Retail Banking in India

Retail Banking in India
1.RETAIL BANKING
DEFINITION:
“Retail banking is typical 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, and so”
Retail Banking environment today is changing fast. The changing customer

demographics demands to create a differentiated application based on scalable
technology, improved service and banking convenience. Higher penetration of
technology and increase in global literacy levels has set up the expectations of the
customer higher than never before. Increasing use of modern technology has
further enhanced reach and accessibility
The market today gives us a challenge to provide multiple and innovative

contemporary services to the customer through a consolidated window as so to
ensure that the bank’s customer gets “Uniformity and Consistency” of service
delivery across time and at every touch point across all channels. The pace of
innovation is accelerating and security threat has become prime of all electronic
transactions. High cost structure rendering mass-market servicing is prohibitively
expensive.
Present day tech-savvy bankers are now more looking at reduction in their
operating costs by adopting scalable and secure technology thereby reducing the
response time to their customers so as to improve their client base and economies
of scale.
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The solution lies to market demands and challenges lies in innovation of new
offering with minimum dependence on branches – a multi-channel bank and to
eliminate the disadvantage of an inadequate branch network. Generation of leads to
cross sell and creating additional revenues with utmost customer satisfaction has
become focal point worldwide for the success of a Bank.
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INTRODUCTION
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. Retail banking refers to provision of
banking services to individuals and small business where the financial institutions
are dealing with large number of low value transactions. This is in contrast to
wholesale banking where the customers are large, often multinational companies,
governments and government enterprise, and the financial institution deal in small
numbers of high value transactions
The concept is not new to banks but is now viewed as an important and attractive
market segment that offers opportunities for growth and profits. Retail banking and
retail lending are often used as synonyms but in fact, the later is just the part of
retail banking. In retail banking all the needs of individual customers are taken care
of in a well-integrated manner.
Today’s retail banking sector is characterized by three basic characteristics:
a) Multiple products (deposits, credit cards, insurance, investments and

securities)
b) Multiple channels of distribution (call center, branch, internet)
c) Multiple customer groups (consumer, small business, and corporate.
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The future of retail banking: A global perspective
AS we have been working with our existing bank clients inside and outside the
country, we have been struck by the rapid and provocative changes facing the retail
sector. While the pace and direction of change seems to vary somewhat from
country to country, retail banks everywhere are working vigorously to address new
technological, regulatory and competitive realities. Collectively, they are trying to
determine strategies and tactics needed to secure their franchises and their futures.
This project addresses three questions from a global perspective. First, what are the
key factors driving the almost universal changes in retail banking? Secondly,
where will these drivers take the industry in the future? Thirdly, what are the
general strategies that retail banks can undertake to succeed over the next decade?
This study is not an academic exercise. Rather, it has grown out of a common
thread of themes which are emerging from client assignments worldwide. These
themes have been assessed and micro-economic analysis undertaken in order to
understand how they operate and where they are taking the industry.
Trends underway: So what are the trends that we see in retail banking? Our core
conclusion is that the retail banking industry, owing to a variety of factors, is
currently not susceptible to scale economies. By this, we mean that retail banks do
not seem to get anymore efficient as they get larger. If anything, the reverse
appears to be the case. However, there are a number of strong reasons to suppose
that this will change in the future. We believe that retail banking will increasingly
be susceptible to scale economies. In turn, this will create pressure for the industry
to restructure.
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Analogies from other industries support this train of thought. We have assessed
two recently deregulated industries -- the power industry, and the
telecommunications industry -- and noted that the forces which drove their
restructuring, and the consequences. Modifying the driving forces for these
industries to those circumstances which are particular to retail banking, we have
been able to come to a vision of how the retail banking industry is likely to
restructure over the coming decade.
We have also looked at other trends. Technology in particular will change the retail
banking industry fundamentally in the years to come. The first key consequence is
that banks will lose their monopoly as centres for money transmission. In other
words, the activity of transmitting money from one person or company to another
will increasingly be able to be carried out be a variety of providers. As with
telecommunications, vigorous cost competition will result. The second key
consequence of technology will be the proliferation of distribution channels for
retail banking products. Whereas in the past, the bank branch was the only channel
for distributing most financial services products, in the future a number of different
channels will continue to erode the branch's predominance. Many of these we are
currently familiar with -- telephone, especially Mobile phone, ATM's, email etc.
In addition, however, new channels are slowly emerging from the primordial soup
of the information superhighway. Although we can only guess at how they will
affect the distribution of retail banking products, we are confident that these will
ultimately supplement the other alternative channels and further erode bank
branch's share.
Consequences of these trends: The consequences of the above will be wholesale

restructuring. We believe that retail banking will disaggregate into an interlinked
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portfolio of activities with three broad categories:s
l. Product Formulators: Within retail banking there will increasingly be divisions

or stand-alone companies who focus on formulating products such as mortgage or
savings, for delivery either direct to clients or to intermediaries.
2. Customer Gateways: We believe that there will be an opportunity for an

