urgent help on 100 marks project-retail banking

[bakhai87]

ppl it is very urgent plz send the project on retail banking plz.

 

[ROHAN KACHALIA]

Retail Banking is is a banking service that is geared primarily toward individual consumers. Retail banking is usually made available by commercial banks, as well as smaller community banks. Unlike wholesale banking, retail banking focuses strictly on consumer markets. Retail banking entities provide a wide range of personal banking services, including offering savings and checking accounts, bill paying services, as well as debit and credit cards. Through retail banking, consumers may also obtain mortgages and personal loans. Although retail banking is, for the most part, mass-market driven, many retail banking products may also extend to small and medium sized businesses. Today much of retail banking is streamlined electronically via Automated Teller Machines (ATMs), or through virtual retail banking known as online banking.

 

[ROHAN KACHALIA]

hii
jus chk if this file is of any help.....

 

[maverick_ronnie]

well i m gt some more information abt retail banking

so this will help u out

 

[ekta zatakia]

hey here is ur projct ready..hope it will help u...........



EXECUTIVE SUMMARY
Retail banking refers to provision of banking services to individuals and small business where the financial institutions are dealing with large number of low value transactions. The concept is not new to banks but is now viewed as an important and attractive market segment that offers opportunities for growth and profits.
Excess of liquidity, increased dependence of corporates on capital markets, the rising income of middle class with increase in purchasing power and ability to handle debts, the increaseing amount of NPA’s from corporate portfolio and the growth and future growth potential of the credit card business has induced banks to shift from wholesale banking to retail banking.
Retail banking has immense opportunities in a growing economy like India. As the growth story gets unfolded in India, retail banking is going to emerge a major driver. Some of the key policy issues relevant to the retail-banking sector are: financial inclusion, responsible lending, and access to finance, long-term savings, financial capability, consumer protection, regulation and financial crime prevention.
The credit portfolio of banking business is fast changing in India. Retail lending is becoming an important segment of bank credit. Large credit exposures are linked to bank’s capital. Limits have to be fixed for single exposure in relation to the capital funds. A paradigm shift from corporate lendind and disintermediation are reasons responsible for resurgence. Banks are facing fierce competition not only amongst themselves but also from aggressive NBFC's. As a result, interest rates on retail lending too have come down.
Risk managemet for banks as far as retail banking goes should focus on risk and return characteristics of consumer loans, revenues from consumer loans, losses from consumer loans, the collection strategies, product structuring and lending policies.
Retention of consumers is going to be a major challenge. Second, rising indebtedness could turn out to be a cause for concern in the future. Third, information technology poses both opportunities and challenges. Even with ATM machines and Internet Banking, many of the customers still prefer the personal touch of their neighborhood branch bank. Fourth, KYC Issues and money laundering risks in retail banking is yet another important issue.
Customer service is perhaps the most important dimension of retail banking followed by constant product innovation. Quality and pace in delivery, introduction of new channels of delivery, cross selling of products, price bundling, and most important of all by become technology savy.


RETAIL BANKING AN INTRODUCTION
Retail banking refers to provision of banking services to individuals and small business where the financial institutions are dealing with large number of low value transactions. This is in contrast to wholesale banking where the customers are large, often multinational companies, governments and government enterprise, and the financial institution deal in small numbers of high value transactions.
The concept is not new to banks but is now viewed as an important and attractive market segment that offers opportunities for growth and profits. Retail banking and retail lending are often used as synonyms but in fact, the later is just the part of retail banking. In retail banking all the needs of individual customers are taken care of in a well-integrated manner. Today’s retail banking sector is characterized by three basic characteristics:
· Multiple products (deposits, credit cards, insurance, investments and securities);
· Multiple channels of distribution (call center, branch, internet) and
· Multiple customer groups (consumer, small business, and corporate).
What is the nature of retail banking? In a recent book, retail banking has been described as “hotter than vindaloo”. Considering the fact that vindaloo, the Indian-English innovative curry in umpteen numbers of restaurants of London, is very hot and spicy, it seems that retail banking is perceived to be the in-thing in today’s world of banking. It is however broad in nature.

WHY ARE BANKS CHANTING TO RETAIL BANKING?
Banks are awash with liquidity. Prime corporates do not borrow from banks except at sub-PLR rates. Banks do not favor other corporates. Suddenly there is a great change in attitude of banks. The name of the game is no longer ‘Lending to big corporates, huge amounts to create loan assets’. Banks invest their resources in government paper to the hilt and then scout for hitherto neglected retail borrowers for lending. Retail credit is now welcomed even from RBI’s perspective. There are no longer any regulatory hurdles. Consumer credit is no longer considered as unproductive, as it triggers demand for consumer products, which in turn help manufacturers in a period of economic slowdown. Retail to project credit stands to a ratio of 3: 1. While the rates of interest on consumer credit have still fallen, there is a scope for further reduction. Perhaps, competition will further bring down the interest rates.
Fixed interest rates on housing loan have sharply fallen, but not the floating rates, which are linked to medium and long-term PLRs. Banks, refuse to reduce these rates, which appears rather unfair. But then the consumers still needs innovative products like graduated payment mortgages etc., in place of stand alone EMI structures.
SME sector borrowers still appear to be suffering from inadequate and delayed credit delivery this sector has immense potential for growth and banks have to devise innovative strategies to fund their ventures on the principle of entrepreneurship and bankabilty rather than mere collateral securities.
Micro finance, another area of retail credit, has unfortunately become a so-called priority sector credit. Perhaps it will be a great idea if it is delinked from the obnoxious priority tag and thereby allow banks to display creativity in financing the sector, especially in rural and semi-urban areas where its potential for positive transformation of socio-economic conditions is immense. Banks are gradually appreciating the virtue of spreading the credit risk by financing large number of small (Retail) borrowers.
Credit card business is growing and even government banks have started marketing cards. Surprisingly, they still do not leverage the network of branches and availability of surplus manpower into effective marketing. The interest rates on credit cards that are 30 percent per annum refuse to come down. May be with the active participation of many banks in this lucrative business, the customer will eventually have the benefit of low rates. Thanks to the on set of ATMs, channel migration is visible.
The personal banking segment customers have become the center of attraction. It is their deposit and savings account that are actively sought after, and not mega deposits at a slightly higher rate of interest. Banks are truly spreading their deposit net rather widely.
It perhaps apt to quote what Hugh McCulloch, secretary of the treasury – UK, said long ago – ‘Distribute your loans rather than concentrate them in a few hands. Large loans to a single borrower or a firm, although some times proper and necessary, are generally injudicious and frequently unsafe. Large borrowers are apt to control the bank, and when this is the relation between a bank and its customers, it is not difficult to decide which one in the end will suffer”.


RETAIL BANKING PRODUCTS AND SERVICES
Wide range of retail banking products and services are offered by the banks, which cover both Depository and Advances to suit various segments of customer like salaried persons, businessmen, traders, professionals, pensioners etc. are as follows:-
· Housing loan.
· Personal loan.
· Vehicle or automobile loan.
· Loan for consumer goods.
· Credit and Debit cards-Global and international.
· Loan for holidays.
· Insurance products.
· Gold loans.
· Event loans.
· Overdraft.
· Mutual funds etc.
· Leasing, hire purchase and factoring services

Retail banking depositories in various segments like children, housewives, salaried class, professionals etc. include the following: -
· Flexi deposit accounts.
· Savings bank accounts.
· Recurring deposit account.
· Fixed deposit
· Lockers.
· Other short-term deposits.
Banks are coming out with more features to add value to retail banking products and services. These are called VALUE ADDED PRODUCTS AND SERVICES. These include the following: -
· Free collection of specified number of outstation instruments per month.
· Instant credit of outstation cheque.
· Concession in commission, exchange for issuance of pay orders and demand drafts.
· Issuance of free chequebooks.
· Issuance of free ATM cards.
· Interest rate options (fixed or floating)
· Waiver of credit card issuance fees.
· Free issuance of Add On cards to the members of the cardholders.
· Accident insurance cover.
· Arranging for insurance cover on the lockers in the bank.
· Reducing the fees charged on locker facilities.
· Free execution of standing instructions of customers.
· Free investment advisory services.
· Legal services for documentation
· Services to senior citizens
Other services include: -
· Payment of utility bills like electricity bills, telephone bills and water bills etc. on due date.
· Payment of monthly or quarterly education fee for children.
· Payment of insurance premium on or before due dates.
· Demating of shares, debentures and bonds.
· Telephone banking.
· Internet banking.
· Making payments at doorsteps.
NRI ACCOUNTS
The present menu of bank accounts for Non-Resident Indians (NRIs) has three categories:
1. Non-Resident (External) Rupee Accounts (NRE)
2. Non-Resident (Ordinary) Rupee Accounts (NRO)
3. Foreign Currency Non-Resident (Banks) Accounts FCNR (B)



