iidbi

1. A
PROJECT STUDY REPORT
ON
TITLED
“CUSTOMER AWARENESS TOWARDS RETAIL BANKING IN IDBI BANK”
Submitted in partial fulfilment for the Award of degree of
Master of Business Administration
SUBMITTED BY: SUBMITTED TO:
Ashish Parashar Dr. Jyotsana Khandelwal
MBA IVth SEM (DEAN)
APEX INSTITUTE OF MANAGEMENT & SCIENCE
2012-2014
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2. CERTIFICATE
This is to certify that MR. Ashish Parashar of MBA fourth semester of Apex Institute Of
Management & Science , Jaipur, has completed her project report on the topic
“CUSTOMER AWARENESS TOWARDS RETAIL BANKING IN IDBI BANK” under the
supervision of Dr. jyotsana Khandelwal.
To my best knowledge the report is original and has not been copied or submitted
anywhere else. It is an independent work done by her.
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3. DECLARATION
Hereby I declare that project report entitled “CUSTOMER AWARENESS TOWARDS
RETAIL BANKING IN IDBI BANK”” submitted for the degree of Master Of Business
Administration, is my original work and the project report has not formed the basis of
the award of any diploma, degree, associate ship, fellowship or any other titles. It has
not been submitted to any other university or institution for the award of any degree or
diploma.
Place: MBA
4THSEM
Date:
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4. Acknowledgement
I express my sincere thanks to my project guide, Dr. Jyotsana Khandelwal for guiding
me right form the inception till the successful completion of the project. I sincerely
acknowledge him for extending their valuable guidance, support for literature, critical
reviews of project and the report and above all the moral support he had provided to
me with all stages of this project.
I would also like to thank the supporting staff of sales and distribution Department, for
their help and cooperation throughout our project.
(Signature)
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5. CONTENTS
S.NO. PARTICULARS PAGE NO.
1 INTRODUCTION TO THE TOPIC 6
2 INTRODUCTION TO THE ORGANIZATION. 26
3 RESEARCH METHODOLOGY
Introduction
Title of study
Objective of study
Type of research
Sample Size and methods of selecting
sample
Data Collection
Limitations of Study
86
4 ANALYSIS AND INTERPRETATIONS 91
5 SWOT 106
6 FACTS AND FINDINGS 111
7 CONCLUSION 114
8 RECOMMENDATION AND SUGGESTION 115
9 APPENDIX 116
10 BIBLIOGRAPHY 122
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6. Introduction: Executive summary of the project
Executive Summary
Indian banking retail sector is witnessing one of the most hectic marketing
activities of all times. There is always a ‘first mover advantage’ in an upcoming sector.
The idea is help to each other "banking business" means the business of receiving
money on current or deposit account, paying and collecting cheque drawn by or paid in
by customers, the making of advances to customers.
The Industrial Development Bank of India Limited commonly known by its
acronym IDBI is one of India's leading public sector banks and 4th largest Bank in
overall ratings.
In this project or research, the main contention is to highlight the customer
awareness towards retail products provided by the IDBI bank. The objective of this
project is to study the changing preference of consumer towards organized retailing
and to analyze customer satisfaction towards products and services offered and to
share and create knowledge around the area of wealth management, develop better
understanding of this area and help each other find better opportunities in the area of
wealth management.
This research will go through formulating the objective of the study, process of
data collection, usage of appropriate sampling plan, processing and analysis of data,
reporting the findings. This study will basically be of Descriptive nature.
Though it will be explorative to some extent, where it will use questionnaire,
schedule and oral interview. Study will be analytical also that includes survey, and fact
finding enquiries. Since no prior assumption was made regarding the consumers
perception even no hypothesis was formulated.
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7. Banking Industry which is basically my concern industry around which my project
has to be revolved is really a very complex industry. And to work for this was really a
complex and hectic task and few times I felt so frustrated that I thought to left the
project and go for any new industry and new project. Challenges which I faced while
doing this project were following-
· Banking sector was quite similar in offering and products and because of that it
was very difficult to discriminate between our product and products of the
competitors.
· Target customers and respondents were too busy persons that to get their time
and view for specific questions was very difficult.
· Sensitivity of the industry was also a very frequent factor which was very
important to measure correctly.
· Area covered for the project while doing job also was very large and it was very
difficult to correlate two different customers/respondents views in a one.
· Every financial customer has his/her own need and according to the
requirements of the customer product customization was not possible.
· So above challenges some time forced me to leave the project but any how I did
my project in all circumstances. Basically in this project I analyzed that-
Customer awareness towards retail banking in IDBI bank.
· Limitations of this research are given time is lesser than required; cost is also a
limitation because while giving the feedback they might not take the survey or
Questionnaires seriously and research is only confined to Jaipur city.
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8. a
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9. INDUSTRY PROFILE
The Banking Regulation Act 1949 defines banking as accepting the purpose of lending
or investment, of deposits of money from the public, repayable on demand or
otherwise and wthdrawable by cheque, draft, order otherwise. The essential function of
a bank is to provide services related to the storing of value and the extending credit.
The evolution of banking dates back to the earliest writing, and continues in the
present where a bank is a financial institution that provides banking and other financial
services. Currently the term bank is generally understood an institution that holds a
banking license. Banking licenses are granted by financial supervision authorities and
provide rights to conduct the most fundamental banking services such as accepting
deposits and making loans. There are also financial institutions that provide certain
banking services without meeting the legal definition of a bank, a so called non-bank.
Banks are a subset of the financial services industry. The word “Bank” is derived from
the Italian word ‘banco’ signifying a bench, which was erected in the market place,
where it was customary to exchange money; the first bench having been established in
Italy a.d. 808. The basic functions of banks are to accept deposits, lend money and act
as collecting and paying agents. The Bank of Barcelona in Spain (1401) was perhaps
the first institution that could be called a bank in this sense. The terms bankrupt and
"broke" are similarly derived from banca rotta , which refers to an out of business bank,
having its bench physically broken. Money lenders in Northern Italy originally did
business in open areas, or big open rooms, with each lender working from his own
bench or table. Typically, a bank generates profits from transaction fees on financial
services or the interest spread on resources it holds in trust for clients while paying
them interest on the asset.
HISTORY OF THE INDIAN BANKING SECTOR
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10. Banking in India has its origin as early as the Vedic period. It is believed that the
transition from money lending to banking must have occurred even before Manu, the
great Hindu Jurist, who has devoted a section of his work to deposits and advances
and laid down rules relating to rates of interest.
During the Mogul period, the indigenous bankers played a very important role in
lending money and financing foreign trade and commerce. During the days of the East
India Company, it was the turn of the agency houses to carry on the banking business.
The General Bank of India was the first Joint Stock Bank to be established in the year
1786. The others which followed were the Bank of Hindustan and the Bengal Bank.
The Bank of Hindustan is reported to have continued till 1906 while the other two failed
in the meantime. In the first half of the 19th century the East India Company
established three banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and
the Bank of Madras in 1843. These three banks also known as Presidency Banks,
were independent units and functioned well. These three banks were amalgamated in
1920 and a new bank, the Imperial Bank of India was established on 27th January
1921.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The
Comptoire d’Escompte de Paris opened a branch in Calcutta in 1860, and another in
Bombay in 1862; branches in Madras and Pondicherry, then a French colony,
followed. Calcutta was the most active trading port in India, mainly due to the trade of
the British Empire, and so became a banking center.The fervour of Swadeshi
movement lead to establishing of many private banks in Dakshina Kannada and Udupi
district which were unified earlier and known by the name South Canara ( South
Kanara ) district. Four nationalised banks started in this district and also a leading
private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle
of Indian Banking".
With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial
Bank of India was taken over by the newly constituted State Bank of India.The
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11. Reserve Bank which is the Central Bank was created in 1935 by passing Reserve
Bank of India Act 1934. In the wake of the Swadeshi Movement, a number of banks
with Indian management were established in the country namely, Punjab National
Bank Ltd, Bank of India Ltd, Canara Bank Ltd, Indian Bank Ltd, the Bank of Baroda
Ltd, The Central Bank of India Ltd. On July 19, 1969, 14 major banks of the country
were nationalized and in 15th April 1980, six more commercial private sector banks
were also taken over by the government.
Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks
(that is with the Government of India holding a stake), 29 private banks (these do not
have government stake; they may be publicly listed and traded on stock exchanges)
and 31 foreign banks. They have a combined network of over 53,000 branches and
17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public
sector banks hold over 75 percent of total assets of the banking industry, with the
private and foreign banks holding 18.2% and 6.5% respectively.
 From World War I to Independence:
The period during the First World War (1914-1918) through the end of the Second
World War (1939-1945), and two years thereafter until the independence of India were
challenging for Indian banking. The years of the First World War were turbulent, and it
took its toll with banks simply collapsing despite the Indian economy gaining indirect
boost due to war-related economic activities. At least 94 banks in India failed between
1913 and 1918.
 Post-independence:
The partition of India in 1947 adversely impacted the economies of Punjab and West
Bengal, paralyzing banking activities for months. India's independence marked the end
of a regime of the Laissez-faire for the Indian banking. The Government of India
initiated measures to play an active role in the economic life of the nation, and the
Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed
economy. This resulted into greater involvement of the state in different segments of
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12. the economy including banking and finance. The major steps to regulate banking
included:
· In 1948, the Reserve Bank of India, India's central banking authority, was
nationalized, and it became an institution owned by the Government of India.
