1. BANKING STRATEGIES FOR THE FUTURE

2. 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

3. Economy vs. Retail Banking  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 - 2005

5. Drivers Of Retail Growth CHANGING CONSUMER DEMOGRAPHICS 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

6. Industry’s response to the change  “Any where”, “Any time” Banking  Improved processes/Bundled product offerings  Faster service/Reduced TAT (time after time)s  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

7.  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% Future Of Retail Banking

8. Future of Retail Banking Contd ….  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

9. 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 Source: Mckinsey

10. Challenges  Sustaining Customer loyalty  NPA (non performing assets) reduction & Fraud prevention  Avoiding Debt Trap for customers  Bringing Rural masses into mainstream banking

11. 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.

12. Strategies for Future… Contd.  Cost effective expansion  Renewed emphasis on superior execution by front-line employees  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 Winning Strategy

14. SHOPPING AROUND (THINGS TO ASK ABOUT WHEN OPENING A CHECKING ACCOUNT) SERVICES Location of bank Location of ATMs Banking hours Minimum balance required Minimum transactions or limits Interest-bearing accounts? Other COSTS Non-primary bank ATM transactions In-branch transaction fees Per-check fees Other checking fees Overdraft protection Printing of checks 14

15. CHECKING ACCOUNT TERMS Bank Statement Cancelled Check Check Check Register/Ledger Endorsement Fee Interest Minimum Balance Outstanding Transactions Overdraft Overdraft Protection Payee Reconciling a Bank Statement Transaction Limits 15

16. REGULATION OF ELECTRONIC BANKING SERVICES Electronic Fund Transfer Act Protects consumers using any type of electronic banking from loss and protects their privacy. Banks must: Offer consumers a record or receipt for all computer transactions. Investigate errors and report to consumer within ten days of error notification. Customers are responsible to report any errors. 16

17. Product Bank services are viewed in terms of satisfaction they deliver and not just things that are created with a value. Bank services are viewed in terms of satisfaction they deliver and not just things that are created with a value. Ex: a bank account is seen in terms of customer satisfaction such safety, convenience of paying dues, keeping records, transferring funds, status, pride in one’s bank etc Ex: a bank account is seen in terms of customer satisfaction such safety, convenience of paying dues, keeping records, transferring funds, status, pride in one’s bank etc Core product Core product Augmented product Augmented product

18. Price Interest rates paid by the bankers on deposits, interest charged by the banker on loans, charges for various types of transactions and fees for certain services like demand draft Interest rates paid by the bankers on deposits, interest charged by the banker on loans, charges for various types of transactions and fees for certain services like demand draft In India, banks adopt administered pricing structure to some extent as the deposit and lending rates are prescribed by the RBI In India, banks adopt administered pricing structure to some extent as the deposit and lending rates are prescribed by the RBI

19. Promotion Advertising, publicity, ales promotion, personal selling are all essential in the bank marketing mix. Advertising, publicity, ales promotion, personal selling are all essential in the bank marketing mix. Right from the stage of introduction, promotion plays a vital role. Right from the stage of introduction, promotion plays a vital role. An advertisement in bank marketing is a promise An advertisement in bank marketing is a promise A promise of satisfaction to prospects who buy the service offered by the bank and who are willing to patronize the bank A promise of satisfaction to prospects who buy the service offered by the bank and who are willing to patronize the bank