TOC_Indian Retail Banking

8/8/2019 TOC_Indian Retail Banking

1/9

Industry Insight Retail Banking

Cygnus Business Consulting & Research Pvt. Ltd. 2009 1


2/9



Disclaimer: All information contained in this report has been obtained from sources believed to be accurate byCygnus Business Consulting &Research Pvt Ltd., (Cygnus). While reasonable care has been taken in its preparation, Cygnus makes no representation or warranty, express orimplied, as to the accuracy, timeliness or completeness of any such information. The information contained herein may be changed without notice.All information should be considered solely as statements of opinion and Cygnus will not be liable for any loss incurred by users from any use of thepublication or contents

Plot no.13/17, Ground Floor , Laxmi Tours, Nagarjuna Hills, Punjagutta, Hyderabad-500008, IndiaTel: +91-40-23430303-05, Fax: +91-40-23430201, E-mail: [email protected]

Website: www.cygnusindia.com

IInndduussttrryy IInnssiigghhtt

RREETTAAIILL BBAANNKKIINNGG

November 2009


3/9



CONTENTS

Executive Summary........................................................................................ 10

Highlights ......................................................................................................... 15

3. Global Banking Industry............................................................................ 17

3.1 Introduction..................................................................................................................... 17

3.2 Global banking assets surpasses US$90 trillion ....................................................... 18

3.3 Rising bad debt and provisions .................................................................................... 18

3.4.Profitability plummets ....................................................................................................19

3.5 Increased emphasis on fee-based and treasury business....................................... 19

3.6 Region-wise Analysis......................................................................................................20

3.6.1 US..............................................................................................................20

3.6.2 Europe.......................................................................................................20

3.6.3 Asia Pacific ................................................................................................21

3.7 Recent Trends................................................................................................................. 22

3.7.1 Level and growth rate of Household Credit............................................22

3.7.2 More Banks focus on reducing losses ......................................................22

3.7.3 Housing bubble collapses..........................................................................23

4. Indian Banking Industry.............................................................................. 24

4.1 Introduction..................................................................................................................... 24

4.2 Evolution........................................................................................................................... 24

4.3 Reforms galore................................................................................................................ 25

4.4 Current Scenario............................................................................................................ 26

4.5 Geographic Spread......................................................................................................... 27

4.6 Key Business Segments .................................................................................................27

4.7. Trends in Indian Banking Industry ............................................................................. 28

4.7.1 Monetary and liquidity position: Relatively stable ....................................28

4.7.2 Growth of Credit Market declines .........................................................28


4/9



4.7.3 Inflationary pressure subsides ..................................................................30

4.7.4. Public sector banks continue to dominate ..............................................31

5. Retail Banking.............................................................................................. 325.1. Introduction.................................................................................................................... 32

5.2. Credit growth ................................................................................................................32

5.3. Segments of retail lending............................................................................................33

5.4. Retail Credit: Geographical Spread...........................................................................34

5.5. Category wise Distribution ......................................................................................... 34

5.6. Comparing India with global peers............................................................................ 35

5.7. Major players and their market share....................................................................... 36

5.7.1. SBI leads with 19% market share.............................................................36

5.7.2. ICICI to catch up other banks.................................................................36

5.7.3. Geographic dominance ............................................................................37

5.8. Recent Trends................................................................................................................ 37

5.8.1. Changing Demographic profile drives the growth ..................................37

5.8.2. Players Response aggressively to the changing environment.................38

5.8.3. NPA Level credit cards and Consumer loans are major concerns ........39

6. Housing Finance .......................................................................................... 40

6.1. Introduction.................................................................................................................... 40

6.2. Industry Structure ......................................................................................................... 40

6.3. Housing Finance Allocation ......................................................................................... 41

6.4.Housing loan disbursement: ......................................................................................... 41

6.5. Lowering interest rates push up home loan disbursement .................................42

6.6. Housing Loan: Demand and Supply Drivers............................................................ 43

6.7. Banks overtake HFCs in housing loan disbursements .......................................... 44

6.8. Banks are aggressive on Refinancing .........................................................................446.9. Changing age profile of borrowers............................................................................ 45

