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advantages of retail banking:

- increases net intrest margin: NIM


- less volaitiy
- less credit risk
disadvantes of retail banking:
- dependant on information technology
- high default rates
- high cost
- bank run
- retail banking around the world
- retail bankin in india
started towrd 18 thc centura
nationalizatio - 1960. reforms sstarte 1990
consumer banking models - late 1970
standard charted and Grindlays bank
credit card -citi bnak - early 1980
during fin year 2011-12 transactin under neft grew by 70% in volume
91% in value, growith in rtgs about 11% in the same time
- mobile banking
as of august 2012 rs 354crore have been processed through mobile
banking in 4 million transaction
- retail bank objectives as per boston counsuling report
Income level (in lacks)
2 - 10 - Mass mkt
10 - 50 - mass affluent
50 - 400 - super affluent
400 - 4000 - HNI
4000 - 1,20,000 super high networth
above 1,20,000 - ultra nigh networh
self acutalizaiton
self - esteem
social need
safety and security
physiological needs
* maslow
-Physiological needs: Core saving, housing losn, personal acciden cover
- safetly and security needs: recurring and fd products,
life insuranc and other insuranc produts, banking mutual fund and
tax planning
- social needs: personal, car, losns for professi devek, SIP,
gold coins, ULIp
- self esteem need: second housin los, loans for home deoc,
speical term depo produ
- self -acutualization - senior citin term d
retirement solution in banking
pensioner loans

- customer requirement on service quality


tangible - apperaance should be simple - phyicasl, personal communcai
reliability - activity performed in promised time frame
responsiveness - resolve issue promptly
assurance - competence and courtesy
Empathy
- customer requiremnt and satisfaction level
* types of business models followed by the branch:
3 mains ones (SID ) - sbu, integrated, departmental
- integrated approach:
unifined approache
- sbu unit:
- business approaches and implementation models in retail banking
segmented appraoch: classification on business potential
resouce, priority, general center and profit center
-public sector - horizontal
privat bank -vertical
- product model in retail banking
retail liablity product:
* product development in retail banking:
* first atm installed in 1959 in ohio
* stages of product devleopment in retail banking
geenrate ideas - idea screening - cocept testing
business & mkt analysiis - product devel, test mkt,& commercialization
* constraints in new product development
-hetrogeneous customers: single product may not satisfy needs
-evolving technology - customer expectatin from produc rising
- too many products - confusion for customers
- difficulty in converting an idea
- saturated resources
* - ICICI - first internet banking
* types of deposit products or liability products
KYC policies
- CAP
- Customer identificatino procdedures
- monitoring of transaction
- risk management

* product evolution:
The generic product:
* product policy
*
=
-

Bank riks
credit risk - borrower failing to pay money
liquidity risk - to earning and capital arising
market risk
operational

* Credit score
DUn and Bradsheet est in 1841
- credit scoring factors
payment histor: 35%
Amounts owed - 30%
lenght of credit histor:15%
New credit - 10%
Types of credit in use :10%
Credit scoring models:
- judgemental scoring models
- statistical scoring models
* Credit scoring bureaus in India:
CIBIL: tied with TransUnion of US
scores ranging from
CIBIL transuion 2.0 succeeded, less than 6 months are scored on
risk index ranging from 1 to 5.
* Warning signs on credit score:
- late payments or default in the recent past
- high utilization of credit limits
- higher percentage of credit card or personal loan on credit inform rpe
- Maintainig a good credit score
paying bill on time
keep balance low
cheques should not bounce
monitor co-singed or joined accont
avoid ad hoc loans
*
-

Issues and mistakes in credit scoring


identity theft
confusion of names
human input error

Experioan, Equifax, highmark


* categoriation o retail assets
* features of retail asset products
-purpose
-eligiblity
-amount

