ambitiousbaba.

com Online Test Series

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 1
 ambitiousbaba.com Online Test Series

CAIIB – Retail Banking

Module A- Retail Banking
Index
No. of Unit Topics Name

Unit 1 Retail Banking Introduction

Unit 2 Retail Banking: Role within the Bank

Operations

Unit 3 Application of Retail Banking Concept and

Distinction between Retail and
Corporate/Wholesale Banking

Unit 1: Retail Banking Introduction

Banking

Individuals Firms

Retails Entrepreneurial Wholesale MSME- Firms

• Mass Retail Banking

• Class Retail Banking (Pvt. Banking) Agriculture
MSME Individual

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

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 2
 ambitiousbaba.com Online Test Series

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).

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 3
 ambitiousbaba.com Online Test Series

• 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

Unit 2: Retail Banking: Role within the Bank

Operations

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 4
 ambitiousbaba.com Online Test Series

The business models for retail banking show interesting revelations across types of
banks. The models adopted by banks vary among the public sector, private sector
and foreign banks. The main approaches are as follows:
• Strategic Business Unit (SBU) Approach,
• Departmental Approach,
• Integrated Approach (part of the overall business plan).

Business Model

• Banks generally structure their retail banking models mainly on a positioning

platform and to be the best/top three among the peer group players or across
players. Strategies are based on the positioning objectives and vary from bank to
bank depending on the importance attached to the business model.
• Among the public sector banks, some banks aim for a place among the top three
retail players across banks including peer group banks while some other public
sector aim for a space in the top three among the peer group. But the strategy
adopted by these banks was a part of the overall strategy based on the business
mix. projections and corporate objectives of the bank.

Unit 3: Application of Retail Banking Concept and

Distinction between Retail and
Corporate/Wholesale Banking
Business Process Structure in Retail Banking

• Horizontally organized model is a modular structure using different process

models for different products offering end to end solutions product wise.
• Vertically organized model provides functionality across products with
customer data base orientation and centralised customer data base is used
across products.
• Predominantly horizontally organized model is mostly product oriented
with common customer information for some products.
• In predominantly vertically organized model, common information is
available for most of the products.

Business Approach (Domain Specific) in Retail Banking

The business strategies with regard to the domains targeted are approached in different
ways by different banks. The most common approaches are as follows:
• Segmented Approach - where branches are classified based on the business
potential with regard to retail space and business targeted in these segments of
branches only with focused marketing strategies. These branches will be
positioned as resource centre branches and will form part of the overall

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 5
 ambitiousbaba.com Online Test Series

segmentation game plan of the bank. Branches are classified as Resource

Centres, Profit Centres, Priority Centres and General Centres to have a clear
business focus. This concept is an effective business model for PSBs with large
network and useful for focused strategies and already getting implemented in
some public sector banks.
• Geography based approach - where retail models are built based on
geographies.
• Classification based approach - where strategies are designed based on the
type of branch viz., Rural. Semi Urban. Urban and Metro. This strategy helps in
better product structuring for specific types of branches.

Product Models in Retail Banking

Liability Products
Liability products are offered to retail banking customers basically under three spaces -
Savings Accounts, Current Accounts and Term Deposit Accounts. Product
differentiation among these accounts is best achieved by adding different value
propositions.

• Retail deposit are stable and constitute core deposits.

• They are interest insensitive and less bargaining for additional interest.
• They constitute low cost funds for the banks.
• Effective customer relationship management with the retail customers build a
strong customer base.
Retail Asset Products
Retail asset financing is a major component of retail banking model of banks. In
fact retail loans are the backbone of the revenue streams of banks. In any customer
expansion strategy, retail loan is packed as the main attraction uniformly by all banks.
• Retail banking results in better yield/improved bottom line for a bank.
• Retail segment is good revenue for funds deployment.
• Consumer loans are presumed to be of lower risk and NPA perception.
• Helps economic revival of nation through increased production activity.
• Improves lifestyles and fulfils aspirations of the people through affordable credit.
• Retail banking involves minimum marketing efforts in a demand-driven
economy.
Other Products/Services
• Other products and services broadly cover the beyond product facilities
tagged to the products and services. These enhance the service experiences of
the customers by providing process and delivery efficiencies by additional
service tools to the basic products.
• One set of these products are Credit Cards, Debit Cards. ATM Cards, Telephone
Banking. Mobile Banking, Internet Banking. Depository Service and Broking
Services. Distribution of third party products like life and non life policies,

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 6
 ambitiousbaba.com Online Test Series

mutual funds, retail sale of gold coins, bill payment services, multi city cheques,
payment gateway for rail, air ticket.

