Page 131 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes In the Assets side, we have credit/loan schemes of the various banks. The job of the banker has
become very difficult in this segment too. Bankers today are offering various sops to attract the
potential customers. For instance, payment of free insurance premium by the bank comes along
with the vehicle loan in respect of few banks. Some banks are prepared to offer total credit
solutions along with housing loan, we mean here, they have enabled facility of consumer
durables finance, vehicle finance in one go the customers who avail of housing loan from them.
This way, we understand retail banking includes designing delivery of customized products
from both sides of the balance sheet.
The following channels are effectively utilized by the bankers to mobilize business from the
potential clients:
Premises banking or banking at doorsteps
Automated Teller Machines

Debit Cards and Credit Cards
Telephone banking
Internet Banking
Mobile Banking
Electronic Funds Transfer/Electronic Clearing System debit

8.2.1 Retail Banking – Retail Lending Schemes (Asset Focused Segment)

There has been a great heat of competition in selling ideas, products and services under this
segment between one bank and the other. Retail lending, a departure from conventional advance,
offers higher yield, quicker turn, the possibility of less incidence of the account going bad or
non-performing if it is monitored on an ongoing basis. Monitoring of the account is easier in
retail lending segment as compared to the conventional advances, for the reason that installments
and repayment schedule have to be monitored in respect of retail lending.

Example: An advance to an industrial unit, security verification, conduct of the account
by the borrower, compliances with statutory norms by the unit, submission of periodical returns
like balance sheet, income tax assessment order and other regulatory ones from time to time.
While novel retail lending products are introduced by the banks to compete effectively in the
market, the products which are prevalent in the industry and marketed by the banks are given
below, as an illustration:
Housing Finance.

Consumer durable finance.
Vehicle (two-wheelers and four-wheelers) finance
Personal Loan

Advance against future lease rentals
Mortgage Loan
Pension Loan etc.
Margin: The contribution brought in by the borrower is termed as margin. Margin requirements
differ from one type of finance to others and they differ from one bank to the other. There is no
standard capsule of margin in this segment.

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