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Retail Banking

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A Summer Internship Project on Retail Banking at Indian Overseas Bank, Regional Office, Patna, By Madhusudan Narayan

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Retail Banking

  1. 1. Retail Banking/ Madhusudan Narayan P a g e | 1 A Project Report On “RETAIL BANKING” For By Madhusudan Narayan Under the guidance of Mr. Sanjay Kumar Mr. Ramakant Behra Senior Marketing Manager Marketing Manager Rapid Retail Centre, Patna Patna Regional Office Indian Overseas Bank, Patna Indian Overseas Bank, Patna “In partial fulfilment of the requirements for the award of the degree of Master of Business Administration (MBA)” Submitted to Department of Management Studies National Institute of Technology Durgapur
  2. 2. Retail Banking/ Madhusudan Narayan P a g e | 2 DECLARATION I hereby declare that the project report titled “RETAIL BANKING” WITH REFERENCE TO “INDIAN OVERSEAS BANK” d o n e b y m e u n d e r g u i d a n c e o f M r . S a n j a y K u m a r , ( S e n i o r M a r k e t i n g M a n a g e r , R . R . C . , I O B P a t n a ) a n d M r . R a m a k a n t B e h r a , ( M a r k e t i n g M a n a g e r , R . O . , P a t n a ) is my original work and has not been published or submitted for any degree, diploma or other similar titles elsewhere. This has been undertaken for the purpose of partial fulfilment of the award of Master of Business Administration (MBA) at National Institute of Technology, Durgapur (West Bengal). Date: 16/ 07/2014 MADHUSUDAN NARAYAN Place: Patna, BIHAR Roll No.: 13/MBA/75 Session: 2013-15
  3. 3. Retail Banking/ Madhusudan Narayan P a g e | 3 PREFACE Retail banking refers to banking in which banking institution execute transactions directly with customers, rather than corporations or other banks. Services offered include: savings accounts, mortgages, personal loans, debit cards, credit cards and so forth or it is a typical mass-market banking where individual customers use local branches of larger commercial banks. This project report attempts to bring under one cover the entire hard work and dedication put in by me in the completion of the Summer Internship Project on Retail Banking with reference to Indian Overseas Bank. I have expressed my experiences in my own simple way. I hope who goes through it will find it interesting and worth reading. All constructive feedback is cordially invited. I am personally Grateful to Chief Regional Manager, Regional Office, Patna and, Chief Manager, RRC, Patna who gave me an opportunity to undertake my project in IOB Rapid Retail Centre, Patna. I would also like to express thanks towards all managers, staff, and to all those who directly or indirectly helped me in successfully execution of my work. It is impossible to list all the people who have helped me during my project. I would like to thank my Project guide Mr. Sanjay Kumar (Senior Marketing Manager, Rapid Retail Centre, Patna, IOB), Mr. Ramakant Behra (Marketing Manager, Patna Regional Office, IOB) and Mr. Abhishek Tiwari (Marketing Manager, IOB, Amritsar) without their help it wouldn’t be possible for me to complete the project at the stipulated period of time for abundant guidance, support, and encouragement throughout my internship Study. Last but not the least I would like to articulate my deep sense of respect to my Father Prof.(Dr.) S.B. Verma, Professor of Commerce, and my mother Late Dr. Hema Verma, Deputy Collector, B.A.S. (Bihar Administrative Service) she is not alive today but her invisible soul had always inspired me, and Uncle Er. Sudhir Kumar Verma, for abundant guidance, support, and encouragement throughout my internship Study. Madhusudan Narayan Roll no.: 13/MBA/75 Session: 2013-15
  4. 4. Retail Banking/ Madhusudan Narayan P a g e | 4 Table of Contents EXECUTIVE SUMMARY.....................................................................5 LITERRATURE REVIEW...................................................................10 INTRODUCTION TO THE CONCEPT: .........................................................12 INDUSTRY PROFILE.....................................................................14 COMPANY PROFILE......................................................................17 VISION CORE VALUES MISSION .............................................19 PRODUCT AND SERVICES ...............................................................20 PERSONAL BANKING ...................................................................20 DEPOSIT PRODUCTS ...................................................................20 RETAIL CREDIT SCHEMES ..............................................................27 VARIOUS RETAIL LENDING SCHEMES .....................................................31 WORK FLOW MODEL......................................................................32 MCKINSEY’S SEVEN S MODEL .............................................................34 STRUCTURE..........................................................................36 SKILLS.............................................................................37 STYLE /CULTURE .....................................................................37 STRATEGY...........................................................................38 SYSTEM.............................................................................39 STAFF..............................................................................39 SHARED VALUE .......................................................................39 SWOT ANALYSIS........................................................................40 RESEARCH METHODOLOGY.................................................................42 TITLE OF THE PROJECT ...............................................................42 STATEMENT OF THE PROBLEM ...........................................................42 OBJECTIVES OF STUDY ................................................................42 OPERATIONAL DEFINITION .............................................................42 DATA COLLECTION ....................................................................42 SAMPLING TECHNIQUE .................................................................43 PLAN OF ANALYSIS ...................................................................44 LIMITATIONS ........................................................................45 DATA ANALYSIS AND INTERPRETATION .....................................................45 S.P.S.S............................................................................54 FACTOR ANALYSIS ....................................................................54 SUMMARY OF FINDINGS..................................................................64 SUGGESTIONS & RECOMMENDATIONS: .......................................................65 CONCLUSIONS – FUTURE GROWTH ..........................................................67 LEARNING EXPERIENCE..................................................................68 ANNEXURE.............................................................................69 BALANCE SHEET ......................................................................69 QUESTIONNAIRE ......................................................................70 BIBLIOGRAPHY .......................................................................71
  5. 5. Retail Banking/ Madhusudan Narayan P a g e | 5 EXECUTIVE SUMMARY In recent years, the financial services industry has been characterised by increased global competition, the transition from paper-based to electronic products, and a raft of regulatory changes. The relentless march of technology has allowed banks to extend the scope of their activities and increase their operational efficiency, automating critical functions such as credit checking and loan approvals. At the same time, the rapid growth of electronic payments has exposed the weaknesses of complex legacy batch-processing systems and prompted the adoption of new technologies that store and transfer critical information in real time. This digital revolution is also presenting new challenges in terms of ensuring data security and protecting customers from fraud across multiple service-delivery channels. Against the backdrop of rapid technological progress, the changing behaviour of customers and target customers has become a critical consideration for banks. As the cost of PCs, processing power and memory continue to fall, customers are increasingly interacting with banks in a virtual world, as well as through more traditional channels such as branch visits and contact centre calls. As a result, banks that fail to innovate and compete effectively across all channels may risk losing market share to a new generation of tech-savvy competitors. In this environment, technological innovation is recognised as a key differentiator among banks today. Institutions in the west increasingly use technology, such as customer segmentation and accessibility Software, to tailor services to the needs of specific customer groups, including older people, young people, or people with disabilities. At the same time, banks in emerging markets are exploring the potential of online and telephone Channels to deliver services to
  6. 6. Retail Banking/ Madhusudan Narayan P a g e | 6 rural, geographically-distributed populations in the most cost-effective way possible. The Retail Banking environment today is changing fast. The changing customer demographics demands to create a differentiated application based on scalable technology, improved service and banking convenience. Higher penetration of technology and increase in global literacy levels has set up the expectations of the customer higher than never before. Increasing use of modern technology has further enhanced reach and accessibility. The market today gives us a challenge to provide multiple and innovative contemporary services to the customer through a consolidated window as so to ensure that the bank's customer gets "Uniformity and Consistency" of service delivery across time and at every touch point across all channels. The pace of innovation is accelerating and security threat has become prime of all electronic transactions. High cost structure rendering mass market servicing is prohibitively expensive. Present day tech-savvy bankers are now more looking at reduction in their operating costs by adopting scalable and secure technology thereby reducing the response time to their customers so as to improve their client base and Economies of scale. The solution lies to market demands and challenges lies in innovation of new offering with minimum dependence on branches:- A multi-channel bank and to eliminate the disadvantage of an inadequate branch network. Generation of leads to cross sell and creating additional revenues with utmost Customer satisfaction has become focal point worldwide for the success of a Bank.
  7. 7. Retail Banking/ Madhusudan Narayan P a g e | 7 TITLE OF PROJECT “A Study on Retail Banking with special reference to INDIAN OVERSEAS BANK” STATEMENT OF THE PROBLEM As there are immense opportunities of the retail banking in India. This dissertation is on the issues and challenges in the retail banking because of the competition of the various banks and the customer satisfaction of the services which the banks are providing and at the same time to solve the complaints of the customer and maintaining the sound relationship for the future and by this way to estimate the future growth of the retail banking. OBJECTIVES  To study the issues and challenges in retail banking.  To study the recent trends in retail banking.  To ensure high satisfaction level and reduce percentage of complaints of customers in retail banking.  To estimate the future growth of Indian retail banking.  To understand Optimization of retail banking channels.  To suggest strategies for improvement in Customer Service.
  8. 8. Retail Banking/ Madhusudan Narayan P a g e | 8 DATA COLLECTION Data was collected from two sources-primary and secondary sources. 1. Primary data collection- The primary data was collected by means of survey. It was collected from different customers through questionnaire. 2. Secondary data collection-This data was collected from Internet, Company’s websites, Books & Magazines. SAMPLE SIZE Sample size was restricted to 50 respondents, since it was not possible to cover the whole universe in the available time period. SAMPLING METHOD For this research Non- Probability Convenience Sampling has been used because time limit for the completion of the work is limited and also managers and employees were not available all the time. Area of Study – Patna, Bihar Duration - 2 months (13th May 2014 – 16th July 2014)
  9. 9. Retail Banking/ Madhusudan Narayan P a g e | 9 SUMMARY OF FINDINGS  44% of the Respondent are availing IOB service on Friends/ Relative Recommendations. It shows IOB Customers are its Brand Ambassadors.  94% of Customers are Happy with Brach timing and they believe it is very good.  98% of Respondents like the Brach ambience & Layout and find it friendly.  There is Tremendous change in Bank Segmentation, as per Bank officials IOB is having around 30%-40% of its customers above the age of 60. But in Survey 94% of the Respondent were below 45 Years.  94% of respondents responded that Branch personnel had been very helpful and courteous  86% of the Customers are Happy with the Minimal time at Teller Counter.  94% of the Customers are Happy with Smooth and Error Free Transactions.  98% of the Respondent are in favour that IOB taken necessary action on their Feedback.  42% of the Customers are Unhappy with the IOB’s E-Product.  88% of the Respondent are Happy with good customer relation and quick services  96% of the Respondent are happy processing procedure while availing different services provided by IOB.  98 % of the Respondent feels satisfied cooperation of the bank employees in processing and helping them in documentation, services and problem faced by them in banking issue.  84% of Respondent are happy with Turn around Time (TAT).  36% and 50% of the Respondent were over satisfied and Satisfied Respectively with Overall level of Satisfaction. SUGGESTIONS  42% of the Respondent are unhappy with E-Products so bank personnel should improve this issue because customer is a source through which business can be increase and satisfy customers is a source to create more customers.  Bank should introduce/ Open new ATMs Especially in Bihar because there is much Scarcity of IOB-ATMs.  24% of the Respondent were not fully satisfied with Branch Personnel cooperation in sorting out problems faced in banking issue, IOB should work on this because CRM is the major aspect of any Business.
