A Summer Internship Project On ANALYZING THE GAP BETWEEN MANAGEMENT PERCEPTION AND CUSTOMER PERCEPTION WITH RESPECT TO THE

SERVICES OFFERED IN RETAIL BANKING

Enrollment no.:123456789

Submitted by Naman Shah

Submitted To: THE NIS ACADEMY Annamalai University

Masters of business Administrstion (MBA) 2011-2012

CERTIFICATE
This is to certify that Mr. Naman Shah the students of MBA 2nd year of NIS Academy, Ahmedabad have completed their Summer Internship Project ANALYZING THE GAP
BETWEEN MANAGEMENT PERCEPTION AND CUSTOMER PERCEPTION WITH RESPECT TO THE SERVICES OFFERED IN RETAIL BANKING in

the year 2011-2012.

Mr. ajay shad Director

Mrs. Smita Project Guide

Date:

DECLARATION
I here by declare that the Summer internship Project titled Analyzing the Gap between Management Perception and Customer Perception With Respect To the Services Offered In Retail Banking is our original work and has not been published elsewhere. This has been undertaken for the purpose of Submited in annamalai University.

Date: Place:

Students Name

Signature: -------------

PREFACE
Retail Banking has always been an integral part of the Banking activities the world over, but it is only in the recent past that it has gathered special momentum. Though internationally this revolution started in 80s with the advent of credit cards followed by other products of retail financial services, yet, as far as India is concerned, the year 1995 marks the starting point of Retail Banking Revolution with Foreign Banks and new generation Private Banks taking the lead. Till 90s only foreign Banks were the main players in Retail Banking activities. The paradigm shift in the Indian Banking Sector brought out by deregulation, liberalization and globalization of the Indian economy and characterized by intense competition and wafer thin margins has compelled banks to shift focus from Corporate Banking to Retail Banking and look upon retail banking as a solution to some of their immediate concerns. Only a few years ago the Retail Banking was scorned by many specialists as too voluminous, transaction heavy and unprofitable business. Consumer and personal loans were considered unproductive and were thus discouraged. But things have changed now. Retail Banking has regained bankers interest not least because it is the activity where many major banks are making most of their money but also because of the more recurrent nature of its earnings. Many European banks that had ventured into wholesale and investment banking activities in a big way had to pay a heavy price in the recent times. The economic downturn and gloomy capital market environment has made investment banking lose mush of its shine making many banks to shift their focus back to Retail Banking. We therefore choose to do our project on Retail banking within the Banking Industry, which has seen tremendous changes in the past years, promising great scope in the years to come.

ACKNOWLEDGMENT
It is really a matter of pleasure for us to get an opportunity to thank all the persons who contributed directly or indirectly for the successful completion of the project report, Analyzing The Gap Between the Management Perception and Customer Perception with reference to Services offered in Retail Banking.

First of all we are extremely thankful to our college NIS Academy for providing us with this opportunity and for all its cooperation and contribution. We also express our gratitude to our director MR.AJAY SHAD,and are highly thankful to him as our respected project guide for giving us the encouragement and freedom to conduct our project. We are also grateful to our Project Guide Mrs. Smita and all our faculty members for their valuable guidance and suggestions for our entire study.

We would also like to thank the Sales Manager Mr. sailendra chadda for extending their valuable time.

CONTENTS

1. Banking Industry Introduction 2. Introduction to Retail Banking 3. Banks Profile 4. Research Methodology 5. Analysis 6. Suggestions 7. Future of Retail Banking 8. Bibliography

EXECUTIVE SUMMARY
The report Analyzing the Gap between Management Perception and Customer Perception With Respect To the Services Offered In Retail Banking aims to assimilate data about the various aspects of Retail banking services, to analyze the perceptions of the management and the customers regarding the services offered in Retail banking and to find out whether any gaps do exist between the services offered and the customer expectations. We have taken 6 Banks which represent the Nationalized, Private and Multinational Banks of the Banking Industry in India- SBI - Corporation Bank HDFC Bank ICICI Bank Citibank ING Vyasya Bank

The criteria for selecting these banks were their deposit base. We have limited our Service Category to the core services in Retail Banking and a few specialized services. The report is a mixture of Secondary and Primary data, with Questionnaires being our major instrument to collect primary data. Major topics we have attempted to cover in this project are to: -

Explore the services and products offered by the banks to individual customers. Understand the perception of the management with respect to services offered by banks.

Understand the perception of the customers with respect to services offered by banks. Analyze whether there is a gap between the customer and management perceptions about the services offered by the banks.

Conclude and enumerate the recommendations that might help to reduce the gaps that exist and foster the relationship of the customer more with the bank.

According to the survey we came to the conclusion that

The new game requires new strategies with an accent on innovation for organizational transformation and to achieve world-class competitiveness through improved efficiency and reduced operational cost. An organisation-centric agenda, policy, programme and operationalising accelerating interventions need to strengthen core competencies of Indian banks; while exploring seeding options for future growth. Thrust on innovation is important particularly in the present context of consolidation and convergence both within and across segments of the financial system.

INTRODUCTION
Service with a smile: Todays finicky banking customers will settle for nothing less. The customer has come to realize somewhat belatedly that he is the king. The customers choice of one entity over another as his principal bank is determined by considerations of service quality rather than any other factor. He wants competitive loan rates but at the same time also wants his loan or credit card application processed in double quick time. He insists that he be promptly informed of changes in deposit rates and service charges and he bristles with customary rage if his bank is slow to redress any grievance he may have. He cherishes the convenience of impersonal net banking but during his occasional visits to the branch he also wants the comfort of personalized human interactions and facilities that make his banking experience pleasurable. In short he wants financial house that will more than just clear his cheque and updates his passbook: he wants a bank that cares and provides great services. So do banks meet these heightened expectations? Is there a gap that exists between the management perception and the customer perception with reference to the services offered in Retail Banking? To find out answers to these questions we undertook a survey of six banks selecting two banks from each of the following:

Private Banks Nationalized Banks Multinational Banks

A lot of surveys have been done in the past by many agencies to understand the aspect of customer satisfaction and to find out the customer friendly banks. Our research adds the dimension of the Gap Analysis between The Management and the customer perceptions regarding the services being offered.

INDUSTRY PROFILE

The Banking Regulation Act 1949 defines banking as accepting the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order otherwise. The essential function of a bank is to provide services related to the storing of value and the extending credit. The evolution of banking dates back to the earliest writing, and continues in the present where a bank is a financial institution that provides banking and other financial services. Currently the term bank is generally understood an institution that holds a banking license. Banking licenses are granted by financial supervision authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so called non-bank. Banks are a subset of the financial services industry. The word bank is derived from the Italian banca which is derived from German and means bench. The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out of business bank, having its bench physically broken. Money lenders in Northern Italy originally did business in open areas, or big open rooms, with each lender working from his own bench or table. Typically, a bank generates profits from transaction fees on financial services or the interest spread on resources it holds in trust for clients while paying them interest on the asset.

SERVICES TYPICALLY OFFERED BY BANKS Although the type of services offered by a bank depends upon the type of bank and the country, services provided usually include:
Directly

take deposits from the general public and issue checking and savings

accounts
Lend Cash

out money to companies and individuals checks money transactions such as wire transfers and cashiers checks cards, ATM, and debit cards

Facilitate

Issue credit

online banking Storage of

valuables, particularly in a safe deposit box

TYPES OF BANKS There are several different types of banks including:

Central

banks usually control monetary policy and may be the lender of last resort in

the event of a crisis. They are often charged with controlling the money supply, including printing paper money. Examples of central banks are the European Central Bank and the US Federal Reserve Bank.
Investment

banks underwrite stock and bond issues and advice on mergers. Examples

of investment banks are Goldman Sachs of the USA or Nomura Securities of Japan.
Merchant

banks were traditionally banks which engaged in trade financing. The

modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike Venture capital firms, they tend not to invest in new companies.

 Private

Banks manage the assets of the very rich. An example of a private bank is the

Union Bank of Switzerland.

Savings

banks write mortgages exclusively. banks are banks located in jurisdictions with low taxation and regulation,

Offshore

such as Switzerland or the Channel Islands. Many offshore banks are essentially private banks.
Commercial Retail

banks primarily lend to businesses (corporate banking)

banks primarily lend to individuals. An example of a retail bank is Washington

Mutual of the USA.

Universal

banks engage in several of these activities. For example, Citigroup, a large American bank, is involved in commercial and retail lending; it owns a merchant bank (Citicorp Merchant Bank Limited) and an investment bank (Salomon Smith Barney); it operates a private bank (Citigroup Private Bank); finally, its subsidiaries in tax-havens offer offshore banking services to customers in other countries.

SOME CHARACTERISTICS ASSOCIATED WITH BANKS IN GENERAL:

BANKS ARE PRONE TO CRISIS

The traditional bank has an inherent tendency to crisis. This is because the bank borrows short term and lends leveraged long term. The sum of deposits and the bank's capital will never equal more than a modest percentage of the loans the bank has outstanding. Even if liquidity is not a concern, if there is no run on the bank, banks can simply choose a bad portfolio of loans, and lose more money than they have. The US Savings and Loan Crisis in the late 1980s and early 1990s is such an incident.
ROLE IN THE MONEY SUPPLY

A bank raises funds by attracting deposits, borrowing money in the inter-bank market, or issuing financial instruments in the money market or a securities market. The bank then lends out most of these funds to borrowers.

