Retail Banking And Wholesale Banking 4g47g

RETAIL BANKING AND WHOLESALE BANKING The concept of retail banking The retail banking means products and services offered to individuals and households sector for personal use and consumption like loans for housing, vehicle, for consumer durable, loans for enjoying vacations etc. It not only means lending but also involves whole of the banking services provided to individuals and household sector. The products to tap their savings and other services are included in retail banking. The retail banking concept has been expanded to include services provided to small and medium sized business and also high net worth individuals . The concept of wholesale banking In the whole sale banking the focus is on corporate, i.e. companies, firms, proprietorship concerns, Public Sector, Institutions, societies, Trusts, clubs etc. Why retail banking Since the year 1991 the process of disintermediation accelerated. The corporate had easy access to funds from the savers thus bying the banks. 1

This led to cut throat competition among the banks to advance the corporate even at sub PLR and also to attract them, they started offering value added service at concessional rates. Banks experienced pressure on their margins and the implementation of new stringent norms of income recognition, assets classification and provisioning made the task for the banks more difficult. The corporate loans gave an average return of 0.5 % to 1.5% but had volumes and less workload but if the other services are added which were to be given at concessional rates the yield were still less. If a big loan goes bad, the entire amount outstanding had to provided for under the provisioning norms. The retail lending gave a return of 3 to 4% but with more work and there was hardly any need for value added services at concessional rates as the borrowers did not have any bargaining power and in the beginning there was not much competition among banks as the concept had not picked up in a big way. Before 1991 also the concept of retail lending was there but was very much limited and restricted to few avenues and very few banks were interested in this. While corporate loans and infact their banking was largely dependent on ups and own of economy but this does not affect the retail lending to a great extent. Retail banking gave a lot of stability and public image as compared to corporate banking.

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Growth of retail banking Housing loans, which is retail banking, has least NPAs and also carry a risk weight of 50%. The market for housing loan is growing @ 50% Over the years there was a felt need for improving quality of life. More consumerism, increase in salaries and income level and saving potential, change in Indian mind set, small family norms are some of the factors leading to demand for loans for consumption leading to thrust on retail lending. Now a days people want, good house, good cars, decent style of living, good clothing, vacations in India and abroad. Apart from the availability of money, there is competition among manufacturers and service providers to make these things within the easy reach of consumers by availability of goods and tying up with banks and other intermediaries. The peer pressure and demonstration affect is also pushing up further demand Through competitive strategies like product innovations, differential pricing, banks have attempted to develop profitable retail business The retail banking due to its reach, has given opportunities to banks to cross sell other products like credit cards, insurance, mutual funds, foreign exchange etc. Retail banking generally provided is:

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 Housing loans.  Loan against salary/pension  Loans for consumer durable.  Personal loans for consumption.  Educational loans.  Auto loans, gold loans, festival loans etc.  Loans against rent receivable.  Loans for vacations.  Loans to doctors for setting up clinic, to chartered ants etc.  Credit cards, debit cards.  Global cards  Deposit products like, flexi deposits etc.  Services like, electricity bill collection, telephone bills, school fees, insurance payment, filing of Income tax returns etc.  ATM, Tele banking, Internet banking, 365 days banking, depository services etc. Impact of retail banking  Customers have become king and banking revolves round him.  Customer has got wide choice in of banks and services, as the banks are outbidding each other to provide new services, products with differential rate structure and utilities.  Even products are tailor-made to suit a class of customers. You want to buy a plot of land, you want to

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apply for an IPO, you can approach a willing bank to lend you and create money for you.  Banks have become a financial super market. Disadvantage of retail banking.  Servicing a large number of customers become a problem, for this banks tend to have separate retail banking or personal banking sections so that corporate and retail customers do not feel the impact of each other and do not feel neglected.  Large number of products with differentiation also poses a problem.  Transaction cost increases. Future of retail banking  Signs of slow down in consumer growth is seen of late.  Possibility of deterioration in assets quality.  Pressure on margins due to entry of large number of players and aggressive marketing.

BANK ASSURANCE Bank assurance or bancassurance is a package of banking and insurance services, which are offered under one roof.

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It is a combination where both services co-exists and add value to the institution. The customer can avail both banking and insurance services together at one point. There is savings in distribution cost; a part of savings is ed on to the customers. The introduction of bancassurance products like life and non life insurance products has broadened the scope of retail banking. It is expected to give a boost to fee based income of the banks in the backdrop of thinning margins. The customers can get the benefit of all their needs being met under one roof. The banks have a large number of branches spread through out the country. The insurance sector gets the benefit of reach and clientele of banking. Most of the banks in India have since tied up arrangement with multi national insurance companies for selling their insurance products in life and non life segment as corporate agent for a fee.

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