PPB unit-03

Retail Banking

•Retail Banking is doing banking business with individual Customers.

Three basic features:

1.Multiple Products (Deposits, Credit Card, Insurance, investments and securities)

2.Multiple Channels of distribution (Call Centre, Branch, Internet, ATM, Mobile & Kiosk)

3.Multiple Customer Groups (Consumer, Small Business and corporate) •

Retail Products:

1.Retail Deposit Products: SB A/c, RD A/c, CA, TD, Zero Balance Salary A/c, BSBDA, Sr Citizen Deposit A/c.

2.Retail Loan products: Housing loan, Auto loan, consumer loan, Personal loan, Education loan, Trade related loan to individuals, Crop loan, Credit Card etc.

3.Retail Services: Safe Deposit Lockers, Depository Services, Banc assurance products etc

Drivers of Retail Business in India

Economic prosperity and increase in purchasing power.

•Changing consumer demographics- 70% of population is below 35 years of age.

Technological innovations: Credit/Debit Cards, ATMs, Internet, Mobile  etc.

Lower rate of interests

Opportunity to diversify risks for banks.

Lower NPAs.

Opportunities of Retail Banking in India

Rise in the middle class –  due to tremendous growth of software industry and retail sector, the % of middle to high income Indian household is expected to continue rising.

•Demand from Retail shopkeepers, pensioners, self employed and those employed in the unorganized sector.

Financial Inclusion Programme- implementation

•Introduction of CIBIL etc

Wholesale banking

•Doing banking business with industrial and business entities. Also called Corporate Banking/Commercial Banking.


1.Fund based : Term Lending, Short term Finance, WC Finance, Bill Discounting, , Export Credit.

2.Non Fund based : BG, LC and Collection of Bills and Documents.

3.Value Added Services: CMS, Vendor Financing, RTGS, Corporate Salary accounts, Syndication Services, Forex , Money Market & Derivative products, Tax Collection, Bankers to Right/Public Issue, NEFT, ECS

4.Internet Banking Services: Payment Gateway Services, Corporate Internet Banking

•Services to Financial Institutions: CMS •Services to Mutual Funds: Collection Services, Payment services, Custodial services, & Fund transfers.

•Bank cater the needs of stock brokers: Clearing Settlement Bankers, Bank Guarantee etc.

International Banking

Banking services catering to cross border transactions is called International Banking.

Services to exporters:

1.Export Packing Credit

2.Export Bill Negotiation

3.Export Bill Purchase and Discounting

4.Export Bill Collection Services

5.Bank Guarantee

6.Rupee Advance against FC Export Bills

7.Export LC Advising

8.Export LC Confirmation

9.Supplier’s Credit: Facility enables Indian exporters to extend term credit to importers (overseas) of eligible goods  at the post shipment stage.

Requirements of Importers

1. Import Bill Collection

2.    Import Bill payments

3.    Advance Payment towards Imports

4.    Issue of Import Letter of  credit

5.    Arranging for Buyer’s and Supplier’s Credit

6.    Bank Guarantee: Banks issue BG in FC on behalf of importers. ●

C. Remittance Services:

1.EEFC (Exchange Earners Foreign Currency) Accounts Services in all permitted purposes.

2.Receipt of Foreign Inward Remittance Services:

3.Payment Services  Abroad (Outward Remittances):

Universal Banking

Super Financial Hub for marketing of all  financial products

Benefit to Banks: – Cross selling of products – fee based and non fee based income.

Benefit to Customers: Saving of time  and speedy delivery  at one place

Progress of Universal Banking in India: •Year 2000: Allowing banks to venture into the insurance business- Life & Non Life. • Tie-up for mutual funds to market their products.

Merger of ICICI with ICICI Bank and IDBI with IDBI Bank.

•Refinance institutions like SIDBI & NABARD also jumped into direct financing.

•Distinction between development finance institutions and commercial banks has greatly disappeared. •Selling of Gold coins. Depository Services either with NSDL or CDSL. •Merchant Banking Services •E-broking services directly or through tie up arrangement with SEBI registered brokers.

American Depository Receipt (ADR) and
Global Depository Receipt (GDR)

•A Depository Receipt (DR) is a type of negotiable financial instrument that is traded on a local stock exchange of a country but represents a security, usually in the form of equity that is issued by a foreign publicly listed company.

•The DR, which is a physical certificate, allows investors to hold share in equity of other countries.

ADRs are typically traded on a US national stock exchange while GDRs are commonly listed on European Stock exchange. •ADRs and GDRs are usually denominated in USD, but can also be denominated in Euros.

The benefit of DRs:

1.For the Company: Obtain greater exposure and raise capital in the world market.

2.For the Investor: Investors portfolio turns into a global one. Investors gain the benefits of diversification

Participatory Notes (PN)

•Foreigners are not allowed to invest directly in the Indian Stock Market. • •

•PNs are issued by FIIs to entities that want to invest in the Indian stock market but do not want to register themselves with the SEBI. • •

FIIs registered with SEBI can issue, deal or hold PN. •

•FIIs are not allowed to issue PNs to Indian nationals, persons of Indian origin or overseas corporate bodies.

That’s all about Unit-03, I hope you easily grasp the whole unit.

Best wishes for Exam



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