Retail Banking

December 2021 Examination

Q1. Retail Banking is a prime arm of banking for building up and grows its resources side.
What does this mean and what is Banks doing towards growing its resources side? Name any
4 resources-side products that Banks provide and explain their characteristics in terms of
product nature, its classification & benefits and cost benefits for Banks (10 Marks)

Ans 1.
Introduction:
Banking that is concerned with the individual being, as opposed to businesses, is called retail
banking. Also known as consumer banking or private banking, it is an institution that provides
services to the individual instead of to businesses. Besides assisting you to obtain credit in an easy
and convenient way, it also enables you to deposit your cash in a relaxed manner and check and
save debts, mortgages, personal loans, credit cards, and so on. So, their primary goal is to offer
services to the character customers pr consumers to present offerings to massive companies and
traders. These banks commonly have a head workplace at the side of diverse branches in distinctive
country locations to offer the broadest possible admission to the most comprehensive possible
range of customers.

Concepts and Applications

Interest in growing retail banking

These days, it is evident that banks are becoming more interested in growing retail banking. The
demand for credit scores from economic and infrastructure devices has been reduced significantly
to smaller banks because those huge companies typically take loans from huge or mounted banks.
Due to this, the banks have decided to provide services not just to the actual consumers, but
additionally to the intake customers.
The resource side offerings are those supplied via a bank and are also a valuable resource to the
bank. When we speak about resource side services of retail banks, then it includes the subsequent
varieties of offerings.

One of the helpful resource aspects of retail banking consists of the following four types of
services:

1. ATM (automated Teller Machines) services: Nowadays, while the banks offer services
to the clients, they have got added ATM services at almost every city street. An electronic banking
outlet permits customers to complete transactions without valuable resources from department
representatives or tellers. It becomes a resource facet service because financial institutions are
gaining a few profits out of it. They grow to be the permanent investment of the bank. The ultimate
objective of the bank is to offer services to consumers. By putting in ATMs at appropriate locations
where it is wanted, the bank can be better capable of providing services like looking at the bank
account info, depositing the amount, and withdrawing a positive quantity to the clients. There are
forms of ATMs, a fundamental unit ATM and a complex one. The basic unit benefits the clients
by using chickening out cash and receiving updates at the account balances. The more complex
one is where the gadget accepts the deposits, allows line-of-credit score payments and transfers,
and gets admission to account information. Each person can access the services rendered through
a primary unit, but the user has to have an account in the bank that operates the system for gaining
access to the complex team.

2. Online Banking System: Retail banks have begun presenting online/ digital baking
services to clients within the modern international. The remaining motive of the banks or any
industry is to provide exceptional offerings to the purchasers with minimum wastage. Using the
digital system, the consumers were supplied banking centers in the comfort of their homes only. It
has benefitted them in reducing their value of taking walks to the bank and their time which they
might have wasted spending within the long queues in the financial institution. Then again, it has
benefitted the bank because it is a long-term investment for the bank. With the appearance of the
era, the new digital machine of banking is emerging. So retail banking will stay backward if it
sticks with its conventional banking centers; consequently, it must introduce the virtual banking
machine.
3. Credit cards/ Debit cards: The banks have begun issuing credit and debit card facilities
to help consumers in security-associated matters. Now they oughtn’t to convey all of the cash to
make a hefty charge for something. However, they could carry on their credit or debit cards which
are secure to keep and use. It has helped the financial institution preserve all of the information of
transactions digitally, which has, someplace or the opposite, decreasing the possibilities of black
cash being utilized in transactions.

4. Mortgage: In recent times, the banks have started out liberalizing their hobby quotes or
documentation facilities for purchasing a mortgage, forgetting anything mortgaged. The banks
have begun providing a few offerings of financial establishments to customers. They could now
avail themselves of loans at a lesser price with more excellent safety and belief in the bank.

Conclusion

Accordingly, we can conclude that in keeping with the changing times, financial markets have also
evolved, and as a consequence, retail banks have also made the shift from their traditional banking
mode. Essentially, they are now delivering exceptional services to the buyers, which are easy to
use and represent a relatively low risk for them as compared to those who do not offer these
services.

Q2. From an era of the past when ‘Customer went to the Bank’, Retail Banking has
transformed itself to today’s era when ‘Bank goes to the customer’. Explain your
understanding of this transformation along with examples of ways and means adopted by
Banks towards achieving this transformational change. Also, explain any 4 of the mechanism
/ tools used by Retail Banks in this regard along with merits and de-merits in each of them
(10 Marks)

Ans 2.
Introduction:
A retail banking organization is also known as consumer banking, private banking, or consumer
services, and it is primarily focused on providing services to individuals rather than to businesses.
It offers financial help in terms of access to credit, deposits their money in a relaxed way, checking
and saving money owed, mortgages, non-public loans, credit score cards, etc. so, their number one
objective is to provide services to the individual customers pr clients rather than giving offerings
to big groups and buyers. Most of these banks are not only based in a single city or town, but they
also have numerous branches, enabling them to provide access to the largest possible number of
customers in an exceptional location.

