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Project On








Alamuri Ratnamala Institute of Engineering and Technology


Affiliated to

Department of Management Studies




This is to certify that the dissertation/project entitled “RETAIL BANKING

ASHOK BHANDE bearing PIN ARMIET/MMS 16/BD 040 in partial
fulfillment of the requirement for the award of the Degree of Master of
Management Studies of University of Mumbai, is a confide to work to the best
of my knowledge and may be placed before the Examination Board for their

Prof. External

Internal Examiner

Dr. L.S. Bothra


I hereby declare that this report, submitted in partial fulfilment of the requirement for the
award for the Darshana Ashok Bhande , to Alamuri Ratnamala Institute of Engineering and
Technology (ARMIET) is my original work and not used anywhere for award of any degree
or diploma or fellowship or for similar titles or prizes.

I further certify that without any objection or condition subject to the permission of the
company where I did my summer project, I grant the rights to Alamuri Ratnamala Institute of
Engineering and Technology (ARMIET) to publish any part of the project if they deem fit in
journals/Magazines and newspapers etc without my permission.

(Darshana Bhande)


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

Excess of liquidity, increased dependence of corporate on capital markets, the

rising income of middle class with increase in purchasing power and ability to
handle debts, the increasing 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 lending 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 management 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, and 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 savvy.

1. Rationale for the study
2. Objective of the study

 Title of the Project

 Objective of the study

 Scope of the study

3. Profile of the company
4. Theoretical Perspective
5. Research Methodology
Data analysis and interpretations using
6 various chart and graphs.
7. Findings
8. Limitation
9. Expected contribution from the study

 Copies of Questionnaire
 Bibliography


Concept of Retail Banking:-

Retail banking is, however, quite broad in nature - it refers to the dealing of
commercial banks with individual customers, both on liabilities and assets sides
of the balance sheet. Fixed, current / savings accounts on the liabilities side; and
mortgages, loans (e.g., personal, housing, auto, and educational) on the assets
side, are the more important of the products offered by banks. Related ancillary
services include credit cards, or depository services. 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 centre, branch, Internet and
kiosk); and Multiple customer groups (consumer, small business, and

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 available in umpteen numbers of restaurants of
London, is indeed very hot and spicy, it seems that Retail banking is perceived
to be the in-thing in today's world of banking.

There are various banks providing the retail services to the consenter all over
India namely HDFC Bank, ICICI Bank, SBI, HSBC Bank, Axis Bank etc.


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 bank ability 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”.

Characteristic of Retail Banking:-

Let me briefly highlight some of the basic reasons.

1. Economic prosperity and the consequent increase in purchasing power have

given a fillip to a consumer boom. Note that during the 10 years after 1992,
India’s economy grew at an average rate of 6.8 percent and continues to grow at
the almost the same rate – not many countries in the world match this

2. Changing consumer demographics indicate vast potential for growth in

consumption both qualitatively and quantitatively. India is one of the countries
having highest proportion (70%) of the population below 35 years of age
(young population). The BRIC report of the Goldman-Sachs, which predicted a
bright future for Brazil, Russia, India and China, mentioned Indian demographic
advantage as an important positive factor for India.

3. Technological factors played a major role. Convenience banking in the form

of debit cards, internet and phone- banking, anywhere and anytime banking has
attracted many new customers into the banking field. Technological innovations
relating to increasing use of credit / debit cards, ATMs, direct debits and phone
banking has contributed to the growth of retail banking in India.

4. The Treasury income of the banks, which had strengthened the bottom lines
of banks for the past few years, has been on the decline during the last two
years. In such a scenario, retail business provides a good vehicle of profit
maximization. Considering the fact that retail’s share in impaired assets is far
lower than the overall bank loans and advances, retail loans have put

comparatively less provisioning burden on banks apart from diversifying their
income streams.


The Retail Banking environment today is changing fast. The changing

customer demographics demands to create a differentiated application based
on scalable technology, improved service and banking convenience. Higher
penetration of technology and increase in global literacy levels has set up the
expectations of the customer higher than never before. Increasing use of
modern technology has further enhanced reach and accessibility.

The market today gives us a challenge to provide multiple and innovative

contemporary services to the customer through a consolidated window as so to
ensure that the bank’s customer gets “Uniformity and Consistency” of service
delivery across time and at every touch point across all channels. The pace of
innovation is accelerating and security threat has become prime of all
electronic transactions. High cost structure rendering mass-market servicing is
prohibitively expensive.

Present day tech-savvy bankers are now more looking at reduction in their
operating costs by adopting scalable and secure technology thereby reducing
the response time to their customers so as to improve their client base and
economies of scale.

The solution lies to market demands and challenges lies in innovation of new
offering with minimum dependence on branches – a multi-channel bank and to
eliminate the disadvantage of an inadequate branch network. Generation of
leads to cross sell and creating additional revenues with utmost customer
satisfaction has become focal point worldwide for the success of a Bank.

