Retail Banking & Wealth Management | JAIIB LATEST NOTES FROM RB&WM SYLLABUS 2024

RETAIL BANKING IMPORTANT TOPIC EXPLAINED | JAIIB LATEST NOTES FROM RB&WM SYLLABUS

In this article, we will get to know about retail banking products from the IIBF-prescribed RB&WM Syllabus 2024.

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INTRODUCTION OF RETAIL BANKING

A banking service called “Retail Banking” is largely targeted towards individual customers. Unlike the wholesale market which has the main objective to sell goods, it only focuses on consumer markets.

Although retail banking is primarily targeted at the general market, many of its products may also be available to small and medium-sized businesses. Mass market banking services are typically understood to be provided to private persons as pure retail banking. Attractive rate spreads because they are broad and because clients are too dispersed to effectively negotiate; credit risk is often adequately diversified because loan amounts are generally small. Demand and the credit cycle are less volatile than they are from major corporations. More delinquencies, particularly for credit card receivables and unsecured retail loans. Since the emphasis was on individual consumers, retail banking was sometimes referred to as consumer banking. The most popular tactics include in-house sourcing, partial outsourcing, end-to-end outsourcing, and primary outsourcing. Retail banking services are provided by both commercial banks and smaller banks.

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Retail banking provides a wide range of customer services are:

Personal banking services

Offering savings

Checking accounts

Bill paying services

Debit/credit card services

Consumers may also obtain mortgages and personal loans through retail banking. Retail banking deals with lending money to consumers which includes a wide range of loans, auto loans, personal loans, and mortgages. The PSBs in India pioneered the idea of retail banking, which was further developed by foreign banks and newer private sector banks. It expanded with a compound annual growth rate of 30.5% between 1999 and 2004 and is anticipated to expand at a pace greater than 30% in 2010. In comparison to other Asian nations like China, Malaysia, Thailand, etc., India still has a very low level of retail banking penetration.

The primary goals of any bank’s retail banking division, producing better asset returns, Getting the right amount of money, Improved risk management, Gaining the trust of consumers through understanding them, handling escalating customer expectations for more transparent product information and higher service standards, securing multichannel excellence through completely connected financial channels, Moving in the direction of more industrialization.

ROLE OF RETAIL BANKING WITHIN BANK OPERATION

Interesting insights across bank types can be seen in the business models for retail banking. Banks in the governmental sector, the private sector, and foreign banks all use different models. The principal methods are the Departmental approach, Integrated approach and Strategic business unit approach. In India, public sector banks typically use the departmental approach as their retail banking business model. Building the business model for retail banking is done as part of the overall business plan and not as a stand-alone departmental or SBU activity. The business concept is quite obvious in newer private-sector banks. Strategic Business Units (SBUs) with a distinct focus and set of corporate goals had been established. The designation of an SBU is more of a Management by Objectives (MBO) method, in which the business model is handled as a modular strategy for generating targeted profits with a provision to drop the module, if the retail plans are not translated as per the objectives Banking institutions typically base the majority of their retail banking models on a positioning platform. Foreign banks typically make decisions based solely on risk rather than positioning objectives.

CHARACTERISTICS OF RETAIL BANKING

It targets facilities for individual customers.

It’s Extended to small and as well as medium size businesses.

It’s focused on a broad range of individual clients in the mass market category.

It offers individual customers with liability, assets, and a wide range of service products.

It provides both physical and virtual delivery of models which means it provides services extended through branches and through technology as well.

ADVANTAGES OF RETAIL BANKING

The loyalty factor works out and customers don’t tend to change from one bank to another often

Less volatility and credit cycle than from the larger corporates.

The client base will be large and so the risk will spread across the customer base.

LIMITATIONS OF RETAIL BANKING

Retail banking as a segment has a number of inherent benefits, but it also faces limitations. Following are some of the restrictions:

Issues managing huge client bases, particularly if IT systems are not adequately reliable.

IT issues may arise as a result of rapid product evolution.

Maintaining branch networks and managing a significant volume of low-value transactions typically comes at a high cost. (As a result, banks are advising customers to reserve the branches for transactions that will add more value and instead use less expensive distribution channels like ATMs, the phone, or the internet.

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