Banking Forms

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 Various Banking forms are:
• Corporate Banking
• Retail Banking
• Rural Banking
• International Banking
Corporate Banking
 Meaning
• Corporate banking means Business banking. It
refers to the aspect of banking that deals with
corporate customer.
• Corporate banking is a subset of business
banking that involves a range of banking
services that are offered only to corporates.
The services include the provision of credit,
cash management facilities, etc.
 Corporate Banking Services
1. Credit Management
Loans and related credit products are offered to corporate customers. Credit
facilities form the largest share of profits for commercial banks. The interest
rates imposed on the loans are significantly high due to the amount of risk
prevalent in lending to corporate customers.
2. Treasury services Management
Treasury services are used by companies to manage their working capital
requirements. Such services are extremely important for multinational
companies as they facilitate currency conversion.
3. Fixed asset requirement financing
Fixed asset requirement financing services are important for corporates
involved in capital-intensive industries such as transportation, information
technology, and heavy machinery manufacturing. Banks facilitate customized
loans and lease agreements for the purchase of equipment, machinery, etc.
4. Employer services
Commercial banks also provide services such as the selection of
retirement plans and healthcare plans, as well as payroll facilities, for
employees.
5. Commercial services
Banks also provide services such as portfolio analysis, leverage analysis,
debt and equity restructuring, analyses of real assets, etc. Other
services that are of importance to corporate clients include asset
management services and underwriters for initial public offering
(IPOs), etc.
6. Equipment Lending
These are called fixed asset requirement financing services. It is mainly
for the corporates involved in capital-intensive industries such as
information technology, transportation, and heavy machinery. Banks
facilitate customized loans and lease agreements for the purchase of
machine equipment.
7. Risk Management
Banks provide advisory and custodial financing to the clients to
safeguard their assets, maximize liquidity, and manage risks.
8. Employer Services
Corporate banks also provide employment services such as
payroll, selection of retirement plans, and healthcare
facilities.
9 Commercial Services
Banks also provide services like portfolio analysis, debt and
equity restructuring, real assets analysis, leverage analysis,
etc.
 Characteristics of Corporate Banking

1. Clientele
A bank’s business banking unit usually serves small to middle-sized businesses and large
conglomerates.
2. Authority
A company’s corporate banking accounts can only be opened after obtaining consensus from the
board of directors of the company. It means that they must be authorized by an official vote or a
corporate resolution. The company’s treasurer usually opens corporate accounts.
3. Liability
Since companies are recognized as separate legal entities under the law, all contents of corporate
accounts are the property of the company and not of the individual board members. It means that
there is a certain degree of independence to corporate accounts. It also indicates that the personal
creditors of the board of directors are not entitled to the contents of the corporate account of a
company.
4. Credit rating
The conduct or functioning of the corporate account forms part of the credit history of the company. It
affects the valuation and share prices of the company, the interest rates applicable to loans extended
to the company, etc.
5. Bankers
Corporate banking requires a degree of expertise in the industry. Thus, corporate bankers are
extremely well paid. JP Morgan Chase, Bank of America Merrill Lynch, and Goldman Sachs are some
of the largest commercial banks in the world.
Financial services provided by Banks to the Corporate
for meeting their banking and financial needs for
• Setting up new projects
• Expansion
• Diversification
• Modernization
• Financial restructuring
• Commercial Banking facilities
Rural Banking
 Meaning
• Regional Rural Banks are the Scheduled Commercial banks in
India conducting banking activities for the rural regions at the
state level.
• Rural banking in India started since the establishment of
banking sector in India. Rural banks mainly focuses upon the
agro sector and priority sector lending. In rural banking in India
there are 14,475 rural banks in the country of which 2126 are
located in remote rural areas.SBI- Largest bank catering to
rural areas.Other commercial banks, RRB’s, Co-operative Banks
also have their establishments in rural areas.NABARD( a wing
of RBI) provides credit and regulates banking in Rural India.
• There were established with an objective of providing
easily accessible banking and credit services to the rural
population and mobilising financial resources from the
urban areas to rural districts of India. Hence, RRBs form a
vital component of the financial service sector in India.
• RRBs operate at the district level in the states, and they
may cover multiple districts within that state.
• Just like any other commercial banks, the organisation of
Regional Rural Bank comprises of a Board of Directors,
Chairperson, Managing Director, Manager, Regional
Managers, and the assistant’s staff.
Ownership and Sponsorship
The ownership of shares of Regional Rural Banks in India is
divided among the Central Government, State
government, and the sponsoring banks:
• Central Government- 50%
• Sponsor banks- 35%
• State government- 15%
The sponsor bank helps the growth of an RRB by providing
trainings to the staff of an RRB, providing management
consultations to the bank for a minimum period of 5 years.
 Structure of Rural Banking