intermediary to capitalise on superior customer knowledge and efficient delivery
channels to sell and service a range of products to individual customers through a
range of delivery channels of the customer choosing.
3. Industry Services: Increasingly the support functions which are at present woven
in to the fabric of the bank will be seen as peripheral supporting activities, and
spun off to either separate divisions within a bank or to third party "outsource"
providers.
This will eventually create an industry for bank services, with new providers
offering a broad range of support activities.
The evolution outlined above will vary significantly by country. This is firstly
because the structure of the retail banking industry today is different in each nation
-- a legacy of historical market evolution and regulation. In addition, the manner
and rate at which markets will be deregulated in the future will also vary. This
means that not only does the retail banking industry in different countries start
from a different point, but that its change trajectory in the future will also vary as
the result of nationally-idiosyncratic deregulation.The bank of the future will not
win by creating a single strategy. Rather, each of its activities within products,
customer channels, and support services will be the subject of a discreet "business
unit" strategy, which will be benchmarked against market-segmented customer
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demand and profitability, and competitors' businesses in this area. Let's site an
example i.e. how many people/customer visit departmental store a day? Answer is
simple, much more people visit store than the bank branch. What does it mean and
who has more information in this respect? Naturally the store has much more
information compare to the bank.
A corollary of this evolution will be that branches will increasingly be but one of a
number of channels of distribution to customers. As a result, their numbers will
decline both as a percentage of all banking transactions, and in absolute numbers.
Winning banks will actively address this issue, migrating their customers to
alternate channels where appropriate.
As with any global-oriented study, the above conclusions are broad and must be
interpreted by any financial institution in the light of its unique circumstances.
Nevertheless, we are confident that the answers to the questions posed will be of
value to banks and to other financial industry executives as they ponder their
strategic alternatives in the future.
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Retail Banks: Their Structure and Function
Definition :-
Retail banks offer a range of services to individual customers and small businesses,
rather than to large companies and other banks. The services can include current
accounts, savings accounts, investment advice and broking, and loans and
mortgages. Retail banks perform two crucial functions for customers: firstly, they
enable customers to bank their money securely, access it easily, and conduct
transactions; and secondly, they provide access to additional money to fund large
purchases, such as buying a home. In return for holding customers’ funds, which
they can then invest, banks pay customers interest.
Traditionally, retail banks have provided these services directly to the customer via
branches. While many still do this, retail banks now offer their services by
telephone and the internet as well. Some operate solely via the internet and do not
have facilities to serve customers at physical outlets. Other organizations, such as
supermarkets, have now entered the banking sector and also offer a wide range of
banking services.
It has become more difficult to identify the traditional retail bank—a bank that
funds itself through customer deposits and lending—because retail banks now
often combine retail and wholesale banking. It is therefore more relevant to today’s
banking structure to regard retail banking as a series of processes rather than as an
institution.
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The intermediation services offered by retail banks (such as looking after

customers’ money and making loans) and the payment services (allowing
customers to make transactions using debit cards, checks, etc.) mean that they
have to make funds available to customers at very short or immediate notice. This
inevitably means that a retail bank has to manage the risk that more money will be
requested by customers than it has available and of customers defaulting on loans.
Banks do this by holding stocks of liquid assets, maintaining a cushion of capital,
lending to different types of borrower, adjusting interest rates, and screening
potential borrowers (credit scoring).
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Advantages
 Your money is much more secure than in a box under your bed and you can
buy goods, be paid, and sell things without cash changing hands.
 The bank you are familiar with and which knows you can also offer you a
wide range of other services, such as mortgages and insurance. Your bank
may be able to offer you competitive deals in return for your loyalty as a
customer.
 Retail banks offer a variety of ways you can access your account and
manage your money, most notably via internet banking. This means that you
can keep a close eye on your finances and avert many potential problems.
Disadvantages
 Banks are a business, and they need to make money from looking after yours. If
the bank decides to apply charges to your account (within the terms of the
account), you may only find out about it afterwards—for example if you
accidentally go overdrawn without permission. If you disagree with a charge,
you will need to contest it to recover the money.
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2. Opportunities and Challenges in Indian Retail Banking
The subject matter of retail banking is of prime importance. In recent

years, commercial banks have witnessed development in the form of retail lending,
all over the world. The growth in the field of retail lending is primarily because of
the speedy advancement in the IT sector, evolving macroeconomic environment,
numerous micro level demand and supply side factors and financial market reform.
This criterion is based on the market research report on retail banking.
India has also experienced growth in the field of retail banking. The retail loan
accounted for approximately one-fifth of the entire bank credit. The housing sector
is undergoing a boom in its credit. The retail loan market has detrimentally
undergone a change, from the sellers market to the buyers market. The time is no
more the same, when it was difficult to get loans from the bank. This indicates that
the retail loan market has shown phenomenal growth and development over recent
years.
The market research reports that were made exclusively for the Indian retail
banking market indicated, that India offers tremendous opportunities in this field. It
further indicated that retail banking market is a booming sector in India.
One of the key contributors for the boom in the Indian retail banking industry is,
the increasing ratio of the Indian middle class. The number of people who fall in
the category of the middle class is increasing rapidly. The younger population of
the country has increased not only its purchasing power; it is also comfortable
acquiring personal debts as compared to their older generations. This dual
combination of increased purchasing power and comfort acquiring personal
loans has contributed majorly in the development of the retail loan sector in India
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If retail banking on one hand offers development opportunities, it also offers

challenges on the other hand. These challenges are listed in the
market research reports made on retail banking. Further growth and success of the
retail market (in the banking sector) will depend upon the capacity and ability of
the banks to meet with the challenges and make the best use of the opportunities.
The technological base and efficiency in operations would give the retail banking
market a competitive edge and will contribute in the success of the business in
India. Prime importance has to be given to consumer interest.
The biggest challenge faced by the Indian banks in the field of retail banking is
going to be the rising indebtedness and lack of technological advancements, a
report by Federation of Indian Chambers of Commerce and Industry (Ficci)
pointed out.
A report of Ficci, namely, ‘Status of the Indian Banking Industry’ - has identified
these two areas as the factors which may affect the future of retail banking in India.
The study has said majority of the respondents do not anticipate any fall in demand
due to hike in interest rates. On the interest rate front, 64% interviewed, foresee a
rise in the interest rates in the future. Out of these, 74% expect the interest rate to
increase by 0.5% and the remaining expect it to increase by 1%. The increased
interest rates are likely to have an adverse impact on the corporate sector lending to
some extent, especially AAA rated borrower, as highlighted by 62% of the banks.
The study has also outlined other issues like customer information and distribution
network, the areas banks need to address. “While retail banking offers phenomenal
opportunities for growth, the challenges are equally daunting. How far the retail
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banking is able to lead growth of the banking industry in future would depend
upon the capacity building of the banks to meet the challenges,” the report said.
India is as the second most attractive retail destination of the most 30 emerging
economies of the world with a retail market growing at a rate of 33% (compound
annual growth rate). Over 50 million people of the country are now credit card
holders and the sector is growing at rate of 30%. About 53% of the respondents of
the study have said that they will increase their retail portfolio by more than 25%
in the year 2005-06.
Housing finance, one of the largest the retail component in terms of growth with a
rate of 112% over the last year, is expected to continue the momentum, though
73% of the bankers interviewed felt that the lending rate for the housing sector is
going to rise.
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3.SCOPE FOR RETAIL BANKING IN INDIA
All round increase in economic activity.Increase in the purchasing power. The

