Retail Banking

Retail means sale of goods in small quantities, it is concerned with buying of goods in small quantities from the wholesaler and selling them in small quantities to the ultimate consumers as per their requirements. The person engaged in this trade is called the retailer. He acts as a link between the wholesaler and the customers. In retail trade goods are sold to the ultimate consumers for personal use and for the use of the business in small quantities only. The retailer does not specialize in a particular line or a particular product. Rather he maintains a large variety of goods. Generally, sales are limited to a local and on a small scale.
MEANING OF BANKING

Banking has come to occupy a pivotal position in a nations economy. According to the modern concept, banking is a business which not only deals with borrowings, lending and remittance of funds, but also an important instrument for fostering economic growth. The Banking Regulation Act 1949, defines the term banking as the accepting for the purpose of lending or investment of deposits of money from the public or otherwise and withdraw able by cheque, draft, order or otherwise. Thus, the essentials of banking are: (1) There should be acceptance of deposited. (2) Deposits should be from the public. (3) Deposits should be repayable on demand or expiry of a term or after a specified periods. (4) The purpose of deposits should be lending or investment. Bank is an institution which deals in money and credit. It buys money from depositors and sell to the borrowers. It is body of persons whether incorporated or not who carry on the business of banking. A bank may defined as a corporation or person which collects deposits from the public, repayable on demand and which supplies and facilitates all kinds of exchanges.

RETAIL BANKING

Retail banking means mobilizing deposit form individuals and providing loan facilities to them in the form of home loans, auto loans, credit cards, etc, is becoming popular. This used to be considered by the banks as a tough proposition because of the volume of operations involved. But during the last couple of years or so, banks seem to have realized that the only sustainable way to increase deposits is to look at small and middle class consumer retail deposit and not the price sensitive corporate depositors. With financial sector reforms gathering momentum, the banking system is facing increasing companies from non-banks and the capital market. More and more companies are tapping the capital market directly for finance. This is one of the main reasons for the banks to focus vigourously on the much ignored retail deposits. Another reason is the current liquidity the margins are 1 to 2 percent above the prime rate; in retail market they are 3to4 percent. It is reported that Indian retail market has the potential to be second only to the USA. National Readership Survey 5puts Indian households with monthly of over Rs. 5000 at 4.5 million. According to the survey, the category of households with annual income of Rs. 2 lakhs and above is growing at the rate of 30 per cent per annum. No winder, banks with vision and insight are trying to woo this market through a series of innovative additions to their products, services, technology and marketing methods. Fixed and unfixed Deposits, (cluster deposits which can be broken into smaller units to help meet depositors overdraft without breaking up entirely), centralised database for any branch banking (whereby the customer can access his account in any of the branches irrespective of where the account is maintained), room services (whereby the customers are visited at their residences offices to enable them to open their accounts), automatic teller machines, tele banking network, extended banking time, courier pickup for cheques and documents, etc are some of the privileges extended to the customers by the banks in are eagerness to cultivate the retail market. In short, in the bold new world of retail banking the customer is crowned as king.
RETAIL BANKING-A COOL OASIS

To bankers struggling through the shifting sands of corporate credit, retail banking looks like a cool oasis. Corporate Credit, retail banking looks like a cool oasis. Corporate customers rely less on commercial banks every day as other fund raising avenues present themselves. As this disintermediation takes place and competition shrinks margins, retail banking has gained an irresistible allure for banks because of its apparently higher margins and potential fir growth.

With their large branch networks, banks have secured sizeable deposits-23 percent of GDP. On the assets side, however, retail advances account for a mere seven per cent of total lending. The penetration of products like car loans or credit cards is very low. With very few focused multi-line banks, non banks are often significant players in retail lending, as HDFC is in house loans. Yet, many non-banks lack the minimum size to make the necessary investments and address the challenges of retail banking. A large number of banks and non-banks have launched or relaunched retail products and are attempting to grow their share of the personal financial services market. Even the term lending institutions have decided that they need to go retail to raise funds. Many organization like ICICI are betting that a large part of their future growth will come from retail customers. Retail banking is much more than as opportunity to addressing dwindling margins. It is an imperative to preserve profits and market positions. Customers now have many more personal financial options, a growing credit culture, a willingness to switch between financial services providers, and a demand for lower interest rates. As they witness these trends, banks realize that they cannot remain passive. The new private sector banks are making inroads in the markets they serve, while competition from non-banks is growing. In respect, older institutions need to revamp their distribution capabilities, customer management capabilities, operating culture, compensation system and operations processing.

