A

Project Report On

RETAIL BANKING IN HDFC BANK

In the partial fulfillment of the Master of Business Administration Program 2011-2012

Department of Management Studies Shrinathji Institute of Technology and Engineering Upali Oden, Nathdwara.

SUPERVISED BY:
Mr. ASHISH ADHOLYA

SUBMITTED BY:
NEHA VARGHESE

RETAIL BANKING

ACKNOWLEGEMENT
Behind every successful effort there lies a contribution from numerous sources irrespective of their magnitude. My project is no exception and I take this opportunity to express my sincere thanks those helping hands whole heartedly. It is with great pleasure and gratitude I acknowledge my indebtness to those who have helped me in completing this project work. Let me take this opportunity to express my sincere thanks to all of them, although they all cant be mentioned here. I wish to place on record my thanks to Dr.Deepthi Bhargv, head of the department, Srinathji institute of management for giving me this opportunity. I wish to express my heartly gratitude and sincere thanks to Mr.Ashish Adholiya for their valuable support, I also want to thank all the faculties of Sreenathji institute of management for helping and providing their valuable time for making this project a success. I give my profound thanks to my friends for their support and last but not the least I want to thanks my family for their help and support without their presence it would not be possible for me to complete this project satisfactorily. Above all I wish to thanks God Almighty for having blessed me to complete this project.

NEHA VARGHESE

PREFACE
Retail banking is banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and transactional accounts, mortgages, personal loans, debit cards, credit cards, and so forth. Retail banking aims to be the one-stop shop for as many financial services as possible on behalf of retail clients. Some retail banks have even made a push into investment services such as wealth management, brokerage accounts, private banking and retirement planning. While some of these ancillary services are outsourced to third parties (often for regulatory reasons), they often intertwine with core retail banking accounts like checking and savings to allow for easier transfers and maintenance

CH-No.
1

CONTENT INTRODUCTION

RESEARCH METHDOLOGY

RETAIL BANKING IN INDIA

DATA ANALYSIS, INTERPRETATION AND PRESENTATION

SWOT ANALYSIS

RECOMENDATION

CONLUSION

BIBLOGRAPHY

EXECUTIVE SUMMERY
Retail means sale of goods in small quantities, it is concerned with buying of goods in small quantities from the wholesaler and selling them in small quantities to the ultimate consumers as per their requirements. The person engaged in this trade is called the retailer. He acts as a link between the wholesaler and the customers. In retail trade goods are sold to the ultimate consumers for personal use and for the use of the business in small quantities only. The retailer does not specialize in a particular line or a particular product. Rather he maintains a large variety of goods. Generally, sales are limited to a local and on a small scale.

MEANING OF BANKING
Banking has come to occupy a pivotal position in a nations economy. According to the modern concept, banking is a business which not only deals with borrowings, lending and remittance of funds, but also an important instrument for fostering economic growth. The Banking Regulation Act 1949, defines the term banking as the accepting for the purpose of lending or investment of deposits of money from the public or otherwise and withdraw able by cheque, draft, order or otherwise. Thus, the essentials of banking are: (1) There should be acceptance of deposited. (2) Deposits should be from the public. (3) Deposits should be repayable on demand or expiry of a term or after a specified periods. (4) The purpose of deposits should be lending or investment. Bank is an institution which deals in money and credit. It buys money from depositors and sells to the borrowers. It is body of persons whether incorporated or not who carry on the business of banking. A bank may defined as a corporation or person which collects deposits from the public, repayable on demand and which supplies and facilitates all kinds of exchanges.

CHAPTER 1 INTRODUCTION
Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so The Retail Banking environment today is changing fast. The changing customer demographics demands to create a differentiated application based on scalable technology, improved service and banking convenience. Higher penetration of technology and increase in global literacy levels has set up the expectations of the customer higher than never before. Increasing use of modern technology has further enhanced reach and accessibility. The market today gives us a challenge to provide multiple and innovative contemporary services to the customer through a consolidated window as so to ensure that the banks customer gets Uniformity and Consistency of service delivery across time and at every touch point across all channels. The pace of innovation is accelerating and security threat has become prime of all electronic transactions. High cost structure rendering massmarket servicing is prohibitively expensive. Present day tech-savvy bankers are now more looking at reduction in their operating costs by adopting scalable and secure technology thereby reducing the response time to their customers so as to improve their client base and economies of scale. The solution lies to market demands and challenges lies in innovation of new offering with minimum dependence on branches a multi-channel bank and to eliminate the

disadvantage of an inadequate branch network. Generation of leads to cross sell and creating additional revenues with utmost customer satisfaction has become focal point worldwide for the success of a Bank. Retail banking is, however, quite broad in nature - it refers to the dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet. Fixed, current / savings accounts on the liabilities side; and mortgages, loans (e.g., personal, housing, auto, and educational) on the assets side, are the more important of the products offered by banks. Related ancillary services include credit cards, or depository services. Retail banking refers to provision of banking services to individuals and small business where the financial institutions are dealing with large number of low value transactions. This is in contrast to wholesale banking where the customers are large, often multinational companies, governments and government enterprise, and the financial institution deal in small numbers of high value transactions. The concept is not new to banks but is now viewed as an important and attractive market segment that offers opportunities for growth and profits. Retail banking and retail lending are often used as synonyms but in fact, the later is just the part of retail banking. In retail banking all the needs of individual customers are taken care of in a well-integrated manner. Todays retail banking sector is characterized by three basic characteristics: Multiple products (deposits, credit cards, insurance, investments and Securities) Multiple channels of distribution (call center, branch, internet) Multiple customer groups (consumer, small business, and corporate).

