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Retail Banking in India - The Comprehensive Industry Report

  • ID: 1092336
  • Report
  • November 2009
  • Region: India
  • 197 Pages
  • Cygnus Research
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  • Andhra Bank
  • Bank of Baroda
  • Canara Bank
  • Citibank
  • HDFC Bank
  • ICICI Bank
  • MORE
Use this report to…
Understand how retail industry is growing
What are strategies taken by retail bank companies and their comparison thereof? and much more……


Retail banking in India has fast emerged as one of the major drivers of the overall banking industry and has witnessed enormous growth in the recent past. The Retail Banking Report encompasses extensive study & analysis of this rapidly growing sector. It primarily covers analysis of the present status, current trends, major issues & challenges in the growth of the retail banking sector. This report helps in Banks, financial institutions, MNC Banks, academicians, consultants and researchers to have a better understanding of the booming opportunities in retail banking in India.

With recession departing away from away global economy, opportunities are slowly emerging in emerging markets. Since emerging markets, except China, were less depending upon US for growth; are first to come out of recession eclipse. Growth opportunities in banking, especially retail segment is set to witness fast growth due to high consumption. The higher growth of retail lending in emerging economies is attributable to fast growth of personal wealth, favourable demographic profile, rapid development in information technology, the conducive macro-economic environment, financial market reforms, and several micro-level supply side factors.

The retail banking strategies of banks are undergoing major transformation, as banks adopt a mix of strategies like organic growth, acquisitions and alliances. This has resulted in a paradigm shift in the marketing strategies of the banks. Public Sector Banks players are adopting aggressive strategies, leveraging their rural branch network and their customer vase to earn a larger share of the retail pie. Banks are also going in for innovative strategies like cross selling, packaged selling of retail products and technology based banking. At the same time, new foreign players are also entering this high growth sector

- Global retail banking vis-à-vis Indian scenario
- Indian retail banking overview
- What are the regulatory factors involved in Indian banking industry
- How interest rate risks, money laundering, and outsourcing are affecting the performance of banking sector?
- What would be the impact of Basel-II norms in Indian banking industry?
- What are the implications of SARFESI Act on recovery of money?
- How the banking industry would combat the competition from upcoming sectors like mutual funds?
- What are the various issues and challenges before this industry?
- What are strategies taken by retail bank companies and their comparison thereof?

The report contains major profiles of - Andhra Bank, AXIS Bank, Bank of Baroda, Bank of India, Canara Bank, Citibank, Central Bank of India, Deutsche Bank, HDFC Bank, HSBC, Indian Overseas Bank, ICICI Bank, I D B I (Industrial Development Bank Of India), Indian Bank, ING Vysya Bank, Jammu & Kashmir Bank Ltd, State Bank of India, Saraswat Co-Operative Bank Ltd, Syndicate Bank, UCO Bank and Union Bank of India

- Indian retail credit
- Housing finance
- Auto finance
- Consumer durable loan
- Educational loan
- Other personal loans
- Credit cards
- Bancassurance

- Banks, Financial institutions
- MNC Banks
- Academicians
- Consultants
- Researchers

The data used, extensively draws from the in-house and proprietary sources available at Cygnus as our research team regularly tracks the sector. The other sources include Bank for International Settlements (BIS), Reserve Bank of India, Banking related Journals, and Research papers, Industry portals, Government Agencies, and Trade associations, monitoring of Industry News and developments etc. The data has been cross-checked by the research team and validated to provide the latest and unambiguous information.

