What is Retail Banking & Its Functions? | Angel One (2024)

In retail banking, customers interact directly with the bank. It entails a person accessing their savings account, checking their balance, managing their money, and depositing money safely and securely. This sort of banking has a lot to offer its consumers, especially students who want to study or live in another country. This article aims to help you get a better picture of what retail banking means.

Retail banks cater to the general population and have a clear banking exterior. They usually have many branches spread throughout cities to make banking services more accessible to their consumers. By providing credit facilities to consumers, retail banking impacts the rate of liquidity, resulting in economic growth. Retail Banks usually provide credit to customers in the form of house and automobile loans, credit cards, auto loans, and mortgages, among other things. The deposits give all credit that these banks collect from their customers.

Types of Retail Banks

The following are the several types of retail banks:

Large Banks:

These are the banks whose names you’ve probably heard and are familiar with at home. Branches of major banks may be found all across the city.

Small banks:

Sometimes known as community banks, have a lesser market share than major banks. They have several locations and are quick to offer loans.

Online banks:

As the name implies, do not have physical locations. The idea of online banks, though, is to keep fees to a minimum.

Regional Rural Banks:

These are banks that have been created in rural regions to meet the needs of low-income individuals. These banks offer retail banking services and loans to these organisations.

Private Banks:

Typically, these are banks that operate in urban areas and cater to the needs of high-income individuals.

Post Offices:

In certain areas, residents may not have access to traditional banks. The National Postal System provides basic banking services like account opening, savings, recurring deposits, and more in these areas.

Objectives of Retail Banking

The following are some of the aims of retail banking.

Provide consumers with a one-stop-shop experience:

Retail banking attempts to provide a full range of financial services to a wide range of customers in one convenient location. It’s a one-stop-shop for clients who don’t want to switch banks. Accept depositing, credit card disposal, cash management, online banking, debit card, MasterCard, and a variety of other services are among them. The integration of these services in one location provides added convenience to the client.

One of the essential tasks that retail banking plays are to stimulate the economy.

It stimulates the economy by boosting the movement of money between people, resulting in the country’s overall growth and development. The availability of greater monetary services has an impact on voters’ capacity to find work, acquire skills, and get access to educational opportunities.

Provide Consumers with Tailored Services:

Retail banking provides maximum happiness to customers by providing services that are tailored to their needs. It tailors monetary services to people’s abilities and preferences. Customers are happier when they get access to personalised services from their personal bankers.

Improve Market Liquidity:

Another important goal of retail banking is to increase market liquidity. It gives credit facilities to people, allowing them to acquire expensive items with ease. By increasing cash flow, the market’s liquidity situation improves, resulting in more job chances.

Provide Credit at a Reasonable Rate:

People can get credit at a lower cost through retail banking than they can through other financial institutions. It modifies the rate of borrowing in accordance with economic considerations. Interest rates are increased during periods of inflation and then reduced whenever the economy enters a period of depression.

Functions of Retail Banking

The following will help you understand the many functions of retail banking: –

Providing a secure location for cash deposits

Customers can deposit money and other important financial items at a retail bank, which is a secure location. They entice customers to deposit money by promising a higher rate of return and ensuring the safety of their investment. People are therefore encouraged to put their ideal laying cash in financial institutions in order to receive interest.

Providing credits for Spending

These financial institutions provide credit to their consumers based on their credit scores. Consumer spending is facilitated by retail banks’ provision of various sorts of loans, including house loans, vehicle loans, mortgages, and a variety of other products. The availability of credit allows consumers to spend their future profits now, increasing the economy’s liquidity rate.

Finance Management

Customers may manage their money utilising a variety of bank cards and online utility services through retail banking. They may quickly use their money to do transactions utilising online payment systems at any moment. Customers do not need to physically visit their branch and may access their accounts from the comfort of their own homes.

Increases monetary flow in the economy

It contributes to the efficient generation of money in the economy. A customer’s loan from one bank becomes a deposit at another bank. This deposit is now being utilised to extend more credit to a new group of clients. In this way, the loan and depositing cycle continues, resulting in a sufficient amount of money in an economy.

Assists With Economic Revitalization

The retail bank plays an important part in the nation’s economic recovery. It enables a better flow of money in the market by providing individuals with loans at a minimal rate of interest. When individuals have enough money, they can easily carry out manufacturing activities, which results in economic growth.

