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Unit - 1 : Retail Banking - Introduction
"Retail Banking is a banking service that is geared primarily toward individual consumers.
Unlike wholesale banking, retail banking focuses strictly on consumer markets.
Although retail banking is, for the most part, mass-market driven, many retail banking products may also extend to small and medium sized businesses.
Pure retail banking is generally conceived to be the provision of mass market banking services to private individuals.
Attractive interest spreads since spreads are wide, since customers are too fragmented to bargain effectively; Credit risk tends to be well diversified, as loan amounts are relatively small.
There is less volatility in demand and credit cycle than from large corporates.
Higher delinquencies especially in unsecured retail loans and credit card receivables.
In some banks retail banking was christened as consumer banking as the focus was towards individual consumers.
Capgemini. ING and the European Financial Management & Marketing Association (EFMA) have studied the global Retail Banking market with the aim of providing insights to financial services community through the World Retail Banking Report(WRBR).
The pricing indices were developed based on three usage patterns viz., less active, active and very active users.
Introduction of the telegraph in the early 1850s which made the process of communication and information exchange faster and reduced the price differentials between stock markets.
Banking services follow the standard industrial development pattern in which prices decline with maturity.
The share of interest income had almost remained steady at about 84% and the share of non interest income also is almost stable at around 16%.This indicates that there were no serious efforts by banks to increase the non interest income through fee based product and third party distribution models.
Retail Banking as a concept in India has been initiated by the PSBs and nurtured by the foreign banks and new generation private sector banks.
It grew by a compounded annual growth rate of 30.5% between 1999 and 2004 and expected to grow at above 30% in 2010
The penetration level of retail banking in India is still very low as compared to the other Asian countries like China, Malaysia, Thailand etc..
The retail banking objectives of any bank would mainly focus on the following:
1. Generating superior returns on assets.
2. Acquiring sufficient funding
3. Enhancing risk management
4. Understanding customers and regaining their trust.
5. Coping with increased demands regarding product transparency and overall service levels.
6. Achieving multi channel excellence with fully integrated banking channels.
7. Moving toward higher levels of industrialization
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