  10. 10. Retail Banking/ Madhusudan Narayan P a g e | 10 LITERRATURE REVIEW Indian Banking industry is one of the most technologically advanced industries with vast networks of branches empowered by strong banking systems, their wide range of product and effective distribution channel capabilities. However, regulatory, structural and technological factors are significantly changing the banking environment throughout the world. One of the most important factors that is motivating the growth of the Indian banking institutions is the liberalization. The financial sector reforms in India were designed to infuse greater competitive vitality in the banking system. To achieve this objective, the “Narsimhan Committee” was formed. The Narsimhan Committee report suggested wide ranging reforms for the Indian banking sector in 1992, including the important one to introduce internationally accepted banking practices so as to enable Indian banks to achieve service excellence. The Committee recommended a liberal policy towards the entry norms of private sector banks and foreign banks into the Indian banking sector. The Interest rate structure has been deregulated to a great extent and banks have been given a great degree of freedom in determining their rate structure for deposits and advances, as well as their other product range. Banking has also become more competitive in respect of branch network. The end result is that market power is getting shifted from banks to their customers. Financial liberalization has led to intense competitive pressures, and retail banks are consequently directing their strategies towards increasing customer satisfaction and loyalty through improved service quality. With such a high potential in the Indian banking industry, all leading banks are looking ahead to establish themselves as the most preferred bank by the customers and this can only happen when they are able to differentiate themselves on the basis of service quality being offered by their competitors. Retail Banking has immense opportunities in a growing economy like India. As the growth story further unfolds in India, retail banking is going to emerge a major driver of economic growth. A.T. Kearney, a global management consulting firm, recently identified India as the second most attractive retail distribution center of 30 emergent markets. Dhandapani Alagiri (2007) in his article entitled as, “Retail Banking: Challenges” has focused on the Retail banking with increased consumer spending and increased challenges in the form of competition and technological upgradation that comes along. Product innovation and competitive packaging services are the most important issues for the new generation customers. It has increased the uses of the mobile and e-banking facilities, security and confidentiality have become very difficult to maintain and that has become a major challenge for the banks. The study emphasized that credit delivery mechanism improved considerably with the advent of technological advances and more methodical
  11. 11. Retail Banking/ Madhusudan Narayan P a g e | 11 credit evaluation and credit scoring models. The study also dwells on the implications of Basel II for retail banking S.Venkata Seshaiah & Vunyale Narender (2007) in their study entitled as, “Factors Affecting Customer’s Choice of Retail Banking”, have identified various factors affecting customer’s choice and study consumer behavior with respect to the people’s choice of retail banks. In this study efforts have been made to go deep into the psychology of the customer’s loyalty. Through a survey is different factors have been identified (1) Safety of deposits (2) size and strength (3) Accuracy (4) General Survey Quality (5) Speed of delivery (6) proximity (7) Security of Environment (8) Cordiality of staff (9) Price & services charges (10) Product packaging (11) General Public Impression (12) Peer Group Impression (13) Face lift (Structural) (14) Friendship with staff (15) advertising & Publicity. The findings showed that retail banking must reorganize their activities to achieve their corporate mission through customer orientation. Sudhir (2005) in his study entitled as, “Growth Pattern of Retail Banking” emphasizes that existing potential of Retail Banking was untapped in rural and semi-rural areas and that untapped clientele provided a good and vast opportunity for growth in this segment Tapan K. Panda & Bivraj Bhushan Parida (2006) in their study entitled as “Customer Relationship Management in Retail Banking in India” talk about the implementation of CRM principles in Retail banking sector, analyze the need for drivers of CRM implementation and the challenges associated with illustration of HDFC Bank and PNB. The article discusses the retail banking challenges like customer retention and finding new customers and the need for implementing CRM in this sector. The study revolved around the perception that the CRM has opened a new path to the world of customer intelligence. In today’s environment business decision & strategies are made looking at the proximity to customers. The market research report by RNCOS (2006), entitled as “Booming Indian Retail Banking Sector” provides extensive research and rational analysis of the opportunities, challenges and drivers critical to the growth of the retail banking Industry in India. The future overview of the industry in terms of asset size, number of financial cardholders and various other important features. The future forecast discussed the prospects of different arms of banking Industry, including rural banking by bank assurance, financial cards, mobile banking, role of technology in retail banking, pension fund and future course of action or strategies for Retail Banking.
  12. 12. Retail Banking/ Madhusudan Narayan P a g e | 12 INTRODUCTION TO THE CONCEPT: RETAIL BANKING AN INTRODUCTION “Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks”. Retail banking refers to banking in which banking institution execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings accounts, mortgages, personal loans, debit cards, credit cards and so forth or it is a typical mass-market banking where individual customers use local branches of larger commercial banks. Drivers of Retail Growth:  Growing disposable incomes  Increasing literacy levels  Higher adaptability to technology  Growing consumerism  Changing mindsets-willingness to borrow/lend Retail banking has become a very important component in the business mix of banks. Retail banking offers multiple comfort factors for banks to do business. Large and divergent customer base across income segment offers huge scope for banks to develop and offer multiple products and services. In addition to traditional products and services offered by banks over the years, the retail model has undergone rapid innovation in the past decade with regard to products, processes, people and technology. Technology has become the driver for retail banking explosion, and technology products like ATM, Internet Banking, Mobile Banking, Card products like Debit Cards and Credit Cards and remittance products like RTGS and NEFT are making their presence felt in retail space. Banks are embracing different strategies, redesigning their conventional business silos, reengineering their channels, product and services to increase the share of customer wallet. A bank functions can be divided into various divisions like: Retail/Personal Banking: This division provides a range of financial services to individual customers and small companies. It operates mainly through branch networks. Retail banking includes routine transactions like deposits and
  13. 13. Retail Banking/ Madhusudan Narayan P a g e | 13 withdrawals of money; money transfer; foreign currency exchange and traveller's cheque encashment. They also deal with personal and small loans, credit and mortgages; insurance policies; investment schemes; pension funds; and advice to customers on various financial matters. Apart from offering home loans, car loans, educational loans, consumer loans, etc. they also develop various deposit schemes and help people fill their offers. Corporate Banking: They deal with medium to large-scale companies and government agencies. It could start at the local branch manager level, though more complex dealings are routed through corporate divisions of clearing banks and their merchant banking subsidiaries. Corporate banking deals with credit and advances, trade finance, foreign exchange management, asset management, lease financing of heavy equipment, infrastructure, machinery, credit risk assessment, etc. They also advise clients on matters such as corporate mergers and acquisition, raising capital and business strategy regarding competitors and outside factors. Merchant Banking: Investment management is the primary activity of this group. It could be on behalf of corporate clients, or institutional investors-like pension funds, investment trusts, or those in the securities business. This groups also handles public issue and marketing of shares, debentures and other such papers. It may also include other stock market functions like dematerialization services, investment advisory services, etc. Merchant banking executives research into capital market, advice and manage funds of various corporate and individual customers. Treasury group: This group takes care of the total funds of a bank including foreign exchange reserves. Responsibilities include bank portfolio management, dealing in foreign currency, etc. There are Forex (foreign exchange) dealers in this group who exclusively deal with the foreign market. They buy and sell foreign exchange at the minimum exchange cost thereby earning maximum profit from the transactions. Rural Banking: This group deals with the banking and credit needs of people in the rural sector. Not all banks have this group and some banks have separate subsidiary companies for rural banking. Product Management: This group conceptualizes various banking services and
  14. 14. Retail Banking/ Madhusudan Narayan P a g e | 14 then develops; implements and manages them. They have the responsibility for a banking product (meaning services like personal loans, home loans, credit cards, loans against shares, educational loans, etc.). Apart from these main functional groups, there is an appraisal group to analyse economic feasibility of industrial projects, the bank's exposure to financial risk and long term returns. There are internal auditors who audit the bank's internal books of accounts. There are various groups of professionals like lawyers, engineers, agricultural scientists, chartered accountant, company secretary, cost accountant and economists who work in various departments in advisory capacities. They help make decisions on issues that are legal, technical or economic in nature. For example, the economist advises various functional groups on the implications of the Union budget on the business of the banks, consumer buying pattern, etc. INDUSTRY PROFILE INDIAN BANKING SECTOR The Indian Banking Sector is quite different from the banking system in the rest of Asia, because of the distinctive geographic, social and economic characteristics of the country. India is the second most populated nation in the world; it has marked economic disparities and high levels of illiteracy. The country followed a socialist approach for well over 4 decades after independence till the government initiated the economic reforms through the policy of liberalization. The banking structure in India is therefore a reflection of the countries socialistic set up. It had to meet the goals set by the five year plans, especially with regard to equitable distribution of wealth, balanced regional economic growth and removing private sector monopolies in trade and industry. The government nationalized the banks in 2 different phases (1969 and 1980). On July 19, 1969, 14 major banks of the country were nationalized and on 15th April 1980, six more commercial private sector banks were taken over by the government. As a consequence the banking system in India concentrated on the domestic sector; very few banks in India had a presence internationally. The nationalized banks had a social obligation of taking the banking sector to the people by expanding the branches and by getting more people to open an account.
