Vous êtes sur la page 1sur 49


The banking sector has under gone turbulent changes in the past few years. The
financial sector reforms have brought in the entry of new private sector and
foreign banks in the country. The conventional banking as outlined above has
given way for professional and high-tech banking. There has been a paradigm
shift from the monopolies of public sector banks to competitive banking. Public
sector banks can no longer remain complacent with their conventional products
and services. With walk in business virtually being ruled out, banks are now
scouting for quality consumers both for building their resources and assets
There were times when the corporate clientele occupied the centre stage and the
retail ones were pushed to the back seat. The slow down of the economy,
sluggish industrial growth and slump in agricultural activities have pushed the
commercial banks to look to the retail customers.
Retail banking has both pros and cons. n a situation like today, the bankers have
very little option, but to chant the !Retail "antra#
Retail credit outstanding as on "arch $$, $%%&, amounted to Rs ',(%,%%% crore.
)ccording to one estimate, the retail segment is e*pected to grow at &%-+%, in
the coming years.
"a-or Players. /tate 0ank of ndia, 1234 0ank, 5T 0ank, 20 0ank and 44
The ratio of retail credit to net credit in the global level is around 6,. n ndia, it
is interesting to note that this ratio is over '%, as on "arch &', $%%$ 7/ource.
R0, )nnual report8. With the economic reforms set in motion, the country is
already rated as a ma-or hub for economic development. ncrease in per capita,
change in lifestyle and growing urbani9ation has made the ndian population rise
N.L.D.I.M.S.R 1
from oblivion and resurges in a modern era. Traditionally against incurring a
debt, the policy of save and spend is gradually giving way to spend and save
Retail banking can be crudely defined as the antonym of wholesale or bulk
banking. t is nothing, but shared business. ) deposit of Rs.' lakh from single
customer vs. small deposits of Rs. '%,%%% each from '% different customers. The
corporate and retail divide is nothing but internal segmentations and the
customer remains always a customer.
Retail banking generally refers to offering financial services, products related to
deposits and assets to individual customers for personal consumption.
0anks concentrate on various segments like professionals, housewives,
pensioners, children, salaried class etc. 2ifferent types of products like recurring
deposits, savings bank deposits, fi*ed deposits, credit cards, housing and
consumer loans and educational loans are offered by banks to the above
mentioned marked segments.
The domain of retail banking market has tremendous growth potential for banks
and finance companies, as at present it is largely untapped. The penetration
level is $.6 to & , and is in a scenario when the requirements of the consumers
are growing. n the past, people never believed in buying consumer goods on
credit. 0ut today the attitude is changing. The demand for consumer products
has increased. Today, about :%, of consumer goods purchased are through
finance schemes;loans as against +%, about ' to ( years ago. The home loans
alone account for nearly two-third of the total retail portfolio of the bank
N.L.D.I.M.S.R 2
Retail banking has inherent advantages outweighing certain disadvantages.
)dvantages are analy9ed both from the resource angle and asset angle.
/table and constitute core deposits. 0etter yield and improved bottom line.
<ess bargaining for additional interest. =ood )venue for funds deployment.
<ow cost funds. <owe risk and >P) perception.
0uilds customer base. 1elps economic revival of the nation through
increased production activity.
ncreases subsidiary business mproves lifestyle and fulfills aspirations of the
people through affordable credit.
) safe and convenient saving avenue. nnovative product development.
"inimum marketing efforts in a demand-driven
Risk weight in certain segments like housing
Current scenrio
N.L.D.I.M.S.R 3
)ccording to the Reserve 0ank of ndia annual report for $%%'-%$, as on "arch
$$, $%%&, retail credit outstanding amounted to Rs ',(%,%%% crore, including
housing loans, loans for consumer
durables, loans to individuals
against shares and bonds, other
non-priority sector personal loans
and advances against fi*ed
deposits. That?s '+.' per cent of
net bank credit outstanding, and
'6.( per cent of non-food gross
bank credit.
ncremental retail credit in 3@%$, at Rs '+,''+ crore, was $%.A per cent of
incremental net bank credit, and $(.& per cent of non-food bank gross credit.
Retail credit increased by only Rs :,%$( crore in 3@%', and accounted for merely
'& per cent of incremental non-food gross bank credit.
The sharp acceleration in the rate of growth of retail credit is clear. The fastest
growing business segments are housing loans, incremental growth in which was
Rs (,$%& crore in 3@%$, compared with Rs $,%+& crore in the preceding yearB
and the category Cother non-priority sector personal loansC, the outstanding of
which increased by Rs 6,&&A crore in 3@$%%$ compared with Rs $,(66 crore in
the previous year.
The higher e*posure to retail lending has come at the cost of credit to industry.
4ompare the &$.( per cent of incremental non-food gross bank credit that went
to medium and large scale industry five years ago, in 'DD(-D:, WT1 the ':.:
per cent that went into the segment last year. Er consider the '&.A per cent of
incremental non-food gross bank credit that went to small scale industries in
'DD(-D: with the measly $.$ per cent that went into the segment last year to
reali9e how lending has changed in the last five years.
73igures in brackets indicate percentage to the total8 Rs. n crores
N.L.D.I.M.S.R 4
/r. >o Type "ar-%% "ar-%' "ar-%$
' 1ousing '+'%% '('+& $$&+(
7&.6$8 7&.++8 7+.'(8
$ 4onsumer durables &A66 66(( :%'6
7%.D(8 7'.'D8 7'.&'8
& loans to individuals against shares;bonds $'+( '(D: '6$%
7%.6+8 7%.&(8 7%.$A8
+ other non-priority sector personal loans '6+%D 'A%(+ $&+%$
7&.A+8 7&.A68 7+.&(8
6 sub-total &66'% +'+:% 6+$A&
7A.A(8 7A.A+8 7'%.''8
( =ross bank credit +%%A'A +(D'6& 6&(:$:
7'%%8 7'%%8 7'%%8
/ource. Report on Trend and progress of 0anking in ndia $%%'-%$,R0
Banks With Large Network
0ank )pril %' "arch %$
44 0ank 6'% '%%%
5T 0ank &%& +A%
1234 0ank $%: +'%
20 0ank :: $$6
=T0 '%' $%%
Total '$&+ $&'&
/ource. )nnual Report and websites of respective banks
N.L.D.I.M.S.R 5
Reti# Bn$in% Functions &i#'#e in Indi
) banks retail offering can be broadly categori9ed into 4ore service, facilitating
service, and supporting service. 4ore service is the reason for being in the
market, facilitating services are needed so that the core service can be used, and
supporting services e*actly discriminates the service package from the services
of competitors.
N.L.D.I.M.S.R 6
Cte%ori(tion o) reti# 'n$ ser&ices*
Core ser&ices Fci#ittin% ser&ices Su++ortin% ser&ices
Payment services 4ash
3oreign 4urrency
Traveler 4harges
22; 0ankers 4heque
"aking payments at door step
nternet banking
Telephone banking
4urrent account and savings
)T" card
/tanding instructions from
customers for making
nter branch;interbank transfer
of funds
/afety vault
4redit cards
2ebit cards
/ervices to senior citi9ens
Telephone banking
nternet banking
4onversion of e*cess balance
to Time deposits
<oan products. 4onsumer
loans, personal loans, housing
loans, educational loans
4urrent account
/avings account
Time deposit account
2elivery of loan at promised
time period
nterest rate option.
3le*ibility in pre-payment of
4ounseling on Real-estate
<egal services for
F4/ for payment of loan
N.L.D.I.M.S.R 7
nsurance products. <ife
insurance, pension schemes
4urrent account
/avings account
Time deposits
/afety vaults
)dditional insurance facility for
family members
4ounseling on post retirement

