Retail banking

Sumit kumar bundela

Present Scenario
Indian retail banking has been showing phenomenal growth In 2004-05, 42% of credit growth came from retail Over the last 5 years CAGR has been over 35% Retail credit levelcrossed Rs.189K Crore in 2004-05 Market has transformed into a buyers market from a sellers market Comprises of multiple products, channels of distribution and multiple customer groups

Economy vs. Retail Banking

Retail assets are just 22% of the total banking assets of India Contribution of retail loans to GDP: India 6% China 15 %, Thailand 24% Taiwan 52% Indian population below 35 yrs of Age 70 % Reach of Formal Banking Channels 20-25% of Indian population
Source: Cygnus Industry Insight

Market Share: Retail Loan - 2005

Consumer Durables 7%

Auto 28% Home 49%

Other personal Loans 16%

Drivers Of Retail Growth

CHANGING CONSUMER DEMOGRAPHICS

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

Industrys response to the change

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

Future Of Retail Banking

The accelerated retail growth has been on a historically low base Penetration continues to be significantly low compared to global bench marks Share of retail credit expected to grow from 22% to 36% Retail credit expected to grow to Rs.575,000 crs by 2010 at an annual growth rate of 25%
Source: Cygnus industry insight

Future of Retail Banking

Contd.

Dramatic changes expected in the credit portfolio of Banks in the next 5 years
Housing will continue to be the biggest growth segment, followed by Auto loans Banks need to expand and diversify by focussing on non urban segment as well as varied income and demographic groups Rural areas offer tremendous potential too which needs to be exploited

Strategic prerequisites.

Performance oriented leadership Sophisticated marketing and sales Efficient distribution channels

Process efficiency and ease of scalability

Superior credit policy, procedures and skills
Source: Mckinsey

Challenges

Sustaining Customer loyalty

NPA reduction & Fraud prevention Avoiding Debt Trap for customers Bringing Rural masses into mainstream banking

Strategies for Future

Reaching to masses : Need to customize Customer segmentation/differentiation

Data mining/CRM based campaigns

Products per customer/loyalty Promoting low risk retail lending products Offer an array of products and financial advisory.

Strategies for Future Contd.

Cost effective expansion

Renewed emphasis on superior execution by front-line employees

Grow through Alliances: Hospitality Retailers Education Automobiles

Consumer Durables Housing/Construction

Winning Strategy
The bank that best addresses and anticipates
customers needs, delivers consistently higher

quality service and connects to the customer

via their channel of choice wins
Y.Y.Chin, OCBC Bank

Thank You !