RBI’s oversight on cooperative banks

• Following the cabinet decision, 1,482 urban cooperative banks and 58 multi-
state cooperative banks will come under the central bank’s oversight, which
would mean tighter supervision.

RBI’s powers on scheduled banks would be hence applicable on cooperative

banks as well. “The decision to bring 1,540 cooperative banks under RBI's
supervision will give an assurance to more than 8.6 crore depositors in these
banks that their money amounting to Rs 4.84 lakh crore will stay safe,”
Union minis ..

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RBI’s oversight on cooperative banks

List of Top 10 Best Cooperative Banks in India:

Saraswat Bank. Born as Saraswat Cooperative Banking Society on September 14,
1918, Saraswat Bank is the Topmost Cooperative Bank in India. ...
Cosmos Bank. ...
SVC Bank. ...
Punjab and Maharashtra Cooperative Bank. ...
Abhyudaya Cooperative Bank. ...
TJSB Sahakari Bank. ...
Bharat Cooperative Bank. ...
Janata Sahakari Bank.
RBI’s oversight on cooperative banks
( three groups will discuss one point each in the next session)
• In view of the latest developments students will debate on how much
control RBI had on Cooperative banks before the new amendment
• whether and to what extent will the latest amendments give RBI
control on the Cooperative banks
• whether such control could have prevented the latest crisis in that
sector or be sufficient to prevent a PMC like situation.
Group Project
Work in FAS groups

• Take any product ( asset or liability ) of a new generation private

sector bank eg ICICI Bank/ HDFC/ Yes bank/ Axis bank (generic
product) and convert it into potential product.
• Bring your product to the table and market it
Introduction
• Retail banking is a service primarily for individual customers.
• Retail banking focuses on consumer markets.
• Retail banking entities provide wide variety of personal banking
services like savings bank, recurring deposits, bill payment services
and debit and credit cards.
• Customers can also avail asset based products like personal loans,
auto loans and mortgage loans.
• Scheduled commercial banks with core banking solutions offer
channel services like E- lobby services, internet banking, mobile
banking and cheque collection.
Characteristics:
Banking facilities targeted at individual customers.
Focussed towards mass market segments.
Offers both liability and asset based products.
The delivery model of retail banking is both physical and virtual.
Extended even to small and medium businesses.
Advantages:
An enlarged client base
To win the customer loyalty by personalized services
Quick disbursal of loans with affordable repayment period and
interest rates
Cross selling of bank assurance products, mutual fund products.
Under one roof solution for retail customers.
Constraints:
Large client base root cause for customer dissatisfaction beyond a
point.
Incompatibility of technology for the rapid change in the products in
retail.
Higher delinquencies in personal loan portfolios.
Retail Banking in India
Public sector banks were into conventional banking and there was no
demarcation of retail and corporate banking. Offering products and
services based on specific consumer segments was not attempted in
a focussed way.
Foreign banks in India set the trend for retail banking and later on
the domestic banks followed this line of business. Since new
generation private banks started their activities with core banking
solutions they were better equipped to offer customised products .
In order to stay in the competition and prevent further slide in their
market share, the PSBs switched over to core banking solution and
introduced various channel services on E- banking platform.
India has the demographic dividend of young population and this has
resulted in multi-fold increase in availability of E banking services.
In the last 2 decades to suit the needs of the large retail clientele, banks
have come out with various innovative retail products for each segment.
Eg : Demat accounts/ASBA (Applications supported by blocked amount)
Payment and settlement systems are also available on E banking
platform like NEFT, RTGS and CTS.
This has given impetus to other government, quasi- government,
corporate and private establishments to switch over to electronic mode
of payments and receipts.
Retail Banking
Banks adopt the following models for implementing their retail trade
initiatives ( development of products and sourcing of business)
In- house sourcing -Most of the PSBs use in- house developed retail
banking models.
Some channel services are outsourced due to lack of in- house facilities.
end to end outsourcing
predominant outsourcing
partial outsourcing
• A bank to remain effective has to constantly review its product line.
• Changes in environment, customers’ preferences, competition are
potential threats to the exiting products.
• In a highly competitive field of banking, all banks offer products with
the almost same features.
• Bank has to adopt product differentiation to overcome this. Bank
should differentiate the product as far as possible from competitors’
product. The strategies adopted are differentiate their features,
benefits and satisfaction level by doing value addition.
• Banks have to highlight the USP (unique selling proposition)
Product Policy
• Product policy is one of the main task in product management. The
product designers should know the types of products to be offered,
suitable to different customer segments.
• The product line should be based on the homogenous needs of
heterogeneous customer base and customer segments.
• The bank has to consider designing products tailored to specific
customer base if the segment is an important segment.
• The bank should be aware of the stage in the product cycle
• To decide this the bank has to evolve a product policy that involve
the following concepts:

• Product positioning
• Brand decisions
• Decisions on packaging
• New product development
Product Life Cycle

