Unit 1 Retail Banking Final.pptx

Retail Banking

1. Unit 1 : Retail banking Products PBS 204 – 4 Credits

2. Syllabus Unit 1 : Introduction to Retail Banking – Definition & Concepts Unit 2: Retail Products Unit 4: Important Assets Products – Home Loans Unit 5: Personal Loans Unit 6 : Educational Loans Unit 7 : Credit Cards & Debit Cards Unit 8 : Third Party Products Unit 9: Axis Bank Products –CASA , FD , Life Insurance , General Insurance , Mutual Funds , Gold Investment Scheme , Gold Loans Unit 10 : Finacle Related Modules to Axis Bank Retail Banking Products

3. Introduction Unit 1: Retail Banking Products

4. Unit 1 1.1 Definition and History 1.2 Roles With in The Bank 1.3 Applicability of Retailing Concepts Advantage / Disadvantages , Opportunities , Challenges in Retail Banking; Functions of Retail Banking Branch ; Types of Customers (Segments) and Types of Accounts 1.4 Distinction between Retail & Corporate / Wholesale Banking

5. 1.1 - HISTORY Banks are among the main participants of the financial system in India. Banking in India originated in the last decade of 18 th century.

6. DIFFERENT PHASES OF BANKING IN INDIA There are three different phases in the history of banking in India. 1. Pre Nationalization Era 2. Nationalizaton Stage 3. Post liberalization Era

7. Pre nationalization era In India the business of banking and credit was practiced even in very early time. The remittance of money through Hundies was very popular

8. Organization STRUCTURE Organizational Structure of banks in India which includes following contents : RBI Commercial Banks Co-operative Banks Development Banks

9. Broad classification of banks 1. The RBI :- The RBI is the supreme monetary and banking authority in country and has the responsibility to control the banking system in country. RBI performs various functions like Controller of Credit ,Issue of currency , lender of the last resort , Controller of liquidity and Money Supply , Banker`s to Bank .

10. TO BE CONTI… 2. Public Sector Banks :- State Bank of India and its Associates Nationalized Banks RRBs

11. Overview 3. Private Sector Banks :- Old generation private banks New generation Private banks

12. CO-OPERATIVE BANKS 4. Co-operative Sector banks :- State co-operative banks Central co-operative banks Primary agriculture credit societies Land development banks State land development banks

13. DEVELOPMENT BANKS 5. Development Banks :- Industrial finance cooperation of india (IFCI) Industrial development bank of india (IDBI) Industrial investment bank of india (IIBI) Small industrial development bank of india (SIDBI) National bank for Agriculture and Rural Development (NABARD) Export import bank of india

14. NATIONALIZATION STAGE After independence in 1955.the imperial Bank of India was nationalized and established as the State Bank of India. On 19 th July 1969 the nationalization of 14 major scheduled commercial banks each having deposit worth 50 crores and above came into effect. Later the govt. nationalized six more commercial private sector banks with deposit liability of not less than RS. 200 crores on 15 th April 1980.

15. Consequences of nationalization The quality of credit assets fell because of liberal credit extension policy. Excessive political interference. Poor performance appraisal policy The credit facilities extended to the priority sector at concessional rates. The high level of low yielding SLR investments adversely affected the profitability of the banks. The rapid branch expansion

16. Post liberalization era The need for restructuring the banking industry in 1992. The reform process enhanced the opportunities and challenges. The root causes for the lack luster performance of banks are – Regulated interest rate structure Lack of focus on profitability Lack of the transparency in the bank’s balance sheet. Lack of competition

17. Retail banking –an introduction All over the world , there is a shift in the economy from the manufacturing to the service sector. Banking industries includes a number of businesses such as corporate banking , investment banking , wealth management , capital market etc. Retail banking is another segment of banking system. It is a typical mass- market banking characterized by a large customer base and large volume of transactions.

18. 1.2 : Definition Retail banking  also known as  Consumer Banking  is the provision of services by a  bank to individual consumers, rather than to companies, corporations or other banks. Services offered include  savings  and  transactional accounts ,   mortgages ,   personal loans , debit cards , and  credit cards . The term is generally used to distinguish these banking services from  investment banking ,   commercial banking  or  wholesale banking. It may also be used to refer to a division or department of a bank dealing with retail customers . Technology has played an important role in streamlining electronically in providing faster and accurate customer services . Various channels like ATMs , Kiosk , E Payment System like cards , On line services , CTS , Mobile banking ,NEFT and NECS are the nee banking paradigms

19. indian retail banking scenArio In India, the retail banking scenario has been the market changing from a seller’s market to buyer’s market. Retail banks offer services like account opening ,credit card , debit card , ATM , internet banking , phone banking, insurance , investment etc. Retail banking refers to dealing of commercial banks with individual customers , both on liability and asset sides of the balance sheet.

20. 1.2 – Role with banking operations 1. BRANCH HEAD 2. OPERATIONS 3. SALES 4. MARKETING / RM 5. Business Development Executive / Officers 6. Regional / Circle RMS

21. 1.3 - Concept Multiple Products :- Various types of deposits/accounts. Credit and debit cards Loans Insurance Mutual funds etc.

