INNOVATIVE PRODUCTS &

BANCASSURANCEPresented by:

Amanpreet

&

Micheal multani

The term “innovation” means ‘to make something

new’

Banks no longer restricted themselves to traditional

banking activities, but explored newer avenues to

increases business and capture new market

INTRODUCTION

From the time Bank of Bengal (1860), qualitative

and quantitative changes taken place

With 1935 regulation, the RBI was proclaimed the

central bank of India.

In the 1990s, greater emphasis being placed on

technology and innovation

New concept like personal banking, retail banking,

total branch automation, etc were introduced.

INDIAN BANKING SECTOR

1. E-BANKING - enables people to carry out most of

their banking transaction using a safe website

which is operated by their respected bank.

Advantages

No longer required to wait in long queues.

Faster & more convenient transaction

Fund transfer become faster & convenient

Apply for bank loan

TYPES OF INNOVATIVE BANKING

2. CORPORATE BANKING

Financial services to large corporate &MNCs

SERVICES

Domestic and international payments

Funding

Channel financing

Overdraft facilities

3. RURAL BANKING

It provides & regulates credit services for the

promotion &development of rural sector mainly

agriculture , SSI , cottage & village industries ,

handicrafts and many more.

Examples of RRB are:- NABARD, SYNDICATE

BANK, UNITED BANK OF INDIA.

NEED

Banks tapping new sources of income

Finding ways to differentiate themselves from other

banks and non-banks

The technology forces the banks to develop a

strategy for online delivery system to broaden the

customer relationship and to retain customers’

loyalty.

Greater competition for the banks as the technology

pushes the delivery of services out of bank and

Focus shifts from cost reduction to maintain market

position.

1 TOTAL BRANCH AUTOMATION

Speed up bank transactions and less error

Toward paperless transactions

2 ANY BRANCH BANKING

It is a facility for customers to operate their account

from any of the same banks network branch

Facilities available

Cash withdrawal & cash deposits

Fund transfer

Account statement

TYPES OF PRODUCTS & SERVICES

3. PLASTIC MONEY

Plastic money are the alternative to the cash or standard money

Convenient to carry

Generic term for all types of bank cards, debit cards, credit

cards

4. RETAIL BANKING

It refers to banking in which banks execute transaction directly with individual, rather than corporate banks.

Services:

Housing finance

Personal loans

Education loans

Auto finance

5.Telebanking: Telebanking refers to banking on phone services.

A customer can access information about his/her account through a

telephone call and by giving the coded Personal Identification

Number (PIN) to the bank.

Telebanking is extensively user friendly and effective in nature.

6. Electronic Funds Transfer (EFT):. The system called electronic

fund transfer (EFT) automatically transfers money from one account

to another.

This system facilitates speedier transfer of funds electronically from

any branch to any other branch. In this system the sender and the

receiver of funds may be located in different cities and may even

bank with different banks.

Funds transfer within the same city is also permitted. The scheme

has been in operation since February 7, 1996, in India.

Electronic clearing service

The ECS was the first version of „Electronic Payments‟ in

India. It is a mode of electronic funds transfer from one bank

account to another bank account using the mechanism of

clearing house. It is very useful in case of bulk transfers from

one account to many accounts or vice- versa. There are two

types of ECS (Electronic Clearing Service)

1. ECS – credit

2. ECS- debit.

ECS facility is available at more than 60 centers in India. The

beneficiary has to maintain an account with one of the banks at

ECS center in order to avail benefits of ECS.

7. National Electronic Funds Transfer (NEFT):National Electronic

Funds Transfer (NEFT) is a nation-wide system that facilitates

individuals, firms and corporates to electronically transfer funds from

any bank branch to any individual, firm or corporate having an account

with any other bank branch in the country.

In order to issue the instruction, the transferor should know not only

the beneficiary’s bank account number but also the IFSC (Indian

Financial System Code) of the concerned bank.

IFSC is an alpha-numeric code that uniquely identifies a bank-branch

participating in the NEFT system. This is a 11 digit code with the first

4 alpha characters representing the bank, and the last 6 numeric

characters representing the branch. The 5th character is 0 (zero). IFSC

is used by the NEFT system to route the messages to the destination

banks / branches

8. Real Time Gross Settlement (RTGS): RTGS transfers are

instantaneous unlike National Electronic Funds Transfer (NEFT)

where the transfers are batched together and effected at hourly

intervals.

RBI allows the RTGS facility for transfers above Rs1lakhs. The RBI

window is open on weekdays from 9 am to 4.30 pm; on Saturdays

from 9 am to 12.30 pm

9. Society for Worldwide Interbank Financial Telecommunications

(SWIFT): SWIFT is solely a carrier of messages. It does not hold

funds nor does it manage accounts on behalf of customers, nor does it

store financial information on an on-going basis. As a data carrier,

SWIFT transports messages between two financial institutions. This

activity involves the secure exchange of proprietary data while

ensuring its confidentiality and integrity.