However, it would not be prudent for a bank to lend out all of its balance sheet. It must keep a certain proportion of its funds in reserve so that it can repay depositors who withdraw their deposits. Bank reserves are typically kept in the form of a deposit with a central bank. This behavior is called fractional-reserve banking and it is a central issue of monetary policy. Some governments (or their central banks) restrict the proportion of a bank's balance sheet that can be lent out, and use this as a tool for controlling the money supply. Even where the reserve ratio is not controlled by the government, a minimum figure will still be set by regulatory authorities as part of banking supervision.
REGULATION

The combination of the instability of banks as well as their important facilitating role in the economy led to banking being thoroughly regulated. The amount of capital a bank is required to hold is a function of the amount and quality of its assets. Major Banks are subject to the Basel Capital Accord promulgated by the Bank for International Settlements. In addition, banks are usually required to purchase deposit insurance to make sure smaller investors are not wiped out in the event of a bank failure. Another reason banks are thoroughly regulated is that ultimately, no government can allow the banking system to fail. There is almost always a lender of last resortin the event of a liquidity crisis (where short term obligations exceed short term assets) some element of government will step in to lend banks enough money to avoid bankruptcy.
HOW BANKS ARE VIEWED

Banks have a long history of being characterized as heartless, rapacious creditors, hounding honest folk down on their luck for the last dime. In United States history, the National Bank was a major political issue during the presidency of Andrew Jackson. Jackson fought against the bank as a symbol of greed and profitmongering, antithetical to the democratic ideals of the United States.

PROFITABILITY

Large banks in the United States are some of the most profitable corporations, especially relative to the small market shares they have. This amount is even higher if one counts the credit divisions of companies like Ford, which are responsible for a large proportion of those company's profits. For example, the largest bank, Citigroup, which for the past 3 years has made more profit then any other company in the world, has only a 5 percent market share. Now if Citigroup were to be as dominant in its industry as a Home Depot, Starbucks, or Wal Mart in their respective industries, with a 30 percent market share, it would make more money than the top ten non-banking US industries combined. In the past 10 years in the United States, banks have taken many measures to ensure that they remain profitable while responding to ever-changing market conditions. First, this includes the Gramm-Leach-Bliley Act, which allows banks again to merge with investment and insurance houses. Merging banking, investment, and insurance functions allows traditional banks to respond to increasing consumer demands for "one stop shopping" by enabling the crossing selling of products (which, the banks hope, will also increase profitability). Second, they have moved toward risk based pricing on loans, which mean charging higher interest rates for those people who they deem more risky to default on loans. This dramatically helps to offset the losses from bad loans, lowers the price of loans to those who have better credit histories, and extends credit products to high risk customers who would have been denied credit under the previous system. Third, they have sought to increase the methods of payment processing available to the general public and business clients. These products include debit cards, pre-paid cards, smart-cards, and credit cards. These products make it easier for consumers to conveniently make transactions and smooth their consumption over time (in some countries with under-developed financial systems, it is still common to deal strictly in cash, including carrying suitcases filled with cash to purchase a home). However, with convenience there is also increased risk that consumers will mis-manage their financial resources and accumulate excessive debt. Banks make money from card products through interest payments and fees charged to consumers and companies that accept the cards. The banks' main obstacles to increasing profits are existing regulatory burdens, new government regulation, and increasing competition from non-traditional financial institutions.

INDIAN BANKING SECTOR

Banking in India has its origin as early as the Vedic period. It is believed that the transition from money lending to banking must have occurred even before Manu, the great Hindu Jurist, who has devoted a section of his work to deposits and advances and laid down rules relating to rates of interest. During the Mogul period, the indigenous bankers played a very important role in lending money and financing foreign trade and commerce. During the days of the East India Company, it was the turn of the agency houses to carry on the banking business. The General Bank of India was the first Joint Stock Bank to be established in the year 1786. The others which followed were the Bank of Hindustan and the Bengal Bank. The Bank of Hindustan is reported to have continued till 1906 while the other two failed in the meantime. In the first half of the 19th century the East India Company established three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks also known as Presidency Banks, were independent units and functioned well. These three banks were amalgamated in 1920 and a new bank, the Imperial Bank of India was established on 27th January 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken over by the newly constituted State Bank of India. The Reserve Bank which is the Central Bank was created in 1935 by passing Reserve Bank of India Act 1934. In the wake of the Swadeshi Movement, a number of banks with Indian management were established in the country namely, Punjab National Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian Bank Ltd, the Bank of Baroda Ltd, the Central Bank of India Ltd. On July 19, 1969, 14 major banks of the country were nationalized and in 15th April 1980 six more commercial private sector banks were also taken over by the government.

Today the commercial banking system in India may be distinguished into: Public Sector Banks a. State Bank of India and its associate banks called the State Bank group b. 20 nationalized banks c. Regional Rural Banks mainly sponsored by Public Sector Banks

Private Sector Banks a. Old generation private banks b. New generation private banks c. Foreign banks in India d. Scheduled Co-operative Banks e. Non-scheduled Banks Co-Operative Sector The co-operative banking sector has been developed in the country to the suppliment the village money lender. The co-operative banking sector in India is divided into 4 components: 1. State Co-operative Banks 2. Central Co-operative Banks 3. Primary Agriculture Credit Societies 4. Land Development Banks 5. Urban Co-operative Banks 6. Primary Agricultural Development Banks 7. Primary Land Development Banks 8. State Land Development Banks

Development Banks 1. Industrial Finance Corporation of India (IFCI) 2. Industrial Development Bank of India (IDBI) 3. Industrial Credit and Investment Corporation of India (ICICI) 4. Industrial Investment Bank of India (IIBI) 5. Small Industries Development Bank of India (SIDBI) 6. SCICI Ltd. 7. National Bank for Agriculture and Rural Development (NABARD) 8. Export Import Bank of India

STATUS OF INDIAN BANKING INDUSTRY

It is useful to note some telling facts about the status of the Indian banking industry juxtaposed with other countries, recognizing the differences between the developed and the emerging economies. First, the structure of the industry: In the worlds top 1000 banks, there are many more large and medium-sized domestic banks from the developed countries than from the emerging economies. Illustratively, according to The Banker 2004, out of the top 1000 banks globally, over 200 are located in USA, just above 100 in Japan, over 80 in Germany, over 40 in Spain and around 40 in the UK. Even China has as many as 16 banks within the top 1000, out of which, as many as 14 are in the top 500. India, on the other hand, had 20 banks within the top 1000 out of which only 6 were within the top 500 banks. This is perhaps reflective of differences in size of economies and of the financial sectors. Second, the share of bank assets in the aggregate financial sector assets: In most emerging markets, banking sector assets comprise well over 80 per cent of total financial sector assets, whereas these figures are much lower in the developed economies. Furthermore, deposits as a share of total bank liabilities have declined since 1990 in many developed countries, while in developing countries public deposits continue to be dominant in banks. In India, the share of banking assets in total financial sector assets is around 75 per cent, as of end-March 2004. There is, no doubt, merit in recognizing the importance of diversification in the institutional and instrument-specific aspects of financial intermediation in the interests of wider choice, competition and stability. However, the dominant role of banks in financial intermediation in emerging economies and particularly in India will continue in the medium-term; and the banks will continue to be special for a long time. In this regard, it is useful to emphasize the dominance of banks in the developing countries in promoting non-bank financial intermediaries and services including in development of debt-markets. Even where role of banks is apparently diminishing in emerging markets, substantively, they continue to play a leading role in non-banking financing activities, including the development of financial markets. Third, internationalization of banking operations : The foreign controlled banking assets, as a proportion of total domestic banking assets, increased significantly in several European countries (Austria, Ireland, Spain, Germany and Nordic countries), but increases have been fairly small in some others (UK and Switzerland). Amongst the emerging economies, while there was marked increase of foreign-controlled ownership in several Latin American economies, the increase has, at best, been modest in the Asian economies. Available evidence seems to indicate some correlation between the extent of liberalization of capital account in the emerging markets and the share of assets controlled by foreign banks. As per the evidence available, the foreign banks in India, which are present in the form of branches, seem to enjoy greater freedom in their operations, including retail banking, in the

country on par with domestic banks, as compared with most of the other developing countries. Furthermore, the profitability of their operations in India is considerably higher than that of the domestically-owned banks and, in fact, is higher than the foreign banks operations in most other developing countries. India continues to grant branch licenses more liberally than the commitments made to the WTO. Fourth, the share of state-owned banks in total banking sector assets: Emerging economies, with predominantly Government-owned banks, tend to have much higher stateownership of banks compared to their developed counterparts. While many emerging countries chose to privatize their public sector banking industry after a process of absorption of the overhang problems by the Government, we have encouraged state-run banks to diversify ownership by inducting private share capital through public offerings rather than by strategic sales and still absorb the overhang problems. The process has helped reduce the burden on the Government, enhance transparency, encourage market discipline and improve efficiency as reflected in stock market valuation, promote efficient new private sector banks, while drastically reducing the share of the wholly government owned public sector banks in a rapidly growing industry. Our successful reform of public sector banks is a good example of a dynamic mix of public and private ownership in banks.

BANKING SYSTEM Introduction The Reserve Bank of India (RBI) is India's central bank. Though the banking industry is currently dominated by public sector banks, numerous private and foreign banks exist. India's government-owned banks dominate the market. Their performance has been mixed, with a few being consistently profitable. Several public sector banks are being restructured, and in some the government either already has or will reduce its ownership. Private and foreign banks The RBI has granted operating approval to a few privately owned domestic banks; of these many commenced banking business. Foreign banks operate more than 150 branches in India. The entry of foreign banks is based on reciprocity, economic and political bilateral relations. An inter-departmental committee approves applications for entry and expansion. Capital adequacy norm Foreign banks were required to achieve an 8 percent capital adequacy norm by March 1993, while Indian banks with overseas branches had until March 1995 to meet that target. All other banks had to do so by March 1996. The banking sector is to be used as a model

for opening up of India's insurance sector to private domestic and foreign participants, while keeping the national insurance companies in operation. Banking India has an extensive banking network, in both urban and rural areas. All large Indian banks are nationalized, and all Indian financial institutions are in the public sector. RBI banking The Reserve Bank of India is the central banking institution. It is the sole authority for issuing bank notes and the supervisory body for banking operations in India. It supervises and administers exchange control and banking regulations, and administers the government's monetary policy. It is also responsible for granting licenses for new bank branches. 25 foreign banks operate in India with full banking licenses. Several licenses for private banks have been approved. Despite fairly broad banking coverage nationwide, the financial system remains inaccessible to the poorest people in India. Indian banking system The banking system has three tiers. These are the scheduled commercial banks; the regional rural banks which operate in rural areas not covered by the scheduled banks; and the cooperative and special purpose rural banks. Scheduled and non scheduled banks There are approximately 80 scheduled commercial banks, Indian and foreign; almost 200 regional rural banks; more than 350 central cooperative banks, 20 land development banks; and a number of primary agricultural credit societies. In terms of business, the public sector banks, namely the State Bank of India and the nationalized banks, dominate the banking sector. Local financing All sources of local financing are available to foreign-participation companies incorporated in India, regardless of the extent of foreign participation. Under foreign exchange regulations, foreigners and non-residents, including foreign companies, require the permission of the Reserve Bank of India to borrow from a person or company resident in India. Regulations on foreign banks Foreign banks in India are subject to the same regulations as scheduled banks. They are permitted to accept deposits and provide credit in accordance with the banking laws and RBI regulations. Currently about 25 foreign banks are licensed to operate in India. Foreign bank branches in India finance trade through their global networks.