WEB IMPACT ON BANKS RETAIL REVENUES: For all those gurus whove been predicting that the net will end the business of said banks, heres a shocker. Even in the SILICON valley-driven USA, Internet is not expected to have a major impact in banks retail revenues. The reason: the absence of a convenient alternative at present to using cash. According to a report by moodys Investors service, at least in the intermediate term, the internet is not expected to impact large US banks core profitability or competitive position.

This is despite the despite business being the simple-most important profit source for most American retail banks. The core retail banking business of deposit taking will be sheltered form web-based competitors and margin shrinkage on this business. Need for convenient access to physical locations coupled with the advantages of multiple delivery channels like branch, ATM, telephone and computers, consumers need to leave money in transactional accounts; customer inertia and the relatively limited cost savings available to consumers from net banking, are cited as the main factors supporting its view. The moodys report, however, cautions that other consumer business such as residential mortgages, auto loans and credit cards may be more vulnerable to web-based competitors. However, most US banks have thin margins or low market shares in these businesses mitigating this impact, says the report made available to the Economic Times. The rating agency is skeptical of banks ability to generate substantial incremental revenues from cross-selling financial products to existing customers via the net. Banks have to maintain a comprehensive and effective web based capability to maintain their competitive position, cautions moodys. The need for customers to take frequent physical receipts, make convenient physical receipts, make convenient physical delivery of cheques using ATMs, inhibition towards paying ATM charges for using another banks ATM network by the consumer and time consuming, difficult and disruptive nature of switching accounts also contribute to the stickiness of retail deposits. With low bank fees for individual transactions and relatively small bank deposits, the opportunity cost in terms of interest income for customers is not material where the deposits are not large. Banks offer convenience and choice and the web-based channels of banks have reported rapid growth in the number of customers by retaining current customers.

According to moodys a survey indicated that 35 per cent of Internet banking customer disconnect because they dont find it convenient. Customers prefer to use a variety of channels to conduct their banking which is why it remains to be seen whether a business model based solely on internet banking will generate adequate returns and sustain long term competition against conventional banking systems. The advent of the internet could, however have a powerful effect on banks acquisition strategies by creating uncertainty about the value of purchasing large branch networks, the study says. For some banks, however, the Internet could facilitate an increase in fee income by generating fees from Internet service arrangements like bill presentment and clearing. However, if smart cards or stored value cards or other electronic cash substitute gain popularity, alternatives could become more attractive to customers. On the other hand, banks might be able to reduce costs of servicing the retail customers by moving them over into a paperless environment. Banks could introduce various incentives to the persuade customers to forego paper statements for the basic savings account and credit card, says moodys.
THE RULES HAVE CHANGED

As the 1900s come to their close and we look eagerly towards the new millennium, a revolution that will change the rules and every thing we have understood of the retail market, financial products and other services. Economic boundaries are disappearing, and the global village is a reality where the retail customer will have a choice in a manner we may have never imagined. Providers of retail products and services will battle for market and market share. It is battle that will be fought at different levels and the real winner will be the customer, who will benefit from increased competition through better products, distribution, technology, pricing, and post transaction service.

The quality and range of products will expand exponentially convenience of usage, customization to individual needs, and a host of other user-friendly add-ons will create a whole new frontier of applications. Companies will have to innovate and continuously upgrade their products. Anticipation, listening and responding to your customers needs, will be the buzz-words of this thrust. Distribution will be the next key benchmark of success. The customer will demand (and therefore the provider will have to respond) for greater convenience of access to the product or service and all this at the best cost of delivery. Re-defined methods, the use of technology specifically the Internet-and realigned strategies will drive this important criterion of success. Constraints of location, timing, accessibility etc will all be history. No matter how brilliant the product you have, your distribution flexibility will be the customers selection parameter. Again, quality of the product and responsive strategies for distribution will also have a link to price. Efficiencies on this front will be the next item on your report card. Through innovation in production and delivery and cost reduction strategies, the price to the customer will have to be at maximum benefit. The intelligent customer will be ruthless with any price distortions, which as a consequence of inefficiencies or market exploitation his cost benefit analysis will not allow for these variables. Would you prefer a product, which (hopefully) is never expected to need post sale service or one which offers the best after sale service if required ? Clearly, the relationship with the customer starts with the transaction, does not and with it. Organisation we have to give equal importance to cost sale needs of customers as the pitch made prior to the sale. Technology will perhaps be the single largest driver of this detail thrust. The entire strategy will evolve around the absolute ability of the organisation to be at the cutting as edge of technology. We will have to invest in technology far ahead of immediate needs and be able to anticipate the future direction at a pace we are perhaps not used to. Being able to keep abreast, but more importantly, being able to recognize the immense potential that technology provides at all stages in the retail chain will be of paramount importance. To leverage, exploit and link technology to your business will be the greatest challenge of the new millennium and I am convinced that the retail war will be won and lost on this

