Difference between Retail and Wholesale Banking

Those days are gone when banking referred to only one thing that is a place where savers can deposit money and borrower take loan when they are in need of funds, however nowadays banking has changed completely and it encompasses many things. Retail and wholesale banking are two of them; let’s look at some of the differences between retail and wholesale banking –

Retail and Wholesale Banking Differences

Meaning

Retail banking refers to that banking which targets individuals and the main focus of such banks is retail customer whereas wholesale banking refers to that banking which targets corporate or big customers and their main focus is providing services to corporate clients.

Ticket Size of Loan

Ticket size of loans given in retail banking is low and due to it impact of NPA will be less pronounced due to diversification as compared to wholesale banking where ticket size of loan is very high and due to it impact of NPA is more pronounced.

Examples

Loans such as car, housing, educational, personal loans are some of the examples of loans given in retail banking whereas loans such as loan for setting industry, machinery advance, export credit are some of the examples of loans given in wholesale banking.

Monitoring and Recovery

Monitoring and recovery if the loan turn out to be NPA in retail banking is more difficult because customer base is wide whereas in case of wholesale banking due to low customer base it is easy to monitor as well recover the loan given to customers.

Interest Rates

Cost of deposit is low in retail banking because retail customers do not have the bargaining power due to less deposit with them whereas in case of corporate customers banks have to offer them high interest rates in order to attract funds from them.

Operational Costs

Retail banking requires large network of branches in order to cater to large customer base and hence it results in high operational costs while in case of wholesale banking small number of branches is sufficient to cater to corporate clients.

As one can see from the above that retail and wholesale banking are very different from each other and that is the reason why many banks have separate branches for retail business and wholesale business.

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