Compliance Engineering Journal ISSN NO: 0898-3577

An Overview of Retail Banking: A Theoretical Perspective

Mr. Ranjansathya Das S *Dr.Aluregowda** Mr. Mahadevaswamy R M ***

*Guest Faculty, Department of Commerce, Govt. First Grade College for Women, Maddur, Mandya, Karnataka, India.

** Associate Professor, Department of Management Studies and Research Centre, PES College of Engineering, Mandya, Karnataka, Insdia.

*** Guest Faculty, Department of Business Administration, Govt. First Grade College, Siddartha Nagara, Mysore, Karnataka, India

The Indian retail banking is one of the fastest growing sectors in Indian economy with innovation and upgradition of products and services in the market place. The adoption of technology and change of technology in the retail banking has attractive tool in the retail banking services. Retail banking services largely depends on services offered by banks and effectiveness of the bank personnel to interact with customers and educating the existing and new customers to investment plans and also introduce new product services to meet the changing needs of the customers through internet banking and digitalization of retail bank services to convenient time and flexible hours. The present study emphasizes on retail banking features, advantages and strategies of retail banking in the changing scenario of banking industry.

Keywords: Banking strategy, Digital services, Indian banking sector, retail banking

INTRODUCTION One of the spectacular innovations in the commercial banking sector is the retail banking. The fastest growing division in the banking sector is the retail sector. Retail banking refers to banking in which banks undergo transactions directly with consumers rather than with corporate or other banks. Consumer credit is the heart of retail banks and it provide services to individuals and small business concerns and the dealings are in large volumes and low values. The retail banking portfolio encompasses deposits and assets linked products as well as other financial services offered to individuals for personal consumption. Retail banking is increasingly viewed by banks as an attractive market segment with opportunities for growth and profit. It is a system of providing soft loans to the general public like family loans, house loans, personal loans, loans against property, car loans, auto loans etc. The products are backed by world-class service standards and delivered to the customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking. Today’s retail banking sector is characterized by three basic features namely multiple products includes deposits, credit cards, insurance, investment and securities, multiple channels of distribution includes call centre, branch, internet and multiple customer groups consists consumer, small business and corporate.

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LITERATURE REVIEW Dr. R Srinivasa (2014), has tried to bring light on role and prosper of retail bank sector in India and its future role in country’s development. Date required for the study has been collected from secondary source like RBI reports, publications and other national and international sources. The study started from gave introduction to industry then to trends later on its role in economic development. Challenges like customers retention, money laundering, ineptness, network management issues and few more have taken part in the study. The study had concluded by giving prime importance to improve retain banking sector in order to make its further more contribution to country’s development. C. Padmavathi, M.S. Balaji, V.J. Sivakumar (2002) , authors have designed the study to evaluate effectiveness of customer relationship management (CRM) in Indian retail banking and to examine its relationship with key customer response variable. Date has been collected from primary sources and statistical methods such as Kaiser –meyer- olkin measure (KMO), Bartlett test of sphericity and exploratory factor analysis have adopted. Since study have conducted on the five basic parameters, authors have expressed their findings with the hope that banks would do better by concentrating on these dimension to improve the customer satisfaction and there by managers can retain their customers. Lianxi Zhou (2004) , author has studied customer satisfaction in chines retail banking sector with help of specifies performance dimension - quality of service. 373 customers have met for collect data regard service quality of the industry and results have been measured and expressed its implication in international setting. Statistical tools percentage calculation and T-test have done to know significant values. As per the study, specific quality dimension to know customers to satisfy was insufficient since they looking for assurance and reliability from local banks and study has suggested managers there to focuses on assurance and reliability in formulation of strategies to satisfy and retain their customers. R.F Balachandra, TSB Bank plc and RL Galloway (1994) , It was the period where the concept of ‘quality in banking services’ getting definition all over the world, authors have studied customers and bank staff (TSb bank plc) requirements of quality services in banking. This was carries out during 1991-1992 on one of the largest bank in UK – TSB Bank plc. The data was collected from large number of customers across the 71 branches by personal interview at their home by wide range of questionnaire. Date was analysed with the help of SERVQUAL classification and Gap model too used to link data with staff perception. As per the study customer were seeking for responsive services with assurance, competence and credibility. And staffs have expressed various reasons for failure of quality in services and the study has discussed wide range of issues to overcome the same issues. Terrence Levesque and Gordon H.G Mc Dougall (1996) , deregulation of banking sector was create a issue of maintain loyal customers in Canada during the study, authors have studied the determinants of customer satisfaction in retail banking in Canada. Data required for the study was collected from church members and university member where they collected data directly from customer with designed questionnaire. Their study found the core and relative performance both would helps to retain loyal customer where these performance helps to satisfy customers need.