· In 1949, the Banking Regulation Act was enacted which empowered the
Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in
India."
· The Banking Regulation Act also provided that no new bank or branch of an
existing bank could be opened without a license from the RBI, and no two banks
could have common directors.
However, despite these provisions, control and regulations, banks in India except the
State Bank o India, continued to be owned and operated by private persons. This
changed with the nationalization of major banks in India on 19 July, 1969.
 Nationalization:
By the 1960s, the Indian banking industry has become an important tool to facilitate
the development of the Indian economy. At the same time, it has emerged as a large
employer, and a debate has ensued about the possibility to nationalize the banking
industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the
Government of India in the annual conference of the All India Congress Meeting in a
paper entitled "Stray thoughts on Bank Nationalization." The paper was received with
positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued
an ordinance and nationalized the 14 largest commercial banks with effect from the
midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described
the step as a "masterstroke of political sagacity." Within two weeks of the issue of the
ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of
Undertaking) Bill, and it received the presidential approval on 9 August, 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The
stated reason for the nationalization was to give the government more control of credit
delivery. With the second dose of nationalization, the GOI controlled around 91% of
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13. the banking business of India. Later on, in the year 1993, the government merged New
Bank of India with Punjab National Bank. It was the only merger between nationalized
banks and resulted in the reduction of the number of nationalized banks from 20 to 19.
After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer
to the average growth rate of the Indian economy.
The nationalized banks were credited by some, including Home minister P.
Chidambaram, to have helped the Indian economy withstand the global financial crisis
of 2007-2009.
 Liberalization:
In the early 1990s, the then Narsimha Rao government embarked on a policy of
liberalization, licensing a small number of private banks. These came to be known as
New Generation tech-savvy banks, and included Global Trust Bank (the first of such
new generation banks to be set up), which later amalgamated with Oriental Bank of
Commerce, UTI Bank(now re-named as Axis Bank), ICICI Bank and HDFC Bank. This
move, along with the rapid growth in the economy of India, revitalized the banking
sector in India, which has seen rapid growth with strong contribution from all the three
sectors of banks, namely, government banks, private banks and foreign banks.
The next stage for the Indian banking has been setup with the proposed relaxation in
the norms for Foreign Direct Investment, where all Foreign Investors in banks may be
given voting rights which could exceed the present cap of 10%,at present it has gone
up to 49% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time,
were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of
working for traditional banks. All this led to the retail boom in India. People not just
demanded more from their banks but also received more.
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14. Currently, banking in India is generally fairly mature in terms of supply, product range
and reach-even though reach in rural India still remains a challenge for the private
sector and foreign banks. In terms of quality of assets and capital adequacy, Indian
banks are considered to have clean, strong and transparent balance sheets relative to
other banks in comparable economies in its region. The Reserve Bank of India is an
autonomous body, with minimal pressure from the government. The stated policy of
the Bank on the Indian Rupee is to manage volatility but without any fixed exchange
rate-and this has mostly been true.
With the growth in the Indian economy expected to be strong for quite some time-especially
in its services sector-the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong. One may also
expect M&As, takeovers, and asset sales.
INDIAN BANKING SYSTEM
 Introduction
The Reserve Bank of India (RBI) is India's central bank. It is the sole authority for
issuing bank notes and the supervisory body for banking operations in India. It
supervises and administers exchange control and banking regulations, and
administers the government's monetary policy. It is also responsible for granting
licenses for new bank branches. Though the banking industry is currently dominated
by public sector banks, numerous private and foreign banks exist. India's government-owned
banks dominate the market. Their performance has been mixed, with a few
being consistently profitable. Several public sector banks are being restructured, and in
some the government either already has or will reduce its ownership.
 Private and foreign banks
The RBI has granted operating approval to a few privately owned domestic banks; of
these many commenced banking business. Foreign banks operate more than 150
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15. branches in India. The entry of foreign banks is based on reciprocity, economic and
political bilateral relations. An inter-departmental committee approves applications for
entry and expansion.
 Capital adequacy norm
Foreign banks were required to achieve an 8 percent capital adequacy norm by March
1993, while Indian banks with overseas branches had until March 1995 to meet that
target. All other banks had to do so by March 1996. The banking sector is to be used
as a model for opening up of India's insurance sector to private domestic and foreign
participants, while keeping the national insurance companies in operation.
The banking system has three tiers. These are the scheduled commercial banks; the
regional rural banks which operate in rural areas not covered by the scheduled banks;
and the cooperative and special purpose rural banks.
 Scheduled and non scheduled banks
There are approximately 80 scheduled commercial banks, Indian and foreign; almost
200 regional rural banks; more than 350 central cooperative banks, 20 land
development banks; and a number of primary agricultural credit societies. In terms of
business, the public sector banks, namely the State Bank of India and the nationalized
banks, dominate the banking sector.
 Local financing
All sources of local financing are available to foreign-participation companies
incorporated in India, regardless of the extent of foreign participation. Under foreign
exchange regulations, foreigners and non-residents, including foreign companies,
require the permission of the Reserve Bank of India to borrow from a person or
company resident in India
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16.  Regulations on foreign banks
Foreign banks in India are subject to the same regulations as scheduled banks. They
are permitted to accept deposits and provide credit in accordance with the banking
laws and RBI regulations. Currently about 25 foreign banks are licensed to operate in
India. Foreign bank branches in India finance trade through their global networks.
 RBI restrictions
The Reserve Bank of India lays down restrictions on bank lending and other activities
with large companies. These restrictions, popularly known as "consortium guidelines"
seem to have outlived their usefulness, because they hinder the availability of credit to
the non-food sector and at the same time do not foster competition between banks.
 Indian vs. foreign banks
Most Indian banks are well behind foreign banks in the areas of customer funds
transfer and clearing systems. They are hugely over-staffed and are unlikely to be able
to compete with the new private banks that are now entering the market. While these
new banks and foreign banks still face restrictions in their activities, they are well-capitalized,
use modern equipment and attract high-caliber employees.
 Government and RBI regulations
All commercial banks face stiff restrictions on the use of both their assets and liabilities
Forty percent of loans must be directed to "priority sectors" and the high liquidity ratio
and cash reserve requirements severely limit the availability of deposits for lending.
The RBI requires that domestic Indian banks make 40 percent of their loans at
confessional rates to priority sectors' selected by the government. These sectors
consist largely of agriculture, exporters, and small businesses. Since July 1993, foreign
banks have been required to make 32 percent of their loans to these priority sector.
Within the target of 32 percent, two sub- targets for loans to the small scale sector
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17. (minimum of 10 percent) and exports (minimum of 12 percent) have been fixed.
Foreign banks, however, are not required to open branches in rural areas, or to make
loans to the agricultural sector.
 The urge to merge:
In the recent past there has been a lot of talk about Indian Banks lacking in scale and
size. The State Bank of India is the only bank from India to make it to the list of Top
100 banks, globally. Most of the PSBs are either looking to pick up a smaller bank or
waiting to be picked up by a larger bank. The central government also seems to be
game about the issue and is seen to be encouraging PSBs to merge or acquire other
banks. Global evidence seems to suggest that even though there is great enthusiasm
when companies merge or get acquired, majority of the mergers/acquisitions do not
really work. So in the zeal to merge with or acquire another bank the PSBs should not
let their common sense take a back seat.
DEVELOPMENTS IN BANKING SYSTEM
SOCIAL CONTROL OF BANK
Indian banking structure has grown considerably in strength and stability due to the
vigorous control and effective monitoring by reserve bank of India. However, Order to
remove the deficiency pointed above, the Government introduced a scheme of social
control of banks. According to the Banking Commission (1972), the social control
scheme was introduced with the main objective of “achieving a wider spread of bank
credit flow to priority sectors and making it a more effective instrument of
development .
NATIONALISATION OF BANKS
Despite of scheme of social control there was no significant reorientation of lending
activities of banks towards meeting the requirements of priority sector like agriculture.
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18. This resulted in nationalization of 14 major commercial banks with individual deposits
exceeding Rs.50 crores in July 1969.
The major objective of nationalization were
· Reduction in concentration of economic power in hands of a few.
· Expansion of credit to priority areas, which were hitherto neglected like
agriculture, small-scale industries and self, employed people.
· Elimination of the use of bank credit for speculative and unproductive purpose.
· To provide a professional bent to bank management and encourage upcoming
entrepreneurs.
At the time of nationalization, the 14 major banks had a paid up capital of Rs. 28.5
crores, deposits of Rs. 2626 crores, advances Rs. 1813 crores and 4134 branches.
In other words the nationalized banks accounted for 80% of branches, 83% of
deposits and 84% of advances of the whole banking system.
The Banks nationalized in 1969 were: -
· Allahabad Bank
· Andhra Bank
· Bank of Baroda
· Bank of India
· Canara Bank
· Central Bank of India
· Dena Bank
· Indian Bank
· Indian Overseas Bank
· Punjab National Bank
· United Commercial Bank
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19. · Union Bank of India
· Syndicate Bank
· Bank of Maharashtra
REGIONAL RURAL BANKS
The RRBs were established with a view to combining the local feel and familiarity
with rural problems. The RRBs are primarily sponsored by the commercial
banks.The primary objectives of these banks are:
· Providing credit for agricultural purposes to small entrepreneurs engaged in