Concepts and Applications

The transformation of customers to banks to banks to customers:
The needs of customers have changed dramatically over the last century, and we should not forget
that. It's still being evolved, so it's not over yet. The tendency in the past was that the bank expected
customers; however, now the bank is moving towards clients; it is no longer the case that the bank
expects customers. A great deal of competition presently exists on the market, especially among
economic institutions. The Bank, in reaction, is now working to expand its market base by taking
advantage of its purchaser base increasingly. The wishes of the clients are unexpectedly
converting, so the bank needs to accommodate its facilities consequently. With the arrival of
technology, clients are looking ahead to an extra digitized form of banking offerings. The
institution with a purpose to offer customers such offerings will benefit the market forces.

Hence, earlier, while there have been fewer banks but more significant clients, they used to go to
the bank and even had to agree to all the terms and situations it'd lay down. However, with the
increase of clients, there was a growth inside the wide variety of monetary institutions that may
provide services to the clients. For, e.g., if the financial institution of Baroda is giving loans at a
higher interest rate, however, Punjab national bank is offering the identical mortgage with a lesser
interest charge. It's far more likely that the purchasers will get a loan from Punjab national bank
instead of Baroda, so now it's miles the choice with the customers and no longer with the banks
because of increasing financial institutions.

4 MECHANISMS/ TOOLS USED BY BANKS:

For the banks to deal with this transformation, the following mechanisms are used or gears are put
in place:

1. Encouraging Customer Engagement: The banking services range from different services in a
manner that is just introducing the goods or services isn't always the most effective requirement;
what is required is that there has to be some extra encouragement to use the product optimally and
for engagement to develop the way we would prefer. To manage this transformation, Banks have
commenced giving sure gives to the customers to be lured to avail of the services. Ability requests
can include waiving charges or optimally superior stages of rewards for a particular movement or
limited duration.

2. Taking mobile customers into account: The bank has made all efforts to reach out to the
clients through the most appropriate channels, such as junk mail and telephone calls, to mention a
few. These are highly effective in building the relationship, and in the changing situation, there's
a requirement for a cordial courting between the bank and its customers. They've started the use
of SMS texting and email, which has extensively improved the results. Further, the banks have
maintained the right communication channel to speak with the customers wherein the clients aren't
informed approximately the entirety about the account because they're not interested in it; they're
as an alternative communicated best about those practical topics.

3. Constant communication with the client: Generally, a purchaser does not want to attach
simplest with the direct message dispatched by the financial institution. Instead, they want a
common communication challenge. They need numerous innovative boards on which they can be
contacted for the Encouragement to do so. Expanding the clients and financial institution
relationship is most effective with a familiar and right communication challenge. The instant the
communication chain is damaged, the clients will not be curious about the usage of the banking
services.

4. Establishing an Encouragement Test: To control this transformation, the banks have set up a
check for checking the Encouragement with the clients. They have understood that a single step
will not be sufficient to maintain the offerings in this competitive financial market. There may be
a demand to interact with the customers due to special needs, opposition, product strains, etc.
Banks have started removing some checks to take reviews from the clients and feature made vital
changes to their services to house the consumers.

Conclusion:

In our experience, we have seen that the transformation from "client to bank" and from "bank to
customer" has added an extra level of balance to the financial market's image. Each bank and each
customer are now given the same importance, and therefore each are equally important. The
conventional situation of the bank having the higher surrender client’s needs has been changed
due to marketplace shape and an increase in opposition. But banks have hooked up various tools
to control the situation after transformation correctly and correctly.

3. “Bank Traditional Limited” is a well-established old Retail Bank operating in India and
is almost a 100-year-old Bank. Its customers are predominantly individuals who are senior
citizens (65 years old) who are comfortable only with traditional modes of banking like
branch banking, using paper cheques, etc. However, in the last few years, this bank had
embarked on various technology projects / initiatives like ATM, internet / mobile banking,
PoS, kiosks etc. due to various businesses and operational compulsions.

a. Analyze the various challenges that ‘Bank Traditional Limited’ will have to manage (5
Marks)

Ans 3a.
Introduction:
It is evident that the conventional banks in India have started changing themselves into new
embracing conditions of adaptability in order to compete with the new banks in India. However,
because of this, a number of issues have arisen which could potentially thwart any prospects of a
future boom. Traditional banks are constantly searching for avenues to provide users with greater
flexibility, performance, and acceptability by enabling them to adopt a more integrated approach.

