Selling third-party products, a fee-based activity, is an emerging opportunity for Public Sector Banks to leverage their vast geographic presence and improve the profitability. The major challenge is lack of skills to understand the products and to market them. Due to sheer size of market for these products, insurance and securities firms also want to tap this route for their growth.

This bit of information is real. In days of Raj, scotch was stored in the vaults of some foreign banks. Warehousing was an issue and by agreeing to keep in their vaults these banks earned the fee income. Scotch has not returned to bank vaults for sure, but something on those lines is happening. Now we can walk into any supermarket, bank, post office, ATM, Internet kiosk, Credit Card Company or departmental store to pick up an insurance product virtually off the shelf. As competition is hotting up, the alternate delivery channel is developing a win-win concept. The barrier between product and service is also gradually disappearing. One can now buy toothpaste and have dental insurance and buy a home loan and have life insurance cover too. Banks are not staying behind and are now selling products across the board ranging from Mutual Funds (MFs) to insurance to equity to government securities on another party's behalf.

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