Page 45 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes 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 the installments
and repayment schedule have to be monitored in respect of retail lending whereas in respect of
conventional advances.

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.
Interest: The rate of interest has been deregulated by the apex monetary authority which suggests
that the rate of interest offered by one bank for a retail lending scheme may not match with the
one offered by the other bank. The rate of interest is decided by the individual banks.

3.2 Composition of Retail Lending

3.2.1 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 to 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 the installments
and repayment schedule have to be monitored in respect of retail lending whereas in respect of
conventional advances.

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.

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