6.10. Higher loan-to-value ratio......................................................................................... 45

6.11. Size of Home Loans.................................................................................................... 45


5/9



6.12. Outlook......................................................................................................................... 46

6.12.1. Rising Home Loans as percentage of GNP ...........................................46

6.12.2. Price correction may be a possible in the near future..........................467. AUTO FINANCE........................................................................................ 47

7.1 Introduction:.................................................................................................................... 47

7.2 Segment-wise auto-finance........................................................................................... 48

7.3 Industry Segment-wise analysis ................................................................................... 48

7.3.1 Cars...........................................................................................................49

7.3.2 Multi-Utility Vehicles ................................................................................49

7.3.3Two Wheeler sales touch 7.44 million......................................................49

7.4 Driving Factors................................................................................................................50

7.4.1 Entry of Foreign Car Makers ....................................................................50

7.4.2 Cheaper Loans Off take ...........................................................................50

7.4.3 Reduction in Taxes & Duties....................................................................51

7.4.4 Changing Business Dynamics....................................................................51

7.5: Indian Automobile Finance Industry Transformation............................................ 51

7.6 Recent Trends................................................................................................................. 52

7.6.1. Recession halts the growth of the market ..............................................52

7.6.2 Used Car Financing...................................................................................52

7.6.3. Auto companies tie-up with PSU Banks ..................................................53

7.7 Major Challenges ............................................................................................................ 53

7.7.1 Sustaining the growth rate........................................................................53

7.7.3. Finding a solution to slowdown in exports and manufacturing activities54

7.7.4 Integrating the entire supply chain and managing inbound logistics ........54

7.7.5 Managing Poor Monsoons ........................................................................55

7.7.6 Maintaining the pace of infrastructure development ...............................55

7.8 Outlook ............................................................................................................................ 55

8. Consumer Durable Finance ....................................................................... 57

8.1 Introduction..................................................................................................................... 57

8.2 Consumer durables credit............................................................................................ 57


6/9



8.2.1 Geographical Spread and Market Share ...................................................58

8.2.2 Category wise Distribution ......................................................................59

8.3 Competition pinches on consumer durable credit growth .................................. 608.4 Innovations in lending avenues for growth ........................................................... 60

8.5 Commercial Banks aggressively capturing market ..................................................61

8.6 Outlook ............................................................................................................................ 62

9. Education Loans .......................................................................................... 63

9.1 Introduction..................................................................................................................... 63

9.2 Educational loans disbursement.................................................................................. 65

9.3 Driving factors................................................................................................................. 66

9.4 Major Challenge in Education Loan............................................................................ 66

9.5 Outlook ............................................................................................................................ 67

10. Other personal Loans............................................................................... 68

10.1. Introduction.................................................................................................................. 68

10.2. Personal Loans: Market share and size wise classification................................. 69

10.3. Increase in Bank lending ............................................................................................ 70

10.4. Competition propels innovation.............................................................................. 71

11. Credit cards ............................................................................................... 71

11. Credit cards ............................................................................................... 72

11.1 Introduction................................................................................................................... 72

11.1.1. Size and growth .....................................................................................72

11.2 Growth: Card volume surges .................................................................................... 73

11.3 Competition and Major Players: ICICI banks Rally ..............................................74

11.4 Industry Spend .............................................................................................................. 76

11.5 Key Trends .................................................................................................................... 77

11.5.1. Cut throat competition .........................................................................77

11.5.2. Infrastructural challenges could soon become irrelevant .....................77

11.5.3. Smarter Debit/Credit Card ...................................................................78

11.5.4. Prepaid cards on the horizon ................................................................78


7/9



11.5.5. Demand for premium and co-brand cards ............................................79

11.5.6. ATM outsourcing ...................................................................................79

11.6 Technology Spend........................................................................................................ 7911.6.1 Mobile Wallets........................................................................................80

11.7 MICROPAYMENTS .....................................................................................................81

11.8 Role of Associations.................................................................................................... 82

11.9 Default in Credit card .................................................................................................82

