Retail Banking is characterized by multiple products (liabilities, assets, services) catering to a large customer base (mass market) through multiple channels. The ticket size (loan/deposit amount) is typically low compared to corporate banking, making statement III incorrect. The customer base is huge, making statement IV incorrect.

Retail banking involves lending small amounts to a huge number of customers. Thus, the risk is spread out (diversified); the default of a few customers doesn't impact the bank significantly. Corporate banking involves huge loans to few entities, leading to high concentration risk.

Servicing millions of small customers requires extensive infrastructure (branches, ATMs, technology) and manpower. This results in high operational/monitoring costs per unit of money handled compared to wholesale banking.

The SBU model treats Retail Banking as a semi-autonomous unit (Profit Center). It has defined targets, dedicated resources, and separate P&L accountability, allowing for focused growth strategies independent of other bank divisions.

At the Self-Actualization stage (the highest level), basic financial needs are met. The customer seeks products that define their legacy, personal growth, or contribution to society (e.g., specialized wealth management, art investing).

TPM ensures fair assessment. A branch collecting deposits "lends" them to the HO and gets paid interest (Transfer Price). A branch giving loans "borrows" from HO and pays interest. The net margin determines branch profit.

Mass Affluent customers sit between the Mass Market and HNIs. They have higher income than average and demand value-added services, premium cards, and investment products but don't require bespoke private banking.

Horizontal organization breaks product silos. Instead of separate departments for Loans, Cards, and Deposits acting blindly, customer data is shared horizontally to enable cross-selling and better relationship management.

CRM uses data to segment customers, predict their needs, and offer relevant products. It shifts focus from "Product-Centric" to "Customer-Centric" banking.

CASA (Current and Savings Account) deposits have the lowest cost of funds. Increasing CASA reduces interest expense. Fee-based income (Cross-selling insurance, MF) adds revenue without using capital. This combination maximizes profit.

Historically, banks served only the wealthy or corporates (Class Banking). Post-nationalization and especially post-1991 reforms with technology, banks now target the general population (Mass Banking) with standardized products.

In a vertical model, each product line operates independently with its own P&L. While this allows specialization, it often creates silos where one department doesn't know the customer's relationship with another department, hindering a unified customer experience.

In banking terms, Loans are Assets (they earn interest) and Deposits are Liabilities (interest is paid). Personal Loan is an asset product for the bank.

During the Growth stage, the product gains market acceptance. Sales volume rises sharply, per-unit cost falls, and profits peak. However, competitors also enter the market during this phase.

Operating Profit reflects the core earnings from business operations. It deducts all expenses (cost of funds, salaries, rent, etc.) from all income sources, but BEFORE deducting provisions for bad debts or taxes.

Remote channels allow customers to transact without physical interaction or visiting a location. Branch, Extension Counter, and RM visits involve physical presence/interaction.

Private banks leveraged technology (ATMs, Internet) early to offer superior service and convenience, targeting the profitable urban salaried class, unlike PSBs which had a broader social mandate.

Physiological needs are basic survival needs (food, shelter). In banking, this translates to basic products needed for day-to-day living, like a savings account for liquidity and consumer loans for household items.

CASA (Current Account Savings Account) deposits pay very low or no interest. A high proportion of CASA means the bank pays less interest overall, reducing its Cost of Funds.

This is a traditional model where retail is just another department alongside others. It typically lacks the focus and agility of the SBU model and is often used by smaller or older public sector banks.

Assets refer to loans given by the bank. Auto Loan is a classic retail asset product. Current, Term, and Salary accounts are liabilities (deposits).

Demographic segmentation uses quantifiable population statistics. Age, income, and gender are the most common parameters used by banks to target retail products (e.g., Senior Citizen FD, Student Loan).

Operating Profit is profit before provisions and taxes. To calculate the final Net Profit, the branch must account for credit costs (provisions for bad loans) and taxation.

Synergy between Corporate and Retail banking is a major growth driver. A bank holding a corporate account can easily tap into the retail business of that corporate's thousands of employees (B2B2C model).

Behavioral segmentation looks at *how* the customer interacts with the bank—are they heavy users (transactors), do they prefer digital channels, are they price-sensitive? This helps in targeted marketing.

Liability products are those where the bank owes money to the customer (Deposits). Savings Account is the most fundamental retail liability product. Loans are assets.