Retail Banking solution centre in Polaris has established itself as a “One-stop
solution for Retail Banking” to cater to the customers with an aim to create a
sustainable profitable core proposition.

Maximum services availing by customer:-

Our Major Offerings:-

 Retail Banking solutions and services.

 Credit cards
 Internet Banking.
 Mortgages practice.
 Multi-Channel Integration.
 Business Rule Engine.
 Customer Relationship Management.
 ATM Solutions and services

Key Benefits Associated with Offerings:-

 On-line, real time processing and cost saving thru Multi channel
 Relationship banking enabled through extensive mining of all customer
 Rapid time-to-market with new product and service offerings.
 Rapid Customer Acquisition. Multi-currency and multi-language
support so as to ensure geographic reach across continents.
 Multi-layer security, monitoring and reporting.

Seamless integration with advanced delivery systems including teller and

branch automated teller

Retail Banking in India 2008:-

Retail banking in India is not a new phenomenon. It has always been prevalent
in India in various forms. For the last few years it has become synonymous with
mainstream banking for many banks.

The typical products offered in the Indian Retail banking segment are housing
loans, consumption loans for purchase of durables, auto loans, credit cards and
educational loans. The loans are marketed under attractive brand names to
differentiate the products offered by different banks. Credit card is another
rapidly growing.

While new generation private sector banks have been able to create a niche in
this regard, the public sector banks have not lagged behind. Leveraging their
vast branch network and outreach, public sector banks have aggressively
forayed to garner a larger slice of the retail pie. By international standards,
however, there is still much scope for Retail banking in India. After all, retail
loans constitute less than seven per cent of GDP in India vis-à-vis about 35 per
cent for other Asian economies — South Korea (55 per cent), Taiwan (52 per
cent), Malaysia (33 per cent) and Thailand (18 per cent). As Retail banking in
India is still growing from modest base, there is a likelihood that the growth
numbers seem to get somewhat exaggerated. One, thus, has to exercise caution
is interpreting the growth of Retail banking in India.

The annual growth in bank credit to the commercial sector is at 25.4%as on

March 31, 2007 and was lower than 27.2% against previous year. Till 2010,
retail banking is expected to grow at a CAGR of 28% to touch a figure of INR
9,700 billion. This requires expansion and diversification of retail product
portfolio, better penetration and faster service mechanism.

The Retail Banking Industry in India covers industry segments like housing
loan, auto loan, personal loan, education loan, consumer durable loan, credit
card etc. Total 22 major retail banks in India are covered in terms of their
performance, strategy and outlook.

Key Highlights Covered:-

- During 2006-07, gross credit extended by Indian commercial banks grew by

34.83% to touch INR 19,495 billion.

- Bank increase deposit Rs.57988 crores during the period of 2007 against
Rs.45, 384 crores during the period of 2006. And that is 19.3% from 16.3% o
HDFC Bank.

- Retail credit constitutes about 25% of the total credit and has grown by 28.0%
to INR 4,218.3 billion

- The annual growth in bank credit to the commercial sector is at 25.4% as on

March 31, 2007 and was lower than 27.2% against previous year.

- Till 2010, retail banking is expected to grow at a CAGR of 28% to touch a

figure of INR 9,700 billion.



Retail banking has inherent advantages outweighing certain disadvantages.

Advantages are analyzed from the resource angle and asset angle.


 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.


 Retail banking results in better yield and improved bottom line for a
 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
 Improves lifestyle and fulfills aspirations of the people through affordable

 Innovative product development credit.
 Retail banking involves minimum marketing efforts in a demand –driven
 Diversified portfolio due to huge customer base enables bank to reduce
their dependence on few or single borrower
 Banks can earn good profits by providing non fund based or fee based
services without deploying their funds.


 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.

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






 The objective of the Retail Bank is to provide its target market customers
a full range of financial products and banking services.

 Giving the customer a one-stop window for all his / her banking
requirements. The products are backed by world class service and
delivered to the customers through the growing branch network, as well
as through alternative delivery channels like ATMs, Phone Banking, Net
Banking and Mobile- Banking.

 To provide customer satisfaction through retail banking services.

 To study the needs of the middle-class, higher middle-class in the banking

segment and provide solutions.

 To identify the extent of households / customers availing retail banking


 To study the issues and challenges in retail banking

 To study the recent trends in retail banking

 To analyze the transforming retail banking processes and focus on

evolving process models.

 To emphasize on the trends of customer relationship management in retail


 To estimate the future growth of Indian retail banking.

 To understand Optimization of retail banking channels.


 Study related to the products and services of retail banking provided by

HDFC Bank.

 All Over India HDFC Bank centers

 Objective of rationale study.

 Need and dislike of customers related to products and services.