trade and industry and other productive activities in rural areas.
· To cater the needs weaker sections of the community.
SECOND NATIONALISATION
In order to move effectively, meet the growing development needs of the economy
and to promote welfare of people on the large scale six more commercial banks
with Demand and Time Liabilities (Deposits) with 200 cr were nationalized in April
1980. With the second nationalization, the number of public sector banks
increased to 28 (1st nationalization 14 banks, 2nd nationalization 6 bank and SBI and
its seven associate banks).
Over the years with the directional change that has occurred in the banking system
and the fact that the banks responding favorably by evolving new strategies and
innovative ideas the credit structure of the country has become strong and steady.
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20. Recognizing the fact that the banks are vital catalytic agents of growth that provide
the basic input of credit, new programmes with the social orientation have been
designed with a view to assist the society.
The names six banks nationalized were as under:
1. Corporation Bank
2. Oriental Bank of Commerce
3. Punjab & Sind Bank
4. Vijaya Bank
5. Andhra Bank
6. New bank of India
After the nationalization of major banks the position altered rapidly and the flow of
credit to the rural areas increased considerably. Along with quantitative expansion
of branch network, there were qualitative improvements in the lending practices of
the banks. The phenomenal change in the lending practices can be termed as a
transformation from class banking to mass banking. In fact the broader national
objectives of eradication of poverty, unemployment and growth with social justice
have shaped the formulation of various directives/ schemes.
CURRENT SCENARIO
The Indian has finally worked up to the competitive dynamics of new Indian market and
is addressing the relevant issues take on the multifarious challenges of globalization.
Banks that employ IT solutions are perceived to be futuristic and proactive players
capable of meeting the multifarious requirement of large customer base. Private Banks
have been fast on the uptake and are reorienting their strategies using the Internet as
a medium.
The Indian banking has come from a long from being a sleepy business institution to a
highly proactive and dynamic entity this transformation has been largely brought by the
large dose of liberalization and economic reforms that allowed exploring new business
opportunities rather than generating revenues from conventional streams.
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21. The Indian industry has confidently hit the growth trial that pick in activity is best
reflected in the banking sector which after all is as candid a mirror of a country’s
economy as you could ever find. Most of the Indian financial intermediaries have been
keeping pace with the deepening market economy, riding the opportunity that come
along with reforms even as they brace themselves for increased competition both
foreign and private by strengthening prudential norms and leveraging technology to
ensure that growth engine hums smoothly along
The essential function of a bank is to provide services related to the storing of value
and the extending credit. The evolution of banking dates back to the earliest writing,
and continues in the present where a bank is a financial institution that provides
banking and other financial services. Currently the term bank is generally understood
an institution that holds a banking license.
Banking licenses are granted by financial supervision authorities and provide rights to
conduct the most fundamental banking services such as accepting deposits and
making loans. There are also financial institutions that provide certain banking services
without meeting the legal definition of a bank, a so called non-bank. Banks are a
subset of the financial services industry.
The word bank is derived from the italian banca, which is derived from German and
means bench. The terms bankrupt and "broke" are similarly derived from banca rotta,
which refers to an out of business bank, having its bench physically broken. Money
lenders in Northern Italy originally did business in open areas, or big open rooms, with
each lender working from his own bench or table.
Typically, a bank generates profits from transaction fees on financial services or the
interest spread on resources it holds in trust for clients while paying them interest on
the asset.
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22. Services typically offered by banks
Although the type of services offered by a bank depends upon the type of bank and the
country, services provided usually include:
· Directly take deposits from the general public and issue checking and saving
accounts.
· Lend out money to companies and individuals (see money lender)
· Cash checks.
· Facilitate money transactions such as wire transfers and cashiers checks
· Issue credit cards, ATM, and debit cards and online banking.
· Storage of valuables, particularly in a safe deposit box.
Types of banks
There are several different types of banks including:
Central banks usually control monetary policy and may be the lender of last resort in
the event of a crisis. They are often charged with controlling the money supply,
including printing paper money. Examples of central banks are the European Central
Bank and the US Federal Reserve Bank.
Investment banks underwrite stock and bond issues and advice on mergers. Examples
of investment banks are Goldman Sachs of the USA or Nomura Securities of Japan.
Merchant banks were traditionally banks which engaged in trade financing. The
modern definition, however, refers to banks which provide capital to firms in the form of
shares rather than loans. Unlike Venture capital firms, they tend not to invest in new
companies. Private banks manage the assets of the very rich. An example of a private
bank is the Union Bank of Switzerland. Savings banks write mortgages exclusively.
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23. Offshore banks are banks located in jurisdictions with low taxation and regulation, such
as Switzerland or the Channel Islands. Many offshore banks are essentially private
banks. Commercial banks primarily lend to businesses (corporate banking)
Retail banks primarily lend to individuals. An example of a retail bank is Washington
Mutual of the USA. Universal banks engage in several of these activities. For example,
Citigroup, a large American bank, is involved in commercial and retail lending; it owns
a merchant bank (Citicorp Merchant Bank Limited) and an investment bank (Salomon
Smith Barney); it operates a private bank (Citigroup Private Bank); finally, its
subsidiaries in tax-havens offer offshore banking services to customers in other
countries.
Banks are prone to crisis
The traditional bank has an inherent tendency to crisis. This is because the bank
borrows short term and lends leveraged long term. The sum of deposits and the bank's
capital will never equal more than a modest percentage of the loans the bank has
outstanding.
Even if liquidity is not a concern, if there is no run on the bank, banks can simply
choose a bad portfolio of loans, and lose more money than they have. The US Savings
and Loan Crisis in the late 1980s and early 1990s is such an incident.
Role in the money supply
A bank raises funds by attracting deposits, borrowing money in the inter-bank market,
or issuing financial instruments in the money market or a securities market. The bank
then lends out most of these funds to borrowers. However, it would not be prudent for
a bank to lend out all of its balance sheet. It must keep a certain proportion of its funds
in reserve so that it can repay depositors who withdraw their deposits.
Bank reserves are typically kept in the form of a deposit with a central bank. This
behaviour is called fractional-reserve banking and it is a central issue of monetary
policy. Some governments (or their central banks) restrict the proportion of a bank's
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24. balance sheet that can be lent out, and use this as a tool for controlling the money
supply. Even where the reserve ratio is not controlled by the government, a minimum
figure will still be set by regulatory authorities as part of banking supervision.
Regulation
The combination of the instability of banks as well as their important facilitating role in
the economy led to banking being thoroughly regulated. The amount of capital a bank
is required to hold is a function of the amount and quality of its assets.
Major banks are subject to the Basel Capital Accord promulgated by the Bank for
International Settlements. In addition, banks are usually required to purchase deposit
insurance to make sure smaller investors are not wiped out in the event of a bank
failure. Another reason banks are thoroughly regulated is that ultimately, no
government can allow the banking system to fail.
There is almost always a lender of last resort—in the event of a liquidity crisis (where
short term obligations exceed short term assets) some element of government will step
in to lend banks enough money to avoid bankruptcy.
How banks are viewed ?
Banks have a long history of being characterized as heartless, rapacious creditors,
hounding honest folk down on their luck for the last dime. See Populism. In United
States history, the National Bank was a major political issue during the presidency of
Andrew Jackson. Jackson fought against the bank as a symbol of greed and profit-mongering,
antithetical to the democratic ideals of the United States.
Profitability
Large banks in the United States are some of the most profitable corporations,
especially relative to the small market shares they have. This amount is even higher if
one counts the credit divisions of companies like Ford, which are responsible for a
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25. large proportion of those company's profits. For example, the largest bank, Citigroup,
which for the past 3 years has made more profit then any other company in the world,
has only a 5 percent market share.
Now if Citigroup were to be as dominant in its industry as a Home Depot, Starbucks,
or Wal Mart in their respective industries, with a 30 percent market share, it would
make more money than the top ten non-banking US industries combined. In the past
10 years in the United States, banks have taken many measures to ensure that they
remain profitable while responding to ever-changing market conditions.
First, this includes the Gramm-Leach-Bliley Act, which allows banks again to merge
with investment and insurance houses. Merging banking, investment, and insurance
functions allows traditional banks to respond to increasing consumer demands for "one
stop shopping" by enabling the crossing selling of products (which, the banks hope, will
also increase profitability).
Second, they have moved toward risk based pricing on loans, which mean charging
higher interest rates for those people who they deem more risky to default on loans.
This dramatically helps to offset the losses from bad loans, lowers the price of loans to
those who have better credit histories, and extends credit products to high risk
customers who would have been denied credit under the previous system.
Third, they have sought to increase the methods of payment processing available to
the general public and business clients. These products include debit cards, pre-paid
cards, smart-cards, and credit cards. These products make it easier for consumers to
conveniently make transactions and smooth their consumption over time (in some
countries with under-developed financial systems, it is still common to deal strictly in
cash, including carrying suitcases filled with cash to purchase a home).
However, with convenience there is also increased risk that consumers will mis-manage
their financial resources and accumulate excessive debt. Banks make money
from card products through interest payments and fees charged to consumers and
companies that accept the cards. The banks' main obstacles to increasing profits are
25