SWIFT, which has its headquarters in Belgium, has developed an 8-

alphabet Bank Identifier Code (BIC). The BIC helps identify the bank.

CRM

Customer Relationship Management Solution is the

set of methodologies and tools that help an

enterprise manage customer relationships in an

organized way - finding, getting, and retaining

customers. It helps to provide better customer

service, increase customer revenues, discover new

customers and sell products more effectively.

10. Mobile Banking: A new revolution in the realm of e-banking is the emergence of mobile banking.

On-line banking is now moving to the mobile world, giving everybody with a mobile phone access to real-time banking services, regardless of their location.

It provides a new way to pick up information and interact with the banks to carry out the relevant banking business.

The potential of mobile banking is limitless and is expected to be a big success.

Booking and paying for travel and even tickets is also expected to be a growth area. This is a very flexible way of transacting banking business.

Facilities are:

Balance enquiry

Fund transfer

Cheque book request, etc

11. Working Capital Finance: Working capital finance is utilized for

operating purposes, resulting in creation of current assets (such as

inventories and receivables). Banks carry out a detailed analysis of

borrowers' working capital requirements.

Credit limits are established in accordance with the process approved

by the board of directors.

12.Project Finance: Project finance business consists mainly of

extending medium-term and long-term rupee and foreign currency

loans to the manufacturing and infrastructure sectors.

Banks also provide financing by way of investment in marketable

instruments such as fixed rate and floating rate debentures.

Lending banks usually insist on having a first charge on the fixed

assets of the borrower. The project finance approval process entails a

detailed evaluation of technical, commercial, financial and

management factors and the project sponsor's financial strength and

experience.

13. Guarantee: In business, parties make commitments. The

beneficiary of the commitment wants to be sure that the party making

the commitment (obliger) will live up to the commitment. This

comfort is given by a guarantor, whom the beneficiary trusts.

Banks issue various guarantees in this manner, and recover a

guarantee commission from the obliger. The guarantees can be of

different kinds, such as Financial Guarantee, Deferred Payment

Guarantee and Performance Guarantee, depending on how they are

structured

14. Loan Syndication: This investment banking role is performed by a

number of universal banks

OTHERS

15. Sale of Financial Products such as mutual funds and insurance is another major service offered by universal banks.

16. Financial Planning and Wealth Management are offered by universal banks.

17. Executors and Trustees: a department within banks – help customers in managing succession of assets to the survivors or the next generation.

18. Lockers: a facility that most Indian households seek to store ornaments and other

19. E-Cheques

20. D-MAT Accounts

21. EDI (Electronic Data Interchange)

22. Dividends payments of commitments

23. Vehicle and home finance

EXAMPLE OF NEW INNOVATIVE SERVICE PROVIDED BY

UNION BANK

1. Village Knowledge Centre (VKC)

Village Knowledge Centre (VKC) serves as information disseminationcentre providing instant access to farmers to latest information/knowledge available in the field of agriculture, starting from cropproduction to marketing.

2. Union Mitr

Union Mitr is especially designed for the rural population. It facilitatesfinancial education to all strata of people.

Services offered in Union Mitr:-

Information on financial products, services and where they areavailable.

Guidance on opening a bank A/C

Information on products of bank including interest rates and charges

Information on managing savings.

Guidance about management of existing debt.

Information on likely avenues of investment

WHAT IS BANCASSURANCE?

Distribution of insurance products through a bank’s distribution

channels.

According to IRDA, ‘bancassurance’ refers to banks acting as

corporate agents for insurers to distribute insurance products

Life Insurance Marketing and Research Association’s

insurance dictionary defines bancassurance as “the provision

of life insurance services by banking and building societies”.

It is basically selling insurance products and services by leveraging

the vast customer base of a bank and fulfills the banking and

insurance needs of the customers at the same time.

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BANCASSURANCE - HISTORY

Originated in France in 1980s

Spread rapidly across Europe

Introduced in India in 1999

Opening up of insurance industry

20 new companies

BANCASSURANCE IN INDIA

In the year 2002 the banks of India were permitted

to do insurance business for the first time.

It is regulated by both RBI and IRDA as it is

combination of bank and insurance.

It is a Win-Win Strategy

Example: SBI Life Insurance Company Ltd has tie

up with SBI.

RBI GUIDELINE FOR BANKS ENTERING INTO

INSURANCE SECTOR :

Joint venture will be allowed for financially strong

banks wishing to undertake insurance business

with risk participation;

For banks which are not eligible for this joint-

venture option, an investment option of up to 10 %

of the net worth of the bank or Rs. 50 crore,

whichever is lower, is available.

Any commercial bank will be allowed to undertake

insure business as agent of insurance companies.

This will be on a fee basis with no-risk participation.