  15. 15. Retail Banking/ Madhusudan Narayan P a g e | 15 SCOPE FOR RETAIL BANKING IN INDIA It is reported that Indian retail market has the potential to be second only to the USA. National Readership Survey 5puts Indian households with monthly of over Rs. 5000 at 4.5 million. According to the survey, the category of households with annual income of Rs. 2 lakhs and above is growing at the rate of 30 per cent per annum. No wonder, banks with vision and insight are trying to woo this market through a series of innovative additions to their products, services, technology and marketing methods. Fixed and unfixed Deposits, (cluster deposits which can be broken into smaller units to help meet depositors’ overdraft without breaking up entirely), centralised database for ‘any branch banking’ (whereby the customer can access his account in any of the branches irrespective of where the account is maintained), room services (whereby the customers are visited at their residences offices to enable them to open their accounts), automatic teller machines, tele banking network, extended banking time, courier pickup for cheques and documents, etc. are some of the privileges extended to the customers by the banks in are eagerness to cultivate the retail market. In short, in the bold new world of retail banking the customer is crowned as king. RETAIL BANKING-A COOL OASIS Retail banking is much more than as opportunity to addressing dwindling margins. It is an imperative to preserve profits and market positions. Customers now have many more personal financial options, a growing credit culture, a willingness to switch between financial services providers, and a demand for lower interest rates. As they witness these trends, banks realize that they cannot remain passive. The new private sector banks are making inroads in the markets they serve, while competition from non-banks is growing. In respect, older institutions need to revamp their distribution capabilities, customer management capabilities, operating culture, compensation system and operations processing. The bankers struggling through the shifting sands of corporate credit, retail banking looks like a cool oasis. Corporate Credit, retail banking looks like a cool oasis. Corporate customers rely less on commercial banks every day as other fund raising avenues present themselves. As this disintermediation takes place and competition shrinks margins, retail banking has gained an irresistible allure for banks because of its apparently higher margins and potential for growth. With their large branch networks, banks have secured sizeable deposits 23% (Percent) of GDP. On the assets side, however, retail advances account for a mere seven per cent of total lending. The penetration of products like car loans
  16. 16. Retail Banking/ Madhusudan Narayan P a g e | 16 or credit cards is very low. With very few focused multi-line banks, non-banks are often significant players in retail lending, as HDFC is in house loans. Yet, many non-banks lack the minimum size to make the necessary investments and address the challenges of retail banking. A large number of banks have launched or relaunched retail products and are attempting to grow their share of the personal financial services market. Even the term lending institutions have decided that they need to go retail to raise funds. Many organization like ICICI are betting that a large part of their future growth will come from retail customers. All round increase in economic activity. Increase in the purchasing power. The rural areas have the large purchasing power at their disposal and this is an opportunity to market Retail Banking. India has around 200 million households and 400 million middleclass population more than 90% of the savings come from the house hold sector. Falling interest rates have resulted in a shift. "Now People Want To Save Less And Spend More." Nuclear family concept is gaining much importance which may lead to large savings, large number of banking services to be provided are day- by-day increasing. Tax benefits are available for example in case of housing loans the borrower can avail tax benefits for the loan repayment and the interest charged for the loan. 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. First, 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%. It also had to play a supportive role to other sectors of the economy like agriculture, small scale industries and exports.
  17. 17. Retail Banking/ Madhusudan Narayan P a g e | 17 COMPANY PROFILE Type Public Sector Bank Traded as BSE: 532388 NSE: IOB Industry Banking, Financial services Founded 10th Feb 1937 Headquarters Chennai, India Number of locations 3,388 branches (2014) and 2,795 ATMs (2014) Key people  M.Narendra (Chairman & MD)  A.D.M Chavali (Executive Director)  Atul Aggrawal (Excutive Director) Product  Term Deposit, Retail ,MSME, Agriculture Loan Services  Finance and insurance  Consumer Banking, Corporate Banking Total income 6,47,593 (March 2014) In Lakhs Operating Profit 1,19,909 (March 2014) In Lakhs Net Profit 26,833 (March 2014) In Lakhs Website www.iob.in
  18. 18. Retail Banking/ Madhusudan Narayan P a g e | 18 INDIAN OVERSEAS BANK : INTRODUCTION INDIAN OVERSEAS BANK (IOB) was founded on 10th February 1937 by Shri. M.Ct.M. Chidambram Chettyara pioneer in industry, banking and insurance. He founded IOB to cater the banking needs of Indian traders in south Asia. At the time of India’s independence, the Bank had 38 branches in India and 7 branches abroad. Deposits amounted to Rs.6.64 crores and Advances Rs.3.23 crores. During the 1960s Indian Banking witnessed strong wave of mergers of weak private sector banks with stronger institutions. IOB itself took five banks into its fold, which helped the Bank widen its reach. The Bank has been attending to the needs of small industry and agriculture since long. Personal loans were given by the Bank right in the early 1950s when the concept was new to the banking industry. Customer service was given top priority by the Bank ever since inception. The Bank also gave importance to mechanization for improving customer service as early as in the 1960s. IOB was youngest the one of 14 major banks which were nationalised in 1969. Indian Overseas Bank (IOB) is a major bank based in Chennai (Madras), having branches in India and abroad with more than 3,388 domestic branches (as on 31.03.2014) and 13 Branches in Foreign Countries. Indian Overseas Bank has an ISO certified in-house Information Technology department, which has developed the software that 3,388 branches use to provide online banking to customers; the bank has achieved 100% networking status as well as 100% CBS status for its branches. IOB also has a network of 2,795 ATMs all over India (as on 31.03.2014) and IOB's International VISA Debit Card is accepted at all ATMs belonging to the Cash Tree and NFS networks. IOB offers internet Banking & Mobile Banking and is one of the bank that the Govt. of India has approved for online payment of taxes. The bank business more than doubled in the last four years.
  19. 19. Retail Banking/ Madhusudan Narayan P a g e | 19 VISION CORE VALUES MISSION VISION To be among the top five nationalised bank in terms of business volume and sustained profitability with global recognition guided by high standards of governance and ethics; and emerge as a “Most preferred Banking partner” to unlock the value of its stakeholders” CORE VALUES Customer centricity  Good people to grow with  Touching heart and spreading smiles  Honesty, Integrity, Fairness & Transparency  Build leaders for industry  Team of skilled and dedicated employees  Innovation and Risk Appetite  Green Banking MISSION  Deliver best of competitive products in terms of quality, range, utility and cost effectiveness.  Optimize HR resources through training, exposure, mentoring and incentive, relying on the “soft touch” instead of “big stick”.  Develop quality bankers who would rise to be future leaders of the industry.  Contribute to country’s economic growth through dedicated efforts and customer focus.  Streamline the process of service delivery from time to time to meet emerging requirements.  Nurture a climate of creative problem solving to resolve customer grievances with ability ensuring that the bank regarded as customer centric.  Emphasize a policy oriented and rule- driven culture of compliance to meet evolving requirements.  Engineer CRM (customer relationship management) and insights gain for further enhancement of product and service quality.  Expand IT infrastructure to deliver all banking services from “one tap” irrespective of customer location.  Adopt a multi-disciplinary approach to facilitate future growth through the evolution of “Banks with in the Bank”
  20. 20. Retail Banking/ Madhusudan Narayan P a g e | 20 PRODUCT AND SERVICES PERSONAL BANKING Personal banking of Indian Overseas Bank is further divided into these main categories: i) Saving Bank ii) Current Account iii) Term Deposit iv) Retail Loans v) Home Loans and Mortgages vi) Depository Services vii) ABSA (Application Supported by Block Amount) viii) International VISA Cards ix) Insurance and Mutual Funds x) Real Time Gross Settlement (RTGS) xi) Pension Payment Scheme xii) Saving Scheme DEPOSIT PRODUCTS  Saving Bank Account  SB Regular  SB Basic/Small  SB Little Star  SB Silver  SB Gold  SB Platinum  SB Student  SB Corporate Salary Account  Term Deposit  RD Gold  Recurring Deposit  Reinvestment Deposit  Special Fixed Deposit  Easy Deposit  Wedding Deposit  Education Deposit  Vardha (for Senior Citizen)  Tax Saver Deposit
  21. 21. Retail Banking/ Madhusudan Narayan P a g e | 21  NRI Accounts  Foreign Currency (Non Residence)  Non Residence External  Non Residence Ordinary  Resident Foreign Currency  IOB NRI Plus  IT Products  IOB VISA International Debit Card  Internet Banking  Mobile Banking  IOB VISA International Credit Card  IOB-AMEX Gold Charge Card  Insurance Products  IOB Jeevan  IOB Health Care Plus  Vidya Jyothi With Suraksha  Liability Insurance  Gold Coin  Gold Coin  Third Party Products  Life Policies LIC  Non Life Polices – USGICO  Mutual Funds  Current Deposit  CD Regular  CD Classic  CD Super  CD Supreme  Tax Saver Products  Tax Saver Deposit  IOB Health Care Plus  IOB Jeevan  Housing Loan – Subha Gruha  LIC Tax Saver Plans  ELSS Mutual Funds  Retail Credit Schemes  Home Improvement Scheme  Home Décor  Home Loan for NRIs  Housing Loan – Subh Gruha  Vehicle Loan – Pushpaka  Clean Loan  Pensioner’s Loan  Sahayika  Sanjeevani  IOB Akshay  Easy Trade Finance  Education Loan –Vidya jyothi
  22. 22. Retail Banking/ Madhusudan Narayan P a g e | 22 Deposit Products Documents Required for Opening a Saving A/c PROFF OF IDENTITY  1. Voter ID  2. Driving License  3. Passport  4. PAN Card  4. Any other ID card (subject to Bank 5. Satisfaction)  6. Letter from recognized public  authority or Public servant verifying  the photograph to bank’s satisfaction RESIDENCE PROFF  1. Ration Card  2. Current Telephone Bill  3. Latest Electricity Bill  4. Bank a/c passbook / statement  5. Registered Lease deed  6. Letter from any recognized public authority  7. Property tax book / Receipt  8. Letter from employer to Bank’s satisfaction  Any one or more document(s) which provide customer information to Bank’s satisfaction SB – Regular • Minimum Balance: Rs 500/- (with Out Cheque Book) & Rs 1000/- (With Cheque Book). • Interest rate at 4.00 % on Daily Product Basis. • Free International VISA Debit Card • SMS alerts for daily transactions. • Free Internet & Mobile Banking Facilities • Anywhere Banking & ASBA Facility Available • Online Tax payment facility. • Utility Bill payment facility • Life & Health Insurance cover available at affordable premium. SB – Silver • Account can be opened with '0' balance. • Minimum Average daily balance - Rs.5,000. • Free International VISA Debit Card • SMS alerts for daily transactions. • Free Internet & Mobile Banking Facilities • Anywhere Banking • Online Tax payment facility. Deposit Products