Housing Development Finance Corporation Limited or HDFC, founded 1977 by Hasmukhbhai Parekh, is an Indian NBFC, focusing on home mortgages. HDFC's distribution network spans 283 outlets that include 66 offices of HDFC's distribution company and HDFC Sales Private Limited. Promoted in 1995 by Housing Development Finance Corporation (HDFC), India's leading housing finance company, HDFC Bank is one of India's premier banks providing a wide range of financial products and services to its over 18 million customers across hundreds of Indian cities using multiple distribution channels including a pan-India network of branches, ATMs, phone banking, net banking and mobile banking. Within a relatively short span of time, the bank has emerged as a leading player in retail banking, wholesale banking, and treasury operations, its three principal business segments. The banks competitive strength clearly lies in the use of technology and the ability to deliver world-class service with rapid response time. Over the last 13 years, the bank has successfully gained market share in its target customer franchises while maintaining healthy profitability and asset quality. In addition, HDFC covers over 90 locations through its outreach programmes. HDFC's marketing efforts continue to be concentrated on developing a stronger distribution network. Home loans are also sourced through HDFC Sales, HDFC Bank Limited and other third party Direct Selling Agents (DSA). To cater to non-resident Indians, HDFC has an office in London, Singapore, and Dubai and service associates in GCC countries.

HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the merchant acquiring business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is positioned in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc. Some of the parameters that winners were measured on: Outstanding annual performance of the retail banking unit Sustainability as a franchise over a long period of time and across economic cycles A well-defined franchise in the chosen marketplace Transparency and accountability of business model Ethical banking Clear sales and execution skills at the product level Rigorous risk management capabilities Superior business and operational processes and technology Strong penetration and efficiency of distribution channels Focus on developing human resources to support the banks strategy

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CHAPTER 2 RESEARCH METHODOLOGY

All the findings and conclusions obtained are based on the survey done in the working area within the time limit. I tried to select the sample representative of the whole group during my job training. I have collected data from people linked with different profession at Udaipur

RESEARCH PLAN:
Preliminary Investigation: In which data on the situation surrounding the problems shall be gathered to arrive at The correct definition of the problem. An understanding of its environment. Exploratory Study: To determine the approximate area where the problem lies. RESEARCH DESIGN: Research was initiated by examining the secondary data to gain insight into the problem. By analyzing the secondary data, the study aim is to explore the short comings of the present system and primary data will help to validate the analysis of secondary data besides on unrevealing the areas which calls for improvement. DEVELOPING THE RESEARCH PLAN: The data for this research project has been collected through self Administration. Due to time limitation and other constraints direct personal interview method is used. A structured questionnaire was framed as it is less time consuming, generates specific and to the point information, easier to tabulate and interpret. Moreover respondents

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prefer to give direct answers. In questionnaires open ended and closed ended, both the types of questions has been used. COLLECTION OF DATA: Secondary Data: It was collected from internal sources. The secondary data was collected on the basis of organizational file, official records, news papers, magazines, management books, preserved information in the companys database and website of the company. Primary data: All the people from different profession were personally visited and Interviewed. They were the main source of Primary data. The method of collection of primary data was direct personal interview through a structured questionnaire. SAMPLING PLAN: Since it is not possible to study whole universe, it becomes necessary to take sample from the universe to know about its characteristics. Sampling Units: Different professionals businessman, households, etc. Sample Technique: Random Sampling. Research Instrument: Structured Questionnaire. Contact Method: Personal Interview. SAMPLE SIZE: My sample size for this project was 200 respondents. Since it was not possible to cover the whole universe in the available time period, it was necessary for me to take a sample size of 200 respondents.

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DATA COLLECTION INSTRUMENT DEVELOPMENT: The mode of collection of Data will be based on Survey Method and Field Activity. Primary data collection will base on personal interview. I have prepared the questionnaire according to the necessity of the data to be collected. RESEARCH LIMITATIONS: It was not possible to understand thoroughly about the different marketing aspects of the Financial Consultant within 60 days. As stipend, money was not given it was difficult to continue the project work. All the work was limited in some limited areas of Udaipur so the findings should not be generalized. The area of research was Udaipur and it was too vast an area to cover within 60 days.

Research Objectives:
The main objective of the project report is to understand the Retail loans provided by bank of Udaipur. The objective was successfully achieved by performing the detailed survey of 5 other banks. The questionnaire for survey study was prepared keeping in mind the following:To give level of information to the customer. To give satisfaction regarding services offered by bank To make out which bank provide services with best resources To know the awareness among the common man about loan which they want to take.