 Measures to improve the level of customer’s expectation.


About HDFC Bank:-

The Housing Development Finance Corporation Limited (HDFC) was amongst

the first to receive an ‘in principle’ approval from the Reserve Bank of India
(RBI) to set up a bank in the private sector, as part of the RBI’s liberalization of
the Indian Banking Industry in 1994. The bank was incorporated in August 1994
in the name of ‘HDFC Bank Limited’, with its registered office in Mumbai,
India. HDFC Bank commenced operations as a Scheduled Commercial Bank in
January 1995.

HDFC is India’s premier housing finance company and enjoys an impeccable

track record in India as well as in international markets. Since its inception in
1977, the Corporation has maintained a consistent and healthy growth in its
operations to remain the market leader in mortgages. Its outstanding loan
portfolio covers well over a million dwelling units. HDFC has developed
significant expertise in retail mortgage loans to different market segments and
also has a large corporate client base for its housing related credit facilities.
With its experience in the financial markets, a strong market reputation, large
shareholder base and unique consumer franchise, HDFC was ideally positioned
to promote a bank in the Indian environment.

Capital Structure:-

The authorize capital of HDFC Bank is Ra.450 crore (Rs.4.5 billion). The paid-
up capital is Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of
the bank’s equity and about 19.4% of the equity is held by the ADS Depository
(in respect of the bank’s American Depository Shares (ADS) Issue). Roughly
31.3% of the equity is held by Foreign Institutional Investors (FIIs) and the

bank has about 190,000 shareholders. The shares are listed on the ‘The Stock
Exchange, Mumbai and the National Stock Exchange. The bank’s American
Depository Shares are listed on the New York Stock Exchange (NYSE) under
the symbol “HDB”.

Distribution Network:-

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable

network of over 761 branches spread over 327 cities across India. All branches
are linked on an online real-time basis. Customers in allover 120 locations are
also serviced through Telephone Banking.
The Bank also has a network of about over 1977 networked ATMs across these
cities. Moreover, HDFC Bank’s ATM network can be accessed by all domestic
and international Visa / MasterCard, Visa Electron / Maestro, Plus / Cirrus and
American Express Credit / Charge cardholders.


HDFC Bank operates in a highly automated environment in terms of

information technology and communication systems. All the banks branches
have online connectivity, which enable the bank to offer speedy funds transfer
facilities to its customers. Multi-branch access is also provided to retail
customers through the branch network and Automated Teller Machines (ATMs).

The bank has made substantial efforts and investments in acquiring the best
technology available internationally, to build the infrastructure for a world class
bank. The Bank’s business in supported by scalable and robust systems which
ensure that the bank clients always get the finest services.

The Bank has prioritized its engagement in technology and the internet as one
of its key goals and has already made significant progress in web-enabling its
core business. In each of its businesses, the Bank has succeeded in leveraging
its market position, expertise and technology to create a competitive advantage
and build market share.


HDFC Bank offers a wide range of commercial and transactional banking

services and treasury products to wholesale and retail customers. The bank has
three key business segments are follows.

Wholesale Banking Services:-

The Banks target market ranges from large, blue-chip manufacturing companies
in the Indian corporate to small & mid-sized corporate and agri-based business.
For these customers, the Bank provides a wide range of commercial and
transactional banking services, including working capital finance, trade
services, transactional services, cash management, etc. the bank is also a leading
provider of structured solutions, which combine cash management services with
vendor and distributor finance for facilitating superior supply chain
management for its corporate customers. Based on its superior product
delivery / service levels and strong customer orientation, the Bank has made
significant inroads into the banking consortia of a number of leading Indian
corporate including multinationals, companies from the domestic business
houses and prime public sector companies. It is recognized as a leading provider
of cash management and transactional banking solutions to corporate customers,
mutual funds, stock exchange and banks

Retail Banking Services:-

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

The HDFC Bank Preferred program for high net worth individuals, the HDFC
Bank Plus and the Investment Advisory Services programs have been designed
keeping in mind needs of customers who seek distinct financial solutions,
information and advice on various investment avenues. The Bank also has a
wide array of retail loan products including Auto Loans, Loans against
marketable securities, Personal Loans and Loans for Two-wheelers. It is also a
leading provider of Depository Participant (DP) services for retail customers,
providing customers the facility to hold their investments in electronic form.

HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the MasterCard Maestro
debit card as well. The Bank launched its credit card business in late 2001. By
September 30, 2005, the bank had a total card base (Debit and credit cards) of
5.2 million cards. The Bank is also one of the leading players in the “merchant
acquiring” business with over 50,000 Point-of –sale (POS) terminals for debit /
credit cards acceptance at merchant establishments.