rural areas have the large purchasing power at their disposal and this is an
opportunity to market Retail Banking.
India has 200 million households and 400 million middleclass population more
than 90% of the savings come from the house hold sector. Falling interest rates
have resulted in a shift. Now People Want To Save Less and Spend More.´
Nuclear family concept is gaining much importance which may lead to large
savings, large number of banking services to be provided are day- by-day
increasing.
Tax benefits are available for example in case of housing loans the borrower can
avail tax benefits for the loan repayment and the interest charged for the loan.
This document analyzed the key policy issues relevant to the retail banking sector
and highlighted the role of financial inclusion, responsible lending, access to
finance, and consumer protection. It is in this context that that one is reminded of
the needs to develop the standards and codes for banking.
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The contribution of the Committee on Procedure & Performance Audit on Public

Services(CPPAPS) (Chairman: Shri S.S. Tarapore) has been invaluable and has
provided great insight. Based on the recommendation of the CPPAPS, the Annual
Policy Statement for 2005-06 announced the decision to set up an independent
Banking Codes & Standards Board of India on the model of the mechanism in the
UK in order to ensure that comprehensive code of conduct for fair treatment of
customers is evolved and adhered to. The codes and standards, together with the
institutional mechanism to monitor them, are expected to enhance the quality of
customer service, to the individual customer in particular. The codes will bring
about greater transparency in the system and also tackle the issue of information
asymmetry. The Board would function as an industry-wide watchdog of the
banking code and ensure that the banks comply with the banking codes.
The codes would establish the banking industry is key commitments and
obligations to customers on standards of practice, disclosure and principles of
conduct for their banking services. The Board will monitor compliance with the
Codes by the affiliated banks.
Second, sharing of information about the credit history of households is extremely

important as far retail banking is concerned. Perhaps due the confidential nature of
banker-customer, banks have a traditional resistance to share credit information on
the client, not only with one another, but also across sectors. Globally, Credit
Information Bureaus have, therefore, been set up to function as a repository of
credit information -both current and historical data on existing and potential
borrowers. The database maintained by these institutions can be accessed by the
lending institutions. Credit Bureaus have been established not only in countries
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with developed financial systems but also in countries with relatively less
developed financial markets, such as, Sri Lanka, Mexico, Bangladesh and the
Philippines. In Indian case, the Credit Information Bureau (India) Limited (CIBIL),
incorporated in 2000, aims at fulfilling the need of credit granting institutions for
comprehensive credit information by collecting, collating and disseminating credit
information pertaining to both commercial and consumer borrowers. At the same
time banks must exercise due diligence before declaring a borrower as defaulter.
Third, outsourcing has become an important issue in the recent past. With the
increasing market orientation of the financial system and to cope with the
competition as also to benefit from the technological innovations such as, e-
banking, the banks are making increasing use of “outsourcing" as a means of both
reducing costs and achieving better efficiency. While outsourcing does have
various cost advantages, it has the potential to transfer risk, management and
compliance to third parties who may not be regulated. A recent BIS Report on
Outsourcing in Financial Services´ developed some high-level principles. A basic
requirement in this context is that a regulated entity seeking to outsource activities
should have in place a comprehensive policy on outsourcing including a
comprehensive outsourcing risk management programme to address the outsourced
activities and the relationship with the service provider. Application of these
principles in the Indian context is under consideration.
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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. The home
maker, the retail shop keeper, the pensioners, self-employed and those employed in
unorganized sector - all need to get a place in the banks. It is in this backdrop the
Annual Policy for 2005-06 pointed out issues relating to financial exclusion and
had announced that the RBI would implement policies to encourage banks which
provide extensive services while disincentivising those which are not responsive to
the banking needs of the community, including the underprivileged. Furthermore,
the nature, scope and cost of services need to be monitored to assess whether there
is any denial, implicit or explicit, of basic banking services to the common person
and banks have been urged to review their existing practices to align them with the
objective of financial inclusion.
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4.HDFC BANK
The Housing Development Finance Corporation Limited (HDFC) was amongst the
first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to
set up a bank in the private sector, as part of the RBI's liberalisation of the Indian
Banking Industry in 1994. The bank was incorporated in August 1994 in the name
of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank
commenced operations as a Scheduled Commercial Bank in January 1995.
Promoters:-
HDFC is India's premier housing finance company and enjoys an impeccable track
record in India as well as in international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy growth in its operations to
remain the market leader in mortgages. Its outstanding loan portfolio covers well
over a million dwelling units. HDFC has developed significant expertise in retail
mortgage loans to different market segments and also has a large corporate client
base for its housing related credit facilities. With its experience in the financial
markets, a strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian
environment.
Business Focus :-
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to

build sound customer franchises across distinct businesses so as to be the preferred
provider of banking services for target retail and wholesale customer segments,
and to achieve healthy growth in profitability, consistent with the bank's risk
appetite. The bank is committed to maintain the highest level of ethical standards,
professional integrity, corporate governance and regulatory compliance. HDFC
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Bank's business philosophy is based on four core values - Operational Excellence,

