In our earlier articles, we made an effort to understand How Banks make money and all the related stuff. Here we focus more on three pillars of banking aka different verticals and their functionality.
As kids and teenagers, many of us had the experience of visiting a bank with parents. Our experience was more or less shaped by how our elders perceived the services than having a sound knowledge about banking. As times have gone, we joined the workforce and start earning salaries making our interaction with banks necessary. The vertical that deals with individuals like us and our requirements is called Retail Banking.
There was always a need for banks to serve the institutions/firms better as the ticket size is large and so are the profits from dealing with them. In earlier days, all the requirements of firms were handled by regular local branches resulting in delay in services thereby leading to dissatisfaction from company’s perspective. Slowly banks started realizing the need for a separate vertical dealing with companies and their requirements. Hence formed Corporate or Wholesale Banking.
Wholesale Banking consist of Bankers well trained to deal with corporates and their ever growing and complex financial needs. The kind of services given to corporates by banks is of high quality. Banks business had shifted gears and entered a growth phase with new business coming from corporates.
Like individuals or entities, banks do have cash requirements i.e., there are days when banks have to take loans from RBI or other banks to tide over short-term liquidity mismatches or raise money from the market to fulfill capital adequacy norms. Treasury deals with te task of mobilizing cash for the banks. In addition, Treasury also arranges the foreign currency requirements of bank’s customers. Treasury plays a crucial role in keeping the cost of funds of banks under control. Their responsibilities also include managing the asset liability mismatch and bank’s investments in securities.