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FEATURES OF RETAIL BANKING

Retail banks are dealing to commercial banks with individual consumers, both the liabilities and the asset side of the balance sheet. The important products offered by banks in retail banking are fixed, current/ savings account on liabilities side and personal loans, house loans, auto loans and educational loans on the asset side. Retail banking sector is characterized by doing banking business in large volume of transactions involving low value, the retail banking portfolio includes deposits and assets linked products as well as other financial services provided to individuals for personal consumption and it provides an opportunity to banks to diversify their asset portfolio. Since loans are given to a large number of consumers and transactions have very low value, the risk of NPA is reduced because all the consumers do not make default in making loan repayment at a time. Retail banking adopting the strategy of the maxim do not keep all the eggs in one basket and this industry is diverse and competitive. There is a large number of retail banking products that are extremely customer-friendly and are offered by many banks. Banks adopt multiple channels of distribution of retail banking products and services.

ADVANTAGES OF RETAIL BANKING

Retail banking is mass market banking, where individual consumer’s diverse are fulfilled at the local level offering multiple products with growth of banking technology and automation of banking process. Retail deposits are stable and constitute core deposits, interest insensitive and less bargaining for additional interest, effective customer relationship management with retail customers builds strong customer base, and retail banking increases the subsidiary business of banks. Retail banking results in better yield and improved bottom line for banks and retail segment is a good avenue for funds deployment, consumer loans are presumed to be of lower risk and NPA perception. It improves lifestyle and fulfils aspirations of people through affordable credit and an opportunity for banks to innovate banking products as per the expectations of various classes of customers and it involves minimum marketing efforts in a demand-driven economy.

RETAIL BUSINESS STRATEGIES Retail banks changing continuously as a future-ready organization and has consistently evolved its capabilities to ensure agility and value creation in its businesses. This focus is integral to the bank’s strategy and bank continued to make progress on its strategic objectives even as the year saw significant challenges. The Bank’s businesses focused on growing the core operating profits in a risk calibrated and forceful manner. The Bank implemented a number of initiatives to expand its customer base and deepen the penetration of products and services, thus further strengthening the franchise. The digital strategy was key driver of the bank’s reach and unlocking potential in its businesses. Retail banks adopted digital banking journey long back and aims to remain at the forefront in re-imagining banking through technology, digitization and

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innovation. Retail banks offerings to customers through traditional products and services with changing digital products and services with the customer friendly technology. There are various banking strategies in retail banking are as follows.

Meeting Customer Needs: The objective of the Bank is to develop products and services that create value for customers. Technology and digitization play an integral part in meeting individual goals of the bank. The bank focuses on providing high levels of functionality and investing in technologies to provide a secure, superior, seamless and uniform service experience to customers across all channels to cover the unique needs of the customers with ranging all diversified customers both in urban and rural market. Increase the purchase power of the customers with expanding the credit size of the business with lowest risk in the retail banks. Retail banks are continuously review the various and diversified products to satisfy all customers in the retail banks.