Global Banking Scenario
Global banking assets touches US$96 tn
Rising Bad debts and Provisions
Profitability plummeted
Region wise analysis
- US
-- Rising defaults and slowdown affects overall credit
- Europe
-- Credit growth dips in European banks
- Asia Pacific
-- Japan find opportunity in serving baby boomers
-- Asia pacific outperforms than developed economies
Recent trends
- Housing bubble collapsed
Indian Banking Industry
Current Scenario
- Monetary and liquidity position: Relatively stable
-- Bank deposits moving up
-- Credit off take slows
Housing finance
Housing loan disbursement: facing the heat from global slowdown
Major Challenges
- Managing volatility in metal and oil prices and in exchange rates
- Finding a solution to slowdown in exports and manufacturing activities
- Integrating the entire supply chain and managing inbound logistics
- Managing Poor Monsoons
- Maintaining the pace of infrastructure development
Credit cards
Key Trends
- Infrastructural challenges could soon become irrelevant
- EMV issuance is still far away
- Prepaid Cards on the horizon
- Demand for premium and co-brand cards
- Full ATM outsourcing
Techology Spend
- Spread of ATMs—primary concern for banks
- Cards being a strong alternative to cash payments
- Internet banking – emergence of new era in personal banking
Micro payment
Consumer credit, Home Loan, Education Loan, Auto Loans and their Risk weight exposures
Credit card Norms
- Single overall limit to an individual
- KYC (know your customer) Norms
- Reporting to Credit Bureau
- Other harassment
Micro Finance
- The Micro Financial sector (Development and Regulation) Bill, 2007
Foreign Exchange Regulations
Remittance Regulations
Mobile Banking
Issues and challenges
A paradigm shift from the monopolies of public sector banks to competitive banking
Retail loan quality seen falling
Tie-Up Arrangement
Basel II Norms
Growth In Retail Electronic Funds Transfer Systems
Future outlook
Emerging trends in technology
Note: Product cover images may vary from those shown
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3 of 6


  • Andhra Bank
  • Bank of Baroda
  • Canara Bank
  • Citibank
  • HDFC Bank
  • ICICI Bank
  • MORE
1.Executive Summary

2. Highlights

3. Global Banking Industry,
3.1 Introduction
3.2 Global banking assets surpasses US$90 trillion
3.3 Rising bad debt and provisions
3.4.Profitability plummets
3.5 Increased emphasis on fee-based and treasury business
3.6 Region-wise Analysis
3.6.1 US
3.6.2 Europe
3.6.3 Asia Pacific
3.7 Recent Trends
3.7.1 Level and growth rate of Household Credit
3.7.2 More Banks focus on reducing losses
3.7.3 Housing bubble collapses

4. Indian Banking Industry
4.1 Introduction
4.2 Evolution
4.3 Reforms galore
4.4 Current Scenario
4.5 Geographic Spread
4.6 Key Business Segments
4.7. Trends in Indian Banking Industry
4.7.1 Monetary and liquidity position: Relatively stable
4.7.2 Growth of Credit Market declines
4.7.3 Inflationary pressure subsides
4.7.4. Public sector banks continue to dominate

5. Retail Banking
5.1. Introduction
5.2. Credit growth
5.3. Segments of retail lending
5.4. Retail Credit: Geographical Spread
5.5. Category wise Distribution
5.6. Comparing India with global peers
5.7. Major players and their market share
5.7.1. SBI leads with 19% market share
5.7.2. ICICI to catch up other banks
5.7.3. Geographic dominance
5.8. Recent Trends
5.8.1. Changing Demographic profile drives the growth
5.8.2. Players' Response aggressively to the changing environment
5.8.3. NPA Level credit cards and Consumer loans are major concerns

6. Housing Finance
6.1. Introduction
6.2. Industry Structure
6.3. Housing Finance Allocation
6.4.Housing loan disbursement
6.5. Lowering interest rates push up home loan disbursement
6.6. Housing Loan: Demand and Supply Driver
6.7. Banks overtake HFCs in housing loan disbursement
6.8. Banks are aggressive on Refinancing
6.9. Changing age profile of borrower
6.10. Higher loan-to-value ratio
6.11. Size of Home Loan
6.12. Outlook
6.12.1. Rising Home Loans as percentage of GNP
6.12.2. Price correction may be a possible in the near future

7.1 Introduction
7.2 Segment-wise autodidact
7.3 Industry Segment-wise analysis
7.3.1 Car
7.3.2 Multi-Utility Vehicle
7.3.3Two Wheeler sales touch 7.44 million.
7.4 Driving Factor
7.4.1 Entry of Foreign Car Maker
7.4.2 Cheaper Loans Off tack
7.4.3 Reduction in Taxes & Du tie
7.4.4 Changing Business Dynamic
7.5: Indian Automobile Finance Industry Transformation
7.6 Recent Trend
7.6.1. Recession halts the growth of the marked
7.6.2 Used Car Financing
7.6.3. Auto companies tie-up with PSU Bank
7.7 Major Challenge
7.7.1 Sustaining the growth rate
7.7.3. Finding a solution to slowdown in exports and manufacturing activities
7.7.4 Integrating the entire supply chain and managing inbound logistic
7.7.5 Managing Poor Monsoon
7.7.6 Maintaining the pace of infrastructure development
7.8 Outlook

