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Unit 8: Banking Systems

In today’s global banking scene, Corporate Bankers are facing a series of unprecedented and Notes
sweeping challenges in the areas like Treasury Management, Trade Finance, Risk Management,
Compliance Management, Electronic Trading and Derivatives Markets. Adding to this are the
mounting complexities from ongoing regulatory changes, decreasing margins and fierce
competition.

Self Assessment

State whether the following statements are true or false:
1. Banks develop short-term relationships with their corporate clients as a part of their
marketing efforts.
2. The pricing decision is not influenced by such factors such as cost, competition, customers,
and other constraints.

3. Every bank has to set its own Benchmark Prime Lending Rate (BPLR) to price its asset
products.
4. The pricing of banking products directly affects customer acquisition and customer
retention.
Fill in the blanks:
5. Cash inflows and outflows are checked by …………… manager.

6. It is the function of treasury management to minimize the …………….. .
7. The main function of treasury management is to maintain the ……………….. of business.

8.2 Retail Banking

The relationship between the bankers and the customers is not the same like before. The market
has undergone a sea change. The customers have become more demanding today. The transition
from sellers market to buyers market has compelled the bankers to understand the pulse and
needs of the customers.
It may not be incorrect to say that the banking products and services today are designed by the
customers. The luxury of discretion to design the products and services by the bankers is not any
more available to the bankers.
Bankers today have no choice except to alter their product mix, delivery channels and corporate
structure to serve their functional role. Some of the products which were shunned by the bankers
and were treated as inflationary 20 years ago in nature like housing loan, consumer durables
finance which otherwise were the prerogative of the bank employees have become targets of
bank business and area of fierce competition and business mantra. Banks are vying with each
other to sell across their ideas and products in the compelling hours of competition and the
unexpected quarters say cooperative banks too have joined the fray.
Retail banking has wider connotation and is not the same as that of retail lending. Retail banking
refers to the efforts of the bankers to reach up to the customers on both fronts of the balance sheet
i.e., Liabilities side as well as Assets side. Under the liabilities side, we have deposits. Unless the
banker designs the products according to the needs of the customers and facilitate better bargain
to them in terms of rate interest, time and delivery channels, it is not easy for them to solicit
business in this segment. The age of walk in deposits is gone. With interest deregulation in the
sector of deposits with the sole exception of Savings Bank Account, where the apex monetary
authority continues to decide the rate of interest, rest of the fields are open for competition.

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