...Retail Banking - Opportunities and Challenges Shyamala Gopinath* The issue of retail banking is extremely important and topical. Across the globe, retail lending has been a spectacular innovation in the commercial banking sector in recent years. The growth of retail lending, especially, in emerging economies, is attributable to the rapid advances in information technology, the evolving macroeconomic environment, financial market reform, and several micro-level demand and supply side factors. India too experienced a surge in retail banking. There are various pointers towards this. Retail loan is estimated to have accounted for nearly one-fifth of all bank credit. Housing sector is experiencing a boom in its credit. The retail loan market has decisively got transformed from a sellers’ market to a buyers’ market. Gone are the days where getting a retail loan was somewhat cumbersome. All these emphasise the momentum that retail banking is experiencing in the Indian economy in recent years. What is Retail Banking? Retail banking is, however, quite broad in nature - it refers to the dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet. Fixed, current / savings accounts on the liabilities side; and mortgages, loans (e.g., personal, housing, auto, and educational) on the assets side, are the more important of the products offered by banks. Related ancillary services include credit...
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...Tour of the World Research Paper-India A Business Report on India A business partnership with at global level demands that the country chosen for business must promise the new business with growth, diversification profit. A lot has been said about the countries of the West regarding their age old stable systems and their efficiency at handling business. However, western markets are highly saturated and suffer from several issues, including sanctions, clandestine policies and reduced distribution of power. Newly developed or developing countries, on the other hand, have the potential to not only accommodate a new business in their markets. Amongst the top developing countries in the world, India is considered as one of the fastest developing economies (Thapar, 2002). It is also claimed that setting up a business in this economy is beneficial in terms of growth and profit. Research of information available in the market and the media is required to understand how and why India can be considered as an option of a new market for the purpose of expanding business. India is the seventh largest country in the world, the second most in population levels and the largest democracy in the world. The government system in the country is quasi-federal, which means that it has a bipartisan political system that is based on American federal government as well on the Westminster system of the United Kingdom which has followed a two house system. The states have their own...
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... SUBPRIME LENDING The term "subprime" refers to the credit status of the borrower, which is being less than ideal. Subprime lending is a general term that refers to the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history. According to the U.S. Department of Treasury guidelines issued in 2001, "Subprime borrowers typically have weakened credit histories that include payment delinquencies i.e. non-payment of the mortgage, and possibly more severe problems such as charge-offs, judgments, and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, debt-to-income ratios, or other criteria that may encompass borrowers with incomplete credit histories." This is when the borrowers have a poor credit history that is they are bad borrowers. Subprime lending is also called B-Paper, near-prime, or second chance lending, as the borrowing is done to customers with a poor credit history or no credit history without any security in return of the money lending. Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others. A subprime loan is offered at a rate higher than A-paper loans due to the increased risk. Subprime lenders To access this increasing market, lenders often take on risks associated with lending to people with poor credit ratings...
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...are key indicators of economic performance and are closely monitored by governments, businesses and consumers. Macroeconomic factors are the factors which affect the wider economy. In other words these factors seem to summarize the picture of economy. Macroeconomic variables include economic output, unemployment, inflation, interest rates, money supply, exchange rate, foreign reserves, savings and investment. Variables used in study: • Consumer Price Index (CPI) Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account within the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the CPI) over time. A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households. It captures the retail price movement for different sections of consumers. In India, the Consumer Price Index or CPI measures changes in the prices paid by consumers for a basket of goods and services. It is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as...