Concepts and applications

Demanding situations OF bank traditional limited:

In terms of traditional banking, there are several challenges which must be tackled in order
to overcome them:

1. Customers who already purchase would be lost: Whenever any items or services are added
in the marketplace, it's yet to be determined whether they will be able to resolve the problems faced
by consumers or not to judge the effectiveness of such a policy. In the immediate case, while “bank
traditional limited” is shifting to digital platforms in which its regular clients are the old age
individuals, the clients might get bored in such a financial institution because the old age human
beings won't be well versed with the new technology. There will be a shift of the bank from
focusing on the needs and claims of the current purchaser to introducing the latest technologies for
the benefit of other clients.

2. Compliance with strict regulatory standards: There are several benchmarks that every bank
has to meet in order to be able to take advantage of certain market conditions. For instance, in
India, the banks must hold CRR, SLR, etc., every conventional financial institution has to conform
to the regulatory standards set using the supervisory authority. Being of a smaller length, the
traditional banks might face the problem of managing these unique ratios. A larger bank will no
longer face such trouble since they already have the colossal workforce to manipulate the
resources.

3. Requires that technical experts are hired: When the bank introduces these new technological
services, it has to rent a whole group of workers. This is properly-versed in its technical intricacies
for managing the entire data and chain of information. It can be a tedious mission to bring the one's
employees. Those should be properly dependent on employees thinking about the increasingly
wide variety of cybercrimes and frauds in the online banking gadget.

Conclusion:

As a result, the shift of financial institutions traditionally restricted to offering conventional

banking services in order to augment their value-added services is not always a bad thing per se.
However, it will result in numerous short-term challenges that need to be encountered. Those
challenges will now not convey any losses to the banking enterprise when nicely managed
efficiently and efficiently. It is important for these banks to take some steps to avoid such
challenges, since they are smaller financial institutions.

b. Analyze the various steps, ways and means this Bank must adopt to manage this necessary
transition (5 Marks)

Ans 3b.
Introduction:
In order to meet the needs of India's new banks, the traditional banks are transforming the way in
which they operate into one that fits with the new conditions of adaptability. Despite this, there
have been many problems and demanding situations which might negatively affect future growth
prospects. It is no secret that the traditional banks are in search for ways that harbor the capacity
to create comprehensive-ranging resilience, efficiency, as well as acceptability. Throughout the
history of the bank, we have seen the various challenges that can be faced by it. Therefore, it is a
requirement on a bank's part to take a few steps in managing this transition in order to be
successful.

Concepts and Applications

STEPS TO MANAGE THE BANK:
Here are a few steps or methods through which the bank can be able to control the challenges of
its clients :

1. The bank should now not close its traditional carrier altogether or lessen the conventional
services to the volume that may cause a lack of capability purchasers, i.e., the vintage age
humans. Similarly, the financial institution may even arrange for a few seminars or
conferences in which the old-age humans (who aren't technologically sound) can be given
specific knowledge and tips about using the new system. It will serve two functions, i.e.,
the bank will now not lose its clients, and its new machine will take a lift. It will also help
the bank advantage goodwill within the society in which its act of education the vintage
age people will be termed as part of CSR (company Social responsibility). That is how the
bank will manage its brand fee as well, which it has received in the final one hundred years
of services.
2. Secondly, the bank should have a technologically sound workforce in dealing with such
subjects of online banking. Human resources have to be a trusted and nicely-discovered
organization of humans thinking about increasing cyber crimes and online fraud cases.
They ought to gain knowledge of now not best to watch out however additionally to beware
of the citizens or users approximately the conditions under which any scam can occur to
them. They ought to hold the online information of the bank intact and comfortable.
 3. Lastly, the bank has to manage matters so that stability can be maintained between the
traditional system and the new virtual device. It's miles because it will assist the bank to
grow or nurture its traditional method if at all, in any circumstance, the new centers of
ATM/ Online Banking no longer gain importance in the marketplace. It has to strictly
manage its terms and conditions for online banking after consulting with a felony
counselor, and then, the services ought to be left open to the usage of the more prominent
public.
4. In addition, the bank has the duty to ensure that safety and security measures are in place.
The installation of CCTV cameras in ATMs, maintaining a criminal chamber that is
capable of dealing with the web/ virtual banking machine troubles, etc. would be examples
of such measures.

Conclusion:

We do not believe that the bank should make such an abrupt change now, but we think it is
important now that any deal not be sudden. It should be planned and executed appropriately, and
then the project should be completed. In order to handle the issues properly, make use of the
workforce, modify how the traditional banking machine functions in view of the virtual banking
system, etc., the right guide must be accompanied by the appropriate service.