one aspect, purely because technology increasingly we influence on the entire chain in a retail business cycle. Above all these, I would list attitude towards customer as the single point basis on determining the winner of the race. Attitude to the customer will influence all the areas we have discussed and will ensure excellence in each one of them. It is an intangible, it is not prescribed in a manual nor is it a quantifiable item in the balance sheet, but an organizations attitude to the customer will be the basis determinant of success for any retail operation. There are interesting and challenging times ahead the future promises a lot but will also make extraordinary demands. The customer will be the most important aspect of your business and ultimately the winner of the retail war. RISK INVOLVED IN RETAIL BUSINESS There are of course, considerable risks in retail banking. They are : (a) (b) (c) (d) (e) (f) (g) (h) Databases on credit history are large. Collection mechanisms are poor. Investments in technology are large. Operating efficiency level needs to be very high. Unlike corporate banking, retail banking involves a large number of small accounts. Demands on processing capabilities are higher. Retail segment is not something you can get into overnight. The right systems and the right architecture needs to be put in place first.

PRODUCT RANGE OF RETAIL BANKING

New Private sector banks have great resource mobilizing and asset expansion capabilities which cannot be undermined by the fact these banks volume. Which have taken decades of option for the old private sector bank to build. These bank are dominating the market with new product, service3 and ideas. Information technology has enabled many private banks are emerging strong in banking and financial services with the marketing of new product and service based on technological capabilities. In the present scenario HDFC bank Ltd. is a fast emerging bank. It has 227branches throughout the India in Rewari city HDFC has one branch also and one ATMs. Apart from the HDFC bank, the other bank like PNB, SBI which is included in study. These both are the public sector bank. SBI is the one bank in India. These two are also providing the retail banking service. Now the emergence of the retail concept of the banking customers are expecting more and better services. To day customer prefer private banks because they can have personal relationship with the bank personnel, with lesser hierachy and It is possible for these banks to forget closer ties with customers also.

HDFC Bank provide the following service :-

1. 3. 5. 7. 9.

Current A/C Corporate Salary A/C Debit Card Intercity/ Inter Branch Banking Bill Pay

2. 4. 6. 8.

Loan Online A/C Phone Banking Net Banking

SBI & PNB Provides following services :-

Deposit

-Demand Deposit -Time Deposit Fixed Deposit Akshaya Deposit Cumulative Deposit Pragati Deposit Current Deposit Saving Deposit

Loan :-

Housing finance for individuals Car finance Finance for consumer disables Finance for Scooter/Motorcycles Finance against future lease Rentols Personal loan to pensioness Personal loan to serving Army officers, Govt. & other Employees

Education loan scheme Advance against life policy Advance against bank deposits

- ATMs

HDFCS RANGE OF PRODUCT

Current A/C:Under this account a person can deposit and with draw money as many times in a day as he wants . The regulars an average quarterly balance of the Rs. 10000 only .Besides the free ATM card and easy accessibility. Your first 50 cheque leave are o Offered free. This can be as: Premium current account From any branch HDFC bank Trade - Small business HDFC bank plus.

Loans :- To Suits every need.

A loan is a specified amount sanctioned for a period of times. Loans are granted generally against the security of assets or on the personal security of the borrower. The borrowers may with draw the amount of the loan in lamp sum in instalment. Similarly it may be repayable in lump sum or in instalment.

HDFC bank provides following loan under the retail banking segment :-

Car Loan (For new and used cars).

Personal loan. Loans against securities and two wheelers . Consumer loan.

Car Loan :- Varity of finance schemes New Car loan :Loan amount : upto 90% Of car value Tenure : 12 to 48 month

Personal Loan :- For anything you have in mind Holiday abroad Wedding in the family Higher education No security or granter required

Loan amount: Rs. 25000 to Rs 10 lack Tenure :12 to 48 months. Eligibility : Salaried, individuals, self-employed doctors and CAS, CS, Engineers M.B.A.S

Two wheelers and Consumer loan :-

Whatever your dream, HDFC have a scheme Two wheelers Personal computer and AC Durable like TV, Washing Machine, Refrigerator etc. For HDFC bank A/C holders only. Loan amount : Rs. 7000 to 1 lakh (Max 85% of product value) Tenure : 6 to 36 months Eligibility : Salaried and self employed individuals

Loan against securities - An overdraft facility Loan amount Rs. 50000 to Rs. 20 lakh (upto 60%of market value of demand share) Mutual Fund Rs. 50000 to Rs. 10 lakh LIC policy Rs.100000 onwards.