-moratorium
- rbi dispensed with pre-payment of home loans on floatin rate basis
* terms and codition of asset products
* Home loans : age of proerperty not > 15 years
eligibilty: 3 years of consistency
amount : upt 50 l for resident indi, hni 2 cr
loan
Tenure of loan
repayment: 15-20 years
fewbank offer upt o 25 years
fixed rate loans max repayment is 10 years
step up pricing
banks allow switch from fixed to float rewrite fee 1%, lock perod
of 3 years
disbursement;
-security: mortage of property to be financed
- land name of applicant or joint with spouse
ltv 80%, smal houe loan 20 l , ltv 90%
moratoriou period: upto 18 months construc, 3 montsh for prucha
of flat
* Home improvement loans
repaird, renowation, upgradation, painting
amt: max upto 5l, few provide upt 10 l
tenure: upt 10 years
security: mortgage should be equal to the property under repair
or renovation. also accept unencumbered immovable property
margin: 20 to 50 margin is provided
moratori: 3 motnsp
prepament: alllwed withough penaltiy
auto/vehile loaon
60 emis 5 years for new cars
36 emi 3 years for used
interest rate: 11 to 14 %
security: hypothetication of vechile
margin; upto 10% for new, 25 for used
moratoiu: no
prepaymen: usually do not
*personal loaon
eligbilit: min take home sal 15 20

amt: max amt extended by private bank is general upto 5l


amt: 5l
tenure: 36 emis 3 years
60 emis 5 years
guranter: a personal gurantee from 2 guranters in which salary
of each guranter being almost equal
* education loan
elibilg: students, laon jointly given to student and their pare/gura
amot: in inda upt 10 l
abroad upt 20 l
tenure: 60 emis, 5 years after prescirbe moratoriusm period
interest rate: loan upto 4l chared lower interest
disbursement: as per requirement of institution
guranter: 4 to 7.50 l an additional perosnal gurantee
amt above 7.50 would require security of tangible asset
moratorii: earol
*
-

processing of retail asset products


application processing and verification
credit scoring
valuation, encumberance and legal - provide for clear title
quantum: amt of loan to be disbursed
santion:
exuecution
verification

* Evolution of Credit cards in india


Citibank and HSBC pioneers in the Indian credit card mkt in 1980s.
Public sector banks: Andra Bank, Bank of Baroda
Foreing banks: standard charted
Citibank,Standard charted, SBI, ICICI, HDFC bank dominate credit
card mkt with more than 90% mkt share
* types of credit card
Proprietary credit card
classic, silver, gold, platinum, titanium
co -branded card
eg of co-branded
- tie up with oil company
* credit scoring of credit cared applicants
* parties to credit card transaction

- cardholder:
* functioning of credit card transaction
* NEFT process flow
origin of request to tranfer fund
SFMS - structured financial messaging system
charges
- upto rs 10,000 = rs. 2.50 (+ Service tax)
- above 10,000 upt 1 lakh - rs 5 + serice tax
- above 1 lak upt 2 lak - rs 15 + seriivie
- above 2 lak - rs 25 + servic tax
* rtgs launch in india march 26 2004.
between 2 to 5 , not more than rs 30
more than rs 5 - not more than 55
_ classification of rtgs transactions
intebank transaction:
customer payment transaction:
delivery vs payment transacction:
- Process flow of Customer Basaed RTGS Transaction
- Creating a reqjest
= Creating a strucured message
=Communicating the message
- tranferring funds
= communciatin to the benefeiciar branch
- maintaingi liquidity wiht rbi
ECS
-

issuing of Mandage: MICR code of branch in which account is maintainde


registrin of mandage: in clearing hosue
account debited
beneficiary account credited: proceeds will be creidt to beneficary

Advantages of ECS
No need to issue check
no payment default
saves time
flexible process
- White label ATM
companies act 1956
- WLA operator
one responsible for maintaing and servcing WLA
sponser bank
- cash mangement:
parabanking:
banks offering service of demat a/c are cardld depositora prticipants

* marketing process:
marketing analysis:
market planning
market implementaiton
marketing control
* categories of Delivery channel:
* Delivery channels
physical channels
- branch:
- extension counters