EXECUTIVE SUMMARY

Retail banking is gaining importance all over the world. As the

technology and customer expectation rapidly changes, the needs
of the consumer also increases. The emphasis is on enhancing
lifetime value of customers. To be successful in the new
millennium firms will have to extend their practice of developing
long term relationships with all their other stake holders including
suppliers, partners etc.

As India is climbing towards success, the population here is

becoming busier and doesnt have much time for traditional retail
banking, therefore to overcome the problem of these people,
retail banking players have come up to provide convenience to
these people by innovating their products.

This project highlights various innovations brought in retail bank

by the retail bankers and the IT companies. It shows innovation
brought by Hewlett-Packard to retail banks. HP shows three
pronged strategy which changes the outlook of retail banking.

It also discloses about the overview of ICICI retail bank which

covers the history and seven marketing mix of ICICI retail bank

and its CRM implementation which covers CRM roadmap and its
strategy.

CHAPTER: 1

INTRODUCTION TO RETAIL BANKING

INTRODUCTION

DIFFERENCE BETWEEN CORE RETAIL BANKING

AND RETAIL BANKING

ADVANTAGES AND DISADVANTAGES

DRIVERS OF BUSINESS

OPPORTUNITIES AND CHALLENGES

SERVICES OFFERED

INTRODUCTION:

RETAIL BANKING is a retail banking service that is geared primarily toward

individual consumers. retail banking is usually made available by commercial retail banks, as
well as smaller community retail banks. Unlike wholesale retail banking, retail banking focuses
strictly on consumer markets. retail banking refers to provision of retail banking services to

individuals and small business where the financial institutions are dealing with large number of
low value transactions. The concept is not new to retail banks but is now viewed as an important
and attractive market segment that offers opportunities for growth and profits.

Excess of liquidity, increased dependence of corporate on capital markets, the rising income of
middle class with increase in purchasing power and ability to handle debts, the increasing
amount of NPAs from corporate portfolio and the growth and future growth potential of the
credit card business has induced retail banks to shift from wholesale retail banking to retail
banking.

Retail banking has immense opportunities in a growing economy like India. As the growth story
gets unfolded in India, retail banking is going to emerge a major driver. Some of the key policy
issues relevant to the retail banking sector are: financial inclusion, responsible lending, and
access to finance, long-term savings, financial capability, consumer protection, regulation and
financial crime prevention.

DIFFERENCE BETWEEN CORE BANKING AND RETAIL

BANKING

Often retail banking is referred to as "non commercial retail banking" this would be your
common checking accounts and consumer loans. Whereas "core banking" is often the very solid
business accounts and commercial loans. It is referred to, as 'core' because it is a core or central
to the retail banks business. Few retail banks survive from just retail banking services, they need
those core business accounts that are perhaps more stable than business.

"Business Retail banking" tends to work with small-to-medium sized enterprises (SMEs).
Business retail banking does all the things that retail banking does but adds the following things:
1) More services: Business Retail banking includes things like more treasury services, revolving
credit, merchant credit, cash management, group insurance, corporate cards and secure Internet
retail banking (e.g. server-to-server).
2) Better rates: Since SME bring in more money, they tend to get better rates than the retail
banking customer, who tends to need lots of maintenance compared to their deposit sizes.
, SME and corporate retail banking customers use the same infrastructure, but the sales platforms
tend to be different to cater to their specific needs.

ADVANTAGES AND DISADVANTAGES OF RETAIL BANKING:

ADVANTAGES:
Retail banking has inherent advantages outweighing certain disadvantages. Advantages are
analyzed from the resource angle and asset angle.
-RESOURCES SIDE

(a) Retail deposits are stable and constitute core deposits.

(b)They are interest insensitive and less bargaining for additional interest.
(c)They constitute low cost funds for the retail banks.
(d)Effective customer relationship management with the customers
built a strong customer base.
(e) Retail banking increases the subsidiary business of the retail banks.

-ASSETS SIDE

a. Retail banking results in better yield and improved bottom line for a retail bank.
b. Retail segment is a good avenue for funds deployment.
c. Consumer loans are presumed to be of lower risk and NPA perception.
d. Helps economic revival of the nation through increased production activity.
e. Improves lifestyle and fulfills aspirations of the people through affordable credit.
f. Innovative product development credit.

g. Retail banking involves minimum marketing efforts in a demand driven

economy.
h. Diversified portfolio due to huge customer base enables retail bank to reduce their
dependence on few or single borrower
i. Retail banks can earn good profits by providing non fund based or fee based services
without deploying their funds.

