MEANING OF BANKING

According to the modern concept, banking is a business which not only deals with
borrowings, lending and remittance of funds, but also an important instrument for
fostering economic growth.

“Bank” is an institution which deals in money and credit. It buys money from depositors
and sell to the borrowers. It is body of persons whether incorporated or not who carry
on the business of banking. A bank may defined as a corporation or person which collects
deposits from the public, repayable on demand and which supplies and facilitates all
kinds of exchanges.

RETAIL BANKING

Retail banking means mobilizing deposit form individuals and providing loan
facilities to them in the form of home loans, auto loans, credit cards, etc, is becoming
popular. This used to be considered by the banks as a tough proposition because of the
volume of operations involved. But during the last couple of years or so, banks seem to have
realized that the only sustainable way to increase deposits is to look at small and middle class
consumer retail deposit and not the price sensitive corporate depositors. With financial sector
reforms gathering momentum, the banking system is facing increasing companies from non-
banks and the capital market. More and more companies are tapping the capital market
directly for finance. This is one of the main reasons for the banks to focus vigourously on the
much ignored retail deposits. Another reason is the current liquidity the margins are 1 to 2
percent above the prime rate; in retail market they are 3to4 percent.

RETAIL BANKING

To bankers struggling through the shifting sands of corporate credit, retail banking looks like
a cool oasis. Corporate Credit, retail banking looks like a cool oasis. Corporate customers
rely less on commercial banks every day as other fund raising avenues present themselves.
As this disintermediation takes place and competition shrinks margins, retail banking has
gained an irresistible allure for banks because of its apparently higher margins and potential
fir growth.

With their large branch networks, banks have secured sizeable deposits-28 percent of GDP.
On the assets side, however, retail advances account for a mere seven per cent of total
lending. The penetration of products like car loans or credit cards is very low. With very few
focused multi-line banks, non banks are often significant players in retail lending, as is in
house loans. Yet, many non-banks lack the minimum size to make the necessary investments
and address the challenges of retail banking.

A large number of banks and non-banks have launched or relaunched retail products and are
attempting to grow their share of the personal financial services market. Even the term
lending institutions have decided that they need to go retail to raise funds. Many organization
like are betting that a large part of their future growth will come from retail customers.

Retail banking is much more than as opportunity to addressing dwindling margins. It is an

imperative to preserve profits and market positions. Customers now have many more
personal financial options, a growing credit culture, a willingness to switch between financial
services providers, and a demand for lower interest rates. As they witness these trends, banks
realize that they cannot remain passive. The new private sector banks are making inroads in
the markets they serve, while competition from non-banks is growing. In respect, older
institutions need to revamp their distribution capabilities, customer management capabilities,
operating culture, compensation system and operations processing.

IMPACT ON BANKS REVENUES:

For all those gurus who’ve been predicting that the net will end the business of said banks,

The reason: the absence of a convenient alternative at present to using cash.

This is despite the despite business being the simple-most important profit source for most
American retail banks.

The core retail banking business of deposit taking will be sheltered form web-based
competitors and margin shrinkage on this business.

Need for convenient access to physical locations coupled with the advantages of multiple
delivery channels like branch, ATM, telephone and computers, consumers need to leave
money in transactional accounts; customer inertia and the relatively limited cost savings
available to consumers from net banking, are cited as the main factors supporting its
view.

The moody’s report, however, cautions that other consumer business such as residential
The need for customers to take frequent physical receipts, make convenient physical receipts,
make convenient physical delivery of cheques using ATMs, inhibition towards paying ATM
charges for using another bank’s ATM network by the consumer and time consuming,
difficult and disruptive nature of switching accounts also contribute to the ‘stickiness’ of
retail deposits.

With low bank fees for individual transactions and relatively small bank deposits, the
opportunity cost in terms of interest income for customers is not material where the
deposits are not large.

Banks offer convenience and choice and the web-based channels of banks have reported
rapid growth in the number of customers by retaining current customers.