ADVANTAGES AND DISADVANTAGES OF RETAIL BANKING
ADVANTAGES
Retail banking has inherent advantages outweighing certain disadvantages. Advantages are analyzed from the resource angle and asset angle.
RESOURCES SIDE
· Retail deposits are stable and constitute core deposits.
· They are interest insensitive and less bargaining for additional interest.
· They constitute low cost funds for the banks.
· Effective customer relationship management with the retail customers built a strong a strong customer base.
· Retail banking increases the subsidiary business of the banks.
ASSETS SIDE
· Retail banking results in better yield and improved bottom line for a bank.
· Retail segment is a good avenue for funds deployment.
· Consumer loans are presumed to be of lower risk and NPA perception.
· Helps economic revival of the nation through increased production activity.
· Improves lifestyle and fulfills aspirations of the people through affordable credit.
· Innovative product development credit.
· Retail banking involves minimum marketing efforts in a demand –driven economy.
· Diversifed portfolio due to huge customer base enables bank to reduce their dependence on few or single borrower
· Banks can earn good profits by providing non fund based or fee based services without deploying their funds.
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.
· 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.
OPPORTUNITIES AND CHALLENGES
Retail banking has immense opportunities in a growing economy like India. As the growth story gets unfolded in India, retail banking is going to emerge a major driver. How does the world view us? The BRIC report is viewing India as an economic superpower. A.T. Kearney, a global management-consulting firm, recently identified India as the “second most attractive retail destination” of 30 emergent markets.
The rise of Indian middle class is an important contributory factor in this regard. The percentage of middle to high-income Indian households is expected to continue rising. The younger population not only wields increasing purchasing power, but as far as acquiring personal debt is concerned, they are perhaps more comfortable than previous generations. Improving consumer purchasing power, coupled with more liberal attitudes towards personal debt, is contributing to India’s retail banking segment.
The combination of above factors promises substantial growth in retail sector, which at present is in the nascent stage. Due to bundling of services and delivery channels, the areas of potential conflicts of interest tend to increase in universal banks and financial conglomerates. Some of the key policy issues relevant to the retail-banking sector are: financial inclusion, responsible lending, and access to finance, long-term savings, financial capability, consumer protection, regulation and financial crime prevention.
What are the challenges for the industry and its stakeholders?
First, retention of consumers is going to be a major challenge. According to a research by Riechheld and Sasser in the Harvard business review, 5percent increase in customer retention can increase profitability by 35 percent in banking business, 50 percent in insurance and brokerage, and 125 percent in the consumer credit card market. Thus, banks need to emphasis on retaining consumer and increasing the market share.
Second, rising indebtedness could turn out to be a cause for concern in the future. India’s position, of course, is not comparable to that of developed world where household debt as a proportion of disposable income is much higher. Such a scenario creates high uncertainty. Expressing concerns about the high growth witnessed in consumer credit segments the reserve bank has, as a temporary measure, put in place risk containment measures and increased the weight from 100 percent to 125 percent in the case of consumer credit including personal loans and credit cards.
Third, information technology poses both opportunities and challenges. Even with ATM machines and Internet Banking, many of the customers still prefer the personal touch of their neighborhood branch bank. Technology has made it possible to deliver services throughout branch network, providing instant updates to checking accounts and rapid movement of money for stock transfers. However, this dependency on the network has bought IT department’s additional responsibilities and challenges in managing, maintaining and optimizing the performance of retail banking networks. Illustratively, ensuring that all bank products and services are available, at all times, and across the entire organization is essential for today’s retail banks to generate revenue and remain competitive. Besides, there are network management challenges, whereby keeping this complex, distributed networks and applications operating properly in support of business objectives becomes essential. Specific challenges include ensuring that account transaction applications run efficiently between the branch offices and data centers.
Fourth, KYC Issues and money laundering risks in retail banking is yet another important issue. Retail lending is regarded as a low risk area for money laundering because of the perception of the sums involved. However, competition for clients may also lead to KYC procedures being waived in the bid for new business. Banks must also consider seriously the type of identification documents the will accept and other processes to be completed. The Reserve Bank has issued details guidelines on application of KYC norms in November 2004.

. STRATEGIES FOR INCREASING RETAIL BANKING BUSINESS
a. Constant product innovation to match the requirements of the customer segments: The customer database available with the banks is the best source of their demographic and financial information and can be used by the banks for targeting certain customer segments for new or modified product. The banks should come out with new products in the area of securities, mutual funds and insurance.
b. Quality service and quickness in delivery: As most of the banks are offering retail products of similar nature, the customers can easily switchover to the one, which offers better service at comparatively lower costs. The quality of service that banks offer and the experience that clients have, matter the most. Hence, to retain the customers, banks have to come out with competitive products satisfying the desires of the customers at the click of a button.
c. Introduction of new delivery channels: Retail customers like to interface with their bank through multiple channels. Therefore, banks should try to give high quality service across all service channels like branches, Internet, ATMs, etc.
d. Tapping of unexploited potential and increasing the volume of business. This will compensate for the thin margins: The Indian retail banking market still remains largely untapped giving a scope for growth to the banks and financial institutions. With changing psyche of Indian consumers, who are now comfortable with the idea of availing loans for their personal needs, banks have tremendous potential lying in this segment. Marketing departments of the banks be geared up and special training be imparted to them so that banks are successful in grabbing more and more of retail business in the market.
e. Infrastructure outsourcing: This will help in lowering the cost of service channels combined with quality and quickness.
f. Detail market research: Banks may go for detail market research, which will help them in knowing what their competitors are offering to their clients. This will enable them to have an edge over their competitors and increase their share in retail banking pie by offering better products and services.
g. Cross-selling of products: PSBs have an added advantage of having a wide network of branches, which gives them an opportunity to sell third-party products through these branches.
h. Business process outsourcing: Outsourcing of requirements would not only save cost and time but would help the banks in concentrating on the core business area. Banks can devote more time for marketing, customer service and brand building. For example, Management of ATMs can be outsourced. This will save the banks from dealing with the intricacies of technology.
i. Tie-up arrangements: PSBs with regional concentration can reap the benefit of reaching customers across the country by entering into strategic alliance with other such banks with intensive presence in other regions. In the present regime of falling interest and stiff competition, banks are aware that it is finally the retail banking which will enable them to hold the head above water. Hence, banks should make all out efforts to boost the retail banking by recognizing the needs of the customers. It is essential that banks would be imaginative in predicting the customers' expectations in the ever-changing tastes and environments. It is the innovative and competitive products coupled with high quality care for clients will only hold the key to success in this area. In short, bankers have to run very fast even to stay where they are now. It is the survival of the fastest now and not only survival of the fittest.