Process Models for Products and Services

• Processing of products and services in retail banking is basically

approached from three dimensions viz., the entire processing is done through
in house resources, some products processed in house and for some products
outsourcing is done for process and the third approach is outsourcing of entire
process subject to prescribing process standards.
• In PSBs and old private banks the entire process for products and services are
done through in house resources but in some banks, process part of some
products are outsourced. But generally no outsourcing is done for the process
part. In new generation private sector banks, outsourcing is attempted partially
for some process areas. In foreign banks, the entire process is outsourced and
normally happens through a dedicated back office covering the entire gamut of
retail banking services.

Pricing of Products and Services

• Banks develop models for pricing of products and services based on certain
fundamental parameters. Market dynamics, risk perception, return
expectations, tenor/duration, resources position, asset liability management
positions and customer profile are some of the variables which are factored into
the pricing model by banks. The balancing of these various variables dynamically
with changing market dynamics is the key function for good pricing model.
• In addition, regulatory advices (both overt and covert) also influence the pricing
models. The fundamental concept of costing in pricing has now gelled with the
asset liability management practices of banks.

Technology Models in Retail Banking

• The technology platform for retail banking plays a major role in the retail
banking initiatives of banks. In today's scenario, technology is the backbone of
the process and delivery efficiencies of banks. The technology models basically
adopted by banks are In House Models, Outsourced Models, Partially In House
and Partially Outsourced Models.
• Each model will have advantages and disadvantages and the overall business will
be the decider of the effectiveness of the model.

Distinction between Retail and Corporate/Wholesale

Banking
Retail Banking and Corporate or Wholesale Banking differ in their basic approach to
banking. The major differences between the two segments are discussed as
follows:

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 7
 ambitiousbaba.com Online Test Series

• Retail Banking targets at the individual segment while corporate banking deals
mainly with corporate clients.
• Retail Banking is a mass market banking model whereas wholesale/corporate
banking look at a relatively smaller segment of business/corporate client base as
compared to retail segment.
• Retail Banking is a B2C approach (Business to Customer) whereas corporate
banking is a B2B approach (Business to Business).
• The ticket size of loans in retail banking is low whereas the ticket size is high in
corporate loans.
• Risk is widespread in retail banking as customer base is huge whereas in
Corporate Banking, the risk is more as the ticket size is big though customer base
is relatively small.
• Returns are more in retail banking as the spreads are more for different asset
classes in retail. But in corporate banking, the returns will be low as corporates
bargain for lower rates due to higher loan amounts.
• Monitoring and recovery in retail assets are more laborious because of the larger
customer base as compared to corporate banking.
• In the liability side also, the cost of deposits is relatively less and mostly go along
with the card rates as the ticket size in retail deposits is small. In corporate
banking, as the ticket sizes of deposits will be large, the cost of deposits will be
high due to pressure from the corporates for higher rates and competitive forces
to garner the deposits.
• The impact of NPA will be more pronounced in corporate banking than retail
banking as the ticket sizes in corporate loans are higher than retail loans.

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 8
 ambitiousbaba.com Online Test Series

Download App- Click here

CAIIB Telegram Group: Click Here

CAIIB Online Mock test with Explanation

CAIIB Mock Link

CAIIB Paper-I (Advanced Bank • Unit wise Mock- 300+questions

Management) Online Mock Tests • Cast Study Mock
• Full length Mock 5- 500
Visit-test.ambitiousbaba.com Questions (Each Mock 100 Q)
• Memory based Mock

Click here -Mock Link

Total- 1000+ Questions

CAIIB Paper-II (Bank Financial • Unit wise Mock- 350+Questions

Management)Online Mock Tests • Case Study Mock
• Full length Mock 5- 500
Visit-test.ambitiousbaba.com Questions(Each Mock 100 Q)
• Memory based Mock

Click Here- Mock Link

Total- 1000+ Questions

CAIIB/DBF Paper-3 (Retail Banking) Online • Unit wise Mock- 300Questions

Mock Tests • Full length Mock 3- 300
Questions(Each Mock 100 Q)
Visit-test.ambitiousbaba.com • Memory based Mock

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 9
 ambitiousbaba.com Online Test Series

Click here-Mock Link

(600+ Questions)

Combo Approx (2700 +Questions) + Capsule

PDF
Visit-test.ambitiousbaba.com
Click here-Mock Link

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 10
 ambitiousbaba.com Online Test Series

BEST ONLINE MOCK TEST FOR JAIIB | CAIIB | BANK PROMTION EXAMS 11