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CHAPTER 3 RETAIL BANKING IN INDIA

All around the world retail lending has been an established market; however its rise in emerging economies like India has been of recent origin. If recent statistics on consumer finance are any indication, the last few years have been trend setting. The traditional debt-averse, middle-class Indians who lived within their thrifty means, never to venture beyond their means, seem to have given way to a new middle-class that is free from all inhibitions regarding conspicuous consumption. Unlike its predecessors, the middle-class of today has donned a new attitude; it attaches no social-stigma in taking loans for spending. Indian retail banking is up and kicking. During 2004-05 retail contributed 42% of overall credit growth. Growing at the CAGR of 35% over last 5 years the retail asset touched Rs1,89,000 crore. Major product segments of retail credit include housing finance, auto finance, personal loans, consumer durable loan and credit cards to name a few. Housing constitutes the biggest segment of 48% of the entire retail credit; followed by the auto loans segment which constitutes almost 27.8%. While the balance retail credit is used by consumer durables at 7.2%, educational and other personal loans take the remaining 16%. Banks are increasing their dominance in housing finance and capturing the market share of the housing finance companies. During 2004-05, the market share of banks stood at 62%, against the 33% by Housing finance companies; Rs2-5 lakh margins constitutes almost a third of the loan size. All the players in this market are adopting an aggressive attitude and the housing loan availability is playing into the players hands. Despite this phenomenal growth in India, the housing loan as a percentage of GDP at 4.91% indicates low penetration when compared to other countries like Malaysia (17%) and Thailand (9%). But again this coupled with the population growth indicates good future prospects. Following the housing loans, it is the auto loan which is also giving the growth of retail credit the necessary boost. In Asia Pacific, India has emerged as the third largest market for cars and MUVs i.e. only after Japan and China.

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Low interest rates, easy finance, up-gradation of rider from two- wheeler to 4-wheelers and opening up of second hand car finance are growth drivers of this segment. The consumer durable loan follows the auto loan market in the third position, constituting approximately 7% of total credit. Metro centers continue to dominate the market with 29% of total retail credit, closely followed by the rural market at 27% of total retail market. Urban and Semi Urban centers contribute around 22% each. The rural market uprising is a recent phenomenon, which has immense growth potential. While private sector banks have dominance in metropolitan areas, nationalized banks have their hold in the urban and semi-urban areas. The rural areas are dominated by RRBs. The last few years have witnessed a high increase in students aspiring for management and professional courses, leading to a spurt in educational loans. Banks are now having a direct tie-up with the educational institutions to cash in on the opportunity. Public sector banks (PSBs) are more focused on the educational loans segment. In the educational loan segment, disbursement of domestic banks has surged by 13% to Rs2249 crore in 200405; up from Rs1983 crore in 2003-04. The number of students availing education loans has increased to 1,40,000 from 1,08,000 during this period. The other personal loans market is characterized by intense competition and the players vie with one another to get business. These loans are driven by urgent and short-term needs and banks have to act swiftly to cash in on that need. Metropolitan and urban areas together constitute two third of total loans under this category. Private sector banks lead in metropolitan areas, whereas in the rural areas the nationalized banks dominate. In India, all the retail banking segments are expected to witness a tremendous growth owing to the low cost of borrowing, changing customer attitudes towards borrowing and optimism regarding economic growth. Retail lending constitutes just 12.36% of the Indian banking system. Given this macroeconomic scenario, the share of retail banking will grow dramatically and it is expected that about 35% of the incremental growth in net credit will come from retail banking. In the next five years i.e. till 2010, retail banking is

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expected to grow by a CAGR of 25% to touch the figure of Rs575,000 crore. This requires expansion and diversification of retail banking product portfolio, better penetration and faster service mechanism. Hitherto, the growth had come from metros and tier I cities. While the loan requirement from larger cities will continue to grow, explosive growth in credit is expected to register in tier II cities, semi-urban and rural areas. However, there are some areas of concern like rising NPA in consumer loans particularly, the delinquency rates in credit cards, and frauds in home loans. Housing prices have grown rapidly. Deflation of asset value is a possibility in certain areas. Aggressive credit growth in retail has increased the requirement for measuring and managing this risk. These require extremely skilled workforce and highly evolved credit delivery and monitoring processes. The other concern is of suicidal pricing by the aggressive banks. This is bringing the margins under pressure. Though rational pricing is critical, the competitive market shall continue to see the pricing pressure. There is also a need for a database and management information system to identify the right type of borrowers. Keeping pace with explosive changes will pose challenge to regulatory authorities. This will not limit only to increase of risk weight of consumer loan by 25 basis points which the regulator announced in mid-term policy review 2004-05. Revision of credit cards issue regulations, and recent draft guidelines on outsourcing are the steps in the right direction. Lack of consensus on definition of retail and transparency in declaration by the players as well the coverage of retail by the central banker in its reports; all of this needs a thorough re-look.

BENEFITS
Traditional lending to the corporate are slow moving along with high NPA risk, treasure profits are now loosing importance hence Retail Banking is now an alternative available for the banks for increasing their earnings. Retail Banking is an attractive market segment having a large number of varied classes of customers. Retail Banking focuses on individual and small units. Customize and wide ranging products are available. The risk

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is spread and the recovery is good. Surplus deployable funds can be put into use by the banks. Products can be designed, developed and marketed as per individual needs.

SCOPE FOR RETAIL BANKING IN INDIA

All round increase in economic activity Increase in the purchasing power. The rural areas have the large purchasing power at their disposal and this is an opportunity to market Retail Banking. India has 200 million households and 400 million middleclass population more than 90% of the savings come from the house hold sector. Falling interest rates have resulted in a shift. Now People Want To Save Less And Spend More. Nuclear family concept is gaining much importance which may lead to large savings, large number of banking services to be provided are day- by-day increasing. Tax benefits are available for example in case of housing loans the borrower can avail tax benefits for the loan repayment and the interest charged for the loan.