Customers prefer to use a variety of channels to conduct their banking which is why it
remains to be seen whether a business model based solely on internet banking will generate
adequate returns and sustain long term competition against conventional banking systems.

The advent of the internet could, however have a powerful effect on banks acquisition
strategies by creating uncertainty about the value of purchasing large branch networks, the
study says.

For some banks, however, the Internet could facilitate an increase in fee income by
generating fees from Internet service arrangements like bill presentment and clearing.

However, if smart cards or stored value cards or other electronic cash substitute gain
popularity, alternatives could become more attractive to customers.

On the other hand, banks might be able to reduce costs of servicing the retail customers by
moving them over into a paperless environment.

Banks could introduce various incentives to the persuade customers to forego paper
statements for the basic savings account and credit card, says moody’s.

CHANGED Banking
As the 1900s come to their close and we look eagerly towards the new millennium, a
revolution that will change the rules and every thing we have understood of the retail market,
financial products and other services. Economic boundaries are disappearing, and the global
village is a reality – where the retail customer will have a choice in a manner we may have
never imagined.

Providers of retail products and services will battle for market and market share. It is battle
that will be fought at different levels and the real winner will be the customer, who will
benefit from increased competition through better products, distribution, technology, pricing,
and post transaction service.

The quality and range of products will expand exponentially –convenience of usage,
customization to individual needs, and a host of other user-friendly add-ons will create a
whole new frontier of applications. Companies will have to innovate and continuously
upgrade their products. Anticipation, listening and responding to your customers needs, will
be the buzz-words of this thrust.

Distribution will be the next key benchmark of success. The customer will demand (and
therefore the provider will have to respond) for greater convenience of access to the product
or service and all this at the best cost of delivery. Re-defined methods, the use of technology
– specifically the Internet-and realigned strategies will drive this important criterion of
success. Constraints of location, timing, accessibility etc will all be history. No matter how
brilliant the product you have, your distribution flexibility will be the customers’ selection
parameter.

Again, quality of the product and responsive strategies for distribution will also have a link
to price. Efficiencies on this front will be the next item on your report card. Through
innovation in production and delivery and cost reduction strategies, the price to the customer
will have to be at maximum benefit. The intelligent customer will be ruthless with any price
distortions, which as a consequence of inefficiencies or market exploitation – his cost benefit
analysis will not allow for these variables.
Would you prefer a product, which (hopefully) is never expected to need post sale service or
one which offers the best after sale service if required ? Clearly, the relationship with the
customer starts with the transaction, does not and with it. Organisation we have to give equal
importance to cost sale needs of customers as the pitch made prior to the sale.

Technology will perhaps be the single largest driver of this detail thrust. The entire strategy
will evolve around the absolute ability of the organisation to be at the cutting as edge of
technology. We will have to invest in technology far ahead of immediate needs and be able
to anticipate the future direction at a pace we are perhaps not used to. Being able to keep
abreast, but more importantly, being able to recognize the immense potential that technology
provides at all stages in the retail chain will be of paramount importance. To leverage,
exploit and link technology to your business will be the greatest challenge of the new
millennium and I am convinced that the retail war will be won and lost on this one aspect,
purely because technology increasingly we influence on the entire chain in a retail business
cycle.

Above all these, I would list attitude towards customer as the single point basis on
determining the winner of the race. Attitude to the customer will influence all the areas we
have discussed and will ensure excellence in each one of them. It is an intangible, it is not
prescribed in a manual nor is it a quantifiable item in the balance sheet, but an organizations
attitude to the customer will be the basis determinant of success for any retail operation.

There are interesting and challenging times ahead – the future promises a lot but will also
make extraordinary demands. The customer will be the most important aspect of your
business and ultimately the winner of the retail war.

RISK INVOLVED IN RETAIL BUSINESS

There are of course, considerable risks in retail banking. They are :

(a) Databases on credit history are large.

