growth driver:
For several years banks viewed consumer loan with skepticism.
Commercial loans denominated the loan portfolio as they generated
high net yield with low credit risk. Consumer loans on the other hand
involved smaller amount, large staff to handle account and high
default rates. Even regulators across the globe have not encouraged
retail banking until now till very recently. However, over past few
years, fierce competition among the banks lowered the spread and
profitability a commercial loan with deregulation and increase in
consumer loan rate, the risk adjusted return in retail sector have
exceed the return on consumer loan.

29

2) Provides diversified asset portfolio:

Retail banking includes comprehensive range of financial product

and services i.e. deposit product, auto loan, car loan, home loan,
loan against equity shares, mortgage loan, payment of bills, debit
card, credit card, etc. These products provide an opportunity for
banks to diversify the asset portfolio with higher profit and relatively
lower NPA.

3) Improves standard of living:

Due to major economic reforms in Indian economy there has been

an increase in per capita income which has led to change in life style
and growing urbanization have made the Indian population rise from
oblivion and resurge in modern era on this front role of retail
banking arises. Retail banking provide all such product and services
(home loan, car loan, personal loan, etc) to its customer which are
required by them to maintain change in their life style in short it
helps in fulfilling aspiration of people through affordable credit.

30

4) CRM tool:

The individual customer is deity of bank in retail banking segment. All

product and services are designed to satisfy need and wants of its
customer. As customer in retail banking belong to different
economic, cultural, educational, and social background there
demand is also varied. It is acceptance of the banking product and
satisfaction of customer that yield profit in this segment. Hence
customer Service and Quality implementation through use of CRM
tools will help banks Success in this competitive world of retail
banking.

5) Innovative product development :

The scope for development in financial services 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 services, market them and finally sells them to satisfy its
customer.

6) Economies of scale:

Retail banking enables banks to utilize existing capacities and

reaching wider population of customer. Banks can get the benefits of
31

information and transaction. In process of extending variety of

services, banks are acquiring enormous amount of customer
information .if this information is systematically recorded, banks can
efficiently utilize this information in order to explore new segment
and to cross sell new services.

WEAKNESS:1) Avoids corporate sector :

Retail banking avoids corporate sector totally which is the backbone

of Indian economy. Main reason put forth or this is decline in
corporate borrowing. However bank can take certain step to manage
their corporate clients such as lower arte credit, higher amount of
loan etc. Managing corporate client is easier as they have well
defined financial policy and project and they concentrate on product
and services offered rather than on CRM of bank unlike individual
clients.

32

2) Marketing (Internal and External):

Retail banking requires strong marketing strategies to be adopted by

bank both internal and external. Under retail banking segment top
level management need employees to introduce product properly to
its employees because if the employees are not aware regarding the
product they are offering that product will fail however effective the
product is also bank require to spend lot on its marketing of product
to general public because if public is not aware regarding the product
and service how will they opt for it. All this increases the cost and
time required to introduce the product in the market which can
reduce or make the product out dated immediately on its arrival.

2) Changes in technology:

Future of retail banking lies in the hand of IT. Various It solution used
by banks such as E-banking, phone banking, ATM leverage the retail
banking product and service offered by banks. But this has weekend
the segment somehow. If banks are not able to adopt the latest
technology it may pull back the growth of bank also this technology
requires lot of capital investment and if at all the technology fails
then it may shake the customers confidence on bank and bank may
land up in losing its customer.

33

3) Reduces the profitability:

It is claimed that retail banking increases overall profitability of the

bank but in reality this is not the case because managing wide range
of product and service requires high quality technology , large
number of staff and all this requires high capital investment which
reduces banks profitability.

4) Co-ordination among various departments:

Success of retail banking is not the result of one department but is

result of various departments together. If there is lack of coordination among various department of the bank then however
strong and effective they may be the product it will fail. Suppose if
the front office is successful in attracting the customer but back
office is not able to execute the delivery of product or service on
time then bank may land up losing the customer although its CRM
was effective.

34

OPPORTUNITIES:1) Scope for innovation:

Under retail banking as banks try to provide all those product and
services which are desired by its customer this segment has more
scope for innovation banks can keep on modifying its products as per
the market demand which helps them from not being out dated .

2) Rise in per capita income:

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 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 toward personal debt, is
contributing to India's retail banking segment.

3) Economic growth:

Retail banking has immense opportunities in a growing economy like

India. In the BRIC Report India is stated as an economic superpower.
35

According to A. T. Kearney, a global management-consulting firm,

recently identified India as the 'second most attractive retail
destination' of 30 emergent markets. Hence retail banking has high
opportunities in India.

