Higher middle class, rising disposable income, changing life style/aspirations, willingness to spend more for luxuries are some of the factors attracting the banks to enter the retail segment in a big way.India is the fourth largest economy in the world with billion population (after US, Japan, China). The country offers an enormous market for retail banking in view of 200 million households/400 million middle class population.
Banks have adopted to retail banking in view of the huge potential. Consumer spending helps to propel economic activity/growth to a great extent. Banks have not been able to carry on business in the usual way due to lack of scope at present. They look up to retail lending as a possible avenue to augment business in the current context. Hence, all the Public Sector Banks, new and old Private Sector Banks as well as Foreign Banks focus on personal banking.
New initiatives, new innovations, new strategies, new products, new delivery mechanisms, ability to cross sell products, consumer orientation in every thing that a bank does, focusing towards relationship management, diversification of business to profitable channels (where delinquency rate is low), developing proper risk forecasting techniques, improving organizational effectiveness, imaginative corporate planning and implicit execution, organizational restructuring, technology initiative, customer care, aggressive marketing strategies, positioning products as a brand, reorient, redesign, reengineer and reinvent work processes besides every employee exhibiting entrepreneurial spirit are the prerequisites for ensuring optimal size and soundness of banks in future.There has been poor demand for credit in the last few years. Banks are flush with funds. The scope for investment is also very limited on account of poor returns. The security market is weak and inactive—not many new projects have been commissioned in the last few years and there are no public issues worth the name.
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