JAIIB RBWM Paper-4 Module-A Unit 1: Retail Banking Introduction

JAIIB Paper 4 (RBWM) Module A Unit 1: Retail Banking Introduction (New Syllabus) 

IIBF has released the New Syllabus Exam Pattern for JAIIB Exam 2023. Following the format of the current exam, JAIIB 2023 will have now four papers. The JAIIB Paper 4 (Retail Banking and Wealth Management) includes an important topic called “Retail Banking Introduction”. Every candidate who are appearing for the JAIIB Certification Examination 2023 must understand each unit included in the syllabus. In this article, we are going to cover all the necessary details of JAIIB Paper 4 (RBWM) Module 1 Retail banking Unit 1: Retail Banking Introduction Aspirants must go through this article to better understand the topic, Retail Banking Introduction and practice using our Online Mock Test Series to strengthen their knowledge of Banker Customer Relationship. Unit 1: Retail Banking Introduction

Retail Banking

  • “Retail Banking is a banking service that is geared primarily toward individual consumers. Retail banking is usually made available by commercial banks, as well as smaller community banks. Unlike wholesale banking, retail banking focuses strictly on consumer markets. Retail banking entities provide a wide range of personal banking services, including offering savings and checking accounts, bill paying services, as well as debit and credit cards.
  • Through retail banking, consumers may also obtain mortgages and personal loans. Although retail banking is, for the most part, mass-market driven, many retail banking products may also extend to small and medium sized businesses. Today much of retail banking is streamlined electronically via Automated Teller Machines (ATMs), or through virtual retail banking known as online banking.”

Characteristics of Retail Banking

The definitions of retail banking as discussed above bring out the following characteristics:

  • Banking facilities targeted at individual customers.
  • Focused towards mass market segment covering a large population of individuals.
  • Offer different liability, asset and a plethora of service products to the individual customers.
  • The delivery model of retail banking is both physical and virtual i.e. services are extended through branches and also through technology driven electronic off site delivery channels like ATMs, Internet Banking and Mobile Banking.
  • Extended to small and medium size businesses.

Advantages of Retail Banking

  • Client base will be large and therefore risk is spread across the customer base.
  • Customer Loyalty will be strong and customers tend not to change from one bank to another very often.
  • Attractive interest spreads since spreads are wide, since customers are too fragmented to bargain effectively; Credit risk tends to be well diversified, as loan amounts are relatively small.
  • There is less volatility in demand and credit cycle than from large corporates.
  • Large numbers of clients can facilitate marketing, mass selling and the ability to categorize/select clients using scoring systems/data mining.

Constraints in Retail Banking

Though retail banking as a segment has a number of embedded advantages, the segment suffers from constraints also. A few of the constraints are listed below:

  • Problems in managing large numbers of clients, especially if IT systems are not sufficiently robust.
  • Rapid evolution of products can lead to IT complications
  • The costs of maintaining branch networks and handling large numbers of low-value transactions tend to be relatively high. (For this reason banks are encouraging clients to use cheaper distribution channels, such as ATMs, the telephone or internet for these transactions and reserve the branches for higher added value transactions).
  • Higher delinquencies especially in unsecured retail loans and credit card receivables.

Prerequisite for Success of Retail Banking

There are various factors that can subscribe to the success of retail banking in India:

  • Presence of an efficient delivery mechanism
  • Product appropriateness
  • Pricing
  • Scoring models for assessing the credit worthiness
  • Consumer protection environment

Challenges for Retail Banking

  • Consumer Protection & Pricing
  • Inadequacy of MIS
  • Understanding of KYC/AML issues
  • Managing Risk
  • Effects of disruptive new technologies
  • Continuing growth

Reason for the Growth of the Retail Banking Segment

  • Rise of the young Indian Professionals
  • Growth as an Economic Superpower
  • Increasing purchasing power of middle class people
  • Financial market reforms
  • Engine of economic growth
  • Mass Market banking
  • Volume driven business
  • Automation of banking process
  • Easy and affordable access
  • Financial liquidity
  • Economic prosperity
  • Changing consumer demographics
  • Technology innovations
  • Increase the Bank Liquid cash
  • Decline in interest rates
  • Declining cost of incremental deposit
  • Changes of terms of loans

Scope of Retail Banking in India 

  • Increase in economic activity is taking place with some recessionary trends.
  • Increase in purchasing power. The rural India has more purchasing power at their disposal and this is an opportunity to market Retail Banking.
  • India has 300 million households and 400 million middle class population. More than 90% of the savings come from the house hold sector. Falling interest rates have resulted in a shift. “Now People Want to Save Less and Spend More.”
  • Nuclear family concept is gaining much importance which may lead to large savings. The number of banking services to be provided is increasing day-by-day.
  • Tax benefits are available. For example, in case of housing loans/ education loan the borrower can avail tax benefits for the loan repayment and the interest charged for the loan.

Future of Retail Banking

  • Growth in Digital Banking
  • Rapid Adaptation of Blockchain by Retail Bankers
  • Artificial Intelligence (AI) and Data Science in Banking
  • Cyber Security to be a Top Priority
  • Payment Innovations
  • Rise of Big Tech in Banking Industry

JAIIB Paper-4 Module-A Unit-1 Retail Banking Introduction(RBWM)






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