Banking industry includes

Retail Banking

Corporate Banking

Investment Banking

Wealth Management

Retail Banking is a typical mass banking characterized by a large customer

base and a large volume of transactions. In retail banking all the needs of
individual customers are taken care of in a well-integrated manner.

Important factor in the economy of a country

Eg: Sub-prime crisis of 2008-09*

Retail Banking is an attractive market segment having large number of varied

classes of customers. It focuses on individual and small units. Customised
and wide ranging products are available. The risk is spread and the recovery is
good. Products can be designed, developed and marketed as per individual
needs.

Features
Characterised by multiple products, multiple channels and multiple customer
groups which are customized and personalized to suit the needs of the various
customer segments.

Multiple Products

Different types of Deposit Accounts

Different types of Loans

Credit /Debit cards

Insurance, mutual fund etc.

Multiple channels of Distribution

Branch Banking

Internet Banking

Mobile Banking
Call Centres

Multiple Customer Groups

Individual customers

Proprietorship Units

Micro and Small business/enterprise.

The typical asset products(loan products) are housing loans, car loans,
consumer loans, pension loans, education loans, credit card etc. The loans
are marketed under attractive brand names to differentiate the products
offered by different banks. The loans are generally for five to seven years with
housing loans granted for a longer duration of 15 to 20 years(vary bank to
bank).

To increase the spread and profits, considerable attention is given to CASA

deposits(low cost). Credit card is another rapidly growing sub-segment.

Importance of Retail Banking

- Low cost funds for the Bank

- Retail deposits are stable and constitute core deposits
- Increases the cross-selling business
- Risk spread over a diversified large number of customers.
- Helps in economic revival of nation through increased production
activity.
- Lower risk and NPA perception, thereby better yield and improved
bottomeline.

Now, customers have more choices in choosing their banks.

Types of Banking catering to the needs of different segments

- Retail Banking – Dealing directly with individuals

- Corporate Banking – Dealing with large business entities
- Private Banking – Providing Wealth management services to HNIs
- Investment Banking – Advising on mergers and acquisitions, Merchant
Banking, Corporate Advisory services
- Universal Banking – Combination of Commercial Banking, Investment
Banking and other types of cross selling.
Private Banking for HNIs

Private Banking is personalized financial and banking services offered to a

bank’s HNIs. A dedicated relationship manager is assigned to the customer
who take care of all his/her banking/financial needs. This include cash
delivered at the doorstep, financial planning for children, retirement planning,
drafting will, investiosng short-term surplus money and even devising
structured products. The critieria for categorising HNIs differs bank to bank.
Mostly this will be based on their volume of deposits, investment in mutual
funds etc.

Retail banking environment is changing fast in view of the changing customer

demographic demands for differentiated applications.

BANKER AND CUSTOMER- THEIR RELATIONSHIPS

BANKER

Banker has not been defined in any statute.

Sir John Paget defines the term Banker as –

No person or body corporate or otherwise can be a banker who does not:

- Take deposit accounts

- Take current accounts
- Issue and pay cheques and
- Collect cheques, crossed and uncrossed, for his customers.

Though Banker is not defined in any statute, Banking is defined, as per Sec 5(b) of BR
Act 1949 as

“ Banking means accepting for the purpose of lending or investment, of deposits of

money from the public repayable on demand or otherwise and withdrawable by
cheque, draft, order or otherwise.”

Hence the basic requirements are :

- Accepting of deposits from public

- Lending or investing the money so collected by way of deposits.
- Allowing withdrawals of deposits on demand or by any other means
CUSTOMER

There is no definition of a Customer available in any statute. The word is derived from
the word ‘custom’ which means a habit or tendency to do certain things in a regular or
particular manner.

Generally accepted definition of a customer is –“ A person who maintains any type

of account with the Bank, whether it is a deposit account or a borrowal account”.

A person frequently visiting the branch of a bank for transacting banking business like
purchase of a draft, encashing a cheque etc is not a customer if he does not maintain
any account with the branch.

A person will be deemed to be a customer even if he has only handed over the
account opening form to the bank and the bank has accepted to open the account,
even though no account has actually been opened in the books of the bank.

Thus a customer means a person who opens account with the bank. When a
customer tenders an account opening form to open an account and banker accepts it,
a contractual relationship is established.

Customer in the words of Mahatma Gandhi

A customer is the most important visitor on our premises.

He is not dependent on us. We are dependent on him.

He is not an interruption on our work. He is the purpose of it.

He is not an outsider on our business. He is part of it.

We are not doing him a favour by serving him. He is doing us a favour by giving us an

opportunity to do so.