• Introduction stage : When a product is introduced the sale volume

will be low and revenue from the product will not be sufficient to
cover the cost of producing, marketing and servicing. It takes time for
the product to occupy the minds of customers.
• Growth stage : the sale volume picks up and the product is likely to
break even and starts generating profits for the organisation. During
this period, the consumer awareness of the product will be high and
that will result in growth.
• Maturity stage: There is more growth and the volume peaks.
• Saturation stage: At this stage because of competition and better
products from the competitors, stagnation will creep in, which will
result in saturation of sales. At this stage business and profits
stagnate, customers develop a tendency of indifference to the
product.
• Decline stage: Final stage in the product
The core products like savings bank, current account, term deposits,
recurring deposits, cash credit, overdraft, retail loans, term loans, etc
need not have strong marketing strategies. These products will have a
stable life in the growth stage of product life cycle as they are
indispensable to the customers. However a frequent up-dation/ add-
ons are necessary to keep pace with competition.
• The success of a bank is to correctly identify the existing phase of the
product life cycle and correctly foresee the future. A bank has to keep
developing new products to replace those reaching the decline stage
• The success of the marketer is to correctly identify the existing phase
of the product life cycle. The marketer has to foresee the
sustainability of the product introduced.
• The proactive marketer has to constantly watch the market trends,
gauge the changing needs of the customers , analyse whether there
is need for developing new products and market them proactively to
meet the changing needs of the customers.
Stages in New Product Development
1. Generating new product idea : New ideas are generated from market
research based on customer expectations from existing and potential
customers, from employees of the bank under employees’ suggestion
scheme. The suggestions are also considered both for refining the existing
products as well as ideas for new products.
• 2. Idea screening : With grouping together all the ideas generated from
various sources, the ideas are analysed based on the following approach
• Whether there is a need for new product
• Is it an improvement on the existing product
• Can the existing infrastructure handle it
• Is the new product in our existing or a new line of business
Stages in New Product Development
3. Concept testing :Concept testing is effectively done by taking feed back from the
customers about their perception of the proposed products. This experiment is to
understand the market response and to know the customer perception of the
product concept.
4. Business analysis and market analysis : This stage will decide whether the product is
viable from the financial and marketing angle. This will be based on the cost benefit
analysis of the product.
5. Actual product development : Now the actual product is developed.
6. Test marketing: The new product developed is first soft launched in selected market
segments. Based on the response and the feed back received from the market , the
product is launched on a full scale to the desired segments.
7. Commercialisation : Full launch of the product
AN EXAMPLE OF A NEW PRODUCT
Egs : Deposit cum credit linked product for working women.
Loan was given to working women to meet their requirements against
recurring deposit that is paid on equal monthly instalments. During the
currency of the loan, only interest is serviced by the borrowers and at
the end of the maturity period of loan, the amount outstanding in the
Recurring Deposits is adjusted to close the loan. The loan principal is
divided into number of months the women beneficiary prefer to
contribute to her recurring deposit. She is required to deposit this
amount every month into her RD, so that on maturity, the amount
saved will be equal to loan taken. The interest is paid by the borrower
on accrual every month.
Product Evolution
According to Theodore Levitt , a product over a period evolves on the
following lines:

• The generic product

• The expected product
• The augmented product
• The potential product
Product Evolution
• Generic Product is an unbranded and undifferentiated commodity like
SB, current account, etc
• Expected Product represents the customers’ expectations from the
product.
• Augmented Product is voluntarily improving the product in order to
enhance its value.
• Potential Product is tomorrow’s product with enormous scope for
improvement in the changed competitive scenario.
Product Positioning
• Rosser Reeves in his famous book “Reality in Advertising” defines
positioning as “the art of selecting out of number of unique selling
propositions, the one which will get the maximum sales”
• For positioning the most important factor is the customer’s mind.
The positioning starts with understanding or mapping of a
prospective or existing customers’ mental perception of products.
• The period of occupation of these products in the mental perception
of the customer depends on effectiveness of the product.
• The positioning guru, Jack Trout defines as “ not what you do to the
product but what you do to the mind”
Example of product positioning

• Citi bank introduced a “un fixed deposit” where customer before

maturity of the deposit can withdraw a part from the term deposit. If
it is partly withdrawn, interest is paid on the balance withdrawn at
the rate applicable for the period the deposit has run and the balance
deposit will get contracted rate of interest. This product became an
instant hit as no other banks had offered this type of product .
Product Branding
• Product Recall is termed as “branding”. Branding initiatives help banks
to develop definite business through product specific strategies
• Branding can be powerful tool for relationship building.
• The branding efforts starts at corporate level of a bank. It is about
giving catchy, attractive and easy to remember names for the
products.
Processing Models for Products
• Process time is the important differentiator in the efficacy of retail banking
operations. Process time is business sensitive and customer sensitive. It is the
important component in product delivery. It reflects confidence and process
efficiency of a bank. Banks are required to prescribe time lines for different
retail products which they exhibit in their premises and also on their web sites.
• The processing models differ from bank to bank. It depends on product range,
process requirements, technology preparedness, delivery capabilities including
human resources and regulatory prescription.
• Most of the banks now a days follow centralized processing model for mainly
savings bank products. Under this process model it includes opening of the
accounts, issuing of pass book, cheque books, debit cards, PIN mailing, etc.
• In the new generation banks, centralized model is followed extensively as most
of their branches are located in metro and big urban centres. In the new
generation private banks, the model is a balanced mix of out- sourcing and in-
house.
• Even the PSBs have shifted to the centralised models for most of their branches.
There may still be a few pockets where PSBs still follow stand alone model.
• In foreign banks, centralized processing is the norm and mostly done through
outsourcing or dedicated back office.
• In some banks, asset side products are outsourced like credit cards, mortgage
loans and personal loans to business correspondents/ franchisees and liability
side products are not.
• Process models differ for products which require single stage process
and multi stage process. Example – issuing fixed deposit receipt
requires single stage process. In opening of savings and current
accounts, it requires multi stage process.