Within this business, the bank has three main product areas – Foreign Exchange
and Derivatives, Local Currency Money Market & Debt Securities, and
Equities. With the liberalization of the financial markets in India, corporate need

more sophisticated risk management information, advice and product structures.
These and fine pricing on various treasury products and provided through the
bank‘s Treasury team. To comply with statutory reserve requirements, the bank
is required to hold 25% of its deposits in government securities. The Treasury
business is responsible for managing the returns and market risk on this
investment portfolio.


 HDFC Bank has won many awards for its excellent service. Major among
them are “Best Bank in India” by Hong Kong based Finance Asia
Magazine in 2005.

 “Company of the Year” Award for Corporate Excellence 2004-05.

 Asian Banker Best Retail Bank in India Award 2007 for outstanding


Focus shifts to Retail Banking

With spreads shrinking, Indian banks are following their global counterparts and
focusing on increasing the share of their fee – based income. The ratio of non-
interest income to total funds has already increased for some banks and the first
quarter results of the current fiscal affirm this fact.

Within the banking sector, increasing competition and growing risk remain
important challenges, as banks concentrate on consolidation to meet
competition, the key driver in staying ahead of the competition is technology
and how well banks use it to meet the needs of their customers. In today’s
sophisticated market, credit risk along with market risk and operational risk are
the real challenges before banks”.

During April to mid-June, the increase in deposits was Rs.57, 988 crores during
the period of 2007 against Rs.45, 389 crores during the period of 2006 in the
previous year, that is, a rise of 19.3 percent as against 16.3 percent in the same
period last year. The proportion of time deposits as compared to demand
deposits was higher indicating spreads may shrink further. “In 2001-02, the
overall growth in deposits is expected to be lower at around 16 percent, largely
due to slower growth in money supply compared with that in 2000-01, lower
interest rates on deposits especially bulk deposits and reduction in dividend
distribution taxes from 20 percent to 10 percent on mutual funds making mutual
funds a more tad-efficient investment.” Said Mr. M.M. Joseph, Research Head
of SBI Capital Markets.

As the growth in scheduled commercial banks credit slowed down to 15.6
percent on a year-on-year basis from 23 percent a year ago. There was the
lowest growth recorded in year 1999 when the year on year increase in bank
credit was 15 percent. In absolute terms total credit increase by Rs.7743 crores
during 2001 against Rs.10965 crores during the corresponding period of the
previous year credit growth remained around 16.5 percent on a year-on-year

The slowdown could be attributed to lack of credit off-take by the industrial

sector even as food credit continued to surge. Because of the recession and
industrial slowdown, most corporate appear to have postponed their expansion
plans and have put on hold Greenfield projects.

Moreover big corporate are bypassing banks and raising money through the
debt market and commercial papers, which are cheaper than bank credit.

Therefore, banks are being forced to look at the mid-corporate. But, this is a
risky strategy as the risk is concentrated and delinquency higher.

To compensate, most banks have devised strategies to go in for retail banking as

a major thrust area.

“The risk here is distributed and there is a huge market to be tapped,” Some of
the banks which have been aggressive in this area are HDFC Bank, ICICI Bank,
State Bank of India (SBI) and Corporation Bank. Interest rates, especially on
short tenure declined due to a reducing in the Bank rate and cut in interest rates
on contractual savings such as Public Provident Fund (PPF). Some of the major
banks have reduced their prime lending rates (PLRs) and others are likely to

follow suit. “The spreads have been shrinking and banks are searching for other
avenues to protect their bottom lines,”

A comparison of old and new private sector banks indicates a clear difference in
profitability. New private sector banks have shown higher ROA and a higher
RONW as compared to old private sector banks. It is also interesting to see the
performance of banks over the previous year.

With spreads shrinking, Indian banks are following their global counterparts and
focusing on increasing the share off their fee-based income. “Fee-based
income” may increase marginally in future.

The ratio of non-interest income to total funds has increased for some banks. A
rising ratio is expected in the future.

The increase in net sales of Corporation Bank is only 5 percent while the rise in
other income is 34 percent. ICICI also raised its other income by 307 percent as
compared to a net sales increase of only 65 percent.

The growth in the economy has been sluggish and banks can no longer afford to
rely on big corporate customers. There is a shift in focus towards retail banking.
Most banks are targeting in middle class and lower middle class segment. Huge
Non-Performing Assets (NPAs) are plaguing old private sector banks. The asset
quality of banks in largely dependent on economic growth and makes it difficult
for them to recover loans till the economy revives.

Some positive policy initiatives have been taken by the Government which will
give an impetus to consolidation in the banking industry. The limit of foreign
direct investment (FDI) in private sector banks has been raised to 49 percent

form 33 percent. This will allow foreign banks to buy a strategic stake in private
sector banks having the latest technology and better quality assets. This year, the
banking industry has witnessed two big mergers. Times Bank Centurion bank
and Punjab bank merged with HDFC Bank and Bank of Madura with ICICI
Bank. Banks could increase their revenue base and leverage on their distribution
network by investing in the growing insurance sector. However, the inflows
would be slow to being with. There has also been a thrust on the housing sector.