Auto Finnce
)verage customer age is less than &% yrs.
Target customers can be classified into the following income groups.

Gehicle 4ategory ncome =roup
Two Wheelers &%%% H A%%% @oung, ambitious, newly employed or low
salaried and Parents of young adults.
4ars I other
7 Personal 5se8
'%%%%- $%%%% People with families, settled -ob, higher middle
class, office going or businessman.
4ars, Three
Wheelers I other
7 0usiness 5se8
- /elf-Fmployed, /mall businessmen to enhance
their services, to start new business.
1eavy Gehicles - 0usinessman I /elf-Fmployed

!-or In)#uencers H 2ealers, 2/)
>ewly employed people are more attracted towards this loan
as people like to have more in very short time.
"ore influence is amongst the people who aspire to buy a
two or four wheeler for improving their social status.
N.L.D.I.M.S.R 8
Sector An#.sis
"arket si9e is Rs. :6%% crore ne*t only to housing segment
)bout :6, of the vehicles especially the cars sold in the country are
through consumer loans schemes.
The factors that +ro+e# %ro/t0 are .
<ow interest rates.
Poor urban transport in many areas, increasing income levels .
Fven for second hand cars finance is available.
ncrease in =2P growth.
ncreased income levels and changing lifestyles.
>early & lacs second hand cars have been financed.
2efault rate for car loans is around ' ,.
nfact on account of liberal financing by banks, production of passenger cars,
motorcycles and scooters has registered good growth
t will also provide a boost to the auto manufacturing sector.
The sector offers intense competition among players. "a-or competitors in the
sector include 44, /0, 1/04, 1234 etc.
0anks and >034s have tie up arrangements with the automobile dealers for
making available vehicle finance.
This has proved to be advantageous for customers also. They can complete all
the formalities with less paper work at the auto dealersJ showroom itself without
going to bank.
N.L.D.I.M.S.R 9
!r$et Leder
The auto finance market is led by 44. 44 bank funds about '6 , of cars that
are rolled out. 44 banks retail portfolio as on /eptember &%, $%%$ was over
Rs. '&+.(' billion, as compared to combined retail portfolio of 44 and 44
bank of about Rs. ::.&6 bn on "arch &', $%%$. Fvery bank has its unique
segmentation and targeting strategy. /imilarly 44 also follows a segmentation
strategy to divide its market into strataJs. This helps them to decide upon their
target audience and what are their wants and needs.
ICICI2s Se%1enttion Strte%.

The 44 bank in ndia has adopted K<ife /tage /egmentation /trategyJ. This
approach aims to minimi9e overlaps between two segments by categori9ing
customers into various segments based on the stage of life they have reached.
The banks philosophy is to have product idea for every stage of an individualJs
life from childhood to retirement and the bank has a wide product range.
44 is also adopting a strategy of creating a liability based product along with a
asset based product and vice-versa.

!r$et Tr%etin% Strte%.*
0ased on the <ife /tage /egmentation /trategy 44 has divided its market into
various segments constituting people from different age group and income class.
This has helped them to decide which segment is to be targeted for which retail
3or eg. The target market for auto finance are people belonging to the age group
of $A-&6 yrs., having a settled -ob or business and belonging to middle class.
N.L.D.I.M.S.R 10
Consu1er Credit

