STRATEGIES BY RETAIL BANK TO VENTURE IN RURAL MARKET

Romil ShuklaA PRESENTATION

AGENDA• INDIAN BANKING INDUSTRY• RETAIL BANKING• RURAL BANKING• SUGGESTION &

RECOMMENDATIONS

INDIAN BANKING INDUSTRY

INDIAN BANKING SECTOR

• Focus on Customer service

• The hardening of bond yields will have negative impact on Q4FY10

results of banks especially PSU banks.

• Focus on KYC Norms

• Structural improvement in the CASA.

• New players in the banking sector .

• At end-March 2010, 50.6 million no-frills

accounts were opened by the banking system.

RETAIL BANKING IN INDIA

KEY FACTORS DRIVING THE GROWTH OF RETAIL BANKING

• Focus on understanding customer needs or preferences

• Customer-specific products or offerings on a regular basis

• Improved processes and bundled product offering

• Any where, any time banking

• Faster service

• Customer-driven strategies

SCOPE FOR RETAIL BANKING IN INDIA

• Increase in economic activity

• Increase in the purchasing power.

• India has 200 million households and 400 million middleclass

population

• Nuclear family concept is gaining much importance

STRATEGIES FOR INCREASING RETAIL BANKING BUSINESS

• Constant product innovation

• Quality service and quickness in delivery

• Introduction of new delivery channels

• Tapping of unexploited potential

• Infrastructure outsourcing

• Detail market research

• Cross-selling of products

Future

RURAL BANKING – THE CURRENT STATUS

THE CURRENT STATUS• Started since the establishment of banking sector in India.

• Mainly focus upon Agro sector

• There are 32,528 rural bank offices and 20,771 semi-urban bank

offices in the country

• SBI and NABARD

• Rural population of about 780 million has limited access .

• Current demand for credit in rural India is around Rs. 1, 50,000 Cr.

• Commercial bank branches cover only 7 % of rural sector

and large market is still untapped.

SUGGESTIONS & RECOMMENDATIONS

MARKET SEGMENTATION

• Geographic segmentation.▫ Rural market

• Demographic segmentation.▫Male – Female▫ 18 – 60 years▫ Literate & Illiterate

• Psychographic Segmentation.▫ People looking for savings

• Behavioural segmentation.▫ Loans▫ Financial help.

NEED OF THE RURAL MARKET

PORTER’S FIVE FORCE MODEL

Bargaining power of suppliers

The product is extremely important to buyersThere are

no substitutes

Bargaining power of customersSwitching to

another product is simple

Customers are price sensitive

Customized products

Threat of new entrants

High fixed costsGovernment

restrictions or legislation

Threat of substitute product

Microfinance institution

SHG’s

WHAT IS NEEDED FROM THE BANKS?

• More financial inclusion

• Micro credit / SHG’s

• Use of technology

• Alternate Distribution channels

• To extend banking services at customers convenience

• Improvement in service levels in rural area

WHAT IS NEEDED FROM THE GOVERNMENT?

• An authority for Rural Banking

• Road map

• Establish open standard for technology to be used

• Financial literacy and credit counselling.

• Strategic action plan for remittance facility for both

inter banking/ intra bank and post office

STEPS TO BE TAKEN

• Expand reach

▫ Tie up with India post.

▫ Partner with NGO/ MFI.

• Kiosk banking.....Offer convenience

▫ Banking services at mini branch.

▫Making kiosk.

▫ The bio metric authentication.

▫ Improved business.

• Educate customers

• Be cost effective

▫ Low cost ATM.

▫ Costs just 1/ 10th that of the traditional ATM.

▫ Transfer of funds from NREGA.

▫ e – governance model

• Innovate and adopt technology

▫ Smart cards, biometrics scanning

▫ Improve the service delivery.

STEPS TO BE TAKEN

• Focus on microfinance

▫40% in priority sector lending

▫MFI lending provides 10-14 % return as against 6-7 % in

government instruments

STEPS TO BE TAKEN

THANK YOU