RETAIL BANKING AND RISK MANAGEMENT
Considering the aggressive growth strategies in retail banking pursued by banks amid intensifying competition, banks may compromise on the credit quality. Though there is a conflicting interest between risk management and marketing, both should work towards a common measurable target, which combines both volumes and bad debts. The sound credit scoring models should not be limited to assessing creditworthiness but also be used for predicting potential bankruptcy, revenue response, profitability attrition and also fraud. Besides, banks have to move from mass marketing where "one size fits all" to targeting specific customers based on their individual behavior, needs and value. The customer database maintained by each bank would be handy to study customer behavior, needs etc., to respond with the right product at the right time through the right channels and deliver conveniently, efficiently and effectively.
The international trends show that large losses can be related to retail loan portfolios and hence there is a need to tread cautiously and manage risks proactively. Though the portfolio of retail loans is better diversified than a corporate loan portfolio, a systemic risk arising out of macroeconomic shocks could still have a large negative impact. The risks include the following:

a. Deficiencies in lending policies,
b. Incorrect product structuring,
c. Inadequate loan documentation,
d. Deficiencies in credit appraisal,
e. Absence of post sanction surveillance and monitoring,
f. Inadequate risk pricing,
g. Inadequately defined lending limits
h. Weak collection strategy.
All the decisions throughout the credit cycle i.e., marketing, application processing, accounts management, collection, recoveries have bad risk implications. Banks need to understand repayment behavior in a retail portfolio in relation to internal credit and marketing policies and outside economic and market influences. This would help them to respond to changes, project and make provision for forward bad debt expectations resulting in a good retail credit risk management. Banks with proactive retail credit risk management processes will be well positioned and would be able to achieve healthy growth in terms of both volumes and profitability. This would facilitate them to capitalize on emerging opportunities and meet challenges in a competitive environment transforming banks into an integrated financial service provider or a virtual universal bank.
Risk Return Characteristics of Consumer Loans
Earlier banks were either wholesale or retail institutions focusing on either commercial or individual consumers respectively. However, this distinction has been blue-red in the recent past as traditional wholesale banks have entered into retail segment. The competition for commercial- customers narrowed the commercial loin yields as returns fell relative to potential risks. Secondly, developing loan and deposit relationships with individuals apparently represents a strategic response to the deregulation. The removal of interest rate ceilings substantially reduced banks' core deposits by making high balance customers more price sensitive. On an average, individuals hold small balances and have deposit accounts frequently providing -a more stable deposit base. Thus, liquidity risk declines as a bank's retail deposit base increases.
Revenues from Consumer Loans
Banks earn substantial returns from interest on loans and associated fees. As many usury ceilings have been eliminated the banks can ration credit via price rather than by altering non-price credit terms. This permits the banks to raise consumer loans at their own conditions. When conditions permit, banks also can de.'ay lowering rates when their borrowing costs decline. Most of the consumer loans are fixed and do not change over a period of time. In declining interest rate scenario consumer loans earn larger spreads compared to banks borrowing cost. When the short-term rates rise the spread narrows until the banks raise loan rates. With aggressive marketing, the consumers are becoming more rate sensitive such that credit card loan rates and fees now closely follow the bank funding costs. In addition to interest income, banks generate substantial non-interest revenues from consumer loans. For example, with traditional installment credit, banks often encourage borrowers to purchase life insurance on which the bank may earn premium in Cr.
Consumer Loan Losses
Losses on consumer loans are normally the highest among all categories of bank credit. This is due to the cyclical patterns in personal income as well as extensive fraud. Losses are due to the mass marketing efforts pursued by many lenders particularly with credit cards. In 2001, in US consumer credit card charge off rate averaged 6.5% such that losses amounted to Rs.10 billion of which 80% historically represent outright defaults and 20% fraud. Both losses and delinquent accounts rise during recessions and decline high growth periods. Therefore, many lenders during factor losses into their pricing as a part of doing business.
Retail banking segment is increasingly attracting the attention of bankers as there are tremendous opportunities for them. It has undergone a massive change - a paradigm shift over the last few years. Technology has played a pivotal role over a decade in the banking scenario. Customers can now experience banking without much constrains of time (service hours) and location of branches unlike yesterday. The idea that has evolved in the new generation banks with the Net and ATMs in force is to enable a customer to move along with his or her bank to an office, shopping plaza, hospital or even a pleasure trip to the Bahamas. Apart from the regular banking products being sold and serviced to, the banks have become a "one stop financial shop" providing with a basket of other financial products like mutual funds, Government of India relief bonds, advisory services to life insurance. The writing on the wall clearly says, "Customer first." Therefore, it would be apt to say that retail banking and distribution would be the engine of growth for future of the banking sector.

RETAIL LENDING
Large credit exposures are linked to bank's capital. Limits have to be fixed for single exposure in relation to the Capital Funds. Thereby, clearly defined exposure ceiling for a single counterparty or group of related counterparties is required to be fixed. In addition to internal ceiling, appropriate level of prudential exposure levels are also to be fixed.
Further, the loan book containing a relatively high proportion of sizeable large credit exposure, is more susceptible to potential credit risk compared to a more widely distributed/mixed portfolio. Thus, retail exposure, with strong dominance on local populace and having personal contact with customers facilitates risk spreading and quality assets.
Credit portfolio of the banking business is fast changing in India. Retail lending is becoming an important segment of bank credit. Its share in the aggregate outstanding credit of SCBs in India has increased from nine percent to over 10 percent in. Retail loans comprising housing, consumer loans and other personal loans together went up by Rs.12,990 crore, which can be considered robust. The share of housing in total personal loans has increased three-fold from mere 3.1 percent to 11.6 percent Incremental housing loans extended by banks amounted to over Rs.6,200 crore from the previous financial year. The share of credit to other non-priority sector "personal loans" witnessed relatively a slower growth rate. However, the market for primary consumer goods has grown at an estimated 20 percent over the last five years, growth that has been fuelled by retail finance. In the face of slowdown in industrial activity, banks have aggressively increased the share of credit towards to retail lending. The critical challenge for the banking industry is approachability and accessibility - the ability to make finance available to those who need it, when they need it and in a manner that the customers want. The industry must become more proactive and reach out to the customer, rather than expecting the customer to reach out to the industry.

RETAIL LENDING: REASONS FOR RESURGENCE
A Paradigm shift from Corporate Lending: The economic slowdown and poor industrial growth have reduced demand for loans and there is stiff competition in the corporate loans market due to continuous fall in interest rates. The corporate lending scene has also undergone radical changes in the recent years. There are few opportunities in the wholesale segment, that is the corporate lending market. Competition has made it unviable to lend to blue chip corporates since they are now able to borrow at a few basis points above the yield on government securities or at sub-PLR. Volatility has been very wide with corporates preferring to tap global markets for finds. This has left only second rung corporates available for lending by domestic banks. While it increases the threat of NPAs, the fact also remains that there are too many banks chasing too few corporates with good rating status. Eying on the mid-corporates and retail finance market is more profitable than corporate banking business since, retail customers are less credit averse and more open to acquire assets through the credit route.
Disintermediation: While on the one hand, we have been talking about the need to reduce NPA; on the other hand, disintermediation requires banking beyond its traditional contours. In times of excess liquidity, disintermediation is a blessing in disguise as it diverts deposits to other avenues. However, it entails some negative effects too. It increases the cost of funds, as there is flight of deposits bearing lower interest rates to other avenues, leaving banks with only high cost deposits. Already, the trend is seen on the deposit side, where PPF, NSCs, mutual funds and insurance products are being accepted as substitutes. On the lending side too, mutual funds are poaching on the best customers. What poses more threat to banks is the fact that mutual funds are becoming the preferred lenders to corporates. Having no provisioning requirement or priority sector lending obligation and carrying almost no risk (as risks are passed on to investors), mutual funds are able to lend with a much finer spread. As a result, spreads for banks in lending have steadily declined and it is estimated that the banks will reach the international level of 1.5-1.7 percent in the next three to four years. During the year, there was a decline in the spread for SCBs to 2.6 from 2.9 percent.

