Meaning
Retail Banking, also known as Consumer Banking or Personal Banking, refers to the banking services provided by a bank to individual customers (general public) rather than to companies, corporations, or other banks. It focuses on meeting the everyday financial needs of individuals.
Retail banking is different from Wholesale Banking (Corporate Banking), which provides banking services to businesses, corporations, and other institutions.
Explanation
Retail banking is the most common form of banking because it deals directly with individual customers. Through retail banking, banks help people save money, make payments, borrow funds, and manage their day-to-day financial transactions.
Banks provide various deposit accounts, loan facilities, payment services, and card-based services to individual customers. These services make banking convenient and help customers manage their personal finances efficiently.
Retail banking is usually handled by a separate Retail Banking Division or Personal Banking Department within a bank.
Services Provided Under Retail Banking
Retail banking mainly includes the following services:
- Savings Accounts
- Current (Transactional) Accounts
- Fixed Deposit and Recurring Deposit Accounts
- Home Loans (Mortgages)
- Personal Loans
- Debit Cards
- Credit Cards
- Other banking services provided to individual customers
Retail Banking vs Wholesale (Corporate) Banking
| Basis | Retail Banking | Wholesale (Corporate) Banking |
|---|---|---|
| Customers | Individual customers (general public) | Companies, corporations, institutions, and other banks |
| Purpose | Personal financial needs | Business and corporate financial needs |
| Services | Savings accounts, personal loans, home loans, debit cards, credit cards | Corporate loans, working capital finance, project finance, cash management, trade finance |
Retail Banking and Commercial Banking
Retail banking is different from Investment Banking and Commercial Banking.
In the United States, the term Commercial Bank was traditionally used for a normal bank to distinguish it from an Investment Bank. After the Great Depression, the Glass–Steagall Act separated normal banking activities from investment banking activities. This distinction was removed in the 1990s.
The term Commercial Bank may also refer to a bank or a division of a bank that mainly deals with deposits and loans of corporations and large businesses, instead of individual customers.
Key Points
- Retail Banking is also called Consumer Banking or Personal Banking.
- It provides banking services to individual customers.
- It includes deposit accounts, personal loans, home loans, debit cards, and credit cards.
- Retail Banking is different from Wholesale (Corporate) Banking.
- Banks generally have a separate Retail Banking Division for individual customers.
- In the U.S., the Glass–Steagall Act separated commercial and investment banking after the Great Depression, and this separation was repealed in the 1990s.
Exam Points
- Retail Banking = Consumer Banking = Personal Banking
- Customers: General Public (Individuals)
- Opposite: Wholesale (Corporate) Banking
- Major services: Savings Account, Transactional Account, Mortgage, Personal Loan, Debit Card, Credit Card
- Glass–Steagall Act separated commercial and investment banking in the U.S.
- The separation was repealed in the 1990s.