Customer Focus, Product Leadership and People.
Capital Structure :-
The authorized share capital of the Bank is Rs. 550 crore. The paid-up capital as
on said date is Rs. 459,69,07,030/- (45,96,90,703 equity shares of Rs. 10/- each).
The HDFC Group holds 23.63 % of the Bank's equity and about 17.05 % of the
equity is held by the ADS Depository (in respect of the bank's American
Depository Shares (ADS) Issue). 27.45% of the equity is held by Foreign
Institutional Investors (FIIs) and the Bank has about 4,33,078 shareholders.
The shares are listed on the Bombay Stock Exchange Limited and The National
Stock Exchange of India Limited. The Bank's American Depository Shares (ADS)
are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and
the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock
Exchange under ISIN No US40415F2002.
Distribution Network
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable

network of 1,725 branches spread in 780 cities across India.All branches are linked
on an online real-time basis. Customers in over 500 locations are also serviced
through Telephone Banking. The Bank's expansion plans take into account the
need to have a presence in all major industrial and commercial centres where its
corporate customers are located as well as the need to build a strong retail
customer base for both deposits and loan products. Being a clearing/settlement
bank to various leading stock exchanges, the Bank has branches in the centres
where the NSE/BSE have a strong and active member base.
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The Bank also has 4,393 networked ATMs across these cities. Moreover, HDFC
Bank’s ATM network can be accessed by all domestic and international
Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express
Credit/Charge cardholders.
Management :-
Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect
from 6th July 2010 subject to the approval of the Reserve Bank of India and the
shareholders. Mr. Vasudev has been a Director of the Bank since October 2006. A
retired IAS officer, Mr. Vasudev has had an illustrious career in the civil services
and has held several key positions in India and overseas, including Finance
Secretary, Government of India, Executive Director, World Bank and Government
nominee on the Boards of many companies in the financial sector.
The Managing Director, Mr. Aditya Puri, has been a professional banker for over
25 years, and before joining HDFC Bank in 1994 was heading Citibank's
operations in Malaysia.
The Bank's Board of Directors is composed of eminent individuals with a wealth of

experience in public policy, administration, industry and commercial banking.
Senior executives representing HDFC are also on the Board.
Senior banking professionals with substantial experience in India and abroad head
various businesses and functions and report to the Managing Director. Given the
professional expertise of the management team and the overall focus on recruiting
and retaining the best talent in the industry, the bank believes that its people are a
significant competitive strength.
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Tecnology
HDFC Bank operates in a highly automated environment in terms of information

technology and communication systems. All the bank's branches have online
connectivity, which enables the bank to offer speedy funds transfer facilities to its
customers. Multi-branch access is also provided to retail customers through the
branch network and Automated Teller Machines (ATMs).
The Bank has made substantial efforts and investments in acquiring the best
technology available internationally, to build the infrastructure for a world class
bank. The Bank's business is supported by scalable and robust systems which
ensure that our clients always get the finest services we offer.
The Bank has prioritized its engagement in technology and the internet as one of
its key goals and has already made significant progress in web-enabling its core
businesses. In each of its businesses, the Bank has succeeded in leveraging its
market position, expertise and technology to create a competitive advantage and
build market share.
BUSINESS
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HDFC Bank offers a wide range of commercial and transactional banking services
and treasury products to wholesale and retail customers. The bank has three key
business segments:
Wholesale Banking Services:-
The Bank's target market ranges from large, blue-chip manufacturing companies in
the Indian corporate to small & mid-sized corporates and agri-based businesses. For
these customers, the Bank provides a wide range of commercial and transactional
banking services, including working capital finance, trade services, transactional
services, cash management, etc. The bank is also a leading provider of structured
solutions, which combine cash management services with vendor and distributor
finance for facilitating superior supply chain management for its corporate
customers. Based on its superior product delivery / service levels and strong
customer orientation, the Bank has made significant inroads into the banking
consortia of a number of leading Indian corporates including multinationals,
companies from the domestic business houses and prime public sector companies. It
is recognized as a leading provider of cash management and transactional banking
solutions to corporate customers, mutual funds, stock exchange members and banks.
Retail Banking services :-
The objective of the Retail Bank is to provide its target market customers a full
range of financial products and banking services, giving the customer a one-
stop window for all his/her banking requirements. The products are backed by
world-class service and delivered to customers through the growing branch
network, as well as through alternative delivery channels like ATMs, net
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banking and Mobile banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC
Bank Plus and the Investment Advisory Services programs have been designed
keeping in mind needs of customers who seek distinct financial solutions,
information and advice on various investment avenues. The Bank also has a
wide array of retail loan products including Auto Loans, Loans against
marketable securities, Personal Loans and Loans for Two-wheelers.
HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the Mastercard Maestro
debit card as well. The Bank launched its credit card business in late 2001. By
March 2010, the bank had a total card base (debit and credit cards) of over 14
million. The Bank is also one of the leading players in the “merchant
acquiring” business with over 90,000 Point-of-sale (POS) terminals for debit /
credit cards acceptance at merchant establishments. The Bank is well
positioned as a leader in various net based B2C opportunities including a wide
range of internet banking services for Fixed Deposits, Loans, Bill Payments,
etc.
Treasury :-
Within this business, the bank has three main product areas - Foreign Exchange
and Derivatives, Local Currency Money Market & Debt Securities, and
Equities. With the liberalization of the financial markets in India, corporates
need more sophisticated risk management information, advice and product
structures. These and fine pricing on various treasury products are provided
through the bank's Treasury team. To comply with statutory reserve
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requirements, the bank is required to hold 25% of its deposits in government