Rural Banking for Inclusive Growth:

Retail Bank believes that a key driver of India’s growth is the rural economy which has distinct financial needs. The retail banking process adopts rural banking operation caters to the complete financial requirements of customers in rural and semi urban locations, primarily engaged in agriculture and agro-related value chain activities. Retail Banks tailor made the products with to disperse small amount large number of customers to reduce the risk and increase loan recovery of small and marginal farmers and customers engaged in agriculture and allied sector. The Bank has adopted a societal approach in meeting the financial needs of its rural customers and offers a bouquet of services and products covering the end to end requirements of rural customers.

The segments include farmers, rural salaried customers, commodity traders, seed and farm input dealers and processors. The key focus for the business is to build banking habits and to help in creating wealth for rural customers. Rural customers have positive relationship with banks to fulfill the financial goals within the credit capability. In addition to direct lending to customers, the Bank also engages with Micro Finance Institutions (MFIs) as a crucial delivery channel for reaching out to the otherwise under-served population and for enabling financial inclusion. The Bank provides financial assistance in the form of term loans to MFIs. These funds are then further extended to individuals and members of Self Help Groups, Grameena Banks, Cooperative banks, NGOs and Joint Liability Groups.

Small and Medium Enterprises:

Small and medium enterprises (SMEs) require a comprehensive relationship approach depending on various factors including size, supply chain linkages and leverage capability. The Bank has been providing tailored products and services for enabling wide ranging support and has been partnering SMEs for their business growth. The Bank follows strong risk management practices in managing its SME portfolio to enhance the portfolio quality by reducing concentration risk

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and to focus on granular and collateralized-lending based growth. With a view to increasing the risk adjusted operating profit from the portfolio; trust and confidence is also placed on harnessing opportunities across transaction banking, foreign exchange and personal banking solutions with the SMEs.

Enhancing Customer Service:

Customer service is an important pillar of banking and the bank makes continuous efforts towards improving customer experience and operational efficiency. A rapidly changing economic and technological landscape has created new dimensions in customer expectations from banks. Speed and convenience are two key drivers in meeting these expectations. To keep up with evolving customer expectations, the Bank is increasing its focus on customer delight and advocacy. This is being measured through the Net Promoter Score, transaction Experience and customer Satisfaction metrics. Today Bank follows a 4D framework to map the entire customer journey across products, processes and channels. The 4D framework constitutes delivery with speed and accuracy, decongestion, digitalization and delivery with empathy to enhance the services to satisfy the customers than the competitors in the market place.

Instantaneous Consumer Loans: Retail banks extended its range of instant products by introducing an array of offerings across segments. Retail banks provide instantaneous home loans to customer. This facility enables lakhs of pre-approved salaried customers of the bank to avail final sanction letter digitally and instantly for loans using the bank’s internet banking facility, In addition to the instantaneous home loans top-up loan is a facility provided by banks, further housing finance companies and other financial institutions that allow you to borrow a certain amount of money over and above your home loan. To compete against these finance companies r etail banks provide s instant top up on home loan through this first-of-its-kind initiative, the Bank helps its existing home loan customers to get instant top-up. It is very useful to its existing customers and it is provide lower interest rate.

Automobile and Digital Loan services: Retail banks are associated with automobile distributors to improve the credit market to fasten up with auto loan facilities provided by the retail banks. These banks helps to customer to get loans, the bank provides its pre-approved customers with a facility to avail the final sanction letter of a car loan instantly and digitally up to some specific period. Retail banks offers a facility to millions of its pre-approved customers to avail instant sanctions of loans for a tenure of up to three years for buying a two wheeler, this loan also covers 100% of the on-road price of the two- wheeler. Retail banks also adopted digital credit card facilities. This instant digital credit facility enables pre-approved customers to buy small ticket items immediately in a completely digital and paperless manner through their mobile phones. An invite-only facility, Pay Later also allows eligible customers to avail instant credit according to the customer eligibility. This digital based

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credit facilities help to customers save time and energy to avail the automobile vehicles loans in pre approval of loans with necessary documents through digital process. It enhances the customer relationship through the customer experience to avail loan from the banks and return through digital process without visit to branch office.

