Primary source of margin for a bank is to raise deposits at a lower rate and lend at a relatively higher rate. Established principle says that lending to many rather than a few reduces the risk. Similar reasoning is applicable while raising deposits too. Retail deposits raised through bank branches are the most preferred form of deposits for banks especially after the recent financial crisis. Retail deposits contribute towards a stable liability portfolio for banks while presenting a large customer base which can be tapped in to sell financial products raising fee income. Leading private sector banks are already earning more than one fourth of their total earnings in the form of fee income. This form of income is relatively less sensitive to interest rate movements and is primarily driven by the branch staff productivity. A 2011 study by Indian Banking Association and BCG focussed on redefining role of branches enumerates that most efficient business models among retail banks ensure that maximum proportion of staff is customer facing. The same study reveals that around 82% of bank employees globally are deployed in customer facing roles compared to 62% among Indian banks. New age private sector banks are more sensitive to this metrics by having deployed about 73% of their employees in customer facing roles. Research points that higher the amount of time branch staff spends with customers, higher is the fee income prospects for the bank. Key here is up-skilling of customer facing employees operating out of bank branches. Other than transactional skills required to perform a service task, a branch banker is expected to perform the role of an investment advisor, wealth manager, financial planner and sometimes even a tax advisor. The skills required to perform these tasks are a combination of financial planning, investment advisory, updated knowledge of personal taxation and awareness of macroeconomic factors.
The other interesting statistics is penetration of bank branches in India. A bank branch per 100,000 adults in India stands at 747 compared to 1,065 for Brazil and 2,063 for Malaysia. This explains increased thrust by RBI to spread banking footprints across under-banked and unbanked areas.
Urban economic clusters reveal another interesting data. IBA-BCG study predicts that wealth is expected to get further concentrated in the hands of few. The top 5% households, primarily residing in the metros and Tier I cities, will account for 30% of the total disposable income across the country. Wealth management services will be demanded by the new rich making it an integral part of the product portfolio for banks.
There exists an enhanced need for comprehensive skill building programs for retail banking professionals which embeds contemporary financial advisory knowledge with traditional transaction banking.