Flexible financing with lower interest rates has resulted in brisk activity in the
sector. SBI and other banks have launched voluntary retirement scheme (VRS),
and effort to bring down operating cost. There is an increased focus towards
auto loans, car loans, funding for infrastructure, and other fee-based services
such as guarantees and commissions on drafts, gold banking, derivatives and the

“Overall, HDFC Bank, ICICI Bank and SBI have shown good performance and
appeared to be geared to take on the challenges,”

These banks are changing their strategy and shifting focus from big corporates
to mid-corporates and also retail banking and housing finance. The Indian
banking system is in the midst of a technological revolution with banks offering
anywhere banking, 24/7 and also attempting to become a one stop financial
shop offering all financial solutions.

It is believed that new private sector banks such HDFC Bank and ICICI Bank
has demonstrated their ability to improve other income, which was previously
the forte of foreign banks due to good service.

This trend is expected to continue. Nationalized banks and old private sector
banks will also follow suit and there is hardly any progress in this area. If old
private sector banks have to service they will have to compete on service.

Pension fund industry in India grew at a CAGR of 122.44% from 1999-00 to

2006-07. In terms of ownership, debit cards are more in number than credit
cards but in terms of transactions, use of credit cards is more prevalent than
debit cards.

The ATM outlets in India increased at a rate of 28.09% from March 2006 to
March 2007.

Outstanding Education loan segment is expected to grow at 36.41% till March

2009 from March 2007 onwards to Rs. 27000 Crore Mark.

Two wheeler finance industry is projected to forge ahead at a CAGR of 14.21%

till 2009-10 from 2005-06.

Indian Mutual Fund industry witnessed a growth of 49.88% from May 2006 to
May 2007, and a higher 215.61% growth was recorded in closed ended
Increasing number of millionaires in India is increasing the scope of Wealth
Management Services.

Bankable households in India are estimated to move up at a CAGR of 28.10%

during 2007-2011.

Study of Retail Banking Products and Services by HDFC

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.


The present menu of bank accounts for Non-Resident Indians (NRIs) has three

1. Non-Resident (External) Rupee Accounts (NRE)

2. Non-Resident (Ordinary) Rupee Accounts (NRO)
3. Foreign Currency Non-Resident (Banks) Accounts FCNR (B)

Opportunities and Challenges of Retail Banking in India:-


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, recently identified India as the "second most attractive

retail destination" of 30 emergent markets.

The rise of the 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 toward personal debt, is

contributing to India’s retail banking segment.

The combination of the above factors promises substantial growth in the retail

sector, which at present is in the nascent stage. Due to bundling of services and

delivery channels, the areas 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?


What are the challenges for the industry and its stakeholders?

1. Retention of customers is going to be a major challenge. According to a

research by Reichheld and Sasser in the Harvard Business Review, 5 per cent
increase in customer retention can increase profitability by 35 per cent in
banking business, 50 per cent in insurance and brokerage, and 125 per cent in
the consumer credit card market. Thus, banks need to emphasize retaining
customers and increasing market share.

2. 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 the 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 the consumer credit segments the Reserve Bank has, as a
temporary measure, put in place risk containment measures and increased the
risk weight from 100 per cent to 125 per cent in the case of consumer credit
including personal loans and credit cards (Mid-term Review of Annual Policy,

3. Information technology poses both opportunities and challenges. Even with

ATM machines and Internet Banking, many consumers still prefer the personal
touch of their neighborhood branch bank. Technology has made it possible to

deliver services throughout the branch bank network, providing instant updates
to checking accounts and rapid movement of money for stock transfers.
However, this dependency on the network has brought 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 retails banks to generate revenues and
remain competitive. Besides, there are network management challenges,
whereby keeping these 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 centre.

4. KYC Issues and money laundering risks in retail banking is yet another
important issue. Retail lending is often 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 they will accept and other processes to be completed.
The Reserve Bank has issued details guidelines on application of KYC norms in
November 2004.


The HDFC Bank face the problem on E-Remittance flows comes from foreign
country for this they prepaid case study for this to solve the problem on e-
remittance the case study are follow.

There are large sums remitted into the country by the NRI community. A large
quantum of the flows comes in from the Gulf (Middle East) region. Most of
these inward remittances come through the ' Rupee Drawing / Draft Drawing'
arrangements the Exchange Houses have with Indian Banks,

India Link System seeks to offer a compelling value proposition to the large
high net worth NRI Customer segment. The Service is to allow the NRI
community to remit funds to India efficiently, safely and speedily

Existing enterprise IT Architecture:-

At HDFC Bank Internet banking exists in the context of a mixed, integrated

enterprise IT architecture, featuring solutions deployed on latest hardware
-architecture systems

HDFC Bank's Internet banking solutions feature 3-tier, layered architecture with
distinct layers for presentation, application and enterprise application
integration that interfaces with the bank's host systems.

