Page 44 - DMGT303_BANKING_AND_INSURANCE

Unit 3: Concept of Retail Banking

Introduction Notes

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.
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

3.1 Retail Banking-retail Lending Schemes

There has been a great heat of competition in selling ideas, products and services under this
segment between one bank to the other. Retail lending, a departure from conventional advance,

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