26. exisiting regularory burdens, new government regulation, and increasing competition
from non-traditional financial institutions.
26

27. IDBI bank: all about-
The economic development of any country depends on the extent to which its financial
system efficiently and effectively mobilizes and allocates resources. There are a
number of banks and financial institutions that perform this function; one of them is the
development bank. Development banks are unique financial institutions that perform
the special task of fostering the development of a nation, generally not undertaken by
other banks. Development banks are financial agencies that provide medium-and long-term
financial assistance and act as catalytic agents in promoting balanced
27

28. development of the country. They are engaged in promotion and development of
industry, agriculture, and other key sectors. They also provide development services
that can aid in the accelerated growth of an economy.
The objectives of development banks are:
· To serve as an agent of development in various sectors, viz. industry,
agriculture, and international trade
· To accelerate the growth of the economy
· To allocate resources to high priority areas
· To foster rapid industrialization, particularly in the private sector, so as to
provide employment opportunities as well as higher production
· To develop entrepreneurial skills
· To promote the development of rural areas
28

29. · To finance housing, small scale industries, infrastructure, and social utilities.
Function-
The IDBI has been established to perform the following functions-
(1) To grant loans and advances to IFCI, SFCs or any other financial institution by way
of refinancing of loans granted by such institutions which are repayable within 25 year?
(2) To grant loans and advances to scheduled banks or state co-operative banks by
way of refinancing of loans granted by such institutions which are repayable in 15
years?
(3) To grant loans and advances to IFCI, SFCs, other institutions, scheduled banks,
state co-operative banks by way of refinancing of loans granted by such institution to
industrial concerns for exports.
(4) To discount or rediscount bills of industrial concerns.
(5) To underwrite or to subscribe to shares or debentures of industrial concerns.
(6) To subscribe to or purchase stock, shares, bonds and debentures of other financial
institutions.
(7) To grant line of credit or loans and advances to other financial institutions such as
IFCI, SFCs, etc.
(8) To grant loans to any industrial concern.
(9) To guarantee deferred payment due from any industrial concern.
(10) To guarantee loans raised by industrial concerns in the market or from
institutions.
29

30. (11) To provide consultancy and merchant banking services in or outside India.
(12) To provide technical, legal, marketing and administrative assistance to any
industrial concern or person for promotion, management or expansion of any industry.
(13) Planning, promoting and developing industries to fill up gaps in the industrial
structure in India.
(14) To act as trustee for the holders of debentures or other securities.
In addition, they are assigned a special role in:
· Planning, promoting, and developing industries to fill the gaps in industrial
sector.
· Coordinating the working of institutions engaged in financing, promoting or
developing industries, agriculture, or trade, rendering promotional services such
as discovering project ideas, undertaking feasibility studies, and providing
technical, financial, and managerial assistance for the implementation of
projects
Subsidiaries-
The following are the subsidiaries of IDBI.
(1) Small Industries Development Bank of India (SIDBI)
(2) IDBI Bank Ltd.
(3) IDBI Capital Market Services Ltd.
(4) IDBI Investment Management Company
30

31. Industrial development bank of India
The industrial development bank of India(IDBI) was established in 1964 by parliament
as wholly owned subsidiary of reserve bank of India. In 1976, the bank’s ownership
was transferred to the government of India. It was accorded the status of principal
financial institution for coordinating the working of institutions at national and state
levels engaged in financing, promoting, and developing industries. IDBI has provided
assistance to development related projects and contributed to building up substantial
capacities in all major industries in India. IDBI has directly or indirectly assisted all
companies that are presently reckoned as major corporate in the country. It has played
a dominant role in balanced industrial development.
IDBI set up the small industries development bank of India (SIDBI) as wholly owned
subsidiary to cater to specific the needs of the small-scale sector. IDBI has engineered
the development of capital market through helping in setting up of the securities
exchange board of India(SEBI), National stock exchange of India limited(NSE), credit
analysis and research limited(CARE), stock holding corporation of India
limited(SHCIL), investor services of India limited(ISIL), national securities depository
limited(NSDL), and clearing corporation of India limited(CCIL)
In 1992, IDBI accessed the domestic retail debt market for the first time by issuing
innovative bonds known as the deep discount bonds. These new bonds became highly
popular with the Indian investor.
In 1994, IDBI Act was amended to permit public ownership up to 49 per cent. In July
1995, it raised over Rs 20 billion in its first initial public (IPO) of equity, thereby
reducing the government stake to 72.14 per cent. In June 2000, a part of government
shareholding was converted to preference capital. This capital was redeemed in March
31

32. 2001, which led to a reduction in government stake. The government stake currently is
51 per cent.
In august 2000, IDBI became the first all India financial institution to obtain ISO 9002:
1994 certification for its treasury operations. It also became the first organization in the
Indian financial sector to obtain ISO 9001:2000 certifications for its forex services.
Milestones
· July 1964: Set up under an Act of Parliament as a wholly-owned subsidiary of
Reserve Bank of India.
· February 1976: Ownership transferred to Government of India. Designated
Principal Financial Institution for co-coordinating the working of institutions at
national and State levels engaged in financing, promoting and developing
industry.
· March 1982: International Finance Division of IDBI transferred to Export-Import
Bank of India, established as a wholly-owned corporation of Government of
India, under an Act of Parliament.
· April 1990: Set up Small Industries Development Bank of India (SIDBI) under
SIDBI Act as a wholly-owned subsidiary to cater to specific needs of small-scale
sector. In terms of an amendment to SIDBI Act in September 2000, IDBI
divested 51% of its shareholding in SIDBI in favour of banks and other
institutions in the first phase. IDBI has subsequently divested 79.13% of its
stake in its erstwhile subsidiary to date.
· January 1992: Accessed domestic retail debt market for the first time with
innovative Deep Discount Bonds; registered path-breaking success.
· December 1993: Set up IDBI Capital Market Services Ltd. as a wholly-owned
subsidiary to offer a broad range of financial services, including Bond Trading,
Equity Broking, Client Asset Management and Depository Services. IDBI Capital
is currently a leading Primary Dealer in the country.
32

33. · September 1994: Set up IDBI Bank Ltd. in association with SIDBI as a private
sector commercial bank subsidiary, a sequel to RBI's policy of opening up
domestic banking sector to private participation as part of overall financial sector
reforms.
· October 1994: IDBI Act amended to permit public ownership upto 49%.
· July 1995: Made Initial Public Offer of Equity and raised over Rs.2000 crore,
thereby reducing Government stake to 72.14%.
· March 2000:Entered into a JV agreement with Principal Financial Group, USA
for participation in equity and management of IDBI Investment Management
Company Ltd., erstwhile a 100% subsidiary. IDBI divested its entire
shareholding in its asset management venture in March 2003 as part of overall
corporate strategy.
· March 2000: Set up IDBI Intech Ltd. as a wholly-owned subsidiary to undertake
IT-related activities.
· June 2000: A part of Government shareholding converted to preference capital,
since redeemed in March 2001; Government stake currently 58.47%.
· August 2000: Became the first All-India Financial Institution to obtain ISO
9002:1994 Certification for its treasury operations. Also became the first
organization in Indian financial sector to obtain ISO 9001:2000 Certification for
its forex services.
· March 2001: Set up IDBI Trusteeship Services Ltd. to provide technology-driven
information and professional services to subscribers and issuers of
debentures.
· February 2002: Associated with select banks/institutions in setting up Asset
Reconstruction Company (India) Limited (ARCIL), which will be involved with
the
33

34. · Strategic management of non-performing and stressed assets of Financial
Institutions and Banks.
· September 2003: IDBI acquired the entire shareholding of Tata Finance
Limited in Tata Home finance Ltd, signaling IDBI's foray into the retail finance
sector. The housing finance subsidiary has since been renamed 'IDBI Home
finance Limited'.
· December 2003: On December 16, 2003, the Parliament approved The
Industrial Development Bank (Transfer of Undertaking and Repeal Bill) 2002 to
repeal IDBI Act 1964. The President's assent for the same was obtained on
December 30, 2003. The Repeal Act is aimed at bringing IDBI under the
Companies Act for investing it with the requisite operational flexibility to
undertake commercial banking business under the Banking Regulation Act
1949 in addition to the business carried on and transacted by it under the IDBI
Act, 1964.
· July 2004: The Industrial Development Bank (Transfer of Undertaking and
Repeal) Act 2003 came into force from July 2, 2004.
· July 2004: The Boards of IDBI and IDBI Bank Ltd. take in-principle decision
regarding merger of IDBI Bank Ltd. with proposed Industrial Development Bank
of India Ltd. in their respective meetings on July 29, 2004.
· September 2004: The new entity "Industrial Development Bank of India" was
incorporated on September 27, 2004 and Certificate of commencement of
business was issued by the Registrar of Companies on September 28, 2004.
· September 2004:Notification issued by Ministry of Finance specifying SASF as
a financial institution under Section 2(h)(ii) of Recovery of Debts due to Banks &
Financial Institutions Act, 1993.
· September 2004:Notification issued by Ministry of Finance on September 29,
2004 for issue of non-interest bearing GoI IDBI Special Security, 2024,
aggregating Rs.9000 crore, of 20-year tenure.
34