ADVANTAGES AND DISADVANTAGES OF RETAIL BANKING ADVANTAGES:

Retail banking has inherent advantages outweighing certain disadvantages. Advantages are analyzed from the resource angle and asset angle. RESOURCE SIDE Retail deposits are stable and constitute core deposits. They are interest insensitive and less bargaining for additional interest. They constitute low cost funds for the banks. Effective customer relationship management with the retail customers built a strong customer base. Retail banking increases the subsidiary business of the banks. 17

ASSETS SIDE Retail banking results in better yield and improved bottom line for a bank. Retail segment is a good avenue for funds deployment. Consumer loans are presumed to be of lower risk and NPA perception. Helps economic revival of the nation through increased production activity. Improves lifestyle and fulfils aspirations of the people through affordable credit. Innovative product development credit. Retail banking involves minimum marketing efforts in a demand driven economy Diversified portfolio due to huge customer base enables bank to reduce their dependence on few or single borrower Banks can earn good profits by providing non fund based or fee based services without deploying their funds.

DISADVANTAGES:
Designing own and new financial products is very costly and time consuming for the bank. Customers now-a-days prefer net banking to branch banking. The banks that are slow in introducing technology-based products, are finding it difficult to retain the customers who wish to opt for net banking. Customers are attracted towards other financial products like mutual funds etc. Though banks are investing heavily in technology, they are not able to exploit the same to the full extent. A major disadvantage is monitoring and follow up of huge volume of loan accounts inducing banks to spend heavily in human resource department. Long term loans like housing loan due to its long repayment term in the absence of

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proper follow-up, can become NPAs. The volume of amount borrowed by a single customer is very low as compared to wholesale banking. This does not allow banks to to exploit the advantage of earning huge profits from single customer as in case of wholesale banking.

OPPORTUNITIES
Retail banking has immense opportunities in a growing economy like India. As the growth story gets unfolded in India, retail banking is going to emerge a major driver. The rise of Indian middle class is an important contributory factor in this regard. The percentage of middle to high-income Indian households is expected to continue rising. The younger population not only wields increasing purchasing power, but as far as acquiring personal debt is concerned, they are perhaps more comfortable than previous generations. Improving consumer purchasing power, coupled with more liberal attitudes towards personal debt, is contributing to Indias retail banking segment. The combination of above factors promises substantial growth in retail sector, which at present is in the nascent stage. Due to bundling of services and delivery channels, the areas of potential conflicts of interest tend to increase in universal banks and financial conglomerates. Some of the key policy issues relevant to the retail-banking sector are: financial inclusion, responsible lending, and access to finance, long-term savings, financial capability, consumer protection, regulation and financial crime prevention.

CHALLENGES TO RETAIL BANKING IN INDIA

The issue of money laundering is very important in retail banking. This compels all the banks to consider seriously all the documents which they accept while approving the loans. The issue of outsourcing has become very important in recent past because various core activities such as hardware and software maintenance, entire ATM set up and operation (including cash, refilling) etc., are being outsourced by Indian banks. Banks are expected to take utmost care to retain the ongoing trust of the public.

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 Customer service should be at the end all in retail banking. Someone has rightly said, It takes months to find a good customer but only seconds to lose one.Thus, strategy Of Knowing Your Customer (KYC) is important. So the banks are required to adopt innovative strategies to meet customers needs and requirements in terms of Services/products etc. The dependency on technology has brought IT departments additional responsibilities and challenges in managing, maintaining and optimizing the performance of retail banking networks. It is equally important that banks should maintain security to the advance level to keep the faith of the customer. The efficiency of operations would provide the competitive edge for the success in retail banking in coming years. The customer retention is of paramount important for the profitability if retail banking business, so banks need to retain their customer in order to increase the market share. One of the crucial impediments for the growth of this sector is the acute shortage of manpower talent of this specific nature, a modern banking professional, for a modern banking sector. If all these challenges are faced by the banks with utmost care and deliberation, the retail banking is expected to play a very important role in coming years, as in case of other nations.

STRATEGIES FOR INCREASING RETAIL BANKING BUSINESS

Constant product innovation to match the requirements of the customer Segments. The customer database available with the banks is the best source of their demographic and financial information and can be used by the banks for targeting certain customer segments for new or modified product. The banks should come out with new products in the area of securities, mutual funds and insurance. Quality service and quickness in delivery As most of the banks are offering retail products of similar nature, the customers can easily switchover to the one, which 20

offers better service at comparatively lower costs. The quality of service that banks offer and the experience that clients have, matter the most. Hence, to retain the customers, banks have to come out with competitive products satisfying the desires of the customers at the click of a button. Introduction of new delivery channels Retail customers like to interface with their bank through multiple channels. Therefore, banks should try to give high quality service across all service channels like branches, Internet, ATMs, etc. Tapping of unexploited potential and increasing the volume of business. This will compensate for the thin margins. The Indian retail banking market still remains largely untapped giving a scope for growth to the banks and financial institutions. With changing psyche of Indian consumers, who are now comfortable with the idea of availing loans for their personal needs, banks have tremendous potential lying in this segment. Marketing departments of the banks be geared up and special training be imparted to them so that banks are successful in grabbing more and more of retail business in the market. Infrastructure outsourcing: This will help in lowering the cost of service channels combined with quality and quickness. Detail market research Banks may go for detail market research, which will help them in knowing what their competitors are offering to their clients. This will enable them to have an edge over their competitors and increase their share in retail banking pie by offering better products and services. Cross-selling of products PSBs have an added advantage of having a wide network of branches, which gives them an opportunity to sell third-party products through these branches. Business process outsourcing Outsourcing of requirements would not only save cost and time but would help the banks in concentrating on the core business area. Banks can devote more time for