Tourism and Travel Services: Retail banks enhance their business through cross-selling. It is a practice of selling an additional product or service to an existing customer. The term cross-selling refers to banks, Non- Banking Financial Institutions (NBFC) that offer or sale of more than one product or service to promote the customers with different products & services according to their needs. It encourages the customers to buy a related or complementary product.

Tourism and travel is a focused knowledge banking group providing comprehensive banking solutions to online travel aggregators, travel agents, tour operators, Meetings, Incentives, Conferences, Exhibitions (MICE) operators and tourism service providers designed basis the nature and attributes of the business. Retail banks offers travel cards through this facility, customers can reload foreign currency instantly. They can also reload the travel cards of their close relatives including their parents, children or spouse after linking them to his/ her savings account. For ex: Make My Trip, an online travel company, the Bank launched two co-branded credit cards that are tailor made to suit the aspirations of travel enthusiasts in the country. Through these cards, customers can accumulate unlimited reward points and redeem them across their travel bookings and various partner merchants on the travel portal.

Services for Women Empowerment:

Retail Banks focus to women empowerment in lead to their financial independence. Women need to be empowered economically. This will make women self-reliant and give them the freedom to choose. This will enable them to benefit from the different options available at their free will. Education helps women to practice the trade of their choice. Retail banks offer educational assistance schemes for women at concessional terms and lower interest rates. Education helps in a big way in women empowerment. Once a woman becomes financially independent and can exercise her choices, she can also help her mother, sister, daughter, and other women in the society to become empowered. The participation of women as compared to men in formal banking is significantly lower. Once a woman becomes financially independent and can exercise her choices, she can also help her mother, sister, daughter, and other women in the society to become empowered. Retail banks offer a host of benefits across categories like banking, lifestyle, convenience, investment & tax planning, child education and protection. This is a premium savings account for upwardly, salaried and self-employed professionals.

Retail banks offer financial assistance to benefits women for meeting the long-term financial needs of the customers and their families, namely asset creation, wealth management, life- protection and investment. Retail Bank launched a first-of-its-kind digital application facility on

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smart phones and tablets enabling bank officials to open current accounts of self-employed individuals and businesses in just a few hours.

Training and Development Programs: Retail banks have initiated special training programs for their women customers who have started self-help groups and start up own businesses. This training enables them to get knowledge of different aspects of trade and commerce. Banks also offer training to women from economically weaker section in various vocations that give them access to jobs. As a result increase multi-folds by bringing several women together to achieve economic independence. These groups promote small savings among its members which are kept with a bank and invested in revenue earning economic activity of the group.

Credit Cards Services:

A credit card is a payment card issued to users to enable the cardholder to pay a merchant for goods and services based on the cardholder's promise to the card issuer to pay them for the amounts plus the other agreed charges. The card issuer creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance. Retail banking is a way for individual consumers to manage their money, have access to credit, and deposit their money in a secure manner. Services offered by retail banks include checking and savings accounts, mortgages, personal loans, credit cards, and certificates of deposit (CDs) and also r etail bank introduced a range of credit cards that offer best-in-the-industry rewards and benefits for customers. For ex: Amazon Pay the online payment platform of the global e-commerce company Amazon, this is the first card in the country to enable Amazon Prime members to earn 5% reward points on shopping on www.amazon.in. Each reward point is equivalent to a rupee which customers can redeem on www.amazon.in from a catalogue of more than 160 million items available on the website or by paying merchants who accept Amazon Pay. The reward points are uncapped and do not expire.

Digital Services to Corporate and MSME: Retail banking revamped its trade online platform by introducing an array of new digital services which enable large, medium and small sized corporate as well as MSMEs to undertake almost all their export-import transactions online and Retail banks provides ‘Eazy pay’, the country’s first digital Point-of-Sale (PoS) application. The all new Eazy pay offers a host of services with many industry-first features including instant and paperless application for card-swipe machine and bar code scanning for instant invoicing. Retail Banks launched ‘GST Business Loan’, a new working capital facility that enables MSMEs to get overdraft based on the turnover reported in their Goods and Services Tax (GST) returns. The facility is available to any MSME. Digital transformation has enormous potential to decouple carbon emissions and resource consumption from economic growth. The need of the hour is for MSMEs to take the lead in adopting

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digitalization and make it an integral part of their business strategies. Entrepreneurs and their units that are successful in understanding the power of digitalization and harnessing it across their value chain will lead this new wave of inclusive & sustainable growth.