Transaction Flow Architecture

India File Upload CORE

Link BANK SQL 2000

File Upload CMS


Core bank and corporate net banking interface:-

The “core bank” application system is built on SQL 2000 and is deployed on
EJB / Microsoft. Our corporate net banking developed on J2EE architecture
with Oracle 8.0.5 as database server. The transactions needs to be updated in
core bank are updated to core bank through external file upload a proprietary
file format of Core bank application.

Transaction process:-

The NRI transactions “Remittance details” are entered in the system based on
the remitter inputs. All authorized transactions are sent to banks’ back-end
application for updates. These transactions are basically for account-to-account

CMS and corporate net banking interface:-

The core Cash Management System (CMS) is built on Oracle and Microsoft
technologies. Both E-net and CMS interface is done online for DD/PO status
and reference number.

Transaction process:

For beneficiaries not having account with bank, the payments are sent to
beneficiary through DD/PO.
The NRI transactions “Remittance details” are entered in the system based on
the remitter inputs. All authorized transactions details are sent to Cash
Management System (CMS) in external file format (DBF). The reference
numbers like CQ/DD number are fetched directly from CMS data base from
ILK online.

Solution NET Advantage

 Multiple exchange supports.

 Exchanges’ proprietary file uploads for remittances; there is no change in

the existing exchange operations for money transactions.

 Relies on an open architecture

 Powerful user management features

 Track remittance online
 Courier tracking for DD/PO dispatches



The unit of observation and analysis of this survey of the bank customers of
HDFC Bank. The sampling frame in the form of a list of all customers is neither
readily available nor can it be easily prepared. One of the notable features of
the design is that the sample has been taken from a cross section of customers in
Mumbai with the objective of enhancing the precision of the estimates. The total
number of branches in India is 761 out of which 70 branches are covered by
Mumbai city. Since most of the policy decisions are been taken by the head
office which is located at Mumbai most of the centers are located at Mumbai.
Hence Mumbai and its suburb were covered in the sampling survey. A total of
1000 customers in different branches of HDFC Bank were selected in the
Sample frame. Information on some basic characteristics of the customer along
with the service availed from HDFC Bank was collected from these customers.
A sub sample of 50 customers was then used for detailed canvassing.

Coverage: -
Mumbai City and its suburb have been covered by the survey.

Reference Period:
The field operation for the customer pre-tested questionnaire was carried out
during July and August, 2008.

Definition of Customer:
“ An organization or individual that receives a product or service from a

A Definition to Guide Customer Service:-

Define by Jack Speer, BizWatch Publisher “Excellent customer service is

the process by which your organization delivers its services or products in a
way that allows the customer to access them in the most efficient, fair, cost
effective, and humanly satisfying and pleasurable manner possible.”

Stratification and Selection of sample Customers:

The Customers are also classified into the following five income categories
based on the data collected on customer’s income. The income categories

 Low, with monthly income of Rs.10, 000/- and below.

 Lower Middle, with monthly income between Rs.10,000-Rs.25,000/-

 Middle, with monthly income between Rs.25,000/- - Rs.50,000/-

 Upper Middle, with monthly income between Rs.50,001 to Rs.1,00,000/-

 High, with monthly income more than Rs.1,00,000/-

Customers in the higher income groups could generally utilize the maximum
product and services provide by the bank. And in the upper Middle income

group customer utilized the services and product in the same proportion of
higher incomer group of customers. And in the middle income and Lower
Middle incomer group customer utilized the services and product from the bank
comparatively less then the upper middle and higher income group customers.
Because high and upper income group customers expected to have larger
savings available for investment, which they invest in a variety of instruments
provided by the bank.

Sample Size and characteristics

Thus, a total of 20 sample customers were selected from each sample, for
canvassing the customer questionnaire. In all 50 customers were selected and a
detailed information was collected from these selected customers through a pre-
tested questionnaire


Distribution of Sample Customers according to their
Monthly income

Monthly Income Group No. of Customers

Unto Rs.10,000 07
Rs.10,001- Rs.25000 22
Rs.25001- Rs.50000 12
Rs.50001- Rs.100000 06
Rs.100001 and above 03

It can be seen from the above, that the data collected for sample
customers according to their monthly income. The Customers having a monthly
income of Rs.10001 to Rs.25000 was the maximum i.e. 22 numbers of
customers. And the second higher income group is from Rs.25001 to Rs.50000
i.e 12 numbers of customers. And least income monthly group is from
Rs.100001 and above i.e. 3 numbers of customers.

