Title

Measuring Effectiveness of Retail Banking in Public Sector

and Private Sector bank
Introduction

RETAIL BANKING AN INTRODUCTION

Retail banking is, however, quite broad in nature - it refers to the dealing of commercial banks with
individual customers, both on liabilities and assets sides of the balance sheet. Fixed, current /savings
accounts on the liabilities side; and mortgages, loans (e.g., personal, housing, auto, and educational)
on the assets side, are the more important of the products offered by banks. Related ancillary
services include credit cards, or depository services. Retail banking refers to provision of banking
services to individuals and small business where the financial institutions are dealing with large
number of low value transactions. This is in contrast to wholesale banking where the customers are
large, often multinational companies, governments and government enterprise, and the financial
institution deal in small numbers of high value transactions. The concept is not new to banks but is
now viewed as an important and attractive market segment that offers opportunities for growth and
profits. Retail banking and retail lending are often used as synonyms but in fact, the later is just the
part of retail banking. In retail banking all the needs of individual customers are taken care of in a
well-integrated manner.

Literature Review
Investopedia explains 'Retail Banking'

Retail banking aims to be the one-stop shop for as many financial services as possible on behalf of
retail clients. Some retail banks have even made a push into investment services such as wealth
management, brokerage accounts, private banking and retirement planning. While some of these
ancillary services are outsourced to third parties (often for regulatory reasons),they often intertwine
with core retail banking accounts like checking and savings to allow for easier transfers and
maintenance.

1.) Dr. Chaisomphol Chaoprasert in his article

LITERATURE REVIEW OF SERVICE QUALITYIMPROVEMENT IN THE RETAIL BANKING INDUSTRY talks

about the importance of Service Quality Improvement The paper analyzes past studies
regarding service quality improvement in the retail banking industry. The continuing trend to a
model of service quality improvement, from personnel counter services to electronic services, is
demonstrated. Improved service quality should be adopted to maintain the core competence and
this paper contributes knowledge and background for banks to apply these findings to better shape
and focus their positions in the market and also to provide service quality to customers.

2.) Innovation in Retail Banking by

Frances X.Frei

Patrick T. Harker

Larry W. Hunter

Reviews about, how does a retail bank innovate? Traditional innovation literature would suggest
that organizations innovate by getting new and/or improved products to market. However, in a
service, the product is the process. Thus, innovation in banking lies more in process and
organizational changes than in new product development in a traditional sense. This paper reviews a
multi-year research effort on innovation and efficiency in retail banking, and discusses both the
means by which innovation occurs along with the factors that make one institution better than
another in innovation. Implications of these results to the study of the broader service sector will be
drawn as well.

Characteristics of Retail Banking

Todays retail banking sector is characterized by three basic characteristics:

Multiple products - deposits, credit cards, insurance, investments and securities

Multiple channels of distribution- call centre, branch, internet

Multiple customer groups - consumer, small business, and corporate

EMERGING ISSUES IN HANDLING RETAIL BANKING

KNOWING CUSTOMER Know your Customer is a concept which is easier said than practiced. Banks
face several hurdles in achieving this.In order to that the product lines are targeted at the right
customers-present and prospective-it is imperative that an integrated view of customers is available
to the banks.
TECHNOLOGY ISSUES Retail banking calls for huge investments in technology. Whether it is setting
up of a Customer Relationship Management System or Establishing Loan Process Automation or
providing anytime, anywhere convenience to the vast number of customers or establishing
channel/product/customer profitability, technology plays a pivotal role.
ORGANIZATIONAL ALIGNMENT It is of utmost importance that the culture and practices of an
institution support its stated goals. Creation of a proper organization structure and business
operating models which would facilitate easy work flow are the needs of the hour.
SOME CRITICAL ISSUES

CUSTOMER SERVICE
PRICE BUNDLING
INNOVATION

CHALLENGES TO RETAIL BANKING IN INDIA

The issue of money laundering is very important in retail banking. This compels all the banks
to consider seriously all the documents which they accept while approving the loans.

