RETAIL BANKING

INTRODUCTION
 Retail banking-
 Retail banking refers to banking in which banking
institutions execute transactions directly with
consumers, rather than corporations or other banks.
 Services offered include:
 Savings and transactional accounts
 Mortgages
 Personal loans
 Debit cards
 Credit cards…………etc………….
 Today’s retail banking sector is characterized by 3
basic characteristics:
 multiple products (deposits, credit cards,
insurance, investments and securities);
 multiple channels of distribution (call centre,
branch, Internet); and
 multiple customer groups (consumer, small
business, and corporate).
 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.
 Rs 20,000-100 lakh
 Duration 5 to 7 years with housing loan up to 15
years.
WHAT HAS CONTRIBUTED TO
RETAIL BANKING?
 Economy prosperity and increase in
purchasing power which led to consumer
boom
 Changing consumer demographics
 Technological factors
 Lowering of treasury income of banks
 Decline in interest rates
PRODUCTS
1) CREDIT CARDS:
 A credit card is a small plastic card issued
to users as a system of payment. It allows
its holder to buy goods and services based
on the holder's promise to pay for these
goods and services.
 The issuer of the card creates a revolving
account and grants a line of credit to the
consumer (or the user) from which the user
can borrow money for payment to a
merchant or as a cash advance to the user.
 Interest charges on credit card:
Credit card issuers usually waive interest
charges if the balance is paid in full each
month, but typically will charge full interest
on the entire outstanding balance from the
date of each purchase if the total balance is
not paid.
2) DEBIT CARDS:
 Debit cards are similar to credit cards, except debit
cards pull money out of your checking or brokerage
account. Debit cards do not create or increase a
loan like credit cards do.
 Debit Cards and the ATM
 For some people, the main reason to have a debit
card is to use it at an ATM. For a while, banks issued
"ATM Cards" which were only useful if you were
standing in front of an ATM trying to take out cash.
Eventually, banks started to add more features so
that a debit card can now be used at almost any
location.
DEBIT CARD V/S CREDIT CARD
 SIMILARITIES:
 Both cards offer special rewards, such as
points and cash back on purchases made
through the card.
 Debit cards and credit cards can be used to
make online payments with the help of the
Pin number assigned to them.
 They can be used to withdraw money from
ATMs, depending on the cash limit available
on these cards.
DIFFERENCES
 In the case of a credit card, the issuer offers
credit and overdraft facilities. This facility is not
available with a debit card, which will only debit
payments from existing and available funds within
the cardholders account.
 A credit cardholder therefore has a monthly bill
to pay in every month that the card is used. If
they don’t pay that bill, high interest charges are
applied. A debit card holder is free from the
hassle of paying those bills, and from the risk of
building up large debts to credit card companies.
 CREDIT CARDS:
 Usage increased since early 1990s
 Total number of cards increased from 2.69
crores in December 2003 to 4.33 crore in
December 2004.
 Working group was set up for regulatory
mechanism of the credit cards
 RBI received many complaints regarding
various undesirable practices by credit card
issuing institutions and their agents.
 The working group has given
recommendations regarding the terms and
conditions to be highlighted and advertised
to the customers
 These recommendations are being processed
within RBI guidelines for healthy growth in
the development of plastic money in India.
 HOUSING FINANCE

 Impact on the economy:

— one of the top employment generator

— forward and backward linkages with over 250 industries

like cement, steel, timber, ceramics, tiles etc…

— a small initiative can boost multiplier effects in the

economy through generation of demand

— the most preferred avenue of investment in recession

prone economy
 HOUSING FINANCE INSTITUTES

 Scheduled commercial banks (SCBs)

 Scheduled co-operative banks

 Regional rural banks

 Agriculture and Rural development banks

 Housing finance companies

 National co-operative housing federation of India

 TYPES OF HOUSING LOANS

 Home-equity loans

 Home extension loans

 Home improvement loans

 Home purchase loans

 Land purchase loans

 Home loans to self help groups/ Micro finance institutions

 Loan to NRIs
 the loan amount and interest rates depends on:

― Loan tenure
― Purpose of loan
― Repayment capacity of borrowers
― Estimated value of property
― Clear title deeds of the borrower
― Cost of the fund to the financier

 The repayment of loan is done through equated

monthly installments(EMIs)
 The below mentioned rates are as on 1st
February, 2011 for loan amount of Rs. 30 lacs
and a tenure of 15 years.

Bank's Name Interest rates (in % pa)

   

Axis Bank 9.5

Bank of Baroda 9.75
Bank of India 10.25
Central Bank of India 10
HDFC Ltd 9.75
ICICI Bank 9.5
LIC Housing Finance 9.95
Punjab National Bank 10.25
SBI 8.5
Union Bank of India 9.75
 HOUSING FINANCE COMPANIES

 HDFC housing finance

 SBI housing loan
 PNB housing finance
 HUDCO niwas
 ICICI home loan
 LIC housing finance
 BOB housing finance ltd.
 IND bank housing ltd.
 DHFL Vysya housing finance ltd.
 Sundarm finance group etc….
 NATIONAL HOUSING BANK

 established on July 9, 1988

 Wholly owned subsidiary of RBI

 Functions:
 Promotion and development of HFIs
 Regulation and supervision of HFCs
 Refinancing
 Project lending
 Development of secondary mortgage market
CURRENT SCENARIO IN RETAIL
BANKING
 The Indian players are bullish on the Retail
business.
 India compares pretty poorly with the other
economies of the world that are now
becoming comparable in terms of spending
patterns with the opening up of our
economy.
 Retail loans in Taiwan is around 41% of GDP,
the figure in India stands at less than 5%.
OPPORTUNITIES IN RETAIL
SECTOR
 Retail banking has immense opportunities in
a growing economy like India.
 The rise of Indian middle class
 Increasing purchasing power
 The above factors promises substantial
growth to retail banking sector which is in
the nascent stage
SCOPE FOR RETAIL BANKING
 All round increase in economic activity
 Increase in the purchasing power. The rural areas have the
large purchasing power at their disposal and this is an
opportunity to market Retail Banking.
 India has 200 million households and 400 million middleclass
population more than 90% of the savings come from the
house hold sector. Falling interest rates have resulted in a
shift. “Now People Want To Save Less And Spend More.”
 Nuclear family concept is gaining much importance which
may lead to large savings, large number of banking services
to be provided are day- by-day increasing.
 Tax benefits are available for example in case of housing
loans the borrower can avail tax benefits for the loan
repayment and the interest charged for the loan.
CHALLENGES IN THE RETAIL
SECTOR
 Retention of customers
 Rising indebtness
 Information technology poses both
opportunities and challenges
 KYC issues and money laundering risks.
FUTURE……!!!!!!
 Customer service should be the be-all and
end-all of the retail banking.
 Sharing of information about the credit
history of the households.
 Outsourcing.
CONCLUSION
 There is need for constant innovation in
retail banking
 This requires product development and
differentiation, innovation and business
process reengineering, micro-planning,
marketing, prudent pricing, customization,
technological up gradation, home /
electronic / mobile banking, cost reduction
and cross-selling
 Furthermore, in all these customers’ interest
is of paramount importance.