Retail & Corporate Banking [Banking Awareness Notes]

 

Banking awareness is an important part of most banking exams. The ‘General awareness’ section of most banking exams contains questions with special reference to banking. Therefore, it is important that you enhance your banking awareness.

Banking can broadly be divided into two types: Retail and Corporate banking. While retail banking involves dealing directly with customers, corporate banking deals with businesses and corporates.

In the following article, we have provided the definition of retail and corporate banking and the various services offered by them.

 

Retail banking

Part of bank that directly deals with consumers or individuals located in the nearby city. It is an activity done by bank with customers face to face; also known as consumer or personal banking.

• The most important source of fund for retail banking is customer deposits

• The profit for retail banking is made from the interest margin of the lender and borrower transaction

• Retail banking is like a visible face of banking to the public with a lot of branches in major cities

• Retail banking has small number of clients compared to corporate banking

• The transactions are of lower value and processing costs are low

 

Retail banking includes some of the following services:

Accounts (savings and current), wealth management, certificates of deposits, guaranteed investment certificates on residential and investment properties, automobile financing, stock brokerage, private banking, debit & credit cards, types of loans, retirement planning, insurance, foreign currency and remittance services, different types of loans, certificate of deposit, etc.

 

 

Corporate banking

Corporate banking, also known as business banking, is when banks deal with business corporations and groups and provide them service. It was first used in USA to differentiate it from investment banking.

• Profit in corporate banking is earned from interest and fee charged for the services

• Corporate banking deals with high value transactions and has high processing costs

• Corporate banking has lower number of clients compared to retail banking

• It is the key profit centre for most banks

 

Some of the services provided in corporate banking are:

Providing credits to businesses, providing loans and other credit products, commercial real estate, savings and current accounts, trade finance, equipment lending, employer services, derivatives, custody, treasury and cash management, foreign exchange, and other services tailor-made for corporates.

 

Both corporate and retail banks are important to global and domestic economies. The customer deposits brought in through retail banking enables banks to provide loans to business customers. For their part, corporate banks make loans available to businesses, thereby contributing to expansion of economy.

All in all, both retail and commercial banks are important for the smooth functioning of economy. A lot of large banks have special divisions to handle retail and corporate banking. Both are profitable for most banks.

 

We hope the above article gives you more clarity on retail and corporate banking. Download this as a PDF to keep it handy.

 

Further reading:

What is Financial Inclusion?

What is inflation?

What is Direct Debit?