Banks are mobilizing more and more savings accounts to get the low cost funds. Banks are earning higher profits by lending hard core portion of these deposits to retail borrowers. That is why new generation banks who wanted to be known for their corporate banking portfolio are now chanting the retail banking mantra. From the risk management perspective also banks are turning towards retail.

The importance of retail banking was a discovery for the public sector banks in the last five years, ever since NPAs of the corporate sector took a toll on the profits of the banks. In fact, IndusInd Bank (the new generation private sector bank) initially wanted to become a niche player in international banking. IDBI bank (another new generation bank) wanted to be known for corporate banking. Today, all the banks are chanting the retail banking mantra.

The evolution of retail banking in India has an interesting history. On the liability side, the PSBs and old private sector banks, given their network across remotest parts of the country, were mopping up the deposits from personal segment, agricultural segment, the retail segment i.e., these deposits were in savings bank and term deposits. The deposits from small industries and small businesses formed a small percentage of the aggregate deposits. The commercial and institutional segment (non-retail segment) was mainly in the current account and widely fluctuating. Thus, `window dressing' for the year-end comes from the non-retail segment. Deposits from the non-retail segment bearing no interest cost, reduced the cost of deposits. But with the importance given to cash management today, together with cash management products, very few finance professionals would keep non-interest earning money with the banks. Thus, current account balances of banks have come down over a period of time. So, the emphasis is on retail banking.

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