RBI restrictions The Reserve Bank of India lays down restrictions on bank lending and other activities with large companies. These restrictions, popularly known as "consortium guidelines" seem to have outlived their usefulness, because they hinder the availability of credit to the nonfood sector and at the same time do not foster competition between banks.

Indian vs. foreign banks Most Indian banks are well behind foreign banks in the areas of customer funds transfer and clearing systems. They are hugely over-staffed and are unlikely to be able to compete with the new private banks that are now entering the market. While these new banks and foreign banks still face restrictions in their activities, they are well-capitalized, use modern equipment and attract high-caliber employees. Government and RBI regulations All commercial banks face stiff restrictions on the use of both their assets and liabilities. Forty percent of loans must be directed to "priority sectors" and the high liquidity ratio and cash reserve requirements severely limit the availability of deposits for lending. The RBI requires that domestic Indian banks make 40 percent of their loans at confessional rates to priority sectors' selected by the government. These sectors consist largely of agriculture, exporters, and small businesses. Since July 1993, foreign banks have been required to make 32 percent of their loans to these priority sector. Within the target of 32 percent, two sub-targets for loans to the small scale sector (minimum of 10 percent) and exports (minimum of 12 percent) have been fixed.

INTEREST RATES AND NON-PERFORMING ASSETS: The best indicator of the health of the banking industry in a country is its level of NPAs. Given this fact, Indian banks seem to be better placed than they were in the past. A few banks have even managed to reduce their net NPAs to less than one percent (before the merger of Global Trust Bank into Oriental Bank of Commerce, OBC was a zero NPA bank). But as the bond yields start to rise the chances are the net NPAs will also start to go up. This will happen because the banks have been making huge provisions against the money they made on their bond portfolios in a scenario where bond yields were falling. Reduced NPAs generally gives the impression that banks have strengthened their credit appraisal processes over the years. This does not seem to be the case. With increasing bond yields, treasury income will come down and if the banks wish to make large provisions, the money will have to come from their interest income, and this in turn, shall bring down the profitability of banks.

RETAIL BANKING
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 forth. This is very different from wholesale banking.

RETAIL BANKING IN INDIA: India is poised to become the world's fourth largest economy in the span of two decades. Economic prosperity is providing many in this populous nation with real purchasing power; it simply is an opportunity that cannot be overlooked by global banks. Despite its appeal, India remains a developing economy. Thus, global banks seeking a presence or expansion in India must craft a business strategy that considers the country's attendant challenges: longestablished competitors; rudimentary infrastructure; dynamic political environment; restrictive regulations; and developing country operational risks.

These challenges should be weighed against the potential gains from entering the marketplace, as well as the likely cost of doing nothing. Extensive research conducted by the IBM Institute for Business Value pinpointed four of the most promising product areas for global banks entering the Indian market: housing loans, automobile loans, small and medium enterprise (SME) banking and personal financial services. However, recognizing the growth opportunities is only the beginning. Global banks targeting India as a source of new growth will have to do much more than just "show up" - success will lie in the details of execution.

With one of the most under penetrated retail lending markets in Asia-Pacific, India offers great potential. India's mortgage debt in 2002 totaled only 2 percent of gross domestic product (GDP), compared to 7 percent of Thailand's GDP, 8 percent of GDP in China and much higher proportions in other parts of the region: Malaysia (28 percent), South Korea (30 percent) and Hong Kong (52 percent). While India remains characterized by extreme wealth and poverty, a middle class is beginning to emerge, with absolute demand for products and services on the rise. To seize this opportunity, new market entrants must exploit specific market niches and leverage best-in-class capabilities while addressing the unique challenges of the Indian banking environment.

During the last decade, India has emerged as one of the biggest and fastest growing economies in the world. The strengthening economy in India has been fueled by the convergence of several key influences: liberalization policies of the government, growth of key economic sectors, development of an English-speaking, well-educated work force and the emergence of a middle class population.

REASONS FOR THE CHANGE OVER FROM CORPORATE BANKING TO RETAIL BANKING: The financial sector reforms undertaken by the Government since the year 1991 have accelerated the process of disintermediation which has encouraged blue chip corporate to access cheaper funds to meet their working capital requirements directly from investors in India and abroad through capital market instruments and external Commercial Borrowings route thus by-passing Banks in the process. The deregulation of markets and interest rates has lead to cut throat competition among Banks for corporate loans making them to lend even at PLR or sub PLR and offer other valued services at comparatively cheaper rates to big and high value corporates. In the process, most of the banks have experienced substantial reduction in interest spreads and drain on their profitability. The introduction of stringent Asset Classification, Income Recognition and provisioning norms has resulted in growing menace of NPAs in corporate loans which has affected the asset quality, profitability and capital adequacy of banks adversely. The risks involved in corporate loans are very high as corporates have to keep all their eggs in one basket. The risks involved in retail Banking advances are comparatively less and well diversified as loan amounts are relatively small ranging from Rs. 5000 to Rs. 100 lac and repayable normally in short period of 3-5 years except housing loans (where repayment period is long up to 15 years in some cases) and from fixed source of income like salaries. Whereas corporate loans give average return of just 0.5 to 1.5 percent only, the retail advances offer attractive interest spread of 3to 4 percent, because retail borrowers are less interest rate sensitive than the Corporates. Another reason for large interest

spreads on retail advances is that the retail customers are too fragmented to bargain effectively. While corporate loans are subject to ups and downs in trade frequently, retail loans are comparatively independent of recession and continue to deliver even during the sluggish phase of economy. Retail Banking gives a lot of stability and public image to banks as compared to corporate banking. The housing loans, which form the major chunk of retail lending and where NPAs are the least, carry risk weight of just 50% for capital adequacy purposes. This is likely to come down further as new Basel Capital Accord or (Basel II) norms are put in place from the year 2006. This offers added incentive to banks for lending to this retail segment as against corporate lending where capital consumption is higher. The greater amount of consumerism in the country with upswing in income levels of burgeoning middle class, which has propensity to consume to raise their standard of living, is enlarging the retail markets. This market is growing 2 50 percent per year and boosting the demand for credit from households. The potential is huge as present penetration level is just over 2 percent in the country. Given the easy liquidity scenario in the country the growth rate in this sector is likely to go up manifold in the years come. This offers great potential for banks to enlarge their loan books. The Indian mindset is also changing and consumers prefer to improve their quality of life even if it means borrowing for facilities like housing, consumer goods vehicles and vacationing etc. Borrowing and lending is no longer considered a taboo. The peer pressure and demonstration effect is further pushing up demand for housing loans, consumer products and automobiles. The profiles of customers are fast changing from conservative dodos to fashionable peacocks. All these developments give big push to Retail Banking activities. Retail Banking clients are generally loyal and tend not to change from one Bank to another very often. Large numbers of Retail clients facilitate marketing, mass selling and ability to categorize/select clients using scoring system and data mining. Banks can cut costs and achieve economies of scale and improve their bottom-line by robust growth in retail business volume.

Through product innovations and competitive pricing strategies Banks can foster business relationship with customers to retain the existing clients and attract new ones.

Innovative products like asset securitization can open new vistas in sustaining optimal capital adequacy and asset liability management for banks. Retail Banking offers opportunities to banks to cross sell other retail products like credit card, insurance, mutual fund products and demat facilities etc. to depositors and investors.

RETAIL BANKING PRODUCTS AND SERVICES Contrary to plain vanilla mass Banking products that the Banks offered in the pre reform era, which the customer had either to take or leave, banks, since last couple of years are offering well researched, tech savvy, borrower friendly, attractive, value added, make your own Sunday type customized products at most competitive rates through a host of most modern delivery channels viz., ATM, internet, telebanking to enhance the comfort of diverse type of customers. Wide range of products that the bank snow offer, cover both the deposits and advances. The core banking products of deposits i.e. Saving bank, recurring deposits and short term deposits and advances i.e. short or medium term loans are packaged with several value additions in different permutations and combinations and attractive brand names. They are released in the market with adequate publicity and ad., support banks products cater to various segments of customers like salaried persons, traders, business men, professionals, technocrats, pensioners, housewives, children, labourers, artisans and craftsmen etc. Banks keep on constantly reviewing their products and services portfolio to cater to the ever escalating expectations of customers.

Retail Lending products Major retail lending products offered by banks are the following: Housing loans Loan for consumer goods Personal loans for marriage, honeymoon, medical treatment and holidaying etc. Education loans Auto loans Gold loans

Event loans Festival loans Insurance products Loan against rent receivables Loan against pension receivables to senior citizens Debit and credit cards Global and international cards Loan to doctors to set up their own clinics or for purchase of medical equipments Loan for women empowerment Loan for purchase of acoustic enclosures for diesel Gen. sets etc.