THREATS:
1) Large disbursement of loans:
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 within an increase in the number of cases of default in loan
repayment thus increasing the banks NPAs.

2) Issue of customers dignity:

Banks have been adopting carrot and stick policy by renegotiating

loan terms where the default is genuine and handing over recovery
to third parties where default is willful. Most of the time, the third
parties or external agents are not trained to handle the loan
repayment process. Hence, they restore to strong arms tactics with
defaulting customers. Many cases of harassment and invasion of
privacy have been reported by the affected parties. Such instances
36

may hamper the image and corporate vision of the bank in near
future.

4) Issue of customer privacy:

Customer privacy is also affected in another way wherein customer

service representatives of the banks ring up customers at any times
at their places of work, informing them about new products and
services. This may cause inconvenience to busy customers. It is also
obligation on part of the banks not to share the private information
from the records of the customers with outside agencies like market
research groups and other advertisers.

5) IT:

The growth of IT has brought with it a number of frauds perpetrated

with the help of technology and which come under the domain of
cyber crimes. Banks are the victims of unscrupulous elements who
have in many instances hacked banks website and stolen credit card
number, pass word and other confidential information relating to
customer.

37

Need For Retail Banking

Until now banks were relying on financing, production
based activities. Retail finance was not favored by Indian banks, But
they have to tune to it now with the demand for loans from
industrial sector is coming downing the past because of the
economic slowdown. As a result banks have become selective in
their lending activities. Further changing demographics, a rapidly
growing ,middle-class, rise in disposable income changing life style
and increasing ability of people to take credit risk are providing banks
with an opportunity to shift their lending operation to retail finance.
Hence bankers have been increasingly shifting to retail to increase
profitability and reduce delinquency rates. Customer shifting, cost
pressure and increasing competition are some of the other reasons.

Retailing is now favored because of the better returns lesser

asset quality problem and low NPA. Further it provides many
opportunities for credit expansion. It helps banks in risk
diversification and is important for low-cost resources mobilization
by banks. For Banks, retail segment is the principal growth driver as
they are slowly gaining market share in the retail space. Foreign
banks are securitizing vehicle loans to rise off balance sheet
resources and to reduce overall cost of funding. For example, Bank of
Muscat is taking over auto loans and personal loans from other
38

banks signaling a softer interest rate regime for consumer finance

and giving indication to the intensifying competition in business.
The objective of the Retail Bank is to provide its target market
customers a full range of financial products and banking services,
giving the customer a one-stop window for all his/her banking
requirements. The products are backed by world-class service and
delivered to the customers through the growing branch network, as
well as through alternative delivery channels like ATMs, Phone
Banking, Net Banking and Mobile Banking.
.
Retail Banking business in Bihar with special reference to IDBI
Bank

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. 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
39

opening up of our economy. For instance, while the total outstanding

Retail loans in Taiwan is around 41% of GDP, the figure in India

stands at less than 5%. The comparison with the West is even more
staggering. Another comparison that is natural when comparing
Retail sectors is the use of credit cards. Here also, the potential lies in
the fact that of all the consumer expenditure in India in 2001, less
than 1% was through plastic, the corresponding US figure standing at
18%. Retail banking in India is not a new phenomenon. It has always
been prevalent in India in various forms. For 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 attractive brand names to
differentiate the products offered by different banks. As shown that
the loan values of these retail lending typically range between Rs.20,
000 to Rs.100 lakh. The loans are generally for duration of five to
seven years with housing loans granted for a longer duration of 15
years. Credit card is another rapidly growing sub-segment of this
product group.
In recent past retail lending has turned out to be a key profit driver
for banks with retail portfolio constituting 21.5 per cent of total
outstanding advances as on March 2004. The overall impairment of
40

the retail loan portfolio worked out much less then the Gross NPA
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.

Retail Banking business in Bihar with special reference to IDBI

Bank

While new generation private sector banks have been able to create
a niche in this regard, the public sector banks have not lagged
behind. Leveraging their vast branch network and outreach, public
sector banks have aggressively forayed to garner a larger slice of the
retail pie. By international standards, however, there is still much
scope for retail banking in India. After all, retail loans constitute less
than seven per cent of GDP in India vis--vis about 35 per cent for
other Asian economies South Korea (55 per cent), Taiwan (52 per
cent), Malaysia (33 per cent) and Thailand (18 per cent). As retail
banking in India is still growing from modest base, there is a
likelihood that the growth numbers seem to get somewhat
exaggerated. One, thus, has to exercise caution is interpreting the
growth of retail banking in India.
The HDFC Bank Preferred program for high net worth individuals, the
HDFC Bank Plus and the Investment Advisory Services programs have
been designed keeping in mind needs of customers who seek distinct
41

financial solutions, information and advice on various investments.