Distribution of customer on the basic of only availing services out

of 50 customers:-

Type of Services and No of customers

Net Banking 27
Phone Banking 15
E-Payment 07
Insta Alerts 20
Locker 04
ATMs 47

It can be seen from the above table and the diagram that maximum number of
customers using ATMs facility that is 47 number of customer utilized the ATMs
facility out of 50 numbers of customers and second higher services utilized by
the customers is Net banking that is 27 out of 50 customers. Third facility used
by customers is Insta Alerts that is 20 out of 50 customers. Minimum number of
customers using Locker and E-Payment services that is 04 and 07 out of 50

Since the purpose of the survey is only to estimate the number and level of
services availed of by the customers. The information on the type of the services
was also collected and the distribution is us under.

Distribution of customer on the basic of type of services availed:-

Income Level
Type of Service Below 10001 25001 – 50001 – Above
10000 -25000 50000 100000 100000
Net Banking 2 10 8 4 3
Phone Banking 2 3 6 3 1

E-Payment - - 2 4 1
Insta Alerts - 8 6 3 3
Locker -- -- -- 1 3
ATMs 4 22 12 6 3

It can be seen from the above, that the data collected for sample customers
according to their monthly level of income. All kind off services are used by
only upper middle and high income group customers that can seen from the
above table. Below Rs.10000 monthly incomes group customers normally use
ATMs, net banking and phone banking services. And Rs.10001 to Rs.25000
monthly income group customers use net banking, phone banking, insta Alerts
and ATMs. And above Rs.25001 to Rs.50000 income group customers use net
banking, phone banking, E-payment and ATMs services. But from the above
table Net banking, phone banking and ATMs services are used all kind of
income group customers and the service like locker and E-payment are used
only upper middle and high incomer group customers. But the maximum type
of services availed by the customer like ATMs, Net Banking and Phone

Profession wise Distribution of monthly income:-

Above 10001 25001 – 50001 – Above
Profession than
– 25000 50000 100000 100001
Professional -- -- -- 1 1
Business Men -- 2 8 3 2
Salaried Person 2 20 4 2 --
Others 5 -- -- -- --

It can be seen from the above table that profession wise distribution off monthly
income are given in this salaried persons monthly income distribution are more

number i.e. less than 10000/- (2 persons), above 10001 – 25000/- (20 persons),
25001-50000/- (4 persons) and 50001 – 100000/- (2 persons). And the second
maximum distribution is Businessmen.

Age Wise Distribution of monthly income:-

Less Above
25001 – 50001 – Above
Age than 10001 –
50000 100000 100000
10000 25000

18 – 24 5 4 1

25 – 39 2 15 4 3

40 – 59 -- 2 7 2 2

60 and above -- 1 -- 1 1

From the above table the age wise distribution of monthly income are given in
this the age between 25 – 39 the monthly income group customers are more
comparatively other age group. And the second maximum monthly income age
group is 40 – 59. And the least income age group are 60 and above.

The level of services provided by the Bank:-

Number of
Level of Services customers

Excellent 10
Very Good 9
Good 28
Average 7
Bad 2

It can be seen from the above table that the level of services provided by the
bank. In this table 28 % of customers say “Good”. And 10% of customers say
“Excellent”, 9% of customers say “Very Good”, 7% of customers say “Average”
and 2% of customers say “Bad”.

Ranking of the customers according to the factor are given


Number of customers
Ranking Existing Tele Economic
from Independently
Customers Marketing situation
1 19 23 1 3 4
2 18 18 7 5 2
3 10 5 16 9 10
4 2 2 14 16 16
5 1 2 12 17 18

From the above table and diagram we can see that the ranking of the customers
according to the factors the first rank is given to “Independently “ factors the
decision are taken by the customer itself rather then he ask other or other
factors. The second rank is given to “Advise from Friends” and “Independently”
in this customer takes some advice from friends and relative before take some
services from the bank. The third rank gives to “Existing customers” the
customer asks some kind of information from exiting customers before take the
services from the customers. Fourth rank gives to”Tele Marketing” and
“Economic Situation” in this the customer take some kind of advice from the
tele-marketing executives and customer itself analysis the economic situation
regarding their products and services accordingly the customer take the
decision. And the fifth rank is given to “Economic situation”. The services may
be Phone Banking, Net Banking, ATMs, Mobile Banking, E-Payment, Insta
Alerts and Lockers Etc. before use the services from the bank the customer are
rank the services and then he buy the services from the bank.


The survey findings are follows:-

 Debit cards have become very popular in India. But, as of date,

ATM/Debit cards have still their primary usage for cash withdrawal from
the ATM machines.

 While credit cards are more popular in making payments online. There is
a growing awareness regarding RTGS amongst Indians but still around
73% of the respondents surveyed have never used RTGS.

 Fund transfer and Online bill payment emerged as the most popular
payment options in internet banking, with over 60% of the respondents
using this method.