Retail banking products for depositors: This is in various segments of customers like ; children, salaried persons, senior citizens, professionals, technocrats, businessmen, retail traders and farmers etc. and it includes: Flexi Deposit Accounts Savings Bank Accounts Recurring Bank Accounts Short Term deposits Deferred Pension Linked Deposit Schemes

Today pure deposit type products are giving way to multi- benefit, multi access generes of banking products. Most of the innovation is taking place in savings bank accounts to make the meager return of 3.55p.a. that they earn more attractive. Most of the banks now offer sweep in and sweep out accounts, called 2-in-1 accounts or value added savings bank accounts. This account is a combination of savings bank and term deposit accounts and offers twin benefit of liquidity of a savings bank account and higher interest earning of term deposit accounts. Add-ons and Freebies To make their products an services more attractive so as to woo maximum number of customers, the banks are vying with each other with whole lot off frills, goodies, freebies, and add-ons. A few of these add-ons. A few of these add-ons and freebies are as under: Free collection of specified number of outstation instruments. Instant credit of outstanding cheques upto Rs. 15000/-

Concession in exchange on demand drafts and pay-orders and commission on bills of exchange

Issuance of free personalized cheque books Free accident insurance covers Free doorsteps opening of accounts Free issuance of ATM, Debit, Credit and Add-on Cards Free investment advisory services Grant of redeemable reward points on use of credit cards Free internet banking, phone banking and anywhere banking facilities Issuance of discount coupons for purchase of various products like computer accessories, music CDs, cassettes, books, toys, garments etc.

Issuance of free PVR, trade fair tickets etc. Concession in rate of interest on Group advances Exemption in upfront fees.

These concessions, freebies and add-ons are based on the True relationship Value (TRV) of the customers and is calculated by the return on various products and services of the banks availed by them. These concessions and freebies are usually offered for purchase of consumer goods but now they have become an integral part of Retail banking products and services also.

New delivery channels for retail banking Products and Services: The advent of new delivery channels viz. ATM, Internet and Telebanking have revolutionalised the retail banking activities. These channels enable Banks to deliver Retail banking products and services in an efficient and cost effective manner. Now-a-days the banks are under great pressure to attract new and retain old customers, as margins are turning wafer thin. In these circumstances reducing administrative and transaction costs has become crucial. Banks are making special offerings to customers through these channels retail banking has been immensely benefited with the revolution in IT and communication technology. The automation of the banking processes is facilitating extension of their reach and rationalization of their costs as well. They are the engine for growth of retail banking business of Banks. The networking of branches has extended the scope of banking to anywhere and anytime 24x 7 days a week banking. It has enabled customers to be the customer of a bank rather than the customers of a particular branch only. Customers can

transact Retail Banking transactions at any of the networked branches without any extra cost. As a matter of fact the Retail Banking per se has taken off because of the advent of multiple banking channels. These channels have enabled banks to go on a massive customer acquisition mode since transaction volumes spread over multiple channels lessen the load on the brick and mortar bank branches.

SOME ASPECTS OF RETAIL BANKING Impact of Retail Banking: The major impact of retail Banking is that, the customers have become the Emperors the fulcrum of all Banking activities, both on the asset side and the liabilities front. The hitherto sellers market has transformed into buyers market the customers have multiple of choices before them now for cherry picking products and services, which suit their lifestyles and tastes and financial requirements as well. Banks now go to their customers more often than the customers go to their banks. The Non-Banking finance companies which have hitherto been thriving on retail business due to high risk and high returns thereon have been dislodged from their profit munching citadel Retail Banking is transforming banks into one stop financial super markets. The share of retail loans is fast increasing in the loan books of banks. Banks can foster lasting business relationship with customers and retain the existing customers and attract new ones. There is a rise in their service as well. Banks can cut costs and achieve economies of scale and improve their revenues and profits by robust growth in retail business. Reduction in costs offers a win win situation both for banks and the customers. It has affected the interface of banking system through different delivery mechanism It is not that banks are sharing the same pie of retail business, the pie itself is growing exponentially. Retail Banking has fuelled a considerable quantum of purchasing power through a slew of retail products. Banks can diversify risks in their credit portfolio and contain the menace of NPAs. Retail banking allows bank to cross sell other products and services as it is far more easier to sell other products to the same customer rather than search for absolutely new ones. Cross selling is one of the best avenues for relationship

Banking and retention of customers. Banks can thus increase their business volume and improve their bottom-line substantially. Re-engineering of business with sophisticated technology based products will lead to business creation, reduction in transaction costs and enhancement in efficiency of operations.

Problems faced in Retail Banking: Retail Banking has all its attendant risks. It is highly sensitive .Banks got to move cautiously. It is easy to enter, but difficult to get out. A systematic and a calculated approach is the pre-requisite for success in the long run. Retail Banking is being introduced with the concept of serving customer with better and innovative products with the latest technology and easy availability. It becomes so popular and widely acceptable that more and more customers had started to use it. Now it becomes a mass product. Customer database have tremendously increased and it becomes difficult to manage them. To match the customer inflows and current customers requirement as well as service standards banks have to set up more branches, distribution channels and new trained staff as well as improvement in back office operations also in very near future. This itself a time bounded problem and banks have to do it as early as possible. Todays competitive market customer has more than one options for his retail banking needs. Every bank is providing more or less similar kind of products. So an unsatisfied customer can easily switch over to the another competitors bank. So banks need to be very careful in handling the customers. They have to continually improve their service standards. Retail Banking is so wide accepted by the customer as well as very aggressively promoted by the bankers that if the bankers do not take adequate care in distributing and recovering advances, there are chances of increasing in NPAs in coming feature. And that would be an alarming situation.

CORE SERVICES Payment services

FACILITATING SUPPORTING SERVICES SERVICES Cash Making payments at doorsteps Foreign currency requirements Internet banking Travelers cheques Telephone banking DD/Bankers cheque TT EFT ATM Card Standing instruction from customers for making payments Inter branch/inter banks transfer of funds Safety vault Current a/c Savings a/c Time deposit a/c Credit cards Debit cards Services to senior citizens Telephone banking Internet banking Conversion of excess balance to time deposit Delivery of time at promised time period Interest rate option: fixed/floating Flexibility in prepayment of loan Counseling on real estate markets Legal services for documentation ECS for payment of loan installments Additional insurance facility for family members Counseling on post retirement savings

Current a/c & savings a/c

Loan product: consumer loans, personal loans, housing loans, educational loans

Insurance products : life insurance Pension schemes

Current a/c Savings a/c Time deposits Safety vaults

BANKING PRODUCTS PORTFOLIO A. Deposits: There are many products in retail banking like F.D., Savings A/c, Current A/c, Recurring A/c, NRI A/c, Corporate Salary A/c, Free Demat A/c, Kids A/c, Senior Citizen Scheme, Cheque Facilities, Overdraft Facilities, Free Demand Draft Facilities, Locker Facilities, Cash Credit Facilities, etc. They are listed and explained as follows: 1. Fixed Deposit: The deposit with the bank for a period, which is specified at the time of making the deposit is known as fixed deposit. Such deposits are also known as F.D or term deposit .A F.D is repayable on the expiry of a specified period. The rate of interest and other terms and conditions on which the banks accepted F.D were regulated by the R.B.I. in section 21 and 35A of the Banking Regulation Act 1949. Each bank has prescribed their own rate of interest and has also permitted higher rates on deposits above a specified amount. R.B.I has also permitted the banks to formulate F.D. schemes specially meant for senior citizen with higher interest than normal.

2. Savings A/c: Saving bank A/c is meant for the people who wish to save a part of their current income to meet their future needs and they can also earn in interest on their savings. The rate of interest payable on by the banks on deposits maintained in savings account is prescribed by R.B.I. The bank should not poen a saving account in the name of : 1. Govt. Department. 2. Municipal Corporation 3. Panchayat Samities 4. State housing Boards 5. Water and Sewerage Boards Now a days the fixed deposit is also linked with saving account. Whenever there is excess of balance in saving a/c it will automatically transfer into Fixed deposit and if there is shortfall of funds in savings a/c , by issuing cheque the money is transferred from fixed deposit to saving a/c. Different banks give different name to this product. 3. Current A/c: A current A/c is an active and running account, which may be operated upon any number of times during a working day. There is no restriction on the number and the amount of withdrawals from a current account. Current account suit the requirements of a big businessmen, joint stock companies, institutions, public authorities and public corporation etc.

4. Recurring Deposit: A variant of the saving bank a/c is the recurring deposit or cumulative deposit a/c introduced by banks in recent years. Here, a depositor is required to deposit an amount chosen by him. The rate of interest on the recurring deposit account is higher than as compared to the interest on the saving a/c. Banks open such accounts for periods ranging from 1 to 10 years. TDS is not applicable to this type of deposit. The recurring deposit account can be opened by any number of persons, more than one person jointly or severally, by a guardian in the name of a minor and even by a minor.

5. NRI Account: NRI accounts are maintained by banks in rupees as well as in foreign currency. Four types of Rupee account can be open in the names of NRI. 1.Non Resident Rupee Ordinary Account (NRO) 2.Non Resident External Account (NRE) 3.Non Resident ( Non Repatriable Deposit Scheme ) ( NRNR) 4.Non Resident ( special)Rupee Account Scheme ( NRSR) Apart from this, foreign currency account is the account in foreign currency. The account can be open normally in US dollar , Pound Sterling , Euro. The accounts of NRIs are Indian millenium deposit, Resident foreign currency, housing finance scheme for NRI investment schemes.

6. Corporate Salary Account: Corporate Salary a/c is a new product by certain private sector banks, foreign banks and recently by some public sector banks also. Under this account salary is deposited in the account of the employees by debiting the account of employer. The only thing required is the account number of the employees and the amount to be paid them as salary. In certain cases the minimum balance required is zero. All other facilities available in savings a/c is also available in corporate salary a/c.

7. Demat Account: Dematerialization is a process by which physical share certificates / securities are taking back by the company or registrar and destroyed ultimately. An equivalent number of shares are credited electronically to customers depository account. Just like saving/current account with a bank one can open a securities account with the depository through a depository participant (DP). 8. Kids Account: ( Minor Account ) Children are invited as customer by certain banks. Under this, Account is opened in the name of kids by parents or guardians. The features of kids account are free personalized cheque book which can be used as a gift cheque , internet banking , investment services etc.

9. Senior Citizenship Scheme : Senior citizens can open an account and on that account they can get interest rate somewhat more than the normal rate of interest. This is due to some social responsibilities of banks towards aged persons whose earning are mainly on the interest rate.

