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INNOVATIVE PRODUCTS &
BANCASSURANCEPresented by:
Amanpreet
&
Micheal multani
The term “innovation” means ‘to make something
new’
Banks no longer restricted themselves to traditional
banking activities, but explored newer avenues to
increases business and capture new market
INTRODUCTION
From the time Bank of Bengal (1860), qualitative
and quantitative changes taken place
With 1935 regulation, the RBI was proclaimed the
central bank of India.
In the 1990s, greater emphasis being placed on
technology and innovation
New concept like personal banking, retail banking,
total branch automation, etc were introduced.
INDIAN BANKING SECTOR
1. E-BANKING - enables people to carry out most of
their banking transaction using a safe website
which is operated by their respected bank.
Advantages
No longer required to wait in long queues.
Faster & more convenient transaction
Fund transfer become faster & convenient
Apply for bank loan
TYPES OF INNOVATIVE BANKING
2. CORPORATE BANKING
Financial services to large corporate &MNCs
SERVICES
Domestic and international payments
Funding
Channel financing
Overdraft facilities
3. RURAL BANKING
It provides & regulates credit services for the
promotion &development of rural sector mainly
agriculture , SSI , cottage & village industries ,
handicrafts and many more.
Examples of RRB are:- NABARD, SYNDICATE
BANK, UNITED BANK OF INDIA.
NEED
Banks tapping new sources of income
Finding ways to differentiate themselves from other
banks and non-banks
The technology forces the banks to develop a
strategy for online delivery system to broaden the
customer relationship and to retain customers’
loyalty.
Greater competition for the banks as the technology
pushes the delivery of services out of bank and
Focus shifts from cost reduction to maintain market
position.
1 TOTAL BRANCH AUTOMATION
Speed up bank transactions and less error
Toward paperless transactions
2 ANY BRANCH BANKING
It is a facility for customers to operate their account
from any of the same banks network branch
Facilities available
Cash withdrawal & cash deposits
Fund transfer
Account statement
TYPES OF PRODUCTS & SERVICES
3. PLASTIC MONEY
Plastic money are the alternative to the cash or standard money
Convenient to carry
Generic term for all types of bank cards, debit cards, credit
cards
4. RETAIL BANKING
It refers to banking in which banks execute transaction directly with individual, rather than corporate banks.
Services:
Housing finance
Personal loans
Education loans
Auto finance
5.Telebanking: Telebanking refers to banking on phone services.
A customer can access information about his/her account through a
telephone call and by giving the coded Personal Identification
Number (PIN) to the bank.
Telebanking is extensively user friendly and effective in nature.
6. Electronic Funds Transfer (EFT):. The system called electronic
fund transfer (EFT) automatically transfers money from one account
to another.
This system facilitates speedier transfer of funds electronically from
any branch to any other branch. In this system the sender and the
receiver of funds may be located in different cities and may even
bank with different banks.
Funds transfer within the same city is also permitted. The scheme
has been in operation since February 7, 1996, in India.
Electronic clearing service
The ECS was the first version of „Electronic Payments‟ in
India. It is a mode of electronic funds transfer from one bank
account to another bank account using the mechanism of
clearing house. It is very useful in case of bulk transfers from
one account to many accounts or vice- versa. There are two
types of ECS (Electronic Clearing Service)
1. ECS – credit
2. ECS- debit.
ECS facility is available at more than 60 centers in India. The
beneficiary has to maintain an account with one of the banks at
ECS center in order to avail benefits of ECS.
7. National Electronic Funds Transfer (NEFT):National Electronic
Funds Transfer (NEFT) is a nation-wide system that facilitates
individuals, firms and corporates to electronically transfer funds from
any bank branch to any individual, firm or corporate having an account
with any other bank branch in the country.
In order to issue the instruction, the transferor should know not only
the beneficiary’s bank account number but also the IFSC (Indian
Financial System Code) of the concerned bank.
IFSC is an alpha-numeric code that uniquely identifies a bank-branch
participating in the NEFT system. This is a 11 digit code with the first
4 alpha characters representing the bank, and the last 6 numeric
characters representing the branch. The 5th character is 0 (zero). IFSC
is used by the NEFT system to route the messages to the destination
banks / branches
8. Real Time Gross Settlement (RTGS): RTGS transfers are
instantaneous unlike National Electronic Funds Transfer (NEFT)
where the transfers are batched together and effected at hourly
intervals.
RBI allows the RTGS facility for transfers above Rs1lakhs. The RBI
window is open on weekdays from 9 am to 4.30 pm; on Saturdays
from 9 am to 12.30 pm
9. Society for Worldwide Interbank Financial Telecommunications
(SWIFT): SWIFT is solely a carrier of messages. It does not hold
funds nor does it manage accounts on behalf of customers, nor does it
store financial information on an on-going basis. As a data carrier,
SWIFT transports messages between two financial institutions. This
activity involves the secure exchange of proprietary data while
ensuring its confidentiality and integrity.