8. Consumer Durable Finance
8.1 Introduction
8.2 Consumer durables credit
8.2.1 Geographical Spread and Market Shear
8.2.2 Category wise Distribution
8.3 Competition pinches on consumer durable credit growth
8.4 Innovations in lending – avenues for growth
8.5 Commercial Banks aggressively capturing marked
8.6 Outlook

9. Education Loan
9.1 Introduction
9.2 Educational loans disbursement
9.3 Driving factor
9.4 Major Challenge in Education Loa
9.5 Outlook

10. Other personal Loans
10.1. Introduction
10.2. Personal Loans: Market share and size wise classification
10.3. Increase in Bank lending
10.4. Competition propels innovation

11. Credit card
11. Credit card
11.1 Introduction
11.1.1. Size and growth
11.2 Growth: Card volume surge
11.3 Competition and Major Players: ICICI banks Rally
11.4 Industry Spend
11.5 Key Trend
11.5.1. Cut throat competition
11.5.2. Infra structural challenges could soon become irrelevant
11.5.3. Smarter Debit/Credit Car
11.5.4. Prepaid cards on the horizon11.5.5. Demand for premium and co-brand card
11.5.6. ATM outsourcing
11.6 Technology Sp en
11.6.1 Mobile Wallet
11.7 MICROPAYMENTS 11.8 Role of Association
11.9 Default in Credit car
11.10 Outlook

12. Braincases
12.1 Introduction
12.2 Changing Business Dynamic
12.3 Braincases: Indian Scenario
12.4 Issues and challenge
12.5 Driving Factor
12.5 Outlook

13. Regulation
13.1. Introduction
13.2. Consumer credit, Home Loan, Education Loan, Auto Loans and their Risk weight exposure
13.3. Housing finance: Growing incidence of fraud
13.4. Credit card Norm
13.4.1. Single overall limit for each individual
13.4.2. KYC (know your customer) Norm
13.4.3. Recovery of retail loans 13.4.4. Reports to Credit Bur ea
13.4.5 Other harassment
13.5. Micro Finance
13.5.1The Micro Financial sector (Development and Regulation) Bill, 2007 13.6. Foreign Exchange Regulation
13.7. Remittance Regulation
13.8. Mobile Banking

14. Issues/Challenges of Retail Banking in India
14.1 Introduction
14.2 A paradigm shift from the monopolies of public sector banks to competitive banking
14.3 Interest rate Kris
14.4 Issue of money laundering
14.5 Competition in retail banking
14.6 Retail loan quality is falling
14.7 Tie-Up Arrangement
14.8 Basel II Norm
14.9 Growth in Retail Electronic Funds Transfer System
14.10 Imbalance in bank credit-deposit & investment-deposit ratio
14.11 Conclusion

15.1 Refocus customer relationships through technology and innovation
15.2 Enterprise CRM in Retail Banking
15.3 Fresh frontiers in Retail Operation
15.4 Micro Finance- an emerging opportunity
15.4.1. Self-Help Group (SHG) – Bank Linkage Program
15.5 Budding opportunities in Non-agricultural rural credit
15.6 The shape of things to com
15.7. Emerging trends in technology
15.8 Conclusion
16. Major Banks Profile
1. Andrea Ban
2. AXIS Ban
3. Bank of Bard
4. Bank of India
5. Canard Ban
6. Titian
7. Central Bank of India
8. Deutsche Ban
9. HDFC Ban
10. HSBC 11. Indian Overseas Ban
12. ICICI Ban
13. I D B I (Industrial Development Bank Of India) 14. Indian Ban
15. ING Visa Ban
16. Jam mu & Kashmir Bank Ltd. 17. State Bank of India
18. Saraswat Co-Operative Bank Ltd. 19. Syndicate Ban
20. UCO Ban
21. Union Bank of India
Note: Product cover images may vary from those shown
4 of 6


  • Andhra Bank
  • Bank of Baroda
  • Canara Bank
  • Citibank
  • HDFC Bank
  • ICICI Bank
  • MORE
In the world economy retail lending is a strong market; however, its rise is evident in emerging economies like India. Asia Pacific’s vast population, combined with high savings rates, explosive economic growth, and underdeveloped retail banking services, provide the most significant growth opportunities for banks. To continue to realise vast growth opportunities in the region, banks will have to effectively serve the retail banking segment. Hence, banks need to innovate diverse range of retail banking products and servicing in order to satisfy the customers of Asia Pacific.

