1. Retail Banking – Deposit Products

Retail banking , also called consumer or personal banking , refers to banking services provided directly to individual customers , as opposed to businesses or institutions. Retail banking is the primary interface between banks and the general public . It involves deposits, loans, and payment services for individuals and is defined by high volume, low value transactions , standardized products, and customer-centric delivery.

Scope of Retail Banking

Retail banking covers both:

• Liability side: Accepting deposits from individuals (savings accounts, current accounts, fixed and recurring deposits).
• Asset side: Lending to individuals (personal loans, home loans, auto loans, education loans).

It also includes payment services (debit/credit cards, ATMs, internet banking, UPI), insurance and investment products (via bancassurance and mutual funds), and wealth management for individuals. Services are delivered through bank branches, ATMs, and increasingly via digital channels such as mobile and internet banking.

Key Features of Retail Banking

• Large Customer Base: Deals with a vast number of individual customers, each with relatively small accounts, helping diversify risk.
• High Volume, Low Value Transactions: Numerous daily transactions of modest amounts; aggregate volumes are significant.
• Standardized Products: Products like savings accounts, FDs, and retail loans are largely standardized, enabling scale and efficiency.
• Consumer-Centric Services: Strong focus on convenience, accessibility, and customer service through branches and digital platforms.
• Stable Funding Source: Retail deposits are a major, stable, and low-cost source of funds for banks.
• Relationship Banking & Cross-Selling: Banks aim for long-term relationships and offer multiple products to the same customer, improving loyalty and revenue.

Retail Banking vs. Corporate Banking

Retail banking focuses on individuals and small-ticket loans , with standardized products and automated processes. Credit risk per customer is low and spread across many borrowers.
Corporate banking focuses on companies , offering large loans and customized services. Credit risk per client is high but managed through intensive due diligence.

Deposit Products in Retail Banking

Deposit products form the liability side of retail banking . They allow customers to safely park money and earn interest, while providing banks with a stable source of funds for lending.

Savings Bank Account

A Savings Account is the most common deposit account for individuals, combining interest earnings with high liquidity. Its key features are:

• Opened by individuals (single/joint); variants exist for minors, students, senior citizens, etc.
• Earns interest; rates are bank-determined (deregulated in 2011). Typically, ~3–4% p.a., higher with some small finance/private banks.
• Interest calculated daily and credited quarterly/monthly.
• Demand deposit : funds withdrawable anytime.
• Access via ATM/debit card, cheque, withdrawal slip, and electronic transfers.
• Minimum balance may apply; zero-balance variants exist (salary accounts, BSBDA).
• Ideal for daily expenses, salary credits, and emergency funds.

Current Account

A Current Account is meant mainly for businesses and professionals requiring frequent transactions.

• Generally no interest
• Unlimited deposits and withdrawals.
• Overdraft facility often available to manage cash flows.
• Higher minimum balance and service charges compared to savings accounts.
• Designed for entities like firms, traders, companies, and professionals.

Fixed Deposit (FD) Account

A Fixed Deposit (Term Deposit) locks funds for a fixed period at a predetermined interest rate.

• Fixed tenure: from 7 days up to 10 years.
• Higher interest than savings accounts; senior citizens usually get ~0.5% extra.
• Interest can be cumulative (paid at maturity) or non-cumulative (paid periodically).
• Premature withdrawal allowed with penalty; some special FDs disallow it.
• Very safe; covered by deposit insurance up to ₹5 lakh.
• Can be pledged as collateral for loans/overdrafts (usually up to ~90% of value).

Recurring Deposit (RD) Account

A Recurring Deposit enables regular monthly savings over a fixed period.

• Fixed monthly installment for a fixed tenure.
• Interest rate similar to corresponding FD tenure.
• Maturity amount = total deposits + interest (each installment earns interest for its remaining term).
• Penalty for missed installments; premature closure allowed with adjusted interest.
• Suitable for salaried individuals and goal-based savings.
• Some banks offer Flexi RDs with variable monthly amounts.

Other Deposit Variants

• Basic Savings Bank Deposit Account (BSBDA): No-frills, zero-balance savings account for financial inclusion. Provides basic banking services free, with limited transactions.
• Salary Account: Savings account variant linked to employer salary credit. Usually zero-balance with additional benefits; may convert to regular savings if salary stops.
• Senior Citizen Accounts: Offer higher FD interest rates, priority service, ...

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