THE INSURANCE REGULATORY AND DEVELOPMENT

AUTHORITY (IRDA) GUIDELINES FOR THE

BANCASSURANCE ARE:

Each bank that sells insurance must have a chief

insurance executive to handle all the insurance

activities;

All the people involved in selling should under-go

mandatory training at an institute accredited by

IRDA and pass the examination conducted by the

authority;

Commercial banks may become corporate agents

for one insurance company

Banks cannot become insurance brokers.

JOINT VENTURES

SBI Life Insurance Company Limited

Joint venture between the State Bank of India and BNP

Paribas Assurance registered with IRDA on 30.03.2001

Share Holdings

1. State Bank of India --- 74%

2. BNP Paribas Assurance --- 26%.

CANARA HSBC ORIENTAL BANK OF

COMMERCE LIFE INSURANCE COMPANY

LIMITED, REG. ON 6TH OF JUNE, 2008 Share Holdings

1. Canara Bank - 51%

2. HSBC Insurance

(Asia Pacific) Holdings Ltd - 26%

3. Oriental Bank of Commerce - 23%

SOME OTHER TIE UPS ARE :Insurance Company Bank

Life Insurance Corporation of India

Corporation Bank, Indian Overseas

Bank, Centurion Bank, Vijaya Bank,

Oriental Bank of Commerce etc

National Insurance Co. Ltd. City Union Bank

United India Insurance Co. Ltd South Indian Bank

Bajaj Allianz General Insurance Co.

Ltd

Karur Vysya Bank and Lord Krishna

Bank

ICICI Prudential Life Insurance Co

Ltd.

ICICI Bank, Bank of India, Citibank,

Federal Bank, and Punjab and

Maharashtra Co-operative Bank.

HDFC Standard Life Union Bank of India

BANCASSURANCE SALES MODELS

Separate Sales Force

Minimum integration between the staff of thepartners and merely utilize the customer database forinsurance product prospecting.

Hand in Glove

Sales force of the insurer utilizing the resources ofthe bank (customer base, brand infrastructure , bankstaff expertise).

Bank staff sells simply package product, but act asintroducers & in the case of more complex productsthe insurer’s financial planner undertake theconstructive selling process and final lead closure.

High interaction between the bank and insurer’s staff.

Fully Integrated

Insurance sales process is wholly owned

by the bank staff while the insurer acts

only as a product and service provider.

Exploitation of bank’s strength and does

not utilize the skills of the insurer.

DIFFERENT BANCASSURANCE MODELS

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Integrated

Broker’s model

InsurerBank

InsurerBank

Non -integrated

•Agents to place at bank branches

•Mine on bank’s client base -telemarketing

•No agent at branches

•Bank’s RMs to sell

Bank Insurer

Bank Broker

Partnership - Leads referral from bank on commercial business;

brokers to recommend business

Agents

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BANCASSURANCE

- DISTRIBUTION CHANNELS

Career Agents

Special Advisers

Salaried Agents

Bank Employees / Platform Banking

Corporate Agencies and Brokerage Firms

Direct Response

Internet

e-Brokerage

Outside Lead Generating Techniques

MICRO-INSURANCE

Micro-insurance, the term used to refer to

insurance to the low-income people.

It is mandatory for all formal insurance companies

to extend their activities to rural and well-identified

social sector in the country (IRDA 2000).

Tata AIG Life - First insurance company to launch

Micro-Insurance Scheme.

ADVANTAGE FOR THE BANKS

Revenue diversification

Satisfaction of more financial needs under the

same roof

Customer retention-Increase in customer loyalty

More profitable resource utilization

Enriched work environment

Establish sales oriented culture

ADVANTAGE FOR THE INSURANCE

COMPANIES

Revenue and channel diversification

Quality customer access

Quicker geographical reach creation of brand equity

Increase in volume and profit

Improved brand equity

Some others

Immediate access to New Markets

Increase in Market Penetration

Reduce reliance on traditional distribution

channel

Combine Cost Saving & Increased Profitability

Develop new financial products more efficiently

Improve sales effectiveness & after sales

service

Insurer

ADVANTAGE FOR THE CONSUMER

Enhanced convenience

One stop shopping for all financial services

Innovative and better product ranges

More credible solution

SWOT ANALYSIS

STRENGTH:

Vast untapped market

Huge pool of skilled professionals

WEAKNESS:

Lack of networking among bank branches

Saving Ability of Middle Class

OPPORTUNITY:

Data mining :Banks have a huge customer

database which has to be properly leveraged.

Target segments should be identified and tapped.

Wide distribution networks of banks

THREATS:

Human Resource Challenges

Non-response from the target groups can also pose

a challenge.

CONCLUSION For bank it just act as a means of product

diversification and additional fee income

For insurance it act as a tool for increasing theirmarket penetration and premium turnover

For customer it benefit them as in term of reducedprice, high quality products and delivery doorsteps

SO EVERYBODY IS WINNER HERE