DISADVANTAGES:

a. Designing own and new financial products is very costly and time consuming for the
retail bank.
b. Customers now-a-days prefer net retail banking to branch retail banking. The retail banks
that are slow in introducing technology-based products, are finding it difficult to retain
the customers who wish to opt for net retail banking.
c. Customers are attracted towards other financial products like mutual funds etc.
d. Though retail banks are investing heavily in technology, they are not able to exploit the
same to the full extent.
e. A major disadvantage is monitoring and follow up of huge volume of loan accounts
inducing retail banks to spend heavily in human resource department
f. Long term loans like housing loan due to its long repayment term in the absence of
proper follow-up, can become NPAs.

DRIVERS OF BUSINESS IN INDIA

ECONOMIC PROSPERITY and the consequent increase in purchasing power
has given a fillip to a consumer boom. During the 10 years after 1992, India's
economy grew at an average rate of 6.8 percent and continues to grow at the
almost the same rate not many countries in the world match this performance.
CHANGING CONSUMER DEMOGRAPHICS indicate vast potential for
growth in consumption both qualitatively and quantitatively. India is one of the
countries having highest proportion (70%) of the population below 35 years of
age (young population). The BRIC report of the Goldman-Sachs, which
predicted a bright future for Brazil, Russia, India and China, mentioned Indian
demographic advantage as an important positive factor for India.
TECHNOLOGICAL FACTORS played a major role. Convenience retail
banking in the form of debit cards, internet and phone-retail banking, anywhere

and anytime retail banking has attracted many new customers into the retail
banking field. Technological innovations relating to increasing use of credit /
debit cards, ATMs, direct debits and phone retail banking has contributed to the
growth of retail banking in India.
TREASURY INCOME OF THE RETAIL BANKS, which had strengthened the
bottom lines of retail banks for the past few years, has been on the decline during
the last two years. In such a scenario, business provides a good vehicle of profit
maximization. Considering the fact that s share in impaired assets is far lower
than the overall retail bank loans and advances, loans have put comparatively
less provisioning burden on retail banks apart from diversifying their income
streams.
DECLINE IN INTEREST RATES have also contributed to the growth of credit
by generating the demand for such credit.

OPPORTUNITIES AND CHALLENGES FOR RETAIL BANKING

Retail banking has immense opportunities in a growing economy like India. As the
growth story gets unfolded in India, retail banking is going to emerge a major driver. How does
the world view us? The BRIC report is viewing India as an economic superpower. A.T. Kearney,
a global management-consulting firm, recently identified India as the second most attractive
destination of 30 emergent markets.

The rise of Indian middle class is an important contributory factor in this regard. The percentage
of middle to high-income Indian households is expected to continue rising. The younger
population not only wields increasing purchasing power, but as far as acquiring personal debt is

concerned, they are perhaps more comfortable than previous generations. Improving consumer
purchasing power, coupled with more liberal attitudes towards personal debt, is contributing to
Indias retail banking segment.

The combination of above factors promises substantial growth in sector, which at present is in
the nascent stage. Due to bundling of services and delivery channels, the areas of potential
conflicts of interest tend to increase in universal retail banks and financial conglomerates. Some
of the key policy issues relevant to the Retail-retail banking sector are: financial inclusion,
responsible lending, and access to finance, long-term savings, financial capability, consumer
protection, regulation and financial crime prevention.

SERVICES OFFERED IN RETAIL BANKS

Any Time Retail banking: -

a. This refers to retail banking service available 24 hours a day and 365 days a year.
b. Such facility is made available to the customer through the Automated Teller
machine.
c. Retail banking, being a service industry, is primarily driven by customers needs.

d. Each customer is willing to pay a price for the services provided it is made
available to him when he wants and where he wants.
e. In the present day of server competition, retail banking services are driven by
technology, which is more oriented towards providing better services to the
customer.
f. The concept of retail banking hours has been changed from the fixed 4 hours to
24 hours.
g. This has been made possible through use of ATMs. Even under the manual
service, the retail banks have stated to extend the service from the traditional 4
hours to 5 hours and even up to 12 hours say from 8 AM to 8 PM.
h. Some retail banks have introduced the practice of Sunday Retail banking or
Holiday Retail banking.
Automated Teller Machine (ATM): -

a. ATM is a machine in the nature of a computer in general sense, but

is dedicated to do certain types of specific jobs only.
b. The hardware and the proprietary i.e. the software used in one
machine can not be used in one machine.