  23. 23. Retail Banking/ Madhusudan Narayan P a g e | 23 • Free Personal Accident Insurance cover for Rs. 1 lakh • Utility Bill payment facility • Overdraft facility up to one-month salary in case of salary earners. SB – GOLD • Minimum average quarterly daily balance is Rs.50000. • Free International VISA Debit Card • SMS alerts for daily transactions. • Free Internet & Mobile Banking Facilities • Any where Banking • Sweep in – Sweep Out Facility • Online Tax payment facility. • Free Personal Accident Insurance cover for Rs. 5 lakh • Utility Bill payment facility • Personalized cheque books free of cost. • Preferential rate for gold coins ( Concession of Rs 15/- per Gm). SB – Platinum • Minimum Balance : Rs 750/- • Free 75 Cheque Leaves per annum • Free International VISA Debit Card • SMS alerts for daily transactions. • Free Internet & Mobile Banking Facilities • Free Personal Accident Insurance cover for Rs 75,000/- • Transfer of funds through RTGS/NEFT (75% concession on charges). • Any where Banking • Online Tax payment facility. • Utility Bill payment facility • Life & Health Insurance Cover available at affordable premium. SB – Student • For the students from the age of 16 Years • Minimum Balance : Rs 500/- • Free 60 Cheque Leaves per annum • Free Multipurpose Usage Card • SMS alerts for daily transactions. • Free Internet & Mobile Banking Facilities • Free Personal Accident Insurance cover of Rs.1 Lac • Transfer of funds through RTGS/NEFT • Any where Banking • Online Tax payment facility. • Utility Bill payment facility
  24. 24. Retail Banking/ Madhusudan Narayan P a g e | 24 • Life & Health Insurance Cover available at affordable premium. SB – Corporate Salary Account • Zero Balance Salary Account for Employees of reputed organization. • Free 60 Cheque Leaves per annum • Free IOB International VISA Debit Card • SMS Alerts for all transactions. • Withdrawal up to Rs 50,000 per Day in ATMs • Free Internet Banking Facility • Free Mobile Banking Facility • Free RTGS/NEFT Facilities • Free Personal Accident Cover for Rs 1 Lac • Over Draft Facility* & much more • Life & Health Insurance cover available at affordable premium. Current Account CD - Regular • Minimum Balance Rs 2000/- for Metro & Urban Branches & For others Rs 1000/- only. • Internet Banking Facility • Any where Banking • NEFT & RTGS Facilities • Cheque Book facility • Online Tax payment facility. • Utility Bill payment facility • Multicity Cheques facility • ASBA facility available. CD - Classic • Minimum Balance > 1 Lac daily Balance over 3 Months • Free Internet Banking Facility & Any where Banking • Free NEFT,25% concession on RTGS • Free Personal Accident Cover for Rs 1 Lac • Free name- Printed Cheque Books • Online Tax payment facility. • Utility Bill payment facility • 50% concession on Multicity Cheques, Folio Charges & DD Charges • ASBA facility available. CD - Super • Minimum Balance > 5 Lac daily Balance over 3 Months • Free Internet Banking Facility & Any where Banking • Free NEFT,50% concession on RTGS
  25. 25. Retail Banking/ Madhusudan Narayan P a g e | 25 • Free Personal Accident Cover for Rs 5 Lac • Free name- Printed Cheque Books • Online Tax payment facility. • Utility Bill payment facility • Free Multicity Cheques • Free Folio Charges • 50% concession on Outstation cheque collection charges & DD Charges • ASBA facility available. CD - Supreme • Minimum Balance Rs.7500/- • Free Debit Card • Free Cheque Leaves • Free Internet Banking • 75% concession on NEFT/RTGS. • Free Cash withdrawal up to RS. 50,000/- under CBS transactions from any Branch • Concession on Gold Coin purchase ( Rs 7.50/- per Gram on minimum purchase of 76 gms in a day) • ASBA facility available. Recurring Deposits • Deposits received for 6 months to a maximum of 10 years as monthly fixed installments. • The amounts saved and interest compounded at quarterly intervals paid at the time of maturity. • Ideal for depositors who save in installments for future big occasions. RD - Gold • This scheme combines the features of RD and Easy deposit schemes and on maturity, Gold coins are given equivalent to the maturity value of the deposits. • Minimum deposit will be Rs.250/- and thereafter in multiples of Rs.50/-. • The minimum and the maximum period of deposit will be 12 months and 24 months respectively. • Concession of Rs 25/- per gram is applicable Reinvestment Deposit • Earn Interest on the interest. • Deposits accepted for 6 months to 10 years. • Interest compounded quarterly and paid at the time of maturity. • Avail loans up to 85% on the principal • Minimum deposit - Rs. 1,000/-. Special Fixed Deposit • Deposits accepted for 6 months to 10 years. • Interest payable every quarterly or monthly. • Monthly interest is payable at discounted rate.
  26. 26. Retail Banking/ Madhusudan Narayan P a g e | 26 • Ideal for depositors who want regular monthly or quarterly interest income. Easy Deposit • The minimum monthly savings amount between Rs.100 to Rs.1000 is to be decided by the depositor. • This will be the core amount and depositor is free to deposit up to 10 times the core amount every month. • Interest at term deposit rates is payable and calculated on the minimum balance between the 10th and the last day of the month. • Deposit amount and accrued interest is repayable after a specified period, which ranges from 6 months to 10 years. Wedding Deposit • This is a variation of RD. The deposit can be made for 63, 84,120 months. • The monthly deposit amount increases every year by the amount of initial deposit. E.g. if the monthly deposit in the first year is Rs.100 it will be Rs.200 in the second year and Rs.300 in the third year and so on. • The deposit can be made in such a way that maturity proceeds are used for marriage expenses of their children. Education Deposit • This is also another variation of RD. • The deposit is accepted for 63 months and 84 months. • The monthly deposit from the second year decreases by 1/5 in the case of 63 month deposit and 1/7 in the case of 84 month deposit. For E.g. if the installment in the first year is Rs.250 the second year it will be Rs.200 and third year Rs.150 and so on. Minimum deposit is Rs.250 for 63 months and Rs.350 for 84 months. • Monthly installments can be planned in such a way that the maturity proceeds are utilized for meeting the education expenses. Vardhan Deposit • Deposit scheme for senior citizens. • Deposits accepted for a maximum period of 10 years. • Minimum deposit amount is Rs.5000. • Depositor is eligible for additional interest of 0.75%. • Cap of Rs 25 Lac applicable to special deposits only. Tax Saver Deposit • Amount from Rs. 10,000 to 1,00,000 • Amount deposited is eligible for tax benefit under Sec 80 ( C) of IT Act. • Period of deposit - 5 years to 10 years. • Premature closure is not permitted till 5 yrs, Interest Rate – 9.00 %.
  27. 27. Retail Banking/ Madhusudan Narayan P a g e | 27 RETAIL CREDIT SCHEMES Home Loan Scheme- Subha Gruha • Housing Finance scheme for resident individuals up to Rs.500 Lakhs. • Margin - 20%. Repayable in 20 years for purchase / construction of new / old houses / flats. • Holiday period – up to 18 months for construction and 3 months for purchase. • Interest rate depends on the size of the loan and repayment period. • Security - Mortgage of house. Home Improvement Scheme • Loan scheme for repair / renovation / up gradation of existing houses to individuals in service, profession, trade. Loan amount - up to Rs.10 Lakhs • Repayable in 120 EMI with a holiday period of 3 months. • Security: Mortgage of property being repaired or any other unencumbered property with market value twice that of the loan amount. Vehicle Loan Scheme- Pushpaka • Car finance scheme for purchase of new as well as used car and 2-wheeler. • 90% of cost of new car and two-wheeler and 75% of market value of used car financed against hypothecation of vehicle. • Higher amount of loan for used car considered on case to case basis. • Repayment - 60 EMI for new cars and 36 EMIs for used cars.. Clean Loan • Loan for salaried employees to meet personal and domestic expenses • Quantum of loan – 10 times monthly salary / 10 lac whichever is lower • For LIC agents up to Rs 5 Lacs • Repayment – 60 EMI for 10 times salary and 36 EMI for others • Undertaking letter from the employer to deduct from the salary ,loan installments every month and remit to bank to be produced. Pensioner’s Loan • All pensioners excluding Malaysian Government pensioners receiving pension through our bank branch are eligible. • The loan amount is restricted to 10 months pension with a ceiling of Rs.2.00 lakhs for those not over 65 years of age and Rs.1 lakh for those who are over 65 years of age. • Repayable out of pension amount in 48 EMI for those not more than 65 years and 36 EMI for those over 65 years.
  28. 28. Retail Banking/ Madhusudan Narayan P a g e | 28 Home Loan for NRIs • Loan scheme for Non-resident Indians / Persons of Indian Origin with monthly income not less than Rs.10, 000/, to buy / construct house / flat in India. • Maximum loan - Rs. 500 Lakhs or 80% of the cost. • Repayable in 15 years. • Security - Mortgage of property. Sahayika Loan • Loan to meet expenditure on social financial commitments • Applicant should be an individual in employment or business / professional or Self-employed with regular income. • Maximum loan amount - Rs.5 Lakhs. • Security and margin: NSC, LIC, ULIP etc. = 25%, Life policies = 10%, • Immovable property = 50%. • Repayment - 48 equated monthly installments. No holiday period. Sanjeevini Loan • Loan Scheme for registered medical practitioners for construction of nursing home, hospitals, purchase of equipment, vehicle, ambulance etc. • Maximum loan - Rs.2 crore in Metro/urban area, Rs.50 Lakhs in semi-urban area and Rs.10 Lakhs in rural area. • Margin - 15-25% for purchase of equipment, 25-30% for construction of nursing home. Repayment – 5 - 7 years. Educational Loan – Vidya Jyothi • Loan scheme to students for education in India and abroad. • Maximum Loan amount - Rs.10.00 Lakhs for study in India and Rs.20.00 Lakhs for foreign study. • Repayable in 5- 7 years, after completion of studies. • No collateral security for loans up to Rs.4 lac. IOB Akshay • Loan against life policies of LIC and other private insurance companies approved by IRDA. • Maximum loan amount - 90% of surrender value in the form of CC/DL/TOD. • Repayment - 36 EMI. Easy Trade Finance • Hassle free advance to retail traders, who can be individuals, proprietary, partnership or company. • Insurance of stock, submission of stock statement etc. are not insisted. • Maximum advance - Rs.300 lakhs. • Margin - ranges from 10% to 50%. • Security: Collateral security of immovable property. Liquid security in the form of NSC, Life policies etc may also be considered.
