Retail Banking Front Office Management

Banking: engaging in the business of keeping money for savings and checking accounts or for exchange or for issuing loans and credit etc.

Retail: the selling of goods to consumers; usually in small quantities and not for resale

Retail Banking: 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 forth.

Retail Banking in India is not a new phenomenon. It has always been prevalent in India in Various Forms. For the last few years it has become synonymous with mainstream banking for many banks.

 Retail Banking:

Retail Banking is nothing but dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet.

Asset Side:

• Fixed, current/saving accounts.

Liabilities Side:

• Mortgages, loans(e.g.: Personal, Housing, Auto & Education)

Today’s retail banking sector is characterized by three basic characteristics:

• Multiple Products(deposits, credit cards, insurance, investments and securities)

• Multiple channel of distribution (call centre, branch and internet)

• Multiple customer groups (consumer, small business and corporate)

The typical products offered in the Indian Retail Banking segment are housing loans, consumption loans for purchase of durables, auto loans, credit cards and educational loans. The loans are marketed under attractive brand names to differentiate the products offered by different banks.

 What has contributed to the retail growth?

There are some basic reasons which needed to highlight briefly they are;

1. Economic prosperity and the consequent increase in purchasing power have given a fillip to a consumer boom. Note that during the 10 years after 1992, India’s economy grew at an average rate of 6.8 percent and continues to grow at the almost the same rate not many countries in the world match this performance.

2. Changing consumer demographics indicate vast potential for growth in consumption both qualitatively and quantitatively. India is one of the countries having highest proportion (70%) of the population below 35 years of age i.e. younger population.

3. Technological Factors played a major role. Technological innovations relating to increasing use of credit/debit cards, ATMs, direct debits and internet and phone banking have contributed to the growth of retail banking in India.

4. The Treasury income of the banks, which had strengthened the bottom lines of banks for the past few years, has been on the decline during the last two years. In such a scenario retail business provides a good vehicle of profit maximization. Considering the fact that retail’s share in impaired assets is far lower than the overall bank loans and advances, retail loans have put comparatively less provisioning burden on banks apart from diversifying their income streams.

5. Decline in Interest rates are has also contributed to the growth of retail credit by generating the demand for such credit.

 Opportunities and Challenges of Retail Banking in India:


Retail banking has immense opportunities in growing economy like India. As the growth story gets unfolded in India, retail banking is going to emerge a major driver. With reference to BRIC report talking India as an Economic Superpower. A. T. Kearney, a global management consulting firm, recently identified India as the “Second most attractive retail destination” of 30 emergent markets.

The rise of the 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 generation. Improving consumer purchasing power, coupled with more liberal attitudes towards personal debt, is contributing to India’s retail banking segment.

The combination of the above factors promises substantial growth in the retail sector, which at present is in the nascent stage. Due to bundling of service and delivery channels, the areas of potential conflicts of interest tend to increase in universal banks. Some of the key point’s issues relevant to retail banking sector are: Financial inclusion, responsible lending and access to finance, long term savings, financial capability, consumer protection, regulation and financial crime prevention


1. Retention of customers is going to be a major challenge. According to research by Reichheld and Sasser in the Harvard Business Review, 5 % increase in customer retention can increase profitability by 35% in banking business, 50% in Insurance and brokerage, and 125% in consumer credit card market. Thus, bank need to emphasis retaining customers and increasing market share.

2. Rising indebtedness could turn out to be a cause concern in the future India’s position, of course is not comparable to that of the developed world where household debt as a proportion of disposable income is much higher. Such a scenario creates high uncertainty.

3. Information Technology poses both opportunities & challenges. Even with ATM machines and internet banking, many consumers still prefer the personal touch of their neighborhood branch bank. Technology has made it possible to deliver service throughout the branch bank network, providing instant updates to checking accounts and rapid movement of money for stock transfers. However, this dependency on the network has brought IT department’s additional responsibilities and challenges in managing, maintaining and optimizing the performance of retail banking networks. Illustratively, ensuring that all bank products and services available, at all times, and across the entire organization is essential fir today’s retails banks to generate revenues and remain competitive.

Besides there are network management Challenges, whereby keeping these complex, distrusted networks and application operating properly in support of business objectives becomes essential.

Specific challenges include ensuring that account transaction application run efficiently between the branch offices and data centers.

 Conclusion:

Banks now need to use retail as a growth trigger. This requires product development and differentiation, innovation, and business process re- engineering, micro- planning, marketing prudent pricing, customization, technological up gradation, home/electronic/mobile banking, and cost reduction and cross selling.

While retail banking offers phenomenal opportunities for growth, the challenges are equally daunting. How far the retail banking is able to lead growth of the banking industry in future would depend upon the capacity building of the banks to meet the challenges and make use of the opportunities profitably. However, the kind of technology used and the efficiency of operations would provide the much needed competitive edge for success in retail banking business. Furthermore, in all these, customers’ interest is of paramount importance.

For studying the application of Retail Banking fundas practically I have visited to HDFC Bank for collecting all the pin points of retail business in banking sector.

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  • Raj Janorkar

    Retail Banking Front Office Management

    2 years ago