RETAIL LENDING: BRIEF WRITE UP ON SOME PRODUCTS
(Since the bankers focus more on this products a detail write up on these products has been provided.)
Housing Loans: A host of factors, such as, number of dual income families, high salaried employees with high purchasing and borrowing powers, phenomenal growth of the information technology sector, attractive tax sops etc., have contributed to the buoyancy in the housing sector. Investing in a house has always been on top of the agenda for most Indian families. Thus, the banks are going in for housing finance with more vigor. Since these loans are very secure, with low incidence of default, demand for housing loans has been growing by leaps and bounds, and they form a growing avenue for deployment of funds by banks. The housing finance market has a penetration of just 1.2 percent of the GDP, much below the levels in emerging markets such as, Thailand (seven percent) and Malaysia (22 percent).
According to Industry estimates, the housing finance market in India is witnessing an annual growth between 30 to 35 percent. The RBI has reduced the risk weightage on bank's loans against residential housing properties to 50 percent from 100 percent which will effectively double the credit disbursements capacity of banks. The housing finance players are dropping interest rates/fees and undercutting each other, due to the reason that they find ways to deploy the low cost funds mobilized, in their pursuit of aggressive growth.
Consumer Loans: India is the second largest consumer market in the world and consumers in this country are dreaming of buying opportunities. The aspirations of these consumers can be fulfilled only when the consumer lending gathers momentum and grows at a much faster pace, which can be made possible by the lending institutions at an affordable rate. With significant spurt in income levels (especially in middle-income segment) and consumerism, consumer loans, also called personal loans, are now-a-days very popular in India. People find personal loans are easy to arrange and made at fixed interest rate and on the basis of fixed monthly repayment program. Interest rate is on from the time the loan is availed. The amount of interest due is added to the amount borrowed and the total sum is repaid by equal monthly installments over the repayment period and the same is commonly known as EMI.
Plastic Money: Consumer behavior has been radically altered by the power of plastic money. A credit card has endowed the middle class with the power to acquire their dream objectives, which are often beyond their normal means. The emergence of plastic money or credit cards in India has ushered in an era of convenience and security, apart from opening up new vistas of effective demand. A credit cardholder gets, inter alia, many benefits like free credit period, discounts on travel expenses, quick loan processing and free gifts. Besides, members get free health insurance and check ups. The comfort that these credit cards provide in terms of payment for shopping bills, electricity bills, phone bills, travel tickets and even petrol bills is enormous. It offers the convenience of immediate payment even with no cash in hand. Presently there are six million credit card holders in India compared to 300 million bank accounts. In spite of this, the card issuance has been growing at over 30 percent to reach the level of 7.6 million. According to the Nilson Report, transaction volume in the Indian payment industry is slated to touch Rs. 10,935 crore, accounting for only 62 percent of total volume in transactions. Further growth in transaction depends on the creation of more transactions at the point of sale centers.
Educational Loans: Education is an essential and integral part for the Human Resource Development and accordingly National/State policies are framed to ensure that this basic need is met through proper initiatives. With gradual reduction in the Government subsidies, education is getting more and more costly and hence, the need for institutional funding, especially to pursue higher/technical/ professional education. The main emphasis is that every meritorious student is provided and opportunity to pursue education with the financial support on affordable terms and conditions.
Strategies to Improve Retail Lending Schemes
• Retail segments provide necessary leeway to banks to go for volume-based business, to offset the decline in margins in a persistently downward interest regime.
• Banks should take advantage of the present low interest rate scenario and try to build up lending volumes as well as clientele base through effectivemarketing and various delivery channels.
• Upgrade the profitability mix of borrowers (retail vs whole sale) to know the behavioral pattern, primarily through a separate Marketing Cell on Loan Products and Services.
• As part of the marketing strategy, banks could organize special exhibitions/ road shows in strategic locations at times of festival celebrations/events.
• Small pamphlets (containing specific retail loan products, features, EMI structure both on floating and fixed interest basis, repayment periods, required documentations, etc.) can be distributed while customers visit to the branches to avoid delay in the processing of loans as well as to educate them on the importance of retail loan schemes.
• Depending up on the quantum of loan and credit rating of customers, softer repayment terms/schedule, especially for availing housing schemes, could be thought of Scout for increasing lending opportunities by adopting new strategies and innovations; banks are resorting to the inorganic routes to fuel the volumes by fresh acquisition and buy out retail loans from finance companies in the present falling prices in housing loans, automobiles and consumer durables.
• Tie ups between manufacturers and banks, and communicating the finance options, as part of the product communications to the customers to drive volumes and increase the retail lending penetration.
• Scout for innovative of bulk financing of housing loans through proper tie-ups with reputed real estate developers, like financing the individual buyers as the buyer is already identified by the developer for allotment.


RETAIL LENDING: SOME CRITICAL ISSUES
Banks are facing fierce competition not only amongst themselves but also from aggressive NBFC's. As a result, interest rates on retail lending too have come down. More importantly, in their eagerness to book more business, credit quality is often overlooked, and there is a risk that many of these loans will end up as NPAs. For example, the Credit Card marketed through direct selling agents aggressively thrusting cards to all and sundry, is also likely to have serious repercussions and impact on NPA of banks. In order to be successful in this line of business; they must make a distinction between the relatively secure housing finance and other kinds of consumer finance. For instance, in the credit card market, regular revolvers are generally charged with lower rate of interest and also other fines or penalties are waived off. Non-revolvers and inactive customers are charged with higher rate of interest. Besides, the card companies earn annual fee, interchange charge, revolving fee and other fees. The other fees constitute bulk of the revenue, which comes from interest charges. This means that customers are paying more than what they should.
Banks are charging at the hectic range of 30 percent to 36 percent plus levies like service charges, which make the effective charge at more than 36 percent, as against the average cost of 20 percent or so, by quoting that high credit losses in the credit card segment. Why the credit card holders are discriminated with such a high rate especially when more players have entered the fray? Such sentiments are already being echoed at various forums although credit card majors are defending such high rates due to the unsecured nature and risk in credit card business.
Actually, most of the non-default credit card holders are eligible for lower differential rate based on their track record. Since the middle and upper middle class is conservative in spending, there will be an increasing shift to debit, away from the credit cards. In the conservative set up, debit cards have a huge growth potential simply because there are no stringent credit criteria to be satisfied while availing them. The number of debit cards issued in India has increased from four lakh in April 2000 to 160 lakh in December 2001. Debit cards are catching up fast and may overtake credit cards as a payment system in India very soon.
Similarly, the lending companies always adopt a fancy way to present the equated monthly installments (EMI) making it lucrative. However, whether it is flat or reducing balance rates, the lender makes the same amount of money. For instances, many banks now-a-days come out with interest rate only on reduced outstanding balance. As against this, lending companies apply various methods of charging interest. For example, for a loan amount to be paid in 12 equal installments the interest is added to the loan amount to get the total amount payable and this is divided by 12 to get an EMI. Once first installment is paid both the principal and interest gets reduced. Thus, customers need to ensure more transparently that the interest will be charged only on the reducing balance and not on the entire amount.





CUSTOMER SERVICE
Customer service is perhaps the most important dimension of retail banking. While most public sector banks offer the same range of service with similar technology/expertise, the level of customer service matters the most in bringing in more business. Perhaps more than the efficiency of service, the approach and attitude towards customers will make the difference.
Front line staff have to be educated in this regard. A scheme of entrusting a group of important customers to the care of each employee/officer with a person to person knowledge and intimacy can be implemented All sundry advices/notices (such as Dr./Cr. advices. TDR maturity advices, etc.) whether signed by employees or officers should be identifiable by the name of those signing, and inviting customers to contact them for further assistance in the matter.
A customer centered organization has to be built up, whose ultimate goal is to "own" a customer. Focused merchandizing through effective market segmentation is the need of the hour. A first step can be the organization of the various retail branches to enter for different market segments like upmarket individuals, traders, common customers, etc..
For the SIB (Small Industry and Business) sector banks, the focus should be on identifying efficient units and allocations of loans lo these units. These banks should try Merchant Banking services en a small scale.
With agricultural output growing at a fast rate and mechanization setting in, banks should try to cater to the credit needs of the people involved in this profession. A wide network is absolutely imperative for this sector.
Separate branches/divisions should be opened for traders and similar government businesses. Special facilities for cash tendered in bulk and immediate issue of drafts, by extending facilities like "guarantee bond" system, will go a long way in mitigating problems faced by traders who are the major customers for drafts issue. Provision for cash counting machines in these branches will reduce the monotony of cashiers and unnecessary delays, thus resulting in better productivity and ultimately in improved customer service.
The personal segment is however the most important one. With the urban segment moving away because of disintermediation and competition from foreign banks, retail banks should focus en the rural/semi-urban areas that hold the maximum potential. Innovative schemes like "paper-gold" schemes can be introduced. In the urban areas, private banking to affluent customers can be introduced, through which advisory and execution services could be provided for a fee. Foreign currency denominated accounts can also be introduced for them.
Nationalized banks compare very poorly with the foreign banks when it comes to the efficiency in services. In order to improve the speed of service the bank should.
a. Improve the rapport between the controlling offices and the branches to ensure that decisions arc communicated fast.
b Make sure that the officials as well as the staff are fully aware of the rules so that processing is faster.

