Retail Banking Corporate Banking Samir K Mahajan WHAT

Retail Banking & Corporate Banking Samir K Mahajan

WHAT IS RETAIL BANKING ? Retail banking refers to the division of a bank that deals directly with retail customers. q Banks that focus purely on retail clientele are relatively few, and most retail banking is conducted by separate divisions of banks, large and small. q Customer deposits garnered by retail banking represent an extremely important source of funding for most banks. Samir K Mahajan

OTHER NAMES OF RETAIL BANKING q CONSUMER BANKING q. PERSONAL BANKING Samir K Mahajan

WHY BANKS FOCUS OF RETAIL BANKING q. Lack of demand for credit from large corporate Traditionally, banks have been catering to the demands of economic developments, finance for manufacturing activities had a greater priorities. Demand for credit from large corporates has fallen primarily due to two reasons: o. Near demise of working capital requirement due enhancement in activities like productivity and increased sales realization o Corporates have their of avenues such as tapping public deposits, issuance of shares and debentures. Samir K Mahajan

WHY BANKS FOCUS OF RETAIL BANKING (contd. ) q. Advent of Economic Liberalization Privatization and globalization has opened up the gate for a lot of new players in banking sectors. Increased purchasing power, consumerism and increased competition among banks have resulted in retail chase. q. Decent returns Retail banking has the potential to provide decent returns for banks with extended client base. Samir K Mahajan

PRODUCTS AND SERVICES – RETAIL BANKING q. Checking and savings accounts – customers are generally charged a monthly fee for checking accounts; savings accounts offer slightly higher interest rates than checking accounts but generally cannot have checks written on them. q. Time and Fixed Deposits – the balance in the account can be withdrawn only after maturity. Fixed deposits interest rate higher than saving accounts. q. Mortgages on residential and investment properties – because of their size, mortgages account for both a substantial part of retail banking profits, as well as the biggest chunk of a bank’s exposure to its retail client base. Samir K Mahajan

PRODUCTS AND SERVICES – RETAIL BANKING (contd) q. Automobile financing – banks offer loans for new and used vehicles, as well as refinancing for existing car loans. q. Credit cards – the high interest rates charged on most credit cards makes this a lucrative source of interest income and fees for banks. q. Debit Cards - directly debit money from customer’s bank account, and can directly be used to purchase goods and services. Use of debit card reduces cost on manpower. q. Personal loans /Consumer loan granted for personal (medical), family (education vacation), or household use (extension, repairs, purchase of air conditioner, computer refrigerator, etc. ), as opposed to business or commercial use. Such loans are either unsecured, or secured by the asset purchased or by a co-signor /guarantor). Unsecured loans / signature loans are advanced on the basis of the borrower's credit-history and ability to repay the loan from personal income. Repayment is usually through fixed amount installments over a fixed term. Samir K Mahajan

PRODUCTS AND SERVICES – RETAIL BANKING(contd) q. Foreign currency and remittance services The increase in cross-border banking transactions by retail clients, and the higher spreads on currencies paid by them, makes these services a profitable offering for retail banking. q. Wealth management A professional service which is the combination of financial/investment advice, accounting/tax services, and legal/estate planning for one fee. q. Stock brokerage (discount and full-service) ) The Bank act as stock exchange broker, issue demat account to the customer q. Insurance The banks offer diversified into insurance business and sells insurance products to its clients. Samir K Mahajan

Emerging Issues in in Handling Retail Bank q q Know the customer Technology Issues Product Innovation Pricing of Products Samir K Mahajan

Strategies for Successful Retail Banking q. Adoption of advanced and latest technology q. Skilled manpower in all branches and offices q. Balanced and sustained growth in deposits q. Strategic cost management q. Market research and market intelligence q. Risk management q. Customer relationship management o. Customer acquisition o. Customer value maximization o. Customer retention q. Service quality with a human touch Samir K Mahajan

RECENT TRENDS IN RETAIL BANKING q. Aggressive entry strategies of foreign banks to Retail Segment q. Customer retention initiatives by PSU Banks q. Aggressive price-war on Retail Credit q. Customers’ preference to more and more alternate channels for convenience q. Fee based income from remittance is shrinking due to RTGS and other technology initiatives q. Higher short term interest and flatter yield curves Samir K Mahajan

Recent trends (contd. ) o Phenomenal rise in nuclear and dual income families & enhanced spending power o Increasing literacy levels o Higher adaptability to technology banking o Growing consumerism o Fiscal incentives to Housing loans o Fastest economic growth over the decade o Phenomenal rise in nuclear and dual income families & enhanced spending power o Higher adaptability to technology banking o Growing consumerism Samir K Mahajan

Next Corporate Banking Samir K Mahajan

CORPORATE BANKING Corporate banking is financial services provided by banks to the corporate for meeting their banking and financial needs for setting up new projects, expansion, diversification, modernization, financial restructuring and commercial banking facilities. Corporate banking includes the following services: q Funded Services which include o Finance for creation of fixed assets/capital expenditure through term loan consortium advance, multiple banking arrangement, consortium finance and loan syndication o Working capital finances through cash credit, overdraft, purchase and discount of bills (inland foreign) , investment in commercial paper issued by corporate q Non-funded service which include o Non-fund based working capital financing through issue of letter of credit and bank guarantee (inland foreign) Samir K Mahajan