Retail Banking

By: Prof: V.K.Agarwal

Retail banking is generally refers to offering financial services, products related to deposits and assets to individual customers for personal consumption. Banks concentrate on various segments like professional, housewives, pensioner, children, salaried class etc. Different types of product like recurring deposit, saving bank deposits, F.D, credit cards, housing & consumer loans are offered by bands of the above mentioned market segments

Current Scenario
Across the globe, retail lending has been a

spectacular innovation in the commercial banking sector in recent years. The growth of retail lending, especially, in emerging economies like India, is attributable to the rapid advances in information technology, the evolving macroeconomic environment, financial market reform, several micro-level demand and supply side factors.

PNB SCHEMES
The loans are marketed under attractive brand names to differentiate the products offered by different banks. As the Report on Trend and Progress of India, has shown that the loan values of these retail lending typically range between Rs.20,000 to Rs.200 lakh. The loans are generally for a of duration of five to seven years with housing loans granted for a longer duration of 25 years. Credit card is another rapidly growing sub-segment of this product group.

PNB SCHEMES..
The products offered in our bank are: Housing loans (Public / NRI ) OD for existing Housing Loan borrowers Conveyance Loan Car & 2 wheeler PNB Vidya Lakshyapurti (Educational loan) PNB Baghban (Reverse Mortgage) Scheme for financing Traders. Contd

PNB SCHEMES
Scheme for financing Property Owners Against

Future Lease Rentals Scheme for financing professional Medical Practitioners Scheme for financing training/ skill up- gradation of construction workers

PNB SCHEMES.
Personal Loan Scheme for Pensioners & Public

PNB Doctor Loan scheme (Gramin Chikitsak)

Gold & Jewellary Advance Consumer Loan PNB Credit Card

Strategies for Future

Performance oriented Leadership Sophisticated marketing & Sales Efficient distribution Channels Superior Credit Policy, Procedures & Skills Reaching to Masses- Higher penetration Customer segmentation/ differentiation Promoting LOW RISK retail lending products Offer an array of products & financial advisory Renewed emphasis on superior execution

by front-line employees

Liability products
Customers deposit savings with bank->liability on

banks side Customer deposit->an ac open->pre decided interest paid->pre decided intervals Liability products-saving & current ac , time (fixed &recurring) & demand deposits(saving bank ac,no frills &current ac)

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 According to KYC norms banks segregate

customers low, medium & high risk categories In India all customer deposit ac are insured by Deposit Insurance and Credit Guarantee corporation(DICGC) If ban liquidated each customer deposit in that bank is repaid up to Rs100000.

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Savings Account
Customer deposit or withdraw.

ATMs instant cash withdrawals &balance enquiry

Debit cards for cashless transaction shopping or

purchasing Banks invest >avenues-> pay modest interest to customers Examples-ICICI Young stars ac

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No Frills Account
Saving ac with zero balance or low minimum

balance facilty->for financial inclusion of poor people in financial system Ex:-Allahabad bank & UCO introduced >mandate Rs. 5 as minimum balance For ATM & cheque book facility they charge Rs250

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Current account
Maintain a minimum balance ->bank pays no

interest on amount deposited->allows user to make unlimited transactions in a day Used to pay rents, taxes, utility bills, Insurance premiums etc.

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Fixed deposit/Term deposit

Is a time deposit->deposits for pre decided time-

>interest on->at pre decided intervals Money withdrawn after maturity->but bank pays less interest Some banks allow partial witdrawal at ATM machines Are also link to safe deposit locker facility.

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Recurring deposit
Allow customer to save small amount of money

every month. Aimed at those ->having high expenditure during month yet would save money for future Banks pays modest interest for amount saved quaterly , half yearly Ex:-June 2006 SBI was 6.00% ICICI 6.25%

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ASSET PRODUCTS

 An asset is something that bank holds in terms of

credit given to customer. The interest rate charged are different for different products. Fixed Floating Customers are protected against variations in case of fixed rates.

Types of Asset Products

Housing Loan

Personal Loan
Education Loan Gold Loan Property and Mortgage Loan Vehicle Loan Agricultural Loan

Housing Loan
It forms the majority of asset portfolio for a retail

bank. It gives financial assistance to customers to construct a house/land. Bank considers many factors such as customer age ,qualification and asset owned etc. Many bank prefers floating rates.

Personal Loan
Bank gives Personal loans to customer to help

them meet personal exigencies like marriage , travel, medical etc. Personal loan given depends on customers creditability and repayment ability. Bank considers customer information like age, income, stability, track record etc. Interest charged is generally fixed rate.

Property loan/Mortgage Loan

It is traditional banking Product.

It is generally offered by public sector banks.

Property assets like land, building, vehicles,gold

etc are mortgaged. Bank decides the amount of loan given against security. Interest rates are fixed based on market rates.

Agricultural Loan
It includes crop loan, farm equipment loan, term loan

etc. Other includes land purchase loan, land development loan, irrigation loans. Certain Property is mortgaged/Hypothecated against the loan. Many banks provides loan cards for farmers to access the funds. Banks that give this loan include SBI and ICICI etc.

Vehicle Loans
Bank provides loans for purchase of two

wheelers, four wheelers and commercial vehicles. Vehicle loans are usually financed up to 85-90% of total invoice amount. Repayment is usually done through EMI. Period ranges from 6 months to 7 years.

Conclusion
Retail banking offers opportunities to banks to cross sell various

other retail products like credit card, insurance, mutual fund product and demat facilities to the depositor. Before the reforms, most of the products offered by banks were multiple, which the customer had no option except to accept or leave them. Retail banking has become the buzzword in banking. It is the flavor of the year. A critical assessment of the foregoing scenario indicates that retail banking is, at present, the only shortcoming left with banks is to survive in this era of falling interest. Banking is undergoing rapid changes worldwide and India is no exception. The financial sector reforms aimed at deregulation, liberalization and globalization of Indian banking has changed the entire scenario of Indian banking. Satisfaction to customers in banking has given way to innovation.
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