Customer Services: The following customer services are offered through the system:

a. Cash withdrawal (up to a specified limit)

b. Cheque/Cash deposit (the receipt being only for the deposit of the envelope containing
cash but not for the amount therein).
c. Enquiry about balances
d. Printing of statement of accounts
e. Request for cheque book and standing instructions.
f. Transfer of funds
g. PIN change

Tele banking: a. From the conventional retail banking, where the services were provided
manually across the table, it has come to a stage where the customer is not
required to visit the retail bank enquiry of balance in the account, sending a
remittance, to get a statement of account, etc.
b. The concept has become so popular that in USA customers do not visit the retail
bank for 97% of their transactions and these are done from either customers
residence or office using a telephone or a home PC.
c. In tele banking the customer is required to open the account with the retail bank
initially by visiting the retail bank.
d. Tele banking services are, generally, provided by the retail bank over the
telephone on a special number.
e. The number at the retail bank is connected to a terminal in the retail bank, which
is either handled manually or is automated by connecting the same to the
computer network.
f. Where the system is automated, two types of technology are used.

 Home Retail banking: -

a. Under home retail banking the customer is served at his residence and there is no need for
the customer to visit the retail banks premises for a number of routine transactions.
b. If the customer needs some information the same can be got by contacting the retail bank
over the phone as described in the tele banking.
c. If the customer wants to put through transaction and wishes to see his account or to get a
statement of his account, he may have to use a PC.
d. This type of facility is available with a town, city or metropolitan area.
e. Under such a situation the customer should have a:
i.

PC

ii.

Modem

iii.

Telephone line

iv. A compatible software for the home PC

f. The home retail banking service can be broadly classified under two groups, one without
using the information technology and another using information technology.
g. When customer contacts the retail bank o the phone no specific technology is involved
and the services of tele banking are provided to him.

 Electronic Fund Transfer (EFT): -

a. In India the fund transfers are basically done through Mail Transfer, Draft or Telegraphic
Transfer.
b. In case of Telegraphic Transfer (TT) again the Department of Telecommunication was the
sole provider of Telephone, Telex and Telegram facilities.
c. With the process of liberalization private operators have started providing alternative
voice communication channels through mobile phones and vast communication as an
alternative channels for data communication.
d. It was normal for any TT to be credited to the beneficiarys account after delay of 2 to 4
days

e. The different forms of EFT prevalent in the use are:

i.

EFT through Electronic Data Interchange

ii.

RETAIL BANKNET

iii.

RBINET

iv. IDRBT VSAT Network

v. EFT from Point of Sales
vi.

Electronic Cash

vii.

SWIFT- Global System for Funds Transfer

viii.

Electronic Clearing Settlement

Internet Retail banking:-

Introduction: The delivery channels include direct dialup connections, private networks, public networks, etc.
with the popularity of computers, easy access to Internet and World Wide Web (WWW), Internet
is increasingly used by retail banks as a channel for receiving instructions and delivering their
products and services to their customers. This form of retail banking is generally referred to as

Internet Retail banking, although the range of products and services offered by different retail
banks vary widely both in their content and sophistication.
Retail banking Services through Internet: a. The Basic Level Service is the retail banks web sites which disseminate information on
different products and services offered to customers and members of public in general.
It may receive and reply to customers queries through e-mail,
b. The Second level are Simple Transactional Web sites which allows customers to submit
their instructions, applications for different services, queries in their account balances,
etc. but do not permit any fund-based transactions on their accounts,
c. The Third level of Internet retail banking service are offered by Fully Transactional Web
sites which allow the customers to operate on their accounts for transfer of funds,
payment of different bills, subscribing to other products of the retail bank and to transact
purchase and sale of securities, etc. The above forms of Internet retail banking service
the customer or by new retail banks, who deliver retail banking service primarily
through Internet or other electronic delivery channels as the value added services. Some
of these retail banks are known as Virtual retail banks or Internet only retail banks
and may not have physical presence in a country despite offering different retail banking
services.