B. Loans and Advances: The main business of the banking company is lending of funds to the constituents, mainly traders, business and industrial enterprises. The major portion of a banks funds is employed by way of loans and advances, which is the most profitable employment of its funds. There are three main principles of bank lending that have been followed by the commercial banks and they are safety , liquidity, and profitability. Banks grant loans for different periods like short term, medium term, long term and also for different purpose.

1. Personal Loans: This is one of the major loans provided by the banks to the individuals. There the borrower can use for his/her personal purpose. This may be related to his/her business purpose. The amount of loan is depended on the income of the borrower and his/her capacity to repay the loan. 2. Housing Loans: NHB is the wholly own subsidiary of the RBI which control and regulate whole industry as per the guidance and information , home loans rates is going to be cheaper so that infrastructure sector gets motivation for development home loans rate is decline up to 7.5% EMI at declining rate so that it becomes cheaper. The purpose of loan to purchase, extension , renovation, and land development. 3. Education Loans: Loans are given for education in country as well as abroad. 4. Vehicle Loans: Loans are given for purchase of scooter, auto-rickshaw, car, bikes etc.. The market size of auto finance is RS 7500 cr. Low interest rates, increasing income levels of people are the factors for growth in this sector. Even for second hand car finance is available. 5.Professional Loans: Loans are given to doctor, C.A, Architect, Engineer or Management Consultant. Here the loan repayment is normally done in the form of equated monthly. 6. Consumer Durable Loans: Under this,loans are given for acquisition of T.V,Cellphones,A.C,Washing Machines,Fridge and other items.

7.Loans against Shares and Securities: Finance against shares are given by banks for different uses. Now a days finance against shares are given mostly in demat shares. A margin of 50% is normally accepted by the bank on market value. For these loans the documents required are normally DP notes, letter of continuing security, pledge form, power of attorney. This loan can be used for business or personal purpose.

Services Provided By the Banks1. Credit Cards: A credit card is an instrument, which provides immediate credit facilities to its holder to avail a variety of goods and services at the merchant outlets. It is made of plastic and hence popularly called as Plastic Money. Such cards are issued by bank to persons with minimum income ranging between RS 50000 and RS 100000 per annum. And are accepted by a variety of business establishments which are notified by the card issuing bank. Some banks insist on the cardholder being their customers while others do not. Few banks do not charge any fee for issuing credit cards while others impose an initial enrollment fee and annual fee also. If the amount is not paid within the time duration the bank charges a flat interest of 2.5% Leading Indian Banks such as : SBI, BOB, Canara Bank, ICICI, HDFC and a few foreign banks like CITIBANK, Standard Chartered etc are the important issuers of credit card in India.

2. DEBIT CARDS: It is a new product introduced in India by Citibank a few years ago in association with MasterCard. A debit card facilitates purchases or payments by the cardholder . It debits money from the a/c of the cardholder during a transaction. This implies that the cardholder can spend only if his account permits. 3. NET BANKING: This facilitates the customers to do all their banking operations from their home by using the internet facility. With Net Banking one can carry out all banking and shopping transactions safely and with total confidentiality.

With Net Banking one can easily perform various functions: 1. Check Account Balance 2. Download Account Statement 3. Request for a stop payment of a cheque. 4. Request for a new cheque book. 5. Make a FD/TDS enquiry. 6. Access DEMAT a/c 7. Transfer funds. 8. Facilitate bill Payments. 9. Open a FD 10. Pay Credit Card dues instantly.

4. Mobile Banking: To avail the mobile banking, one needs to have a savings, current and FD a/c and mobile connection. Using mobile banking facility one can 1. 2. 3. 4. 5. 6. 7. 8. 9. Check Balance Check last three transactions. Request for a statement Request for a cheque book. Enquire on a cheque status. Instruct stock cheque payment. View FD details. Transfer funds. Pay Utility Bills.

5. Phone Banking: It helps to conduct a wide range of banking transactions from the comfort of ones home or office. Using phone banking facility one can 1. 2. 3. 4. 5. Check Balance Check last three transactions. Request for a cheque book. Transfer funds. Enquire on a cheque status, and much more.

6. Anywhere Banking: One can operate his roaming current a/c at one centre at any other designated of a particular across any other centre. One can deposit or withdraw cash from any branch of a particular bank all over the country up to a prescribed limit. One can also transfer funds.

7.Automated Teller Machines ( ATM) : ATMs features user-friendly graphic screens with easy to follow instructions. The ATMs interact with customers in their local language for increased convenience. ATMs are generally located in commercial areas, residential localities, major petrol pumps, airports, near railway stations and other places, which are conveniently accessible to customers. ICICI Banks ATM network is one of the largest and most widespread ATM network in India. Following are the features available on ATMs which can be accessed from anywhere at anytime : 1. 2. 3. 4. 5. 6. Cash Withdrawal Cash Deposit Balance Enquiry Mini A/c Statements Cheque Book Request Transaction at various merchant establishments.

9. Smart Card: The smart card, a latest additional to the world of banking and information technology has emerged as the largest volume driven end-product in the world due to its data portability, security and convenience. Smart Card is similar in size to todays plastic payment card, it has a memory chip embedded in it. The chip stores electronic data and programmes that are protected by advanced security features. When coupled with a reader, the smart card has the processing power to serve many different applications. As an access-control device, smart cards make personal and business data available only to appropriate users. To ensure the confidentiality of all banking service, smart cards have mechanisms offering a high degree of security. These mechanisms are based on private and public key cryptography combined with a digital certificate, one of the most advanced security techniques currently available. Infact , it is possible to connect to the web banking service without a smart card.

Banking on Retail
With a jump in the Indian economy from a manufacturing sector, that never really took off, to a nascent service sector, Banking as a whole is undergoing a change. A larger option for the consumer is getting translated into a larger demand for financial products and customization of services is fast becoming the norm than a competitive advantage. With the Retail banking sector expected to grow at a rate of 30% [Chanda Kochhar, ED, ICICI Bank] players are focusing more and more on the Retail and are waking up to the potential of this sector of banking. At the same time, the banking sector as a whole is seeing structural changes in regulatory frameworks and securitization and stringent NPA norms expected to be in place by 2004 means the faster one adapts to these changing dynamics, the faster is one expected to gain the advantage. The reasons behind the euphemism regarding the Retail-focus of the Indian banks and how much of it is worth the attention that it is attracting are the question here.. Potential for Retail in India: Is sky the limit? The Indian players are bullish on the Retail business and this is not totally unfounded. There are two main reasons behind this. Firstly, it is now undeniable that the face of the Indian consumer is changing. This is reflected in a change in the urban household income pattern. The direct fallout of such a change will be the consumption patterns and hence the banking habits of Indians, which will now be skewed towards Retail products. At the same time, India compares pretty poorly with the other economies of the world that are now becoming comparable in terms of spending patterns with the opening up of our economy. For instance, while the total outstanding Retail loans in Taiwan is around 41% of GDP, the figure in India stands at less than 5%. The comparison with the West is even more staggering. Another comparison that is natural when comparing Retail sectors is the use of credit cards. Here also, the potential lies in the fact that of all the consumer expenditure in India in 2001, less than 1% was through plastic, the corresponding US figure standing at 18%.

But how competitive are the players? The fact that the statistics reveal a huge potential also brings with it a threat that is true for any sector of a country that is opening up. Just how competitive are our banks? Is the threat of getting drubbed by foreign competition real? To analyze this, one needs to get into the shoes of the foreign banks. In other words, how do they see us? Are we good takeover targets? Going by international standards, a large portion of the Indian population is simply not bankable taking profitability into consideration. On the other hand, the financial services market is highly over-leveraged in India. Competition is fierce, particularly from local private banks such as HDFC and ICICI, in the business of home, car and consumer loans. There, precisely lie the pitfalls of such explosive growth. All banks are targeting the fluffiest segment i.e. the upwardly mobile urban salaried class. Although the players are spreading their operations into segments like self- employed and the semi-urban rich, it is an open secret that the big city Indian yuppies form the most profitable segment. Over-dependence on this segment is bound to bring in inflexibility in the business. What about the foreign giants? The foreign banks have identified this problem but there are certain systematic risks involved in operating in the Retail market for them. These include regulatory restrictions that prevent them from expanding their branch network. So these banks often take the Direct Selling Agent (DSA) route whereby low-end jobs like sourcing or transaction processing are outsourced to small regional layers. So now on, when you see a loan mela or a road show showcasing the retail bouquet of an elite MNC giant, you know that a significant commission earned out of any such booking gets ploughed back to our own economy. Perhaps, one of the biggest impediments in foreign players leveraging the Indian markets is the absence of positive credit bureaus. In the west the risk profile can be easily mapped to things like SSNs and this information can be publicly traded. PAN is a step in this direction but lot more work need to be done. What has been a positive step towards this is a negative file sharing started by a consortium of 11 banks. However, as a McKinsey study points out actual write-offs on NPAs show a strong negative correlation with sharing of positive information. On top of this, the spend-now-pay-later credit culture in India is just not picking up. A swift legal procedure against consumers creating bad debt is virtually non-existent. Finally, the vast geographical and cultural diversity of the country makes credit policy formulation a tough job and it simply cannot be dictated from a Wall

Street or a Singapore boardroom! All these add up to the unattractiveness of the Indian retail market to the foreign players. So over the past few years, in spite of the entry of MNCs in many industries, Retail Banking has seen a flurry of panicky exits. Fewer than 40 remain in India and their share of total bank assets currently 7.2% is falling. Those that remain might be thought to be likely buyers of Indian banks. Yet Citibank, HSBC and Standard Charteredall in India for more than a century, and with relatively large retail networksseem to have no pressing need to acquire a local bank. Established foreign banks have preferred to take over customers or businesses from other foreign banks that want to leave. Thus HSBC, in recent years, has acquired customers from France's BNP, Germany's Deutsche Bank and Japan's Bank of TokyoMitsubishi. ABN Amro took over Bank of America's retail business. So all for the keeping then? This will perhaps be the most wrongful inference that can be drawn from the above. We just cannot afford to look inwards and repeat the mistakes that were the side effects of the Nationalization of the Banking System. A growing market can never be an alibi for lack of innovation. Indian banks have shown little or no interest in innovative tailor-made products. They have often tried to copy process designs that have been tested, albeit successfully, in the West. Each economic culture has its own traits and one who successfully adapts those to the business is the eventual winner. A case in point is the successful implementation of micro-credit networks in Bangladesh. Positioning a bank as a tech-savvy financial vendor in a country where Internet penetration is an abysmal 1.65% can only add to the over-leveraging as pointed out earlier. The focus of the sector should remain in macroeconomic wealth creation and not increasing the per capita indebtedness that will do little but add to the NPA burden. Retail Banking in India has to be developed in the Indian way, notwithstanding the long queues in front of the teller counters in the Public sector banks.

