Consumer Banking Assignment

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INTRODUCTION We dont want satisfied customerswe want delighted customers. It is the new marketing mantra today. The same applies to banking as well. Retail banking and Rural banking were once considered as taboos by the leading foreign and domestic banks. But cut-throat competition, innovation and advanced technology have altogether changed the faced of banking sector. Now all banks have recognized the importance of retail banking.

Retail banking is that part of a bank that offers products and services primarily to individual customers, professional, self-employed individuals or small businesses. The focus is on creating products and services that meet the needs of the target customers and are profitable for the bank as well.

The approach to retail banking products is more on a mass production basis wherein all risk and operations are based on and geared to cater to a large number of customers. This is therefore, significantly different from corporate banking or wholesale banking where focus is on large sized customer accounts rather than large numbers of customers.

Understanding retail banking will help in servicing your customer better as it would give you a perspective and insight into how such products are structured and specific requirements for each set of products. This would help you advice your customer in a more informed manner besides making you a more informed consumer. With the advent of ATMs, Anytime banking has come into picture. Satellites and telecom networks across the world have made Anywhere banking possible. Now it is the turn of Anyhow banking, and the leading bank of the next century will be the one which has all these three As.WHAT IS RETAIL BANKING?

Retail banking is however; quite broad in nature it refers to the dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet. Fixed current/savings accounts on the liabilities side; and mortgages, loans (e.g. personal, housing, auto and educational) on the assets side are the more important of the products offered by banks. Related ancillary services include credit cards, or depository services. Todays retail banking sector is characterized by three basic characteristics.

Multiple products (deposits, credit card, insurance, investments and securities).

Multiple channels of distribution (call center, branch, internet and kiosk); and

Multiple customer groups (consumer, small business)


Retail Banking Services:-Banking services provided to individual members of the public as opposed to those provided to businesses and institutions.SWOT ANALYSIS OF RETAIL BANKINGSTRENGTH:-1) Emerging as a new growth driver:

For several years banks viewed consumer loan with skepticism. Commercial loans denominated the loan portfolio as they generated high net yield with low credit risk. Consumer loans on the other hand involved smaller amount, large staff to handle account and high default rates. Even regulators across the glob have not encouraged retail banking until now till very recently. However , over past few years, fierce competition among the lowered the spread and profitability an commercial loan with deregulation and increase in consumer loan rate, the risk adjusted return in retail sector have exceed the return on consumer loan.2) Provides diversified asset portfolio:

Retail banking includes comprehensive range of financial product and services i.e. deposit product, auto loan, car loan, home loan, loan against equity shares, mortgage loan, payment of bills, debit card, credit card, etc. These product provide an opportunity for banks to diversify the asset portfolio with higher profit and relatively lower NPA.

3) Improves standard of living:

Due to major economic reforms in Indian economy there has been an increase in per capita income which has led to change in life style and growing urbanization have made the Indian population rise from oblivion and resurge in modern era on this front role of retail banking arises. Retail banking provide all such product and services(home loan, car loan, personal loan, etc) to its customer which are required by them to maintain change in there life style in short it helps in fulfilling aspiration of people through affordable credit.4) CRM tool:

The individual customer is deity of bank in retail banking segment . All product and services are designed to satisfy need and wants of its customer. As customer in retail banking belong to different economic, cultural, educational, and social background there demand is also varied. It is acceptance of the banking product and satisfaction of customer that yield profit in this segment. Hence customer Service and Quality implementation through use of CRM tools will help banks

Success in this competitive world of retail banking.5) Innovative product development :

The scope for development in financial services is unlimited. In retail banking ball is in the court of bankers where they approach the customer finds out there financial need and problem, designs the product and services, market them and finally sells them to satisfy its customer.6) Economies of scale:

Retail banking enables banks to utilize existing capacities and reaching wider population of customer. Banks can get the benefits of information and transaction. In process of extending variety of services, banks are acquiring enormous amount of customer information .if this information is systematically recorded , banks can efficiently utilize this information in order to explore new segment and to cross sell new services. WEAKNESS:-1) Avoids corporate sector :

Retail banking avoids corporate sector totally which is the backbone of Indian economy. Main reason put forth or this is decline in corporate borrowing. However bank can take certain step to manage there corporate clients such as lower arte credit, higher amount of loan etc. Managing corporate client is more easier as they have well defined financial policy and project and they concentrate on product and services offered rather than on CRM of bank unlike individual clients.2) Marketing (Internal and External):

Retail banking requires strong marketing strategies to be adopted by bank both internal and external. under retail banking segment top level management need employees ds to introduce product properly to its employees because if the employees are not aware regarding the product they are offering that product will fail however effective the product is also bank require to spend lot on its marketing of product to general public because if public is not aware regarding the product and service how will they opt for it . all this increases the cost and time required to introduce the product in the market which can reduce or make the product out dated immediately on its arrival.3) Changes in technology:

Future of retail banking lies in the hand of IT . Various It solution used by banks such as E-banking, phone banking , ATM leverage the retail banking product and service offered by banks. But this has weekend the segment some how . if banks are not able to adobt the latest technology it may pull back the growth of bank also this technology requires lot of capital investment and if at all the technology fails then it may shake the customers confidence on bank and bank may land up in loosing its customer.4) Reduces the profitability:

It is claimed that retail banking increases overall profitability of the bank but in reality this is not the case because managing wide range of product and service requires high quality technology , large number of staff and all this requires high capital investment which reduces banks profitability. 5) Co-ordination among various department:

Success of retail banking is not the result of one department but is result of various departments together. If there is lack of co-ordination among various department of the bank then however strong and effective the may be the product it will fail. Suppose if the front office is successful in attracting the customer but back office is not able to execute the delivery of product or service on time then bank may land up loosing the customer although its CRM was effective.NEED FOR RETAIL BANKING

(The Ultimate Service Provider)

Until now banks were relying on financing , production based activities. Retail finance was not favored by Indian banks, But they have to tune to it now with the demand for loans from industrial sector is coming downing the past because of the economic slowdown. As a result banks have become selective in there lending activities . Further changing demographics, a rapidly growing ,middle-class, rise in disposable income , changing life style and increasing ability of people to take credit risk are providing banks with an opportunity to shift there lending operation to retail finance. Hence bankers have been increasingly shifting to retail to increase profitability and reduce delinquency rates. Customer shifting , cost pressure and increasing competition are some of the other reasons . Retailing is now favored because of the better returns lesser asset quality problem and low NPA. Further it provides many opportunities for credit expansion. It helps banks in risk diversification and is important for low-cost resources mobilization by banks. For Banks, retail segment is the principal growth driver as they are slowly gaining market share in the retail space. Foreign banks are securitizing vehical loans to raise off-balance sheet resources and to reduce overall cost of funding. For example, Bank of Muscat is taking over auto loans and personal loans from other banks signal