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...Non-Performing Assets (NPA) - Meaning Non-Performing Assets are popularly known as NPA. Commercial Banksassets are of various types. All those assets which generate periodical income are called as Performing Assets (PA). While all those assets which do not generate periodical income are called asNon-Performing Assets (NPA). If the customers do not repay principal amount and interest for a certain period of time then such loans become non-performing assets (NPA). Thus non-performing assets are basically non-performing loans. In India, the time frame given for classifying the asset as NPA is 180 days as compared to 45 days to 90 days of international norms India and Non-Performing Assets In India, NPA were very high in the beginning of 90's. Over a period of time there is considerable decline in the NPA's of all banks. In the case of public sector banks, gross non-performing assets were 9.4% in 2002-03 and it declined to 7.8% in 2003-04. The net NPA during the same period declined from 4.5% to 3%. Types of NPA NPA have been divided or classified into following four types:- 1. Standard Assets : A standard asset is a performing asset. Standard assets generate continuous income and repayments as and when they fall due. Such assets carry a normal risk and are not NPA in the real sense. So, no special provisions are required for Standard Assets. 2. Sub-Standard Assets : All those assets (loans and advances) which are considered as non-performing for a period of 12...
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...President Ambit Corporate Finance Pte. Ltd. Vinod Wadhwani is Vice President, Ambit Corporate Finance Pte Ltd., He is responsible for Mergers and Acquisitions Group in the company. Earlier, he has worked as a marine engineer in merchant navy for eight years. • Increase in disposable income levels due to decrease in marginal tax rates and increase in total income levels • Tax benefits and other fiscal incentives announced in the Union Budgets • Increasing affordability of housing property purchase due to declining interest rates and stable property prices • Decline in the average house cost to annual income ratio to around 4-5 from 11-14 during the last decade resulting in an affordable EMI as a percentage of monthly income • Aggressive lending by banks to the housing sector due to lower credit offtake by...
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...Chain. Source – ibm.com/services 12 International Strategy 13 Institutional Strategy 13 Recommendations for Future Growth 14 Delivering Value to Customers 14 Human Resource Capital 15 Research and Development 16 References 17 Bibliography 18 Introduction The ‘Credit Crunch’ emerged in 2007 with the first effects being felt by the U.S. Mortgage industry. The term ‘credit crunch’ came was used to describe the collapse of the subprime mortgage industry that resulted in a freeze in lending by financial institutions. With non-payment of loans, huge debt and no capital gains, financial institutions began to go under. Investment banks, financial services and real estate market felt immediate impacts. Trillions of U.S. dollars were lost, huge government bailouts were necessary and a global slowdown of consumer spending and economic activity. In fact, by early 2008, the effects snowballed to global markets. Prior to 2007 and this global economic crisis, the lending habits of the Mortgage industry had opened the way for this eventual collapse. Mortgages were granted to low income earners at low interest rates. These were called subprime loans...
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...nations, like India have immensely benefited from the globalizing economy. Wealth has been pouring into the country as investments (both direct and institutional). Indian companies are acquiring companies all over the world, hence benefitting from expansion. This has directly affected the lives of many citizens in our country. For many, there has been a dramatic increase in the disposable income. The savings, consumption and investment patterns have changed in the past few years. This has meant that there has been an increase in demand for many financial services from different financial firms. The market has responded to this soaring demand with making attractive offers and services for the customers at affordable rates. Since the LPG reforms of 1991, there have been progressive reforms in the financial sector allowing for better and easier facilities and options to the consumer. An increasing financially aware middle class have realized the importance of financial services. Banks have streamlined and rationalized themselves to meet with the changing demands of the people. However, not all the reforms in the financial services sector have still been able to bring in the other half of India’s population who are un-banked. There are many reasons that are obvious for this kind of financial exclusion. Most of the un-banked or financially excluded population of India lives in rural areas; nevertheless, there is also a significant amount of the urban population of India who faces...
