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Liberalization, economic growth, changing demographics, and technological advancements have fueled the growth of retail banking in India. The product range in retail banking includes four broad categories: liability products, asset products, credit cards/debit cards, and investment products. Liability products include savings accounts, no-frills accounts, current accounts, fixed deposit/term deposits, and recurring deposits. Asset products include all kinds of retail loans, such as housing loans, personal loans, education loans, gold loans, loans to senior citizens, property and mortgage loans, vehicle loans, and agricultural loans. The investment products include investments in mutual funds, insurance policies, and pension plans. These are discussed in subsequent chapters. As the bargaining power of a retail customer is less than that of a corporate customer, banks tend to charge the same price/interest rate for all retail customers, with the exception of high-value segments (HNIs and NRIs). Banks set the price for liability products, without the interference of the RBI. Asset products are priced based on the prime lending rates set by banks for each asset category. Overt pricing and covert pricing are the two different approaches to pricing.
The promotion of retail banking products is done through various avenues of promotion, such as advertising, sales promotion, personal selling, brand building, public relations, telemarketing, direct sales, and direct-response advertising.
The common distribution channels in retail banking are branches, ATMs, the Internet, phone banking, and mobile banking, EFTPOS, direct selling agents (DSAs), call centers, and distribution network of alliance partners. There are some overlaps between the promotional avenues and distribution channels. For example, telemarketing and personal selling may be outsourced to DSAs.
Cross-selling helps the banks to increase their sales by selling different products to existing clients. It helps improve customer retention, reduce the cost of customer acquisition, and enhance customer lifetime profitability. Cross-selling also helps the customers in terms of reduced prices, faster and easier processing, and customized products. However, excessive cross-selling would be viewed by the customer as harassment.
Retail Banking in India
The Paradigm Shift
Differences between Retail and Corporate Banking
Factors Contributing to the Growth in Retail Banking
Competition to Retail Banks
Types of Retail Banking Products
New Product Development
Generic New Products
Banking to HNIs and NRIs
Price Elasticity of Demand
Pricing of Liability Products
Pricing of Asset Products
Covert and Overt Pricing
Direct Mail and Direct-response Advertising
Phone and Mobile Banking
Direct Selling Agents (DSA)
Distribution Network of Alliance Partners
Need for Cross-selling
Issues in Cross-selling