(b) Collection mechanisms are poor.
(c) Investments in technology are large.
 (d) Operating efficiency level needs to be very high.
(e) Unlike corporate banking, retail banking involves a large number of small
accounts.
(f) Demands on processing capabilities are higher.
(g) Retail segment is not something you can get into overnight.
(h) The right systems and the right – architecture needs to be put in place first.

PRODUCTs - RETAIL BANKING

New Private sector banks have great resource mobilizing and asset expansion capabilities
which cannot be undermined by the fact these banks volume. Which have taken decades
of option for the old private sector bank to build. These bank are dominating the market
with new product, service3 and ideas. Information technology has enabled many private
banks are emerging strong in banking and financial services with the marketing of new
product and service based on technological capabilities.

In the present scenario HDFC bank Ltd. is a fast emerging bank.

Apart from the HDFC bank, the other bank like PNB, SBI which is included in
study. These both are the public sector bank. SBI is the one bank in India. These two are
also providing the retail banking service.

Now the emergence of the retail concept of the banking customers are expecting
more and better services. To day customer prefer private banks because they can have
personal relationship with the bank personnel, with lesser hierachy and It is possible for
these banks to forget closer ties with customers also.

Bank provide the following service :-

1. Current A/C 2. Loan

3. Corporate Salary A/C 4. Online A/C

5. Debit Card 6. Phone Banking

7. Intercity/ Inter Branch Banking 8. Net Banking

9. Bill Pay

Deposit

-Demand Deposit

 Current Deposit
 Saving Deposit

-Time Deposit

 Fixed Deposit
 Akshaya Deposit
 Cumulative Deposit
 Pragati Deposit

Loan :-

 Housing finance for individuals

 Car finance
 Finance for consumer disables
 Finance for Scooter/Motorcycles
 Finance against future lease Rentols
  Personal loan to pensioness
 Personal loan to serving Army officers, Govt. & other
Employees
 Education loan scheme
 Advance against life policy
 Advance against bank deposits

- ATM’s
Current A/C:-

Under this account a person can deposit and with draw money as many times in a day
as he wants . The regulars an average quarterly balance of the Rs. 10000 only .Besides the
free ATM card and easy accessibility. Your first 50 cheque leave are o

Offered free. This can be as:-

 Premium current account – From any branch

- Small business

bank plus.

Loans :- To Suits every need.

A loan is a specified amount sanctioned for a period of times. Loans are granted
generally against the security of assets or on the personal security of the borrower. The

borrowers may with draw the amount of the loan in lamp sum in instalment. Similarly it may
be repayable in lump sum or in instalment.

Loan under the retail banking segment :-

 Car Loan (For new and used cars).

 Personal loan.
 Loans against securities and two wheelers .
  Consumer loan.

Car Loan :- Varity of finance schemes

New Car loan :-

Loan amount : upto 90% Of car value

Tenure : 12 to 48 month
Personal Loan :- For anything you have in mind

 Holiday abroad

 Wedding in the family

 Higher education

 No security or granter required

Loan amount: Rs. 25000 to Rs 10 lack

Tenure :12 to 48 months.

Eligibility : Salaried, individuals, self-employed doctors and CAS, CS, Engineers M.B.A.S

Two wheelers and Consumer loan :-

 Two wheelers
 Personal computer and AC
 Durable like TV, Washing Machine, Refrigerator etc.

For HDFC bank A/C holders only.

Loan amount : Rs. 7000 to 1 lakh (Max 85% of product value)

Tenure : 6 to 36 months

Eligibility : Salaried and self employed individuals

Loan against securities - An overdraft facility

Loan amount – Rs. 50000 to Rs. 20 lakh (upto 60%of market value of demand share)

Mutual Fund – Rs. 50000 to Rs. 10 lakh

LIC policy – Rs.100000 onwards.

