STRATEGIES BY RETAIL BANK TO VENTURE IN RURAL MARKET
Romil ShuklaA PRESENTATION
AGENDA• INDIAN BANKING INDUSTRY• RETAIL BANKING• RURAL BANKING• SUGGESTION &
RECOMMENDATIONS
INDIAN BANKING INDUSTRY
INDIAN BANKING SECTOR
• Focus on Customer service
• The hardening of bond yields will have negative impact on Q4FY10
results of banks especially PSU banks.
• Focus on KYC Norms
• Structural improvement in the CASA.
• New players in the banking sector .
• At end-March 2010, 50.6 million no-frills
accounts were opened by the banking system.
RETAIL BANKING IN INDIA
KEY FACTORS DRIVING THE GROWTH OF RETAIL BANKING
• Focus on understanding customer needs or preferences
• Customer-specific products or offerings on a regular basis
• Improved processes and bundled product offering
• Any where, any time banking
• Faster service
• Customer-driven strategies
SCOPE FOR RETAIL BANKING IN INDIA
• Increase in economic activity
• Increase in the purchasing power.
• India has 200 million households and 400 million middleclass
population
• Nuclear family concept is gaining much importance
STRATEGIES FOR INCREASING RETAIL BANKING BUSINESS
• Constant product innovation
• Quality service and quickness in delivery
• Introduction of new delivery channels
• Tapping of unexploited potential
• Infrastructure outsourcing
• Detail market research
• Cross-selling of products
Future
RURAL BANKING – THE CURRENT STATUS
THE CURRENT STATUS• Started since the establishment of banking sector in India.
• Mainly focus upon Agro sector
• There are 32,528 rural bank offices and 20,771 semi-urban bank
offices in the country
• SBI and NABARD
• Rural population of about 780 million has limited access .
• Current demand for credit in rural India is around Rs. 1, 50,000 Cr.
• Commercial bank branches cover only 7 % of rural sector
and large market is still untapped.
SUGGESTIONS & RECOMMENDATIONS
MARKET SEGMENTATION
• Geographic segmentation.▫ Rural market
• Demographic segmentation.▫Male – Female▫ 18 – 60 years▫ Literate & Illiterate
• Psychographic Segmentation.▫ People looking for savings
• Behavioural segmentation.▫ Loans▫ Financial help.
NEED OF THE RURAL MARKET
PORTER’S FIVE FORCE MODEL
Bargaining power of suppliers
The product is extremely important to buyersThere are
no substitutes
Bargaining power of customersSwitching to
another product is simple
Customers are price sensitive
Customized products
Threat of new entrants
High fixed costsGovernment
restrictions or legislation
Threat of substitute product
Microfinance institution
SHG’s
WHAT IS NEEDED FROM THE BANKS?
• More financial inclusion
• Micro credit / SHG’s
• Use of technology
• Alternate Distribution channels
• To extend banking services at customers convenience
• Improvement in service levels in rural area
WHAT IS NEEDED FROM THE GOVERNMENT?
• An authority for Rural Banking
• Road map
• Establish open standard for technology to be used
• Financial literacy and credit counselling.
• Strategic action plan for remittance facility for both
inter banking/ intra bank and post office
STEPS TO BE TAKEN
• Expand reach
▫ Tie up with India post.
▫ Partner with NGO/ MFI.
• Kiosk banking.....Offer convenience
▫ Banking services at mini branch.
▫Making kiosk.
▫ The bio metric authentication.
▫ Improved business.
• Educate customers
• Be cost effective
▫ Low cost ATM.
▫ Costs just 1/ 10th that of the traditional ATM.
▫ Transfer of funds from NREGA.
▫ e – governance model
• Innovate and adopt technology
▫ Smart cards, biometrics scanning
▫ Improve the service delivery.
STEPS TO BE TAKEN
• Focus on microfinance
▫40% in priority sector lending
▫MFI lending provides 10-14 % return as against 6-7 % in
government instruments
STEPS TO BE TAKEN
THANK YOU
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