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STRATEGIES BY RETAIL BANK TO
         VENTURE IN RURAL MARKET




A PRESENTATION
AGENDA
•   INDIAN BANKING INDUSTRY
•   RETAIL BANKING
•   RURAL BANKING
•   SUGGESTION &
    RECOMMENDATIONS
INDIAN BANKING INDUSTRY
INDIAN BANKING SECTOR

• Focus on Customer service
• The hardening of bond yields will have negative impact on Q4FY10
  results of banks especially PSU banks.
• Focus on KYC Norms
• Structural improvement in the CASA.
• New players in the banking sector .
• At end-March 2010, 50.6 million no-frills
  accounts were opened by the banking system.
RETAIL BANKING IN INDIA
KEY FACTORS DRIVING THE
       GROWTH OF RETAIL BANKING
• Focus on understanding customer needs or preferences
• Customer-specific products or offerings on a regular basis
• Improved processes and bundled product offering
• Any where, any time banking
• Faster service
• Customer-driven strategies
SCOPE FOR RETAIL BANKING IN
                INDIA
• Increase in economic activity
• Increase in the purchasing power.
• India has 200 million households and 400 million middleclass
  population
• Nuclear family concept is gaining much importance
STRATEGIES FOR INCREASING
        RETAIL BANKING BUSINESS
• Constant product innovation
• Quality service and quickness in delivery
• Introduction of new delivery channels
• Tapping of unexploited potential
• Infrastructure outsourcing
• Detail market research
• Cross-selling of products


                                              Future
RURAL BANKING –
THE CURRENT STATUS
THE CURRENT STATUS
• Started since the establishment of banking sector in India.
• Mainly focus upon Agro sector
• There are 32,528 rural bank offices and 20,771 semi-urban bank
  offices in the country
• SBI and NABARD
• Rural population of about 780 million has limited access .
• Current demand for credit in rural India is around Rs. 1, 50,000 Cr.
• Commercial bank branches cover only 7 % of rural sector
  and large market is still untapped.
SUGGESTIONS &
RECOMMENDATIONS
MARKET SEGMENTATION
• Geographic segmentation.
  ▫ Rural market
• Demographic segmentation.
  ▫ Male – Female
  ▫ 18 – 60 years
  ▫ Literate & Illiterate
• Psychographic Segmentation.
  ▫ People looking for savings
• Behavioural segmentation.
  ▫ Loans
  ▫ Financial help.
NEED OF THE RURAL MARKET
PORTER’S FIVE FORCE MODEL
 Bargaining power
    of customers                                      Threat of new
                                                          entrants
Switching to another
  product is simple                                   High fixed costs
Customers are price                                     Government
       sensitive                                       restrictions or
                                                         legislation
Customized products
                         Industry rivalry
                           Improving product
                             differentiation
                       Creatively using channel of
 Bargaining power              distribution
                                                         Threat of
    of suppliers           High Exit Barriers        substitute product
   The product is                                      Microfinance
extremely important                                      institution
     to buyers
                                                           SHG’s
     There are
   no substitutes
WHAT IS NEEDED FROM THE BANKS?
• More financial inclusion
• Micro credit / SHG’s
• Use of technology
• Alternate Distribution channels
• To extend banking services at customers convenience
• Improvement in service levels in rural area
WHAT IS NEEDED FROM THE
              GOVERNMENT?
• An authority for Rural Banking
• Road map
• Establish open standard for technology to be used
• Financial literacy and credit counselling.
• Strategic action plan for remittance facility for both
  inter banking/ intra bank and post office
STEPS TO BE TAKEN
• Expand reach
  ▫ Tie up with India post.
  ▫ Partner with NGO/ MFI.

• Kiosk banking.....Offer convenience
  ▫ Banking services at mini branch.
  ▫ Making kiosk.
  ▫ The bio metric authentication.
  ▫ Improved business.
STEPS TO BE TAKEN
• Educate customers
• Be cost effective
  ▫ Low cost ATM.
  ▫ Costs just 1/ 10th that of the traditional ATM.
  ▫ Transfer of funds from NREGA.
  ▫ e – governance model

• Innovate and adopt technology
  ▫ Smart cards, biometrics scanning
  ▫ Improve the service delivery.
STEPS TO BE TAKEN
• Focus on microfinance
  ▫ 40% in priority sector lending
  ▫ MFI lending provides 10-14 % return as against 6-7 % in
    government instruments
Banks in rural sector