4onsumer credit sector is growing at '6,
Fasy credit terms
4onsumer credit encompasses e*tension of loans for white goods,
educational loans, finance for meeting travel, medical e*penses etc.
2emand for loans for acquisition of TG, cell phones, )4Js, dish-washer,
washing machine, fridge etc. is on the rise.
There are nearly '$ lakh outlets contributing to Rs.'+%%% 4r to the =2P
7about '.$, of =2P8
3urther investments of Rs. &6%%% 4r are in the pipeline.
0anks also offer loans through tie-ups with corporates.
2efault rate is a bit high at &,-+,. This e*plains the relatively higher rate of
0asic understanding of middle class drivers is a must.
3or unsecured loans, return is high and at the same time competition is low.
Custo1er "ro)i#e
4ustomers in the income bracket of Rs. &%%% - '%%%% p.m.
5sually availed by young married couples but with the change in peopleJs
perception about loans every strata of the society is getting attracted to
4ustomers normally belong to middle class families.
People aspiring to improve their standard of living are normally attracted towards
this loan.
4onsumer loans are normally taken by people buying new houses, so the target
customers are mostly those people who take housing loans.
N.L.D.I.M.S.R 11
Credit Crds*
"ention cards and most people will think of credit cards. @et, popular as they are,
credit cards, which are accepted as a payment device at over $% million shops
worldwide, really represent -ust one type of card. Ether cards include debit cards,
smart cards and charge cards.
) smart card is used to store cash in an electronic form.
) charge card carries all the features of credit cards e*cept that you cannot
defer your payment to the card company.
) debit card is simply used as substitute for cash or check payments
Consu1er +ro)i#e
4redit card users generally belong to the income bracket of Rs. D%,%%% p.a.
and above.
There is a large middle class segment who are prospective cardholders and
cannot satisfy the normal criteria for issuance of cards.
"ost of the middle class people do not go for credit cards because they do
not want to fall in the debit trap in view of their low income levels.
There are about 6.6 bn cardholders in ndia but the average amount spent is
very low.
1owever, slowly people in ndia are getting acquainted with the plastic money
Traditionally used by rich people to avoid carrying heavy cash.
Sector An#.sis*
4ard industry has migrated from paper-based to terminal-based as a part of risk
administration. Tier- cities are highly targeted by multiple issuers and acquirers.
N.L.D.I.M.S.R 12
"any big players of the market are averse towards cities other than tier-,
although tier- cities have a potential of being a promising markets for credit
There are ( million cards in use.
The potential is anticipated at +% million.
4redit card culture pioneered by foreign banks initially like
4itibank, /tan4hart etc. in our country.
Payment habits have undergone a change.
4redit cards have increased from 6 lacs in 'DD$ to (% lacs in
$%%$ 7avg. growth at $%-$6 , p.a.8
The average annual spending through credit cards is around
Rs.'A%%% 4r. 7which is less than ', of total personal consumption spending
in ndia, as compared to &%, in 5/. /0, 44 0ank has a card base of D
lacs and ( lacs respectively.8
4redit cards in ndia are used more as a transactional
investment rather than as a medium of servicing credit.
t offers an attractive interest of &%, to &(,.
4ard business is popular on account of its wider
4redit card usage also entitles holders for attractive bonus,
incentives, loyalty points etc.
The debit cards usage is also becoming popular with a card
base of one million.
0anks in ndia have reali9ed that the credit card business need not remain an
e*clusive preserve of foreign banks like 4itibank or /tandard 4hartered 0ank.
4ard business is a very potential and fast growing market is no where near the
market potential. /tate 0ank of ndia, a late entrant has already issued D lakh
cards. 1234 0ank, another late entrant has reached a card base of over
N.L.D.I.M.S.R 13
:%,%%%. 4itibank /uvidha credit card is also turning out to be a great success
story. Ether important players in the sector are 1/04, /0, 44, 5T etc.
There is a case for reduction in the rate of interest on debit balances from
present level of over &%, p.a. nterestingly, )ndhra bank and 1234 bank rather
than any other foreign banks have taken positive steps in this regard. The
network of branches does not seem to be effectively utili9ed for marketing by
ndian banks in credit card business. f only these banks becomes market savvy
and e*ploit branches to the hilt in issuance of credit cards, there could be great
success awaiting them.
The potential segments which many banks have not e*plored so far are self-
employed people and housewives. /elf-employed people due to lack of proper
identity 7i.e. either salary certificate of P>R number8 are still borrowing at a
higher rate and banks are no t assessing the credit risk premiums properly.
/imilarly, a suitable banking product is required, which makes the housewife to
feel liberated and empowered. The survey of >4)FR shows that rural ndia is
gradually possessing variety of consumer durables and electronic goods. 0anks
have to design suitable products to meet the requirements of rural rich and rural
poor. 4ensus of $%%' shows that ndia has +$& towns 7Fight "etros, 'D "ini
N.L.D.I.M.S.R 14
"etros, &D( Towns8, and that financial products are very rare for urban poor and
low salaried persons.
Housin% Lon 3 Nestin% 'eco1es #ucrti&e 'usiness

f one were to study the sector-wise performance over the last five years, the
housing finance industry has outperformed everyoneJs e*pectations. <oan
disbursals have grown at a 4)=R of over &6, in the last five years. 0ut the
industry is still fragmented with a large number of players spread across different
parts of the country. There are nearly &A& 134s or housing finance companies in
the country currently. This is apart from the numerous banks that have entered in
to the fray. n this article we look at the nature of this industry, its trends, the
ma-or players involved and the prospects of the industry going forward.
The housing finance industry is estimated to be worth nearly Rs &&% bn 73@%$8
and is estimated to have grown by nearly $A, compared to 3@%'. ) huge deficit
of nearly +% m 73@%$F8 dwelling units is likely to ensure that the robust growth
rates in this sector will continue in the future.
N.L.D.I.M.S.R 15
4ustomers normally belong to age group of $6-&6. The average consumer
age is &' years.
These customers generally are in the income bracket of Rs. A%%%;- p.m. and
>ormally availed by .
>ewly married couples
3amilies breaking up into nuclear families
People aspiring to acquire higher status and improved standard of living.
DINK - Kdouble income no kidsJ i.e. both the husband and spouse earning.
ndian middle class forms the ma-or chunk of the customer portfolio.
Primary influencers in a housing loan decision are