SWIFT, which has its headquarters in Belgium, has developed an 8-
alphabet Bank Identifier Code (BIC). The BIC helps identify the bank.
CRM
Customer Relationship Management Solution is the
set of methodologies and tools that help an
enterprise manage customer relationships in an
organized way - finding, getting, and retaining
customers. It helps to provide better customer
service, increase customer revenues, discover new
customers and sell products more effectively.
10. Mobile Banking: A new revolution in the realm of e-banking is the emergence of mobile banking.
On-line banking is now moving to the mobile world, giving everybody with a mobile phone access to real-time banking services, regardless of their location.
It provides a new way to pick up information and interact with the banks to carry out the relevant banking business.
The potential of mobile banking is limitless and is expected to be a big success.
Booking and paying for travel and even tickets is also expected to be a growth area. This is a very flexible way of transacting banking business.
Facilities are:
Balance enquiry
Fund transfer
Cheque book request, etc
11. Working Capital Finance: Working capital finance is utilized for
operating purposes, resulting in creation of current assets (such as
inventories and receivables). Banks carry out a detailed analysis of
borrowers' working capital requirements.
Credit limits are established in accordance with the process approved
by the board of directors.
12.Project Finance: Project finance business consists mainly of
extending medium-term and long-term rupee and foreign currency
loans to the manufacturing and infrastructure sectors.
Banks also provide financing by way of investment in marketable
instruments such as fixed rate and floating rate debentures.
Lending banks usually insist on having a first charge on the fixed
assets of the borrower. The project finance approval process entails a
detailed evaluation of technical, commercial, financial and
management factors and the project sponsor's financial strength and
experience.
13. Guarantee: In business, parties make commitments. The
beneficiary of the commitment wants to be sure that the party making
the commitment (obliger) will live up to the commitment. This
comfort is given by a guarantor, whom the beneficiary trusts.
Banks issue various guarantees in this manner, and recover a
guarantee commission from the obliger. The guarantees can be of
different kinds, such as Financial Guarantee, Deferred Payment
Guarantee and Performance Guarantee, depending on how they are
structured
14. Loan Syndication: This investment banking role is performed by a
number of universal banks
OTHERS
15. Sale of Financial Products such as mutual funds and insurance is another major service offered by universal banks.
16. Financial Planning and Wealth Management are offered by universal banks.
17. Executors and Trustees: a department within banks – help customers in managing succession of assets to the survivors or the next generation.
18. Lockers: a facility that most Indian households seek to store ornaments and other
19. E-Cheques
20. D-MAT Accounts
21. EDI (Electronic Data Interchange)
22. Dividends payments of commitments
23. Vehicle and home finance
EXAMPLE OF NEW INNOVATIVE SERVICE PROVIDED BY
UNION BANK
1. Village Knowledge Centre (VKC)
Village Knowledge Centre (VKC) serves as information disseminationcentre providing instant access to farmers to latest information/knowledge available in the field of agriculture, starting from cropproduction to marketing.
2. Union Mitr
Union Mitr is especially designed for the rural population. It facilitatesfinancial education to all strata of people.
Services offered in Union Mitr:-
Information on financial products, services and where they areavailable.
Guidance on opening a bank A/C
Information on products of bank including interest rates and charges
Information on managing savings.
Guidance about management of existing debt.
Information on likely avenues of investment
WHAT IS BANCASSURANCE?
Distribution of insurance products through a bank’s distribution
channels.
According to IRDA, ‘bancassurance’ refers to banks acting as
corporate agents for insurers to distribute insurance products
Life Insurance Marketing and Research Association’s
insurance dictionary defines bancassurance as “the provision
of life insurance services by banking and building societies”.
It is basically selling insurance products and services by leveraging
the vast customer base of a bank and fulfills the banking and
insurance needs of the customers at the same time.
21
BANCASSURANCE - HISTORY
Originated in France in 1980s
Spread rapidly across Europe
Introduced in India in 1999
Opening up of insurance industry
20 new companies
BANCASSURANCE IN INDIA
In the year 2002 the banks of India were permitted
to do insurance business for the first time.
It is regulated by both RBI and IRDA as it is
combination of bank and insurance.
It is a Win-Win Strategy
Example: SBI Life Insurance Company Ltd has tie
up with SBI.
RBI GUIDELINE FOR BANKS ENTERING INTO
INSURANCE SECTOR :
Joint venture will be allowed for financially strong
banks wishing to undertake insurance business
with risk participation;
For banks which are not eligible for this joint-
venture option, an investment option of up to 10 %
of the net worth of the bank or Rs. 50 crore,
whichever is lower, is available.
Any commercial bank will be allowed to undertake
insure business as agent of insurance companies.
This will be on a fee basis with no-risk participation.
