August 9

RETAIL BANKING

2013
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Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks.

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Retail Banking
Retail banking 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 in India 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 is in contrast to wholesale banking where the customers are large, often multinational companies, and government enterprise, and the financial institution deal in small numbers of high value transactions. The concept is not new to banks but is now viewed as an important and attractive market segment that offers opportunities for growth and profits. Retail banking and retail lending are often used as synonyms but in fact, the later is just the part of retail banking. In retail banking all the needs of individual customers are taken care of in a well-integrated manner.

Todays retail banking sector is characterized by three basic characteristics: Multiple products (deposits, credit cards, insurance, investments and securities) Multiple channels of distribution (call centre, branch, internet) Multiple customer groups (consumer, small business, and corporate).

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Types of products offered by retail banking

Current Accounts: A current account is the form of transactional
account found in the UK and other countries with a UK banking heritage; a current account offers various flexible payment methods to allow customers to distribute money directly to others. Most current accounts come with a cheque book and offer the facility to arrange standing orders, direct debits and payment via a debit card. Current accounts may also allow borrowing via an overdraft facility.

Saving Accounts: Saving accounts are accounts maintained by retail

financial institutes that pay interest but cannot be used directly as money the narrow sense of a medium of exchange (for example, by writing a cheque). These accounts let customers set aside a portion of their liquid assets while earning a monetary return. For the bank, money in a savings account may not be callable immediately and in some jurisdictions, does not incur a reserve requirements freeing up cash from the bank's vault to be lent out with interest.

Debit Cards: A debit card also known as a bank card or check card is
a plastic payment card that provides the cardholder electronic access to his or her bank account at a financial institution. Some cards have asorted value with which a payment is made, while most relay a message to the cardholder's bank to withdraw funds from a payee's designated bank account. The card, where accepted, can be used instead of cash when making purchases. In some cases, the primary
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RETAIL BANKING account number is assigned exclusively for use on the Internet and there is no physical card.

ATM: An ATM card also known as a client card, key card, or cash card
is a payment card provided by a financial institute to its customers which enables the customer to use an automated teller machine(ATM) for transactions such as: deposits, cash withdrawals, obtaining account information, and other types of banking transactions, often through interbank networks. It can also be used on improvised ATMs, such as merchants' card terminals that deliver ATM features without any cash drawer commonly referred to as mini ATMs. These terminals can also be used as Cashless scrip ATMs by cashing the fund transfer receipt at the merchant's cashier.

Credit Cards: A credit card is a payment card issued to users as a

system of payment. It allows the cardholder to pay for goods and services based on the holder's promise to pay for them. The issuer of the card creates a revolving accounts and grants a line of credit to the consumers (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. A credit card is different from a charge card: a charge card requires the balance to be paid in full each month.] In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card.
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Cheque: Cheques are a type of bill of exchange and were developed as

a way to make payments without the need to carry large amounts of money. While paper money evolved from promissory notes, another form of negotiable instrument, similar to cheques in that they were originally a written order to pay the given amount to whoever had it in their possession (the "bearer"). Technically, a cheque is a negotiable instrument instructing a financial institute to pay a specific amount of a specific currency from a specified transactional held in the drawer's name with that institution. Both the drawer and payee may natural person or legal entities. Specifically, cheques are order instruments, and are not in general payable simply to the bearer (as bearer instrument are) but must be paid to the payee. In some countries, such as the US, the payee may endorse the cheque, allowing them to specify a third party to whom it should be paid.

Mortgages: A mortgage loan is a loan secured real property through

the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.

Home equity loan: A home equity loan is a type of loan in which the
borrower uses the equity in their home as collateral. Home equity loans
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RETAIL BANKING are often used to finance major expenses such as home repairs, medical bills or college education. A home equity loan creates a lien against the borrower's house, and reduces actual home equity.

Personal loan: In finance, unsecured debt refers to any type

of debt or general obligation that is not collateralized by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms for repayment. In the event of the bankruptcy of the borrower, the unsecured creditors will have a general claim on the assets of the borrower after the specific pledged assets have been assigned to the secured creditors, although the unsecured creditors will usually realize a smaller proportion of their claims than the secured creditors.

Time deposit / Term deposit: A time deposit also known as

a certificate of deposit in the United States, a term deposit, particularly in Canada, Australia;bond in UK in India and in some other countries is a money deposit at a banking institution that cannot be withdrawn for a certain "term" or period of time (unless a penalty is paid)]. When the term is over it can be withdrawn or it can be held for another term. Generally speaking, the longer the term the better the yield on the money. In its strict sense, certificate deposit is different from that of time deposit in terms of its negotiability: CDs are negotiable and can be rediscounted when the holder needs some liquidity, while time deposits must be kept until maturity. The opposite, sometimes known as a sight deposit or "on call" deposit, can be withdrawn at any time, without any notice or penalty: e.g., money deposited in a checking account or savings account in a bank.
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RETAIL BANKING The rate of return is higher than for savings accounts because the requirement that the deposit be held for a prespecified term gives the bank the ability to invest it in a higher-gain financial product class. However, the return on a time deposit is generally lower than the longterm average of that of investments in riskier products like stocks or bonds.

Prateek Raghuvanshi 12BSP1579