  29. 29. Retail Banking/ Madhusudan Narayan P a g e | 29 CORPORATE BANKING It comprises of following :  Micro small and Medium Enterprise (MSME)  IT and Ites BPO  SWIFT Centres  Authorised Dealers  BG Verification  IOB Expo Gold Card RURAL BANKING It comprises of following:  IOB’s Commitment for Social Causes  Rural Products  Agricultural Short Terms Loans  Financial Inclusion  Agri-Business Consultancy  PM 15 Point Program  Agriculture Term Loans  IOB Special Credit Schemes  PMRY Subsidy  Agriculture loan forms NRI ACCOUNTS It comprises of following:  NRI Newsletter  NRI Queries  Non-Resident Ordinary (NRO)  Resident Foreign Currency Account (RFC)  Foreign Currency Non-Resident Accounts (Banks)  IOB NRI Plus Deposit  NRI Homeloan Scheme  NRI Remittances INTERNATIONAL BANKING Indian Overseas Bank has 13 International Branches.
  30. 30. Retail Banking/ Madhusudan Narayan P a g e | 30 OTHER SERVICES Other important services of Indian Overseas Bank are: i) Government Business  E Payment of Direct Taxes  E Payment of Indirect Taxes  Sales Tax Collection ii) E – Products iii) Debit Cards/Credit Cards iv) National Eligibility Fund Transfer (NEFT)
  31. 31. Retail Banking/ Madhusudan Narayan P a g e | 31 VARIOUS RETAIL LENDING SCHEMES Rate of Interest under Retail Credit Products. (as on 31st May 2014) S No Name of Scheme Interest Rate % p.a (Floating)1 Pushpaka-loan 10.75 % 2 Sahayika-loan to meet social financial commitments 14.00% 3 Sanjeevini - loan to medical practitioners for setting up nursing homes/hospitals and for purchase of equipments  For Loans up to Rs. 1.00 Crore.  Above Rs.1 Crore to 5.00 Crores 12.00% 12.50% 4 Pensioners' loan Scheme - loan to pensioners for meeting immediate emergency needs 14.25% 5 Home Décor - loan for furnishing your home. 13.00% 6 Liquirent - loan against future rent receivables  Tenor up to 36 months  Tenor more than 36 months 13.00% 13.50% 7 Akshay - loan against life policies of LIC and private insurers approved by IRDA 14.00% 8 Vidya Jyothi - loan for pursuing higher education  Up to Rs. 4 Lacs  Above Rs. 4 lacs to Rs.7.50 lacs  Above Rs.7.50 lacs  Ward of Staff  Vocational Courses 12.25% 13.50% 13.25% 12.00% 12.25% 9 Clean Loan - loan to employees of reputed organizations to meet personal expenditure 15.25% 10 Easy Trade Finance - Hassle free working capital finance and term loan to retail traders: Working Capital: Term Loan: Term Loan: 13.25% 13.75% 11 IOB Career Dream  Loan Secured by NSC,LIC,KVP etc  Loan without security/against immovable property 14.00% 14.25% 12 IOB Scholar  Up to Rs. 4 Lacs  Above Rs. 4 lacs  Ward of Staff 12.75% 13.50% 12.00% 13 Jewel Loans  Up to Rs. 3 Lacs  Above Rs. 3 lacs 11.75% 12.75% 14 Home Improvement 10.25% 15 IOB Personal Loan *1.00% interest concession if 100% collateral security is provided 0.50% interest concession for women borrowers 12.00% 16 Reverse Mortgage 11.25% 17 IOB Surya  Scheme A -- For Individuals  Scheme B -- For Institutions 11.75% 12.50% 18 IOB Royal  Repayment Less than 4 years  Repayment Above 4 years 14.50% 15.25%
  32. 32. Retail Banking/ Madhusudan Narayan P a g e | 32 WORK FLOW MODEL DEPOSITS Customer Approaching the Bank/Enquiry Introduction Documentation Saving, Fixed, Current and Recurring Account A/C holder facility Deposits Withdrawal Cashier Cashier Cash supervision Cash supervision Account for the customer
  33. 33. Retail Banking/ Madhusudan Narayan P a g e | 33 ACCOUNT OPENING Choose an Institution Go to the Bank or Website Pick the Product You Want Provide Your Information Agree to Terms Print, Sign, and Mail (If Applicable) Congratulate Yourself!
  34. 34. Retail Banking/ Madhusudan Narayan P a g e | 34 MCKINSEY’S SEVEN S MODEL MCKINSEY’S SEVEN S MODEL AS APPLICABLE TO INDIAN OVERSEAS BANK The Seven-S is a framework for analysing organizations and their effectiveness. It looks at the seven key elements that make the organizations successful, or not: strategy; structure; systems; style; skills; staff; and shared values. Consultants at McKinsey & Company developed the 7S model in the late 1970s to help managers address the difficulties of organizational change. The model shows that organizational immune systems and the many interconnected variables involved make change complex, and that an effective change effort must address many of these issues simultaneously. 7-S Model – A Systemic Approach to Improving Organizations The 7-S model is a tool for managerial analysis and action that provides a structure with which to consider a company as a whole, so that the organization's problems may be diagnosed and a strategy may be developed and implemented. The 7-S diagram illustrates the multiplicity interconnectedness of elements that define an organization's ability to change. The theory helped to
  35. 35. Retail Banking/ Madhusudan Narayan P a g e | 35 change manager's thinking about how companies could be improved. It says that it is not just a matter of devising a new strategy and following it through. Nor is it a matter of setting up new systems and letting them generate improvements. ----Shared values” ―are commonly held beliefs, mindsets, and assumptions that shape how an organization behaves – its corporate culture. Shared values are what engender trust. They are an interconnecting centre of the 7S’s model. Values are the identity by which a company is known throughout its business areas, what the organization stands for and what it believes in, it central beliefs and attitudes. These values must be explicitly stated as both corporate objectives and individual values ― Strategy” is a plan of an organization formulates to reach identified goals, and a set of decisions and actions aimed at gaining a sustainable advantage over the competition. ―Systems” define the flow of activities involved in the daily operation of business, including its core processes and its support systems. They refer to the procedures, processes and routines that are used to manage the organization and characterize how important work is to be done. ―Style” refers to the cultural style of the organization, how key managers behave in achieving the organization's goals, how managers collectively spend their time and attention, and how they use symbolic behaviour. How management acts is more important that what management says. ―Staff” refers to the number and types of personnel within the organization and how companies develop employees and shape basic values. ―Skills” refer to the dominant distinctive capabilities and competencies of the personnel or of the organization as a whole. ---Structure” is the organizational chart and associated information that shows who reports to whom and how tasks are both divided up and integrated. In other words, structures describe the hierarchy of authority and accountability in an organization, the way the organization's units relate to each other: centralized, functional divisions (top-down); decentralized (the trend in larger organizations); matrix, network, holding, etc. These relationships are frequently diagrammed in organizational charts. Most organizations use some mix of structures - pyramidal, matrix or networked ones - to accomplish their goals.
  36. 36. Retail Banking/ Madhusudan Narayan P a g e | 36 STRUCTURE Board of Directors CONSTITUTION: The Constitution of the Board of the Bank is governed by "The Nationalized Banks (Management and Miscellaneous Provisions) Scheme, 1970, formulated by the Central Government, after consultation with the Reserve Bank of India, in exercise of the powers conferred by section 9 of "The Banking Companies (Acquisition and Transfer of Undertakings) Act,1970". COMPOSITION: The Composition of the Board of Directors of a Bank is governed by "The Nationalised Banks (Management and Miscellaneous Provisions) Scheme 1970" read with "The Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws (Amendment) Act 2006" and amendment to the vide Extraordinary Gazette Notification dated 19.02.2007 of the Central Government. CONTRIBUTION: In terms of The Banking Companies (Acquisition and Transfer of Undertakings Act 1970, the General Superintendence, Direction and Management of the affairs and business of the Bank vests in the Board of Directors which is entitled to exercise all such powers and do all such acts and things as the Bank is authorized to exercise and do. STRENGTH OF THE BOARD: Presently, there are 13 Directors on the Board of the Bank. Brief Particulars of each of the directors are placed below: Desination Name Date of Appointment/ Charge Chairman and Managing Director Shri. M.Narendra 1st November 2010 Executive Director Shri A.D.M.Chavali 28th December 2011 Executive Director Shri. Atul Agarwal 27th September 2013 Government Nominee Director Dr. Alok Pande 22 July 2011
  37. 37. Retail Banking/ Madhusudan Narayan P a g e | 37 RBI Nominee Director Shri.Nirmal Chand 13 March 2014 Officer Employee Director Shri. Jai Deo Sharma 02 May 2013 Part-Time Non-Official Director (Nominated by GOI) Shri Niranjan Kumar Agarwal 01 November 2011 Share holder Director Shri.Ajit Vasant Sardesai 08 December 2011 Share holder Director Shri.S.Sadagopan 08 December 2011 Part Time Non Official director (Nominated by RBI) Shri.Chinnaiah 13 Novembe 2013 Part-Time Non-Official Director (Nominated by RBI) Smt. S Sujatha 05 December 2013 Part –time Non-official Director Shri A.B.D. Badushas 12 December 2013 Workmen Employee Director Shri. R. Sampath Kumar 24 January 2014 Source: http://www.iob.in/aboutus.aspx SKILLS Highly skilled candidates are recruited at various levels across the organization. Skills can be classified broadly into highly skilled and semi skilled routine work. Various training program are organized regularly to impart training needs of the employees. STYLE /CULTURE The culture of the organisation, consisting of two components: Organisational culture: the dominant values and beliefs, and norms, which develop over time and become relatively enduring features of organisation life. Management Style: More matter of what managers do than what they say how do a company‘s managers spend their time? What are they focusing attention on? Symbolism – the creation and maintenance (or sometimes deconstruction) of meaning is a fundamental responsibility of managers. Building a high performance culture is another key prerogative of the HR function. Indian Overseas Bank envisage a credible and transparent performance management process that helps in aligning individual goals with corporate
  38. 38. Retail Banking/ Madhusudan Narayan P a g e | 38 objectives, both quantitative and qualitative, and encourages cross sell and team spirit. Indian Overseas Bank performance management process will be supported by a robust rewards and recognition strategy for each business and a market based compensation structure that is flexible, responsive and helps retention through asset building and wealth creation for top performers. STRATEGY Being one of the leading banking institutions with rich culture of professionalism the bank has various strategies to tackle with competitors in the market. The bank has the strategy to make use of the growing potential of the rural sector as well as the global academy, the business landscape will be changing magically and so will the financial service need. The bank has the strategy to enhance the reach of anytime and anywhere banking. It has the ATM’s almost in all the cities and in good numbers but quite less ATMs in Bihar. With the growing of the net banking the bank have several new products and facilities with state-of-the-art facilities, enabling you to conduct all your banking activities using your personal computer, from the comfort of your home or office. Thus providing you with secure, 24 hour access to all your accounts from anywhere in the world. Unique Advantages: Single Access Key: Our revolutionary technology allows you to access your account with your Internet Banking. Just log on to our website (www.iob.in), select Internet Banking services and key in your Login ID and Password. On successful validation you will be allowed to access to your account.