35. · September 2004: Notification for appointed day as October 1, 2004, issued by
Ministry of Finance on September 29, 2004.
· September 2004:RBI issues notification for inclusion of Industrial Development
Bank of India Ltd. in Schedule II of RBI Act, 1934 on September 30, 2004.
· October 2004: Appointed day - October 01, 2004 - Transfer of undertaking of
IDBI to IDBI Ltd. IDBI Ltd. commences operations as a banking company. IDBI
Act, 1964 stands repealed
· January 2005: The Board of Directors of IDBI Ltd., at its meeting held on
January 20, 2005, approved the Scheme of Amalgamation, envisaging merging
of IDBI Bank Ltd. with IDBI Ltd. Pursuant to the scheme approved by the
Boards of both the banks, IDBI Ltd. will issue 100 equity shares for 142 equity
shares held by shareholders in IDBI Bank Ltd. EGM has been convened on
February 23, 2005 for seeking shareholder approval for the scheme.
 BOARD MEMBERS
 Shri Yogesh Agarwal, CMD
 Shri O.V. Bundellu, DMD
 Shri Jitender Balakrishnan, DMD
35

36.  Shri Arun Ramanathan, Finance Secretary
 Shri Ajay Shankar, Secretary (IPP)
 Shri K. Narasimha Murthy
 Shri H.L. Zutshi
 Shri Analjit Singh
 Smt. Lila Firoz Poonawalla
 Shri A. Sakthivel
 Shri Subhash Tuli
36

37. Profile Of IDBI Bank-
Industrial Development Bank came into existence with the Enactment of Parliamentary
Act in July 1964 as a subsidiary of Reserve Bank of India. The ownership vesting with
the Government of India. It was Designated Principal Institution for coordinating the
working of institutions at national and state level engaged in financing, promoting and
developing Industry. With the Government opening up of Domestic Banking sector to
private participation as part of overall financial sector reforms, in September 94,
Industrial Development bank in association with its subsidiary SIDBI, set up IDBI Bank
Ltd as a private sector commercial bank.
This initiative has blossomed into a major success story. IDBI bank, which began with
an equity capital of Rs 1000 million, commenced its first branch at Indore in November
1995. Thereafter in less than seven years the bank has attained a front ranking
position in the Indian Banking Industry. IDBI Bank successfully completed its public
issue in February 99, which led to its paid up capital expanding to Rs 1400 million.
On December 16, 2003 the parliament approved the Industrial Development bank
(Transfer of Undertaking and Repeal Bill) 2002 to repeal IDBI Act 1964. The Repeal
Act is aimed at Bringing IDBI under the companies Act for investing it with the requisite
operational flexibility to undertake commercial banking business under the Banking
Regulation Act 1949 in addition to the business carried on and Transacted by it under
the IDBI Act 1964. The New act came into force in July 2004.
The Board of Both IDBI and IDBI Bank decided to merger both the entities and to form
Industrial Development Bank of India. (IDBI Ltd.)The Merged entity became one the
Largest Financial Institution. With the Strength of the Parent company the Bank plans
to expand its network and grow on a large scale.
37

38. · Number of Branches: 453
· Number of Extension Counters:6
· Number of ATM s: 536
· Presence in 256 centres.
Industrial Development Bank of India Limited, now more popularly known as IDBI
Bank, was established as a wholly-owned subsidiary of Reserve Bank of India. The
foundation of the bank was laid down under an Act of Parliament, in July 1964. The
main aim behind the setting up of IDBI was to provide credit and other facilities for the
Indian industry, which was still in the initial stages of growth and development.
In February 1976, the ownership of IDBI was transferred to Government of India.
After the transfer of its ownership, IDBI became the main institution, through which the
institutes engaged in financing, promoting and developing industry were to be
coordinated. In January 1992, IDBI accessed domestic retail debt market for the first
time, with innovative Deep Discount Bonds, and registered path-breaking success. The
following year, it set up the IDBI Capital Market Services Ltd., as its wholly-owned
subsidiary, to offer a broad range of financial services, including Bond Trading, Equity
Broking, Client Asset Management and Depository Services.
In September 1994, in response to RBI's policy of opening up domestic banking sector
to private participation, IDBI set up IDBI Bank Ltd., in association with SIDBI. In July
1995, public issue of the bank was taken out, after which the Government's
shareholding came down (though it still retains majority of the shareholding in the
bank).
In September 2003, IDBI took over Tata Home Finance Ltd, renamed ‘IDBI Home
finance Limited’, thus diversifying its business domain and entering the arena of retail
finance sector.
The year 2005 witnessed the merger of IDBI Bank with the Industrial Development
38

39. Bank of India Ltd. The new entity continued to its development finance role, while
providing an array of wholesale and retail banking products (and does so till date).
The following year, IDBI Bank acquired United Western Bank (which, at that time, had
230 branches spread over 47 districts, in 9 states). In the financial year of 2008, IDBI
Bank had a net income of Rs 9415.9 crores and total assets of Rs 120,601 crores.
The Present
Today, IDBI Bank is counted amongst the leading public sector banks of India, apart
from claiming the distinction of being the 4th largest bank, in overall ratings. It is
presently regarded as the tenth largest development bank in the world, mainly in terms
of reach. This is because of its wide network of 509 branches, 900 ATMs and 319
centers. Apart from being involved in banking services, IDBI has set up institutions like
The National Stock Exchange of India (NSE), The National Securities Depository
Services Ltd. (NSDL) and the Stock Holding Corporation of India (SHCIL).
RETAIL BANKING
Service with a smile: Today’s finicky banking customers will settle for nothing less. The
customer has come to realize somewhat belatedly that he is the king. The customer’s
choice of one entity over another as his principal bank is determined by considerations
of service quality rather than any other factor. He wants competitive loan rates but at
the same time also wants his loan or credit card application processed in double quick
time. He insists that he be promptly informed of changes in deposit rates and service
charges and he bristles with ‘customary rage’ if his bank is slow to redress any
grievance he may have. He cherishes the convenience of impersonal net banking but
during his occasional visits to the branch he also wants the comfort of personalized
human interactions and facilities that make his banking experience pleasurable. In
short he wants financial house that will more than just clear his cheque and updates
his passbook: he wants a bank that cares and provides great services. So, do banks
39

40. meet these heightened expectations? Is there a gap that exists between the
management perception and the customer perception with reference to the services
offered in Retail Banking?
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.
40

41. Retail banking is, however, quite broad in nature - it refers to the dealing of commercial
banks with individual customers, both on liabilities and assets sides of the balance
sheet. Fixed, current / savings accounts on the liabilities side; and mortgages, loans
(e.g., personal, housing, auto, and educational) on the assets side, are the more
important of the products offered by banks. Related ancillary services include credit
cards, or depository services.
The issue of retail banking is extremely important and topical. Across the globe, retail
lending has been a spectacular innovation in the commercial banking sector in recent
years. The growth of retail lending, especially, in emerging economies, is attributable
to the rapid advances in information technology, the evolving macroeconomic
environment, financial market reform, and several micro-level demand and supply side
factors.
India too experienced a surge in retail banking. There are various pointers towards
this. Retail loan is estimated to have accounted for nearly one-fifth of all bank credit.
Housing sector is experiencing a boom in its credit. The retail loan market has
decisively got transformed from a sellers’ market to a buyers’ market. All these
emphasize the momentum that retail banking is experiencing in the Indian economy in
recent years.
Retail banking refers to provision of banking services to individuals and small
business where the financial institutions are dealing with large number of low value
transactions. The concept is not new to banks but is now viewed as an important and
attractive market segment that offers opportunities for growth and profits. Today’s retail
banking sector is characterized by three basic characteristics:
 Multiple products (deposits, credit cards, insurance, investments and securities)
 Multiple channels of distribution (call center, branch, and internet)
 Multiple customer groups (consumer, small business, and corporate).
41

42. OBJECTIVES
 To study on the Customer Satisfaction level on retail banking
 To know the technical advancement benefits for customers.
 To understand the operations and modalities of Retail banking
 To study on the Impact of the Banking Crisis and the Flight to Quality
 To study and analyze the concept of Customer Relationship
Management of banks in general.
 To predict the future position of Retail banking in India
Concept of Retail Banking
The retail banking encompasses deposit and assets linked products as well as other
financial services offered to individual for personal consumption. Generally, the pure
retail banking is conceived to be the provision of mass banking products and services
to private individuals as opposed to wholesale banking which focuses on corporate
clients.
Over the years, the concept of retail banking has been expanded to include in many
cases the services provided to small and medium sized businesses. Some banks in
Europe even include their private banking business i.e. services to high net worth net
worth individuals in their retail banking portfolio.
The concept of Retail banking is not new to banks. It is only from past few years that it
is being viewed as an attractive market segment, which offers opportunities for growth
with profits. The diversified portfolio characteristic of retail banking gives better comfort
42