Company Profile
ING group originated in 1990 from the merger between Nationale Nederlanden the largest Dutch Insurance Company and NMB Post Bank Group. Combining roots and ambitions, the newly formed company called Internationale Nederlanden Group. Market circles soon abbreviated the name to I-N-G. The company followed suit by changing the statutory name to ING Group. ING is a global financial services company providing banking, investments, life insurance and retirement services and operates in more than 50 countries. ING is a global financial institution of Dutch origin offering banking, investments, life insurance and retirement services. ING serve more than 85 million private, corporate and institutional customers in Europe, North and Latin America, Asia and Australia. They draw on their experience and expertise, their commitment to excellent service and their global scale to meet the needs of a broad customer base, comprising individuals, families, small businesses, large corporations, institutions and governments

ING Vysya FOUNDATION (ING CSR)

World over ING has strengthened its name as a good corporate citizen. The ING Chances for Children initiative (CFC) a global program in partnership with UNICEF is to educate 50,000 underprivileged children in three countries, Ethiopia, India and Brazil by 2008. In India the focus is primarily in the districts of Dharampuri and Krishnagiri in Tamil Nadu. Through the national Child labor Elimination (NCLP) bridge schools, ING provides much needed support to UNICEF, to fund, monitor, and provide children with quality primary education The Indian arm of the Chances for Children programs is run by the support of ING business units in India (ING, ING Life Insurance and ING Investment Management) through the ING Vysya Foundation. The Foundation was set up almost 3 year ago and was actively involved in the post Tsunami rehabilitation of the victims. ING Group set up a dedicated Tsunami Support account. In India, the Foundation partnered with five NGO providing much needed financial support, from rebuilding of schools to providing fishing boats, giving much needed hope to destroyed lives. The Indian chapter of CFC involves the partnership of the Foundation with 7 NGO working in primary education. Not only does the Foundation provide much needed financial support to

these organizations but also runs strong voluntary programs giving the employees a chance to meet the children, work with them and take ownership and responsibility for the vision of its partners. The Foundation creates systems that ensure CSR activities within the organization. Various programs are initiated with the employees, whether it is taking 100 children for a day out to the planetarium or watching a film with them. It collectively influences the culture of the organization; and also provides the employees with an opportunity to contribute to the vision of the organizations CSR. Recently ING Vysya Foundation launched its initiative Run Ricky Run. In this initiative, for every run Ricky makes the Foundation will sponsor one child to go to school through its association with its NGO partner in Bangalore, SUKRUPA. Addressing health care, poverty or human rights issues, there is no better way than through the corridors of education. The main focus of the Foundation in India is to support not for profit organizations working in the area of education.

STRATEGY
INGs overall mission is to help customers manage their financial future. Capitalizing on changing customer preferences and building on our solid business capabilities, INGs strategic focus is on banking, investments, life insurance and retirement services. They provide retail customers with the products they need during their lives to grow savings, manage investments and prepare for retirement with confidence. With wide range of products, innovative distribution models and strong footprints in both mature and developing markets, ING has the long-run economic, technological and demographic trends on their side. ING aligns its business strategy around a universal customer ideal: saving and investing for the future should be easier. While steering the business through turbulent times, ING will execute efforts across all its business lines to strengthen customer confidence and meet their needs, preserve a strong capital position, further mitigate risks and bring its costs in line with revenue expectations.

Product of bank Types of saving accounts offered by ING Vysya Bank A) ORANGE SAVINGS ACCOUNT:
This account is the basic product of ING Vysya Bank. In this account minimum cash balance required to open an account & the Quarterly Average Balance requirement is Rs5000. Some of the major features and benefits of this account are:

FREE
Free issue of International Debit Card. Unlimited ATM transactions at over 25,000 (Cirrus/Cashnet) ATMs in India, where QAB is maintained. Shopping convenience at over 2 Lakh merchant locations, with the ING Vysya International Debit card. Unlimited ATM transactions at over 196 ING Vysya ATMs. 2 Demand Drafts with a value not exceeding Rs.50,000 per annum, where QAB is maintained. Unlimited usage of payable at par (PAP) Cheques. Transfer of funds across all branches. National Electronic Funds Transfer (NEFT) through the internet banking channel. Electronic Bill Payment service. Smartserv - Personal Assistance Service. Statement of Account through E-mail. Mi-b@nk - Internet banking facility. RTGS (Real Time Gross Settlement) transactions at all branches. AAA Cash deposit (Customers) Free up to 2 transactions per month and a value limit of Rs. 50,000/-

BENEFITS
Free unlimited access to 25,000 + other bank ATMs- enhanced accessibility. Free multi branch, Multi-city banking convenience. Payable at par Cheques. Smart serv- Personal Concierge Services.

B)ING FORMULA SAVINGS ACCOUNT:

This is the product of ING Vysya Bank which is targeted towards the upper middle class segment of the society. Basically the targeted segment is the age group between 18-40 yrs. This product has its significance particularly in Metropolitan/A grade cities. This product is also useful for people who travel frequently particularly to Metropolitan/A grade cities. Minimum cash balance required to open this account and Quarterly Average Balance requirement is Rs. 25000/-

Some of the major features and benefits of this account are : Maximum withdrawal limit from INGs ATM or any other banks ATM is Rs. 50,000. Maximum shopping limit through INGs ATM/Debit card is Rs. 75,000. Free Payable at Par cheques. Exclusive F1 themed, Internet Banking services. Formula 1 International Debit card. Free sms alerts on transactions above Rs. 1500.

SPECIAL BENEFITS CARD FUEL GAUGE

Fill fuel across any petrol pump in India and get the 2.5% surcharge waived.

SPEED LAP
Shop using your ING Formula savings account and get Formula One merchandise.

RACE DAY
Whenever there is a Formula 1 race anywhere in the world, there is a race for u as well. Shop using your ING Formula debit card on the day of the race and top 25 spenders for the race day wins vouchers from ING. 3 winners Gift vouchers worth Rs. 5000/10 runner ups- Gift vouchers worth Rs. 2000/12 second runner ups- Gift vouchers worth Rs. 1000/-

B)PLATINA ACCOUNTS
This product (account) of ING Vysya Bank is a special product for special class of customers. This can also be termed as Preferred Platina Banking. This product is designed to reduce the efforts put in handling banking and financial needs. This product has special features which are mainly meant for business class people who have to make large payments and have regular transactions. The Platina account holder becomes the preferred customer of the bank. The average quarterly balance (QAB) is Rs. 100,000

Features: Dedicated Relationship Manager

Our dedicated relationship managers can help you manage your money; while you pursue your passion, be it business or pleasure.

Wealth Management Service

Our preferred banking services offer you customized financial strategies on how to invest and where to invest based on simple financial risk profiling.

ING Platina Debit Card

Use your ING Platina Gold Debit Card and withdraw cash up to Rs1 lac per day from any ATM, Avail a 1% cash back on shopping with your Debit Card.

Account Representative Services

Now when you are out building a business empire or taking that well deserved vacation, just nominate someone else to do your routine banking enquires.

Preferential rates on ING products

Get more out of the Platina relationship. Avail preferential rates on Demat, Bank Lockers, Personal and Home loans.

CORPORATE RESPOSIBILITY
ING wants to pursue profit on the basis of sound business ethics and respect for its stakeholders. Corporate responsibility is therefore a fundamental part of INGs strategy: ethical, social and environmental factors play an integral role in business decisions.

Finanicial BalanceSheet The ING Vysya BANK Ltd.

ING Vysya Bank Ltd., is an entity formed with the coming together of erstwhile, Vysya Bank Ltd, a premier bank in the Indian Private Sector and a global financial powerhouse, ING of Dutch origin, during Oct 2002. The origin of the erstwhile Vysya Bank was pretty humble. It was in the year 1930 that a team of visionaries came together to form a bank that would extend a helping hand to those who weren't privileged enough to enjoy banking services. ING and ING Vysya Life Insurance are headquartered at Bangalore, while the corporate office of ING Investment Management is situated at Mumbai. The synergies arising out of the three distinct but complimentary businesses are bound to be an asset to the group in the changing market dynamics of the future. The first such signs are already visible on the horizon with combined products being successfully launched by the different entities of the group in conjunction with each other It's been a long journey since then and the Bank has grown in size and stature to encompass every area of present-day banking activity and has carved a distinct identity of being India's Premier Private Sector Bank. In 1980, the Bank completed fifty years of service to the nation and post 1985; the Bank made rapid strides to reach the coveted position of being the number one private sector bank. In 1990, the bank completed its Diamond Jubilee year. At the Diamond Jubilee Celebrations, the then Finance Minister Prof. Madhu Dandavate, had termed the performance of the bank stupendous. The 75th anniversary, the Platinum Jubilee of the bank was celebrated during 2005. The long journey of seventy-five years has had several milestones 1930 Set up in Bangalore 1948 Scheduled Bank 1985 Largest Private Sector Bank 1987 The Vysya Bank Leasing Ltd. Commenced 1988 Pioneered the concept of Co branding of Credit Cards 1990 Promoted Vysya Bank Housing Finance Ltd. 1992 Deposits cross Rs.1000 crores 1993 Number of Branches crossed 300 1996 Signs Strategic Alliance with BBL., Belgium. Two National Awards by Gem & Jewellery Export

Promotion Council for excellent performance in Export Promotion Cash Management Services, & commissioning of VSAT. Golden Peacock Award - for the best HR 1998 Practices by Institute of Directors. Rated as Best Domestic Bank in India by Global Finance (International Financial Journal - June 1998) State -of - the -art Date Centre at ITPL, Bangalore. 2000 RBI clears setting up of ING Vysya Life Insurance Company 2001 ING-Vysya commenced life insurance business. The Bank launched a range of products & services like the Vys Vyapar Plus, the range of loan schemes for traders, ATM services, Smartserv, personal assistant service, Save & Secure, an 2002 account that provides accident hospitalization and insurance cover, Sambandh, the International Debit Card and the mi-b@nk net banking service. 2002 ING takes over the Management of the Bank from October 7th , 2002 2002 RBI clears the new name of the Bank as ING Vysya Bank Ltd, vide their letter of 17.12.02 2003 Introduced customer friendly products like Orange Savings, Orange Current and Protected Home Loans .