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...Commercial Banks A commercial bank is a type of financial intermediary and a type of bank. It raises funds by collecting deposits from businesses and consumers via checkable deposits, savings deposits, and time deposits. It makes loans to businesses and consumers. It also buys corporate bonds and government bonds. Its primary liabilities are deposits and primary assets are loans and bonds. For Eg: - Bank of Baroda, Canara Bank, Dena Bank etc.Commercial banks work with short term funds. Their working capital consists mainly of moneys deposited by customers and withdrawable by them on demand or on short notice. If a bank lends such moneys for long periods or keeps them blocked in any other way, it will be unable to meet the demands of its depositors for withdrawal of cash, and will be forced to go into liquidation. Commercial banks are the most important source of institutional credit in the money market. A commercial bank is a profit seeking business firm, dealing in money or rather dealing in claims to money. Commercial banks are the most important bank in India. The commercial banks account for over 80% of the total bank credit. Functions of Commercial Banks The commercial banks perform a number of vital functions. The functions of a commercial bank can be broadly classified into the followings: (1) Accepting Deposits: -The bank collects deposits from the public. The deposits can be of different types – such as: Savings Deposits: - This type of deposits...
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...and cause a deficit causing the deflation in the country. “The Nikkei average plunged from nearly 39,000 points in December 1989 to about 14,300 points in August 1992, thereby losing about 60% of its value. As a result, investors lost the equivalent of (U.S.) $2 trillion and property values plummeted by about $10 trillion. Property values in certain parts of the country declined by 70% and plunged Japan into a deep recession for 10-years.” (Alston, 2013) To summarize the stock market collapsed, property prices dropped, banks curtailed the easy lending practices the created the economic boom, consumer spending halted- recession created, deflation, and the Japanese government was unsuccessful 2. What lessons does the history of Japan over the past 20 years hold for other nations? What can countries do to avoid the kind of deflationary spiral that has gripped Japan? Other nations can learn from what happened with Japan. Strict lending practices should have been in place to begin with, this would help decrease the amount of bad debt. The Government need to watch its spending. Japan is stuck because its debt is so high, it is extremely difficult to become strong again. 3. What do you think would be required to get the Japanese economy moving again? In order to get the Japanese economy moving again, the Japanese government should do three things. First, fiscal stimulus that would raise the growth rate of the country above where it is at and where it is expected to be. Less...
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...VICTORIOUS TEAM Countries For The Project for the Period 2011 : 1] China 2] India 3] USA Team Members and Students IDS : Nikita Bhivate A2604 ( U.S.A.) Li Jianwei A2394 ( China ) Tingting Hao A2319 ( India ) MBA 531 International Financial Management. Prof. Jayant Kanitkar. INTRODUCTION : Introduction Of China : During the period from 2007 to 2011, the whole world has been suffering from global economic recession and financial crisis. From US subprime to EU sovereign debt crisis, China, as the second largest economy in the world, experienced internal and external economic impacts. In the year of 2007, China’s economic development reached its pick. With the expectation of CNY appreciation, hot money flooded into China. As a result of this, the price of investment asset surged up sharply. The housing price tripled, and the Shanghai stock index reached to a historical level of 6300 from less than 3000 with in one year. The wealth effect from the high investment asset price stimulated consumption. Moreover, China was keeping its high net exports trading volume and fixed asset investment. The GDP growth rate exceeded 10%. However, the financial bubble broke in the US, and a chain reaction directly affected China. In 2008, all economic indictors shown that China’s development slowed down. Stock market can be regarded as the forecaster of economic. The Shanghai stock index dropped to 1900 from 6300. Affected by recession in international...
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...Commercial Banks A commercial bank is a type of financial intermediary and a type of bank. It raises funds by collecting deposits from businesses and consumers via checkable deposits, savings deposits, and time deposits. It makes loans to businesses and consumers. It also buys corporate bonds and government bonds. Its primary liabilities are deposits and primary assets are loans and bonds. For Eg: - Arab-islamic Bank, Amman-Cairo Bank etc… .Commercial banks work with short term funds. Their working capital consists mainly of moneys deposited by customers and withdraw able by them on demand or on short notice. If a bank lends such moneys for long periods or keeps them blocked in any other way, it will be unable to meet the demands of its depositors for withdrawal of cash, and will be forced to go into liquidation. Commercial banks are the most important source of institutional credit in the money market. A commercial bank is a profit seeking business firm, dealing in money or rather dealing in claims to money. Commercial banks are the most important bank in such as USA , Europe and Palestine . The commercial banks account for over 80% of the total bank credit. Functions of Commercial Banks The commercial banks perform a number of vital functions. The functions of a commercial bank can be broadly classified into the followings: (1) Accepting Deposits: -The bank collects deposits from the public. The deposits can be of different types – such as: Savings Deposits:...
