1.0RETAIL 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 is in contrast to wholesale banking where the customers are large, often multinational companies, governments 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.
❖ “Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so”
❖ “Retail banking is a banking service that is geared primarily toward individual consumers”
❖ “Banking services for individual customers”
Retail banking is usually made available by commercial banks, as well as smaller community banks. Unlike wholesale banking, retail banking focuses strictly on consumer markets. Retail banking entities provide a wide range of personal banking services, including offering savings and checking accounts, bill paying services, as well as debit and credit cards. Through retail banking, consumers may also obtain mortgages and personal loans. Although retail banking is, for the most part, mass-market driven, many retail banking products may also extend to small and medium sized businesses. Today much of retail banking is streamlined electronically via Automated Teller Machines (ATMs), or through virtual retail banking known as online banking.
1.2Characteristics of Retail Banking
Today’s retail banking sector is characterized by three basic characteristics:
o Multiple products
o deposits, credit cards, insurance, investments and securities
o Multiple channels of distribution
o call centre, branch, internet
o Multiple customer groups
o consumer, small business, and corporate
1.3ORIGIN AND HISTORY OF BANKING IN INDIA
Banks are among the main participants of the financial system in India. Banking offers several facilities and opportunities. Banks in India were started on the British pattern in the beginning of the 19th century. The first half of the 19th century, The East India Company established 3 banks;
The Bank of Bengal
The Bank of Bombay and
The Bank of Madras
These three banks were known as Presidency Banks. In 1920 these three banks were amalgamated and The Imperial Bank of India was formed. In those days, all the banks were joint stock banks and a large number of them were small and weak.
At the time of the 2nd world war about 1500 joint stock banks were operating in India out of which 1400 were non- scheduled banks. Due to vague and dishonest management there were a number of bank failures. Hence the government had to step in and the Banking Company’s Act (subsequently named as the Banking Regulation Act) was enacted which led to the elimination of the weak banks that...