Tn%i'#e Fctors*
1ousing Fstate agents
3riends I Relatives
Intn%i'#e Fctors*
n ndia, owning a house has a high social regard.
nsecurity of staying in rental houses.
/ense of 0elongingness.
N.L.D.I.M.S.R 16
ndustry in Transition
2emand for this category is picking up due to -
/teady fall in interest rates.
ncreased start-up salaries.
)spirational changes in lifestyle.
"ore hassle-free.
Effer of free insurance cover for various risks.
Effer of various incentives in the form of low or no charges for pre-closure of
loan-lower processing ; administrative; documentation chargesB interest on
reducing balance methodB choice or option for fi*ed;floating interest rates etc.
ncome ta* shelters on interest paid.
3all in interest rates has changed the way the salaried class view housing
loans. The interest rates on housing loans have declined from average ':-
'A, in 'DD+ to :.$6-A.6, now, thereby making loans cheaper.
Farlier, houses would cost on an average $% years of salary, which has now
come down to -ust A-'% years? salary.
4hanging demographics of the ndian populace has also played an important
role in the development of this industry. The emergence of a new class of
families called 2>L or Kdouble income no kidsJ has played its part.
The key players are 1234, <413, 4anfin 1ome, /0, 44, 0ank of 0aroda
There is very stiff competition in the matter of interest rates- rate cuts are
announced at very frequent intervals.
The market si9e is e*pected to grow to Rs.+%, %%% 4r.
N.L.D.I.M.S.R 17
/i9e of the loan varies from Rs. $ lakhs to Rs. ' 4r. )verage tenure of
housing loans is '6 years
<ower default rate is a big attraction for banks to take-up to housing finance
7default rate is -ust %.6,8.
t provides a big impetus for housing construction activities also-growth in
infrastructure industry.
Transaction cost is also low.
t is easier for banks to appraise;assess as they look into fewer aspects like
background, employment, e*perience, number of dependants, previous track
record, proof for pay, copy of T returns, property documents and age of the
property etc.
!r$et Fr%1enttion
0efore going any further, a brief view at the level of fragmentation in the industry
is of significance. The graph above gives us the breakup of market share based
on outstanding housing loans as on "arch &', $%%$. The split up pie of the
market share indicates that 1234 is still the market leader followed by /0. 0ut
in terms of the housing loan assets, <4 1ousing 3inance limited 7<4138
occupies second spot ne*t to 1234.
What is significant is the fact that banks have stepped in to the domain of these
134s and are capturing market share of the incremental loans disbursed.
N.L.D.I.M.S.R 18
4urrently, banks have garnered close to &6, share of the housing finance
market by offering competitive rates of interest. )mong banks, /0 and 44
0ank have been the most aggressive as far as loan disbursals are concerned.
We e*pect the trend to continue with banks gaining a larger share in incremental
loan disbursals.
"er)or1nce o) HFCs
"rticu#rs F456 F455 F477 F478
=rowth in income '6.', ':.%, '+.$, $'.+,
=rowth in net profits '(.(, &.+, ':.', ':.D,
/ource. >10 , change compared to corresponding previous period
Ne/ d.n1ics
)n important development in the housing finance business has been the entry of
new players. The relatively low risk in a housing portfolio has spurred new
entrants in the last few years. )rguably, the most significant entrant has been
44 1ome 3inance. )mong non-banking finance companies, /undaram
3inance and Tata 3inance launched housing finance subsidiaries in the recent
past, while banks have shown increased interest in acquiring housing assets.
0anks have always had subsidiaries handling housing finance, but in the recent
past they seem to have taken a greater interest in building retail assets. 0anks
have a clear advantage in the field simply because they access the lowest cost
funds in ndia. )s things stand, a loan from a bank is less e*pensive than one
from a housing finance company.
2espite the overwhelming advantage that banks have, 134s are unperturbed.
The reasons range from a feeling that banks will lose interest in retail finance
N.L.D.I.M.S.R 19
after a point to a belief that banks are not geared to servicing a big thrust into
housing finance. n short, the 134s believe banks cannot match them in a critical
area M service.
)ccess to resources. )nother differentiator
2ewan 1ousing and <4 1ousing 3inance both run operations with a profitability
level of about $% per cent. 2espite that, 2ewan is unlikely to grow at <4
1ousing?s pace in the current environment. <4?s superior pedigree and access
to resources appears to have played a critical role in larger disbursements. 3or
e*ample, between $%%% and $%%$, 2ewan?s housing loan disbursement grew
from Rs '(& crore to Rs $%% crore. En the other hand, between 'DDD and $%%',
<4 1ousing?s disbursements to individuals grew from Rs D+6 crore to Rs ',6D:
C0n%in% Contours
The fast-changing environment has had a telling impact on 134s. 3ollowing
heightened competition, spreads 7difference between interest income and