securities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio
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RATINGS
Credit Rating:-
The Bank has its deposit programs rated by two rating agencies - Credit
Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited.
The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)'
[Triple A] by CARE, which represents instruments considered to be "of the
best quality, carrying negligible investment risk". CARE has also rated the
bank's Certificate of Deposit (CD) programme "PR 1+" which represents
"superior capacity for repayment of short term promissory obligations". Fitch
Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA
( ind )" rating to the Bank's deposit programme, with the outlook on the rating
as "stable". This rating indicates "highest credit quality" where "protection
factors are very high"
The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated
by CARE and Fitch Ratings India Private Limited and its Tier I perpetual
Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has
assigned the rating of "CARE AAA" for the subordinated Tier II Bonds while
Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the
outlook on the rating as "stable". CARE has also assigned "CARE AAA [Triple
A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has
assigned the rating "AAA / Stable" for the Bank's Perpetual Debt programme
and Upper Tier II Bond issue. In each of the cases referred to above, the ratings
awarded were the highest assigned by the rating agency for those instruments.
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Branch Services
Welcome to the networked world of HDFC Bank. You can open an account at any
branch nearest to your residence or office and access it at any branch in the city or
anywhere in the country.
ATM :-
Withdraw cash, check your balance, order a cheque book, all at your own
convenience, from any of the over 4,393 HDFC Bank ATMs across the country.
The fast, easy and convenient way of transacting through your account
Accounts & Deposits:-
Banking should be effortless. With HDFC Bank, the efforts are rewarding. No
matter what a customer’s need and occupational status, we have a range of
solutions that are second to none.
Whether you’re employed in a company and need a simple Savings account or run
your own business and require a robust banking partner, HDFC Bank not only has
the perfect solution for you, but also can recommend products that can augment
your planning .
Savings Accounts:-
These accounts are primarily meant to inculcate a sense of saving for the future,
accumulating funds over a period of time. Whatever your occupation, we are
confident that you will find the perfect banking solution. Open an account in your
name or register for one jointly with a family member today.
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Current Accounts:-
Now, with an HDFC Bank Current Account, experience the freedom of multi-city
banking! You can have the power of multi-location access to your account from
any of our 1,725 branches in 780 cities. Not only that, you can do most of your
banking transactions from the comfort of your office or home without stepping out.
We make it our business to help you with your business by offering you a Current
Account with all the benefits you need to stay ahead of your competition.
At HDFC Bank, we understand that running a business requires time and money,
also that your business needs are constantly evolving. That's where we come in.
We provide you with a choice of Current Account options to exclusively suit your
business - whatever the size or scope.
Fixed Deposits:-
Long-term investments form the chunk of everybody's future plans. An alternative

to simply applying for loans, fixed deposits allow you to borrow from your own
funds for a limited period, thus fulfilling your needs as well as keeping your
savings secure.
27
ICICI Bank is India’s second-largest bank with total assets of Rs. 3,634.00 billion
(US$ 81 billion) at March 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896
million) for the year ended March 31, 2010. The Bank has a network of 2,035
branches and about 5,518 ATMs in India and presence in 18 countries. ICICI Bank
offers a wide range of banking products and financial services to corporate and
retail customers through a variety of delivery channels and through its pecialized
subsidiaries in the areas of investment banking, life and non-life insurance, venture
capital and asset management. The Bank currently has subsidiaries in the United
Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain,
Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and
representative offices in United Arab Emirates, China, South Africa, Bangladesh,
Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in
Belgium and Germany.
ICICI Bank’s equity shares are listed in India on Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American Depositary Receipts
(ADRs) are listed on the New York Stock Exchange (NYSE).
To understand about this big bank, we need to understand how it became so big a
force to reckon with. ICICI (Industrial Credit Investment Corporation of India)
promoted the ICICI bank in 1994 with its stake reducing to 46% after the IPO in
1998. ICICI is a well-known name in India along with IDBI and was formed in
1955 at the initiative of the World Bank, Indian Government and Indian Industries.
28
Both of these institutions have an exceptional brand-image and one of the highest
possible ratings from CRISIL and other rating organizations. ICICI can be
considered an oligopolistic corporation along with IDBI (please M2M me, if you
want to discuss this!). ICIC listed in NYSE in 2000. In 2001 it underwent a tight
marriage with Bank of Madura in a stock-only amalgamation. This was a tough
marriage and I guess they are still suffering from this hiccup, which kind of
substantiates their mediocre performance today, in my perspective. This and the
merger with the ICICI Corporation have caused some management strain and some
tough merger time. I could only wish they come over this and serve the customers
in a better manner.
29
ICICI Bank Groups
ICICI Venture is the largest and one of the most successful private equity and
venture capital management companies in India with aggregate funds under
management in excess of USD 2 billion. ICICI Venture is a subsidiary of ICICI
Bank, India’s second-largest bank with total assets of about US$ 56.3 bn (March
31, 2006) and market capitalization of about USD 10.8 bn (June 2006).
Over the years, ICICI Venture has built an enviable portfolio of companies in the
sectors of information technology, pharmaceuticals, biotechnology, media and
retail thereby delivering value consistently to its investors.
ICICI Venture has the distinction of managing a large number of exits in the
country. With over 100 liquidity events, the organization has reaped rich
experience and is well positioned to handle IPOs, strategic sale and/or mergers.
30
ICICI Venture has a wide network of third party investors, which include
domestic investors such as public sector banks, financial institutions and insurance
companies. A significant portion of the fund’s corpus is also from international
development financial institutions and international funds.
The company has over 40 qualified professionals with experience across sectors
and functions. The capabilities of the team, structure of the organization, emphasis
on value creation and performance evaluation matrices enable ICICI Venture to
extract superior returns from its investments.
31
Loans
ICICI Bank offers wide variety of Loans Products to suit your requirements.
Coupled with convenience of networked branches/ ATMs and facility of E-
channels like Internet and Mobile Banking, ICICI Bank brings banking at your
doorstep. Select any of our loan product and provide your details online and our
representative will contact you for getting loans.
Home Loans:-
The No. 1 Home Loans Provider in the country, ICICI Bank Home Loans offers
some unbeatable benefits to its customers - Doorstep Service, Simplified
Documentation and Guidance throughout the Process. It's really easy !
Personal Loans:-
If you're looking for a personal loan that's easy to get, your search ends here. ICICI
Bank Personal Loans are easy to get and absolutely hassle free. With minimum
documentation you can now secure a loan for an amount upto Rs. 10 lakhs.
Car Loans:-
The most preferred financier for car loans in the country. Network of more than
1000 channel partners in over 200 locations. Tie-ups with all leading automobile
manufacturers to ensure the best deals. Flexible schemes & quick processing.
Hassle-free application process on the click of a mouse.
Commercial Vehicle Loans:-

