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.
Products:
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, and 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.
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. Issue of debit and credit card.
•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
Advantages of participatory notes

 Anonymity: Any entity investing in participatory notes is not required to register with
SEBI, whereas all FIIs have to compulsorily get registered. It enables large hedge funds
to carry out their operations without disclosing their identity.
 Ease of trading: Trading through participatory notes is easy because they are like
contract notes transferable by endorsement and delivery.
 Tax saving: Some of the entities route their investment through participatory notes
to take advantage of the tax laws of certain preferred countries.

Disadvantages of P-notes: Indian regulators are not very happy about participatory notes
because they have no way to know who owns the underlying securities. It is alleged that a lot of
unaccounted money made its way to the country through the participatory note route.