Page 36 - BANKING FINANCE APRIL 2017

ARTICLE

to transform the lives of banking customers .As a result , tacular innovation in the commercial banking sector in re-
direct channels such as mobile and the internet are be- cent years .India too experience a surge and a paradigm
coming increasingly important in retail banking. The digi- shift in retail banking .Retail banking received momentum
tal disruption and the ensuing change in customer behaviour nearly a decade ago when a few Indian Banks replicated
is causing paradigm shift in the way banking itself is thought the retail banking model of developed countries .In the
about. The retail banking strategies of banks are undergo- course of time other banks also fell in line .
ing a major transformation. Powerful forces are reshaping
the banking industry. Retail loan is estimated to have accounted for nearly one-
fifth of all bank credit .The retail loan market has decisively
Customer expectations, technological capabilities, regula- got transformed from seller's market to a buyer's market
tory requirements, demographics and economics are cre- .All these emphasize the momentum that retail lending is
ating an imperative to change. This article discusses about experiencing in the Indian economy in recent years . Retail
the emerging trend in Retail banking and the imperative Banking as a business model is adopted by all the banks in
need for the banks to respond dynamically and to adjust India on account of multiple comfort factors for the banks
themselves in the emerging digital banking paradigm to viz. acquisition of a huge customer base, multiple product
drive more productive businesses and relationships. offerings, better pricing and profitability. The retail banking
, where customer value is at the core operations , creating
Transformation of Retail Banking in India and nurturing long term relationships with the customer is
the key to maximizing wallet share.
The banking industry had undergone a lot of transformation
over the last three decades. In the initial phase of evolution
The Indian government's ambitious vision for a digitally
of banking, the government focused on productive sectors
savvy Indian consumer ,is emerging across urban as well
and hence bank credit had flown to these sectors . But
as rural markets .As depicted , by 2020 , the number of
over time, due to the emergence of middle class having
smartphone users to equal the number of active bank
substantial purchasing power in India , the regulators have
accounts in the country and cover 70-80 % of the eligible
become more accommodating in allowing the banks to lend
population. It is possible to envisage that almost all eli-
even for consumption purposes.
gible customers will be on boarded on to the mobile
phone-based digital payment and saving platform in next
The banks have become a virtual marketplace offering
among others, various non-banking financial products and five years .A similar revolution is conceivable on the lending
side .
services to the customers. The high proportion of 79 %
of the population below 35 years of age , has offered to
the Indian banking system, a ready market, for mobilization Retail Banking Business Trend
and deployment of their funds in the last one decade or Bank deposits on April 3, 2015 stood at Rs 91.5 trillions,
so. Besides, the technological innovations relating to in- which is 12.6 % over the deposit base of Rs 81.2 trillions as
creasing use of credit / debit cards, ATMs, direct debits and on April 4, 2014 .As per the ICE 360 Survey 2014 , gross
phone banking, etc has contributed to the growth of retail savings of the Indian household constitutes 29.27 % of the
banking in India. gross household income in the year 2013-14. Of the total
gross savings , 51.8 % emanated from rural areas compris-
In addition, the decline in interest rates has also augmented ing 179.5 million households with a share of 55.4 % of to-
the growth of retail credit by generating demand for such tal income of Indian households. Rising levels of mean sav-
credit. Retail banking has also received a thrust from the ings and income witnessed in households with improved
policymakers' push for inclusive growth in the wake of the education status . Growth in total retail loans has picked
global financial crisis, towards achievement of universal fi- up after slowing in 2009 to 2011 .While certain segment
nancial inclusion. Retail banking business has also met the such as credit card loans have remained stagnant , some
bank's quest for new sources of revenue and new channels other categories like housing loans have grown
for profit. Across the globe ,retail lending has been a spec- steadily(Table- 1 & Graph -1).

36 | 2017 | APRIL | BANKING FINANCE

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