We have extended products like funding of new vehicles, finance on used vehicles,
top up on existing loans, working capital loans & other banking products.
32
Loans against Securities:-

You don’t have to sell your securities. All you have to do is pledge your securities
in favour of ICICI Bank. We will then grant you an overdraft facility up to a value
determined on the basis of the securities pledged by you.
33
Accounts & Deposits

ICICI Bank has designed a gamut of accounts and deposits to cater to your unique
banking needs. Add this to our extensive branch & ATM network and facilities
like mobile, phone, internet and doorstep banking, and experience banking at its
best.
Dream Deposits:-
A unique offering of four term deposit plans that enable you realise your dreams at
every stage of your life.
Fixed Deposit:-
Fixed Deposits at ICICI Bank comes with nomination facility. We also offer online
access to your Fixed Deposits through our Internet Banking channel. Internet
Banking at ICICI Bank allows you to connect your Credit Card, Loan and your
Fixed Deposit with your savings account.
Savings Account:-
Debit-cum-ATM Card – With ICICI Bank Savings Account you will get a debit
card that you can use to withdraw cash from any ATM. You may also use your
debit card to directly make purchases through a Visa/Mastercard POS (Point of
Sale) machine available at most stores! This will help you access your money from
anywhere.
34
Life Plus Senior Citizen Services:-

ICICI Bank’s ‘Life Plus’ Senior Citizen Services have been designed to empower
senior citizens to independently carry out the day-to-day banking transactions with
dignity and confidence. These senior citizen benefits are exclusively for customers
above 60 years of age.
Young Stars:-
Banking can be fun !
At Young Stars, we will guide your child through the world of banking - from
checking the child’s savings account balance to guiding through fun zones and
special pages on the Internet Banking channel. It makes banking a pleasure and
teaches your child to manage his or her personal finances through a savings
account.
You can transfer pocket money into your child's account. You can even shop with
him / her at Young Stars Shopping Page. You can also open a recurring deposit in
your Child’s name.
Once you are done with your 'banking', you can access your child's account with
all the fun links to special zones designed to suit your child's area of interests and
also impart knowledge on the current events of the world.
Child Education Plan:-

ICICI Bank presents “Child Education Plan”, a unique way to save for your child's
future.
To fulfil your child's dream & aspirations, begin by making small investments in a
35
Recurring Deposit for a short tenure and receive regular payouts for the rest of the
tenure in your child's “Youngstar Savings Account“.
36
Bank Branch
You can find a host of ICICI retail products at our widespread Bank Branch
network-Bank Accounts,Credit and Debit cards, Bonds, Demat Accounts, Loans
against Shares, etc.
Anywhere Banking:-
ICICI Bank is the second largest bank in the country. It services a customer
accounts through a multi-channel access network. This includes branches and
extension counters, ATMs, Call Centre and Internet Banking .
Thus, one can access the various services ICICI Bank has to offer at anytime,
anywhere and from anyplace. To learn more about the various channels, please
click on the topic of your interest mentioned in the left menu.
ATM:-
ICICI Bank's 24 Hour ATM network is one of the largest and most widespread
ATM Network in India. Our ATMs are located in commercial areas, residential
localities, major petrol pumps, airports, near railway stations and other places
which are conveniently accessible to our customers.
ICICI Bank ATMs features user-friendly graphic screens with easy to follow
instructions. We have introduced ATMs which interact with customers in their
local language for increased convenience.
37
Following are the features available on our ATMs, which can be accessed
from anywhere at anytime.
38
 Cash Withdrawal: Withdraw upto Rs. 25,000/- per day from your
account (50,000 for HNI's). Fast Cash option provides the facility of
withdrawing prefixed amounts. Ultra Fast Cash option allows you
to withdraw Rs.3000/- in one shot.
 Balance Enquiry : Know your ledger balance and available balance
 Mini Statement : Get a printout of your last 8 transactions and your
current balance.
 Deposit Cash / Cheques : Available at all full function ATMs,
Customers can deposit both cash and cheques. Cash deposited in
ATMs will be credited to the account on the same day (provided
cash is deposited before the clearing) and cheques are sent for
clearing on the next working day.
 Funds Transfer: Transfer funds from one account to another linked
account in the same branch.
 PIN Change : Change the Personal Identification Number (PIN) of
ATM or Debit card.
 Payments : The latest feature of our ATMs, this functionality can be
used for payment of bills, making donations to temples / trusts,
buying internet packs, airtime recharges for prepaid mobile phones
and much more...
Start Internet Banking
Steps to Login
1. You would receive two pin mailers from ICICI Bank
a Internet Banking User id,

b Login password and Transaction password.
2. Check that the pin mailers arrive in a sealed condition, else

please contact our 24 hour Customer Care Centre.
39
3. Key in the user id and password on the website and press

GO.
6. Who's the Retail banking king? ICICI or HDFC?

