Following globalization in India, retail banking has made strong inroads into Indian banking. Every bank, small or big, new or old, private or foreign is chanting the retail mantra. Since retail banking is evolving at a faster pace, the players are redrawing their strategies to optimize on the business potential.
Retail banking has been at the forefront of the growth for many a consumer economy worldwide. Following globalization in India, the FMCG and consumer durable products opened up to international players. Retail banking made strong inroads into Indian banking as well. Retail customers, who represent a huge untapped market for consumer credit, have suddenly become the darling of the banking sector. That there is tremendous scope for increasing credit to the retail segment in India is clear from the fact that as of today, retail loans account for a mere 2.6% of GDP in comparison to around 40-60% in Korea and Taiwan; and 75% in the USA. Clearly, given the size of our economy and its population, the possibility of expanding the retail credit is enormous.
As per the studies of NCAER, Platinum and ORG-Marg (2001), the population of Indian middle class (urban) has increased from 11.6 million to 27.5 million in the last decade. The higher income affluent class increased from 0.5 million to 2.1 million during the same period. Around 43% of the urban population have availed loans, while another 22% will tend to avail the loans in future. As per JD Power 2002 survey, 82% of car buyers avail finance for their purchases as compared to 74%, two years ago.
Banks world over are seriously looking at retail markets and plan to increase their revenues to 50% from this segment. In India, on an average, a significant portion of revenues originate from wholesale and commercial banking, with retail forming a relatively small proportion both in terms of volumes as well as revenues. As banks shift their focus to retail customers in a big way, the retail loan book is expected to expand significantly, resulting in higher revenues. |