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marketing, customer service and brand building. For example, Management of ATMs can be outsourced. This will save the banks from dealing with the intricacies of technology. Tie-up arrangements PSBs with regional concentration can reap the benefit of reaching customers across the country by entering into strategic alliance with other such banks with intensive presence in other regions. In the present regime of falling interest and stiff competition, banks are aware that it is finally the retail banking which will enable them to hold the head above water. Hence, banks should make all out efforts to boost the retail banking by recognizing the needs of the customers. It is essential that banks would be imaginative in predicting the customers' expectations in the ever-changing tastes and environments. It is the innovative and competitive products coupled with high quality care for clients will only hold the key to success in this area. In short, bankers have to run very fast even to stay where they are now. It is the survival of the fastest now and not only survival of the fittest.

SPECIAL FEATURES OF RETAIL CREDIT

One of the prominent features of Retail Banking products is that it is a volume driven business. Further, Retail Credit ensures that the business is widely dispersed among a large customer base unlike in the case of corporate lending, where the risk may be concentrated on a selected few plans. Ability of a bank to administer a large portfolio of retail credit products depends upon such factors: Strong credit assessment capability Because of large volume good infrastructure is required. If the credit assessment itself is qualitative, than the need for follow up in the future reduces considerably. Sound documentation A latest system for credit documentation is necessary pre-requisite for healthy growth of credit portfolio, as in the case of credit assessment, this will also minimize the need to follow up at future point of time. Strong possessing capability

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since large volumes of transactions are involved, today transactions, maintenance of backups is required. Regular constant follow- up Ideally, follow up for loan repayments should be an ongoing process. It should start from customer enquiry and last till the loan is repaid fully. Skilled human resource This is one of the most important pre-requisite for the efficient management of large and diverse retail credit portfolio. Only highly skilled and experienced man power can withstand the river of administrating a diverse and complex retail credit portfolio. Technological support This is yet another vital requirement. Retail credit is highly technological intensive in nature, because of large volumes of business, the need to provide instantaneous service to the customer large, faster processing, maintaining database, etc.

SOME CRITICAL ISSUES

CUSTOMER SERVICE Customer service is perhaps the most important dimension of retail banking. While most public sector banks offer the same range of service with similar technology/expertise, the level of customer service matters the most in bringing in more business. Perhaps more than the efficiency of service, the approach and attitude towards customers will make the difference. Front line staffs have to be educated in this regard. A scheme of entrusting a group of important customers to the care of each employee/officer with a be implemented all sundry advices/notices such as Dr. /Cr. advices. TDR maturity advices, etc. whether signed by employees or officers should be identifiable by the name of those signing, and inviting customers to contact them for further assistance in the matter. A customer centered organization has to be built up, whose ultimate goal is to "own" a customer. Focused merchandizing through effective market segmentation is the need of the hour. A first step can be the organization of the various retail branches to enter for different market segments like

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up market individuals, traders, common customers, etc.. For the SIB (Small Industry and Business) sector banks, the focus should be on identifying efficient units and allocations of loans these units. These banks should try Merchant Banking services en a small scale. With agricultural output growing at a fast rate and mechanization setting in, banks should try to cater to the credit needs of the people involved in this profession. A wide network is absolutely imperative for this sector. Separate branches/division should be opened for traders and similar government businesses. Special facilities for cash tendered in bulk and immediate issue of drafts, by extending facilities like "guarantee bond" system, will go a long way in mitigating problems faced by traders who are the major customers for drafts issue. Provision for cash counting machines in these branches will reduce the monotony of cashiers and unnecessary delays, thus resulting in better productivity and ultimately in improved customer service. The personal segment is however the most important one. With the urban segment moving away because of disintermediation and competition from foreign banks, retail banks should focus en the rural/semi-urban areas that hold the maximum potential. Innovative schemes like "paper-gold" schemes can be introduced. In the urban areas, private banking to affluent customers can be introduced, through which advisory and execution services could be provided for a fee. Foreign currency denominated accounts can also be introduced for them. Nationalized banks compare very poorly with the foreign banks when it comes to the efficiency in services. In order to improve the speed of service the bank should. Improve the rapport between the controlling offices and the branches to ensure that decisions arc communicated fast. Make sure that the officials as well as the staff are fully aware of the rules so that processing is faster. TECHNOLOGY In the current scenario, the importance of technology cannot be understated for retail banks which entail large volumes, large queues and paperwork. But most of the banks are burdened with a large staff strength which cannot be done away with.

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Besides, in the rural and semi-urban areas, customers will not be at home in an automated, impersonal environment. The objective would be to ensure faster and easier customer service and more usable information, instantly, economically and easily to all those who need it -customers as well as employees. Proper management information systems can also be implemented to aid in superior decision making. Communication technology is especially needed for money transfer between the same city and also between cities. There are inordinate delays in India because of geographical and other factors. Modem technology can make it possible to clear any check anywhere in India within three days. Installation of FAX facilities at all the big branches will facilitate speedy transfer of payment advices. Computerization will be of great help in improving back-office operations. At present, 60% of India's rural branches can have PCs. These can be used for quick retrieval and report generation. This will also drastically reduce the time bank staffs spend in filling and filing returns. Housekeeping operations can also be speeded up.