Avenues. The Bank also has a wide array of retail loan products
including Auto Loans, Loans against marketable securities, Personal
Loans and Loans for Two-wheelers. It is also a leading provider of
Depository Participant (DP) services for retail customers, providing
customers the facility to hold their investments in electronic form.
HDFC Bank was the first bank in India to launch an International
Debit Card in association with VISA (VISA Electron) and issues the
Master debit card as well. The Bank launched its credit card business
in late 2001. By March 2005, the bank had a total card base (debit
and credit cards) of 4.2 million cards. The Bank is also one of the
leading players in the merchant acquiring business with over
42,000 Point-of-sale (POS) terminals for debit / credit cards
acceptance at merchant establishments. The Bank is well positioned
as a leader in various net based B2C opportunities including a wide
range of internet banking services for Fixed Deposits, Loans, Bill
Payments, etc.

Advantages of Retail Banking

Retail Banking has inherent advantages outweighing certain
disadvantages.

Retail Banking business in Bihar with special reference to IDBI Bank

42

RESOURCES SIDE:
Retail deposit are stable and constitute core deposit
They are interest insensitive and less bargaining for additional
interest
They constitute the low cost for banks
Effective CRM 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 improve bottom line
of a bank.
Retail segment is a good avenue for funds deployment.
The consumer loan is presumed to be of lower risk and NPA
perception.
Help economic revival of the nation through increased
production activities.
Improves lifestyle and fulfills aspiration of people through
affordable credit.
Innovative product development.
Retail segment involves minimum marketing efforts in a
demand driven economy.

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DISADVANTAGES
V Designing own and new financial products is very costly and time
Consuming for the bank.
V 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. V Customers are attracted towards other financial products
like Mutual funds etc. v though banks are investing heavily in
technology, they are not able to exploit the same to the full extent. v
A major disadvantage is monitoring and follows up of huge volume of
loan accounts inducing banks to spend heavily in human resource
department.

Retail Banking business in Bihar with special reference to IDBI Bank

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 exploit
the advantage of earning huge profits from single customer as in
case of wholesale banking.

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Scope for Retail Banking In India

All round increase in economic activity.
Increase in the purchasing power. The rural areas have the large
purchasing power at their disposal and this is an opportunity to
market Retail Banking.
India has 200 million households and 400 million middleclass
population more than 90% of the savings come from the house
hold sector. Falling interest rates have resulted in a shift.
Now People Want To Save Less And Spend More.
Nuclear family concept is gaining much importance which may
lead to large savings, large number of banking services to be
provided are day-by-day increasing.
Tax benefits are available for example in case of housing loans
the borrower can avail tax benefits for the loan repayment and
the interest charged for the loan.

45

1) How many branches do you have in Bihar? Out of these

how many are in Patna?

Interpretation:
Branches of a particular bank show the visibility of the bank.
Typically retail banking can be defined as mass-market banking in
which individual customers use local branches of larger commercial
banks. Through this definition we can clearly make out the role that
number of branches play in retail business of a particular bank.
According, to the RBI rules, a bank will get license to open branches
in urban area only when they open 2-3 branches in rural and semi
urban areas. Bihar, the state understudy is a mixture of the three,
rural, semi-urban, and urban areas. From the above figure we can see
the number of branches, which the seven banks compared, have in
Bihar. From here we can conclude that IDBI needs to expand itself in
the area.
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2) How many ATMs do you have in Bihar? Out of these haw

many are in Patna?

Interpretation:
As a branch is important for the visibility of a bank, similarly, are the
ATMs. ATM hits are one of the sources of income for the banks.
Comparing the number of ATMs which the other banks have; IDBI
needs to expand the number of its ATMs.

47

3) What are the factors you consider while opening new

branches in Bihar?

a. Business potential
b. Volume of mass catered
c. Presence of competitors
d. Demography of the area
e. Area accessibility

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Interpretation:

From the above figure we can conclude that the most important factor
which the banks sees before opening a branch in an area is the
business potential of that area. Again if we compare the above figure
with the number of branches that the selected banks have in Bihar, we
can see that banks like ICICI and Axis have a good number of
branches in Bihar. This clearly indicates that these banks believe that
there is much business potential in the area and thus IDBI Bank have
a huge scope in this business.