In 2008, global banks losses were US$4.1tn, of which US accounts for US$2.7tn, European and Japanese banks losses account for US$1.3tn and rest by others. Banking strategies are presently undergoing various transformations, as the overall scenario has changed over last year. Till the recent past, most of the banks had adopted fierce cost-cutting measures to sustain recession. This strategy however has become obsolete in the light of immense growth opportunities for banking industry. Most bankers are realising that banks shall focus more on core business i.e., lending and borrowing rather than growing on the back of investing in complex derivative products. Banks are now confident about their high performance in terms of organic growth and in realising high returns.

A bank’s growth strategy evolves around the customer satisfaction. Improved customer relationship management can only lead to fulfillment of long-term, as well as, short-term objectives of the bankers. This requires efficient and accurate customer database management and development of well-trained sales force to develop and sustain long-term profitable customer relationship. Japan remained the major contributor in total bank deposits; it has experienced an increase of nearly 2%. While China’s total deposit grew by 17.90% in FY08. Relatively smaller player like India also recorded an outstanding growth of 19% in total bank deposit during 2008-09. Countries like India have emerged as potential market with huge investment opportunities.

During 2008-09, gross credit extended by Indian commercial banks grew by 20.09% to touch Rs27,293 billion. Retail credit has grown by 7.8% to Rs5574 billion during the same period. Housing sector constitutes the lion’s share of about 49% in the total retail disbursement, auto loans (22%), other personal loans (18%), educational loans (5%), credit card receivables (5%) and consumer durables (1%).

Banks continue to gather a greater share in housing loan disbursements by outdoing Housing Finance Companies (HFCs). The Indian housing finance industry has been growing by leaps and bounds in the past few years. Housing loans credit by SCB and HFC grew only by 5% during May 09 compared 13.8% growth in May 08. Credit flow to housing was lower at Rs130.28 billion during May 09 as compared to Rs317.35 billion in May08. Low lending in housing sector was due to tightening monetary measures, banks denial in lending funds, high interest rates and very high non-performing assets. Despite being a late entrant in the housing finance, the banks have overtaken the HFCs in the home loan market. The share of the banks in total home loan disbursement has risen from 48% in 2003-04 to 59% in 2008-09. Outstanding Housing loans, as a percentage of GDP, increased in the last five years from 7.06% in 2005-06 to 8.29% in 2008-09. It is expected to leap by double digits in the next 2-3 years. Indian housing market is likely to grow on the lines of Malaysia and Thailand; these countries have already reached the double digit figures as percentage of GDP.

Auto loan after experiencing 18% CAGR is last 5 years has witnessed 15% dip during 2008-09. In Asia Pacific, India has emerged as the third largest market for cars and MUVs, after Japan and China. High interest rates, banks delay in financing, high oil prices, delay in monsoons are main constraints of this segment.

The last few years have witnessed a high increase in students aspiring for management and professional courses, leading to a spurt in educational loans. Banks are now having a direct tie-up with the educational institutions to cash in on the opportunity. Public Sector Banks (PSBs) are focussing on the educational loans segment. During 2008-09, the outstanding for education loans increased by 35% to Rs285.79 billion.
The credit card culture has gained immense popularity over past 5 years. The total number of cards issued in India has gone up by nearly 22.33% in the FY09. The total number of credit cards issued is estimated to be at around 259 million in 2008-09. The actual usage too has registered an increase both in terms of volume and value at the rate of 13.7% and 12.7% respectively in current period. The total spends in the payment industry for the year 2008-09 crossed Rs839 billion at the POS. This reflects a growth of 22% over the previous year. As on March 31, 2009, outstanding credit card receivables stood at Rs280 billion i.e., a growth of 6% over 2007-08. Almost all the categories of banks issue credit cards. Credit cards have found greater acceptance in terms of usage in the major cities of the country, with the four major metropolitan cities accounting for the bulk of the transactions.