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...ICC Banking Summit Kolkata 18 May 2013 Foreword Over the past couple of years, the Indian banking sector has displayed a high level of resilience in the face of high domestic inflation, rupee depreciation and fiscal uncertainty in the US and Europe. In order to stimulate the economy and support growth of the banking sector, the Reserve Bank of India (RBI) adopted several policy measures. © 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Asset quality, capital adequacy, financial inclusion and talent management are some of the key issues facing the Indian banking industry, which despite serving the second largest populated country in the world with a total of 87 banks (including 26 public sector banks, 20 private banks and 41 foreign banks), as per the RBI, reaches out to only about half of the country’s households, scripting a nominal global footprint. The rising consumerism from the emerging ‘middle’ India and the higher purchasing power in rural India on account of rising employment provides opportunities for banks to look beyond the traditional customer segments. However, these segments would require flexible operating models which would ensure responsiveness at the last mile and at the same time be viable for the banks. On the other hand, global aspirations of Indian corporates calls for funding...
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...MAJOR PROJECT ON CUSTOMER PREFRENCES WITH REGARD TO THE RETAIL BANKING SCHEMES This Dissertation report is being submitted as a part of the requirements of the MBA (FINANCE) Program of Punjab Technical University ,Jalandhar. SUBMITTED TO: PROJECT GUIDE: SUBMITTED BY: Kamna Pathak MBA (FINANCE) 2 YR. ROLL NO. ……………. RIMT – IMCT Mandigobindgarh ACKNOWLEDGEMENT This study was made possible with the consultations, support and kind opinions from several people. So with immense gratitude, I acknowledge all those, whose guidance and valuable inputs have helped in the materialization of this project. No words are enough to thank Assistant Manager Mr. Rahul Kapoor of State Bank of Patiala, who not only inspired me to work on this project but also accepted to guide me a lot. In spite of heavy responsibilities and busy schedules, he always managed time to provide proper guidance. Clearly I owe a special in-depth of gratitude to my friends who created a motivating environment to work on this project and also helped me in understanding and reviewing major concept from various point of views. Finally I would like to be grateful to all those who directly or indirectly have been of great help and obliged me with their support and have helped me in converting my collection of data and information into a finely polished project. DECLARATION I Kamna Pathak of MBA(Finance) 2nd year, studying at RIMT-IMCT Mandigobindgarh...
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...The Reserve Bank of India (RBI) is the nation’s central bank fundamental commitment to maintaining the nation’s monetary and financial stability. From ensuring stability of interest and exchange rates to providing liquidity and an adequate supply of currency and credit for the real sector; from ensuring bank penetration and safety of depositors’ funds to promoting and developing financial institutions and markets, and maintaining the stability of the financial system through continued macro-financial surveillance, the Reserve Bank plays a crucial role in the economy. Our decisions touch the RBI at a Glance Managed by Central Board of Directors India’s monetary authority Supervisor of financial system Issuer of currency Manager of foreign exchange reserves Banker and debt manager to government Supervisor of payment system Banker to banks Maintaining financial stability Developmental functions Research, data and knowledge Sharing Central Board of Directors by the Numbers Official Directors 1 Governor 4 Deputy Governors, at a maximum Non-Official Directors 4 directors—nominated by the Central Government to represent each local board 10 directors nominated by the Central Government with expertise in various segments of the economy 1 representative of the Central Government 6 meetings—at a minimum—each year 1 meeting—at a minimum—each quarter Monetary Authority Issuer of Currency Banker and Debt Manager to Government Banker to...
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