e*penditure8 have declined over the last couple of years. 1234 feels that its
current spread, of '.A-$ per cent, is likely to hold firm. 4ompetition has whittled
down high margins and changed housing finance into a low margin, low-risk
With their geographical spread and customer knowledge, the 134s are trying to
tap new opportunities that have come up. 5sing their e*isting infrastructure to
sell other financial products to retail customers has caught the fancy of the 134s.
The opening up of the insurance industry, in particular, seems to have triggered a
determined move to diversify income stream.
Fven here, the bigger players are in a different league. 3or instance, a 1234 has
the resource base to promote subsidiaries in most other areas of financial
intermediation M be it asset management, insurance or commercial banking.
/maller 134s that have wide distribution networks can only hope to leverage
their reach for a commission.
N.L.D.I.M.S.R 20
W0. Is It s)e Bet?
) house is generally the single largest investment an individual makes in a
"oreover, the emotional dimension of a house makes it intrinsically safer for a
)nother factor that adds to the safety of the loan is that most borrowers have a
significant level of personal money invested in a house. f they lose possession of
a house, it would mean a lot of personal wealth slipping out.
>one of the factors that have thus far made home loans one of the safest
deployment avenues is likely to change in the near future, thereby ensuring that
the business remains one of the financial sector?s safest.
T1F relatively negligible risk in housing finance is best illustrated through an
e*ample. 1234, the market leader in housing finance, had aggregate bad loans
of %.A' per cent of its portfolio on "arch &', $%%'. )t the other end of the
spectrum, a much smaller company, 2ewan 1ousing 3inance, had aggregate
bad loans of about %.6 per cent in "arch $%%$.
4orporation 0ank, one of the soundest banks in the country, had an aggregate
bad loan of 6.+ per cent of gross advances in "arch $%%'. )mong non-banking
financial companies 7>034s8, a tightly run company such as 4holamandalam
3inance reported in Nune $%%' that '.6 per cent of assets had problems. Thus, a
portfolio of housing assets seems safer than a mi*ed portfolio that other financial
intermediaries have.
K. Ho% Ne9t??
Prospects of the housing finance industry look encouraging mainly due to the fact
that the gap in demand and supply has not been corrected adequately. )t the
end of the ninth five-year plan period i.e. 3@%$, the shortfall in dwelling units was
in the region of +% m. n terms of dwelling units the 5rban )ffairs and
Fmployment "inistry has stated that cumulatively ndia will have to add a
N.L.D.I.M.S.R 21
minimum of (.6 m houses per year to add && m houses in order to bridge the
current gap. )t present the supply of houses stands at close to $.6 m per year.
)part from that the ndian economy may have reached a stage where interest
rates may continue to remain soft over the long-term. This is likely to ensure a
steady demand for housing loans.
Housin% s0ort%e continues
:1i##ion units; F4<8 F468 F458 F478E
Rural ''.( '(.& '+.: '$.A
5rban &.% :.% A.$ (.(
Total '+.( $&.& $$.D 'D.+
/ource. >10
N.L.D.I.M.S.R 22
Retail banking supermarket with the ability to
cross-sell entire range of credit products.
nnovative products
Technological superiority
Wide distribution
1igh top of mind awareness due to
aggressive advertising
/trong 4redit controls
1igh 4ustomer /ervice /tandards
Fconomies of scale through growing
$+*: service levels
Ffforts are concentrated more towards the
urban consumers thus ignoring the rural
>umber and spread of branches is very low
as compared to P/5 banks.
F*cessive focus on non-branch distribution
channel reducing the scope of personal
interaction needed for the sale of retail
N.L.D.I.M.S.R 23
4hanging consumer outlook towards loans
and related products
Rising consumer income levels
ncreasing banking habits among ndian
0eing >o.' in the auto finance segment
paves the way to consolidate its market
leadership across all the segments.
Rapid increase in the retail loan market si9e
to the tune of &% H +% ,
/tiff competition in the housing loans
segment from 1234, <4 1ousing etc.
n the 4redit card segment, competition from
4itibank, /tan4hart etc.
Ef late, lots of >on 0anking 3inancial
nstitutions have emerged and have eaten
up the banksJ market share.
Fducating people by way of advertisements
might help competitors to reap the benefits.
Ef late banks are coming up with innovative product offerings and promotion
schemes to tie up old customers and attract new customers. /ome of the
innovative offerings are listed below.-
Stndrd C0rtered AN= has launched the 1ome /aver )ccount. )long with
the 1ome <oan, your will get a 3RFF savings bank account into which you
may deposit your monthly salary. The F" for the loan will be automatically
reduced from your account. The e*cess balance in your savings account will
earn interest that will be ad-usted against your future F" payments. The
bank claims that the effective interest rate gets reduced by upto +6, because
of this scheme.