The consumer durable loan outstanding as on March 31, 2009 was Rs81 billion. In total personal loans, consumer loans account only for 1% as on March 2009. In a tenure-wise market share of Consumer Durable loans, long-term loans leads with 59% market share and medium term loans with 41% market share. In terms of size, consumer durables segment has maximum loans which are between Rs25,001 to Rs0.2 million. However, outstanding amount declined by 4% during fiscal 2008-09. This is primarily due to bank’s denial in lending and postponement of purchasing decision due to high inflation on account of high food prices.

The other personal loans market is characterised by intense competition and the players vie with one another to get business. These loans are driven by urgent and short-term needs, and banks have to act swiftly to cash in on that need. Metropolitan and urban areas together constitute two thirds of total loans under this category. Private sector banks lead in metropolitan areas, whereas in the rural areas the nationalised banks have more pie.

Bancassurance, the much talked about channel of insurance distribution through banks, has gained immense popularity among Indian insurance companies and banking sector ever since its introduction in 2000-2001. Pushing the risk products through banks is a cost-effective affair for an insurance company compared to the agent route. While for banks, considering the falling interest rates, fee based income coming in at a minimum cost is more than a welcome move. Bancassurance has cleanly outperformed other alternate channels of distribution for insurance products, with a share of almost 25-30% of the premium income amongst the private players in FY 2008. There is huge potential in this alternative channel, with only 4,500-5,000 bank branches currently distributing insurance products.

In India, all the retail banking segments are expected to witness steep growth owing to the low cost of borrowing, changing customer attitudes towards borrowing and optimism regarding economic growth. The share of total retail credit in bank credit has increased from 6.4% to over 25% in the past 15 years. In the next four years, till 2010, retail banking is expected to grow at a CAGR of 20% to reach Rs7970 bn. This requires expansion and diversification of retail product portfolio, better penetration and faster service mechanism. Hitherto, the growth had come from metros and tier I cities while the loan requirement from larger cities will continue to grow, explosive growth in credit is expected to register in tier II cities, semi-urban and rural areas.

However, there are some areas of concern like rising NPA in consumer loans particularly, the delinquency rates in credit cards and frauds in home loans. Housing prices have grown rapidly during 2005-2008. Deflation of asset value is a possibility in certain areas. Aggressive credit growth in retail has increased the requirement for measuring and managing this risk. These require extremely skilled workforce and highly evolved credit delivery and monitoring processes, so that the banking professionals can track the market perfectly. The other concern is of suicidal pricing by the aggressive banks. This is bringing the margins under pressure. Though rational pricing is critical, the competitive market shall continue to see the pricing pressure. There is also a need for database and a management information system to identify the right kind of borrowers. Lack of consensus on definition of retail and transparency in declaration by the players as well the coverage of retail by the RBI in its reports––all of this need a thorough re-look.

As India’s economy matures with excellent performance in terms of GDP and other parameters like per capita income, balance of payments, inflation and financial market, consumer spending––all set to increase by many folds. This positive trend will definitely fuel the growth Indian banking industry. To continue to realise the vast growth opportunities in the country, banks will have to effectively serve the retail banking segment. To meet the expectations and win the hearts of the customers, the banks should innovate by developing a diverse range of retail products, needed by the customers and servicing them efficiently.
Note: Product cover images may vary from those shown
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- Andhra Bank
- AXIS Bank
- Bank of Baroda
- Bank of India
- Canara Bank
- Citibank
- Central Bank of India
- Deutsche Bank
- HDFC Bank
- Indian Overseas Bank
- ICICI Bank
- I D B I (Industrial Development Bank Of India)
- Indian Bank
- ING Vysya Bank
- Jammu & Kashmir Bank Ltd
- State Bank of India
- Saraswat Co-Operative Bank Ltd
- Syndicate Bank
- UCO Bank and Union Bank of India
Note: Product cover images may vary from those shown
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Note: Product cover images may vary from those shown