What is the difference between Retail and Corporate Banking?

Retail Banking and Corporate Banking Overview

Retail and corporate banks are among the most important contributors to India's economic growth and development. However, they both operate differently and offer different banking services. So, the major difference between retail and corporate banking is their target customers. 

Retail banking provides financial services to individuals and small businesses. Whereas, corporate banking is more geared towards larger quantities of loans and investment products to business conglomerates and companies.

Retail banking is the public's first impression of banking, with bank branches in major cities. In comparison, corporate banking works with businesses to issue them loans and provide credit. Along with this they also offer savings accounts and checking accounts designed for companies. They don't serve individuals.

Major differences between Retail Banking and Corporate Banking 

  1. Clientele 
  2. Amount of money involved
  3. Services offered
  4. Amount of money produced

What is Retail Banking?

A retail banking division deals directly with retail customers. Clients can get various products and services from retail banks. That includes credit and debit cards, mortgages, and personal loans. In addition, retail banking also includes checking and savings accounts and offers investment advice. Retail banking is also termed consumer or personal banking. And, it includes smaller personal investments of clients.

Features of Retail Banking

Small size transactions

Retail banks have small-size transactions. As the amount involved in issuing a car loan, personal loan, or fixed deposit is not high.

Less amount of risk involved

Retail banks lend a small amount of money to their customers. For instance, if a retail bank lent a loan of Rs. 10 lakhs. And, the borrower couldn't return the amount, the loss is only ten lakhs. As a result, the risk is also low.

Multiple branches

Retail banks must open more branches in places to attract clients and increase the client base. So, you can see many branches of retail banks across the cities.

High administrative and operational costs

Retail banks have a lot of branches and have to spend a large amount of money. Therefore the major expenses are on facilities, staff, and other operations. Therefore, overall expenditure on administration and operation is increased.

Offer multiple services to the customers

Retail banks provide

  • The facility of opening saving bank accounts.
  • Offering credit and debit cards.
  • Lending car loans.
  • Personal loans.
  • Various other types of loans to customers.

In addition, selling mutual funds and products like insurance are some of the services retail banks provide.

Deals with a high level of competition

Many players in the market offer retail banking services. So, competition not only increases due to the presence of many players. Furthermore, this is because of interest rate struggles. The retail banking market constantly competes to offer more services at a lower interest rate. 

What is a Corporate Banking?

It refers to the customised financial services provided to businesses. A major focus is to help firms finance themselves and raise capital. Examples of corporate banking are employer services, commercial services, cash, and risk management.

Features of corporate banking

Business Clients

Corporate banks offer services to large conglomerates and middle and small-sized organisations. 

Getting a corporate account is not easy

The firm must get a consensus from the board of directors to open a corporate account in the corporate bank. Generally, the company treasurer is responsible for opening corporate accounts for the business.

Independence and safety

The corporate account's content can not be accessible by the personal creditor of the board of directors. The corporate accounts are supposed to be the corporate bank's property and not the board members. So, corporate accounts give more freedom and security to the account holders.

Credit Rating 

The applicable interest rates, the share price of the company, and overall valuation depend on the functioning or conduct of the corporate accounts.

Handsome salaries of the corporate bankers

For establishing and running a corporate bank smoothly, experts are needed. In addition, a high level of expertise is required for corporate banks to develop and function. Corporate banks' complexities and expertise are hard to handle. That's why corporate bankers are highly paid.

Major differences and comparisons between retail and corporate banking

Comparison Base Retail Banking Corporate Banking
Offered Services

Standardised

Customised 

Customer Base

Large

Small

Transaction Values

Low to moderate

High

Operating Cost

Higher

Lower

Let us now understand the difference between retail and corporate banking in detail.

Offered Services

Retail banks provide standard services like opening savings accounts and issuing credit or debit cards. They also provide loans such as personal loans and vehicle loans, etc. Corporate banking offers services to small or mid-size companies and business conglomerates. These services offer cash, credit and risk management, etc.

The difference in customer base

The most common and evident difference between retail and corporate banks is their customer base. Retail banks have a large customer base. Whereas corporate banks are limited to a few business clients like mid-small companies. 

Transactions 

Retail banks involve limited transactions. Whereas corporate banks lend massive amounts of money to their business clients. Therefore, the transactions involved in retail and corporate banks significantly differ.

Processing or operating cost

Multiple branches, locations, and a large staff add to a retail bank's operational and processing costs. On the other hand, corporate banks provide limited services and have few office locations. All this results in low operating costs.

The final takeaway 

The differences between retail and corporate banking will help me choose a field. In addition, Individuals can decide the field of their interest. In addition, this information is also helpful for the existing bankers and banks. So, retail banking and corporate banking sectors are excellent career choices for banking aspirants. 

Imarticus learning offers courses in the finance and banking sector. So, you can get in touch with our team and decide the course of your interest.  Our team will guide you about careers in finance and banking. In addition, our experts will make your journey easy and successful. At Imarticus Learning we are happy to suggest and show you the path to a successful banking career.

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