ECOFORUM [Volume 5, Issue 2 (9), 2016] 137 Krishnakumar RAMANATHAN Justice KS Hegde Institute of Management, NITTE, India krishnakumar@nitte.edu.in Babu P. GEORGE Fort Hays State University, Kansas, USA bpgeorge@fhsu.edu Abstract The banking industry in India is going through a unique competitive situation: on the one hand, the proliferation of new banks has increased competition multi-fold; on the other hand, given the rigid regulatory environment, banks have very little liberty to innovate products. The entry of multinational banking giants with superior service operations has further amplified the competition for customers. This paper examines the business performance of Karnataka bank during the period between 2006 and 2014 in order to bring home some of these challenges. Based on feedback from the branch managers, savings and current accounts - two classic banking products – suffered the most in the onslaught. Practicing managers as well as customers that we interviewed held that banking services in terms of customer experience ought to be improved and that various value added services could be introduced. Customers also expected reduced penalty for minimum balance and enhanced insurance cover for their accounts. Keywords: Retail banking, banking products, challenges, Karnataka Bank, India. JEL Classification: M16, M29 I. INTRODUCTION Banks in India have been through big changes since the economic liberalisation that began in 1991. Opening up of the economy offered opportunities as well as increasing competition from both domestic and foreign players. To be the preferred bank means changing “good enough” and offering a unique value proposition to be a bank of customer’s preference. And that means changing the way people have always done things. This study helps in understanding why particular products - especially some ‘weaker products’ - are digressing the productivity of the Indian banks over a period of time. Analysis of the business of Karnataka Bank based on the performance of products like current account, savings account, fixed deposits, housing loan, education loan, vehicle loan, agricultural loan, etc., reveals certain key weaknesses that are indicative of the troubles faced by the banking sector in India. For a comparative analysis, performance indicators of other banks in the same sector who are competitors to Karnataka Bank, like Karur Vysya bank, Axis bank, and ING Vysya bank were taken into consideration. II. BACKGROUND Attempts have been made to study the efficiency and productivity of banking sector in developed countries (Berger and Humphrey, 1997; Berger et al., 1999; Isik and Hassan, 2002 a, b; Yildirim and Philippatos, 2007). However, studies analyzing the efficiency of banks in developing countries, including India, are relatively modest (Hegde, George, and Nedelea, 2007; George and Hegde, 2004). In their extensive international literature survey, Berger and Humphrey (1997) noted that the vast majority of the efficiency literature focuses on the banking markets of well-developed countries with particular emphasis on the U.S. markets. Fethi and Pasiouras (2010) provided an extensive survey on efficiency and productivity studies in banking sector published in various research journals covering the period 1998-2008. They identified 151 studies that use DEA to estimate various measures of bank efficiency and productivity growth, and 30 studies that provide similar estimates at the branch level. More than 75% of the studies focus on efficiency and productivity issues of banks in developed countries. The literature on bank efficiency reveals mixed experiences of liberalization policies undertaken in various countries. A number of studies report the existence of efficiency gains due to liberalization programmes undertaken in various emerging and transition countries including Turkey (Zaim, 1995; Isik and Hassan, 2003), Thailand (Leightner and Lovell, 1998), Hungary (Hasan and Marton, 2003), the Central and Eastern European THE EVOLVING COMPETITIVE DYNAMICS IN THE RETAIL BANKING SECTOR IN INDIA: A CASE STUDY OF KARNATAKA BANK