43. and spreads the essence of retail banking in individual customers. Though the term
retail banking and retail lending are often used synonymously, yet the later is lust one
side of retail banking. In retail banking, all the banking needs of individual customers
are taken care of in an integrated manner.
Review of Literature
Anil Dutta and Kirti Dutta in their paper reveal the expectations and perceptions of the
consumers across the three banking sectors in India. The study revealed that gap
varies across the banking sector with public sector banks showing the widest gap and
foreign banks showing a narrow gap. It is important for the service providers to know
the level of customer expectations so that they can meet and even exceed them to
gain maximum customer satisfaction .In the study of Mark Durkin et al., customer
satisfaction questionnaire was issued to over 2,000 retail customers. Twenty-five
senior branch bank managers were then asked to rank the same set of issues to
ascertain what they felt to be the key influencers to customer registration for internet
banking.
The three factors that the managers failed to identify, fell into two broad categories:
relationship management status and comfort with new technology .
Financial institutions are actively developing new electronic banking products for their
retail customers. To date, the market leaders have drawn a disproportionably higher
share of e-retail banking customers. In response, smaller institutions have become
quite active in exploring ways to participate profitably in online banking. A major
influence is from a customer relationship management (CRM) perspective, where
institutions try to limit the outflow of current customers and direct high-value customers
to potential products from a multi-product service offering array.
These efforts can succeed only if retail bank marketers focus the promotion of the new
products and services that can utilise this channel toward those customers who are
most likely to find them attractive (Don Sciglimpagli). The first aim of this study was to
43

44. examine the role that online and electronic banking play in defining the customer's
primary financial relationship. The analysis of 701 retail customers of a financial
institution presented in this study suggests that banks and other institutions are highly
vulnerable to loss of customers to rivals with extensive online services. A second aim
was to examine to what extent information on banking relationships is able to extend
CRM analysis beyond that offered by typical demographic and income data.
Current customer account relationships are found to be highly predictive of use of
electronic services use in general. And, interest in the use of specific online services is
related to differing customer relationships in addition to ordinary demographic and
balance information. These findings can be useful for retail banking in identifying
potential high-value users from a customer relationship management perspective .
The purpose of the paper by Aurto Molina is to investigate the impact of relational
benefits on customer satisfaction in retail banking. This paper presents a causal model
that identifies a connection between the relational benefits achieved through a stable
and long-term relationship with a given bank and customer satisfaction with retail
banking.
Based on a theoretical framework regarding the relationship between relational
benefits and customer satisfaction, an empirical study using a sample of 204 bank
customers was conducted, and the theoretical model is tested.
Multi-item indicators from prior studies were employed to measure the constructs of
interest, and the proposed relationships were tested using structural equations
modeling methods. The results show that confidence benefits have a direct, positive
effect on the satisfaction of customers with their bank. However, special treatment
benefits and social benefits did not have any significant effects on satisfaction in a
retail banking environment. The findings suggest that banks can create customer
satisfaction through relational strategies that focus on building customer confidence.
Therefore, frontline employees should be committed to establishing and maintaining
confidence benefits for customers. Thus the study provides useful information on the
44

45. relationship between customer satisfaction and specific relational benefits in retail
banking.
The important change drivers in most European retail banking systems are found to be
competition and IT developments. Two broad strategic themes are explored. The first
is the evolution of retail banking in a strategic marketing context from a supply focus
towards a much greater demand orientation. The second theme explored is the
intensifying strategic imperative towards a shareholder value culture.
The key features and strategic challenges of the `new' retail banking revolution are
finally summarized in the study of Gardener Edwar and Howcroft Barry .Due to
increasing competition in retail banking, understanding the customer perception about
service quality is becoming indispensable. The private sector banks are posing a very
stiff competition to the public sector banks through their initiatives for meeting
customer expectations and gaining a cutting edge. This is reflected by the increasing
market share and better profitability of private banks in comparison to that of public
sector banks.
At the same time, public sector banks have also responded to the challenges posed
by the private sector banks through conscious efforts to enhance their service quality.
This study (R.A.Ravi) compares public sector banks and private sector banks in terms
of user perception of their retail banking services.
In his article in Business Line T. B. Kapali, explains the perceived stability of the
income stream from the retail business is probably the most important driver of the
push into retail. Cross-country studies clearly point - increasing urbanization, rising
income levels; all indicating that the demand for retail finance will continue to be very
strong well into the future. ICICI or HDFC over the past few years does show the
stability which has been imparted to the overall revenue stream by the retail business.
With the growth of the Indian economy over the past few years, the retail banking
sector in India has also witnessed phenomenal growth. It has faced up to the need of
45

46. the hour and introduced anytime, anywhere banking, for its customers through ATMs,
mobile and internet banking. It has also offered services like D-MAT, plastic money
(credit and debit cards), online transfers, etc. The concept of CBS (Core Banking
Solution), which allows a customer to fulfill a wide range of banking operation online,
has come alive during the past few years. This has not only helped in reducing
operational costs but facilitated greater conveniences to its customers and so the
customer preferences have to be taken care of constantly in the retail banking
business.
In the age of consumerism, the customer is king. And the banking sector is latching on
to this mantra of sales and marketing. Although the sector is part of the service
industry, only recently have individual banks woken up to the fact that offering products
and services tailored to meet the customers' specific needs can actually bring in more
business. Banks today do much more than lend and borrow money.
The new-age private sector banks can be said to be the forerunners in offering such
customer-oriented service. Banks are even taking loans to the customers. Banks have
also become a one-stop shop for selling products such as mutual funds, insurance and
RBI bonds and offer service such as payment of utility bills and equity trading. Cross-selling
also helps banks personalise products for their customers.
For instance, banks give loans against insurance, or link deposit schemes to
insurance, depending on customer needs. The banks are converting to the age of
commoditised business i.e., Give the consumer a product and a reason to use it.
The rapid and provocative changes facing the retail sector seems to vary somewhat
from country to country, retail banks everywhere are working vigorously to address
new technological, regulatory and competitive realities. Collectively, they are trying to
determine strategies and tactics needed to secure their franchises and their futures.
The bank of the future will not win by creating a single strategy. Rather, each of its
activities within products, customer channels, and support services will be the subject
of a discreet "business unit" strategy, which will be benchmarked against market-
46

47. segmented customer demand and profitability, and competitors' businesses in this
area.
The above studies show that retail banking business will continue to be very strong,
well into the future. The increasing competition is compelling the service providers to
know the level of customer expectations and meet them. The studies also suggest that
the bank of the future will not win by creating a single strategy but focus on building
customer confidence and extensive online services.
The present study looks into understanding the customers’ perception towards the
retail banking and also their awareness regarding the various retail banking services.
What is Retail Banking?
Retail banking is, however, quite broad in nature - it refers to the dealing of commercial
banks with individual customers, both on liabilities and assets sides of the balance
sheet. Fixed, current / savings accounts on the liabilities side; and mortgages, loans
(e.g., personal, housing, auto, and educational) on the assets side, are the more
important of the products offered by banks. Related ancillary services include credit
cards, or depository services.
Today’s retail banking sector is characterized by three basic characteristics:
· Multiple products (deposits, credit cards, insurance, investments and securities);
· Multiple channels of distribution ( branch, internet); and
· Multiple customer groups (consumer, small business, and corporate).
Retail Banking in India:
47