A deposit-heavy branch collects more funds than it lends locally. It transfers the surplus to the Head Office and earns interest (Transfer Price) on it, which becomes its major income source.

This diversification is the biggest strength. Unlike a corporate loan where one default can wipe out profits, retail defaults are usually small and statistically predictable.

In this model, branches focus only on sales and customer service. All operational tasks (account opening, loan sanctioning, clearing) are moved to a Centralized Processing Unit to improve efficiency and standardize risk.

Retail involves millions of transactions (High Volume) but the value of each transaction (e.g., ATM withdrawal, Personal Loan) is relatively small (Low Ticket Size).

This statement is false. Cash withdrawals on credit cards usually attract interest from day one. There is NO interest-free period for cash advances.

WLAs are ATMs set up, owned, and operated by non-banks. They are authorized by the RBI under the Payment and Settlement Systems Act, 2007. Examples include Tata Communications Payment Solutions (Indicash).

Process involves the procedures, mechanisms, and flow of activities. In banking, efficient processes (like quick loan approval or fast account opening) are a key differentiator.

HNIs require personalized investment advice, tax planning, and estate planning. Private Banking is the specialized division that caters to these complex needs.

This principle suggests that a small portion of high-value customers contributes the majority of the bank's profitability. CRM strategies focus on retaining this top 20%.

Current Accounts typically carry 0% interest. Therefore, they are the cheapest source of funds for a bank. Savings accounts carry low interest (2.7%-3%), while Term Deposits carry high interest.

When a product is declining (obsolete or unpopular), banks try to revive it by bundling it with other products, reducing costs to maintain margin, or simply withdrawing it from the market.

AI/ML models can process unstructured data to predict repayment behavior, enabling banks to lend to "New to Credit" customers whom traditional models might reject.

Risk diversification is a key advantage. In corporate banking, a single default (e.g., Kingfisher) can create a massive NPA. In retail, the impact of individual defaults is negligible on the overall portfolio.

Digital channels have almost zero marginal cost per transaction compared to the high infrastructure and staff costs of branches and ATMs.

In services, the provider is inseparable from the service. A rude or incompetent staff member equals bad service in the customer's mind, regardless of the product's quality.

Horizontal structures break down silos, allowing data and processes to flow across product lines. This enables the bank to see the "whole customer" and offer relevant products (e.g., offering a home loan to a savings account customer).

Hypothecation is the charge created on movable assets (like cars) where the possession remains with the borrower, but the bank has the right to seize it in case of default.

India's demographic dividend (young population) and the rise of a consuming middle class with higher disposable income have fueled the demand for housing, vehicles, and personal loans.

This approach holds branch managers accountable for the bottom line. They must generate enough income (interest + fee) to cover their operating costs (staff, rent, etc.) and generate a surplus.

At this stage, the priority shifts from asset accumulation to income generation and security. Reverse Mortgage provides income from property, and savings schemes offer safe returns.

POS terminals are electronic devices used at retail locations to process card payments.

RBI has made NEFT and RTGS available 24x7x365. IMPS was always 24x7.

BPR involves rethinking workflows from scratch (e.g., implementing Centralized Processing Units for loans) to eliminate redundancies and improve customer turnaround time (TAT).

Place refers to distribution channels. In digital banking, the "place" of service delivery has shifted from physical branches to the customer's smartphone or computer.

Given the volume of retail accounts, ensuring compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) norms requires robust technology and constant vigilance, which is resource-intensive.

This segment focuses on the general population. Profitability comes from economies of scale and cross-selling basic products like savings accounts and debit cards.

Since the bank does not use its own funds to create an asset but acts as an agent earning commission, this is Non-Interest Income. It is crucial for boosting Return on Assets (RoA).

Most PSBs still follow the departmental approach where retail is one division within the general banking framework, though many are slowly moving towards the SBU model for better focus.

Personal loans are typically unsecured (Clean). The bank relies on the borrower's income and credit score (CIBIL) rather than physical security.

*99# service uses USSD technology to allow basic banking on feature phones (non-smartphones) without internet data.

Cross-selling increases the "Wallet Share" of the customer and deepens the relationship, making it harder for the customer to switch banks.

Promotion includes all communication strategies used to inform, persuade, and remind customers about the bank's products.