Corporate salary A/c:With HDFC banks corporate salary A/C, employees receive an array of rewards with then monthly pay cheque. All at no extra coast to organisation. E-age banking service from any where, at any time: Phone banking Inter branch banking Net banking Bill payable Free phone banking Free mobile banking Free demand draft Free International debit card Direct salary credit Overdraft facility Demote A/C Joint A/C facility Free Demand Draft

PHONE BANKING: HDFC bank provides phonebanking facility to its customers. With the help of this service customers can get their account detail, ask for a cheque book or a statement, open a fixed deposit, transfer money within their own accounts, order a demand drafts, stop cheque payment etc. all by phone INTERCITY/ INTERBRANCH BANKING: At HDFC you can access your account from any of their 131 branches in 26 cities. So you can withdraw cash form another branch, through a self-cheque. You can deposit a local cheque in one branch and get it credited to your account in another city. NETBANKING : Internet banking is just like normal banking, with a one big exception that you dont have to go to the bank for transactions. Instead you can access your account any time form any part of the world, and do so when you have the time ,and not when the bank is open. Through the net banking you can transfer funds within the same bank, open a fixed deposit, get a demand draft, make a TDS enquiry request a stop payment of on a cheque, request for a new cheque book or even cheque your account balance. BILLPAY : HDFC bank provides its customers to pay their mobile bills in some selected cities over the phone as well as through their ATMs. In Mumbai you can pay BPL Mobile bills, in Delhi you can pay Airtel bills and in Chennai you can pay RPG and Sky cell cellular bills through this facility. You can also pay MTNL bills in Mumbai and Delhi and MSEB bills in Pune and Mumbai. It saves a lot of time , which you spend in long queues or writing cheques.

Debit Cards HDFC Banks International debit card provide seamless freedom and fiscal management to spending, both locally and globally. The Debit and ATM Card, when issued as visa compliant cards, will give you the freedom to access your savings or current at merchant location and ATMs. Whenever you make payments, the amount will be instantly debited from your account. The present ATM cards allow you to access your account 24 hours a day, all through the year.

How does it work? All you need to do is present your card to the merchant who will swipe it through the electronic terminal and enter the amount of your purchase. You only need to sign the transaction slip. Your account will be automatically debited for the amount of your purchase. Your debit card can be used at any merchant location displaying the visa electronic logo or at any ATM displaying the circus logo of course, you can always use it any HDFC Bank ATM as a normal ATM card.

What if your Debit Card is lost or stolen? If your card is lost or stolen, you are protected from fraudulent charges from the moment you report the loss to the bank.

Any transaction limit for the Debit Card? For the safety of the card holders, the bank have a daily limit of Rs. 15000 at ATM, (at merchant location there is no transaction limit,) and this is subject to the available balance in your account.

SBI & PNB PRODUCT RANGE Deposit Deposits accepted by bank may be categorised as demand deposit and time deposit. Demand Deposit

Demand deposits are those deposits that can be withdrawn without notice. Bank undertake to repay such deposits as demand. The following types of deposit accounts are classified under Demand Deposits. (a) (b) Current Account Saving Account

Current Account : Under this accounts, a person can deposit and with draw money as many times in a day as he wants. Money can be withdrawn by issuing cheques. Current acount are remunerative type of deposit accounts as no interest its payable on the credit balances outstanding in these accounts.

Saving Accounts : This account is opened for the purpose of savings. Any purpose of savings. Any person including a minor can open this account by depositing a small sum of money. Saving Bank Account is subject to the restriction as to the number of withdrawal as also the amount of withdraw as also the amount of withdrawal permitted by banks during any specified period. However there is no restriction on the number and amount of deposits that can be made on any day. Balances in the Saving Bank Account cans interest at rates as determined by RBI from time to time.

Time Deposit Any deposit, which is repayable after a period of notice rather than repayable after a fixed date or period, is a time deposit or popularly called as term deposits. The following type of account in both banks are classified under Retail Time Deposits. Fixed Deposit

Apshaya Deposit Cumulative Deposit Pragati Deposit

Fixed Deposit :Fixed Deposit where the depositor makes a lumpsum deposit where the depositors makes a lumpsum deposit at one time for a fixed period and receive payment there of on Maturity with interest. Apshaya Deposit :Apshaya Deposit is a reinvestment deposit Scheme where the depositors makes a lumpsum deposit at one time for a fixed period and receive payment there of on Maturity with interest