  39. 39. Retail Banking/ Madhusudan Narayan P a g e | 39 Secure Technology: For the first time in India, our Two Factor Authorization allows for "One Time Passwords" for Internet Banking transaction authentication to be delivered via SMS to your Mobile Phone. This password enhances your Internet Banking security and allows you the freedom of banking without remembering multiple passwords. Instant Payment Solutions: Our Real Time Gross Settlement (RTGS) Payment and Electronic Funds Transfer (NEFT) facilities allow you to transfer funds to own or third party accounts instantly. You can also request for multiple Demand Drafts at various locations and set up standing instructions for your account to execute routine payments SYSTEM Formal and informal procedures that support the strategy and structure (systems are more powerful than they are given credit). The bank follows a systematic procedure at all the levels. The bank has very good performance appraisal system, training and development system, resource allocation system, distribution and recovery system. The instructions flow from top management to lower levels of management. The training needs are developed after TNI (Training Needs Identification) and all the programs are put on the monthly/annual training calendar to be implemented. STAFF The people/human resources management – processes used to develop managers, socialization processes, ways of shaping basic values of management cadre, ways of introducing young recruits to the company, ways of helping to manage the careers of employees. Indian Overseas Bank envisaged that for an individual to work with the organization in perfect synergy, his/her goals had to be linked with the goals of the organization. This process of aligning individual and organizational goals was termed as the performance management process. The main objective of these innovative performance management practices was to encourage the employees to think innovatively. SHARED VALUE The bank aimed at building a culture to inculcate professional entrepreneurship in them to make themselves and the shareholders prosperous.
  40. 40. Retail Banking/ Madhusudan Narayan P a g e | 40 Indian Overseas Bank has planned to steadily increase its presence in retail business. Earlier bank has purposely maintained a low-key presence in the retail market, now is planning to increase exposure in this segment. There is tremendous scope for IOB’s growth as it was trying to take care of the latent needs of the customers with highly skilled and involved employees. Organizational Chart of IOB Patna Region SWOT ANALYSIS STRENGHTS:  IOB is one of the largest public sector banks operating in India. It has an extensive distribution network comprising of 3376 branches in pan India and 7 branches in abroad.  Best Customer Relationship Management.  Customers of IOB are IOB Marketers.  Quick Disbursement of Loans.  The Bank has a strong retail depository base & has good number of customer.
  41. 41. Retail Banking/ Madhusudan Narayan P a g e | 41  Bank boasts of strong brand equity.  The bank has a near competitive edge in area of operations.  It has a highly automated environment in terms of information technology & communication system.  Awards  Best Public Sector Banker Award.  Best Indian Banker Award.  SME Award.  Skoch Award for Financial Inclusion.  Best in rural Outreach  Best CSR Practise from IPE BFSI Award  It has many innovative products like Little Star Account, NRI services, Vardhan Deposit for Senior Citizens. WEAKNESS:  Sometimes account opening and delivery of cheque book take comparatively more time.  Technology need to be upgraded especially Softwares.  Low Retention Rate  Occasionally link failure.  Lack of ATMs in Bihar. OPPORTUNITY:  Branch expansion.  Door step services.  A strong Corporate identity can be achieved through Branding (Public Awareness)  IOB should focus on to increase Tie up with Private Organisations, Colleges and Universities.  Infrastructure improvements & better systems for trading & settlement in the government securities & foreign exchange markets.  IOB should open more Branch in Rural areas to target more Rural Public. THREATS:  Potential Entrant (Upcoming Banks).  Similar Products which are offered by other Banks.  Slow Economy Growth Rate.
  42. 42. Retail Banking/ Madhusudan Narayan P a g e | 42 RESEARCH METHODOLOGY TITLE OF THE PROJECT “A Study on Retail Banking with special reference to Indian Overseas Bank” STATEMENT OF THE PROBLEM As there are immense opportunities of the retail banking in India. This project is on the issues and challenges in the retail banking because of the competition of the various banks and the customer satisfaction of the services which the banks are providing and at the same time to solve the complaints of the customer and maintaining the sound relationship for the future and by this way to estimate the future growth of the retail banking. OBJECTIVES OF STUDY  To study the issues and challenges in retail banking.  To study the recent trends in retail banking.  To ensure high satisfaction level and reduce percentage of complaints of customer in retail banking.  To estimate the future growth of Indian retail banking.  To understand Optimization of retail banking channels.  To suggest strategies for improvement in Customer Service. OPERATIONAL DEFINITION Retail banking refers to banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth. And to know about the customer’s perceptions about the different products of the bank like current account, savings account, FD, Smart Saver, Smart Access and others. DATA COLLECTION There are several approaches of data collection. The primary sources of data collection are done through: - Observations and Questionnaire Methodology
  43. 43. Retail Banking/ Madhusudan Narayan P a g e | 43 QUESTIONNAIRE Questionnaire is the method of data collection, which is very much popular, particularly in big cities. Different modes of questions are put up on the paper and the particular universe, on which the research is conducted, are asked to fill their responses. The Secondary source includes data collection through: Magazines, Journals, Books, Newspapers etc. and Indian Overseas Bank’s Website. SAMPLING TECHNIQUE (a)Sampling Unit: - Walk in customers and the company database of high ended customer. (b)Sample Size:- Sample size for this project was restricted to 50 respondents. Since it was not possible to cover the whole universe in the available time period, it was necessary for me to take a sample size of 50 respondents. (c) Sampling Method:- There are three methods of sampling:- 1. Probability Sampling 2. Non-Probability Sampling 3. Quota For this research work Non- Probability Convenience Sampling has been chosen because time limit for the completion of the work is limited. Area of Study - Patna, Bihar Duration - 2 months (13th May 2014 – 16th July 2014) DATA COLLECTION METHOD Data for the present study is collected from two sources: 1. Primary Data: The data are collected directly from the universe by conducting interviews, etc. these are the original sources from which the researcher directly gathers data which are not previously referred. All the people from different profession were personally visited and interviewed. They were the main source of primary data. The method of collection of primary data was
  44. 44. Retail Banking/ Madhusudan Narayan P a g e | 44 personal direct interview through a structured questionnaire. The primary data was collected by means of survey. Questionnaires were prepared and customers of Indian Overseas Bank were approached to fill up these questionnaires. The filled up information was later analyzed to obtain the required information. 2. Secondary Data: The data are collected from the secondary sources such as magazines, journals, etc. These sources consist of already variable data in the form of statements, and reports, which may include sensory reports, financial statements of the company, reports of governments departments, etc. It was collected from internal sources. The secondary data was collected on the basis of organizational file, official records, newspapers, magazines, management books, preserved information in the company’s database and the website of the company. Both Primary and Secondary sources was used for data collection. For primary source, Questionnaire was used. For secondary source Internet, Books and Newspapers etc. were used. RESEARCH DESIGN Research design is simply the framework or plan for a study, used as a guide in collecting and analysing data. There are three types of Research Design:- 1. Exploratory Research Design 2. Descriptive Research Design 3. Casual Research Design For the study, Exploratory Research Design was undertaken to classify the investors on their risk and return profile. PLAN OF ANALYSIS The data obtained from the structured questionnaire’s are interpreted and recorded. The table, Pie Chart, and factor analysis, correlation (SPSS) were constructed using data from the questionnaire. which was then used for analyzing the acquired data.
