The document discusses trends and future outlook of retail banking in India. It notes that retail banking is growing rapidly due to increasing incomes, literacy, and technology adoption. Growth is seen across retail deposits, credit products like housing loans, auto loans, and credit cards. However, challenges also exist like managing risks of higher retail lending, customer delinquencies, lack of borrower data, and potential economic impacts. Overall, the future of retail banking is seen as customer-centric with competition ensuring them better services and rates.

1. Future of Retail Banking
- Bhaskar Ghose, Managing Director,
IndusInd Bank

2. Recent trends
 Aggressive entry strategies of foreign
banks to Retail Segment
 Customer retention initiatives by PSU
Banks
 Aggressive price-war on Retail Credit

3. Recent trends contd…
 Rapid penetration of Personal Computers,
Mobile phones and on-line Trading and
purchase options encouraged increased usage
of technology banking
 Booming economy and continuous per capita
income will further push the living standards of
people

4. Recent trends contd…
 Customers’ preference to more and more
alternate channels for convenience
 Fee based income from remittance is
shrinking due to RTGS and other
technology initiatives
 Higher short term interest and flatter
yield curves

5. Recent trends contd…
 Phenomenal rise in nuclear and dual income
families & enhanced spending power
 Increasing literacy levels
 Higher adaptability to technology banking

6. Recent trends contd….
 Growing consumerism
 Fiscal incentives to Housing loans
 Fastest economic growth over the decade

7. Retail Liabilities
 Banks continue to offer valued added Products
and Services for customer acquisition and
retention
 Retail Banking technology is gaining its
importance due to the continued demand
 Customer Relationship Management (CRM) is
going to be a mandatory requirement for banks
to leverage the existing relationship

8. Retail Liabilities contd…..
 Retail Banking customers are demanding more
and more features and product differentiation
 More and more Retail customers in the age
group of 20-35 with high saving potential
 Future of Retail Liabilities would be from Tier
II & Tier III locations

9. Retail Liabilities contd…
 Alternate delivery channels, channel integration
and single sign on expectation from customers
 Branch Banking channels are going to be
business expansion channel than Transaction
processing centre
 More and more customers are moving out of the
Branch Banking channel to other alternate
delivery channels

10. Retail Liabilities -Future
 Rate of growth of deposit may be affected by
other investment opportunities like Mutual
Funds and Bonds
 Banks may prefer to have sharing arrangements
 Smart Card/Stored value card would gain
importance

11. Retail Credit
 Retail Credit business shifted from Private
Money lenders to NBFCs and Banks in the last
decade
 Now, the shift is from NBFC s to Banks
 In future, the shift is expected from inefficient
Banks to Banks with set processes and quick
delivery systems

12. Retail Credit contd….
 Loan to GDP ratio is less than 40%, which is
only a fraction, compared to the developed
economy
 Every Bank has enough opportunities to
perform without unhealthy competition
 Business potential in Semi urban and Rural
areas are very high, which is yet to be explored

13. Retail Credit contd….
 Banks overtake HFCs in Home Loans
 Banks overtake NBFCs in Auto loans
 The same trend would continue for next few
years

14. Retail Credit contd….
 Basel II implementation and necessity to have
stringent Risk Management systems would
exert pressure on Retail lending in future
 Banks with well defined systems and
procedures would emerge as leaders in Retail
Credit

15. Retail Credit contd….
 Home Loan is expected to grow at 30%
 Housing loan as % of GDP will touch 10%
 Used Car finance is growing over 20% rate and
is expected to continue

16. Retail Credit contd….
 Mix of Retail Credit is expected at –
Home Loan 49%, Auto loans 28%,
Personal loans 16% and Consumer
durables 7%
 Educational loans which are at a low ebb
also expected to grow at 20% in the
coming years

17. Retail Credit contd….
 Housing and Auto loans together, would
continue to contribute to the level of 18%
 Other Retail advances would move from 8 to
13%
 Agricultural segment is expected maintain the
10% level

18. Retail Credit contd….
 Personal loan segment is also expected to grow
@ 20% with higher yield ranging from 12-16%
 Gross Retail Advances would move to over 40%
of total advances in the next 5 years

19. Credit Card business
 Credit Card issuance at 50% growth rate in
2004-05, compared to 36% growth during the
pervious year
 Credit Card growth is estimated at CAGR of
20%
 Draft guidelines on Credit Card operations
would affect the Credit Card growth
 Single overall limit for Credit Cards would
ensure lower delinquency rate under the
segment

20. Retail Credit - Challenges
 Customer tendency to borrow more and repay
less may adversely affect the NPA levels in
future
 Future delinquency rates are not properly
factored in fixing the Retail credit pricing by
few banks
 Increased risk weight of Consumer Credit

21. Retail Credit – Challenges
contd….
 Liquidity mismatches may emerge as an issue
 Slight change in economic scenario may affect
the whole system
 Existing Retail scoring models may not predict
impact of mild recession

22. Retail Credit –Challenges
contd….
 Lack of Credit information of Retail customers
from the Banking system
 CIBIL is addressing the issue only to a certain
extent
 No system to eliminate multiple finances,
including Personal Loans
 Higher level of NPA from Personal Loans

23. Retail Credit –Challenges
contd….
 Higher Loan-to-value ratio may emerge as a
problem during recession
 Sale of assets without any control from the bank
in the case of Consumer Credit
 Growing incidents of frauds and cyber crimes

24. Future- for the Customer
 Future of Retail Banking is for the
CUSTOMER
 Pricing is determined by Customer
 Competition among Banks would ensure him
better service at cheaper rate
 Customer would be able to discount his future
earnings as Retail Credit for his higher standard
of living

25. Thank You