RETAIL BANKING

Banks are a prominent and vital part of the financial system in India. They
are one of the biggest contributors to the growth of the economy and
development of the country. Retail banking is one of the most elemental
components of the commercial banking system and is of /utmost
importance to the general public.
Retail banking, also known as consumer banking, is the provision of
services by a bank to the general public, rather than to companies,
corporations or other banks, which are often described as wholesale
banking. The three most important functions are credit, deposit, and money
management. Banking services which are regarded as retail include
provision of savings and transactional accounts, mortgages, personal
loans, debit cards, and credit cards. In retail banking, the focus is on the
individual consumer.
Products
Typical retail banking services offered by banks include:
 Current accounts - Some other terms used to refer to this type of bank
account at a retail bank are: checking account, transaction account,
and demand deposit account. It is made available to the account holder
as per their demand. The account holder can also make frequent
transactions through it.
 Savings accounts - This is a type of bank account that customers can
open at a bank, providing retail banking services to deposit money and
obtain interest on it.
 Debit cards - It is a plastic payment card that is used instead of cash
to make payments at ATMs and other places. Most of the banks
provide this card for each current or savings account.
 ATM cards - These cards are restricted to withdraw and do other
transactions at ATM.
 Credit cards - Just like debit cards, this is a plastic card to make
payments instead of cash. Banks allow cardholders to make the
payments on credit with a promise to pay the bank the amount spent
and agreed on additional charges.
Traveler's cheques - A traveler's cheque is a medium of exchange that
can be used in place of hard currency. They can be denominated in one of
a number of major world currencies and are per-printed, fixed-
amount cheques designed to allow the person signing it to make an
unconditional payment to someone else as a result of having paid the
issuer for that privilege.
They were generally used by people on vacation in foreign countries
instead of cash, as many businesses used to accept traveler's cheques as
currency.
 Mortgages
What are Mortgages?
Section 58(a) of the TRANSFER OF PROPERTY ACT, 1882 defines
mortgages as “ mortgage is the transfer of an interest in specific
immovable property for the purpose of securing the payment of t
money advanced”.
 Types of Mortgages:
There are six types of mortgages:
Simple Mortgage: The mortgagor must have bound himself personally
to repay the loan
• To secure the loan he has transferred to the mortgagee the right
to have specific immovable property sold in the event of his
having failed to repay.

Mortgage by Conditional Sale

• on the condition that on default of payment of the mortgage
money (loan) on the certain date the sale shall become absolute
OR
• on the condition that in such payment being made the sale shall
become void.

Unsufructuary Mortgage:
• That the possession of the property is delivered to the mortgage;
• That the mortgagee is to get rents and profits in lieu of the interest
or principle or both;
 • The mortgagee cannot foreclose or sue for the sale.
• That no personal liability is incurred by the mortgagor

English Mortgage:
• That the mortgagor should bind himself to repay the mortgage
money/loan on a certain day;
• That the mortgaged property should be transferred absolutely to
the mortgagee; and
• That such absolute transfer should be made subject to a
provision that the mortgagee will recover the property to the
mortgagor, upon the payment by him of the mortgage money on
the appointed day.

Mortgage by Deposit of Title Deeds:

• Also called as Equitable Mortgage.
• A debt should be there.
• Deposit of the title deed with the lender(most essential)
• Deposit is with that intention the said title deed shall be security
for the debt.

Anamalous Mortgage:
• According to Section 58(g) of the Transfer of Property Act 1882,
a mortgage which is not a simple mortgage, a mortgage by conditional
sale and usufructuary mortgage and a mortgage by deposit of title
deeds.
  Home equity loans - A home equity loan is a type of loan in which
the borrower uses the equity of his or her home as collateral. The loan
amount is determined by the value of the property, and the value of the
property is determined by an appraiser from the lending institution.[
 Loans - Banks lend money to their customers for various purposes.
Loans in India through retail banks include home loans, auto loans for
new/used vehicles, consumer loans, education loans, crop loans to
farmers, business loans for small scale businesses.
 Certificates of deposit/Term deposits - A time deposit or term
deposit (also known as a certificate of deposit in the United States) is
an interest-bearing bank deposit with a specified period of maturity.[1] It
is a money deposit at a banking institution that cannot be withdrawn
for a specific term or period of time (unless a penalty is paid). When
the term is over, it can be either withdrawn or held for another term.
Generally speaking, the longer the term, the better the yield on the
money.

Apart from the above-mentioned features of retail banking, banks allow their
clients to avail safe deposit lockers for safekeeping of their valuables at
annual charges. Funds transfer, NEFT, RTGS, Core Banking Solutions,
Internet banking, mobile banking, information system, electronic clearings
service, cheque clearance, remittances, payment settlement and more are
some other important services provided by retail banks.

Types of Retail Banks

These banks are often termed as people’s banks as they cater to the needs
of the general public. It is sometimes also referred to as personal banking
or mass-market banking. Commonly, large commercial banks have local
branches to meet various objectives of retail banking. Some common types
of retail banks are:
 Commercial Banks: Also known as banks in general. However, this
category excludes investment banks and financial institutions. They help
their clients through various banking services like personal banking,
business banking, online banking, financial services, and lending and
borrowing.
 Regional Rural Banks: RRBs are also known Gramin Banks, which
have been established at a regional level in various states of India to
cater to low-income groups or people residing in regional areas. These
 banks offer regular retail banking services and also include loans and
mortgages.
 Private Banks: These are usually the banks that operate in urban
areas and cater to moderate to high level income groups.
 Post Offices: In regions where people do not have access to regular
banks, the National Postal System offered basic banking services like
account opening, savings, recurring deposits, and more. For developing
countries, this is a convenient and secure mode of banking in areas
where underdeveloped sections of society cannot reach the bank.