2004 Introduced Protected Home Loans - a housing loan product Introduced Solo - My Own Account for youth and Customer Service Line Phone Banking Service Bank has networked all the branches to facilitate AAA transactions i.e. Anywhere, Anytime & 2006 Anyhow Banking 2005

The ING Vysya Bank

ING Vysya Bank branch was established somewhere in September 2011 and it stands at third position in the region for its performance. It is the newest Private Sector Bank in the city and yet has achieved a remarkable growth rate in past 7 months. It has got its Journal Ledger of the size of Rs.120, 000,000 (12 crore rupees) and has got customer base of 1800 well satisfied happy customers. Every month around 70 to 90 saving accounts and 20 to 30 current account are opened which shows the consistency of the Bank and currently bank holds around 1500 saving bank accounts.

Growth at ING Vysya Bank.

In terms of pure numbers, the performance over the decades can better be appreciated from the following table:

Rs. in millions Year Networh

1940 1950 1960 1970 1980 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0.001 1.40 1.60 3.00 11.50 162.10 5900.00 652700 6863.24 7067.90 7473.20 7094.00 10196.70 11101.90 14260.00 15940 22230

Deposits
0.400 5.30 20.10 91.50 1414.30 8509.40 74240.00 81411.10 80680.00 91870 104780.00 125893.10 133352.50 204980 248900 248900 258650

Advance
0.400 3.80 13.50 63.80 813.70 4584.80 39380.00 43163.10 44180.00 56120.00 69367.30 90805.90 102315.20 119761.70 146500.00 167510.00 185070

Profit
0.001 0.09 0.13 0.74 1.13 50.35 443.10 371.90 687.50 863.50 590.01 381.80 90.6 889.0 1569 1888.00 2422.00

Outlets
4 16 19 39 22.8 319 481 484 483 456 523 536 562 626 677 857 866

Outlets comprises of 510 branches, 13 ECs, 28 Satellite Offices and 400 ATMs as of March 31st 2011. Additionally the bank also has Internet Banking, Mobile Banking and Customer Service Line for Phone Banking Service. Even in the recessionary period the ING Vysya Bank is going in profits. While other banks are losing a big percentage of their expected profits.

ING Vysya Bank Q4 Profit up 34% Continued Profit Growth sustained by Strong Fee Income Performance
ING Vysya Bank announced its audited financial results for the financial year 2010-11 following the approval by its Board of Directors at their meeting held in Bangalore today.

FINANCIAL HIGHLIGHTS Q4 Performance

The Net Profit (PAT) of the Bank for the quarter ended 31 March 2011 increased by 34% to Rs. 91.3 crores. compared to Rs. 67.9 crores reported in the corresponding quarter of the previous year . Net Interest Income (NII) for the quarter increased by 9% to Rs. 268.3 crores from Rs. 247.1 crores. NIM is at 3.3% for the quarter.

The Bank further increased Provision Coverage Ratio to 83.4% as at 31 March 2011 from 76.4% as at 31 December 2010. Return on assets improved to 0.99% compared to 0.85% in March 2010 quarter and return on equity to 14.2% from 11.8%. Nine months ended December2011 The Net Profit (PAT) of the Bank for year ended 31 March 2011 increased by 32% to Rs. 318.7 crores compared to Rs. 242.2 crores reported in the previous year. Net Interest Income (NII) increased by 21% to Rs. 1,006.5 crores from Rs. 829.8 crores. This was achieved on the back of improvement in the cost of deposits which reduced to 5.25% from 5.33% for the year ended March 2010. The balance sheet quality continues to improve dramatically with net NPA of 0.39%%, which is less than one third of the previous year.Our provision cover of 83% is perhaps the best in the industry.

Business Highlights
Total Deposits were Rs. 30,194 crores at the end of March 2011, up from Rs. 25,865 crores as atthe end of March 2010. Current and Savings (CASA) deposits grew by 24% to Rs. 10,459 croresfrom Rs. 8,427 crores as at end of March 2010. CASA ratio increased to 34.6% of total depositsas at the end of March 2011 as against 32.6% at the end of March 2010. Gross Advances grew by 28% to Rs. 24,060 crores at the end of March 2011 from Rs. 18,832 crores as at end March 2010. The Credit Deposit Ratio stood at 78.2% as at March 2011 as against 71.6% as at March 2010. The Gross NPA ratio and Net NPA ratio were at 2.30% and 0.39% respectively as at 31 March 2011 compared to 2.96% and 1.20% respectively as at 31 March 2010. Provision Cover increased from 60.2% at the end of March 2010 to 83.4% as at 31 March 2011 The Capital Adequacy Ratio (CAR) of the Bank as at 31 March 2011 stood at 12.94% from 14.91%, as at 31 March 2010

stood at Rs.1,568 crores compared to Rs. 1,459 crores as at end December 2007 and the Capital Adequacy Ratio stood at 10.72% in December 2008. In October 2008, the bank increased its capital through the issue of Tier 1 Perpetual debt amounting to approx. Rs.95 crores. Subsequent to the quarter end, the Bank raised an additional Rs.200 crores of Upper Tier 2 capital which has been subscribed entirely by ING Group. we have achieved our targets of high quality and faster than market growth. We have grown advances at 28% and CASA at 24%. I am also pleased to state we have now crossed 500 branches, and as of March 2011 have 510 branches. The balance sheet quality continues to improve dramatically with net NPA of 0.39%%, which is less than one third of the previous year. Our provision cover of 83% is perhaps the best in the industry.

Other Developments
During the last quarter the bank expanded its network, with 19 new branches and 23 ATMs. As of March 2011, the Bank had 510 branches, 28 satellite offices and 400 ATMs. The bank was awarded the CIO 100 Award by Indias CIO magazine. The recognition was accorded for the innovative, customer centric Mobile Voice Recording Solution that made banking easier for the customer. The bank participated and promoted awareness for the Earth Hour for the third year in succession, both amongst the internal and external customers, service providers and local communities of Bangalore. More importantly, the banks First Solar Powered ATM was launched on 26th, March 2011, reflective of our support to the cause. ING is a origin offering banking, investments, life insurance and retirement services to over 85 million private, corporate and institutional clients in more than 40 countries.

What is Customer Service?

Customer Service is the service provided in support of a companys core products. Customer Service most often includes answering questions, taking orders, dealing with billing issues, handling complaints, and perhaps scheduling maintenance or repairs. Customer Service can occur on site , or it can occur over the phone or via the internet. Many companies operate customer service call centers, often staffed around the clock. Typically there is no charge for customer service. Quality customer service is essential to building customer relationships. It should not, however, be confused with the services provided for sale by a company. Services tend to be more intangible than manufactured products. There is a growing market for services and increasing dominance of services in economies worldwide. There are generally two types of customer expectations. The highest can be termed as desired service : the level of service the customer hopes to receive. The threshold level of acceptable service which the customers will accept is adequate service. Yet there is hard evidence that consumers perceive lower quality of service overall and are less satisfied. Possible reasons might be: With more companies offering tiered service based on the calculated profitability of different market segments, many customers are in fact getting less service than they have in past. Increasing use by companies of self-service and technology-based service is perceived as less service because no human interaction or human personalization is provided.

Technology-based services ( Automated Voice Systems, Internet-Based Services, Technology Kiosks) are hard to implement, and there are many failures and poorly designed systems in place. Customer expectations are higher because of the excellent service they receive from some companies. Thus they expect the same from all and are frequently disappointed. Organizations have cut costs to the extent that they are too lean and are too understaffed to provide quality service. The intensely competitive job market results in less skilled people working in frontline service jobs ;talented workers soon get promoted or leave for better opportunities. Many companies give lip service to customer focus and service quality; but they fail to provide the training , compensation, and support needed to actually deliver quality service. Delivering consistent, high-quality service is not easy, yet many companies promise it.

The gaps model positions the key concepts, strategies, and decisions in services marketing in a manner that begins with the customer and builds the organizations tasks around what is needed to close the gap between customer expectations and perceptions. The central focus of the gaps model is the customer gap, the difference between customer expectations and perceptions. Firms need to close this gap- between what customers expect and receive in order to satisfy their customers and build long term relationships with them. To close this all important customer gap, the model suggests that four gaps- the provider gaps- need to be closed. The following four provider gaps, shown below are the underlying causes behind the customer gap: Gap 1: Not knowing what customers expect. Gap 2: Not selecting the right service designs and standards. Gap 3: Not delivering to service standards. Gap 4: Not matching performance to promises.

RESEARCH DESIGN

Objectives of the study: There has been an honest attempt to

Explore the services and products offered by the banks to individual customers. Identify key factors and strategies employed by individual banks to increase their market share in retail banking.

Understand the perception of the customers and the management with respect to services offered by banks.

Generate additional information to analyze the gap between the customer and management perceptions about the services offered by banks.

Conclude and enumerate the innovations required to reduce the gap and increase the customer base of banks.

Scope of the Study: Scope of the study is to understand the various services and the products offered by the banks to the individual customers and to find out the gaps in the services being offered and the customer expectations. An effort is also made to suggest the banks as to where the gaps exist and what needs to be done to close the gaps. The study was done taking six banks into consideration. They are ICICI Bank, HDFC Bank, Citibank, Standard Chartered, SBI, Corporation Bank. The survey was restricted to the bank customers in Ahmedabad and Gandhinagar.