48. Retail banking in India is not a new phenomenon. It has always been prevalent in India
in various forms. For the last few years it has become synonymous with mainstream
banking for many banks.
The typical products offered in the Indian retail banking segment are housing loans,
consumption loans for purchase of durables, auto loans, credit cards and educational
loans. The loans are marketed under attractive brand names to differentiate the
products offered by different banks. As the Report on Trend and Progress of India,
2003-04 has shown that the loan values of these retail lending typically range between
Rs.20,000 to Rs.100 lakh.
The loans are generally for duration of five to seven years with housing loans granted
for a longer duration of 15 years. Credit card is another rapidly growing sub-segment of
this product group.In recent past retail lending has turned out to be a key profit driver
for banks with retail portfolio constituting 21.5 per cent of total outstanding advances
as on March 2004. The overall impairment of the retail loan portfolio worked out much
less then the Gross NPA ratio for the entire loan portfolio. Within the retail segment,
the housing loans had the least gross asset impairment. In fact, retailing make ample
business sense in the banking sector.
Drivers of retail banking business in India
Some of the basic reasons which led to the retail banking growth are as follows:
 First, economic prosperity and the consequent increase in purchasing power
has given a fillip to a consumer boom. During the 10 years after 1992, India's
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49. economy grewat an average rate of 6.8 percent and continues to grow at almost
the same rate – not many countries in the world match this performance.
 Second, changing consumer demographics indicate vast potential for growth in
consumption both qualitatively and quantitatively. India is one of the countries
having highest proportion (70%) of the population below 35 years of age (young
population). The BRIC report of the Goldman-Sachs, which predicted a bright
future for Brazil, Russia, India and China, mentioned Indian demographic
advantage as an important positive factor for India.
 Third, technological factors played a major role. Convenience banking in the
form of debit cards, internet and phone-banking, anywhere and anytime banking
has attracted many new customers into the banking field. Technological
innovations relating to increasing use of credit / debit cards, ATMs, direct debits
and phone banking has contributed to the growth of retail banking in India.
 Fourth, the treasury income of the banks, which had strengthened the bottom
lines of banks for the past few years, has been on the decline during the last
few years. In such a scenario, retail business provides a good vehicle of profit
maximization. Considering the fact that retail’s share in impaired assets is far
lower than the overall bank loans and advances, retail loans have put
comparatively less provisioning burden on banks apart from diversifying their
income streams.
 Fifth, decline in interest rates have also contributed to the growth of retail credit
by generating the demand for such credit.
Opportunities and Challenges of Retail Banking in India
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? As already referred to the BRIC Report, talking India as
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50. 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 the 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 toward personal debt, is contributing to India's retail banking segment.
Global investors are attracted to India because of the growing number of well-educated,
English-speaking workers who are comfortable working in information
technology. India's IT work force will be augmented by a booming population of
engineering students. Furthermore, India's labor pool also serves as an expanding
customer base for retail bank products and services.
The development of India's economy is boosting overall consumer purchasing power.
The percentage of middle to high income Indian households is expected to continue
rising. The younger, more educated population not only wields increasing purchasing
power, but it is more comfortable than previous generations with acquiring personal
debt
The combination of the above factors promises substantial growth in the 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.
The challenges for the industry and its stakeholders are as follows:
 First, retention of customers is going to be a major challenge. According to a
research by Reichheld and Sasser in the Harvard Business Review, 5 per cent
increase in customer retention can increase profitability by 35 per cent in
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51. banking business, 50 per cent in insurance and brokerage, and 125 per cent in
the consumer credit card market. Thus, banks need to emphasise on retaining
customers and increasing 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 the 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 the consumer credit segments, the Reserve Bank
has, as a temporary measure, put in place risk containment measures and
increased the risk weight from 100 per cent to 125 per cent in the case of
consumer credit including personal loans and credit cards (Mid-term Review of
Annual Policy, 2004-05).
 Third, information technology poses both opportunities and challenges. Even
with ATM machines and Internet Banking, many consumers still prefer the
personal touch of their neighbourhood branch bank. Technology has made it
possible to deliver services throughout the branch bank network, providing
instant updates to checking accounts and rapid movement of money for stock
transfers. However, this dependency on the network has brought IT
departments additional responsibilities and challenges in managing, maintaining
and optimizing the performance of retail banking networks. Illustratively,
ensuring that all bank products and services are available, at all times, and
across the entire organization is essential for today’s retails banks to generate
revenues and remain competitive. Besides, there are network management
challenges, whereby keeping these complex distributed networks and
applications operating properly in support of business objectives becomes
essential. Specific challenges include ensuring that account transaction
applications run efficiently between the branch offices and data centres.
 Fourth, KYC Issues and money laundering risks in retail banking is yet another
important issue. Retail lending is often 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
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52. for new business. Banks must also consider seriously the type of identification
documents they will accept and other processes to be completed. The Reserve
Bank has issued detailed guidelines on application of KYC norms in November
2004.
Reasons for the change over from Corporate Banking to Retail Banking:
 The financial sector reforms undertaken by the Government since the
year 1991 have accelerated the process of disintermediation which has
encouraged blue chip corporate to access cheaper funds to meet their
working capital requirements directly from investors in India and abroad
through capital market instruments and external Commercial Borrowings
route thus by-passing Banks in the process. The deregulation of markets
and interest rates has lead to cut throat competition among Banks for
corporate loans making them to lend even at PLR or sub PLR and offer
other valued services at comparatively cheaper rates to big and high
value corporate. In the process, most of the banks have experienced
substantial reduction in interest spreads and drain on their profitability.
 The introduction of stringent Asset Classification, Income Recognition
and provisioning norms has resulted in growing menace of NPAs in
corporate loans which has affected the asset quality, profitability and
capital adequacy of banks adversely. The risks involved in corporate
loans are very high as corporate have to keep all their eggs in one
basket. The risks involved in retail Banking advances are comparatively
less and well diversified as loan amounts are relatively small ranging
from Rs. 5000 to Rs. 100 lakh and repayable normally in short period of
3- years except housing loans (where repayment period is long up to 15
years in some cases) and from fixed source of income like salaries.
 Whereas corporate loans give average return of just 0.5 to 1.5 percent
only, the retail advances offer attractive interest spread of 3to 4 percent,
because retail borrowers are less interest rate sensitive than the
52

