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˜ Aggressive entry strategies of foreign banks to Retail

Segment
˜ Customer retention initiatives by PSU Banks
˜ Aggressive price-war on Retail Credit
 




˜ 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
 




˜ 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





˜ Phenomenal rise in nuclear and dual income families &

enhanced spending power
˜ Increasing literacy levels
˜ Higher adaptability to technology banking





˜ Growing consumerism
˜ Fiscal incentives to Housing loans
˜ Fastest economic growth over the decade
 

 


˜ 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
 

 



˜ 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
 

 



˜ 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
 

 

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˜ 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
 



˜ 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
 




˜ 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
 





˜ Banks overtake HFCs in Home Loans

˜ Banks overtake NBFCs in Auto loans
˜ The same trend would continue for next few years
 




˜ 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
 





˜ 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
 




˜ Mix of Retail Credit is expected at ² 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
 





˜ 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
 




˜ 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
 
  
˜ 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
 


 


˜ 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
 


 




˜ 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
 







˜ 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
 







˜ 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
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˜ 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
Thank You