4)

Over which products do you consider your bank has an

USP over other banks?

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Interpretation:
The purpose behind asking the USP of every bank was to help the
bank understudy, i.e., IDBI
Bank to know the prevailing products of its peer banks. According, to
the banks the products defined by them where those which they
consider has an advantage over all other banks. Doing a competitors
product analysis IDBI can bring an improvisation in its products if
required.

5)

According to you state the scope of retail business in the

rural areas of Bihar?

The common answer to this question by all the banks was very high
potential. According, to all the banks, Bihar is in its development
stage. Not only in its capital city, Patna, but even in the outskirts the
development process is appreciable. As said by them the agriculture
sector is the major revenue generator for our country. So, they focus
more on the areas with agriculture land. Also they have different
products for different areas. The reach of other banks to rural and
semi-urban areas except SBI is not much. The banks consider that
there is scope for their bank to expand their wings to these areas now.
So, we can conclude that these areas have a capacity to provide retail
business to the banks and hence IDBI Bank can have more branches
in Bihar.
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6) Do you have any special rural scheme? If yes name them.

Interpretation:
The above are the various products which the banks provide in the
rural areas. In Bihar rural areas can be a major business provider to
the banks. So, the banks believe that they need to have few exceptions
in their products when they cater the customers of the rural areas.
They have provided few added facilities like the customers there need
not maintain a high AQB in their accounts. Also there are loans for
the farmers at subsidized interest rates. These attractive offers helps
bank to get more customers from these areas. Through this study
IDBI can see what its competitors provide so that by improving its
products, it can have an edge over all its peer banks.

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7) What do you consider is the biggest obstacle while conducting

business in Bihar?
Answers:
a. Movement of cash
b. Bringing of deposits
c. Small customer database
d. Unawareness of the mass
e. Lower education level
Interpretation:
The following were the main issues which were raised by the banks
regarding their biggest obstacle while conducting business in Bihar.
The level of education being less deprives the customers from
understanding the exciting and new schemes. Thus they keep
themselves aloof of taking any new risk and follow the traditional
way of banking. This does not initiate the banks to open new branches
in rural areas. But even facing the following issues the banks said that
they could overcome this problem by talking to customers and
explaining the about the new schemes. The banks said that they would
impart KYC knowledge through branch level. Setting up Canopies,
distributing pamphlets, making announcements through radio,
demonstrative advertisements through television and the best word of
mouth will certainly prove useful for the bank.

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8) What obstacles do you face while dealing with the customers in

Bihar?

Interpretation:
To achieve any objective, there are some problems that could not be
over-looked through. Even when the banks believe that they have a
good scope of increasing their business in Bihar, they face few
problems while reaching to their goal. The major problem we could
conclude while dealing with customers in this area was KYC (Know
Your Customer). According, to them there is unawareness among the
customers about the formalities that need to be done for opening an
account. IDBI should maintain a good CRM as this is the only way of
dealing with customers having less knowledge about banking.

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Conclusions and Suggestions

Basic Findings
The credibility of IDBI bank is good in comparison to its
competitors as GOI (Government of India) is a major share
holder in the company.
IDBI bank has potential market in Bihar region and thus has
opportunities for growth.
The products of IDBI bank have good credibility in the region
and are in par with its competitors. The initial balance for A/C
opening is Rs, 5000/- and thats why people are reluctant in
opening the same but now the bank provides Zero Balance
Account which can help them in increasing their CASA ratio.
There is still unawareness among the mass about the bank
being a fully owned Government bank.
The TPD products of the bank are not yet popular among the
mass. The various rates of interest like the current interest rate
of Fixed deposit
which is 9.5% for 500 days and an additional .75% for senior
citizen is quite appreciated by the common mass.
The privilege given to the preferred customer and royal
customer like home service is liked and appreciated by the
customers.

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 The ATM facilities provided by the bank makes its services

hustle free.
The various add ones by the ATM are cash deposit by way of
envelopes, payment of bills, payment of LIC premium,
recharging mobile phones, card to card transfer.

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Bibliography And References

Books referred to understand and make this project were:B1- Anti- Money Laundering & Know Your Customer (Indian Institute
Of Banking & Finance).
B2- IC-33 Life Insurance (Insurance Institute of India).
Few more references to make this project were: SOF (Schedule Of Facilities) of every account helped to know
about the account better
A Profile Of banks by- Reserve Bank of India
Websites
www.google.com
www.idbi.com
www.axisbank.com
www.icici.com
www.hdfcbank.com
www.indusind.com
www.corpbank.com
www.obcindia.co.in
www.scribd.com

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