53. Corporate. Another reason for large interest spreads on retail advances
is that the retail customers are too fragmented to bargain effectively.
 While corporate loans are subject to ups and downs in trade frequently,
retail loans are comparatively independent of recession and continue to
deliver even during the sluggish phase of economy.
 Retail Banking gives a lot of stability and public image to banks as
compared to corporate banking.
 The housing loans, which form the major chunk of retail lending and
where NPAs are the least, carry risk weight of just 50% for capital
adequacy purposes. This is likely to come down further as new Basel
Capital Accord or (Basel II) norms are put in place from the year 2006.
This offers added incentive to banks for lending to this retail segment as
against corporate lending where capital consumption is higher.
 The greater amount of consumerism in the country with upswing in
income levels of burgeoning middle class, which has propensity to
consume to raise their standard of living, is enlarging the retail markets.
This market is growing 2 50 percent per year and boosting the demand
for credit from households. The potential is huge as present penetration
level is just over 2 percent in the country. Given the easy liquidity
scenario in the country the growth rate in this sector is likely to go up
manifold in the years come. This offers great potential for banks to
enlarge their loan books.
 The Indian mindset is also changing and consumers prefer to improve
their quality of life even if it means borrowing for facilities like housing,
consumer goods vehicles and vacationing etc. Borrowing and lending is
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54. no longer considered a taboo. The peer pressure and demonstration
effect is further pushing up demand for housing loans, consumer
products and automobiles. The profiles of customers are fast changing
from conservative dodos to fashionable peacocks. All these
developments give big push to Retail Banking activities.
 Retail Banking clients are generally loyal and tend not to change from
one Bank to another very often.
 Large numbers of Retail clients facilitate marketing, mass selling and
ability to categorize/select clients using scoring system and data mining.
Banks can cut costs and achieve economies of scale and improve their
bottom-line by robust growth in retail business volume.
 Through product innovations and competitive pricing strategies Banks
can foster business relationship with customers to retain the existing
clients and attract new ones.
 Innovative products like asset securitization can open new vistas in
sustaining optimal capital adequacy and asset liability management for
banks.
 Retail Banking offers opportunities to banks to cross-sell other retail
products like credit card, insurance, mutual fund products and demat
facilities etc. to depositors and investors.
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55. Impact of Retail Banking:
The major impact of retail Banking is that, the customers have become the Emperors –
the fulcrum of all Banking activities, both on the asset side and the liabilities front. The
hitherto sellers market has transformed into buyers market the customers have
multiple of choices before them now for cherry picking products and services, which
suit their lifestyles and tastes and financial requirements as well. Banks now go to their
customers more often than the customers go to their banks.
 Retail Banking is transforming banks into one stop financial super
markets.
 The share of retail loans is fast increasing in the loan books of banks.
 Banks can foster lasting business relationship with customers and retain
the existing customers and attract new ones. There is a rise in their
service as well.
 Banks can cut costs and achieve economies of scale and improve their
revenues and profits by robust growth in retail business. Reduction in
costs offers a win win situation both for banks and the customers.
 It has affected the interface of banking system through different delivery
mechanism
 It is not that banks are sharing the same pie of retail business, the pie
itself is growing exponentially. Retail Banking has fuelled a considerable
quantum of purchasing power through a slew of retail products.
 Banks can diversify risks in their credit portfolio and contain the menace
of NPAs. Retail banking allows bank to cross sell other products and
services as it is far more easier to sell other products to the same
customer rather than search for absolutely new ones. Cross selling is
one of the best avenues for relationship
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56.  Banking and retention of customers. Banks can thus increase their
business volume and improve their bottom-line substantially.
 Re-engineering of business with sophisticated technology based
products will lead to business creation, reduction in transaction costs and
enhancement in efficiency of operations.
Problems faced in Retail Banking :
 Retail Banking has all it’s attendant risks. It is highly sensitive .Banks got
to move cautiously. It is easy to enter, but difficult to get out. A systematic
and a calculated approach is the pre-requisite for success in the long run.
 Retail Banking is being introduced with the concept of serving customer
with better and innovative products with the latest technology and easy
availability. It becomes so popular and widely acceptable that more and
more customers had started to use it. Now it becomes a mass product.
Customer database have tremendously increased and it becomes
difficult to manage them.
 To match the customer inflows and current customer requirements as
well as service standards, banks have to set up more branches,
distribution channels and new trained staff as well as improvement in
back office operations also in very near future. This itself a time bounded
problem and banks have to do it as early as possible.
 Today’s competitive market customer has more than one options for his
retail banking needs. Every bank is providing more or less similar kind of
products. So an unsatisfied customer can easily switch over to another
competitor’s bank. So banks need to be very careful in handling the
customers. They have to continually improve their service standards.
 Retail Banking is so wide accepted by the customer as well as very
aggressively promoted by the bankers that if the bankers do not take
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57. adequate care in distributing and recovering advances, there are
chances of increasing in NPAs in coming feature. And that would be an
alarming situation.
BENEFITS OF RETAIL BANKING
Traditional lending to the corporate are slow moving along with high NPA risk,
treasure profits are now loosing importance hence Retail Banking is now an alternative
available for the banks for increasing their earnings. Retail Banking is an attractive
market segment having a large number of varied classes of customers. Retail Banking
focuses on individual and small units. Customize and wide ranging products are
available. The risk is spread and the recovery is good. Surplus deployable funds can
be put into use by the banks. Products can be designed, developed and marketed as
per individual needs.
SCOPE FOR RETAIL BANKING IN INDIA
• 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 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.”
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58. • 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.
CHALLENGES TO RETAIL BANKING IN INDIA
 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.
 The issue of outsourcing has become very important in recent past because various
core activities such as hardware and software maintenance, entire ATM set up and
operation (including cash, refilling) etc., are being outsourced by Indian banks.
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59.  Banks are expected to take utmost care to retain the ongoing trust of the public.
 Customer service should be at the end all in retail banking. Someone has rightly said,
“It takes months to find a good customer but only seconds to lose one.” Thus, strategy
of Knowing Your Customer (KYC) is important. So the banks are required to adopt
innovative strategies to meet customer’s needs and requirements in terms of
services/products etc.
 The dependency on technology has brought IT departments’ additional responsibilities
and challenges in managing, maintaining and optimizing the performance of retail
banking networks. It is equally important that banks should maintain security to the
advance level to keep the faith of the customer.
 The efficiency of operations would provide the competitive edge for the success in
retail banking in coming years.
 The customer retention is of paramount important for the profitability if retail banking
business, so banks need to retain their customer in order to increase the market share.
 One of the crucial impediments for the growth of this sector is the acute shortage of
manpower talent of this specific nature, a modern banking professional, for a modern
banking sector.
 If all these challenges are faced by the banks with utmost care and deliberation, the
retail banking is expected to play a very important role in coming years, as in case of
other nations.
EMERGING ISSUES IN HANDLING RETAIL BANKING
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60.  KNOWING CUSTOMER
· ‘Know your Customer’ is a concept which is easier said than practiced. Banks face
several hurdles in achieving this. In order to that the product lines are targeted at the
right customers-present and prospective-it is imperative that an integrated view of
customers is available to the banks. The benefits flowing out of cross-selling and up-selling
will remain a far cry in the absence of this vital input. In this regard the
customer databases available with most of the public sector banks, if not all, remain far
from being enviable.
 What needs to be done is setting up of a robust data warehouse where from
meaningful data on customers, their preferences, there spending patterns, etc. can be
mined. Cleansing of existing data is the first step in this direction. PSBs have a long
way to go in this regard.
 TECHNOLOGY ISSUES
· Retail banking calls for huge investments in technology. Whether it is setting up of a
Customer Relationship Management System or Establishing Loan Process Automation
or providing anytime, anywhere convenience to the vast number of customers or
establishing channel/product/customer profitability, technology plays a pivotal role.
And it is a long haul. The Issues involved include adoption of the right technology at
the right time and at the same time ensuring volumes and margins to sustain the
investments.
 It is pertinent to remember that Citibank, known for its deployment of technology, took
nearly a decade to make profits in credit cards. It has also to be added in the same
breath that without adequate technology support, it would be well nigh possible to
administer the growing retail portfolio without allowing its health to deteriorate. Further,
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61. the key to reduction in transaction costs simultaneously with increase in ability to
handle huge volumes of business lies only in technology adoption.
 PSBs are on their way to catch up with the technology much required for the success
of retail banking efforts. Lack of connectivity, stand alone models, concept of branch
customer as against bank customer, lack of convergence amongst available channels,
absence of customer profiling, lack of proper decision support systems, etc., are a few
deficiencies that are being overcome in a great way. However, the initiatives in this
regard should include creating flexible computing architecture amenable to changes
and having scalability, a futuristic approach, networking across channels, development
of a strong Customer Information Systems (CIS) and adopting Customer Relationship
Management (CRM) models for getting a 360 degree view of the customer.
 ORGANIZATIONAL ALIGNMENT
· It is of utmost importance that the culture and practices of an institution support its
stated goals. Having decided to take a plunge into retail banking, banks need to have a
well defined business strategy based on the competitive of the bank and its potential.
Creation of a proper organization structure and business operating models which
would facilitate easy work flow are the needs of the hour. The need for building the
organizational capacity needed to achieve the desired results cannot be overstated.
 This would mean a strong commitment at all levels, intensive training of the rank and
file, putting in place a proper incentive scheme, etc. As a part of organizational
alignment, there is also the need for setting up of an effective Corporate Marketing
Division. Most of the public sector banks have only publicity departments and not
marketing setup.
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62.  A fully fledged marketing department or division would help in evolving a brand
strategy, address the issue of alienation from the upwardly mobile, high net worth
customer group and improve the recall value of the institution and its products by
arresting the trend of getting receded from public memory. The much needed tie-ups
with manufacturers/distributors/builders will also facilitated smoothly.
 It is time to break the myth PSBs are not customer friendly. The attention is to be
diverted to vast databases of customers lying with the PSBs till unexploited for
marketing.
 PRODUCT INNOVATION
· Product innovation continues to be yet another major challenge. Even though
bank after bank is coming out with new products, not all are successful. What is
of crucial importance is the need to understand the difference between novelty
and innovation? Peter Drucker in his path breaking book: “Management
Challenges for the 21st Century” has in fact sounded a word of caution:
“innovation that is not in tune with the strategic realities will not work; confusing
novelty with innovation (should be avoided), test of innovation is that it creates
value; novelty creates only amusement”.
· The days of selling the products available in the shelves are gone. Banks need
to innovate products suiting the needs and requirements of different types of
customers. Revisiting the features of the existing products to continue to keep
them on demand should not also be lost sight of.
 PRICING OF PRODUCT
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63. · The next challenge is to have appropriate policies in place. The industry today is
witnessing a price war, with each bank wanting to have a larger slice of the cake that is
the market, without much of a scientific study into the cost of funds involved, margins,
etc. The strategy of each player in the market seems to be: ‘under cutting others and
wooing the clients of others’.
· Most of the banks that use rating models for determining the health of the retail
portfolio do not use them for pricing the products. The much needed transparency in
pricing is also missing, with many hidden charges. There is a tendency, at least on the
part of few to camouflage the price. The situation cannot remain his way for long. This
will be one issue that will be gaining importance in the near future.
 PROCESS CHANGES
· Business Process Re-engineering is yet another key requirement for banks to handle
the growing retail portfolio. Simplified processes and aligning them around delivery of
customer service impinging on reducing customer touch-points are of essence.
· A realization has to drawn that automating the inefficiencies will not help anyone and
continuing the old processes with new technology would only make the organization an
old expensive one.
63

64. · Work flow and document management will be integral part of process changes. The
documentation issues have to remain simple both in terms of documents to be
submitted by the customer at the time of loan application and those to be executed
upon sanction.
 ISSUE CONCERNING HUMAN RESOURCES
· While technology and product innovation are vital , the soft issues concerning the
human capital of the banks are more vital.
· The corporate initiatives need to focus on bringing around a frontline revolution.
Though the changes envisaged are seen at the frontline, the initiatives have to really
come from the ‘back end’.
· The top management of banks must be seen as practicing what preaches. The
initiatives should aim at improved delivery time and methods of approach. There is an
imperative need to create a perception that the banks are market-oriented.
 This would mean a lot of proactive steps on the part of bank management which would
include empowering staff at various levels, devising appropriate tools for performance
measurement bringing about a transformation – ‘can’t do ‘to’ can do’ mind-set change
from restrictive practices to total flexible work place, say.
64

65.  By having universal tellers, bringing in managerial controlling work place, provision of
intensive training on products and processes, emphasizing, coaching etiquette, good
manners and best behavioral models, formulating objective appraisals, bringing in
transparency, putting in place good and acceptable reward and punishment system,
facilitating the placement of young /youthful staff in front-line defining a new role for
front-line staff by projecting them as sellers of products rather than clerks at work and
changing the image of the banks from a transaction provider to a solution provider.
 RURAL ORIENTATION
· As of now, action that is taking place on the retail front is by and large confined two
metros and cities. There is still a vast market available in rural India, which remains to
be trapped. Multinational Corporations, as manufacturers and distributors, have
already taken the lead in showing the way by coming out with exquisite products,
packaging and promotions, keeping the rural customer in mind.
· Washing powders and shampoos in Re.1 sachet made available through an efficient
network and testimony to the determination of the MNCs to penetrate the rural market.
In this scenario, banks cannot lack behind.
· In particular PSBs, which have a strong rural presence, need to address the needs of
rural customers in a big way. These and only these will propel retail growth that is
envisaged as a key strategy for portfolio expansion by most of the banks.
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