Growth of Retail Banking in India
RETAIL BANKING
Project Work
Acceleration, Deceleration & Moderation in the growth of retail credit in India
David Varghese
2011PGPRAK004
PGP RAK, IIM INDORE
Introduction
Retail banking is the mobilization of deposits, lending and provision of financial services by a bank in the retail segment which results in fee-based income. Retail lending has been a great innovation across the globe in the commercial banking sector in recent years. Lending is not a new concept- it has been there for many years. Similarly retail deposit is also not a new concept. But retail lending is the new sector on which banks are concentrating now. Retail lending has seen different phases in its lifetime, since the liberalization of India in 1991. Both private and public sector banks, irrespective of size have been increasingly focusing on retail segment for both resource mobilization and lending. Banks are now the primary source of retail lending, a position previously enjoyed by NBFI’s. The surge on retail loans was largely on account of increasing liquidity due to the reduction in CRR/SLR over the years, increasing autonomy with respect to product innovation, reduced dependency on corporate customers. The demand side growth drivers such as increasing disposable income, enlarging middle class, increasing population of young people, changing attitude of customers towards loans etc. also were positive for the retail banking sector. Acceleration, Deceleration & Moderation
The growth in retail credit in India went through a lot of tough times. Prior to economic reforms in 1990, most of the banking credit was focused on agriculture, industry and commerce. Various regulatory restrictions were in place in order to ensure limits on total amount of housing loans and loans to individuals. There were other restrictions related to rate of interest, margin stipulation and maximum repayment period. After the economic and regulatory reforms were made, 3 distinct phases
Project Work
Acceleration, Deceleration & Moderation in the growth of retail credit in India
David Varghese
2011PGPRAK004
PGP RAK, IIM INDORE
Introduction
Retail banking is the mobilization of deposits, lending and provision of financial services by a bank in the retail segment which results in fee-based income. Retail lending has been a great innovation across the globe in the commercial banking sector in recent years. Lending is not a new concept- it has been there for many years. Similarly retail deposit is also not a new concept. But retail lending is the new sector on which banks are concentrating now. Retail lending has seen different phases in its lifetime, since the liberalization of India in 1991. Both private and public sector banks, irrespective of size have been increasingly focusing on retail segment for both resource mobilization and lending. Banks are now the primary source of retail lending, a position previously enjoyed by NBFI’s. The surge on retail loans was largely on account of increasing liquidity due to the reduction in CRR/SLR over the years, increasing autonomy with respect to product innovation, reduced dependency on corporate customers. The demand side growth drivers such as increasing disposable income, enlarging middle class, increasing population of young people, changing attitude of customers towards loans etc. also were positive for the retail banking sector. Acceleration, Deceleration & Moderation
The growth in retail credit in India went through a lot of tough times. Prior to economic reforms in 1990, most of the banking credit was focused on agriculture, industry and commerce. Various regulatory restrictions were in place in order to ensure limits on total amount of housing loans and loans to individuals. There were other restrictions related to rate of interest, margin stipulation and maximum repayment period. After the economic and regulatory reforms were made, 3 distinct phases
References: * http://www.cmie.com/ * http://economictimes.indiatimes.com * Retail Banking – Concept, Development and Issues by Ramesha, K * http://www.reportbuyer.com/banking_finance/banking/retail_banking/retail_banking_india.html * http://www.bankingonly.com/detail-news.php?news_id=1922