Even their offices reflect their attitudes. ICICI Bank's headquarters in suburban
Mumbai [ Images ] is a huge, imposing edifice in glass and granite. HDFC Bank's
office in central Mumbai is comparatively smaller and more sedately furnished.
The two banks have carried forward their style statement in their approach to
business. ICICI Bank thinks big, is all for growth and hungry for marketshare.
HDFC Bank is more conservative and cautious, grows at a measured pace, without
taking any undue risks.
ICICI Bank's assets in the retail space stand at Rs 56,000 crore (Rs 560 billion). In
comparison, the tally for HDFC Bank is Rs 18,000 crore (Rs 180 billion). ICICI
Bank also leads HDFC Bank in almost every segment they are present in. But
that's just the current update.
The DNA of the strategy:-
ICICI Bank began its retail banking venture in mid-1999. By January 2000, it had
moved on to introducing home loans, car loans, personal loans and credit cards.
Realising the need for a bigger retail deposit base, the bank started building a
branch and an ATM network. The acquisition of Bank of Madura in March 2001
added 263 branches, many of them in cities where ICICI Bank did not have a
presence.
The merger of the erstwhile financial institution ICICI Limited with the bank in
April 2002, gave it a ready-made corporate clientele. The flip side was that ICICI
Bank had Rs 10,000 crore (Rs 100 billion) of restructured assets for which it had to
make provisions.
40
On the other hand, HDFC Bank kick started its operations in 1995 with a focus on
corporate banking, targeting the top-end of the market. Reminisces Paresh
Sukthankar, head, credit and market risk, HDFC Bank, “Although the asset yields
may have been lower, we were able to cross-sell products so that the overall
returns were better. We may have grown slower than our peers, but the risks were
lower.”
HDFC Bank ventured into retail lending in 1998, a year before ICICI Bank. But in
products like credit cards, it was slow to get off the mark. For instance, its credit
cards were launched only two years ago.
By then ICICI Bank had been present in the credit card business for nearly three
years. Says Sukthankar, “We believe that a sales cycle is not completed till the
asset comes back to us. So we were not aggressive in those products where we
perceived the risks were higher.”
However, HDFC Bank was handicapped because it could not sell home loans
(because its parent HDFC was in the business), though it has been originating them
in the past one-and-a-half years. For ICICI Bank, home loans are 46 per cent of its
retail assets.
A banking consultant observes that ICICI Bank is far more aggressive. Though
ICICI executives do not admit it, industry sources observe that ICICI’s pricing has
been far more competitive, which probably brought it more customers.
According to some industry experts, growth for ICICI Bank may have come at the
cost of quality. ICICI Bank denies this.
Says Kalpana Morparia [ Images ], deputy managing director, ICICI Bank, “If your
screening is not tight, it will show up in the very first year of the loan. Our
provisioning is very strict, so any defaults would show up in the non-performing
41
loans (NPLs). Our home loan NPLs are just 0.25 per cent, while for car loans they
are 0.45 per cent.”
Better pick-up:-
The numbers tell the story. ICICI Bank's retail deposits are nudging Rs 60,000
crore (Rs 600 billion) and in FY05, it grew its deposits by 47 per cent compared
with the industry deposit growth of 14 per cent.
HDFC Bank's retail deposits are about Rs 23,000 crore (Rs 230 billion). Even in
home loans, ICICI Bank commands 30 per cent of the market, having eaten into
housing finance pioneer, HDFC's share.
Says Morparia, "The convenience proposition together with the geographical reach
has paid off. We rolled out ATMs far ahead of the others and were able to cross-
sell our products.
42
HDFC ICICI
Mar-09
Bank Bank
Even in the number of customers
Branches 467 565
ICICI Bank leads by a distance,
ATMs 1,147 2,000
Nearly 14 million customers bank
Cities 211 371
with ICICI Bank, while the number for
Retail assets (Rs
HDFC Bank is less than 18,000 56,000 half (6.4
crore)
million).
Deposits (Rs
ICICI Bank has issued 3 38,000 99,800 million credit
crore)
cards -- that is more than twice the
Car loans (Rs
number of HDFC Bank's 2,500 11,500 credit card
crore)
users. However, industry observers point
Credit cards (Mn) 1.3 3
out that ICICI Bank's effective users
for credit cards may not be Retail customers 6.4 13.7 high.
(Mn)
Nonetheless, they concede that even with a
Cost of deposits
discounted customer base, 3.2 4.5 the numbers
(%)
will still be strong. Even in businesses
Net interest
like online trading where 3.2 2.4 the risks are
margin (%)
relatively low, ICICI Bank commands a
Net NPLs (%) 0.2 2
two-thirds marketshare.
Says Morparia, "We are the largest

