In India, banks play a vital and integral role in the financial system. They have made a valuable contribution to India’s economic growth. For consumers as a whole, retail banking is one of the most essential elements of the commercial banking system.
Retail banking is a concept that has been extremely helpful to developing nations like India. In today’s article, we will look into what retail banking is and everything you need to know about this innovative banking concept.
What is retail banking?
Retail banking, also called personal banking or consumer banking, provides financial services to private individuals instead of businesses. With retail banking services, individuals may deposit funds, get credit, and keep track of their finances efficiently and securely.
The primary goal of retail banking systems is to provide customers with an array of banking solutions, including checking and savings accounts, account openings, mortgages, debit cards, and more.
This method is intended for people in general and their financial requirements. It doesn’t include businesses, companies, or enterprises that would need more sophisticated financial solutions.
Retail banking example
Let’s say that you’re only entering a bank to make a deposit. You encounter a bank representative at the bank. The representative explains to you a few of the profitable investment plans that are out there.
You are convinced and decide to put some money into the plan. The representative also informs you about a senior citizen FD programme at the same time. You open an FD account for your parent or any other relative because FD interest rates are higher than those of regular FD schemes.
All of these services fall under the facilities offered by retail banks.
Types of retail banking
Sometimes referred to as banks in general, these banks provide a range of banking solutions. These banks have branches spread throughout the city.
These banks handle smaller deposits and run on a smaller scale. They are multi-location businesses offering nearly all the services that a large bank can offer.
Here, physical locations are non-existent, as the name suggests. But the whole point of online banks is to minimise fees.
Rural regional banks:
RRBs also referred to as Gramin Banks, are regional banks that were set up in several Indian states to serve individuals with low incomes or those living in rural areas. These banks provide mortgages and financing in addition to regular retail banking solutions.
These banks typically serve moderate-to-high-income demographics and are located in urban areas.
The National Postal System provided opening accounts, deposits, recurring payments, and other basic banking amenities for those living in areas without access to traditional banks.
Features of retail banking
Here are some characteristics that define retail banks:
Standardised services and products: Consumers may get standardised products and services from retail banks. Some of the options are savings, credit cards, loans, loans for houses, current accounts, and FD accounts.
Various distribution platforms: Retail banks use a variety of channels to provide their services to their customers. Some examples are local bank branches, websites, mobile apps, and so on.
Diverse customer categories: Small and medium-sized businesses, families, communities, and individual clients are all served by retail banks. In this way, retail banks provide their clients with the ability to handle their finances, deposit money for protection, or get credit as needed.
Advantages of retail banking
Retail banking offers the following benefits:
- Deposits in retail banking are reliable and core.
- Banks can obtain affordable funds from retail banking.
- The increased interest rates have little effect on retail banking.
- The consumers of retail banks receive first-rate customer service.
Commercial banking vs retail banking
Banks that cater to individual consumers are known as retail banks. This is where customers can access the bank’s services. Clients can avail of standard banking services from the bank.
On the contrary, offering specialised services to specific clients is a part of commercial banking. These banks take deposits from customers and make them available for businesses to make investments in and profit from.
Retail banking vs corporate banking
Retail banking serves consumers and small businesses. Financial products and services typically include savings and checking accounts, loans, and investment options. Retail banks provide support to customers through branches, digital platforms, and mobile applications.
Conversely, corporate banking provides financial services to large corporations. Treasury services include corporate loans, cash administration, and others. Corporate banks have a network of specialised departments that work together to provide clients with personalised solutions that meet their particular needs.
The banking sector has changed significantly over the last few years. There is a strong correlation between retail banking and the recovery of the economy. Retail banking improves the market’s ability to handle money by making low-interest loans available to consumers.
Retail banking is the division of a bank that provides financial services to individual consumers, such as savings accounts, loans, credit cards, etc. Branch banking is the operation of storefront locations that offer the same services as the main office of the bank.
There is no definitive answer to this question, as both types of banking differ from each other. Corporate banking deals with large businesses and offers services like trade finance, cash management, syndicated loans, etc. Retail banking serves the general public and offers services including deposits, mortgages, personal loans, etc.
Retail banking offers banking solutions to individuals and small businesses, whereas wholesale banking is about offering services to governments, financial institutions, large organisations, currency conversion, and investment banking. Retail banking is more regulated than wholesale banking.
According to the Reserve Bank of India, there were 137 scheduled commercial banks in India as of March 2023, of which 21 were private sector banks, 12 were public sector banks, 46 were foreign banks, and 43 were regional rural banks. These banks offer retail banking services to their customers.
The two main functions of a commercial bank are:
– Accepting deposits from the public in various forms, such as savings, current, and fixed deposits.
– Providing loans and advances to individuals and businesses for various purposes such as consumption, investment, and trade