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Banks are no longer places where people would go deposit or withdraw their money and that would be the end of the story. Banks irrespective of their size and span have diversified into many segments. If one has to broadly classify the activities into categories, then they would mostly come under Retail and Corporate or Commercial banking.
Most of us usually who walk into banks hardly focus on the fact that is it a retail branch or a corporate branch, honestly most of us might not even know the difference in both. At times even merging corporate banks definition with investment banking, however, that is an absolutely different end of the spectrum, where deals like mergers and acquisitions and takeovers are done, basically, it is focused on top management incorporates.
Let us understand how Retail Banking is Different from Corporate Banking…….
So retail banking is generally the face of the bank situated in forms of various branches located across cities, who deal with daily retail customers, also mostly known as personal banking. These banks or branches purely deal with retail customer’s, their volumes are large in terms of clientele. You will not find many banks that purely focus on retail banking. It is interesting to note that retail banking represents the footing through which funds are collected for most banks.
It is mostly referred to as commercial banking as well. Here the bank’s clientele is not individuals but corporates, irrespective of their size, they could be small as well as large businesses. It is a customer tailored finance services designed and personalised for corporates addressing their needs. They offer more or less the same services as in retail banking but with large volumes matching the cash flow of the companies they are dealing with. In addition, they also open personal and current accounts offering mortgages, working capital loans, overdraft facilities and loans to businesses.
The key difference is in the volumes and services offered by Retail and Corporate Banks:
Key Functions of the Retail Banks
There ae a large number, a variety of products and services offered by most retail banks. Fundamental services include a quintessential checking and savings accounts, a line of credit like home mortgages, vehicle loans, personal loans at high-interest rates. Credit cards, remittance services are a few profitable offering that retail banking presents to its clients.
Needless to say, the financial strength of an individual is the deciding factor in the services that will be offered to the client. If the client is of high potential then the client might be offered a private banker, or a relationship manager who will manage their banking requirement, however, if the client is of modest means would need to perform the tasks themselves either through a teller or through the technology integrated mediums of transactions offered by most retail banks these days, like ATM, Online transactions, internet banking etc., to name a few.cz
Key functions of Corporate Banks
One of the ways that corporate banks can ensure profit is by sanctioning loans and other products of credit, which become a key factor in corporate banking. Managing the cash flow or the working capital of the corporate, with Treasury and currency conversion requirements is another area of function. Corporate banks also structure and customise loans managing the expansion needs to businesses such as offering equipment loans for the manufacturing clientele. Trade finance, bill collection, credit letters and payroll are common tasks handled by this sector for the companies they are representing. Some banks might also offer commercial real estate analysis, portfolio evaluation, debt and equity structuring as well. Through the commercial banking intervention, banks might also offer asset management to their clients.
Most large banks have a separate division to handle the retail and corporate function as both these function guarantee as great profit centres.
The existence of both the wings of banking is essential for the healthy functioning of local and global economies. While one brings in deposits from personal customers (Retail Banking), which in turn enables corporate banking to offer expansion assistance to companies, further leading in creating jobs and aiding the expansion of economies.