What is Wholesale Banking?
Wholesale banking involves providing banking services to other commercial banks, mortgage brokers, large corporate, mid-size companies, real estate developers, international trading businesses, institutional customers or other corporations. The services which come under the net of wholesale banking involves wholesaling, underwriting, market making, consultancy, mergers and acquisitions, joint ventures, fund management etc. The focus is on high-level clients and high-value transactions.
Wholesale Banking in India
India presents a strong case for the growth of wholesale banking due to continued globalisation of Indian companies, India being seen as a favourable investment destination, increase in infrastructure spending, stable government, robust markets, stable currency, low deficits, etc. Wholesale banking thus comprises a major share of the banking revenues due to the above factors and also due to an increased inclination of government towards mid-segment companies which have increasing banking requirements. In wholesale banking too, it is the corporate banking which comprises a lion’s share i.e. about 85%. Likewise, with the rebound of economy and a positive outlook, the possibility of a growth in investment banking, M&A etc. is highly likely.
Wholesale clientele for banks are highly significant for banks to drive business. Banks provide various forms of banking solutions like project finance, leasing finance, working capital finance, merchant banking, syndication services etc. are also provided to clients
The major advantage in wholesale banking is that a client can have easy and one-place access to all its finances and their details. This makes internal stock transfers, fund transfers, allocations and distributions simpler. It however, it increases the risk it poses to the clients as all their funds are parked in one institution and the businesses depend on the financial health of the bank for smooth run. In cases of economic downturns, if the banks crash, all the dependent businesses come to a standstill instantly. Thus, businesses usually diversify into several financial institutions to remain afloat during any crisis. The major Indian Banks which are involved in wholesale banking are-SBI, ICICI, IDBI Bank, Canara Bank, Bank of India, Punjab National Bank, Bank of Baroda, Central Bank of India etc.