N.L.D.I.M.S.R 24

Effer loans with no guarantors. "ost banks require that you present a
guarantor who will back you up if you default on your loan repayment. t
can often be embarrassing to ask friends to stand guarantor as most
banks do not accept relatives as guarantors.
4itibank gives home loans upto D%, of the property value, the highest
from any bank 7only Tata 1sg 3in. matched this offer8
4itibank offers a fle*i-savings account to reduce your cost of borrowing.
The bank will automatically open a /aving )ccount from which you can
give standing instructions to deduct the F" payments for the loan. @ou
can then prepay the loan at any point in time and be given instant credit
for the same, in case you get a large lump-sum annual bonus from your
employer. /hould you require money in an emergency at any point you
can avail of a over draft on this savings account at an interest rate that is
the same as that on your 1ome loan. This works out much cheaper than
taking an over draft on a normal savings account
De/n Housin% Finnce and <4 1ousing 3inance <td.
offers consumer loans to their e*isting 1ome <oan customers at a discount to
market rates. The customer has to be a housing loan borrower for the period
not less than ( month with a good repayment record
3RFF 2E50<F PRETF4TE> P<)> in the form of Personal )ccident Risk
4over and Property nsurance
GIC Housin% Fin>
=ives a free personal accident cover along with the loan. Eriental 0ank of
4ommerce has started to offer a free property insurance cover of the
value of property and a free accident cover of upto Rs. 6 lacs.
=413< gives 4onsumer loans for purchase of home equipment at the
same interest rate as the home loan to customers at rates of interest that
N.L.D.I.M.S.R 25
are the lower than other consumer loans. The total loan amount including
the housing loan can be upto D%, of the value of the home. The tenure of
the consumer loan is restricted to 6 years.
Effer F#e9i'#e :Custo1i(ed; Re+.1ent Sc0e1es, keeping in mind the
fact that each individual has a unique problem requiring unique solutions,
1234 has developed various repayment options like /tep 5p Repayment
3acility, 3le*ible <oan nstallment and 0alloon Payment /cheme
"ri "ssu? Second !ort%%e Arrn%e1ents. 1234 has a tie-up with a
large number of Public /ector Ergani9ations and banks which enable us
to offer loans to your employees with the fle*ibility of their spouse also
availing a loan from his;her own employer
S)e Docu1ent Stor%e Fci#ities. 1234 has state of art storage
facilities, which are theft and fire proof, at various locations where loan and
property documents are stored. n this way valuable documents are stored
safely over the period of the loan and are released almost immediately after
a customer repays his loan
) customer, after availing of a loan can approach 1234 anytime thereafter
to increase the E@uted !ont0#. Inst##1ent which will help him repay the
loan faster.
Ho1e Con&ersion Lon offered to its e*isting customers who are
interested in moving to a new house. Through this scheme customers can
apply to have their e*isting loan transferred towards the purchase of the
new home. 4ustomers may also apply for an additional loan amount for the
purchase of the new house. This gives the customer the option of selling
their e*isting house, if they wish to, without having to repay their old loan
N.L.D.I.M.S.R 26
The fi*ed rate loan can be converted to floating without any penalty
charges. 1owever, you will be charged $, if you refinance the loan from
another company
Will waive the last $ F" payments on the loan if the customer has a
perfect repayment record with no bounced cheques. The loan amount
initially taken must e*ceed Rs. 6 lacs and no prepayments where to have
been made during the tenure of the loan. This is not available for the
3loating rate loan.
There is a discounted start-up fee for =overnment employees. The
)dministrating fees stand reduced from%.:, to %.6, only.
3ree triple insurance - property cover, earthquake cover and personal
accident cover. given free along with the loan 7 not available for the
3loating rate loan8
@ou can prepay the entire loan in any year without any prepayment
penalty. Fach prepayment has to be at least '%, of the outstanding loan.
1owever, the floating rate loan has a ', prepayment penalty.
Effers fle*ible interest rate loans that can be reset every year depending
on the prevailing interest rates at that point. The new interest rate will be
applicable for the rolling one year
=uarantor is required only for loans more than Rs. '% lacs. Flse no
@ou can prepay up to $6, of the outstanding loan in any year without
paying a penalty. 3or amounts over that, $, penalty levied.
N.L.D.I.M.S.R 27
<aunches a &% year tenure home loan, the longest available
44 also launches a variable rate loan with a monthly rest basis versus
the regular fi*ed rate loan that is on an annual rest basis
>o guarantors are required for loans up to $% years in most cases
>o pre payment fees for any part payment as long as the loan is not fully
retired, else $, charge on pre paid amount. @ou can repay up to &&, of
the outstanding loan in any year without paying penalty.
3ree accident death cover for the owner
/pecial '%%, funding for select properties
1igher eligibility for self-employed professionals through segment-specific
LIC Hs% Finnce Ltd. will lower quoted interest rate by %.6, for loans
covered by a life insurance cover that is taken from <4. The life cover must
be taken for a minimum period that covers the tenure of the 1ome <oan
Effers 1ome <oans with no start-up costs. "ost banks charge as high as
$, as processing and administrative fees
Prepayment is $, if the entire loan is pre paid else it is %,. )void this
penalty by prepaying up to DD, of your loan if need be
Tt Hs% Finnce
Effers 1ome <oans up to D%, of the value of the property and '%%, in
some new pro-ects.
N.L.D.I.M.S.R 28
Prepayment penalty of %, for up to + prepayments in each year. The
entire loan can be retired without incurring any penalty.
3ree accident and property insurance. The premium payable for a Tata
)= /ingle Premium <ife 4over can also be included in the loan amount
IDBI Bn$ offers balance transfer scheme.
f you have taken a fi*ed rate loan at a high rate of interest a few years back,
then you can enter into an arrangement with 20 bank to transfer the loan to
them at the current lower rate of interest. @ou will also get free gifts to
compensate you for the difference as the old and new F". The original F"
cheques will be used by 20 to recover the loan amount from you over the
remaining tenure of the loan. @ou will not get the benefits of any further fall in
interest rates in this product.
Private ndian 0anks have managed to create a greater awareness about