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 Functions of Regional Rural Banks
1. Accept Deposits
RRBs accept deposits from their members who hold an account in the bank.
Deposits can be made in current or savings accounts.
Depositors can also be made in fixed or recurring forms.
2. Loan Extension
The RRB Act of 1975 states that the RRB can extend loans and credit services to
the Priority Sector (PS). The loans to this sector are classified under PSL or
Priority Sector Lending. The RBI announced the coverage of RBBs in PSL from FY
1997.
The priority sector comprises of small and marginal farmers, craftsmen and artisans,
local traders, medium and small scale businesses, education, housing, renewable
energy, etc. which needs development and financial investment.
75% of the total Bank Credit has to be provided to the Priority Lending Sector. Out
of this total credit, 10% has to be given to the economically weaker sections.
Hence, short- term loans on a low rate of interest are extended by these banks to
the priority sector. RRBs cannot, however, extend large or long- term loans to its
customers.
3. Wage disbursement
The Regional Rural Banks in India perform the important
function of distribution of wages under the MGNREGA
(Mahatma Gandhi National Rural Employment Guarantee
Act), the Pradhan Mantri Gram Sadak Yojana (PMGSY).
The pensions provided under the poverty alleviation
schemes and pension schemes of India are also distributed
through these banks.
4. Secondary functions of RRBs
Similar to commercial banks, the secondary functions of
the Regional Rural Banks in India are providing agency
services and general utility services to their customers.
Agency services like foreign exchange, bill payments,
money wire transfer, etc. are performed by RRBs.
Utility services like ATM, UPI, issuance of debit cards,
locker facilities, etc. are also provided by RRBs in India.
Regulation of the Regional Rural Banks in India
1) Reserve Bank of India: The RBI Act 1934 and the
Banking Regulation Act 1949 are two principal regulating
statutes for commercial banks in India.
2) NABARD: It stands for National Bank for Agricultural and
Rural Development of India is the chief body for
regulating rural banking sector in India.
NABARD was established on July 12, 1982, by the RBI with
an objective to improve the credit flow concentrated in
the urban areas to the rural and semi-urban areas of
India.
Its major functions are monitoring, policy making, planning
the activities and credit system of the rural banks.
NABARD also helps rural banks in their development and
supervises their activities on a timely basis.
 Importance of Regional Rural Banks
1. Reduce rural and urban gap by mobilising financial resources and services to rural regions.
2. Regional Rural Banks pave the way for inclusion of the marginal population like small farmers,
Below Poverty Line (BPL) farmers and workers, small entrepreneurs, artisans, women, etc.
3. Regional Rural Banks assist rural businesses by providing them short- term loans, insurance
facilities, etc., and help to improve the role of entrepreneurship in rural areas.
4. Providing assistance like loans, advances, insurance to agriculturists for farming inputs,
equipment, processing, marketing activities, and cooperative societies helps in the growth of
agriculture and the advancement of farmers.
5. Many public and private sector banks do not deal with farmers and rural section due to their
small financial needs, fewer incomes, etc. In such a case, there is a need for a separate banking
system to protect the interests of these sectors.
6. The RRBs look forward to covering underserved rural areas in terms of financial services and
extending credit assistance.
7. Help in the growth of cooperative societies, agricultural societies, etc.
8. RRBs reduce farmers’ and the weaker sections’ dependence on traditional sources like
moneylenders who exploited them with a high rate of interests on loans.
Retail Banking
 Meaning
• Retail banking, also known as consumer banking or personal
banking, is banking that provides financial services to
individual consumers rather than businesses. ... Services
offered by retail banks include checking and savings accounts,
mortgages, personal loans, credit cards, and certificates of
deposit (CDs).
• The term “retail banking” refers to financial services provided
to people rather than companies, and it is used to refer to
banking that is referred to as “consumer banking” or “personal
banking” in the banking sector. Customers may manage their
money, get credit, and deposit their money in a safe and secure
atmosphere by participating in retail banking operations.
How Retail Banking works
Retail banks offers services to common people. Retail
refers to front shop for commercial banking services.