TECHNOLOGY
In the current scenario, the importance of technology cannot be understated for retail banks which entail large volumes, large queues and paperwork. But most of the banks are burdened with a large staff strength which cannot be done away with. Besides, in the rural and semi-urban areas, customers will not be at home in an automated, impersonal environment.
The objective would be to ensure faster and easier customer service and more usable information, instantly, economically and easily to all those who need it -customers as well as employees. Proper management information systems can also be implemented to aid in superior decision making.
Communication technology is especially needed for money transfer between the same city and also between cities. There are inordinate delays in India because of geographical and other factors. Modem technology can make it possible to clear any check anywhere in India within three days. Installation of FAX facilities at all the big branches will facilitate speedy transfer of payment advices. Computerization will be of great help in improving back-office operations. At present, 60% of India's rural branches can have PCs. These can be used for quick retrieval and report generation. This will also drastically reduce the time bank staff spend in filling and filing returns. Housekeeping operations can also be speeded up.



PROFITS FROM RELATIONSHIP
Customer relationship is the base on which the structure of retail banking will evolve. The cost to develop customer relationship is always higher than the revenue, but when the relationship grows new demands will appear and then the incremental revenue would be higher than incremental cost. The costs associated with building up of relationship are huge. They are, advertising costs, price incentives, set up costs for accounts, information and service costs, etc.
The reality of retail banking is large fixed costs, customer-driven costs, high relationship origination costs and considerable cost differences in serving the customers through the different distribution channels.
Customer service delivery is pivotal for the success of retail banking. This is not possible only through technology. Process consistency within and across service channels is paramount. Banks are increasingly making investment in a single type of process, rather investing in a set of processes that improves customer service to a consistent level. Improving process consistency also depends on human resource policies.
Sales and service culture has to be developed against the pure service culture. Banks have to note that, the Internet will not replace the other channels of interaction with the customer, just like VCRs did not replace the experience of going to the movies. Alignment of technology, human resource management and strategy are very essential for the success of retail banking.

PRICE BUNDLING
Price bundling is a selling arrangement where several different products are explicitly marketed together to a price that is dependent on the offer. As banks are multi-product firms this strategy is more applicable to retail banking. Price bundling offers several economic and strategic benefits to a bank. It offers economies of, utilization of the existing capacities and reaching wider population of customers. Bank can get the benefits of information and transacting. In the process of extending variety of services, banks are acquiring enormous amount of customer information. If this information is systematically stored, banks can efficiently utilize this information in order to explore new segments and to cross-sell new services to these segments. Cross-selling opportunities and larger customer base can also be the motive for merger against usually stated advantage of cost savings. Price bundling can be used in order to lengthen the relationship with a customer. It will reduce the need of resources to be put on acquiring new customers and saves time of the bank. Among the strategic benefits, price bundling may cause less aggressive competition; it differentiates its products compared to rivals in the same market where the products are sold individually or in other kinds of bundles.
Retail banking offers many services and it gives an opportunity to the bank to combine different services in different kinds of bundles. In many cases demand for one service affects the demand for another service, for example current or savings account and payment services are highly related, and here price bundling is a better alternative than individual selling. Banks have to analyze the customer segment and bundle products before applying the pricing strategies.
The first step in price bundling decision is to select the customer segment. The bundle is targeted to choose a strategic objective. If there are two products (A and B) that are considered to be bundled together, the comprehensive strategic objectives for the different customer segments are:
• Cross-selling to customers that only buy one of the products.
• Retaining customers that already buy both of the products.
• Acquiring new customers when they buy neither product for the time being.
CROSS SELLING
According to Money magazine, it costs a bank five times less to cross-sell an existing client than to acquire a new one. And research shows the more products a customer buys from an institution, the less likely that a person would leave. Now major banks are increasingly relying on cross-selling and new banking product? to expand their businesses. This has prompted an increased focus once using new products, and extracting more value from existing business customers. "Relationship management" and "customer solutions" are some of the buzzwords that banks are using as they seek to expand their business with existing customers. The success of cross selling concept can only be gauged by calculating "profitability per customer.' However, banks today are satisfied merely counting the number of products sold per customer without getting into any mathematical calculations. However, cross selling has its advantage. It considerably reduces customer acquisition costs, servicing, marketing and communication costs and thereby substantially increases spreads for banks. Therefore, one sees bank statements loaded with newsletters that boast new schemes and services that the customer can avail from the bank and annoys the customer. Analyzing the customer database and then putting the right customer relationship management strategies ;n place is essential to ensure that the cross-selling effort does not backfire. The more relationships a bank has with a customer, the more loyal the customer will be. The more will be the inertia to move to another bank. The bank could also get to know the customer through several relationships; thus the assessment of the credit quality of the customer can be bettered. Banks even venture out into new businesses looking at cross-selling opportunities ahead. For instance. HDFC Bank entered commercial vehicle financing in February 2002 with intent to tempt fleet operators to avail of cash management services and personal banking services along with vehicular finance.
Traditionally, barks got their customers through a combination of advertising, word-of-mouth, publicity, acceptable rates on saving and checking accounts, and sheer luck of geography. Most customers stayed loyal to their banks, and they typically did all their banking with a banker their family may have known for years. As the financial services industry has become more market-driven and more competitive, traditional loyalties have eroded, and the one-stop neighborhood bank has become a thing of the past. Gone are the days when a customer patronized a single bank for comprehensive financial services - for everything from a basic checking account to a mortgage to retirement planning and more. Today, consumer: rely on multiple financial service providers -traditional and online banks, insurance companies and others to meet their several banking needs. When traditional loyalties erode, maintaining existing customers becomes a problem. In such a scenario, cross selling offers an answer.
The cross selling of financial products and services hold both advantages and disadvantages. On the plus side, broadening a firm’s
Business range offers significant potential benefits for customer and also the b inks. The diversification means cheaper finance for the customer and reduced exposure to the business cycle for the bank. On the minus side, the few firms that have embraced cross-selling so far have often found it to be a difficult and largely unprofitable exercise: it takes considerable time and skill to weld together the cultures, risk profiles and images of banks. Certainly, if it can be made to work, cross selling is an appealing prospect. But expanding the customer relationship has its own risks. Cross selling may result in a diversification of the financial risk to a provider, but it results in a concentration of business risk. Rather than losing just one piece of a customers' finances if a relationship sours, a one-stop shop stands to lose the rest of the customers.
INNOVATION
The scope for innovation in financial services is unlimited. Although banks have introduced a variety of deposit and loan products, the basic features of all these products are almost one and the same. Among the delivery channels, ATMs have emerged as ubiquitous money centers. Almost all banks have established their ATMs. India had only 400 ATMs, which increased to 3,600. Out of this 881 ATMs have Swadhan connectivity. It is projected that the number of ATMs will reach up to 35,000 by the end of. The question arises is, are they cash cows? The answer is certainly no. For most of the banks the overhead costs on these ATMs are far higher than the revenue generated by them. ATM operation costs are largely fixed in nature - the cost of the machine, its maintenance, replenishment of currency, and the satellite (network) connection. There should be a minimum number of transactions to cover these costs. Banks have to innovate wide range of services in addition to cash withdrawals. ATMs should allow customers to buy postal and revenue stamps, payment of bills, event tickets, sports tickets, etc. Banks can offer ATM screens for slide show advertising also. However, the advantage of the ATM has always been speed and convenience, probably on introduction of these new services customer has to spend more time at a point. ATMs can guide the customer also. For example, if a customer's account balance has reached to bare minimum the ATM can give a helpful suggestion that "we notice your balance is low, can we help with a loan?" ATMs can be either within the premises of a branch or at a remote place. On premises ATMs are highly immune to competition, but branches can reduce the staff, on installation of ATM. The scope for wider services through off-premises ATMs is very high; it provides great opportunity for fee revenue. The cost of maintenance of off-premises ATMs is higher in terms of replenishment, cash couriers, armed security etc. In the US, approximately 23 percent of ATMs are offering sale of postage stamps. It is the right time for banks to question themselves whether ATM is a service channel, sales channel, or branding opportunity?
The future of retail banking lies more in mobile banking. Mobile telephone market is penetrating, and mobile phones are ideal to utilize Internet banking services without customer accesses to PC. By a tacit acceptance India has around three million mobile phone users and this number is expected to reach to eight million by 2003.
Smart card revolution will further change the face of retail banking. Smart cards can store information; carry out local processing on the data stored and can perform complex calculations. At present, India has around 3.4 million smart card users and it is estimated that by the end of 2004 it will reach 14.7 million.