PRICE BUNDLING
Price bundling is a selling arrangement where several different products are explicitly marketed together to a price that is dependent on the offer. As banks are multi-product firms this strategy is more applicable to retail banking. Price bundling offers several economic and strategic benefits to a bank. It offers economies of, utilization of the existing capacities and reaching wider population of customers. Bank can get the benefits of information and transacting. In the process of extending variety of services, banks are acquiring enormous amount of customer information. If this in formation is systematically stored, banks can efficiently utilize this information in order to explore new segments and to cross-sell new services to these segments. Cross-selling opportunities and larger customer base can also be the motive for merger against usually stated advantage of cost savings. Price bundling can be used in order to lengthen the relationship with a customer. It will

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reduce the need of resources to be put on acquiring new customers and saves time of the bank. Among the strategic benefits, price bundling may cause less aggressive competition; it differentiates its products compared to rivals in the same market where the products are sold individually or in other kinds of bundles.

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CHAPTER -4 DATA ANALYSIS, INTERPRETATION AND PRESENTATION

Q1. Your Age?
TABLE Seria l No 1 2 3 4 Base 200 respondents GRAPH
80 70 60 50 40 30 20 10 0 18 - 23 YEAR 24 - 29 YEAR 30 - 35 YEAR 35 YEAR AND ABOVE NO OF RESPONDENT

Age Category 18-23Years 24-29 years 30-35 year 35 years and above

Number of Respondents 40 70 60 30

Percentage 20% 35% 15% 100%

AGE

Interpretation: From the table and graph above it can be seen that 20% respondents age are 18 to 23 years. 35% respondents age are 27 to 29 years. 30% respondents age are 30 to 35 years. 15% respondents age are 35 to above years.

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Q2. Marital Status? TABLE

Seria l No 1 2 Category Number of Respondents 140 60 Percentage 70% 30%

Married Unmarried

160 140 120 100 80 60 40 20 0 married unmarried

Interpretation From the table and graph above it can be seen that 70% respondents are married. 30% respondents are unmarried.

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Q3. Educational Qualification? TABLE

Seria l No 1 2 3 4 Category Number of Respondents 70 40 20 70 Percentage 35% 20% 10% 35%

Under graduate Graduate Post graduate

Illiterate

Base 200 respondents GRAPH

80 70 60 50 40 30 20 10 0 Graduate Post graduate Illiterate

Interpretation From the table and graph above it can be seen that 35% respondents are Under graduate. 2 0% respondents are Graduate. 10% respondents are Post graduate.

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Q4. Number Of years Are You are a customer of HDFC TABLE

Seria l No 1 2 Category Number of Respondents Percentage 70%

Less than five years More than five years

78 122

61%

Base 200 respondents GRAPH

140 120 100 80 60 40 20 0 less than more than 5 year 5 year

Interpretation From the table and graph above it can be seen that 39% respondents are customer of HDFC for less than five years. 61% respondents are customer of HDFC for more than five years

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Q5. What type of customer you are ? TABLE

Seria l No 1 2 3 Category Number of Respondents 40 108 52 Percentage 20% 54% 26%

Business Profession Service

Base 200 respondents GRAPH

120 100 80 60 40 20 0 Business profession service

Interpretation From the table and graph above it can be seen that 20% respondents Occupation is Business. 26% respondents Occupation is Profession. 54% respondents Occupation is Service.

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Q6. Are you satisfy with the retail banking services provided by the HDFC bank? TABLE
Seria l No 1 2 Category Number of Respondents 140 60 Percentage 70% 30%

Yes No

Base 200 respondents GRAPH

160 140 120 100 80 60 40 20 0 Yes No

Interpretation From the table and graph above it can be seen that 70 % is satisfy with retail banking services provided by HDFC Bank. 30% is not satisfied with retail banking services provided by HDFC Bank.

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Q7. Do you use credit card in your dairly routine? TABLE

Seria l No 1 2 Category Number of Respondents Percentage

Yes No

84 116

42% 58%

Base 200 respondents GRAPH

140 120 100 80 60 40 20 0 Yes No

Interpretation From the table and graph above it can be seen that 42% respondents use credit card. 58% respondents use credit card.

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Q8. What is your perception about different products/services provided by HDFC bank?
TABLE Seria l No 1 2 3 Base 200 respondents GRAPH
140 120 100 80 60 40 20 0
e e cr at iv ra tiv o id e a

Category Lucrative Not lucrative No idea

Number of Respondents 50 120 30

Percentage 25% 60% 15%

uc

Lu

Interpretation From the table and graph above it can be seen that 25% respondents perception about different products is lucrative. 60% respondents perception about different products is not lucrative. 15% respondents have no idea.

on l

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Q9. Are you satisfied with the online banking in HDFC bank? TABLE
Seria l No 1 2 3 Category Number of Respondents Percentage 5% 80% 15%

Yes No Will tell later

10 160
30

Base 200 respondents GRAPH

180 160 140 120 100 80 60 40 20 0 yes no will tell you later

Interpretation From the table and graph above it can be seen that 80% respondents are not interested to open an account with the bank. 5% respondents are interested to open an account with the bank. 15% of the respondents say that they will tell later.