Methodology: The report Analyzing the Gap between Management Perception and Customer Perception With Respect To the Services Offered In Retail Banking aims to assimilate data about the various aspects of Retail banking services, to analyze the perceptions of the management and the customers regarding the services offered in Retail banking and to find out whether any gaps do exist between the services offered and the customer expectations. We have taken 6 Banks which represent the Nationalized, Private and Multinational Banks of the Banking Industry in India- SBI - Corporation Bank HDFC Bank ICICI Bank Citibank Standard Chartered Bank

The criteria for selecting these banks were their deposit base. We have limited our Service Category to the core services in Retail Banking and a few specialized services. The report is a mixture of Secondary and Primary data, with Questionnaires being our major instrument to collect primary data. Major topics we have attempted to cover in this project are to: Explore the services and products offered by the banks to individual customers. Understand the perception of the management with respect to services offered by banks. Understand the perception of the customers with respect to services offered by banks. Analyze whether there is a gap between the customer and management perceptions about the services offered by the banks. Conclude and enumerate the recommendations that might help to reduce the gaps that exist and foster the relationship of the customer more with the bank.

Data collection Method: Secondary Data:In order to have a proper understanding of the sector of Retail Banking an in depth study was done from the various books, magazines, articles written on the subject. A lot of data has also been collected from these and also from websites on the topic as also from the websites of the six banks.

Primary Data: The primary data was collected by means of a survey. Questionnaires were prepared and customers of the six banks were approached to fill up these questionnaires. The filled up information was later analyzed to obtain the required information.

Sampling Plan: Sampling was one of the methods of data and information collection. Two types of samples were used . One was the management to gain an understanding about their perceptions of the services they provide. Other was the customers of these banks to gain an idea about as to how they rate the services they obtain. The sample size of the customers was 10 each from each of the six banks ie.60 customers. The management sample size was restricted to 1 each, namely the Branch Manager from the six banks which is 6 managers.

Data Collection Source: The study required the understanding of the concept of Retail Banking and of the various products associated with it. The method used was that of secondary research and primary research. Under secondary research a detailed study was done from the various books, journals, magazines written on the subject of banking ad retail banking to obtain the required information and to have a precise idea of the services of retail banking.

Field Work: The branch managers of each of the six banks were approached and questions were put to them as per the questionnaire, and the answers duly filled up. Appropriate probing was done where ever necessary. For the customers cold calling was the approach employed. The customers coming to the banks were approached and as per their convenience and acceptance the questions were put to them and the answers given by them duly filled up. Here too probing was employed where deemed necessary.

Limitations: The sample size was restricted with in the area Ahmedabad, Gandhinagar. Further it was a convenience sampling. There were time and cost limitations. The six banks selected have been considered as representatives of the banking sector. Also the opinions have been generalized to the public. This project has been done for academic purpose and not done as a professional researcher for the company.

QUESTIONARY

Strategies for Increasing Retail Banking Business 1. In the view to increase the business, bankers should undertake the risk assessment for the customers and continuously study their behavior for timely fulfillment of their needs. 2. Technology should be upgraded continuously as well as it should be customer oriented. 3. Public Sector Banks need to be more professional in their approach. They should also be more customer oriented. 4. Proper and continuous training should be provided to the staff. 5. The main concern for the bank should be to build up a IT Savvy Customer Base. Due to various reasons, the principal being Security, people have a mental block in using this technology which is otherwise very convenient and customer friendly. 6. The banks would also have to gear up to use the international standards in areas like Demat of Securities, electronic settlement system for funds and securities. 7. Banks must work out strategic plans to computerize their rural and semi-urban branch operations. 8. The inter branch and inter bank funds transfer mechanisms should be more effective. 9. The public sector banks have to adapt themselves to the growing demands of the industry.

Future of Retail Banking

The Banker asked European banks what they consider the future of retail banking to be. The results, put together with the help of Henrion Ludlow Schmidt and Enalyzer, highlight the sectors strengths and fears as it heads into the 21st century. What will the retail bank of the future look like, how it will operate and how will it change from the bank of today? The Banker surveyed the top 300 banks in western Europe plus the top 100 banks in central and eastern Europe based on our rankings and asked bankers for their views. With the help of Henrion Ludlow Schmidt, one of Europes leading independent brand consultancies, and Enalyzer, which markets cutting edge eResearch solutions, we received detailed online responses from 58 banks across 26 countries. In brief, consumers are going to expect more in terms of accessibility, personalisation and product/service innovation and the successful retail bank of the future will be brand-led with all its activities from recruitment to marketing, from strategy to implementation guided by a constantly reviewed and differentiated brand vision. Such a bank will also make use of a greater degree of advanced technology, including online transactions, but will not shift to a virtual model it will have to retain a real feel. The key findings from the responses of the 58 banks are divided into topic areas as follows, and calibrated replies can be noted in the charts related to the 56 individual questions asked in six key question blocks. Technology The provision of online banking facilities and converging technologies will dominate the retail bank of the future to provide product information, give financial advice and to allow customers to access and manage their accounts online. Ninety-three percent of respondents see an increase in online transactions. Internet banking will be the norm in five years time 86% selected online as one of the top three methods used to contact banks allowing 24-hour availability. ATMs are regarded as one of the main future methods of contact with the customer (62%), which is interesting given reciprocity agreements diminishing branded experience and the discussion about the cashless society. Banks will need to develop powerful technology solutions, driven by customer demand. Bankers still expect personal callers at their branches (56%). Mobile phone contacts are not expected to be that significant (30%) but there is the question of what impact 3G technology will make in the future. Branding Brand reputation and building stronger brands is of crucial significance to bankers planning the future of retail banking in Europe. Ninety-six percent think it is extremely important or important to build up brand reputation and personality to create stronger customer loyalty. The majority thinks that the market will be dominated by strong brands (89%) but there is less support for the creation of new brands (64% disagree or strongly disagree with this). A strong brand is seen as extremely important to attracting customers, differentiating players from their competitors and gaining trust.

Transparency seems to be an important factor for building a strong brand (96%). Opinions drift more apart on the subject of a shift to virtual banks (40% strongly agree or agree whereas 60% disagree or strongly disagree). Seventy-one percent strongly agree or agree over the importance of the development of crossborder networks whereas only 64% see cross-border consolidation coming. Building up brand reputation and personality is regarded as much more important (96%) than building global networks (60%). Bankers think brand reputation and personality create stronger loyalty than physical presence on the high street (83%). More than one third believes that a strong brand does not protect the retail banking business from the effects of economic slowdown and recession. Motivated staff (100%) and internal communications (95%) are considered to be the most powerful drivers to build a strong brand. Products and services The majority of the participants find personalised/individual products and services of high quality and innovation crucially important for supporting customers needs and aspirations. Competence in financial advice is regarded as extremely important or important by 96%. The product offer should be clear (86%) and the breadth of offer is also considered key (70%). The most important ancillary products and services are 24-hour service (57%), pensions (57%), portfolio management (54%), financial consultation (54%) and insurance products (52%), whereas less than 10% consider stockbroking, communication products or legal products as important. Low fees and service charges do not seem to be very significant. They are seen as extremely important or important by only 58%. However, the majority of respondents think that reducing interchange fees for card transactions are less important. Opinion is divided over the one-stop-shop offering all products under a single umbrella. Bank management and development All respondents see the vital contribution of people, in terms of attitudes and knowledge. Bankers acknowledge that it will be their staff who secure their survival in the next five years. Staff need to be skilled, helpful and motivated. Having a company culture, a clear vision and values are important for the majority. Among the most influential tasks/ functions in the organisation for shaping the retail bank of the future, the majority clearly regards customer relationship management (89%) as most important, followed by marketing and communications as well as IT and organisation (both 59%). Sales and quality management are also expected to become more influential (52% and 51%). More than two-thirds think the influence of knowledge management will stay the same. More than one-third (38%) believe acquisitions will play a less significant role in the future. Ethics and transparency are being recognised as significant business drivers. The implementation of performance standards could help to improve financial performance (82%). Local branches are still considered as extremely important or important by 70%. Banks are likely to stay banks free of coffee shops and gimmicks. One-stop-shop and more relaxed ambience in branches are regarded as less important.

One respondent commented that the development of retail banking would depend highly on tax regulations. Communications and marketing Like branding, the importance of communications and marketing cannot be denied. Ninetyfour percent expect marketing to be of growing importance in shaping the retail bank of the future. Furthermore, pro-active marketing is regarded as very important to retain and foster the customer relationship (87%). The bankers questioned see a strong importance of internal communications (see also Branding). Market and customers Banks are becoming more customer focused. The majority agree that a stronger focus should be put on the private client sector (extremely important or important for 83%) as well as on banking for small businesses (89%). Relationships with customers will change considerably although personal contact will still be important. The highest overall agreement is over the growing importance of customer relationship management, including attraction of customers but also building up customer loyalty. Seventy percent of bankers expect their customers to become less loyal and to transfer between banks more frequently. Seventy-seven percent believe ethical management of funds will increasingly influence customer choice. Almost all believe that it is extremely important or important to differentiate from competitors. The analysis of this data could be greatly extended given the wide range of questions and responses shown. And while the results of this survey came from 26 European countries, led by Spain with seven responses, the analysis in many instances provides critical food for thought for retail banks around the world. Business models that focus on core competence suggest that the retail bank of the future might: build core financial products that are highly specialised but sold to retail instructions; commission financial products from specialised manufacturers to be re-branded/whitelabelled and combined with own products; specialise in financial retail, only sourcing appropriate products and packaging as needed, either on demand or through long-term supplier contracts; do everything, build, package, brand and sell own financial products and services.

Bibliography

1. Books and Magazines: Services Marketing By Valarie Zeithaml and Mary Jo Bitner Banking and Finance Business Today Outlook Money

2. Newspapers: Business Standard Economic Times Times of India 3. Brochures and Catalogues Provided By: State Bank Of India Corporation Bank HDFC Bank ICICI Bank Standard Chartered Citibank 4. Internet Web-Sites: Google.com Indiainfoline.com