GROUP MEMBERS:Ahmad Faraz Anant Raj Khaitan Ankit Choudhary Bikash Ram Om Prakash Sharma Manas Saigal

What is retail banking?

It refers to the dealing of commercial banks with individual customers both on liabilities and assets side of the balance sheet. Transactions takes place directly through customers rather than corporations or other banks.

Retail banking in India

The Indian financial sector (including banks, non-banking financial companies, or NBFCs, and housing finance companies, or HFCs) reported a compounded annual growth rate (CAGR) of 19% over the last three years. In recent past retail lending has turn out to be a key profit driver for banks. Total banking credit stood at close to Rs. 39 trillion as on March 25, 2011 and reported a strong 21.4% growth in 2010-11, led by credit to the infrastructure sector and to NBFCs Today,about 70% of consumer goods purchased through fianancial schemes/loans.

Drivers of retail banking in India

Credit to commercial real estate increased by 21% for the year 2010-11 . Changing consumer demographics-70% of population is below 35 yrs of age. Technological factors-convenience banking in the form of internet banking,debit/credit cards,ATMs etc. Decline in the interest rates of lending and increase in the interest on deposits. In 2010-11, according to ICRAs estimates, the overall deposits of private banks increased by 22%, while that of PSBs increased by 18%.

SCOPE FOR RETAIL BANKING IN INDIA

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.

Retail banks deal on liability and assets side of balance sheet.

Liability side- Fixed ,current /savings account. Assets side - Mortgages, loans such as- Personal. - Housing. - Autoloans-automobile loans. - Educational.

KEY PLAYERS

Key players in retail banking industry in India

Public sector banks-State bank of India -Canara bank -Punjab national bank -IDBI -Syndicate bank -Oriental bank of Commerce

 Private sector banks in India-ICICI bank -HDFC bank -Citibank -AXIS bank Foreign banks-Royal bank of Scotland -Deutsche bank

State bank of India

Largest state owned banking and financial services company in India. Owner- Government of India. Founded on 1 July 1955 Chairman -Mr. Pratip Chauduri Headquarters -Mumbai Revenue Indian rupee 85,962.07 crore (US$ 32.44 billion) (2011). Profit Indian rupee 9,166.05 crore (US$ 2.34 billion) (2011). Total assets-US$ 369.56 billion(2011) Over 21,500 branches and 25000 ATMsall over World.

Punjab National Bank

Founded -1895 Headquarters- New Delhi MD and Chairman K.R.Kamath Revenue Rs 31,206 crore Net Income- Rs 4574 crore Total Assets Rs 373,876 crore 5000 branches all over india.

ICICI Bank
Industrial credit and investment corporation of india Second largest bank in India. Founded - 1955 Headquarters-Mumbai. Chairman-K.V.Kamath CEO and MD- Chanda Kochhar Revenue Indian rupee 59,599.77 crore (US$ 13.182 billion) (2011) Profit Indian rupee 4,843.41 crore (US$ 1.366 billion) (2011) Branches- 2575 branches and 8003 ATMs.

DEUTSCHE bank
International bank,operates in more than 72 countries and more than 100,000 employees. Headquarters-Frankfurt (Germany). CEO and chairman - Josef Ackermann. Products-Investment, commercial, retail and private banking, asset management. Revenue 33.2 billion (2011). Profit 4.3 billion (2011). Total assets 2.164 trillion (2011).

Total equity 2.4 billion (2011).

HDFC bank
Incorporated in August 1994. Housing Development and Finance Corporation. Headquarters-Mumbai. Chairman-C.M Vasudev. MD Aditya Puri Revenue- US$ 5.585 billion (2011) Profit - US$ 923.8 million (2011) Total assets -US$ 65.483 billion (2011) First bank to launch international debit card in association with VISA(VISA electron) The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking

PRODUCTS

 Deposits Debit cards Mortgages Credit Cards Retail loans-it includes the following loans:-Automobile loan(auto loan). -Home loan. -Personal loan. -Educational loan.

Products offered in retail banking

Deposits
Deposits include1) Current /savings accounts - type of bank account at a banking institution that allows money to be deposited and withdrawn by the account holder. - These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank, and represent the amount owed by the bank to the customer. - Some banks charge a fee for this service, while others may pay th customer interest on

Saving Account
Savings account are meant to promote the habit of saving among the citizens while allowing them to use their funds when required.
Savings account interest rate is 4 % compounded half yearly calculated on daily product basis w.e.f 01.04.2010.

