Banks in India have traditionally offered mass banking products. Most common deposit
products being Savings Bank, Current Account, Term deposit Account and lending products
being Cash Credit and Term Loans. Due to Reserve Bank of India guidelines, Banks have had
little to do besides accepting deposits at rates fixed by Reserve Bank of India and lend
amount arrived by the formula stipulated by Reserve Bank of India at rates prescribed by
the latter. PLR (Prime lending rate) was the benchmark for interest on the lending
products. But PLR itself was, more often than not, dictated by RBI. Further, remittance
products were limited to issuance of Drafts, Telegraphic Transfers, Bankers Cheque and
Internal Transfer of funds.
In view of several developments in the 1990s, the entire banking products structure has
undergone a major change. As part of the economic reforms, banking industry has been
deregulated and made competitive. New players have added to the competition. IT revolution
has made it possible to provide ease and flexibility in operations to customers. Rapid
strides in information technology have, in fact, redefined the role and structure of
banking in India. Further, due to exposure to global trends after Information explosion
led by Internet, customers - both Individuals and Corporates - are now demanding better
services with more products from their banks. Financial market has turned into a buyer's
market. Banks are also changing with time and are trying to become one-stop financial
supermarkets. Market focus is shifting from mass banking products to class banking with
introduction of value added and customised products.
A few foreign & private sector banks have already introduced customised banking
products like Investment Advisory Services, SGL II accounts, Photo-credit cards, Cash
Management services, Investment products and Tax Advisory services. A few banks have gone
in to market mutual fund schemes. Eventually, the Banks plan to market bonds and
debentures, when allowed. Insurance peddling by Banks will be a reality soon. The recent
Credit Policy of RBI announced on 27.4.2000 has further facilitated the entry of banks in
this sector. Banks also offer advisory services termed as 'private banking' - to
"high relationship - value" clients.
The bank of the future has to be essentially a marketing organisation that also sells
banking products. New distribution channels are being used; more & more banks are
outsourcing services like disbursement and servicing of consumer loans, Credit card
business. Direct Selling Agents (DSAs) of various Banks go out and sell their products.
They make house calls to get the application form filled in properly and also take your
passport-sized photo. Home banking has already become common, where you can order a draft
or cash over phone/internet and have it delivered home. ICICI bank was the first among the
new private banks to launch its net banking service, called Infinity. It allows the user
to access account information over a secure line, request cheque books and stop payment,
and even transfer funds between ICICI Bank accounts. Citibank has been offering net
banking to its Suvidha program to customers.
Products like debit cards, flexi deposits, ATM cards, personal loans including consumer
loans, housing loans and vehicle loans have been introduced by a number of banks.
Corporates are also deriving benefit from the increased variety of products and
competition among the banks. Certificates of deposit, Commercial papers, Non-convertible
Debentures (NCDs) that can be traded in the secondary market are gaining popularity.
Recently, market has also seen major developments in treasury advisory services. With the
introduction of Rupee floating rates for deposits as well as advances, products like
interest rate swaps and forward rate agreements for foreign exchange, risk management
products like forward contract, option contract, currency swap are offered by almost every
authorised dealer bank in the market. The list is growing.
Public Sector Banks like SBI have also started focusing on this area. SBI plans to open
100 new branches called Personal Banking Branches (PBB) this year. The PBBs will also
market SBI's entire spectrum of loan products: housing loans, car loans, personal loans,
consumer durable loans, education loans, loans against share, financing against gold.