Retail banking as applicable modern times may be defined as providing credits to individuals for non entrepreneurial activities. This is because usually retail loans are used towards consumptions and the loans has to be repaid by the borrower out of his own resources and not from the income stream generated by deployment of the loan. The growth and retail banking in terms of volumes and types of products has been quite pronounced in the recent years. Some of the basic reasons attributed for this spurt are;
® India’s economic prosperity
® Consequent increase
®Consequent increase in purchasing power
® Changing consumer demographic with one of the highest section of the population below the age of 35 years
® Technological innovation such as ATMs, Credit cards etc.
® Decline in treasury income causing retail banking to be the focus of profit maximization and decline in interest in recent years.
® There has also been an expansion in the nature and product offered under retail banking
There has been a revolution in the range of products and the way these are serviced in the retail banking sector than the traditional bankers. For example previously one had to physically visits a bank branch in ordered to open an account where as today the bank often ‘visits’ a customer who shows or may show and inclination to open an account with it.
Capturing the trend and progress of retail banking would require dividing retail banking by products, services and technology. Even this classification would be quite simplistic, as the broad category mentioned, could get further subdivided. For instance speaking about the services rendered to a customer of retail banking, Customer Relationship Management (CRM) would be one of the areas of study it includes but may not be limited to exception best banking wealth management, Know Your Customer (KYC) compliance, internet and mobile banking products life cycle management, customer data integration and relationship banking among others.
Objectives of the Study
The study was designed and conducted to accomplish the following objectives:
1. To understand the concept of Retail Banking
2. To understand the reason for the growth of retail banking
3. To analyze the challenges & opportunities of it
4. To study the various products being offered in retail banking portfolio
5. To analyzing the key to competitive advantage in Retail Banking
6. And to assess the differentiating feature of the Particular Bank
Scope of the Study
1. To understand the real promoters of retail banking
2. To analyze the significance of retail banking on overall customer groups
3. To understand the working structure of retail banking
4. To analyze the effect of retail on the profitability of the banking sector itself as well as on the normal customer behavior
5. Consumer response to retail banking
6. The management quality of retail banking
7. Earning Quality
8. Liquidity Quality
The growth of retail portfolio with the banks in the last few years has been impressive. The retail portfolio is useful to banks for managing business mix and earning a fee income. That the retail portfolio can be securitized and sold out makes it attractive to loan issuing banks .This aspect makes the portfolio, attractive to banks with surplus liquidity though they may not have the reach to increase the portfolio by direct sales of products.
The Bank has now started to adopt a retail strategy in their operations. They have started to waive a net to catch customers. The another angel of the Retail Banks to caught a customer is like;
If you are employed or have a regular income, about 25 years of age or more able to provide proof about your address and identity then Better be ready for an onslaught of marketing by retail bankers for a home loan, or a personal loan or a card or all of these .It does not matter if you have already taken loan and possess a credit card or two .in fact these enhance your reliability! Out bound calls (calls made by BPO employees to the prospective clients) are particularly focused on those who have already established their credit worthiness by borrowing! Out bond callers hunt good customers and shower them with fires.
You have arrived in the city of your destination by flight. Don’t throw away your boarding pass at the end of the journey. Not yet. Persons with almost no knowledge of credit cards (or banking) will be waiting in the car park/taxi stand to offer you ‘lifetime free gold card’. Nonchalantly they will also add that nothing more than a boarding pass is indeed (to prove the credit worthiness) and they will not ask for anything else!
Have you used the credit card to make some purchase and intend to send a cheque to the card company? Wait. It is not uncommon for banks to ring up and offer to convert your credit card purchases/dues into loans by offering you installment options.
You already have a credit card? There will be upgrade offers! New card issuers offer to take over credits. Some of the card companies will offer fresh cash backs. Mobile companies will exhort you not to pay your bill and that you have a generous credit limit.
Grocers and Hire Purchase (HP) vendors have joined the long list of people who offer you retail credit.
From above all information it is seen that, retail banking is directed at salaried and self employed persons. That is on those people who can meet EMI commitments. Thus retail tends to be urban and semi urban in focus. Yet it is seen that retail banking products do not have uniform or standard terms of credit. In fact, despite being marketed to the salaried / self employed class it is seen that terms such as the amount of loan, repayment period, rate of interest, margin, collateral, etc could be different from person to person. It is the appraisal methodology which is score card driven and easy delivery format that makes the retail product unique and capable of fast multiplication.
Unlike the past when bank products were marketed in the branches, retail is out in the open. Retail products / loans are issued/ marketed in branches, loan melas, factories, and malls. In additional to bank staff, BPOs, mail order, telephone & e-mail are used to marketing retail. The list of Marketing Avenue is endless. It is enough if the banks touch base with one of them. Thanks to IT also, information about customers is immediately put on the retail highway. Almost no information (lead) escapes the eye of the retail marketing units.
Marketing Management by Philip Kotler