 Interestingly, many customers have been unable to use internet banking

due to the non availability of site or connectivity problems. Moreover, a
trust in the security of internet banking is yet to develop amongst the
majority of bank customers.

 As far as mobile banking is concerned, its popularity is limited mainly

due to the charges for sending SMS's are not justified. Despite the
available payment options, how well customers are able to use them is
still a question. The key differentiator in future will be how banks can
increase usage of these payment options by the end user. Competitive
analysis of Indian retail sector vis-à-vis global retail industry.
 Supportive policies and regulations of government for the retail sector.

 Issues and implications related to the current foreign direct investment in

the retail sector.

 Market size and growth of Indian retail sector segmented by sectors, retail
formats, and regional segmentations.

 Increasing employment opportunities with stepping up of international

retail brands in India.

 Behavioral pattern, preferences and expenditure capacity of Indian


 Increasing acceptance of e-retailing among Indian consumers.

 Evolution of franchise businesses in Indian retail sector.

 IT trends in Indian retail industry and technological expansion leading to

the stores’ Security.

 Customers’ preference to more and more alternate channels for


 Fee based income from remittance is shrinking due to RTGS and other
technology initiatives.

 Rapid penetration of Personal Computers, Mobile phones and on-line

Trading and purchase options encouraged increased usage of technology

 Booming economy and continuous per capita income will further push
the living standards of people.

 Banks continue to offer valued added Products and Services for customer
acquisition and retention.

 Retail Banking technology is gaining its importance due to the continued

 Retail Banking customers are demanding more and more features and
product differentiation.

 More and more Retail customers in the age group of 25-39 with high
saving potential.

 Every Bank has enough opportunities to perform without unhealthy


 Business potential in Semi urban and rural areas are very high, which is
yet to be explored.


From this report provides an insight into ATM users’ perceptions, requirements
and problems Report will help banks and vendors in making ATM transactions
user friendly and satisfying.

 The findings of the survey were rather surprising – from more people
accepting the norms of depositing cash / cheques in these ATMs to
waiting in long queues and finding no money left in the machine.

 As many banks encourage the use of ATMs to their clients, ATMs have
today become indispensable tools for majority of banking transactions.
But, the drawbacks still seem to outweigh the benefits.

 The trends have changed with people visiting more frequently to these
machines than monthly and having started using value-added services
like bill-payment and mobile top-ups among others.

 Also highlights minor issues generally overlooked by banks – like non

availability of deposit envelopes and not being able to print receipts after
a transaction.

 Customer tendency to borrow more and repay less may adversely affect
the NPA levels in future.

 Future delinquency rates are not properly factored in fixing the Retail
credit pricing by few banks

 Increased risk weight of Consumer Credit

 Liquidity mismatches may emerge as an issue

 Slight change in economic scenario may affect the whole system

 Existing Retail scoring models may not predict impact of mild recession

 Growing incidents of frauds and cyber crimes



The banking industry has a very important role to play in the common man’s
life. The middle class in India is big in number and ever growing. Therefore, in
order to satisfy the requirements of this growing middle class, banks have to
offer the best of financial products and services, and that too at an attractive
cost. Doing this project was a great experience and in the deal I learnt quite a bit
about the banking sector, specially the retail segment. In finding out more about
this sector, I have collected invaluable information about the banking industry.
What I have tried to do here is to gain an understanding of banks, particularly
focusing my attention on the retail segment, which is such an important part of
each one’s life today.

As a very famous saying goes “Degrees Can Be Put On Display, But

Knowledge Can’t”, what I have presented here is just a project but what I have
earned in the meanwhile is something which is much more precious that
anything in this world i.e. knowledge. So doing this project has definitely added
to my knowledge.



1) Name of the Customer: ___________________________

2) Address of the Customer: __________________________



3) Age: __________

4) Occupation______________________

5) Occupation_____________________

More than
More than More than
Less than Rs.50001/- Above
Rs.10001/- Rs.25001/-
Rs.10000/- to 100000/-
to 25000/- to 50000/-

6) What facilities you utilize from your bank

Home Saving Credit Net

Loan A/c Card Banking

E- Insta Lockers OD / FD /
Payment Alerts . CC

7) Whether you are utilizing the services provided by the bank?

Yes No

8) How much time you utilized these services in a year?

Services Daily Weekly Monthly Quarterly Yearly

Insta Alerts
Net Banking


9) Please rank the factors according to you is necessary for utilizing the
of bank

Advise from Friends

Existing customers
Phone Banking
Economic Situation

10) What is the level of service provided by HDFC BANK?

Excellent Very Good Good

Average Bad

11) Based on your past experience with bank, have you ever changed your

Yes No

12) What measures should be taken for improving the level of services of




 HDFC Bank brochures

 www.hdfcbank.com

 The Times of India

 The Economics Times

 Annual Report of HDFC Bank 2006-2007


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