  45. 45. Retail Banking/ Madhusudan Narayan P a g e | 45 LIMITATIONS  Designing own and new financial products is very costly and time consuming for the bank.  Customers now-a-days prefer net banking to branch banking. The banks that are slow in introducing technology-based products, are finding it difficult to retain the customers who wish to opt for net banking.  Customers are attracted towards other financial products like mutual funds etc.  The volume of amount borrowed by a single customer is very low as compared to wholesale banking. This does not allow banks to exploit the advantage of earning huge profits from single customer as in case of wholesale banking.  Though banks are investing heavily in technology, they are not able to exploit the same to the full extent. DATA ANALYSIS AND INTERPRETATION Profile of Respondents Respondents were the customers of Indian Overseas Bank, Main branch, of age group 21-65 years. 1. What is your Age Group? Parameters In Numbers In Percentage Below 25 11 22% 25-30 13 26% 30-35 11 22% 35-40 7 14% 40-45 5 10% Above 45 3 6% Table Number – 01 Interpretation: The purpose of this question is to know the age group of the Respondent. Inference: 94% of the Respondent are below the age of 45. below 25 25-30 30-35 35-40 40-45 above 45 Series1 22% 26% 22% 14% 10% 6% 22% 26% 22% 14% 10% 6% 0% 5% 10% 15% 20% 25% 30% Age Group
  46. 46. Retail Banking/ Madhusudan Narayan P a g e | 46 2. Do you have any Bank Account? If Yes which type of Account? Account Type In Numbers In Percentage Savings Account 36 72% Current Account 10 20% Loan Account 4 8% Table Number --- 02 Interpretation: The purpose of this question is to know Account type of the respondent. Inference: 72% of the Respondent is having Savings Account. 3. What is Your Occupation? Parameters In Numbers In Percentage Self-Employed 13 26% Service 17 34% Student 9 18% Business 11 22% Table No -- 03 Interpretation: The purpose of this question is find the Occupation of the Respondent. Inference: 34% of the Respondent are service holder and 22% and 26% are Businessman and Self-Employed Respectively. SB CA LL SB CA LL 72% 20% 8% 72% 20% 8% 0% 20% 40% 60% 80% Account Type Service Self-Employed Student Business Series1 34% 26% 18% 22% 34% 26% 18% 22% 0% 10% 20% 30% 40% Occupation
  47. 47. Retail Banking/ Madhusudan Narayan P a g e | 47 4. What kind of service or services do you expect from IOB? Parameters In Numbers In Percentage Quick Response 15 30% Services Better than other Bank 12 24% Extra Facility for Existing Customers 5 10% Good Customer Relation 18 36% Table No. --04 Interpretation: The purpose of this question is the Service Expectation of Respondent. Inference: 36% of the respondent are happy with Bank’s Good Customer Relations and 30% are happy with Quick response of the bank. Since, both of them are related to customers satisfaction which is good. 5. What influence you to come and avail services from IOB? Parameters In Numbers In Percentage Govt. of India Undertakings 19 38% Friend/ Relative Recommendations 22 44% Brand Value 6 12% Advertisement 3 6% Table No. -- 05 Interpretation: The purpose of this question is to know that what Influence respondent to avail service from Indian Overseas Bank? Inference: 44% of the Respondent are availing service after friends/ Relative Recommendation it says that IOB Customers are IOB Marketers. 38% of the Respond are availing service of IOB in favour of Govt. of India Undertakings. Quick Response SBOB Extra Facility GCRM Series1 30% 24% 10% 36% 30% 24% 10% 36% 0% 10% 20% 30% 40% Service Expectation GOI Undertaking Friend Recomendation Recommendation Brand Value Advertisement Series1 38% 44% 12% 6% 38% 44% 12% 6% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
  48. 48. Retail Banking/ Madhusudan Narayan P a g e | 48 6. The Branch timings (10:30 am to 4:30 pm from Monday to Friday and 10:30 am to 1:30 pm on Saturday) are convenient? Parameters In Numbers In Percentage Could Be Better 0 0% Satisfactory 3 6% Good 20 40% Excellent 27 54% Table No. ---06 Interpretation: The purpose of this question is to know satisfaction level on Brach timings Inference: 94% of the Respondent are happy with branch timings. 7. Is the branch ambience & layout is very friendly? Parameters In Numbers In Percentage Could Be Better 0 0% Satisfactory 3 6% Good 22 44% Excellent 25 50% Table No. --- 07 Interpretation: The purpose of this question is to know about branch ambience & layout Inference: 94% of the Respondent are satisfied with branch layout and ambience. Could be Better Satisfactory Good Excellent Branch Timing 0% 6% 40% 54% 0% 6% 40% 54% 0% 10% 20% 30% 40% 50% 60% Branch Timing Could be Better Satisfactory Good Excellent Ambience_Layout 0% 6% 44% 50% 0% 6% 44% 50% 0% 10% 20% 30% 40% 50% 60% Ambience_Layout
  49. 49. Retail Banking/ Madhusudan Narayan P a g e | 49 8. Is the waiting time at the Teller Counter was minimal? Parameters In Numbers In Percentage Could Be Better 1 2% Satisfactory 6 12% Good 18 36% Excellent 25 50% Table No. ---08 Interpretation: The purpose of this question is to know about the waiting time at counter. Inference: 86% of the Respondent are happy with waiting time at the teller counter. 9. Is the transactions done by us have been smooth & error free? Parameters In Numbers In Percentage Could Be Better 0 0% Satisfactory 3 6% Good 23 46% Excellent 24 48% Table No. --- 09 Interpretation: The purpose of this question is to know about Transactions Feedback. Inference: 94% of the Respondent are satisfied with smooth and error free Trasactions. Could be Better Satisfactory Good Excellent Waiting_Time 2% 12% 36% 50% 2% 12% 36% 50% 0% 10% 20% 30% 40% 50% 60% Waiting_Time Could be Better Satisfactory Good Excellent 0 3 23 24 Error_free_transaction 0% 6% 46% 48% 0% 6% 46% 48% 0% 10% 20% 30% 40% 50% 60% Error_free_transaction
  50. 50. Retail Banking/ Madhusudan Narayan P a g e | 50 10.Is IOB looks into the feedback provided by you and takes necessary action if required? Parameters In Numbers In Percentage Could Be Better 1 2% Satisfactory 8 16% Good 32 64% Excellent 9 18% Table No. ---10 Interpretation: The purpose is to know response on feedback provided by customers. Inference: 98% of the Respondent are satisfied with their response on feedback. 11.How was your experience while using IOB E-Products?(like–ATM, Internet/Mobile Banking, etc) Parameters In Numbers In Percentage Could Be Better 5 10% Satisfactory 16 32% Good 22 44% Excellent 7 14% Table No. --- 11 Interpretation: The purpose of this question is to know the satisfaction on E-Products. Inference: 44% of the Respondent are not fully satisfied with E-Product, Especially ATM they told there is Scarcity of IOB’s ATM in the State. So Bank should look in this regard. Could be Better Satisfactory Good Excellent 1 8 32 9 Series1 2% 16% 64% 18% 2% 16% 64% 18% 0% 10% 20% 30% 40% 50% 60% 70% Customer_feedback Could be Better Satisfactory Good Excellent E-Product 10% 32% 44% 14% 10% 32% 44% 14% 0% 10% 20% 30% 40% 50% E-Product
  51. 51. Retail Banking/ Madhusudan Narayan P a g e | 51 12.How do you find IOB employees provide you good customer relation and quick services? Parameters In Numbers In Percentage Could Be Better 2 4% Satisfactory 4 8% Good 25 50% Excellent 19 38% Table No. ----12 Interpretation: The purpose of this question is to know the Satisfaction on CRM. Inference: 88% of the Respondent are happy with CRM of the IOB. 13. How do you find the processing procedure while availing different services provided by IOB? Parameters In Numbers In Percentage Could Be Better 2 4% Satisfactory 8 16% Good 24 48% Excellent 16 32% Table No. ----13 Interpretation: The purpose of this question is to know about Processing Procedure. Inference: 96% of the Respondent are satisfied with the Processing Procedure. Could be Better Satisfactory Good Excellent CRM 4% 8% 50% 38% 4% 8% 50% 38% 0% 10% 20% 30% 40% 50% 60% CRM Could be Better Satisfactory Good Excellent Processing_procedure 4% 16% 48% 32% 4% 16% 48% 32% 0% 10% 20% 30% 40% 50% 60% Processing_procedure
  52. 52. Retail Banking/ Madhusudan Narayan P a g e | 52 14.Is the branch personnel have been very helpful and courteous? Parameters In Numbers In Percentage Could Be Better 1 2% Satisfactory 2 4% Good 28 56% Excellent 19 38% Table No. ----14 Interpretation: The purpose of this question is to know about branch personnel nature. Inference: 94% of the Respondent are happy with branch personnel helpfulness. 15. How do you find the cooperation of the bank employees in processing and helping you with documentation, services and problem faced by you in banking issue ? Parameters In Numbers In Percentage Could Be Better 1 2% Satisfactory 11 22% Good 27 54% Excellent 11 22% Table No. ---14 Interpretation: The purpose to know the Employee helping nature on banking Problems. Inference: 98% of the Respondent are satisfied with employee co-operation. Could be Better Satisfactory Good Excellent Branch_helpfullness 2% 4% 56% 38% 2% 4% 56% 38% 0% 10% 20% 30% 40% 50% 60% Branch_helpfullness Could be Better Satisfactory Good Excellent Employee_co-operation 2% 22% 54% 22% 2% 22% 54% 22% 0% 10% 20% 30% 40% 50% 60% Employee_co-operation
  53. 53. Retail Banking/ Madhusudan Narayan P a g e | 53 16. Are you happy with the TAT (Turn Around Time) post request ? *** Parameters In Numbers In Percentage Could Be Better 1 2% Satisfactory 7 14% Good 27 54% Excellent 15 30% Table No. ----15 Interpretation: The purpose of this question is to know about TAT feedback. Inference: 98% of the Respondent are satisfied on TAT post request. 17.Your overall level of satisfaction with IOB? Parameters In Numbers In Percentage Over Satisfied 18 36% Satisfactory 25 50% Not Dis-satisfied 7 14% Dis-satisfied 0 0% Table No. ----16 Interpretation: The purpose of this question is to know the overall satisfaction with IOB Inference: 36% of the Respondent are delighted with IOB service and rest 64% are happy with IOB Service. Since more than one-third Respondents are delighted with Service it is a very great sign for any Business Organisation for Rapid Progress. Could be Better Satisfactory Good Excellent TAT 2% 14% 54% 30% 2% 14% 54% 30% 0% 10% 20% 30% 40% 50% 60% TAT Dis-satisfied Not Dis-satisfied Satisfied Over Satisfied OverAll_satisfaction 0% 14% 50% 36% 0% 14% 50% 36% 0% 10% 20% 30% 40% 50% 60% OverAll_satisfaction
  54. 54. Retail Banking/ Madhusudan Narayan P a g e | 54 S.P.S.S. (STASTICAL PACAGE FOR SOCIAL SCIENCES) OUTPUT, ANALYSIS AND INTERPRETATION Analysis: FACTOR ANALYSIS Factor analysis is a statistical method used to describe variability among observed, correlated variables in terms of a potentially lower number of unobserved variables called factors. The main goal of factor analysis is data reduction. A typical use of factor analysis is in survey research, where a researcher wishes to represent a number of questions with a smaller number of factors. Factor analysis is only possible when some of its variables are correlated. In other words, it is possible, for example, that variations in three or four observed variables mainly reflect the variations in fewer unobserved variables. Factor analysis searches for such joint variations in response to unobserved latent variables. The observed variables are modelled as linear combinations of the potential factors, plus "error" terms. Factor analysis is related to principal component analysis (PCA), but the two are not identical.