Current Account
This type of account is meant for businessmen,firms,companies,public enterprises etc.that have numerous daily banking transactions. Current accounts are cheque operated accounts meant neither for the purpose of earning interest nor for the purpose of savings but only for convenience of business. As per RBI directives ,banks are not allowed to pay interest.

2)Term Deposits
A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time. - When the term is over it can be withdrawn or it can be rolled over for another term. Generally speaking, the longer the term the better the yield on the money. - Customers receives fixed interest rate according to the duration of the deposit. - It varies from 7-90 days to upto 10 years. - state bank of India gives - 7.00 %interest on 7-90 days deposit - 7.25 % on deposits between 91-179 years. - 7.00 % for 180-240 days fixed deposits. - 7.75% for 240 days to less than 1 year deposits. - 9.25% for 1 year to 10 years deposits.

Debit cards
A debit card (also known as a bank card or check card) is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic check, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card. Debit cards are used widely for telephone,cash withdrawl and Internet purchases. Also called as ATM cards.(automated teller machine). The debit card transactions are routed through the VISA or MasterCard networks rather than directly via the issuing bank.

Mortgage
It is a loan secured by real property(land and buildings). It is done by the use of mortgage note which evidences the existance of a loan. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.

Credit card
A credit card is a small plastic card issued to users as a system of payment It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services Credit cards are issued by a credit card issuer, such as a bank or credit union. SBI credit card,citi bank credit card

SBI platinum card

With your SBI Card you have instant access at 10 million Visa ATMs worldwide including over 45,000 Visa ATMs in India and more than 25,000 State Bank ATMs spread across more than 100 cities in India. Fees -Joining Fee (One time) Rs. 2,999 Annual Fee (p.a.) + Rs. 2,999 Extended Credit Interest Free Credit Period 20-50 days (applicable only on retail purchases and if previous months outstanding balance is paid in full) Finance charges-Upto 3.35% p.m. (40.2% p.a.) from the transaction date Minimum Amount Due 5% of Total Outstanding (Min Rs. 200) + Govt. Service Tax. In association with VISA.

RETAIL LOANS

AUTOMOBILE LOANS

AUTOMOBILE LOANS
1) Automobile loans(auto loans) - With a bunch of auto loan offers that are available these days, it is now within the reach of many to bring home their dream cars and other vehicles. ICICI auto loan-it offers upto 90% of the ex-showroom price. -Rate is 11 % to 17 %.

Allahabad bank - it provides auto loan at the rate of basic rate +2.5% - Minimum amount is 50,000 Rs. - Maximum amount is 85%% of the price of automobile. - Tenure of the repayment is minimum 1 year and maximum is 7 years. IDBI-rate is 12.75% to 14.25% HDFC bank-rate is 11%.

HOME LOANS

2) Home loan- There are different types of home loans available in the market to cater borrowers different needs. Home Purchase Loan : This is the basic type of a home loan which has the purpose of purchasing a new house. Home Improvement Loan : This type of home loan is for the renovation or repair of the home which is already bought. Home Extension Loan : This type of loan serves the purpose when the borrower wants to extend or expand an existing home, like adding an extra room etc. Home Conversion Loan : It is that loan wherein the borrower has already taken a home loan to finance his current home, but now wants to move to another home. The Conversion Home Loan helps the borrower to transfer the existing loan to the new home which

 ICICI home loan -one of the leading home loan provider in India. - home loan tenure is upto 20 years. - rate of interest- it is 10.75 % which is minimum in the category - SBI rate is 10.75% 11.75%. - Minimum amount is Rs 1 lakh and maximum is 20 lakh. - Tenure is 5 years to 10 years. IDBI home loan-rate is 11.50% - Minimum amount is 1 lakh and maximum is I crore Rs. - Tenure is 10 years to 15 years. HDFC home loans-rate is 10.75 % - tenure is 3 years. SBI-rate is 10.75 % p.a, processing fee is upto 25 lac is 0.25%,25 lac -75 lac is rs 10000.and above is 20000.

