UNIT 1 RETAIL BANKING: INTRODUCTION
v "Retail Banking is a banking service that is geared primarily
toward individual consumers.
v Unlike wholesale banking, retail banking focuses strictly on
consumer markets.
v Although retail banking is, for the most part, mass-market driven,
many retail banking products may also extend to small and medium sized
businesses.
v Pure retail banking is generally conceived to be the provision of
mass market banking services to private individuals.
v
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.
v
There is
less volatility in demand and credit cycle than from large corporates.
v
Higher
delinquencies especially in unsecured retail loans and credit card receivables.
v
In some
banks retail banking was christened as consumer banking as the focus was
towards individual consumers.
v 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).
v The pricing indices were developed based on three usage patterns
viz., less active, active and very active users.
v 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.
v
Banking services
follow the standard industrial development pattern in which prices decline with
maturity.
v
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.
v
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.
v
It grew by a
compounded annual growth rate of 30.5% between 1999 and 2004 and expected to
grow at above 30% in 2010
v
The
penetration level of retail banking in India is still very low as compared to
the other Asian countries like China, Malaysia, Thailand etc..