CASE STUDY ON PRODUCT INNOVATION OF
STATE BANK OF INDIA
Banking originated at a time when indigenous bankers played a very important role in lending money and financing foreign trade and commerce. During the days of the East India Company, it was the turn of the agency houses to carry on the banking business. The General Bank of India was first the joint stock bank to be established in the year 1786. The others which followed were the Bank Hindustan and the Bengal Bank.
In the first half of the 19th century the East India Company established three banks; the Bank of Bengal, 1809 the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks also known as presidency banks were amalgamated in 1920 and a new bank, the Imperial Bank of India was established in 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken over by the newly constituted State Bank of India (SBI).

FEATURES OF STAE BANK OF INDIA
· It is the India's largest bank in terms of assets, net earnings, and number of branches, market capitalisation and market share.
· It has a vast distribution network of over 13,600 branches in India and 54 overseas offices in 28 countries.
· SBI is the preferred vehicle of the Government of India for raising funds abroad by way of NRI Bonds /India Millenium Deposit.
· It has a dominant corporate and retail banking franchise serving more than 90 million customers.
· SBI is the only Indian bank to feature in the top 100 banks ranked in terms of tier 1 capital (The Banker, July 24) and the only Indian bank to feature in the top 100 banks in the world.
· SBI also has 200 years of continuous profitability.
ü Central banker prior to formation of the Reserve Bank of India.
ü It holds record of continuous dividend payment.
· It is also the best positioned to leverage the resurgence in the Indian economy.
· Critical size achieved by the State Bank Group—USD 100 billion plus size, profit crosses USD 1 billion mark.
ü Consolidated group presents a formidable entity.
ü Seven associate banks considered together are the second largest bank in the country.
· SBI has nearly l/5th of the market share of total deposits and advances; along with the seven associate banks the State Bank Group enjoys more than l/4th market share.
PRIMARY ACTIVITIES
The primary activities can be listed as follow:
· Treasury operations
· Corporate banking group
· National banking group
· NPA management
· Internal controls
· Cross-selling
· Management information system
· Community services
TREASURY OPERATIONS
The State Bank is the largest player and market mover in both the Rupee and Forex markets in India. Treasury operations have expanded significantly beyond the conventional role of liquidity management and regulatory compliance to emerge as a major profit centre. The implementation of the Treasury Solutions Software has facilitated online trading, accounting, valuation and portfolio risk management. Real time gross settlement systems (RTGS) has also been implemented. Trading in derivatives, both Rupee and Forex, was introduced after putting in place requisite policies and risk management systems.
CORPORATE BANKING GROUP (CBG)
The bank's corporate banking group consists of three strategic business units (SBUs), namely Corporate Accounts Group, Leasing SBU and Project Finance SBU.

Corporate Accounts Group (CAG)
CAG's loan portfolio constituted about 34.5 per cent of the bank's commercial and institutional non-food credit and 16.7 per cent of the total domestic credit portfolio as on March 2004. Innovative products of the CAG were successful. For example, SBI-FAST, a niche cash management product, had a turnover of Rs 2,72,501 crore spread over 308 centres.
The loan product with MIBOR-related pricing, launched in February 2003, achieved a turnover of Rsl9,070 crore in the following year. Besides providing a wide range of financial services to its customers, the CAG has also been instrumental in marketing commercial papers, non-convertible debentures and bonds issued by top-rated corporates.
Leasing SBU
Compared to CAG and the Project Finance SBU, the Leasing SBU is not active in the market.
Project Finance SBU
The bank's Project Finance SBU focuses on core and infrastructure sectors which are seen as drivers of future growth, like telecommunications oil and gas, roads, bridges, ports and urban infrastructure. The SBU has also played an advisory role to the government through various committees, particularly in the power sector.

SECONDARY ACTIVITIES
Associates and subsidiaries Associates: SBI has the following seven associate banks (ABs) with controlling interest ranging from 75 per cent to 100 per cent.
• State Bank of Bikaner and Jaipur (SBBJ).
• State Bank of Hyderabad (SBH).
• State Bank of Indore (SBIr) .
• State Bank of Mysore (SBM).
• State Bank of Patiala (SBP).
• State Bank of Saurashtra (SBS).
• State Bank of Travancore (SBT).
These seven ABs have a combined network of 4,596 branches in India which are fully computerised and 1,070 ATMs networked with SBI ATMs, providing value-added services to clientele. Subsidiaries: SBICI Bank Ltd (banking subsidiary, fully owned by SBI). SBICI Bank Ltd has two branches, fully computerised, operating in Mumbai. Foreign Subsidiaries
SBI International (Mauritius) Ltd, Offshore Bank: It is one of the first offshore banks to be established in Mauritius in 1990, with a paid up capital of USD 10 million. The bank has had a consistent record of having earned profits since its very first year of operations.
State Bank of India (California): State Bank of India (California), a wholly owned subsidiary in California is a California State Chartered Bank and a member of the Federal Deposit Insurance Corporation. With four-full service branches and a money transfer office, the bank caters to the banking needs of the community, ethnic and non-ethnic alike, through various deposit and loan schemes. The bank also provides Internet banking, tele-banking, ATM service and credit cards.
State Bank of India (Canada): State Bank of India (Canada)—a wholly owned subsidiary of State Bank of India—has been operating in Canada at four locations—Toronto, Vancouver, Surrey and Mississauga—extending various facilities to Indians settled in Canada such as remittance of funds through a network of over 9,000 offices of State Bank of India, the largest commercial bank in India and through the branches of its associate banks. SBI(C) has also been instrumental in fostering trade ties between India and Canada by extending financial, advisory and logistic support to Canadian and Indian corporates.
INMB Bank Ltd., Lagos: A subsidiary of SBI, INMB Bank Ltd, (formerly Indo-Nigerian Merchant Bank Ltd) was incorporated on 26 November 1981 under the Banking Act, 1969. The principle activity of the bank is providing banking services, mainly to corporate clients. Such services include the granting of loans and advances, equipment leasing, corporate finance activities, and financial advisory services.