themselves over the last $ years, according to the findings of the latest round of
>GF/TR)4L 7G8, the fifth round of a syndicated study by ER=-")R= on the
investment and banking habits and preference of the ndian investor.
T0e s0r+ rise in t0e unided rec## o) "ri&te Indin 'n$s is test1ent to
t0e %%ressi&e d&ertisin% nd 1r$etin% dri&e o) t0ese +#.ers o&er t0e
+st one .er
) reading of the list of top '% banks in terms of recall shows a doubling of the
number of ndian investors who are now aware of the ndian private banks like
N.L.D.I.M.S.R 29
44 0ank and 1234 0ank compared to two years ago. While recall for the
other banks that are part of the top '% remains largely unchanged, 6', of
ndians are now aware of 44 0ank and +$, are aware of 1234 0ank
compared to $:, and $(, respectively when the last round of >GF/TR)4L
was conducted.
Unaided Recall of Banking Brands
Bn$ Brnds A777 A77A
/0 A$ , A& ,
4anara 0ank 6& , 6+ ,
44 0ank $: , 6' ,
P>0 +: , +D ,
0o0 +A , +D ,
0o ++ , ++ ,
1234 0ank $( , +$ ,
4itibank &: , &( ,
4entral 0ank +$ , &( ,
)dvertising, in the retail banking industry, is an important medium of making the
prospective consumers aware of the various products as also the players offering
them. )lthough it has only a (, influence 7based on our primary research
findings8 in the purchase decision it plays a ma-or role in induce a customer to
include the advertised bank in his consideration list.
)dvertising by banks has been a recent phenomenon. Reali9ing that product
advantages are not any more sustainable, banks are opting for advertising to
gain strategic differentiation.
)n analysis of banksJ advertising brings out the following features.
) ma-or chunk of total advertising spend belongs to the private I
nternational banks.
N.L.D.I.M.S.R 30
)nother observation reveals that banks with less penetration have higher
advertising spends.
44 and 1234 head the fleet of banks in terms of their advertising
The advertisements have both factual as well as emotional appeal. The
private banks focus on cashing upon emotional needs of a consumer
whereas public banks stick to traditional advertising focusing only on the
product features.
Television and hoardings seem to be the preferred mode of advertisement
across all banks.
The international banks are striving to achieve a local appeal in a bid to
woo consumers
The following is the summary of a few banksJ advertising strategies.
The bankJs initial positioning was mainly on service factor and now this
has changed to a customerJs interest focused and a friendly bank.
With the shift in positioning there has also been change in the message
conveyed from service focused to customer interest focused.
t is the first to sign up a celebrity K)mitabh bachchanJ for its advertising.
This conveyed a message of the bank being as popular and famous as
the celebrity.
N.L.D.I.M.S.R 31
"r. Fasy life H the fictional character in the 44 ads is the first brand icon
associated with any bank.
t is also the first bank to address the emotional appeal and attach it to the
physical appeal.
!edi *
The general preference is for television, hoardings, newspapers,
maga9ines, radio etc.
)T"s also form an effective advertising tool as their mere presence
makes the consumer aware of the bank. 0esides this, )T" machines are
also effectively utili9ed to cross-sell the bankJs retail offerings to its already
e*isting customers.
"ositionin%. The bankJs positioning conveys an international appeal to the
local consumer.
!ess%e* The bank is trying to promote its global e*pertise to the ndian
customers, i.e. service levels at par with international standards, anticipating
customers growing needs and designing products accordingly.
!edi *
N.L.D.I.M.S.R 32
)s far as media is concerned 1/04 has more concentration on print media
as compared to other mediums.
Positioning of the bank conveys-
F*pertise service.
t tries to address the financial needs of the consumers.
The bankJs presence in the housing sector for a fairly long period is
portrayed in its advertisements.
They also focus on promoting the simplicity in work procedure, superior
service. Their ads also strive to bring the bank out of the Konly housingJ
!edi *
The most preferred medium by the bank are hoardings and print media.
They rely on word of mouth and goodwill which they have created through
$6 years of service.
T0e )o##o/in% t'#e s0o/s "UNCHLINES o) so1e 'n$s*3
4)>)R) 0)>L !Ser"ice to grow# grow to ser"ice$%
>2)> 0)>L Poised for higher growth
N.L.D.I.M.S.R 33
/0 0)>L With &ou' all the wa&
1234 0)>L !We understand &our world%
1/04 0)>L !(he world)s local *ank%
>2)> EGFR/F)/ 0)>L !+ood ,eo,le to grow with%
2F>) 0)>L !(he trusted fa-il& *ank%
44 0)>L !.a& I hel, &ou%
GN)@) 0)>L !A friend &ou can *ank with%
3F2FR)< 0)>L !/our ,erfect *anking ,artner%
20 !Plan ahead$ +et ahead%
ERF>T)< 0)>L E3 4E""FR4F !Where e"er& indi"idual is
213< !(he friendl& housing loan ,eo,le%
Top of mind awareness of consumers for banks offering various retail
3actors influencing their purchase decision.
To study the comparative influence of various mediums of advertisements
in creating awareness amongst the consumers.
N.L.D.I.M.S.R 34
To find the immediate competitors in the minds of consumer for every
retail product.
)n e*ploratory research was conducted in order the study the consumer
perception about various banks offering retail products and the banks they
opt for.
S1+#e Si(e
) random sample of '%% were administered with the questionnaire and
responses collected.
Reserc0 Are
The research was carried out at 0orivali, "ira road, 4hurchgate and
)ndheri regions in "umbai.
Res+ondents2 +ro)i#e
2ata was collected from respondents across all age and income groups. 2ata
relating to age was collected. This segmentation helped us to gain insights into
the perception and preferences across all age groups. 0ased on the nature of
retail banking products age groups were identified and classified as follows.
N.L.D.I.M.S.R 35
"a-ority of the
respondents belonged to
the age group of $6 H +%
The reason associated
with it is that this group is
the highest user of retail
Respondents earning Rs. A%%%-
'6%%% constitute the ma-or chunk
of the respondents using retail
This income group qualifies
almost all eligibility criteria of
retail offerings.
Retail products being also
designed for students and
retired people, they were
considered for the survey.
N.L.D.I.M.S.R 36
/alaried and businessmen being the ma-or users of retail users of retail
Dt Co##ection Too#s
2ata was collected using Ouestionnaires. The Ouestionnaire consisted of
suitable combination of Rating /cale, Ranking /cale and open ended
Ouestions in the level of importance.
)n in depth interview was also conducted while administering the
Sources o) Dt
Ouestionnaires were administered to people with e*perience of any retail