The issue of outsourcing has become very important in recent past because various core
activities such as hardware and software maintenance, entire ATM set up and operation
(including cash, refilling) etc., are being outsourced by Indian banks.

Banks are expected to take utmost care to retain the ongoing trust of the public

Customer service should be at the end all in retail banking.

Someone has rightly said, It takes months to find a good customer but only seconds to lose
one. Thus, strategy of Knowing Your Customer (KYC) is important. So the banks are
required to adopt innovative strategies to meet customers needs and requirements in
terms of services/products etc.

The dependency on technology has brought IT departments additional responsibilities and

challenges in managing, maintaining and optimizing the performance of retail banking
networks. It is equally important that banks should maintain security to the advance level to
keep the faith of the customer.

The efficiency of operations would provide the competitive edge for the success in retail
banking in coming years.

The customer retention is of paramount important for the profitability if retail banking
business, so banks need to retain their customer in order to increase the market share.

One of the crucial impediments for the growth of this sector is the acute shortage of
manpower talent of this specific nature, a modern banking professional, for a modern
banking sector.

If all these challenges are faced by the banks with utmost care and deliberation, the retail banking is
expected to play a very important role in coming years, as in case of other nations.
STRATEGIES FOR INCREASING RETAIL BANKING

Constant product innovation to match the requirements of the customer segments

Quality service and quickness in delivery
Introduction of new delivery channels
Tapping of unexploited potential and increasing the volume of business
Infrastructure outsourcing
Detail market research
Cross-selling of products
Business process outsourcing
Tie-up arrangements

FUTURE OF RETAIL BANKING

Retail banking has significant past and glorious future over the years. Indian retail banking,
according to a report, is likely to grow at a CAGR of 28 per cent till 2010 to Rs 97,00 billion. So,
although the revolution in retail banking has changed the face of the Indian banking industry as a
whole, it has still miles to go.

On the whole, looking ahead, the prospects of retail banking are brighter than ever and the bankers
have to give continued thrust to this area of banking. Thus, with the consumers ever multiplying
needs there is definitely a vast scope for the furtherance of the retail banking business.
Operationally, there is a possibility that technology go beyond merely reducing the cost & improving
the quality of current products. It may prove possible, even profitable, to combine functions in new
ways.

The future of retail banking lies more in mobile banking. Mobile telephone market is penetrating,
and mobile phones are ideal to utilize Internet banking services without customer accesses to PC. By
a tacit acceptance India has around three million mobile phone users and this number is expected to
reach to eight million by 2003. Smart card revolution will further change the face of retail banking.
Smart cards can store information; carry out local processing on the data stored and can perform
complex calculations. At present, India has around 3.4 million smart card users and it is estimated
that by the end of 2004 it will reach 14.7 million.

CONCLUSIONS

Retail banking is the fastest growing sector of the banking industry with the key success by
attending directly the needs of the end customers is having glorious future in coming years.
Retail banking sector as a whole is facing a lot of competition ever since financial sector reforms
were started in the country. Walk-in business is a thing of past and banks are now on their toes to
capture business. Banks therefore, are now competing for increasing their retail business.

There is a need for constant innovation in retail banking. This requires product development and
differentiation, micro-planning, marketing, prudent pricing, customization, technological
upgradation, home / electronic / mobile banking, effective risk management and asset liability
management techniques.

While retail banking offers phenomenal opportunities for growth, the challenges are equally
discouraging. How far the retail banking is able to lead growth of banking industry in future would
depend upon the capacity building of banks to meet the challenges and make use of opportunities
profitably.

However, the kind of technology used and the efficiency of operations would provide the much
needed competitive edge for success in retail banking business. Furthermore, in all these customer
interest is of chief importance. The banking sector in India is representing this and I do hope they
would continue to succeed in this traded path.