PRODUCTS AND SERVICES
State Bank of India has a vibrant range of products and services ranging from personal banking, NRI services to agriculture, international and corporate services.
PERSONAL BANKING
SBI has a wide range of products in personal banking which are designed with huge flexibility to meet every customers needs. And with a ATM count crossing the 5,000 mark, SBI is heading towards excellence in the personal banking sector. The personal banking products are listed below:
· SBI term deposits
· SBI recurring deposits
· SBI housing loan
· SBIcar loan
· SBI educational loan
· SBI personal loan
· SBI loan for pensioners
· Loan against mortgage of property
· Loan against shares and debentures
· Rent Plus scheme
· Medi-Plus scheme

SBI Term Deposit
SBI offers attractive term deposit schemes that range from 15 days to 10 years and that can be opened with as low as Rs 1,000.
The rates of interest are as follows.

w.e.f. 29 November 2004 (maturity amt. for Rs. 100)
Period (% p.a.) Period Mat.Amt Mat.Amt
7 days to 14 days 3.00 6 months 102.5156 102.5156
15 days and upto 45 days 4.00 9 months 103.7971 103.7971
46 days and upto 179 days 4.50 12 months 105.6145 105.6145
18 days to less than 1 year 5.00 24 months 111.5442 111.5442
1 year to less than 3 years 5.50 36 months 118.6813 118.6813
3 years to less than 5 years 5.75 6 months 133.0365 133.0365
5 years and above 6.25

The deposits offer features like safety, liquidity transferability and flexibility and timely payment of interests.
RECURRING DEPOSITS
The recurring deposits schemes of SBI feature high flexibility in periods of deposit with maturity ranging from 6 months to 10 years which can be opened with amounts as low as Rs. 100.
HOUSING LOANS
SBI housing loans come with features like no hidden costs or unnecessary documentation. They have the longest tenors and repayment terms are amongst the most flexible. SBI offers a totally transparent process. SBI even gives an in-principle approval prior to identifying a house/flat, relieving the customer of the tension of anticipating the approved amount. And to show the importance which SBI gives to housing loans, SBI has specialised housing loan branches to serve the needs better. A special Short-term Housing Loan Scheme for loans of repayment period up to 5 years has been launched by SBI. This scheme carries still lower rates of interest. Other features of SBI housing loans are as follows.1
· Low equated monthly nstalments (EMI).
· Low interest rates, currently between 8 per cent per annum and 9.25 per cent per annum on daily reducing balances.
· A nominal processing fee of 0.25 per cent.
· No hidden costs or administrative costs.
· No prepayment penalties. Compare with penalties of up to 2 per cent charged by others.
· In-principle approval given prior to customer's identifying a house/flat, giving flexibility in choice.
SBI CAR LOANS
SBI car loans come with the following features:
· Lowest interest rates.
· Longer repayment period of upto 84 months.
· No processing charges.
· No hidden costs or administrative charges.
· Finance for-one-time road tax, registration fee and insurance premium.
· No advance EMIs.
· Complete transparency : SBI levys interest on the daily reducing balance method. When customers pay one instalment, the interest is automatically calculated on the reduced balance thereafter. When customers pay interest on an annual reducing balance, as charged by many other companies/banks, the interest amount for the coming year is determined on the amount outstanding at the beginning of the year. Customers continue to pay interest even on the amounts they repay during the year.
· The interest rates offered are floating rates and fixed rates.

SBI EDUCATIONAL LOANS
The SBI educational loans include loans for the following expenses:
· Fees payable to college/school/hostel.
· Examination /library /laboratory fees.
· Purchase of books/equipment/instruments/uniforms.
· Caution deposit/building fund/refundable deposit.
· Travel expenses/passage money for studies abroad.
· Purchase of computers considered necessary for completion of course.
· Cost of a two-wheeler upto Rs 50,000.
Amount of loan
· For studies in India, maximum Rs 10 lakh.
· Studies abroad, maximum Rs 20 lakh.
Processing fees
· No processing fee/upfront charges
· Deposit of Rs 5,000 for education loan for studies abroad which will be adjusted in the margin money.
Repayment tenure
Repayment commences 1 year after completion of course or 6 months after securing a job, whichever is earlier.


SBI PERSONAL LOANS
SBI personal loans are available across the country from more than 3,000 branches and come with the following features.
· Lowest interest rates.
· Lowest processing charges—only 1 per cent of the loan amount. No hidden costs or administrative charges.
· No security required which means minimal documentation.
· No prepayment penalties. Reduces the interest burden and customers can optimally utilise their surplus funds by prepaying the loan.
· Long repayment period of up to 48 months.
The important feature is processing charges which are 1 per cent of the loan amount. This is amongst the lowest fees in the industry. Processing fees have to be paid upfront. There are no hidden costs or other administrative charges.
SBI Loans for Pensioners
These loans are available to central or state government pensioners drawing pension through one of SBI branches. Loans can be availed of up to a maximum of 6 months pension, subject to a ceiling of Rs 40,000 and comes with easy documentation. The loan may be repaid over 2 years and will carry a low interest rate of 13.1 per cent. There are no processing fees, no hidden costs and no prepayment penalties. Whenever customers have some surplus funds, they can credit their loan account, thereby reducing the loan liability and interest burden.

Loan against Property
This loan comes with features like minimum amount of 1 lakh and maximum amount of 50 lakhs and margin of up to 50 per cent. The loan amount can be repaid in maximum of 60 installments and customers can opt to divert any surplus funds towards prepayment of the loan without attracting any penalty.
Loans against Shares and Debentures
SBI offers loans upto Rs 20 lakh with the following features:
· Lowest interest rates.
· Lowest processing charges, only 1 per cent of the loan amount—while some other banks charge upto 2 percent
· No hidden costs or administrative charges.
· No prepayment penalties.
The margin is 5 per cent in this case and the loan has to be repaid in 30 months through a suitable reducing balance program.
Rent Plus
This is a term loan available for 7 years or the residual lease period, whichever is lower, the main purpose of such loan is to meet the liquidity mismatch of the applicants. Minimum loan amount is Rs 50,000 and maximum is Rs 5 crore in non metros and Rs 7.5 crores in metros. The margin is 15 per cent.


Medi Plus Scheme
This loan is available for specialised medical treatments which not only do the cost implications run into several lakhs of rupees, but more often than not, these liquid funds also need to be generated at a very short notice, in order to be able to make prompt hospital bill payments. With this in mind, Medi Plus is specially designed to make life simpler for customers. Medi Plus Scheme covers the cost of treatments such as:
· Corneal implant
· Orthodontic treatment (fixed tooth implant)
· Ilazirav Technique of lengthening a limb
· Congenital heart surgery
· Angioplasty
· Heart valve replacement surgery
· GIFT (in-vitro technique for child bearing)
· Serious accidents and multiple injuries surgery
· Hip and knee replacement surgery
· Coronary artery bypass/graft surgery
· Cochlear implants (surgical) for the hearing impaired
· Onco-surgery upto Grade I
· Reconstructive nose surgery with face lifting
· Penile implant surgery
· Artificial limb prosthesis
· For employees and professionals: Rs 2 lakh
· For pensioners and agents: Rs 1 lakh
NRI ACCOUNTS
The following types of NRI accounts are offered by SBI.
· NRE rupee accounts
· Savings bank
· Current accounts
· Term deposits (interest paid out quarterly)
· Special term deposits (interest compounded quarterly)
· Foreign currency non-resident accounts. Fixed deposits in Pound Sterling, US Dollar nd Euro Currencies
· Resident foreign currency accounts
· All these accounts come with features like ATM, Internet banking, easy swipe facility between fixed deposit and current accounts.
Agricultural Accounts
The following types of agricultural accounts are offered by SBI.
· Crop loan
· Produce marketing loan scheme
· Loan against warehouse receipts /cold storage receipts
· Kisan credit card scheme (KCC)
· Agricultural term loans (ATL)
· Land development schemes
· Minor irrigation schemes
· Farm mechanisation schemes
· Financing of combine harvesters
· Kisan gold card scheme
· Land purchase scheme
· Krishi plus scheme
· Arthias plus scheme
· Dairy plus scheme
· Broiler plus scheme
· Finance to horticulture
· Lead bank scheme
Crop Loans
This loan provides financial assistance to meet cultivation expenses for various crops.
Produce marketing loan scheme
The bank provides financial assistance to help farmers store produce in their own premises to prevent distress sale. This facilitates immediate renewal of crop loans for the next season.
Loan against warehouse receipts/cold storage receipts
A loan for a period upto 6 months is provided to farmers storing produce in private/ government warehouse/cold storages against pledge of warehouse/cold storage receipt to prevent distress sale.
Kisan credit card scheme
This is specially designed to meet the short-term credit needs of the farmers and is also available to farmers having good track records with other banks.