Advantages of Retail Banking

Retail banking is an alternative for banks as well as individual customers.
The importance of retail banking stresses the advantages of services
offered by banks. Unlike corporate banking, retail banking concentrates on
small units and individuals for earnings. Over the years, it has proven to
have increased earnings and businesses for banks. It has reduced
operational costs and has helped banks in establishing a brand image in
the market among the general public. In addition, banks have developed
customer relationship with their clients. This has increased and
strengthened the customer base.
The retail sector is a large contributor to the revenue earned by banks as
well as economic development. It reduces the risk for banks if they depend
on loans for their incomes. Additionally, it provides a safe way to keep your
savings and capital secure.

Retail Banking Trends in India

In the past 10 years, the banking industry has undergone a major evolution.
Due to the rise of competition, the IT revolution, emergence of Fintech and
non-financial services, and changing customer demographics and
expectations have prompted banks to adopt new strategies and
techniques. Banks are moving towards the digital transformation that offers
better customer experience, reduction in operating costs and lower cost for
banking transactions. Meanwhile, internet banking and mobile banking are
the most rapidly emerging trends in the retail banking sector. Technological
innovation has made banking easy and convenient. This trend is predicted
to result in a drop-in bank visits drastically in the coming years. Use of
artificial intelligence and voice assistants to deliver personalized and
contextualized services are technologically-forward innovations expected to
change banking systems. Adoption of bio-metrics authentication and KYC
systems are a few changing trends that are expected to lower risks of fraud
and fraudulent activities.

Current Scenario in Retail Banking:

• It has emerged as major drivers of the overall banking industry and

has witnessed enormous growth.
• The retail loan market has decisively got transformed from a seller's
market to buyer's market.
• India is considered as the second most attractive retail destination.

Challenges Faced by Retail Banking Industry:

1. Consumer Protection and Pricing:

• There are charges led for the not maintaining minimum bank balance,
for every cheque which has been returned back.
• For the retail banking to be successful, the sector must apply pricing
that are non-discriminatory, risk-based, competitive and value added

2. Inadequacy of MIS:
• For any sector to be successful , accurate, consistent and granular
information is needed.
• The Indian banks lack information and hence it becomes difficult to
find out how many customers does the bank have and what are the
resources available with the banks.
• For the Retail Banking to be more successful it is necessary that they
build a appropriate MIS.

3. Understanding and Tackling KYC/AML:

• The banks have faced significant amount of penalties from the
regulators for not carrying out the adequate KYC.
• Banks need to be mindful about the KYC due diligence for the third
party products that they sell from their premises through their delivery
channel.

4. Managing Risk:
• The retail banking business involves dealing with large number of
customers over various delivery channels, there by crating different
possibilities.
 • These possibilities can be in the form of inadequacy of internet
guidelines, inadequacy in the technlogy systems supplied by vendors,
fradulant activities carried out by customers or hackers.
• The bank have developed operational risk system that can only tackle
traditional delivery channels.
• The a banks have faced a large number of technology frauds in the
past few years, the banks need to develop systems to tackle such
kinds of risk as it may cost reputational risk to the banks.

5. Countering the effects of disruptive new technology:

• Retail banking has been the most impacted by the technology, with
the increasing use of digital technologies , the use of banking facilities
have reduced to some extent.
• With the banking facilities being operative 24/7 , it the necessity for
the banks to invest in appropriate technology channels.
• The RBI's is making constant efforts of increasing banking facilities
and bringing more adult population in the formal financial system.

Scope in Retail Banking:

• All round increase in economic activity

• increase in the purchasing power. The rural areas have the large
purchasing power at their disposal and this is an opportunity to
market Retail Banking.
• India has 200 million households and 400 million middleclass
population more than 90% of the savings come from the house hold
sector. Falling interest rates have resulted in a shift. “Now People
Want To Save Less And Spend More.”

• Nuclear family concept is gaining much importance which may

lead to large savings, large number of banking services to be
provided are day- by-day increasing.
• Tax benefits are available for example in case of housing loans the
borrower can avail tax benefits for the loan repayment and the
interest charged for the loan.

 Example Of Retail Banking:

Retail banking encompasses the services offered to consumers by commercial
banks. The term “Retail” refers to the almost storefront-shopping nature of
commercial banking services.
Most commercial banks have extensive retail banking services and products to
reach a wide consumer base.
 Here is a brief story about Ram’s day at his bank XYZ. He arrives at the bank
one day to deposit Rs. 20000 cheque into his account. He decides to deposit
Rs. 10000 of the cheque into his existing account. The other Rs. 10000 he de-
cides to use to open a savings account. Ram sits with a bank representative who
explains the various savings account options and helps him with opening an ac-
count once he’s made a decision
 Additionally, the account representative informs Ram of retirement plans the bank
offers as well as educational savings plans for his children. Before he leaves,
Ram also takes information on auto loans offered by the bank since he is consid-
ering purchasing a new car. While at the bank, Ram was able, in one place, to
deposit money, open a savings account and find information relating to banking
products he may need in future.

 Why it matters:
Retail banking is a framework that allows commercial banks to offer banking
products and services in one place at virtually any of their branch locations. The
retail banking aspects turns commercial banks into a kind of “Store” (or retailer)
where clients are able to purchase multiple banking products.