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RETAIL BANKING STRATEGIES FOR THE FUTURE. Mrs. Soundara Kumar GM Personal Banking State Bank of India. Present Scenario. Indian retail banking has been showing phenomenal growth In 2004-05, 42% of credit growth came from retail Over the last 5 years CAGR has been over 35%

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retail banking strategies for the future

RETAIL BANKING STRATEGIES FOR THE FUTURE

Mrs. Soundara Kumar

GM Personal Banking

State Bank of India

present scenario
Present Scenario
  • Indian retail banking has been showing phenomenal growth
  • In 2004-05, 42% of credit growth came from retail
  • Over the last 5 years CAGR has been over 35%
  • Retail credit levelcrossed Rs.189K Crore in 2004-05
  • Market has transformed into a ‘buyer’s market’ from a ‘seller’s market’
  • Comprises of multiple products, channels of distribution and multiple customer groups
economy vs retail banking
Economy vs. Retail Banking
  • Retail assets are just 22% of the total banking assets of India

Contribution of retail loans to GDP:

India 6% China 15 %,

Thailand 24% Taiwan 52%

Indian population below 35 yrs of Age – 70 %

Reach of Formal Banking Channels – 20-25% of Indian population

Source: Cygnus Industry Insight

drivers of retail growth
Drivers Of Retail Growth

CHANGING CONSUMER DEMOGRAPHICS

  • Growing disposable incomes
  • Youngest population in the world
  • Increasing literacy levels
  • Higher adaptability to technology
  • Growing consumerism
  • Fiscal incentives for home loans
  • Changing mindsets-willingness to borrow/lend
  • Desire to improve lifestyles
  • Banks vying for higher market share
industry s response to the change
Industry’s response to the change
  • “Any where”, “Any time” Banking
  • Improved processes/Bundled product offerings
  • Faster service/Reduced TATs
  • Customer specific products/offerings on a regular basis
  • ‘Bank’ customer has replaced ‘Branch’ customer
  • Focus on understanding customer needs/ preferences
  • Segmentation/Differentiation of customers
  • Customer driven strategies
  • Building relationships
slide7

Future Of Retail Banking

  • The accelerated retail growth has been on a historically low base
  • Penetration continues to be significantly low compared to global bench marks
  • Share of retail credit expected to grow from 22% to 36%
  • Retail credit expected to grow to Rs.575,000 crs by 2010 at an annual growth rate of 25%

Source: Cygnus industry insight

future of retail banking contd
Future of Retail BankingContd….
  • Dramatic changes expected in the credit portfolio of Banks in the next 5 years
  • Housing will continue to be the biggest growth segment, followed by Auto loans
  • Banks need to expand and diversify by focussing on non urban segment as well as varied income and demographic groups
  • Rural areas offer tremendous potential too which needs to be exploited
strategic prerequisites
Strategic prerequisites….
  • Performance oriented leadership
  • Sophisticated marketing and sales
  • Efficient distribution channels
  • Process efficiency and ease of scalability
  • Superior credit policy, procedures and skills

Source: Mckinsey

challenges
Challenges
  • Sustaining Customer loyalty
  • NPA reduction & Fraud prevention
  • Avoiding Debt Trap for customers
  • Bringing Rural masses into mainstream banking
strategies for future
Strategies for Future…
  • Reaching to masses : Need to customize
  • Customer segmentation/differentiation
  • Data mining/CRM based campaigns
  • Products per customer/loyalty
  • Promoting low risk retail lending products
  • Offer an array of products and financial advisory.
strategies for future contd
Strategies for Future… Contd.
  • Cost effective expansion
  • Renewed emphasis on superior execution by front-line employees
  • Grow through Alliances:

Hospitality Education

Retailers Automobiles

Consumer Durables Housing/Construction

winning strategy
Winning Strategy

The bank that best addresses and anticipates customers needs, delivers consistently higher quality service and connects to the customer via their channel of choice wins

Y.Y.Chin, OCBC Bank