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Banks in rural sector

  • 1. STRATEGIES BY RETAIL BANK TO VENTURE IN RURAL MARKET A PRESENTATION
  • 2. AGENDA • INDIAN BANKING INDUSTRY • RETAIL BANKING • RURAL BANKING • SUGGESTION & RECOMMENDATIONS
  • 4. INDIAN BANKING SECTOR • Focus on Customer service • The hardening of bond yields will have negative impact on Q4FY10 results of banks especially PSU banks. • Focus on KYC Norms • Structural improvement in the CASA. • New players in the banking sector . • At end-March 2010, 50.6 million no-frills accounts were opened by the banking system.
  • 6. KEY FACTORS DRIVING THE GROWTH OF RETAIL BANKING • Focus on understanding customer needs or preferences • Customer-specific products or offerings on a regular basis • Improved processes and bundled product offering • Any where, any time banking • Faster service • Customer-driven strategies
  • 7. SCOPE FOR RETAIL BANKING IN INDIA • Increase in economic activity • Increase in the purchasing power. • India has 200 million households and 400 million middleclass population • Nuclear family concept is gaining much importance
  • 8. STRATEGIES FOR INCREASING RETAIL BANKING BUSINESS • Constant product innovation • Quality service and quickness in delivery • Introduction of new delivery channels • Tapping of unexploited potential • Infrastructure outsourcing • Detail market research • Cross-selling of products Future
  • 9. RURAL BANKING – THE CURRENT STATUS
  • 10. THE CURRENT STATUS • Started since the establishment of banking sector in India. • Mainly focus upon Agro sector • There are 32,528 rural bank offices and 20,771 semi-urban bank offices in the country • SBI and NABARD • Rural population of about 780 million has limited access . • Current demand for credit in rural India is around Rs. 1, 50,000 Cr. • Commercial bank branches cover only 7 % of rural sector and large market is still untapped.
  • 12. MARKET SEGMENTATION • Geographic segmentation. ▫ Rural market • Demographic segmentation. ▫ Male – Female ▫ 18 – 60 years ▫ Literate & Illiterate • Psychographic Segmentation. ▫ People looking for savings • Behavioural segmentation. ▫ Loans ▫ Financial help.
  • 13. NEED OF THE RURAL MARKET
  • 14. PORTER’S FIVE FORCE MODEL Bargaining power of customers Threat of new entrants Switching to another product is simple High fixed costs Customers are price Government sensitive restrictions or legislation Customized products Industry rivalry Improving product differentiation Creatively using channel of Bargaining power distribution Threat of of suppliers High Exit Barriers substitute product The product is Microfinance extremely important institution to buyers SHG’s There are no substitutes
  • 15. WHAT IS NEEDED FROM THE BANKS? • More financial inclusion • Micro credit / SHG’s • Use of technology • Alternate Distribution channels • To extend banking services at customers convenience • Improvement in service levels in rural area
  • 16. WHAT IS NEEDED FROM THE GOVERNMENT? • An authority for Rural Banking • Road map • Establish open standard for technology to be used • Financial literacy and credit counselling. • Strategic action plan for remittance facility for both inter banking/ intra bank and post office
  • 17. STEPS TO BE TAKEN • Expand reach ▫ Tie up with India post. ▫ Partner with NGO/ MFI. • Kiosk banking.....Offer convenience ▫ Banking services at mini branch. ▫ Making kiosk. ▫ The bio metric authentication. ▫ Improved business.
  • 18. STEPS TO BE TAKEN • Educate customers • Be cost effective ▫ Low cost ATM. ▫ Costs just 1/ 10th that of the traditional ATM. ▫ Transfer of funds from NREGA. ▫ e – governance model • Innovate and adopt technology ▫ Smart cards, biometrics scanning ▫ Improve the service delivery.
  • 19. STEPS TO BE TAKEN • Focus on microfinance ▫ 40% in priority sector lending ▫ MFI lending provides 10-14 % return as against 6-7 % in government instruments

Editor's Notes

  1. The third quarter results for the Indian banking industry were in line with our expectations with the Net interest Income growing by 12% and flat growth in PAT on year on year basis for banks in KRC Universe.38% from 34% y-o-y basis.
  2. The rural areas have the large purchasing power at their disposal and this is an opportunity to market Retail Banking. which may lead to large savings, large number of banking services to be provided are day-by-day increasingmore than 90% of the savings come from the house hold sector.
  3. NABARD ensures the credit growth to rural sector About 500 -600 million people in India do not still have bank accounts
  4. Focus on non-farm rural business Reach out to the needy through Easy and affordable financial services through the best Expand network throughExclusive focused attention to the financial inclusion of unbanked rural area
  5. on national mission on financial inclusion replicating the successful plots Undertake a massive programme for
  6. operators as the agents of the business correspondents, helps in building rural entrepreneurs
  7. for wage disbursement with finger print authentication and local language interfacethat is people friendly and empowers the poorest labour to assert his/ her rights. for signatures and handheld devices and other innovate technology needs to be explored.
  8. (agriculture, SME & government securities).