The advantages that a bank can reap by going retail are lower NPAs, lower risk weight in certain segments like housing loan, better yield, low cost funds, strong customer base etc. If banks handle it effectively and efficiently, it could be the panacea for all banking illness.
Banking, as defined in Banking Regulation Act, is acceptance of deposits for the purpose of lending and investment and not repayable otherwise than on demand. With the limited network of commercial banks, and monopolies of few presidency banks, the business flow was spontaneous and bankers had nothing more to do than banking defined in the statute book, In the Early Banking.
The nationalization of major commercial banks in the late 1960s and early 1980s and the introduction of Lead Bank Scheme resulted in large-scale expansion of bank network in the country. The per branch population, which was over 60,000 in the early 1960s has come down to 10,000 now.
Added to this, the financial sector reforms have brought in the entry of new private sector and foreign banks into the country. The conventional banking as outlined above have given way for professional and hi-tech banking. There has been a paradigm shift from the monopolies of public sector banks to competitive banking. Public sector banks can no longer remain complacent with their conventional products and services. With walk-in business virtually being ruled out, banks are now scouting for quality consumers both for building their resources and assets. |