Branch managers monitor the Break-even point to know the minimum business volume required to cover fixed and variable costs.

Retail loans (Housing, Auto) create demand for goods and services (cement, steel, cars), driving industrial growth and economic development.

DPD stands for "Days Past Due". A value of "000" means the borrower has met their payment obligation on or before the due date for that month, indicating good credit behavior.

The breakdown of joint families into nuclear families creates new demand for housing, household goods, and vehicles, driving the need for retail loans. Coupled with rising income, this presents a massive growth opportunity.

In uncertain economic times (recession), customers prioritize safety of capital over high returns. Thus, the demand for safe liability products like Fixed Deposits tends to rise as people save more.

Empathy involves understanding the customer’s specific needs and providing personalized service. Physical appearance is "Tangibles," dependability is "Reliability," and willingness to help is "Responsiveness."

Secure Sockets Layer (SSL) or Transport Layer Security (TLS) encrypts the communication channel, indicated by "https://" and a padlock icon, protecting passwords and financial data from eavesdropping.

Repayment generally commences one year after the completion of the course or 6 months after getting a job, whichever is earlier. The standard moratorium is Course Period + 1 year.

Wealth Management is an integrated process. While investment advisory focuses on asset allocation, Wealth Management looks at the entire financial life of a High Net Worth Individual (HNI), including succession and tax optimization.

While banks can outsource support functions like marketing, recovery, or IT maintenance, the core decision-making function of Sanctioning Loans (taking credit risk) must remain with the bank's own officers.

Cost-to-Income ratio measures operating expenses as a percentage of operating income. A lower ratio means the bank is spending less to generate each rupee of income, indicating high operational efficiency.

Since retail banking depends on volume, the ability to serve millions of customers quickly, cheaply, and accurately through robust IT systems and channels (ATMs, Mobile) is the most critical success factor.

Reverse Mortgage allows senior citizens to pledge their self-owned property to a bank in exchange for a regular income stream (annuity), without selling the house during their lifetime.

Omni-channel means the customer can start a transaction on one channel (e.g., Mobile) and finish it on another (e.g., Branch) without loss of context. It ensures data synchronization across channels.

Direct Marketing involves communicating directly with targeted individual consumers to obtain an immediate response, using mail, telephone, email, or SMS.

Psychographics delves into the "Why" of buying behavior—focusing on inner traits like lifestyle choices (e.g., adventurous vs safe) and values, rather than just external stats like age.

Retail customers tend to be loyal and don't move money frequently based on small rate changes. This provides a stable and cheap source of funds for the bank (Stable Funding Base).

ABM analyzes the costs of specific activities (e.g., processing a cheque) to see if they add value. If not, processes are re-engineered or automated to save costs.

Paying the MAD ensures no late payment fee is charged and the card remains active. However, interest is still charged on the remaining unpaid balance.

Since the SBU is an independent profit center, its head has autonomy and direct accountability to the top leadership for the unit's performance.

Biometric ATMs use fingerprints or iris scans for authentication instead of PINs, making them accessible to rural/illiterate populations who might struggle with numbers or passwords.

Safety needs focus on security (Insurance, FD). Social needs involve belonging and status, leading to demand for consumer loans (Car Loan, Home Improvement) to improve lifestyle and social standing.

Asset Allocation is the core strategy of wealth management. By diversifying across non-correlated asset classes, it aims to optimize returns for a given level of risk.

Margin is the borrower's own contribution. Margin = 100% - LTV%. So, 100 - 80 = 20%.

Successful cross-selling relies on "Right Product, Right Customer, Right Time". Selling a pension plan to a 25-year-old might fail, but selling a car loan might succeed.

M&A Advisory is a core Investment Banking/Corporate Banking function dealing with large companies. Retail banking focuses on individual consumers.

SEO involves optimizing website content so that it ranks higher when customers search for keywords like "Best Home Loan" or "Credit Card", driving free (organic) traffic.

NII is the difference between the interest income a bank earns from lending and the interest it pays to depositors. It is the primary source of profit for a retail bank.

Semi-Closed PPIs allow purchase of goods/services at a network of clearly identified merchant locations/establishments but do not permit cash withdrawal (unless fully KYC compliant and interoperable).