3)PERSONAL LOAN
Thinking of renovating your house? Yearning to buy a new laptop? Need financial assistance for marriage-related expenses or for your child's higher education? An ICICI Bank Personal Loan is your one-stop-shop for fulfilling all your financial aspirations! Allahabad bank-13 % p.a -Minimum amount is 15,000 Rs and Maximum is 75,000 -Minimum for 1 year and for 3 years. SBI rate is 16.75% to 20%. HDFC bank- rate is 15.75 % to 19.75% p.a - 1 year to 5 years. - 25,000 to 1 lakh.

EDUCATIONAL LOAN

Till some quality education was not affordable to some illustrious students because of the financial constraints. But the boom in the banking sector has led to release of large amount of funds for education loans. Now, education loans are easily available from various banks in India and this change is encouraging more and more students to take up higher education despite their financial shortcomings. SBI educational loan- for loans upto Rs 4 lacs, 3.75% above Base rate ,currently it is 13.25 % p.a - for loans above 4 lacs Rs and upto Rs 7. 5 lacs,it is 5.25 % above base rate ,currently it is 13.75 % p.a - above Rs 7.50 lacs it is 4.25 % above base

4) EDUCATIONAL LOAN years back higher education and

 ICICI educational loan -study in India ,loan upto Rs 10 lacs. -abroad maximum Rs 20 lacs. - rate is - minimum at 13 % p.a - maximum is 13.75 %p.a HDFC -education loan at 19 % p.a -1 to 7 years. -50,000 to 15 lacs.

ADVANTAGES AND DISADVANTAGES OF RETAIL BANKING

ADVANTAGES
They are interest insensitive and less bargaining for additional interest. Effective customer relationship management with the retail customers built a strong customer base. Retail banking increases the subsidiary business of the banks. Retail segment is a good avenue for funds deployment.

Continued
Retail banking results in better yield and improved bottom line for a bank. Consumer loans are presumed to be of lower risk and NPA perception. Helps economic revival of the nation through increased production activity. Improves lifestyle and fulfils aspirations of the people through affordable credit. Innovative product development credit

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

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

GROWTH OF RETAIL BANKING IN INDIA

Increase in banking business by 35%, insurance and brokerage by 50%, consumer credit card by 125% just with an increase in retention of customers. Information technology has played a vital role in the growth of business.

Continued
Decreasing interest rates has also contributed to the growth of retail credit. Economic prosperity has made an average increase of 6.8% to the retail growth. Credit cards and housing credits have also provided a growth in retail sector.

GROWTH OF RETAIL BANKING IN INDIA

CHANGING CONSUMER DEMOGRAPHICS:-

Growing disposable incomes Youngest population in the world Increasing literacy levels Higher adaptability to technology Growing consumerism Fiscal incentives for home loans Changing mindsets-willingness to borrow/lend Desire to improve lifestyles

Challenges of Retail Banking

Sustaining Customer loyalty.

Fraud prevention.

Avoiding Debt Trap for customers.

Continued
The issue of outsourcing has become very important in recent past because various core activities such as hardware and software maintenance, entire ATM set up and operation (including cash, refilling) etc., are being outsourced by Indian banks. The dependency on technology has brought IT departments additional responsibilities and challenges in managing, maintaining and optimizing the performance of retail banking networks. It is equally important that banks should maintain security to the advance level to keep the faith of the customer.

Continued
The customer retention is of paramount important for the profitability if retail banking business, so banks need to retain their customer in order to increase the market share. One of the crucial impediments for the growth of this sector is the acute shortage of manpower talent of this specific nature, a modern banking professional, for a modern banking sector. The challenge is to design and innovate the financial products which cater to the target segment needs The retail banks have to market their products aggressively.

OPPORTUNITY The rise of the middle class is an important contributory factor in this regard. Improving consumers purchasing power, coupled with more liberal attitude toward personal debt is contributing to India's retail banking segment Increase in purchasing power of the younger population would give an immense opportunity.

 The SEZs will also provide growth opportunity for retail banking. It has been found that younger generation is more comfortable in acquiring debt than the previous generation, thereby improving-purchasing power and liberal attitude towards personal debt, and contributing to India's retail segment The biggest opportunity for the Indian banking system today is the Indian consumer Demographic shifts in terms of income levels and cultural shifts in terms of lifestyle aspirations are changing the profile of the Indian consumer. This is and will be a key driver of economic growth going forward.

 The Indian banking sector is at an exciting point in its evolution. The opportunity are immense to enter new businesses and new markets, to develop new ways of working, to improve efficiency, and to deliver higher levels of customer service.

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