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    Retail Banking & Its (Non) Importance in The Country's Economy

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    numair1989
    This document summarizes the history and development of retail banking in India. It notes that while retail banking has grown rapidly since liberalization at around 30% annually, reaching 9700 billion rupees, it still only constitutes 7% of the Indian economy compared to 35% in other Asian countries. The document argues that banks have primarily targeted urban consumers, viewing many rural Indians as "unbankable", but that various government programs and innovations in financial technology now make profitably serving rural markets possible through reduced acquisition costs. It concludes that banks that deploy services through entire ecosystems using seamless supply chains will succeed in expanding financial inclusion across India.

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    Retail Banking & Its (Non) Importance in The Country's Economy

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    numair1989
    33 views9 pages
    This document summarizes the history and development of retail banking in India. It notes that while retail banking has grown rapidly since liberalization at around 30% annually, reaching 9700 billion rupees, it still only constitutes 7% of the Indian economy compared to 35% in other Asian countries. The document argues that banks have primarily targeted urban consumers, viewing many rural Indians as "unbankable", but that various government programs and innovations in financial technology now make profitably serving rural markets possible through reduced acquisition costs. It concludes that banks that deploy services through entire ecosystems using seamless supply chains will succeed in expanding financial inclusion across India.

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    This document summarizes the history and development of retail banking in India. It notes that while retail banking has grown rapidly since liberalization at around 30% annually, reaching 9700 billion rupees, it still only constitutes 7% of the Indian economy compared to 35% in other Asian countries. The document argues that banks have primarily targeted urban consumers, viewing many rural Indians as "unbankable", but that various government programs and innovations in financial technology now make profitably serving rural markets possible through reduced acquisition costs. It concludes that banks that deploy services through entire ecosystems using seamless supply chains will succeed in expanding financial inclusion across India.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    33 views9 pages

    Retail Banking & Its (Non) Importance in The Country's Economy

    Uploaded by

    numair1989
    This document summarizes the history and development of retail banking in India. It notes that while retail banking has grown rapidly since liberalization at around 30% annually, reaching 9700 billion rupees, it still only constitutes 7% of the Indian economy compared to 35% in other Asian countries. The document argues that banks have primarily targeted urban consumers, viewing many rural Indians as "unbankable", but that various government programs and innovations in financial technology now make profitably serving rural markets possible through reduced acquisition costs. It concludes that banks that deploy services through entire ecosystems using seamless supply chains will succeed in expanding financial inclusion across India.

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    Retail Banking & its (non) importance in the countrys economy

    Aniruddha Paul Head IT Change Delivery, ING Vysya Bank, March 4, 2011

    History of Banking in India


    1786 The General Bank of India Bank of Calcutta (later, Bank of Bengal and in 1921, SBI)

    1806

    1860

    1st foreign bank in India: Comptoire d'Escompte de Paris Indian banks inspired by the Swadeshi movement. Dakshina Kannada became the cradle of Indian banking RBI Act; Banking Regulation Act Nationalization Liberalization Guidelines on new licenses

    External shocks have undermined under capitalized Indian owned banks GoI direction imposed on banking

    1906-11

    1948-49 1969 1990s 2011

    Liberalization of the economy and the industry leads to the rapid growth of banking, especially retail banking as we know it. Demise of the 4-6-4 method!

    What is Retail Banking and what makes it different? In a world of parity products, how do you gain leverage?
    Definition - Banking in which banking institutions execute transactions directly with customers

    Typical products: savings and transaction accounts; mortgages; personal loans; debit and credit cards, etc
    Working principle: Law of Large Numbers; probabilistic modeling

    Critical success factors:


    Distribution Branch, channels Branding Unit costs cost per account, cost per transaction Pricing Risk management

    Retail Banking: Whats been good for Indian banks hasnt been good enough for the country
    Scorching pace of growth since liberalization: CAGR of around 30% to touch a figure of INR 9700 Billion. Bankable households are growing at a CAGR of 28% (2007-11) Whats powering this growth? Economic prosperity and growth rate Young population (70%<35 years)

    Technology channels: ATM, POS, Web, Mobile Retail loans constitute 7% of our economy versus 35% in other Asian countries Retail assets are at only 25% of total banking assets 41% of Indias adult population is un-banked Number of loan accounts: 14% of adult population 73% of farm households have no access to institutional credit Share of money lenders in rural debt has moved from 17% in 1991 to 30% in 2002

    This imbalance is caused by banks chasing the low hanging fruit that constitutes the urban savvy consumer

    Purely from a profitability perspective, a large portion of the Indian population is perceived to be unbankable
    The costs of servicing the remote rural sector using traditional business models (KYC; branch centric model; incremental cost of infrastructure) makes profitable banking unviable Therefore, all banks tend to target the upwardly mobile urban salaried class Banks are even creating financial exclusion barriers by increasing minimum balance requirements and average deposit sizes Technology has lowered the cost of servicing this target segment

    Fortunately, the scenario is changing

    Financial Inclusion (FI) is an RBI mandate, government mandate and a social mandate
    There IS a fortune at the base of the pyramid Social security payments and NREGA payments are being routed through banks

    MFIs have shown that its possible to run extremely profitable businesses. Most major banks are working on a business-driven FI strategy

    Simplified KYC norms and UID is expected to drive down the cost of customer acquisition

    Innovation in mobile / hand held devices using an uniquely Indian model offers the best potential breakout strategy

    The banks that will succeed will be those that can deploy business services through the entire eco systems through seamless supply chains

    Source: Verizone

    The Wrap

    Today, if you look at financial systems


    around the globe, more than half the population of the world - out of six billion people, more than three billion do not qualify to take out a loan from a bank. This is a shame. The poor themselves can create a poverty-free world.. all we have to do is to free them from the chains that we have put around them
    - Muhammad Yunus

    Thank you

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