Agricultural term loans
Agricultural term loans are provided for the purchase of assets (e.g., farm machinery, bullocks, sheep, and, e.g., creation of assets orchard development, poultry, and dairy development, e.g.,) connected with rural activities like agriculture, horticulture, plantation, sericulture, animal husbandry, fisheries and where the loan amount is repayable over a period of time exceeding 3 years.
Land development schemes
This is mainly to provide credit solutions for land development projects in the form of direct finance to cultivators for better productivity. Loans under this head cover various activities like land clearance (e.g., removal of bushes and trees), land leveling and shaping, contour/graded bunding, bench terracing for hilly areas, contour stone walls, staggered contour trenches, disposal drains, reclamation of saline/alkaline soils and fencing.
Minor irrigation schemes
Provides credit for creating irrigation facilities from underground/surface water sources. All structures and equipments connected with it are also financed. Loans cover various activities like digging of new wells (open/bore wells), deepening of existing wells (traditional/in well bore), energisation of wells (oil engine/electrical pump set), laying of pipe lines, installing drip/sprinkler irrigation system and lift irrigation system.


Farm mechanisation scheme
This scheme provides credit for purchase of farm equipment and machinery for agricultural operations. The scheme covers activities like purchase of tractors and accessories, trailers, power tillers, combine harvesters, power sprayers, dusters, and threshers.
Financing of combine harvesting
Finance is given for the purpose of purchase of combine. Models only in the approved list of combines will be financed.
Kisan gold card scheme
To sanction hassle free term loans to farmers having, excellent repayment record. Investment credit for which term loans are ordinarily sanctioned are covered. Consumption loan to meet domestic expenses like children's education, marriage, and medical expenses are also be included to the extent of 20 per cent of limit.
Land purchase scheme
Loan to small and marginal farmers/landless labourers for purchase of agricultural land.
Krishi plus scheme
Scheme for financing tractor to rural youth for custom hiring.
Arthias plus scheme
To finance commission agents against their receivables of farmers.

Dairy plus scheme
This scheme finances purchase of milk cattle, milking machines, construction of sheds, chaff cutter and other equipments.
Broiler plus scheme
Under the scheme, loans are available to farmers for construction of broiler sheds, any other development work required and equipment needed for broiler farming.
Finance to horticulture
Loans for development of fruit orchards like mango, chikoo, guava, grapes, pomegranate, apple, and lechee as well as short-term fruit crops (e.g., banana, and pineapple), flowers in open and green houses (e.g., roses, carnation, chrysanthemums, and jasmine) and vegetable crops (e.g., potato, tomato, brinjal, gourds, and peas) are financed.
Lead bank Scheme
The bank has been assigned lead responsibility in respect of 140 districts out of the total 564 districts across the country.
SME Schemes
SBI has been playing a vital role in the development of small-scale industries since 1956. The bank has financed over 8 lakh SSI units in the country. It has 55 specialised SSI branches, 99 branches in industrial estates and more than 400 branches with small industry banking divisions.
To cater to the needs of small scale industries, SBI offers the SME schemes which include the following:
· Project Uptech
· Charter For SSI
· SSI Loans
· Business enterprises
· Retail trade
· Professionals and self-employed persons
· Doctors Plus
· Dental Doctor Plus
· SBIShoppe
· Cyber Plus
· SME Credit Plus
· Small business credit card
· SME petro credit
· Dal Mill Plus
· Paryatan Plus
· Transport operators
· Auto clean
· Eicher Motor Limited (EML)
· Auto loan
· Artisan credit card
· Rice Mills Plus
· School Plus
· Swarojgar credit card
· Flexi loan

Other services of the bank include the following:
· SBI Vishwa Yatra foreign travel card
· ATM services
· Internet banking E-pay
· E-rail
· RBIEFT
· Safe deposit locker
· Gift cheques
· Foreign inward remittance






CONCLUSION
There is a need for constant innovation in retail banking. In bracing for tomorrow a paradigm shift in bank financing through innovative products and mechanism involving constant upgradation and revalidation of banks’ internal system and processes is called for. Banks now need to use retail as a growth trigger. This requires product development and differentiation, micro-planning, marketing, prudent pricing, customization, technological upgradation, home / electronic / mobile banking, effective risk management and asset liability management techniques.
While retail banking offers phenomenal opportunities for growth, the challenges are equally daunting. How far the retail banking is able to lead growth of banking industry in future would depend upon the capacity builcing of banks to meet the challenges and make use of opportunities profitably. However, the kind of technology used and the effenciency of operations would provide the much needed competitive edge for success in retail banking business. Furthuremore, in all these customer interest is of paramount importance. The banking sector in india is demonstrating this and I do hope they would continue to chart in this traded path.

 

[nimi_0188]

INTERVIEW
(Analysis)

For better understanding of this topic I have visited ICICI Bank where I meat Mr. Rajesh Vinod Suba (Branch Manager). I had asked him certain set of Question to know his views and thoughts on this segment and here I have tried to share with you all his experience that he shared with me.
Reason for choosing ICICI Bank is that it is one of the best and leading bank in Retail banking segment (i.e. Private Bank)
Questions was asked by me and replied was given by the ICICI Branch Manager Mr. Rajesh Vinod Suba:-

1. How your products and services differ from other Banks?
- Mr. Rajesh Suba:- “ Our product are innovative in terms of features, We provide simplified procedure of documentation, and competitive pricing.” We also provide 8am. to 8pm. 12 hours banking services.

2. What is your primary motive behind Retail Banking?
- Mr. Rajesh Suba:- “ Customer satisfaction and profit go hand in hand, if there are no customer there is no business and at the end we have to do business and business is not for charity.”

3. What are the products and services included in Retail Banking?
- Mr. Rajesh Suba:- Our Bank provide wide range of product and services to the customer such as Deposits, Loans (i.e. Personal loan , Home loan, Car loan etc.), Debit and Credit Cards, Insurance, Demat services, Online services, Money transfer, Mobile Banking, Internet Banking, Core Banking, E-mail us, Call us etc.





4. Do you think customers are comfortable with your Retail Banking Services?
- Mr. Rajesh Suba:- Yes, off course. Because we are having multi-channel distribution through 550 physical outlets, more than 1800 ATMs, mobile, telephone and internet banking facilities. Therefore, customer can save time and money. As a result customers are more comfortable with our Retail Banking Services.

5. What are the pros and cons of Retail Banking?
- Mr. Rajesh Suba:- There is no cons of Retail Banking. Customer want fast and quick services that we are providing through Retail Banking. As there is continuous innovation in Retail Banking (i.e. ATM, Internet Banking, Phone Banking etc.)

6. Do you face a competition?
- Mr. Rajesh Suba:- Yes, off course we do face competition from other banks and in days ahead level of competition is going to be multiplied but with advance technology, innovative product and effective CRM we possess no threat.

7. What are the marketing strategies that you use in Retail Banking?
- Mr. Rajesh Suba:- We are using Television, Press and Radio advertising for marketing our products.

8. What are you plan to do in future?
- Mr. Rajesh Suba: - As our bank is one of the best and leading bank in India, We are planning to move further International Banking and Rural Banking in next 2 years.




Mr. Rajesh Suba have agreed the importance of Retail banking by saying that :
“Retail Banking is very blood and marrow present day banking”

 

[kruts]

i wan info on related topic of Business avenues in retail banking plzzzzzzzzzzzzz people help

 

[manthan_479]

c the above information isnt that enuf...n a project related to ur is already uploaded on Mp...pls use the search option...

 

[kruts]

d main problem is dat it is business avenues so i guess i need to put all means used by bankers to attract customers so d above info is good but a little less relevant i want virtual banking stuff

 

[manthan_479]

c d links...

Virtual bank - Wikipedia, the free encyclopedia
i-flex solutions - IT financial services solutions provider,capital market technology solutions,CRM software solutions,IT insurance services,mutual funds solutions,retail banking technology,cash management solutions,investment management solutions,of

will project on e-banking will help....???????

 

[jitendra05]

ppl it is very urgent plz send the project on retail banking plz.

Hey friend, you do not need to worry about the content for your project as i am going to help you. As you mentioned that you are preparing project on retail banking so that i am uploading a document on retail banking and would like you to download and check it.