  55. 55. Retail Banking/ Madhusudan Narayan P a g e | 55  Kaiser-Meyer-Olkin Measure of Sampling Adequacy - This measure varies between 0 and 1, and values closer to 1 are better. A value of 0.6 is a suggested minimum. Here it is .803 which signifies that we can continue with factor analysis.  Bartlett’s Test of Sphericity - This tests the null hypothesis that the correlation matrix is an identity matrix. An identity matrix is matrix in which all of the diagonal elements are 1 and all off diagonal elements are 0. here significance value is .00 <.05 so we reject this null hypothesis and it shows that multicollinearity occurs. Here we accept Alternate hypothesis. (Null = no correlation exists among variables, Alternate = Correlation Exist among variables) The Bartlett’s Test of Sphericity relates to the significance of the study and thereby shows the validity and suitability of the responses collected to the problem being addressed through the study. For Factor Analysis to be recommended suitable, the Bartlett’s Test of Sphericity must be less than 0.05. Once the extraction of factors has been completed, we examine the table of 'Communalities' which tells us how much of the variance in each of the original variables is explained by the extracted factors. Higher communalities are desirable. This is the proportion of each variable's variance that can be explained by the factors. It can be defined as the sum of squared factor loadings for the variables. This explains how much important variables are. Average of Extraction is .905 which is more than .6, so factor analysis is possible. It provides both, Initial and Extraction,
  56. 56. Retail Banking/ Madhusudan Narayan P a g e | 56 Initial means variables are fully involved (100% or 1.0). We can find the extraction value are more than 0.40 so all the variables contributing to development of factor analysis. Initial: This is the proportion of each variable’s variance that can be explained by the factors. Extraction: The values in this column indicate the proportion of each variable’s variance that can be explained by the retained factors. Variables with high values are well represented in the common factor space, while variables with low values are not well represented. Factor: The initial no. of factors is the same as the no. of variables used in the factor analysis. Initial eigen values- Eigen values are the variances of the factors. Because we conducted our factor analysis on the correlation matrix, the variables are standardized, which means that the each variable has a variance of 1 and the total variance is equal to the no. of variance used in the analysis. TOTAL VARIECE EXPLAINED : The value which I got is 90.512 it is very very good. Here 3 factors are explaining 90% of Variance. The table is below: Scree Plot : It graphically represents eigen value against the factor values. From fig. we can note how the curve drops sharply at fast and the level off at horizontal axis.
  57. 57. Retail Banking/ Madhusudan Narayan P a g e | 57 With the help of component matrix, we can find the correlation between variables and factors which we get from Principal Component Matrix (PCM). But for our analysis, we apply rotated variables and factors which we get from PCM. This table contains the unrotated factor loadings, which are the correlations between the variable and the factor. The possible value range of this correlation lies between -1 to +1.
  58. 58. Retail Banking/ Madhusudan Narayan P a g e | 58 Another important aspect that needs mention is the Rotated Component Matrix. While deciding how many factors one would analyse is whether a variable might relate to more than one factor. Finally, the Rotated Component Matrix shows the factor loadings for each variable. Rotation maximizes high item loadings and minimizes low item loadings, thereby producing a more interpretable and simplified solution. This table contains the rotated factor loadings (factor pattern matrix), which represents both how the variables are weighted for each factor but also the correlation between the variables and the factor. The possible value range for this correlation is between -1 to +1. Componet Transform Matrix : Not using this table for anything. It has to do with SPSS performing the orthogonal rotation that we asked for. CONCLUSION Now these 11 parameters can be grouped into 3 factors viz. 1, 2, 3. This varies between 0 and 1, and values closer to 1 are better. A value of more than 0.7 (here I had taken 0.85 and above) is a considered to be very good parameter which can be very useful to figure out the factors important for customers satisfaction in Indian Overseas Bank, (Patna Main Branch) Patna. Customer Satisfaction (Factor 01): Waiting_Time, Customer_feedback, CRM , Processing_procedure, Branch_helpfullness, Employee_co-operation, TAT Essential Service (Factor 2): Error_free_transaction, E-Product. Branch Service (Factor 3): Branch_Timing, Ambience_Layout. Based on the values got in our analysis we can further group the parameters as under Most important: Brach_Timing, Customer_feedback, Employee_co-operation Important to a certain extent: E-Product, Error_free_transaction, Processing_procedure, Branch_helpfullness, TAT The rest of the parameters can be stacked in the Not Important category and can be neglected as they are less than 0.7 Value.
  59. 59. Retail Banking/ Madhusudan Narayan P a g e | 59 OPPORTUNITIES AND CHALLENGES Retail banking has immense opportunities in a growing economy like India. As the growth story gets unfolded in India, retail banking is going to emerge a major driver. How does the world view us? The BRIC report is viewing India as an economic superpower. A.T. Kearney, a global management-consulting firm, recently identified India as the ―second most attractive retail destination of 30 emergent markets. The rise of Indian middle class is an important contributory factor in this regard. The percentage of middle to high-income Indian households is expected to continue rising. The younger population not only wields increasing purchasing power, but as far as acquiring personal debt is concerned, they are perhaps more comfortable than previous generations. Improving consumer purchasing power, coupled with more liberal attitudes towards personal debt, is contributing to India‘s retail banking segment. The combination of above factors promises substantial growth in retail sector, which at present is in the nascent stage. Due to bundling of services and delivery channels, the areas of potential conflicts of interest tend to increase in universal banks and financial conglomerates. Some of the key policy issues relevant to the retail-banking sector are: financial inclusion, responsible lending, and access to finance, long-term savings, financial capability, consumer protection, regulation and financial crime prevention.  Challenges for the Industry and its Stakeholders:  First, retention of consumers is going to be a major challenge. According to a research by Riechheld and Sasser in the Harvard Business review, 5 percent increase in customer retention can increase profitability by 35 percent in banking business, 50 percent in insurance and brokerage, and 125 percent in the consumer credit card market. Thus, banks need to emphasis on retaining consumer and increasing the market share.  Second, rising indebtedness could turn out to be a cause for concern in the future. India’s position, of course, is not comparable to that of developed world where household debt as a proportion of disposable income is much higher. Such a scenario creates high uncertainty. Expressing concerns about the high growth witnessed in consumer credit segments the reserve bank has, as a temporary measure, put in place risk containment measures and
  60. 60. Retail Banking/ Madhusudan Narayan P a g e | 60 increased the weight from 100 percent to 125 percent in the case of consumer credit including personal loans and credit cards.  Third, information technology poses both opportunities and challenges. Even with ATM machines and Internet Banking, many of the customers still prefer the personal touch of their neighbourhood branch bank. Technology has made it possible to deliver services throughout branch network, providing instant updates to checking accounts and rapid movement of money for stock transfers. However, this dependency on the network has bought IT department‘s additional responsibilities and challenges in managing, maintaining and optimizing the performance of retail banking networks and It is equally important that banks should maintain security to the advance level to keep the faith of the customers.  Fourth, KYC Issues and money laundering risks in retail banking is yet another important issue. Retail lending is regarded as a low risk area for money laundering because of the perception of the sums involved. However, competition for clients may also lead to KYC procedures being waived in the bid for new business. Banks must also consider seriously the type of identification documents the will accept and other processes to be completed. The Reserve Bank has issued details guidelines on application of KYC norms in November 2004.  Fifth, the issue of money laundering is very important in retail banking. This compels all the banks to consider seriously all the documents which they accept while approving the loans.  Sixth, Banks are expected to take utmost care to retain the ongoing trust of the Customers. Someone has rightly said, "It takes months to find a good customer but only seconds to lose one." Thus, Customer service should be t h e f i rs t a n d f i n al st ra t e g y at the end all in retail banking. RETAIL BANKING : ADVANTAGES AND DISADVANTAGES Retail banking has inherent advantages outweighing certain disadvantages. Advantages are analysed from the resource angle and asset angle.
  61. 61. Retail Banking/ Madhusudan Narayan P a g e | 61 RESOURCE SIDE  Retail deposits are stable and constitute core deposits.  They are interest insensitive and less bargaining for additional interest.  They constitute low cost funds for the banks.  Effective customer relationship management with the retail customers built a strong customer base.  Retail banking increases the subsidiary business of the banks. ASSESTS SIDE:  Retail banking results in better yield and improved bottom line for a bank.  Retail segment is a good avenue for funds deployment.  Consumer loans are presumed to be of lower risk and NPA perception.  Helps economic revival of the nation through increased production activity.  Improves lifestyle and fulfils aspirations of the people through affordable credit.  Innovative product development credit.  Retail banking involves minimum marketing efforts in a demand -driven economy.  Diversified portfolio due to huge customer base enables bank to reduce their dependence on few or single borrower.  Banks can earn good profits by providing non fund based or fee based services without deploying their funds. DISADVANTAGES  Designing own and new financial products is very costly and time consuming for the bank.  Customers now-a-days prefer net banking to branch banking. The banks that are slow in introducing technology- based products, are finding it difficult to retain the customers who wish to opt for net banking.  Customers are attracted towards other financial products like mutual funds etc.  Though banks are investing heavily in technology, they are not able to exploit the same to the full extent.  A major disadvantage is monitoring and follow up of huge volume of loan accounts inducing banks to spend heavily in human resource department.
  62. 62. Retail Banking/ Madhusudan Narayan P a g e | 62  Long term loans like housing loan due to its long repayment term in the absence of proper follow-up, can become NPAs.  The volume of amount borrowed by a single customer is very low as compared to wholesale banking. This does not allow banks to to exploit the advantage of earning huge profits from single customer as in case of wholesale banking. Trends in Retail Banking Growing a retail banking business is becoming increasingly challenging. The yield curve is flattening, reducing bank’s net interest margin. Competition is intensifying, as new, non-traditional players enter the retail banking space. And consumer preferences for financial products, payment methods and distribution channels continue to evolve, providing revenue opportunities, but also introducing new operational challenges. The changing dynamics of the retail banking business have significant implications for financial institutions. In order to successfully compete in this environment, banks must provide a distinctive customer experience and offer innovative product solutions in order to differentiate their value proposition in the marketplace. Key trends in retail Banking are: 1. Bifurcation of the retail banking business:  National- Consolidate- Credit Cards  Home Equity Loans Mortgages  Local- Fragmented- Deposits  Instalment Loans & Small Business Loans 2. Lack of differentiation in retail financial services:  Many financial institutions are struggling to differentiate their value propositions in the retail banking market.  Free checking is now offered by all or most financial institutions.  Most institutions no longer charge for online banking or online bill payment.

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