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RETAIL BANKING STRATEGIES FOR THE FUTURE Mrs. Soundara Kumar GM Personal Banking State Bank of India.

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Presentation on theme: "RETAIL BANKING STRATEGIES FOR THE FUTURE Mrs. Soundara Kumar GM Personal Banking State Bank of India."— Presentation transcript:

1 RETAIL BANKING STRATEGIES FOR THE FUTURE Mrs. Soundara Kumar GM Personal Banking State Bank of India

2 Present Scenario Indian retail banking has been showing phenomenal growth Indian retail banking has been showing phenomenal growth In , 42% of credit growth came from retail In , 42% of credit growth came from retail Over the last 5 years CAGR has been over 35% Over the last 5 years CAGR has been over 35% Retail credit levelcrossed Rs.189K Crore in Retail credit levelcrossed Rs.189K Crore in Market has transformed into a buyers market from a sellers market Market has transformed into a buyers market from a sellers market Comprises of multiple products, channels of distribution and multiple customer groups Comprises of multiple products, channels of distribution and multiple customer groups

3 Economy vs. Retail Banking Retail assets are just 22% of the total banking assets of India Retail assets are just 22% of the total banking assets of India Contribution of retail loans to GDP: Contribution of retail loans to GDP: India 6%China15 %, Thailand 24%Taiwan 52% Indian population below 35 yrs of Age – 70 % Indian population below 35 yrs of Age – 70 % Reach of Formal Banking Channels – 20-25% of Indian population Reach of Formal Banking Channels – 20-25% of Indian population Source: Cygnus Industry Insight Source: Cygnus Industry Insight

4 Market Share: Retail Loan

5 Drivers Of Retail Growth CHANGING CONSUMER DEMOGRAPHICS CHANGING CONSUMER DEMOGRAPHICS Growing disposable incomes Growing disposable incomes Youngest population in the world Youngest population in the world Increasing literacy levels Increasing literacy levels Higher adaptability to technology Higher adaptability to technology Growing consumerism Growing consumerism Fiscal incentives for home loans Fiscal incentives for home loans Changing mindsets-willingness to borrow/lend Changing mindsets-willingness to borrow/lend Desire to improve lifestyles Desire to improve lifestyles Banks vying for higher market share Banks vying for higher market share

6 Industrys response to the change Any where, Any time Banking Any where, Any time Banking Improved processes/Bundled product offerings Improved processes/Bundled product offerings Faster service/Reduced TATs Faster service/Reduced TATs Customer specific products/offerings on a regular basis Customer specific products/offerings on a regular basis Bank customer has replaced Branch customer Bank customer has replaced Branch customer Focus on understanding customer needs/ preferences Focus on understanding customer needs/ preferences Segmentation/Differentiation of customers Segmentation/Differentiation of customers Customer driven strategies Customer driven strategies Building relationships Building relationships

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

8 Future of Retail Banking Contd …. Dramatic changes expected in the credit portfolio of Banks in the next 5 years 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 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 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 Rural areas offer tremendous potential too which needs to be exploited

9 Strategic prerequisites…. Performance oriented leadership Performance oriented leadership Sophisticated marketing and sales Sophisticated marketing and sales Efficient distribution channels Efficient distribution channels Process efficiency and ease of scalability Process efficiency and ease of scalability Superior credit policy, procedures and skills Superior credit policy, procedures and skills Source: Mckinsey Source: Mckinsey

10 Challenges Sustaining Customer loyalty Sustaining Customer loyalty NPA reduction & Fraud prevention NPA reduction & Fraud prevention Avoiding Debt Trap for customers Avoiding Debt Trap for customers Bringing Rural masses into mainstream banking Bringing Rural masses into mainstream banking

11 Strategies for Future… Reaching to masses : Need to customize Reaching to masses : Need to customize Customer segmentation/differentiation Customer segmentation/differentiation Data mining/CRM based campaigns Data mining/CRM based campaigns Products per customer/loyalty Products per customer/loyalty Promoting low risk retail lending products Promoting low risk retail lending products Offer an array of products and financial advisory. Offer an array of products and financial advisory.

12 Strategies for Future… Contd. Cost effective expansion Cost effective expansion Renewed emphasis on superior execution by front-line employees Renewed emphasis on superior execution by front-line employees Grow through Alliances: Grow through Alliances: HospitalityEducation RetailersAutomobiles Consumer Durables Housing/Construction

13 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 Winning Strategy

14 Thank You !


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