Corporate salary A/c:-

, employees receive an array of rewards with then monthly pay cheque. All at no extra
coast to organisation. E-age banking service from any where, at any time:-

 Phone banking
 Inter branch banking
 Net banking
 Bill payable
 Free phone banking
 Free mobile banking
 Free demand draft
 Free International debit card
 Direct salary credit
 Overdraft facility
 Demote A/C
 Joint A/C facility
 Free Demand Draft

PHONE BANKING: bank provides phonebanking facility to its customers. With the help
of this service customers can get their account detail, ask for a cheque book or a statement,
open a fixed deposit, transfer money within their own accounts, order a demand drafts, stop
cheque payment etc. all by phone

INTERCITY/ INTERBRANCH BANKING: At you can access your account from any
of their 131 branches in 26 cities. So you can withdraw cash form another branch, through a
self-cheque. You can deposit a local cheque in one branch and get it credited to your account
in another city.

NETBANKING : Internet banking is just like normal banking, with a one big exception
that you don’t have to go to the bank for transactions. Instead you can access your account
any time form any part of the world, and do so when you have the time ,and not when the
bank is open. Through the net banking you can transfer funds within the same bank, open a
fixed deposit, get a demand draft, make a TDS enquiry request a stop payment of on a
cheque, request for a new cheque book or even cheque your account balance.

BILLPAY : HDFC bank provides its customers to pay their mobile bills in some selected
cities over the phone as well as through their ATMs. In Mumbai you can pay BPL Mobile
bills, in Delhi you can pay Airtel bills and in Chennai you can pay RPG and Sky cell cellular
bills through this facility. You can also pay MTNL bills in Mumbai and Delhi and MSEB
bills in Pune and Mumbai. It saves a lot of time , which you spend in long queues or writing
cheques.

Debit Cards

Bank’s International debit card provide seamless freedom and fiscal management
to spending, both locally and globally.

The Debit and ATM Card, when issued as visa compliant cards, will give you the
freedom to access your savings or current at merchant location and ATM’s.

Whenever you make payments, the amount will be instantly debited from your
account. The present ATM cards allow you to access your account 24 hours a day, all
through the year.
How does it work?

All you need to do is present your card to the merchant who will swipe it through the
electronic terminal and enter the amount of your purchase. You only need to sign the
transaction slip.

Your account will be automatically debited for the amount of your purchase. Your
debit card can be used at any merchant location displaying the visa electronic logo or at any
ATM displaying the circus logo of course, you can always use it any HDFC Bank ATM as a
normal ATM card.

What if your Debit Card is lost or stolen?

If your card is lost or stolen, you are protected from fraudulent charges from the
moment you report the loss to the bank.

Any transaction limit for the Debit Card?

For the safety of the card holders, the bank have a daily limit of Rs. 15000 at ATM,
(at merchant location there is no transaction limit,) and this is subject to the available balance
in your account.

Deposit

Deposits accepted by bank may be categorised as demand deposit and time deposit.

Demand Deposit
 Demand deposits are those deposits that can be withdrawn without notice. Bank
undertake to repay such deposits as demand. The following types of deposit accounts are
classified under Demand Deposits.

(a) Current Account

(b) Saving Account

Current Account :

Under this accounts, a person can deposit and with draw money as many times in a day as he wants. Money can be withdrawn
by issuing cheques. Current acount are remunerative type of deposit accounts as no interest its payable on the credit balances outstanding in
these accounts.

Saving Accounts :

This account is opened for the purpose of savings. Any purpose of savings. Any person including a minor can open this account by
depositing a small sum of money. Saving Bank Account is subject to the restriction as to the number of withdrawal as also the amount of
withdraw as also the amount of withdrawal permitted by banks during any specified period. However there is no restriction on the number
and amount of deposits that can be made on any day. Balances in the Saving Bank Account cans interest at rates as determined by RBI
from time to time.

Time Deposit

Any deposit, which is repayable after a period of notice rather than repayable after a
fixed date or period, is a time deposit or popularly called as term deposits. The following
type of account in both banks are classified under Retail Time Deposits.

 Fixed Deposit
 Apshaya Deposit
 Cumulative Deposit
 Pragati Deposit
Fixed Deposit :-

Fixed Deposit where the depositor makes a lumpsum deposit where the depositors
makes a lumpsum deposit at one time for a fixed period and receive payment there of on