distributors of mutual fund products and
RBI Bonds."
'Tell all' street:-
43
The stock market has always valued HDFC Bank at a huge premium -- at the
current price of Rs 585, HDFC Bank is valued at 3.5 times price to forward book
(valuation based on estimated book value in FY 06 of Rs 165).
The multiple for ICICI Bank that quotes at Rs 415, is just 2.1 (estimated book
value Rs 194). The reason: the impeccable quality of HDFC Bank's balance sheet.
With NPLs of less than 0.2 per cent, compared with 2 per cent for ICICI Bank, its
books are definitely in far better shape.
HDFC Bank's operations are also more profitable -- its net interest margin at 3.2
per cent is way higher than that of ICICI Bank's 2.4 per cent. Also, it is able to
access deposits at a lower cost. On an average, it pays an interest of 3.2 per cent
while ICICI Bank shells out 4.5 per cent.
Says Morparia, "We understand why the market gives a lower valuation. It's
because we have more NPLs and we have assets like Dabhol on our books. We had
a legacy of high NPLs of 5 per cent."
Given its legacy, ICICI Bank has not done a bad job. Its net interest margin in
FY05 at 2.4 per cent was an improvement from the 1.9 per cent that it posted in
FY04.
Moreover, net NPLs at 2 per cent in FY05 were down from 2.9 per cent in the
previous year. ICICI Bank's cost of deposits, too, has come down by 90 basis
points to 4.5 per cent. Says an analyst, "Things are changing. In the past the
markets rewarded you for profitability. Now they will reward you for both growth
and profitability."
Poised for take off:-
44
Does sheer size tilt the balance in favour of ICICI Bank? Observes a consultant,
"When you opt for a high growth strategy, it's not necessary that you're always
doing the smart thing. Scale has to be built with profitability otherwise it is not a
sustainable advantage."
Sukthankar says, "While size and growth are important, success is also measured
by other attributes such as margins and asset quality. Size beyond a point becomes
less important."
He adds, "If you are not in the top three, it becomes difficult to get visibility or
economies of scale. We have grown fast enough and reached a threshold level at
which we have economies of scale."
However, consultants believe that HDFC Bank could have leveraged its parent's
customers far more effectively to cross-sell products and grow faster.
Says a banking consultant, "While HDFC Bank has about two years to get ready
for the future, ICICI Bank probably has three years." Should HDFC Bank and its
parent be merged, it could catapult them to a new league.
But round one of the banking sweepstakes has clearly gone to ICICI Bank.
45
7. FUTURE OF RETAIL BANKING
Retail banking has significant past and glorious future over the years. Indian retail
banking, according to a report, is likely to grow at a CAGR of 28 per cent till 2010
to Rs 97,00 billion. So, although the revolution in retail banking has changed the
face of the Indian banking industry as a whole, it has still miles to go. On the
whole, looking ahead, the prospects of retail banking are brighter than ever and the
bankers have to give continued thrust to this area of banking.Thus, with the
consumers ever multiplying needs there is definitely a vast scope for the
furtherance of the retail banking business.
Operationally, there is a possibility that technology go beyond merely reducing the

cost & improving the quality of current products.It may prove possible, even
profitable, to combine functions in new ways. The future of retail banking lies
more in mobile banking. Mobile telephone market is penetrating, and mobile
phones are ideal to utilize Internet banking services without customer accesses to
46
PC. By a tacit acceptance India has around three million mobile phone users and
this number is expected to reach to eight million by 2003. Smart card revolution
will further change the face of retail banking. Smart cards can store information;
carry out local processing on the data stored and can perform complex calculations.
At present, India has around 3.4 million smart card users and it is estimated that by
the end of 2004 it will reach 14.7 million
8.CONCLUSIONS
Retail banking is the fastest growing sector of the banking industry with the key
success by attending directly the needs of the end customers is having glorious
future in coming years. There is a need for constant innovation in retail banking.
Retail Banking is a booming sector. It is dynamic in nature. There has been a

significant change in demographic profile of customers. There is huge market to
cover so banks have greater opportunity. There is scope for the development of
new innovative products. Banks have to come with the new innovative products
and service to retain market.
In current situation the branch banking is dead, the amount of transations done at
branch is just 28% but it is not at all dead and it can’t be replaced by any other
delivery channel.
47
In current scenario, ICICI Bank for many reasons can be said as a No.1 bank
dealing with retail operation in country.
In future, bank need to equip themselves with internal capabilities and build
efficient and viable business models to create the advantage of new opportunities
available into a long terms sustainable competitive advantages. Which will help
them capture the words thus ,promising a forever sunshine in future of Retail
Banking.
BIBLIOGRAPHY
News paper referred
 Economic times
 Times of India
Books Referred
 Retail Marketing management

- By David Gilbert
 Retail management
- By Gibson.vedamna.
Web Sites Visited
 www.RBI.com
 www.reports.rbi.org.in
48
 www.hdfcbank.com
 www.icicibank.com
49

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Retail Banking in India

Retail Banking environment today is changing fast. The changing customer

The market today gives us a challenge to provide multiple and innovative

Today’s retail banking sector is characterized by three basic characteristics:

a) Multiple products (deposits, credit cards, insurance, investments and

The future of retail banking: A global perspective

Consequences of these trends: The consequences of the above will be wholesale

portfolio of activities with three broad categories:s

l. Product Formulators: Within retail banking there will increasingly be divisions

2. Customer Gateways: We believe that there will be an opportunity for an

Retail Banks: Their Structure and Function

The intermediation services offered by retail banks (such as looking after

2. Opportunities and Challenges in Indian Retail Banking

The subject matter of retail banking is of prime importance. In recent

If retail banking on one hand offers development opportunities, it also offers

3.SCOPE FOR RETAIL BANKING IN INDIA

All round increase in economic activity.Increase in the purchasing power. The

The contribution of the Committee on Procedure & Performance Audit on Public

Second, sharing of information about the credit history of households is extremely

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to

Bank's business philosophy is based on four core values - Operational Excellence,

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable

The Bank's Board of Directors is composed of eminent individuals with a wealth of

HDFC Bank operates in a highly automated environment in terms of information

Wholesale Banking Services:-

Retail Banking services :-

banking and Mobile banking.

requirements, the bank is required to hold 25% of its deposits in government

Accounts & Deposits:-

Long-term investments form the chunk of everybody's future plans. An alternative

Belgium and Germany.

ICICI Bank Groups

Commercial Vehicle Loans:-

Loans against Securities:-

Accounts & Deposits

Life Plus Senior Citizen Services:-

Child Education Plan:-

1. You would receive two pin mailers from ICICI Bank

a Internet Banking User id,

2. Check that the pin mailers arrive in a sealed condition, else

3. Key in the user id and password on the website and press

6. Who's the Retail banking king? ICICI or HDFC?

The DNA of the strategy:-

Says Morparia, "We are the largest

'Tell all' street:-

Poised for take off:-

7. FUTURE OF RETAIL BANKING

Operationally, there is a possibility that technology go beyond merely reducing the

Retail Banking is a booming sector. It is dynamic in nature. There has been a

News paper referred

 Retail Marketing management

Web Sites Visited

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