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Q10. Do you want any changes in retail banking services provided by HDFC? TABLE
Seria l No 1 2 Category Number of Respondents Percentage 60% 40%

No
yes

120 80

Base 200 respondents GRAPH

140 120 100 80 60 40 20 0 NO YES

Interpretation From the table and graph above it can be seen that 60% no suggestions. 25% have suggestion.

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CHAPTER 5 SWOT ANALYSIS

STRENGTH:
Indian banks have compared favorably on growth, asset quality and profitability with other regional banks over the last few years. The banking index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 percent growth in the market index for the same period. Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks. Bank lending has been a significant driver of GDP growth and employment. Extensive reach: the vast networking & growing number of branches & ATMs. Indian banking system has reached even to the remote corners of the country. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake)after merger of New Bank of India in Punjab National Bank in 1993, 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector

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banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. Foreign banks will have the opportunity to own up to 74 per cent of Indian private sector. Banks and 20 per cent of government owned banks.

WEAKNESS:
PSBs need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall organizational performance ethic & strengthen human capital. Old private sector banks also have the need to fundamentally strengthen skill levels. The cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCBs), unless industry utilities and service bureaus. Refusal to dilute stake in PSU banks: The government has refused to dilute its stake in PSU banks below 51% thus choking the headroom available to these banks for raining equity capital. Impediments in sectoral reforms: Opposition from Left and resultant cautious approach from the North Block in terms of approving merger of PSU banks may hamper their growth prospects in the medium term.

OPPORTUNITY:
The market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth

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management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations. Banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates provided. This will expose the weaker banks. With increased interest in India, competition from foreign banks will only intensify. Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks. New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitably serve segments like the rural/low income and affluent/HNI segments; actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms. Attracting, developing and retaining more leadership capacity Foreign banks committed to making a play in India will need to adopt alternative approaches to win the race for the customer and build a value-creating customer franchise in advance of regulations potentially opening up post 2009. At the same time, they should stay in the game for potential acquisition opportunities as and when they appear in the near term. Maintaining a fundamentally long-term valuecreation mindset. Reach in rural India for the private sector and foreign banks. With the growth in the Indian economy expected to be strong for quite some time especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. the Reserve Bank of India (RBI) has approved a proposal from the government to amend the Banking Regulation Act to permit banks to trade in commodities and commodity derivatives. 39

Liberalization of ECB norms: The government also liberalised the ECB norms to permit financial sector entities engaged in infrastructure funding to raise ECBs. This enabled banks and financial institutions, which were earlier not permitted to raise such funds, explore this route for raising cheaper funds in the overseas markets. Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has allowed them to raise perpetual bonds and other hybrid capital securities to shore up their capital. If the new instruments find takers, it would help PSU banks, left with little headroom for raising equity. Significantly, FII and NRI investment limits in these securities have been fixed at 49%, compared to 20% foreign equity holding allowed in PSU banks.

THREATS:
Threat of stability of the system: failure of some weak banks has often threatened the stability of the system. Rise in inflation figures which would lead to increase in interest rates. Increase in the number of foreign players would pose a threat to the PSB as well as the private players.

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CHAPTER 6 RECOMENDATION

KNOWING CUSTOMER

Know your Customer is a concept which is easier said than practiced. Banks face several hurdles in achieving this. In order to that the product lines are targeted at the right customers-present and prospective-it is imperative that an integrated view of customers is available to the banks. The benefits flowing out of cross-selling and upselling will remain a far cry in the absence of this vital input. In this regard the customer databases available with most of the public sector banks, if not all, remain far from being enviable. What needs to be done is setting up of a robust data warehouse where from meaningful data on customers, their preferences, there spending patterns, etc. can be mined. Cleansing of existing data is the first step in this direction. PSBs have a long way to go in this regard. TECHNOLOGY ISSUES

Retail banking calls for huge investments in technology. Whether it is setting up of a Customer Relationship Management System or Establishing Loan Process Automation or providing anytime, anywhere convenience to the vast number of customers or establishing channel/product/customer profitability, technology plays a pivotal role. And it is a long haul. The Issues involved include adoption of the right technology at the right time and at the same time ensuring volumes and margins to sustain the investments. It is pertinent to remember that Citibank, known for its deployment of technology, took nearly a decade to make profits in credit cards. It has also to be added in the same breath that without adequate technology support, it would be well nigh possible toad minister the growing retail portfolio without allowing its health to deteriorate. Further, the key to reduction in transaction costs simultaneously with increase in ability to handle huge volumes of business lies only

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in technology adoption. PSBs are on their way to catch up with the technology much required for the success of retail banking efforts. Lack of connectivity, stand alone models, concept of branch customer as against bank customer, lack of convergence amongst available channels, absence of customer profiling, lack of proper decision support systems, etc., are a few deficiencies that are being overcome in a great way. However, the initiatives in this regard should include creating flexible computing architecture amenable to changes and having scalability, a futuristic approach, networking across channels, development of a strong Customer Information Systems (CIS) and adopting Customer Relationship Management (CRM) models for getting a 360 degree view of the customer. ORGANIZATIONAL ALIGNMENT