Many commercial banks deals with retail banks for
services and products as well. In the banking
industry, retail banking refers to banking that works
directly with individual clients and offers them with
basic financial services such as savings bank
accounts, mortgages, personal loans, debit cards,
credit cards, and safe deposit boxes.
Types of Retail Bank
There are three types of retail banks.
Commercial Banks provide different services to consumers.
This type of banks’ main way of earning profit is the interest
rate which varies from their different services.
Credit Union act and serve just like commercial banks. But the
biggest difference is that a credit union provides services on
a narrow scale. It is a non-profit organization and the
depositors of this type of bank are the shareholders of it.
Certain Investment Funds serve all the services just like
commercial banks. This type of institution allows its
consumers to get loans. They also help investors to fund
their money to small businesses.
 Services Offered by Retail Bank
Bank Accounts
Bank accounts include things like checking accounts, savings accounts, and retirement accounts, to
name a few examples. When you open a checking account, you’ll get a debit card that may be used to
make purchases, as well as the option to pay bills online or by electronic means. Money market
accounts provide a somewhat greater interest rate than savings accounts, but there are certain limits
on how often the money may be withdrawn.
Safe Lockers
In order to prevent your valuables from being stolen or damaged while you are away from home, little
value safes are housed in Safes inside the bank’s walls.
Deposits
The interest rates on Certificates of Deposit (CDs) are greater than those on savings accounts, but you
must normally leave your money in the account for at least several months in order to avoid being
charged an early withdrawal fee.
Personal Loan
Unsecured personal loans may be used to pay a number of costs without the need to put up any kind of
collateral as a form of security. The capacity to spend and repay repeatedly is provided through
revolving lines of credit (such as credit cards), allowing borrowers to avoid having to qualify for a new
loan each time.
Auto Loans
Individuals may get auto loans to aid them in the
purchase of a car. Auto loans can also be
refinanced.
Home / Mortgage Loans
Homes are purchased with the help of mortgage
loans, and second mortgages allow borrowers to
refinance current debts or withdraw cash from
the value of their property.
International Banking
 Meaning
• International banking is just like any other banking service,
but it takes place across different nations or internationally.
To put in another way, international banking is an
arrangement of financial service by a residential bank of
one country to the residents of another country.
• The best banks for international banking in India are
American Express Banking Corporation, Barclays Bank Plc,
Bank of America, Citibank N.A, Deutsche Bank, DBS Bank
India Limited, HSBC Ltd, Standard Chartered Bank, and
others. Standard Chartered Bank ranks the best in terms of
credit card services.
 Reasons for International Banking
• Low Marginal Costs – Managerial and
marketing knowledge developed at home can
be used abroad with low marginal costs.
Knowledge Advantage -The foreign bank
subsidiary can draw on the parent bank’s
knowledge of personal contacts and credit
investigations for use in that foreign market
• Home Nation Information Services –Local firms
in a foreign market may be able to obtain more
complete information on trade and financial
markets in the multinational bank’s home
nation than is obtainable from foreign
domestic banks.
• Prestige - Very large multinational banks have
high perceived prestige, which can be
attractive to new clients.
• Regulatory Advantage -Multinational banks are
often not subject to the same regulations as
domestic banks.
• Wholesale Defensive Strategy -Banks follow
their multinational customers abroad to avoid
losing their business at home and abroad
• Retail Defensive Strategy- Multinational banks
also compete for retail services such as travelers
checks, tourist and foreign business market.
• Transactions Costs - Multinational banks may
be able to circumvent government currency
controls.
• Growth- Foreign markets may offer
opportunities to growth not found
domestically.
• Risk Reduction -Greater stability of earnings
due to diversification
International Banks – Key Risks
• International lending risk
• Country risk
• Credit Risk
• Currency Risk
• Foreign Exchange Risk
 World’s Largest
International Banks
 .
Citigroup U.S.

Mizuho Bank/ Mizuho Corp Bank Japan

HSBC Holdings U.K.

Bank of America U.S.

JP Morgan Chase U.S.

Deutsche Bank Germany

Royal Bank of Scotland Group U.K.