Business Banking is also known by the term ‘Commercial banking’ comes into centers when the banks or the division of a bank starts dealing with businesses. In the past times, Investment banks and commercial banks were divided into their set of entities, however the ‘Glass-Steagall Act’ is also familiar as the "Banking Act of 1933" has opened all the barriers letting investment banks to engage in commercial banking.
Types of Business Banking:
- Retail Banking
- Wholesale Banking
- Universal Banking
- Virtual Banking
When ‘Retail Banking’ comes into the foreground, we often relate it with retail trade. Though to some extent both terms are very close, however, the difference lies in transaction executes within banks and consumers with no participation of banks or corporations. Retail Banking stands on three vital pillars making its strongest ever to meet its successive goals in the present market. These are
- Multiple Products: Multiple Products imply various financial products like savings, transactions, personal loans, credit cards, debit cards, mortgage, deposits, etc.
- Multiple Delivery Channels: Various Channels available to deal with customers like a customer service center, internet kiosks, etc.
- Multiple Customer segments: Customer segment incorporates Small businessman and corporate.
List of Products offers in Retail Banking:
- Deposit Products like Flexi products which are the fusion of a two-term demand deposit and a fixed deposit. In this, the depositor is free to get facilities of both the liquidity of savings and current accounts with the high returns of fixed deposits.
- Loan Products available like Education Loan, Personal Loan, Housing Loan, Commercial Loans, Gold Loan, Mortgage, etc.
- Card Products such as Credit Card, Debit card, etc.
- Travelers Products like Traveler’s cheques etc.
The reason why Banks attract Retail Banking includes lower transaction costs, more productivity, sale and more convenience in the business. For already established banks, it’s handy to maintain, but for new fishes, it’s a hard nut to crack as establishing ‘Retail banking’ needs a vast network.
Wholesale Banking usually includes high scale corporate, industrialists and businessmen. Multinational companies and business houses are main participants of this kind of banking. This Banking is also famous with the name Corporate/Commercial Banking.
Products available in Wholesale Banking:
- Fund-Based Services
- Term Lending
- Short-term Finance
- Working Capital Finance
- Bill Discounting
- Structured Finance
- Export Credit
- Non-Fund Based Services
- Bank Guarantees
- Letter of Credit
- Collection of Bills and Discounts
- Value-added Services
- Cash Management Services
- Channel Financing
- Vendor Financing
- Real-time Gross Settlement
- Corporate Salary Accounts
- Syndicate Services
- Forex Desk
- Money Market Desk
- Derivatives Desk
- Employee Trunks
- Tax Collection
- Bankers to Right/Public issue
- Internet Banking Services
- Payment Gateway services
- Corporate Internet Banking
- Supply Chain Management
- Supply Chain Partners
- Depository Receipt
- Participatory Notes
In narrow banking, Narrow Banks who have a weak capital base works well to restrict the raising of deposits from customers and invest it in safe security bonds and commercial papers, etc. Properties of Narrow banking include deposits without any lending rate, high rated asset security, Enormously high liquidity, Fewer interest rates for depositors, etc. The main objective of introducing Narrow banks amongst the low capital based banks was:
- In order to supply a secure and safe framework.
- To give a clear line of operation to such weak banks
- To put an end on upcoming troubles by means of regulatory guidelines
A real blend of investment banks and Commercial banks gave birth to Universal Banks. This type of Bank provides full financial services like trading, wealth and asset management, financial advisory, etc. all under one roof. The concepts originally started by Narsimham Committee, however, brought into reality by the Khan Committee with the strong aim to justify and harmonize the function of banks and develop the financial institution in India. Regulatory guidelines ease up the working of Banks and promote it to start a competition between banks to change to Universal Banks. Today IDBI, ICICI are emerging in the Universal category and many are in a race to obtain the position.
Virtual/ Internet Banking/ e-Banking
e-Banking or internet banking is computer-based banking that does not directly involve the interface with a customer or their physical presence at the bank branch. Virtual Banking offers banking services like deposit, withdrawal and other services through automated teller machines or computerized devices.