What is Retail Banking & Its Functions? | Angel One (2024)

FAQs

What is Retail Banking & Its Functions? | Angel One? ›

In retail banking, customers interact directly with the bank. It entails a person accessing their savings account, checking their balance, managing their money, and depositing money safely and securely.

What is retail banking and its functions? ›

Retail banking is a way for individual consumers to manage their money, have access to credit, and deposit their funds in a secure manner. Services offered by retail banks include checking and savings accounts, mortgages, personal loans, credit cards, and certificates of deposit (CDs).

What is a bank and its functions? ›

A bank is a financial institution that is licensed to accept checking and savings deposits and make loans. Banks also provide related services such as individual retirement accounts (IRAs), certificates of deposit (CDs), currency exchange, and safe deposit boxes.

What is the difference between retail banking and branch banking? ›

Customers can visit the branch to manage their accounts, apply for loans, make deposits, and withdraw cash. On the other hand, retail banking is more focused on providing basic banking services, such as savings accounts, checking accounts, ATM services, and credit cards. 2.

What is the difference between retail and commercial banking? ›

The key difference between retail and commercial banking is who the products are designed for. While retail banks service individuals, communities, small businesses, and families, commercial banks focus on larger companies, government entities, and institutions.

What is retail banking in simple words? ›

Retail banking, also called personal banking or consumer banking, is financial services geared toward individual customers rather than large corporations. Retail banks offer products like savings accounts and debit cards to the general public, and working in retail banking requires high levels of customer service.

What are the three basic characteristics of retail banking? ›

Retail banking provides financial services for individuals and families. The three most important functions are credit, deposit, and money management.

What are the four main functions of banks? ›

Primary Functions of Banks
  • Accepting Deposits. The banks accept deposits from their customers, who can withdraw their funds at will. ...
  • Lending Loans & Advances. A bank lends funds to needy people at a certain rate of interest. ...
  • Issue of Notes/ Drafts. ...
  • Credit Deposits.
Oct 12, 2023

What are the two basic functions of banking? ›

Although banks do many things, their primary role is to take in funds—called deposits—from those with money, pool them, and lend them to those who need funds.

What are the three 3 main functions of a bank? ›

There are three main functions for a bank:
  • Receiving money: Deposits are the sums of money that a consumer gives to the bank. ...
  • Keeping money: Reserves can be kept in two ways by banks. ...
  • Lending money: People are given money by the bank on the basis of time and interest.

Is retail banking a bank teller? ›

Depending on the size of the bank, retail bankers may also serve as bank tellers.

What are the benefits of retail banking? ›

Advantages of Retail Banking

Benefit from guaranteed returns on deposits, particularly with Fixed Deposits (FDs). Utilise innovative banking products with ease of access via online banking. You can select from many banks and Non-Banking Financial Companies (NBFCs).

What are the retail banking products? ›

What Are Retail Banking Products? The retail banking products include checking accounts, credit cards, savings accounts, mortgages, debit cards, home equity loans, CDs, and personal loans.

Which problem would be best addressed by a retail bank? ›

A retail bank primarily serves individual consumers. Therefore, a couple seeking a mortgage loan to buy a house is the best example of a problem addressed by a retail bank from the given options.

Why did people quit putting their money in banks during 1979? ›

In 1979, the financial health of the thrift industry was again challenged by a return of high interest rates and inflation, sparked this time by a doubling of oil prices and exacerbated by dwindling resources of the Federal Savings and Loan Insurance Corporation (FSLIC).

Can a bank be both retail and commercial bank? ›

Some banks offer both retail banking services and commercial banking services. How do these banks make a profit? Both commercial and retail banks lend money at a higher rate than they borrow it. This allows them to balance those that save more with those who borrow more, which is vital for a healthy economy.

What are the three products of retail banking? ›

What Are Retail Banking Products? The retail banking products include checking accounts, credit cards, savings accounts, mortgages, debit cards, home equity loans, CDs, and personal loans.

What are the three types of retail banks? ›

There are three main types of retail banks which are commercial banks, credit unions, and savings and loan associations.

What is benefit of retail banking? ›

The advantages of retail banking include: Receive tailored assistance through dedicated relationship managers. Access various financial products and services covering deposits and loans. Benefit from guaranteed returns on deposits, particularly with Fixed Deposits (FDs).

What are the different types of retail banking operations? ›

They are commercial banks, credit unions, and certain investment funds that offer retail banking services. All three retail bank types work toward providing similar banking services. These include checking accounts, savings accounts, mortgages, debit cards, credit cards, and personal loans.

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