Banking Segments & Classifications
Banking Segment
In the case of India, the ultimate regulatory body for the banking sector is the Reserve Bank of India. In the year 2008 Reserve Bank of India stipulated four segments for the banking products, namely:-
- Treasury,
- Retail Banking,
- Corporate Banking,
- Other Banking businesses.
In the first case, the entire activity regarding investments is considered. The word treasury has its link with the word treasure which, in this case necessarily means considering the whole wealth of the bank and managing it. It possesses the ultimate heavyweight task involving liquidity of a firm and therefore needs to be handled insightfully. The good analysis, analyses based decision making and resolving the issues of a financial institution’s wealth are needed in this case.
Retail banking mostly directed towards the normal (ordinary) customers. The retail exposures are drafted by the Basel Committee and needs to fulfil four orientations. These are
- Orientation,
- Product,
- Granularity,
- Limited individual exposure
Orientation criterion mandates focusing to individual customers or small businesses. Here, small business refers to any business with an annual turnover of Rs. 500 mn or less. Product criterion defines the same as it suggests, to focus an individual customer to various banking products like student loan, housing loan, overdraft facility and other commitments like car loans etc. The granularity ensures that the maximum amount a single borrower can get from the bank is the 0.2% of the total retail wealth of that Bank. Limited individual exposure sets this limit to 50 mn INR for a single borrower.
Corporate banking handles the corporate affairs. The corporate banking not only handles the corporate firms, but also the banking of trusts etc. Corporate bankers make advances to these sectors and essential for the sustainability of the manufacturing and service sector of the Country. It provides (in many cases) the working capital for an industry making it to strive in the market and therefore keeping the stock markets and total industrial output of the Country steep. For example, organizations like Air India and previously UB group kept their industries running with this capital for almost a decade. Corporate banking, in recent times has shown risks of defaulting (mainly with the PSU banks).
Other banking businesses involve everything not covered in the above categories. For example, insurance joint ventures and marketplaces which are common today with the banks (and the reward points etc.) are in this segment.
However, as mentioned in the introduction, the businesses are regulated by the RBI to keep their customers safe and also to keep banks from going bankrupt (a common problem in the young Indian Republic after independence). The liberalization policies have broadened the scope and reach of the banking businesses making it possible for the banks to help even in the Country’s educational, research and defence sector.
