RETAIL BANKING

INTRODUCTION:

“Retail Banking is a typical mass-market banking where individual customers use local branches of
larger commercial banks. Services offered include: savings and checking accounts, mortgages, personal
loans, debit cards, credit cards and so”

Retail banking aims to be the one stop shop for as many financial services as possible on behalf of the
retail clients. 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.

Contribution of retail loans to GDP:

 India - 6%
 China - 15 %,
 Thailand - 24%
 Taiwan - 52%

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 and internet)

Multiple customer groups (consumer, small businesses and corporate)

DRIVERS OF RETAIL GROWTH:

 Growing disposable incomes

 Youngest population in the world
 Increasing literacy levels
 Higher adaptability to technology
 Growing consumerism
 Fiscal incentives for home loans
 Changing mindsets-willingness to borrow/lend
 Desire to improve lifestyles
 Banks vying for higher market share
EVOLUTION OF RETAIL BANKING:

 “Any where”, “Any time” Banking

 Improved processes/Bundled product offerings
 Faster service/Reduced TATs
 Customer specific products/offerings on a regular basis
 ‘Bank’ customer has replaced ‘Branch’ customer
 Focus on understanding customer needs/ preferences
 Segmentation/Differentiation of customers
 Customer driven strategies
 Building relationships

SCOPE OF RETAIL BANKING:

 Retail banking increases the economic status of the country.

 It increases the purchasing power. The rural areas have a large purchasing power at their disposal
and thus increasing the opportunity to market retail banking.
 Nuclear family concept is gaining much importance which may lead to large saving thus large
number of banking services to be provided are day by day increasing.
 Tax benefits are available. In case of housing loan the borrower can avail the tax benefits for the
loan repayment and the interest charged for the loan.

ADVANTAGES

Retail banking has inherent advantages outweighing certain disadvantages. The advantages are analyzed
from the resource and asset side.

Resource side:

 Retail deposits are stable and constitute core deposit.

 They are interest insensitive and less bargaining for additional interest.
 It increases the subsidiary business of the banks.
 Effective customer relationship management with the retail customers built a strong customer
base.

Asset side:

 It results in better yield for a bank.

 It supports innovative product development credit
 It helps in economic revival of the nation through increased production activity.
 Improves lifestyle and fulfils aspirations of the people through affordable credit.
 It involves minimum marketing efforts in the demand-driven economy.
CHALLENGES TO RETAIL BANKING IN INDIA

Money Laundering:

This is one of the major issue in retail banking. This compels all the banks to consider seriously
all the documents which they accept while approving loans.

Outsourcing:

The various core banking activities like hardware and software maintenance , ATM setup and
operation etc are being outsourced by India.

Customer Services:

Banks are expected to retain the ongoing trust of the public. Customer retention is so important in
retail banking. The strategy of “Know Your Customer” is mandatory for any banks so that they
can meet their requirements and needs in terms of services/products etc.

Security:

The dependencies on technologies has brought IT department in managing and optimizing the
performance of retail banking networks. It is also important that banks should maintain their
security to the advanced level to keep the faith of the customer.

Insufficient Manpower:

Though the revolution in technology has made the banking sector modernized, there is a lack in
modern banking professionals to handle it in an elegant manner.

STRATEGIES FOR INCREASING RETAIL BANKING BUSINESS

 Constant product innovation to match the requirements of the customer.

 Quality service and quickness in delivery.
 Introducing new delivery channels.
 Detailed marketing research.
 Cross selling of products.
 Business process outsourcing.
 Tie-up arrangements.