A score of 750+ (out of 900) indicates a responsible borrower with a good track record of repayment. Banks often offer lower interest rates to such customers.

CPUs take the burden of processing, documentation, and sanctioning away from branches. This allows branches to focus on sales while specialists at CPU ensure uniform risk assessment and faster sanctions.

While technology is an enabler, the rapid pace of obsolescence requires banks to constantly invest huge sums in upgrading Core Banking, ATMs, and Digital platforms, which is a significant financial strain.

Over time, market movements can change a portfolio's asset mix (e.g., equity becomes 70% instead of 60%). Rebalancing involves selling overperforming assets and buying underperforming ones to restore the original risk profile.

Working Capital limits for large corporates fall under Wholesale/Corporate Banking. Retail banking deals with individuals and small businesses.

Niche marketing focuses on a specific subset of the market with unique needs. A women's savings account caters specifically to the financial needs and preferences of women.

Direct costs are those that can be directly attributed to the branch's operations. HO expenses and IT costs are typically indirect or allocated costs.

Since internet banking relies on digital credentials, the biggest threat is cybercrime, including phishing (stealing passwords) and malware (infecting devices).

Home loans are secured by the mortgage of the property being financed. Personal loans and credit card debt are generally unsecured. Education loans up to ?4 Lakh are collateral-free.

Universal Banking is a system where banks provide a wide variety of financial services, including commercial banking, investment banking, and insurance, becoming a one-stop shop.

"Click and Mortar" refers to the strategy of having both an online presence (Click) and physical branches (Mortar) to serve customers effectively.

Studies show it costs 5-7 times more to acquire a new customer than to retain an existing one. Loyal customers are also more likely to buy more products (cross-sell).

Estate Planning ensures the smooth transmission of wealth to the next generation, minimizing legal disputes and taxes. It is a key component of comprehensive wealth management.

Interest in EMI is calculated on the outstanding principal balance. As principal is repaid each month, the interest component decreases, and the principal component increases.

Closed wallets (like Amazon Pay balance initially) are issued by an entity for facilitating the purchase of goods and services from that entity only. They do not permit cash withdrawal or redemption.

With millions of transactions, the risk of system failure, fraud, human error, and cyber attacks (Operational Risk) is significant in retail banking.

In a service industry like banking, trust is paramount. A strong brand signals reliability, making customers more likely to choose that bank and stick with it.

Mutual Funds are products created by Asset Management Companies (AMCs), not the bank itself. The bank acts as a distributor/agent.

This method is more accurate as it recognizes that long-term funds have a different cost/value than short-term funds, aligning internal pricing with market realities.

Understanding the geographic concentration of customers helps banks place branches/ATMs strategically and tailor products to local needs (e.g., agricultural loans in rural areas).

LAP allows borrowers to unlock the value of their property for various needs like business expansion, education, marriage, etc. Unlike a home loan, usage is flexible.

Chatbots use AI to answer common questions instantly, reducing the load on human customer care agents and improving service availability.

CKYCR stores KYC records centrally. A customer with a CKYC identifier can open accounts with other banks/insurers/mutual funds without submitting physical documents again.

Robo-advisors use algorithms to assess a client's risk profile and goals to recommend and manage an investment portfolio at a low cost.

Timely repayment of past dues is the most critical factor (approx. 35% weightage). Defaults or late payments significantly damage the score.

NPAs are a double blow: the bank loses interest income (income leakage) and must also set aside funds as provisions from its profits (expense), directly hitting the bottom line.

SCSS involves the customer depositing money with the bank. It is a liability for the bank.

Intangibility makes marketing services challenging. Banks must use physical evidence (branding, ambiance) and reputation to make the service "real" to the customer.

Phishing uses fraudulent emails or websites to trick users into revealing their Netbanking passwords and PINs.

Loyalty is a behavior. Segmenting based on loyalty helps banks design retention programs for loyal customers and acquisition offers for switchers.

A horizontal structure integrates data across products, giving the bank a 360-degree view of the customer's total relationship (savings + loans + cards), enabling better service and cross-selling.

While policies vary, banks generally require a margin of 10-15%. Financing 100% is rare and risky. On-Road price includes registration and insurance, which is the true cost to the borrower.

The trend is shifting towards "Phygital" (Physical + Digital) banking, where data and AI are used to offer hyper-personalized products and seamless digital experiences.