Digital Products and Services:

Retail banking offers digital banking products with the Digital Transformation and Mobility Banking (DTMB) team at the fore front. Retail Bank has launched digital banking products include paper-less auto loans using biometric technology, personal loan on net banking, Mobile Apps, Missed Call Recharge, Instant loans and also innovative interview platform that uses analytics to conduct video based assessments and enables digital interviewing to screen and select talent. The solution provides a comprehensive tool using multiple aspects for decision- making by analyzing a candidate’s resume content as per the hiring manager's requirement. The project has been globally recognized by platforms like Asian Banker Summit and the Employee Engagement Achievers Awards.

International Banking:

Retail banks launched Global Payments Innovation (GPI) platform to facilitate faster cross- border payments by significantly improving transparency and efficiency for all category of remitters. The service enables real-time payments tracking across correspondent banks. Retail Bank allows NRIs to remit money to India through social media, including WhatsApp and by email, through Money2India, i-banking and mobile banking. This is most useful to money transfer options for NRIs. Retail banks offer Indian students a completely online payment solution through its ‘Money2World’ platform for outward remittances. With this, Indian residents, who are customers of any bank in India, can initiate an online remittance to make fee payments to a foreign university at a fixed exchange rate from the comfort of their homes anytime.

CONCLUSION:

Retail banking system is one of the banking systems. The banks provide so many facilities to its customer across the country. Retail banking adopting multiple strategies to offer the various products and services to customers with an holistic approach to earn profit with lowest risk. Retail banks today offers many products and services means traditional products saving bank account, current accounts, home loans and car loans, education loans to students in bank branches and emerged service oriented instantaneous home and car loans through i-banking services, digital services, e-payment services, money transfer for NRIs. Retail banking helps to international banking offers financial services, such as payment accounts and lending opportunities, to foreign clients. Digital innovations in banking sector, emerging financial models, delivery systems and customer expectations are driving banks to re-evaluate how they deliver value to their digital customers. The customer services are playing a very significant role

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in retail banking business. Retail banks strengthen the online offers by implementing new direct net features and integrating the newer sales channels for the clients to use the internet for their transactions and dealing in the banks.

References:

1. Dr. Srinivasa Rao, “The Role of Retail Bank in Indian Economy”, International Journal of Engineering Research and General Science, Volume 2. Issue 2. February 2014. ISSN 2091-2730. 2. C. Pandmavathy, MS Balagy and VJ Sivkumar, “Measuring effectiveness of customer relationship management in Indian Retail Bank”, International Journal of bank Marketing, Vol.30 No.4 2002. pp. 246-266. 3. Lianxi Zhou, “A Dimension – Specific Analysis of Performance- only measurement of Service quality and satisfaction in Chinas retail banking”, Journal of Service Marketing, Volume 18, Number 7. 2004. pp053-546, ©Emerald Group Publication Limited ISSN 0887 6045. 4. R.F Balachandra, TSB Bank plc and RL Galloway, “Quality In Retail Bank”, International Journal of Service Industry Management, Vol.5 Iss 4. pp 5-23. 1994. Press 0956-4233. 5. Terrence Levesque, Gordonn H.G Mc Dougall, “Determinants of customer satisfaction in retail banking’, International Journal of Bank Marketing, 14/7 (1996) 12-20, ©MCB University Press ISBN 0265-2323. 6. ICICI Bank: Performance and Strategy .September 2019. 7. ICICI Bank: Annual Report 2018-19. 8. Retail banking in India- an overview. 9. https://www.yesbank.in/banking-initiatives/responsible-banking/positive-impact/say-yes- to-sustainable-msmes-in-india/msme-digital-transformation .

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