11.10 Outlook........................................................................................................................ 82

12. Bancassurance ........................................................................................... 84

12.1 Introduction................................................................................................................... 84

12.2 Changing Business Dynamics ..................................................................................... 84

12.3 Bancasssurance: Indian Scenario ...............................................................................85

12.4 Issues and challenges ................................................................................................... 89

12.5 Driving Factors ............................................................................................................. 90

12.5 Outlook...................................................................................................................91

13. Regulations ................................................................................................ 92

13.1. Introduction.................................................................................................................. 92

13.2. Consumer credit, Home Loan, Education Loan, Auto Loans and their Risk

weight exposures................................................................................................................ 92

13.3. Housing finance: Growing incidence of frauds ..................................................... 93

13.4. Credit card Norms .....................................................................................................94

13.4.1. Single overall limit for each individual ...................................................94

13.4.2. KYC (know your customer) Norms .....................................................94

13.4.3. Recovery of retail loans .........................................................................95

If the borrower fails to comply with the notice, the Bank may take the possession of

the security. ............................................................................................................................ 96

13.4.4. Reports to Credit Bureau .....................................................................96

13.4.5 Other harassment...................................................................................96

13.5. Micro Finance............................................................................................................... 97

13.5.1The Micro Financial sector (Development and Regulation) Bill, 2007 ...97


8/9



13.6. Foreign Exchange Regulations.................................................................................. 97

13.7. Remittance Regulations.............................................................................................. 98

13.8. Mobile Banking............................................................................................................. 9814. Issues/Challenges of Retail Banking in India .......................................... 99

14.1 Introduction................................................................................................................... 99

14.2 A paradigm shift from the monopolies of public sector banks to competitive

banking..................................................................................................................................... 99

14.3 Interest rate risk.........................................................................................................100

14.4 Issue of money laundering........................................................................................100

14.5 Competition in retail banking..................................................................................101

14.6 Retail loan quality is falling........................................................................................102

14.7 Tie-Up Arrangement .................................................................................................102

14.8 Basel II Norms ............................................................................................................ 102

14.9 Growth in Retail Electronic Funds Transfer Systems ........................................104

14.10 Imbalance in bank credit-deposit & investment-deposit ratio.......................105

14.11 Conclusion.................................................................................................................105

15. THE FUTURE.......................................................................................... 107

15.1 Refocus customer relationships through technology and innovation ............107

15.2 Enterprise CRM in Retail Banking ..........................................................................108

15.3 Fresh frontiers in Retail Operations......................................................................109

15.4 Micro Finance- an emerging opportunity..............................................................110

15.4.1. Self-Help Group (SHG) Bank Linkage Programme ..........................111

15.5 Budding opportunities in Non-agricultural rural credit.....................................112

15.6 The shape of things to come ...................................................................................113

15.7. Emerging trends in technology...............................................................................113

15.8 Conclusion...................................................................................................................11616. Major Banks Profiles............................................................................... 117

1. Andhra Bank ....................................................................................................................126

2. AXIS Bank.........................................................................................................................129


9/9



3. Bank of Baroda ................................................................................................................133

4. Bank of India ....................................................................................................................136

5. Canara Bank.....................................................................................................................1396. Citibank.............................................................................................................................143

7. Central Bank of India .....................................................................................................147

8. Deutsche Bank ................................................................................................................150

9. HDFC Bank......................................................................................................................153

10. HSBC...............................................................................................................................157

11. Indian Overseas Bank ..................................................................................................160

12. ICICI Bank......................................................................................................................164

13. I D B I (Industrial Development Bank Of India)....................................................168

14. Indian Bank.....................................................................................................................172

15. ING Vysya Bank ............................................................................................................176

16. Jammu & Kashmir Bank Ltd. ......................................................................................178

17. State Bank of India........................................................................................................182

18. Saraswat Co-Operative Bank Ltd. ............................................................................185

19. Syndicate Bank ..............................................................................................................188

20. UCO Bank......................................................................................................................191

21. Union Bank of India......................................................................................................195

Documents

TOC_Indian Retail Banking