THE INSURANCE REGULATORY AND DEVELOPMENT
AUTHORITY (IRDA) GUIDELINES FOR THE
BANCASSURANCE ARE:
Each bank that sells insurance must have a chief
insurance executive to handle all the insurance
activities;
All the people involved in selling should under-go
mandatory training at an institute accredited by
IRDA and pass the examination conducted by the
authority;
Commercial banks may become corporate agents
for one insurance company
Banks cannot become insurance brokers.
JOINT VENTURES
SBI Life Insurance Company Limited
Joint venture between the State Bank of India and BNP
Paribas Assurance registered with IRDA on 30.03.2001
Share Holdings
1. State Bank of India --- 74%
2. BNP Paribas Assurance --- 26%.
CANARA HSBC ORIENTAL BANK OF
COMMERCE LIFE INSURANCE COMPANY
LIMITED, REG. ON 6TH OF JUNE, 2008 Share Holdings
1. Canara Bank - 51%
2. HSBC Insurance
(Asia Pacific) Holdings Ltd - 26%
3. Oriental Bank of Commerce - 23%
SOME OTHER TIE UPS ARE :Insurance Company Bank
Life Insurance Corporation of India
Corporation Bank, Indian Overseas
Bank, Centurion Bank, Vijaya Bank,
Oriental Bank of Commerce etc
National Insurance Co. Ltd. City Union Bank
United India Insurance Co. Ltd South Indian Bank
Bajaj Allianz General Insurance Co.
Ltd
Karur Vysya Bank and Lord Krishna
Bank
ICICI Prudential Life Insurance Co
Ltd.
ICICI Bank, Bank of India, Citibank,
Federal Bank, and Punjab and
Maharashtra Co-operative Bank.
HDFC Standard Life Union Bank of India
BANCASSURANCE SALES MODELS
Separate Sales Force
Minimum integration between the staff of thepartners and merely utilize the customer database forinsurance product prospecting.
Hand in Glove
Sales force of the insurer utilizing the resources ofthe bank (customer base, brand infrastructure , bankstaff expertise).
Bank staff sells simply package product, but act asintroducers & in the case of more complex productsthe insurer’s financial planner undertake theconstructive selling process and final lead closure.
High interaction between the bank and insurer’s staff.
Fully Integrated
Insurance sales process is wholly owned
by the bank staff while the insurer acts
only as a product and service provider.
Exploitation of bank’s strength and does
not utilize the skills of the insurer.
DIFFERENT BANCASSURANCE MODELS
30
Integrated
Broker’s model
InsurerBank
InsurerBank
Non -integrated
•Agents to place at bank branches
•Mine on bank’s client base -telemarketing
•No agent at branches
•Bank’s RMs to sell
Bank Insurer
Bank Broker
Partnership - Leads referral from bank on commercial business;
brokers to recommend business
Agents
31
BANCASSURANCE
- DISTRIBUTION CHANNELS
Career Agents
Special Advisers
Salaried Agents
Bank Employees / Platform Banking
Corporate Agencies and Brokerage Firms
Direct Response
Internet
e-Brokerage
Outside Lead Generating Techniques
MICRO-INSURANCE
Micro-insurance, the term used to refer to
insurance to the low-income people.
It is mandatory for all formal insurance companies
to extend their activities to rural and well-identified
social sector in the country (IRDA 2000).
Tata AIG Life - First insurance company to launch
Micro-Insurance Scheme.
ADVANTAGE FOR THE BANKS
Revenue diversification
Satisfaction of more financial needs under the
same roof
Customer retention-Increase in customer loyalty
More profitable resource utilization
Enriched work environment
Establish sales oriented culture
ADVANTAGE FOR THE INSURANCE
COMPANIES
Revenue and channel diversification
Quality customer access
Quicker geographical reach creation of brand equity
Increase in volume and profit
Improved brand equity
Some others
Immediate access to New Markets
Increase in Market Penetration
Reduce reliance on traditional distribution
channel
Combine Cost Saving & Increased Profitability
Develop new financial products more efficiently
Improve sales effectiveness & after sales
service
Insurer
ADVANTAGE FOR THE CONSUMER
Enhanced convenience
One stop shopping for all financial services
Innovative and better product ranges
More credible solution
SWOT ANALYSIS
STRENGTH:
Vast untapped market
Huge pool of skilled professionals
WEAKNESS:
Lack of networking among bank branches
Saving Ability of Middle Class
OPPORTUNITY:
Data mining :Banks have a huge customer
database which has to be properly leveraged.
Target segments should be identified and tapped.
Wide distribution networks of banks
THREATS:
Human Resource Challenges
Non-response from the target groups can also pose
a challenge.
CONCLUSION For bank it just act as a means of product
diversification and additional fee income
For insurance it act as a tool for increasing theirmarket penetration and premium turnover
For customer it benefit them as in term of reducedprice, high quality products and delivery doorsteps
SO EVERYBODY IS WINNER HERE