Realization has dawned on banks that customer retention is more crucial than acquiring new customers. The growing competition and the technological innovations have created tremendous awareness among the customers. In order to retain even the existing customers, products are required to be upgraded keeping in mind the developments in other markets. With globalization, banks are required to keep themselves abreast with developments worldwide.

The Indian Banking witnessed paradigm shift after the financial sector reforms in 1991. The banks realized that profit will be under pressure after the introduction of prudential norms and asset classification. There was a clear shift on the emphasis from growth to profit and clean, transparent and healthy balance sheets as opposed to large sized balance sheets in earlier years. As the foreign exchange and money markets were gradually deregulated, the competition intensified. The net result is that margins are under tremendous pressure and the banks are looking for new avenues to meet the challenges posed to them. They have realized that they have no option but to address the needs of the customers effectively to survive in the highly competitive market and customer loyalty programs are gradually made an integral part to face new challenges.

Most of the High Networth Individuals (HNIs) are not interested in paying 30 to 36% interest made available on the credit cards. Instead they prefer to use debit cards, which serves the purpose of a credit card and an ATM card. A few of the HNIs who want to avail of credit at a relatively cheaper rate are offered overdraft facilities at 12 to 14% along with debit cards. The debit card transactions are debited to the overdraft account where they are required to pay only 14%. If this trend continues interest conscious customers may switch over to the debit cards from credit cards and credit card issuing organizations may have to intensify their credit risk analysis to ensure that they are not left with people who are not able to command credit in the market.

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