There are four broadly defined process mode is implemented across banks. These models are defined based on the technology and customer interface capabilities of the banks. The four broad classifications are:
Horizontally Organised Model
Vertically Organised Model
Predominantly Vertically Organised Model
Predominantly Horizontally Organised Model
The horizontal or vertical model depends on the level of customer information available in a single platform in the data base side for offering multiple products/services across assets, liabilities and other services.
Horizontally organised model is a modular structure using different process models for different products. Offering end to end solutions product wise.
Vertically organised model provides functionality across products with customer data base orientation and centralized customer data base is used across products.
Predominantly horizontally organised model is mostly product oriented with common customer information for some products.
In predominantly vertically organized model, common information is available for most of the products.
Inmost of the PSBs, horizontally organized model is adopted. In some banks, predominantly horizontally organized model do exist and reflect the level of common customer information available for some products.
New private sector banks generally follow a vertically organized model.
In foreign banks, it is mostly predominantly vertically organised model which implies that retail banking initiatives are attempted with common customer information across products.
Distinction between Retail and Corporate/Wholesale Banking
Retail Banking targets at the individual segment while corporate banking deals mainly with corporate clients.
Retail Banking is a mass market banking model whereas wholesale/corporate banking caters to a relatively smaller segment of business/corporate client base.
Retail Banking is a B2C approach (Business to Customer) whereas corporate banking is a B2B approach (Business to Business).
The ticket size of loans in retail banking is low whereas the ticket size is high in corporate loans. Ticket size means the amount of loan per customer.
Risk is widespread in retail banking as customer base is huge whereas in Corporate Banking, the risk is more as the ticket size is big though customer base is relatively small.
Returns are more in retail banking as, the spreads are more for different asset classes in retail. But in corporate banking, the returns will be low as corporate bargain for lower rates due to higher loan amounts.
Monitoring and recovery in retail assets are more laborious because of the larger customer base as compared to corporate banking.
In the liability side also, the cost of deposits is relatively less in retail banking and mostly go along with the card rates as the ticket size in retail deposits is small. In corporate banking, as the ticket sizes of deposits will be large, the cost of deposits will be high due to pressure from the corporate for higher rates and competitive forces to garner the deposits.
The impact of NPA will be more pronounced in corporate banking than retail banking as the ticket sizes in corporate loans are higher than retail loans.