22. Multiple channels 2. Multiple channels of distribution Internet banking Mobile banking Call centers

23. MUTLIPLE CUSTOMER GROUP 3. Multiple customer groups :- Individual customers Petty businesses Small and medium enterprises

24. Universal Banking provides entire range of financial services 24

25. Universal banking A  universal bank  participates in many kinds of banking activities and is both a  commercial  and an  investment bank  as well as providing other  financial services  such as  insurance. ] These are also called full-service financial firms, although there can also be full-service investment banks which provide wealth and asset management, trading, underwriting, researching as well as financial advisory . A banking system in which banks provide a  wide variety  of financial services, including both commercial and investment services. Universal banking started some European countries, including Switzerland. In the United States, however, banks are required to separate their commercial and  investment banking services . Proponents of universal banking argue that it helps banks better diversify risk. Detractors think dividing up banks' operations is a less risky strategy. But now in India also many banks have become universal banking as they are selling and marketing various types of financial services at one point. Axis Bank ,ICICI Bank and HDFC banka re the examples of Universal Banking system.

26. Narrow Banking Narrow banking  is a proposed type of bank called a narrow bank also called a safe bank. It is an antonym to Universal Banking . Narrow banking would restrict banks to holding liquid and safe government bonds. Loans would be made by other financial intermediaries. That is, the deposit taking and payment activities would be separated from financial intermediation activities . It is also called as Banking for limited purposes / Restricted banking . Commercial Banking activities alone - no investment banking, Advisory, consulting etc There is a rarely asset liability mismatch Narrow banking would restrict banks to holding liquid and safe government bonds . Loans would be made by other financial intermediaries . That is, the deposit taking and payment activities would be separated from financial intermediation activities. 26

27. Narrow BANKING Purported attributes of  narrow  banking include - 1. no lending of deposits 2. extremely high liquidity 3. extremely high asset security 4. lower interest rates paid to depositors 5. regulatory framework with higher level of scrutiny and operational and investing restrictions Additional criteria applied to  safe  banks include - 1. no derivatives 2. no off balance sheet assets 3. high degree of institutional transparency (e.g. continuous real-time disclosure of financial records) 4. capped executive salaries 5. low risk jurisdictions

28. Shadow banking The  financial intermediary involved in facilitating the creation of credit across the global  financial system but whose members are not subject to regulatory oversight. The shadow banking system also refers to unregulated activities by regulated institutions The shadow banking system has escaped regulation primarily because it did not accept traditional  bank deposits, As a result, many of the institutions and instruments were able to employ higher market, credit and  liquidity risks , and did not have  capital requirements l commensurate with those risks. Subsequent to the  sub prime meltdown in 2008, the activities of the shadow banking system came under increasing scrutiny and regulations. Examples of intermediaries not subject to regulation include hedge funds, unlisted derivatives and other unlisted instruments. Examples of unregulated activities by regulated institutions

29. Advantages of Retail Banking Client based will be large and therefore risk is spread across the customer base Customer loyalty will be strong and customers tend not to change from one bank to another very often. Attractive interest spreads since spreads are wide , since customers are too fragmented to bargain effectively . Credit Risk tends to be well diversified , as loan amounts are relatively There is a less volatility in demand and credit cycle from large corporates. Large number of clients can facilitate marketing , mass selling and the ability to categorise / select clients using scoring systems / data mining.

30. Disadvantages / constraints Problems in managing large numbers of clients , especially if IT systems are not sufficiently robust. Rapid evolution of products can lead to IT complications. Cost of maintaining branch networks and handling large numbers of low value transaction tend to be relatively high. Higher delinquencies especially in unsecured retail loans and credit cards receivables .

31. Retail banking Opportunities

32. Retail Banking in Retail stores way...

33. 1.3 - challenges Retention of Customers Rising Indebtedness Information technology plays both the role of opportunity an challenge KYC and money laundering Cyber Crimes Outsourcing of financial services Customer Complaints and dissatisfaction

34. Functions of retail banking 1. Banking facilities targeted at individual customers 2.Focussed towards mass market segment covering a large population of individuals 3.Offer different liability , asset and a pletheora of service products to the individuals customers. 4.The delivery model of retail banking is both physical and virtual i.e services are extended through branches and also through technology driven electronic off site delivery channel like ATMs , internet banking and mobile banking. 5.Extended to small and medium size businesses.

35. Types of customers segment

36. Types of accounts Current Account Savings Account Term Deposit Recurring Deposit Investment Prodcuts – Mutual Funds , life Insurance and General Insurance Assets – Loan Account – Overdraft Business Loans account Forex Accounts NRE / NRO Accounts

37. Future of Retail Banking Future of Retail Banking is for the CUSTOMER so efficient customer services , satisfaction and customer delight is a key to success. Pricing is determined by Customer. Competition among Banks would ensure him better service at cheaper rate. Customer would be able to discount his future earnings as Retail Credit for his higher standard of living. Sharing of information about the credit history of households is extremely important . CIBIL incorporated in India in 2000 aims at fulfilling the needs of credit granting institution for comprehensive credit information by collecting , collating and disseminating credit information pertaining to both commercial and consumer banking. Finally , retail banking does not refer to lending only .In the whole story of retailing one should not forget the role played by retail depositors.

38. Retail Banking 39

39. Future of Retail Banking 40

40. conclusion Retail banking is typically mass- market banking where individual customers use local branches of larger commercial banks. Services offered include savings and checking accounts , mortgages , personal loans , debit cards , credit cards etc. There is a constant need of constant innovation in retail banking. Product development differentiation , innovation and business process reengineering , micro planning , marketing , cost reduction and electronic banking , technolgoical up grdation – New Banking Paradigms.