Essential for All Upcoming IBPS PO 2017 Exams
In India, the concept of narrow banking was introduced on recommendation of Committee on Capital Account Convertibility (Tarapore Committee). It was suggested as a solution to the problem of high NPAs and related matters. The Committee proposed that increment resources of narrow banks should be used to invest in low risk assets like Government Securities.
A ‘Narrow Bank’ in its narrow sense, is the system of banking under which a bank places its fund in risk-free assets with maturity period matching its liability maturity profile, so that there is no problem relating to asset liability mismatch and the quality of assets remains intact without leading to emergence of NPAs.
Such an approach can ensure the regular deployment of funds in low risk liquid assets. With such pattern of deployment of funds, these banks are expected to remove the problems of bank failures and the consequent systemic risks and loss to depositors.
Retail banking sector is characterized by 3 basic characteristics –
- Multiple delivery channels (call center, branch, kiosk and internet);
- Multiple products (deposits, credit cards, insurance, investments etc.);
- Multiple customer groups (Consumer, small business and corporate).
- To increase penetration by providing increasing level of services.
- To increased access by offering value added services to customers by packing them with retail banking products and services.
- Retail banking provides a good spreading of 3-4% better than the very thin proportion of corporate clients' growth.
Various Segments in Retail Banking:
Originally there are 3 important segments in retail banking –
- Deposit products (convenient deposit schemes such as flexi-deposit)
- Loan products (such as housing loans, conveyance loans, education loans, personal loans for diverse purpose such as medical expenses, travel abroad) and
- Other products.
Delivery channels of retail banking:
The delivery of these products and services can be through branch banking, internet banking or ATMs (Automated Teller Machines). These can be called home banking, internet banking, credit cards, mobile banking etc.
Bank have excellent opportunity to cross sell various retail products like insurance policies, credit cards, funds investment services (including mutual funds). Ancillary services like dematerialization, portfolio management etc.