offering, currently using or used in the past.
Secondr. Sources. 2ata was collected from the various websites from the
internet as well as Nournals of "arketing.
The respondents
were asked to rank
the following factors
N.L.D.I.M.S.R 37
according to their preferences in the e*tent to which they influence their
purchase decision.
"a-ority of the respondents considered processing time to be the ma-or
influencing factor for making purchase decision while interest rate forms a
close second.
Time is the most valuable factor in todayJs world of hectic schedules, thatJs
the reason why processing time is considered as most valuable factor in
consideration list.
n our survey ma-ority
of the respondents
had availed Gehicle
loan followed by
credit cards.
n our survey ma-ority
of the respondents
belong to the age
group of $6-+% and
ma-ority of them are
salaried people. This is the stage where people try to bring alive their
aspirations of having their own home and vehicle and hence these loan
constitute ma-or chunk of retail product availed by the respondents.
Respondents were asked which banks they considered for purchasing a retail
offering before selecting a specific bank. The responses for different retail
products were as follows-
N.L.D.I.M.S.R 38
"a-ority of the
considered 1234 and
44 for availing
housing loan.
$6 years of superior
service has helped
1234 in creating
goodwill in the mind of
people and has helped the bank for consideration.
44 has created a
place of its own in the
mind of customers by
its heavy
advertisement and
superior service in
every category of retail
44 forms the ma-or
chunk in the
consideration list for vehicle loan followed by 1234.
Through aggressive advertisements and superior
service 44 has created a ma-or place in the consideration list.
N.L.D.I.M.S.R 39
"a-ority of the respondents considered 4T 0)>L for credit cards followed by
/T)> 41)RT and 1/04.
0eing the first bank to launch credit cards and through aggressive
advertisements in the past 4T 0)>L has created awareness amongst the
customers and by providing superior service it 4T 0)>L still acquire ma-or
share in the consideration list.
/0 and 1234 form
the ma-or chunk for
consideration in this
category followed by
nterest rates being the
ma-or factor for
educational loan P/5s
have the competitive
edge due to low interest rate.
N.L.D.I.M.S.R 40
/0 outrages other banks in the consideration list for educational loan.
<ow interest rates and an e*tensive presence in varied locations seem to be
the primary reason for this.
44 in general has
a high level of
awareness among
the people owing to
its e*tensive
)mong these,
awareness through
television is the highest level followed by newspapers.
awareness of /0
through various
media was
/0, being an old and
e*perienced player,
has immense
awareness through
the word of mouth media.
N.L.D.I.M.S.R 41
1234 being a private
and an aggressive
player, especially in
the home finance
arena, has taken the
print media as its
stalwart for
The reason for the largest pie is that a large chunk of the T= is also an avid
reader of newspapers and maga9ines.
The graph reveals that
close to fifty percent of
the awareness is about
44 and 1234.
N.L.D.I.M.S.R 42
4ustomers do not seem to regard 1/04 as a bank offering car loan owing to
its limited advertising about this product.
The personal loan
market is a relatively
fragmented market
with respect to
)ccording to our
survey 1234 is the
clear market leader in
the awareness
This area is also
being aggressively
invaded by many
other players owing
to the increased requirement for homes.
N.L.D.I.M.S.R 43
4T0)>L is also
perceived to be a market
leader, besides being
) quarter share of the
awareness pie of
KEthersJ can be attributed
to a gamut of the recent
new launches as also the varied co-branded credit cards.
Re#tion 'et/een 'sic3'n$in% nd reti#3'n$in% c0oices
The survey also tried to study, analy9e and correlate respondentsJ decision in
selecting a bank for general banking purposes and for availing retail products.
The findings revealed that +eo+#e %ener##. +re)er "SU 'n$s close to their
locality to bank with whereas private banks and foreign banks have higher
preference on the retail banking front.
The reason associated with this behavior is the close pro*imity and long
e*istence of P/5 banks making them safe and trustworthy. )lso people have had
accounts with the P/5 banks as private banks were non-e*istent earlier, and
hence are reluctant to change their banks. 1owever due to efficient service, short
processing time, competitive rates and a caring attitude people have started to
prefer private banks for meeting their retail needs.
N.L.D.I.M.S.R 44
The scenario is becoming highly competitive in every sphere of banking
activity- more so u n respect of retail lending.
Proceesing time and interest rates are ma-or influencing factor for making
purchase decision.
)s per survey 44 and 1234 are to ma-or brand name considered for
housing, auto and personal loans.
)wareness through television is the highest level followed by newspapers.
N.L.D.I.M.S.R 45
The future of banking is dependent on technology, marketing, logistics.
0anks have to prepare themselves for facing a soft interest regime.
>ew kind of management skills are required to manage the retail lending
True to nfosys cult, bankers do need to understand that.
- =rowth comes from repeat business
- Repeat business from relationships
- Relationship from customers
- 4ustomers relationship based on trust
- Trust emanates from customers faiths;beliefs and,
- <astly maintaining harmony with the environment.
Professional 0anker
Websites of 0anks
Fconomic times
N.L.D.I.M.S.R 46
8> Which bank7s8 do you bank with presentlyP

A> Rank the following factors according to their weightage in your
purchase decision.
Processing time QQQQQQQ
=oodwill QQQQQQQ
Word of mouth QQQQQQQ
)dvertisement QQQQQQQQ
N.L.D.I.M.S.R 47
D> Which retail banking product have you availedP
R 1ousing <oan R 4ar <oan R Fducation <oan
R Personal <oan R Ethers, Please specify QQQQQQQQQQQQQQQQQ

E> Which banks did you consider in your decision making before buying
this productP
F> 1ow did you become aware of themP 7tick relevant8

Bn$s GH ; '; c; d;
>ewspapers I
Word of mouth
I> Which bank did you choose and whyP

<> )re you satisfied with the bankJs serviceP
6> Would you suggest any improvementP
5> Which bank comes to mind when thinking about car loan
87> Which bank comes to mind when thinking about personal loan
N.L.D.I.M.S.R 48
88> Which bank comes to mind when thinking about housing loan.
8A> Would you recommend your bank to someone else for the same
product or any other product that your bank offersP
@es >o

8D> Please recommend a retail product, not currently available, which if
offered, will be readily availed by you.
N.L.D.I.M.S.R 49