Retail Banking

2873 Words Dec 15th, 2010 12 Pages
EMERGING ISSUES & OPPORTUNITIES OF RETAIL BANKING IN INDIA

1.0 RETAIL BANKING –An Introduction

Retail banking is, however, quite broad in nature - it refers to the dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet. Fixed, current / savings accounts on the liabilities side; and mortgages, loans (e.g., personal, housing, auto, and educational) on the assets side, are the more important of the products offered by banks. Related ancillary services include credit cards, or depository services. Retail banking refers to provision of banking services to individuals and small business where the financial institutions are dealing with large number of low value transactions. This
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Today banks are broadly classified into 2 groups namely—

(a) Scheduled banks

(b) Non-Scheduled banks

2.0 BENEFITS AND LIMITATIONS OF RETAIL BANKING

BENEFITS

Retail banking has inherent advantages outweighing certain disadvantages. Advantages are analyzed from the resource angle and asset angle.

Resource Side

✓ Retail deposits are stable and constitute core deposits.

✓ They are interest insensitive and less bargaining for additional interest.

✓ They constitute low cost funds for the banks.

✓ Effective customer relationship management with the retail customers built a strong customer base.

✓ Retail banking increases the subsidiary business of the banks.

ASSETS SIDE

✓ Retail banking results in better yield and improved bottom line for a bank.

✓ Retail segment is a good avenue for funds deployment.

✓ Consumer loans are presumed to be of lower risk and NPA perception.

✓ Helps economic revival of the nation through increased production activity.

✓ Improves lifestyle and fulfils aspirations of the people through affordable credit.

✓ Innovative product development credit.

✓ Diversified portfolio due to huge customer base enables bank to reduce their dependence on few or single
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