Meaning of Wholesale Banking
Wholesale banking refers to those banking services that are offered to institutional customers, government agencies, local governments, companies with huge balance sheets etc. it also includes interbank lending and borrowing. Banks of India commonly use this business segment and it is popularly known as corporate banking or commercial banking in India. This is in direct contrast to retail banking that is provision of banking services to individual people. Services that included in wholesale banking are – - large trade transactions, - working capital, - underwriting, - M&A (mergers and acquisition), - currency conversion, - fleet and equipment leasing, - loan participation, - merchant banking, - trust services.
Differences between wholesale and retail banking
Wholesale banking
- Banking services that are offered to institutional customers, government agencies, local governments, companies with huge balance sheets etc.
- Funds are taken from large entities and invested back into them.
- There are low volumes of large transactions.
- Example: HDFC
Retail banking
- Banking services are offered to individual customers.
- Funds are taken from individual customers and given to them.
- There are large volumes of low transactions.
- Example: PNB
Advantages of wholesale banking
It offers the same services that a retail bank has to offer to larger institutions at a lower base price. There is also a significant discount on services in exchange for large deposits being placed in the financial institution.
Disadvantages of wholesale banking
If the cash of an entity is concentrated in one location, then there is a huge reliance on the stability of the location for the funds to be safe.
Some of the measures that can be taken to transform wholesale banking making large scale investments in the next generation of re-platforming and automating certain products and processes: - Investing in new technology in partnership with fintech firms. - Mutualising processes especially in areas such as reference data management, lending operations etc. - Setting bold aspirations for dramatic improvements.
