Imc bhaskar ghosh-indusindppt
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  • 1. Future of Retail Banking- Bhaskar Ghose, Managing Director, IndusInd Bank
  • 2. Recent trends Aggressive entry strategies of foreign banks to Retail Segment Customer retention initiatives by PSU Banks Aggressive price-war on Retail Credit
  • 3. Recent trends contd… Rapid penetration of Personal Computers, Mobile phones and on-line Trading and purchase options encouraged increased usage of technology banking Booming economy and continuous per capita income will further push the living standards of people
  • 4. Recent trends contd… Customers’ preference to more and more alternate channels for convenience Fee based income from remittance is shrinking due to RTGS and other technology initiatives Higher short term interest and flatter yield curves
  • 5. Recent trends contd… Phenomenal rise in nuclear and dual income families & enhanced spending power Increasing literacy levels Higher adaptability to technology banking
  • 6. Recent trends contd…. Growing consumerism Fiscal incentives to Housing loans Fastest economic growth over the decade
  • 7. Retail Liabilities Banks continue to offer valued added Products and Services for customer acquisition and retention Retail Banking technology is gaining its importance due to the continued demand Customer Relationship Management (CRM) is going to be a mandatory requirement for banks to leverage the existing relationship
  • 8. Retail Liabilities contd….. Retail Banking customers are demanding more and more features and product differentiation More and more Retail customers in the age group of 20-35 with high saving potential Future of Retail Liabilities would be from Tier II & Tier III locations
  • 9. Retail Liabilities contd… Alternate delivery channels, channel integration and single sign on expectation from customers Branch Banking channels are going to be business expansion channel than Transaction processing centre More and more customers are moving out of the Branch Banking channel to other alternate delivery channels
  • 10. Retail Liabilities -Future Rate of growth of deposit may be affected by other investment opportunities like Mutual Funds and Bonds Banks may prefer to have sharing arrangements Smart Card/Stored value card would gain importance
  • 11. Retail Credit Retail Credit business shifted from Private Money lenders to NBFCs and Banks in the last decade Now, the shift is from NBFC s to Banks In future, the shift is expected from inefficient Banks to Banks with set processes and quick delivery systems
  • 12. Retail Credit contd…. Loan to GDP ratio is less than 40%, which is only a fraction, compared to the developed economy Every Bank has enough opportunities to perform without unhealthy competition Business potential in Semi urban and Rural areas are very high, which is yet to be explored
  • 13. Retail Credit contd…. Banks overtake HFCs in Home Loans Banks overtake NBFCs in Auto loans The same trend would continue for next few years
  • 14. Retail Credit contd…. Basel II implementation and necessity to have stringent Risk Management systems would exert pressure on Retail lending in future Banks with well defined systems and procedures would emerge as leaders in Retail Credit
  • 15. Retail Credit contd…. Home Loan is expected to grow at 30% Housing loan as % of GDP will touch 10% Used Car finance is growing over 20% rate and is expected to continue
  • 16. Retail Credit contd…. Mix of Retail Credit is expected at – Home Loan 49%, Auto loans 28%, Personal loans 16% and Consumer durables 7% Educational loans which are at a low ebb also expected to grow at 20% in the coming years
  • 17. Retail Credit contd…. Housing and Auto loans together, would continue to contribute to the level of 18% Other Retail advances would move from 8 to 13% Agricultural segment is expected maintain the 10% level
  • 18. Retail Credit contd…. Personal loan segment is also expected to grow @ 20% with higher yield ranging from 12-16% Gross Retail Advances would move to over 40% of total advances in the next 5 years
  • 19. Credit Card business Credit Card issuance at 50% growth rate in 2004-05, compared to 36% growth during the pervious year Credit Card growth is estimated at CAGR of 20% Draft guidelines on Credit Card operations would affect the Credit Card growth Single overall limit for Credit Cards would ensure lower delinquency rate under the segment
  • 20. Retail Credit - Challenges Customer tendency to borrow more and repay less may adversely affect the NPA levels in future Future delinquency rates are not properly factored in fixing the Retail credit pricing by few banks Increased risk weight of Consumer Credit
  • 21. Retail Credit – Challenges contd…. Liquidity mismatches may emerge as an issue Slight change in economic scenario may affect the whole system Existing Retail scoring models may not predict impact of mild recession
  • 22. Retail Credit –Challenges contd…. Lack of Credit information of Retail customers from the Banking system CIBIL is addressing the issue only to a certain extent No system to eliminate multiple finances, including Personal Loans Higher level of NPA from Personal Loans
  • 23. Retail Credit –Challenges contd…. Higher Loan-to-value ratio may emerge as a problem during recession Sale of assets without any control from the bank in the case of Consumer Credit Growing incidents of frauds and cyber crimes
  • 24. Future- for the Customer Future of Retail Banking is for the CUSTOMER Pricing is determined by Customer Competition among Banks would ensure him better service at cheaper rate Customer would be able to discount his future earnings as Retail Credit for his higher standard of living
  • 25. Thank You