It is of utmost importance that the culture and practices of an institution support its stated goals. Having decided to take a plunge into retail banking, banks need to have a well defined business strategy based on the competitive of the bank and its potential. Creation of a proper organization structure and business operating models which would facilitate easy work flow are the needs of the hour.The need for building the organizational capacity needed to achieve the desired results cannot be overstated. This would mean a strong commitment at all levels, intensive training of the rank and file, putting in place a proper incentive scheme, etc.As a part of organizational alignment, there is also the need for setting up of an effective Corporate Marketing Division. Most of the public sector banks have only publicity departments and not marketing setup.A fully fledged marketing department or division would help in evolving a brand strategy, address the issue of alienation from the upwardly mobile, high net worth customer group and improve the recall value of the institution and its products by arresting the trend of getting receded from public memory.The much needed tie-ups with manufacturers/distributors/builders will also facilitated smoothly.It is time to break the myth PSBs are not customer friendly.The attention is to be diverted to vast databases of customers lying with the PSBs till unexploited for marketing.

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PRODUCT INNOVATION

Product innovation continues to be yet another major challenge. Even though bank after bank is coming out with new products, not all are successful. What is of crucial importance is the need to understand the difference between novelty and innovation? Peter Drucker in his path breaking book: Management Challenges for the 21stCentury has in fact sounded a word of caution: innovation that is not in tune with the strategic realities will not work; confusing novelty with innovation (should be avoided), test of innovation is that it creates value; novelty creates only amusement. The days of selling the products available in the shelves are gone.Banks need to innovate products suiting the needs and requirements of different types of customers. Revisiting the features of the existing products to continue to keep them on demand should not also be lost sight of. PRICING OF PRODUCT

The next challenge is to have appropriate policies in place. The industry today is witnessing a price war, with each bank wanting to have a larger slice of the cake that is the market, without much of a scientific study into the cost of funds involved, margins, etc. The strategy of each player in the market seems to be: under cutting others and wooing the clients of others .Most of the banks that use rating models for determining the health of the retail portfolio do not use them for pricing the products. The much needed transparency in pricing is also missing, with many hidden charges. There is a tendency, at least on the part of few to camouflage the price. The situation cannot remain his way for long. This will be one issue that will be gaining importance in the near future. PROCESS CHANGES

Business Process Re-engineering is yet another key requirement for banks to handle the growing retail portfolio. Simplified processes and aligning them around delivery of customer service impinging on reducing customer touch-points are of essence. A realization has to drawn that automating the inefficiencies will not help anyone and

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continuing the old processes with new technology would only make the organization an old expensive one. Work flow and document management will be integral part of process changes. The documentation issues have to remain simple both in terms of documents to be submitted by the customer at the time of loan application and those to be executed upon sanction. ISSUE CONCERNING HUMAN RESOURCES

While technology and product innovation are vital, the soft issues concerning the human capital of the banks are more vital.The corporate initiatives need to focus on bringing around a frontline revolution. Though the changes envisaged are seen at the frontline, the initiatives have to really come from the back end. The top management of banks must be seen as practicing what preaches. The initiatives should aim at improved delivery time and methods of approach. There is an imperative need to create a perception that the banks are market-oriented. This would mean a lot of proactive steps on the part of bank management which would include empowering staff at various levels, devising appropriate tools for performance measurement bringing about a transformation cant do to can do mind-set change from restrictive practices to total flexible work place, say. By having universal tellers, bringing in managerial controlling work place, provision of intensive training on products and processes, emphasizing, coaching etiquette, good manners and best behavioral models, formulating objective appraisals, bringing in transparency, putting in place good and acceptable reward and punishment system, facilitating the placement of young /youthful staff in front-line defining a new role for front-line staffby projecting them as sellers of products rather than clerks at work and changing the image of the banks from a transaction provider to a solution provider. RURAL ORIENTATION As of now, action that is taking place on the retail front is by and large confined two metros and cities. There is still a vast market available in rural India, which remains to be trapped. Multinational Corporations, as manufacturers and distributors, have

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already taken the lead in showing the way by coming out with exquisite products, packaging and promotions, keeping the rural customer in mind. Washing powders and shampoos in Re.1 sachet made available through an efficient network and testimony to the determination of the MNCs to penetrate the rural market. In this scenario, banks cannot lack behind. In particular PSBs, which have a strong rural presence, need to address the needs of rural customers in a big way. These and only these will propel retail growth that is envisaged as a key strategy for portfolio expansion by most of the banks.

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Chapter 7 Conclusion
Retail banking in India has seen a dramatic change over the years. It has evolved from a time when the mindset of a traditional middle class Indians used to be debt averse, which preferred managing under their thrifty means to the current mindset which doesnt hesitate in taking loans for spending. To keep in pace, the retail banking environment today is changing fast. The changing customer demographics compel to create a differentiated platform based on latest technology, improved service and banking convenience. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the merchant acquiring business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is positioned in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.

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QUESTIONNAIR
Q1. Your Age?
Q2. Marital Status? Q3. Educational Qualification? Q4. Number of years Are You are a customer of HDFC Q5. What type of customer you are? Q6. Are you satisfied with the retail banking services provided by the HDFC bank? Q7. Do you use credit card in your dairly routine? Q8. What is your perception about different products/services provided by HDFC bank? Q9. Are you satisfied with the online banking in HDFC bank?

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Chapter 8 BIBLOGRAPHY HDFC BRANCH UDAIPUR WIKIPEDIA

WWW.HDFC.COM

GOOGLE OTHER GERNALS

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